Exhibit
10.5


 




 





 


LOAN AND SECURITY AGREEMENT


 


 


by and among


 


 


CUTTER
& BUCK INC.


 


as Borrower,


 


 


THE
LENDERS THAT ARE SIGNATORIES HERETO


 


as the Lenders,


 


 


WELLS
FARGO BANK, N.A.


 


 


as the Agent,


 


 


and


 


 


CENTURY BUSINESS CREDIT CORPORATION


 


 


as the Collateral Agent


 


 


Dated as of March 10, 2003


 


 




 




















 


TABLE OF CONTENTS


 


	
  1.

  	
  DEFINITIONS AND
  CONSTRUCTION

  
	
   

  	
  1.1

  	
  Definitions

  
	
   

  	
  1.2

  	
  Accounting
  Terms

  
	
   

  	
  1.3

  	
  Code

  
	
   

  	
  1.4

  	
  Construction

  
	
   

  	
  1.5

  	
  Schedules and Exhibits

  
	
   

  	
   

  	
   

  
	
  2.

  	
  LOAN
  AND TERMS OF PAYMENT

  
	
   

  	
  2.1

  	
  Revolver
  Advances

  
	
   

  	
  2.2

  	
  Intentionally Omitted

  
	
   

  	
  2.3

  	
  Borrowing
  Procedures and Settlements

  
	
   

  	
  2.4

  	
  Payments.

  
	
   

  	
  2.5

  	
  Overadvances

  
	
   

  	
  2.6

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

  
	
   

  	
  2.7

  	
  Cash
  Management

  
	
   

  	
  2.8

  	
  Crediting Payments;
  Float Charge

  
	
   

  	
  2.9

  	
  Designated Account

  
	
   

  	
  2.10

  	
  Maintenance
  of Loan Account; Statements of Obligations

  
	
   

  	
  2.11

  	
  Fees

  
	
   

  	
  2.12

  	
  Letters of Credit and
  Acceptances

  
	
   

  	
  2.13

  	
  LIBOR
  Option

  
	
   

  	
  2.14

  	
  Capital Requirements

  
	
   

  	
   

  	
   

  
	
  3.

  	
  CONDITIONS; TERM OF
  AGREEMENT

  
	
   

  	
  3.1

  	
  Conditions
  Precedent to the Initial Extension of Credit

  
	
   

  	
  3.2

  	
  Conditions
  Subsequent to the Initial Extension of Credit

  
	
   

  	
  3.3

  	
  Conditions
  Precedent to all Extensions of Credit

  
	
   

  	
  3.4

  	
  Term

  
	
   

  	
  3.5

  	
  Effect of Termination

  
	
   

  	
  3.6

  	
  Early Termination by
  Borrower

  
	
   

  	
   

  	
   

  
	
  4.

  	
  CREATION OF SECURITY
  INTEREST

  
	
   

  	
  4.1

  	
  Grant of Security Interest

  
	
   

  	
  4.2

  	
  Negotiable Collateral

  
	
   

  	
  4.3

  	
  Collection
  of Accounts, General Intangibles, and Negotiable Collateral

  
	
   

  	
  4.4

  	
  Delivery
  of Additional Documentation Required

  
	
   

  	
  4.5

  	
  Power
  of Attorney

  
	
   

  	
  4.6

  	
  Right
  to Inspect

  
	
   

  	
  4.7

  	
  Control
  Agreements

  
	
   

  	
   

  	
   

  
	
  5.

  	
  REPRESENTATIONS AND
  WARRANTIES

  



 


i

















 


	
   

  	
  5.1

  	
  No
  Encumbrances

  
	
   

  	
  5.2

  	
  Eligible
  Accounts

  
	
   

  	
  5.3

  	
  Eligible Inventory

  
	
   

  	
  5.4

  	
  Equipment

  
	
   

  	
  5.5

  	
  Location of
  Inventory and Equipment

  
	
   

  	
  5.6

  	
  Inventory
  Records

  
	
   

  	
  5.7

  	
  Location of
  Chief Executive Office; FEIN

  
	
   

  	
  5.8

  	
  Due
  Organization and Qualification; Subsidiaries

  
	
   

  	
  5.9

  	
  Due Authorization; No Conflict

  
	
   

  	
  5.10

  	
  Litigation

  
	
   

  	
  5.11

  	
  No Material Adverse Change

  
	
   

  	
  5.12

  	
  Fraudulent Transfer.

  
	
   

  	
  5.13

  	
  Employee
  Benefits

  
	
   

  	
  5.14

  	
  Environmental Condition

  
	
   

  	
  5.15

  	
  Brokerage
  Fees

  
	
   

  	
  5.16

  	
  Intellectual Property

  
	
   

  	
  5.17

  	
  Leases

  
	
   

  	
  5.18

  	
  DDAs

  
	
   

  	
  5.19

  	
  Complete Disclosure

  
	
   

  	
  5.20

  	
  Indebtedness

  
	
   

  	
   

  	
   

  
	
  6.

  	
  AFFIRMATIVE
  COVENANTS

  
	
   

  	
  6.1

  	
  Accounting
  System

  
	
   

  	
  6.2

  	
  Collateral Reporting

  
	
   

  	
  6.3

  	
  Financial
  Statements, Reports, Certificates

  
	
   

  	
  6.4

  	
  Intentionally Omitted

  
	
   

  	
  6.5

  	
  Return

  
	
   

  	
  6.6

  	
  Maintenance of Properties

  
	
   

  	
  6.7

  	
  Taxes

  
	
   

  	
  6.8

  	
  Insurance.

  
	
   

  	
  6.9

  	
  Location of
  Inventory and Equipment

  
	
   

  	
  6.10

  	
  Compliance with Laws

  
	
   

  	
  6.11

  	
  Leases

  
	
   

  	
  6.12

  	
  Brokerage Commissions

  
	
   

  	
  6.13

  	
  Existence

  
	
   

  	
  6.14

  	
  Environmental

  
	
   

  	
  6.15

  	
  Disclosure
  Updates

  
	
   

  	
   

  	
   

  
	
  7.

  	
  NEGATIVE
  COVENANTS

  
	
   

  	
  7.1

  	
  Indebtedness

  
	
   

  	
  7.2

  	
  Liens

  
	
   

  	
  7.3

  	
  Restrictions on
  Fundamental Changes

  
	
   

  	
  7.4

  	
  Disposal
  of Assets

  
	
   

  	
  7.5

  	
  Change
  Name, etc

  
	
   

  	
  7.6

  	
  Guarantee

  
	
   

  	
  7.7

  	
  Nature
  of Business

  
	
   

  	
  7.8

  	
  Prepayments and Amendments

  



 


ii

















 


	
   

  	
  7.9

  	
  Change
  of Control

  
	
   

  	
  7.10

  	
  Consignments

  
	
   

  	
  7.11

  	
  Distributions

  
	
   

  	
  7.12

  	
  Accounting
  Methods

  
	
   

  	
  7.13

  	
  Investments

  
	
   

  	
  7.14

  	
  Transactions with
  Affiliates

  
	
   

  	
  7.15

  	
  Suspension

  
	
   

  	
  7.16

  	
  Intentionally Omitted

  
	
   

  	
  7.17

  	
  Use
  of Proceeds

  
	
   

  	
  7.18

  	
  Change
  in Location of Chief Executive Office; Inventory and Equipment with Bailees

  
	
   

  	
  7.19

  	
  Securities Accounts

  
	
   

  	
  7.20

  	
  Financial Covenants

  
	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS OF
  DEFAULT

  
	
   

  	
   

  	
   

  
	
  9.

  	
  THE LENDER
  GROUP’S RIGHTS AND REMEDIES

  
	
   

  	
  9.1

  	
  Rights
  and Remedies

  
	
   

  	
  9.2

  	
  Remedies Cumulative

  
	
   

  	
   

  	
   

  
	
  10.

  	
  TAXES AND
  EXPENSES.

  
	
   

  	
   

  	
   

  
	
  11.

  	
  WAIVERS; INDEMNIFICATION

  
	
   

  	
  11.1

  	
  Demand;
  Protest

  
	
   

  	
  11.2

  	
  The Lender
  Group’s Liability for Collateral

  
	
   

  	
  11.3

  	
  Indemnification

  
	
   

  	
   

  	
   

  
	
  12.

  	
  NOTICES

  
	
   

  	
   

  	
   

  
	
  13.

  	
  CHOICE OF
  LAW AND VENUE; JURY TRIAL WAIVER

  
	
   

  	
   

  	
   

  
	
  14.

  	
  ASSIGNMENTS
  AND PARTICIPATIONS; SUCCESSORS

  
	
   

  	
  14.1

  	
  Assignments and Participations

  
	
   

  	
  14.2

  	
  Successors

  
	
   

  	
   

  	
   

  
	
  15.

  	
  AMENDMENTS;
  WAIVERS

  
	
   

  	
  15.1

  	
  Amendments and Waivers

  
	
   

  	
  15.2

  	
  Replacement of Holdout
  Lender

  
	
   

  	
  15.3

  	
  No Waivers; Cumulative
  Remedies

  
	
   

  	
   

  	
   

  
	
  16.

  	
  COLLATERAL AGENT;
  THE LENDER GROUP

  
	
   

  	
  16.1

  	
  Appointment
  and Authorization of Collateral Agent

  
	
   

  	
  16.2

  	
  Delegation of Duties

  
	
   

  	
  16.3

  	
  Liability of Agent
  and Collateral Agent

  
	
   

  	
  16.4

  	
  Reliance by
  Agent and Collateral Agent

  
	
   

  	
  16.5

  	
  Notice of Default
  or Event of Default

  
	
   

  	
  16.6

  	
  Credit
  Decision

  
	
   

  	
  16.7

  	
  Costs and Expenses;
  Indemnification

  



 


iii

















 


	
   

  	
  16.8

  	
  Agent
  and Collateral Agent in Individual Capacities

  
	
   

  	
  16.9

  	
  Successor Agent
  and Collateral Agent

  
	
   

  	
  16.10

  	
  Lender in Individual
  Capacity

  
	
   

  	
  16.11

  	
  Withholding
  Taxes

  
	
   

  	
  16.12

  	
  Collateral
  Matters

  
	
   

  	
  16.13

  	
  Restrictions
  on Actions by Lenders; Sharing of Payments

  
	
   

  	
  16.14

  	
  Agency for Perfection

  
	
   

  	
  16.15

  	
  Concerning
  the Collateral and Related Loan Documents

  
	
   

  	
  16.16

  	
  Field
  Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
  Other Reports and Information

  
	
   

  	
  16.17

  	
  Several Obligations;
  No Liability

  
	
   

  	
  16.18

  	
  Legal
  Representation of Agent and Collateral Agent

  
	
   

  	
   

  	
   

  
	
  17.

  	
  GENERAL
  PROVISIONS.

  
	
   

  	
  17.1

  	
  Effectiveness

  
	
   

  	
  17.2

  	
  Section Headings

  
	
   

  	
  17.3

  	
  Interpretation

  
	
   

  	
  17.4

  	
  Severability of Provisions

  
	
   

  	
  17.5

  	
  Amendments in Writing

  
	
   

  	
  17.6

  	
  Counterparts;
  Telefacsimile Execution

  
	
   

  	
  17.7

  	
  Revival and
  Reinstatement of Obligations

  
	
   

  	
  17.8

  	
  Integration

  



 


iv

















 


EXHIBITS AND
SCHEDULES


 


	
  Exhibit A-1

  	
  Form of Assignment and Acceptance

  
	
   

  	
   

  
	
  Exhibit C-1

  	
  Form of Compliance Certificate

  
	
   

  	
   

  
	
  Exhibit L-1

  	
  Form of LIBOR Notice

  
	
   

  	
   

  
	
  Schedule A-1

  	
  Collateral Agent’s Account

  
	
   

  	
   

  
	
  Schedule C-1

  	
  Commitments

  
	
   

  	
   

  
	
  Schedule D-1

  	
  Designated Account

  
	
   

  	
   

  
	
  Schedule E-1

  	
  Eligible Inventory Locations

  
	
   

  	
   

  
	
  Schedule P-1

  	
  Permitted Liens

  
	
   

  	
   

  
	
  Schedule 2.6(b)

  	
  Letter of Credit Fees

  
	
   

  	
   

  
	
  Schedule 2.8(a)

  	
  Cash Management Banks

  
	
   

  	
   

  
	
  Schedule 5.5

  	
  Locations of Inventory and Equipment

  
	
   

  	
   

  
	
  Schedule 5.7

  	
  Chief Executive Office; FEIN

  
	
   

  	
   

  
	
  Schedule 5.8(b)

  	
  Capitalization of Borrower

  
	
   

  	
   

  
	
  Schedule 5.8(c)

  	
  Capitalization of Borrower’s
  Subsidiaries

  
	
   

  	
   

  
	
  Schedule 5.10

  	
  Litigation

  
	
   

  	
   

  
	
  Schedule 5.14

  	
  Environmental Matters

  
	
   

  	
   

  
	
  Schedule 5.16

  	
  Intellectual Property

  
	
   

  	
   

  
	
  Schedule 5.18

  	
  Demand Deposit Accounts

  
	
   

  	
   

  
	
  Schedule 5.20

  	
  Permitted Indebtedness

  



 


v

















 


LOAN AND SECURITY AGREEMENT


 


THIS LOAN AND SECURITY AGREEMENT (this
“Agreement”), is entered into as of March 10, 2003 between and among, on
the one hand, the lenders identified on the signature pages hereof (such
lenders, together with their respective successors and assigns, are referred to
hereinafter each individually as a “Lender” and collectively as the “Lenders”),
WELLS
FARGO BANK, N.A., as the agent for the Lenders
(“Agent”), and CENTURY BUSINESS CREDIT CORPORATION, as the collateral agent
for the Lenders (“Collateral Agent”) and, on the other hand, CUTTER &
BUCK INC., a Washington corporation (“Borrower”).


 


The parties agree as
follows:


 


1.                                      DEFINITIONS AND
CONSTRUCTION.


 


1.1                               Definitions. 
As used in this Agreement, the following terms shall have the following
definitions:


 


“Acceptances”
shall mean any existing and future drafts which involve Borrower or beneficiary
under a Letter of Credit as drawer that are processed and accepted for payment
by Agent, Agent or other accepting bank in its absolute discretion.


 


“Account Debtor”
means any Person who is or who may become obligated under, with respect to, or
on account of, an Account, chattel paper, or a General Intangible.


 


“Accounts” means
all of Borrower’s now owned or hereafter acquired right, title, and interest
with respect to “accounts” (as that term is defined in the Code), and any and
all supporting obligations in respect thereof.


 


“ACH Transactions”
means any cash management or related services (including the Automated Clearing
House processing of electronic funds transfers through the direct Federal
Reserve Fedline system) provided by Agent or its Affiliates for the account of
Borrower or its Subsidiaries.


 


“Additional Documents”
has the meaning set forth in Section 4.4.


 


“Adjusted Letter of
Credit Usage” means, as of the date of determination, the sum of
(a) 40% of the undrawn amount of outstanding Qualified Import Letters of
Credit issued for the purpose of purchasing Eligible Inventory, plus
(b) 100% of the undrawn amount of all other outstanding Letters of Credit,
plus
(c) 100% of the amount of outstanding time drafts accepted by an
Underlying Issuer as a result of drawings under Underlying Letters of Credit,
including Acceptances.


 


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


 


“Advances” has the
meaning set forth in Section 2.1.


 


1

















 


“Affiliate” means,
as applied to any Person, any other Person who, directly or indirectly,
controls, is controlled by, or is under common control with, such Person.  For purposes of this definition, “control”
means the possession, directly or indirectly, of the power to direct the
management and policies of a Person, whether through the ownership of Stock, by
contract, or otherwise; provided, however, that, for purposes of the
definition of Eligible Accounts and Section 7.14 hereof:
(a) any Person which owns directly or indirectly 10% or more of the
securities having ordinary voting power for the election of directors or other
members of the governing body of a Person or 10% or more of the partnership or
other ownership interests of a Person (other than as a limited partner of such
Person) shall be deemed to control such Person, (b) each director (or
comparable manager) of a Person shall be deemed to be an Affiliate of such
Person, and (c) each partnership or joint venture in which a Person is a
partner or joint venturer shall be deemed to be an Affiliate of such Person.


 


“Agent” means
Wells Fargo Bank, N.A., solely in its capacity as agent for the Lenders
hereunder, and any successor thereto.


 


“Agent’s Liens”
means the Liens granted by Borrower to Agent for the benefit of the Lender
Group under this Agreement or the other Loan Documents.


 


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


 


“Agreement” has
the meaning set forth in the preamble hereto.


 


“Applicable Prepayment
Premium” means, as of any date of determination, $150,000.


 


“Assignee” has the
meaning set forth in Section 14.1.


 


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


 


“Authorized Person”
means any officer or other employee of Borrower.


 


“Availability”
means, as of any date of determination, if such date is a Business Day, and
determined at the close of business on the immediately preceding Business Day,
if such date of determination is not a Business Day, the amount that Borrower
is entitled to borrow as Advances under Section 2.1 (after giving
effect to all then outstanding Obligations (other than Bank Products
Obligations) and all sublimits and reserves applicable hereunder).


 


“Bank Product
Agreements” means those certain cash management service agreements entered
into from time to time by Borrower or its Subsidiaries in connection with any
of the Bank Products.


 


“Bank Product
Obligations” means all obligations, liabilities, contingent reimbursement
obligations, fees, and expenses owing by Borrower or its Subsidiaries to Agent
or its Affiliates pursuant to or evidenced by the Bank Product Agreements and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to 


 


2

















 


become due, now
existing or hereafter arising, and including all such amounts that Borrower is
obligated to reimburse to Collateral Agent or any member of the Lender Group as
a result of Collateral Agent or such member of the Lender Group purchasing
participations or executing indemnities or reimbursement obligations  with respect to the Bank Products provided
to Borrower or its Subsidiaries pursuant to the Bank Product Agreements.


 


“Bank Products”
means any service or facility extended to Borrower or its Subsidiaries by Agent
or any Affiliate of Agent including: 
(a) credit cards, (b) credit card processing services,
(c) debit cards, (d) purchase cards, (e) ACH Transactions,
(f) cash management, including controlled disbursement, accounts or
services, or (g) Hedge Agreements.


 


“Bank Product Reserves”
means, as of any date of determination, the amount of reserves that Collateral
Agent has established (based upon Agent’s or its Affiliate’s reasonable
determination of the credit exposure in respect of then extant Bank Products)
for Bank Products then provided or outstanding.


 


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


 


“Base LIBOR Rate”
means the rate per annum, determined by Collateral Agent in accordance with its
customary procedures, and utilizing such electronic or other quotation sources
as it considers appropriate (rounded upwards, if necessary, to the next 1/16%),
on the basis of the rates at which Dollar deposits are offered to major banks
in the London interbank market on or about 11:00 a.m. (California time) 2
Business Days prior to the commencement of the applicable Interest Period, for
a term and in amounts comparable to the Interest Period and amount of the LIBOR
Rate Loan requested by Borrower in accordance with this Agreement, which
determination shall be conclusive in the absence of manifest error.


 


“Base Rate” means,
the rate of interest announced within Agent at its principal office in San Francisco
as its “prime rate”, with the understanding that the “prime rate” is one of
Agent’s base rates (not necessarily the lowest of such rates) and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Agent may
designate.


 


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


 


“Base Rate Margin”
means zero percentage points.


 


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


 


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


 


3

















 


“Books” means
Borrower’s and its Subsidiaries’ now owned or hereafter acquired books and
records (including all of its Records indicating, summarizing, or evidencing
its assets (including the Collateral) or liabilities, all of Borrower’s or its
Subsidiaries’ Records relating to its or their business operations or financial
condition, and all of its or their goods or General Intangibles related to such
information).


 


“Borrower” has the
meaning set forth in the preamble to this Agreement.


 


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


 


“Borrowing Base”
has the meaning set forth in Section 2.1.


 


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


 


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


 


“Capitalized Lease
Obligation” means any Indebtedness represented by obligations under a
Capital Lease.


 


“Cash Equivalents”
means (a) marketable direct obligations issued or unconditionally
guaranteed by the United States or issued by any agency thereof and backed
by the full faith and credit of the United States, in each case maturing
within 1 year from the date of acquisition thereof, (b) marketable direct
obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or
Moody’s, (c) commercial paper maturing no more than 270 days from the date
of acquisition thereof and, at the time of acquisition, having a rating of A-1
or P-1, or better, from S&P or Moody’s, and (d) certificates of
deposit or bankers’ acceptances maturing within 1 year from the date of acquisition
thereof either (i) issued by any bank organized under the laws of the
United States or any state thereof which bank has a rating of A or A2, or
better, from S&P or Moody’s, or (ii) certificates of deposit less than
or equal to $100,000 in the aggregate issued by any other bank insured by the
Federal Deposit Insurance Corporation.


 


“Century” means
Century Business Credit Corporation, a New York corporation.


 


“Certification of
Officers” means the Certification of Officers of Cutter & Buck Inc.,
duly executed and delivered by Borrower to Collateral Agent.


 


“Change of Control”
means (a) any “person” or “group” (within the meaning of Sections 13(d)
and 14(d) of the Exchange Act), becomes the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of 20%, or more, of
the Stock of Borrower 


 


4

















 


having the right
to vote for the election of members of the Board of Directors, or (b) a
majority of the members of the Board of Directors do not constitute Continuing
Directors, or (c) Borrower ceases to directly own and control 100% of the
outstanding capital Stock of each of its Subsidiaries extant as of the Closing
Date.


 


“Closing Date”
means the date of the making of the initial Advance (or other extension of
credit) hereunder or the date on which Collateral Agent sends Borrower a
written notice that each of the conditions precedent set forth in
Section 3.1 either have been satisfied or have been waived.


 


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


 


“Collateral” means
all of Borrower’s now owned or hereafter acquired right, title, and interest in
and to each of the following:


 


(a)                                  Accounts,


 


(b)                                 Books,


 


(c)                                  Equipment,


 


(d)                                 General
Intangibles,


 


(e)                                  Inventory,


 


(f)                                    Investment
Property,


 


(g)                                 Negotiable
Collateral,


 


(h)                                 money
or other assets of Borrower that now or hereafter come into the possession,
custody, or control of any member of the Lender Group, and


 


(i)                                     the
proceeds and products, whether tangible or intangible, of any of the foregoing,
including proceeds of insurance covering any or all of the foregoing, and any
and all Accounts, Books, Equipment, General Intangibles, Inventory, Investment
Property, Negotiable Collateral, Real Property, money, deposit accounts, or
other tangible or intangible property resulting from the sale, exchange,
collection, or other disposition of any of the foregoing, or any portion
thereof or interest therein, and the proceeds thereof.


 


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


 


“Collateral Agent”
means Century Business Credit Corporation, solely in its capacity as collateral
agent for the Lenders hereunder, and any successor thereto.


 


5

















 


“Collateral Agent’s
Account” means the account identified on Schedule A-1.


 


“Collateral Agent
Advances” has the meaning set forth in Section 2.3(e)(i).


 


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


 


“Commitment”
means, with respect to each Lender, its Commitment, and, with respect to all
Lenders, their Commitments, in each case as such Dollar amounts are set forth
beside such Lender’s name under the applicable heading on Schedule C-1
or on the signature page of the Assignment and Acceptance pursuant to which
such Lender became a Lender hereunder in accordance with the provisions of Section 14.1.


 


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


 


“Continuing Director”
means (a) any member of the Board of Directors who was a director (or
comparable manager) of Borrower on the Closing Date, and (b) any
individual who becomes a member of the Board of Directors after the Closing
Date if such individual was appointed or nominated for election to the Board of
Directors by a majority of the Continuing Directors, but excluding any such
individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of
Borrower (as such terms are used in Rule 14a-11 under the Exchange Act) and
whose initial assumption of office resulted from such contest or the settlement
thereof.


 


“Control Agreement”
means a control agreement, in form and substance satisfactory to Collateral
Agent, executed and delivered by Borrower, Collateral Agent, and the applicable
securities intermediary with respect to a Securities Account or bank with
respect to a deposit account.


 


“Credit Card Reserve”
means a reserve in the amount of $250,000 for credit card lines to be provided
to Borrower by Agent.


 


“Daily Balance”
means, with respect to each day during the term of this Agreement, the amount
of an Obligation owed at the end of such day.


 


“DDA” means any
checking or other demand deposit account maintained by Borrower.


 


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


 


“Defaulting Lender”
means any Lender that fails to make any Advance (or other extension of credit)
that it is required to make hereunder on the date that it is required to do so
hereunder.


 


6

















 


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


 


“Designated Account”
means that certain DDA of Borrower identified on Schedule D-1.


 


“Dilution” means,
as of any date of determination, a percentage, based upon the experience of the
immediately prior 90 days, that is the result of dividing the Dollar (or Dollar
equivalent) amount of (a) bad debt write-downs, discounts, advertising
allowances, credits, or other dilutive items with respect to the Accounts of
Borrower during such period, by (b) Borrower’s gross billings with respect to
Accounts during such period (excluding extraordinary items).


 


“Disbursement Letter”
means an instructional letter executed and delivered by Borrower to Collateral
Agent regarding the extensions of credit to be made on the Closing Date, the
form and substance of which is satisfactory to Collateral Agent.


 


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


 


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


 


(a)                                  Accounts
that the Account Debtor has failed to pay within 120 days of original invoice
date or Accounts with selling terms of more than 60 days,


 


(b)                                 Accounts
owed by an Account Debtor (or its Affiliates) where 25% or more of all Accounts
owed by that Account Debtor (or its Affiliates) are deemed ineligible under
clause (a) above,


 


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


 


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


 


(e)                                  Accounts
that are not payable in Dollars,


 


7

















 


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


 


(g)                                 Accounts
with respect to which the Account Debtor is either (i) the United States
or any department, agency, or instrumentality of the United States
(exclusive, however, of Accounts with respect to which Borrower has complied,
to the reasonable satisfaction of Collateral Agent, with the Assignment of
Claims Act, 31 USC § 3727), or (ii) any state of the
United States (exclusive, however, of (y) Accounts owed by any state that
does not have a statutory counterpart to the Assignment of Claims Act, or (z)
Accounts owed by any state that does have a statutory counterpart to the
Assignment of Claims Act as to which Borrower has complied to Collateral
Agent’s satisfaction),


 


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


 


(i)                                     Accounts
with respect to an Account Debtor whose total obligations owing to Borrower
exceed 20% (such percentage as applied to a particular Account Debtor being
subject to reduction by Collateral Agent in its Permitted Discretion if the
creditworthiness of such Account Debtor deteriorates) of all Eligible Accounts,
to the extent of the obligations owing by such Account Debtor in excess of such
percentage,


 


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


 


(k)                                  Accounts
with respect to which the Account Debtor is located in the states of New
Jersey, Minnesota, or West Virginia (or any other state that requires a
creditor to file a business activity report or similar document in order to
bring suit or otherwise enforce its remedies against such Account Debtor in the
courts or through any judicial process of such state), unless Borrower has
qualified to do business in New Jersey, Minnesota, West Virginia, or such other
states, or has filed a business activities report with the applicable division
of taxation, the department of revenue, or with such other state offices, as
appropriate, for the then-current year, or is exempt from such filing
requirement,


 


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


 


8

















 


(m)                               Accounts
that are not subject to a valid and perfected first priority Agent’s Lien,


 


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


 


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


 


“Eligible In-Transit
Inventory” means those items of Inventory that do not qualify as Eligible
Landed Inventory solely because they are not in a location set forth on Schedule E-1
or in transit among such locations, but as to which (a) the Inventory was
the subject of a Qualified Import Letter of Credit, (b) such Inventory
currently is in transit (whether by vessel, air, or land) from a location
outside of the continental United States to a location set forth on Schedule E-1
that is the subject of a Collateral Access Agreement, (c) title to such
Inventory has passed to Borrower, (d) such Inventory is insured against
types of loss, damage, hazards, and risks, and in amounts, satisfactory to
Collateral Agent in its Permitted Discretion, (e) such Inventory either
(1) is the subject of a negotiable bill of lading (x) that is consigned to
Collateral Agent (either directly or by means of endorsements), (y) that was
issued by the carrier respecting the subject Inventory, and (z) that either is
(i) in the possession of Collateral Agent or a customs broker (in each
case in the State of Washington), or (ii) the subject of a telefacsimile
copy that Collateral Agent has received from the Underlying Issuer which issued
the Underlying Letter of Credit and as to which Collateral Agent also has
received a confirmation from such Underlying Issuer that such document is
in-transit by air-courier to Collateral Agent or a customs broker (in each
case, in the State of Washington), or (2) is the subject of a negotiable cargo
receipt and is not the subject of a bill of lading (other than a negotiable
bill of lading consigned to, and in the possession of, a consolidator or
Collateral Agent, or their respective agents) and such negotiable cargo receipt
is (x) consigned to Collateral Agent (either directly or by means of
endorsements), (y) that was issued by a consolidator respecting the subject
Inventory, (z) that  either is
(i) in the possession of Collateral Agent or a customs broker (in each
case in the State of Washington), or (ii) the subject of a telefacsimile
copy that Collateral Agent has received from the Underlying Issuer which issued
the Underlying Letter of Credit and as to which Collateral Agent also has
received a confirmation from such Underlying Issuer that such document is
in-transit by air-courier to Collateral Agent or a customs broker (in each
case, in the State of Washington), (f) Borrower has provided a certificate
to Collateral Agent that certifies that, to the best knowledge of Borrower,
such Inventory meets all of Borrower’s representations and warranties contained
in the Loan Documents concerning Eligible Inventory, that it knows of no reason
why such Inventory would not be accepted by Borrower when it arrives in
Washington, and that the shipment as evidenced by the documents conforms to the
related order documents, and (g) the Underlying Letter of Credit has been
drawn upon in full and the Underlying Issuer has honored such drawing and
Collateral Agent has honored its obligations to the Underlying Issuer under the
applicable Qualified Import Letter of Credit.


 


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


 


9

















 


“Eligible Landed
Inventory” means Inventory consisting of first quality finished goods held
for sale in the ordinary course of Borrower’s business located at one of
Borrower’s business locations set forth on Schedule E-1 (or
in-transit between any such locations), that complies with each of the
representations and warranties respecting Eligible Inventory made by Borrower
in the Loan Documents, and that is not excluded as ineligible by virtue of the
one or more of the criteria set forth below; provided, however,
that such criteria may be fixed and revised from time to time by Collateral
Agent in Collateral Agent’s Permitted Discretion to address the results of any
audit or appraisal performed by Collateral Agent from time to time after the
Closing Date.  In determining the amount
to be so included, Inventory shall be valued at the lower of cost or market on
a basis consistent with Borrower’s historical accounting practices.  An item of Inventory shall not be included
in Eligible Inventory if:


 


(a)                                  it
is retail inventory;


 


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


 


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


 


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


 


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


 


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


 


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


 


“Eligible Transferee”
means (a) a commercial bank organized under the laws of the
United States, or any state thereof, and having total assets in excess of
$250,000,000, (b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company,
insurance company, or other financial institution or fund that is engaged in
making, purchasing, or otherwise investing in commercial loans in the ordinary
course of its business and having (together with its Affiliates) total assets
in excess of $250,000,000, (d) any Affiliate (other than individuals) of a
Lender that was party hereto as of the Closing Date, (e) so long as no
Event of Default has occurred and is continuing, any other Person approved by
Collateral Agent and Borrower, and (f) during the continuation of an Event
of Default, any other Person approved by Collateral Agent.


 


10

















 


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


 


“Environmental Law”
means any applicable federal, state, provincial, foreign or local statute, law,
rule, regulation, ordinance, code, binding and enforceable guideline, binding
and enforceable written policy, or rule of common law now or hereafter in
effect and in each case as amended, or any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment, to the extent binding on Borrower, relating to the
environment, employee health and safety, or Hazardous Materials, including
CERCLA; RCRA; the Federal Water Pollution Control Act, 33 USC § 1251 et
seq; the Toxic Substances Control Act, 15 USC, § 2601 et  seq;
the Clean Air Act, 42 USC § 7401 et  seq.; the Safe
Drinking Water Act, 42 USC. § 3803 et  seq.; the Oil
Pollution Act of 1990, 33 USC. § 2701 et  seq.; the
Emergency Planning and the Community Right-to-Know Act of 1986, 42 USC.
§ 11001 et  seq.; the Hazardous Material Transportation Act,
49 USC § 1801 et  seq.; and the Occupational Safety and
Health Act, 29 USC. §651 et  seq. (to the extent it regulates
occupational exposure to Hazardous Materials); any state and local or foreign
counterparts or equivalents, in each case as amended from time to time.


 


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


 


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


 


“Equipment” means
all of Borrower’s now owned or hereafter acquired right, title, and interest
with respect to equipment, machinery, machine tools, motors, furniture,
furnishings, fixtures, vehicles (including motor vehicles), tools, parts, goods
(other than consumer goods, farm products, or Inventory), wherever located,
including all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.


 


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


 


“ERISA Affiliate”
means (a) any Person subject to ERISA whose employees are treated as
employed by the same employer as the employees of Borrower under IRC
Section 414(b), (b) any trade or business subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), 


 


11

















 


(c) solely
for purposes of Section 302 of ERISA and Section 412 of the IRC, any
organization subject to ERISA that is a member of an affiliated service group
of which Borrower is a member under IRC Section 414(m), or (d) solely
for purposes of Section 302 of ERISA and Section 412 of the IRC, any
Person subject to ERISA that is a party to an arrangement with Borrower and
whose employees are aggregated with the employees of Borrower under IRC
Section 414(o).


