exv10wxey



 





Exhibit 10(e)




 





ASHWORTH U.K. LTD.




as Borrower



 



 




LOAN AGREEMENT




Dated February 29, 2008




$10,000,000



 



 




BANK OF AMERICA, N.A.,




as Lender




 





 









 





	 	 	 	 	 
	SECTION 1 DEFINITIONS; RULES OF CONSTRUCTION
	 	 	1	 
	 
	 	 	 	 
	1.1 Definitions
	 	 	1	 
	1.2 Accounting Terms
	 	 	25	 
	1.3 [intentionally omitted]
	 	 	25	 
	1.4 Certain Matters of Construction
	 	 	25	 
	1.5 US Loan Agreement definitions
	 	 	25	 
	1.6 Third Party rights
	 	 	25	 
	 
	 	 	 	 
	SECTION 2 CREDIT FACILITIES
	 	 	26	 
	 
	 	 	 	 
	2.1 Revolver Commitment
	 	 	26	 
	2.2 [Intentionally Deleted]
	 	 	26	 
	2.3 Letter of Credit Facility
	 	 	26	 
	 
	 	 	 	 
	SECTION 3 INTEREST, FEES AND CHARGES
	 	 	28	 
	 
	 	 	 	 
	3.1 Interest
	 	 	28	 
	3.2 Fees
	 	 	30	 
	3.3 Computation of Interest, Fees, Yield Protection
	 	 	30	 
	3.4 Reimbursement Obligations
	 	 	30	 
	3.5 Illegality
	 	 	31	 
	3.6 Inability to Determine Rates
	 	 	31	 
	3.7 Increased Costs; Capital Adequacy
	 	 	31	 
	3.8 Mitigation
	 	 	32	 
	3.9 Funding Losses
	 	 	32	 
	 
	 	 	 	 
	SECTION 4 LOAN ADMINISTRATION
	 	 	32	 
	 
	 	 	 	 
	4.1 Manner of Borrowing and Funding Revolver Loans
	 	 	32	 
	4.2 Number and Amount of LIBOR Loans; Determination of Rate
	 	 	33	 
	4.3 [Intentionally omitted.]
	 	 	34	 
	4.4 [Intentionally omitted.]
	 	 	34	 
	4.5 Effect of Termination
	 	 	34	 
	 
	 	 	 	 
	SECTION 5 PAYMENTS
	 	 	34	 
	 
	 	 	 	 
	5.1 General Payment Provisions
	 	 	34	 
	5.2 Repayment of Revolver Loans
	 	 	34	 
	5.3 [Intentionally Deleted]
	 	 	35	 
	5.4 Payment of Other Obligations
	 	 	35	 
	5.5 Marshaling; Payments Set Aside
	 	 	35	 
	5.6 Application of Payments
	 	 	35	 
	5.7 Loan Account; Account Stated
	 	 	35	 
	5.8 Taxes
	 	 	35	 
	 
	 	 	 	 
	SECTION 6 CONDITIONS PRECEDENT
	 	 	36	 






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	6.1 Conditions Precedent to Initial Loans
	 	 	36	 
	6.2 Conditions Precedent to All Credit Extensions
	 	 	37	 
	6.3 Limited Waiver of Conditions Precedent
	 	 	38	 
	 
	 	 	 	 
	SECTION 7 COLLATERAL
	 	 	38	 
	 
	 	 	 	 
	7.1 Debenture
	 	 	38	 
	7.2 Certain After-Acquired Collateral
	 	 	38	 
	7.3 No Assumption of Liability
	 	 	38	 
	 
	 	 	 	 
	SECTION 8 COLLATERAL ADMINISTRATION
	 	 	38	 
	 
	 	 	 	 
	8.1 Borrowing Base Certificates
	 	 	38	 
	8.2 Administration of Accounts
	 	 	39	 
	8.3 Administration of Inventory
	 	 	40	 
	8.4 Administration of Equipment
	 	 	40	 
	8.5 Administration of Deposit Accounts
	 	 	41	 
	8.6 General Provisions
	 	 	41	 
	8.7 [intentionally omitted]:
	 	 	42	 
	 
	 	 	 	 
	SECTION 9 REPRESENTATIONS AND WARRANTIES
	 	 	43	 
	 
	 	 	 	 
	9.1 General Representations and Warranties
	 	 	43	 
	9.2 Complete Disclosure
	 	 	46	 
	 
	 	 	 	 
	SECTION 10 COVENANTS AND CONTINUING AGREEMENTS
	 	 	47	 
	 
	 	 	 	 
	10.1 Affirmative Covenants
	 	 	47	 
	10.2 Negative Covenants
	 	 	49	 
	 
	 	 	 	 
	SECTION 11 EVENTS OF DEFAULT; REMEDIES ON DEFAULT
	 	 	54	 
	 
	 	 	 	 
	11.1 Events of Default
	 	 	54	 
	11.2 Remedies upon Default
	 	 	55	 
	11.3 License
	 	 	56	 
	11.4 Setoff
	 	 	56	 
	11.5 Remedies Cumulative; No Waiver
	 	 	56	 
	 
	 	 	 	 
	SECTION 12 MISCELLANEOUS
	 	 	57	 
	 
	 	 	 	 
	12.1 Consents, Amendments and Waivers
	 	 	57	 
	12.2 Indemnity
	 	 	57	 
	12.3 Notices and Communications
	 	 	57	 
	12.4 Performance of Borrower’s Obligations
	 	 	58	 
	12.5 Credit Inquiries
	 	 	59	 
	12.6 Severability
	 	 	59	 
	12.7 Cumulative Effect; Conflict of Terms
	 	 	59	 
	12.8 Counterparts
	 	 	59	 






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	12.9 Entire Agreement
	 	 	59	 
	12.10 No Control; No Advisory or Fiduciary Responsibility
	 	 	59	 
	12.11 Confidentiality
	 	 	60	 
	12.12 [Intentionally Omitted]
	 	 	60	 
	12.13 GOVERNING LAW
	 	 	60	 
	12.14 [Intentionally Omitted]
	 	 	60	 
	12.15 Waivers by Borrower
	 	 	60	 
	12.16 [intentionally omitted]
	 	 	61	 
	12.17 Judgment Currency
	 	 	61	 






	 	 	 
	LIST OF SCHEDULES
	 	 
	Schedule G-1

	 	Subsidiary Guarantors
	Schedule P-1

	 	Permitted Asset Disposition
	Schedule P-2

	 	Permitted Capital Leases
	Schedule P-3

	 	Permitted Investments
	Schedule 8.5

	 	Deposit Accounts
	Schedule 8.6.1

	 	Business Locations
	Schedule 9.1.4

	 	Names and Capital Structure
	Schedule 9.1.5

	 	Former Names and Companies
	Schedule 9.1.9

	 	Surety Obligations
	Schedule 9.1.12

	 	Patents, Trademarks, Copyrights and Licenses
	Schedule 9.1.15

	 	Environmental Matters
	Schedule 9.1.17

	 	Litigation
	Schedule 9.1.19

	 	Pension Plans
	Schedule 9.1.21

	 	Labour Relations
	Schedule 10.1.11

	 	Post-Closing Covenants
	Schedule 10.2.1(d)

	 	Borrowed Money
	Schedule 10.2.2

	 	Existing Liens
	Schedule 10.2.17

	 	Existing Affiliate Transactions






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LOAN AGREEMENT




     THIS LOAN AGREEMENT is dated February 29, 2008, between ASHWORTH U.K. LTD., a company
incorporated in England and Wales with its registered office at 21 St. Thomas Street, Bristol BS1
6JS, United Kingdom and with company number 02862712 (“Borrower”), and BANK OF AMERICA,
N.A., a national banking association (“Lender”).



R E C I T A L S:




     Borrower has requested that Lender provide a credit facility to Borrower to finance its
business enterprise. Lender is willing to provide the credit facility on the terms and conditions
set forth in this Agreement.



     NOW, THEREFORE, for valuable consideration hereby acknowledged, the parties agree as follows:



SECTION 1 DEFINITIONS; RULES OF CONSTRUCTION




     1.1 DEFINITIONS. As used herein, the following terms have the meanings set forth
below:



     Account: any indebtedness of an Account Debtor owed to the Borrower under or pursuant
to a Sale Contract, including all rights to payment for goods sold or leased, or for services
rendered.



     Account Debtor: a Person who is obligated under an Account.



     Accounts Formula Amount: 85% of the Value of Eligible Accounts; provided,
however, that such percentage shall be reduced by 1.0% for each whole percentage point
(after rounding any partial percentage point to the nearest whole percentage point) that the
Dilution Percent exceeds 5.0%.



     Affiliate: with respect to any Person, another Person that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by or is under common Control with
the Person specified. “Control” means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise. “Controlling” and
“Controlled” have correlative meanings.



     Applicable Inventory Advance Rate: 70% during each Seasonal Advance Rate Period; and
65% at all other times.



     Applicable Law: all laws, rules, regulations and governmental guidelines applicable
to the Person, conduct, transaction, agreement or matter in question, including all applicable
statutory law, common law and equitable principles, and all provisions of constitutions, treaties,
statutes, rules, regulations, orders and decrees of Governmental Authorities.



     Applicable Margin: with respect to any Type of Loan, the margin set forth below, as
determined by the Fixed Charge Coverage Ratio for the last Fiscal Quarter with respect to which
financial statements have been delivered pursuant to Section 10.1.2:



 









 





	 	 	 	 	 	 	 
	 	 	 	 	Base Rate	 	LIBOR
	 	 	Fixed Charge	 	Revolver	 	Revolver
	Level	 	Coverage Ratio	 	Loans	 	Loans
	I
	 	> 1.40:1.00	 	0%	 	1.25%
	II
	 	 > 1.20:1.00 £ 1.40:1.00	 	0%	 	1.50%
	III
	 	£ 1.20:1.00	 	0%	 	1.75%





Until May 1, 2008, margins shall be determined as if Level I were applicable. Thereafter, the
margins shall be subject to increase or decrease upon receipt by Lender pursuant to Section 10.1.2
of the financial statements and corresponding Compliance Certificate for the last Fiscal Quarter,
which change shall be effective on the first day of the calendar month following receipt. If, by
the first day of a month, any financial statements and Compliance Certificate due in the preceding
month have not been received, then the margins shall be determined as if Level III were applicable,
from such day until the first day of the calendar month following actual receipt.




     Acquisition Consideration: the purchase consideration for any Permitted Acquisition
(other than Equity Interests in Parent) and all other payments paid to or for the benefit of any
seller by Borrower or any Subsidiary in exchange for, or as part of, or in connection with, any
Permitted Acquisition, whether paid in cash or properties or otherwise and whether payable at or
prior to the consummation of such Permitted Acquisition or deferred for payment at any future time,
whether or not any such future payment is subject to the occurrence of any contingency, and
includes any and all payments representing the purchase price and any assumptions of Debt,
“earn-outs” and other agreements to make any payment the amount of which is, or the terms of
payment of which are, in any respect subject to or contingent upon the revenues, income, cash flow
or profits (or the like) of any person or business; provided that any such future payment that is
subject to a contingency shall be considered Acquisition Consideration only to the extent of the
reserve, if any, required under GAAP at the time of such sale to be established in respect thereof
by any Borrower or any Subsidiary.



     Asset Disposition: a sale, lease, license, consignment, transfer or other disposition
of Property of an Obligor, including a disposition of Property in connection with a sale-leaseback
transaction or synthetic lease.



     Availability: the Borrowing Base minus the principal balance of all Revolver Loans.



     Availability Block: $1,000,000.



     Availability Reserve: the sum (without duplication) of (a) the Inventory Reserve;
(b) the Rent and Charges Reserve; (c) the LC Reserve; (d) the Bank Product Reserve; (e) all accrued
Royalties, whether or not then due and payable by the Borrower; (f) the aggregate amount of
liabilities secured by Liens upon Collateral that are senior to Lender’s Liens (but imposition of
any such reserve shall not waive an Event of Default arising therefrom); (g) the Availability
Block; and (h) such additional reserves, in such amounts and with respect to such matters, as
Lender in its Credit Judgment may elect to impose from time to time.



     Bank Product: any of the following products, services or facilities extended to the
Borrower or a Subsidiary by Lender or any of its Affiliates: (a) Cash Management Services;



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(b) products under Hedging Agreements; (c) commercial credit card and merchant card services;
and (d) leases and other banking products or services as may be requested by the Borrower or a
Subsidiary, other than Letters of Credit or the US Loan Facility.




     Bank Product Debt: Debt and other obligations of Borrower or a Subsidiary relating to
Bank Products.



     Bank Product Reserve: the aggregate amount of reserves established by Lender from
time to time in its reasonable discretion in respect of Bank Product Debt.



     Base Rate: the rate of interest announced by Lender from time to time as its prime
rate. Such rate is a rate set by Lender based upon various factors including its costs and desired
return, general economic conditions and other factors, and is used as a reference point for pricing
some loans, which may be priced at, above or below such announced rate. Any change in such rate
announced by Lender shall take effect at the opening of business on the day specified in the public
announcement of such change or, if no such public announcement is made, on the day on which it is
notified to the Borrower.



     Base Rate Revolver Loan: a Revolver Loan that bears interest based on the Base Rate.



     Board of Governors: The Board of Governors of the US Federal Reserve System.



     Borrowed Money: with respect to any Obligor, without duplication, its (a) Debt that
(i) arises from the lending of money by any Person to such Obligor, (ii) is evidenced by notes,
drafts, bonds, debentures, credit documents or similar instruments, (iii) accrues interest or is a
type upon which interest charges are customarily paid (excluding trade payables or taxes owing in
the ordinary course of business), or (iv) was issued or assumed as full or partial payment for
Property; (b) Capital Leases; (c) reimbursement obligations with respect to letters of credit; and
(d) guaranties of any Debt of the foregoing types owing by another Person.



     Borrowing: a group of Loans of one Type that are made on the same day or are
converted into Loans of one Type on the same day.



     Borrowing Base: on any date of determination, an amount equal to the lesser of
(a) the Revolver Commitment, minus the LC Reserve, or (b) the sum of the Accounts Formula
Amount, plus the Inventory Formula Amount, minus the Availability Reserve.



     Borrowing Base Certificate: a certificate, in substantially the form agreed to by
Lender and Borrower prior to the date hereof or otherwise in form and substance reasonably
satisfactory to Lender, by which Borrower certifies calculation of the Borrowing Base.



     Business Day: a day (other than a Saturday or Sunday) on which banks are open for
general business in London and:



     (a) (in relation to any date for payment or purchase of a currency other than Euro) the
principal financial centre of the country of that currency; or



     (b) (in relation to any date for payment or purchase of Euro) any TARGET Day.



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     Capital Expenditures: all liabilities incurred, expenditures made or payments due
(whether or not made) by the Borrower or a Subsidiary for the acquisition of any fixed assets, or
any improvements, replacements, substitutions or additions thereto with a useful life of more than
one year, including the principal portion of Capital Leases, but excluding proceeds of Asset
Dispositions re-invested in the business of the Borrower or a Subsidiary making such Asset
Disposition to the extent such re-investment is permitted hereunder. For purposes of this
definition, the purchase price of equipment or other fixed assets that are purchased simultaneously
with the trade-in of existing assets or with insurance proceeds shall be included in Capital
Expenditures only to the extent of the net amount by which such purchase price exceeds the credit
granted by the seller of such assets for the assets being traded in at such time or the amount of
such insurance proceeds, as the case may be.



     Capital Lease: any lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP.



     Capital Lease Lien: a Lien that secures a Capital Lease, encumbering only the assets
leased with such Capital Lease and accessions to, and products and proceeds (including insurance
condemnation proceeds) of, such leased assets.



     Cash Collateral: cash, and any interest or other income earned thereon, that is
delivered to Lender to Cash Collateralize any Obligations.



     Cash Collateral Account: a demand deposit, money market or other account maintained
with Lender and subject to Lender’s Liens.



     Cash Collateralize: the delivery of cash to Lender, as security for the payment of
Obligations, in an amount equal to (a) with respect to LC Obligations, 105% of the aggregate LC
Obligations, and (b) with respect to any other Obligations (including Obligations arising under
Bank Products) other than contingent Obligations, Lender’s good faith estimate of the amount due or
to become due, including all fees and other amounts relating to such Obligations. “Cash
Collateralization” has a correlative meaning.



     Cash Equivalent: at any time:



     (a) certificates of deposit maturing within one year after the relevant date of calculation
and issued by a bank or financial institution which has a rating for its long-term unsecured and
non credit-enhanced debt obligations of A or higher by Standard & Poor’s Rating Services or Fitch
Ratings Ltd or A-2 or higher by Moody’s Investor Services Limited or a comparable rating from an
internationally recognized credit rating agency;



     (b) any investment in marketable debt obligations issued or guaranteed by the government of
the United States of America, the United Kingdom or by an instrumentality or agency of any of them
having an equivalent credit rating, maturing within one year after the relevant date of calculation
and not convertible or exchangeable to any other security;



     (c) commercial paper not convertible or exchangeable to any other security:



          (i) for which a recognized trading market exists,




-4-









 





          (ii) issued by an issuer incorporated in the United States of America or the United Kingdom,




          (iii) which matures within one year after the relevant date of calculation, and




          (iv) which has a credit rating of either A-1 or higher by Standard & Poor’s Rating Services or
F-1 or higher by Fitch Ratings Ltd or P-1 or higher by Moody’s Investor Services Limited, or, if no
rating is available in respect of the commercial paper, the issuer of which has, in respect of its
long-term unsecured and non-credit enhanced debt obligations, an equivalent rating;




     (d) any investment in money market funds which:



          (i) have a credit rating of either A-1 or higher by Standard & Poor’s Rating Services or F-1
or higher by Fitch Ratings Ltd or P-1 or higher by Moody’s Investor Services Limited,




          (ii) invest substantially all their assets in securities of the types described in paragraphs
(a) to (d) above, and




          (iii) can be turned into cash on not more than 60 days’; notice;




     (e) Sterling bills of exchange eligible for rediscount at the Bank of England and accepted by
a banking institution which has, in respect of its long-term unsecured debt obligations, a rating
of A-2 or higher by Moody’s Investor Services Limited, a or higher by Standard & Poor’s Rating
Services or a or higher by Fitch Ratings Ltd; or



     (f) any other debt security approved by the Lender, in each case, denominated in Sterling,
Euro or Dollars and to which the Borrower or any Guarantor is alone (or, together with any other
such Obligor) beneficially entitled at that time and which is not issued or guaranteed by any
Obligor or subject to any Lien (other than a Lien in favour of the Lender).



     Cash Management Services: any services provided from time to time by Lender or any of
its Affiliates to the Borrower or a Subsidiary in connection with operating, collections, payroll,
trust, or other depository or disbursement accounts, including automated clearinghouse, e-payable,
electronic funds transfer, wire transfer, controlled disbursement, overdraft, depository,
information reporting, lockbox and stop payment services.



     Change in Law: the occurrence, after the date hereof, of (a) the adoption or taking
effect of any law, rule, regulation or treaty; (b) any change in any law, rule, regulation or
treaty or in the administration, interpretation or application thereof by any Governmental
Authority; or (c) the making or issuance of any request, guideline or directive (whether or not
having the force of law) by any Governmental Authority.



     Change of Control: (a) Parent ceases to own and control, beneficially and of record,
directly or indirectly, all Equity Interests in Borrower or any Obligor (except in connection with
a merger or consolidation permitted under Section 10.2.9); (b) a change in the majority of
directors of Parent, unless approved by the then majority of directors; or (c) all or substantially
all of the assets of a Subsidiary of the Borrower are sold or transferred (except in connection
with a merger or consolidation permitted under Section 10.2.9) without providing Lender at
least



-5-









 




30 days’ prior written notice of such sale and obtaining the written consent of Lender which
consent shall not be unreasonably withheld.




     Claims: all liabilities, obligations, losses, damages, penalties, judgments,
proceedings, interest, costs and expenses of any kind (including remedial response costs,
reasonable lawyers’ fees and Extraordinary Expenses) at any time (including after Full Payment of
the Obligations) incurred by or asserted against any Indemnitee in any way relating to (a) any
Loans, Letters of Credit, Loan Documents, or the use thereof or transactions relating thereto,
(b) any action taken or omitted to be taken by any Indemnitee in connection with any Loan
Documents, (c) the existence or perfection of any Liens, or realization upon any Collateral,
(d) exercise of any rights or remedies under any Loan Documents or Applicable Law, or (e) failure
by any Obligor to perform or observe any terms of any Loan Document, in each case including all
costs and expenses relating to any investigation, litigation, arbitration or other proceeding
(including an Insolvency Proceeding or appellate proceedings), whether or not the applicable
Indemnitee is a party thereto.



     Closing Date: as defined in Section 6.1.



     Collateral: all Property described in any Security Documents as security for any
Obligations, and all other Property that now or hereafter secures (or is intended to secure) any
Obligations; provided, however, that the term “Collateral” shall not include, and no security
interest hereunder or any other Loan Documents shall attach to, any Excluded Assets.



     Commitment Termination Date: the earliest to occur of (a) the Revolver Termination
Date; (b) the date on which Borrower terminates the Revolver Commitment pursuant to Section 2.1.3;
or (c) the date on which the Revolver Commitment is terminated pursuant to Section 11.2.



     Compliance Certificate: a certificate, in form and substance reasonably satisfactory
to Lender, by which Borrower certifies compliance with Section 10.1.2 and calculates the applicable
Level for the Applicable Margin.



     Contingent Obligation: any obligation of a Person arising from a guaranty, indemnity
or other assurance of payment or performance of any Debt, lease, dividend or other obligation
(“primary obligations”) of another obligor (“primary obligor”) in any manner,
whether directly or indirectly, including any obligation of such Person under any (a) guaranty,
endorsement, co-making or sale with recourse of an obligation of a primary obligor; (b) obligation
to make take-or-pay or similar payments regardless of nonperformance by any other party to an
agreement; and (c) arrangement (i) to purchase any primary obligation or security therefor, (ii) to
supply funds for the purchase or payment of any primary obligation, (iii) to maintain or assure
working capital, equity capital, net worth or solvency of the primary obligor, (iv) to purchase
Property or services for the purpose of assuring the ability of the primary obligor to perform a
primary obligation, or (v) otherwise to assure or hold harmless the holder of any primary
obligation against loss in respect thereof. The amount of any Contingent Obligation shall be
deemed to be the stated or determinable amount of the primary obligation (or, if less, the maximum
amount for which such Person may be liable under the instrument evidencing the Contingent
Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with
respect thereto.



