Exhibit 10.1






Exhibit 10.1




SECOND AMENDED AND RESTATED CREDIT AGREEMENT AND GUARANTY




dated as of




August 7, 2009




among




HAMPSHIRE GROUP, LIMITED,




as Borrower,




HAMPSHIRE GROUP, LIMITED,

HAMPSHIRE DESIGNERS, INC.,

and

ITEM-EYES, INC.,

as Letter of Credit Account Parties,




HAMPSHIRE DESIGNERS, INC.,

and

ITEM-EYES, INC.,

as Guarantors,




and




HSBC BANK USA, NATIONAL ASSOCIATION,

JPMORGAN CHASE BANK, N.A.,

WACHOVIA BANK, NATIONAL ASSOCIATION,

and

BANK LEUMI USA,




AS BANKS,

and




HSBC BANK USA, NATIONAL ASSOCIATION,




as Agent



 


 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	 
	ARTICLE I DEFINITIONS, ACCOUNTING TERMS AND RULES OF CONSTRUCTION
	 	 	2	 
	Section 1.01 Definitions
	 	 	2	 
	Section 1.02 Accounting Terms
	 	 	24	 
	Section 1.03 Computation of Time Periods
	 	 	24	 
	Section 1.04 Rules of Construction
	 	 	24	 
	ARTICLE II REVOLVING CREDIT LOANS
	 	 	25	 
	Section 2.01 Revolving Credit
	 	 	25	 
	Section 2.02 [Intentionally Omitted.]
	 	 	25	 
	Section 2.03 Notice and Manner of Borrowing
	 	 	25	 
	Section 2.04 Conversions and Continuation
	 	 	26	 
	Section 2.05 Non-Receipt of Funds by Agent
	 	 	27	 
	Section 2.06 Interest
	 	 	27	 
	Section 2.07 Notes
	 	 	27	 
	Section 2.08 Repayments and Mandatory and Optional Prepayments
	 	 	28	 
	Section 2.09 Method of Payment
	 	 	29	 
	Section 2.10 Use of Proceeds
	 	 	30	 
	Section 2.11 Minimum Amounts
	 	 	30	 
	Section 2.12 Establishment of Loan Account; Collection of Accounts
	 	 	30	 
	Section 2.13 Closing Fee
	 	 	30	 
	Section 2.14 Fee Letter
	 	 	31	 
	Section 2.15 Commitment Fee
	 	 	31	 
	Section 2.16 Defaulting Bank
	 	 	31	 
	ARTICLE III LETTERS OF CREDIT
	 	 	32	 
	Section 3.01 Trade Letters of Credit; Cash Collateral for Letters of Credit Expiring After Termination Date
	 	 	32	 
	Section 3.02 Reimbursement Obligation
	 	 	33	 
	Section 3.03 Payment of Commissions, Expenses and Interest
	 	 	34	 
	Section 3.04 Proper Drawing; Letter of Credit Issuing Bank’s Honoring
	 	 	34	 
	Section 3.05 Standby Letters of Credit
	 	 	35	 
	Section 3.06 Amendment; Change; Modification; No Waiver
	 	 	35	 
	Section 3.07 U.C.P. and I.S.P.; Agreements and Acknowledgments; Indemnification
	 	 	35	 
	Section 3.08 Licenses; Insurance; Regulations
	 	 	37	 
	Section 3.09 Airway and Steamship Guaranties
	 	 	37	 
	Section 3.10 Additional Security
	 	 	38	 
	Section 3.11 Continuing Rights and Obligations
	 	 	38	 
	Section 3.12 Instructions; No Liability
	 	 	38	 
	Section 3.13 Steamship Guaranty
	 	 	39	 
	Section 3.14 Letter of Credit Application and Agreement
	 	 	39	 
	Section 3.15 Existing Letters of Credit; Use of Term “Letter of Credit Issuing Bank”
	 	 	39	 
	Section 3.16 Borrower’s Obligations Under Letters of Credit
	 	 	39	 






 


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	 	 	Page	 
	 
	ARTICLE IV PARTICIPATION
	 	 	39	 
	Section 4.01 Participating Banks’ Pro Rata Shares
	 	 	39	 
	Section 4.02 Sale and Purchase of Participation
	 	 	40	 
	Section 4.03 Participation in Fees and Collateral; Relationship
	 	 	40	 
	Section 4.04 Procedures
	 	 	40	 
	Section 4.05 Collections and Remittances
	 	 	41	 
	Section 4.06 Sharing of Setoffs and Collections
	 	 	41	 
	Section 4.07 Indemnification; Costs and Expense
	 	 	42	 
	Section 4.08 Administration; Standard of Care
	 	 	42	 
	Section 4.09 Independent Investigation by the Participating Banks
	 	 	43	 
	Section 4.10 Participating Banks’ Ownership of Interests in the Participation; Repurchases by
the Letter of Credit Issuing Banks
	 	 	44	 
	ARTICLE V GUARANTY
	 	 	44	 
	Section 5.01 Guaranty
	 	 	44	 
	Section 5.02 Guarantor’s Guaranty Obligations Unconditional
	 	 	45	 
	Section 5.03 Waivers
	 	 	45	 
	Section 5.04 Subrogation
	 	 	46	 
	Section 5.05 Limitation of Liability
	 	 	46	 
	ARTICLE VI CONDITIONS PRECEDENT
	 	 	46	 
	Section 6.01 Conditions Precedent to Use of a Credit Facility on and after the Restatement Date
	 	 	46	 
	Section 6.02 Conditions Precedent to All Credit Facilities
	 	 	48	 
	Section 6.03 Deemed Representation
	 	 	48	 
	ARTICLE VII REPRESENTATIONS AND WARRANTIES
	 	 	49	 
	Section 7.01 Incorporation
	 	 	49	 
	Section 7.02 Corporate Power and Authority; No Conflicts
	 	 	49	 
	Section 7.03 Legally Enforceable Agreements
	 	 	49	 
	Section 7.04 Litigation
	 	 	49	 
	Section 7.05 Financial Statements
	 	 	50	 
	Section 7.06 Ownership and Liens
	 	 	50	 
	Section 7.07 Taxes
	 	 	50	 
	Section 7.08 ERISA
	 	 	50	 
	Section 7.09 Subsidiaries; Ownership of Guarantors; Investments
	 	 	51	 
	Section 7.10 Operation of Business
	 	 	51	 
	Section 7.11 No Default on Outstanding Judgments or Orders
	 	 	51	 
	Section 7.12 No Defaults on Other Agreements
	 	 	51	 
	Section 7.13 Labor Disputes and Acts of God
	 	 	51	 
	Section 7.14 Governmental Regulation
	 	 	52	 
	Section 7.15 Partnerships
	 	 	52	 
	Section 7.16 Environmental Protection
	 	 	52	 
	Section 7.17 Solvency
	 	 	52	 
	Section 7.18 Properties; Priority of Liens
	 	 	52	 
	Section 7.19 No Burdensome Restrictions
	 	 	52	 






 


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	 	 	Page	 
	 
	Section 7.20 Federal Regulations
	 	 	52	 
	Section 7.21 Deposit and Securities Accounts
	 	 	53	 
	Section 7.22 Disclosure
	 	 	53	 
	Section 7.23 Security Interests
	 	 	53	 
	Section 7.24 Anti-Terrorism Laws
	 	 	53	 
	Section 7.25 Trading with the Enemy
	 	 	54	 
	ARTICLE VIII AFFIRMATIVE COVENANTS
	 	 	54	 
	Section 8.01 Maintenance of Existence
	 	 	54	 
	Section 8.02 Conduct of Business
	 	 	55	 
	Section 8.03 Maintenance of Properties
	 	 	55	 
	Section 8.04 Maintenance of Records
	 	 	55	 
	Section 8.05 Maintenance of Insurance
	 	 	55	 
	Section 8.06 Compliance with Laws
	 	 	55	 
	Section 8.07 Right of Inspection
	 	 	55	 
	Section 8.08 Reporting Requirements
	 	 	56	 
	Section 8.09 Compliance With Environmental Laws
	 	 	59	 
	Section 8.10 Contractual Obligations
	 	 	59	 
	Section 8.11 Payment of Fees
	 	 	59	 
	Section 8.12 Execution of Supplemental Instruments
	 	 	59	 
	(a)
	 	 	59	 
	Section 8.13 Inactive Subsidiaries
	 	 	59	 
	ARTICLE IX NEGATIVE COVENANTS
	 	 	60	 
	Section 9.01 Debt
	 	 	60	 
	Section 9.02 Guaranties
	 	 	61	 
	Section 9.03 Liens
	 	 	61	 
	Section 9.04 Sale of Assets
	 	 	63	 
	Section 9.05 Transactions with Affiliates
	 	 	63	 
	Section 9.06 Investments; Acquisitions
	 	 	64	 
	Section 9.07 Mergers
	 	 	64	 
	Section 9.08 Leases
	 	 	65	 
	Section 9.09 Dividends
	 	 	65	 
	Section 9.10 Restricted Payments
	 	 	65	 
	Section 9.11 Fiscal Year
	 	 	65	 
	Section 9.12 Changes, Amendments or Modifications
	 	 	65	 
	Section 9.13 Nature of Business
	 	 	65	 
	Section 9.14 Double Negative Pledge
	 	 	66	 
	Section 9.15 Factoring Agreements
	 	 	66	 
	Section 9.16 Deposit and Securities Accounts
	 	 	66	 
	Section 9.17 Anti-Terrorism Laws
	 	 	66	 
	Section 9.18 Trading with the Enemy Act
	 	 	67	 






 


iii









 





	 	 	 	 	 
	 	 	Page	 
	 
	ARTICLE X FINANCIAL COVENANTS
	 	 	67	 
	Section 10.01 Consolidated EBITDA
	 	 	67	 
	Section 10.02 Consolidated Capital Expenditures
	 	 	67	 
	Section 10.03 Minimum Liquidity Amount
	 	 	67	 
	Section 10.04 Net Availability
	 	 	67	 
	Section 10.05 Loan Clean-Up Period
	 	 	67	 
	ARTICLE XI EVENTS OF DEFAULT
	 	 	68	 
	Section 11.01 Events of Default
	 	 	68	 
	Section 11.02 Remedies
	 	 	70	 
	Section 11.03 Application of Proceeds
	 	 	70	 
	ARTICLE XII THE AGENT AND COLLATERAL MONITOR
	 	 	71	 
	Section 12.01 Appointment, Powers and Immunities of Agent
	 	 	71	 
	Section 12.02 Reliance by Agent
	 	 	71	 
	Section 12.03 Defaults
	 	 	72	 
	Section 12.04 Rights of Agent as a Bank
	 	 	72	 
	Section 12.05 Indemnification of Agent
	 	 	72	 
	Section 12.06 Documents
	 	 	72	 
	Section 12.07 Non-Reliance on Agent and Other Banks
	 	 	73	 
	Section 12.08 Failure of Agent to Act
	 	 	73	 
	Section 12.09 Resignation of Agent
	 	 	73	 
	Section 12.10 Amendments Concerning Agency Function
	 	 	74	 
	Section 12.11 Liability of Agent
	 	 	74	 
	Section 12.12 Transfer of Agency Function
	 	 	74	 
	Section 12.13 Withholding Taxes
	 	 	74	 
	Section 12.14 Collateral Monitor
	 	 	74	 
	ARTICLE XIII YIELD PROTECTION
	 	 	75	 
	Section 13.01 Additional Costs
	 	 	75	 
	Section 13.02 Illegality
	 	 	76	 
	Section 13.03 Certain Compensation
	 	 	77	 
	Section 13.04 Substitution of Banks
	 	 	77	 
	ARTICLE XIV MISCELLANEOUS
	 	 	78	 
	Section 14.01 Amendments and Waivers
	 	 	78	 
	Section 14.02 Usury
	 	 	78	 
	Section 14.03 Expenses; Indemnification
	 	 	78	 
	Section 14.04 Assignment; Participation; Additional Bank
	 	 	79	 
	Section 14.05 Notices
	 	 	81	 
	Section 14.06 Setoff; Sharing
	 	 	81	 
	Section 14.07 Jurisdiction; Immunities
	 	 	82	 
	Section 14.08 Governing Law
	 	 	82	 
	Section 14.09 Counterparts
	 	 	82	 
	Section 14.10 Exhibits and Schedules
	 	 	83	 
	Section 14.11 Table of Contents; Headings
	 	 	83	 
	Section 14.12 Severability
	 	 	83	 
	Section 14.13 Integration; Conflicts
	 	 	83	 
	Section 14.14 Jury Trial Waiver
	 	 	83	 
	Section 14.15 HSBC
	 	 	83	 
	Section 14.16 USA PATRIOT Act Notice
	 	 	83	 
	Section 14.17 Amendment and Restatement
	 	 	84	 






 


iv









 





EXHIBITS AND SCHEDULES




Exhibits




	 	 	 
	Exhibit A
	 	Form of Pledge Agreement
	Exhibit B
	 	Form of Security Agreement
	Exhibit C
	 	Form of Trademark Security Agreement
	Exhibit D
	 	Form of Borrowing Notice
	Exhibit E
	 	Form of Borrowing Base Certificate
	Exhibit F
	 	Form of Revolving Credit Note
	Exhibit G
	 	[Intentionally Omitted]
	Exhibit H
	 	Form of Assignment and Acceptance
	Exhibit I
	 	Form of Reaffirmation Agreement
	Exhibit J
	 	Form of Booked Order Report






Schedules




	 	 	 
	Schedule 1.01(a)
	 	Eligible Inventory Locations
	Schedule 1.01(b)
	 	Eligible Trade Letter of Credit Locations
	Schedule 1.01(c)
	 	Existing Letters of Credit
	Schedule 3.01
	 	Trade Letter of Credit Ceiling
	Schedule 7.04
	 	Litigation
	Schedule 7.06
	 	Trademarks
	Schedule 7.09
	 	Direct and Indirect Subsidiaries;
Inactive Subsidiaries; Ownership of Guarantors, Investments
	Schedule 7.13
	 	Labor Disputes and Acts of God
	Schedule 7.21
	 	Deposit and Securities Accounts
	Schedule 9.03
	 	Permitted Liens
	Schedule 10.01
	 	Consolidated EBITDA





 


v









 





SECOND AMENDED AND RESTATED CREDIT AGREEMENT AND GUARANTY dated as of August 7, 2009, among
HAMPSHIRE GROUP, LIMITED, (“Borrower”), HAMPSHIRE DESIGNERS, INC., (“Designers”) and ITEM-EYES,
INC. (“Item-Eyes”), HSBC BANK USA, NATIONAL ASSOCIATION, (“HSBC”), and the other financial
institutions which are now or which hereafter become a party hereto (individually a “Bank” and
collectively the “Banks”), HSBC as Letter of Credit Issuing Bank for all Letters of Credit, and
HSBC, as administrative agent and sole lead arranger for the Banks (in such capacity, together with
any successors in such capacity, the “Agent”).



RECITALS:




(1) The Borrower, the Guarantors, Hampshire Sub, Inc. (f/k/a Shane Hunter, Inc.) SB
Corporation, HSBC, as agent, and various other financial institutions party thereto have previously
entered into an Amended and Restated Credit Agreement and Guaranty dated as of February 15, 2008,
as amended by Amendment No. 1 dated as of April 15, 2008 and, by Amendment No. 2 dated as of August
8, 2008, (as amended, the “Existing Agreement”).



(2) Each Bank shall be deemed, upon the Restatement Date (as defined below), to have
exchanged its Revolving Credit Commitment, its Trade Letter of Credit Commitment and its Standby
Letter of Credit Commitment (as each such term is defined in the Existing Agreement) for the
Revolving Credit Commitment, the Trade Letter of Credit Commitment and the Standby Letter of Credit
Commitment (as each such term is defined below), respectively, in an amount equal to its Pro Rata
Share (as defined below).



(3) The Borrower, the Guarantors, the Banks and the Agent wish to amend the Existing Agreement
to make certain changes in the terms of the Existing Agreement, release and remove certain Banks,
and restate the Existing Agreement in its entirety.



(4) The parties hereto intend that (a) the Obligations (as defined in the Existing Agreement)
that remain unpaid and outstanding as of the Restatement Date shall continue to exist under this
Agreement on the terms set forth herein, (b) any letter of credit outstanding under the Existing
Agreement as of the Restatement Date shall be Letters of Credit under and as defined in this
Agreement and(c) the Collateral (as defined in the Existing Agreement), other than Excluded
Collateral (as defined below) shall continue to secure the Obligations (as defined below).



(5) Following such restatement, this Agreement will set forth the definitive terms and
conditions of the agreement of the Borrower, the Guarantors, the Banks and the Agent regarding the
matters covered by this Agreement as of the date the Existing Agreement is restated (the
“Restatement Date”), and the Existing Agreement will continue to govern such terms prior to such
date.


 


1









 





NOW, THEREFORE, in consideration for the foregoing agreements and for other good and valuable
consideration whose receipt and sufficiency are acknowledged, the Borrower, the Guarantors, the
Banks and the Agent hereby agree as follows:



ARTICLE I




DEFINITIONS, ACCOUNTING TERMS AND RULES OF CONSTRUCTION




Section 1.01 Definitions. As used in this Agreement, the following terms have the following
meanings (terms defined in the singular to have a correlative meaning when used in the plural and
vice versa):



“Accounts” means all of the accounts receivable as defined in the Master Security Agreement
and the Guarantor Security Agreements.



“Accounts Receivable Reserves” means the applicable trade accounts receivable reserves
recorded by the Borrower on its books in accordance with GAAP.



“Affiliate” means, as to any Person, any other Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with such Person; (b) which directly or
indirectly beneficially owns or holds five percent (5%) or more of any class of voting stock of the
such Person; or (c) five percent (5%) or more of the voting stock of which is directly or
indirectly beneficially owned or held by such Person. The term “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by contract, or
otherwise.



“Agent” means HSBC, when acting in its capacity as Agent under any of the Loan Documents, and
any permitted successors and assigns thereto.



“Agent’s Office” means the address of HSBC as set forth on the signature page of this
Agreement, or such other address as HSBC may designate by written notice to Borrower, the
Guarantors and the Banks.



“Agreement” means this Second Amended and Restated Credit Agreement and Guaranty, as the same
may be amended, restated, modified and/or supplemented from time to time.




“Airway Guaranty” has the meaning set forth in Section 3.09 hereof.



“Anti-Terrorism Laws” shall mean any applicable Laws relating to terrorism or money
laundering, including Executive Order No. 13224, the USA PATRIOT Act, the applicable Laws
comprising or implementing the Bank Secrecy Act, and the applicable Laws administered by the United
States Treasury Department’s Office of Foreign Asset Control (as any of the foregoing applicable
Laws may from time to time be amended, renewed, extended or replaced).


 


2









 





“Applicable Margin” means (a) with respect to a Eurodollar Rate Loan, four percent (4.00%),
and (b) with respect to a Prime Rate Loan, three percent (3.00%).



“Applicable Percentage” means the percentage set forth in the column entitled “Applicable
Percentage” in the definition of Permitted Investments.




“Application” means the application by a Letter of Credit Party for a Letter of Credit.



“Assignment and Acceptance” means an Assignment and Acceptance substantially in the form of
Exhibit H hereto.



“Assignment of Proceeds Agreement” means an Assignment of Factored Credit Balance and Proceeds
Agreement or other similar agreement, in form and substance reasonably satisfactory to Agent, duly
executed by Borrower and the Restricted Subsidiaries and any Factor and a Consent and
Acknowledgment thereto duly executed by such Factor.



“Authorized Person” means any duly authorized officer or employee, or combination thereof of
Borrower.



“Availability for Revolving Credit Loans” means the lesser of (a) the Revolving Credit
Commitment minus the Letter of Credit Obligations and (b) the Borrowing Base minus the Letter of
Credit Obligations which have not been cash collateralized pursuant to the terms of this Agreement.



“Availability Reserves” shall mean, as of any date of determination, such reserves in amounts
as Agent may from time to time establish and revise in good faith in accordance with customary
credit practices in the commercial finance industry reducing the amount of Revolving Credit Loans
and Letters of Credit which would otherwise be available to the Borrower under the lending
formula(s) provided for herein: (a) to reflect events, conditions, contingencies or risks which, as
determined in good faith by Agent in accordance with its customary credit practices, do or could
reasonably be expected to adversely affect either (i) the Collateral or its value, (ii) the assets
or business of the Borrower or any Restricted Subsidiary of the Borrower or (iii) the security
interests and other rights of Agent in the Collateral (including the enforceability, perfection and
priority thereof) or (b) to reflect Agent’s good faith belief that any collateral report or
financial information furnished to it or any Bank by or on behalf of the Borrower or any Subsidiary
of the Borrower, is or may have been incomplete, inaccurate or misleading in any material respect
or (c) in respect of any state of facts which Agent determines in good faith constitutes an Event
of Default or may, with notice or the passage of time or both, constitute an Event of Default. The
amount of any Availability Reserve established by Agent shall have a reasonable relationship to the
event, condition or other matter which is the basis for such reserve as determined by Agent in good
faith.




“Bank” or “Banks” has the meaning set forth in the preamble to this Agreement.



“Bank Default” has the meaning set forth in Section 2.16 hereof.


 


3









 






“Bank Equity” has the meaning set forth in Section 9.06 hereof.




“Bank Parties” means Agent, each of the Banks and each of the Letter of Credit Issuing Banks.



“Bank Secrecy Act” shall mean the Bank Secrecy Act of 1970, 12 USC §§ 1730(d), 1829(b),
1951-1959 and 31 USCS §§ 5311 et seq, as same has been or shall hereafter be renewed, extended,
amended or replaced from time to time.



“Banking Day” means, with respect to Eurodollar Rate Loans, any day on which commercial banks
are open for domestic and international business, including dealings in Dollar deposits, in London,
England and New York, New York, and with respect to all other matters, any day other than a day on
which commercial banks in New York, New York, are authorized or required by law to close.



“Banking Services” means each and any of the following bank services provided to the Borrower
and any Restricted Subsidiary by any Bank or any of its Affiliates: (a) credit cards for commercial
customers, (b) stored value cards, and (c) treasury management services (including, without
limitation, controlled disbursements, automated clearinghouse transactions, returned items,
overdrafts and interstate depository network services).



“Banking Services Obligations” shall mean any and all obligations of the Borrower and any
Restricted Subsidiary, whether absolute or contingent and howsoever and whenever created, arising,
evidenced or acquired in connection with Banking Services.




“Blocked Person” has the meaning set forth in Section 7.24(b) hereof.



“Board of Governors” means the Board of Governors of the Federal Reserve System or any
successor.



“Book Value” shall mean, as to any Inventory in respect of which such amount is to be
determined, the lower of (a) the cost (as reflected in the general ledgers of Designers, Item-Eyes
or, with the approval of Agent, any other existing or future Subsidiary of the Borrower), as
applicable or (b) market value (both cost and market value being determined in accordance with GAAP
calculated on a first in first out basis).




“Booked Order Report” means the report substantially in the form of Exhibit J hereto.




“Booked Orders” has the meaning set forth in Section 3.01 hereof.



“Borrower Pledge Agreement” means the Pledge Agreement dated August 15, 2003 executed by
Borrower in favor of Agent for the ratable benefit of the Bank Parties, as previously amended and
reaffirmed, and as further amended and reaffirmed by the Borrower pursuant to the Reaffirmation
Agreement.



“Borrower Trademark Security Agreement” means the Collateral Assignment and Trademark
Collateral Assignment and Security Agreement dated August 15, 2003 executed by Borrower in favor of
Agent for the ratable benefit of the Bank Parties, as previously amended and reaffirmed, and
as further amended and reaffirmed by the Borrower pursuant to the Reaffirmation Agreement.


 


4









 






“Borrowing Base” shall mean, at any time, an amount equal to the lesser of




(a) the aggregate amount of the Revolving Credit Commitment; or




(b) the sum of (without duplication):




(i) the Applicable Percentage of Cash Collateral (provided, however,
that notwithstanding any other provision of this Agreement, (A) the value of such Cash
Collateral shall be the value of Cash Collateral as of the date to which such Borrowing Base
calculation refers and (B) for purposes of the Borrowing Base, Cash Collateral shall not
include any Cash Collateral that was otherwise required to be pledged under this Agreement
to secure any Letter of Credit Obligations), plus




(ii) eighty-five percent (85%) of the Net Amount of Eligible Accounts, plus




(iii) the lesser of (A) the sum of (I) fifty percent (50%) of Net Amount of Eligible
Inventory plus (II) fifty percent (50%) of the amount of Eligible In-Transit Inventory, or
(B) eighty-five percent (85%) of the Net NOLV Percentage of such Eligible Inventory and
Eligible In-Transit Inventory, or (C) the Inventory Cap, plus




(iv) the lesser of (A) fifty percent (50%) of the aggregate undrawn amount of all
outstanding Eligible Trade Letters of Credit, or (B) eighty-five percent (85%) of the Net
NOLV Percentage times the aggregate undrawn amount of all outstanding Eligible Trade Letters
of Credit, less




(v) Availability Reserves.



“Borrowing Base Certificate” means the certificate substantially in the form of Exhibit
E hereto.




“Borrowing Notice” has the meaning set forth in Section 2.03 hereof.



“Capital Lease” means any lease which has been or should be capitalized on the books of the
lessee in accordance with GAAP.



“Cash Collateral” means cash and Cash Equivalents, and any interest or other income earned
thereon, that is delivered to Agent as Collateral for the Obligations and held in the Cash
Collateral Account or delivered to any other Bank and held in a Deposit Account, provided that, the
Agent has received a fully executed Control Agreement with such Bank.



“Cash Collateral Account” means a savings, checking or time deposit account at any of the Bank
Parties, or securities account at HSBC (or HSBC Brokerage (USA) Inc. or HSBC acting in a brokerage
capacity), which account shall be subject to Agent’s perfected Lien for the benefit of the Banks.


 


5









 





“Cash Equivalents” means the first 15 types of investments set forth in the definition of
“Permitted Investments”.



“Change of Control” means (a) any “person” or “group” (within the meaning of Sections 13(d)
and 14(d)(2) of the Exchange Act) shall have become the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act) of Voting Shares entitled to exercise more than 51% of the total
power of all outstanding Voting Shares of the Borrower (including any Voting Shares which are not
then outstanding of which such person or group is deemed the beneficial owner) or (b) any merger or
consolidation in which the Borrower is not the surviving entity thereof or sale of all or
substantially all of the property or assets of Borrower. For purposes of this definition, the term
“Voting Shares” shall mean all outstanding shares of any class or classes (however designated) of
capital stock of the Borrower entitled to vote generally in the election of members of the Board of
Directors thereof.




“Code” means the Internal Revenue Code of 1986.



“Collateral” means any and all personal property subject to a Lien granted by any of the
Security Documents and this Agreement, but in no event shall Collateral include Excluded
Collateral.