 


“Event of Default”
has the meaning set forth in Section 8.


 


“Excess Availability”
means the amount, as of the date any determination thereof is to be made, equal
to Availability minus the aggregate amount, if any, of all trade payables of
Borrower aged in excess of historical levels with respect thereto and all book
overdrafts in excess of historical practices with respect thereto, in each case
as determined by Collateral Agent in its Permitted Discretion.


 


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


 


“Existing Lender”
means Washington Mutual Bank.


 


“FEIN” means
Federal Employer Identification Number.


 


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


 


“Funding Losses”
has the meaning set forth in Section 2.13(b)(ii).


 


“GAAP” means
generally accepted accounting principles as in effect from time to time in the
United States, consistently applied.


 


“General Intangibles”
means all of Borrower’s now owned or hereafter acquired right, title, and
interest with respect to general intangibles (including payment intangibles,
contract rights, rights to payment, rights arising under common law, statutes,
or regulations, choses or things in action, goodwill, patents, trade names,
trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
rights to payment and other rights under any royalty or licensing agreements,
infringement claims, computer programs, information contained on computer disks
or tapes, software, literature, reports, catalogs, money, deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims), and any and all
supporting obligations in respect thereof, and any other personal property
other than goods, Accounts, Investment Property, and Negotiable Collateral.


 


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


 


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


 


12

















 


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


 


“Hedge Agreement”
means any and all transactions, agreements, or documents now existing or hereafter
entered into between Borrower or its Subsidiaries and Agent or its Affiliates,
which provide 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
Borrower’s or its Subsidiaries’ exposure to fluctuations in interest or
exchange rates, loan, credit exchange, security or currency valuations or
commodity prices.


 


“Indebtedness”
means (a) all obligations for borrowed money, (b) all obligations
evidenced by bonds, debentures, notes, or other similar instruments and all
reimbursement or other obligations in respect of letters of credit, bankers
acceptances, interest rate swaps, or other financial products, (c) all
obligations under Capital Leases, (d) all obligations or liabilities of
others secured by a Lien on any asset of Borrower or its Subsidiaries,
irrespective of whether such obligation or liability is assumed, (e) all
obligations for the deferred purchase price of assets (other than trade debt
incurred in the ordinary course of business and repayable in accordance with
customary trade practices), and (f) any obligation guaranteeing or
intended to guarantee (whether directly or indirectly guaranteed, endorsed,
co-made, discounted, or sold with recourse) any obligation of any other Person.


 


“Indemnified
Liabilities” has the meaning set forth in Section 11.3.


 


“Indemnified Person”
has the meaning set forth in Section 11.3.


 


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


 


“Intangible Assets”
means, with respect to any Person, that portion of the book value of all of
such Person’s assets that would be treated as intangibles under GAAP.


 


“Interest Period”
means, with respect to each LIBOR Rate Loan, a period commencing on the date of
the making of such LIBOR Rate Loan and ending 1, 2, or 3 months thereafter; provided,
however, that (a) if any Interest Period would end on a day that is
not a 


 


13

















 


Business Day, such
Interest Period shall be extended (subject to clauses (c)-(e) below) to the
next succeeding Business Day, (b) interest shall accrue at the applicable
rate based upon the LIBOR Rate from and including the first day of each
Interest Period to, but excluding, the day on which any Interest Period
expires, (c) any Interest Period that would end on a day that is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Business Day, (d) with respect to
an Interest Period that begins on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period), the Interest Period shall end on the
last Business Day of the calendar month that is 1, 2, or 3 months after the
date on which the Interest Period began, as applicable, and (e) Borrower
may not elect an Interest Period which will end after the Maturity Date.


 


“IP Security Agreement”
means an intellectual property security agreement executed and delivered by
Borrower and Collateral Agent, the form and substance of which is satisfactory
to Collateral Agent.


 


“Inventory” means
all Borrower’s now owned or hereafter acquired right, title, and interest with
respect to inventory, including goods held for sale or lease or to be furnished
under a contract of service, goods that are leased by Borrower as lessor, goods
that are furnished by Borrower under a contract of service, and raw materials,
work in process, or materials used or consumed in Borrower’s business.


 


“Inventory Reserves”
means reserves (determined from time to time by Collateral Agent in its
Permitted Discretion) for (a) the estimated costs relating to unpaid
freight charges, warehousing or storage charges, taxes, duties, and other
similar unpaid costs associated with the acquisition of Eligible In-Transit
Inventory by Borrower, plus (b) the estimated reclamation claims of unpaid
sellers of Inventory sold to Borrower.


 


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


 


“Investment Property”
means all of Borrower’s now owned or hereafter acquired right, title, and
interest with respect to “investment property” as that term is defined in the
Code, and any and all supporting obligations in respect thereof.


 


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


 


“Issuing Lender”
means Collateral Agent, in its capacity as a Lender or any other Lender that,
at the request of Borrower and with the consent of Collateral Agent agrees, in
such Lender’s sole discretion, to become an Issuing Lender for the purpose of
issuing L/Cs or L/C Undertakings or Acceptances pursuant to Section 2.12.


 


14

















 


“L/C” has the
meaning set forth in Section 2.12(a).


 


“L/C Disbursement”
means a payment made by the Issuing Lender pursuant to a Letter of Credit.


 


“L/C Undertaking”
has the meaning set forth in Section 2.12(a).


 


“Lender” and “Lenders”
have the respective meanings set forth in the preamble to this Agreement, and
shall include any other Person made a party to this Agreement in accordance
with the provisions of Section 14.1.


 


“Lender Group”
means, individually and collectively, each of the Lenders (including the Issuing
Lender), Collateral Agent and Agent.


 


“Lender Group Expenses”
means all (a) costs or expenses (including taxes, and insurance premiums)
required to be paid by Borrower under any of the Loan Documents that are paid
or incurred by the Lender Group, (b) fees or charges paid or incurred by
Collateral Agent in connection with the Lender Group’s transactions with
Borrower, including, fees or charges for photocopying, notarization, couriers
and messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, appraisal (including periodic Collateral
appraisals or business valuations to the extent of the fees and charges (and up
to the amount of any limitation) contained in this Agreement), real estate
surveys, real estate title policies and endorsements, and environmental audits,
(c) costs and expenses incurred by Collateral Agent in the disbursement of
funds to Borrower (by wire transfer or otherwise), (d) charges paid or
incurred by Collateral Agent resulting from the dishonor of checks,
(e) reasonable costs and expenses paid or incurred by the Lender Group to
correct any default or enforce any provision of the Loan Documents, or in
gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated, (f) audit
fees and expenses of Collateral Agent related to audit examinations of the
Books to the extent of the fees and charges (and up to the amount of any
limitation) contained in this Agreement, (g) reasonable costs and expenses
of third party claims or any other suit paid or incurred by the Lender Group in
enforcing or defending the Loan Documents or in connection with the
transactions contemplated by the Loan Documents or the Lender Group’s
relationship with Borrower or any guarantor of the Obligations,
(h) Collateral Agent’s and each Lender’s reasonable fees and expenses
(including attorneys fees) incurred in advising, structuring, drafting,
reviewing, administering, or amending the Loan Documents, and
(i) Collateral Agent’s and each Lender’s reasonable fees and expenses
(including attorneys fees) incurred in terminating, enforcing (including
attorneys fees and expenses incurred in connection with a “workout,” a
“restructuring,” or an Insolvency Proceeding concerning Borrower or in
exercising rights or remedies under the Loan Documents), or defending the Loan
Documents, irrespective of whether suit is brought, or in taking any Remedial
Action concerning the Collateral.


 


15

















 


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


 


“Letter of Credit”
means an L/C or an L/C Undertaking, as the context requires.


 


“Letter of Credit
Usage” means, as of any date of determination, the aggregate undrawn amount
of all outstanding Letters of Credit plus 100% of the amount of outstanding
time drafts accepted by an Underlying Issuer as a result of drawings under
Underlying Letters of Credit, including Acceptances.


 


“LIBOR Deadline”
has the meaning set forth in Section 2.13(b)(i).


 


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


 


“LIBOR Rate”
means, for each Interest Period for each LIBOR Rate Loan, the rate per annum
determined by Collateral Agent (rounded upwards, if necessary, to the next
1/16%) by dividing
(a) the Base LIBOR Rate for such Interest Period, by (b) 100% minus
the Reserve Percentage.  The LIBOR Rate
shall be adjusted on and as of the effective day of any change in the Reserve
Percentage.


 


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


 


“LIBOR Rate Margin”
means two and three quarters percentage points (2.75%).


 


“Lien” means any
interest in an asset securing an obligation owed to, or a claim by, any Person
other than the owner of the asset, whether such interest shall be based on the
common law, statute, or contract, whether such interest shall be recorded or
perfected, and whether such interest shall be contingent upon the occurrence of
some future event or events or the existence of some future circumstance or
circumstances, including the lien or security interest arising from a mortgage,
deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, security agreement, conditional sale or trust receipt, or from a
lease, consignment, or bailment for security purposes and also including
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases, and other title exceptions and encumbrances
affecting Real Property.


 


“Loan Account” has
the meaning set forth in Section 2.10.


 


“Loan Documents”
means this Agreement, the Bank Product Agreements, the Treasury Management
Agreements, the Control Agreements, the IP Security Agreement, the Disbursement
Letter, the Certification of Officers, the Letters of Credit, the Officers’
Certificate, any note or notes executed by Borrower in connection with this
Agreement and payable to a member of the Lender Group, and any other agreement
entered into, now or in the future, by Borrower and the Lender Group in
connection with this Agreement.


 


“Material Adverse
Change” means (a) a material adverse change in the business, prospects,
operations, results of operations, assets, liabilities or condition (financial
or otherwise) 


 


16

















 


of Borrower,
(b) a material impairment of Borrower’s ability to perform its obligations
under the Loan Documents to which it is a party or of the Lender Group’s
ability to enforce the Obligations or realize upon the Collateral, or
(c) a material impairment of the enforceability or priority of the Agent’s
Liens with respect to the Collateral as a result of an action or failure to act
on the part of Borrower.


 


“Maturity Date”
has the meaning set forth in Section 3.4.


 


“Maximum Revolver
Amount” means Thirty-Five Million Dollars ($35,000,000).


 


“Negotiable Collateral”
means all of Borrower’s now owned and hereafter acquired right, title, and
interest with respect to letters of credit, letter of credit rights,
instruments, promissory notes, drafts, documents, and chattel paper (including
electronic chattel paper and tangible chattel paper), and any and all supporting
obligations in respect thereof.


 


“Obligations”
(a) means all loans, Advances, debts, principal, interest (including any
interest that, but for the provisions of the Bankruptcy Code, would have
accrued), contingent reimbursement obligations with respect to outstanding
Letters of Credit, premiums, liabilities (including all amounts charged to
Borrower’s Loan Account pursuant hereto), obligations, fees, charges, costs,
Lender Group Expenses (including any fees or expenses that, but for the
provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties of any kind and description owing by Borrower
to the Lender Group pursuant to or evidenced by the Loan Documents and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter
arising, and including all interest not paid when due and all Lender Group
Expenses that Borrower is required to pay or reimburse by the Loan Documents, by
law, or otherwise, and (b) all Bank Product Obligations.  Any reference in this Agreement or in the
Loan Documents to the Obligations shall include all amendments, changes,
extensions, modifications, renewals replacements, substitutions, and
supplements, thereto and thereof, as applicable, both prior and subsequent to
any Insolvency Proceeding.


 


“Originating Lender”
has the meaning set forth in Section 14.1(e).


 


“Overadvance” has
the meaning set forth in Section 2.5.


 


“Participant” has
the meaning set forth in Section 14.1(e).


 


“Pay-Off Letter”
means a letter, in form and substance satisfactory to Collateral Agent, from
Existing Lender to Collateral Agent respecting the amount necessary to repay in
full all of the obligations of Borrower owing to Existing Lender and obtain a
release of all of the Liens existing in favor of Existing Lender in and to the
assets of Borrower.


 


“Permitted Discretion”
means a determination made in good faith and in the exercise of reasonable
(from the perspective of a secured asset-based lender) business judgment.


 


“Permitted
Dispositions” means (a) sales or other dispositions by Borrower or its
Subsidiaries of Equipment that is substantially worn, damaged, or obsolete in
the ordinary course of business, (b) sales by Borrower or its Subsidiaries
of Inventory to buyers in the ordinary 


 


17

















 


course of
business, (c) the use or transfer of money or Cash Equivalents by Borrower
or its Subsidiaries in a manner that is not prohibited by the terms of this
Agreement or the other Loan Documents, and (d) the licensing by Borrower
or its Subsidiaries, on a non-exclusive basis, of patents, trademarks,
copyrights, and other intellectual property rights in the ordinary course of
business.


 


“Permitted Investments”
means (a) investments in Cash Equivalents, (b) investments in
negotiable instruments for collection, and (c) advances made in connection
with purchases of goods or services in the ordinary course of business.


 


“Permitted Liens”
means (a) Liens held by Agent for the benefit of Collateral Agent and the
Lenders, (b) Liens for unpaid taxes that either (i) are not yet
delinquent, or (ii) do not constitute an Event of Default hereunder and
are the subject of Permitted Protests, (c) Liens set forth on Schedule P-1,
(d) the interests of lessors under operating leases, (e) purchase
money Liens or the interests of lessors under Capital Leases to the extent that
such Liens or interests secure Permitted Purchase Money Indebtedness and so
long as such Lien attaches only to the asset purchased or acquired and the
proceeds thereof, (f) Liens arising by operation of law in favor of
warehousemen, landlords, carriers, mechanics, materialmen, laborers, or
suppliers, incurred in the ordinary course of business and not in connection
with the borrowing of money, and which Liens either (i) are for sums not
yet delinquent, or (ii) are the subject of Permitted Protests,
(g) Liens arising from deposits made in connection with obtaining worker’s
compensation or other unemployment insurance, (h) Liens or deposits to
secure performance of bids, tenders, or leases incurred in the ordinary course
of business and not in connection with the borrowing of money, (i) Liens
granted as security for surety or appeal bonds in connection with obtaining
such bonds in the ordinary course of business, (j) Liens resulting from
any judgment or award that is not an Event of Default hereunder, (k) with
respect to any Real Property, easements, rights of way, and zoning restrictions
that do not materially interfere with or impair the use or operation thereof.


 


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


 


“Permitted Purchase
Money Indebtedness” means, as of any date of determination, Purchase Money
Indebtedness incurred after the Closing Date in an aggregate principal amount
outstanding at any one time not in excess of $5,000,000.


 


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


 


18

















 


“Personal Property
Collateral” means all Collateral other than Real Property.


 


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


 


“Pro Rata Share” means:


 


(a)  with
respect to a Lender’s obligation to make Advances and receive payments of
principal, interest, fees, costs, and expenses with respect thereto, the
percentage obtained by dividing (i) such Lender’s Commitment, by
(ii) the aggregate Commitments of all Lenders,


 


(b)  with
respect to a Lender’s obligation to participate in Letters of Credit and
Acceptances, to reimburse the Issuing Lender, and to receive payments of fees
with respect thereto, the percentage obtained by dividing (i) such Lender’s
Commitment, by (ii) the aggregate Commitments of all Lenders,


 


(c)  with
respect to all other matters (including the indemnification obligations arising
under Section 16.7), the percentage obtained by dividing
(i) such Lender’s Commitment, by (ii) the aggregate amount of
Commitments of all Lenders; provided, however, that, in each
case, in the event all Commitments have been terminated, Pro Rata Share shall
be determined according to the Commitments in effect immediately prior to such
termination.


 


“Purchase Money
Indebtedness” means Indebtedness (other than the Obligations, but including
Capitalized Lease Obligations), incurred at the time of, or within 20 days
after, the acquisition of any fixed assets for the purpose of financing all or
any part of the acquisition cost thereof.


 


“Qualified Import
Letter of Credit” means a Letter of Credit that (a) is issued to
facilitate the purchase by Borrower of Eligible Inventory, (b) is in form
and substance acceptable to Collateral Agent, and (c) is issued to support
an Underlying Letter of Credit that only is drawable by the beneficiary thereof
by the presentation of, among other documents, either (i) a negotiable
bill of lading that is consigned to Collateral Agent (either directly or by
means of endorsements) and that was issued by the carrier respecting the
subject Eligible Inventory, or (ii) a negotiable cargo receipt that is
consigned to Collateral Agent (either directly or by means of endorsements) and
that was issued by a consolidator respecting the subject Eligible Inventory; provided,
however, that, in the latter case, no bill of lading shall have been
issued by the carrier (other than a bill of lading consigned to the
consolidator or to Collateral Agent).


 


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


 


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


 


“Remedial Action”
means all actions taken to (a) clean up, remove, remediate, contain,
treat, monitor, assess, evaluate, or in any way address Hazardous Materials in
the indoor 


 


19

















 


or outdoor
environment, (b) prevent or minimize a release or threatened release of
Hazardous Materials so they do not migrate or endanger or threaten to endanger
public health or welfare or the indoor or outdoor environment, (c) perform
any pre-remedial studies, investigations, or post-remedial operation and
maintenance activities, or (d) conduct any other actions authorized by 42
USC § 9601.


 


“Rent Reserve”
means an amount equal to three (3) months rent for each of the leased locations
where Borrower’s Inventory is located.


 


“Report” has the
meaning set forth in Section 16.17.


 


“Required Availability”
means Excess Availability in an amount of not less than $5,000,000.


 


“Required Lenders”
means, at any time, Lenders whose Pro Rata Shares aggregate more than 50% of
the Commitments, or if the Commitments have been terminated irrevocably, more
than 50% of the Obligations (other than Bank Product Obligations) then
outstanding.


 


“Reserve Percentage”
means, on any day, for any Lender, the maximum percentage prescribed by the
Board of Governors of the Federal Reserve System (or any successor Governmental
Authority) for determining the reserve requirements (including any basic,
supplemental, marginal, or emergency reserves) that are in effect on such date
with respect to eurocurrency funding (currently referred to as “eurocurrency
liabilities”) of that Lender, but so long as such Lender is not required or
directed under applicable regulations to maintain such reserves, the Reserve
Percentage shall be zero.


 


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


 


“Risk Participation
Liability” means, as to each Letter of Credit and Acceptance, all
reimbursement obligations of Borrower to the Issuing Lender with respect to an
L/C Undertaking or Acceptance, consisting of (a) the amount available to
be drawn or which may become available to be drawn, (b) all amounts that
have been paid by the Issuing Lender to the Underlying Issuer to the extent not
reimbursed by Borrower, whether by the making of an Advance or otherwise, and
(c) all accrued and unpaid interest, fees, and expenses payable with
respect thereto.


 


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


 


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


 


“Settlement” has
the meaning set forth in Section 2.3(f)(i).


 


“Settlement Date”
has the meaning set forth in Section 2.3(f)(i).


 


20

















 


“Solvent” means,
with respect to any Person on a particular date, that such Person is not
insolvent (as such term is defined in the Uniform Fraudulent Transfer Act).


 


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


 


“Swing Lender”
means Collateral Agent, as a Lender, or any other Lender that, at the request
of Borrower and with the consent of Collateral Agent agrees, in such Lender’s
sole discretion, to become the Swing Lender hereunder.


 


“Swing Loan” has
the meaning set forth in Section 2.3(d)(i).


 


“Tangible Net Worth”
means, as of any date of determination, the result of (a) Borrower’s total
stockholder’s equity, minus (b) the sum of (i) all
Intangible Assets of Borrower, and (ii) all amounts due to Borrower from
Affiliates, as of such date.


 


“Taxes” has the
meaning set forth in Section 16.11.


 


“Treasury Management
Account” has the meaning set forth in Section 2.7(a).


 


“Treasury Management
Agreements” means those certain cash management service agreements, in form
and substance satisfactory to Collateral Agent, each of which is among
Borrower, Collateral Agent, and the Agent.


 


“Underlying Issuer”
means a third Person which is the beneficiary of an L/C Undertaking and which
has issued a letter of credit at the request of the Issuing Lender for the
benefit of Borrower and, in the case of a proposed Qualified Import Letter of
Credit, has agreed, in writing, to hold documents of title as agent for
Collateral Agent.


 


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


 


“Voidable Transfer”
has the meaning set forth in Section 17.7.


 


“Working Capital”
means, as of any date of determination, the result of Borrower’s current assets
less Borrower’s current liabilities, as of such date.


 


1.2                               Accounting Terms.  All accounting terms not specifically
defined herein shall be construed in accordance with GAAP.  When used herein, the term “financial
statements” shall include the notes and schedules thereto.  Whenever the term “Borrower” is used in
respect of a financial covenant or a related definition, it shall be understood
to mean Borrower and its Subsidiaries on a consolidated basis unless the
context clearly requires otherwise.


 


1.3                               Code.  Any terms used in this Agreement that are
defined in the Code shall be construed and defined as set forth in the Code
unless otherwise defined herein.


 


21

















 


1.4                               Construction. 
Unless the context of this Agreement or any other Loan Document clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, the term “including” is not limiting, and
the term “or” has, except where otherwise indicated, the inclusive meaning
represented by the phrase “and/or.”  The
words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this
Agreement or any other Loan Document refer to this Agreement or such other Loan
Document, as the case may be, as a whole and not to any particular provision of
this Agreement or such other Loan Document, as the case may be.  Section, subsection, clause, schedule, and
exhibit references herein are to this Agreement unless otherwise
specified.  Any reference in this
Agreement or in the other Loan Documents to any agreement, instrument, or
document shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and
supplements, thereto and thereof, as applicable (subject to any restrictions on
such alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements set forth herein).  Any reference herein to any Person shall be
construed to include such Person’s successors and assigns.  Any requirement of a writing contained
herein or in the other Loan Documents shall be satisfied by the transmission of
a Record and any Record transmitted shall constitute a representation and
warranty as to the accuracy and completeness of the information contained
therein.


 


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


 


2.                                      LOAN AND TERMS OF PAYMENT.


 


2.1                               Revolver Advances.


 


(a)                                  Subject
to the terms and conditions of this Agreement, and during the term of this
Agreement, each Lender agrees (severally, not jointly or jointly and severally)
to make advances (“Advances”) to Borrower in an amount at any one time
outstanding not to exceed such Lender’s Pro Rata Share of an amount equal to the lesser
of (i) the Maximum Revolver Amount less the Letter of Credit
Usage, or (ii) the Borrowing Base less the Adjusted Letter of Credit Usage
and the aggregate amount of the Inventory Reserves.  For purposes of this Agreement, “Borrowing Base,” as of
any date of determination, shall mean the result of:


 


(x)                                   85%
of the amount of Eligible Accounts, less the Credit Card Reserve, plus


 


(y)                                 60%
of the value of Eligible Inventory, minus


 


(z)                                   the
sum of (i) the Bank Products Reserve, (ii) the Rent Reserve, and
(iii) the aggregate amount of reserves, if any, established by Collateral
Agent under Section 2.1(b).


 


(b)                                 Anything
to the contrary in this Section 2.1 notwithstanding, Collateral
Agent shall have the right to establish reserves in such amounts, and with
respect to such matters, as Collateral Agent in its Permitted Discretion shall
deem necessary or appropriate, against the Borrowing Base, including reserves
with respect to (i) Dilution exceeding an acceptable percentage,
(ii) sums that Borrower is required to pay (such as taxes, assessments,
insurance 


 


22

















 


premiums, or, in the case
of leased assets, rents or other amounts payable under such leases) and has
failed to pay under any Section of this Agreement or any other Loan
Document, and (iii) amounts owing by Borrower to any Person to the extent
secured by a Lien on, or trust over, any of the Collateral (other than any
existing Permitted Lien set forth on Schedule P-1 which is
specifically identified thereon as entitled to have priority over the Agent’s
Liens), which Lien or trust, in the Permitted Discretion of Collateral Agent
likely would have a priority superior to the Agent’s Liens (such as Liens or
trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen,
laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales,
or other taxes where given priority under applicable law) in and to such item
of the Collateral.


 


(c)                                  The
Lenders shall have no obligation to make additional Advances hereunder to the
extent such additional Advances would cause the Revolver Usage to exceed the
Maximum Revolver Amount.


 


(d)                                 Amounts
borrowed pursuant to this Section may be repaid and, subject to the terms
and conditions of this Agreement, reborrowed at any time during the term of
this Agreement.


 


2.2                               Intentionally Omitted.


 


2.3                               Borrowing Procedures and Settlements.


 


(a)                                  Procedure
for Borrowing.  Each
Borrowing shall be made by an irrevocable written request by an Authorized
Person delivered to Collateral Agent (which notice must be received by
Collateral Agent no later than 10:00 a.m. (California time) on the Business Day
prior to the date that is the requested Funding Date in the case of a request
for an Advance specifying (i) the amount of such Borrowing, and
(ii) the requested Funding Date, which shall be a Business Day; provided,
however, that in the case of a request for Swing Loan in an amount of
$2,000,000, or less, such notice will be timely received if it is received by
Collateral Agent no later than 10:00 a.m. (California time) on the Business Day
that is the requested Funding Date) specifying (i) the amount of such
Borrowing, and (ii) the requested Funding Date, which shall be a Business
Day.  At Collateral Agent’s election, in
lieu of delivering the above-described written request, any Authorized Person
may give Collateral Agent telephonic notice of such request by the required
time, with such telephonic notice to be confirmed in writing within 24 hours of
the giving of such notice.


 


(b)                                 Collateral
Agent’s Election.  Promptly
after receipt of a request for a Borrowing pursuant to Section 2.3(a),
Collateral Agent shall elect, in its discretion, (i) to have the terms of Section 2.3(c)
apply to such requested Borrowing, or (ii) if the Borrowing is for an
Advance, to request Swing Lender to make a Swing Loan pursuant to the terms of Section 2.3(d)
in the amount of the requested Borrowing; provided, however, that
if Swing Lender declines in its sole discretion to make a Swing Loan pursuant
to Section 2.3(d), Collateral Agent shall elect to have the terms
of Section 2.3(c) apply to such requested Borrowing.


 


(c)                                  Making of
Advances.


 


(i)                                     In
the event that Collateral Agent shall elect to have the terms of this Section 2.3(c)
apply to a requested Borrowing as described in 


 


23

















 


Section 2.3(b),
then promptly after receipt of a request for a Borrowing pursuant to Section 2.3(a),
Collateral Agent shall notify the Lenders, not later than 1:00 p.m. (California
time) on the Business Day immediately preceding the Funding Date applicable
thereto, by telecopy, telephone, or other similar form of transmission, of the
requested Borrowing.  Each Lender shall
make the amount of such Lender’s Pro Rata Share of the requested Borrowing
available to Collateral Agent in immediately available funds, to Collateral
Agent’s Account, not later than 10:00 a.m. (California time) on the Funding
Date applicable thereto.  After
Collateral Agent’s receipt of the proceeds of such Advances, upon satisfaction
of the applicable conditions precedent set forth in Section 3
hereof, Collateral Agent shall make the proceeds thereof available to Borrower
on the applicable Funding Date by transferring immediately available funds
equal to such proceeds received by Collateral Agent to Borrower’s Designated
Account; provided, however, that, subject to the provisions of Section 2.3(i),
Collateral Agent shall not request any Lender to make, and no Lender shall have
the obligation to make, any Advance if Collateral Agent shall have actual
knowledge that (1) one or more of the applicable conditions precedent set forth
in Section 3 will not be satisfied on the requested Funding Date
for the applicable Borrowing unless such condition has been waived, or (2) the
requested Borrowing would exceed the Availability on such Funding Date.


 


(ii)                                  Unless
Collateral Agent receives notice from a Lender on or prior to the Closing Date
or, with respect to any Borrowing after the Closing Date, at least 1 Business
Day prior to the date of such Borrowing, that such Lender will not make
available as and when required hereunder to Collateral Agent for the account of
Borrower the amount of that Lender’s Pro Rata Share of the Borrowing,
Collateral Agent may assume that each Lender has made or will make such amount
available to Collateral Agent in immediately available funds on the Funding
Date and Collateral Agent may (but shall not be so required), in reliance upon
such assumption, make available to Borrower on such date a corresponding
amount.  If and to the extent any Lender
shall not have made its full amount available to Collateral Agent in
immediately available funds and Collateral Agent in such circumstances has made
available to Borrower such amount, that Lender shall on the Business Day
following such Funding Date make such amount available to Collateral Agent,
together with interest at the Defaulting Lender Rate for each day during such
period.  A notice submitted by
Collateral Agent to any Lender with respect to amounts owing under this
subsection shall be conclusive, absent manifest error.  If such amount is so made available, such
payment to Collateral Agent shall constitute such Lender’s Advance on the date
of Borrowing for all purposes of this Agreement.  If such amount is not made available to Collateral Agent on the
Business Day following the Funding Date, Collateral Agent will notify Borrower
of such failure to fund and, upon demand by Collateral Agent, Borrower shall
pay such amount to 


 


24

















 


Collateral Agent for
Collateral Agent’s account, together with interest thereon for each day elapsed
since the date of such Borrowing, at a rate per annum equal to the interest
rate applicable at the time to the Advances composing such Borrowing.  The failure of any Lender to make any
Advance on any Funding Date shall not relieve any other Lender of any
obligation hereunder to make an Advance on such Funding Date, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on any Funding Date.


 


(iii)                               Collateral
Agent shall not be obligated to transfer to a Defaulting Lender any payments
made by Borrower to Collateral Agent for the Defaulting Lender’s benefit, and,
in the absence of such transfer to the Defaulting Lender, Collateral Agent
shall transfer any such payments to each other non-Defaulting Lender member of
the Lender Group ratably in accordance with their Commitments (but only to the
extent that such Defaulting Lender’s Advance was funded by the other members of
the Lender Group) or, if so directed by Borrower and if no Default or Event of
Default had occurred and is continuing (and to the extent such Defaulting
Lender’s Advance was not funded by the Lender Group), retain same to be
re-advanced to Borrower as if such Defaulting Lender had made Advances to
Borrower.  Subject to the foregoing,
Collateral Agent may hold and, in its Permitted Discretion, re-lend to Borrower
for the account of such Defaulting Lender the amount of all such payments
received and retained by it for the account of such Defaulting Lender.  Solely for the purposes of voting or
consenting to matters with respect to the Loan Documents, such Defaulting
Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall
be deemed to be zero.  This
Section shall remain effective with respect to such Lender until (x) the
Obligations under this Agreement shall have been declared or shall have become
immediately due and payable, (y) the non-Defaulting Lenders, Collateral Agent,
and Borrower shall have waived such Defaulting Lender’s default in writing, or
(z) the Defaulting Lender makes its Pro Rata Share of the applicable Advance
and pays to Collateral Agent all amounts owing by Defaulting Lender in respect
thereof.  The operation of this
Section shall not be construed to increase or otherwise affect the
Commitment of any Lender, to relieve or excuse the performance by such Defaulting
Lender or any other Lender of its duties and obligations hereunder, or to
relieve or excuse the performance by Borrower of its duties and obligations
hereunder to Collateral Agent or to the Lenders other than such Defaulting
Lender.  Any such failure to fund by any
Defaulting Lender shall constitute a material breach by such Defaulting Lender
of this Agreement and shall entitle Borrower at its option, upon written notice
to Collateral Agent, to arrange for a substitute Lender to assume the
Commitment of such Defaulting Lender, such substitute Lender to be acceptable
to Collateral Agent.  In connection with
the arrangement of such a substitute Lender, the Defaulting Lender shall have
no right to refuse to be replaced hereunder, and agrees to execute and deliver
a completed form of 


 


25

















 


Assignment and Acceptance
Agreement in favor of the substitute Lender (and agrees that it shall be deemed
to have executed and delivered such document if it fails to do so) subject only
to being repaid its share of the outstanding Obligations (other than Bank
Product Obligations) (including an assumption of its Pro Rata Share of the Risk
Participation Liability) without any premium or penalty of any kind whatsoever;
provided  further, however, that any such assumption of the
Commitment of such Defaulting Lender shall not be deemed to constitute a waiver
of any of the Lender Groups’ or Borrower’s rights or remedies against any such
Defaulting Lender arising out of or in relation to such failure to fund.


 


(d)                                 Making of
Swing Loans.


 


(i)                                     In
the event Collateral Agent shall elect, with the consent of Swing Lender, as a
Lender, to have the terms of this Section 2.3(d) apply to a
requested Borrowing as described in Section 2.3(b), Swing Lender as
a Lender shall make such Advance in the amount of such Borrowing (any such
Advance made solely by Swing Lender as a Lender pursuant to this Section 2.3(d)
being referred to as a “Swing Loan” and such Advances being referred to
collectively as “Swing Loans”) available to Borrower on the Funding Date
applicable thereto by transferring immediately available funds to Borrower’s
Designated Account.  Each Swing Loan is
an Advance hereunder and shall be subject to all the terms and conditions
applicable to other Advances, except that no such Swing Loan shall be eligible
for the LIBOR Option and all payments on any Swing Loan shall be payable to
Swing Lender as a Lender solely for its own account (and for the account of the
holder of any participation interest with respect to such Swing Loan).  Subject to the provisions of Section 2.3(i),
Collateral Agent shall not request Swing Lender as a Lender to make, and Swing
Lender as a Lender shall not make, any Swing Loan if Collateral Agent has
actual knowledge that (i) one or more of the applicable conditions
precedent set forth in Section 3 will not be satisfied on the
requested Funding Date for the applicable Borrowing unless such condition has
been waived, or (ii) the requested Borrowing would exceed the Availability
on such Funding Date.  Swing Lender as a
Lender shall not otherwise be required to determine whether the applicable
conditions precedent set forth in Section 3 have been satisfied on
the Funding Date applicable thereto prior to making, in its sole discretion,
any Swing Loan.