     Credit Judgment: Lender’s judgment exercised reasonably and in good faith, based upon
its consideration of any factor that it believes (a) could reasonably be expected to adversely



-6-









 




affect the quantity, quality, mix or value of Collateral, the enforceability or priority of
Lender’s Liens, or the amount that Lender could reasonably be expected to receive in liquidation of
any Collateral (including any such Collateral consisting of Inventory subject to a License that
restricts Lender’s right to dispose of such Inventory, unless Lender has received an appropriate
Lien Waiver); (b) demonstrates that any collateral report or financial information delivered by any
Obligor is incomplete, inaccurate or misleading in any material respect; (c) materially increases
the likelihood of any Insolvency Proceeding involving an Obligor; or (d) creates or could
reasonably be expected to result in a Default or Event of Default. In exercising such judgment,
Lender may consider any factors related to the Borrower and the business of the Borrower that could
reasonably be expected to increase the credit risk of lending to Borrower on the security of the
Collateral.




     Debenture: the fixed and floating charge debenture created or to be created by
Borrower in favour of Lender in the form or substantially in the form of the draft initialed for
identification purposes by Borrower and Lender.



     Debt: as applied to any Person, without duplication, (a) all obligations of such
Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes,
loan agreements or other similar instruments; (b) all obligations of such person to pay the
deferred purchase price of property or services (other than deferred compensation and trade
accounts payable, in each case in the ordinary course of business); (c) Capital Leases; (d) all
Contingent Obligations; (e) all reimbursement obligations in connection with letters of credit
issued for the account of such Person; and (f) in the case of the Borrower, the Obligations. The
Debt of a Person shall include any recourse Debt of any partnership in which such Person is a
general partner or joint venturer.



     Default: an event or condition that, with the lapse of time or giving of notice,
would constitute an Event of Default.



     Default Rate: for any Obligation (including, to the extent permitted by law, interest
not paid when due), 2% plus the interest rate otherwise applicable thereto.



     Deposit Account: a blocked account of Borrower with Lender or other financial
institution reasonably acceptable to Lender, to which all payments from Account Debtors (other than
as set forth in Section 8.2.6) are required to be paid over which Lender has exclusive control for
withdrawal purposes by virtue of the Debenture and the Deposit Account Control Agreements.



     Deposit Account Control Agreements: the notices and acknowledgements to be executed
by each institution maintaining a Deposit Account pursuant to the Debenture.



     Dilution Percent: the percent, determined for Borrower’s most recently completed 12
months, equal to (a) all non-cash reductions to Accounts, including, but not limited to, bad debt
write-downs or write-offs, discounts, returns, promotions, credits, credit memos and other dilutive
items with respect to Accounts, divided by (b) gross collections.



     Distribution: any declaration or payment of a distribution, interest or dividend on
any Equity Interest; any distribution, advance or repayment of Debt to a holder of Equity Interests
(in its capacity as such); or any purchase, redemption, or other acquisition or retirement for
value of any Equity Interest, in each case other than payment-in-kind and other than dividend
payments



-7-









 




or other distributions payable solely in the common stock or other common equity interests of
the person making such dividend or other distribution.




     Dollars: lawful money of the United States.



     EBITDA: determined on a consolidated basis for Parent and its Subsidiaries, net
income, calculated before interest expense, provision for income taxes, depreciation and
amortization expense, gains or extraordinary charges or non-cash charges or losses arising from the
sale of capital assets, gains arising from the write-up of assets, and any extraordinary gains (in
each case, to the extent included or deducted, as applicable, in determining net income).



     Eligible Account: an Account owing to the Borrower that arises in the ordinary course
of business from the sale of goods or rendition of services, is payable in Dollars, Euro or
Sterling and is not excluded by the criteria set forth in the next succeeding sentence. No Account
shall be an Eligible Account if (a) it is unpaid for more than 60 days after the original due date,
or more than 120 days after the original invoice date; (b) 50% or more of the Accounts owing by the
Account Debtor are not Eligible Accounts under clause (a) of this definition; (c) when aggregated
with other Accounts owing by the Account Debtor, it exceeds 20% of the aggregate Eligible Accounts
(or such higher percentage as Lender may establish for the Account Debtor from time to time);
(d) it does not conform with a covenant or representation herein; (e) it is owing by a creditor or
supplier, or is otherwise subject to a potential offset, counterclaim, dispute, deduction,
discount, recoupment, reserve, defense, chargeback, credit or allowance (but ineligibility shall be
limited to the amount thereof); (f) an Insolvency Proceeding has been commenced by or against the
Account Debtor; or the Account Debtor has failed, has suspended or ceased doing business, is
liquidating, dissolving or winding up its affairs, or is not Solvent; (g) the Account Debtor is
organized or has its principal offices or assets in a jurisdiction which was not in the European
Union prior to May 1, 2004; (h) it is owing by the United States or United Kingdom or any
department, agency or instrumentality of either, unless, as to an Account owing by the United
States, or any department, agency or instrumentality, the Account has been assigned to Lender in
compliance with the Assignment of Claims Act; (i) it is not subject to a duly perfected, first
priority Lien in favor of Lender, or is subject to any other Lien (other than customary chargeback
rights, and Permitted Liens specified in Sections 10.2.2(c), (d) and (g) and subject, in the case
of the first priority nature of Lender’s Lien, to such specified Permitted Liens having priority by
operation of applicable law over the Lien of the Lender); (j) the goods giving rise to it have not
been delivered to and accepted by the Account Debtor, the services giving rise to it have not been
accepted by the Account Debtor, or it otherwise does not represent a final sale; (k) it is
evidenced by Chattel Paper or an Instrument of any kind, or has been reduced to judgment; (l) its
payment has been extended, the Account Debtor has made a partial payment, or it arises from a sale
on a cash-on-delivery basis; (m) it arises from a sale to an Affiliate, or from a sale on a
bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment, or other repurchase
or return basis; (n) it represents a progress billing or retainage; or (o) it includes a billing
for interest, fees or late charges, but ineligibility shall be limited to the extent thereof. In
calculating delinquent portions of Accounts under clauses (a) and (b), credit balances more than 60
days past due or more than 120 days from the invoice date for such Account will be excluded. For
the purpose of valuing Eligible Accounts denominated in Euro or Sterling, the amount of such
Eligible Account shall be converted into the Equivalent Amount thereof in Dollars on the last
Business Day of each fiscal month; provided, that Lender reserves the right to adjust, at any time
in its reasonable credit judgment, the value of Dollars of such Eligible Accounts to take into
account currency rate exchange fluctuations since the last valuation thereof.



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     Eligible In-Transit Inventory: Inventory owned by the Borrower that would be Eligible
Inventory if it were not in transit from a foreign location to a location of the Borrower within
the United Kingdom and that is not excluded by the following criteria. No Inventory shall be
Eligible In-Transit Inventory unless it (a) is subject to a negotiable bill of lading showing
Lender as indorsee, which bill of lading is in the possession of Lender, or held to the order of
Lender by such other Person as Lender shall approve; (b) is fully insured in a manner satisfactory
to Lender, with the interests of Lender noted on the policy; (c) has been identified to the
applicable sales contract and title has passed to the Borrower; (d) is not sold by a vendor that
has a right to reclaim, divert shipment of, repossess, stop delivery, claim any reservation of
title or otherwise assert Lien rights against the Inventory, or with respect to whom the Borrower
is in default of any obligations; (e) is subject to purchase orders and other sale documentation
satisfactory to Lender; (f) is shipped by a common carrier that is not affiliated with the vendor;
(g) is being handled by a customs broker, freight-forwarder or other handler that has delivered a
Lien Waiver and (h) is subject to a pledge or charge in favour of Lender in form and substance
satisfactory to Lender.



     Eligible Inventory: Inventory owned by the Borrower that is not excluded by the
following criteria. No Inventory shall be Eligible Inventory unless it (a) is finished goods, and
not raw materials or work-in-process, packaging or shipping materials, labels, samples, display
items, bags, replacement parts or manufacturing supplies; (b) is not held on consignment, nor
subject to any deposit or down payment; (c) is in new and saleable condition and is not damaged,
defective, shopworn or otherwise unfit for sale; (d) is not greater than 12 months old), obsolete
or unmerchantable, and does not constitute returned or repossessed goods; (e) meets all standards
imposed by any Governmental Authority, and does not constitute hazardous materials under any
Environmental Law; (f) conforms with the covenants and representations herein; (g) is subject to
Lender’s duly perfected, first priority Lien, and no other Lien (other than the Permitted Liens
specified in Section 10.2.2(c), (d) and (g) and subject, in the case of the first priority nature
of Lender’s Lien, to such specified Permitted Liens having priority by operation of applicable law
over the Lien of the Lender); (h) is within the United Kingdom, is not in transit except between
locations of Borrower, and is not consigned to any Person; (i) is not subject to any warehouse
receipt or negotiable Document; (j) it is not subject to a retention of title claim by its
supplier; (k) is not located on leased premises or in the possession of a warehouseman, processor,
repairman, mechanic, shipper, freight forwarder or other Person, unless the lessor or such Person
has delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been established; and
(l) is reflected in the details of a current perpetual inventory report (provided, that
Inventory that is in-transit or that is “pack and hold” Inventory does not need to meet the
conditions of this clause (l)).



     Eligible Slow Moving Inventory: Inventory owned by the Borrower (a) that would be
Eligible Inventory if it were not greater than 12 months old or (b) that is less than 24 months
old.



     Enforcement Action: any action to enforce any Obligations or Loan Documents or to
realize upon any Collateral (whether by judicial action, self-help, notification of Account
Debtors, exercise of setoff or recoupment, or otherwise).



     Environmental Laws: any applicable law or regulation which relates to:



     (a) the pollution or protection of the environment;



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     (b) harm to or the protection of human health;



     (c) the conditions of the workplace; or



     (d) any emission or substance capable of causing harm to any living organism or the
environment.



     Environmental Notice: a written notice from any Governmental Authority or other
Person of any possible noncompliance with, investigation of a possible violation of, litigation
relating to, or potential fine or liability under any Environmental Law, or with respect to any
Environmental Release, environmental pollution or hazardous materials, including any complaint,
summons, citation, order, claim, demand or request for correction, remediation or otherwise.



     Environmental Release: (i) a breach, or alleged breach of, Environmental Law (ii) any
accident, fire, explosion or other similar event of any type involving an emission or substance
which is capable of causing harm to any living organism or the environment or (iii) any other
environmental contamination.



     Equipment: all machinery, fixtures, furniture, office machinery, vehicles, trailers,
implements and other equipment of every kind and description now owned or hereafter acquired by and
used or useful in connection with the Borrower’s business and all equipment of like kind or type
hereafter acquired by Borrower in substitution or replacement thereof, and all additions and
accessions thereto.



     Equity Interest: the ownership interest of any (a) shareholder in a corporation;
(b) partner in a partnership (whether general, limited, limited liability or joint venture);
(c) member in a limited liability company; or (d) other Person having any other form of equity
security or ownership interest.



     Equivalent Amount: on any date of determination, with respect to obligations or
valuations denominated in Euro or Sterling (the “first currency”), the amount of Dollars (the
“second currency”) which would result from the Lender converting the first currency into the second
currency at the applicable currency exchange rate as reasonably determined by Lender and set forth
on the world wide web. (unless otherwise specified by Lender, the applicable currency exchange rate
for any currency at any time shall be the rate set forth for such currency at such time at the
following website link:
http://www.oanda.com/cgi/crossrate/crossrateresult.shtml?quotes=GBP"es=CAD"es=EUR"es=JPY
"es=CHF"es=USD"es=AUD"es=SEK&go=Get+my+Table)



     Euro or €: the single currency for the time being of Participating Member States.



     Event of Default: as defined in Section 11.



     Excluded Assets: (a) real property and any fixtures attached or appurtenant thereto,
(b) any rights or property acquired by an Obligor under, or subject to, a lease, contract, or
license, if and for so long as the grant of a Lien under any Security Document would constitute or
result in (x) the abandonment, invalidation or unenforceability of any right, title or interest of
such Obligor therein or (y) a breach or termination pursuant to the terms of, or a default under,



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any such lease, contract, or license (other than to the extent that any restriction on such
assignment would be rendered ineffective pursuant to any Applicable Law or principles of equity),
(c) any insurance or condemnation proceeds from any of the foregoing to the extent required to be
maintained for the benefit of, and paid over to, a Person other than Parent, Borrower or their
Affiliates, (d) any insurance or condemnation proceeds covering any real property leased by an
Obligor or fixtures attached or appurtenant thereto to the extent required to be maintained for the
benefit of, and paid over to, the applicable landlord; any insurance or condemnation proceeds from
any of the foregoing, (e) any insurance or condemnation proceeds covering any real property leased
by an Obligor or fixtures attached or appurtenant thereto to the extent required to be maintained
for the benefit of, and paid over to, the applicable landlord, and (f) the UK Lease Deposit;
provided, however, that at such time as the condition causing such abandonment,
invalidation or unenforceability shall be no longer in effect with respect to any property, such
property shall no longer constitute Excluded Assets.




     Excluded Tax: with respect to Lender or any other recipient of a payment to be made
by or on account of any Obligation, taxes imposed on or measured by its overall net income (however
denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction
(or any political subdivision thereof) under the laws of which such recipient is organized or in
which its principal office is located or, in the case of Lender, in which its applicable lending
office is located.



     Extraordinary Expenses: all costs, expenses or advances that Lender may incur with
respect to the Obligations during a Default or Event of Default, or during the pendency of an
Insolvency Proceeding of an Obligor, including those relating to (a) any audit, inspection,
repossession, storage, repair, appraisal, insurance, manufacture, preparation or advertising for
sale, sale, collection, or other preservation of or realization upon any Collateral; (b) any
action, arbitration or other proceeding (whether instituted by or against Lender, any Obligor, any
representative of creditors of an Obligor or any other Person) in any way relating to any
Collateral (including the validity, perfection, priority or avoidability of Lender’s Liens with
respect to any Collateral), Loan Documents, Letters of Credit or Obligations, including any lender
liability or other Claims; (c) the exercise, protection or enforcement of any rights or remedies of
Lender in, or the monitoring of, any Insolvency Proceeding; (d) settlement or satisfaction of any
taxes, charges or Liens with respect to any Collateral; (e) any Enforcement Action; and
(f) negotiation and documentation of any modification, waiver, workout, restructuring or
forbearance with respect to any Loan Documents or Obligations. Such costs, expenses and advances
include transfer fees, Other Taxes, storage fees, insurance costs, permit fees, utility reservation
and standby fees, legal fees, appraisal fees, brokers’ fees and commissions, auctioneers’ fees and
commissions, accountants’ fees, environmental study fees, wages and salaries paid to employees of
any Obligor or independent contractors in liquidating any Collateral, and travel expenses.



     Fiscal Quarter: each period of three months, commencing on the first day of a Fiscal
Year.



     Fiscal Year: the fiscal year of Borrower and Subsidiaries for accounting and tax
purposes, ending on October 31 of each year.



     Fixed Charge Coverage Ratio: the ratio, determined on a consolidated basis for Parent
and its Subsidiaries, of (a) EBITDA minus Capital Expenditures (except those financed with



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Borrowed Money other than Revolver Loans) and cash taxes paid, to (b) Fixed Charges. Such
ratio shall be measured on a Fiscal Year to date basis for measurement dates prior to the end of
Fiscal Year 2008, and on a most recent four Fiscal Quarter basis for measurement dates thereafter.




     Fixed Charges: the sum of interest expense (other than payment-in-kind), principal
payments made by any Obligor on Borrowed Money (other than the Obligations), and Distributions made
by Parent.



     Foreign Subsidiary: a Subsidiary that is organized under laws of any jurisdiction
other than England and Wales.



     FSA: the Financial Services Authority of the United Kingdom.



     Full Payment: with respect to any Obligations, (a) if such Obligations are
Obligations other than (i) LC Obligations, (ii) Obligations arising under Bank Products, or (iii)
contingent indemnity Obligations, the full cash payment thereof, including any interest, fees and
other charges accruing during an Insolvency Proceeding (whether or not allowed in the proceeding);
and (b) if such Obligations are LC Obligations or Obligations arising under Bank Products, Cash
Collateralization thereof (or delivery of a standby letter of credit acceptable to Lender in its
discretion, in the amount of required Cash Collateral). The Revolver Loans shall not be deemed to
have been paid in full until the Revolver Commitment has expired or been terminated.



     GAAP: generally accepted accounting principles in effect in the United States from
time to time, including any changes permitted under such principles as set forth in Section 1.2.



     Governmental Approvals: all authorizations, consents, approvals, licenses and
exemptions of, registrations and filings with, and required reports to, all Governmental
Authorities.



     Governmental Authority: any national, federal, state, municipal, foreign or other
governmental department, agency, commission, board, bureau, court, tribunal, instrumentality,
political subdivision, or other entity or officer exercising executive, legislative, judicial,
regulatory or administrative functions for or pertaining to any government or court, in each case
whether associated with the United Kingdom, the European Union or a foreign entity or government.



     Guarantors: Parent and each of Borrower’s Subsidiaries set forth on Schedule G-1 and
each other Person who guarantees payment or performance of any Obligations.



     Guaranty: each guaranty agreement executed by a Guarantor in favor of Lender.



     Hedging Agreement: an agreement relating to any swap, cap, floor, collar, option,
forward, cross right or obligation, or combination thereof or similar transaction, with respect to
interest rate, foreign exchange, currency, commodity, credit or equity risk.



     Immaterial Tax: a state or local Tax obligation of an Obligor, with respect to which
the amount of all such Taxes is less than $250,000.



     Indemnified Taxes: Taxes other than Excluded Taxes.



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     Indemnitees: Lender and its officers, directors, employees, Affiliates, agents and
attorneys.



     Insolvency Proceeding: any case or proceeding commenced by or against a Person under
any law for, or any agreement of such Person to, or any application or petition for the purposes of
(a) the entry of an order for relief under any insolvency, debtor relief or debt adjustment law;
(b) the appointment of a receiver, trustee, liquidator, provisional liquidator, administrator,
conservator or other custodian for such Person or for all or any part of its Property; or (c) an
assignment or trust mortgage for the benefit of creditors.



     Insurance Assignment: each collateral assignment of insurance pursuant to which an
Obligor assigns to Lender such Obligor’s rights under business interruption or other insurance
policies as Lender reasonably deems appropriate, as security for the Obligations.



     Intellectual Property: all intellectual Property of a Person, including inventions,
designs, patents, copyrights, trademarks, service marks, trade names, trade secrets, confidential
or proprietary information, customer lists, know-how, software and databases; all embodiments or
fixations thereof and all related documentation, applications, registrations and franchises; all
licenses or other rights to use any of the foregoing; and all books and records relating to the
foregoing.



     Intellectual Property Claim: any claim or assertion (whether in writing, by suit or
otherwise) that the Borrower’s or Subsidiary’s ownership, use, marketing, sale or distribution of
any Inventory, Equipment, Intellectual Property or other Property violates another Person’s
Intellectual Property.



     Intercompany Subordination Agreement: the Intercompany Subordination Agreement
executed by Parent, Borrower and each of their Subsidiaries in form and substance satisfactory to
Lender.



     Interest Period: as defined in Section 3.1.3.



     Inventory: all goods intended for sale, lease, display or demonstration; all work in
process; and all raw materials, and other materials and supplies of any kind that are or could be
used in connection with the manufacture, printing, packing, shipping, advertising, sale, lease or
furnishing of such goods, or otherwise used or consumed in the Borrower’s business (but excluding
Equipment).



     Inventory Formula Amount: the least of (i) $10,000,000; (ii) the sum of (x) the
Applicable Inventory Advance Rate times the Value of Eligible Inventory; plus (y) the Applicable
Inventory Advance Rate times the Value of Eligible In-Transit Inventory plus (z) the Slow Moving
Inventory Advance Rate times the Value of Eligible Slow Moving Inventory, or (iii) 85% of the
product of (y) NOLV Percentage multiplied by (z) the sum of (1) the Value of Eligible Inventory
plus (2) the Value of Eligible In-Transit Inventory plus (3) the Value of Eligible Slow Moving
Inventory.



     Inventory Reserve: reserves established by Lender to reflect factors that may
negatively impact the Value of Inventory, including change in salability, obsolescence,
seasonality, theft, shrinkage, imbalance, change in composition or mix, markdowns and vendor
chargebacks.



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     Inverse Inventory Advance Rate: for LC Obligations relating to documentary Letters of
Credit issued to support Borrower’s purchase of Inventory, a percentage equal to 100% minus
the Applicable Inventory Advance Rate.



     Investment: any acquisition of all or substantially all assets of a Person; any
acquisition of record or beneficial ownership of any Equity Interests of a Person; or any advance
or capital contribution to or other investment in a Person.



     LC Application: an application by Borrower to Lender for issuance of a Letter of
Credit, in form and substance reasonably satisfactory to Lender.



     LC Conditions: the following conditions necessary for issuance of a Letter of Credit:
(a) each of the conditions set forth in Section 6; (b) after giving effect to such issuance, total
LC Obligations do not exceed the Letter of Credit Subline, no Overadvance exists and, if no
Revolver Loans are outstanding, the LC Obligations do not exceed the Borrowing Base (without giving
effect to the LC Reserve for purposes of this calculation); (c) the expiration date of such Letter
of Credit is (i) no more than 365 days from issuance, in the case of standby Letters of Credit,
(ii) no more than 120 days from issuance, in the case of documentary Letters of Credit, and
(iii) at least 20 Business Days prior to the Revolver Termination Date; (d) the Letter of Credit
and payments thereunder are denominated in Dollars, Euro or Sterling; and (e) the purpose and form
of the proposed Letter of Credit is satisfactory to Lender in its reasonable discretion.



     LC Documents: all documents, instruments and agreements (including LC Requests and LC
Applications) delivered by Borrower or any other Person to Lender in connection with issuance,
amendment or renewal of, or payment under, any Letter of Credit.



     LC Obligations: the sum (without duplication) of (a) all amounts owing by Borrower
for any drawings under Letters of Credit (such amounts denominated in Euro or Sterling to be valued
at the Equivalent Amount thereof); (b) the stated amount of all outstanding Letters of Credit
(Letters of Credit denominated in Euro or Sterling to be valued at the Equivalent Amount thereof);
and (c) all fees and other amounts owing with respect to Letters of Credit.



     LC Request: a request for issuance of a Letter of Credit, to be provided by Borrower,
in form reasonably satisfactory to Lender.