“Collateral Monitor” means HSBC, when acting in its capacity as Collateral Monitor under any
of the Loan Documents, and any successor thereto.



“Consolidated Amortization” means the amortization or write-off of impaired value adjustments
of the intangible assets of Borrower and the Restricted Subsidiaries, on a consolidated basis, all
as determined in accordance with GAAP.



“Consolidated Capital Expenditures” means the Dollar amount of gross expenditures (including
the principal portion of payments under Capital Leases, net of any sublease income) made for real
property, fixed assets, property, plant and equipment, and all renewals, improvements and
replacements thereto (including, but not limited to, maintenance and repairs thereof but only to
the extent required to be capitalized in accordance with GAAP) incurred or paid by Borrower and the
Restricted Subsidiaries.



“Consolidated Debt” shall mean, at any date of determination, the aggregate amount of all
funded debt of the Borrower and its Restricted Subsidiaries, determined on a consolidated basis in
accordance with GAAP.



“Consolidated Depreciation” means depreciation of Borrower and its Restricted Subsidiaries, on
a consolidated basis, all as determined in accordance with GAAP.



“Consolidated EBITDA” means, for any period, Consolidated Net Income, plus Consolidated
Interest Expense, plus Consolidated Taxes, plus Consolidated Depreciation, plus Consolidated
Amortization, all for such period.



“Consolidated Interest Expense” means, for any period, all interest paid or required to be
paid by Borrower and its Restricted Subsidiaries on all of their respective Debt, including the
Obligations,
during such period.


 


6









 





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



“Consolidated Taxes” means, for any period, the income and franchise taxes of Borrower and its
Restricted Subsidiaries, on a consolidated basis, all as determined in accordance with GAAP.



“Contractual Obligations” means as to any Person, any provision of any security issued by such
Person or of any agreement, instrument or undertaking to which such Person is a party or by which
it or any of its property is bound.



“Control Agreement” means any Deposit Account Control Agreement and/or Securities Account
Control Agreement among the Borrower, the Deposit Bank party thereto and the Agent, in form and
substance reasonably satisfactory to the Agent.




“Credit Facilities” means, collectively, the Revolving Credit Loans and the Letters of Credit.



“Debt” means: (a) indebtedness or liability for borrowed money, or for the deferred purchase
price of property or services (including trade obligations); (b) the principal portion of
obligations as lessee under Capital Leases; (c) obligations under letters of credit issued for the
account of any Person; (d) all obligations arising under bankers’ or trade acceptance facilities of
any Person; (e) all guarantees, endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent obligations to purchase any of the items included in this
definition, to provide funds for payment, to supply funds to invest in any Person, or otherwise to
assure a creditor against loss; and (f) all obligations secured by any Lien on property owned by
such Person, whether or not the obligations have been assumed. For purposes of the foregoing, the
amount of any Debt described in clause (e) shall be equal to the lesser of (A) the amount of the
primary obligation in respect to which such guaranty is issued and (B) the maximum liability amount
under the terms of such guaranty.



“Default” means any event which, with the giving of notice or lapse of time, or both, would
become an Event of Default.



“Default Rate” means, at any time, a rate of interest equal to 2% per annum plus the highest
rate that would then be applicable to Prime Rate Loans; provided, that, if the Default Rate is
implemented and the applicable Obligation is a Revolving Credit Loan, Default Rate shall mean, with
respect to an amount of any such Loan not paid when due, a rate per annum equal to two percent (2%)
above the Interest Rate then in effect thereon.


 


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“Defaulting Bank” has the meaning set forth in Section 2.16 hereof.




“Deposit Account” has the meaning given to such term in the Uniform Commercial Code.



“Deposit Bank” means such Bank or Person maintaining any of the Borrower’s Deposit Accounts or
Securities Accounts.




“Designers” means Hampshire Designers, Inc., a Delaware corporation.



“Designers Pledge Agreement” means the Pledge Agreement dated August 15, 2003 executed by
Designers in favor of Agent for the ratable benefit of the Bank Parties, as previously amended and
reaffirmed, and as further amended and reaffirmed by Designers pursuant to the Reaffirmation
Agreement.



“Designers Trademark Security Agreement” means the Trademark Collateral Assignment and
Security Agreement dated August 15, 2003 executed by Designers in favor of Agent for the ratable
benefit of the Bank Parties, as previously amended and reaffirmed, and as further amended and
reaffirmed by Designers pursuant to the Reaffirmation Agreement.




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



“Eligible Accounts” shall mean (a) the trade accounts receivable created in the ordinary
course of business by Designers, Item-Eyes and, with the approval of Agent and the Required Banks,
any other existing or future Subsidiary of the Borrower, which (i) are subject to a valid, first
priority, fully perfected security interest in favor of Agent for the ratable benefit of the Bank
Parties and which conform to the representations and warranties contained herein and in the Loan
Documents, and (ii) at all times shall continue to be acceptable to Agent based on the criteria set
forth below, as revised from time to time by the Agent in good faith (the “Non-Factored Accounts”),
and, (b) the Factored Accounts, but only to the extent a Factor has the credit risk with respect to
such Factored Accounts pursuant to the applicable Factoring Agreement with such Factor, and
provided, further, that such Factored Accounts remain subject to an Assignment of Proceeds
Agreement and the Factor has otherwise agreed to the terms set forth in Section
9.03(e)(iii) hereof.



In general, the Non-Factored Accounts may, as determined by Agent in good faith, be deemed
Eligible Accounts if:




(a) delivery of the merchandise has been completed;




(b) no return, rejection or repossession has occurred;



(c) the merchandise has been accepted by the account debtor without dispute, setoff, defense
or counterclaim;


 


8









 





(d) such trade account receivable is unconditionally payable in Dollars within 90 days of the
invoice date and is not evidenced by a promissory note, chattel paper or any other instrument or
document, Notwithstanding the prior sentence, a trade account receivable payable more than 90
days but less than 150 days from the invoice date may be eligible (the “Over 90 Receivables”)
provided that, (i) such receivable is due from Ross Stores, Inc., TJX Companies Inc., Burlington
Coat Factory Investment Holdings, Marshalls of MA Inc., Kohl’s Corporation and Mercury Beach-Maid
Inc. or such other customer approved by Agent, (ii) such receivable is scheduled in sufficient
detail to the Borrowing Base Certificate which includes such receivable, and (iii) such receivable
is not more than 15 days past due;



(e) except as otherwise provided pursuant to subclause “(d)” above with respect to the Over 90
Receivables, no more than 60 days has elapsed from the invoice due date and no more than 120 days
has elapsed from the invoice date;




(f) the account debtor is not an Affiliate of the Borrower or any Restricted Subsidiary;



(g) such trade account receivable does not constitute an obligation of the United States or
any other Governmental Authority;



(h) the chief executive office of the account debtor with respect thereto is located in the
continental United States, unless the trade account receivable is supported by a letter of credit
or other similar obligation reasonably satisfactory to Agent or Agent has received evidence that
credit insurance with respect to such Account has been assigned to Agent and names Agent as loss
payee;



(i) the account debtor with respect thereto is not also a supplier or a creditor of the
Borrower or any Restricted Subsidiary, unless such supplier or creditor has executed a no offset
letter reasonably satisfactory to Agent (but the portion of the Non-Factored Accounts of such
account debtor in excess of the amount at any time and from time to time owed by such Subsidiary of
Borrower to such account debtor or claimed to be owed may be deemed an Eligible Account);



(j) not more than 50% of the aggregate amount of all trade account receivables from an
account debtor with respect thereto remain unpaid more than 60 days past the invoice due date or
120 days past the invoice date;



(k) the account debtor is not insolvent, subject to a bankruptcy, reorganization,
receivership, insolvency arrangement or any similar proceeding;



(l) no facts, events or occurrences exist that would impair the validity, enforceability or
collectibility of such trade account receivable or reduce the amount payable, or delay payment
thereunder, all as determined in the good faith by Agent (provided, that, as to facts, events or
occurrences that reduce the amount payable under such receivable the amount payable thereunder as
so reduced, may be deemed an Eligible Account);



(m) no covenant, representation or warranty contained in this Agreement with respect to such
trade account receivable has been breached;



(n) the sale to the account debtor is not on a bill and hold, guaranteed sale, sale and
return,
sale on approval, consignment or any other repurchase or return basis or is not evidenced by
chattel paper;


 


9









 





(o) the Borrower has not made any agreement with any customer for any deduction therefrom,
except for discounts or allowances made in the ordinary course of business for prompt payment, all
of which discounts or allowances are reflected in the calculation of the face value of each
respective invoice related thereto;



(p) the account debtor is not located in New Jersey, Minnesota, or any other state which Agent
has informed Borrower denies creditors access to its courts, unless Borrower is incorporated under
the laws of such state or has either qualified as a foreign corporation authorized to transact
business in such state or has filed a Notice of Business Activities Report or similar filing with
the applicable state agency for the then current year; and



(q) such Receivable is otherwise satisfactory to Agent as determined in good faith by Agent in
the exercise of its discretion in a commercially reasonable manner and in accordance with customary
credit practices in the asset based lending industry.



The aggregate amount of all Eligible Accounts of Designers, Item-Eyes and, with the approval
of Agent and the Required Banks, any other existing or future Subsidiary of the Borrower, shall be
reduced by any reserves deemed necessary by Agent in good faith, including the Accounts Receivable
Reserves, to the extent that such amounts are not already included in the Availability Reserves.



“Eligible Bank” means (i) any of the Banks, or (ii) a commercial bank organized under the laws
of the United States of America or any State thereof which has a Bank Equity of not less than Two
Hundred Fifty Million Dollars ($250,000,000).



“Eligible Inventory” shall mean inventory or Eligible Prior Season Inventory of Designers and
Item-Eyes and, with the approval of Agent and the Required Banks, any other existing or future
Subsidiary of the Borrower, comprised solely of finished goods located in the United States which
meets all of the following specifications:



(r) the inventory is owned by Designers and Item-Eyes and, with the approval of Agent and the
Required Banks, any other existing or future Subsidiary of the Borrower, free and clear of any
existing Lien (other than warehouseman’s and landlord’s liens as long as a reasonably satisfactory
waiver has been entered into with Agent), other than the liens and security interests in favor of
Agent under the Loan Documents, it is not held on consignment and may be lawfully sold and it
continues to be in full conformity with any representations and warranties made under the Loan
Documents by the Borrower and its Restricted Subsidiaries to Agent with respect thereto;



(s) Designers and Item-Eyes and, with the approval of Agent and the Required Banks, any other
existing or future Subsidiary of the Borrower, has the right to assignment thereof and the power to
grant liens thereon and security interests with respect thereto;


 


10









 





(t) the inventory arose or was acquired in the ordinary course of business of Designers and
Item-Eyes, or, with the approval of Agent and the Required Banks, any other existing or future
Subsidiary of the Borrower, as applicable and does not represent returned, second quality or
damaged goods;



(u) the inventory is readily marketable for sale by Designers and Item-Eyes and, with the
approval of Agent and the Required Banks, any other existing or future Subsidiary of the Borrower;



(v) the inventory is located at one of the addresses for locations of Collateral set forth on
Schedule 1.01(a) and with respect to which inventory Agent, for the ratable benefit of the
Bank Parties, has been granted and has perfected a valid, first priority security interest therein;



(w) the inventory is not goods to be returned to a supplier of the Borrower or any Restricted
Subsidiary, or, with the approval of Agent and the Required Banks, any other existing or future
Subsidiary of the Borrower;




(x) the inventory is not samples;



(y) if the inventory is sold under a licensed trademark, with respect to each Required
Licensor, Agent shall have entered into a licensor waiver letter, in form and substance
satisfactory to Agent, with such Required Licensor with respect to the rights of Agent to use the
trademark to sell or otherwise dispose of such inventory;



(z) the inventory is not obsolete, slow-moving or unmerchantable and is and at all times shall
continue to be acceptable to Agent in all respects as determined by Agent in good faith; and



(aa) the inventory, other than Eligible In-Transit Inventory, is not located in a warehouse or
on leased premises unless Agent has entered into a warehouseman’s waiver or landlord’s waiver, as
the case may be, on terms reasonably satisfactory to Agent.



“Eligible In-Transit Inventory” shall mean “in transit” finished goods inventory of Designers
and Item-Eyes and, with the approval of Agent and the Required Banks, any other existing or future
Subsidiary of the Borrower, shipped under an Eligible Trade Letter of Credit, the amount of which
is equal to the face amount of the related Eligible Trade Letter of Credit, provided that such
inventory (a) has been paid for by the Borrower and has not otherwise been included in Eligible
Inventory or under an Eligible Trade Letter of Credit, and (b) such inventory would otherwise
qualify as Eligible Inventory and is otherwise satisfactory in all respects as determined by Agent
in good faith.



“Eligible Prior Season Inventory” shall mean Prior Season Inventory which Agent determines, in
good faith, to be eligible inventory. In general, Prior Season Inventory may be deemed Eligible
Prior Season Inventory if (a) it is subject to a confirmed purchase order, (b) the cost of such
inventory is an amount in the general ledger of Designers and Item-Eyes or such other existing or
future Subsidiary of the Borrower approved by Agent and the Required Banks, as the case may be,
which will produce, when such inventory is sold, a gross profit margin which is satisfactory to
Agent, and (c) such inventory
would otherwise qualify as Eligible Inventory and is otherwise satisfactory in all respects to
Agent in good faith.


 


11









 





“Eligible Trade Letter of Credit” shall mean a commercial letter of credit issued by Agent for
the account of the Borrower covering finished goods inventory of Designers and Item-Eyes and, with
the approval of Agent and the Required Banks, any other existing or future Subsidiary of the
Borrower, for which (a) the documents of title have been or will be consigned to Agent, (b) the
underlying goods have been or will be insured to the satisfaction of Agent, and (c) the underlying
goods have been or will be shipped to an eligible location in the United States set forth on
Schedule 1.01(b).



“Environmental Discharge” means any discharge or release by Borrower or any Restricted
Subsidiaries of any Hazardous Materials in violation of any applicable Environmental Law.



“Environmental Law” means any Law relating to pollution of the environment, including Laws
relating to noise or to emissions, discharges, releases or threatened releases of Hazardous
Materials into the workplace, the community or the environment, or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.



“Environmental Notice” means any complaint, order, citation, letter, inquiry, notice or other
written communication from any Governmental Authority (a) affecting or relating to Borrower’s or
any Restricted Subsidiaries’ violation of any Environmental Law in connection with any activity or
operations at any time conducted by Borrower or such Restricted Subsidiary, (b) relating to the
unpermitted occurrence or Presence of or exposure to or possible or threatened or alleged
occurrence or presence of or exposure to Environmental Discharges or Hazardous Materials at any of
Borrower’s or any Restricted Subsidiary’s locations or facilities, including, without limitation:
(i) the existence of any contamination or possible or threatened contamination at any such location
or facility and (ii) remediation of any Environmental Discharge or Hazardous Materials at any such
location or facility or any part thereof; and (c) any violation or alleged violation of any
relevant Environmental Law.



“ERISA” means the Employee Retirement Income Security Act of 1974, including any rules and
regulation promulgated thereunder.



“ERISA Affiliate” means any corporation or trade or business which is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the Code) as Borrower or
any Guarantor or is under common control (within the meaning of Section 414(c) of the Code) with
Borrower or such Guarantor; provided however, that for purposes of provisions
herein concerning minimum funding obligations (imposed under Section 412 of the Code or Section 302
of ERISA), the term “ERISA Affiliate” shall also include any entity required to be aggregated with
Borrower or any Guarantor under Section 414(m) or 414(o) of the Code.



“Eurodollar Base Rate” means with respect to any Interest Period for a Eurodollar Rate Loan,
the arithmetic mean, as calculated by Agent, of the respective rates per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1 %) quoted at approximately 11:00 A.M. London time by the
principal London branch of Agent two (2) Banking Days prior to the first day of such Interest
Period for the
offering to leading banks in the London interbank market of Dollar deposits in immediately
available funds, for a period, and in an amount, comparable to the Interest Period and principal
amount of the Eurodollar Rate Loan which shall be made by Agent and outstanding during such
Interest Period.


 


12









 





“Eurodollar Rate Loan” means a Loan that bears interest at a rate based on the Eurodollar Base
Rate.



“Eurodollar Rate” means, for any Eurodollar Rate Loan for any Interest Period therefor, a rate
per annum (rounded upwards, if necessary to the nearest 1/100 of 1%) determined by Agent to be
equal to the quotient of (a) the Eurodollar Base Rate for such Loan for such Interest Period,
divided by (b) one minus the Reserve Requirement for such Loan for such Interest Period.




“Event of Default” has the meaning set forth in Section 11.01 hereof.




“Exchange Act” means the Securities Exchange Act of 1934, as amended.



“Excluded Accounts” means all Deposit Accounts specifically and exclusively used as zero
balance accounts or used for security deposits, payroll, payroll taxes, deferred compensation and
other employee wage and benefit payments to or for the benefit of the Borrower’s or any of its
Subsidiaries’ employees, and the accounts listed on Part II of Schedule 7.21.



“Excluded Collateral” shall have the meaning ascribed to such term in the Master Security
Agreement.



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




“Existing Agreement” has the meaning set forth in Recitals hereof.



“Existing Letters of Credit” means letters of credit issued pursuant to the Existing Agreement
and set forth on Schedule 1.01(c) attached hereto.




“Factor” shall have the meaning set forth in Section 9.03(e) hereof.



“Factored Accounts” shall mean the trade accounts receivable of Designers, Item-Eyes and, with
the approval of the Agent and the Required Banks, any other existing or future Subsidiary of the
Borrower, created in the ordinary course of business which have been purchased and/or assigned to
the Factor under a Factoring Agreement, which may include trade accounts receivable for which the
Factor has no credit risk.



“Factoring Agreement” means any factoring agreement by and between Borrower and/or any
Restricted Subsidiary and a Factor.


 


13









 





“Federal Funds Rate” means, for any day, the rate per annum (rounded, if necessary, to the
next
greater 1/100 of 1%) equal to the rate per annum at which the Agent is offered overnight
Federal funds by a Federal funds broker selected by the Agent at or about 2:00 p.m., New York time,
on such day, provided that if such day is not a Banking Day, the Federal Funds Rate for
such day shall be such rate at which the Agent is offered overnight Federal funds by such Federal
funds broker at or about 2:00 p.m., New York time, on the next preceding Banking Day.




“Fee Letter” shall mean the fee letter dated of even date herewith between Borrower and HSBC.




“Field Examination” has the meaning set forth in Section 8.07 hereof.




“Fiscal Month” means each of the twelve (12) monthly periods of Borrower’s Fiscal Year.




“Fiscal Month End Date” means the last day of any Fiscal Month of each Fiscal Year.




“Fiscal Quarter” means each of the four (4) quarterly periods of Borrower’s Fiscal Year.




“Fiscal Year” means each calendar year ending December 31.



“Foreign Bank” means any Bank that is organized under the laws of a jurisdiction other than
that in which Borrower is located. For purposes of this definition, the United States of America,
each State thereof and the District of Columbia shall be deemed to constitute a single
jurisdiction.



“GAAP” means generally accepted accounting principles in the United States of America from
time to time, applied on a basis consistent with those used in the preparation of the financial
statements referred to in Section 7.05 hereof.



“Good Faith Contest” means the contest of an item if: (a) the item is diligently contested in
good faith by appropriate proceedings timely instituted; (b) adequate reserves are established in
accordance with GAAP; (c) during the period of such contest, the enforcement of any contested item
is effectively stayed; and (d) the failure to pay or comply with the contested item during the
period of the Good Faith Contest is not likely to result in a Material Adverse Change.



“Governmental Authority” means any nation or government, any state or other political
subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.



“Guarantor” and “Guarantors” means (i) with respect to all Obligations other than the Letter
of Credit Obligations, Designers and Item-Eyes and any present or future Restricted Subsidiaries
that are organized under the laws of any state or territory of the United States that are not
Inactive Subsidiaries subject to Section 8.11 hereof, and (ii) with respect to all Letter
of Credit Obligations, Borrower, Designers and Item-Eyes and any present or future Restricted
Subsidiaries that are organized under the laws of any state or territory of the United States that
are not Inactive Subsidiaries subject to Section 8.11 hereof; provided,
however, that MC Inc. shall be deemed not to be a Guarantor.



“Guarantor Security Agreements” means any Security Agreements executed by any of
Designers, Item-Eyes and any other Guarantors to secure the Guaranty Obligations.


 


14









 





“Guaranty” means, collectively, all of the guarantees provided by the Guarantors pursuant to
Section 5.01 hereof.




“Guaranty Obligations” has the meaning set forth in Section 5.01 hereof.




“Hampshire Sub” means Hampshire Sub, Inc. (f/k/a Shane Hunter, Inc.), a Delaware corporation.



“Hazardous Materials” means any pollutant, effluents, emissions, contaminants, toxic or
hazardous wastes or substances, as any of those terms are defined from time to time in or for the
purposes of any applicable Environmental Law, including asbestos fibers and friable asbestos,
polychlorinated biphenyls, and any petroleum or hydrocarbon-based products or derivatives.



“HSBC” means HSBC Bank USA, National Association and its successors and assigns and any Person
acting as agent or nominee for HSBC Bank USA, National Association and any corporation the stock of
which is owned or controlled directly or indirectly by, or is under common control with, HSBC Bank
USA, National Association and/or HSBC Holdings plc., including but not limited to HSBC Business
Credit (USA) Inc.



“Inactive Subsidiary” means any Subsidiary of the Borrower that has (a) revenues in the
relevant Fiscal Year that do not exceed Two Hundred Fifty Thousand Dollars ($250,000) or (b) assets
that do not exceed Two Hundred Fifty Thousand Dollars ($250,000). (As of the Restatement Date,
MCHK, MC Apparel, Hampshire Sub and SB are the Inactive Subsidiaries.)



“Instructions” means oral or written instructions or instructions transmitted by electronic
means given on behalf of Borrower by one or more Authorized Persons.



“Instrument” means with respect to any Letter of Credit or Steamship Guaranty, Airway
Guaranty, any draft, receipt, acceptance, teletransmission, including, but not limited to, telex or
cable, or other written demand for payment under such Letter of Credit.



“Interest Period” means, with respect to any Eurodollar Rate Loan, a period of one, two, three
or six months, such period commencing on the date such Loan is made, converted from another type of
Loan or renewed, as Borrower may select in accordance with Section 2.03 hereof,
provided that, each such Interest Period, which commences on the last Banking Day
of a calendar month (or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month), shall end on the last Banking Day of the appropriate
calendar month; provided, further, that,



(a) If any Interest Period would otherwise end on a day which is not a Banking Day, that
Interest Period shall be extended to the next succeeding Banking Day unless such Interest Period is
with respect to a Eurodollar Rate Loan and the result of such extension would be to extend such
Interest Period into another calendar month, in which event such Interest Period shall end on the
immediately preceding Banking Day.


 


15









 





(b) No Interest Period with respect to a Revolving Credit Loan shall extend beyond the
Revolving Credit Termination Date.



“Interest Rate” means either (a) with respect to a Prime Rate Loan, the Prime Rate plus the
Applicable Margin or (b) with respect to a Eurodollar Rate Loan, the Eurodollar Rate plus the
Applicable Margin.



“Interest Rate Contracts” means interest rate swap agreements, interest rate cap agreements,
interest rate collar agreements, interest rate insurance and other agreements or arrangements
designed to provide protection against fluctuation in interest rates, in each case, in form and
substance reasonably satisfactory to the Agent.



“International Standby Practices” means the “International Standby Practices (ISP98),” as
promulgated by the Institute of International Banking Law & Practice, Inc., approved by the
International Chamber of Commerce (“ICC”) Commission on Banking Technique and Practice, and issued
by the ICC as Publication No. 590, or any successor code of standby letter of credit practices
among banks adopted by the Bank as a standby letter of credit issuer in the ordinary course of its
business and in effect at the time of reference.



“Inventory” shall have the meaning set forth in the Master Security Agreement and the Security
Agreements that have been executed by the Guarantors.




“Inventory Cap” means Twenty Five Million Dollars ($25,000,000).




“Item-Eyes” means Item-Eyes, Inc., a Delaware corporation.



“Item-Eyes Trademark Security Agreement” means the Trademark Collateral Assignment and
Security Agreement dated August 15, 2003 executed Item-Eyes by in favor of Agent for the ratable
benefit of the Bank Parties, as previously amended and reaffirmed by Item-Eyes and as further
amended and reaffirmed pursuant to the Reaffirmation Agreement.



“Law” means any applicable federal, state or local statute, law, rule, regulation, ordinance,
order, code, policy or rule of common law, now or hereafter in effect, and any applicable judicial
or administrative interpretation thereof by a Governmental Authority or otherwise, including any
judicial or administrative order, consent decree or judgment.




“Letters of Credit” means Trade Letters of Credit and the Standby Letters of Credit.



“Letter of Credit Account Parties” means the Borrower, Designers, Item-Eyes, and all other
Restricted Subsidiaries.



“Letter of Credit Fee” means the Letter of Credit Issuance Fee, the Trade Letter of Credit Fee
and the Standby Letter of Credit Fee.



“Letter of Credit Issuance Fee” has the meaning set forth in section 3.03 hereof.


 


16









 






“Letter of Credit Issuing Bank” means HSBC with respect to all Letters of Credit.



“Letter of Credit Obligations” means at any time an amount equal to the sum of (a) the
aggregate amount of Trade Letter of Credit Obligations, (b) the aggregate amount of Standby Letter
of Credit Obligations and (c) any Letter of Credit Fee due and payable.



“Lien” means any mortgage, deed of trust, pledge, security, interest, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or preference, priority,
or other security agreement or preferential arrangement, charge, or encumbrance of any kind or
nature whatsoever (including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as any of the
foregoing.



“Liquidity Amount” shall mean an amount equal to the Net Availability plus any Suppressed
Availability.



“Loan” means an extension of credit by the Banks to the Borrower under Article II in
the form of a Revolving Credit Loan.




“Loan Account” shall have the meaning set forth in Section 2.12(a) hereof.



“Loan Document(s)” means this Agreement, the Notes, the Letters of Credit, the Security
Documents, the Fee Letter, any and all documents executed in connection with the Letters of Credit
and any and all other agreements, instruments and documents heretofore, now or hereafter executed
by Borrower or Guarantor and/or delivered to Agent or any Bank in respect of the transactions
contemplated by this Agreement.



“Master Security Agreement” means the Amended and Restated Master Security Agreement executed
by Borrower and each Guarantor in favor of Agent for the ratable benefit of the Banks.