 


(ii)                                  The
Swing Loans shall be secured by the Agent’s Liens, shall constitute Advances
and Obligations hereunder, and shall bear interest at the rate applicable from
time to time to Advances that are Base Rate Loans.


 


26

















 


(e)                                  Collateral
Agent Advances.


 


(i)                                     Collateral
Agent hereby is authorized by Borrower and the Lenders, from time to time in
Collateral Agent’s sole discretion, (1) after the occurrence and during the
continuance of a Default or an Event of Default, or (2) at any time that any of
the other applicable conditions precedent set forth in Section 3
have not been satisfied, to make Advances to Borrower on behalf of the Lenders
that Collateral Agent, in its Permitted Discretion deems necessary or desirable
(a) to preserve or protect the Collateral, or any portion thereof,
(b) to enhance the likelihood of repayment of the Obligations (other than
the Bank Product Obligations), or (c) to pay any other amount chargeable
to Borrower pursuant to the terms of this Agreement, including Lender Group
Expenses and the costs, fees, and expenses described in Section 10
(any of the Advances described in this Section 2.3(e) shall be
referred to as “Collateral Agent Advances”).  Each Collateral Agent Advance is an Advance hereunder and shall
be subject to all the terms and conditions applicable to other Advances, except
that no such Collateral Agent Advance shall be eligible for the LIBOR Option
and all payments thereon shall be payable to Collateral Agent solely for its
own account (and for the account of the holder of any participation interest
with respect to such Collateral Agent Advance).


 


(ii)                                  The
Collateral Agent Advances shall be repayable on demand and secured by the
Agent’s Liens granted to Agent under the Loan Documents, shall constitute
Advances and Obligations hereunder, and shall bear interest at the rate
applicable from time to time to Advances that are Base Rate Loans.


 


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


 


(i)                                     Collateral
Agent shall request settlement (“Settlement”) with the Lenders on a
weekly basis, or on a more frequent basis if so determined by Collateral Agent,
(1) on behalf of Swing Lender, with respect to each outstanding Swing Loan, (2)
for itself, with respect to each Collateral Agent Advance, and (3) with respect
to Collections received, as to each by notifying the Lenders by telecopy,
telephone, or other similar form of transmission, of such requested Settlement,
no later than 2:00 p.m. (California time) on the Business Day immediately prior
to the date of such requested Settlement (the date of such requested Settlement
being the “Settlement Date”). 
Such notice of a Settlement Date shall include a 


 


27

















 


summary statement of the
amount of outstanding Advances, Swing Loans, and Collateral Agent Advances for
the period since the prior Settlement Date. 
Subject to the terms and conditions contained herein (including Section 2.3(c)(iii)):  (y) if a Lender’s balance of the Advances,
Swing Loans, and Collateral Agent Advances exceeds such Lender’s Pro Rata Share
of the Advances, Swing Loans, and Collateral Agent Advances as of a Settlement
Date, then Collateral Agent shall, by no later than 12:00 p.m. (California
time) on the Settlement Date, transfer in immediately available funds to the
account of such Lender as such Lender may designate, an amount such that each
such Lender shall, upon receipt of such amount, have as of the Settlement Date,
its Pro Rata Share of the Advances, Swing Loans, and Collateral Agent Advances,
and (z) if a Lender’s balance of the Advances, Swing Loans, and Collateral
Agent Advances is less than such Lender’s Pro Rata Share of the Advances, Swing
Loans, and Collateral Agent Advances as of a Settlement Date, such Lender shall
no later than 12:00 p.m. (California time) on the Settlement Date transfer in
immediately available funds to the Collateral Agent’s Account, an amount such
that each such Lender shall, upon transfer of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and
Collateral Agent Advances.  Such amounts
made available to Collateral Agent under clause (z) of the immediately
preceding sentence shall be applied against the amounts of the applicable Swing
Loan or Collateral Agent Advance and, together with the portion of such Swing
Loan or Collateral Agent Advance representing Swing Lender’s Pro Rata Share
thereof, shall constitute Advances of such Lenders.  If any such amount is not made available to Collateral Agent by
any Lender on the Settlement Date applicable thereto to the extent required by
the terms hereof, Collateral Agent shall be entitled to recover for its account
such amount on demand from such Lender together with interest thereon at the
Defaulting Lender Rate.


 


(ii)                                  In
determining whether a Lender’s balance of the Advances, Swing Loans, and
Collateral Agent Advances is less than, equal to, or greater than such Lender’s
Pro Rata Share of the Advances, Swing Loans, and Collateral Agent Advances as
of a Settlement Date, Collateral Agent shall, as part of the relevant
Settlement, apply to such balance the portion of payments actually received in
good funds by Collateral Agent with respect to principal, interest, fees
payable by Borrower and allocable to the Lenders hereunder, and proceeds of
Collateral.  To the extent that a net
amount is owed to any such Lender after such application, such net amount shall
be distributed by Collateral Agent to that Lender as part of such next
Settlement.


 


(iii)                               Between
Settlement Dates, Collateral Agent, to the extent no Collateral Agent Advances
or Swing Loans are outstanding, may pay over to Swing Lender any payments
received by Collateral Agent, that in accordance with the terms of this
Agreement would be applied to the


 


28

















 


reduction of the
Advances, for application to Swing Lender’s Pro Rata Share of the
Advances.  If, as of any Settlement
Date, Collections received since the then immediately preceding Settlement Date
have been applied to Swing Lender’s Pro Rata Share of the Advances other than
to Swing Loans, as provided for in the previous sentence, Swing Lender shall
pay to Collateral Agent for the accounts of the Lenders, and Collateral Agent
shall pay to the Lenders, to be applied to the outstanding Advances of such
Lenders, an amount such that each Lender shall, upon receipt of such amount,
have, as of such Settlement Date, its Pro Rata Share of the Advances.  During the period between Settlement Dates,
Swing Lender with respect to Swing Loans, Collateral Agent with respect to
Collateral Agent Advances, and each Lender (subject to the effect of letter
agreements between Collateral Agent and individual Lenders) with respect to the
Advances other than Swing Loans and Collateral Agent Advances, shall be
entitled to interest at the applicable rate or rates payable under this
Agreement on the daily amount of funds employed by Swing Lender, Collateral
Agent, or the Lenders, as applicable.


 


(g)                                 Notation.  Collateral Agent shall record on its books
the principal amount of the Advances owing to each Lender, including the Swing
Loans owing to Swing Lender, and Collateral Agent Advances owing to Collateral
Agent, and the interests therein of each Lender, from time to time.  In addition, each Lender is authorized, at
such Lender’s option, to note the date and amount of each payment or prepayment
of principal of such Lender’s Advances in its books and records, including
computer records, such books and records constituting conclusive evidence,
absent manifest error, of the accuracy of the information contained therein.


 


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


 


(i)                                     Optional
Overadvances.  Any contrary
provision of this Agreement notwithstanding, the Lenders hereby authorize
Collateral Agent or Swing Lender, as applicable, and Collateral Agent or Swing
Lender, as applicable, may, but is not obligated to, knowingly and
intentionally, continue to make Advances (including Swing Loans) to Borrower
notwithstanding that an Overadvance exists or thereby would be created, so long
as (i) after giving effect to such Advances (including a Swing Loan), the
outstanding Adjusted Revolver Usage does not exceed the Borrowing Base by more
than $500,000, (ii) after giving effect to such Advances (including a
Swing Loan), the outstanding Revolver Usage (except for and excluding amounts
charged to the Loan Account for interest, fees, or Lender Group Expenses) does
not exceed the Maximum Revolver Amount, and (iii) at the time of the
making of any such Advance (including any Swing Loan), Collateral Agent does
not believe, in good faith, that the Overadvance created by such Advance will
be outstanding for more than 90 days. 
The foregoing provisions are for the 


 


29

















 


exclusive benefit of
Collateral Agent, Swing Lender, and the Lenders and are not intended to benefit
Borrower in any way.  The Advances and
Swing Loans, as applicable, that are made pursuant to this Section 2.3(i)
shall be subject to the same terms and conditions as any other Advance or Swing
Loan, as applicable, except that they shall not be eligible for the LIBOR
Option and the rate of interest applicable thereto shall be the rate applicable
to Advances that are Base Rate Loans under Section 2.6(c) hereof
without regard to the presence or absence of a Default or Event of Default.


 


(i)                                     In
the event Collateral Agent obtains actual knowledge that the Revolver Usage
exceeds the amounts permitted by the preceding paragraph, regardless of the
amount of, or reason for, such excess, Collateral Agent shall notify Lenders as
soon as practicable (and prior to making any (or any additional) intentional
Overadvances (except for and excluding amounts charged to the Loan Account for
interest, fees, or Lender Group Expenses) unless Collateral Agent determines
that prior notice would result in imminent harm to the Collateral or its
value), and the Lenders with Revolver Commitments thereupon shall, together
with Collateral Agent, jointly determine the terms of arrangements that shall
be implemented with Borrower intended to reduce, within a reasonable time, the
outstanding principal amount of the Advances to Borrower to an amount permitted
by the preceding paragraph.  In the
event Collateral Agent or any Lender disagrees over the terms of reduction or
repayment of any Overadvance, the terms of reduction or repayment thereof shall
be implemented according to the determination of the Required Lenders.


 


(ii)                                  Each
Lender with a Revolver Commitment shall be obligated to settle with Collateral
Agent as provided in Section 2.3(f) for the amount of such Lender’s
Pro Rata Share of any unintentional Overadvances by Collateral Agent reported
to such Lender, any intentional Overadvances made as permitted under this Section 2.3(i),
and any Overadvances resulting from the charging to the Loan Account of
interest, fees, or Lender Group Expenses.


 


2.4                               Payments.


 


(a)                                  Payments by
Borrower.


 


(i)                                     Except
as otherwise expressly provided herein, all payments by Borrower shall be made
to Collateral Agent’s Account for the account of the Lender Group and shall be
made in immediately available funds, no later than 11:00 a.m. (California time)
on the date specified herein.  Any
payment received by Collateral Agent later than 11:00 a.m. (California time)
shall be deemed to have been received on the following Business Day and any
applicable interest or fee shall continue to accrue until such following
Business Day.


 


30

















 


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


 


(b)                                 Apportionment
and Application of Payments.


 


(i)                                     Except
as otherwise provided with respect to Defaulting Lenders and except as
otherwise provided in the Loan Documents (including letter agreements between
Collateral Agent and individual Lenders), aggregate principal and interest
payments shall be apportioned ratably among the Lenders (according to the
unpaid principal balance of the Obligations to which such payments relate held
by each Lender) and payments of fees and expenses (other than fees or expenses
that are for Collateral Agent’s separate account, after giving effect to any
letter agreements between Collateral Agent and individual Lenders) shall be
apportioned ratably among the Lenders having a Pro Rata Share of the type of
Commitment or Obligation to which a particular fee relates.  All payments shall be remitted to Collateral
Agent and all such payments (other than payments received while no Default or
Event of Default has occurred and is continuing and which relate to the payment
of principal or interest of specific Obligations or which relate to the payment
of specific fees), and all proceeds of Accounts or other Collateral received by
Collateral Agent, shall be applied as follows:


 


(A)                              first,
to pay any Lender Group Expenses then due to Collateral Agent under the Loan
Documents, until paid in full,


 


(B)                                second,
to pay any Lender Group Expenses then due to the Lenders under the Loan
Documents, on a ratable basis, until paid in full,


 


(C)                                third,
to pay any fees then due to Collateral Agent (for its separate accounts, after
giving effect to any letter agreements between Collateral Agent and individual
Lenders) under the Loan Documents until paid in full,


 


31

















 


(D)                               fourth,
to pay any fees then due to any or all of the Lenders (after giving effect to
any letter agreements between Collateral Agent and individual Lenders) under
the Loan Documents, on a ratable basis, until paid in full,


 


(E)                                 fifth,
to pay interest due in respect of all Collateral Agent Advances, until paid in
full,


 


(F)                                 sixth,
ratably to pay interest due in respect of the Advances (other than Collateral
Agent Advances), and the Swing Loans until paid in full,


 


(G)                                seventh,
to pay the principal of all Collateral Agent Advances until paid in full,


 


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


 


(I)                                    tenth,
so long as no Event of Default has occurred and is continuing, and at
Collateral Agent’s election (which election Collateral Agent agrees will not be
made if an Overadvance would be created thereby), to pay amounts then due and
owing by Borrower or its Subsidiaries in respect of Bank Products, until paid
in full,


 


(J)                                   eleventh,
so long as no Event of Default has occurred and is continuing, to pay the
principal of all Advances until paid in full,


 


(K)                               twelfth,
so long as no Event of Default has occurred and is continuing, to pay all
Acceptances when due until paid in full,


 


(L)                                 thirteenth,
if an Event of Default has occurred and is continuing, ratably (i) to pay
the principal of all Advances until paid in full, and (ii) to Collateral
Agent, to be held by Collateral Agent, for the benefit of Agent or its
Affiliates, as applicable, as cash collateral in an amount up to the amount of
the Bank Products Reserve established prior to the occurrence of, and not in
contemplation of, the subject Event of Default until Borrower’s and its
Subsidiaries’ obligations in respect of the then extant Bank Products have been
paid in full or the cash collateral amount has been exhausted,


 


(M)                            fourteenth,
if an Event of Default has occurred and is continuing, to Collateral Agent, to
be held by Collateral Agent, for the ratable benefit of Issuing 


 


32

















 


Lender and Lenders, as
cash collateral in an amount up to 105% of the then extant Letter of Credit
Usage, until paid in full,


 


(N)                               fifteenth,
to pay any other Obligations (including Bank Product Obligations) until paid in
full, and


 


(O)                               sixteenth,
to Borrower (to be wired to the Designated Account) or such other Person
entitled thereto under applicable law.


 


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


 


(iii)                               In
each instance, so long as no Event of Default has occurred and is continuing, Section 2.4(b)
shall not be deemed to apply to any payment by Borrower specified by Borrower
to be for the payment of specific Obligations then due and payable (or
prepayable) under any provision of this Agreement.


 


(iv)                              For
purposes of the foregoing, “paid in full” means payment of all amounts owing
under the Loan Documents according to the terms thereof, including loan fees,
service fees, professional fees, interest (and specifically including interest
accrued after the commencement of any Insolvency Proceeding), default interest,
interest on interest, and expense reimbursements, whether or not the same would
be or is allowed or disallowed in whole or in part in any Insolvency
Proceeding.


 


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


 


2.5                               Overadvances. 
If, at any time or for any reason, the amount of Obligations (other than
Bank Product Obligations) owed by Borrower to the Lender Group pursuant to Sections
2.1 and 2.12 is greater than either the Dollar or percentage limitations
set forth in Sections 2.1 or 2.12, (an “Overadvance”), Borrower
immediately shall pay to Collateral Agent, in cash, the amount of such excess,
which amount shall be used by Collateral Agent to reduce the Obligations in
accordance with the priorities set forth in Section 2.4(b).  In addition, Borrower hereby promises to pay
the Obligations (including principal, interest, fees, costs, and expenses) in
Dollars in full to the Lender Group as and when due and payable under the terms
of this Agreement and the other Loan Documents.


 


33

















 


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


 


(a)                                  Interest
Rates.  Except as provided in
clause (d) below, all Obligations (except for undrawn Letters of Credit
and except for Bank Product Obligations) that have been charged to the Loan
Account pursuant to the terms hereof shall bear interest on the Daily Balance
thereof as follows (i) if the relevant Obligation is an Advance that is a
LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR
Rate Margin, and (ii) otherwise, at a per annum rate equal to the Base
Rate plus the Base Rate Margin.


 


The foregoing
notwithstanding, at no time shall any portion of the Obligations (other than
Bank Product Obligations) bear interest on the Daily Balance thereof at a per
annum rate less than 3.5%.  To the
extent that interest accrued hereunder at the rate set forth herein would be
less than the foregoing minimum daily rate, the interest rate chargeable
hereunder for such day automatically shall be deemed increased to the minimum
rate.


 


(b)                                 Letter of
Credit Fees.  Borrower shall
pay Collateral Agent (for the ratable benefit of the Lenders) a Letter of
Credit fee (in addition to the charges, commissions, fees, and costs set forth
in Section 2.12(m)) which shall accrue at a rate equal to 0.125%
per month (or portion thereof) times the Daily Balance of the undrawn
amount of all outstanding Letters of Credit. 
Borrower shall also pay Collateral Agent (for the ratable benefit of the
Lenders), each time a Letter of Credit is opened or negotiated, a fee equal to
0.125% times the stated amount of such Letter of Credit.  In addition, Borrower shall pay Collateral
Agent such fees as are set forth on Schedule 2.6(b) hereto, as such
fee may change from time to time.


 


(c)                                  Acceptance
Fees.  Borrower shall pay
Collateral Agent (for the ratable benefit of the Lenders) an acceptance fee
equal to 4.5% of each Acceptance at the time of issuance of such Acceptance, in
addition to any fees charged by Agent for issuing such Acceptance.


 


(d)                                 Default Rate.  Upon the occurrence and during the
continuation of an Event of Default (and at the election of Collateral Agent or
the Required Lenders),


 


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


 


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


 


(e)                                  Payment.  Interest, Letter of Credit fees, and all
other fees payable hereunder shall be due and payable, in arrears, on the first
day of each month at any time that Obligations or Commitments are outstanding.  Borrower hereby authorizes Collateral Agent,
from time to time without prior notice to Borrower, to charge such interest and
fees, all Lender Group Expenses (as and when incurred), the charges,
commissions, fees, and costs provided for in Section 2.12(e) (as
and when accrued or incurred), the fees and costs provided for in 


 


34

















 


Section 2.11
(as and when accrued or incurred), and all other payments as and when due and
payable under any Loan Document (including any amounts due and payable to Agent
or its Affiliates in respect of Bank Products up to the amount of the then
extant Bank Products Reserve) to Borrower’s Loan Account, which amounts
thereafter shall constitute Advances hereunder and shall accrue interest at the
rate then applicable to Advances hereunder. 
Any interest not paid when due shall be compounded by being charged to
Borrower’s Loan Account and shall thereafter constitute Advances hereunder and
shall accrue interest at the rate then applicable to Advances that are Base
Rate Loans hereunder.


 


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


 


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


 


2.7                               Cash Management


 


(a)                                  Borrower
shall (i) establish and maintain treasury management services of a type
and on terms satisfactory to Collateral Agent at Wells Fargo Bank, N.A.
(“Wells”), and shall request in writing and otherwise take such reasonable
steps to ensure that all of its Account Debtors forward payment of the amounts
owed by them directly to Wells (including by legending its invoices), and
(ii) deposit or cause to be deposited promptly, and in any event no later
than the first Business Day after the date of receipt thereof, all Collections
(including those sent directly by Account Debtors to Wells) into a bank account
in Borrower’s name (a “Treasury Management Account”) at Wells.


 


(b)                                 Wells
shall establish and maintain a Treasury Management Agreement with Collateral
Agent and Borrower, in form and substance acceptable to Collateral Agent.  Such Treasury Management Agreement shall
provide, among other things, that (i) all items of payment deposited in
such Treasury Management Account and proceeds thereof are held by Wells as
agent or bailee-in-possession for Agent and Collateral Agent, (ii) Wells
has no rights of setoff or recoupment or any other claim against the applicable
Treasury Management Account other than for payment of its service fees and
other charges directly related to the administration of such Treasury Management
Account and for returned checks or other items of payment, and (iii) at
any time from and after written instructions from Collateral Agent that
(A) Availability 


 


35

















 


hereunder has dropped
below $5,000,000 or (B) aggregate Advances outstanding hereunder exceed
$5,000,000, it immediately will forward by daily sweep all amounts in the
applicable Treasury Management Account to the Collateral Agent’s Account.


 


(c)                                  The
Treasury Management Account shall be a cash collateral account, with all cash,
checks and similar items of payment in such account securing payment of the
Obligations, and in which Borrower is hereby deemed to have granted a Lien to
Agent.


 


2.8                               Crediting
Payments; Float Charge.  The receipt of any payment item by
Collateral Agent (whether from transfers to Collateral Agent by Agent pursuant
to the Treasury Management Agreement or otherwise) shall not be considered a
payment on account unless such payment item is a wire transfer of immediately
available federal funds made to the Collateral Agent’s Account or unless and
until such payment item is honored when presented for payment.  Should any payment item not be honored when
presented for payment, then Borrower shall be deemed not to have made such payment
and interest shall be calculated accordingly. 
Anything to the contrary contained herein notwithstanding, any payment
item shall be deemed received by Collateral Agent only if it is received into
the Collateral Agent’s Account on a Business Day on or before 11:00 a.m.
(California time).  If any payment item
is received into the Collateral Agent’s Account on a non-Business Day or after
11:00 a.m. (California time) on a Business Day, it shall be deemed to have been
received by Collateral Agent as of the opening of business on the immediately
following Business Day.  From and after
the Closing Date, Collateral Agent shall be entitled to charge Borrower for 1
Business Days of `clearance’ or `float’ at the rate applicable to Base Rate
Loans under Section 2.6 on all Collections that are received by
Borrower (regardless of whether forwarded by Agent to Collateral Agent).  This across-the-board 1 Business Day
clearance or float charge on all Collections is acknowledged by the parties to
constitute an integral aspect of the pricing of the financing of Borrower and
shall apply irrespective of whether or not there are any outstanding monetary
Obligations; the effect of such clearance or float charge being the equivalent
of charging 1 Business Days of interest on such Collections.  The parties acknowledge and agree that the
economic benefit of the foregoing provisions of this Section 2.8
shall be for the exclusive benefit of Collateral Agent.


 


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


 


2.10                        Maintenance
of Loan Account; Statements of Obligations. 
Collateral Agent shall maintain an account on its books in the name of
Borrower (the “Loan Account”) on which Borrower will be charged with all
Advances (including Collateral Agent Advances and Swing Loans) made by
Collateral Agent, Swing Lender, or the Lenders to Borrower or for Borrower’s
account, the Letters of Credit issued by Issuing Lender for Borrower’s account,
and with all other payment Obligations hereunder or under the other Loan
Documents (except for Bank 


 


36

















 


Product Obligations),
including, accrued interest, fees and expenses, and Lender Group Expenses.  In accordance with Section 2.8,
the Loan Account will be credited with all payments received by Collateral
Agent from Borrower or for Borrower’s account, including all amounts received
in the Collateral Agent’s Account from Agent. 
Collateral Agent shall render statements regarding the Loan Account to
Borrower, including principal, interest, fees, and including an itemization of
all charges and expenses constituting Lender Group Expenses owing, and such
statements shall be conclusively presumed to be correct and accurate and
constitute an account stated between Borrower and the Lender Group unless,
within 30 days after receipt thereof by Borrower, Borrower shall deliver to
Collateral Agent written objection thereto describing the error or errors
contained in any such statements.


 


2.11                        Fees.   Borrower shall pay to Collateral Agent the
following fees and charges, which fees and charges shall be non-refundable when
paid (irrespective of whether this Agreement is terminated thereafter) and
shall be apportioned among the Lenders in accordance with the terms of letter
agreements between Collateral Agent and individual Lenders:


 


(a)                                  Audit,
Appraisal, and Valuation Charges. 
For the separate account of Collateral Agent, audit, appraisal, and
valuation fees and charges as follows (i) a fee of $850 per day, per
auditor, plus out-of-pocket expenses for each financial audit of Borrower
performed by personnel employed by Collateral Agent, (ii) if implemented,
a one time charge of $3,000 plus out-of-pocket expenses for expenses for the
establishment of electronic collateral reporting systems, (iii) a fee of
$1,500 per day per appraiser, plus out-of-pocket expenses, for each appraisal
of the Collateral performed by personnel employed by Collateral Agent, and
(iv) the actual charges paid or incurred by Collateral Agent if it elects
to employ the services of one or more third Persons to perform financial audits
of Borrower, to appraise the Collateral, or any portion thereof, or to assess
Borrower’s business valuation.


 


2.12                        Letters
of Credit and Acceptances


 


(a)                                  Subject
to the terms and conditions hereof, Issuing Lender agrees to issue letters of
credit for the account of Borrower (each, an “L/C”) or to purchase
participations or execute indemnities or reimbursement obligations (each such
undertaking, an “L/C Undertaking”) with respect to letters of credit
issued by an Underlying Issuer (as of the Closing Date, the prospective
Underlying Issuer is to be Agent) for the account of Borrower or (b) accept, or
cause to be accepted Acceptances; provided, however, that Issuing Lender will
not be required to issue or cause to be issued any Letter of Credit or accept
or cause to be accepted any Acceptance to the extent that the face amount of
such Letter of Credit or Acceptance would then cause (i) the Adjusted
Letter of Credit Usage to exceed the Borrowing Base less the amount of
outstanding Advances; (ii) the aggregate of outstanding Acceptances to
exceed $5,000,000; or (iii) the Letter of Credit Usage to exceed the
Maximum Revolver Amount less the total amount of Advances then
outstanding.  All disbursements or
payments related to Letters of Credit (unless immediately reimbursed) and
Acceptances (unless paid on o r before the last day of the term thereof) shall
be deemed to be Base Rate Loans and shall bear interest at the rate set forth
in Section 2.6; Letters of Credit that have not been drawn upon and
Acceptances that have not matured shall not bear interest.


 


37

















 


(b)                                 Borrower
may request Collateral Agent to issue or cause the issuance of a Letter of
Credit by delivering to Collateral Agent and Issuing Lender, Issuing Lender’s
form of Letter of Credit Application (the “Letter of Credit Application”)
completed to the satisfaction of Collateral Agent and Issuing Lender; and, such
other certificates, documents and other papers and information as Collateral
Agent or Issuing Lender may reasonably request.  Borrower 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 Collateral
Agent upon any amendment, extension or renewal of any Letter of Credit.


 


(c)                                  Each
commercial L/C shall, among other things, (i) provide for the payment of sight
drafts 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 six (6) months
after such L/C’s date of issuance and in no event later than the Maturity
Date.  Each commercial L/C shall be
subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, and any
amendments or revision thereof adhered to by the Issuing Lender and, to the
extent not inconsistent therewith, the laws of the State of California.


 


(d)                                 Collateral
Agent shall use its reasonable efforts to notify Lenders of the request by
Borrower for a Letter of Credit or an Acceptance hereunder.


 


(e)                                  Agent
and Collateral Agent shall have absolute discretion whether to accept any
draft.  Without in any way limiting
Agent’s and Collateral Agent’s absolute discretion whether to accept any draft,
Borrower will not present for acceptance any draft, and Agent and Collateral
Agent will generally not accept any drafts (i) that arise out of transactions
involving the sale of goods by Borrower not in the ordinary course of its
business, (ii) that involve a sale to an Affiliate of Borrower, (iii) that
involve any purchase for which Agent and Collateral Agent have not received all
related documents, instruments and forms requested by either of them, (iv) for
which Agent or Collateral Agent is unable to locate a purchaser in the ordinary
course of business on standard terms, or (v) that is not eligible for
discounting with Federal Reserve Banks pursuant to paragraph 7 of
Section 13 of the Federal Reserve Act, as amended.


 


(f)                                    Subject
to terms set by Agent and Collateral Agent from time to time in their
discretion with respect to the acceptance of drafts generally, Borrower may
request Acceptances on any Business Day, by delivering to Collateral Agent a
request for an Acceptance in the form acceptable to Agent and Collateral Agent
and, upon demand, copies of all invoices, delivery receipts and related
documents relating to that request that Agent and Collateral Agent might
require.  Provided that the request for
Acceptance is received prior to 10:30 a.m. and approved by Collateral Agent,
Collateral Agent shall make the net proceeds of the Acceptance available to
Borrower by crediting the net amount of the Acceptance in lawful money of the
United States and in immediately available funds to the Designated
Account.


 


(g)                                 Borrower
shall pay to Collateral Agent the amount of any Acceptance on or before its
maturity date.  In addition, Collateral
Agent is hereby irrevocably authorized, in its sole discretion, to make
Advances from time to time, or to charge, or to instruct Agent to charge, 


 


38

















 


any account of Borrower,
to pay any Acceptance for which payment is due, or at any time after the
occurrence of an Event of Default to fund cash collateral for any outstanding
Acceptance.


 


(h)                                 Each
Acceptance shall be payable in Dollars and shall be in the face amount of at
least $1,000.  The maturity of each
Acceptance shall be in any 30 day increment equal to or greater than 30 and
less than or equal to 180 days or, if such day is not a Business Day, on the
next succeeding Business Day and, in any event, no later than the day preceding
the Maturity Date.  This subsection (h)
will not apply to Acceptances created under L/C’s.


 


(i)                                     In
connection with any Letter of Credit or Acceptance, Borrower shall indemnify,
save and hold Agent, Collateral Agent, each Lender and each Issuing Lender
harmless from any loss, cost, expense or liability, including, without
limitation, payments made by Agent, Collateral Agent, any Lender or any Issuing
Lender and expenses and reasonable attorneys’ fees incurred by Agent,
Collateral Agent, any Lender or Issuing Lender arising out of, or in connection
with, any Letter of Credit or Acceptance to be issued or created for Borrower.  Borrower shall be bound by Agent’s,
Collateral Agent’s or any Issuing Lender’s regulations and good faith
interpretations of any Letter of Credit or Acceptance issued or created for
Borrower’s account, although this interpretation may be different from its own;
and, neither Agent, nor Collateral Agent, nor any Lender, nor any Issuing
Lender nor any of their correspondents shall be liable for any error,
negligence, or mistakes, whether of omission or commission, in following
Borrower’s instructions or those contained in any Letter of Credit, Acceptance
or of any modifications, amendments or supplements thereto or in issuing or
paying any Letter of Credit or Acceptance, except for Agent’s, Collateral
Agent’s, any Lender’s, any Issuing Lender’s or such correspondents’ gross negligence
or willful misconduct.


 


(j)                                     Borrower
shall authorize and direct any Issuing Lender to name Borrower as the
“Applicant” or “Account Party” of each Letter of Credit.  If Collateral Agent is not the Issuing
Lender of any Letter of Credit, Borrower shall authorize and direct the Issuing
Lender to deliver to Collateral Agent all instruments, documents, and other
writings and property received by the Issuing Lender pursuant to the Letter of
Credit or any Acceptance related thereto and to accept and rely upon Collateral
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.


 


(k)                                  In
connection with all Letters of Credit and Acceptances issued or caused to be
issued or created by Collateral Agent under this Agreement, Borrower hereby
appoints Collateral Agent, or its designee, as its attorney, with full power
and authority if an Event of Default or Default shall have occurred, (i) to
sign and/or endorse Borrower’s name upon any warehouse, shipping, dock or other
receipts, letter of credit applications and acceptances; (ii) to sign
Borrower’s name on bills of lading; (iii) to clear Inventory through the
United States of America Customs Department (“Customs”) in the name of
Borrower or Collateral Agent or Collateral Agent’s designee, and to sign and
deliver to Customs officials powers of attorney in the name of Borrower for
such purpose; (iv) to complete in Borrower’s name or Collateral Agent’s, or in
the name of Collateral Agent’s designee, any order, sale or transaction, obtain
the necessary documents in connection therewith, and collect the proceeds
thereof; and (v) upon Borrower’s refusal to do so or after the occurrence
and during the continuation of any Event of Default, to cancel, rescind,
terminate, modify, amend or adjust in any other way, in whole or in 


 


39

















 


part, any pending Letter
of Credit or Acceptance transaction, and to do any and all other acts and
things which may be necessary or proper in connection with this Agreement, the
Letters of Credit and the Acceptances, or to enable Collateral Agent to obtain
payment of any monies owed to it. 
Neither Collateral 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 Collateral Agent’s or its attorney’s gross negligence or willful
misconduct.  This power, being coupled
with an interest, is irrevocable as long as any Letter of Credit or Acceptance
remains outstanding.


 


(l)                                     Collateral
Agent reserves the sole right, in Collateral Agent’s sole discretion, to waive
any discrepancies, defects or mistakes in any of the documents presented to
Collateral Agent or Issuing Lender for negotiation or acceptance.


 


(m)                               Each
Lender shall be deemed to have irrevocably purchased an undivided participation
in each Letter of Credit and Acceptance, in an amount equal to its Pro Rata
Share of the Risk Participation Liability of such Letter of Credit or
Acceptance. Each Lender agrees to fund its Pro Rata Share of any Advance deemed
made pursuant to subsection 2.12(a) on the same terms and
conditions as if Borrower had requested such Advance and Collateral Agent shall
promptly pay to Issuing Lender the amounts so received by it from the
Lenders.  In the event that at the time
a disbursement is made the unpaid balance of Advances exceeds or would exceed,
with the making of such disbursement, the Dollar or percentage limitations set
forth in Section 2.1, and such disbursement is not reimbursed by
Borrower within two (2) Business Days, Collateral Agent shall promptly notify
each Lender and upon Collateral Agent’s demand each Lender shall pay to
Collateral Agent such Lender’s Pro Rata Share of such unreimbursed disbursement
together with such Lender’s Pro Rata Share of Collateral Agent’s unreimbursed
costs and expenses relating to such unreimbursed disbursement.  Upon receipt by Collateral Agent of a
repayment from Borrower of any amount disbursed by Collateral Agent for which
Collateral Agent had already been reimbursed by Lenders, Collateral Agent shall
deliver to each Lender that Lender’s pro rata share of such repayment.  Each Lender’s participation commitment shall
continue until the last to occur of any of the following events: (A) Collateral
Agent and Issuing Lender cease to be obligated to issue or cause to be issued
Letters of Credit or Acceptances hereunder; (B) no Letter of Credit or
Acceptance issued or created hereunder remains outstanding and uncancelled or
(C) all Persons (other than Borrower) have been fully reimbursed for all
payments made under or relating to Letters of Credit and Acceptances.