     LC Reserve: the aggregate of all LC Obligations, other than (a) those that have been
Cash Collateralized and (b) if no Default or Event of Default exists, those constituting charges
owing to Lender. For purposes of this definition, (x) in the case of documentary Letters of Credit
issued to support Borrower’s purchase of Eligible In-Transit Inventory (and so long as such Letters
of Credit have not become bankers acceptances), the reserve shall be limited to (i) the Inverse
Inventory Advance Rate times (ii) the amount of LC Obligations attributable to such
documentary Letters of Credit and (y) in the case of all other Letters of Credit and bankers
acceptances, the reserve shall equal 100% of the face amount of all outstanding Letters of Credit
and bankers acceptances.



     Lender Professionals: attorneys, solicitors, counsel, accountants, appraisers,
auditors, business valuation experts, environmental engineers or consultants, turnaround
consultants, and other professionals and experts retained by Lender.



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     Letter of Credit: any standby or documentary letter of credit issued by Lender for
the account of the Borrower, or any indemnity, guarantee, exposure transmittal memorandum or
similar form of credit support issued by Lender for the benefit of the Borrower.



     Letter of Credit Subline: $2,000,000.



     LIBOR: for any Interest Period with respect to a LIBOR Loan, the per annum rate of
interest (rounded upward, if necessary, to the nearest 1/100th of 1%), determined by Lender at
approximately 11:00 a.m. (London time) two Business Days prior to or, in the case of Sterling, on
the first day of such Interest Period, for a term comparable to such Interest Period, equal to (1)
(in the case of Dollars and Sterling) (a) the British Bankers Association Interest Settlement Rate
(“BBA LIBOR”) for the relevant currency, as displayed on the appropriate page of the
Reuters screen (or, if unavailable, such other commercially available source as may be designated
by Lender) or (b) if BBA LIBOR is not available for any reason, the interest rate at which deposits
in the relevant currency and in the approximate amount of the LIBOR Loan would be offered by
Lender’s London branch to major banks in the London interbank market and (2) (in the case of Euro)
(a) the percentage rate per annum determined by the Banking Federation of the European Union (“BFEU
Rate”) for the relevant Interest Period as displayed on the appropriate page of the Reuters screen
(or, if unavailable, such other commercially available source as may be designated by Lender), such
rate being known as “EURIBOR” or (b) if the BFEU Rate is not available for any reason, the interest
rate at which deposits in Euro and in the approximate amount of the LIBOR Loan would be offered by
Lender’s London branch to major banks in the European interbank market.



     LIBOR Loan: each set of LIBOR Revolver Loans having a common length and commencement
of Interest Period and denominated in the same currency.



     LIBOR Revolver Loan: a Revolver Loan that bears interest based on LIBOR.



     License: any license or agreement under which an Obligor is authorized to use
Intellectual Property in connection with any manufacture, marketing, distribution or disposition of
Collateral, any use of Property or any other conduct of its business.



     Licensor: any Person from whom an Obligor obtains the right to use any Intellectual
Property.



     Lien: any Person’s interest in Property securing an obligation owed to, or a claim
by, such Person, whether such interest is based on common law, statute or contract, including
liens, security interests, pledges, hypothecations, statutory trusts, reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Property.



     Lien Waiver: an agreement, in form and substance reasonably satisfactory to Lender,
by which (a) for any material Collateral located on leased premises, the lessor waives or
subordinates any Lien it may have on the Collateral to the Lien of Lender, and agrees to permit
Lender to enter upon the premises and remove the Collateral or to use the premises to store or
dispose of the Collateral; (b) for any Collateral held by a warehouseman, processor, shipper,
customs broker or freight forwarder, such Person waives or subordinates any Lien it may have on the
Collateral to the Lien of Lender, agrees to hold any Documents in its possession relating to the
Collateral as agent for Lender, and agrees to deliver the Collateral to Lender upon request;



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(c) for any Collateral held by a repairman, mechanic or bailee, such Person acknowledges
Lender’s Lien, waives or subordinates any Lien it may have on the Collateral to the Lien of Lender,
and agrees to deliver the Collateral to Lender upon request; and (d) for any Collateral subject to
a Licensor’s Intellectual Property rights, the Licensor grants to Lender the right, vis-à-vis such
Licensor, to enforce Lender’s Liens with respect to the Collateral, including the right to dispose
of it with the benefit of the Intellectual Property, whether or not a default exists under any
applicable License.




     Loan: a Revolver Loan.



     Loan Account: the loan account established by Lender on its books pursuant to
Section 5.7.



     Loan Documents: this Agreement, Other Agreements and Security Documents.



     Loan Year: each calendar year commencing on the Closing Date and on each anniversary
of the Closing Date.



     Mandatory Cost: the percentage rate per annum calculated by Lender as being the
addition to the interest rate required to compensate Lender for the cost of compliance with (a) the
requirements of the Bank of England and/or the FSA (or, in either case, any other authority which
replaces all or any of its functions) or (b) the requirements of the European Central Bank.



     Material Adverse Effect: the effect of any event or circumstance that, taken alone or
in conjunction with other events or circumstances, (a) has or could be reasonably expected to have
a material adverse effect on the business, operations, Properties, prospects or condition
(financial or otherwise) of the Obligors taken as a whole, on the value of any material Collateral,
on the enforceability of any Loan Documents, or on the validity or priority of Lender’s Liens on
any Collateral; (b) impairs the ability of the Obligors taken as a whole, to perform any material
obligations under the Loan Documents, including repayment of any Obligations; or (c) otherwise
impairs the ability of Lender to enforce or collect any Obligations or to realize upon any
Collateral.



     Material Contract: any agreement or arrangement to which the Borrower or a Subsidiary
is party (other than the Loan Documents) (a) for which breach, termination, nonperformance or
failure to renew could reasonably be expected to have a Material Adverse Effect; or (b) that
relates to Subordinated Debt, or Debt in an aggregate amount of $100,000 or more.



     Moody’s: Moody’s Investors Service, Inc., and its successors.



     Net Proceeds: with respect to an Asset Disposition, proceeds (including, when
received, any deferred or escrowed payments) received by the Borrower or a Subsidiary in cash from
such disposition, net of (a) reasonable and customary costs and expenses actually incurred in
connection therewith, including legal fees and sales commissions; (b) amounts applied to repayment
of Debt secured by a Permitted Lien senior to Lender’s Liens on Collateral sold; (c) transfer or
similar taxes; and (d) reserves for indemnities, until such reserves are no longer needed;
provided, that “Net Proceeds” shall not include proceeds of or constituting Excluded Assets.



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     NOLV Percentage: the net orderly liquidation value of Inventory, expressed as a
percentage, expected to be realized at an orderly, negotiated sale held within a reasonable period
of time, net of all liquidation expenses, as determined from the most recent appraisal of
Borrower’s Inventory performed by an appraiser and on terms reasonably satisfactory to Lender.



     Notice of Borrowing: a Notice of Borrowing to be provided by Borrower to request a
Borrowing of Revolver Loans, in form satisfactory to Lender.



     Notice of Conversion/Continuation: a Notice of Conversion/Continuation to be provided
by Borrower to request a conversion or continuation of any Loans as LIBOR Loans, in form
satisfactory to Lender.



     Obligations: all (a) principal of and premium, if any, on the Loans, (b) LC
Obligations and other obligations of Obligors with respect to Letters of Credit, (c) interest,
expenses, fees and other sums payable by Obligors under Loan Documents, (d) obligations of Obligors
under any indemnity for Claims, (e) Extraordinary Expenses, (f) Bank Product Debt, and (g) other
Debts, obligations and liabilities of any kind owing by any Obligor to Lender pursuant to the Loan
Documents, whether now existing or hereafter arising, whether evidenced by a note or other writing,
whether allowed in any Insolvency Proceeding, whether arising from an extension of credit, issuance
of a letter of credit, acceptance, loan, guaranty, indemnification or otherwise, and whether direct
or indirect, absolute or contingent, due or to become due, primary or secondary, or joint or
several; provided, however, that the Obligations shall not include any obligations under the US
Loan Facility. Obligations denominated in Euro or Sterling shall be valued at the Equivalent Amount
thereof.



     Obligor: the Borrower, each Guarantor, or other Person that is liable for payment of
any Obligations or that has granted a Lien in favor of Lender on its assets to secure any
Obligations.



     Organic Documents: with respect to any Person, its charter, certificate or articles
of incorporation, by-laws, articles of organization, memorandum and articles of association,
constitution (within the meaning of section 257 of the Companies Act 2006), limited liability
agreement, operating agreement, members agreement, shareholders agreement, partnership agreement,
certificate of partnership, certificate of formation, voting trust agreement, or similar agreement
or instrument governing the formation or operation of such Person.



     Other Agreement: each LC Document; Lien Waiver; Borrowing Base Certificate,
Compliance Certificate, the Intercompany Subordination Agreement, financial statement or report
delivered hereunder; or other document, instrument or agreement (other than this Agreement or a
Security Document) now or hereafter delivered by an Obligor or other Person to Lender in connection
with any transactions relating hereto.



     Other Taxes: all present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies arising from any payment made under any Loan Document or
from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.



     Overadvance: as defined in Section 2.1.4.



     Parent: Ashworth, Inc., a Delaware corporation.



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     Participating Member State: any member state of the European Communities that adopts
or has adopted the Euro as its lawful currency in accordance with legislation of the European
Community relating to Economic and Monetary Union.



     Payment Item: each check, draft or other item of payment payable to the Borrower,
including those constituting proceeds of any Collateral.



     Pension Plan: the Borrower’s personal pension plan and any employee benefit plan or
arrangement (a) maintained or contributed to by any Obligor or Subsidiary; (b) mandated by a
government for employees of any Obligor or Subsidiary.



     Permitted Acquisition: any transaction for the (a) acquisition of all or
substantially all of the property of any Person, or of any business or division of any Person; or
(b) acquisition (including by merger or consolidation) of all or substantially all of the Equity
Interests of any Person that becomes a Subsidiary after giving effect to such transaction; provided
that each of the following conditions shall be met:




     (i) no Default or Event of Default then exists or would result therefrom;




     (ii) after giving effect to such transaction, Availability is at least $2,000,000;




     (iii) no Borrower or Subsidiary shall, in connection with any such transaction, assume
or remain liable with respect to any Debt of the related seller, except to the extent
permitted under Section 10.2.1;




     (iv) the Person or business to be acquired shall be, or shall be engaged in, a business
of the type that Borrower and the Subsidiaries are permitted to be engaged in under Section
10.2.16 and the property acquired in connection with any such transaction shall be made
subject to the Lien of the Security Documents and shall be free and clear of any Liens,
other than Permitted Liens;




     (v) the Board of Directors of the Person to be acquired shall not have indicated
publicly its opposition to the consummation of such acquisition (which opposition has not
been publicly withdrawn);




     (vi) all transactions in connection therewith shall be consummated in all material
respects in accordance with all Applicable Law;




     (vii) with respect to any transaction, unless Lender shall otherwise agree, Borrower
shall have provided Lender with (A) historical financial statements for the last three
fiscal years (or, if less, the number of years since formation) of the Person or business to
be acquired (audited if available without undue cost or delay) and unaudited financial
statements thereof for the most recent interim period which are available, (B) reasonably
detailed projections for the succeeding five years pertaining to the Person or business to
be acquired and updated projections for Parent and the Subsidiaries after giving effect to
such transaction, (C) a reasonably detailed description of all material information relating
thereto and copies of all material documentation pertaining to such transaction, and (D) all
such other information and data relating to such transaction or the person or business to be
acquired as may be reasonably requested by Lender;



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     (viii) at least 10 Business Days prior to the proposed date of consummation of the
transaction, Borrower shall have delivered to Lender a certificate of a Senior Officer
certifying that (A) such transaction complies with this definition, and (B) such transaction
could not reasonably be expected to result in a Material Adverse Effect;




     (ix) the Acquisition Consideration for such acquisition shall not exceed $2,000,000,
and the aggregate amount of the Acquisition Consideration for all Permitted Acquisitions
since the Closing Date shall not exceed $10,000,000;




     (x) prior to the date of consummation of the transaction, Lender shall have received
and approved all acquisition documents, lien searches, opinions and other documents as
requested by Lender;




     (xi) For proposed Permitted Acquisitions other than those permitted under subsection
(xiii), the Fixed Charge Coverage Ratio immediately prior to and after giving effect to such
Permitted Acquisition shall be no less than 1.10:1.00;




     (xii) No more than two Permitted Acquisitions shall be entered into or consummated
during any Fiscal Year after the first Loan Year;




     (xiii) No more than one Permitted Acquisitions shall be entered into or consummated
during the first Loan Year, and in no event shall such Permitted Acquisition in the First
Loan Year have a cash portion of any Acquisition Consideration for such acquisition exceed
$250,000;




     (xiv) Borrower have provided Lender with forecasted balance sheets, profit and loss
statements, and cash flow statements of the Person or related to the assets to be acquired,
all prepared on a basis consistent with such Person’s or assets’ historical financial
statements, together with appropriate supporting details and a statement of underlying
assumptions for the 3 year period following the date of the proposed acquisition (on a year
by year basis, and for the 1 year period following the date of the proposed acquisition, on
a month by month basis), in form and substance (including as to scope and underlying
assumptions) reasonably satisfactory to Lender;




     (xv) the assets being acquired (other than a de minimis amount of assets in relation to
the assets being acquired) are located within Ireland, United Kingdom, mainland Europe or
Scandinavia or the Person whose Equity Interest is being acquired is organized in a
jurisdiction located within Ireland, United Kingdom, mainland Europe or Scandinavia;




     (xvi) For proposed acquisitions other than those permitted under subsection (xiii),
Borrower has provided Lender with written notice of the proposed acquisition at least 30
Business Days prior to the anticipated closing date of the proposed acquisition and, not
later than 5 Business Days prior to the anticipated closing date of the proposed
acquisition, copies of the acquisition agreement and other material documents relative to
the proposed acquisition, which agreement and documents must be reasonably acceptable to
Lender; and




     (xvii) the subject assets or Equity Interests, as applicable, are being acquired
directly by an Obligor, and (i) in the case of an asset acquisition, such Obligor shall have



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executed and delivered or authorized, as applicable, any and all documentation
reasonably requested by the Lender in order to include the newly acquired assets within the
collateral hypothecated under the Loan Documents, and (ii) in the case of an acquisition of
Equity Interests, such Obligor shall have complied with Section 10.1.9 of the Agreement.



     Notwithstanding the foregoing, the Accounts and Inventory of the Person being acquired or
comprising the assets being acquired shall not be considered for inclusion in the Borrowing Base
until a field audit or appraisal of such Person or such assets has been completed to the
satisfaction of Lender.



     Permitted Asset Disposition: as long as no Default or Event of Default exists and all
Net Proceeds are remitted to Lender (if and to the extent required by Section 5.2), an Asset
Disposition that is (a) sale of Inventory in the ordinary course of business; (b) a disposition of
Inventory or other Property that is obsolete, unmerchantable or otherwise not used or useful in the
ordinary course of business; (c) termination of a lease of real or personal Property that is not
necessary for the ordinary course of business, and which termination could not reasonably be
expected to have a Material Adverse Effect; (d) leases of real or personal property in the ordinary
course of business; (e) mergers and consolidations in compliance with Section 10.2.9; (f) the
unwinding of any Hedging Agreement; (g) any Asset Disposition from any Subsidiary to the Borrower;
(h) Investments in compliance with Section 10.2.5; (i) dispositions of Property identified on
Schedule P-1; (j) Distributions in compliance with Section 10.2.4; (k) the creation of any
Permitted Lien; (l) dispositions of Accounts in connection with the compromise, settlement or
collection thereof in the ordinary course of business or in bankruptcy or similar proceedings and
exclusive of factoring or similar arrangements; (m) licenses of Intellectual Property granted by
Borrower or any Subsidiary in the ordinary course of business; (n) Investments in compliance with
Section 10.2.5; (n) other dispositions that, in the aggregate during any 12 month period, have a
fair market or book value (whichever is more) of $250,000 or less; (o) [intentionally omitted]; or
(p) approved in writing by Lender.



     Permitted Capital Leases: (i) Capital Leases of Borrower and Subsidiaries set forth
on Schedule P-2, and (ii) other Capital Leases of Borrower and Subsidiaries so long as the
aggregate amount of such other Capital Leases does not exceed $250,000 at any time outstanding.



     Permitted Contingent Obligations: Contingent Obligations (a) arising from
endorsements of Payment Items for collection or deposit in the ordinary course of business;
(b) arising from Hedging Agreements permitted hereunder; (c) existing on the Closing Date, and any
extension or renewal thereof that does not increase the amount of such Contingent Obligation when
extended or renewed; (d) incurred in the ordinary course of business with respect to surety, appeal
or performance bonds, or other similar obligations; (e) arising from customary indemnification
obligations in favor of purchasers in connection with dispositions of Equipment permitted
hereunder; (f) arising under the Loan Documents; (g) in respect of a guaranty of Debt or other
obligations permitted hereunder; (h) product warranties in the ordinary course of business; or
(i) in addition to the foregoing, in an aggregate amount of $100,000 or less at any time.



     Permitted Distributions: (a) Borrower and Subsidiaries may make Distributions to an
officer or employee for salary, travel expenses, commissions and similar items in the ordinary
course of business; (b) Borrower and Subsidiaries may purchase, redeem or otherwise acquire




-20-











 




shares of its common stock or other common equity interests or warrants or options to acquire
any such shares with the proceeds received from the substantially concurrent issue of new shares of
its common stock or other common equity interests; and (c) Borrower and Subsidiaries may declare
and make other Distributions so long as no Default or Event of Default exists before and
immediately after declaring and making such Distribution, and after giving effect thereto
Availability is at least $2,000,000.




     Permitted Investments: (a) Investments existing on the Closing Date and set forth on
Schedule P-3; (b) Cash Equivalents that, in the case of an Obligor, are subject to Lender’s Lien
and control, pursuant to documentation in form and substance reasonably satisfactory to Lender; (c)
loans and advances permitted under Section 10.2.7; (d) Investments by the Borrower in any other
Obligor and Investments by any Obligor in the Borrower; (e) Investments received in connection with
the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers; (f) endorsement of negotiable instruments held for collection in the
ordinary course of business; (g) lease, utility and other similar deposits in the ordinary course
of business; (h) Investments in Hedging Agreements, (i) Investments made by the Borrower or any
Subsidiary as a result of consideration received in connection with a Permitted Asset Disposition
made in compliance with Section 10.2.6, (j) Permitted Contingent Obligations; (k) Permitted
Acquisitions (and any deposits required in connection therewith); (l) at any time after the First
Loan Year, additional Investments which do not exceed $10,000,000.00 in the aggregate at any time
provided that at the time of such Investment under this clause (l) no Event of Default exists or
would exist after giving effect to such Investment, after giving effect thereto Availability is at
least $2,000,000; (m) deposit accounts that, in the case of an Obligor, are, except as otherwise
permitted hereunder, subject to Lender’s Lien and control, pursuant to documentation in form and
substance reasonably satisfactory to Lender; and (n) the UK Lease Deposit. The amount of any
Investment outstanding at any time pursuant to clause (l) hereunder (x) shall not include any
appreciation in the value of any such Investment occurring after the acquisition or making of such
Investment and (y) shall be deemed to be reduced upon the disposition or repayment of or return on
any such Investment, by an amount equal to the return of capital or principal with respect to such
Investment to the applicable Person, less the reasonable cost of the disposition of such Investment
and net of taxes.



     Permitted Lien: as defined in Section 10.2.2.



     Permitted Purchase Money Debt: Purchase Money Debt of Borrower and Subsidiaries that
is unsecured or secured only by a Purchase Money Lien, as long as the aggregate amount does not
exceed $500,000 at any time and its incurrence does not violate Section 10.2.3.



     Person: any individual, corporation, limited liability company, partnership, joint
venture, joint stock company, land trust, business trust, unincorporated organization, Governmental
Authority or other entity.



     Properly Contested: with respect to any obligation of an Obligor, (a) the obligation
is subject to a bona fide dispute regarding amount or the Obligor’s liability to pay; (b) the
obligation is being properly contested in good faith by appropriate proceedings promptly instituted
and diligently pursued; (c) appropriate reserves have been established in accordance with GAAP;
(d) non-payment could not have a Material Adverse Effect, nor result in forfeiture or sale of any
assets of the Obligor; (e) no Lien is imposed on assets of the Obligor, unless bonded and stayed to
the reasonable satisfaction of Lender; and (f) if the obligation results from



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entry of a judgment or other order, such judgment or order is stayed pending appeal or other
judicial review.




     Property: any interest in any kind of property or asset, whether real, personal or
mixed, or tangible or intangible.



     Purchase Money Debt: (a) Debt (other than the Obligations) for payment of any of the
purchase price of fixed assets; (b) Debt (other than the Obligations) incurred within 180 days
before or after acquisition of any fixed assets, for the purpose of financing any of the purchase
price thereof; and (c) any renewals, extensions or refinancings (but not increases) thereof.



     Purchase Money Lien: a Lien that secures Purchase Money Debt, encumbering only the
fixed assets acquired with such Debt and accessions to, and products and proceeds (including
insurance condemnation proceeds) of, such acquired assets.



     Real Estate: all right, title and interest (whether as owner, lessor or lessee) in
any real Property or any buildings, structures, parking areas or other improvements thereon.



     Refinancing Conditions: the following conditions for Refinancing Debt: (a) it is in
an aggregate principal amount that does not exceed the principal amount of the Debt being extended,
renewed or refinanced (except by an amount equal to a reasonable premium or other reasonable amount
paid, and fees and expenses reasonably incurred, in connection with such refinancing, extension or
renewal and by an amount equal to any existing commitments unutilized thereunder); (b) it has a
final maturity no sooner than the Debt being extended, renewed or refinanced; (c) if applicable, it
is subordinated to the Obligations at least to the same extent as the Debt being extended, renewed
or refinanced; (d) the representations, covenants and defaults applicable to it are, taken as a
whole, no less favorable to Borrower than those applicable to the Debt being extended, renewed or
refinanced as determined in good faith by Parent’s board of directors; (e) no additional Property
or, if applicable, class of Property is subjected to a Lien to secure it; (f) no additional Person
or, if applicable, category of Person is obligated on such Debt (except for Permitted Contingent
Obligations arising from the guaranty of such Debt); and (g) upon giving effect to it, no Default
or Event of Default exists.



     Refinancing Debt: Borrowed Money that is the result of an extension, renewal or
refinancing of Debt permitted under Section 10.2.1(b), (d) or (f) .



     Reimbursement Date: as defined in Section 2.3.2.



     Relevant Interbank Market: in relation to Euro, the European interbank market and, in
relation to any other currency, the London interbank market.