“Material Adverse Change” means either (a) a material adverse change in the status of the
business, assets, liabilities, results of operations, condition (financial or otherwise) or
property or prospects of Borrower and its Restricted Subsidiaries, taken as a whole, or (b) any
event or occurrence of whatever nature which is likely to have a material adverse effect on
Borrower’s ability to perform its obligations under the Loan Documents to which it is a party.




“MC Inc.” means Marisa Christina, Incorporated, a Delaware corporation.




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




“MCHK” means C.M. Marisa Christina (H.K.), Limited, a Hong Kong [company].



“Monthly Date(s)” means the first Banking Day of each calendar month occurring on or after the
Restatement Date.



“Multiemployer Plan” means a Plan defined as such in Section 3(37) of ERISA.


 


17









 





“Net Amount of Eligible Accounts” shall mean and include at any time, without duplication, as
determined by the Collateral Monitor in its reasonable discretion, the gross amount of Eligible
Accounts at such time less (a) sales, excise or similar taxes and (b) returns, discounts, claims,
credits, allowances, of any nature at any time issued, owing, granted, outstanding, available or
claimed; provided, that such amounts have not already otherwise been deducted.



“Net Amount of Eligible Inventory” shall mean, at any time, the aggregate Book Value of
Eligible Inventory, as determined by the Collateral Monitor in its reasonable discretion.



“Net Availability” shall mean, at any date, (a) the Availability for Revolving Credit Loans
less (b) the aggregate principal amount of all outstanding Revolving Credit Loans.



“Net NOLV Percentage” means the NOLV of the Eligible Inventory over the Book Value of such
Eligible Inventory.



“NOLV” means the “net orderly liquidation value” of the Inventory as set forth in the most
recent appraisal report of the Inventory received by the Agent.




“Non-Consenting Bank” has the meaning set forth in Section 14.04(h) hereof.




“Note(s)” means the Revolving Credit Notes.



“Obligations” shall mean any and all Revolving Credit Loans, Letter of Credit Obligations, and
all other indebtedness, liabilities and obligations of every kind, nature and description owing by
Borrower, a Letter of Credit Account Party or Guarantors to each Bank Party, the Banks and/or
their Affiliates, arising out of or in connection with the Loans, the Notes, the Letters of Credit,
including Airway Guaranty or Steamship Guaranty, this Agreement, the other Loan Documents and any
and all Banking Services Obligations and Interest Rate Contracts (but solely to the extent a Bank
is a counter-party to such Interest Rate Contract), including without limitation for principal,
interest, charges, fees, expenses, reimbursement obligations and foreign exchange obligations,
however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under
this Agreement, whether now existing or hereafter arising, whether arising before, during or after
the Revolving Credit Termination Date or after the commencement of any case with respect to
Borrower, any Letter of Credit Account Party or any Guarantor under the Bankruptcy Code or any
similar statute, whether direct or indirect, absolute or contingent, joint or several, due or not
due, primary or secondary, liquidated or unliquidated, secured or unsecured, original, renewed or
extended and whether arising directly or howsoever acquired by the Banks including from any other
entity outright, conditionally or as collateral security, by assignment, merger with any other
entity, participations or interests of the Banks in the obligations of Borrower, Letter of Credit
Account Parties or Guarantors to others, assumption, operation of law, subrogation or otherwise and
shall also include all amounts chargeable to Borrower, any Letter of Credit Account Party or any
Guarantor under this Agreement or in connection with any of the foregoing, provided
however, that indebtedness and obligations due to any of the Banks in connection with
transactions between Borrower or any Guarantor and any such Bank separate from this Agreement,
excluding those in connection with Interest Rate Contracts, shall not be deemed “Obligations”.


 


18









 





“Outstanding Credit Facilities” means at any time an amount equal to the sum of (a) the
aggregate principal amount of all outstanding Revolving Credit Loans plus (b) the Letter of Credit
Obligations.




“Participating Banks” means each Bank other than HSBC.




“Participation” has the meaning set forth in Section 4.01 hereof.




“Patriot Act” has the meaning set forth in Section 14.16 hereof.



“PBGC” means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all
of its functions under ERISA.



“PCAOB” means the Public Company Accounting Oversight Board and any entity succeeding to any
or all of its functions under the Sarbanes-Oxley Act of 2002, as amended.




“Pension Plan” means any Plan subject to Title IV of ERISA.




“Permitted Investments” means any of the following:



	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Maximum	 	 	Minimum	 	 	Applicable	 
	Investment Type	 	Maturity	 	 	Rating	 	 	Percentage	 
	Cash
	 	 	N/A	 	 	 	N/A	 	 	 	100	%
	US Government Agency Bills, Notes
and Bonds (excluding savings, Zero Coupons and STRIPs) 
	 	1 year	 	 	 	N/A	 	 	 	95	%
	Commercial Paper
	 	9 months	 	 	 	A1/P1	 	 	 	80	%
	Asset Backed Commercial Paper
	 	9 months	 	 	 	A2/P2	 	 	 	80	%
	Domestic Certificate of Deposit
	 	1 year	 	 	 	N/A	 	 	 	90	%
	Corporate Bonds
	 	1 year	 	 	AAA	 	 	 	85	%
	Municipal Notes/Bonds
	 	1 year	 	 	AAA	 	 	 	85	%
	Tax Exempt or Taxable Money Market
Funds
	 	 	N/A	 	 	AAA	 	 	 	95	%
	Stock,
obligations or securities received in settlement of debts
(created in the ordinary course of
business) owing to the Borrower
	 	 	N/A	 	 	 	N/A	 	 	 	0	%






“Permitted Liens” has the meaning set forth in Section 9.03 hereof.


 


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“Person” means an individual, partnership, corporation, business trust, joint stock company,
trust, unincorporated association, joint venture, Governmental Authority or other entity of
whatever nature.



“Plan” means any plan, agreement, arrangement or commitment which is an employee benefit plan,
as defined in Section 3(3) of ERISA, maintained by Borrower, any Guarantor or any ERISA Affiliate
or with respect to which Borrower, any Guarantor or any ERISA Affiliate at any relevant time has
any liability or obligation to contribute.



“Pledge Agreement” means a Pledge Agreement substantially in the form of Exhibit A
hereto, to be delivered by Borrower and certain Guarantors under the terms of this Agreement.



“Presence” when used in connection with any Environmental Discharge or Hazardous Materials,
means and includes presence, generation, manufacture, installation, treatment, use, storage,
handling, repair, encapsulation, disposal, transportation, spill, discharge and release.



“Prime Rate” means the greater of (a) that rate of interest from time to time announced by
HSBC at its Principal Office as its prime commercial lending rate as determined by Agent and (b)
the Eurodollar Base Rate for a one month Interest Period on such day plus 2%. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate being charged to any
customer. The interest rate for Prime Rate Loans shall change when and as the Prime Rate changes
and which changes in the rate of interest resulting from changes in the Prime Rate shall take
effect immediately without notice or demand of any kind.



“Prime Rate Loan” means any Revolving Credit Loan when and to the extent the Interest Rate
therefor is based on the Prime Rate.



“Principal Office” means the principal office of HSBC, presently located at 452 Fifth Avenue,
New York, New York 10018.



“Prior Season Inventory” shall mean finished goods inventory of Designers, Item-Eyes and, with
the approval of Agent and the Required Banks, any other existing or future Subsidiary of the
Borrower, which was manufactured for sale in a shipping season prior to the current shipping
season, as the case may be, of Designers, Item-Eyes or such other existing or future Subsidiary of
the Borrower which has been approved by Agent and the Required Banks (for purposes of this
definition, the term “shipping season” means the period of time in which Inventory of Designers,
Item-Eyes and, with the approval of Agent and the Required Banks, any other existing or future
Subsidiary of the Borrower, is shipped for sale, such period to be determined in a manner
consistent with such Persons’ past business practices).



“Pro Rata Share” means (a) with respect to each Bank’s Revolving Credit Commitment and with
respect to Letters of Credit, the percentage set forth below such Bank’s name on the signature page
hereof as the same may be adjusted upon any assignment by a Bank pursuant to Section 14.04 hereof
and (b) with respect to each payment on the Revolving Credit Loans, a fraction, the numerator of
which is the outstanding principal amount of all such Revolving Credit Loans owed to such Bank, and
the
denominator of which is the outstanding principal amount of all such Revolving Credit Loans
owed to all Banks.


 


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“Prohibited Transaction” means any transaction prohibited under Section 406 of ERISA or
Section 4975 of the Code.




“Quarterly Date” means the last Banking Day of each March, June, September, and December.



“Reaffirmation Agreement” means the Reaffirmation Agreement executed by the Borrower and the
Guarantors in favor of the Agent for the ratable benefit of the Bank Parties, substantially in the
form of Exhibit I hereto.



“Regulatory Change” means, with respect to any Bank, any change after the date of this
Agreement in the United States federal, state, municipal or foreign laws or regulations (including
without limitation Regulation D) or the adoption or making after such date of any interpretations,
directives or requests applying to a class of banks including any of the Banks of or under any
United States federal, state, municipal or foreign laws or regulations (whether or not having the
force of law) by any court or governmental or monetary authority charged with the interpretation or
administration thereof.



“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA or in the
regulations thereunder except for any such event for which the 30-day notice requirement is waived.



“Required Banks” means at any time the Banks holding fifty one percent (51 %) of the aggregate
Revolving Credit Commitment. In calculating the Revolving Credit Commitment of each Bank for
purposes of this definition of “Required Banks”, each Bank (other than HSBC) shall be deemed to
have a portion of the Trade Letter of Credit Commitment or the Standby Letter of Credit
Commitment, as the case may be, equal to that Bank’s Pro Rata Share of the Trade Letter of Credit
Commitment or the Standby Letter of Credit Commitment, as the case may be, and HSBC shall be deemed
to have a portion of such Trade Letter of Credit Commitment or Standby Letter of Credit Commitment
equal to one hundred percent (100%) minus the sum of the Pro Rata Shares of the other Banks.



“Required Licensor” means, with respect to inventory of the Borrower or a Restricted
Subsidiary that is sold under a licensed trademark, each licensor that has licensed such trademark
to the Borrower and/or the Restricted Subsidiaries to the extent that the gross revenues received
or to be received by the Borrower and/or the Restricted Subsidiaries with respect to the sale of
inventory subject to such licensed trademark equals or is in excess of Five Million Dollars
($5,000,000) for any twelve month period (taking into account sales as well as unfilled orders).
The Required Licensors as of the Restatement Date are Geoffrey Beene, Inc. (as to the “Geoffrey
Beene” licensed trademark) and Levi Strauss & Co. (as to the “Dockers” and “Dockers Premium”
licensed trademarks).



 


21









 





“Reserve Requirement” means, for any Eurodollar Rate Loan for any Interest Period therefor,
the rate at which reserves (including any marginal, supplemental or emergency reserves) are
required to be maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve
System in New York City with deposits exceeding One Billion Dollars ($1,000,000,000) against
in the case of Eurodollar Rate Loans, “Eurocurrency Liabilities” (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect
any other reserves required to be maintained by such member banks by reason of any Regulatory
Change against (a) any category of liabilities which includes deposits by reference to which the
Eurodollar Base Rate is to be determined as provided in the definition of “Eurodollar Base Rate” in
this Section 1.01 hereof or (b) any category of extensions of credit or other assets which
include Eurodollar Rate Loans. Agent will use its best efforts to promptly notify Borrower of any
change of such Reserve Requirement.




“Restatement Date” has the meaning set forth in Recitals hereof.



“Restricted Payment” means (i) any guaranties other than those guaranties permitted by
Section 9.02 hereof, and/or (ii) any repurchase of any shares of the Borrower.



“Restricted Subsidiaries” means, individually and collectively, Designers, Item-Eyes, SB,
Hampshire Sub, MC Inc., MC Apparel, MCHK and any existing and future Subsidiaries of Borrower,
together with their respective successors and assigns.



“Revolving Credit Commitment” means the commitment of the Banks to lend, pursuant to their Pro
Rata Share, Forty Eight Million Dollars ($48,000,000) to Borrower pursuant to the terms of this
Agreement.




“Revolving Credit Loan(s)” has the meaning set forth in Section 2.01 hereof.




“Revolving Credit Note(s)” has the meaning set forth in Section 2.07 hereof.




“Revolving Credit Termination Date” means June 30, 2011.



“Revolving Eurodollar Rate Loan” shall mean a Revolving Credit Loan when and to the extent the
Interest Rate therefor is determined on the basis of the definition “Eurodollar Base Rate.”




“SB” means SB Corporation, a Delaware corporation.




“Securities Account” has the meaning given to such term in the Uniform Commercial Code.



“Security Agreement” means a Security Agreement substantially in the form of Exhibit B
hereto.



“Security Documents” means the Master Security Agreement, the Borrower Pledge Agreement, the
Designers Pledge Agreement, the Borrower Trademark Security Agreement, the Designers Trademark
Security Agreement, the Item-Eyes Trademark Security Agreement and each other Security Agreement,
Pledge Agreement and Trademark Security Agreement, to the extent executed, separately or jointly,
by any party obligated in connection with the Obligations.


 


22









 





“Solvent” means, when used with respect to any Person, that (a) the fair value of the property
of such Person, on a going concern basis, is greater than the total amount of liabilities
(including, without
limitation, contingent liabilities) of such Person, (b) the present fair saleable value of the
assets of such Person, on a going concern basis, is not less than the amount that will be required
to pay the probable liabilities of such Person on its debts as they become absolute and matured,
(c) such Person does not intend to, and does not believe that it will incur debts or liabilities
beyond such Person’s ability to pay as such debts and liabilities mature, and (d) such Person is
not engaged in business or a transaction, and is not about to engage in business or a transaction,
for which such Person’s property would constitute unreasonably small capital after giving due
consideration to the prevailing practice in the industry in which such Person is engaged.
Contingent liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.



“Standby Letter of Credit” means a Standby Letter of Credit issued by HSBC for the account of
Borrower.



“Standby Letter of Credit Commitment” shall have the meaning set forth in Section 3.05
hereof.




“Standby Letter of Credit Fee” has the meaning set forth in Section 3.03 hereof.



“Standby Letter of Credit Obligations” means at any time an amount equal to the sum of (a) the
aggregate unused face amount of all outstanding Standby Letters of Credit, plus any variance
allowed under the terms of the Standby Letter of Credits, (b) the aggregate amount of all
unreimbursed obligations on Standby Letters of Credit and (c) the aggregate amount of all
outstanding overdrafts created to satisfy any of the foregoing obligations.




“Steamship Guaranty” has the meaning set forth in Section 3.09 hereof.



“Subsidiary” means, as to any Person, a corporation of which shares of stock having ordinary
voting power (other than stock having such power only by reason of the happening of a contingency)
to elect a majority of the board of directors or other managers of such corporation are at the time
owned, or the management of which is otherwise controlled, directly, or indirectly through one or
more intermediaries, or both, by such Person.



“Suppressed Availability” shall mean an amount equal to (i) the Borrowing Base as determined
in accordance with Section (b) of the “Borrowing Base” definition but without regard to the
Inventory Cap (which shall be calculated based upon the last Borrowing Base Certificate delivered
to Agent in accordance with Section 8.08(a) hereof) minus (ii) the Revolving Credit Commitment.



“Test Period” shall mean, at any date of determination, the four most recently ended
consecutive Fiscal Quarters of Borrower (in each case taken as one accounting period) for which
financial statements have been or are required to be delivered pursuant to Section 8.08
hereof.



“Trade Letter of Credit Ceiling” means an amount determined at any time equal to the
applicable percentage set forth in the table appearing in Section 3.01 hereof times the Borrower’s
Booked Orders.


 


23









 






“Trade Letter of Credit” has the meaning set forth in Section 3.01 hereof.



“Trade Letter of Credit Commitment” shall have the meaning set forth in Section 3.01
hereof.




“Trade Letter of Credit Fee” has the meaning set forth in Section 3.03 hereof.



“Trade Letter of Credit Obligations” means at any time an amount equal to the sum of (a) the
aggregate unused face amount of all outstanding Trade Letters of Credit, plus any variance allowed
under the terms of the Trade Letter of Credits, (b) the aggregate amount of all unreimbursed
obligations on Trade Letters of Credit, (c) the aggregate amount of all outstanding overdrafts
created to satisfy any of the foregoing obligations and (d) the aggregate amount of all Airway
Guaranties and Steamship Guaranties.



“Trademark Security Agreement” means a Trademark Collateral Assignment and Security Agreement,
substantially in the form of Exhibit C hereto.



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



“Uniform Customs and Practices” means, with regard to each Letter of Credit, the Uniform
Customs and Practices for Documentary Letters of Credit (1993 Revision), International Chamber of
Commerce Publication No. 500, and any subsequent revision thereof adhered to by HSBC on the date
such Letter of Credit is issued.



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



Section 1.02.
Accounting Terms. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP, and all financial data required to be delivered hereunder shall
be prepared in accordance with GAAP.



Section 1.03.
Computation of Time Periods. Except as otherwise provided herein, in this
Agreement, in the computation of periods of time from a specified date to a later specified date,
the word “from” means “from and including” and words “to” and “until” each means “to but
excluding”.



Section 1.04.
Rules of Construction. When used in this Agreement: (a) “or” is not exclusive;
(b) a reference to a law includes any amendment or modification to such law and any statutory
amendments and recodifications; (c) a reference to a Person includes its permitted successors and
permitted assigns; and (d) a reference to an agreement, instrument or document shall include such
agreement, instrument or document as the same may be amended, modified or supplemented from time to
time in accordance with its terms and as permitted by the Loan Documents.


 


24









 





ARTICLE II




REVOLVING CREDIT LOANS





Section 2.01 Revolving Credit.



(a) Subject to the terms and conditions of this Agreement, each of the Banks severally and not
jointly agrees to make loans (the “Revolving Credit Loans”) according to each such Bank’s Pro Rata
Share of the Revolving Credit Commitment, to Borrower from time to time during the period from the
Restatement Date up to but not including the Revolving Credit Termination Date, provided that the
aggregate principal amount of all Revolving Credit Loans outstanding at any time does not exceed
the Availability for Revolving Credit Loans. Each Revolving Credit Loan which shall not utilize the
Availability for Revolving Credit Loans in full shall be in the minimum amount set forth in
Section 2.11 hereof. Subject to the terms hereof, the Borrower may borrow, make an
Optional Prepayment pursuant to Section 2.08 hereof, and reborrow under this Section
2.01 hereof.



(b) A Bank Default by a Defaulting Bank shall not relieve any other Bank of its obligation (if
any) to make such Revolving Credit Loan on such date, but no other Bank shall be responsible for
the failure by a Defaulting Bank to make such Revolving Credit Loans.



(c) Subject to the provisions of Section 14.01 hereof, the advance rates set forth in
the definition of “Borrowing Base” may be increased or decreased by Agent at any time and from time
to time in the exercise of its commercially reasonable discretion in good faith and in accordance
with customary credit practices in the asset based lending industry. Borrower consents to any such
increases or decreases and acknowledges that decreasing the advance rates or increasing or imposing
Availability Reserves may limit or restrict Revolving Credit Loans requested by Borrower. Agent
shall give Borrower five (5) days prior written notice of its intention to decrease such advance
rates.




Section 2.02 [Intentionally Omitted.]



Section 2.03 Notice and Manner of Borrowing. Borrower shall give Agent telephonic notice, to
be followed by written or telegraphic or facsimile notice in the form of Exhibit D hereto
(irrevocable and effective upon receipt) of any Loan, such notice to indicate, in the case of a
Revolving Credit Loan, whether such Loan shall be a Prime Rate Loan or a Revolving Eurodollar Rate
Loan. Each of the foregoing notices (a “Borrowing Notice”) must specify the date and the amount of
such Loan to the Agent and the Agent will promptly notify each Bank of receipt by the Agent of a
Borrowing Notice and of the contents thereof. In the case of a Eurodollar Rate Loan, the Borrowing
Notice shall be received not later than three (3) Banking Days prior to such Eurodollar Rate Loan
and shall specify the Interest Period selected, In the case of a Prime Rate Loan, the Borrowing
Notice shall be received not later than noon (New York time) on the date of such proposed Prime
Rate Loan. Not later than 1:00 P.M. (New York time) on the date of a Loan, each Bank will cause to
be transmitted to the Agent, to an account designated by the Agent, in immediately available funds,
such Bank’s Pro Rata Share of such Loan. After the Agent’s receipt of such funds, not later than
3:00 P.M. (New York time) on the date of a Loan, and upon fulfillment of the applicable conditions
set forth in Article VI, the Agent will make such Loan
available to Borrower in immediately available funds by crediting the amount thereof to the
accounts as designated by Borrower to Agent.


 


25









 






Section 2.04 Conversions and Continuation.



(a) The Borrower shall have the right to convert one type of Revolving Credit Loan into
another type of Revolving Credit Loan at any time or from time to time; provided
that: (i) the Borrower shall give the Agent at least three (3) Banking Days notice of the
conversion of a Prime Rate Loan into a Revolving Eurodollar Rate Loan and (ii) Revolving Eurodollar
Rate Loans may be prepaid or converted only on the last day of an Interest Period for such
Revolving Eurodollar Rate Loan.



(b) Borrower may, as long as no Default or Event of Default shall have occurred and be
continuing, elect to continue any Eurodollar Rate Loan at any time prior to the expiration of the
applicable Interest Period; provided that the Borrower shall give the Agent at
least three (3) Banking Days notice of the continuation of such Eurodollar Rate Loan.



(c) If the Borrower shall have failed to timely continue pursuant to Section 2.04(b)
hereof a Eurodollar Rate Loan, then, upon the expiration of the Interest Period applicable to such
Eurodollar Rate Loan, the Borrower shall be deemed to have elected to continue such Eurodollar Rate
Loan as a Eurodollar Rate Loan with a one-month Interest Period; provided that no
Default or Event of Default of the type described in Section 11.01(a) and (e)
hereof then exists.



(d) After the occurrence of and during the continuation of a Default or an Event of Default of
the type described in Section 11.01(a) or (e) hereof, the Borrower may not elect
(i) to have a Loan be made as a Revolving Eurodollar Rate Loan, (ii) to have a Revolving Credit
Loan converted to a Revolving Eurodollar Rate Loan, or (iii) to have a Eurodollar Rate Loan
continued as a Eurodollar Rate Loan, after the expiration of any applicable Interest Period.



(e) Upon receipt of a notice of conversion pursuant to Section 2.04(a) hereof or a
notice of continuation pursuant to Section 2.04(b) hereof, the Agent will promptly notify
each Bank thereof, or, if no timely notice is provided by the Borrower, the Agent will promptly
notify each Bank of the details of any automatic conversion. All conversions and continuations
shall be made according to each Bank’s applicable Pro Rata Share of the outstanding principal
amounts of the Revolving Credit Loans or the Term Eurodollar Rate Loans with respect to which the
notice was given.


 


26









 





Section 2.05 Non-Receipt of Funds by Agent. Unless the Agent shall have received notice from
a Bank, prior to the date on which such Bank is to provide funds to the Agent for a Loan to be made
by such Bank, that such Bank will not make available to the Agent such funds, the Agent may assume
that such Bank has made such funds available to Agent on the date of such Loan in accordance with
Section 2.03 hereof and the Agent, in its sole discretion, may, but shall not be obligated
to, in reliance upon such assumption, make available to Borrower on such date a corresponding
amount. If and to the extent such Bank shall not have made such funds available to the Agent, such
Bank agrees to repay the Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to Borrower until the date such
amount is repaid
to the Agent, for three (3) Banking Days, at the Federal Funds Rate and thereafter, at the
Prime Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid
shall constitute such Bank’s Loan for purposes of this Agreement. If such Bank does not pay such
corresponding amount forthwith upon Agent’s demand therefor, the Agent shall promptly notify
Borrower, and Borrower shall immediately pay such corresponding amount to the Agent with the
interest thereon, for each day from the date such amount is made available to Borrower until the
date such amount is repaid to the Agent, at the rate of interest applicable at the time to such
proposed Loan. Unless the Agent shall have received notice from Borrower prior to the date on
which any payment is due to any Bank hereunder that Borrower will not make such payment in full,
the Agent may assume that Borrower has made such payment in full to the Agent on such date and the
Agent, in its sole discretion, may, but shall not be obligated to, in reliance upon such
assumption, cause to be distributed to each Bank on such due date an amount equal to the amount
then due such Bank. If and to the extent Borrower shall not have so made such payment in full to
the Agent, each Bank shall repay to the Agent forthwith on demand such amount distributed to such
Bank together with interest thereon, for each day from the date such amount is distributed to such
Bank until the date such Bank repays such amount to the Agent, for three (3) Banking Days, at the
Federal Funds Rate and thereafter at the Prime Rate.



Section 2.06 Interest. Borrower shall pay interest to the Agent, for the account of the
applicable Bank, on the outstanding and unpaid principal amount of the Loans at a rate per annum
equal to the Interest Rate. Any principal or interest amount not paid when due (at maturity, by
acceleration or otherwise) shall bear interest thereafter, payable on demand, at the Default Rate.



The interest rate on each Prime Rate Loan shall change when the Prime Rate changes. Interest
on each Loan shall not exceed the maximum amount permitted under applicable Law and shall be
calculated on the basis of a year of three hundred sixty (360) days for the actual number of days
elapsed.



Accrued interest shall be due and payable (a) in the case of a Prime Rate Loan (i) in arrears
on each Monthly Date, commencing with the first such date after such Prime Rate Loan, and (ii) upon
each payment or prepayment of principal on such Prime Rate Loan and (b) in the case of a Eurodollar
Rate Loan, at the end of each Interest Period and, in the case of a Eurodollar Rate Loan with an
Interest Period of more than three months’ duration, each day prior to the last day of such
Interest Period that occurs at intervals of three months’ duration after the first day of such
Interest Period, and (c) in the case of a prepayment that reduces the Revolving Credit Commitment
in accordance with Section 2.08 hereof, upon each such prepayment.



Section 2.07 Notes. All Revolving Credit Loans made by each Bank under this Agreement shall
be evidenced by, and repaid with interest in accordance with, a single promissory note of Borrower
in substantially the form of Exhibit F duly completed, in the principal amount equal to
such Bank’s Pro Rata Share of the total Revolving Credit Commitment, dated the date such bank
becomes a Bank, payable to such Bank and maturing as to principal on the Revolving Credit
Termination Date (the “Revolving Credit Notes”). Each Bank is hereby authorized by Borrower to
endorse on the schedule attached to the Revolving Credit Note held by it the amount of each
Revolving Credit Loan, and the payment amount of each principal payment received by such Bank on
account of the Revolving Credit Loans, which endorsement shall, in the absence of manifest error,
be conclusive as to the outstanding
balance of the Revolving Credit Loans made by such Bank; provided however,
that the failure to make such notation with respect to any Revolving Credit Loan or payment shall
not limit or otherwise affect the obligations of Borrower under this Agreement or the Revolving
Credit Note held by such Bank. Each Bank agrees that prior to any assignment of the Revolving
Credit Note, it will endorse the schedule attached to its Revolving Credit Note.