 


(n)                                 Any
and all charges, commissions, fees, and costs incurred by the Issuing Lender
relating to Underlying Letters of Credit shall be Lender Group Expenses for
purposes of this Agreement and immediately shall be reimbursable by Borrower to
Collateral Agent for the account of the Issuing Lender; it being acknowledged
and agreed by Borrower that the issuance charge imposed by the prospective
Underlying Issuer may be changed from time to time, and that the Underlying
Issuer also imposes a Schedule of charges for amendments, extensions,
drawings, and renewals.


 


(o)                                 If
by reason of (i) any change in any applicable law, treaty, rule, or
regulation or any change in the interpretation or application thereof by any
Governmental Authority, or (ii) compliance by the Underlying Issuer or the
Lender Group with any direction, request, or requirement (irrespective of whether
having the force of law) of any Governmental 


 


40

















 


Authority or monetary
authority including, Regulation D of the Federal Reserve Board as from time to
time in effect (and any successor thereto):


 


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


 


(ii)                                  there
shall be imposed on the Underlying Issuer or the Lender Group any other
condition regarding any Underlying Letter of Credit or any Letter of Credit
issued pursuant hereto,


 


and the result of the
foregoing is to increase, directly or indirectly, the cost to the Lender Group
of issuing, making, guaranteeing, or maintaining any Letter of Credit or to
reduce the amount receivable in respect thereof by the Lender Group, then, and
in any such case, Collateral Agent may, at any time within a reasonable period
after the additional cost is incurred or the amount received is reduced, notify
Borrower, and Borrower shall pay on demand such amounts as Collateral Agent may
specify to be necessary to compensate the Lender Group for such additional cost
or reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate then applicable to Base Rate
Loans hereunder.  The determination by
Collateral Agent of any amount due pursuant to this Section, as set forth in a
certificate setting forth the calculation thereof in reasonable detail, shall,
in the absence of manifest or demonstrable error, be final and conclusive and
binding on all of the parties hereto.


 


(p)                                 Borrower
acknowledges and agrees that certain of the Qualified Import Letters of Credit
may provide for the presentation of time drafts to the Underlying Issuer.  If an Underlying Issuer accepts such a time
draft that is presented under an Underlying Letter of Credit, it is
acknowledged and agreed that (i) the Letter of Credit will require the
Issuing Lender to reimburse the Underlying Issuer for amounts paid on account
of such time draft on or after the maturity date thereof, (ii) the pricing
provisions hereof (including Sections 2.6(b) and 2.12(e)) shall
continue to apply, until payment of such time draft on or after the maturity
date thereof, as if the Underlying Letter of Credit were still outstanding, and
(iii) on the date on which Issuing Lender makes payment to the Underlying
Issuer of the amounts paid on account of such time draft, Borrower immediately
shall reimburse such amount to Issuing Lender and such amount shall constitute
an L/C Disbursement hereunder.


 


2.13                        LIBOR Option


 


(a)                                  Interest and
Interest Payment Dates.  In
lieu of having interest charged at the rate based upon the Base Rate, Borrower
shall have the option (the “LIBOR Option”) to have interest on all or a
portion of the Advances be charged at a rate of interest based upon the LIBOR
Rate.  Interest on LIBOR Rate Loans
shall be payable on the earliest of (i) the last day of the Interest
Period applicable thereto, (ii) the occurrence of an Event of Default in
consequence of which the Required Lenders or Collateral Agent on behalf thereof
elect to accelerate the maturity of all or any portion of the Obligations, or
(iii) termination of this Agreement pursuant to the terms hereof.  On the last day of each applicable Interest
Period, unless Borrower properly has exercised the LIBOR Option with respect
thereto, the interest rate applicable to such LIBOR Rate Loan automatically
shall convert to the rate of interest then applicable to Base Rate Loans 


 


41

















 


of the same type
hereunder.  At any time that an Event of
Default has occurred and is continuing, Borrower no longer shall have the
option to request that Advances  bear
interest at the LIBOR Rate and Collateral Agent shall have the right to convert
the interest rate on all outstanding LIBOR Rate Loans to the rate then
applicable to Base Rate Loans hereunder.


 


(b)                                 LIBOR
Election.


 


(i)                                     Borrower
may, at any time and from time to time, so long as no Event of Default has
occurred and is continuing, elect to exercise the LIBOR Option by notifying
Collateral Agent prior to 11:00 a.m. (California time) at least 3 Business Days
prior to the commencement of the proposed Interest Period (the “LIBOR
Deadline”).  Notice of Borrower’s
election of the LIBOR Option for a permitted portion of the Advances and an
Interest Period pursuant to this Section shall be made by delivery to
Collateral Agent of a LIBOR Notice received by Collateral Agent before the
LIBOR Deadline, or by telephonic notice received by Collateral Agent before the
LIBOR Deadline (to be confirmed by delivery to Collateral Agent of a LIBOR
Notice received by Collateral Agent prior to 5:00 p.m. (California time)
on the same day.  Promptly upon its
receipt of each such LIBOR Notice, Collateral Agent shall provide a copy
thereof to each of the Lenders having a Revolver Commitment.


 


(ii)                                  Each
LIBOR Notice shall be irrevocable and binding on Borrower.  In connection with each LIBOR Rate Loan,
Borrower shall indemnify, defend, and hold Collateral Agent and the Lenders
harmless against any loss, cost, or expense incurred by Collateral Agent or any
Lender as a result of (a) the payment of any principal of any LIBOR Rate
Loan other than on the last day of an Interest Period applicable thereto
(including as a result of an Event of Default), (b) the conversion of any
LIBOR Rate Loan other than on the last day of the Interest Period applicable
thereto, or (c) the failure to borrow, convert, continue or prepay any
LIBOR Rate Loan on the date specified in any LIBOR Notice delivered pursuant
hereto (such losses, costs, and expenses, collectively, “Funding Losses”).  Funding Losses shall, with respect to
Collateral Agent or any Lender, be deemed to equal the amount determined by
Collateral Agent or such Lender to be the excess, if any, of (i) the
amount of interest that would have accrued on the principal amount of such
LIBOR Rate Loan had such event not occurred, at the LIBOR Rate that would have
been applicable thereto, for the period from the date of such event to the last
day of the then current Interest Period therefor (or, in the case of a failure
to borrow, convert, or continue, for the period that would have been the
Interest Period therefor), minus (ii) the amount of interest
that would accrue on such principal amount for such period at the interest rate
which Collateral Agent or such Lender would be offered were it to be offered,
at the commencement of such period, Dollar deposits of a comparable amount and
period in the London interbank market. 
A certificate of Collateral Agent or a Lender delivered to Borrower
setting 


 


42

















 


forth any amount or
amounts that Collateral Agent or such Lender is entitled to receive pursuant to
this Section shall be conclusive absent manifest error.


 


(iii)                               Borrower
shall have not more than 5 LIBOR Rate Loans in effect at any given time.  Borrower only may exercise the LIBOR Option
for LIBOR Rate Loans of at least $1,000,000 and integral multiples of $500,000
in excess thereof.


 


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


 


(d)                                 Special
Provisions Applicable to LIBOR Rate.


 


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


 


(ii)                                  In
the event that any change in market conditions or any law, regulation, treaty,
or directive, or any change therein or in the interpretation of application
thereof, shall at any time after the date hereof, in the reasonable opinion of
any Lender, make it unlawful or impractical for such Lender to fund or maintain
LIBOR Advances or to continue such 


 


43

















 


funding or maintaining,
or to determine or charge interest rates at the LIBOR Rate, such Lender shall
give notice of such changed circumstances to Collateral Agent and Borrower and
Collateral Agent promptly shall transmit the notice to each other Lender and
(y) in the case of any LIBOR Rate Loans of such Lender that are outstanding,
the date specified in such Lender’s notice shall be deemed to be the last day
of the Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR
Rate Loans of such Lender thereafter shall accrue interest at the rate then
applicable to Base Rate Loans, and (z) Borrower shall not be entitled to elect
the LIBOR Option until such Lender determines that it would no longer be
unlawful or impractical to do so.


 


(e)                                  No
Requirement of Matched Funding. 
Anything to the contrary contained herein notwithstanding, neither
Collateral Agent, nor any Lender, nor any of their Participants, is required
actually to acquire eurodollar deposits to fund or otherwise match fund any
Obligation as to which interest accrues at the LIBOR Rate.  The provisions of this Section shall
apply as if each Lender or its Participants had match funded any Obligation as
to which interest is accruing at the LIBOR Rate by acquiring eurodollar
deposits for each Interest Period in the amount of the LIBOR Rate Loans.


 


2.14                        Capital
Requirements.  If, after the date hereof, any Lender
determines that (i) the adoption of or change in any law, rule, regulation
or guideline regarding capital requirements for banks or bank holding
companies, or any change in the interpretation or application thereof by any
Governmental Authority charged with the administration thereof, or
(ii) compliance by such Lender or its parent bank holding company with any
guideline, request, or directive of any such entity regarding capital adequacy
(whether or not having the force of law), the effect of reducing the return on
such Lender’s or such holding company’s capital as a consequence of such
Lender’s Commitment hereunder to a level below that which such Lender or such
holding company could have achieved but for such adoption, change, or
compliance (taking into consideration such Lender’s or such holding company’s
then existing policies with respect to capital adequacy and assuming the full
utilization of such entity’s capital) by any amount deemed by such Lender to be
material, then such Lender may notify Borrower and Collateral Agent
thereof.  Following receipt of such
notice, Borrower agrees to pay such Lender on demand the amount of such
reduction of return of capital as and when such reduction is determined,
payable within 90 days after presentation by such Lender of a statement in the
amount and setting forth in reasonable detail such Lender’s calculation thereof
and the assumptions upon which such calculation was based (which statement
shall be deemed true and correct absent manifest error).  In determining such amount, such Lender may
use any reasonable averaging and attribution methods.


 


3.                                      CONDITIONS; TERM OF
AGREEMENT.


 


3.1                               Conditions
Precedent to the Initial Extension of Credit. 
The obligation of the Lender Group (or any member thereof) to make the
initial Advance (or otherwise to extend any credit provided for hereunder), is
subject to the fulfillment, to the satisfaction of Agent and Collateral Agent,
of each of the conditions precedent set forth below:


 


44

















 


(a)                                  the
Closing Date shall occur on or before
March      , 2003;


 


(b)                                 Collateral
Agent shall have received all financing statements required by Collateral
Agent, duly executed by Borrower, and Collateral Agent shall have received
searches reflecting the filing of all such financing statements;


 


(c)                                  Collateral
Agent shall have received each of the following documents, in form and
substance satisfactory to Collateral Agent, duly executed, and each such
document shall be in full force and effect:


 


(i)                                     the
Treasury Management Agreements,


 


(ii)                                  the
Control Agreements,


 


(iii)                               the
IP Security Agreement,


 


(iv)                              the
Disbursement Letter,


 


(v)                                 the
Certification of Officers, and


 


(vi)                              the
Pay-Off Letter, together with UCC termination statements and other
documentation evidencing the termination by Existing Lender of its Liens in and
to the properties and assets of Borrower, or authorization to effect the same;


 


(d)                                 Collateral
Agent shall have received a certificate from the Secretary of Borrower
attesting to the resolutions of Borrower’s Board of Directors authorizing its
execution, delivery, and performance of this Agreement and the other Loan
Documents to which Borrower is a party and authorizing specific officers of
Borrower to execute the same;


 


(e)                                  Collateral
Agent shall have received copies of Borrower’s Governing Documents, as amended,
modified, or supplemented to the Closing Date, certified by the Secretary of
Borrower;


 


(f)                                    Collateral
Agent shall have received a certificate of status with respect to Borrower,
dated within 10 days of the Closing Date, such certificate to be issued by the
appropriate officer of the jurisdiction of organization of Borrower, which
certificate shall indicate that Borrower is validly existing in such
jurisdiction;


 


(g)                                 Collateral
Agent shall have received certificates of status with respect to Borrower, each
dated within 30 days of the Closing Date, such certificates to be issued by the
appropriate officer of the jurisdictions (other than the jurisdiction of
organization of Borrower) in which its failure to be duly qualified or licensed
would constitute a Material Adverse Change, which certificates shall indicate
that Borrower is in good standing in such jurisdictions;


 


(h)                                 Collateral
Agent shall have received a certificate of insurance, together with the
endorsements thereto, as are required by Section 6.8, the form and
substance of which shall be satisfactory to Collateral Agent;


 


45

















 


(i)                                     Collateral
Agent shall have received an opinion of Borrower’s counsel in form and
substance satisfactory to Collateral Agent;


 


(j)                                     Collateral
Agent shall have received satisfactory evidence (including a certificate of the
chief financial officer of Borrower) that all tax returns required to be filed
by Borrower have been timely filed and all taxes upon Borrower or its
properties, assets, income, and franchises (including Real Property taxes and
payroll taxes) have been paid prior to delinquency, except such taxes that are
the subject of a Permitted Protest;


 


(k)                                  Borrower
shall have the Required Availability after giving effect to the initial
extensions of credit hereunder;


 


(l)                                     Collateral
Agent shall have completed its business, legal, and collateral due diligence,
including (i) a collateral audit and review of Borrower’s books and
records and verification of Borrower’s representations and warranties to the
Lender Group, the results of which shall be satisfactory to Collateral Agent,
and (ii) an inspection of each of the locations where Inventory is
located, the results of which shall be satisfactory to Collateral Agent;


 


(m)                               Borrower
shall pay all Lender Group Expenses incurred in connection with the
transactions evidenced by this Agreement;


 


(n)                                 Collateral
Agent shall have received copies of each of the license and distribution
agreements to which Borrower is a party, together with a certificate of the
Secretary of Borrower certifying each such document as being a true, correct,
and complete copy thereof;


 


(o)                                 Borrower
shall have received all licenses, approvals or evidence of other actions
required by any Governmental Authority in connection with the execution and
delivery by Borrower of this Agreement or any other Loan Document or with the
consummation of the transactions contemplated hereby and thereby; and


 


(p)                                 all
other documents and legal matters in connection with the transactions
contemplated by this Agreement shall have been delivered, executed, or recorded
and shall be in form and substance satisfactory to Collateral Agent.


 


3.2                               Conditions
Subsequent to the Initial Extension of Credit.  The obligation of the Lender Group (or any
member thereof) to continue to make Advances (or otherwise extend credit
hereunder) is subject to the fulfillment, on or before the date applicable
thereto, of each of the conditions subsequent set forth below (the failure by
Borrower to so perform or cause to be performed constituting an Event of
Default):


 


(a)                                  within
30 days of the Closing Date, deliver to Collateral Agent certified copies of
the policies of insurance, together with the endorsements thereto, as are
required by Section 6.8, the form and substance of which shall be
satisfactory to Collateral Agent and its counsel; and


 


(b)                                 by
no later than March 31, 2003, Collateral Agent shall have received Collateral
Access Agreements with respect to the following locations:  701 North 34th Street, Suite 400,
Seattle, Washington 98103 and 401 Oakside Avenue, SW Renton, Washington
98055.


 


46

















 


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


 


(a)                                  the
representations and warranties contained in this Agreement and the other Loan
Documents shall be true and correct in all material respects on and as of the
date of such extension of credit, as though made on and as of such date (except
to the extent that such representations and warranties relate solely to an
earlier date),


 


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


 


(c)                                  no
injunction, writ, restraining order, or other order of any nature prohibiting,
directly or indirectly, the extending of such credit shall have been issued and
remain in force by any Governmental Authority against Borrower, Collateral
Agent, any Lender, or any of their Affiliates.


 


(d)                                 no
Material Adverse Change shall have occurred; provided, that
(i) closures of Borrower’s retail stores and termination of the leases at
such stores, and (ii) settlement of the currently pending securities
litigation against Borrower, so long as such settlement does not cause a breach
of any of the financial covenants set forth in Section 7.20, shall
not constitute Material Adverse Change.


 


3.4                               Term. 
This Agreement shall become effective upon the execution and delivery
hereof by Borrower, Collateral Agent, Collateral Agent and the Lenders and
shall continue in full force and effect for a term ending on March 10,
2005 (the “Maturity Date”).  The
foregoing notwithstanding, the Lender Group, upon the election of the Required
Lenders, shall have the right to terminate its obligations under this Agreement
immediately and with notice to Borrower upon the occurrence and during the
continuation of an Event of Default.


 


3.5                               Effect of
Termination.  On the
date of termination of this Agreement, all Obligations (including contingent
reimbursement obligations of Borrower with respect to outstanding Letters of
Credit and including all Bank Products Obligations) immediately shall become
due and payable without notice or demand (including (a) either
(i) providing cash collateral to be held by Collateral Agent for the
benefit of Lenders in an amount equal to 105% of the then extant Letter of Credit
Usage, or (ii) causing the original Letters of Credit to be returned to
the Issuing Lender, or (iii) providing a back to back standby letter of
credit in an amount equal to the then extant Letter of Credit Usage, and
(b) providing cash collateral to be held by Collateral Agent for the
benefit of Agent or its Affiliates with respect to the then extant Bank
Products Obligations).  No termination
of this Agreement, however, shall relieve or discharge Borrower of its duties,
Obligations, or covenants hereunder and the Agent’s Liens in the Collateral
shall remain in effect until all Obligations have been fully and finally
discharged and the Lender Group’s obligations to provide additional credit
hereunder have been terminated.  When
this Agreement has been terminated and all of the Obligations have been fully
and finally discharged and the Lender Group’s obligations to provide additional
credit under the Loan Documents have been terminated irrevocably, Collateral
Agent will, at Borrower’s sole expense, execute and deliver any UCC termination
statements, lien releases, mortgage releases, re-assignments


 


47

















 


of trademarks, discharges
of security interests, and other similar discharge or release documents (and,
if applicable, in recordable form) as are reasonably necessary to release, as
of record, the Agent’s Liens and all notices of security interests and liens
previously filed by Collateral Agent with respect to the Obligations.


 


3.6                               Early
Termination by Borrower.  Borrower has the option, at any time upon 90
days prior written notice to Agent and Collateral Agent, to terminate this
Agreement by paying to Collateral Agent, for the benefit of the Lender Group,
in cash, the Obligations (including (a) either (i) providing cash collateral
to be held by Collateral Agent for the benefit of Lenders in an amount equal to
105% of the Letter of Credit Usage at such time, or (ii) causing the
original Letters of Credit to be returned to the Issuing Lender, or
(iii) providing a back to back standby letter of credit in an amount equal
to the then extant Letter of Credit Usage, and (b) providing cash
collateral to be held by Collateral Agent for the benefit of Agent or its
Affiliates with respect to the Bank Products Obligations then outstanding), in
full, together with the Applicable Prepayment Premium (to be allocated based
upon letter agreements between Collateral Agent and individual Lenders).  If Borrower has sent a notice of termination
pursuant to the provisions of this Section, then the Commitments shall
terminate and Borrower shall be obligated to repay the Obligations (including
(a) either (i) providing cash collateral to be held by Collateral
Agent for the benefit of Lenders in an amount equal to 105% of the then extant Letter
of Credit Usage, or (ii) causing the original Letters of Credit to be
returned to the Issuing Lender, or (iii) providing a back to back standby
letter of credit in an amount equal to the then extant Letter of Credit Usage,
and (b) providing cash collateral to be held by Collateral Agent for the
benefit of Agent or its Affiliates with respect to the then extant Bank
Products Obligations), in full, together with the Applicable Prepayment
Premium, on the date set forth as the date of termination of this Agreement in
such notice.  In the event of the
termination of this Agreement at any time prior to the Maturity Date, for any
other reason, including (a) termination upon the election of the Required
Lenders to terminate after the occurrence of an Event of Default, (b) foreclosure
and sale of Collateral, (c) sale of the Collateral in any Insolvency
Proceeding, or (iv) restructure, reorganization, or compromise of the
Obligations by the confirmation of a plan of reorganization or any other plan
of compromise, restructure, or arrangement in any Insolvency Proceeding, then,
in view of the impracticability and extreme difficulty of ascertaining the
actual amount of damages to the Lender Group or profits lost by the Lender
Group as a result of such early termination, and by mutual agreement of the
parties as to a reasonable estimation and calculation of the lost profits or
damages of the Lender Group, Borrower shall pay the Applicable Prepayment
Premium to Collateral Agent (to be allocated based upon letter agreements between
Collateral Agent and individual Lenders), measured as of the date of such
termination.  Notwithstanding the above,
no Applicable Prepayment Premium shall be due and payable in connection with a
prepayment that results from a refinancing by Agent or any of its Affiliates.


 


4.                                      CREATION OF SECURITY
INTEREST.


 


4.1                               Grant of
Security Interest. 
Borrower hereby grants to the Agent, for the benefit of the Lender
Group, a continuing security interest in all of its right, title, and interest
in all currently existing and hereafter acquired or arising Personal Property
Collateral in order to secure prompt repayment of any and all of the
Obligations in accordance with the terms and conditions of the Loan Documents
and in order to secure prompt performance by Borrower of 


 


48

















 


each of its covenants and
duties under the Loan Documents.  The
Agent’s Liens in and to the Personal Property Collateral shall attach to all
Personal Property Collateral without further act on the part of the Agent or
Borrower.  Anything contained in this
Agreement or any other Loan Document to the contrary notwithstanding, except
for Permitted Dispositions, Borrower has no authority, express or implied, to
dispose of any item or portion of the Collateral.


 


4.2                               Negotiable
Collateral.  In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, and if and to
the extent that perfection or priority of Agent’s security interest is
dependent on or enhanced by possession, Borrower, immediately upon the request
of Collateral Agent, shall endorse and deliver physical possession of such
Negotiable Collateral to Collateral Agent, as bailee for Agent.


 


4.3                               Collection
of Accounts, General Intangibles, and Negotiable Collateral. 
Agent hereby appoints and designates Collateral Agent as its agent to
handle all day to day and post-Event of Default activity relating to the
Collateral, including, without limitation, collateral monitoring and management
and exercising secured party remedies against the Collateral.  At any time after the occurrence and during
the continuation of an Event of Default, Collateral Agent or Collateral Agent’s
designee may (a) notify Account Debtors of Borrower that the Accounts,
chattel paper, or General Intangibles have been assigned to Collateral Agent or
Agent or that Collateral Agent or Agent has a security interest therein, or
(b) collect the Accounts, chattel paper, or General Intangibles directly
and charge the collection costs and expenses to the Loan Account.  Borrower agrees that it will hold in trust
for the Lender Group, as the Lender Group’s trustee, any Collections that it
receives and immediately will deliver said Collections to Collateral Agent or
the Agent in their original form as received by Borrower.


 


4.4                               Delivery
of Additional Documentation Required. 
At any time upon the request of Collateral Agent, Borrower shall execute
and deliver to Collateral Agent, any and all financing statements, original
financing statements in lieu of continuation statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, and all other documents (the “Additional Documents”) that
Collateral Agent may request in its Permitted Discretion, in form and substance
satisfactory to Collateral Agent, to perfect and continue perfected or better
perfect the Lender Group’s Liens in the Collateral (whether now owned or
hereafter arising or acquired), to create and perfect Liens in favor of
Collateral Agent or Agent, for the benefit of the Lender Group, in any Real
Property acquired after the Closing Date, and in order to fully consummate all
of the transactions contemplated hereby and under the other Loan
Documents.  To the maximum extent
permitted by applicable law, Borrower authorizes Collateral Agent to execute
any such Additional Documents in Borrower’s name and authorizes Collateral
Agent to file such executed Additional Documents in any appropriate filing
office.  In addition, on such periodic
basis as Collateral Agent shall require, Borrower shall (a) provide
Collateral Agent with a report of all new patentable, copyrightable, or
trademarkable materials acquired or generated by Borrower during the prior
period, (b) cause all patents, copyrights, and trademarks acquired or
generated by Borrower that are not already the subject of a registration with
the appropriate filing office (or an application therefor diligently
prosecuted) to be registered with such appropriate filing office in a manner
sufficient to impart constructive notice of Borrower’s ownership thereof, and
(c) cause to be prepared, executed, and delivered to Collateral Agent
supplemental schedules to the applicable Loan Documents to identify such
patents, copyrights, and trademarks as being subject to the security interests
created thereunder.


 


49

















 


4.5                               Power of Attorney. 
Borrower hereby irrevocably makes, constitutes, and appoints Agent and
Collateral Agent (and any of Agent’s and Collateral Agent’s officers,
employees, or agents designated by Agent or Collateral Agent) as Borrower’s
true and lawful attorney, with power to (a) if Borrower refuses to, or
fails timely to execute and deliver any of the documents described in Section 4.4,
sign the name of Borrower on any of the documents described in Section 4.4,
(b) at any time that an Event of Default has occurred and is continuing,
sign Borrower’s name on any invoice or bill of lading relating to the
Collateral, drafts against Account Debtors, or notices to Account Debtors,
(c) send requests for verification of Accounts, (d) endorse
Borrower’s name on any Collection item that may come into the Lender Group’s
possession, (e) at any time that an Event of Default has occurred and is
continuing, make, settle, and adjust all claims under Borrower’s policies of
insurance and make all determinations and decisions with respect to such
policies of insurance, and (f) at any time that an Event of Default has
occurred and is continuing, settle and adjust disputes and claims respecting
the Accounts, chattel paper, or General Intangibles directly with Account
Debtors, for amounts and upon terms that Agent or Collateral Agent determines
to be reasonable, and Agent and Collateral Agent may cause to be executed and
delivered any documents and releases that Agent or Collateral Agent determines
to be necessary.  The appointment of
each of Agent and Collateral Agent as Borrower’s attorney, and each and every
one of its rights and powers, being coupled with an interest, is irrevocable
until all of the Obligations have been fully and finally repaid and performed
and the Lender Group’s obligations to extend credit hereunder are terminated.


 


4.6                               Right to Inspect.  Collateral Agent and each Lender (through
any of their respective officers, employees, or agents) shall have the right,
from time to time hereafter, during normal business hours and with same day
notice (which notice shall only be required so long as no Event of Default
shall have occurred and be continuing) to Borrower to inspect the Books and to
check, test, and appraise the Collateral in order to verify Borrower’s
financial condition or the amount, quality, value, condition of, or any other
matter relating to, the Collateral.


 


4.7                               Control Agreements. 
Borrower agrees that it will not transfer assets out of any Securities
Accounts other than as permitted under Section 7.19 and, if to
another securities intermediary, unless each of Borrower, Collateral Agent
and/or Agent, and the substitute securities intermediary have entered into a
Control Agreement.  No arrangement
contemplated hereby or by any Control Agreement in respect of any Securities
Accounts or other Investment Property shall be modified by Borrower without the
prior written consent of Collateral Agent. 
Upon the occurrence and during the continuance of a Default or Event of
Default, Collateral Agent may notify any securities intermediary to liquidate
the applicable Securities Account or any related Investment Property maintained
or held thereby and remit the proceeds thereof to the Collateral Agent’s
Account.


 


5.                                      REPRESENTATIONS AND
WARRANTIES.


 


In order to induce the
Lender Group to enter into this Agreement, Borrower makes the following
representations and warranties to the Lender Group which shall be true,
correct, and complete, in all material respects, as of the date hereof, and
shall be true, correct, and complete, in all material respects, as of the
Closing Date, and at and as of the date of the making of each Advance (or other
extension of credit) made thereafter, as though made on and as of the date of
such Advance (or other extension of credit) (except to the extent that such
representations and 


 


50

















 


warranties relate
solely to an earlier date) and such representations and warranties shall
survive the execution and delivery of this Agreement:


 


5.1                               No Encumbrances. 
Borrower has good and indefeasible title to the Collateral and the Real
Property, free and clear of Liens except for Permitted Liens.


 


5.2                               Eligible Accounts. 
The Eligible Accounts are bona fide existing payment obligations of
Account Debtors created by the sale and delivery of Inventory or the rendition
of services to such Account Debtors in the ordinary course of Borrower’s
business, owed to Borrower without defenses, disputes, offsets, counterclaims,
or rights of return or cancellation.  As
to each Account that is identified by Borrower as an Eligible Account in a
borrowing base report submitted to Collateral Agent, such Account is not
excluded as ineligible by virtue of one or more of the excluding criteria set
forth in the definition of Eligible Accounts.


 


5.3                               Eligible
Inventory.  All
Eligible Inventory is of good and merchantable quality, free from defects.  As to each item of Inventory that is identified
by Borrower as Eligible Inventory in a borrowing base report submitted to
Collateral Agent, such Inventory is not excluded as ineligible by virtue of one
or more of the excluding criteria set forth in the definition of Eligible
Inventory.


 


5.4                               Equipment. 
All of the Equipment is used or held for use in Borrower’s business and
is fit for such purposes.


 


5.5                               Location
of Inventory and Equipment.  The Inventory and Equipment are not stored
with a bailee, warehouseman, or similar party and are located only at the
locations identified on Schedule 5.5.


 


5.6                               Inventory Records. 
Borrower keeps correct and accurate records itemizing and describing the
type, quality, and quantity of its Inventory and the book value thereof.


 


5.7                               Location
of Chief Executive Office; FEIN.  The chief executive
office of Borrower is located at the address indicated in Schedule 5.7
and Borrower’s FEIN is identified in Schedule 5.7.


 


5.8                               Due
Organization and Qualification; Subsidiaries.


 


(a)                                  Borrower
is duly organized and validly existing under the laws of the jurisdiction of
its organization and qualified to do business in any state where the failure to
be so qualified reasonably could be expected to have a Material Adverse Change.


 


(b)                                 Set
forth on Schedule 5.8(b), is a complete and accurate description of
the authorized capital Stock of Borrower, 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 5.8(b), there are no subscriptions, options, warrants,
or calls relating to any shares of Borrower’s capital Stock, including any
right of conversion or exchange under any outstanding security or other
instrument.  Borrower is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock.


 


51

















 


(c)                                  Set
forth on Schedule 5.8(c), is a complete and accurate list of
Borrower’s direct and indirect Subsidiaries, showing: (i) the jurisdiction
of their organization, (ii) the number of shares of each class of common
and preferred Stock authorized for each of such Subsidiaries, and (iii) the
number and the percentage of the outstanding shares of each such class owned
directly or indirectly by Borrower.  All
of the outstanding capital Stock of each such Subsidiary has been validly
issued and is fully paid and non-assessable.


 


(d)                                 Except
as set forth on Schedule 5.8(c), there are no subscriptions,
options, warrants, or calls relating to any shares of Borrower’s Subsidiaries’
capital Stock, including any right of conversion or exchange under any
outstanding security or other instrument. 
Neither Borrower nor any of its Subsidiaries is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of Borrowers’ Subsidiaries’ capital Stock or any security
convertible into or exchangeable for any such capital Stock.


 


5.9                               Due
Authorization; No Conflict.


 


(a)                                  The
execution, delivery, and performance by Borrower of this Agreement and the Loan
Documents to which it is a party have been duly authorized by all necessary
action on the part of Borrower.


 


(b)                                 The
execution, delivery, and performance by Borrower of this Agreement and the Loan
Documents to which it is a party do not and will not (i) violate any
provision of federal, state, or local law or regulation applicable to Borrower,
the Governing Documents of Borrower, or any order, judgment, or decree of any
court or other Governmental Authority binding on Borrower, (ii) conflict
with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under any material contractual obligation of Borrower,
(iii) result in or require the creation or imposition of any Lien of any
nature whatsoever upon any properties or assets of Borrower, other than
Permitted Liens, or (iv) require any approval of Borrower’s
interestholders or any approval or consent of any Person under any material
contractual obligation of Borrower.


 


(c)                                  Other
than the filing of financing statements, fixture filings, and Mortgages, the
execution, delivery, and performance by Borrower of this Agreement and the Loan
Documents to which Borrower is a party do not and will not require any
registration with, consent, or approval of, or notice to, or other action with
or by, any Governmental Authority or other Person.


 


(d)                                 This
Agreement and the other Loan Documents to which Borrower is a party, and all
other documents contemplated hereby and thereby, when executed and delivered by
Borrower will be the legally valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, except
as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting
creditors’ rights generally.


 


(e)                                  The
Agent’s Liens are validly created, perfected, and first priority Liens, subject
only to Permitted Liens.


 


52

















 


5.10                        Litigation.  Other than those matters disclosed on Schedule 5.10,
there are no actions, suits, or proceedings pending or, to the best knowledge
of Borrower, threatened against Borrower, or any of its Subsidiaries, as
applicable, except for (a) matters that are fully covered by insurance
(subject to customary deductibles), and (b) matters arising after the
Closing Date that, if decided adversely to Borrower, or any of its Subsidiaries,
as applicable, reasonably could not be expected to result in a Material Adverse
Change.


 


5.11                        Financial
Statements.  All
financial statements relating to Borrower that have been delivered by Borrower
to the Lender Group have been prepared in accordance with GAAP (except, in the
case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and present fairly in all material
respects, Borrower’s financial condition as of the date thereof and results of
operations for the period then ended.


 


5.12                        Fraudulent
Transfer.


 


(a)                                  Borrower
is Solvent.


 


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


 


5.13                        Employee Benefits. 
None of Borrower, any of its Subsidiaries, or any of their ERISA
Affiliates maintains or contributes to any Benefit Plan.


 


5.14                        Environmental
Condition.  Except as set forth on Schedule 5.14,
(a) to Borrower’s knowledge, none of Borrower’s assets has ever been used
by Borrower or by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials,
where such production, storage, handling, treatment, release or transport was
in violation, in any material respect, of applicable Environmental Law,
(b) to Borrower’s knowledge, none of Borrower’s properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, (c) Borrower
has not received notice that a Lien arising under any Environmental Law has
attached to any revenues or to any Real Property owned or operated by Borrower,
and (d) Borrower has not received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal or
state governmental agency concerning any action or omission by Borrower
resulting in the releasing or disposing of Hazardous Materials into the
environment.