     Rent and Charges Reserve: the aggregate of (a) all past due rent and other amounts
owing by an Obligor to any landlord, warehouseman, processor, repairman, mechanic, shipper, freight
forwarder, broker or other Person who possesses any Collateral or could assert a Lien on any
Collateral; and (b) a reserve at least equal to three months rent and other charges that could be
payable to any such Person, unless it has executed a Lien Waiver; provided,
however, that for the first 60 days after the Closing Date, the amount of any Rent and
Charges Reserve for any leased location with respect to which the Borrower is still diligently
pursuing a Lien Waiver shall be $0.



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     Restricted Investment: any Investment by the Borrower or a Subsidiary that is not a
Permitted Investment.



     Revolver Commitment: Lender’s obligation to make Revolver Loans and to issue Letters
of Credit in an amount up to $10,000,000.



     Revolver Loan: a loan made pursuant to Section 2.1.



     Revolver Termination Date: January 11, 2012.



     Royalties: all royalties, fees, expense reimbursement and other amounts payable by
the Borrower under a License.



     Sale Contract: a contract or agreement, including a purchase order, between the
Borrower and an Account Debtor for the sale of goods to that Account Debtor.



     S&P: Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies,
Inc., and its successors.



     Seasonal Advance Rate Period: the period (but no more than one period) during any
Fiscal Year (a) commencing upon notice from Borrower to Lender, which notice may only be given on
(x) or after January 1 and before May 15 of such Fiscal Year and (y) so long as no Default or Event
of Default then exists, and (b) continuing until the earliest of (x) 4 months from the giving of
such notice, (y) a Default or Event of Default shall occur, or (z) June 1 of such Fiscal Year.



     Secured Parties: Lender and providers of Bank Products.



     Security Documents: the Guarantees, Debenture, Deposit Account Control Agreements,
and all other documents, instruments and agreements now or hereafter securing (or given with the
intent to secure) any Obligations.



     Senior Officer: the chairman, chief executive officer, finance director, chief
financial officer, treasurer or assistant treasurer, or other executive director (or person of
equivalent seniority) of the Borrower or, if the context requires, an Obligor.



     Slow Moving Inventory Advance Rate: 65% during the first Loan Year; 43% during the
second Loan Year; 22% during the third Loan Year; and 0% thereafter.



     Solvent: as to any Person, such Person (a) owns Property whose fair salable value is
greater than the amount required to pay all of its debts (including contingent, subordinated,
unmatured and unliquidated liabilities); (b) owns Property whose present fair salable value (as
defined below) is greater than the probable total liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) of such Person as they become absolute and matured; (c) is
able to pay all of its debts as they mature; (d) has capital that is not unreasonably small for its
business and is sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage; (e) is not “deemed unable to pay its debts” within the
meaning of Section 123 of the Insolvency Act 1986; and (f) has not incurred (by way of assumption
or otherwise) any obligations or liabilities (contingent or otherwise) under any Loan Documents, or
made any conveyance in connection therewith, with actual intent to hinder, delay



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or defraud either present or future creditors of such Person or any of its Affiliates.
“Fair salable value” means the amount that could be obtained for assets within a reasonable
time, either through collection or through sale under ordinary selling conditions by a capable and
diligent seller to an interested buyer who is willing (but under no compulsion) to purchase.




     Sterling or £: the lawful currency for the time being of the United Kingdom.



     Subordinated Debt: Debt incurred by the Borrower that is expressly subordinate and
junior in right of payment to Full Payment of all Obligations, and is on terms (including maturity,
interest, fees, repayment, covenants and subordination) satisfactory to Lender.



     Subsidiary: any entity more than 50% of whose voting securities or Equity Interests
is owned by the Borrower (including indirect ownership by the Borrower through other entities in
which the Borrower directly or indirectly owns more than 50% of the voting securities or Equity
Interests).



     TARGET: Trans-European Automated Real-time Gross Settlement Express Transfer payment
system.



     TARGET Day: any day on which TARGET is open for the settlement of payments in Euro.



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



     Type: any type of a Loan (i.e., Base Rate Revolver Loan or LIBOR Loan) that has the
same interest option and, in the case of LIBOR Loans, the same Interest Period.



     UK Lease Deposit: deposit of £100,000 paid by Borrower to Juniper Developments
Limited (the “Landlord”) under the terms of a rent deposit deed dated 5 September 2003 between (1)
Landlord and (2) Borrower (as Tenant), relating to the premises at Unit 2, Juniper (Phase 2),
Fenton Way, Basildon, Essex, United Kingdom (the “Property”), and in respect of an Agreement for
Lease of the Property between the same parties dated 4 June 2003.



     US Loan Document: the US Loan Agreement and any document, agreement, or instrument
evidencing the loans under the US Loan Facility, or any guarantee or security therefor.



     US Loan Facility: the loan facility now or in the future provided by Lender to the
Parent and certain of its Subsidiaries pursuant to the US Loan Agreement.



     Upstream Payment: a Distribution by Borrower to Parent.



     Value: (a) for Inventory, its value determined on the basis of the lower of cost or
market, calculated on a first-in, first-out basis, and excluding any portion of cost attributable
to intercompany profit among Borrower and its Affiliates; and (b) for an Account, its face amount,
net of any returns, rebates, discounts (calculated on the shortest terms), credits, allowances or
Taxes (including sales, excise or other taxes) that have been or could be claimed by the Account
Debtor or any other Person.



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     1.2 ACCOUNTING TERMS. Under the Loan Documents (except as otherwise specified
herein), all accounting terms shall be interpreted, all accounting determinations shall be made,
and all financial statements shall be prepared, in accordance with GAAP applied on a basis
consistent with the most recent audited financial statements of Borrower delivered to Lender
before the Closing Date and using the same inventory valuation method as used in such financial
statements, except for any change required or permitted by GAAP if Borrower’s appointed external
auditors concur in such change, and the change is disclosed to Lender.



     1.3 [INTENTIONALLY OMITTED].



     1.4 CERTAIN MATTERS OF CONSTRUCTION. The terms “herein,” “hereof,” “hereunder” and
other words of similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. In the
computation of periods of time from a specified date to a later specified date, “from” means “from
and including,” and “to” and “until” each mean “to but excluding.” The terms “including” and
“include” shall mean “including, without limitation” and, for purposes of each Loan Document, the
parties agree that the rule of ejusdem generis shall not be applicable to limit any provision.
Section titles appear as a matter of convenience only and shall not affect the interpretation of
any Loan Document. All references to (a) laws or statutes include all related rules, regulations,
interpretations, amendments and successor provisions; (b) any document, instrument or agreement
include any amendments, waivers and other modifications, extensions or renewals (to the extent
permitted by the Loan Documents); (c) any section mean, unless the context otherwise requires, a
section of this Agreement; (d) any exhibits or schedules mean, unless the context otherwise
requires, exhibits and schedules attached hereto, which are hereby incorporated by reference;
(e) any Person include successors and assigns; (f) (unless otherwise specified) time of day means
time of day in London, England; or (g) discretion of Lender mean its reasonable discretion. All
calculations of Value, fundings of Loans, issuances of Letters of Credit and payments of
Obligations shall be in Dollars and, unless the context otherwise requires, all determinations
(including calculations of Borrowing Base and financial covenants) made from time to time under
the Loan Documents shall be made in light of the circumstances existing at such time. Borrowing
Base calculations shall be consistent with historical methods of valuation and calculation, and
otherwise reasonably satisfactory to Lender (and not necessarily calculated in accordance with
GAAP). No provision of any Loan Documents shall be construed against any party by reason of such
party having, or being deemed to have, drafted the provision. Whenever the phrase “to the best of
Borrower’s knowledge” or words of similar import are used in any Loan Documents, it means actual
knowledge of a Senior Officer, or knowledge that a Senior Officer would have obtained if he or she
had engaged in good faith and diligent performance of his or her duties, including reasonably
specific inquiries of employees or agents and a good faith attempt to ascertain the matter to
which such phrase relates.



     1.5 US LOAN AGREEMENT DEFINITIONS Unless otherwise defined herein words and
expressions defined in the US Loan Agreement shall, unless the context otherwise requires, have
the same meaning when used herein.



     1.6 THIRD PARTY RIGHTS: Unless expressly provided to the contrary in a Loan Document,
a person who is not a party to this Agreement has no right under the Contracts (Rights of Third
Parties) Act 1999 to enforce or to enjoy the benefit of any term of this



-25-









 




Agreement. Notwithstanding any term of any Loan Document, the consent of any person who is
not a party to this Agreement is not required to rescind or vary this Agreement at any time.




SECTION 2 CREDIT FACILITIES




     2.1 Revolver Commitment.



          2.1.1 REVOLVER LOANS. Lender agrees, on the terms set forth herein, to make Revolver
Loans to Borrower in an aggregate amount up to the Revolver Commitment, from time to time through
the Commitment Termination Date. The Revolver Loans may be repaid and reborrowed as provided
herein. In no event shall Lender have any obligation to honor a request for a Revolver Loan if the
unpaid balance of Revolver Loans outstanding (with all Revolver Loans denominated in Euro or
Sterling valued at the Equivalent Amount thereof), at such time (including the requested Loan)
would exceed the Borrowing Base.




          2.1.2 USE OF PROCEEDS. The proceeds of Revolver Loans shall be used by Borrower
solely (a) to satisfy existing Debt; (b) to pay fees and transaction expenses associated with the
closing of this credit facility; (c) to pay Obligations in accordance with this Agreement; and
(d) for working capital and other lawful corporate purposes of Borrower, including Permitted
Acquisitions.




          2.1.3 VOLUNTARY TERMINATION OF REVOLVER COMMITMENT.




          (a) The Revolver Commitment shall terminate on the Revolver Termination Date, unless sooner
terminated in accordance with this Agreement. Upon at least 15 days prior written notice to
Lender, Borrower may, at its option, terminate the Revolver Commitment and this credit facility.
Any notice of termination given by Borrower shall be irrevocable; provided that a notice of
termination delivered by Borrower may state that such notice is conditioned upon the effectiveness
of other credit facilities, in which case such notice may be revoked by Borrower (by notice to
Lender on or prior to the specified effective date) if such condition is not satisfied. On the
termination date, Borrower shall make Full Payment of all Obligations.




          2.1.4 OVERADVANCES. If the aggregate Revolver Loans (with all Revolver Loans
denominated in Euro or Sterling valued at the Equivalent Amount thereof) exceed the Borrowing Base
(“Overadvance”) or the Revolver Commitment at any time, the excess amount shall be payable
by Borrower on demand by Lender, but all such Revolver Loans shall nevertheless constitute
Obligations secured by the Collateral and entitled to all benefits of the Loan Documents. Any
funding or sufferance of an Overadvance shall not constitute a waiver of the Event of Default
caused thereby. Notwithstanding the above, if an Overadvance comes into existence solely as a
result of fluctuations in currency exchange rates and such Overadvance is not greater than 3% of
the Revolver Commitment, the Overadvance shall be payable by Borrower within 10 days after demand
by Lender.




     2.2 [Intentionally Deleted]



     2.3 Letter of Credit Facility.



          2.3.1 ISSUANCE OF LETTERS OF CREDIT. Lender agrees to issue or extend Letters of
Credit from time to time until 20 Business Days prior to the Revolver




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Termination Date (or until the Commitment Termination Date, if earlier), on the terms set
forth herein, including the following:




          (a) The Borrower acknowledges that Lender’s willingness to issue any Letter of Credit is
conditioned upon its receipt of a LC Application with respect to the requested Letter of Credit, as
well as such other instruments and agreements as Lender may customarily require for issuance of a
letter of credit of similar type and amount. Lender shall have no obligation to issue any Letter
of Credit unless (i) it receives a LC Request and LC Application at least three Business Days prior
to the requested date of issuance; and (ii) each LC Condition is satisfied.




          (b) Letters of Credit may be requested by the Borrower only (i) to support obligations of the
Borrower incurred in the ordinary course of business; or (ii) for other purposes as Lender may
approve from time to time in writing. The renewal or extension of any Letter of Credit shall be
treated as the issuance of a new Letter of Credit, except that delivery of a new LC Application
shall be required at the reasonable discretion of Lender.




          (c) Borrower assume all risks of the acts, omissions or misuses of any Letter of Credit by the
beneficiary. In connection with issuance of any Letter of Credit, Lender shall not be responsible
for the existence, character, quality, quantity, condition, packing, value or delivery of any goods
purported to be represented by any Documents; any differences or variation in the character,
quality, quantity, condition, packing, value or delivery of any goods from that expressed in any
Documents; the form, validity, sufficiency, accuracy, genuineness or legal effect of any Documents
or of any endorsements thereon; the time, place, manner or order in which shipment of goods is
made; partial or incomplete shipment of, or failure to ship, any goods referred to in a Letter of
Credit or Documents; any deviation from instructions, delay, default or fraud by any shipper or
other Person in connection with any goods, shipment or delivery; any breach of contract between a
shipper or vendor and the Borrower; errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex, telecopy, e-mail, telephone or
otherwise; errors in interpretation of technical terms; the misapplication by a beneficiary of any
Letter of Credit or the proceeds thereof; or any consequences arising from causes beyond the
control of Lender, including any act or omission of a Governmental Authority. Lender shall be
fully subrogated to the rights and remedies of each beneficiary whose claims against Borrower are
discharged with proceeds of any Letter of Credit.




          (d) In connection with its administration of and enforcement of rights or remedies under any
Letters of Credit or LC Documents, Lender shall be entitled to act, and shall be fully protected in
acting, upon any certification, documentation or communication in whatever form believed by Lender,
in good faith, to be genuine and correct and to have been signed, sent or made by a proper Person.
Lender may consult with and employ legal counsel, accountants and other experts to advise it
concerning its obligations, rights and remedies, and shall be entitled to act upon, and shall be
fully protected in any action taken in good faith reliance upon, any advice given by such experts.
Lender may employ agents and attorneys-in-fact in connection with any matter relating to Letters of
Credit or LC Documents, and shall not be liable for the negligence or misconduct of agents and
attorneys-in-fact selected with reasonable care.




          (e) If the Borrower so requests in any applicable LC Application, the Lender may, in its sole
and absolute discretion, agree to issue a Letter of Credit that has automatic extension provisions
(each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension
Letter of Credit must permit the Lender to prevent any such extension at least once in




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each twelve-month period (commencing with the date of issuance of such Letter of Credit) by
giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice
Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is
issued. Unless otherwise directed by the Lender, the Borrower shall be required to make request to
the Lender for any such extension within 5 Business Days prior to the termination date of such
Letter of Credit; provided, however, that the Lender shall not permit any such
extension if (A) the Lender has determined that it would not be permitted, or would have no
obligation, at such time to issue such Letter of Credit in its revised form (as extended) under the
terms hereof, or (B) one or more of the applicable conditions specified in Section 6 is not then
satisfied.




          (f) Notwithstanding the provisions of this Section 2 (including without limitation Sections
2.3.1 and 2.3.2), Lender shall not be exonerated from any liability to the Borrower resulting from
its gross negligence or willful misconduct.




          2.3.2 REIMBURSEMENT. If Lender honors any request for payment under a Letter of
Credit, Borrower shall pay to Lender, without duplication, on the same day (“REIMBURSEMENT
DATE”), the amount paid under such Letter of Credit, together with interest at the interest
rate for Base Rate Revolver Loans from the Reimbursement Date until payment by Borrower. The
obligation of Borrower to reimburse Lender for any payment made under a Letter of Credit shall be
absolute, unconditional, and irrevocable, and shall be paid without regard to any lack of validity
or enforceability of any Letter of Credit or the existence of any claim, setoff, defense or other
right that Borrower may have at any time against the beneficiary. Whether or not Borrower submits
a Notice of Borrowing, Borrower shall be deemed to have requested a Borrowing of Base Rate Revolver
Loans in an amount necessary to pay all amounts due on any Reimbursement Date.




          2.3.3 CASH COLLATERAL.




               (i) If any LC Obligations, whether or not then due or payable, shall for any reason be
outstanding at any time (a) that an Event of Default exists and is continuing, (b) that
Availability is less than zero, or (c) after the Commitment Termination Date, then Borrower shall,
at Lender’s request, Cash Collateralize the stated amount of all outstanding Letters of Credit and
pay to Lender the amount of all other LC Obligations. If Borrower fails to provide Cash Collateral
as required herein, Lender may advance, as Revolver Loans, the amount of the Cash Collateral
required.



               (ii) If Borrower requests that any Letter of Credit be renewed pursuant to Section 2.2.2(e)
which causes the expiration date of such Letter of Credit to be after the Commitment Termination
Date, before such renewal becomes effective, Borrower shall Cash Collateralize the stated amount of
such Letter of Credit.



SECTION 3 INTEREST, FEES AND CHARGES




     3.1 Interest.



          3.1.1 RATES AND PAYMENT OF INTEREST.




          (a) The Obligations shall bear interest (i) if a Base Rate Revolver Loan, at the Base Rate in
effect from time to time, plus the Applicable Margin; (ii) if a LIBOR Loan, at LIBOR for the
applicable Interest Period, plus the Applicable Margin and Mandatory Cost; and




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(iii) if any other Obligation (other than the LC Obligations and Bank Product Debt)
(including, to the extent permitted by law, interest not paid when due), at the Base Rate in effect
from time to time, plus the Applicable Margin for Base Rate Revolver Loans. Interest shall accrue
from the date the Loan is advanced or the Obligation is incurred or payable, until paid by
Borrower. If a Loan is repaid on the same day made, one day’s interest shall accrue.




          (b) During an Insolvency Proceeding with respect to the Borrower, or during any other Event of
Default if Lender in its discretion so elects, Obligations (other than the LC Obligations and Bank
Product Debt) shall bear interest at the Default Rate (whether before or after any judgment). The
Borrower acknowledges that the cost and expense to Lender due to an Event of Default are difficult
to ascertain and that the Default Rate is a fair and reasonable estimate to compensate Lender for
this.




          (c) Interest accrued on the Loans shall be due and payable in arrears, (i) on the first day of
each month; (ii) on any date of prepayment, with respect to the principal amount of Loans being
prepaid; and (iii) on the Commitment Termination Date. Interest accrued on any other Obligations
shall be due and payable as provided in the Loan Documents and, if no payment date is specified,
shall be due and payable on demand. Notwithstanding the foregoing, interest accrued at the Default
Rate shall be due and payable on demand.




          3.1.2 APPLICATION OF LIBOR TO OUTSTANDING LOANS.




          (a) Borrower may on any Business Day, subject to delivery of a Notice of
Conversion/Continuation, elect to convert any portion of the Base Rate Revolver Loans to, or to
continue any LIBOR Loan at the end of its Interest Period as, a LIBOR Loan. During any Default or
Event of Default, Lender may declare that no Loan may be made, converted or continued as a LIBOR
Loan.




          (b) Whenever Borrower desire to convert or continue Loans as LIBOR Loans, Borrower shall give
Lender a Notice of Conversion/Continuation, no later than 11:00 a.m. at least three Business Days
before the requested conversion or continuation date. Each Notice of Conversion/Continuation shall
be irrevocable, and shall specify the amount of Loans to be converted or continued, the conversion
or continuation date (which shall be a Business Day), and the duration of the Interest Period
(which shall be deemed to be one month if not specified). If, upon the expiration of any Interest
Period in respect of any LIBOR Loans, Borrower shall have failed to deliver a Notice of
Conversion/Continuation, they shall be deemed to have elected to convert such Loans into Base Rate
Revolver Loans.




          3.1.3 INTEREST PERIODS. In connection with the making, conversion or continuation of
any LIBOR Loans, Borrower shall select an interest period (“INTEREST PERIOD”) to apply,
which interest period shall be one, two, three or six months; PROVIDED, HOWEVER,
that: the Interest Period shall commence on the date the Loan is made or continued as, or converted
into, a LIBOR Loan, and shall expire on the numerically corresponding day in the calendar month at
its end; if any Interest Period commences on a day for which there is no corresponding day in the
calendar month at its end or if such corresponding day falls after the last Business Day of such
month, then the Interest Period shall expire on the last Business Day of such month; and if any
Interest Period would expire on a day that is not a Business Day, the period shall expire on the
next Business Day; and no Interest Period shall extend beyond the Revolver Termination Date.




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          3.1.4 INTEREST RATE NOT ASCERTAINABLE. If Lender shall determine that on any date for
determining LIBOR, due to any circumstance affecting the London interbank market, adequate and fair
means do not exist for ascertaining such rate on the basis provided herein, then Lender shall
immediately notify Borrower of such determination. Until Lender notifies Borrower that such
circumstance no longer exists, the obligation of Lender to make LIBOR Loans shall be suspended, and
no further Loans may be converted into or continued as LIBOR Loans.




     3.2 Fees.



          3.2.1 [INTENTIONALLY OMITTED].




          3.2.2 LC FACILITY FEES. Borrower shall pay to Lender (a) a fee equal to the
Applicable Margin in effect for LIBOR Revolver Loans times the average actual daily stated amount
of Letters of Credit, which fee shall be payable monthly in arrears, on the first day of each
month; (b) a fronting fee equal to 0.125% per annum on the stated amount of each Letter of Credit,
which fee shall be payable monthly in arrears, on the first day of each month; and (c) all
customary charges associated with the issuance, amending, negotiating, payment, processing,
transfer and administration of Letters of Credit, which charges shall be paid as and when incurred.
During an Event of Default, the fee payable under clause (a) shall be increased by 2% per annum.




     3.3 COMPUTATION OF INTEREST, FEES, YIELD PROTECTION. All interest, as well as fees
and other charges calculated on a per annum basis, shall be computed for the actual days elapsed,
based on a year of 360 days, or, in any case where the practice in the Relevant Interbank Market
differs, in accordance with that market practice. Each determination by Lender of any interest,
fees or interest rate hereunder shall be final, conclusive and binding for all purposes, absent
manifest error. All fees shall be fully earned when due and shall not be subject to rebate,
refund or proration. All fees payable under Section 3.2 are compensation for services and are
not, and shall not be deemed to be, interest or any other charge for the use, forbearance or
detention of money. A certificate as to amounts payable by Borrower under Section 3.4, 3.6, 3.7,
3.9 or 5.8, setting forth the calculation thereof in reasonable detail, submitted to Borrower by
Lender shall be final, conclusive and binding for all purposes, absent manifest error, and
Borrower shall pay such amounts to the appropriate party within 10 Business Days following receipt
of the certificate.