 


27









 






Section 2.08 Repayments and Mandatory and Optional Prepayments.



(a) The Revolving Loans shall be due and payable in full on the Revolving Credit Termination
Date subject to earlier prepayment as provided herein.



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



(c) Borrower may prepay without premium or penalty but subject to the provisions of
Section 13.03 hereof a Eurodollar Rate Loan, in whole or in part, with accrued interest to
the date of such prepayment on the amount paid, provided that, each partial
prepayment shall be in a principal amount of not less than One Million Five Hundred Thousand
Dollars ($1,500,000) (each such payment, an “Optional Prepayment”).



(d) During the term of this Agreement, Borrower shall make mandatory prepayments (i) in an
amount equal to the net proceeds received in any Fiscal Year, from the sale of all or any part of
the assets of the Borrower or any Restricted Subsidiary; (ii) in an amount equal to the net
proceeds received by Borrower or any Restricted Subsidiary from the sale or issuance of any debt
instrument, and (iii) in an amount equal to the net proceeds received by Borrower or any Restricted
Subsidiary under any insurance policy, to the extent that, in the case of property and casualty
insurance, such proceeds are not used by Borrower or such Restricted Subsidiary to repair or
replace the property which was the subject of such insurance claim, with a reasonable period of
time but in no event later than six (6) months from the date such proceeds are received by the
Borrower or such Subsidiary, unless Borrower or such Subsidiary has taken action to effect such
repair or replacement, as determined by the Agent in good faith, or unless otherwise agreed to by
the Agent. With respect to prepayments received by the Agent for the ratable benefit of Banks
under this Section 2.08(d), such prepayments shall be applied first, to the then
outstanding Revolving Credit Loans, and second, at the discretion of Agent, to be held as Cash
Collateral to secure Letter of Credit Obligations.


 


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(e) To the extent that, at any given time, (i) the Outstanding Credit Facilities exceed the
then effective Revolving Credit Commitment, or (ii) the Outstanding Credit Facilities exceed the
sum of the Availability for Revolving Credit Loans plus the Letter of Credit Obligations, or (iii)
the Revolving Credit Loans exceed the Availability for Revolving Credit Loans, or (iv) the
Obligations exceed any of the other borrowing limitations set forth in this Agreement, in each case
the Borrower shall immediately pay to the Agent for the ratable benefit of the Banks a mandatory
prepayment of the Revolving Credit Loans in an amount equal to such excess and/or Borrower shall
immediately provide Cash Collateral for the Letter of Credit Obligations to the extent required to
eliminate such excess. Any Cash Collateral deposited with the Agent for the ratable benefit of the
Banks in accordance with the terms of this Section 2.08 shall be credited, for purposes of
the calculation of Availability for Revolving Credit Loans under Section 2.01 hereof,
against the outstanding Letter of Credit Obligations subject to Section 2.08(f) hereof.



(f) In the event Eurodollar Rate Loans are outstanding at the time of any payment under this
Section 2.08 hereof, such payment shall be applied first to reduce any Prime Rate Loans
outstanding to zero. Any remaining payment amount shall be deemed to be Cash Collateral and shall
be deposited by Agent in a segregated account to be applied to the Eurodollar Rate Loans. The Cash
Collateral in such segregated account shall represent a reduction of the Eurodollar Rate Loans then
outstanding and such amount shall be credited against Revolving Credit Loans for purposes of
calculating Availability for Revolving Credit Loans. Agent shall hold such amounts in such
segregated account and use it to pay the Eurodollar Rate Loans as such loans mature. If the
amounts in the segregated account are sufficient to pay (at maturity) the then outstanding
Eurodollar Rate Loans, any remaining payment shall then be applied to Letter of Credit Obligations
in accordance with Section 2.08(d) hereof.



Section 2.09 Method of Payment. All payments of principal, interest and other amounts payable
hereunder, under the Notes or under any other Loan Document shall be made, without setoff or
counterclaim, not later than 2:00 p.m. (New York time) on the date when due in Dollars to the Agent
at the Agent’s Office in immediately available funds and if received after 2:00 p.m. New York time,
then such payment shall be credited the next Banking Day. The Agent will promptly thereafter cause
to be distributed to each Bank (a) such Bank’s Pro Rata Share of the payments of principal and
interest in like funds, and (b) fees or sums payable to such Bank in accordance with the terms of
this Agreement, including, but not limited to, amounts due in accordance with Article XIII.



Borrower hereby authorizes the Agent to charge, from time to time, against any account it
maintains with the Agent or any Bank, any such amount so due to the Agent and/or the Banks and the
Agent agrees to provide a written notice of such charge to the Borrower within a reasonable period
after such charge.



Except to the extent provided in this Agreement, whenever any payment to be made under this
Agreement or under the Notes shall be stated to be due on any day other than a Banking Day, such
payment shall be made on the next succeeding Banking Day, and such extension of time shall, in such
case, be included in the computation of the payment of interest and other fees, as the case may be.


 


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Section 2.10 Use of Proceeds. On and after the date hereof, the proceeds of the Revolving
Credit Loans will be used by Borrower to provide working capital for Borrower and its Restricted
Subsidiaries. The Trade Letters of Credit will be used for importation and purchasing of inventory
by Borrower and its Restricted Subsidiaries.



Borrower will not, directly or indirectly, use any part of such proceeds for the purpose of
purchasing or carrying any margin stock within the meaning of Regulation U of the Board of
Governors or to extend credit to any Person for the purpose of purchasing or carrying any such
margin stock.



Section 2.11 Minimum Amounts. Each Eurodollar Rate Loan shall be in an amount at least equal
to One Million Five Hundred Thousand ($1,500,000) Dollars and in integral multiples of $500,000 in
excess thereof.




Section 2.12 Establishment of Loan Account; Collection of Accounts.



(a) Agent shall maintain a loan account (the “Loan Account”) on its books in which shall be
recorded the Loans and other Obligations and the Collateral, all payments made by or on behalf of
Borrower and all other appropriate debits and credits as provided in this Agreement, including
fees, charges, costs, expenses and interest. All entries in the Loan Account shall be made in
accordance with Agent’s customary practices as in effect from time to time. The records of Agent
shall be conclusive and binding, in the absence of manifest error.



(b) All proceeds of Collateral shall be deposited by Borrower and the Restricted Subsidiaries
into a lockbox account, dominion account or such other blocked account (collectively, the “Blocked
Accounts”) as Agent may require pursuant to an arrangement with such bank (the “Blocked Account
Bank”) as may be selected by Borrower and be acceptable to Agent. Agent acknowledges and agrees
that Borrower’s accounts at JPMorgan Chase Bank are acceptable Blocked Accounts and that JPMorgan
Chase Bank is an acceptable Blocked Account Bank. Borrower (or the applicable Restricted
Subsidiary), Agent and such Blocked Account Bank shall enter into an agreement directing said
Blocked Account Bank to transfer such funds so deposited to Agent, either to any account maintained
by Agent at said Blocked Account Bank or by wire transfer to appropriate account(s) of Agent. All
funds deposited in a Blocked Account shall immediately become the property of Agent. Neither Agent
nor any Bank assumes any responsibility for any Blocked Account arrangement, including without
limitation, any claim of accord and satisfaction or release with respect to deposits accepted by
any bank thereunder. Alternatively, Agent may establish depository accounts (collectively, the
“Depository Accounts”) in the name of Agent at a bank or banks for the deposit of such funds and
Borrower shall deposit all proceeds of Collateral or cause same to be deposited, in kind, in such
Depository Accounts of Agent in lieu of depositing same to the Blocked Accounts.



Section 2.13 Closing Fee. Upon the execution of this Agreement, Borrower shall pay to Agent,
for the ratable benefit of Banks, a closing fee in the amount of Two Hundred Forty Thousand Dollars
($240,000), which fee shall be fully earned and payable as of the date hereof.


 


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Section 2.14 Fee Letter. Borrower shall pay the amounts required to be paid in the Fee Letter
and at the times required by the Fee Letter.



Section 2.15 Commitment Fee. If, for any Agreement Quarter (as defined below) during the term
of this Agreement, the average daily unpaid balance of the Revolving Credit Loans plus Letter of
Credit Obligations for Borrower for each day of such quarter does not equal the Revolving Credit
Commitment then Borrower shall pay to Agent, for the ratable benefit of Banks, a fee at a rate
equal to one half of one percent (.50%) per annum on the amount by which the Revolving Credit
Commitment exceeds such aggregate average daily unpaid balance of the Revolving Credit Loans plus
Letter of Credit Obligations for Borrower. Such fee shall be payable by Borrower to Agent in
arrears on the last day of each calendar quarter, shall be fully earned as of the date of payment
and shall not be subject to refund, rebate or proration for any reason whatsoever. For the
purposes of this Section 2.14 only, the term “Agreement Quarter” shall mean each calendar
quarter of each calendar year.




Section 2.16 Defaulting Bank.



(a) Notwithstanding anything to the contrary contained herein, in the event any Bank (x) has
refused (which refusal constitutes a breach by such Bank of its obligations under this Agreement)
to make available its portion of any Loan or (y) notifies either Agent or Borrower that it does not
intend to make available its portion of any Loan (if the actual refusal would constitute a breach
by such Bank of its obligations under this Agreement) (each, a “Bank Default”), all rights and
obligations hereunder of such Bank (a “Defaulting Bank”) as to which a Bank Default is in effect
and of the other parties hereto shall be modified to the extent of the express provisions of this
Section 2.16 while such Bank Default remains in effect.



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



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


 


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(d) If there are Letter of Credit Obligations outstanding at the time a Bank becomes a
Defaulting Bank then the Borrower shall within five (5) Banking Days following notice by the Agent,
cash collateralize such Defaulting Lender’s Pro Rata Share of the Letter of Credit Obligations
until (i) such Letter of Credit Obligations cease to be outstanding, (ii) such Bank ceases to be a
Defaulting Bank, or (iii) such Defaulting Bank assigns its Pro Rata Share of such Letter of Credit
Obligations to one or more Banks or other assignees pursuant to Section 14.04, whichever
shall first occur.



(e) Other than as expressly set forth in this Section 2.16, the rights and obligations of a
Defaulting Bank (including the obligation to indemnify Agent) and the other parties hereto shall
remain unchanged. Nothing in this Section 2.16 shall be deemed to release any Defaulting Bank from
its obligations under this Agreement and the other Loan Documents, shall alter such obligations,
shall operate as a waiver of any default by such Defaulting Bank hereunder, or shall prejudice any
rights which Borrower, Agent or any Bank may have against any Defaulting Bank as a result of any
default by such Defaulting Bank hereunder.



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



ARTICLE III




LETTERS OF CREDIT




Section 3.01 Trade Letters of Credit; Cash Collateral for Letters of Credit Expiring After
Termination Date. Letter of Credit Issuing Bank agrees, on the terms and conditions hereinafter
set forth, to issue trade letters of credit payable at sight with a maturity date of up to one
hundred eighty (180) days from the date of issuance (such Letters of Credit issued by Letter of
Credit Issuing Bank after the Restatement Date, and all the Existing Letters of Credit are
collectively referred to herein as the “Trade Letters of Credit”) for the account of a Letter of
Credit Account Party, during the period from the Restatement Date to five (5) Banking Days prior to
the Revolving Credit Termination Date; provided that, at no time will the
outstanding Trade Letter of Credit Obligations exceed the lesser of (a) the Revolving Credit
Commitment less outstanding Revolving Credit Loans and Letter of Credit Obligations (other than
Trade Letter of Credit Obligations) or (b) the Borrowing Base less outstanding Revolving Credit
Loans and Letter of Credit Obligations (other than Trade Letter of Credit Obligations) (the “Trade
Letter of Credit Commitment”); provided further that, Letter of Credit
Issuing Bank will not be required to issue a Trade Letter of Credit with a maturity (expiration)
date of more than 90 days after the Revolving Credit Termination Date and, with respect to all
Letters of Credit with a maturity (expiration) date after the Revolving Credit Termination Date,
all of such outstanding Trade Letters of Credit Obligations and/or Standby Letters of Credit
Obligations, as of five (5) Banking Days prior to the Revolving Credit Termination Date, shall be
secured by Cash Collateral at one hundred and five percent (105%) of the face amount thereof. In
addition to the foregoing, and notwithstanding such Letter of Credit’s maturity (expiration) date,
any Letter of Credit issued by a Letter of Credit Issuing Bank after May 1, 2011 shall be secured
by Cash Collateral at one hundred and five percent (105%) of the face amount thereof. In addition
to the foregoing, the Letter of Credit Issuing Bank will not be required to
issue a Trade Letter of Credit at any time if the sum of the aggregate outstanding Trade
Letter of Credit Obligations plus the face amount of the requested Trade Letter of Credit is in
excess of the Trade Letter of Credit Ceiling applicable at such time, to be determined pursuant to
the table set forth on Schedule 3.01.


 


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For purposes of this Section 3.01 hereof, the term “Booked Orders” shall mean, as of any date
of calculation, the aggregate dollar value of all written customer orders (including orders in
respect of items previously shipped and sold) received to such date of calculation in the
applicable Fiscal Year, as set forth in the Booked Order Report.



Title documents shall be consigned to Agent at Agent’s request; provided that
with respect to any Existing Letters of Credit for delivery of goods from outside of the United
States into the United States, within five (5) Banking Days of the Restatement Date, at Agent’s
request Borrower shall apply for amendments to such Letters of Credit to provide that all title
documents related to such goods shall be consigned to Agent.



Section 3.02 Reimbursement Obligation. With respect to each Letter of Credit, the Letter of
Credit Account Party for which such Letter of Credit has been issued will pay Letter of Credit
Issuing Bank, within one (1) Banking Day of demand at Letter of Credit Issuing Bank’s Principal
Office, in immediately available funds, the amount required to reimburse Letter of Credit Issuing
Bank in respect of Letter of Credit Issuing Bank’s payment of each Instrument applicable and/or
relating to such Letter of Credit. Such reimbursement shall be made with interest from the date of
Letter of Credit Issuing Bank’s payment of such Instrument to the date of reimbursement (i) in the
event that such reimbursement is made within one (1) Banking Day of such demand, such interest
shall be at the rate applicable to such Letter of Credit, and (ii) in the event that such
reimbursement is made after one (1) Banking Day of such demand, such interest shall be at the
Default Rate. If the Instrument is in foreign currency, such reimbursement shall be in Dollars at
Letter of Credit Issuing Bank’s selling rate for cable transfers to the place of payment of the
Instrument current on the date of payment or of Letter of Credit Issuing Bank’s settlement of its
obligation, as Letter of Credit Issuing Bank may require. If, for any cause, on the date of
payment or settlement, as the case may be, there is no selling rate or other rate of exchange
generally current in New York for effecting such transfers, each applicable Letter of Credit
Account Party will pay Letter of Credit Issuing Bank on demand an amount in Dollars equivalent to
Letter of Credit Issuing Bank’s actual cost of settlement of its obligation however or whenever
Letter of Credit Issuing Bank shall make such settlement, with interest at the Prime Rate for
Revolving Credit Loans from the date of settlement to the date of payment. Each Letter of Credit
Account Party will comply with all governmental exchange regulations now or hereafter applicable to
each Letter of Credit or Instrument or payments related thereto and will pay Letter of Credit
Issuing Bank, on demand, in Dollars, such amount as Letter of Credit Issuing Bank may be or may
have been required to expend on account of such regulations. HSBC may debit, or direct any other
Bank to debit, any account or accounts maintained by any other Letter of Credit Account Party with
any office of HSBC or any other Bank or any of their respective Subsidiaries or Affiliates (now or
in the future) and apply the proceeds to the payment of any and all amounts owed by any Letter of
Credit Account Party to Letter of Credit Issuing Bank hereunder, and such Bank, Subsidiary or
Affiliate shall be authorized to act in accordance
herewith and shall treat this authorization as irrevocable, and HSBC agrees to provide a
written notice of such debit to the Borrower within a reasonable period after such debit.


 


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Section 3.03 Payment of Commissions, Expenses and Interest. Each Letter of Credit Account
Party will pay interest where chargeable, including reasonable fees and charges of counsel, or
reasonable costs allocated by Letter of Credit Issuing Bank’s internal legal department in
connection with the enforcement of this Agreement or any Letter of Credit. Unless otherwise
agreed:



(a) interest payable under this Article III on amounts not paid when due shall be at
the lesser of (i) the maximum rate permissible under applicable Law and (ii) the Default Rate;



(b) each Letter of Credit Account Party shall pay to Letter of Credit Issuing Bank on demand
such amounts as Letter of Credit Issuing Bank, in its sole discretion, determines are necessary to
compensate it for any cost attributable to its issuing or having outstanding such Letter of Credit
resulting from the application of any Law or regulation applicable to Letter of Credit Issuing Bank
regarding any reserve, assessment, capital adequacy or similar requirements relating to letters of
credit or the reimbursement agreements with respect thereto or to similar liabilities or assets of
Letter of Credit Issuing Bank whether existing at the time of issuance of the Letter of Credit or
adopted thereafter including, but not limited to, fees and amounts payable with respect to
amendments to and increases of a Letter of Credit. Each Letter of Credit Account Party
acknowledges that there may be various methods of allocating costs to the Letter of Credit and
agrees that Letter of Credit Issuing Bank’s allocation for purposes of determining the costs
referred to above shall be conclusive and binding upon each Letter of Credit Account Party provided
such allocation is made in good faith; and



(c) in addition to the Letter of Credit Issuing Bank’s standard fees and charges for Letters
of Credit and all other fees, commissions and other amounts otherwise payable with respect to
issuance of Letters of Credit, including, but not limited to, a fee equal to one quarter of one
(0.25%) percent of the face amount of each Letter of Credit payable upon issuance (the “Letter of
Credit Issuance Fee”) (all of which shall be for the Letter of Credit Issuing Bank’s own account),
each Letter of Credit Account Party shall pay to Agent (for the pro rata benefit of the Banks) an
amount equal to (i) four (4.00%) percent per annum of the face amount of each Standby Letter of
Credit issued for the account of such Letter of Credit Account Party, payable quarterly in advance
upon issuance (the “Standby Letter of Credit Fee”) and (ii) two and one-quarter of one (2.25%)
percent per annum of the face amount of each Trade Letter of Credit issued for the account of
such Letter of Credit Account Party, payable quarterly in advance upon issuance (the “Trade Letter
of Credit Fee”).



Section 3.04 Proper Drawing; Letter of Credit Issuing Bank’s Honoring. Letter of Credit
Issuing Bank may accept or pay any Instrument presented to it on or before the expiration date of
the applicable Letter of Credit. Except insofar as written instructions may be given by an
Authorized Person expressly to the contrary, and prior to Letter of Credit Issuing Bank’s issuance
of a Letter of Credit:



(a) Letter of Credit Issuing Bank may honor the related Instrument(s) in an amount or amounts
not exceeding the amount of such Letter of Credit, although shipment(s) in excess of the
quantity called for under such Letter of Credit are made, and


 


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(b) Letter of Credit Issuing Bank may honor, as complying with the terms of such Letter of
Credit and of the Application relating to it, any Instrument or other document otherwise in order
signed or issued by a person purporting to be an administrator, executor, trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, liquidator, receiver or other legal
representative of the party authorized under such Letter of Credit to draw or issue such
Instruments or other documents.



Section 3.05 Standby Letters of Credit. During the period from the Restatement Date to five
(5) Banking Days prior to the Revolving Credit Termination Date, Letter of Credit Issuing Bank may
open, at the request of and for the account of a Letter of Credit Account Party, Standby Letters of
Credit; provided, that, at no time will the outstanding Standby Letter of Credit
Obligations exceed the lesser of (a) Ten Million Dollars ($10,000,000), or (b) the Revolving Credit
Commitment less outstanding Revolving Credit Loans and Letter of Credit Obligations (other than
Standby Letter of Credit Obligations) or (c) the Borrowing Base less outstanding Revolving Credit
Loans and Letter of Credit Obligations (other than Standby Letter of Credit Obligations) (the
“Standby Letter of Credit Commitment”). No Standby Letter of Credit shall have a stated expiration
date later than the earlier of (a) the Revolving Credit Termination Date (unless collateralized as
provided in Section 3.01 hereof) or (b) 364 days from the date of issuance. For the
purpose of calculating the Net Availability and the Availability for Revolving Credit Loans as such
term is used in the definition of Net Availability, Standby Letters of Credit shall be deemed
Revolving Credit Loans and not Letters of Credit. No Standby Letter of Credit shall be issued by
the Letter of Credit Issuing Bank after May 1, 2011 unless collateralized as provided in Section
3.01 hereof.



Section 3.06 Amendment; Change; Modification; No Waiver. In the event of any amendment,
change or modification relating to a Letter of Credit or any Instruments or documents called for
thereunder, including waiver of noncompliance of any such Instruments or documents with the terms
of such Letter of Credit, this Agreement shall be binding upon each Letter of Credit Account Party
with regard to such Letter of Credit as so amended, changed, or modified, and to any act taken by
Letter of Credit Issuing Bank or any of its correspondents relating thereto. No amendment, change,
waiver, or modification to which Letter of Credit Issuing Bank has consented shall be deemed to
mean that Letter of Credit Issuing Bank will consent or has consented to any other or subsequent
request to amend, change, modify or waive a term of such Letter of Credit. Letter of Credit
Issuing Bank shall not be deemed to have waived any of its rights hereunder, unless Letter of
Credit Issuing Bank or its authorized agent shall have signed such waiver in writing. No such
waiver, unless expressly stated therein, shall be effective as to any transaction which occurs
subsequent to the date of such waiver, nor as to any continuance of a breach after such waiver.



Section 3.07 U.C.P. and I.S.P.; Agreements and Acknowledgments; Indemnification. The Uniform
Customs and Practice and the International Standby Practices shall be binding on each Letter of
Credit Account Party and Letter of Credit Issuing Bank, except to the extent it is otherwise
expressly agreed. It is also agreed that:



(a) user(s) of a Letter of Credit shall not be deemed agents of Letter of Credit Issuing Bank;


 


35









 





(b) none of Letter of Credit Issuing Bank, its Affiliates, Subsidiaries, or its correspondents
shall be responsible for:




(i) failure of any Instrument to bear any reference to the related Letter of Credit or
inadequate reference in any Instrument to such Letter of Credit, or failure of any document
(other than documents expressly required to be presented under such Letter of Credit) to
accompany any Instrument at negotiation, or failure of any person to note the amount of any
Instrument on the reverse of a Letter of Credit, or to surrender or take up a Letter of
Credit or to forward documents apart from Instruments as required by the terms of such
Letter of Credit, each of which provisions, if contained in a Letter of Credit itself, it is
agreed may be waived by Letter of Credit Issuing Bank; or




(ii) errors, omissions, interruptions or delays in transmission, or delivery of any
message, by mail, telex, cable, telegraph, wireless or other teletransmission or by oral
instructions, whether or not they may be in cipher;



(c) Letter of Credit Issuing Bank shall not be responsible for any act, error, neglect or
default, omission, insolvency or failure in business of any of its correspondents;




(d) Each Letter of Credit Account Party will promptly examine:




(i) any copy of a Letter of Credit (and of any amendments the thereof) sent to it by
Letter of Credit Issuing Bank; and




(ii) all Instruments and documents delivered to it, from time to time, and, in the
event of any claim of non compliance with a Letter of Credit Account Party’s instructions or
other irregularity, the applicable Letter of Credit Account Party will immediately notify
Letter of Credit Issuing Bank thereof in writing, each Letter of Credit Account Party being
conclusively deemed to have waived any such claim against Letter of Credit Issuing Bank and
its correspondents unless such notice is given as aforesaid;



(e) any action, inaction or omission on the part of Letter of Credit Issuing Bank or any of
its correspondents, under or in connection with a Letter of Credit or the related Instruments,
documents or property, if, in good faith, shall be binding upon each Letter of Credit Account Party
and shall not place Letter of Credit Issuing Bank or any of its correspondents under any liability
to any Letter of Credit Account Party; and



(f) in the event that Letter of Credit Issuing Bank shall pre-assign a letter of credit number
or numbers to any Letter of Credit Account Party, each Letter of Credit Account Party shall keep
such number(s) confidential and shall not disclose any such number to any Person until the Letter
of Credit to which such number relates has been approved by Letter of Credit Issuing Bank.


 


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Each Letter of Credit Account Party agrees to hold HSBC, each Affiliate and Subsidiary of
HSBC, Letter of Credit Issuing Bank, Collateral Monitor, Agent, each Bank, each Affiliate and
Subsidiary of each Bank, each of their officers, directors, employees and correspondents
indemnified and harmless against any and all claims, loss, liability or damage, including
reasonable counsel fees, howsoever arising from or in connection with any Letter of Credit or any
Application, including, without limitation, any such claim, loss, liability or damage arising out
of any transfer, sale, delivery, surrender or endorsement of any document at any time(s) held by
Letter of Credit Issuing Bank or any of its Affiliates or Subsidiaries, or held for the account of
any one of them by any correspondent of any of them, or arising out of any action for injunctive or
other judicial or administrative relief arising out of or in connection with any Letter of Credit
and affecting, directly or indirectly, HSBC, or each Affiliate or Subsidiary of HSBC (but excluding
any such losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of any of HSBC, each Affiliate and Subsidiary of HSBC, Letter of
Credit Issuing Bank, Collateral Monitor, Agent, each Bank, each Affiliate and Subsidiary of each
Bank, each of their officers, directors, employees and correspondents, as determined by a court of
competent jurisdiction in a final and non-appealable judgment).



Section 3.08 Licenses; Insurance; Regulations. Each Letter of Credit Account Party will
procure promptly any necessary import, export or other licenses for the import, export or shipping
of the property shipped under or pursuant to or in connection with each Letter of Credit, and will
comply with all foreign and domestic governmental regulations in regard to the shipment of such
property or the financing thereof, and will furnish such certificates in that respect as Letter of
Credit Issuing Bank may, at any time(s), reasonably require, and will keep such property adequately
covered by insurance in amounts, against risks and with companies reasonably satisfactory to Agent,
and will assign the policies or certificates of insurance to Agent, or will make the loss or
adjustment, if any, payable to Agent, at Agent’s option, and will furnish Agent, on its demand,
with evidence of acceptance by the insurers of such assignment. Should the insurance upon such
property for any reason be unsatisfactory to Agent, Agent may, at Borrower’s expense, obtain
insurance satisfactory to Agent.



Each Application for a Trade Letter of Credit hereunder shall constitute the warranty and
certification made by each Letter of Credit Account Party that is a party to such Application that
no shipment or payment to be made in connection with such Trade Letter of Credit violates or will
violate any Law or any United States export, currency control, or other regulations.