 


5.15                        Brokerage Fees. 
Borrower has not utilized the services of any broker or finder in
connection with Borrower’s obtaining financing from the Lender Group under this
Agreement and no brokerage commission or finders fee is payable by Borrower in
connection herewith.


 


5.16                        Intellectual
Property.  Borrower
owns, or holds licenses in, all trademarks, trade names, copyrights, patents, patent
rights, and licenses that are necessary to the conduct of its business as
currently conducted.  Attached hereto as
Schedule 5.16 is a true, correct, and complete listing of all
material patents, patent applications, trademark registrations, trademark 


 


53

















 


applications, copyright
applications, and copyright registrations as to which Borrower is the owner or
is an exclusive licensee.


 


5.17                        Leases. 
Borrower enjoys peaceful and undisturbed possession under all leases
material to the business of Borrower and to which it is a party or under which
it is operating.  All of such leases are
valid and subsisting and no material default by Borrower exists under any of
them.


 


5.18                        DDAs. 
Set forth on Schedule 5.18 are all of Borrower’s DDAs,
including, with respect to each depository (i) the name and address of
such depository, and (ii) the account numbers of the accounts maintained
with such depository.  Borrower agrees
to close all of its DDAs at Washington Mutual Bank by no later than April 30,
2003.


 


5.19                        Complete
Disclosure.  All factual information (taken as a whole)
furnished by or on behalf of Borrower in writing to Collateral Agent or any
Lender (including all information contained in the Schedules hereto or in the
other Loan Documents) for purposes of or in connection with this Agreement, the
other Loan Documents, or any transaction contem­plated herein or therein is,
and all other such factual information (taken as a whole) hereafter furnished
by or on behalf of Borrower in writing to Collateral Agent or any Lender will
be, true and accurate, in all material respects, on the date as of which such
information is dated or certified and not incomplete by omitting to state any
fact necessary to make such information (taken as a whole) not misleading in
any material respect at such time in light of the circumstances under which
such information was provided.  On the
Closing Date, the Closing Date Projections represent, and as of the date on
which any other Projections are delivered to Collateral Agent, such additional
Projections represent Borrower’s good faith best estimate of its future
performance for the periods covered thereby.


 


5.20                        Indebtedness. 
Set forth on Schedule 5.20 is a true and complete list of
all Indebt­edness of Borrower outstanding immediately prior to the Closing Date
that is to remain outstanding after the Closing Date and such
Schedule accurately reflects the aggregate principal amount of such
Indebtedness and the principal terms thereof.


 


6.                                      AFFIRMATIVE COVENANTS.


 


Borrower covenants and
agrees that, so long as any credit hereunder shall be available and until full
and final payment of the Obligations, Borrower shall and shall cause each of
its Subsidiaries to do all of the following:


 


6.1                               Accounting System. 
Maintain a system of accounting that enables Borrower to produce
financial statements in accordance with GAAP and maintain records pertaining to
the Collateral that contain information as from time to time reasonably may be
requested by Collateral Agent.  Borrower
also shall keep an inventory reporting system that shows all additions, sales,
claims, returns, and allowances with respect to the Inventory.


 


6.2                               Collateral
Reporting.  Provide Collateral Agent (and if so
requested by Collateral Agent, with copies for each Lender) with the following
documents at the following times in form satisfactory to Collateral Agent:


 


54

















 


	
  Daily

  	
   

  	
  (a)

  	
   

  	
  a sales journal,
  collection journal, and credit register since the last such Schedule and
  a calculation of the Borrowing Base as of such date, and  

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)

  	
   

  	
  notice of all returns,
  disputes, or claims.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Weekly

  	
   

  	
  (c)

  	
   

  	
  Inventory reports
  specifying Borrower’s cost and the wholesale market value of its Inventory,
  by category, with additional detail showing additions to and deletions from
  the Inventory.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly (not later than
  the 10th day of each month)

  	
   

  	
  (d)

  	
   

  	
  a detailed calculation
  of the Borrowing Base (including detail regarding those Accounts that are not
  Eligible Accounts),

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (e)

  	
   

  	
  a detailed aging, by
  total, of the Accounts, together with a reconciliation to the detailed
  calculation of the Borrowing Base 
  previously provided to Collateral Agent,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (f)

  	
   

  	
  a summary aging, by
  vendor, of Borrower’s accounts payable 
  and any book overdraft, and

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (g)

  	
   

  	
  a calculation of
  Dilution for the prior month.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quarterly

  	
   

  	
  (h)

  	
   

  	
  a detailed list of
  Borrower’s customers,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)

  	
   

  	
  a report regarding
  Borrower’s accrued, but unpaid, ad valorem taxes,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Upon request by
  Collateral Agent

  	
   

  	
  (j)

  	
   

  	
  copies of invoices in
  connection with the Accounts, credit memos, remittance advices, deposit
  slips, shipping and delivery documents in connection with the Accounts and,
  for Inventory and Equipment acquired by Borrower, purchase orders and
  invoices, and

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (k)

  	
   

  	
  such other reports as
  to the Collateral, or the financial condition of Borrower, as Agent or
  Collateral Agent may request.

  



 


In addition, Borrower
agrees to cooperate fully with Collateral Agent to facilitate and implement a
system of electronic collateral reporting in order to provide electronic
reporting of each of the items set forth above.


 


6.3                               Financial
Statements, Reports, Certificates.  Deliver to
Collateral Agent, with copies to each Lender:


 


(a)                                  as
soon as available, but in any event within 45 days  after the end of each of the first 3 fiscal quarters during each
of Borrower’s fiscal years,


 


(i)                                     a
company prepared consolidated balance sheet, income statement, and statement of
cash flow covering Borrower’s and its Subsidiaries’ operations during such
period,


 


55

















 


(ii)                                  a
certificate signed by the chief financial officer of Borrower (in his or her
corporate capacity) to the effect that:


 


(A)                              the
financial statements delivered hereunder have been prepared in accordance with
GAAP (except for the lack of footnotes and being subject to year-end audit
adjustments) and fairly present in all material respects the financial
condition of Borrower and its Subsidiaries,


 


(B)                                the
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents are true and correct in all material respects on and as of
the date of such certificate, as though made on and as of such date (except to
the extent that such representations and warranties relate solely to an earlier
date), and


 


(C)                                there
does not exist any condition or event that constitutes a Default or Event of
Default (or, to the extent of any non-compliance, describing such non-compliance
as to which he or she may have knowledge and what action Borrower has taken, is
taking, or proposes to take with respect thereto), and


 


(iii)                               for
each month that is the date on which a financial covenant in Section 7.20
is to be tested, a Compliance Certificate demonstrating, in reasonable detail,
compliance at the end of such period with the applicable financial covenants
contained in Section 7.20, and


 


(b)                                 as
soon as available, but in any event within 90 days after the end of each of
Borrower’s fiscal years,


 


(i)                                     financial
statements of Borrower and its Subsidiaries for each such fiscal year, audited
by independent certified public accountants reasonably acceptable to Collateral
Agent and certified, without any qualifications, by such accountants to have
been prepared in accordance with GAAP (such audited financial statements to
include a balance sheet, income statement, and statement of cash flow and, if
prepared, such accountants’ letter to management),


 


(ii)                                  a
certificate of such accountants addressed to Collateral Agent and the Lenders
stating that such accountants do not have knowledge of the existence of any
Default or Event of Default under Section 7.20,


 


(c)                                  as
soon as available, but in any event within 30 days prior to the start of each
of Borrower’s fiscal years,


 


56

















 


(i)                                     copies
of Borrower’s Projections, in form and substance (including as to scope and
underlying assumptions) satisfactory to Collateral Agent, in its sole
discretion, for the forthcoming 3 years, year by year, and for the forthcoming
fiscal year, month by month, certified by the chief financial officer of
Borrower as being such officer’s good faith best estimate of the financial
performance of Borrower during the period covered thereby,


 


(d)                                 if
and when filed by Borrower,


 


(i)                                     Form
10-Q quarterly reports, Form 10-K annual reports, and Form 8-K current reports,


 


(ii)                                  any
other filings made by Borrower with the SEC,


 


(iii)                               copies
of Borrower’s federal income tax returns, and any amendments thereto, filed
with the Internal Revenue Service, and


 


(iv)                              any
other information that is provided by Borrower to its shareholders generally,


 


(e)                                  if
and when filed by Borrower and as requested by Collateral Agent, satisfactory
evidence of payment of applicable excise taxes in each jurisdictions in which
(i) Borrower conducts business and pays any such excise tax,
(ii) where Borrower’s failure to pay any such applicable excise tax would
result in a Lien on the properties or assets of Borrower, or (iii) where
Borrower’s failure to pay any such applicable excise tax reasonably could be
expected to result in a Material Adverse Change,


 


(f)                                    as
soon as Borrower has knowledge of any event or condition that constitutes a
Default or an Event of Default, notice thereof and a statement of the curative
action that Borrower proposes to take with respect thereto, and


 


(g)                                 upon
the request of Collateral Agent, any other report reasonably requested relating
to the financial condition of Borrower.


 


In addition to the
financial statements referred to above, Borrower agrees to deliver financial
statements prepared on both a consolidated and consolidating basis and agrees
that no Subsidiary of Borrower will have a fiscal year different from that of
Borrower.  Borrower agrees that its
independent certified public accountants are authorized to communicate with
Collateral Agent and to release to Collateral Agent whatever financial
information concerning Borrower that Collateral Agent may reasonably request.  Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Collateral Agent
pursuant to or in accordance with this Agreement, and agrees that Collateral
Agent may contact directly any such accounting firm or service bureau in order
to obtain such information.


 


6.4                               Intentionally
Omitted.


 


57

















 


6.5                               Return.  Cause returns and allowances, as between
Borrower and its Account Debtors, to be on the same basis and in accordance
with the usual customary practices of Borrower, as they exist at the time of
the execution and delivery of this Agreement. 
If, at a time when no Event of Default has occurred and is continuing,
any Account Debtor returns any Inventory to Borrower, Borrower promptly shall
determine the reason for such return and, if Borrower accepts such return,
issue a credit memorandum (with a copy to be sent to Collateral Agent) in the
appropriate amount to such Account Debtor. 
If, at a time when an Event of Default has occurred and is continuing,
any Account Debtor returns any Inventory to Borrower, Borrower promptly shall
determine the reason for such return and, if Collateral Agent consents (which
consent shall not be unreasonably withheld), issue a credit memorandum (with a
copy to be sent to Collateral Agent) in the appropriate amount to such Account
Debtor.


 


6.6                               Maintenance
of Properties.  Maintain and preserve all of its properties
which are necessary or useful in the proper conduct to its business in good
working order and condition, ordinary wear and tear excepted, and comply at all
times with the provisions of all leases to which it is a party as lessee so as
to prevent any loss or forfeiture thereof or thereunder.


 


6.7                               Taxes.  Cause all assessments and taxes, whether
real, personal, or otherwise, due or payable by, or imposed, levied, or
assessed against Borrower or any of its assets to be paid in full, before
delinquency or before the expiration of any extension period, except to the
extent that the validity of such assessment or tax shall be the subject of a
Permitted Protest.  Borrower will make
timely payment or deposit of all tax payments and withholding taxes required of
it by applicable laws, including those laws concerning F.I.C.A., F.U.T.A.,
state disability, and local, state, and federal income taxes, and will, upon
request, furnish Collateral Agent with proof satisfactory to Collateral Agent
indicating that Borrower has made such payments or deposits.


 


6.8                               Insurance.


 


(a)                                  At
Borrower’s expense, maintain insurance respecting its assets wherever located,
covering loss or damage by fire, theft, explosion, and all other hazards and
risks as ordinarily are insured against by other Persons engaged in the same or
similar businesses. Borrower also shall maintain business interruption, public
liability, and product liability insurance, as well as insurance against
larceny, embezzlement, and criminal misappropriation.  All such policies of insurance shall be in such amounts and with
such insurance companies as are reasonably satisfactory to Collateral Agent.
Borrower shall deliver copies of all such policies to Collateral Agent with a
satisfactory lender’s loss payable endorsement naming Collateral Agent as sole
loss payee or additional insured, as appropriate.  Each policy of insurance or endorsement shall contain a clause
requiring the insurer to give not less than 30 days prior written notice to
Collateral Agent in the event of cancellation of the policy for any reason
whatsoever.


 


(b)                                 Borrower
shall give Collateral Agent prompt notice of any loss covered by such
insurance.  Collateral Agent shall have
the exclusive right to adjust any losses payable under any such insurance
policies in excess of $50,000, without any liability to Borrower whatsoever in
respect of such adjustments.  Any monies
received as payment for any loss under any insurance policy mentioned above
(other than liability insurance policies) or as payment of any award or
compensation for condemnation or taking by eminent domain, shall be paid over
to Collateral Agent to be applied at the option of the Required Lenders either
to the prepayment of 


 


58

















 


the Obligations or shall
be disbursed to Borrower under staged payment terms reasonably satisfactory to
the Required Lenders for application to the cost of repairs, replacements, or
restorations. Any such repairs, replacements, or restorations shall be effected
with reasonable promptness and shall be of a value at least equal to the value
of the items of property destroyed prior to such damage or destruction.


 


(c)                                  Borrower
will not take out separate insurance concurrent in form or contributing in the
event of loss with that required to be maintained under this Section 6.8,
unless Collateral Agent is included thereon as named insured with the loss
payable to Collateral Agent under a lender’s loss payable endorsement or its
equivalent.  Borrower immediately shall
notify Collateral Agent whenever such separate insurance is taken out,
specifying the insurer thereunder and full particulars as to the policies
evidencing the same, and copies of such policies promptly shall be provided to
Collateral Agent.


 


6.9                               Location
of Inventory and Equipment.  Keep the Inventory and Equipment only at the
locations identified on Schedule 5.5; provided, however,
that Borrower may amend Schedule 5.5 so long as such amendment
occurs by written notice to Collateral Agent not less than 30 days prior to the
date on which Inventory or Equipment is moved to such new location, so long as
such new location is within the continental United States, and so long as,
at the time of such written notification, Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected the
Agent’s Liens on such assets and also provides to Collateral Agent a Collateral
Access Agreement.


 


6.10                        Compliance with
Laws.  Comply with
the requirements of all applicable laws, rules, regulations, and orders of any
Governmental Authority, including the Fair Labor Standards Act and the
Americans With Disabilities Act, other than laws, rules, regulations, and
orders the non-compliance with which, individually or in the aggregate, would
not result in and reasonably could not be expected to result in a Material
Adverse Change.


 


6.11                        Leases.  Pay when due all rents and other amounts
payable under any leases to which Borrower is a party or by which Borrower’s
properties and assets are bound, unless such payments are the subject of a
Permitted Protest.


 


6.12                        Brokerage
Commissions.   Pay any
and all brokerage commission or finders fees incurred in connection with or as
a result of Borrower’s obtaining financing from the Lender Group under this
Agreement.  Borrower agrees and acknowledges
that payment of all such brokerage commissions or finders fees shall be the
sole responsibility of Borrower, and Borrower agrees to indemnify, defend, and
hold Collateral Agent and the Lender Group harmless from and against any claim
of any broker or finder arising out of Borrower’s obtaining financing from the
Lender Group under this Agreement.


 


6.13                        Existence.  At all times preserve and keep in full force
and effect Borrower’s valid existence and good standing and any rights and
franchises material to Borrower’s businesses.


 


59

















 


6.14                        Environmental.


 


(a)                                  Keep
any property either owned or operated by Borrower free of any Environmental
Liens or post bonds or other financial assurances sufficient to satisfy the
obligations or liability evidenced by such Environmental Liens,
(b) comply, in all material respects, with Environmental Laws and provide
to Collateral Agent documentation of such compliance which Collateral Agent
reasonably requests, (c) promptly notify Collateral Agent of any release
of a Hazardous Material in any reportable quantity from or onto property owned
or operated by Borrower and take any Remedial Actions required to abate said
release or otherwise to come into compliance with applicable Environmental Law,
and (d) promptly provide Collateral Agent with written notice within 10
days of the receipt of any of the following: 
(i) notice that an Environmental Lien has been filed against any of
the real or personal property of Borrower, (ii) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against Borrower, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.


 


6.15                        Disclosure Updates. 
Promptly and in no event later than 5 Business Days after obtaining
knowledge thereof, (a) notify Collateral Agent if any written information,
exhibit, or report furnished to the Lender Group contained any untrue statement
of a material fact or omitted to state any material fact necessary to make the
statements contained therein not misleading in light of the circumstances in
which made, and (b) correct any defect or error that may be discovered
therein or in any Loan Document or in the execution, acknowledgement, filing,
or recordation thereof.


 


7.                                      NEGATIVE COVENANTS.


 


Borrower covenants and
agrees that, so long as any credit hereunder shall be available and until full
and final payment of the Obligations, Borrower will not and will not permit any
of its Subsidiaries to do any of the following:


 


7.1                               Indebtedness. 
Create, incur, assume, permit, guarantee, or otherwise become or remain,
directly or indirectly, liable with respect to any Indebtedness, except:


 


(a)                                  Indebtedness
evidenced by this Agreement and the other Loan Documents, together with
Indebtedness owed to Underlying Issuers with respect to Underlying Letters of
Credit,


 


(b)                                 Indebtedness
set forth on Schedule 5.20,


 


(c)                                  Permitted
Purchase Money Indebtedness, and


 


(d)                                 refinancings,
renewals, or extensions of Indebtedness permitted under clauses (b) and
(c) of this Section 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and
conditions of such refinancings, renewals, or extensions do not, in Collateral
Agent’s judgment, materially impair the prospects of repayment of the
Obligations by Borrower or materially impair Borrower’s creditworthiness,
(ii) such refinancings, renewals, or extensions do not result in an increase
in the principal amount of, or interest rate with respect to, the Indebtedness
so refinanced, renewed, or extended, (iii) such 


 


60

















 


refinancings, renewals,
or extensions do not result in a shortening of the average weighted maturity of
the Indebtedness so refinanced, renewed, or extended, nor are they on terms or
conditions that, taken as a whole, are materially more burdensome or
restrictive to Borrower, and (iv) if the Indebtedness that is refinanced,
renewed, or extended was subordinated in right of payment to the Obligations,
then the terms and conditions of the refinancing, renewal, or extension
Indebtedness must include subordination terms and conditions that are at least
as favorable to the Lender Group as those that were applicable to the
refinanced, renewed, or extended Indebtedness; and


 


(e)                                  Indebtedness
composing Permitted Investments.


 


7.2                               Liens. 
Create, incur, assume, or permit to exist, directly or indirectly, any
Lien on or with respect to any of its assets, of any kind, whether now owned or
hereafter acquired, or any income or profits therefrom, except for Permitted
Liens (including Liens that are replacements of Permitted Liens to the extent
that the original Indebtedness is refinanced, renewed, or extended under Section 7.1(d)
and so long as the replacement Liens only encumber those assets that secured
the refinanced, renewed, or extended Indebtedness).


 


7.3                               Restrictions
on Fundamental Changes.


 


(a)                                  Enter
into any merger, consolidation, reorganization, or recapitalization, or
reclassify its Stock.


 


(b)                                 Liquidate,
wind up, or dissolve itself (or suffer any liquidation or dissolution).


 


(c)                                  Convey,
sell, lease, license, assign, transfer, or otherwise dispose of, in one
transaction or a series of transactions, all or any substantial part of its
assets.


 


7.4                               Disposal of
Assets.  Other than
Permitted Dispositions, convey, sell, lease, license, assign, transfer, or
otherwise dispose of any of Borrower’s assets.


 


7.5                               Change Name, etc. 
Change Borrower’s name, state of incorporation, FEIN, corporate
structure, or identity, or add any new fictitious name; provided, however,
that Borrower may change its name upon at least 30 days prior written notice to
Collateral Agent of such change and so long as, at the time of such written
notification, Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected the Agent’s Liens.


 


7.6                               Guarantee.  Guarantee or otherwise become in any way
liable with respect to the obligations of any third Person except by
endorsement of instruments or items of payment for deposit to the account of
Borrower or which are transmitted or turned over to Collateral Agent.


 


7.7                               Nature of Business. 
Make any change in the principal nature of its business.


 


61

















 


7.8                               Prepayments
and Amendments.


 


(a)                                  Except
in connection with a refinancing permitted by Section 7.1(d),
prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness of
Borrower, other than the Obligations in accordance with this Agreement, and


 


(b)                                 Except
in connection with a refinancing permitted by Section 7.1(d),
directly or indirectly, amend, modify, alter, increase, or change any of the
terms or conditions of any agreement, instrument, document, indenture, or other
writing evidencing or concerning Indebtedness permitted under Sections
7.1(b) or (c).


 


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


 


7.10                        Consignments. 
Consign any Inventory or sell any Inventory on bill and hold, sale or
return, sale on approval, or other conditional terms of sale.


 


7.11                        Distributions. 
Make any distribution or declare or pay any dividends (in cash or other
property, other than common Stock) on, or purchase, acquire, redeem, or retire
any of Borrower’s Stock, of any class, whether now or hereafter outstanding.


 


7.12                        Accounting Methods. 
Modify or change its method of accounting (other than as may be required
to conform to GAAP) or enter into, modify, or terminate any agreement currently
existing, or at any time hereafter entered into with any third party accounting
firm or service bureau for the preparation or storage of Borrower’s accounting
records without said accounting firm or service bureau agreeing to provide
Collateral Agent information regarding the Collateral or Borrower’s financial
condition.


 


7.13                        Investments.  Except for Permitted Investments, directly
or indirectly, make or acquire any Investment or incur any liabilities
(including contingent obligations) for or in connection with any Investment; provided,
however, that Borrower and its Subsidiaries shall not have Permitted
Investments (other than in the Treasury Management Account) in deposit accounts
or Securities Accounts in excess of $5,000,000 outstanding at any one time
unless Borrower or its Subsidiary, as applicable, and the applicable securities
intermediary or bank have entered into Control Agreements governing such
Permitted Investments, as Collateral Agent shall determine in its Permitted
Discretion, to perfect (and further establish) the Agent’s Liens in such
Permitted Investments.


 


7.14                        Transactions
with Affiliates.  Directly or indirectly enter into or permit
to exist any transaction with any Affiliate of Borrower except for transactions
that are in the ordinary course of Borrower’s business, upon fair and
reasonable terms, that are fully disclosed to Collateral Agent, and that are no
less favorable to Borrower than would be obtained in an arm’s length
transaction with a non-Affiliate.


 


7.15                        Suspension. 
Suspend or go out of a substantial portion of its business.


 


7.16                        Intentionally
Omitted.


 


7.17                        Use of Proceeds.  Use the proceeds of the Advances and the
Term Loan for any purpose other than (a) on the Closing Date, (i) to
repay, in full, the outstanding principal, accrued 


 


62

















 


interest, and accrued
fees and expenses owing to Existing Lender, and (ii) to pay transactional
fees, costs, and expenses incurred in connection with this Agreement, the other
Loan Documents, and the transactions contemplated hereby and thereby, and
(b) thereafter, consistent with the terms and conditions hereof, for its
lawful and permitted purposes.


 


7.18                        Change
in Location of Chief Executive Office; Inventory and Equipment with Bailees.  Relocate its chief executive office to a new
location without providing 30 days prior written notification thereof to
Collateral Agent and so long as, at the time of such written notification,
Borrower provides any financing statements or fixture filings necessary to
perfect and continue perfected the Agent’s Liens and also provides to
Collateral Agent a Collateral Access Agreement with respect to such new
location.  The Inventory and Equipment
shall not at any time now or hereafter be stored with a bailee, warehouseman,
or similar party without Collateral Agent’s prior written consent.


 


7.19                        Securities
Accounts.  Establish or maintain any Securities Account
unless Collateral Agent shall have received a Control Agreement in respect of
such Securities Account.  Borrower shall
not transfer assets out of any Securities Account; provided, however,
that, so long as no Event of Default has occurred and is continuing or would
result therefrom, Borrower may use such assets (and the proceeds thereof) to
the extent not prohibited by this Agreement.


 


7.20                        Financial
Covenants.


 


(a)                                  Fail
to maintain:


 


(i)                                     Tangible Net
Worth.  Tangible Net Worth of
at least $50,000,000 at all times, measured at the end of each fiscal quarter.


 


(ii)                                  Working Capital.  Working Capital of at least $35,000,000 at
all times, measured at the end of each fiscal quarter.


 


(b)                                 Make:


 


(i)                                     Capital
Expenditures.  Capital
expenditures in any fiscal year in excess of the amount set forth in the
following table for the applicable period:


 


	
  Fiscal Year 2003

  	
   

  	
  Fiscal
  Year 2004

  	
   

  	
  Fiscal
  Year 2005

  	
   

  
	
  $

  	
  3,000,000

  	
   

  	
  $

  	
  2,500,000

  	
   

  	
  $

  	
  2,500,000

  	
   

  
									



 


8.                                      EVENTS OF DEFAULT.


 


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


 


63

















 


8.1                               If
Borrower fails to pay when due and payable, or when declared due and payable,
all or any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due the Lender Group,
reimbursement of Lender Group Expenses, or other amounts constituting
Obligations);


 


8.2                               If
Borrower fails to perform, keep, or observe (a) any term, provision,
condition or covenant contained in Section 6.2 and such failure
continues for a period of 5 days after such failure; (b) any term,
provision, condition or covenant contained in Sections 6.3, 6.6, 6.7 or 6.11
and such failure continues for a period of 15 days after the date of such
failure; or (c) any other term, provision, condition, covenant, or
agreement contained in this Agreement or in any of the other Loan Documents;


 


8.3                               If
any material portion of Borrower’s or any of its Subsidiaries’ assets is
attached, seized, subjected to a writ or distress warrant, levied upon, or
comes into the possession of any third Person;


 


8.4                               If
an Insolvency Proceeding is commenced by Borrower or any of its Subsidiaries;


 


8.5                               If
an Insolvency Proceeding is commenced against Borrower, or any of its
Subsidiaries, and any of the following events occur:  (a) Borrower or the Subsidiary consents to the institution
of such Insolvency Proceeding against it, (b) the petition commencing the
Insolvency Proceeding is not timely controverted, (c) the petition
commencing the Insolvency Proceeding is not dismissed within 45 calendar days
of the date of the filing thereof; provided, however, that,
during the pendency of such period, Collateral Agent (including any successor
Collateral Agent) and each other member of the Lender Group shall be relieved
of their obligations to extend credit hereunder, (d) an interim trustee is
appointed to take possession of all or any substantial portion of the
properties or assets of, or to operate all or any substantial portion of the
business of, Borrower or any of its Subsidiaries, or (e) an order for
relief shall have been entered therein;


 


8.6                               If
Borrower or any of its Subsidiaries is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs;


 


8.7                               If
a notice of Lien, levy, or assessment is filed of record with respect to any of
Borrower’s or any of its Subsidiaries’ assets by the United States, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any time
hereafter to any one or more of such entities becomes a Lien, whether choate or
otherwise, upon any of Borrower’s or any of its Subsidiaries’ assets and the
same is not paid before such payment is delinquent;


 


8.8                               If
a judgment or other claim in excess of $100,000 becomes a Lien or encumbrance
upon any material portion of Borrower’s or any of its Subsidiaries assets, and
such judgment or other claim is not discharged or bonded pending appeal within
30 days;


 


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8.9                               If
there is a default in any material agreement to which Borrower or any of its
Subsidiaries is a party and such default (a) occurs at the final maturity
of the obligations thereunder, or (b) results in a right by the other
party thereto, irrespective of whether exercised, to accelerate the maturity of
Borrower’s or its Subsidiaries’ obligations thereunder, to terminate such
agreement, or to refuse to renew such agreement pursuant to an automatic
renewal right therein;


 


8.10                        If
Borrower or any of its Subsidiaries makes any payment on account of
Indebtedness that has been contractually subordinated in right of payment to
the payment of the Obligations, except to the extent such payment is permitted
by the terms of the subordination provisions applicable to such Indebtedness;


 


8.11                        If any
material misstatement or misrepresentation exists now or hereafter in any warranty,
representation, statement, or Record made to the Lender Group by Borrower, its
Subsidiaries, or any officer, employee, Collateral Agent, or director of
Borrower or any of its Subsidiaries;


 


8.12                        If this
Agreement or any other Loan Document that purports to create a Lien, shall, for
any reason, fail or cease to create a valid and perfected and, except to the
extent permitted by the terms hereof or thereof, first priority Lien on or
security interest in the Collateral covered hereby or thereby; or


 


8.13                        Any
provision of any Loan Document shall at any time for any reason be declared to
be null and void, or the validity or enforceability thereof shall be contested
by Borrower, or a proceeding shall be commenced by Borrower, or by any
Governmental Authority having jurisdiction over Borrower, seeking to establish
the invalidity or unenforceability thereof, or Borrower shall deny that
Borrower has any liability or obligation purported to be created under any Loan
Document.


 


9.                                      THE LENDER GROUP’S
RIGHTS AND REMEDIES.


 


9.1                               Rights and Remedies. 
Upon the occurrence, and during the continuation, of an Event of
Default, the Required Lenders (at their election but without notice of their
election and without demand) may authorize and instruct Collateral Agent to do
any one or more of the following on behalf of the Lender Group (and Collateral
Agent, acting upon the instructions of the Required Lenders, shall do the same
on behalf of the Lender Group), all of which are authorized by Borrower:


 


(a)                                  Declare
all Obligations, whether evidenced by this Agreement, by any of the other Loan
Documents, or otherwise, immediately due and payable;


 


(b)                                 Cease
advancing money or extending credit to or for the benefit of Borrower under
this Agreement, under any of the Loan Documents, or under any other agreement
between Borrower and the Lender Group;


 


(c)                                  Terminate
this Agreement and any of the other Loan Documents as to any future liability
or obligation of the Lender Group, but without affecting any of the  Agent’s Liens in the Collateral and without
affecting the Obligations;


 


65

















 


(d)                                 Settle
or adjust disputes and claims directly with Account Debtors for amounts and
upon terms which Collateral Agent considers advisable, and in such cases,
Collateral Agent will credit Borrower’s Loan Account with only the net amounts
received by Collateral Agent in payment of such disputed Accounts after
deducting all Lender Group Expenses incurred or expended in connection
therewith;


 


(e)                                  Cause
Borrower to hold all returned Inventory in trust for the Lender Group,
segregate all returned Inventory from all other assets of Borrower or in
Borrower’s possession and conspicuously label said returned Inventory as the
property of the Lender Group;


 


(f)                                    Without
notice to or demand upon Borrower, make such payments and do such acts as
Collateral Agent considers necessary or reasonable to protect its security
interests in the Collateral.  Borrower
agrees to assemble the Personal Property Collateral if Collateral Agent so
requires, and to make the Personal Property Collateral available to Collateral
Agent at a place that Collateral Agent may designate which is reasonably
convenient to both parties.  Borrower
authorizes Collateral Agent to enter the premises where the Personal Property
Collateral is located, to take and maintain possession of the Personal Property
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
Lien that conflicts with the Agent’s Liens and to pay all expenses incurred in
connection therewith and to charge Borrower’s Loan Account therefor.  With respect to any of Borrower’s owned or
leased premises, Borrower hereby grants Collateral Agent a license to enter
into possession of such premises and to occupy the same, without charge, in
order to exercise any of the Lender Group’s rights or remedies provided herein,
at law, in equity, or otherwise;


 


(g)                                 Without
notice to Borrower (such notice being expressly waived), and without
constituting a retention of any collateral in satisfaction of an obligation
(within the meaning of the Code), set off and apply to the Obligations any and
all (i) balances and deposits of Borrower held by the Lender Group
(including any amounts received in the Treasury Management Account), or (ii) Indebtedness
at any time owing to or for the credit or the account of Borrower held by the
Lender Group;


 


(h)                                 Hold,
as cash collateral, any and all balances and deposits of Borrower held by the
Lender Group, and any amounts received in the Treasury Management Account, to
secure the full and final repayment of all of the Obligations;


 


(i)                                     Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell (in the manner provided for herein) the Personal Property
Collateral.  Borrower hereby grants to
Collateral Agent a license or other right to use, without charge, Borrower’s
labels, patents, copyrights, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it pertains
to the Personal Property Collateral, in completing production of, advertising
for sale, and selling any Personal Property Collateral and Borrower’s rights
under all licenses and all franchise agreements shall inure to the Lender
Group’s benefit;


 


(j)                                     Sell
the Personal Property Collateral at either a public or private sale, or both,
by way of one or more contracts or transactions, for cash or on terms, in such
manner and 


 


66

















 


at such places (including
Borrower’s premises) as Collateral Agent determines is commercially
reasonable.  It is not necessary that
the Personal Property Collateral be present at any such sale;


 


(k)                                  Collateral
Agent shall give notice of the disposition of the Personal Property Collateral
as follows:


 


(i)                                     Collateral
Agent shall give Borrower a notice in writing of the time and place of public
sale, or, if the sale is a private sale or some other disposition other than a
public sale is to be made of the Personal Property Collateral, the time on or
after which the private sale or other disposition is to be made; and


 


(ii)                                  The
notice shall be personally delivered or mailed, postage prepaid, to Borrower as
provided in Section 12, at least 10 days before the earliest time
of disposition set forth in the notice; no notice needs to be given prior to
the disposition of any portion of the Personal Property Collateral that is
perishable or threatens to decline speedily in value or that is of a type
customarily sold on a recognized market;


 


(l)                                     Collateral
Agent, on behalf of the Lender Group, may credit bid and purchase at any public
sale; and


 


(m)                               Collateral
Agent may seek the appointment of a receiver or keeper to take possession of
all or any portion of the Collateral or to operate same and, to the maximum
extent permitted by law, may seek the appointment of such a receiver without
the requirement of prior notice or a hearing;


 


(n)                                 The
Lender Group shall have all other rights and remedies available at law or in
equity or pursuant to any other Loan Document; and


 


(o)                                 Any
deficiency that exists after disposition of the Personal Property Collateral as
provided above will be paid immediately by Borrower.  Any excess will be returned, without interest and subject to the
rights of third Persons, by Collateral Agent to Borrower.