     3.4 REIMBURSEMENT OBLIGATIONS. Borrower shall reimburse Lender for all Extraordinary
Expenses. Borrower shall also reimburse Lender for all legal, accounting, appraisal, consulting,
and other fees, costs and expenses incurred by it in connection with (a) negotiation and
preparation of any Loan Documents, including any amendment or other modification thereof;
(b) administration of and actions relating to any Collateral, Loan Documents and transactions
contemplated thereby, including any actions taken to perfect or maintain priority of Lender’s
Liens on any Collateral, to maintain any insurance required hereunder or to verify Collateral; and
(c) subject to the limits of Section 10.1.1(b), each inspection, audit or appraisal with respect
to any Obligor or Collateral, whether prepared by Lender’s personnel or a third party. If, for
any reason (including inaccurate reporting on financial statements or a Compliance Certificate),
it is determined that a higher Applicable Margin should have applied to a period than was actually
applied, then the proper margin shall be applied retroactively and Borrower shall immediately pay
to Lender an amount equal to the



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difference between the amount of interest and fees that would have accrued using the proper
margin and the amount actually paid. If it is determined within 30 days after an adjustment in
the Applicable Margin that the Applicable Margin should have been adjusted to a lower Applicable
Margin, then the proper margin shall be applied retroactively and Lender shall pay to Borrower an
amount equal to the difference between the amount of interest that would have accrued using the
proper margin, such adjustment payment shall only be made by Lender if the reason for the
application of the incorrect Applicable Margin is a result of calculation mistakes made by
Borrower on a Compliance Certificate (and not mistakes or inaccurate reporting on financial
statements), and Borrower notifies Lender of such mistake within 30 days after such incorrect
adjustment to the Applicable Margin. All amounts payable by Borrower under this Section shall be
due on demand.




     3.5 ILLEGALITY. If it has become unlawful, or any Governmental Authority has
asserted that it is unlawful, for Lender to make, maintain or fund Loans, then, on notice thereof
by Lender to Borrower, any obligation of Lender to make or continue Loans shall be suspended until
Lender notifies Borrower that the circumstances giving rise to such determination no longer exist.
Upon delivery of such notice, Borrower shall prepay all Loans immediately, save in the case of
LIBOR Loans which may be prepaid on the last day of the Interest Period therefor, if Lender may
lawfully continue to maintain such LIBOR Loans to such day. Upon any such prepayment Borrower
shall also pay accrued interest on the amount so prepaid.



     3.6 INABILITY TO DETERMINE RATES. If Lender notifies Borrower for any reason in
connection with a request for a Borrowing of, conversion to or continuation of, a LIBOR Loan that
(a) deposits of Dollars, Sterling or Euro are not being offered to banks in the London interbank
market for the applicable amount and Interest Period of such Loan, (b) adequate and reasonable
means do not exist for determining LIBOR for the requested Interest Period, or (c) LIBOR for the
requested Interest Period does not adequately and fairly reflect the cost to Lender of funding
such Loan, then the obligation of Lender to make or maintain LIBOR Loans shall be suspended until
it revokes the notice. Upon receipt of the notice, Borrower may revoke any pending request for a
Borrowing of, conversion to or continuation of a LIBOR Loan or, failing that, will be deemed to
have submitted a request for a Base Rate Revolver Loan.



     3.7 INCREASED COSTS; CAPITAL ADEQUACY.



          3.7.1 CHANGE IN LAW. If any Change in Law shall: impose modify or deem applicable any
reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets
of, deposits with or for the account of, or credit extended or participated in by, Lender; subject
Lender to any Tax with respect to any Loan, Loan Document or Letter of Credit, or change the basis
of taxation of payments to Lender in respect thereof (except for Indemnified Taxes or Other Taxes
covered by Section 5.8 and the imposition of, or any change in the rate of, any Excluded Tax
payable by Lender); or impose on Lender or the London interbank market any other condition, cost or
expense affecting any Loan, Loan Document or Letter of Credit; and the result thereof shall be to
increase the cost to Lender of making or maintaining any LIBOR Loan (or of maintaining its
obligation to make any such Loan), or to increase the cost to Lender of issuing or maintaining any
Letter of Credit (or of maintaining its obligation to issue any Letter of Credit), or to reduce the
amount of any sum received or receivable by Lender hereunder (whether of principal, interest or any
other amount) then, upon request by Lender pursuant to a certificate as set forth in Section 3.3,
Borrower will




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pay to Lender such additional amount or amounts as will compensate Lender for such additional
costs incurred or reduction suffered.




          3.7.2 CAPITAL ADEQUACY. If Lender reasonably determines that any Change in Law
affecting Lender or its holding company regarding capital requirements has or would have the effect
of reducing the rate of return on Lender’s or such holding company’s capital as a consequence of
this Agreement, Revolver Commitments, Loans or Letters of Credit to a level below that which Lender
or such holding company could have achieved but for such Change in Law (taking into consideration
Lender’s and such holding company’s policies with respect to capital adequacy), then from time to
time upon request pursuant to a certificate as set forth in Section 3.3 Borrower will pay to Lender
such additional amount or amounts as will compensate it or its holding company for any such
reduction suffered.




          3.7.3 COMPENSATION. Failure or delay on the part of Lender to demand compensation
pursuant to this Section shall not constitute a waiver of its right to demand such compensation,
but Borrower shall not be required to compensate Lender for any increased costs incurred or
reductions suffered more than nine months prior to the date that Lender notifies Borrower of the
Change in Law giving rise to such increased costs or reductions and of Lender’s intention to claim
compensation therefor (except that, if the Change in Law giving rise to such increased costs or
reductions is retroactive, then the nine-month period referred to above shall be extended to
include the period of retroactive effect thereof).




     3.8 MITIGATION. If Lender gives a notice under Section 3.5 or requests compensation
under Section 3.7, or if Borrower is required to pay additional amounts under Section 5.8, then
Lender shall use reasonable efforts to designate a different lending office or to assign its
rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the
reasonable judgment of Lender, such designation or assignment (a) would eliminate the need for
such notice or reduce amounts payable in the future, as applicable; and (b) would not subject
Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to Lender.
Borrower agrees to pay all reasonable costs and expenses incurred by Lender in connection with any
such designation or assignment.



     3.9 FUNDING LOSSES. If for any reason (a) any Borrowing of, or conversion to or
continuation of, a LIBOR Loan does not occur on the date specified therefor in a Notice of
Borrowing or Notice of Conversion/Continuation (whether or not withdrawn), (b) any repayment or
conversion of a LIBOR Loan occurs on a day other than the end of its Interest Period, or
(c) Borrower fails to repay a LIBOR Loan when required hereunder, then Borrower shall pay to
Lender all losses and expenses that it sustains as a consequence thereof, including loss of
anticipated profits and any loss or expense arising from liquidation or redeployment of funds or
from fees payable to terminate deposits of matching funds. Lender shall not be required to
purchase deposits of Dollars, Sterling or Euro in the London interbank market or any other
offshore currency market to fund any LIBOR Loan, but the provisions hereof shall be deemed to
apply as if Lender had purchased such deposits to fund its LIBOR Loans.



SECTION 4 LOAN ADMINISTRATION




     4.1 Manner of Borrowing and Funding Revolver Loans.



          4.1.1 NOTICE OF BORROWING.




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          (a) Whenever Borrower desires funding of a Borrowing of Revolver Loans, Borrower shall give
Lender a Notice of Borrowing. Such notice must be received by Lender no later than 11:00 a.m.
(i) on the Business Day of the requested funding date, in the case of Base Rate Revolver Loans, and
(ii) at least three Business Days prior to the requested funding date, in the case of LIBOR Loans.
Notices received after 11:00 a.m. shall be deemed received on the next Business Day. Each Notice
of Borrowing shall be irrevocable and shall specify (A) the amount of the Borrowing, (B) the
requested funding date (which must be a Business Day), (C) whether the Borrowing is to be made as
Base Rate Revolver Loans or LIBOR Loans, (D) the currency requested (which shall be Dollars, Euro
or Sterling) and (E) in the case of LIBOR Loans, the duration of the applicable Interest Period
(which shall be deemed to be one month if not specified).




          (b) Unless payment is otherwise timely made by Borrower, the becoming due of any Obligations
(whether principal, interest, fees or other charges, including Extraordinary Expenses, LC
Obligations, Cash Collateral and Bank Product Debt) shall be deemed to be a request for Base Rate
Revolver Loans on the due date, in the amount of such Obligations. The proceeds of such Revolver
Loans shall be disbursed as direct payment of the relevant Obligation. In addition, Lender may, at
its option, charge such Obligations against any operating, investment or other account of the
Borrower maintained with Lender or any of its Affiliates.




          (c) If Borrower establishes a controlled disbursement account with Lender or any of its
Affiliates, then the presentation for payment of any check or other item of payment drawn on such
account at a time when there are insufficient funds to cover it shall be deemed to be a request for
Base Rate Revolver Loans on the date of such presentation, in the amount of the cheque and items
presented for payment. The proceeds of such Revolver Loans may be disbursed directly to the
controlled disbursement account or other appropriate account.




          4.1.2 FUNDINGS. Lender shall fund each Borrowing on the applicable funding date and,
subject to the terms of this Agreement, shall disburse the proceeds as directed by Borrower.




          4.1.3 NOTICES. Borrower authorizes Lender to extend, convert or continue Loans,
effect selections of interest rates, and transfer funds to or on behalf of Borrower based on (and
Lender agrees to honor subject to any conditions set forth herein) telephonic or e-mailed
instructions. Borrower shall confirm each such request by prompt delivery to Lender of a Notice of
Borrowing or Notice of Conversion/Continuation, if applicable, but if it differs in any material
respect from the action taken by Lender, the records of Lender shall govern. Lender shall not have
any liability for any loss suffered by the Borrower as a result of Lender acting upon its
understanding of telephonic or e-mailed instructions from a person believed in good faith to be a
person authorized to give such instructions on the Borrower’s behalf.




     4.2 Number and Amount of LIBOR Loans; Determination of Rate.



     No more than six Borrowings of LIBOR Loans may be outstanding at any time, and each Borrowing
of LIBOR Loans when made shall be in a minimum amount (or increment, if in excess thereof) as
follows:



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	4.3 Currency	 	4.4 Minimum amount	 	4.5 Increment
	4.6 Dollars

	 	4.7   $100,000
	 	4.8   $10,000
	4.9 Sterling

	 	4.10 £  50,000
	 	4.11 £  5,000
	4.12 Euro

	 	4.13 €  75,000
	 	4.14 €  7,500





Upon determining LIBOR for any Interest Period requested by Borrower, Lender shall promptly notify
Borrower thereof by telephone or electronically and, if requested by Borrower, shall confirm any
telephonic notice in writing.




     4.15 [Intentionally omitted.]



     4.16 [Intentionally omitted.]



     4.17 EFFECT OF TERMINATION. On the effective date of any termination of the Revolver
Commitment, all outstanding Obligations shall be immediately due and payable, and each Secured
Party may terminate its Bank Products. All undertakings of Borrower contained in the Loan
Documents shall survive any termination until Full Payment of the Obligations, and Lender shall
retain its Liens in the Collateral and all of its rights and remedies under the Loan Documents
until Full Payment of the Obligations. The provisions of Sections 2.3, 3.4, 3.6, 3.7, 3.9, 5.5,
5.8, 12.2 and this Section, and the obligation of each Obligor with respect to each indemnity
given by it in any Loan Document, shall survive Full Payment of the Obligations and any release
relating to this credit facility.



SECTION 5 PAYMENTS




     5.1 GENERAL PAYMENT PROVISIONS. All payments of Obligations shall be made in the
currency in which they are denominated, without offset, counterclaim or defense of any kind, free
of (and without deduction for) any Indemnified Taxes or Other Taxes, and in immediately available
funds, not later than 12:00 noon on the due date. Any payment after such time shall be deemed
made on the next Business Day. If any payment under the Loan Documents shall be stated to be due
on a day other than a Business Day, the due date shall be extended to the next Business Day and
such extension of time shall be included in any computation of interest and fees. Any payment of
a LIBOR Loan prior to the end of its Interest Period shall be accompanied by all amounts due under
Section 3.9. Any prepayment of Loans shall be applied first to Base Rate Revolver Loans and then
to LIBOR Loans; provided, however, that as long as no Event of Default exists,
prepayments of LIBOR Loans may, at the option of Borrower and Lender, be held by Lender as Cash
Collateral and applied to such Loans at the end of their Interest Periods.



     5.2 REPAYMENT OF REVOLVER LOANS. Revolver Loans shall be due and payable in full on
the Revolver Termination Date, unless payment is sooner required hereunder. Revolver Loans may be
prepaid from time to time, without penalty or premium. If any Asset Disposition includes the
disposition of Accounts or Inventory (other than sales of Inventory in the ordinary course of
business), then Net Proceeds equal to the greater of (a) the net book value of such Accounts and
Inventory, or (b) the reduction in the Borrowing Base upon giving



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effect to such disposition, shall be applied to the Revolver Loans. Notwithstanding anything herein to the contrary, if an Overadvance exists, Borrower shall, on the sooner of Lender’s
demand or the first Business Day after the Borrower has knowledge thereof, repay the outstanding
Revolver Loans in an amount sufficient to reduce the principal balance of Revolver Loans to the
Borrowing Base.




     5.3 [Intentionally Deleted].



     5.4 PAYMENT OF OTHER OBLIGATIONS. Obligations other than Loans, including LC
Obligations and Extraordinary Expenses, shall be paid by Borrower as provided in the Loan
Documents or, if no payment date is specified, on demand.



     5.5 MARSHALING; PAYMENTS SET ASIDE. Lender shall have no obligation to marshal any
assets in favor of any Obligor or against any Obligations. If any payment by or on behalf of
Borrower is made to Lender, or Lender exercises a right of setoff, and such payment or the
proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent
or preferential, set aside or required (including pursuant to any settlement entered into by
Lender in its discretion) to be repaid to a trustee, receiver or any other Person, then to the
extent of such recovery, the Obligation originally intended to be satisfied, and all Liens, rights
and remedies relating thereto, shall be revived and continued in full force and effect as if such
payment had not been made or such setoff had not occurred.



     5.6 APPLICATION OF PAYMENTS. At all times commencing on the Closing Date the ledger
balance in the main Deposit Account as of the end of a Business Day shall be applied to the
Obligations at the beginning of the next Business Day. If, as a result of such application, a
credit balance exists, the balance shall not accrue interest in favor of Borrower and shall be
made available to Borrower as long as no Default or Event of Default exists. Borrower irrevocably
waives the right to direct the application of any payments or Collateral proceeds, and agrees that
Lender shall have the continuing, exclusive right to apply and reapply same against the
Obligations, in such manner as Lender deems advisable, notwithstanding any entry by Lender in its
records.



     5.7 LOAN ACCOUNT; ACCOUNT STATED.



          5.7.1 LOAN ACCOUNT. Lender shall maintain in accordance with its usual and customary
practices an account or accounts (“LOAN ACCOUNT”) evidencing the Debt of Borrower resulting
from each Loan or issuance of a Letter of Credit from time to time. Any failure of Lender to
record anything in the Loan Account, or any error in doing so, shall not limit or otherwise affect
the obligation of Borrower to pay any amount owing hereunder.




          5.7.2 ENTRIES BINDING. Entries made in the Loan Account shall constitute presumptive
evidence of the information contained therein. If any information contained in the Loan Account is
provided to or inspected by any Person, then such information shall be conclusive and binding on
such Person for all purposes absent manifest error, except to the extent such Person notifies
Lender in writing within 30 days after receipt or inspection that specific information is subject
to dispute.




     5.8 Taxes.




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          5.8.1 PAYMENTS FREE OF TAXES. Any and all payments by any Obligor on account of any
Obligations shall be made free and clear of and without reduction or withholding for any
Indemnified Taxes or Other Taxes, PROVIDED that if an Obligor shall be required by
Applicable Law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then
(a) the sum payable shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section) Lender receives an
amount equal to the sum it would have received had no such deductions been made; (b) the Obligor
shall make such deductions; and (c) Borrower shall timely pay the full amount deducted to the
relevant Governmental Authority in accordance with Applicable Law. Without limiting the foregoing,
Borrower shall timely pay all Other Taxes to the relevant Governmental Authorities if and to the
extent required by Applicable Law.




          5.8.2 PAYMENT. Borrower shall indemnify, hold harmless and reimburse Lender, within
10 days after demand therefor, pursuant to a certificate complying with Section 3.3, for the full
amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed
or asserted on or attributable to amounts payable under this Section) paid by Lender with respect
to any Obligations, Letters of Credit or Loan Documents, and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other
Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability setting forth the calculation thereof in
reasonable detail delivered to Borrower by Lender shall be conclusive absent manifest error. As
soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower, Borrower
shall deliver to Lender a receipt issued by the Governmental Authority evidencing such payment or
other evidence of payment reasonably satisfactory to Lender.




          5.8.3 REFUNDS. If Lender receives a refund of any Indemnified Taxes or Other Taxes as
to which it has been indemnified by the Borrower or with respect to which the Borrower has paid
additional amounts hereunder, Lender shall pay to Borrower an amount equal to such refund (but only
to the extent of indemnity payments made, or additional amounts paid, by Borrower hereunder with
respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket costs and expenses of Lender incurred in obtaining such refund, and without interest
(other than any interest paid by the relevant Governmental Authority with respect to such refund).




SECTION 6 CONDITIONS PRECEDENT




     6.1 CONDITIONS PRECEDENT TO INITIAL LOANS. In addition to the conditions set forth
in Section 6.2, Lender shall not be required to fund any requested Loan, issue any Letter of
Credit or otherwise extend credit to Borrower hereunder, until the date (“Closing Date”)
that each of the following conditions has been satisfied or waived in writing by Lender:



          (a) Each other Loan Document shall have been duly executed and delivered to Lender by each of
the signatories thereto, and each Obligor shall be in compliance with all terms thereof.




          (b) Lender shall have received acknowledgments of all filings or recordations necessary to
perfect its Liens in the Collateral, as well as Lien searches and other evidence





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reasonably satisfactory to Lender that such Liens are the only Liens upon the Collateral,
except Permitted Liens. upon making the requested Loan, issuing a Letter of Credit or otherwise
extending credit to Borrower, the sum of all outstanding obligations under the US Loan Facility
plus all Obligations shall not be in excess of $55,000,000.




          (c) Lender shall have received duly executed Deposit Account Control Agreements relating to
each Deposit Account in accordance with the Debenture.




          (d) Lender shall have received certificates, in form and substance reasonably satisfactory to
it, from a knowledgeable Senior Officer of Borrower certifying that, after giving effect to the
initial Loans and transactions hereunder, (i) Borrower together with its Subsidiaries, is Solvent;
(ii) no Default or Event of Default exists; (iii) the representations and warranties set forth in
Section 9 are true and correct; and (iv) Borrower and each other Obligor has complied with all
agreements and conditions to be satisfied by it under the Loan Documents.




          (e) Lender shall have received a certificate of a duly authorized officer of each Obligor,
certifying (i) that attached copies of such Obligor’s Organic Documents are true and complete, and
in full force and effect, without amendment except as shown; (ii) that an attached copy of
resolutions authorizing execution and delivery of the Loan Documents is true and complete, and that
such resolutions are in full force and effect, were duly adopted, have not been amended, modified
or revoked, and constitute all resolutions adopted with respect to this credit facility; and
(iii) to the title, name and signature of each Person authorized to sign the Loan Documents.
Lender may conclusively rely on this certificate until it is otherwise notified by the applicable
Obligor in writing.




          (f) Lender shall have received a written opinion of local counsel to Lender in the United
Kingdom, in form and substance reasonably satisfactory to Lender.




          (g) Lender shall have received copies of policies or certificates of insurance for the
insurance policies carried by Borrower, all in compliance with the Loan Documents.




          (h) Lender shall have completed its business, financial and legal due diligence of Obligors,
including (x) a field examination, with results reasonably satisfactory to Lender and (y) an
appraisal of the Borrowers Inventory, with results reasonably satisfactory to Lender. No material
adverse change in the financial condition of any Obligor or in the quality, quantity or value of
any Collateral shall have occurred since October 31, 2007.




          (i) Borrower shall have paid all fees and expenses to be paid to Lender on the Closing Date.




          (j) Lender shall have received a Borrowing Base Certificate prepared as of January 31, 2008.




     6.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. Lender shall not be required to
fund any Loans, issue any Letters of Credit, or grant any other
accommodation to or for the benefit of Borrower, unless the following conditions are
satisfied or waived by Lender in writing:



          (a) No Default or Event of Default shall exist at the time of, or result from, such funding,
issuance or grant;




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          (b) The representations and warranties of each Obligor in the Loan Documents shall be true and
correct on the date of, and upon giving effect to, such funding, issuance or grant (except for
representations and warranties that expressly relate to an earlier date);




          (c) All conditions precedent in any other Loan Document shall be satisfied;




          (d) No event shall have occurred or circumstance exist that has or could reasonably be
expected to have a Material Adverse Effect; and With respect to issuance of a Letter of Credit, the
LC Conditions shall be satisfied.




Each request (or deemed request) by Borrower for funding of a Loan, issuance of a Letter of Credit
or grant of an accommodation shall constitute a representation by Borrower that the foregoing
conditions are satisfied on the date of such request and on the date of such funding, issuance or
grant. As an additional condition to any funding, issuance or grant, Lender shall have received
such other information, documents, instruments and agreements as it reasonably deems appropriate in
connection therewith.




     6.3 LIMITED WAIVER OF CONDITIONS PRECEDENT. If Lender funds any Loans, issues any
Letters of Credit or grants any other accommodation when any conditions precedent are not
satisfied (regardless of whether the lack of satisfaction was known or unknown at the time), it
shall not operate as a waiver of (a) the right of Lender to insist upon satisfaction of all
conditions precedent with respect to any subsequent funding, issuance or grant; nor (b) any
Default or Event of Default due to such failure of conditions or otherwise.



SECTION 7 COLLATERAL




     7.1 DEBENTURE. To secure the prompt payment and performance of all Obligations,
Borrower shall execute and deliver to Lender the Debenture.



     7.2 CERTAIN AFTER-ACQUIRED COLLATERAL. Borrower shall promptly notify Lender in
writing if, after the Closing Date, Borrower obtains any interest in any Collateral (which in the
aggregate exceeds $100,000) consisting of Deposit Accounts, Chattel Paper, Documents, Instruments,
Intellectual Property, Investment Property or Letter-of-Credit Rights and, upon Lender’s request,
shall promptly take such actions as Lender deems appropriate to effect Lender’s duly perfected,
first priority Lien upon such Collateral, including obtaining any appropriate possession, control
agreement or Lien Waiver. If any Collateral is in the possession of a third party, at Lender’s
request, Borrower shall obtain an acknowledgment that such third party holds the Collateral for
the benefit of Lender.