Section 3.09 Airway and Steamship Guaranties. HSBC may, in its discretion, issue a letter of
indemnity or such other document requested by the party in possession of merchandise to enable a
Letter of Credit Account Party to take possession of such merchandise forthwith without production
of the shipping documents (an “Airway Guaranty” or “Steamship Guaranty”, as the case may be). Such
Airway Guaranty or Steamship Guaranty shall be deemed a part of the Letter of Credit Obligations
and shall be included, without duplication, as such in the calculation of the Borrowing Base, the
Availability for Revolving Credit Loans, the Trade Letter of Credit Commitment and the Standby
Letter of Credit Commitment, as applicable, provided, however, that any merchandise
which is the subject of such Airway Guaranty or Steamship Guaranty shall not be included in
Eligible Inventory or Eligible In-Transit Inventory or Eligible Trade Letters of Credit.


 


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Section 3.10 Additional Security. If a temporary restraining order or an injunction
(preliminary or permanent) or any similar order is issued in connection with any Letter of Credit
or any
Instrument or documents relating thereto, which order, injunction, or similar order may apply,
directly or indirectly, to Letter of Credit Issuing Bank, each Letter of Credit Account Party
shall, on demand, deliver, convey, transfer, or assign to the Agent additional security of a value
and character reasonably satisfactory to Agent and Letter of Credit Issuing Bank, or make such
payment as Agent and/or Letter of Credit Issuing Bank may require.



Section 3.11 Continuing Rights and Obligations. Agent’s and Letter of Credit Issuing Bank’s
rights hereunder shall continue unimpaired, and each Letter of Credit Account Party shall be and
remain obligated in accordance with the terms and provisions hereof, notwithstanding the release
and/or substitution of any property which may be held as Collateral at any time(s), or of any
rights or interest therein. No delay, extension of time, renewal, compromise or other indulgence
which may occur or be granted by Agent and/or Letter of Credit Issuing Bank shall impair Agent’s
and/or Letter of Credit Issuing Bank’s rights or powers hereunder.



Section 3.12 Instructions; No Liability. Instructions may be honored by Agent and Letter of
Credit Issuing Bank when received from an Authorized Person. Each Letter of Credit Account Party
may furnish Agent and Letter of Credit Issuing Bank with written confirmation of any such
Instruction, but Agent’s and Letter of Credit Issuing Bank’s responsibility with respect to any
Instruction shall not be affected by its failure to receive, or the content of, such confirmation.
Neither Agent nor Letter of Credit Issuing Bank shall have responsibility to notify any Letter of
Credit Account Party of any discrepancies between such Letter of Credit Account Party’s
instructions and its written confirmation, and in the event of any such discrepancy, the original
Instruction shall govern. Agent and Letter of Credit Issuing Bank shall be fully protected in, and
shall incur no liability to any Letter of Credit Account Party for, acting upon any Instructions or
any oral, written, telephone, teleprocess, electronic, or other amendments thereto which it in good
faith believes to have been given by any Authorized Person, and in no event shall Agent or Letter
of Credit Issuing Bank be liable for special, consequential, or punitive damages in connection
therewith. Agent and Letter of Credit Issuing Bank may, at its option, use any means of verifying
any Instruction received by it. Agent and Letter of Credit Issuing Bank also may, at its option,
refuse to act upon any instruction or other communication or any part thereof, without incurring
any responsibility for any loss, liability or expense arising out of such refusal. All such
authorizations and instructions shall continue in full force and effect unless Letter of Credit
Issuing Bank may elect to act upon additional instructions delivered to it by any Letter of Credit
Account Party prior to the issuance of a Letter of Credit in reliance upon the original
Instructions. Notwithstanding anything to the contrary contained herein, each Letter of Credit
Issuing Bank is authorized to delegate to one or more of its Affiliates any or all of its rights
and obligations with respect to any or all Letters of Credit issued by such Letter of Credit
Issuing Bank; provided that, no Letter of Credit may be issued by, and no obligations under
outstanding Letters of Credit may be delegated to, an Affiliate of a Letter of Credit Issuing Bank
unless (i) such Letter of Credit is confirmed by a Letter of Credit Issuing Bank, or (ii) such
Affiliate of a Letter of Credit Issuing Bank has the same or better credit rating as the applicable
Letter of Credit Issuing Bank based on the credit rating assigned to each by Moody’s Investors
Service, Inc. or Standard & Poor’s Ratings Group (a division of The McGraw Hill Companies, Inc.)
(or any successor or assignee of the business of each such company in the business of rating
securities credit rating).


 


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Section 3.13 Steamship Guaranty. Any Steamship Guaranty which the Letter of Credit Issuing
Bank may issue from time to time at its sole discretion will be deemed Letter of Credit
Obligations.



Section 3.14 Letter of Credit Application and Agreement. If requested by the Letter of Credit
Issuing Bank, each Letter of Credit Account Party also shall submit an Application and/or letter of
credit reimbursement agreement on the Letter of Credit Issuing Bank’s standard forms in connection
with any request for a Letter of Credit. In the event of any inconsistency between the terms and
conditions of this Agreement and the terms and conditions of any Application and/or letter of
credit reimbursement agreement and/or any other agreement submitted by a Letter of Credit Account
Party to, or entered into by a Letter of Credit Account Party with, the Letter of Credit Issuing
Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.




Section 3.15 Existing Letters of Credit; Use of Term “Letter of Credit Issuing Bank”.



(a) Banks, Borrower, Guarantors, Agent and Letter of Credit Issuing Bank hereby acknowledge
and agree that the Existing Letters of Credit constitute Letters of Credit hereunder and commencing
the Restatement Date, each Bank shall be deemed to have purchased from the Letter of Credit Issuing
Bank an undivided participating interest in the obligations of the Letter of Credit Issuing Bank
under and in connection with such Existing Letters of Credit pursuant to Article IV hereof.



(b) Notwithstanding anything to the contrary contained in this Agreement, with respect to all
Letters of Credit, to the extent that any consent or action is required by, or any notice is
required to be provided to, the Letter of Credit Issuing Bank for any matter relating to Letters of
Credit, the Letter of Credit Issuing Bank shall be deemed to mean only HSBC and such consent,
action and/or notice shall only be required of/to HSBC.



Section 3.16 Borrower’s Obligations Under Letters of Credit. With respect to Letters of
Credit issued for the account of a Letter of Credit Account Party that is not the Borrower, the
Borrower hereby agrees that, in addition to each other Letter of Credit Account Party for whose
account such Letter of Credit has been issued, the Borrower shall be primarily obligated for all
reimbursement obligations and Letter of Credit Fees in connection with any and all such Letters of
Credit to the same extent as if such Letters of Credit had named the Borrower as the account party
therefor.



ARTICLE IV




PARTICIPATION




Section 4.01 Participating Banks’ Pro Rata Shares. Subject to the terms and conditions
hereinafter set forth in this Article IV, Letter of Credit Issuing Bank hereby agrees to
sell and each Participating Bank hereby agrees to purchase a risk participation (“Participation”)
from Letter of Credit Issuing Bank in each Letter of Credit to the extent of each Bank’s Pro Rata
Share.


 


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Section 4.02 Sale and Purchase of Participation. Each Participating Bank hereby irrevocably
and unconditionally agrees to purchase, and Letter of Credit Issuing Bank hereby agrees to sell and
transfer to each Participating Bank, an undivided fractional interest equal to such Participating
Bank’s Pro Rata Share in each Letter of Credit upon issuance thereof and each draw thereunder upon
such drawing, and in the obligations of the Letter of Credit Account Parties in respect of each
such Letter of Credit under this Agreement and the Letter of Credit (including all related payments
and recoveries to which such Participating Bank is entitled pursuant to Section 4.05
hereof).



Section 4.03 Participation in Fees and Collateral; Relationship. Agent shall pay each
Participating Bank its Pro Rata Share of each Letter of Credit Fee (other than the Letter of Credit
Issuance Fee). These fee shall be due and payable promptly, after such Fees are paid to Agent.



The relationship between Letter of Credit Issuing Bank (in its capacity as seller of a
Participation pursuant to this Article IV) and each Participating Bank (in its capacity as
purchaser of a Participation pursuant to this Article IV) is and shall be that of a
purchaser and seller of a property interest and not a creditor-debtor relationship or joint
venture. Letter of Credit Issuing Bank (in its capacity as seller of a Participation pursuant to
this Article IV) shall owe each Participating Bank (in its capacity as purchaser of a
Participation pursuant to this Article IV) no duty except as specifically set forth in this
Article IV.



Section 4.04 Procedures. Whenever a draw shall be made under a Letter of Credit and a Letter
of Credit Account Party shall fail to reimburse Letter of Credit Issuing Bank therefor in
accordance with this Agreement, Letter of Credit Issuing Bank will promptly notify each
Participating Bank regarding such draw as follows: (a) the date of such draw, and (b) the amount
of such draw or payment. Although Letter of Credit Issuing Bank shall be responsible for paying
each such draw on each Letter of Credit, each Participating Bank shall bear its Pro Rata Share of
the credit risk associated with each such draw. Accordingly, in the event that the amount of any
such draw is not paid in full by or on behalf of a Letter of Credit Account Party when required in
accordance with the terms of this Agreement, for any reason, Letter of Credit Issuing Bank shall
give prompt notice by telephone (promptly confirmed in writing) or telex to each Participating Bank
of such event. Upon receipt of such telephone or telex notice, each Participating Bank shall cause
to be transmitted to Letter of Credit Issuing Bank, to an account to be specified by Letter of
Credit Issuing Bank, an amount in immediately available funds equivalent to its Pro Rata Share of
such draw or payment in such manner to ensure that such funds are received by, and available to,
Letter of Credit Issuing Bank by 3:00 P.M., New York City time, on the date demand therefor was
made by Letter of Credit Issuing Bank (if demand was made by 11:00 A.M., New York City time) or by
10:00 A.M., New York City time, on the Banking Day following the date demand therefore was made (if
demand was made after 11:00 A.M., New York City time) and any such payment by each Participating
Bank shall be deemed a Revolving Credit Loan.



Letter of Credit Issuing Bank shall advise each Participating Bank quarterly of its Pro Rata
Share of the Letter of Credit Obligations (but shall have no liability for its failure to do so).
In addition, Letter of Credit Issuing Bank shall supply any notices of reasonable requests in the
ordinary course of business.


 


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Section 4.05 Collections and Remittances. Whenever Letter of Credit Issuing Bank receives any
payment, interest reimbursement, collection, recovery, setoff, counterclaim or banker’s lien on
account of a Letter of Credit, whether from a Letter of Credit Account Party, the Collateral, or
otherwise, it shall allocate such receipt as follows:



(a) First, to the payment of taxes, assessments, insurance premiums, legal fees, or for
similar purposes as required by the Letter of Credit, as the case may be, or any other Loan
Document, and, if previously paid by Agent or Letter of Credit Issuing Bank, such sums shall be
retained by Agent or Letter of Credit Issuing Bank, as the case may be; and



(b) Second, in the event a Letter of Credit Account Party fails to reimburse Letter of Credit
Issuing Bank, when due, for any draw under a Letter of Credit, and Letter of Credit Issuing Bank
receives a payment of or on account of such defaulted amount as to which a Participating Bank has
paid Letter of Credit Issuing Bank the amount of its Pro Rata Share pursuant to Section
4.04 hereof, that portion of the amount received shall be allocated between each such
Participating Bank and Letter of Credit Issuing Bank pro rata, with each such
Participating Bank’s percentage of the principal amount based on its Pro Rata Share and with each
such Participating Bank’s portion of the interest and fees on its Pro Rata Share based upon the
amounts set forth above.



If any payment received by Letter of Credit Issuing Bank and distributed or credited to a
Participating Bank is later rescinded or is otherwise returned by Letter of Credit Issuing Bank for
whatever reason (including, without limitation, settlement of an alleged claim), each such
Participating Bank, upon demand by Letter of Credit Issuing Bank, shall immediately pay to Letter
of Credit Issuing Bank, such Participating Bank’s Pro Rata Share of the amount so returned, with
interest at the Federal Funds Rate from and after the date of demand. The covenants contained in
this paragraph shall survive the termination of this Agreement.



Section 4.06 Sharing of Setoffs and Collections. Each Participating Bank agrees that to the
extent any payment is received by it on any of a Letter of Credit Account Party’s obligations under
a Letter of Credit, whether by counterclaim, setoff, banker’s lien, by realizing on collateral or
otherwise and such payment results in such Participating Bank receiving a greater payment than it
would have been entitled to under Section 4.05 hereof had the total amount of such payment
been paid directly to Letter of Credit Issuing Bank for disbursement according to that Section,
then such Participating Bank shall immediately purchase for cash from Letter of Credit Issuing Bank
an additional Participation and a participation from the other Participating Banks in such Letter
of Credit (subject to the same terms and conditions provided for herein), sufficient in amount so
that such payment shall effectively be shared pro rata with HSBC and the other
Participating Banks in accordance with the amount, and to the extent, of their respective interests
in the Letter of Credit; provided however, that if all or any portion of such
payment is thereafter recovered from such Participating Bank at any time, the purchase shall be
rescinded and the purchase price returned to the extent of such recovery upon demand by such
Participating Bank with interest at the Federal Funds Rate from and after the date of demand.


 


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Section 4.07 Indemnification; Costs and Expense. To the extent not reimbursed by a Letter of
Credit Account Party, and without limiting the obligation of the Letter of Credit Account Parties
to do
so, each Participating Bank agrees to, on demand, reimburse each Letter of Credit Issuing Bank
for, indemnify each Letter of Credit Issuing Bank against, and hold each Letter of Credit Issuing
Bank harmless from, to the extent of each such Participating Banks Pro Rata Share of, any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses,
or disbursements of any kind whatsoever (including, without limitation, disbursements necessary, in
the reasonable judgment of such Letter of Credit Issuing Bank, to preserve or protect the
Collateral), that may, at any time, be imposed on, incurred by, or asserted against such Letter of
Credit Issuing Bank in any way relating to this Agreement, a Letter of Credit, the Collateral or
any other Revolving Credit Loan Document or other instrument relating to any of the foregoing, or
the transactions contemplated thereby and hereby, or any action taken or omitted by such Letter of
Credit Issuing Bank under or in connection with any of the foregoing; provided
however, that no Participating Bank shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses,
or disbursements resulting from such Letter of Credit Issuing Bank’s gross negligence or willful
misconduct, as determined by a court of competent jurisdiction in a final and non-appealable
judgment. The covenants contained in this Section 4.07 hereof shall survive the
termination of this Agreement.



Section 4.08 Administration; Standard of Care. Letter of Credit Issuing Bank will administer
each Letter of Credit in the ordinary course of business and in accordance with its usual
practices, modified from time to time as it deems appropriate under the circumstances. Except as
expressly set forth in the third paragraph of this Section 4.08, Letter of Credit Issuing
Bank shall be entitled to use its discretion in taking or refraining from taking any actions in
connection with any of the foregoing as if it were the sole party involved in any of the foregoing
and no Participation existed.



Each Participating Bank acknowledges that its Participation hereunder is without recourse to
any Letter of Credit Issuing Bank and that each such Participating Bank expressly assumes all risk
of loss in connection with its Participation in the Letters of Credit as if such Participating Bank
had directly provided such Letters of Credit. No Letter of Credit Issuing Bank shall have any
liability express or implied, for any action taken or omitted to be taken by such Letter of Credit
Issuing Bank or for any failure or delay in exercising any right or power possessed by such Letter
of Credit Issuing Bank under any of the Loan Documents except for actual losses, if any, suffered
by any Participating Bank that are proximately caused either by such Letter of Credit Issuing
Bank’s gross negligence or by such Letter of Credit Issuing Bank’s willful misconduct, in each case
as determined by a court of competent jurisdiction in a final and non-appealable judgment. Without
limiting the foregoing, each Letter of Credit Issuing Bank (a) may consult with legal counsel,
independent public accountants, appraisers, and other experts, selected by such Letter of Credit
Issuing Bank, and shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such persons, (b) shall be entitled to rely on, and shall incur
no liability by acting upon, any conversation, notice, consent, certificate, statement, order, or
any document or other writing (including, without limitation, telegraph, telex, telecopy, TWX, or
other telecommunication device) believed by such Letter of Credit Issuing Bank to be genuine and
correct and to have been signed, sent, or made by the proper person, (c) makes no warranty or
representation of any kind or character relating to any Letter of Credit Account Party or the
Collateral, and shall not be responsible for any warranty or representation made in or in
connection with any of the Loan Documents, (d) makes no warranty or representation as to, and shall
not be
responsible for the correctness as to form, the due execution, legality, validity,
enforceability, genuineness, sufficiency, or collectability of any of the Loan Documents, for any
failure by any Letter of Credit Account Party or any Person to perform its obligations thereunder,
for a Letter of Credit Account Party’s use of the proceeds therefrom, or for the preservation of
the Collateral or the loss, depreciation, or release thereof, (e) makes no warranty or
representation as to, and assumes no responsibility for, the authenticity, validity, accuracy, or
completeness of any notice, financial statement, or other document or information received by such
Letter of Credit Issuing Bank or any Participating Bank in connection with, or otherwise referred
to in, any of the Loan Documents, and (f) shall not be required to make any inquiry concerning the
observance or performance of any agreement contained in, or conditions of, any of the Loan
Documents, or to inspect the property, books, or records of any Letter of Credit Account Party or
any Person.


 


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Notwithstanding the provisions of the first paragraph of this Section 4.08, each
Letter of Credit Issuing Bank agrees that it will not waive any Event of Default without the
consent of the Participating Banks constituting the Required Banks and it will not take any of the
following actions without the written consent of each Participating Bank: (i) extend the maturity
date of any Letter of Credit beyond ninety (90) days after the Revolving Credit Termination Date;
(ii) increase the amount of the Trade Letter of Credit Commitment or the Standby Letter of Credit
Commitment; (iii) reduce the fees charged on the Letters of Credit below the amount required to be
paid to such Letter of Credit Issuing Bank or to the Participating Banks pursuant to the terms of
this Article IV; or (iv) release any Guarantor or any Collateral, except as otherwise
contemplated in any Loan Documents. Each Letter of Credit Issuing Bank shall be fully justified in
failing or refusing to take any action under any of the Loan Documents unless it shall first
receive such advice or concurrence of the Participating Banks constituting the Required Banks.



Each Letter of Credit Issuing Bank and the Participating Banks may lend money to, accept
deposits from, and generally engage in any kind of business with each Letter of Credit Account
Party as freely as though no Participation had been granted to a Participating Bank.



Section 4.09 Independent Investigation by the Participating Banks. Each Participating Bank
acknowledges (a) that each Letter of Credit Issuing Bank has provided such Participating Bank with
copies of all of the Loan Documents and each Letter of Credit Account Party and each Letter of
Credit Issuing Bank has provided or granted such Participating Bank access to, certain financial
data and other information pertaining to the Letter of Credit Account Parties and the Guarantors
that such Participating Bank has requested in order to enable it to make an independent, informed
judgment with respect to the desirability of purchasing Participation in the Letters of Credit, (b)
that no Letter of Credit Issuing Bank has made any representations or warranties to such
Participating Bank and that no prior or future act by any Letter of Credit Issuing Bank, including,
without limitation, any review of the affairs of any Letter of Credit Account Party, shall be
deemed to constitute a representation or warranty of such Letter of Credit Issuing Bank, and (c)
that such Participating Bank has independently, without reliance upon any Letter of Credit Issuing
Bank, and based on such information as such Participating Bank has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property, financial condition, and
general credit worthiness of each Letter of Credit Account Party, made its own
analysis of the value and Lien status of any Collateral, and made its own decision to execute
this Agreement and thereby purchase from the applicable Letter of Credit Issuing Bank(s) a
Participation in accordance with this Article IV in the Letters of Credit. Each
Participating Bank agrees that, independently and without reliance upon any Letter of Credit
Issuing Bank or any representations or statements of any Letter of Credit Issuing Bank, and based
on such information as such Participating Bank deems appropriate at the time, it will continue to
make and rely upon its own credit analysis and decisions in taking or not taking any action under
this Article IV or any of the Loan Documents.


 


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Section 4.10 Participating Banks’ Ownership of Interests in the Participation; Repurchases by
the Letter of Credit Issuing Banks. Each Participating Bank hereby represents and warrants to each
Letter of Credit Issuing Bank that the purchase of its Participation in the Letters of Credit (a)
is a legal investment pursuant to the Law under which such Participating Bank is organized and
operates, (b) has been duly authorized and approved by all necessary action of the management of
such Participating Bank, and (c) is made for such Participating Bank’s own account for the purpose
of investment only and with no present intention of disposing of the same.



Upon the occurrence of an Event of Default and failure to consent to a change in this
Agreement where such Participating Bank’s consent is required pursuant to this Article IV,
each Letter of Credit Issuing Bank, or any party designated by it, shall have the right (but not
the obligation) to repurchase such Participating Bank’s Participation in any Letter of Credit for a
purchase price equal to any unpaid amount due the Participating Bank with respect to such
Participation. Upon demand and payment therefor, such Participating Bank shall promptly transfer
to such Letter of Credit Issuing Bank its Participation in any such Letter of Credit by executing
and delivering to such Letter of Credit Issuing Bank an instrument of transfer in form and
substance satisfactory to such Letter of Credit Issuing Bank and such Participating Bank;
provided however, that failure by such Participating Bank to do so shall not affect
such Letter of Credit Issuing Bank’s repurchase of such Participating Bank’s Participation in any
such Letter of Credit, which repurchase shall be effective upon payment therefor by such Letter of
Credit Issuing Bank to such Participating Bank. At any time before each payment, such Letter of
Credit Issuing Bank may withdraw and terminate its offer to repurchase such Participating Bank’s
Participation in any such Letter of Credit prior to the payment of such price.



ARTICLE V




GUARANTY




Section 5.01 Guaranty. Each Guarantor hereby, jointly and severally, irrevocably, absolutely
and unconditionally guarantees to each Bank Party and their successors, endorsees, transferees and
assigns the prompt and complete payment by Borrower and each Letter of Credit Account Party, as and
when due and payable (whether at stated maturity or by required prepayment, acceleration, demand or
otherwise), of all Obligations and agrees to pay on demand any and all expenses (including counsel
fees and expenses) which may be paid or incurred by any Bank Party in collecting any or all of the
Obligations and/or enforcing any rights under any of the Loan Documents or under the Obligations
(the “Guaranty”). The Guaranty of each Guarantor of the payment of the Obligations is such
Guarantor’s “Guaranty Obligation”.


 


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Section 5.02 Guarantor’s Guaranty Obligations Unconditional.



(a) Each Guarantor hereby guarantees that the Obligations will be paid strictly in accordance
with the terms of the Loan Documents, regardless of any Law now or hereafter in effect in any
jurisdiction affecting any such terms or, the rights of any Bank Party with respect thereto. The
obligations and liabilities of each Guarantor under this Guaranty shall be to the extent permitted
by applicable law absolute and unconditional irrespective of: (i) any lack of validity or
enforceability of any of the Obligations, any Loan Documents, or any agreement or instrument
relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term
in respect of, all or any of the Obligations, or any other amendment or waiver of or consent to any
departure from any Loan Documents or any other documents or instruments executed in connection with
or related to the Obligations; (iii) any exchange or release of, or non-perfection of any Lien on
or in, any Collateral, or any release or amendment or waiver of or consent to any departure from
any other guaranty, for all or any of the Obligations; or (iv) any other circumstances which might
otherwise constitute a defense (other than indefeasible payment in full) available to, or a
discharge of, Borrower, any Letter of Credit Account Party or any other guarantor in respect of the
Obligations of any Guarantor in respect of this Guaranty.



(b) This Guaranty is a continuing guaranty and shall remain in full force and effect until:
(i) the payment in full of all the Obligations and the termination of the Revolving Credit
Commitment; and (ii) the payment of the other expenses to be paid by the Guarantors pursuant
hereto. This Guaranty shall continue to be effective or shall be reinstated, as the case may be,
if, at any time, any payment, or any part thereof, of any of the Obligations is rescinded or must
otherwise be returned by any Bank Party upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of Borrower and/or any Letter of Credit Account Party or otherwise, all as though
such payment had not been made.



(c) The obligations and liabilities of each Guarantor under this Guaranty shall not be
conditioned or contingent upon the pursuit by the Agent or any Bank or any other Person at any time
of any right or remedy against Borrower, any Letter of Credit Account Party or any other Person
which may be or become liable in respect of all or any part of the Obligations or against any
Collateral or security or guarantee therefor or right of setoff with respect thereto.



(d) Each Guarantor hereby consents that, without the necessity of any reservation of rights
against any Guarantor and without notice to or further assent by any Guarantor, any demand for
payment of any of the Obligations made by any Bank Party may be rescinded by such Bank Party and
any of the Obligations continued after such rescission.



Section 5.03 Waivers. To the extent permitted by applicable law, each Guarantor hereby
waives: (a) promptness and diligence; (b) notice of or proof of reliance by any Bank Party upon
this Guaranty or acceptance of this Guaranty; (c) notice of the incurrence of any Obligation by
Borrower and/or any Letter of Credit Account Party or the renewal, extension or accrual of any
Obligation; (d) notice of any actions taken by any Bank Party or Borrower, any Letter of Credit
Account Party or any other party under any Loan Document, or any other agreement or instrument
relating to the Obligations; (e) all other notices, demands and protests, and all other formalities
of every kind other than such as are
provided for in the Loan Documents in connection with the enforcement of the Obligations or of
the obligations of any Guarantor hereunder, the omission of or delay or which, but for the
provisions of this Section 5.03, might constitute grounds for relieving any Guarantor of
its obligations hereunder; and (f) any requirement that any Bank Party protect, secure, perfect or
insure any Lien on any property subject thereto or exhaust any right or take any action against
Borrower, any Letter of Credit Account Party or any other Person or any Collateral.


 


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Section 5.04 Subrogation. Each Guarantor agrees that it hereby defers any rights which it may
acquire by way of subrogation under this Guaranty, whether acquired by any payment made hereunder,
by any setoff or application of funds of such Guarantor by any Bank Party or otherwise until the
Obligations have been paid in full.



Section 5.05 Limitation of Liability. The obligations of each Guarantor hereunder shall be
limited to an aggregate amount equal to the largest amount that would not render its obligations
hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any
comparable provision of any applicable state law.