 


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


 


10.                               TAXES AND EXPENSES.


 


If Borrower fails to pay
any monies (whether taxes, assessments, insurance premiums, or, in the case of
leased properties or assets, rents or other amounts payable under such leases)
due to third Persons, or fails to make any deposits or furnish any required
proof of payment or 


 


67

















 


deposit, all as
required under the terms of this Agreement, then, Collateral Agent, in its sole
discretion and without prior notice to Borrower, may do any or all of the
following:  (a) make payment of the
same or any part thereof, (b) set up such reserves in Borrower’s Loan
Account as Collateral Agent deems necessary to protect the Lender Group from
the exposure created by such failure, or (c) in the case of the failure to
comply with Section 6.8 hereof, obtain and maintain insurance
policies of the type described in Section 6.8 and take any action
with respect to such policies as Collateral Agent deems prudent.  Any such amounts paid by Collateral Agent
shall constitute Lender Group Expenses and any such payments shall not
constitute an agreement by the Lender Group to make similar payments in the
future or a waiver by the Lender Group of any Event of Default under this
Agreement.  Collateral Agent need not
inquire as to, or contest the validity of, any such expense, tax, or Lien and
the receipt of the usual official notice for the payment thereof shall be
conclusive evidence that the same was validly due and owing.


 


11.                               WAIVERS;
INDEMNIFICATION.


 


11.1                        Demand; Protest. 
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of documents, instruments,
chattel paper, and guarantees at any time held by the Lender Group on which
Borrower may in any way be liable.


 


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


 


11.3                        Indemnification. 
Borrower shall pay, indemnify, defend, and hold the Agent-Related
Persons, the Lender-Related Persons with respect to each Lender, each
Participant, and each of their respective officers, directors, employees,
agents, and attorneys-in-fact (each, an “Indemnified Person”) harmless
(to the fullest extent permitted by law) from and against any and all claims,
demands, suits, actions, investigations, proceedings, and damages, and all
reasonable attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them (a) in connection with or as a result of
or related to the execution, delivery, enforcement, performance, or
administration of this Agreement, any of the other Loan Documents, or the
transactions contemplated hereby or thereby, and (b) with respect to any
investigation, litigation, or proceeding related to this Agreement, any other
Loan Document, or the use of the proceeds of the credit provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or any
act, omission, event, or circumstance in any manner related thereto (all the
foregoing, collectively, the “Indemnified Liabilities”).  The foregoing to the contrary
notwithstanding, Borrower shall have no obligation to any Indemnified Person
under this Section 11.3 with respect to any Indemnified Liability
that a court of competent jurisdiction finally determines to have resulted from
the gross negligence or willful misconduct of such Indemnified Person.  This provision shall survive the termination
of this Agreement and the repayment of the Obligations.  If any 


 


68

















 


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


 


12.                               NOTICES.


 


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


 


	
  If to Borrower:

  	
  CUTTER
  & BUCK INC.

  
	
   

  	
  701 N. 34th Street,
  Suite 400

  Seattle, Washington  98103

  Attn:  Ms. Fran Conley

  Fax No.  206.448.3034

  
	
   

  	
   

  
	
  with copies to:

  	
  LANE
  POWELL SPEARS LUBERSKY LLP

  
	
   

  	
  1420 Fifth Avenue,
  Suite 4100

  Seattle, WA 98101

  Attn:  Michael Morgan, Esq.

  Fax No.  (206) 223-7107

  
	
   

  	
   

  
	
  If to Collateral Agent:

  	
  CENTURY
  BUSINESS CREDIT CORPORATION

  
	
   

  	
  333 South Grand Avenue,
  Suite 4150

  Los Angeles, CA  90071

  Attn:  Martin Eckstein

  Fax No.  310.453.7443

  
	
   

  	
   

  
	
  with copies to:

  	
  BUCHALTER,
  NEMER, FIELDS & YOUNGER

  
	
   

  	
  601 So. Figueroa Street

  Suite 2400

  Los Angeles, California  90017

  Attn:  Jeffrey H. Kapor, Esq.

  Fax No.  213.896-0400

  



 


69

















 


	
  If to Agent:

  	
  WELLS
  FARGO BANK, N.A.

  999 Third Avenue, 47th Floor

  Seattle, Washington  98104

  Attn:  Tony Liebo

  Fax No.  206.447-9851

  



 


Collateral Agent and
Borrower may change the address at which they are to receive notices hereunder,
by notice in writing in the foregoing manner given to the other party.  All notices or demands sent in accordance
with this Section 12, other than notices by Collateral Agent in
connection with enforcement rights against the Collateral under the provisions
of the Code, shall be deemed received on the earlier of the date of actual
receipt or 3 Business Days after the deposit thereof in the mail.  Borrower acknowledges and agrees that
notices sent by the Lender Group in connection with the exercise of enforcement
rights against Collateral under the provisions of the Code shall be deemed sent
when deposited in the mail or personally delivered, or, where permitted by law,
transmitted by telefacsimile or any other method set forth above.


 


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


 


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


 


(b)                                 THE PARTIES
AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT COLLATERAL AGENT’S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE COLLATERAL AGENT ELECTS TO BRING SUCH ACTION OR WHERE
SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  BORROWER AND THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON  CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING
IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13(b).


 


(c)                                  BORROWER AND
THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS



 


70

















 


OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
OR STATUTORY CLAIMS.  BORROWER AND THE
LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.  IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.


 


14.                               ASSIGNMENTS AND
PARTICIPATIONS; SUCCESSORS.


 


14.1                        Assignments
and Participations.


 


(a)                                  Any
Lender may, with the written consent of Borrower (such consent not to be
unreasonably withheld) and Collateral Agent (provided that no written consent
of Collateral Agent shall be required in connection with any assignment and
delegation by a Lender to an Eligible Transferee), assign and delegate to one
or more assignees (each an “Assignee”) all, or any ratable part of all,
of the Obligations, the Commitments and the other rights and obligations of
such Lender hereunder and under the other Loan Documents, in a minimum amount
of $5,000,000; provided, however, that Borrower and Collateral
Agent may continue to deal solely and directly with such Lender in connection
with the interest so assigned to an Assignee until (i) written notice of
such assignment, together with payment instructions, addresses, and related
information with respect to the Assignee, have been given to Borrower and
Collateral Agent by such Lender and the Assignee, (ii) such Lender and its
Assignee have delivered to Borrower and Collateral Agent an Assignment and
Acceptance in form and substance satisfactory to Collateral Agent, and
(iii) the assignor Lender or Assignee has paid to Collateral Agent for
Collateral Agent’s separate account a processing fee in the amount of
$5,000.  Anything contained herein to
the contrary notwithstanding, the consent of Collateral Agent shall not be
required (and payment of any fees shall not be required) if such assignment is
in connection with any merger, consolidation, sale, transfer, or other
disposition of all or any substantial portion of the business or loan portfolio
of such Lender.


 


(b)                                 From
and after the date that Collateral Agent notifies the assignor Lender (with a
copy to Borrower) that it has received an executed Assignment and Acceptance
and payment of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights
and obligations hereunder and under the other Loan Documents have been assigned
by it pursuant to such Assignment and Acceptance, relinquish its rights (except
with respect to Section 11.3 hereof) and be released from its obligations
under this Agreement (and in the case of an Assignment and Acceptance covering
all or the remaining portion of an assigning Lender’s rights and obligations
under this Agreement and the other Loan Documents, such Lender shall cease to
be a party hereto and thereto), and such assignment shall affect a novation
between Borrower and the Assignee.


 


71

















 


(c)                                  By
executing and delivering an Assignment and Acceptance, the assigning Lender
thereunder and the Assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: 
(1) other than as provided in such Assignment and Acceptance, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement
or any other Loan Document furnished pursuant hereto, (2) such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of Borrower or the performance or observance by
Borrower of any of its obligations under this Agreement or any other Loan
Document furnished pursuant hereto, (3) such Assignee confirms that it has
received a copy of this Agreement, together with such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance, (4) such Assignee will,
independently and without reliance upon Collateral Agent, such assigning Lender
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement, (5) such Assignee appoints
and authorizes Collateral Agent to take such actions and to exercise such
powers under this Agreement as are delegated to Collateral Agent, by the terms hereof,
together with such powers as are reasonably incidental thereto, and (6) such
Assignee agrees that it will perform all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.


 


(d)                                 Immediately
upon each Assignee’s making its processing fee payment under the Assignment and
Acceptance and receipt and acknowledgment by Collateral Agent of such fully
executed Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments
arising therefrom.  The Commitment
allocated to each Assignee shall reduce such Commitments of the assigning
Lender pro
tanto.


 


(e)                                  Any
Lender may at any time, with the written consent of Borrower (such consent not
to be unreasonably withheld) and Collateral Agent, sell to one or more
commercial banks, financial institutions, or other Persons not Affiliates of
such Lender (a “Participant”) participating interests in its
Obligations, the Commitment, and the other rights and interests of that Lender
(the “Originating Lender”) hereunder and under the other Loan Documents
(provided that no written consent of Collateral Agent shall be required in
connection with any sale of any such participating interests by a Lender to an
Eligible Transferee); provided, however, that (i) the
Originating Lender shall remain a “Lender” for all purposes of this Agreement
and the other Loan Documents and the Participant receiving the participating
interest in the Obligations, the Commitments, and the other rights and
interests of the Originating Lender hereunder shall not constitute a “Lender”
hereunder or under the other Loan Documents and the Originating Lender’s
obligations under this Agreement shall remain unchanged, (ii) the
Originating Lender shall remain solely responsible for the performance of such
obligations, (iii) Borrower, Collateral Agent, and the Lenders shall
continue to deal solely and directly with the Originating Lender in connection
with the Originating Lender’s rights and obligations under this Agreement and
the other Loan Documents, (iv) no Lender shall transfer or grant any
participating interest under which the Participant has the right to approve any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document, except to the 


 


72

















 


extent such amendment to,
or consent or waiver with respect to this Agreement or of any other Loan
Document would (a) extend the final maturity date of the Obligations
hereunder in which such Participant is participating, (b) reduce the
interest rate applicable to the Obligations hereunder in which such Participant
is participating, (c) release all or a material portion of the Collateral
or guaranties (except to the extent expressly provided herein or in any of the
Loan Documents) supporting the Obligations hereunder in which such Participant
is participating, (d) postpone the payment of, or reduce the amount of,
the interest or fees payable to such Participant through such Lender, or
(e) change the amount or due dates of scheduled principal repayments or
prepayments or premiums, and (v) all amounts payable by Borrower hereunder
shall be determined as if such Lender had not sold such participation, except
that, if amounts outstanding under this Agreement are due and unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement.  The rights of any Participant only shall be
derivative through the Originating Lender with whom such Participant
participates and no Participant shall have any rights under this Agreement or
the other Loan Documents or any direct rights as to the other Lenders,
Collateral Agent, Borrower, the Collections, the Collateral, or otherwise in
respect of the Obligations.  No
Participant shall have the right to participate directly in the making of
decisions by the Lenders among themselves.


 


(f)                                    In
connection with any such assignment or participation or proposed assignment or
participation, a Lender may disclose all documents and information which it now
or hereafter may have relating to Borrower or Borrower’s business.


 


(g)                                 Any
other provision in this Agreement notwithstanding, any Lender may at any time
create a security interest in, or pledge, all or any portion of its rights
under and interest in this Agreement in favor of any Federal Reserve Bank in
accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury
Regulation 31 CFR §203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law.


 


(h)                                 Agent
may, with the prior consent of Collateral Agent, assign any rights or
obligations it may have hereunder to any other Person.


 


14.2                        Successors. 
This Agreement shall bind and inure to the benefit of the respective
successors and assigns of each of the parties; provided, however,
that Borrower may not assign this Agreement or any rights or duties hereunder
without the Lenders’ prior written consent and any prohibited assignment shall
be absolutely void ab initio.  No consent to assignment by the Lenders shall release Borrower
from its Obligations.  A Lender may
assign this Agreement and the other Loan Documents and its rights and duties
hereunder and thereunder pursuant to Section 14.1 hereof and,
except as expressly required pursuant to Section 14.1 hereof, no
consent or approval by Borrower is required in connection with any such
assignment.


 


73

















 


15.                               AMENDMENTS; WAIVERS.


 


15.1                        Amendments and
Waivers.  No
amendment or waiver of any provision of this Agreement or any other Loan
Document, and no consent with respect to any departure by Borrower therefrom,
shall be effective unless the same shall be in writing and signed by the
Required Lenders (or by Collateral Agent at the written request of the Required
Lenders) and Borrower and then any such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in
writing and signed by all of the Lenders affected thereby and Borrower, do any
of the following:


 


(a)                                  increase
or extend any Commitment of any Lender,


 


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


 


(c)                                  reduce
the principal of, or the rate of interest on, any loan or other extension of
credit hereunder, or reduce any fees or other amounts payable hereunder or
under any other Loan Document,


 


(d)                                 change
the percentage of the Commitments that is required to take any action
hereunder,


 


(e)                                  amend
this Section or any provision of the Agreement providing for consent or
other action by all Lenders,


 


(f)                                    release
Collateral other than as permitted by Section 16.12,


 


(g)                                 change
the definition of “Required Lenders”,


 


(h)                                 contractually
subordinate any of the Agent’s Liens,


 


(i)                                     release
Borrower from any obligation for the payment of money, or


 


(j)                                     change
the definition of Borrowing Base or the definitions of Eligible Accounts,
Eligible Inventory, Eligible In-Transit Inventory, Eligible Landed Inventory,
Maximum Revolver Amount, or change Section 2.1(b), or


 


(k)                                  amend
any of the provisions of Section 16.


 


and, provided further,
however, that no amendment, waiver or consent shall, unless in writing
and signed by Collateral Agent, Issuing Lender, or Swing Lender, as applicable,
affect the rights or duties of Collateral Agent, Issuing Lender, or Swing
Lender, as applicable, under this Agreement or any other Loan Document.  The foregoing notwithstanding, any amendment,
modification, waiver, consent, termination, or release of, or with respect to,
any provision of this Agreement or any other Loan Document that relates only to
the relationship of the Lender Group 


 


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among themselves, and
that does not affect the rights or obligations of Borrower, shall not require
consent by or the agreement of Borrower.


 


15.2                        Replacement
of Holdout Lender.


 


(a)                                  If
any action to be taken by the Lender Group or Collateral Agent hereunder
requires the unanimous consent, authorization, or agreement of all Lenders, and
a Lender (“Holdout Lender”) fails to give its consent, authorization, or
agreement, then Collateral Agent, upon at least 5 Business Days prior
irrevocable notice to the Holdout Lender, may permanently replace the Holdout
Lender with one or more substitute Lenders (each, a “Replacement Lender”), and
the Holdout Lender shall have no right to refuse to be replaced hereunder.  Such notice to replace the Holdout Lender
shall specify an effective date for such replacement, which date shall not be
later than 15 Business Days after the date such notice is given.


 


(b)                                 Prior
to the effective date of such replacement, the Holdout Lender and each
Replacement Lender shall execute and deliver an Assignment and Acceptance
Agreement, subject only to the Holdout Lender being repaid its share of the
outstanding Obligations (including an assumption of its Pro Rata Share of the
Risk Participation Liability) without any premium or penalty of any kind
whatsoever.  If the Holdout Lender shall
refuse or fail to execute and deliver any such Assignment and Acceptance
Agreement prior to the effective date of such replacement, the Holdout Lender
shall be deemed to have executed and delivered such Assignment and Acceptance
Agreement.  The replacement of any
Holdout Lender shall be made in accordance with the terms of Section 14.1.  Until such time as the Replacement Lenders
shall have acquired all of the Obligations, the Commitments, and the other
rights and obligations of the Holdout Lender hereunder and under the other Loan
Documents, the Holdout Lender shall remain obligated to make the Holdout
Lender’s Pro Rata Share of Advances and to purchased a participation in each
Letter of Credit, in an amount equal to its Pro Rata Share of the Risk Participation
Liability of such Letter of Credit.


 


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


 


16.                               AGENT; COLLATERAL AGENT; THE LENDER GROUP.


 


16.1                        Appointment
and Authorization of Agent and Collateral Agent. 
Each Lender hereby designates and appoints Century and Wells Fargo Bank,
N.A. (“Wells”) as its representatives under this Agreement and the other Loan
Documents and each Lender hereby irrevocably authorizes Agent and Collateral
Agent to take such action on its behalf under the 


 


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provisions of this
Agreement and each other Loan Document and to exercise such powers and perform
such duties as are expressly delegated to Agent and Collateral Agent by the
terms of this Agreement or any other Loan Document, together with such powers
as are reasonably incidental thereto. 
Agent and Collateral Agent agree to act as such on the express
conditions contained in this Section 16.  The provisions of this Section 16 are solely for the
benefit of Agent, Collateral Agent, and the Lenders, and Borrower shall have no
rights as a third party beneficiary of any of the provisions contained
herein.  Any provision to the contrary
contained elsewhere in this Agreement or in any other Loan Document notwithstanding,
neither Agent nor Collateral Agent shall have any duties or responsibilities,
except those expressly set forth herein, nor shall Agent or Collateral Agent
have or be deemed to have any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read Agent nor into this Agreement or any other Loan
Document or otherwise exist against Collateral Agent; it being expressly
understood and agreed that the use of the word, “Collateral Agent” and “Agent”
are for convenience only, that Century and Wells are merely the representatives
of the Lenders, and only have the contractual duties set forth herein.  Except as expressly otherwise provided in
this Agreement, each of Agent and Collateral Agent shall have and may use its
sole discretion with respect to exercising or refraining from exercising any
discretionary rights or taking or refraining from taking any actions that Agent
or Collateral Agent expressly is entitled to take or assert under or pursuant
to this Agreement and the other Loan Documents.  Without limiting the generality of the foregoing, or of any other
provision of the Loan Documents that provides rights or powers to Agent and Collateral
Agent, Lenders agree that each of Agent and Collateral Agent shall have the
right to exercise the following powers as long as this Agreement remains in
effect:  (a) maintain, in
accordance with its customary business practices, ledgers and records
reflecting the status of the Obligations, the Collateral, the Collections, and
related matters, (b) execute or file any and all financing or similar
statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim, notices and other written agreements with respect
to the Loan Documents, (c) make Advances, for itself or on behalf of
Lenders as provided in the Loan Documents, (d) exclusively receive, apply,
and distribute the Collections as provided in the Loan Documents, (e) open
and maintain such bank accounts and cash management arrangements as Agent or
Collateral Agent deems necessary and appropriate in accordance with the Loan
Documents for the foregoing purposes with respect to the Collateral and the
Collections, (f) perform, exercise, and enforce any and all other rights
and remedies of the Lender Group with respect to Borrower, the Obligations, the
Collateral, the Collections, or otherwise related to any of same as provided in
the Loan Documents, and (g) incur and pay such Lender Group Expenses as
Agent or Collateral Agent may deem necessary or appropriate for the performance
and fulfillment of its functions and powers pursuant to the Loan Documents.


 


16.2                        Delegation of
Duties.  Each of Agent and Collateral Agent may
execute any of its duties under this Agreement or any other Loan Document by or
through agents, employees or attorneys-in-fact and shall be entitled to advice
of counsel concerning all matters pertaining to such duties.  Neither Agent nor Collateral Agent shall be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects as long as such selection was made without gross negligence or
willful misconduct.


 


16.3                        Liability
of Agent and Collateral Agent.  None of the
Agent-Related Persons shall (i) be liable for any action taken or omitted
to be taken by any of them under or in connection with this Agreement or any
other Loan Document or the transactions contemplated 


 


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hereby (except for its
own gross negligence or willful misconduct), or (ii) be responsible in any
manner to any of the Lenders for any recital, statement, representation or
warranty made by Borrower or any Subsidiary or Affiliate of Borrower, or any
officer or director thereof, contained in this Agreement or in any other Loan
Document, or in any certificate, report, statement or other document referred
to or provided for in, or received by Agent or Collateral Agent under or in
connection with, this Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of Borrower or any other party to any Loan
Document to perform its obligations hereunder or thereunder.  No Agent-Related Person shall be under any
obligation to any 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 other Loan Document, or to inspect the Books or properties of
Borrower or the books or records or properties of any of Borrower’s
Subsidiaries or Affiliates.


 


16.4                        Reliance
by Agent and Collateral Agent.  Each of Agent and
Collateral Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, facsimile, telex or telephone message, statement or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent, or made by the proper Person or Persons, and upon advice and
statements of legal counsel (including counsel to Borrower or counsel to any
Lender), independent accountants and other experts selected by Agent or
Collateral Agent.  Each of Agent and
Collateral Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless Agent or
Collateral Agent shall first receive such advice or concurrence of the Lenders
as it deems appropriate and until such instructions are received, Agent or Collateral
Agent shall act, or refrain from acting, as it deems advisable.  If Agent or Collateral Agent so requests, it
shall first be indemnified to its reasonable satisfaction by Lenders against
any and all liability and expense that may be incurred by it by reason of
taking or continuing to take any such action. 
Each of Agent and Collateral Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Lenders and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders.


 


16.5                        Notice
of Default or Event of Default.  Neither Agent nor
Collateral Agent shall be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default, except with respect to defaults in the
payment of principal, interest, fees, and expenses required to be paid to Agent
or Collateral Agent for the account of the Lenders, except with respect to Events
of Default of which Agent or Collateral Agent has actual knowledge, unless
Agent or Collateral Agent shall have received written notice from a Lender or
Borrower referring to this Agreement, describing such Default or Event of
Default, and stating that such notice is a “notice of default.”  Collateral Agent promptly will notify the
Lenders of its receipt of any such notice or of any Event of Default of which
Collateral Agent has actual knowledge. 
If any Lender obtains actual knowledge of any Event of Default, such
Lender promptly shall notify the other Lenders and Collateral Agent of such
Event of Default.  Each Lender shall be
solely responsible for giving any notices to its Participants, if any.  Subject to Section 16.4, Agent
and/or Collateral Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Required Lenders in accordance with
Section 9; provided, however, that unless and until
Agent and/or Collateral Agent has received any such request, Agent and/or
Collateral 


 


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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.


 


16.6                        Credit Decision. 
Each Lender acknowledges that none of the Agent-Related Persons has made
any representation or warranty to it, and that no act by Agent or Collateral
Agent hereinafter taken, including any review of the affairs of Borrower and
its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender.  Each Lender represents to Agent and
Collateral Agent that it has, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrower.  Each Lender also represents that it will, independently and
without reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrower and any
other Person (other than the Lender Group) party to a Loan Document.  Except for notices, reports, and other
documents expressly herein required to be furnished to the Lenders by
Collateral Agent, neither Agent nor Collateral Agent shall have any duty or responsibility
to provide any Lender with any credit or other information concerning the
business, prospects, operations, property, financial and other condition or
creditworthiness of Borrower and any other Person party to a Loan Document that
may come into the possession of any of the Agent-Related Persons.


 


16.7                        Costs
and Expenses; Indemnification.  Each of Agent and
Collateral Agent may incur and pay Lender Group Expenses to the extent Agent or
Collateral Agent reasonably deems necessary or appropriate for the performance
and fulfillment of its functions, powers, and obligations pursuant to the Loan
Documents, including court costs, reasonable attorneys fees and expenses, costs
of collection by outside collection agencies and auctioneer fees and costs of
security guards or insurance premiums paid to maintain the Collateral, whether
or not Borrower is obligated to reimburse Agent, Collateral Agent or Lenders
for such expenses pursuant to the Loan Agreement or otherwise.  Each of Agent and Collateral Agent is
authorized and directed to deduct and retain sufficient amounts from
Collections received by Agent or Collateral Agent to reimburse Agent and
Collateral Agent for such out-of-pocket costs and expenses prior to the
distribution of any amounts to Lenders. 
In the event Agent and/or Collateral Agent is not reimbursed for such
costs and expenses from Collections received by Agent or Collateral Agent, each
Lender hereby agrees that it is and shall be obligated to pay to or reimburse
Agent and Collateral Agent for the amount of such Lender’s Pro Rata Share
thereof.  Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Agent-Related Persons (to the extent not reimbursed by or on
behalf of Borrower and without limiting the obligation of Borrower to do so),
according to their Pro Rata Shares, from and against any and all Indemnified
Liabilities; provided, however, that no Lender shall be liable
for the payment to any Agent-Related Person of any portion of such Indemnified
Liabilities resulting 


 


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solely from such
Person’s gross negligence or willful misconduct nor shall any Lender be liable
for the obligations of any Defaulting Lender in failing to make an Advance or
other extension of credit hereunder. 
Without limitation of the foregoing, each Lender shall reimburse Agent
and Collateral Agent upon demand for such Lender’s ratable share of any costs
or out-of-pocket expenses (including attorneys fees and expenses) incurred by
Agent or Collateral Agent in connection with the preparation, execution,
delivery, administration, modification, amendment, or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document, or any document contemplated by or referred to herein, to the extent
that Agent or Collateral Agent is not reimbursed for such expenses by or on
behalf of Borrower.  The undertaking in
this Section shall survive the payment of all Obligations hereunder and
the resignation or replacement of Agent or Collateral Agent.


 


16.8                        Agent
and Collateral Agent in Individual Capacities. 
Each of Wells (to the extent provided hereunder) and Century and its
Affiliates may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in, and generally engage in any
kind of banking, trust, financial advisory, underwriting, or other business
with Borrower and its Subsidiaries and Affiliates and any other Person (other
than the Lender Group) party to any Loan Documents as though Wells were not
Agent and Century were not Collateral Agent hereunder, and, in each case,
without notice to or consent of the other members of the Lender Group.  The other members of the Lender Group
acknowledge that, pursuant to such activities, each of Wells and Century or its
Affiliates may receive information regarding Borrower or its Affiliates and any
other Person (other than the Lender Group) party to any Loan Documents that is
subject to confidentiality obligations in favor of Borrower or such other
Person and that prohibit the disclosure of such information to the Lenders, and
the Lenders acknowledge that, in such circumstances (and in the absence of a
waiver of such confidentiality obligations, which waiver Collateral Agent will
use its reasonable best efforts to obtain), neither Agent nor Collateral Agent
shall be under any obligation to provide such information to them.  The terms “Lender” and “Lenders” include
Century in its individual capacity.


 


16.9                        Successor
Agent and Collateral Agent.  Each of Agent and Collateral Agent may
resign as Agent or Collateral Agent upon 45 days notice to the Lenders.  If Agent or Collateral Agent resigns under
this Agreement, the Required Lenders shall appoint a successor Agent or
Collateral Agent for the Lenders.  If no
successor Agent or Collateral Agent is appointed prior to the effective date of
the resignation of Agent or Collateral Agent, Agent or Collateral Agent may
appoint, after consulting with the Lenders, a successor Agent or Collateral
Agent.  If Agent or Collateral Agent has
materially breached or failed to perform any material provision of this
Agreement or of applicable law, the Required Lenders may agree in writing to
remove and replace Agent or Collateral Agent with a successor Agent or
Collateral Agent from among the Lenders. 
In any such event, upon the acceptance of its appointment as successor
Agent or Collateral Agent hereunder, such successor Agent or Collateral Agent
shall succeed to all the rights, powers, and duties of the retiring Agent or
Collateral Agent and the terms “Agent” or “Collateral Agent” shall mean such
successor Agent or Collateral Agent and the retiring Agent’s or Collateral
Agent’s appointment, powers, and duties as Agent or Collateral Agent shall be
terminated.  After any retiring Agent’s
or Collateral Agent’s resignation hereunder as Agent or Collateral Agent, the
provisions of this Section 16 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent or Collateral
Agent under this Agreement.


 


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If no successor
Agent or Collateral Agent has accepted appointment as Agent or Collateral Agent
by the date which is 45 days following a retiring Agent’s or Collateral Agent’s
notice of resignation, the retiring Agent’s or Collateral Agent’s resignation
shall nevertheless thereupon become effective and the Lenders shall perform all
of the duties of Agent or Collateral Agent hereunder until such time, if any,
as the Lenders appoint a successor Agent or Collateral Agent as provided for
above.


 


16.10                 Lender in
Individual Capacity.  Any Lender and its respective Affiliates may
make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with Borrower and its
Subsidiaries and Affiliates and any other Person (other than the Lender Group)
party to any Loan Documents as though such Lender were not a Lender hereunder
without notice to or consent of the other members of the Lender Group.  The other members of the Lender Group
acknowledge that, pursuant to such activities, such Lender and its respective
Affiliates may receive information regarding Borrower or its Affiliates and any
other Person (other than the Lender Group) party to any Loan Documents that is
subject to confidentiality obligations in favor of Borrower or such other
Person and that prohibit the disclosure of such information to the Lenders, and
the Lenders acknowledge that, in such circumstances (and in the absence of a
waiver of such confidentiality obligations, which waiver such Lender will use
its reasonable best efforts to obtain), such Lender not shall be under any
obligation to provide such information to them.  With respect to the Swing Loans and Collateral Agent Advances,
Swing Lender shall have the same rights and powers under this Agreement as any
other Lender and may exercise the same as though it were not the sub-agent of
Collateral Agent.


 


16.11                 Withholding Taxes.


 


(a)                                  If
any Lender is a “foreign corporation, partnership or trust” within the meaning
of the IRC and such Lender claims exemption from, or a reduction of, U.S.
withholding tax under Sections 1441 or 1442 of the IRC, such Lender agrees with
and in favor of Collateral Agent and Borrower, to deliver to Collateral Agent
and Borrower:


 


(i)                                     if
such Lender claims an exemption from withholding tax pursuant to its portfolio
interest exception, (a) a statement of the Lender, signed under penalty of
perjury, that it is not a (i) a “bank” as described in
Section 881(c)(3)(A) of the IRC, (ii) a 10% shareholder (within the meaning
of Section 881(c)(3)(B) of the IRC), or (iii) a controlled foreign
corporation described in Section 881(c)(3)(C) of the IRC, and (b) a
properly completed IRS Form W-8BEN, before the first payment of any interest
under this Agreement and at any other time reasonably requested by Collateral
Agent or Borrower;


 


(ii)                                  if
such Lender claims an exemption from, or a reduction of, withholding tax under
a United States tax treaty, properly completed IRS Form W-8BEN before the
first payment of any interest under this Agreement and at any other time
reasonably requested by Collateral Agent or Borrower;


 


80

















 


(iii)                               if
such Lender claims that interest paid under this Agreement is exempt from
United States withholding tax because it is effectively connected with a
United States trade or business of such Lender, two properly completed and
executed copies of IRS Form W-8ECI before the first payment of any interest is
due under this Agreement and at any other time reasonably requested by
Collateral Agent or Borrower;


 


(iv)                              such
other form or forms as may be required under the IRC or other laws of the
United States as a condition to exemption from, or reduction of,
United States withholding tax.


 


Such Lender agrees
promptly to notify Collateral Agent and Borrower of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.


 


(b)                                 If
any Lender claims exemption from, or reduction of, withholding tax under a
United States tax treaty by providing IRS Form W-8BEN and such Lender
sells, assigns, grants a participation in, or otherwise transfers all or part
of the Obligations of Borrower to such Lender, such Lender agrees to notify
Collateral Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of Borrower to such Lender.  To the extent of such percentage amount,
Collateral Agent will treat such Lender’s IRS Form W-8BEN as no longer valid.


 


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


 


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


 


(e)                                  All
payments made by Borrower hereunder or under any note will be made without
setoff, counterclaim, or other defense, except as required by applicable law
other than for Taxes (as defined below). 
All such payments will be made free and clear of, and without deduction
or withholding for, any present or future taxes, levies, imposts, duties, fees,



 


81

















 


assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction (other
than the United States) or by any political subdivision or taxing
authority thereof or therein (other than of the United States) with
respect to such payments (but excluding, any tax imposed by any jurisdiction or
by any political subdivision or taxing authority thereof or therein (i) measured
by or based on the net income or net profits of a Lender, or (ii) to the
extent that such tax results from a change in the circumstances of the Lender,
including a change in the residence, place of organization, or principal place
of business of the Lender, or a change in the branch or lending office of the
Lender participating in the transactions set forth herein) and all interest,
penalties or similar liabilities with respect thereto (all such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges being
referred to collectively as “Taxes”). 
If any Taxes are so levied or imposed, Borrower agrees to pay the full
amount of such Taxes, and such additional amounts as may be necessary so that
every pay­ment of all amounts due under this Agreement or under any note,
including any amount paid pursuant to this Section 16.11(e) after
withholding or deduction for or on account of any Taxes, will not be less than
the amount provided for herein; provided, however, that Borrower
shall not be required to increase any such amounts payable to Collateral Agent
or any Lender (i) that is not organized under the laws of the
United States, if such Person fails to comply with the other requirements
of this Section 16.11, or (ii) if the increase in such amount
payable results from Collateral Agent’s or such Lender’s own willful mis­conduct
or gross negligence.  Borrower will
furnish to Collateral Agent as promptly as possible after the date the payment
of any Taxes is due pursuant to applicable law certified copies of tax receipts
evidencing such payment by Borrower.