     7.3 NO ASSUMPTION OF LIABILITY. The Lien on Collateral to be granted under the
Debenture is given as security only and shall not subject Lender to, or in any way modify, any
obligation or liability of Borrower relating to any Collateral.



SECTION 8 COLLATERAL ADMINISTRATION




     8.1 BORROWING BASE CERTIFICATES. By the 15th day of each month (or such later time
as Lender may approve (via e-mail or otherwise)), Borrower shall deliver to Lender a Borrowing
Base Certificate prepared as of the close of business of the previous month, and at such other
times as Lender may request. All calculations of Availability in any



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Borrowing Base Certificate
shall originally be made by Borrower and certified by a Senior Officer, provided that Lender may
from time to time review and adjust any such calculation (a) to reflect its reasonable estimate of
declines in value of any Collateral, due to collections received in the Deposit Account or
otherwise; (b)  reflect changes in dilution in accordance with the Dilution Percentage and the
Accounts Formula Amount and (c) to the extent the calculation is not made in accordance with this
Agreement or does not accurately reflect the Availability Reserve.




     8.2 ADMINISTRATION OF ACCOUNTS.



          8.2.1 RECORDS AND SCHEDULES OF ACCOUNTS. Borrower shall keep accurate and complete
records of its Accounts, including all payments and collections thereon, and shall submit to Lender
sales, collection, reconciliation (including a reconciliation from the general ledger to agings)
and other reports in form reasonably satisfactory to Lender, on such periodic basis as Lender may
request. Borrower shall also provide to Lender, on or before the 15th day of each month, a
detailed aged trial balance of all Accounts as of the end of the preceding month, specifying each
Account’s Account Debtor name and address, amount, invoice date and due date, showing any discount,
allowance, credit, authorized return or dispute, and including such proof of delivery, copies of
invoices and invoice registers, copies of related documents, repayment histories, status reports
and other information as Lender may reasonably request. If Accounts in an aggregate face amount of
$200,000 or more cease to be Eligible Accounts, Borrower shall notify Lender of such occurrence
promptly (and in any event within two Business Days) after the Borrower has knowledge thereof.




          8.2.2 TAXES. If an Account of the Borrower includes a charge for any Taxes, Lender is
authorized, in its discretion, to pay the amount thereof to the proper taxing authority for the
account of the Borrower and to charge Borrower therefor; provided, however, that Lender shall not
be liable for any Taxes that may be due from Borrower or with respect to any Collateral.




          8.2.3 ACCOUNT VERIFICATION. Whether or not a Default or Event of Default exists,
Lender shall have the right at any time, in the name of Lender, any designee of Lender or the
Borrower, to verify the validity, amount or any other matter relating to any Accounts of Borrower
by mail, telephone or otherwise. Borrower shall cooperate fully with Lender in an effort to
facilitate and promptly conclude any such verification process.




          8.2.4 MAINTENANCE OF DEPOSIT ACCOUNTS. Borrower shall maintain Deposit Accounts
pursuant to arrangements acceptable to Lender. If a Deposit Account is not maintained with Lender,
Lender may require daily transfer of all funds in such account to a Deposit Account maintained with
Lender. Lender does not assume any responsibility to Borrower for any Deposit Account, including
any claim of accord and satisfaction or release with respect to any Payment Items accepted by any
bank.




          8.2.5 PROCEEDS OF COLLATERAL. Borrower shall request in writing and otherwise take
all commercially reasonable steps to ensure that all payments on Accounts or otherwise relating to
Collateral are made directly to a Deposit Account. Except as otherwise set forth in Section 8.2.6,
if the Borrower or Subsidiary receives cash or Payment Items with respect to any Collateral, it
shall hold same in trust for Lender and promptly (not later than the next Business Day) deposit
same into a Deposit Account.





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          8.2.6 EXCLUDED BANK ACCOUNTS. Notwithstanding any provision of this Section 8.2 or
any other provision of any Loan Document to the contrary, (A) Borrower and Subsidiaries may
maintain accounts used exclusively for workers compensation, payroll and employee health insurance
and trust accounts that are not a part of the cash management and control systems described herein
(and not subject to a Deposit Account Control Agreement) provided that Borrower shall not
accumulate or maintain cash in such accounts as of any date of determination in excess of cheques
outstanding against such accounts as of that date and amounts necessary to meet minimum balance
requirements, (B) Borrower may maintain local collection accounts used exclusively for the
collection of Accounts owed by an Account Debtor located in a jurisdiction other than the United
Kingdom which collection accounts shall not be a part of the cash management and control systems
described herein (and not subject to a Deposit Account Control Agreement); provided that Borrower
shall not accumulate or maintain cash in any such account in excess of €125,000 or in the
aggregate in all such accounts in excess of €300,000, as of any date of determination and such
collection accounts are subject to periodic sweeps to the Deposit Account in such frequency as is
acceptable to Lender in its reasonable discretion.




     8.3 ADMINISTRATION OF INVENTORY.



          8.3.1 RECORDS AND REPORTS OF INVENTORY. Borrower shall keep accurate and complete
records of its Inventory, including costs and daily withdrawals and additions, and shall submit to
Lender inventory and reconciliation reports (including a reconciliation from the general ledger to
the perpetual inventory) in form reasonably satisfactory to Lender, on such periodic basis as
Lender may request. Borrower shall conduct periodic cycle counts consistent with historical
practices, and shall provide to Lender a report based on each such inventory and count promptly
upon completion thereof, together with such supporting information as Lender may request.




          8.3.2 RETURNS OF INVENTORY. Borrower shall not return any Inventory to a supplier,
vendor or other Person, whether for cash, credit or otherwise, unless (a) such return is in the
ordinary course of business; (b) no Default, Event of Default or Overadvance exists or would result
therefrom; (c) Lender is promptly notified if the aggregate
Value of all Inventory returned in any month exceeds $200,000; and (d) any payment received by
the Borrower for a return is promptly remitted to Lender for application to the Obligations.




          8.3.3 ACQUISITION, SALE AND MAINTENANCE. Borrower shall not acquire or accept more
than $50,000 at any one time (valued at Borrower’s cost) of any Inventory on consignment or
approval, unless the same is identified to Lender and excluded from the Borrowing Base, and shall
take all steps to assure that all Inventory is produced in accordance with Applicable Law.
Borrower shall not sell any Inventory on consignment or approval or any other basis (other than
customary rights of return) under which the customer may return or require the Borrower to
repurchase such Inventory. Borrower shall use, store and maintain all Inventory with reasonable
care and caution, in accordance with applicable standards of any insurance and in conformity with
all Applicable Law, and shall make current rent payments (within applicable grace periods provided
for in leases) at all locations where any Collateral is located.




     8.4 ADMINISTRATION OF EQUIPMENT.



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          8.4.1 RECORDS AND SCHEDULES OF EQUIPMENT. Borrower shall keep accurate and complete
records of its Equipment, including kind, quality, quantity, cost, acquisitions and dispositions
thereof, and at any time a Default or Event of Default exists shall submit to Lender, on such
periodic basis as Lender may request, a current schedule thereof, in form reasonably satisfactory
to Lender. Promptly upon request, Borrower shall deliver to Lender evidence of their ownership or
interests in any Equipment.




          8.4.2 DISPOSITIONS OF EQUIPMENT. Borrower shall not sell, lease or otherwise dispose
of any Equipment, without the prior written consent of Lender, other than (a) a Permitted Asset
Disposition; and (b) disposal, sale or replacement of Equipment that is worn, damaged or obsolete
with Equipment of like function and value, if the replacement Equipment is acquired substantially
contemporaneously with such disposition and is free of Liens other than Permitted Liens.




          8.4.3 CONDITION OF EQUIPMENT. The Equipment is in good operating condition and
repair, and all necessary replacements and repairs have been made so that the value and operating
efficiency of the Equipment is preserved at all times, reasonable wear and tear excepted. Borrower
shall ensure that the Equipment is mechanically and structurally sound, and capable of performing
the functions for which it was designed, in accordance with manufacturer specifications. Borrower
shall not permit any Equipment to become affixed to real Property unless any landlord or mortgagee
delivers a Lien Waiver.




     8.5 ADMINISTRATION OF DEPOSIT ACCOUNTS. Schedule 8.5 sets forth all Deposit Accounts
maintained by Borrower. Borrower shall take all actions necessary to establish Lender’s control
of each such Deposit Account (except as permitted by Section 8.2.6 and with respect to any account
containing not more than $25,000 at any time.) Except as permitted by Section 8.2.6, Borrower
shall be the sole account holder of each Deposit Account and shall not allow any other Person
(other than Lender) to have control over a Deposit Account or any Property deposited therein.
Borrower shall promptly notify Lender of any
opening or closing of a Deposit Account and, with the consent of Lender, will amend Schedule
8.5 to reflect same.



     8.6 GENERAL PROVISIONS.



          8.6.1 LOCATION OF COLLATERAL. All tangible items of Collateral, other than Inventory
in transit, shall at all times be kept by Borrower at the business locations set forth in Schedule
8.6.1, except that Borrower may (a) make sales or other dispositions of Collateral in accordance
with Section 10.2.6; and (b) move Collateral to another location in the United Kingdom other than a
location listed on Schedule 8.6.1, so long as Borrower gives 30 Business Days prior written notice
to Lender and takes all steps necessary pursuant to Section 7.6 to perfect Lender’s security
interest in such Collateral prior to it being moved to a new location.




          8.6.2 INSURANCE OF COLLATERAL; CONDEMNATION PROCEEDS.




          (a) Borrower shall maintain insurance with respect to the Collateral, covering casualty,
hazard, public liability, theft, malicious mischief, flood (if necessary) and other risks, in
amounts, with endorsements and with insurers (with a Best Rating of at least A7, unless




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otherwise
approved by Lender) reasonably satisfactory to Lender. All proceeds under each such policy (other
than proceeds constituting Excluded Assets) shall be payable to Lender. From time to time upon
request, Borrower shall deliver to Lender the originals or certified copies of its insurance
policies and updated flood plain searches. Unless Lender shall agree otherwise, each policy shall
include reasonably satisfactory endorsements (i) showing Lender as sole loss payee or additional
insured, as appropriate (except with respect to insurance proceeds constituting Excluded Assets);
(ii) requiring 30 days prior written notice to Lender in the event of cancellation of the policy
for any reason whatsoever; and (iii) specifying that the interest of Lender shall not be impaired
or invalidated by any act or neglect of the Borrower or the owner of the Property, nor by the
occupation of the premises for purposes more hazardous than are permitted by the policy. If the
Borrower fails to provide and pay for any insurance required hereunder or under Section 10.1.7,
Lender may, at its option, but shall not be required to, procure the insurance and charge Borrower
therefor. Borrower agrees to deliver to Lender, promptly as rendered, copies of all reports made
to insurance companies. While no Event of Default exists, Borrower may settle, adjust or
compromise any insurance claim, as long as the proceeds are delivered to Lender. If an Event of
Default exists, only Lender shall be authorized to settle, adjust and compromise such claims
(except claims in respect of Excluded Assets).




          (b) Any proceeds of insurance (other than proceeds from workers’ compensation or D&O insurance
and other than proceeds constituting Excluded Assets) and any awards arising from condemnation of
any Collateral shall be paid to Lender. Any such proceeds or awards that relate to Inventory shall
be applied to payment of the Revolver Loans, and then to any other Obligations outstanding.




          (c) If requested by Borrower in writing within 60 days after Lender’s receipt of any insurance
proceeds or condemnation awards relating to any loss or destruction of
Collateral consisting of Equipment or Real Estate which are to be payable to Lender pursuant
to clauses (a) and (b), Borrower may use such proceeds or awards to repair or replace such
Equipment or Real Estate (and until so used, the proceeds shall be held by Lender as Cash
Collateral) as long as (i) no Default or Event of Default exists; (ii) such repair or replacement
is promptly undertaken and concluded, in accordance with plans reasonably satisfactory to Lender;
(iii) replacement buildings are constructed on the sites of the original casualties and are of
comparable size, quality and utility to the destroyed buildings; (iv) the repaired or replaced
Property is free of Liens, other than Permitted Liens; and (v) Borrower complies with disbursement
procedures for such repair or replacement as Lender may reasonably require.




          8.6.3 PROTECTION OF COLLATERAL. All expenses of protecting, storing, warehousing,
insuring, handling, maintaining and shipping any Collateral, all Taxes payable with respect to any
Collateral (including any sale thereof), and all other payments required to be made by Lender to
any Person to realize upon any Collateral, shall be borne and paid by Borrower. Lender shall not
be liable or responsible in any way for the safekeeping of any Collateral, for any loss or damage
thereto (except for reasonable care in its custody while Collateral is in Lender’s actual
possession), for any diminution in the value thereof, or for any act or default of any
warehouseman, carrier, forwarding agency or other Person whatsoever, but the same shall be at
Borrower’s sole risk.




          8.6.4 DEFENSE OF TITLE TO COLLATERAL. Borrower shall at all times defend its title to
Collateral and Lender’s Liens therein against all Persons, claims and demands whatsoever, except
Permitted Liens.




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     8.7 [INTENTIONALLY OMITTED]:



SECTION 9 REPRESENTATIONS AND WARRANTIES




     9.1 GENERAL REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into this
Agreement and to make available the Revolver Commitments, Loans and Letters of Credit, Borrower
represents and warrants that:



          9.1.1 ORGANIZATION AND QUALIFICATION. Borrower is duly incorporated as a private
limited company registered in England and Wales and validly existing under the laws of England and
Wales. Borrower is duly qualified, authorized to do business and in good standing as a foreign
corporation in each jurisdiction where failure to be so qualified could reasonably be expected to
have a Material Adverse Effect. Borrower has no Subsidiaries.




          9.1.2 POWER AND AUTHORITY. Each Obligor is duly authorized to execute, deliver and
perform its Loan Documents. The execution, delivery and performance of the Loan Documents have
been duly authorized by all necessary action, and do not (a) require any consent or approval of any
holders of Equity Interests of any Obligor, other than those already obtained; (b) contravene the
Organic Documents of any Obligor; (c) violate in any material respect or cause a material default
under any Applicable Law or Material Contract; or (d) result in or require the imposition of any
Lien (other than Permitted Liens) on any Property of any Obligor.




          9.1.3 ENFORCEABILITY. Each Loan Document is a legal, valid and binding obligation of
each Obligor party thereto, enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights
generally.




          9.1.4 CAPITAL STRUCTURE. Schedule 9.1.4 shows, for Borrower, its name, its
jurisdiction of incorporation, its authorized and issued Equity Interests as of the date hereof,
the holders of its Equity Interests as of the date hereof, and to the knowledge of Borrower, all
agreements as of the date hereof binding on such holders with respect to their Equity Interests.
As of the date hereof, except as set forth on Schedule 9.1.4, there are no outstanding options to
purchase, warrants, subscription rights, agreements to issue or sell, convertible interests,
phantom rights or powers of attorney relating to any Equity Interests of the Borrower.




          9.1.5 CORPORATE NAMES; LOCATIONS. During the five years preceding the Closing Date,
except as shown on Schedule 9.1.5, Borrower has not been known as or used any corporate, fictitious
or trade names, has been the surviving corporation of a merger or combination, or has acquired any
substantial part of the assets of any Person. The chief executive offices and other places of
business of Borrower are shown on Schedule 8.6.1. For the purposes of The Council of the European
Union Regulation No. 1346/2000 on Insolvency Proceedings (the “REGULATION”), Borrower’s
centre of main interests (as that term is used in Article 3(1) of the Regulation) is situated in
England.




          9.1.6 TITLE TO PROPERTIES; PRIORITY OF LIENS. Borrower has good and marketable title
to (or valid leasehold interests in) all of its Real Estate, and good title to valid leasehold
interests in, or valid license to use all of its personal Property, including all Property
reflected in any financial statements delivered to Lender, in each case free of Liens




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except Permitted Liens. Borrower has paid and discharged all lawful claims that, if unpaid, could become
a Lien on its Properties, other than Permitted Liens. All Liens of Lender in the Collateral are
duly perfected, first priority Liens, subject only to Permitted Liens that are expressly allowed to
have priority over Lender’s Liens under this Agreement or that have priority by operation of
Applicable Law.




          9.1.7 ACCOUNTS. Lender may rely, in determining which Accounts are Eligible Accounts,
on all statements and representations made by Borrower with respect thereto. Borrower warrants,
with respect to each Account at the time it is shown as an Eligible Account in a Borrowing Base
Certificate, that: it is genuine and in all respects what it purports to be, and is not evidenced
by a judgment; it arises out of a completed, bona fide sale and delivery of goods or rendition of
services in the ordinary course of business, and substantially in accordance with any purchase
order, contract or other document relating thereto; it is for a sum certain, maturing as stated in
the invoice covering such sale or rendition of services, a copy of which has been furnished or is
available to Lender on request; it is not subject to any offset, Lien (other than Lender’s Lien and
Permitted Liens set forth in Section 10.2.2 (c)), deduction, defense, dispute, counterclaim or
other adverse condition except as arising in the ordinary course of business and disclosed to
Lender; and it is absolutely owing by the Account Debtor, without contingency in
any respect; no purchase order, agreement, document or Applicable Law restricts assignment of
the Account to Lender (regardless of whether the restriction is, under applicable law,
ineffective), and Borrower is the sole payee or remittance party shown on the invoice; no
extension, compromise, settlement, modification, credit, deduction or return has been authorized
with respect to the Account, except discounts or allowances granted in the ordinary course of
business for prompt payment that are reflected on the face of the invoice related thereto and in
the reports submitted to Lender hereunder; and to the best of Borrower’s knowledge, (i) there are
no facts or circumstances that are reasonably likely to impair the enforceability or collectibility
of such Account; (ii) the Account Debtor had the capacity to contract when the Account arose,
continues to meet Borrower’s customary credit standards, is Solvent, is not contemplating or
subject to an Insolvency Proceeding, and has not failed, or suspended or ceased doing business; and
(iii) there are no proceedings or actions threatened or pending against any Account Debtor that
could reasonably be expected to have a material adverse effect on the Account Debtor’s financial
condition.




          9.1.8 FINANCIAL STATEMENTS. The balance sheets, and related statements of operations
of Borrower that have been and are hereafter delivered to Lender, are prepared in accordance with
GAAP, and fairly present the financial positions and results of operations of Borrower at the dates
and for the periods indicated, subject to changes resulting from audit and year-end adjustments and
the absence of footnotes. All projections delivered from time to time to Lender have been prepared
in good faith, based on assumptions believed by Borrower to be reasonable at the time made in
light of the circumstances at such time. Since October 31, 2007, there has been no change in the
condition, financial or otherwise, of the Borrower that could reasonably be expected to have a
Material Adverse Effect. Obligors, taken as a whole, are Solvent.




          9.1.9 SURETY OBLIGATIONS. Except as set forth in Schedule 9.1.9, Borrower is not
obligated as surety or indemnitor under any bond or other contract that assures payment or
performance of any obligation of any Person, except as permitted hereunder.






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          9.1.10 TAXES. Borrower has filed all tax returns and other reports that it is
required by law to file, and has paid, or made provision for the payment of, all Taxes upon it, its
income and its Properties that are due and payable, except to the extent being Properly Contested
or to the extent constituting Immaterial Tax obligations. The provision for Taxes on the books of
Borrower is adequate for all years not closed by applicable statutes, and for its current Fiscal
Year.




          9.1.11 BROKERS. There are no brokerage commissions, finder’s fees or investment
banking fees payable in connection with any transactions contemplated by the Loan Documents.




          9.1.12 INTELLECTUAL PROPERTY. Borrower owns or has the lawful right to use all
Intellectual Property necessary for the conduct of its business, without conflict with any rights
of others. Except as would not reasonably be expected to have a Material Adverse Effect, there is
no pending or, to the Borrower’s knowledge, threatened Intellectual Property Claim with respect to
the Borrower or any of its Property (including any Intellectual
Property). Except as disclosed on Schedule 9.1.12 or as otherwise disclosed to Lender in
writing, Borrower does not pay or owe any Royalty or other compensation to any Person with respect
to any Intellectual Property in excess of $100,000 per year with respect to each such Person. All
Intellectual Property owned, used or licensed by, or otherwise subject to any interests of, the
Borrower is shown on Schedule 9.1.12.




          9.1.13 GOVERNMENTAL APPROVALS. Except as could not reasonably be expected to have a
Material Adverse Effect, Borrower has, is in compliance with, and is in good standing with respect
to, all Governmental Approvals necessary to conduct its business and to own, lease and operate its
Properties. All necessary import, export or other licenses, permits or certificates for the import
or handling of any goods or other Collateral have been procured and are in effect, and Borrower
have complied with all foreign and domestic laws with respect to the shipment and importation of
any goods or Collateral, except where noncompliance could not reasonably be expected to have a
Material Adverse Effect.




          9.1.14 COMPLIANCE WITH LAWS. Borrower has duly complied, and its Properties and
business operations are in compliance, in all material respects with all Applicable Law, except
where noncompliance could not reasonably be expected to have a Material Adverse Effect. Except as
could not reasonably be expected to have a Material Adverse Effect, there have been no citations,
notices or orders of noncompliance issued to the Borrower under any Applicable Law. No Inventory
has been produced in violation of the FLSA.




          9.1.15 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as disclosed on Schedule 9.1.15, or
as would not reasonably be expected to have a Material Adverse Effect, Borrower’s past or present
operations, Real Estate or other Properties are not subject to any investigation to determine
whether any remedial action is needed to address any environmental pollution, hazardous material or
environmental clean-up. Except as would not reasonably be expected to have a Material Adverse
Effect, Borrower has not received any Environmental Notice. Except as would not reasonably be
expected to have a Material Adverse Effect, Borrower has no contingent liability with respect to
any Environmental Release, environmental pollution or hazardous material on any Real Estate now or
previously owned, leased or operated by it.






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          9.1.16 BURDENSOME CONTRACTS. Borrower is not a party or subject to any contract,
agreement or charter restriction that could reasonably be expected to have a Material Adverse
Effect.




          9.1.17 LITIGATION. Except as shown on Schedule 9.1.17, there are no proceedings or
investigations pending or, to the Borrower’s knowledge, threatened against the Borrower, or any of
its businesses, operations, Properties, prospects or conditions, that (a) relate to any Loan
Documents or transactions contemplated thereby; or (b) could reasonably be expected to have a
Material Adverse Effect. Borrower is not in default with respect to any order, injunction or
judgment of any Governmental Authority.