ARTICLE VI




CONDITIONS PRECEDENT




Section 6.01 Conditions Precedent to Use of a Credit Facility on and after the Restatement
Date. The obligations of the Banks on or after the date of this Agreement to make a Loan and the
obligation of HSBC to issue the initial Letter of Credit is subject to the condition precedent that
the Banks shall have received on or before the Restatement Date each of the following documents, in
form and substance satisfactory to the Banks and their counsel, and each of the following
requirements shall have been fulfilled:



(a) Evidence of Due Organization and all Corporate Actions by Borrower and each Guarantor. A
certificate of the Secretary or Assistant Secretary of Borrower and each Guarantor, dated the date
of this Agreement, attesting to the certificate of incorporation and by-laws of Borrower and each
Guarantor and all amendments thereto and to all corporate actions taken by Borrower and each
Guarantor, including resolutions of its board of directors and/or an authorized committee thereof,
authorizing the execution, delivery and performance of the Loan Documents, and each other document
to be delivered pursuant to the Loan Documents;



(b) Incumbency
and Signature Certificates of Borrower and each Guarantor. A certificate of
the Secretary or Assistant Secretary of Borrower and each Corporate Guarantor, dated the date of
this Agreement, certifying the names and true signatures of the officers of Borrower and each
Guarantor authorized to sign the Loan Documents to which it is a party, and the other documents to
be delivered pursuant to the Loan Documents;


 


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(c) Good Standing Certificates of Borrower and each Guarantor. A Certificate, dated
reasonably near the date of this Agreement, from the Secretary of State (or other appropriate
official) of the jurisdiction of incorporation of Borrower and each Guarantor certifying as to the
due incorporation and good standing of Borrower or such Guarantor and certificates, dated
reasonably near the date of this Agreement, from the Secretary of State (or other appropriate
official) of each other jurisdiction where Borrower and each Guarantor is required to be qualified
to conduct business, certifying that Borrower or such Guarantor is duly qualified to do such
business and is in good standing in each such state;




(d) Notes. The Revolving Credit Notes duly executed by the Borrower;



(e) Reaffirmation
Agreement. The Reaffirmation Agreement duly executed by the Borrower and
the Guarantors;



(f) Security Documents. The Master Security Agreement duly executed by Borrower and each
Guarantor, together with Uniform Commercial Code searches identifying all of the financing
statements on file with respect to the Borrower and each Guarantor in all jurisdictions in which
the Borrower and each Guarantor is organized as of the Restatement Date and during the five years
prior thereto, including the financing statements filed by the Agent against such party indicating
that no party other than the Agent claims an interest in any of the Collateral except with respect
to Permitted Liens;



(g) Control
Agreements. The Control Agreements duly executed by the Borrower and each Deposit
Bank party thereto with respect to each Deposit Account and Securities Account listed on Part I of
Schedule 7.21.



(h) Opinions
of Counsel for Borrower and Guarantors. A favorable opinion of Willkie Farr &
Gallagher LLP, counsel for Borrower and each Guarantor, addressed to all Banks, dated the date of
this Agreement;



(i) Payment
of Fees. Payment in full to the Agent of all fees required to be paid to the
Agent and payment in full of all other fees required to be paid in accordance with the Loan
Documents, including, but not limited to, the Fee Letter;



(j) Officer’s
Certificate. The following statements shall be true and the Agent shall have
received a certificate signed by a duly authorized officer of Borrower dated the date of this
Agreement stating that:




(i) The representations and warranties contained in this Agreement and in each of the
other Loan Documents are correct on and as of the date of this Agreement as though made on
and as of such date; and




(ii) No Default or Event of Default has occurred and is continuing;



(k) Terminations. Termination or assignment of UCC Financing Statements terminating or
assigning Liens other than Permitted Liens and termination letters from all of the banks party to
the Existing Agreement that are not a Bank hereunder terminating their rights and obligations
thereunder;


 


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(l) Pre-Closing Borrowing Base Certificate. After giving effect to any existing Revolving
Credit Loans and Letter of Credit Obligations and any other extension of credit to be made by the
Banks on the date of this Agreement, a Borrowing Base Certificate of Borrower and its Restricted
Subsidiaries showing Net Availability of Five Million Dollars ($5,000,000) (the Borrowing Base
Certificate shall reflect all information as of June 27, 2009);



(m) USA Patriot Act. The Bank shall have received, sufficiently in advance of the Restatement
Date, all documentation and other information required by bank regulatory authorities under
applicable “know your customer” and anti-money laundering rules and regulations, including without
limitation, the Patriot Act, including, without limitation, the information described in
Section 14.16; and



(n) Additional Documentation. Such other approvals, opinions, evidence of insurance or
documents as the Agent or any Bank may reasonably request.



Section 6.02 Conditions Precedent to All Credit Facilities. The obligations of the Bank
Parties, as the case may be, to provide each Credit Facility, shall be subject to the further
conditions precedent that on the date of providing such Credit Facility:




(a) The following statements shall be true:




(i) (A) the representations and warranties with a materiality provision contained in
this Agreement and in each of the other Loan Documents are correct on and as of the date of
providing such Credit Facility as though made on and as of such date and (B) all the
representations and warranties with no materiality provision contained in this Agreement and
in each of the other Loan Documents are correct in all material respects on and as of the
date of providing such Credit Facility as though made on and as of such date, except, in
each case, to the extent that such representations and warranties expressly relate to an
earlier date (in which case, such representations and warranties shall have been correct on
and as of such earlier date); and




(ii) no Default or Event of Default has occurred and is continuing, or could result
from providing such Credit Facility;



(b) The Agent shall have received such other approvals, opinions or documents as the Agent may
reasonably request.



Section 6.03 Deemed Representation. Each request under a Credit Facility and acceptance by
Borrower of any proceeds of such Revolving Credit Loan or the issuance of any Letter of Credit, as
the case may be, shall constitute (a) for representations and warranties with a materiality
provision, a representation and warranty that the statements contained in Section 6.02(a)
hereof are true and correct both on the date of such notice and as of the date of the providing of
such Revolving Credit Loan or issuance of such Letter of Credit, as the case
may be, and (b) for
representations and warranties with no
materiality provision, a representation and warranty that the statements contained in
Section 6.02(a) hereof are true and correct in all material respects both on the date of
such notice and as of the date of the providing of such Revolving Credit Loan or issuance of such
Letter of Credit, as the case may be.


 


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ARTICLE VII




REPRESENTATIONS AND WARRANTIES





Borrower and each Guarantor hereby represents and warrants that:



Section 7.01 Incorporation. Good Standing and Due Qualification. Borrower and each Guarantor
is duly incorporated, validly existing and in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power and authority to own its assets and to transact the
business in which it is now engaged or proposed to be engaged, and is duly qualified as a foreign
corporation and in good standing under the laws of each other jurisdiction in which such
qualification is required, except to the extent that its failure to be so qualified could not
result in a Material Adverse Change.



Section 7.02 Corporate Power and Authority; No Conflicts. The execution, delivery and
performance by Borrower and each Guarantor of the Loan Documents to which it is a party have been
duly authorized by all necessary corporate action and do not and will not: (a) require any consent
or approval of its stockholders which has not been obtained; (b) contravene its certificate of
incorporation or by-laws; (c) violate any provision of, or require any filing (other than the
filing of the financing statements contemplated by the Security Documents), registration, consent
or approval under any Law (including, without limitation, Regulations T, U and X of the Board of
Governors), order, writ, judgment, injunction, decree, determination or award presently in effect
having applicability to Borrower or any Guarantor; (d) result in a breach of or constitute a
default under or require any consent under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which Borrower or any Guarantor is a party or by which it or its
properties may be bound or affected; (e) result in, or require, the creation or imposition of any
Lien (other than as created under the Security Documents), upon or with respect to any of the
properties now owned or hereafter acquired by Borrower or any Guarantor; or (f) cause such
corporation to be in default under any such Law, order, writ, judgment, injunction, decree,
determination or award or any such indenture, agreement, lease or instrument.



Section 7.03 Legally Enforceable Agreements. Each Loan Document to which Borrower and each
Guarantor is a party is a legal, valid and binding obligation of Borrower and each Guarantor,
enforceable against Borrower and each Guarantor in accordance with its terms, except to the extent
that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws
affecting creditors’ rights generally.



Section 7.04 Litigation. There are no actions, suits or proceedings (private or governmental)
pending or, to the knowledge of Borrower or any Guarantor, threatened, against or affecting
Borrower or any Guarantor before any Governmental Authority or arbitrator, except as set forth in
Schedule 7.04. None of the actions set forth on Schedule 7.04 are reasonably expected to result in a
Material Adverse Change.


 


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Section 7.05 Financial Statements. Each of: (a) the consolidated balance sheets of Borrower
and its Subsidiaries as of December 31, 2008 and the related consolidated statements of income and
retained earnings, and consolidated statements of cash flows of Borrower and its Subsidiaries for
the Fiscal Year, then ended, and the accompanying footnotes, together, with the opinion thereon,
dated April 2, 2009 of Deloitte & Touche LLP, independent certified public accountants, copies of
which have been furnished to the Banks, and (b) the internally prepared financial statements as of
March 27, 2009 showing Borrower and the Restricted Subsidiaries, fairly present the financial
condition of Borrower and its Subsidiaries as at such dates and the results of the operations of
Borrower and its Subsidiaries for the periods covered by such statements, all in accordance with
GAAP consistently applied except as set forth in the notes thereto and subject in the case of
interim financials statements to normal year end adjustments. There has been no Material Adverse
Change since March 27, 2009. There are no liabilities of Borrower or any of the Subsidiaries, fixed
or contingent, which are material but are not reflected in the financial statements referred to
above or in the notes thereto, other than liabilities arising in the ordinary course of business
since December 31, 2008.



Section 7.06 Ownership and Liens. Borrower and each Restricted Subsidiary have title to, or
valid leasehold interests in, all of their properties and assets, real and personal, including the
properties and assets, and leasehold interests reflected in the financial statements referred to in
Section 7.05 hereof (other than any properties or assets disposed of in the ordinary course
of business or as otherwise permitted pursuant to this Agreement and the other Loan Documents), and
none of the properties and assets owned by Borrower or any Restricted Subsidiary and none of their
leasehold interests are subject to any Lien, except as may be permitted under this Agreement.
Neither Borrower nor any Restricted Subsidiary has any copyright or patent. All trademarks owned by
Borrower and/or the Restricted Subsidiaries as of the date hereof are indicated on Schedule
7.06 hereto.



Section 7.07 Taxes. Borrower and each Guarantor have filed all tax returns (federal, state
and local) required to be filed and have paid all taxes, assessments and governmental charges and
levies thereon to be due, including interest and penalties, except to the extent that (i) adequate
reserves have been established therefor by the Borrower or (ii) they are the subject of a Good
Faith Contest.



Section 7.08 ERISA. Each Plan is administered in compliance in all material respects with all
applicable provisions of ERISA and the Code except where such failure would not reasonably be
expected to result in a Material Adverse Change. Neither a Reportable Event nor a Prohibited
Transaction has occurred with respect to any Plan that could reasonably be expected to result in a
Material Adverse Change; no notice of intent to terminate a Pension Plan has been filed nor has any
Pension Plan been terminated; no circumstance exists which constitutes grounds under Section 4042
of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a trustee to
administer, a Plan, nor has the PBGC instituted any such proceedings; neither Borrower nor any
Guarantor nor any ERISA Affiliate has completely or partially withdrawn under Section 4201 or 4204
of ERISA from a Multiemployer Plan; and no Plan which is a Multiemployer Plan is in reorganization
(within the meaning of Section 4241 of ERISA), is insolvent (within the meaning of Section 4245 of
ERISA) or is
terminating; Borrower, each Guarantor and each ERISA Affiliate has met its minimum funding
requirements under ERISA with respect to all of its Pension Plans; and neither Borrower nor any
Guarantor nor any ERISA Affiliate has incurred any liability to the PBGC under ERISA; and neither
Borrower, any Guarantor, nor any ERISA Affiliate has liability for retiree medical, life insurance
or other death benefits (contingent or otherwise) other than as a result of a continuation of
medical coverage required under Section 4980B of the Code or as required pursuant to an employment
agreement.


 


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Section 7.09 Subsidiaries; Ownership of Guarantors; Investments. As of the Restatement Date,
all of the outstanding capital stock or other interests of each Guarantor is set forth on
Schedule 7.09 and has been validly issued, is fully paid and nonassessable and, is owned
free and clear of all Liens other than Permitted Liens. As of the Restatement Date, Schedule
7.09 lists each of the Borrower’s direct and indirect Subsidiaries and all other capital stock
and other equity securities or other debt or equity investments owned or held by Borrower or any
Restricted Subsidiary. Each of the Borrower’s Inactive Subsidiaries as of the Restatement Date is
listed on Schedule 7.09, and no other Subsidiary of the Borrower is an Inactive Subsidiary
at such date.



Section 7.10 Operation of Business. Borrower and each Restricted Subsidiary possesses all
licenses, permits, franchises, and trade names, or rights thereto, to conduct its business
substantially as now conducted and as presently proposed to be conducted, and Borrower and each
Restricted Subsidiary is not in violation of any valid rights of others with respect to any of the
foregoing, except, in each case, as could not otherwise result in a Material Adverse Change.



Section 7.11 No Default on Outstanding Judgments or Orders. Borrower and each Guarantor have
satisfied all judgments and Borrower and each Guarantor are not in default with respect to any
judgment, writ, injunction, or decree of any court, arbitrator or any rule or regulation of any
federal, state, municipal or other Governmental Authority, commission, board, bureau, agency or
instrumentality, domestic or foreign.



Section 7.12 No Defaults on Other Agreements. Neither Borrower nor any Restricted Subsidiary
is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument
or subject to any certificate of incorporation or corporate restriction which is likely to result
in a Material Adverse Change. Neither Borrower nor any Restricted Subsidiary is in default in any
material respect in the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any agreement or instrument. Neither Borrower nor any Guarantor is a
party to any agreement which restricts or prohibits any Guarantor from declaring and/or paying
dividends to Borrower.



Section 7.13 Labor Disputes and Acts of God. Neither the business nor the properties of
Borrower or any Restricted Subsidiary are affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the
public enemy or other casualty (whether or not covered by insurance), except (i) as could not
result in a Material Adverse Change or (ii) as specified in Schedule 7.13.


 


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Section 7.14 Governmental Regulation. Neither Borrower nor any Guarantor is subject to
regulation under the Investment Company Act of 1940, the Interstate Commerce Act, the Federal Power
Act or any statute or regulation limiting its ability to incur indebtedness for money borrowed as
contemplated hereby.



Section 7.15 Partnerships. Neither Borrower nor any Restricted Subsidiary is a partner in any
partnership.



Section 7.16 Environmental Protection. Borrower and each Restricted Subsidiary have obtained
all permits, licenses and other authorizations which are required under all Environmental Laws,
except to the extent failure to have any such permit, license or authorization is not likely to
result in a Material Adverse Change. Borrower and each Restricted Subsidiary are in compliance
with all Environmental Laws and the terms and conditions of the required permits, licenses and
authorizations, and is also in compliance with all other applicable limitations, restrictions,
obligations, schedules and timetables contained in those Laws or contained in any plan, order,
decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved by a
Governmental Authority thereunder, except to the extent failure to comply is not likely to result
in a Material Adverse Change.



The Collateral contains no Hazardous Materials that, under any Environmental Law then in
effect, (a) would impose liability on Borrower or any Guarantor that could result in a Material
Adverse Change or (b) could result in the imposition of a Lien on the Collateral or any portion
thereof or any other assets of Borrower or any Guarantor, in each case if not properly handled in
accordance with applicable Law.



Section 7.17 Solvency. Borrower and each Guarantor is, and upon consummation of the
transactions contemplated by this Agreement, the other Loan Documents, and any other documents,
instruments or agreements relating thereto, will be Solvent.



Section 7.18 Properties; Priority of Liens. All of the properties and assets owned by the
Borrower and the Guarantors are owned by each of them, respectively, free and clear of any Lien of
any nature whatsoever, except as provided for in the Security Documents, and Permitted Liens.



Section 7.19 No Burdensome Restrictions. No Contractual Obligation of the Borrower or any
Restricted Subsidiary and no Law materially adversely affects, or insofar as the Borrower may
reasonably foresee may so affect, the business, operations, property or financial or other
condition of the Borrower or any such Restricted Subsidiary, except as could not result in a
Material Adverse Change.



Section 7.20 Federal Regulations. The Borrower is not engaged nor will it engage, principally
or as one of its important activities, in the business of extending credit for the purpose of
“purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted
terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from
time to time hereafter in effect. No part of the proceeds of any Loans hereunder will be used for
“purchasing” or “carrying” “margin stock” as so defined or for any purpose which violates, or which
would be inconsistent with, the provisions of the Regulations of such Board of Governors.


 


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Section 7.21 Deposit and Securities Accounts. All of the Deposit Accounts, Securities
Accounts or other accounts in the name of or used by the Borrower and each Guarantor maintained at
any bank or other financial institution are set forth on Schedule 7.21, subject to the
right of the Borrower and each Guarantor to establish new accounts in accordance with Section
9.16 hereof.



Section 7.22 Disclosure. As of the Restatement Date, the Borrower has disclosed to the Banks
and the Agent all agreements, instruments and corporate or other restrictions to which it or any of
its Restricted Subsidiaries is subject, and all other matters known to it, that, individually or in
the aggregate, could reasonably be expected to result in a Material Adverse Change. No report,
financial statement, certificate or other information furnished (whether in writing or orally) by
or on behalf of the Borrower or any Restricted Subsidiary to the Banks and the Agent in connection
with the transactions contemplated hereby and the negotiation of this Agreement or delivered
hereunder or under any other Loan Document (in each case as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to state any material
fact necessary to make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to projected financial information, the
Borrower represents only that such information was prepared in good faith based upon assumptions
believed to be reasonable at the time and no representation or warranty is made as to whether such
projected financial information will be realized.



Section 7.23 Security Interests. Each Security Agreement creates in favor of the Agent, for
the benefit of the Banks, a legal, valid and enforceable security interest in the Collateral
secured thereby. Upon the filing of the UCC-1 financing statements and the recording of the
Collateral Assignments for Security referred to in each Trademark Security Agreement in the United
States Patent and Trademark Office and the United States Copyright Office, as applicable, such
security interests in and Liens on the Collateral granted thereby shall be perfected, first
priority security interests, subject to Permitted Liens, and no further recordings or filings are
or will be required in connection with the creation, perfection or enforcement of such security
interests and Liens, other than (i) the filing of continuation statements in accordance with
applicable law, (ii) the recording of the Collateral Assignments for Security pursuant to each
Trademark Security Agreement in the United States Patent and Trademark Office and the United States
Copyright Office, as applicable, with respect to after-acquired U.S. patent and trademark
applications and registrations and U.S. copyrights and (iii) the recordation of appropriate
evidence of the security interest in the appropriate foreign registry with respect to all foreign
intellectual property.




Section 7.24 Anti-Terrorism Laws.



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



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


 


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



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



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



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



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




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



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



Section 7.25 Trading with the Enemy. Neither Borrower nor any Affiliate of Borrower has
engaged, nor does it intend to engage, in any business or activity prohibited by the Trading with
the Enemy Act.



ARTICLE VIII




AFFIRMATIVE COVENANTS




So long as any of the Notes shall remain unpaid or any Letter of Credit Obligation shall
remain outstanding or any Bank Party shall have a Revolving Credit Commitment hereunder, or any
other amount is owing by Borrower to any Bank Party hereunder or under any other Loan Document,
Borrower and each Guarantor, shall:



Section 8.01 Maintenance of Existence. Subject to the provisions of Section 9.07,
preserve and maintain its corporate existence and good standing in the jurisdiction of its
incorporation, and qualify and remain qualified as a foreign corporation in each jurisdiction in
which such qualification is required, except (i) to the extent that its failure to so qualify could
not result in a Material Adverse Change and (ii) that Inactive Subsidiaries may be merged out of
existence or dissolved.


 


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Section 8.02 Conduct of Business. Continue to operate its business in a manner consistent
with the conduct of it on and prior to the Restatement Date.



Section 8.03 Maintenance of Properties. Maintain, keep and preserve all of its properties,
(tangible and intangible) necessary or used in the proper conduct of its business in good working
order and condition, ordinary wear and tear excepted.



Section 8.04 Maintenance of Records. Keep adequate records and books of account, in which
complete entries will be made in accordance with GAAP.



Section 8.05 Maintenance of Insurance. Maintain insurance with financially sound and
reputable insurance companies or associations in such amounts and covering such risks as are
usually carried by companies engaged in the same or a similar business and similarly situated.



Section 8.06 Compliance with Laws. Comply in all respects with all applicable Laws, such
compliance to include, without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property, except (a) in the case
of the failure to pay taxes, (i) adequate reserves have been established therefor by the Borrower
or (ii) such taxes are the subject of a Good Faith Contest, and (b) to the extent that its failure
to so comply is not likely to result in a Material Adverse Change.




Section 8.07 Right of Inspection.



(a) Permit Collateral Monitor and/or its designee, at any time and from time to time, upon
reasonable prior notice, to examine and make copies of the extracts from the books and records of
Borrower and its Subsidiaries, and visit the properties of Borrower and its Subsidiaries, and
discuss the affairs, finances and accounts of Borrower and its Subsidiaries with any of their
respective employees, officers, directors and independent accountants and examine and audit the
inventory and receivables of Borrower and each Subsidiary (such foregoing right of inspection and
review to be referred to as the “Field Examination”), at least twice during any twelve month
period, with the cost of at least two such Field Examinations during each twelve month period from
and after the Restatement Date being borne by the Borrower prior to an Event of Default;
provided that, at any time an Event of Default has occurred and is continuing,
Collateral Monitor and/or its designee shall be authorized to conduct at any time and from time to
time (without any requirement for prior notice) as many Field Examinations as it, the Agent or the
Required Banks reasonably request and the Borrower shall be required to pay the entire cost of all
such Field Examinations (even if more than two Field Examination is conducted in a twelve month
period).



(b) Permit Collateral Monitor and/or its designee, at any time and from time to time, upon
reasonable notice, to conduct inventory appraisals of Borrower and each Subsidiary at least once
during each twelve month period with the cost of at least one such inventory appraisal during each
twelve month period from and after the Restatement Date being borne by the Borrower prior to an
Event of Default; provided that, at any time an Event of Default has occurred and
is continuing, Collateral Monitor and/or its designee shall be authorized to conduct at any time
and from time to time (without
any requirement for prior notice) as many inventory appraisals as it, the Agent or the
Required Banks reasonably request and the Borrower shall be required to pay the entire cost of all
such inventory appraisals (even if more than one inventory appraisal is conducted in a twelve month
period).


 


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Section 8.08 Reporting Requirements. Furnish directly to each of the Banks:



(a) Borrowing
Base Certificate. As soon as available and in any event within the twentieth
(20th) day of each month as and for the prior month (or more frequently if reasonably required by
Agent), (i) a Borrowing Base Certificate (which shall be calculated as of the last day of the
immediately preceding month and which shall not be binding upon Agent or restrictive of Agent’s
rights under this Agreement), (ii) accounts receivable agings, (iii) accounts payable agings, and
(iv) Inventory reports. In addition, Borrower shall, upon not less than eight (8) Banking Days’
notice if prior to the existence of a Default or Event off Default and upon no notice at any other
time, deliver to Agent at such intervals as Agent may reasonably require or at any time in
connection with a field examination performed by or on behalf of Agent for the purpose of enabling
Agent to test Borrowing Base calculations: (A) confirmatory assignment schedules, (B) copies of
requested customers’ invoices, (C) evidence of shipment or delivery, (D) supporting detail with
respect to the Booked Orders set forth on the Booked Order Report and (E) such further schedules,
documents and/or information regarding the Collateral as Agent may reasonably require including,
without limitation, trial balances and test verifications. Agent shall have the right to confirm
and verify all trade account receivables by any manner and through any medium it considers
advisable and do whatever it may deem reasonably necessary to protect its interests hereunder.
Notwithstanding anything to the contrary contained above, if Revolving Loans have been advanced by
the Banks against the value of the Eligible Inventory, then Borrower shall deliver to each Bank
within three (3) Banking Days of the end of the prior week, a Borrowing Base Certificate (which
shall be calculated as of the last day of the immediately preceding week and which shall not be
binding upon Agent or restrictive of Agent’s rights under this Agreement).



(b) Borrower’s
Monthly Financial Statements. As soon as available and in any event within
thirty (30) days after the end of each month of each Fiscal Year of Borrower (except for months
that are also a quarter end or the Fiscal Year End), (i) the consolidated balance sheet of Borrower
and its Subsidiaries as of the end of such month, and (ii) the consolidated statements of income of
Borrower and Subsidiaries both for such month and for the period commencing at the end of the
previous Fiscal Year and ending with the end of such month, all in reasonable detail and stating in

comparative form corresponding unaudited consolidated figures for the corresponding date and period
in the previous Fiscal Year and all prepared in accordance with GAAP for interim financial
information consistently applied and certified by the chief financial officer of Borrower.



(c) Booked
Order Report. On the first Banking Day of each month, a Booked Order Report for
that month.


 


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(d) Borrower’s Quarterly Financial Statements. As soon as available and in any event within
forty-five (45) days after the end of each of the first three quarters of each Fiscal Year of
Borrower, the consolidating balance sheets of Borrower, and (i) its Restricted Subsidiaries, and
(ii) all of its Subsidiaries as of the end of such quarter, consolidated and consolidating
statements of income,
statements of stockholders’ equity and cash flow statements of Borrower and (A) its Restricted
Subsidiaries and (B) all of its Subsidiaries both for such quarter and for the period commencing at
the end of the previous Fiscal Year and ending with the end of such quarter, all in reasonable
detail and stating in comparative form corresponding unaudited consolidated figures for the
corresponding date and period in the previous Fiscal Year and all prepared in accordance with GAAP
for interim financial information, consistently applied and certified by the chief financial
officer of Borrower.



(e) Borrower’s Annual Financial Statements. As soon as available and in any event within
ninety (90) days after the end of each Fiscal Year of Borrower: (i) for Borrower and its
Subsidiaries, on a consolidated and consolidating basis, the balance sheets, statements of changes
in stockholders’ equity, income statements and statements of cash flow for such Fiscal Year, all in
reasonable detail and stating in comparative form the respective consolidated figures for the
corresponding date and period in the Fiscal Year and all prepared in accordance with GAAP
consistently applied, and the consolidated financials referenced in this Section 8.08(b)(i)
shall be audited by such independent certified public accountants selected by Borrower and
reasonably acceptable to Banks and the consolidating financial statements referenced in this
Section 8.08(b)(i) shall be certified by the chief financial officer of Borrower; and (ii)
for Borrower and the Restricted Subsidiaries, on a consolidated and consolidating basis, the
balance sheets, statements of changes in stockholders’ equity, income statements and statements of
cash flow for such Fiscal Year, all in reasonable detail and stating in comparative form the
respective consolidated figures for the corresponding date and period for such Fiscal Year and all
prepared in accordance with GAAP consistently applied, and which shall be certified by the chief
financial officer of Borrower, and (iii) for Borrower and the Restricted Subsidiaries, the balance
sheets and income statements prepared on a consolidated basis in accordance with GAAP consistently
applied, and which shall be audited by such independent certified public accountants registered by
the PCAOB as selected by the Borrower and acceptable to the Banks, such acceptance not to be
unreasonably withheld.