 


16.12                 Collateral Matters.


 


(a)                                  The
Lenders hereby irrevocably authorize each of Agent and Collateral Agent, at its
option and in its sole discretion, to release any Lien on any Collateral
(i) upon the termination of the Commitments and payment and satisfaction
in full by Borrower of all Obligations, (ii) constituting property being
sold or disposed of if a release is required or desirable in connection
therewith and if Borrower certifies to Collateral Agent that the sale or
disposition is permitted under Section 7.4 of this Agreement or the
other Loan Documents (and Agent and Collateral Agent may rely conclusively on
any such certificate, without further inquiry), (iii) constituting
property in which Borrower owned no interest at the time the security interest
was granted or at any time thereafter, or (iv) constituting property
leased to Borrower under a lease that has expired or is terminated in a
transaction permitted under this Agreement. 
Except as provided above, neither Agent nor Collateral Agent will
execute and deliver a release of any Lien on any Collateral without the prior
written authorization of (y) if the release is of all or substantially all of
the Collateral, all of the Lenders, or (z) otherwise, the Required
Lenders.  Upon request by Agent or
Collateral Agent or Borrower at any time, the Lenders will confirm in writing
Agent’s or Collateral Agent’s authority to release any such Liens on particular
types or items of Collateral pursuant to this Section 16.12; provided,
however, that (1) neither Agent nor Collateral Agent shall be required
to execute any document necessary to evidence such release on terms that, in
Agent’s or Collateral Agent’s opinion, would expose Agent or Collateral Agent
to liability or create any obligation or entail any consequence other than the
release of such Lien without recourse, representation, or warranty, and (2)
such release shall not in any manner discharge, affect, or impair the
Obligations or any Liens (other than those expressly being released) upon (or
obligations of Borrower in respect of) all interests retained by Borrower,
including, the proceeds of any sale, all of which shall continue to constitute
part of the Collateral.


 


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(b)                                 Neither
Agent nor Collateral Agent shall have any obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by Borrower or is
cared for, protected, or insured or has been encumbered, or that the Agent’s
Liens have been properly or sufficiently or lawfully created, perfected,
protected, or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent or Collateral Agent
pursuant to any of the Loan Documents, it being understood and agreed that in
respect of the Collateral, or any act, omission, or event related thereto,
subject to the terms and conditions contained herein, each of Agent and
Collateral Agent may act in any manner it may deem appropriate, in its sole
discretion given Collateral Agent’s own interest in the Collateral in its
capacity as one of the Lenders and that neither Agent nor Collateral Agent
shall have any other duty or liability whatsoever to any Lender as to any of
the foregoing, except as otherwise provided herein.


 


16.13                 Restrictions
on Actions by Lenders; Sharing of Payments.


 


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


 


(b)                                 If,
at any time or times any Lender shall receive (i) by payment, foreclosure,
setoff, or otherwise, any proceeds of Collateral or any payments with respect
to the Obligations arising under, or relating to, this Agreement or the other
Loan Documents, except for any such proceeds or payments received by such
Lender from Collateral Agent pursuant to the terms of this Agreement, or
(ii) payments from Collateral Agent in excess of such Lender’s ratable
portion of all such distributions by Collateral Agent, such Lender promptly
shall (1) turn the same over to Collateral Agent, in kind, and with such
endorsements as may be required to negotiate the same to Collateral Agent, or
in immediately available funds, as applicable, for the account of all of the
Lenders and for application to the Obligations in accordance with the
applicable provisions of this Agreement, or (2) purchase, without recourse or
warranty, an undivided interest and participation in the Obligations owed to
the other Lenders so that such excess payment received shall be applied ratably
as among the Lenders in accordance with their Pro Rata Shares; provided,
however, that if all or part of such excess payment received by the purchasing
party is thereafter recovered from it, those purchases of participations shall
be rescinded in whole or in part, as applicable, and the applicable portion of
the purchase price paid therefor shall be returned to such purchasing party,
but without interest except to the extent that such purchasing party is
required to pay interest in connection with the recovery of the excess payment.


 


16.14                 Agency for
Perfection.  Each of Agent and Collateral Agent hereby
appoints each other Lender as its agent (and each Lender hereby accepts such
appointment) for the 


 


83

















 


purpose of perfecting the
Agent’s Liens in assets which, in accordance with Article 9 of the UCC can
be perfected only by possession.  Should
any Lender obtain possession of any such Collateral, such Lender shall notify
Collateral Agent thereof, and, promptly upon Collateral Agent’s request
therefor shall deliver such Collateral to Collateral Agent or in accordance
with Collateral Agent’s instructions.


 


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


 


16.15                 Concerning
the Collateral and Related Loan Documents. 
Each member of the Lender Group authorizes and directs Agent and
Collateral Agent to enter into this Agreement and the other Loan Documents
relating to the Collateral, for the benefit of the Lender Group.  Each member of the Lender Group agrees that
any action taken by Agent or Collateral Agent in accordance with the terms of
this Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent or Collateral Agent of its powers set forth therein or herein,
together with such other powers that are reasonably incidental thereto, shall
be binding upon all of the Lenders.


 


16.16                 Field
Audits and Examination Reports; Confidentiality; Disclaimers by Lenders; Other
Reports and Information.  By becoming a party to this Agreement, each
Lender:


 


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


 


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


 


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


 


(d)                                 agrees
to keep all Reports and other material, non-public information regarding
Borrower and its Subsidiaries and their operations, assets, and existing and
contemplated business plans in a confidential manner; it being understood and
agreed by Borrower that in any event such Lender may make disclosures
(a) to counsel for and other advisors, accountants, and auditors to such
Lender, (b) reasonably required by any bona  fide potential or actual Assignee or
Participant in connection with any contemplated or actual assignment or
transfer by such Lender of an interest herein or any participation interest in
such 


 


84

















 


Lender’s rights
hereunder, (c) of information that has become public by disclosures made
by Persons other than such Lender, its Affiliates, assignees, transferees, or
Participants, or (d) as required or requested by any court, governmental
or administrative agency, pursuant to any subpoena or other legal process, or
by any law, statute, regulation, or court order; provided, however,
that, unless prohibited by applicable law, statute, regulation, or court order,
such Lender shall notify Borrower of any request by any court, governmental or
administrative agency, or pursuant to any subpoena or other legal process for
disclosure of any such non-public material information concurrent with, or
where practicable, prior to the disclosure thereof, and


 


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


 


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


 


16.17                 Several
Obligations; No Liability.  Notwithstanding that certain of the Loan
Documents now or hereafter may have been or will be executed only by or in
favor of Agent and/or Collateral Agent in its capacity as such, and not by or
in favor of the Lenders, any and all obligations on the part of Agent and/or
Collateral Agent (if any) to make any credit available hereunder shall
constitute the several (and not joint) obligations of the respective Lenders on
a ratable basis, according to their respective Commitments, to make an amount
of such credit not to exceed, in principal amount, at any one time outstanding,
the amount of their respective Commitments. 
Nothing contained herein shall confer upon any Lender any interest in,
or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender.  Each Lender shall be solely responsible for
notifying its Participants of any matters relating to the Loan Documents to the
extent any such notice may be required, and no 


 


85

















 


Lender shall have
any obligation, duty, or liability to any Participant of any other Lender.  Except as provided in Section 16.7,
no member of the Lender Group shall have any liability for the acts or any
other member of the Lender Group.  No
Lender shall be responsible to Borrower or any other Person for any failure by
any other Lender to fulfill its obligations to make credit available hereunder,
nor to advance for it or on its behalf in connection with its Commitment, nor
to take any other action on its behalf hereunder or in connection with the financing
contemplated herein.


 


16.18                 Legal
Representation of Agent and Collateral Agent. 
In connection with the negotiation, drafting, and execution of this
Agreement and the other Loan Documents, or in connection with future legal
representation relating to loan administration, amendments, modifications,
waivers, or enforcement of remedies, Buchalter, Nemer, Fields &
Younger (“Buchalter”) only has represented and only shall represent Wells in
its capacity as Agent and Century in its capacity as Collateral Agent and as a
Lender.  Each other Lender hereby
acknowledges that Buchalter does not represent it in connection with any such
matters.


 


17.                               GENERAL PROVISIONS.


 


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


 


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


 


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


 


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


 


17.5                        Amendments in
Writing.  This Agreement only can be amended by a
writing signed by Collateral Agent (on behalf of the requisite Lenders) and
Borrower.


 


17.6                        Counterparts;
Telefacsimile Execution.  This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same
Agreement.  Delivery of an executed
counterpart of this Agreement by telefacsimile shall be equally as effective as
delivery of an original executed counterpart of this Agreement.  Any party delivering an executed counterpart
of this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, 


 


86

















 


enforceability,
and binding effect of this Agreement. 
The foregoing shall apply to each other Loan Document mutatis
mutandis.


 


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


 


17.8                        Integration. 
This Agreement, together with the other Loan Documents, reflects the
entire understanding of the parties with respect to the transactions
contemplated hereby and shall not be contradicted or qualified by any other agreement,
oral or written, before the date hereof.


 


[Signature page to follow.]


 


87

















 


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


 


	
   

  	
  CUTTER & BUCK INC.

  a Washington corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ernest Johnson

  
	
   

  	
  Title:

  	
  Senior Vice President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CENTURY BUSINESS CREDIT CORPORATION

  a New York corporation, as Collateral Agent and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven A. Stone

  
	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK, N. A.

  a national banking association, as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


88

















 


EXHIBIT A-1


 


FORM OF ASSIGNMENT AND ACCEPTANCE
AGREEMENT


 


This ASSIGNMENT AND ACCEPTANCE AGREEMENT
(“Assignment  Agreement”) is entered into as of
                            
between                                                 
(“Assignor”) and
                                                   
(“Assignee”).  Reference is made to the
Agreement described in Item 2 of Annex I annexed hereto
(the “Loan Agreement”).  Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
them in the Loan Agreement.


 


18.  IN ACCORDANCE WITH THE TERMS AND CONDITIONS
OF SECTION 14 OF THE LOAN AGREEMENT, THE ASSIGNOR HEREBY SELLS AND ASSIGNS
TO THE ASSIGNEE, AND THE ASSIGNEE HEREBY PURCHASES AND ASSUMES FROM THE
ASSIGNOR, THAT INTEREST IN AND TO THE ASSIGNOR’S RIGHTS AND OBLIGATIONS UNDER
THE LOAN DOCUMENTS AS OF THE DATE HEREOF WITH RESPECT TO THE OBLIGATIONS OWING
TO THE ASSIGNOR, AND ASSIGNOR’S PORTION OF THE TOTAL COMMITMENTS, THE REVOLVER
COMMITMENTS, AN THE TERM LOAN COMMITMENTS ALL AS SPECIFIED IN ITEM 4.B
AND ITEM 4.C OF ANNEX I.  AFTER GIVING EFFECT TO SUCH SALE AND ASSIGNMENTS, THE ASSIGNEE’S
PORTION OF THE COMMITMENTS WILL BE AS SET FORTH IN ITEM 4.B OF ANNEX I.  AFTER GIVING EFFECT TO SUCH SALE AND
ASSIGNMENT THE ASSIGNOR’S AMOUNT AND PORTION OF THE COMMITMENTS WILL BE AS SET
FORTH IN ITEM 4.D AND ITEM 4.E OF ANNEX I.


 


19.  THE ASSIGNOR (A) REPRESENTS AND
WARRANTS THAT IT IS THE LEGAL AND BENEFICIAL OWNER OF THE INTEREST BEING
ASSIGNED BY IT HEREUNDER AND THAT SUCH INTEREST IS FREE AND CLEAR OF ANY
ADVERSE CLAIM; (B) MAKES NO REPRESENTATION OR WARRANTY AND ASSUMES NO
RESPONSIBILITY WITH RESPECT TO ANY STATEMENTS, WARRANTIES OR REPRESENTATIONS
MADE IN OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE EXECUTION, LEGALITY,
VALIDITY, ENFORCEABILITY, GENUINENESS, SUFFICIENCY OR VALUE OF THE LOAN
DOCUMENTS OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED PURSUANT THERETO; AND
(C) MAKES NO REPRESENTATION OR WARRANTY AND ASSUMES NO RESPONSIBILITY WITH
RESPECT TO THE FINANCIAL CONDITION OF BORROWER OR THE PERFORMANCE OR OBSERVANCE
BY BORROWER OF ANY OF ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS OR ANY OTHER
INSTRUMENT OR DOCUMENT FURNISHED PURSUANT THERETO.


 


20.  THE ASSIGNEE (A) CONFIRMS THAT IT HAS
RECEIVED COPIES OF THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, TOGETHER
WITH COPIES OF THE FINANCIAL STATEMENTS REFERRED TO THEREIN AND SUCH OTHER
DOCUMENTS AND INFORMATION AS IT HAS DEEMED APPROPRIATE 


 


89

















 


TO
MAKE ITS OWN CREDIT ANALYSIS AND DECISION TO ENTER INTO THIS ASSIGNMENT
AGREEMENT; (B) AGREES THAT IT WILL, INDEPENDENTLY AND WITHOUT RELIANCE, AS
IT SHALL DEEM APPROPRIATE AT THE TIME, CONTINUE TO MAKE ITS OWN CREDIT
DECISIONS IN TAKING OR NOT TAKING ACTION UNDER THE LOAN DOCUMENTS;
(C) CONFIRMS THAT IT IS ELIGIBLE AS AN ASSIGNEE UNDER THE TERMS OF THE
LOAN AGREEMENT; (D) APPOINTS AND AUTHORIZES THE AGENT TO TAKE SUCH ACTION
AS AGENT ON ITS BEHALF AND TO EXERCISE SUCH POWERS UNDER THE LOAN DOCUMENTS AS
ARE DELEGATED TO AGENT BY THE TERMS THEREOF, TOGETHER WITH SUCH POWERS AS ARE
REASONABLY INCIDENTAL THERETO; (E) AGREES THAT IT WILL PERFORM IN
ACCORDANCE WITH THEIR TERMS ALL OF THE OBLIGATIONS WHICH BY THE TERMS OF THE
LOAN DOCUMENTS ARE REQUIRED TO BE PERFORMED BY IT AS A LENDER [AND
(F) ATTACHES THE FORMS PRESCRIBED BY THE INTERNAL REVENUE SERVICE OF THE
UNITED STATES CERTIFYING AS TO THE ASSIGNEE’S STATUS FOR PURPOSES OF
DETERMINING EXEMPTION FROM UNITED STATES WITHHOLDING TAXES WITH RESPECT TO ALL
PAYMENTS TO BE MADE TO THE ASSIGNEE UNDER THE LOAN AGREEMENT OR SUCH OTHER
DOCUMENTS AS ARE NECESSARY TO INDICATE THAT ALL SUCH PAYMENTS ARE SUBJECT TO
SUCH RATES AT A RATE REDUCED BY AN APPLICABLE TAX TREATY.]


 


21.  FOLLOWING THE EXECUTION OF THIS ASSIGNMENT
AGREEMENT BY THE ASSIGNOR AND ASSIGNEE, IT WILL BE DELIVERED BY THE ASSIGNOR TO
THE AGENT FOR RECORDING BY THE AGENT. 
THE EFFECTIVE DATE OF THIS ASSIGNMENT (THE “SETTLEMENT DATE”) SHALL BE
THE LATER OF (A) THE DATE OF THE EXECUTION HEREOF BY THE ASSIGNOR AND THE
ASSIGNEE, THE PAYMENT BY ASSIGNOR OR ASSIGNEE TO AGENT FOR AGENT’S SOLE AND
SEPARATE ACCOUNT A PROCESSING FEE IN THE AMOUNT OF $5,000, AND THE RECEIPT OF
ANY REQUIRED CONSENT OF THE AGENT, AND (B) THE DATE SPECIFIED IN ITEM 5
OF ANNEX I.


 


22.  UPON RECORDING BY THE AGENT, AS OF THE
SETTLEMENT DATE (A) THE ASSIGNEE SHALL BE A PARTY TO THE LOAN AGREEMENT
AND, TO THE EXTENT OF THE INTEREST ASSIGNED PURSUANT TO THIS ASSIGNMENT
AGREEMENT, HAVE THE RIGHTS AND OBLIGATIONS OF A LENDER THEREUNDER AND UNDER THE
OTHER LOAN DOCUMENTS, AND (B) THE ASSIGNOR SHALL, TO THE EXTENT OF THE
INTEREST ASSIGNED PURSUANT TO THIS ASSIGNMENT AGREEMENT, RELINQUISH ITS RIGHTS
AND BE RELEASED FROM ITS OBLIGATIONS UNDER THE LOAN AGREEMENT AND THE OTHER
LOAN DOCUMENTS.


 


23.  UPON RECORDING BY THE AGENT, FROM AND AFTER
THE SETTLEMENT DATE, THE AGENT SHALL MAKE ALL PAYMENTS UNDER THE LOAN AGREEMENT
AND THE OTHER LOAN DOCUMENTS IN RESPECT OF THE INTEREST ASSIGNED HEREBY
(INCLUDING, WITHOUT LIMITATION, ALL PAYMENTS OR PRINCIPAL, INTEREST AND
COMMITMENT FEES (IF APPLICABLE) WITH RESPECT THERETO) TO THE ASSIGNEE.  UPON THE 


 


90

















 


SETTLEMENT
DATE, THE ASSIGNEE SHALL PAY TO THE ASSIGNOR THE ASSIGNED SHARE (AS SET FORTH
IN ITEM 4.B OF ANNEX I) OF THE PRINCIPAL AMOUNT OF ANY
OUTSTANDING LOANS UNDER THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS.  THE ASSIGNOR AND ASSIGNEE SHALL MAKE ALL
APPROPRIATE ADJUSTMENTS IN PAYMENTS UNDER THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS FOR PERIODS PRIOR TO THE SETTLEMENT DATE DIRECTLY BETWEEN THEMSELVES
ON THE SETTLEMENT DATE.


 


THIS ASSIGNMENT AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF
                                                  .


 


[Remainder of page left intentionally blank.]


 


91

















 


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


 


	
   

  	
  [NAME OF ASSIGNOR]

  as Assignor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNEE]

  as Assignee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


ACCEPTED THIS
        DAY OF

                           ,
20      .


 


 


	
  CENTURY BUSINESS CREDIT CORPORATION

  AS COLLATERAL AGENT

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
				



 


92

















 


ANNEX FOR ASSIGNMENT AND ACCEPTANCE


 


ANNEX I


 


	
  1.

  	
   

  	
  Borrower:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Name and Date of Loan
  Agreement:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Loan and Security
  Agreement, dated as of
                                    ,
  among Borrower, the lenders signatory thereto as the Lenders, Wells Fargo
  Bank, N.A., as agent, and Century Business Credit Corporation, as collateral
  agent.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Date of Assignment
  Agreement:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Amounts:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a.

  	
  Assignor’s Commitment

  	
   

  	
  $                                

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  b.

  	
  Assigned Share of
  Commitment

  	
   

  	
                                  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c.

  	
  Assigned Amount of
  Commitment

  	
   

  	
  $                                

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  d.

  	
  Resulting Amount of
  Assignor’s Commitment after giving effect to the sale and Assignment to Assignee

  	
   

  	
  $                                

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  e.

  	
  Assignor’s Resulting
  Share of Commitment after giving effect to the Assignment to Assignee

  	
   

  	
                                  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Settlement Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Notice and Payment
  Instructions, etc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Assignee:

  	
  Assignor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Agreed and Accepted:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [ASSIGNOR]

  	
  [ASSIGNEE]

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  	
   

  	
   

  
													



 


93

















 


Accepted:


 


CENTURY BUSINESS CREDIT CORPORATION,

as Collateral Agent


 


	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
				



 


94

















 


[Agented]


 


EXHIBIT C-1


 


(Form of
Compliance Certificate)


 


[on Borrower’s
letterhead]


 


To:                              Century
Business Credit Corporation

333 South Grand Avenue, Suite 4150

Los Angeles, CA 90071

Attn:  Martin Eckstein


 


Re:                               Compliance
Certificate dated
                                           


 


Ladies and Gentlemen:


 


Reference is made to that
certain Loan and Security Agreement, dated as of                                            
(the “Loan Agreement”) among CUTTER & BUCK INC., a Washington
corporation (“Borrower”), the lenders signatory thereto (the “Lenders”),
WELLS FARGO BANK, N.A., as agent, and CENTURY BUSINESS CREDIT CORPORATION, as
collateral agent for the Lenders (“Collateral Agent”).  Capitalized terms used in this Compliance
Certificate have the meanings set forth in the Loan Agreement unless
specifically defined herein.


 


Pursuant to Section 6.3
of the Loan Agreement, the undersigned officer of Borrower hereby certifies
that:


 


24.  THE FINANCIAL INFORMATION OF BORROWER
FURNISHED IN SCHEDULE 1 ATTACHED HERETO, HAS BEEN PREPARED IN ACCORDANCE
WITH GAAP (EXCEPT FOR YEAR-END ADJUSTMENTS AND THE LACK OF FOOTNOTES, IN THE
CASE OF FINANCIAL STATEMENTS DELIVERED UNDER SECTION 6.3(A) OF THE LOAN
AGREEMENT) AND FAIRLY PRESENTS THE FINANCIAL CONDITION OF BORROWER.


 


25.  SUCH OFFICER HAS REVIEWED THE TERMS OF THE
LOAN AGREEMENT AND HAS MADE, OR CAUSED TO BE MADE UNDER HIS/HER SUPERVISION, A
REVIEW IN REASONABLE DETAIL OF THE TRANSACTIONS AND CONDITION OF BORROWER
DURING THE ACCOUNTING PERIOD COVERED BY THE FINANCIAL STATEMENTS DELIVERED
PURSUANT TO SECTION 6.3 OF THE LOAN AGREEMENT.


 


26.  SUCH REVIEW HAS NOT DISCLOSED THE EXISTENCE
ON AND AS OF THE DATE HEREOF, AND THE UNDERSIGNED DOES NOT HAVE KNOWLEDGE OF
THE EXISTENCE AS OF THE DATE HEREOF, OF ANY EVENT OR CONDITION 


 


95

















 


THAT
CONSTITUTES A DEFAULT OR EVENT OF DEFAULT, EXCEPT FOR SUCH CONDITIONS OR EVENTS
LISTED ON SCHEDULE 2 ATTACHED HERETO, SPECIFYING THE NATURE AND PERIOD
OF EXISTENCE THEREOF AND WHAT ACTION BORROWER HAS TAKEN, IS TAKING, OR PROPOSES
TO TAKE WITH RESPECT THERETO.


 


27.  BORROWER IS IN TIMELY COMPLIANCE WITH ALL
REPRESENTATIONS, WARRANTIES, AND COVENANTS SET FORTH IN THE LOAN AGREEMENT AND
THE OTHER LOAN DOCUMENTS, EXCEPT AS SET FORTH ON SCHEDULE 2 ATTACHED
HERETO.  WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING, BORROWER IS IN COMPLIANCE WITH THE COVENANTS CONTAINED IN SECTION
7.20 OF THE LOAN AGREEMENT AS DEMONSTRATED ON SCHEDULE 3 HEREOF.


 


IN WITNESS WHEREOF, this
Compliance Certificate is executed by the undersigned this
          day of
                            ,
              .


 


 


	
   

  	
  CUTTER & BUCK INC.,

  a Washington corporation, as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


96

















 


SCHEDULE 3


 


27.1                        Minimum Tangible Net Worth.


 


(a)  The Tangible Net Worth of Borrower, as of
the last day of the fiscal quarter ending
                          ,
          , is calculated as
follows:


 


(i)                                     Borrower’s
total stockholder equity at book value:


 


	
   

  	
  $

  



 


(ii)                                  All
Intangible Assets of Borrower:


 


	
   

  	
  $

  



 


(iii)                               All
amounts due to Borrower from Affiliates, calculated on a consolidated basis:


 


	
   

  	
  $

  



 


	
  Item (i) minus
  Item (ii) minus

  Item (iii) (= Tangible Net Worth)

  	
  $

  



 


(b)  The Tangible Net Worth set forth above [is/is not]
greater than or equal to the amount set forth in Section 7.20(a)(i) of the
Loan Agreement for the corresponding period.


 


27.2                        Minimum Working Capital.


 


(a)                                  The
Working Capital of Borrower, as of the last day of the fiscal quarter ending
                          ,
          , is calculated as
follows:


 


(i)                                     Borrower’s
current assets:


 


	
   

  	
  $

  



 


(ii)                                  Borrower’s
current liabilities:


 


	
   

  	
  $

  



 


	
  Item (i) minus
  Item (ii)

  (= Working Capital):

  	
  $

  



 


(b)                                 The
Working Capital set forth above [is/is not] greater than or equal to the
amount set forth in Section 7.20(a)(ii) of the Loan Agreement for the
corresponding period.


 


97

















 


27.3                        Maximum Capital Expenditures.


 


(a)                                  The
aggregate amount of capital expenditures made or committed to be made to date
in the current fiscal year is
$                              .


 


(b)                                 The
aggregate amount set forth above [is/is not] less than or equal to the
amount set forth in Section 7.20(b)(i) of the Loan Agreement for the
corresponding period.


 


98

















 


[Agented]


 


EXHIBIT
L-1


 


FORM OF LIBOR NOTICE


 


Century Business Credit Corporation

333 South Grand Avenue, Suite 4150

Los Angeles, CA 90071

Attention:  Martin Eckstein


 


Ladies and Gentlemen:


 


Reference hereby is made
to that certain Loan and Security Agreement, dated as of
                                
(the “Loan Agreement”), among CUTTER & BUCK INC., a Washington
corporation (“Borrower”), the lenders signatory thereto (the “Lenders”),
and WELLS FARGO BANK, N.A., as agent, and CENTURY BUSINESS CREDIT CORPORATION,
as collateral agent for the Lenders (“Collateral Agent”).  Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to them in the Loan
Agreement.


 


This LIBOR Notice
represents Borrower’s request to elect the LIBOR Option with respect to
outstanding Advances in the amount of
$                            
(the “LIBOR Rate Advance”)[, and is a written confirmation of the
telephonic notice of such election given to Collateral Agent].


 


Such LIBOR Rate Advance
will have an Interest Period of [1, 2, or 3] month(s) commencing on
                                            .


 


This LIBOR Notice further
confirms Borrower’s acceptance, for purposes of determining the rate of
interest based on the LIBOR Rate under the Loan Agreement, of the LIBOR Rate as
determined pursuant to the Loan Agreement.


 


99

















 


Borrower represents and
warrants that (i) as of the date hereof, each representation or warranty
contained in or pursuant to any Loan Document, any agreement, instrument,
certificate, document or other writing furnished at any time under or in
connection with any Loan Document, and as of the effective date of any advance,
continuation or conversion requested above is true and correct in all material
respects (except to the extent any representation or warranty expressly related
to an earlier date), (ii) each of the covenants and agreements contained
in any Loan Document have been performed (to the extent required to be
performed on or before the date hereof or each such effective date), and
(iii) no Default or Event of Default has occurred and is continuing on the
date hereof, nor will any thereof occur after giving effect to the request
above.


 


 


	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CUTTER
  & BUCK INC.,

  a Washington corporation as Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
  Acknowledged by:

  	
   

  
	
   

  	
   

  
	
  CENTURY
  BUSINESS CREDIT CORPORATION,

  as Collateral Agent

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
											



 


100

















 


Schedule A-1


 


Collateral Agent’s Account


 


An account at a bank
designated by Collateral Agent from time to time as the account into which
Borrower shall make all payments to Collateral Agent for the benefit of the
Lender Group and into which the Lender Group shall make all payments to
Collateral Agent under this Agreement and the other Loan Documents; unless and
until Collateral Agent notifies Borrower and the Lender Group to the contrary,
Collateral Agent’s Account shall be that certain deposit account bearing
account number 003-002330 and maintained by Collateral Agent with Chase
Manhatan Bank, 349 Fifth Avenue, New York, New York 10018,
ABA #_021000021.


 


101

















 


Schedule C-1


 


Commitments


 




	
  Lender

  	
   

  	
  Commitment

  	
   

  
	
  Century Business
  Credit Corporation

  	
   

  	
  $

  	
  35,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  All Lenders

  	
   

  	
  $

  	
  35,000,000

  	
   

  






 


102

















 


Schedule D-1


 


Designated Account


 


Account number 4945098804
of Borrower maintained with Borrower’s Designated Account Bank, or such other
deposit account of Borrower (located within the United States) that has
been designed as such, in writing, by Borrower to Collateral Agent.


 


“Designated Account Bank”
means Wells Fargo Bank, N.A., whose office is located at 999 3rd
Avenue, Seattle, WA 98104, and whose ABA number is 121000248.


 


103

















 


Schedule E-1


 


Eligible
Inventory Locations


 


701 N. 34th
Street, Suite 400, Seattle, Washington 
98103


 


4001 Oaksdale Avenue SW,
Renton, Washington  98055


 


104

















 


Schedule P-1


 


Permitted
Liens


 


105

















 


SCHEDULE 2.6(b)


 


TO LOAN AND SECURITY
AGREEMENT


 


(Collateral Agent L/C
Fees)


 


	
  Issuance (Opening)

  	
   

  	
  $100 Flat

  
	
   

  	
   

  	
   

  
	
  Cable Notification

  	
   

  	
  $25 Per Page

  
	
   

  	
   

  	
   

  
	
  Amendment Fee

  	
   

  	
  $75 Flat (1-3)

  
	
   

  	
   

  	
  $100 Flat (After 3)

  
	
   

  	
   

  	
   

  
	
  Acceptance Commission

  	
   

  	
  1-1/2% p.a.

  
	
   

  	
   

  	
  Minimum $125

  
	
   

  	
   

  	
   

  
	
  Negotiation Commission

  	
   

  	
  1/8% (Minimum $100)

  
	
   

  	
   

  	
   

  
	
  Processing Fee

  	
   

  	
  $100 Per Invoice
  Negotiated

  
	
   

  	
   

  	
   

  
	
  Discrepancy Fee

  	
   

  	
  $150 Per Discrepancy

  
	
   

  	
   

  	
   

  
	
  Document Against
  Payment

  	
   

  	
  1/2% Flat

  
	
   

  	
   

  	
  $100 Minimum

  
	
   

  	
   

  	
   

  
	
  Expiration Commission

  	
   

  	
  1/8% Flat/$100 Minimum

  
	
   

  	
   

  	
   

  
	
  Authorization to
  Pay/Reinstatement of Expired Letter of Credit

  	
   

  	
  1/8% Flat/$100 Minimum

  
	
   

  	
   

  	
   

  
	
  Letter of Indemnity
  (Steamship Guarantee) Outstanding

  	
   

  	
  $100 Flat to Issue and
  $50 Flat for Each 30 Days

  
	
   

  	
   

  	
   

  
	
  Air Release

  	
   

  	
  $100 Flat

  



 


106

















 


Schedule 5.5


 


Locations
of Inventory and Equipment


 


Administrative
Offices


701 N.
34th Street, Suite 400, Seattle, Washington  98103


 


Warehouse


4001
Oaksdale Avenue SW, Renton, Washington 
98055


 


Showroom


Beaux
Arts Building


80 W. 40th
Street, 6th Floor


New
York, NY  10018


 


107

















 


Schedule 5.7


 


Chief
Executive Officer; FEIN


 


The chief executive
office of Borrower is located at 701 N. 34th Street, Suite 400,
Seattle, Washington  98103.  The Borrower’s Federal Employee
Identification Number is:  91-1474587.


 


108

















 


Schedule 5.8(b)


 


Capitalization


 


As of January 31, 2003


(Actual Dollars)


 


	
  Common Stock*

  	
   

  	
  $

  	
  64,806,054

  	
   

  
	
  Deferred Compensation

  	
   

  	
  (52,400

  	
  )

  
	
  Retained Earnings

  	
   

  	
  8,211,810

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Stockholders Equity

  	
   

  	
  $

  	
  72,965,364

  	
   

  



 












*Common Stock, no par
value:  25,000,000 shares authorized;
10,634,132 issued and outstanding at January 31, 2003.


 


Preferred Stock, no par
value:  6,000,000 shares authorized; no
shares outstanding at January 31, 2003.


 


Options outstanding as of
March 10, 2003:  2,142,297.


 


109

















 


Schedule 5.8(c)


 


Capitalization
of Borrower’s Subsidiaries


 


Borrower does not have
any subsidiaries.


 


110

















 


Schedule 5.10


 


Litigation


 


111

















 


Schedule 5.14


 


Environmental
Matters


 


None.


 


112

















 


Schedule 5.16


 


License/Distribution
Agreements


 


113

















 


Schedule 5.18


 


Demand
Deposit Accounts


 


Wells Fargo Bank, N.A.


999 Third Avenue


Seattle, WA  98104


 


4945098804 – General
Account


4945098812 – Payroll
Account


4945097376 – Collections
Account


4945097830 – E-Commerce
Account


 


Washington Mutual Bank


1201 Third Avenue, Suite
1000


Seattle, WA  98101


 


3033688258 – General
Account


9350520114 – Payroll
Account


9350520213 – Collection
Account (Repurchase Account)


9350528986 – E-Commerce
Account


 


114

















 


Schedule 5.20


 


Permitted
Indebtedness


January
31, 2003


(Actual
Dollars)


 


	
  Accounts Payable:

  	
   

  	
  $

  	
  8,994,127

  	
   

  
	
  Accrued Liabilities:

  	
   

  	
  8,549,858

  	
   

  
	
  Capital Leases:

  	
   

  	
  3,249,228

  	
   

  
	
  Deferred income tax liability:

  	
   

  	
  2,039,699

  	
   

  
	
  Deferred gains:

  	
   

  	
  130,959

  	
   

  
	
  Restructuring liabilities (Long Term):

  	
   

  	
  3,221,775

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Liabilities:

  	
   

  	
  $

  	
  26,185,646

  	
   

  



 


115

















 


SCHEDULE P-1


PERMITTED
LIENS


 


	
  Debtor Name

  	
   

  	
  Jurisdiction

  	
   

  	
  File No.

  and Date

  	
   

  	
  Secured
  Party

  	
   

  	
  Collateral

  	
   

  	
  Search

  Thru

  Date

  	
   

  	
  Status

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  STATE OF ORGANIZATION

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cutter & Buck Inc. (a WA corp.)