          9.1.18 NO DEFAULTS. No event or circumstance has occurred or exists that constitutes
a Default or Event of Default.




          9.1.19 PENSIONS. Except as set forth in Schedule 9.1.19, Borrower is not nor has at
any time been an employer (for the purposes of Sections 38 to 51 of the Pensions Act 2004) of an
occupational pension scheme which is not a money purchase scheme (as those terms are defined in
the Pensions Schemes Act 1993) and Borrower is not nor has at any time been “connected” with or an
“associate” of (as those terms are used in Sections 39 and 43 of the Pensions Act 2004) such an
employer.




          9.1.20 TRADE RELATIONS. There exists no actual or threatened termination, limitation
or modification of any business relationship between the Borrower and any customer or supplier, or
any group of customers or suppliers, who individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect. There exists no condition or circumstance that could
reasonably be expected to impair the ability of the Borrower to conduct its business at any time
hereafter in substantially the same manner as conducted on the Closing Date.




          9.1.21 LABOUR RELATIONS. Except as set forth on Schedule 9.1.21, Borrower is not
party to or bound by any collective bargaining agreement, management agreement or consulting
agreement which Borrower’s obligations thereunder exceeds $500,000. There are no grievances,
disputes or controversies with any union or other organization of the Borrower’s employees, or, to
the Borrower’s knowledge, any asserted or threatened strikes, work stoppages or demands for
collective bargaining that could individually or in the aggregate reasonably be expected to have a
Material Adverse Effect.




          9.1.22 PAYABLE PRACTICES. Except as would not reasonably be expected to have a
Material Adverse Effect, Borrower has made no material change in its historical accounts payable
practices from those in effect on the Closing Date.




     9.2 COMPLETE DISCLOSURE. None of the representations or warranties made by the
Borrower in the Loan Documents as of the date such representations and warranties are made or
deemed made, considering each of the foregoing in the context in which it was made and together
with all other representations, warranties and written statements theretofore furnished by such
Obligor to the Lender in connection with the Loan Documents, contains any untrue statement of a
material fact or omits any material fact required to be stated therein or necessary to make such
representation, warranty or written statement, in light of the circumstances under which it is
made, not misleading as of the time when made or delivered;



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provided that the Borrower’s
representation and warranty as to any forecast, projection or other statement regarding future
performance, future financial results or other future development is limited to the fact that such
forecast, projection or statement was prepared in good faith on the basis of information and
assumptions that the Borrower believed to be reasonable as of the date such material was prepared
(it being understood that the projections are subject to significant uncertainties and
contingencies, many of which are beyond the Borrower’s control, and that no assurance can be given
that the projections will be realized).




SECTION 10 COVENANTS AND CONTINUING AGREEMENTS




     10.1 AFFIRMATIVE COVENANTS. As long as any Revolver Commitment or Obligations are
outstanding, Borrower shall, and shall cause each Subsidiary to:



          10.1.1 INSPECTIONS; APPRAISALS.




          (a) Permit Lender from time to time, subject (except when a Default or Event of Default
exists) to reasonable notice and normal business hours, to visit and inspect the Properties of the
Borrower or Subsidiary, inspect, audit and make extracts from the Borrower’s or Subsidiary’s books
and records, and discuss on a confidential basis with its officers, employees, agents, advisors and
independent accountants the Borrower’s or Subsidiary’s business, financial condition, assets,
prospects and results of operations. Lender shall not have any duty to the Borrower to make any
inspection, nor to share any results of any inspection, appraisal or report with the Borrower.
Borrower acknowledges that all inspections, appraisals and reports are prepared by Lender for its
purposes, and Borrower shall not be entitled to rely upon them.




          (b) Reimburse Lender for all its reasonable charges, costs and expenses in connection with
(i) examinations of any Obligor’s books and records or any other financial or Collateral matters as
Lender reasonably deems appropriate, up to twice per Loan Year; and (ii) appraisals of Inventory up
to one time per Loan Year; provided, however, that if an examination or appraisal is initiated
during a Default or Event of Default, all charges, costs and expenses therefor shall be reimbursed
by Borrower without regard to such limits. Subject to and without limiting the foregoing, Borrower
specifically agree to pay Lender’s then standard charges (such standard charges as of the Closing
Date are $850 per day per person plus out of pocket expenses) for each day that an employee of
Lender or its Affiliates is engaged in any examination activities, and shall pay the standard
charges of Lender’s internal appraisal group. This Section shall not be construed to limit
Lender’s right to conduct examinations or to obtain appraisals at any time in its reasonable
discretion, nor to use third parties for such purposes.




          10.1.2 FINANCIAL AND OTHER INFORMATION. Keep adequate records and books of account
with respect to its business activities, in which proper entries are made in accordance with GAAP
reflecting all financial transactions; and furnish to Lender: as soon as available, its annual
accounts prepared pursuant to, and in accordance with, Chapter 4 of Part 1 of the Companies Act
2006;




          (a) [Intentionally Omitted]; concurrently with the delivery of Borrowing Base Certificates
pursuant to Section 8.1, a listing of Borrower’s trade payables, specifying the trade creditor and
balance due, and a detailed trade payable aging, all in form satisfactory to Lender;




          (b) [Intentionally Omitted];





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          (c) [intentionally omitted]; and such other reports and information (financial or otherwise)
as Lender may reasonably request from time to time in connection with any Collateral or the
Borrower’s, Subsidiary’s or other Obligor’s financial condition or business.




          10.1.3 NOTICES. Notify Lender in writing, promptly after the Borrower’s obtaining
knowledge thereof, of any of the following that affects Borrower: (a) the threat or commencement
of any proceeding or investigation that would reasonably be expected to have a Material Adverse
Effect; (b) any pending or threatened labour dispute, strike or walkout, or the expiration of any
material labour contract that could reasonably be expected to have a Material Adverse Effect;
(c) any default under or termination of a Material Contract; (d) the existence of any Default or
Event of Default; (e) any judgment in an amount exceeding $200,000; (f) the assertion of any
Intellectual Property Claim, that could reasonably be expected to have a Material Adverse Effect;
(g) any Environmental Release by an Obligor or on any Property owned, leased or occupied by an
Obligor; or receipt of any Environmental Notice that could reasonably be expected to have a
Material Adverse Effect; (h) [intentionally omitted]; (i) the discharge of or any withdrawal or
resignation by Borrower’s independent accountants; or (j) any opening of a new office or place of
business where the Borrower’s Accounts, Inventory or Borrower’s books and records are located, at
least 30 days after such opening.




          10.1.4 LANDLORD AND STORAGE AGREEMENTS. Upon request, provide Lender with copies of
all existing material agreements, and promptly after execution thereof provide Lender with copies
of all future agreements, between an Obligor and any landlord, warehouseman, processor, shipper,
bailee or other Person that owns any premises at which any Collateral may be kept or that otherwise
may possess or handle any Collateral.




          10.1.5 COMPLIANCE WITH LAWS. Comply with all Applicable Laws, including Environmental
Laws and laws regarding collection and payment of Taxes, and maintain all Governmental Approvals
necessary to the ownership of its Properties or conduct of its business, unless failure to comply
or maintain could not reasonably be expected to have a Material Adverse Effect.




          10.1.6 TAXES. Pay and discharge all Taxes prior to the date on which they become
delinquent or penalties attach, unless such Taxes are being Properly Contested or constitute
Immaterial Taxes.




          10.1.7 INSURANCE. In addition to the insurance required hereunder with respect to
Collateral, maintain insurance with insurers (with a Best Rating of at least A7, unless otherwise
approved by Lender) reasonably satisfactory to Lender, (a) with respect to the Properties and
business of Borrower and Subsidiaries of such type (including product liability, workers’
compensation, larceny, embezzlement, or other criminal misappropriation insurance), in such
amounts, and with such coverages and deductibles as are customary for companies similarly situated;
and (b) business interruption insurance in an amount not less than $4,000,000, with deductibles and
subject to an Insurance Assignment reasonably satisfactory to Lender.




          10.1.8 LICENSES. Except as would not reasonably be expected to have a Material
Adverse Effect, keep each material License affecting any Collateral (including the manufacture,
distribution or disposition of Inventory) or any other material Property of Borrower and
Subsidiaries in full force and effect; promptly notify Lender of any proposed material modification
to any such License, or entry into any new material License, in each case at least 30




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days prior to
its effective date; pay all Royalties when due unless being contested in good faith;
and notify Lender of any default or breach asserted by any Person to have occurred under any
material License.




          10.1.9 FUTURE SUBSIDIARIES. Promptly notify Lender upon any Person becoming a
Subsidiary and, if such Person is not a Foreign Subsidiary, cause it to guaranty the Obligations in
a manner satisfactory to Lender, and to execute and deliver such documents, instruments and
agreements and to take such other actions as Lender shall reasonably require to evidence and
perfect a Lien in favour of Lender on all assets of such Person, including delivery of such legal
opinions, in form and substance reasonably satisfactory to Lender, as it shall reasonably deem
appropriate.




          10.1.10 PENSIONS. Ensure that:




          (a) Neither Borrower nor any Subsidiary is or has been at any time an employer (for the
purposes of Sections 38 to 51 of the Pensions Act 2004) of an occupational pension scheme which is
not a money purchase scheme (as those terms are defined in the Pension Schemes Act 1993); and
Neither Borrower nor any Subsidiary is or has been at any time “connected” with or an “associate”
of (as those terms are used in Sections 39 or 43 of the Pensions Act 2004) such an employer.




          (b) Borrower shall ensure that all pension schemes operated by or maintained for the benefit
of it and its Subsidiaries and/or any of their employees are fully funded based on the minimum
funding requirement under Section 56 of the Pensions Act 1995 or the statutory funding objective
under Section 222 of the Pensions Act 2004 and that no action or omission is taken or made by any
member of the Group in relation to such a pension scheme which has or is reasonably likely to have
a Material Adverse Effect (including, without limitation, the termination or commencement of
winding-up proceedings of any such pension scheme or any member of the Group ceasing to employ any
member of such a pension scheme).




          (c) Borrower shall deliver to Lender, at such times as those reports are prepared in order to
comply with the then current statutory or auditing requirements (as applicable either to the
trustees of any relevant schemes or to Borrower or any Subsidiary), actuarial reports in relation
to all pension schemes mentioned in this Section 10.1.10.




          (d) Borrower shall promptly notify Lender of any material change in the rate of contributions
paid or recommended to be paid (whether by the scheme actuary or otherwise) or required (by law or
otherwise) to be paid in respect of any pension scheme mentioned in this Section 10.1.10.




          10.1.11 POST-CLOSING COVENANTS. Borrower shall satisfy each of the covenants set
forth in Schedule 10.1.11 within the time periods specified therein.




     10.2 NEGATIVE COVENANTS. As long as any Revolver Commitment or Obligations are
outstanding, Borrower shall not, and shall cause each Subsidiary not to:



          10.2.1 PERMITTED DEBT. Create, incur, guarantee or suffer to exist any Debt, except:
the Obligations;




          (a) Subordinated Debt;




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          (b) Permitted Purchase Money Debt and Permitted Capital Leases;




          (c) Borrowed Money as identified on Schedule 10.2.1(d) (other than the Obligations,
Subordinated Debt and Permitted Purchase Money Debt), but only to the extent outstanding on the
Closing Date and not satisfied with proceeds of the initial Loans;




          (d) Bank Product Debt;




          (e) Debt that is in existence when a Person becomes a Subsidiary or that is secured by an
asset when acquired by the Borrower or Subsidiary, as long as such Debt was not incurred in
contemplation of such Person becoming a Subsidiary or such acquisition, and does not exceed
$1,000,000 in the aggregate at any time;




          (f) Permitted Contingent Obligations;




          (g) Refinancing Debt as long as each Refinancing Condition is satisfied;




          (h) Investments that are not Restricted Investments;




          (i) Hedging Agreements permitted under Section 10.2.15;




          (j) Debt in respect of (i) workers’ compensation claims or obligations in respect of health,
disability or other employee benefits or property, casualty or liability insurance or
self-insurance or completion, bid, performance, appeal or surety bonds issued for the account of
the Borrower or any Subsidiary, bankers acceptances and other similar obligations not constituting
Borrowed Money that are incurred in the ordinary course of business, and (ii) guarantees of, or
obligations of the Borrower or any Subsidiary with respect to letters of credit supporting, any
obligations described in clause (m);




          (k) Debt arising from the honoring by a bank or other financial institution of a cheque, draft
or similar instrument (except in the case of daylight overdrafts) drawn against insufficient funds
in the ordinary course of business; provided, however, that such Debt is extinguished within five
Business Days of incurrence;




          (l) Debt arising in connection with endorsement of instruments for deposit in the ordinary
course of business Debt with respect to the deferred purchase price due to the seller for any
Permitted Acquisition, provided that such Debt is subordinated to the Obligations on terms
reasonably acceptable to Lender;




          (m) Debt arising from agreements of the Borrower or any Subsidiary providing for
indemnification, adjustment of purchase price, earn-outs or similar obligations, in each case,
incurred or assumed in connection with the disposition or acquisition of any Subsidiary or any
other business or assets, other than guarantees of Debt incurred by any Person acquiring all
or any portion of such Subsidiary, business or assets for the purpose of financing such
acquisition;




          (n) Debt owing to Parent or any other Borrower under the US Loan Documents, provided that not
more than $6,000,000 of such loans may be outstanding at any one time; and Unsecured Debt assumed
in connection with Permitted Acquisitions in an aggregate amount not to exceed $200,000 at any time
outstanding;





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          (o) Debt that is not included in any of the preceding clauses of this Section, is not secured
by a Lien and does not exceed $500,000 in the aggregate at any time.




          10.2.2 PERMITTED LIENS. Create or suffer to exist any Lien upon any of its Property,
except the following (collectively, “PERMITTED LIENS”):




          (a) Liens granted pursuant to the Security Documents and other Liens in favor of Lender;




          (b) Purchase Money Liens securing Permitted Purchase Money Debt and Capital Lease Liens
securing Permitted Capital Leases;




          (c) Liens for Taxes not yet past due or being Properly Contested; statutory Liens, such as
carriers’, warehousemen’s, materialmen’s, workmen’s, suppliers’, repairmen’s and mechanics’ Liens
and other similar Liens (other than Liens for Taxes and Landlord’s and Lessor’s Liens) arising in
the ordinary course of business, but only if (i) payment of the obligations secured thereby is not
yet due or is being Properly Contested, and (ii) such Liens do not materially impair the value or
use of the Property or materially impair operation of the business of the Borrower or Subsidiary;




          (d) (i) Liens incurred or deposits or pledges made in the ordinary course of business to
secure the performance of tenders, bids, leases, contracts (except those relating to Borrowed
Money), statutory obligations and other similar obligations, or arising as a result of progress
payments under government contracts, as long as such Liens are at all times junior to Lender’s
Liens, and (ii) pledges and deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other social security laws or regulations, other
than any Liens for Taxes;




          (e) (i) landlords’ and lessors’ Liens in respect of rent not in default and (ii) Liens arising
in the ordinary course of business that are subject to Lien Waivers;




          (f) Liens arising by virtue of a judgment or judicial order against the Borrower or a
Subsidiary, or any Property of the Borrower or a Subsidiary, as long as such Liens are adequately
bonded and any appropriate legal proceedings which may have been duly initiated for the review of
such judgment have not been finally terminated or the period within which the proceedings may be
initiated has not expired; easements, rights-of-way, restrictions (including zoning restrictions),
covenants, licenses, encroachments, protrusions or other agreements of record, and other similar
charges or encumbrances on Real Estate, that do not secure any Debt
and do not interfere with the ordinary course of business; normal and customary rights of
setoff upon deposits in favor of depository institutions, and Liens of a collecting bank on Payment
Items in the course of collection; and existing Liens shown on Schedule 10.2.2 and any Lien granted
as a replacement or substitute therefor; provided that any such replacement or substitute Lien
(i) except as permitted by Section 10.2.1, does not secure an aggregate amount of Debt, if any,
greater than that secured on the Closing Date and (ii) is not expanded beyond the property or
categories of property subject thereto on the Closing Date; leases or subleases of the properties
of the Borrower or a Subsidiary granted by such Person to third parties, in each case entered into
in the ordinary course of business so long as such leases or subleases do not, individually or in
the aggregate, (i) interfere in any material respect with the ordinary conduct of the business of
the Borrower or a Subsidiary or (ii) materially impair the use (for its intended





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purposes) or the value of the property subject thereto; bankers’ Liens, rights of setoff and
other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or
more accounts maintained by the Borrower or a Subsidiary, in each case granted in the ordinary
course of business in favour of the bank or banks or security intermediary with which such accounts
are maintained, securing amounts owing to such bank or securities intermediary including with
respect to cash management and operating account arrangements, including those involving pooled
accounts and netting arrangements; provided that, unless such Liens are non-consensual and arise by
operation of law, in no case shall any such Liens secure (either directly or indirectly) the
repayment of any Debt;




          (g) Liens on fixed assets acquired in connection with a Permitted Acquisition so long as such
Liens were existing at the time of such Acquisition by a Borrower or Subsidiary and were not
incurred, extended or renewed in contemplation of such Acquisition; provided that (i) the
Debt secured by such Lien is permitted under Section 10.2.1, (ii) the Lien shall attach solely to
the property acquired, and (iii) at the time of acquisition of such fixed assets, the aggregate
amount remaining unpaid on all Debt secured by Liens on such fixed assets whether or not assumed by
a Borrower or Subsidiary shall not exceed an amount equal to the fair market value at the time of
acquisition of such fixed assets;




          (h) Liens in favour of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods;




          (i) Liens securing Refinancing Debt permitted sunder Section 10.2.1;




          (j) Liens on property of and Equity Interests in a Foreign Subsidiary securing Debt of such
Foreign Subsidiary permitted under Section 10.2.1(h);




          (k) Liens in respect of the UK Lease Deposit; and Liens incidental to the conduct of the
business or the ownership of the assets of the Borrower or a Subsidiary that (x) were not incurred
in connection with Borrowed Money, (y) do not in the aggregate materially detract from the value of
the assets subject thereto or materially impair the use thereof in the operation of such business
and (z) do not secure obligations aggregating in excess of $200,000.




          10.2.3 [INTENTIONALLY DELETED].




          10.2.4 DISTRIBUTIONS; UPSTREAM PAYMENTS. Declare or make any Distributions, except
the Borrower may declare and pay Upstream Payments.




          10.2.5 RESTRICTED INVESTMENTS. Make any Restricted Investment.




          10.2.6 DISPOSITION OF ASSETS. Make any Asset Disposition, except a Permitted Asset
Disposition, a disposition of Equipment under Section 8.4.2, or a transfer of Property by a
Subsidiary or Obligor to the Borrower.




          10.2.7 LOANS. Make any loans or other advances of money to any Person, except
(a) advances to an officer or employee for salary, travel expenses, commissions and similar items
in the ordinary course of business; (b) prepaid expenses and extensions of trade credit made in the
ordinary course of business; (c) deposits with financial institutions permitted hereunder; (d) as
long as no Default or Event of Default exists, intercompany loans by a




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Subsidiary to the Borrower, (e) Permitted Investments and (f) a loan by Borrower to Parent
provided that not more than $6,000,000 of such loans may be outstanding at any one time.




          10.2.8 RESTRICTIONS ON PAYMENT OF CERTAIN DEBT. (a) Make any payments (whether
voluntary or mandatory, or a prepayment, redemption, retirement, defeasance or acquisition) with
respect to any Subordinated Debt, except regularly scheduled payments of principal, interest and
fees, but only to the extent permitted under any subordination agreement relating to such Debt (and
a Senior Officer of Borrower shall certify to Lender, not less than five Business Days prior to the
date of payment, that all conditions under such agreement have been satisfied); or (b) if an Event
of Default has occurred and is continuing or will result after giving effect thereto, make any
voluntary prepayment of Borrowed Money (other than the Obligations) prior to the due date for any
payments under the agreements evidencing such Debt as in effect on the Closing Date (or as amended
thereafter with the consent of Lender).




          10.2.9 FUNDAMENTAL CHANGES. Merge, combine or consolidate with any Person, or
liquidate, wind up its affairs or dissolve itself, in each case whether in a single transaction or
in a series of related transactions, except for mergers or consolidations of a wholly-owned
Subsidiary into the Borrower; change its name or conduct business under any fictitious name, or
maintain its centre of main interests (as that term is used in Article 3(1) of The Council of the
European Union Regulation No. 1346/2000 on Insolvency Proceedings (the “REGULATION”), other
than in England and Wales or have an “establishment” (as that term is used in Article 2(h) of the
Regulation) in any other jurisdiction, without, in each such case, giving Lender 30 days advance
written notice thereof; change its tax, charter or other organizational identification number; or
change its form or country of incorporation without giving Lender 30 days advance written notice
thereof.




          10.2.10 SUBSIDIARIES. Form or acquire any Subsidiary after the Closing Date, except
in accordance with Sections 10.1.9 and 10.2.5.




          10.2.11 ORGANIC DOCUMENTS. Amend, modify or otherwise change any of its Organic
Documents except for any amendment, modification or other change that does not adversely affect
Lender or any duty to pay the Obligations.




          10.2.12 TAX CONSOLIDATION. File or consent to the filing of any consolidated income
tax return with any Person other than Parent and its Subsidiaries.




          10.2.13 ACCOUNTING CHANGES. Make any material change in accounting treatment or
reporting practices, except as required by GAAP and in accordance with Section 1.2; or change its
Fiscal Year.




          10.2.14 AGGREGATE OUTSTANDINGS. At no time shall the sum of all outstanding
obligations under the US Loan Facility plus all Obligations be in excess of $55,000,000.




          10.2.15 HEDGING AGREEMENTS. Enter into any Hedging Agreement, except to hedge risks
arising in the ordinary course of business and not for speculative purposes.




          10.2.16 CONDUCT OF BUSINESS. Engage in any business, other than its business as
conducted on the Closing Date and any activities incidental thereto and business reasonably related
and/or complementary thereto.




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          10.2.17 AFFILIATE TRANSACTIONS. Enter into or be party to any transaction with an
Affiliate, except (a) transactions contemplated by the Loan Documents; (b) payment of reasonable
compensation to officers and employees for services actually rendered, and loans and advances
permitted by Section 10.2.7; (c) payment of customary directors’ fees and indemnities;
(d) transactions solely between Borrower and Parent as set forth in Section 10.2.7;
(e) transactions with Affiliates that were consummated prior to the Closing Date, as shown on
Schedule 10.2.17; (f) transactions with Affiliates in the ordinary course of business, upon fair
and reasonable terms fully disclosed to Lender and no less favorable than would be obtained in a
comparable arm’s-length transaction with a non-Affiliate; (g) Permitted Distributions;
(h) Permitted Investments; (i) Permitted Asset Dispositions and (j) payment of administrative or
related expenses of Borrower in the ordinary course of business and consistent with past practices.