(f) Management Letters. Promptly upon receipt thereof, copies of any reports submitted to
Borrower and any Restricted Subsidiary by independent certified public accountants in connection
with the examination of the financial statements of such Borrower and Restricted Subsidiary made by
such accountants.



(g) Certificate of No Default. Within forty-five (45) days after the end of the first three
(3) quarters of each Fiscal Year of Borrower and within ninety (90) days after the end of each
Fiscal Year of Borrower and within thirty (30) days after each month not coinciding with a quarter
end or Fiscal Year End, a certificate of the chief financial officer of Borrower (i) certifying
that no Default or Event of Default has occurred and is continuing or, if a Default or Event of
Default has occurred and is continuing, a statement as to the nature thereof and the action which
is proposed to be taken with respect thereto, and (ii) with computations demonstrating compliance
with the covenants contained in Article X, as of the end of that fiscal period.



(h) Notice of Litigation. Promptly after receipt of notice of the commencement thereof,
notice of all actions, suits, and proceedings before any Governmental Authority, affecting Borrower
or any Restricted Subsidiary which, if determined adversely to Borrower or any Restricted
Subsidiary,
could result in a Material Adverse Change.


 


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(i) Notices of Defaults and Events of Default. As soon as possible and in any event within
ten (10) days after the occurrence of each Default or Event of Default a written notice setting
forth the details of such Default or Event of Default and the action which is proposed to be taken
with respect thereto.



(j) ERISA Reports. As soon as possible and in any event within twenty (20) days after
Borrower knows or has reason to know that any Reportable Event or Prohibited Transaction has
occurred with respect to any Plan or that the PBGC or Borrower has instituted or will institute
proceedings under Title IV of ERISA to terminate any Pension Plan or that Borrower, or any ERISA
Affiliate has completely or partially withdrawn from a Multiemployer Plan or that a Plan which is a
Multiemployer Plan is in reorganization (within the meaning of Section 4241 of ERISA), is insolvent
(within the meaning of Section 4245 of ERISA) or is terminating, Borrower will deliver to each of
the Banks a certificate of the chief financial officer of Borrower setting forth details as to such
Reportable Event or Prohibited Transaction or Pension Plan termination or withdrawal or
reorganization or insolvency and the action Borrower proposes to take with respect thereto.



(k) Annual Business Plan. As soon as possible and in any event no later than March 31 in any
year, a copy of an annual consolidated business plan in form and substance reasonably acceptable to
the Banks with respect to the then current Fiscal Year (consisting of consolidated balance sheets
of Borrower and its Subsidiaries, and consolidated statements of earnings and cash flow statements
of Borrower and its Subsidiaries, prepared on a quarterly basis for such year) for Borrower and its
Subsidiaries approved by Borrower’s Board of Directors, together with the assumptions and
projections on which the business plan is based. Based on the information provided in the submitted
annual business plan, the Banks may determine, in their sole and absolute discretion, the amount of
the Supplemental Amount (if any) for such current Fiscal Year; provided that, any
determination of the Supplemental Amount shall require the consent of all Banks (in their sole and
absolute discretion). Any material changes made to the plan during the year will be provided by
Borrower as soon as possible.



(l) Insurance. Upon the occurrence of any casualty, damage or loss, whether or not giving
rise to a claim under any insurance policy, in an amount greater than Two Hundred and Fifty
Thousand Dollars ($250,000), notice thereof, together with copies of any document relating thereto
(including copies of any such claim) in possession or control of Borrower and any Restricted
Subsidiary or any agent of Borrower and any Restricted Subsidiary; and immediately after the
occurrence thereof, written notice of any cancellation of any insurance policy required to be
maintained by Borrower and any Restricted Subsidiary pursuant to Section 8.05 hereof.



(m) Material Adverse Change. As soon as possible and in any event within five (5) days after
the occurrence of any event or circumstance which is likely to result in or has resulted in a
Material Adverse Change, written notice thereof.



(n) Environmental Notices. As soon as possible and in any event within ten (10) days after
receipt by any corporate executive officer, copies of all Environmental Notices received by
Borrower or
any Restricted Subsidiary which are not received in and do not relate to the ordinary course
of Borrower or such Restricted Subsidiary’s business.


 


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(o) Required Licensors. At any time a licensor that has licensed a trademark to the Borrower
and/or a Restricted Subsidiary becomes a Required Licensor, written notice thereof as soon as
possible and in any event within five (5) days after such licensor becomes a Required Licensor.



(p) General Information. Such other information respecting the conditions or operations,
financial or otherwise, of Borrower or any Restricted Subsidiary as the Agent or any Bank may from
time to time reasonably request, including, without limitation, a notice that an Inactive
Subsidiary is no longer an Inactive Subsidiary.



Section 8.09 Compliance With Environmental Laws. Comply in all respects with all applicable
Environmental Laws where the failure to comply could result in a Material Adverse Change.



Section 8.10 Contractual Obligations. Perform and observe all the terms and provisions of
each material Contractual Obligation to be performed or observed by it, maintain each such material
Contractual Obligation in full force and effect, enforce each such material Contractual Obligation
in accordance with its terms, except to the extent that failure to do any of the foregoing could
not result in a Material Adverse Change.



Section 8.11 Payment of Fees. Pay to Agent on demand all usual and customary fees and
expenses which Agent incurs in connection with (a) the forwarding of Loan proceeds and (b) the
establishment and maintenance of any Blocked Accounts or Depository Accounts as provided for in
Section 2.12. Agent may, without making demand, charge Borrower’s Account for all such fees and
expenses and for any other fees, costs and expenses provided for in this Agreement or the Fee
Letter.




Section 8.12 Execution of Supplemental Instruments.



(a) Execute and deliver to Agent from time to time, promptly following demand, such reasonable
supplemental agreements, statements, assignments and transfers, or instructions or documents
relating to the Collateral, and such other instruments as Agent may reasonably request, in order
that the full intent of this Agreement may be carried into effect.



(b) To the extent not previously provided, deliver to Agent within ninety (90) days from the
Restatement Date, (i) warehouseman and/or landlord lien waivers, in form and substance satisfactory
to Agent, for each of the leased locations where Inventory is located as of the Restatement Date,
executed by such warehouseman and/or landlord, (ii) licensor waiver letters, in form and
substance satisfactory to Agent, with respect to Inventory sold under a licensed trademark in
effect as of the Restatement Date, executed by such licensor and (iii) Control Agreements with
respect to all of the Borrower’s and Restricted Subsidiaries’ deposit accounts existing as of the
Restatement Date and as of the end of such ninety (90) day period following the Restatement Date.



Section 8.13 Inactive Subsidiaries. At such time as (i) any Inactive Subsidiary ceases to
constitute an “Inactive Subsidiary” or (ii) MC Inc. has (A) revenues in a Fiscal Year that exceed
Two Hundred Fifty Thousand Dollars ($250,000) or (B) assets that exceed Two Hundred Fifty Thousand
Dollars ($250,000), such Subsidiary will execute and deliver all of the applicable documentation
required to be executed and delivered by a newly acquired Restricted Subsidiary pursuant to
sub-clauses (i) and (ii) of the proviso to Section 9.06(c) hereof.


 


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ARTICLE IX




NEGATIVE COVENANTS




So long as any of the Notes shall remain unpaid or any Letter of Credit Obligation shall
remain outstanding or any Bank Party shall have any Revolving Credit Commitment hereunder or any
other amount is owing by Borrower to any Bank Party hereunder or under any other Loan Document,
Borrower and each Guarantor shall not:




Section 9.01 Debt. Create, incur, assume or suffer to exist any Debt, except:



(a) Debt of Borrower and the Guarantors under this Agreement, the Notes, or any other Loan
Document;



(b) Accounts payable to any Person that supplies goods or services to Borrower or any
Guarantor, and other current liabilities (other than Debt) incurred, in the ordinary course of
business; provided that, all such accounts and liabilities are paid in the ordinary
course of business;



(c) Debt secured by purchase money Liens (i) permitted by Section 9.03 hereof and (ii)
of acquired properties and acquired Persons who become Restricted Subsidiaries;



(d) Debt incurred upon the refinancing of all or any portion of the Debts described in
Section 9.01(c);



(e) Debt of any Subsidiary to the Borrower, of the Borrower to any Subsidiary or of any
Subsidiary to any other Subsidiary;




(f) Debt incurred in connection with any Capital Lease;




(g) Debt incurred in connection with the financing of any insurance premiums;



(h) up to an aggregate Three Million Dollars ($3,000,000) in unsecured lines of credit to be
used for general corporate purposes;



(i) up to an aggregate Two Million Dollars ($2,000,000) in unsecured lines of credit to be
used for trade letters of credit payable at sight;




(j) Guaranties permitted under Section 9.02 hereof; and



(k) Debt under Interest Rate Contracts with a counter-party that is a Bank or with another
counter-party that is reasonably satisfactory to the Agent and the Required Banks.


 


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Section 9.02 Guaranties. Assume, guarantee, endorse or otherwise be or become directly or
contingently responsible or liable (including, but not limited to an agreement to purchase any
obligation, stock, assets, goods or services or to supply or advance any funds, assets, goods or
services, or an agreement to maintain or cause such Person to maintain a minimum working capital or
net worth or otherwise to assure the creditors of any Person against loss) for the obligations of
any Person, except:



(a) guaranties by endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business;




(b) the Guaranty Obligations;



(c) guaranties by Borrower or any Restricted Subsidiary of accounts payable incurred in the
ordinary course of business by Borrower or any Restricted Subsidiary, as the case may be;



(d) guarantees of up to Two Hundred Thousand Dollars ($200,000) of trade obligations of
Borrower or a Restricted Subsidiary; and




(e) Guaranties permitted under Section 9.06(e) hereof.



Section 9.03 Liens. Create, incur, assume or suffer to exist any Lien, upon or with respect
to any of its real or personal properties (including, without limitation, leasehold interests,
leasehold improvements and any other interest in real property or fixtures), now owned or hereafter
acquired, except the following (“Permitted Liens”):




(a) Liens granted under and pursuant to the Loan Documents;



(b) Liens for taxes or assessments or other government charges or levies if not yet due and
payable or if due and payable if they are the subject of a Good Faith Contest;



(c) Liens imposed by law, such as mechanic’s, materialmen’s, landlord’s, warehousemen’s and
carrier’s Liens, and other similar Liens, securing obligations incurred in the ordinary course of
business which are not past due for more than ninety (90) days, or which are the subject of a Good
Faith Contest;



(d) Liens under workmen’s compensation, unemployment insurance, social security or similar
legislation (other than ERISA) or to secure letters of credit obtained in connection therewith;


 


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(e) Liens of CIT Group/Commercial Services, Inc. or any other Person, each in its capacity as
factor for Borrower or a Restricted Subsidiary and/or provides credit protection with respect to
the Accounts of Borrower or a Restricted Subsidiary (each a “Factor”) so long as, with respect to
each such Factor, subject to the proviso contained in Section 9.15 hereof, Agent has
obtained the following in form and substance reasonably satisfactory to Agent: (i) a copy of the
executed Factoring Agreement; (ii) a duly executed Assignment of Proceeds Agreement and (iii) an
agreement duly executed by Factor
(whether contained within the Assignment of Proceeds Agreement or separately) pursuant to
which Factor agrees, among other things, (A) not to make any loans or advances to Borrower or a
Restricted Subsidiary or to guaranty on behalf of Borrower or any Restricted Subsidiary any amounts
and (B) to waive the right of setoff against Accounts or proceeds thereof of amounts owed by
Borrower or a Restricted Subsidiary to Factor or Factor’s clients arising out of claims or accounts
receivable owed by Borrower or a Restricted Subsidiary to such other clients of Factor or other
third parties and (C) except with respect to Factored Accounts, that the Lien of Agent in the
property of Borrower and each Restricted Subsidiary is senior to the Lien of Factor in such
property;



(f) Liens, deposits or pledges to secure the performance of bids, tenders, contracts (other
than contracts for the payment of money), leases (permitted under the terms of this Agreement),
public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar
bonds, or other similar obligations arising in the ordinary course of business;



(g) licenses or sublicenses of intellectual property granted to other Persons in the ordinary
course of business not materially interfering with the conduct of the business of the Borrower and
its Subsidiaries taken as a whole;



(h) any interest of a licensor or sublicensor under any license or sublicense permitted by
this Agreement as to which the Borrower or any of its Subsidiaries is the licensee or sublicensee;



(i) bankers’ Liens, right 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;



(j) judgment and other similar Liens arising in connection with court proceedings,
provided that, the existence of such Liens does not constitute an Event of
Default;



(k) easements, rights-of-way, restrictions, zoning and other similar encumbrances which, in
the aggregate, do not materially interfere with the occupation, use and enjoyment by Borrower or
any Guarantor of the property or assets encumbered thereby in the normal course of its business or
materially impair the value of the property subject thereto;



(l) each of the Liens listed on Schedule 9.03 securing the Debt specified on such
schedule, including any extension or modification thereof but not the extension of such Lien to
other property in whole or in part; and



(m) purchase money Liens on any real property, fixtures or equipment hereafter acquired or the
assumption of or taking subject to any Lien on real property, fixtures or equipment existing at the
time of such acquisition, or a Lien incurred in connection with any conditional sale or other title
retention agreement or a Capital Lease; provided that:




(i) any property subject to any of the foregoing is acquired by Borrower or any
Guarantor in the ordinary course of its business and the Lien on any such property (if not
preexisting) is created contemporaneously with such acquisition or within 90 days thereof;


 


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(ii) the Debt secured by any Lien so created, assumed or existing shall not exceed one
hundred percent (100%) of the lesser of the cost or fair market value as of the time of
acquisition of the property covered thereby including shipping and installation costs; and




(iii) each such Lien shall attach only to the property so acquired and fixed
improvements thereon.



Section 9.04 Sale of Assets. Sell, lease, assign, transfer or otherwise dispose of any of its
now owned or hereafter acquired assets to any Person or any capital stock of the Borrower’s
Subsidiaries to any Person, except for (a) inventory disposed of in the ordinary course of
business; (b) the sale or other disposition of worn out or obsolete assets or no longer necessary
for the conduct of its business; (c) accounts receivable pursuant to a Factoring Agreement, subject
to compliance with Section 9.15 hereof; (d) Borrower’s issuance of capital stock or other
equity interest or options to purchase such capital stock or equity interests (including, without
limitation, under any employee compensation or retention plan); (e) provided no Default or Event of
Default has occurred and is continuing, the licensing to third-parties of any of the Borrower’s or
its Subsidiaries’ intellectual property, including, without limitation, any trademarks; (f)
provided no Default or Event of Default has occurred and is continuing, the sale or disposition of
any Cash Equivalents or securities held for investment purposes and such proceeds are used to
invest in other Permitted Investments; (g) provided no Default or Event of Default has occurred and
is continuing, the release of any claims that the Borrower or any of its Subsidiaries may have
against any third-party pursuant to a settlement thereof; and (h) any payments or transfer of
assets among the Borrower and its Subsidiaries permitted under Sections 9.05, 9.06
and 9.10.



Section 9.05 Transactions with Affiliates. Enter into any transaction, including, without
limitation, the purchase, sale or exchange of property or the rendering of any service, with any
Affiliate other than Borrower or any Restricted Subsidiary or enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the rendering of any
service, with any such Affiliate, except for transactions among Borrower and its Restricted
Subsidiaries or in the ordinary course of and pursuant to the reasonable requirements of Borrower’s
or the Restricted Subsidiary’s business and upon fair and reasonable terms no less favorable to
Borrower or Restricted Subsidiary than it would obtain in a comparable arms’ length transaction
with a Person not an Affiliate.


 


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Section 9.06 Investments; Acquisitions. Except as provided in Sections 9.05 and
9.10 hereof, make any loan or advance or purchase or otherwise acquire any capital stock,
assets, obligations or other securities of, make any capital contribution to, or otherwise invest
in, or acquire any interest in, any Person except the following: (a) Permitted Investments; (b)
investments made in accordance with Section 9.10 hereof; (c) the formation (but not by way
of acquisition, except for acquisitions for which the consideration consists of equity securities
of the Borrower) of additional wholly owned Subsidiaries of Borrower or the Restricted
Subsidiaries; provided, that, in connection therewith, unless Agent shall waive
such requirements or such Subsidiary shall be an Inactive Subsidiary or a foreign Subsidiary, (i)
each such Subsidiary shall become a Guarantor hereunder by delivering to Agent a joinder to this
Agreement, the joinder to the Master Security Agreement, the capital stock or other equity interest
of each such Subsidiary shall be pledged to Agent for the benefit of Banks and such Subsidiary
shall deliver to Agent a Security Agreement and, to the extent such Subsidiary owns stock of
another Person,
a Pledge Agreement, and, to the extent such Subsidiary owns any intellectual property, a
Trademark Security Agreement and shares of stock, stock powers and powers of attorney and each
other agreement, document or instrument reasonably requested by Agent in connection with the
foregoing, including, without limitation, a certificate from such Subsidiary’s insurance carriers
evidencing the coverage required by Section 8.05 hereof (which certificate(s) shall show
that the Agent is an additional insured and loss payee), (ii) such Subsidiary shall satisfy the
conditions precedent set forth in Sections 6.01(a), (b), (c), (f), (h) and (i) to
the same extent as if such Subsidiary were an original party to this Agreement, and (iii) if the
Accounts and/or Inventory of such Subsidiary are to be in the Borrowing Base, then Collateral
Monitor and/or its designee shall conduct an examination of the books and records of such
Subsidiary, at the expense of the Borrower, and the results of such examination shall be in form
and substance reasonably satisfactory to the Required Banks; (d) investments in Borrower’s common
stock made with director, officer and employee deferred compensation pursuant to the terms
Borrower’s common stock purchase plan and investments made with director, officer or employee
deferred compensation pursuant to Borrower’s deferred compensation plan; (e) loans or advances to
any employees of Borrower or a Restricted Subsidiary or guaranties made by Borrower and the
Restricted Subsidiaries of indebtedness or obligations of any of their employees not to exceed Two
Hundred Thousand Dollars ($200,000) in the aggregate during any Fiscal Year outstanding in the
ordinary course of business for reasonable and necessary work-related, moving, entertainment and
other ordinary business expenses to be incurred by such employee(s) in connection with their
employment; provided that, as of the date of such loan or guarantee and after
giving effect thereto, no Event of Default shall exist or have occurred; and (f) investments in or
capital contributions to the Borrower’s Restricted Subsidiaries, provided further
that, with respect to the Permitted Investments (1) all certificates of deposit, bankers
acceptances and money market funds shall be issued or offered by a domestic office of a commercial
bank organized under the laws of the United States of America or any State thereof which has a
combined capital and surplus and undivided profits (“Bank Equity”) of not less than Five Hundred
Million Dollars ($500,000,000), except that amounts up to the aggregate of Five Million Dollars
($5,000,000) are permitted with banks with Bank Equity of less than Five Hundred Million Dollars
($500,000,000) but greater than Fifty Million Dollars ($50,000,000); (2) all money market funds
shall comply with the criteria set forth in Securities and Exchange Commission Rule 2a-7 under the
Investment Company Act of 1940 and have portfolio assets of at least Five Billion Dollars
($5,000,000,000); (3) the aggregate amount of commercial paper rated less than A1/P1, asset backed
commercial paper rated less than A1/P1, medium term notes, variable rate demand notes, corporate
bonds and municipal notes/bonds shall not exceed Twenty Million Dollars ($20,000,000) at any time;
and (4) the aggregate amount of Permitted Investments of the type referred to in the preceding
clause (3) with respect to any individual issuer shall not exceed Ten Million Dollars ($10,000,000)
at any time.



Section 9.07 Mergers. Merge or consolidate with, or sell, assign, lease or otherwise dispose
of (whether in one transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to any Person or form any Subsidiary,
except that the foregoing shall not prohibit (i) the formation of a new Subsidiary
in accordance with the requirements of Section 9.06 hereof, or (ii) the merger of
Restricted Subsidiaries with and into each other or into Borrower (with the Borrower as the
surviving corporation), so long as at the time thereof or as a result thereof there shall be no
Default or Event of Default.


 


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Section 9.08 Leases. Create, incur, assume, or suffer to exist any obligation as lessee for
the rental or hire of any real or personal property except: (a) Capital Leases permitted under
Section 9.03(m) hereof, (b) each of the real property leases, whether retail, office,
warehouse or otherwise, in effect on this date and those real property leases entered into in the
future, and (c) leases that do not in the aggregate require Borrower and its Subsidiaries to make
payments (including taxes, insurance, maintenance, and similar expenses which Borrower is required
to pay under the terms of the lease but excluding all payments based upon a percentage of sales or
revenues) in any Fiscal Year in excess of the amount permitted under Section 10.04 hereof.



Section 9.09 Dividends. Declare or pay any cash dividends on capital stock of Borrower; or
purchase, redeem, retire, or otherwise acquire for value any of the capital stock or securities
convertible into capital stock of Borrower now or hereafter outstanding or make any distribution of
assets to its stockholders as such whether in cash, assets, or in obligations of Borrower or any
Restricted Subsidiary, or allocate or otherwise set apart any sum for the payment of any dividend
or distribution on, or for the purchase, redemption, or retirement of any shares of its capital
stock, except in all cases for transactions that are made in common stock of Borrower.



Section 9.10 Restricted Payments. Notwithstanding anything to the contrary contained in this
Article IX, make any Restricted Payment; except that, so long as no Default
exists and is continuing, Borrower may make advances or payments to or investments in, or issue
guaranties for any Restricted Subsidiary.



Section 9.11 Fiscal Year. Change its fiscal year to a period other than its fiscal year in
effect on the date hereof.



Section 9.12 Changes, Amendments or Modifications. Change, amend, modify or supplement any of
the following: (a) its certificate of incorporation; or (b) by-laws, or (c) any other material
agreement to which Borrower is a party, to the extent any of the foregoing is likely to result in a
Material Adverse Change.




Section 9.13 Nature of Business.



(a) Engage in any business other than the businesses in which they are engaged on the
Restatement Date and reasonable extensions thereof and other businesses that are complimentary or
reasonably related thereto.



(b) Notwithstanding anything to the contrary contained in this Agreement, the Borrower will
not, and will not permit any of its Subsidiaries to, transfer any assets to, or make any investment
in, any Inactive Subsidiary except for de minimis amounts of cash invested in
accordance with the terms of this Agreement which is necessary to pay for various expenses that may
be incurred in connection with any liquidation or dissolution of each such Inactive Subsidiary in
accordance with the terms of this Agreement or to maintain their corporate or limited liability
company existence, as the case may be; provided, however, that the provisions of
this Section 9.13(b) shall cease to apply as to any Inactive Subsidiary which has become a
Guarantor pursuant to the requirements of Section 8.11 hereof.


 


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Section 9.14 Negative Pledge. Enter into any agreement which prohibits or limits the ability
of the Borrower or any Restricted Subsidiary to create, incur, assume or suffer to exist any Lien
upon any of its property or revenues, whether now owned or hereafter acquired.



Section 9.15 Factoring Agreements. Enter into, amend or modify any Factoring Agreement with a
Factor unless (a) subject to the proviso set forth in this Section below, the Factoring Agreement
has been approved in writing by Agent and the conditions set forth in Section 9.03(e)(i),
(ii) and (iii) hereof have been satisfied or (b) such amendment or modification
thereof does not adversely affect the interest of the Agent (for purposes hereof, any change in
fees, the rate of interest or the commissions charged by the Factor under the Factoring Agreement,
or in the extension of the term of the Factoring Agreement, shall not be deemed to adversely affect
the interest of the Agent); provided, that, with respect to Factoring Agreements
entered into after the Restatement Date that provide that the Factor(s) may purchase
certain Accounts from the Borrower or any Restricted Subsidiary in an amount not to exceed One
Million Five Hundred Thousand Dollars ($1,500,000) in the aggregate, the conditions set forth in
subclause (a) above (provided that the Borrower provide the Agent with a copy of the relevant
Factoring Agreement) do not have to be satisfied until the sixtieth (60th) day after the date of
the Factoring Agreement.



Section 9.16 Deposit and Securities Accounts. The Borrower and each Guarantor shall not,
directly or indirectly, after the date hereof, establish or maintain any Deposit Account or
Securities Account other than Excluded Accounts unless each of the following conditions is
satisfied: (a) the Agent shall receive not more than twenty (20) days after such Deposit Account
or Securities Account has been established written notice thereof, which notice shall specify in
reasonable detail the name of the account, the owner of the account, the name and address of the
bank or financial institution at which such account is to be opened or established and the purpose
of the account, (b) the bank or financial institution where such account is opened or maintained
shall be an Eligible Bank, and (c) the Borrower shall, within forty-five (45) days of the opening
or establishing of such account, either (i) deliver to the Agent a Control Agreement with respect
to such Deposit Account or Securities Account or (ii) arrange for the Agent to become the customer
of the bank or financial institution with respect to the Deposit Account or Securities Account on
terms and conditions acceptable to the Agent.




Section 9.17 Anti-Terrorism Laws. Permit any Subsidiary, Affiliate or agent to:



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



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



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



 


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Section 9.18 Trading with the Enemy Act. Engage in any business or activity in violation of
the Trading with the Enemy Act.



ARTICLE X




FINANCIAL COVENANTS




So long as any of the Notes shall remain unpaid or any Letter of Credit Obligation shall
remain outstanding or any Bank Party shall have any Revolving Credit Commitment hereunder or any
other amount hereunder is owing by Borrower to any Bank Party hereunder or under any other Loan
Document:



Section 10.01 Consolidated EBITDA. Borrower and its Restricted Subsidiaries shall maintain
as of the end of each month set forth below, calculated (i) in the case of any month ending in
2009, for the period commencing on January 1, 2009 and ending with the end of such month and (ii)
in all other cases, calculated on a rolling twelve (12) month basis, Consolidated EBITDA, in an
amount not less than the amount set forth on Schedule 10.01 as of the end of the applicable
month corresponding thereto as set forth on Schedule 10.01.



Section 10.02 Consolidated Capital Expenditures. Borrower and its Restricted Subsidiaries
shall not, in any Fiscal Year set forth below, make Consolidated Capital Expenditures in the
aggregate amount in excess of the amount set forth below opposite such Fiscal Year.



	 	 	 	 	 
	Fiscal Year	 	Capital Expenditures	 
	12/31/09
	 	$	1,500,000	 
	12/31/10
	 	$	1,000,000	 






Section 10.03 Minimum Liquidity Amount. Borrower’s and Guarantors’ aggregate Liquidity Amount
shall, at all times, be no less than Twenty Million Dollars ($20,000,000).