  	
   

  	
  DOL, WA (UCC, Tax
  Liens, Bankruptcy)

  	
   

  	
  96-243-0321

  8-30-96

  	
   

  	
  Colonial Pacific
  Leasing Corp.

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
  1-22-03

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  97-037-0186

  2-6-97

  	
   

  	
  Washington Mutual Bank
  dba

  	
   

  	
  All inventory and
  accounts

  	
   

  	
   

  	
   

  	
  To be terminated

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  97-356-0422

  12-22-97

  	
   

  	
  Colonial Pacific
  Leasing Corp.

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  98-204-0230

  7-6-90

  	
   

  	
  Colonial Pacific
  Leasing Corp.

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  98-240-0240

  8-28-98

  	
   

  	
  Washington Mutual Bank
  dba Western Bank, as Administrative Agent

  	
   

  	
  Blanket

  	
   

  	
   

  	
   

  	
  To be terminated

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  98-275-0256

  10-2-98

  	
   

  	
  Colonial Pacific
  Leasing Corp.

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  99-074-0259

  3-15-99

  	
   

  	
  Colonial Pacific Leasing
  Corp.

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2000-041-0261

  2-10-00

  	
   

  	
  Manufacturers Bank

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2000-077-0134

  3-17-00

  	
   

  	
  Manufacturers Bank

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2000-138-0315

  3-17-00

  	
   

  	
  First American
  Commercial Bancorp., Inc.

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2000-138-0316

  3-17-00

  	
   

  	
  Manufacturers Bank

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2000-318-0792

  11-13-00

  	
   

  	
  Manufacturers Bank

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2000-318-0793

  11-13-00

  	
   

  	
  Manufacturers Bank

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2001-038-0111

  2-7-01

  	
   

  	
  First American
  Commercial Bancorp., Inc.

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2001-038-0112

  2-7-01

  	
   

  	
  Fidelity Leasing, Inc.

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2001-038-0116

  2-7-01

  	
   

  	
  Firstar Bank, N.A.

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2001-038-0117

  2-7-01

  	
   

  	
  Firstar Bank, N.A.

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2001-038-0137

  2-7-01

  	
   

  	
  Firstar Bank, N.A.

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2001-046-0373

  2-15-01

  	
   

  	
  National City Leasing
  Corporation

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  



 


116

















 


	
  Debtor Name

  	
   

  	
  Jurisdiction

  	
   

  	
  File No.

  and Date

  	
   

  	
  Secured Party

  	
   

  	
  Collateral

  	
   

  	
  Search

  Thru

  Date

  	
   

  	
  Status

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2001-046-0374

  2-15-01

  	
   

  	
  TCF Leasing. Inc.

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2001-086-0176

  3-27-01

  	
   

  	
  First American
  Commercial Bancorp., Inc.

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2001-087-0206

  3-28-01

  	
   

  	
  First American
  Commercial Bancorp., Inc.

  	
   

  	
  Lease filing (specific
  equipment)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  2002-350-6308-9

  12-13-02

  	
   

  	
  Hilco Merchant
  Resources, LLC

  	
   

  	
  Inventory as specified
  in Agency Agreement dtd. 12-3-02

  	
   

  	
   

  	
   

  	
  No action

  



 


And any other financing statements filed against
inventory or fixtures in states where Cutter & Buck maintains retail
stores.


 


117

















 


SCHEDULE
5.10


Litigation


 


On November 7, 2002, a shareholder derivative lawsuit
entitled, Morris Haimowitz, Derivately on behalf of Cutter & Buck, Inc. v.
Frances M. Conley, Michael S. Brownfield, Larry C. Mounger, James C. Towne,
Harvey N. Jones, Martin J. Marks and Stephen S. Lowber and Cutter & Buck,
Inc., No. 02-2-32038-4SEA, was filed by Morris Haimowitz in the Superior Court
of the State of Washington, for King County. 
The complaint names as defendants certain of the Company’s current and
former directors and the Company’s former CFO. 
It is purportedly brought on behalf of the Company.  The complaint alleges that the individual
defendants are liable to the Company for breach of their fiduciary duties,
abuse of control, gross mismanagement and unjust enrichment in connection with
the events giving rise to the Company’s restatement of its financial
statements.  It seeks unspecified
damages, costs and attorney fees as well as equitable relief.


 


The Company remains a defendant in three shareholder
class action lawsuits in the United States District Court for the Western
District of Washington and alleging violations of federal securities laws,
purportedly filed on behalf of all persons who purchased the Company’s common
stock during the period from June 23, 2000 to August 12, 2002: Steven Bourret
v. Cutter & Buck Inc., Harvey N. Jones and Stephen S. Lowber; Stanley Sved
v. Cutter & Buck Inc. and Harvey N. Jones; and Jason P. Hebert v. Cutter
& Buck Inc., Harvey N. Jones and Stephen S. Lowber.


 


On November 12, 2002, the Tilson Growth Fund filed a
motion asking the Court to consolidate the Bourret, Sved and Hebert shareholder
class action suits into a single proceeding before the Honorable Robert Lasnik,
United States District Court Judge for the Western District of Washington, for
pretrial and trial proceedings, enter an Order requiring the defendants to
preserve documents, appoint Tilson Growth Fund as the lead plaintiff under
Section 21D(a)(3)(B) of the Securities Exchange Act of 1934, and approve
Tilson Growth Fund’s selection of plaintiff’s lead and liaison counsel.  In February 2003, the Court appointed the
Tilson Growth Fund as the lead plaintiff, and the Milberg Weiss firm as lead
counsel for the plaintiff class.  The
Court consolidated the three class action suits and ordered the plaintiff to
file an amended consolidated complaint within 60 days following the entry of
the Court’s order.


 


On December 6, 2002, Genesis Insurance Company, the
Company’s primary Directors’ and Officers’ liability insurance carrier,
notified the Company that it intends to rescind the Company’s primary
Directors’ and Officers’ liability insurance coverage as a result of alleged
misrepresentations by the Company’s former Chief Financial Officer and the
Company in connection with the Company’s policy applications in 2001 and
2002.  The Company subsequently obtained
replacement Directors’ and Officers’ liability insurance coverage from another
carrier.  This coverage will not,
however, protect the Company against any liabilities arising from the existing
shareholder class action and derivative lawsuits described above.


 


On December 26, 2002, the Company filed a lawsuit
entitled, Cutter & Buck Inc. v. Genesis Insurance Company, Executive Risk
Indemnity, Inc., and Lumbermens Mutual Casualty Company, in the United States
District Court for the Western District of Washington.  The Company’s complaint alleges that
Genesis’ attempt to rescind the Company’s primary Directors’ and Officers’
liability insurance is unlawful and seeks declaratory relief and damages for
breach of contract and the duty of good faith and fair dealing from Genesis and
the Company’s excess Directors’ and Officers’ liability insurance
carriers.  In late February, Lumbermens
Mutual Casualty Company informed the Company that, unlike Genesis, it is not
seeking rescission of its excess policy and will proceed with coverage under a
full reservation of rights if losses reach $15 million.  Executive Risk Indemnity, Inc. has not given
the Company its coverage position.  On
March 3, 2003, the Company filed an amended complaint.


 


We also remain a party to a lawsuit related to labor
issues in Saipan: Does vs. The Gap, Inc. The Company has entered into a
settlement of the claims against it. 
This settlement is subject to court approval.  The hearing for preliminary approval of the settlement occurred
in February 2002.  The court granted


 


118

















 


preliminary approval of the settlement in May 2002.  The settlement was revised as part of a
global settlement with other previously non-settling parties on October 7, 2002
and the Court granted preliminary approval of the settlement on October 31,
2002.  A hearing as to whether to grant
final approval of the settlement is currently scheduled on March 20, 2003.


 


We received a cease and desist letter in late January
2003 from Longchamp USA, Inc. and S.A. Jean Cassegrain asserting that our tote
bags infringe their trade dress rights in their tote bag designs.


 


We served a demand for arbitration on February 27,
2003, against 908 Broadway LLC and Phillip Mullins Co. asserting claims for
anticipatory repudiation and breach of contract for unspecified damages, and
the defendants are expected to assert counterclaims.


 


We are also party to other routine litigation
incidental to our business.  Management
believes the ultimate resolution of these other routine matters will not have a
material adverse effect on our financial position and results of operations.


 


119

















 


Schedule
5.16


License/Distribution
Agreements


 


International Accounts


 


1.                                       License
Agreement dated as of December 13, 2002 between Cutter & Buck Inc.
(Licensor) and Global Golf Gloves CC, of South Africa (Licensee).


 


2.                                       License
Agreement dated as of January 1, 2000 between Cutter & Buck Inc. (Licensor)
and Caufield Apparel Group Ltd., an Ontario, Canada corporation (Licensee).


 


3.                                       License
Agreement dated as of May 20, 2002 between Cutter & Buck Inc. (Licensor)
and Cutter & Buck Sportswear (Europe) Ltd., an Irish limited company
(Licensee).


 


4.                                       License
Agreement dated as of May 14, 1999 between Cutter & Buck Inc. (Licensor)
and The Seibu Department Stores, Ltd., a Japanese corporation (Licensee).  This
Agreement has expired.  Cutter &
Buck is currently negotiating a renewal agreement.


 


5.                                       Renewal
and Amendment to Distribution Agreement dated as of February 12, 2002 between
Cutter & Buck Inc.  (Supplier) and
The Seibu Department Stores, Ltd., a Japanese corporation (Distributor).  This
Agreement has expired.  Cutter &
Buck is currently negotiating a renewal agreement.


 


6.                                       Distribution
Agreement dated as of October 22, 2002 between Cutter & Buck Inc.
(Supplier) and Pinx International, a Republic of Korea corporation
(Distributor).


 


7.                                       Distribution
Agreement dated as of January 25, 2002 between Cutter & Buck Inc.
(Supplier) and Pro Golf International, a United Arab Emirates corporation
(Distributor) for Men’s Products.


 


8.                                       Distribution
Agreement dated as of January 25, 2002 between Cutter & Buck Inc.
(Supplier) and Pro Golf International, a United Arab Emirates corporation
(Distributor) for Women’s Products.


 


9.                                       Distribution
Agreement dated as of January 3, 2000 between Cutter & Buck Inc. (Supplier)
and Pan-West (Pte) Ltd., a Singapore corporation (Distributor) for Men’s
Products.  This Agreement has expired. 
Cutter & Buck is currently negotiating a renewal agreement.


 


10.                                 Distribution
Agreement dated as of January 3, 2000 between Cutter & Buck Inc. (Supplier)
and Pan-West (Pte) Ltd., a Singapore corporation (Distributor) for Women’s
Products.  This Agreement has expired. 
Cutter & Buck is currently negotiating a renewal agreement.


 


120

















 


11.                                 License
Agreement dated as of March 5, 2003 between Cutter & Buck Inc. (Licensor)
and Goarg Pty. Ltd. (Licensee).


 


Domestic Accounts


 


1.                    License
Agreement dated as of August 15, 2001 between Cutter & Buck Inc. (Licensor)
and Leedsworld, Inc., a Delaware corporation (Licensee).


 


2.                    First
Amendment dated March 5, 2002 between Cutter & Buck Inc. (Licensor) and
Leedsworld, Inc., a Delaware corporation (Licensee).


 


3.                    License
Agreement dated as of April 1, 2000 between Cutter & Buck Inc. (Licensor)
and Swany America Corp., a New York corporation (Licensee).


 


4.                    License
Agreement dated as of January 1, 2002 between Cutter & Buck Inc. (Licensor)
and 908 Broadway LLC (formerly Philip Mullins Company), a Kentucky corporation
(Licensee).


 












* Excludes agreements and
contracts entered into by Cutter & Buck Inc., as the licensee, for
software, information systems and web-based applications.


 


121

















 


Schedule
5.16


CUTTER
& BUCK INC. - PATENTS


 


	
  Docket
  No./

  App/Pat No.

  	
   

  	
  Country

  	
   

  	
  Title

  	
   

  	
  Name of Inventor

  	
   

  	
  Remarks

  
	
  1722-1

  D436,719

  	
   

  	
  U.S.

  	
   

  	
  Improved Outsole for a Shoe (design)

  	
   

  	
  Cutter & Buck Inc.

  	
   

  	
  Expires 01-30-15

  
	
  1722-1-2

  	
   

  	
  EP (Europe-multiple countries)

  	
   

  	
  Improved Outsole for a Shoe (design)

  	
   

  	
  Cutter & Buck Inc.

  	
   

  	
  Various countries - see below

  
	
  1722-1-3

  1,092,937

  	
   

  	
  JP (Japan)

  	
   

  	
  Improved Outsole for a Shoe (design)

  	
   

  	
  Cutter & Buck Inc.

  	
   

  	
  4th year MF due 09-29-03

  
	
  1722-1-4

  142148

  	
   

  	
  AU (Australia)

  	
   

  	
  Same

  	
   

  	
  Cutter & Buck Inc.

  	
   

  	
  Renewal & fee due 07-27-05

  
	
  1722-1-5

  0264033

  	
   

  	
  KR (Korea)

  	
   

  	
  Same

  	
   

  	
  Cutter & Buck Inc.

  	
   

  	
  Renewal due 07-26-03

  
	
  1722-1-8

  146,149/4

  	
   

  	
  ES (Spain)

  	
   

  	
  Same

  	
   

  	
  Cutter & Buck Inc.

  	
   

  	
  1st MF due 06-28-05

  
	
  1722-1-10

  2,085,321

  	
   

  	
  GB (United Kingdom)

  	
   

  	
  Same

  	
   

  	
  Cutter & Buck Inc.

  	
   

  	
  Renewal due 01-27-04

  
	
  1722-1-16

  200000768

  	
   

  	
  DK (Denmark)

  	
   

  	
  Same

  	
   

  	
  Cutter & Buck Inc.

  	
   

  	
  Renewal due 07-27-04

  
	
  1722-1-17

  126,298

  	
   

  	
  CH (Switzerland)

  	
   

  	
  Same

  	
   

  	
  Cutter & Buck Inc.

  	
   

  	
  Renewal due 07-27-04

  
	
  1722-1-18

  66,181

  	
   

  	
  SE - Sweden

  	
   

  	
  Same

  	
   

  	
  Cutter & Buck Inc.

  	
   

  	
  Renewal due 07-27-04

  
	
  1722-1-19

  20,981

  	
   

  	
  FI (Finland)

  	
   

  	
  Same

  	
   

  	
  Cutter & Buck Inc.

  	
   

  	
  Renewal due 07-27-04

  
	
  1722-1-20

  75,780

  	
   

  	
  NO (Norway)

  	
   

  	
  Same

  	
   

  	
   

  	
   

  	
  Renewal due 07-28-04

  
	
  1722-1-22

  D.12888

  	
   

  	
  IE (Ireland)

  	
   

  	
  Same

  	
   

  	
  Cutter & Buck Inc.

  	
   

  	
  Renewal due 01-27-04

  
	
  1722-1-23

  37359

  	
   

  	
  AT (Austria)

  	
   

  	
  Same

  	
   

  	
  Cutter & Buck Inc.

  	
   

  	
  Renewal due 07-31-04

  
	
  1722-3

  6,161,315

  	
   

  	
  U.S.

  	
   

  	
  Outsole for a Shoe (utility patent)

  	
   

  	
  Cutter & Buck Inc.

  	
   

  	
  1st maintenance fee due 06-19-04

  



 


122

















 


Schedule
5.16


CUTTER
& BUCK INC. – PATENT APPLICATIONS


 




	
  Description

  	
   

  	
  Filing Date

  	
   

  	
  Serial No.

  	
   

  	
  Name of Inventor

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NONE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  






 


123

















 


Schedule
5.16


CUTTER
& BUCK INC. – REGISTERED COPYRIGHTS


 


	
  Copyright

  	
   

  	
  Registration Date

  	
   

  	
  Registration No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NONE

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


124

















 


Schedule
5.16

CUTTER & BUCK, INC.

REGISTERED AND PENDING TRADEMARKS AND SERVICE MARKS


 


	
  Status

  	
   

  	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Date of

  Filing

  	
   

  	
  Application

  Number

  	
   

  	
  Class

  	
   

  	
  Registration

  Number

  	
   

  	
  Renewal

  Date

  
	
  ACTIVE

  	
   

  	
  ARGENTINA

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  02/25/93

  	
  (1)

  	
  1871607

  	
   

  	
  25

  	
   

  	
  1553547

  	
   

  	
  02/28/05

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  AUSTRALIA

  	
   

  	
  Pennant Logo

  	
   

  	
  05/18/99

  	
   

  	
  794467

  	
   

  	
  25

  	
   

  	
  794467

  	
   

  	
  05/18/09

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  AUSTRALIA

  	
   

  	
  Tour Logo

  	
   

  	
  11/11/92

  	
   

  	
   

  	
   

  	
  25

  	
   

  	
  590039

  	
   

  	
  11/11/09

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  BAHAMAS

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  02/25/93

  	
   

  	
  15704

  	
   

  	
  38

  	
   

  	
  15704

  	
   

  	
  02/25/07

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  BARBADOS

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  02/26/93

  	
   

  	
  P1052

  	
   

  	
  25

  	
   

  	
  81/7731

  	
   

  	
  08/19/08

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  BENELUX

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  09/17/92

  	
   

  	
  785905

  	
   

  	
  18 25

  	
   

  	
  522963

  	
   

  	
  Renewed on 9/17/02;
  renewal cert to be issued in 5/03.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  BOLIVIA

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  11/08/95

  	
   

  	
  026587

  	
   

  	
  25

  	
   

  	
  64029-C

  	
   

  	
  05/28/07

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  CANADA

  	
   

  	
  Pennant Logo

  	
   

  	
  07/26/99

  	
   

  	
  1023999

  	
   

  	
  N/A

  	
   

  	
  TMA549,074

  	
   

  	
  08/01/16

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  CANADA

  	
   

  	
  Tour Logo

  	
   

  	
  05/25/90

  	
   

  	
  658 443

  	
   

  	
  N/A

  	
   

  	
  411,033

  	
   

  	
  04/16/08

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  CHINA (PRC)

  	
   

  	
  CUTTER & BUCK

  	
   

  	
   

  	
   

  	
  95091962

  	
   

  	
  25

  	
   

  	
  973734

  	
   

  	
  04/06/07

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PENDING

  	
   

  	
  CHINA (PRC)

  	
   

  	
  Pennant Logo

  	
   

  	
  09/21/99

  	
   

  	
  9900113125

  	
   

  	
  25

  	
   

  	
   

  	
   

  	
   

  



 


125

















 


	
  Status

  	
   

  	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Date of

  Filing

  	
   

  	
  Application

  Number

  	
   

  	
  Class

  	
   

  	
  Registration

  Number

  	
   

  	
  Renewal

  Date

  
	
  ACTIVE

  	
   

  	
  COLOMBIA

  	
   

  	
  CUTTER & BUCK

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  171126

  	
   

  	
  12/29/04

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  COMMUNITY TRADEMARK

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  07/20/99

  	
   

  	
  1247410

  	
   

  	
  25

  	
   

  	
  1247410

  	
   

  	
  07/20/09

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  COMMUNITY TRADEMARK

  	
   

  	
  Pennant Logo

  	
   

  	
  05/18/99

  	
   

  	
  1176981

  	
   

  	
  25

  	
   

  	
  1176981

  	
   

  	
  05/18/09

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  COMMUNITY TRADEMARK

  	
   

  	
  Tour Logo

  	
   

  	
  07/20/99

  	
   

  	
  1247832

  	
   

  	
  25

  	
   

  	
  1247832

  	
   

  	
  07/20/09

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  CZECH REPUBLIC

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  04/19/96

  	
   

  	
  110504

  	
   

  	
  25

  	
   

  	
  198965

  	
   

  	
  04/19/06

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  DENMARK

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  10/08/92

  	
   

  	
  7158/92

  	
   

  	
  25

  	
   

  	
  0933/93

  	
   

  	
  01/29/13

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  DOMINICAN REPUBLIC

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  05/13/93

  	
   

  	
  57030

  	
   

  	
  44

  	
   

  	
  57030

  	
   

  	
  05/15/13

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  ECUADOR

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  05/28/96

  	
   

  	
  68844

  	
   

  	
  25

  	
   

  	
  4815-97

  	
   

  	
  12/09/07

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  GERMANY

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  10/07/92

  	
   

  	
  J 28523

  	
   

  	
  25

  	
   

  	
  2053747

  	
   

  	
  10/7/12

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  GREECE

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  05/25/94

  	
   

  	
  146140/94

  	
   

  	
  25

  	
   

  	
  119319

  	
   

  	
  04/25/04

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  HONG KONG

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  07/16/1999

  	
   

  	
  808/93

  	
   

  	
  25

  	
   

  	
  B8189/1994

  	
   

  	
  08/27/13

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  HONG KONG

  	
   

  	
  Pennant Logo

  	
   

  	
  07/19/99

  	
   

  	
  99/09409

  	
   

  	
  25

  	
   

  	
  10789

  	
   

  	
  07/20/06

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  HUNGARY

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  04/16/96

  	
   

  	
  M96 01135

  	
   

  	
  25

  	
   

  	
  146,403

  	
   

  	
  04/16/06

  



 


126

















 


	
  Status

  	
   

  	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Date of

  Filing

  	
   

  	
  Application

  Number

  	
   

  	
  Class

  	
   

  	
  Registration

  Number

  	
   

  	
  Renewal

  Date

  
	
  ACTIVE

  	
   

  	
  INDIA

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  07/18/95

  	
   

  	
  B 672471

  	
   

  	
  25

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  INDONESIA

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  11/12/93

  	
   

  	
  H4.HC.01.01-14530

  	
   

  	
  25

  	
   

  	
  328020

  	
   

  	
  05/12/03

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  ITALY

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  07/29/92

  	
   

  	
  92 244

  	
   

  	
  18 25

  	
   

  	
  657132

  	
   

  	
  07/29/12

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  JAPAN

  	
   

  	
  Pennant Logo

  	
   

  	
  06/18/93

  	
   

  	
  05-061147

  	
   

  	
  25

  	
   

  	
  3254598

  	
   

  	
  01/31/07

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  JAPAN

  	
   

  	
  Pennant Logo

  	
   

  	
  07/30/99

  	
   

  	
  11-069019

  	
   

  	
  24 28

  	
   

  	
  4,402,831

  	
   

  	
  07/21/10

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  JAPAN

  	
   

  	
  Tour Logo

  	
   

  	
  06/18/93

  	
   

  	
  05-061145

  	
   

  	
  25

  	
   

  	
  3371367

  	
   

  	
  06/02/10

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  JAPAN

  	
   

  	
  Tour Logo

  	
   

  	
  07/30/99

  	
   

  	
  11-069018

  	
   

  	
  24 28

  	
   

  	
  4,402,830

  	
   

  	
  07/21/10

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  JAPAN

  	
   

  	
  CB CUTTER & BUCK

  	
   

  	
  02/23/93

  	
   

  	
  05-017919

  	
   

  	
  25

  	
   

  	
  3180744

  	
   

  	
  07/31/06

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  JAPAN

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  06/18/93

  	
   

  	
  05-061146

  	
   

  	
  25

  	
   

  	
  3369366

  	
   

  	
  04/03/08

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  LEBANON

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  04/17/96

  	
   

  	
  95-01-099442

  	
   

  	
  25

  	
   

  	
  69416

  	
   

  	
  06/21/11

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  MALAYSIA

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  10/16/93

  	
   

  	
  93/08150

  	
   

  	
  25

  	
   

  	
  93/08150

  	
   

  	
  10/16/07

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  MALAYSIA

  	
   

  	
  Pennant Logo

  	
   

  	
  05/26/99

  	
   

  	
  99-004554

  	
   

  	
  25

  	
   

  	
  99-004554

  	
   

  	
  05/26/09

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  MEXICO

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  06/01/92

  	
   

  	
  141011

  	
   

  	
  25

  	
   

  	
  448204

  	
   

  	
  Renewed 12/1/02;
  awaiting renewal certificate

  



 


127

















 


	
  Status

  	
   

  	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Date of

  Filing

  	
   

  	
  Application

  Number

  	
   

  	
  Class

  	
   

  	
  Registration

  Number

  	
   

  	
  Renewal

  Date

  
	
  ACTIVE

  	
   

  	
  MEXICO

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  06/01/92

  	
   

  	
  141012

  	
   

  	
  42

  	
   

  	
  448112

  	
   

  	
  Renewed 12/1/02;
  awaiting renewal certificate

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  NETHERLANDS ANTILLES

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  02/25/1993

  	
   

  	
   

  	
   

  	
  25

  	
   

  	
  02918

  (prior Reg. No. 17379)

  	
   

  	
  02/25/13

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  NEW ZEALAND

  	
   

  	
  Pennant Logo

  	
   

  	
  05/18/99

  	
   

  	
  309664

  	
   

  	
  25

  	
   

  	
  309664

  	
   

  	
  05/18/06

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  NORWAY

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  10/07/92

  	
   

  	
  92.5032

  	
   

  	
  25

  	
   

  	
  162808

  	
   

  	
  06/27/04

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  NORWAY

  	
   

  	
  Pennant Logo

  	
   

  	
  05/20/99

  	
   

  	
  1999 04989

  	
   

  	
  25

  	
   

  	
  200314

  	
   

  	
  11/15/09

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  PANAMA

  	
   

  	
  CUTTER & BUCK &
  Design

  	
   

  	
  03/23/94

  	
   

  	
  4311

  	
   

  	
  25

  	
   

  	
  63296

  	
   

  	
  unknown

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  PARAGUAY

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  12/21/93

  	
   

  	
  93/21729

  	
   

  	
  25

  	
   

  	
  171473

  	
   

  	
  09/16/04

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  PERU

  	
   

  	
  CUTTER & BUCK

  	
   

  	
   

  	
   

  	
  018391

  	
   

  	
  25

  	
   

  	
  031671

  	
   

  	
  12/12/06

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PENDING

  	
   

  	
  PHILLIPPINES

  	
   

  	
  Tour Logo

  	
   

  	
   

  	
   

  	
  0012101

  	
   

  	
  25

  	
   

  	
  Registration pending

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  POLAND

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  04/18/96

  	
   

  	
  Z-158.749

  	
   

  	
  25

  	
   

  	
  109325

  	
   

  	
  04/18/06

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  PORTUGAL

  	
   

  	
  Tour Logo

  	
   

  	
  05/29/92

  	
   

  	
  283424

  	
   

  	
  25

  	
   

  	
  283424

  	
   

  	
  01/20/04

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  RUSSIAN FEDERATION

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  04/17/96

  	
   

  	
  96704889

  	
   

  	
  25

  	
   

  	
  154189

  	
   

  	
  04/17/06

  



 


128

















 


	
  Status

  	
   

  	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Date of

  Filing

  	
   

  	
  Application

  Number

  	
   

  	
  Class

  	
   

  	
  Registration

  Number

  	
   

  	
  Renewal

  Date

  
	
  ACTIVE

  	
   

  	
  SINGAPORE

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  02/16/93

  	
   

  	
  1066/93

  	
   

  	
  25

  	
   

  	
  T93/01066I

  	
   

  	
  02/16/03

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  SINGAPORE

  	
   

  	
  Pennant Logo

  	
   

  	
  05/20/99

  	
   

  	
  T99/05173A

  	
   

  	
  25

  	
   

  	
  T99/05173A

  	
   

  	
  05/20/09

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  SLOVAKIA

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  04/24/96

  	
   

  	
  1060-96

  	
   

  	
  25

  	
   

  	
  184456

  	
   

  	
  04/24/06

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  SLOVENIA

  	
   

  	
  CUTTER & BUCK

  	
   

  	
   

  	
   

  	
  Z-9670654

  	
   

  	
  25

  	
   

  	
  9670654

  	
   

  	
  05/10/06

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  SOUTH AFRICA

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  04/07/94

  	
   

  	
  94/3460

  	
   

  	
  25

  	
   

  	
  B94/3460

  	
   

  	
  04/07/04

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  SOUTH AFRICA

  	
   

  	
  Pennant Logo

  	
   

  	
  05/18/99

  	
   

  	
  99/08735

  	
   

  	
  25

  	
   

  	
  99/08735

  	
   

  	
  05/18/09

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ALL PENDING

  	
   

  	
  SOUTH KOREA

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  07/10/01

  	
   

  	
  40-2001-30208

  40-2001-30211

  40-2001-30212

  40-2001-13386

  70-2001-0000727

  	
   

  	
  14

  25

  28

  35

  25

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  SOUTH KOREA

  	
   

  	
  Pennant Logo

  	
   

  	
  05/26/99

  	
   

  	
  99-17818

  	
   

  	
  25

  	
   

  	
  483439

  	
   

  	
  12/13/10

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PENDING

  	
   

  	
  SOUTH KOREA

  	
   

  	
  BUCK

  	
   

  	
  11/05/2002

  	
   

  	
  40-2002-0051011

  	
   

  	
  25

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PENDING

  	
   

  	
  SOUTH KOREA

  	
   

  	
  Tour Logo

  	
   

  	
  11/05/2002

  	
   

  	
  40-2002-0050939

  	
   

  	
  25

  	
   

  	
   

  	
   

  	
   

  



 


129

















 


	
  Status

  	
   

  	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Date of

  Filing

  	
   

  	
  Application

  Number

  	
   

  	
  Class

  	
   

  	
  Registration

  Number

  	
   

  	
  Renewal

  Date

  
	
  ACTIVE

  	
   

  	
  SWITZERLAND

  	
   

  	
  Pennant Logo

  	
   

  	
  05/19/99

  	
   

  	
  04373/1999

  	
   

  	
  25

  	
   

  	
  466563

  	
   

  	
  05/19/09

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  TAIWAN

  	
   

  	
  CUTTER & BUCK

  	
   

  	
   

  	
   

  	
  84046961

  	
   

  	
  25

  	
   

  	
  00728787

  	
   

  	
  09/15/06

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  THAILAND

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  12/14/93

  	
   

  	
  257305

  	
   

  	
  25

  	
   

  	
  18045

  	
   

  	
  12/13/03

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  TRINIDAD & TOBAGO

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  03/03/93

  	
   

  	
  21459

  	
   

  	
  38

  	
   

  	
  21459

  	
   

  	
  08/27/06

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  TURKEY

  	
   

  	
  CUTTER & BUCK

  	
   

  	
   

  	
   

  	
  95/011972

  	
   

  	
  25

  	
   

  	
  166347

  	
   

  	
  10/19/05

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  UNITED ARAB EMIRATES

  	
   

  	
  Pennant Logo

  	
   

  	
  04/23/00

  	
   

  	
  35972

  	
   

  	
  25

  	
   

  	
  29275

  	
   

  	
  04/23/10

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  UNITED KINGDOM

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  08/27/92

  	
   

  	
  1510701

  	
   

  	
  25

  	
   

  	
  1510701

  	
   

  	
  08/27/09

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  UNITED KINGDOM

  	
   

  	
  Tour Logo

  	
   

  	
  11/15/91

  	
   

  	
  1482901

  	
   

  	
  25

  	
   

  	
  1482901

  	
   

  	
  11/15/08

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  URUGUAY

  	
   

  	
  Tour Logo

  	
   

  	
   

  	
   

  	
  263110

  	
   

  	
  25

  	
   

  	
  263110

  	
   

  	
  03/29/04

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  USA

  	
   

  	
  CUTTER & BUCK

  	
   

  	
  01/22/01

  	
   

  	
  76/198,352

  	
   

  	
  14,18,24,25,28,35

  	
   

  	
  2,552,315

  	
   

  	
  03/26/08

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  USA

  	
   

  	
  Pennant Logo

  	
   

  	
  11/06/98

  	
   

  	
  75/584,312

  	
   

  	
  25

  	
   

  	
  2,311,321

  	
   

  	
  01/25/06

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  USA

  	
   

  	
  Tour Logo

  	
   

  	
  03/12/99

  	
   

  	
  75/659,558

  	
   

  	
  25 (foot-wear)

  	
   

  	
  2,460,208

  	
   

  	
  06/12/07

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACTIVE

  	
   

  	
  USA

  	
   

  	
  Tour Logo

  	
   

  	
  04/26/90

  	
   

  	
  75/053,273

  	
   

  	
  25

  	
   

  	
  1,660,896

  	
   

  	
  10/15/11

  



 


130

















 


	
  Status

  	
   

  	
  Country

  	
   

  	
  Trademark

  	
   

  	
  Date of

  Filing

  	
   

  	
  Application

  Number

  	
   

  	
  Class

  	
   

  	
  Registration

  Number

  	
   

  	
  Renewal

  Date

  
	
  ACTIVE

  	
   

  	
  VENEZUELA

  	
   

  	
  CUTTER & BUCK

  	
   

  	
   

  	
   

  	
  6387/98

  	
   

  	
  25

  	
   

  	
   

  	
   

  	
  Renewed 11/02; awaiting
  certificate

  



 


131