          10.2.18 [INTENTIONALLY OMITTED].




          10.2.19 AMENDMENTS TO SUBORDINATED DEBT. Amend, supplement or otherwise modify any
document, instrument or agreement relating to any Subordinated Debt, if such modification
(a) increases the principal balance of such Debt, or increases any required cash payment payable
prior to the Full Payment of all Obligations; (b) accelerates the date on which any installment of
principal or any interest is due, or adds any additional redemption, put or prepayment provisions;
(c) shortens the final maturity date or otherwise accelerates amortization; (d) increases the
interest rate; (e) increases or adds any fees or charges; (f) modifies any covenant in a manner or
adds any representation, covenant or default that is more onerous or restrictive in any material
respect for the Borrower or Subsidiary, or that is otherwise materially adverse to the Borrower,
any Subsidiary or Lender; or (g) results in the Obligations not being fully benefited by the
subordination provisions thereof.




SECTION 11 EVENTS OF DEFAULT; REMEDIES ON DEFAULT




     11.1 EVENTS OF DEFAULT. Each of the following shall be an “Event of Default”
hereunder, if the same shall occur for any reason whatsoever, whether voluntary or involuntary, by
operation of law or otherwise:



          (a) The Borrower fails to pay (i) when and as required to be paid hereunder, any amount of
principal or interest of any Loan or any reimbursement of any drawing under a Letter of Credit, or
(ii) within five Business Days after the same becomes due, any other amount payable hereunder or
under any other Loan Document;




          (b) Any representation, warranty or other written statement of an Obligor made in connection
with any Loan Documents or transactions contemplated thereby is incorrect or misleading in any
material respect when given;




          (c) The Borrower breaches or fail to perform any covenant contained in Sections 2.1.4, 6.3,
8.1, 8.2.4, 8.2.5, 8.6.2, 10.1.1(a), 10.1.2, or 10.2 or Clause 6 of the Debenture;




          (d) An Obligor breaches or fails to perform any other covenant contained in any Loan
Documents, and such breach or failure is not cured within 30 days after a Senior Officer of such
Obligor has knowledge thereof or receives notice thereof from Lender, whichever is sooner;




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          (e) A Guarantor repudiates, revokes or attempts to revoke its Guaranty; an Obligor denies or
contests the validity or enforceability of any Loan Documents or Obligations, or the perfection or
priority of any Lien granted to Lender; or any Loan Document ceases to be in full force or effect
for any reason (other than a waiver or release by Lender);




          (f) Any “Event of Default” occurs under any US Loan Document, or any other document,
instrument or agreement to which an Obligor is a party or by which it or any of its Properties is
bound, relating to any Debt (other than the Obligations) in excess of $200,000, if the maturity of
or any payment with respect to such Debt may be accelerated or demanded due to such “Event of
Default”;




          (g) Any judgment or order for the payment of money is entered against an Obligor in an amount
that exceeds, individually or cumulatively with all unsatisfied judgments or orders against all
Obligors, $500,000 (net of any insurance coverage therefor not disputed by the insurer), and the
same shall remain undischarged, unvacated or unbonded for a period of 30 consecutive days
consecutive days during which execution shall not be effectively stayed, by reason of a pending
appeal or otherwise;




          (h) A loss, theft, damage or destruction occurs with respect to any Collateral if the amount
not covered by insurance exceeds $200,000;




          (i) Any Obligor is enjoined, restrained or in any way prevented by any Governmental Authority
from conducting any material part of its business; any Obligor suffers the loss, revocation or
termination of any material license, permit, lease or agreement necessary to its business; there is
a cessation of any material part of any Obligor’s business for a material period of time; any
material Collateral or Property of the Obligors (taken as a whole) is taken or impaired through
condemnation; any Obligor agrees to or commences any liquidation, dissolution or winding up of its
affairs; or Obligors, taken as a whole cease to be Solvent;




          (j) An Insolvency Proceeding is commenced by any Obligor; any Obligor makes an offer of
settlement, extension or composition to its unsecured creditors generally; a trustee is appointed
to take possession of any substantial Property of or to operate any of the business of any Obligor;
or an Insolvency Proceeding is commenced against any Obligor and: the Obligor consents to
institution of the proceeding, the petition commencing the proceeding is not timely controverted by
the Obligor, the petition is not dismissed within 30 days after filing, or an order for relief is
entered in the proceeding;




          (k) [intentionally omitted];




          (l) [intentionally omitted]; or A Change of Control occurs; or any event occurs or condition
exists that has a Material Adverse Effect.




     11.2 REMEDIES UPON DEFAULT. If an Event of Default described in Section 11.1(j)
occurs with respect to the Borrower, then to the extent permitted by Applicable Law, all
Obligations shall become automatically due and payable and all Revolver Commitments shall
terminate, without any action by Lender or notice of any kind.1 In addition, or if any other
Event of Default exists, Lender may in its discretion do any one or more of the following from



 



1 This provision is of doubtful validity under English law.




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time to time: declare any Obligations immediately due and payable, whereupon they shall be
due and payable without diligence, presentment, demand, protest or notice of any kind, all of
which are hereby waived by Borrower to the fullest extent permitted by law; terminate, reduce or
condition any Revolver Commitment, or make any adjustment to the Borrowing Base; require Obligors
to Cash Collateralize the Obligations including the LC Obligations and Obligations in respect of
Bank Products but excluding other contingent Obligations such as rights to indemnification as to
which no claim has been made, and, if Obligors fail promptly to deposit such Cash Collateral,
Lender may advance the required Cash Collateral as Revolver Loans (whether or not an Overadvance
exists or is created thereby, or the conditions in Section 6 are satisfied); and exercise any
other rights or remedies afforded under the Debenture, any agreement, by law, at equity or
otherwise.




     11.3 LICENSE. Except (i) with respect to Intellectual Property constituting Excluded
Assets, or (ii) as prohibited by any agreement (including any License) with respect to any
Intellectual Property, Lender is hereby granted an irrevocable, non-exclusive license or other
right to use, license or sub-license (without payment of royalty or other compensation to any
Person), effective at any time that a Default or Event of Default has occurred and is continuing,
any or all Intellectual Property of Borrower, computer hardware and software, trade secrets,
brochures, customer lists, promotional and advertising materials, labels, packaging materials and
other Property, in advertising for sale, marketing, selling, collecting, completing manufacture
of, or otherwise exercising any rights or remedies with respect to, any Collateral.



     11.4 SETOFF. At any time during an Event of Default, Lender and its Affiliates are
authorized, to the fullest extent permitted by Applicable Law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final, in whatever currency) at any
time held and other obligations (in whatever currency) at any time owing by Lender or such
Affiliate to or for the credit or the account of Borrower against any Obligations, irrespective of
whether or not Lender or such Affiliate shall have made any demand under this Agreement or any
other Loan Document and although such Obligations may be contingent or unmatured or are owed to a
branch or office of Lender or such Affiliate different from the branch or office holding such
deposit or obligated on such indebtedness. The rights of Lender and each such Affiliate under
this Section are in addition to other rights and remedies (including other rights of setoff) that
such Person may have.



     11.5 REMEDIES CUMULATIVE; NO WAIVER.



          11.5.1 CUMULATIVE RIGHTS. All covenants, conditions, provisions, warranties,
guaranties, indemnities and other undertakings of Borrower contained in the Loan Documents are
cumulative and not in derogation or substitution of each other. In particular, the rights and
remedies of Lender are cumulative, may be exercised at any time and from time to time, concurrently
or in any order, and shall not be exclusive of any other rights or remedies that Lender may have,
whether under any agreement, by law, at equity or otherwise.




          11.5.2 WAIVERS. The failure or delay of Lender to require strict performance by
Borrower with any terms of the Loan Documents, or to exercise any rights or remedies with respect
to Collateral or otherwise, shall not operate as a waiver thereof nor as establishment of a course
of dealing. All rights and remedies shall continue in full force and effect until Full Payment of
all Obligations. No modification of any terms of any Loan Documents (including any waiver thereof)
shall be effective, unless such modification is




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specifically provided in a writing directed to Borrower and executed by Lender, and such
modification shall be applicable only to the matter specified. No waiver of any Default or Event
of Default shall constitute a waiver of any other Default or Event of Default that may exist at
such time, unless expressly stated. If Lender accepts performance by any Obligor under any Loan
Documents in a manner other than that specified therein, or during any Default or Event of Default,
or if Lender shall delay or exercise any right or remedy under any Loan Documents, such acceptance,
delay or exercise shall not operate to waive any Default or Event of Default nor to preclude
exercise of any other right or remedy.




SECTION 12 MISCELLANEOUS




     12.1 Consents, Amendments and Waivers.



          12.1.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the
benefit of Borrower, Lender, and their respective successors and assigns, except that (i) Borrower
shall have no right to assign its rights or delegate its obligations under any Loan Documents and
(ii) no assignment by Lender (other than an assignment to Lender’s Affiliates) of its rights and
obligations hereunder shall be effective without the prior written consent of Parent which shall
not be unreasonably withheld or delayed and shall be deemed given if no objection is made within 15
Business Days after notice of the proposed assignment by Lender; PROVIDED that if a Default
or an Event of Default exists, Lender may assign any of its rights and obligations without Parent’s
consent.




          12.1.2 AMENDMENTS AND OTHER MODIFICATIONS. No modification of any Loan Document,
including any extension or amendment of a Loan Document or any waiver of a Default or Event of
Default, shall be effective without the prior written agreement of Lender and each Obligor party to
such Loan Document. However, only the consent of the parties to a Bank Product shall be required
for any modification of such agreement, and no Affiliate of Lender that is party to a Bank Product
agreement shall have any other right to consent to or participate in any manner in modification of
any other Loan Document. The funding of any Loans or issuance of any Letters of Credit during a
Default or Event of Default shall not be deemed to constitute a waiver of such Default or Event of
Default, nor to establish a course of dealing. Any waiver or consent granted by Lender hereunder
shall be effective only if in writing, and then only in the specific instance and for the specific
purpose for which it is given.




     12.2 Indemnity. BORROWER SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES AGAINST
ANY CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE, INCLUDING CLAIMS ARISING
FROM THE NEGLIGENCE OF AN INDEMNITEE. In no event shall any party to a Loan Document have any
obligation thereunder to indemnify or hold harmless an Indemnitee with respect to a Claim that is
determined in a final, non-appealable judgment by a court of competent jurisdiction to result from
the gross negligence or willful misconduct of such Indemnitee.



     12.3 NOTICES AND COMMUNICATIONS.



          12.3.1 NOTICE ADDRESS. Subject to Section 4.1.3, all notices and other communications
by or to a party hereto shall be in writing and shall be given to the Borrower, at Borrower’s
address shown on the signature pages hereof, and to any other Person at its address



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shown on the signature pages hereof, or at such other address as a party may hereafter specify
by notice in accordance with this Section 12.3. Each such notice or other communication shall be
effective only (a) if given by facsimile transmission, when transmitted to the applicable facsimile
number, if confirmation of receipt is received; (b) if given by mail, three Business Days after
deposit in the mail, with first-class postage pre-paid, addressed to the applicable address; or
(c) if given by personal delivery, when duly delivered to the notice address with receipt
acknowledged; or (d) if given by electronic communication in accordance with Section 12.3.2, as
provided in such Section. Notwithstanding the foregoing, no notice to Lender pursuant to Section
2.1.3, 2.3, 3.1.2, or 4.1.1 shall be effective until actually received by the individual to whose
attention at Lender such notice is required to be sent. Any written notice or other communication
that is not sent in conformity with the foregoing provisions shall nevertheless be effective on the
date actually received by the noticed party.




          12.3.2 ELECTRONIC COMMUNICATIONS; VOICE MAIL. Electronic mail and internet websites
may be used only for routine communications, such as financial statements, Borrowing Base
Certificates and other information required by Section 10.1.2, administrative matters, distribution
of Loan Documents for execution, and matters permitted under Section 4.1.3. Lender makes no
assurances as to the privacy and security of electronic communications. Voice mail may not be used
as effective notice under the Loan Documents. Unless Borrower and Lender otherwise agree, (i)
notices and other communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written acknowledgement); provided that
if such notice or other communication is not sent during the normal business hours of the
recipient, such notice or communication shall be deemed to have been sent at the opening of
business on the next business day for the recipient, and (ii) notices or communications posted to
an Internet or intranet website shall be deemed received upon the deemed receipt by the intended
recipient at its e-mail address as described in the foregoing clause (i) of notification that such
notice or communication is available and identifying the website address therefor.




          12.3.3 NON-CONFORMING COMMUNICATIONS. Lender may rely upon any notices purportedly
given by or on behalf of the Borrower even if such notices were not made in a manner specified
herein, were incomplete or were not confirmed, or if the terms thereof, as understood by the
recipient, varied from a later confirmation. Borrower shall indemnify and hold harmless each
Indemnitee from any liabilities, losses, costs and expenses arising from any telephonic
communication purportedly given by or on behalf of the Borrower.




     12.4 PERFORMANCE OF BORROWER’S OBLIGATIONS. Lender may, in its reasonable discretion
at any time and from time to time, at Borrower’s expense, pay any amount or do any act required of
the Borrower under any Loan Documents or otherwise lawfully requested by Lender (and, in any such
case, not paid or performed by an Obligor within 10 days after written request therefor by Lender)
to (a) enforce any Loan Documents or collect any Obligations; (b) protect, insure, maintain or
realize upon any Collateral; or (c) defend or maintain the validity or priority of Lender’s Liens
in any Collateral, including any payment of a judgment, insurance premium, warehouse charge,
finishing or processing charge, or landlord claim, or any discharge of a Lien. All payments,
costs and expenses (including Extraordinary Expenses) of Lender under this Section shall be
reimbursed by Borrower, on demand, with interest from the date incurred to the date of payment
thereof at the Default Rate applicable to Base Rate Revolver Loans. Any payment made or action
taken by Lender under



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this Section shall be without prejudice to any right to assert an Event of Default or to
exercise any other rights or remedies under the Loan Documents.




     12.5 CREDIT INQUIRIES. Borrower hereby authorizes Lender (but it shall have no
obligation) to respond to usual and customary credit inquiries from third parties concerning the
Borrower or any Subsidiary.



     12.6 SEVERABILITY. Wherever possible, each provision of the Loan Documents shall be
interpreted in such manner as to be valid under Applicable Law. If any provision is found to be
invalid under Applicable Law, it shall be ineffective only to the extent of such invalidity and
the remaining provisions of the Loan Documents shall remain in full force and effect.



     12.7 CUMULATIVE EFFECT; CONFLICT OF TERMS. The provisions of the Loan Documents are
cumulative. The parties acknowledge that the Loan Documents may use several limitations, tests or
measurements to regulate similar matters, and they agree that these are cumulative and that each
must be performed as provided. Except as otherwise provided in another Loan Document (by specific
reference to the applicable provision of this Agreement), if any provision contained herein is in
direct conflict with any provision in another Loan Document, the provision herein shall govern and
control.



     12.8 COUNTERPARTS. Any Loan Document may be executed in counterparts, each of which
shall constitute an original, but all of which when taken together shall constitute a single
contract. This Agreement shall become effective when Lender has executed it and received
counterparts bearing the signatures of all other parties hereto. Delivery of a signature page of
any Loan Document by telecopy or electronic communication (e.g., pdf files delivered via email)
shall be effective as delivery of a manually executed counterpart of such agreement.



     12.9 ENTIRE AGREEMENT. Time is of the essence of the Loan Documents. The Loan
Documents constitute the entire contract among the parties relating to the subject matter hereof,
and supersede any and all previous agreements and understandings, oral or written, relating to the
subject matter hereof.



     12.10 NO CONTROL; NO ADVISORY OR FIDUCIARY RESPONSIBILITY. Nothing in any Loan
Document and no action of Lender pursuant to any Loan Document shall be deemed to constitute
control of any Obligor by Lender. In connection with all aspects of each transaction contemplated
by any Loan Document, Borrower acknowledges and agrees that (a)(i) this credit facility and all
related services by Lender or its Affiliates are arm’s-length commercial transactions between
Borrower and such Person; (ii) Borrower has consulted its own legal, accounting, regulatory and
tax advisors to the extent it has deemed appropriate; and (iii) Borrower is capable of evaluating
and understanding, and does understand and accept, the terms, risks and conditions of the
transactions contemplated by the Loan Documents; (b) each of Lender and its Affiliates is and has
been acting solely as a principal in connection with this credit facility, is not the financial
advisor, agent or fiduciary for Borrower, any of its Affiliates or any other Person, and has no
obligation with respect to the transactions contemplated by the Loan Documents except as expressly
set forth therein; and (c) Lender and its Affiliates may be engaged in a broad range of
transactions that involve interests that differ from Borrower and its Affiliates, and have no
obligation to disclose any of such interests to Borrower or its Affiliates. To the fullest extent
permitted by Applicable Law, Borrower hereby waives and releases any



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claims that it may have against Lender and its Affiliates with respect to any breach or
alleged breach of agency or fiduciary duty in connection with any aspect of any transaction
contemplated by a Loan Document.




     12.11 CONFIDENTIALITY. Lender agrees to maintain the confidentiality of all
Information (as defined below), except that Information may be disclosed (a) to its Affiliates and
to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors
and representatives (it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep such Information
confidential); (b) to the extent requested by any regulatory authority purporting to have
jurisdiction over it (including any self-regulatory authority, such as the National Association of
Insurance Commissioners); (c) to the extent required by Applicable Law or by any subpoena or
similar legal process; (d) to any other party hereto; (e) in connection with the exercise of any
remedies, the enforcement of any rights, or any action or proceeding relating to any Loan
Documents; (f) subject to an agreement containing provisions substantially the same as those of
this Section, to any potential or actual transferee of any interest in a Loan Document or any
actual or prospective party (or its advisors) to any Bank Product; (g) with the consent of the
Borrower; or (h) to the extent such Information (i) becomes publicly available other than as a
result of a breach of this Section or (ii) becomes available to Lender or any of its Affiliates on
a non-confidential basis from a source other than Borrower. Notwithstanding the foregoing, Lender
may issue and disseminate to the public general information describing this credit facility,
including the names and addresses of Borrower and a general description of Borrower’s businesses,
and may use Borrower’s names in advertising and other promotional materials. For purposes of this
Section, “Information” means all information received from an Obligor or Subsidiary
relating to it or its business, other than any information that is available to Lender on a
non-confidential basis prior to disclosure by the Obligor or Subsidiary. Lender acknowledges that
(i) Information may include material non-public information concerning an Obligor or Subsidiary;
(ii) it has developed compliance procedures regarding the use of material non-public information;
and (iii) it will handle such material non-public information in accordance with Applicable Law,
including federal and state securities laws.



     12.12 [INTENTIONALLY OMITTED]



     12.13 GOVERNING LAW. THIS AGREEMENT, UNLESS OTHERWISE SPECIFIED, SHALL BE GOVERNED
BY THE LAWS OF ENGLAND AND WALES.



     12.14 [Intentionally Omitted].



     12.15 WAIVERS BY BORROWER. To the fullest extent permitted by Applicable Law,
Borrower waives (a) the right to trial by jury (which Lender hereby also waives) in any proceeding
or dispute of any kind relating in any way to any Loan Documents, Obligations or Collateral;
(b) presentment, demand, protest, notice of presentment, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of any commercial paper, accounts, documents,
instruments, chattel paper and guaranties at any time held by Lender on which the Borrower may in
any way be liable, and hereby ratifies anything Lender may do in this regard; (c) notice prior to
taking possession or control of any Collateral; (d) any bond or security that might be required by
a court prior to allowing Lender to exercise any rights or remedies; (e) the benefit of all
valuation, appraisement and exemption laws; (f) any claim against Lender, on any theory of
liability, for special, indirect, consequential, exemplary or



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punitive damages (as opposed to direct or actual damages) in any way relating to any
Enforcement Action, Obligations, Loan Documents or transactions relating thereto; and (g) notice
of acceptance hereof. Borrower acknowledges that the foregoing waivers are a material inducement
to Lender entering into this Agreement and that Lender is relying upon the foregoing in its
dealings with Borrower. Borrower has reviewed the foregoing waivers with its legal counsel and
has knowingly and voluntarily waived its jury trial and other rights following consultation with
legal counsel. In the event of litigation, this Agreement may be filed as a written consent to a
trial by the court.




     12.16 [INTENTIONALLY OMITTED].



     12.17 JUDGMENT CURRENCY. If for the purpose of obtaining judgment in any court it is
necessary to convert an amount due hereunder in the currency in which it is due (the “Original
Currency”) into another currency (the “Second Currency”), the rate of exchange applied shall be
that at which, in accordance with normal banking procedures, Lender could purchase in the London
foreign exchange market, the Original Currency with the Second Currency on the date two (2)
Business Days preceding that on which judgment is given. Each Obligor agrees that its obligation
in respect of any Original Currency due from it hereunder or under any other Loan Document to
which it is party shall, notwithstanding any judgment or payment in such other currency, be
discharged only to the extent that, on the Business Day following the date Lender receives payment
of any sum so adjudged to be due hereunder in the Second Currency, Lender may, in accordance with
normal banking procedures, purchase, in the London foreign exchange market, the Original Currency
with the amount of the Second Currency so paid; and if the amount of the Original Currency so
purchased or could have been so purchased is less than the amount originally due in the Original
Currency, each Obligor agrees as a separate obligation and notwithstanding any such payment or
judgment to indemnify Lender and the Lenders against such loss. The term “rate of exchange” in
this Section 12.17 means the spot rate at which Lender, in accordance with normal practices, is
able on the relevant date to purchase the Original Currency with the Second Currency, and includes
any premium and costs of exchange payable in connection with such purchase.



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     EXECUTED AS A DEED on the date set forth above.



	 	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	          /s/ John Tolle
 

	 	 
	 

	 	Name:
	 	           John Tolle	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:
	 	           Vice President	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 	55 South Lake Avenue, Suite 900	 	 
	 	 	Pasadena, California 91011	 	 
	 	 	Attn:     John Tolle	 	 
	 

	 	Telecopy:
	 	(626) 584-4601	 	 
	 
	 	 	 	 	 	 





	 	 	 	 	 	 	 
	 

	 	BORROWER:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	ASHWORTH U.K. LTD.	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	/s/ Halina Balys
 

	 ,	Director
	 	 
	 
	 	 	 	 	 	 
	 

	 	/s/ Greg W. Slack
 

	 ,	Director
	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:	 	 	 	 
	 

	 	21 St. Thomas Street	 	 	 	 
	 

	 	Bristol BS16JS	 	 	 	 
	 

	 	United Kingdom	 	 	 	 






S-1

Loan Agreement (UK)