Section 10.04 Net Availability. Borrower and Guarantors shall, at all times, have Net
Availability of not less than Five Million Dollars ($5,000,000).



Section 10.05 Loan Clean-Up Period. Notwithstanding anything to the contrary contained herein
(including, but not limited to, Section 2.01 hereof), Borrower shall have no Loans outstanding from
the periods (i) January 1, 2010 to May 31, 2010 and (ii) January 1, 2011 to June 30, 2011.


 


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ARTICLE XI




EVENTS OF DEFAULT




Section 11.01 Events of Default. Any of the following events shall be an “Event of Default”:



(a) (i) Borrower shall fail to pay the principal of any Note as and when due and payable, or
any Letter of Credit Account Party shall fail to reimburse the Letter of Credit Issuing Bank on a
Letter of Credit as and when due and payable; (ii) Borrower shall fail to pay interest on any Note
within five (5) Banking Days of when such interest is due and payable; (iii) Borrower or any Letter
of Credit Account Party shall fail to pay within five (5) Banking Days after the request for
payment is made any fees or expenses or other payments required to be paid under the terms of any
of the Loan Documents; (iv) Borrower shall fail to make any payments or prepayments under
Section 2.08 (d) hereof within three (3) Banking Days; (iv) Borrower shall fail to make any
payments under Section 2.08 (e) hereof on the date required by that Section; (v) Borrower
shall fail to deliver, in accordance with Section 8.08(a)(i) hereof, a Borrowing Base
Certificate showing all Revolving Credit Loans and all Letter of Credit Obligations as of such
Fiscal Month End Date are in compliance with the Borrowing Base as of such Fiscal Month End Date or
(vi) Borrower shall fail to permit to the inspection of its books and records as provided herein;
or



(b) any representation or warranty made or deemed made by Borrower or any Guarantor in this
Agreement or in any other Loan Document to which it is a party or which is contained in any
certificate, document, opinion, financial or other statement furnished at any time under or in
connection with any Loan Document shall prove to have been incorrect in any material respect on or
as of the date made or deemed made; or



(c) Borrower or any Guarantor shall fail to perform or observe any term, covenant or agreement
contained in this Agreement or any of the Loan Documents (other than those covered by any other
Event of Default) and such failure shall continue for fifteen (15) days or more following the
earlier of the time (i) an executive officer of Borrower knew or should have known of such Event of
Default; or (ii) written notice of such Event of Default is given to Borrower by the Agent (except
that this Section 11.01(c) shall not apply to the delivery of a Borrowing Base Certificate
not in compliance with Section 8.08(a)(i) hereof); or



(d) Borrower or any Guarantor shall: (i) fail to pay any Debt of Borrower or any Guarantor in
an amount greater than One Million Dollars ($1,000,000) (other than the payment obligations
described in (a) above) when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) after giving effect to any applicable grace period; or (ii) fail to perform or
observe any term, covenant or condition on its part to be performed or observed or an event of
default has occurred under any agreement or instrument relating to any such Debt, when required to
be performed or observed, the effect of which is to cause any such Debt to become, or to permit any
such Debt to be declared to be, due and payable prior to its scheduled maturity; or


 


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(e) Borrower or any Guarantor: (i) shall generally not, or be unable to, or shall admit in
writing its inability to, pay its debts as such debts become due; or (ii) shall make an assignment
for the benefit of creditors, petition or apply to any tribunal for the appointment of a custodian,
receiver or trustee for it or a substantial part of its assets; or (iii) shall commence any
proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (iv) shall
have had any such petition or application filed or any such proceeding shall have been commenced,
against it, in which an
adjudication or appointment is made or order for relief is entered, or which petition,
application or proceeding remains undismissed or unstayed for a period of sixty (60) days or more;
or shall be the subject of any proceeding under which its assets may be subject to seizure,
forfeiture or divestiture; or (v) by any act or omission shall indicate its consent to, approval of
or acquiescence in any such petition, application or proceeding or order for relief or the
appointment of a custodian, receiver or trustee for all or any substantial part of its property; or
(vi) shall suffer any such custodianship, receivership or trusteeship to continue undischarged for
a period of thirty (30) days or more; or



(f) one or more judgments, decrees or orders for the payment of money in excess of One Million
Dollars ($1,000,000) in the aggregate shall be rendered against Borrower or any Guarantor, and such
judgments, decrees or orders shall continue unsatisfied and in effect for a period of thirty (30)
consecutive days without being vacated, discharged, satisfied or stayed or bonded pending appeal;
or



(g) any of the following events shall occur or exist with respect to Borrower or any Guarantor
or any ERISA Affiliate: (i) any Prohibited Transaction involving any Plan; (ii) any Reportable
Event shall occur with respect to any Pension Plan; (iii) the filing under Section 4041 of ERISA of
a notice of intent to terminate any Plan or the termination of any Pension Plan; (iv) any event or
circumstance exists which might constitute grounds entitling the PBGC to institute proceedings
under Section 4042 of ERISA for the termination of, or for the appointment of a trustee to
administer, any Pension Plan, or the institution by the PBGC of any such proceedings; (v) complete
or partial withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization, insolvency, or termination of any Multiemployer Plan; (vi) an accumulated funding
deficiency (as defined in Section 302 of ERISA or Section 412 of the Code) exists with respect to a
Plan, whether or not waived; and in each case above, such event or condition, together with all
other events or conditions, if any, would reasonably be expected to subject Borrower or any
Guarantor or any ERISA Affiliate to any tax, penalty, or other liability to a Plan, Multiemployer
Plan, the PBGC, or otherwise (or any combination thereof) which in the aggregate exceeds or may
exceed Three Hundred Fifty Thousand ($350,000) Dollars; or



(h) Article V shall, at any time after the execution and delivery of this Agreement
and for any reason, cease to be in full force and effect or shall be declared null and void, or the
validity or enforceability thereof shall be contested by any Guarantor or any Guarantor shall deny
it has any further liability or obligation under or shall fail to perform its obligations under
Article V; or




(i) the occurrence of a Change of Control; or




(j) the occurrence of a Material Adverse Change; or



(k) the Liens of the Agent in any material portion of the Collateral shall for any reason fail
to be perfected Liens (other than by reason of a release of Collateral in accordance with the terms
of the Security Documents or the satisfaction in full of the Obligations) except to the extent any
such failure results from the failure of the Agent to maintain possession of pledged equity
interests actually delivered to it representing securities pledged under the Security Documents,
and such failure shall continue for ten (10) days or more following the earlier of the time (i) an
executive officer of Borrower knew or
should have known of such Event of Default; or (ii) written notice of such Event of Default is
given to Borrower by the Agent.


 


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Section 11.02 Remedies. If any Event of Default shall occur and be continuing, the Agent may
and, upon request of the Required Banks, shall by notice to Borrower, (a) declare the Revolving
Credit Commitment, the Trade Letter of Credit Commitment and the Standby Letter of Credit
Commitment to be terminated, whereupon the same shall forthwith terminate; (b) require Borrower to
provide Cash Collateral or the equivalent thereof in an aggregate amount of one hundred and five
percent (105%) of all outstanding Letter of Credit Obligations; (c) declare the outstanding Notes,
all interest thereon, and all other amounts payable under this Agreement, and any other Loan
Documents to be forthwith due and payable, whereupon the Notes, all such interest, and all such
amounts due under this Agreement, and under any other Loan Document shall become and be forthwith
due and payable, without presentment, demand, protest, or further notice of any kind, all of which
are hereby expressly waived by Borrower; (d) exercise any remedies provided in any of the Loan
Documents; and/or (e) exercise any remedies provided by Law; provided however, that
upon the occurrence of an Event of Default referred to in Section 11.01(e) hereof, the
Revolving Credit Commitment, and the Trade Letter of Credit Commitment or Standby Letter of Credit
Commitment shall automatically terminate and the outstanding Notes, Letters of Credit, and any
other amounts payable under this Agreement or any of the other Loan Documents, and all interest on
any of the foregoing shall be forthwith due and payable without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by Borrower. Furthermore, upon
and following an Event of Default, at the direction of the Required Banks, all Revolving Credit
Loans, any and all accrued and unpaid interest, fees or amounts due hereunder and all other
Obligations, to the extent permitted by applicable law, shall bear interest (payable on demand, and
in any event on the last day of each month, and computed daily on the basis of a 360-day year for
actual days elapsed) at the Default Rate until paid. In no event, however, shall any amount
payable hereunder be in excess of the maximum rate of interest permitted under applicable law. The
obligation to so pay interest upon any Obligation shall not be construed so as to waive or limit
any of the other remedies hereinabove set forth or to waive the requirement for payment on the same
date that payment is to be made as set forth in this Agreement.



Section 11.03
Application of Proceeds. The proceeds realized from the sale or
any other disposition of any Collateral
shall be applied as follows: first, to the reasonable costs, expenses and attorneys’ fees
and expenses incurred by Agent for collection and for acquisition, completion, protection, removal,
storage, sale and delivery of the Collateral; second, to fees payable in connection with
this Agreement; third, to interest then due and payable upon any of the Loans;
fourth, to prepay principal on the Loans; fifth, to interest then due and payable
on the other Obligations; sixth, to furnish to Agent Cash Collateral in an amount not less
than 105% of the outstanding Letter of Credit Obligations; seventh, to the payment of any
Banking Services Obligations; and eighth, to payment of any other Obligations in such order
as Agent may determine in its sole discretion, and for the ratable benefit of the Banks.


 


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ARTICLE XII




THE AGENT AND COLLATERAL MONITOR




Section 12.01 Appointment, Powers and Immunities of Agent. Each Bank hereby irrevocably
appoints and authorizes the Agent to act as its agent hereunder and under any other Loan Document
with such powers as are specifically delegated to the Agent by the terms of this Agreement and any
other Loan Document, together with such other powers as are reasonably incidental thereto. The
Agent shall have no duties or responsibilities except those expressly set forth in this Agreement
and any other Loan Document, and shall not by reason of this Agreement be a trustee for any Bank.
The Agent shall not be responsible to the Banks for any recitals, statements, representations or
warranties made by Borrower or any Guarantor or any officer or official of the Borrower or any
Guarantor or anyone purporting to be an Authorized Person or any other Person contained in this
Agreement or any other Loan Document, or in any certificate or other document or instrument
referred to or provided for in, or received by any of them under, this Agreement or any other Loan
Document, or for the value, legality, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document or any other document or instrument
referred to or provided for herein or therein, for the perfection or priority of any Lien securing
the Obligations or for any failure by Borrower or any Guarantor to perform any of its obligations
hereunder or thereunder. The Agent may employ agents and attorneys-in-fact and shall not be
responsible, except as to money or securities received by it or its authorized agents, for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable
care. Neither the Agent nor any of its directors, officers, employees or agents shall be liable or
responsible for any action taken or omitted to be taken by it or them hereunder or under any other
Loan Document or in connection herewith or therewith, except for its or their own gross negligence
or willful misconduct as determined by a court of competent jurisdiction in a final and
non-appealable judgment. Borrower shall pay any fee agreed to by Borrower and the Agent with
respect to the Agents services hereunder at the date of this Agreement and each anniversary thereof
during the term of this Agreement.



Section 12.02 Reliance by Agent. The Agent shall be entitled to rely upon any certification,
notice or other communication (including any thereof by telephone, telecopy, telex, telegram or
cable) reasonably believed by it to be genuine and correct and to have been signed or sent by or on
behalf of the proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Agent. The Agent may deem and treat each
Bank as the holder of the Revolving Credit Loans made by it and Participation purchased by it for
all purposes hereof unless and until a notice of the assignment or transfer thereof satisfactory to
the Agent signed by such Bank shall have been furnished to the Agent but the Agent shall not be
required to deal with any Person who has acquired a participation in any Revolving Credit Loan, or
Bank. As to any matters not expressly provided for by this Agreement, the Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder in accordance with
instructions signed by the Required Banks, and such instructions of the Required Banks and any
action taken or failure to act pursuant thereto shall be binding on all of the Banks and any other
holder of all or any portion of any Revolving Credit Loan, or Participation.


 


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Section 12.03 Defaults. The Agent shall not be deemed to have knowledge of the occurrence of
a Default or Event of Default, other than a payment default, unless the Agent has received notice
from a Bank or Borrower or any Guarantor specifying such Default or Event of Default and stating
that such notice is a “Notice of Default.” In the event that the Agent receives such a notice of
the occurrence of a Default or Event of Default, the Agent shall give prompt notice thereof to the
Banks. The Agent shall (subject to Section 12.08 hereof) take such action with respect to
such Default or Event of Default which is continuing as shall be directed by the Required Banks;
provided that, unless and until the Agent shall have received such directions, the
Agent may take such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interest of the Banks; and provided
further that, the Agent shall not be required to take any such action which it
determines to be contrary to Law.



Section 12.04 Rights of Agent as a Bank. With respect to its Revolving Credit Commitment and
the Revolving Credit Loans and the Letters of Credit issued by it, the Agent in its capacity as a
Bank hereunder shall have the same rights and powers hereunder as any other Bank and may exercise
the same as though it were not acting as the Agent, and the term “Bank” or “Banks” shall, unless
the context otherwise indicates, include the Agent in its capacity as a Bank. The Agent and its
Affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to
(on a secured or unsecured basis), and generally engage in any kind of banking, trust or other
business with Borrower or any Guarantor and any of their Affiliates as if it were not acting as the
Agent, and the Agent may accept fees and other consideration from Borrower for services in
connection with this Agreement or otherwise without having to account for the same to the Banks.



Section 12.05 Indemnification of Agent. The Banks agree to indemnify the Agent (to the extent
not reimbursed under Section 13.03 hereof or under the applicable provisions of any other
Loan Document, but without limiting the obligations of Borrower under Section 13.03 hereof
or such provisions), for its Pro Rata Share of any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of this Agreement, any other Loan Document or any other documents
contemplated by or referred to herein or the transactions contemplated hereby or thereby
(including, without limitation, the costs and expenses which Borrower or any Guarantor are
obligated to pay under Section 13.03 hereof) or under the applicable provisions of any
other Loan Document or the enforcement of any of the terms hereof or thereof or of any such other
documents or instruments; provided that, no Bank shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful misconduct of the Agent.



Section 12.06 Documents. The Agent will forward to each Bank, promptly after the Agent’s
receipt thereof, a copy of each report, notice or other document required by this Agreement or any
other Loan Document to be delivered to the Agent for such Bank.


 


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Section 12.07 Non-Reliance on Agent and Other Banks. Each Bank agrees that it has,
independently and without reliance on the Agent, HSBC or any other Bank, and based on such
documents and information as it has deemed appropriate, made its own credit analysis of Borrower
and each Guarantor and the decision to enter into this Agreement and that it will, independently
and without
reliance upon the Agent, HSBC or any other Bank, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking
or not taking action under this Agreement or any other Loan Document. The Agent shall not be
required to keep itself informed as to the performance or observance by Borrower or any Guarantor
of this Agreement or any other Loan Document or any other document referred to or provided for
herein or therein or to inspect the properties or books of Borrower or any guarantor. Except for
notices, reports and other documents and information expressly required to be furnished to the
Banks by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the affairs, financial condition or business
of Borrower or any Guarantor (or any of their Affiliates) which may come into the possession of the
Agent or any of its Affiliates. The Agent shall not be required to file this Agreement, any other
Loan Document or any document or instrument referred to herein or therein, for record or give
notice of this Agreement, any other Loan Document or any document or instrument referred to herein
or therein, to anyone; provided however, the Agent shall (a) file each Trademark
Security Agreement with the United States Patent and Trademark Office, and (b) with respect to
Borrower and the Restricted Subsidiaries that are parties to a Security Agreement, file financing
statements (UCC-1) set forth in Section 6.01 hereof in the state where such Borrower and
Restricted Subsidiary is organized.



Section 12.08 Failure of Agent to Act. Except for action expressly required of the Agent
hereunder, the Agent shall in all cases be fully justified in failing or refusing to act hereunder
unless it shall have received further assurances (which may include Cash Collateral) of the
indemnification obligations of the Banks under Section 12.05 hereof in respect of any and
all liability and expense which may be incurred by it by reason of taking or continuing to take any
such action.



Section 12.09 Resignation of Agent. Subject to the appointment and acceptance of a successor
Agent as provided below, the Agent may resign at any time by giving written notice thereof to the
Banks, Borrower and each Guarantor. Upon any such resignation, the Required Banks shall have the
right to appoint a successor Agent, which, unless an Event of Default shall have occurred and be
continuing, shall be reasonably acceptable to Borrower. If no successor Agent shall have been so
appointed by the Required Banks and shall have accepted such appointment within thirty (30) days
after the retiring Agent’s giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent, which shall be a bank which has an office in New York, New
York and assets in an amount not less than One Billion ($1,000,000,000) Dollars, which, unless an
Event of Default shall have occurred and be continuing, shall be reasonably acceptable to Borrower.
The Required Banks or the retiring Agent, as the case may be, shall upon the appointment of a
successor Agent promptly so notify Borrower and the other Banks. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed
to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent’s resignation hereunder as Agent, the provisions of this Article XII shall
continue in effect for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Agent.


 


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Section 12.10 Amendments Concerning Agency Function. The Agent shall not be bound by any
waiver, amendment, supplement or modification of this Agreement or any other Loan Document which
affects its duties hereunder or thereunder unless it shall have given its prior consent thereto.



Section 12.11 Liability of Agent. The Agent shall not have any liabilities or
responsibilities to Borrower or any Guarantor on account of the failure of any Bank to perform its
obligations hereunder or to any Bank on account of the failure of Borrower or any Guarantor to
perform its obligations hereunder or under any other Loan Document.



Section 12.12 Transfer of Agency Function. Without the consent of Borrower, any Guarantor or
any Bank, the Agent may at any time or from time to time transfer its functions as Agent hereunder
to any of its offices located in New York, New York, provided that, the Agent shall
promptly notify Borrower and the Banks thereof.



Section 12.13 Withholding Taxes. Each Bank represents that it is entitled to receive any
payments to be made to it hereunder without the withholding of any tax and will furnish to the
Agent such forms, certifications, statements and other documents as the Agent may request from time
to time to evidence such Bank’s exemption from the withholding of any tax imposed by any
jurisdiction or to enable the Agent to comply with any applicable laws or regulations relating
thereto. Without limiting the effect of the foregoing, if any Bank is not created or organized
under the laws of the United States of America or any state thereof, such Bank will furnish to the
Agent Form 4224 or Form W-8BEN of the Internal Revenue Service, or such other forms,
certifications, statements or documents, duly executed and completed by such Bank as evidence of
such Bank’s complete exemption from the withholding of U.S. tax with respect thereto. The Agent
shall not be obligated to make any payments hereunder to such Bank in respect of any Revolving
Credit Loan or Participation or such Bank’s Revolving Credit Commitment or obligation to purchase a
Participation until such Bank shall have furnished to the Agent the requested form, certification,
statement or document.



Section 12.14 Collateral Monitor. Each Bank and Agent acknowledge and agree that: (i) any and
all reports prepared by Collateral Monitor are being supplied to them solely to assist them in
their own independent credit analysis of Borrower and its Subsidiaries and (ii) Collateral Monitor
makes absolutely no representation or warranty whatsoever regarding (x) the accuracy completeness
or adequacy of such reports or (y) any financial or other information contained therein or the
financial condition of Borrower and its Subsidiaries. It is further understood and agreed that
Collateral Monitor shall not incur any liability to Agent or Banks whatsoever in connection with
the delivery of such reports or the contents of such reports or their use thereof or reliance
thereon and Agent and Banks each hereby waive any and all claims that they may now or hereafter
have against Collateral Monitor in connection therewith.



Borrower and its Subsidiaries hereby waive any and all claims that they may now or hereafter
have against Collateral Monitor arising in connection with such reports and/or Collateral Monitor’s
performance of its duties and functions as Collateral Monitor and hereby indemnifies and holds
Collateral Monitor harmless from any and all loss liability or expense incurred by Borrower and its
Subsidiaries as a result of such reports or the contents thereof other than any loss, liability or
expense
arising from the gross negligence or willful misconduct of Collateral Monitor as determined by
a court of competent jurisdiction in a final and non-appealable judgment.


 


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Collateral Monitor’s reports may contain confidential information which is non-public,
confidential or proprietary in nature, and therefore is being provided to Agent and Banks on a
confidential basis and is to be used for the sole purpose of assisting Agent and Banks in their
independent credit analysis of Borrower and its Subsidiaries as described above.



Except as may be required by applicable law or by any federal regulator or any auditor of
Agent or any Bank, each Bank and Agent will not disclose any of the contents of such reports to any
person, including Borrower and its Subsidiaries, other than those officers, directors, employees,
representatives and professional advisors of such Bank or Agent or who need to know the contents
thereof for the purpose of such credit analysis described above.



The Collateral Monitor shall have no duties or responsibilities except those expressly set
forth in this Agreement and any other Loan Document. The Collateral Monitor shall not be bound by
any waiver, amendment, supplement or modification of this Agreement or any other Loan Document
which affects its duties hereunder or thereunder unless it shall have given its prior written
consent.



ARTICLE XIII




YIELD PROTECTION




Section 13.01 Additional Costs. (a) Borrower shall pay directly to the Agent from time to
time within five (5) Banking Days after demand, such amounts as any Bank may reasonably determine
to be necessary to compensate it for any costs which the Bank determines are attributable to its
making or maintaining any Eurodollar Rate Loans under this Agreement or its obligation to make any
such loans hereunder, or any reduction in any amount receivable by the Bank hereunder in respect of
any such loans or such obligation (such increases in costs and reductions in amounts receivable
being herein called “Additional Costs”), resulting from any Regulatory Change which: (i) changes
the basis of taxation of any amounts payable to the Bank under this Agreement in respect of any of
such loans (other than taxes imposed on the overall net income of the Bank for any of such loans by
the jurisdiction in which the Bank has its principal office or is deemed to hold the loans); or
(ii) imposes or modifies any reserve, special deposit, deposit insurance or assessment, minimum
capital, capital ratio or similar requirements relating to any extensions of credit or other assets
of, or any deposits with or other liabilities of, the Bank (including any of such loans or any
deposits referred to in the definition of “Eurodollar Base Rate”; or (iii) imposes any other
condition affecting this Agreement (or any extensions of credit or liabilities), except to the
extent any such Regulatory Change has previously resulted in a change in the calculation of
Eurodollar Rate as a result of being included in the Reserve Requirement used in calculating such
Eurodollar Rate. The Agent will notify Borrower of any event occurring after the date of this
Agreement which will entitle the Bank to compensation pursuant to this Section 13.01(a) as
promptly as practicable after it obtains knowledge thereof and determines to request such
compensation.


 


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(b) Without limiting the effect of the foregoing provisions of this Section 13.01, in
the event that, by reason of any Regulatory Change, the Bank either (i) incurs Additional Costs
based on or measured by the excess above a specified level of the amount of a category of deposits
or other liabilities of the Bank which includes deposits by reference to which the interest rate on
Eurodollar Rate Loans is determined as provided in this Agreement or a category of extensions of
credit or other assets of the Bank which includes Eurodollar Rate Loans or (ii) becomes subject to
restrictions on the amount of such a category of liabilities or assets which it may hold, then, if
the Bank so elects by notice to Borrower, the obligation of the Bank to make or renew, and to
convert loans of any other type into, loans of such type hereunder shall be suspended until the
date such Regulatory Change ceases to be in effect.



(c) Without limiting the effect of the foregoing provisions of this Section 13.01 (but
without duplication), Borrower shall pay directly to the Agent from time to time within five (5)
Banking Days after request, such amounts as the Agent may determine to be necessary to compensate
any Bank for any costs which it determines are attributable to the maintenance by it or any of its
affiliates pursuant to any Regulatory Change of any court or governmental or monetary authority of
capital in respect of its loans hereunder or its obligation to make loans hereunder (such
compensation to include, without limitation, an amount equal to any reduction in return on assets
or equity of the Bank to a level below that which it could have achieved but for such Regulatory
Change), except to the extent the Eurodollar Base Rate has been adjusted to reflect such costs.
The Agent will notify Borrower if any Bank is entitled to compensation pursuant to this Section
13.01(c) as promptly as practicable after it determines to request such compensation.



(d) Determinations and allocations by the Agent or Bank for purposes of this Section
13.01 of the effect of any Regulatory Change pursuant to subsections (a) or (b), or of the
effect of capital maintained pursuant to subsection (c), on its costs of making or maintaining
loans or its obligation to make loans, or on amounts receivable by, or the rate of return to, it in
respect of loans or such obligation, and of the additional amounts required to compensate the Bank
under this Section 13.01, shall be conclusive, provided that, such
determinations and allocations are made on a reasonable basis and absent manifest error and having
a retroactive effect of no more than one hundred twenty (120) days. Upon the request of the
payor(s) under this Section 13.01, the Agent or Bank, as the case may be, shall promptly
provide an explanation in reasonable detail of the applicable event and the calculations of the
amounts contained in such demand or request.



Section 13.02 Illegality. Notwithstanding any other provision in this Agreement, in the event
that it becomes unlawful for a Bank to (a) honor its obligation to make or renew Eurodollar Rate
Loans hereunder or convert loans of any type into loans of such type, or (b) maintain Eurodollar
Rate Loans hereunder, then the Bank shall promptly notify Borrower thereof and the Bank’s
obligation to make or renew Eurodollar Rate Loans and to convert other types of loans into loans of
such type hereunder shall be suspended until such time as the Bank may again make, renew, or
convert and maintain such affected loans and the Bank’s outstanding Eurodollar Rate Loans shall be
converted to Prime Rate Loans at the end of the then current Interest Period unless earlier
required by law.


 


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Section 13.03 Certain Compensation. Borrower shall pay to the Agent, upon the request of the
Agent, such amount or amounts as shall be sufficient (in the reasonable opinion of the Agent) to
compensate any Bank for any loss, cost or expense which the Bank determines is attributable to:



(a) any payment or prepayment of a Eurodollar Rate Loan made by the Bank on a date other than
the last day of an Interest Period for such Loan (whether by reason of acceleration or otherwise);
or



(b) any failure by Borrower to borrow a Eurodollar Rate Loan to be made by the Bank on the
date specified therefor in the relevant notice.



Without limiting the foregoing, such compensation shall include an amount equal to the excess,
if any, of (i) the amount of interest which otherwise would have accrued on the principal amount so
paid, prepaid or not borrowed for the period from and including the date of such payment,
prepayment or failure to borrow to but excluding the last day of the then current Interest Period
for such Loan (or, in the case of a failure to borrow, to but excluding the last day of the
Interest Period for such Loan which would have commenced on the date specified therefor in the
relevant notice) at the applicable rate of interest for such Loan provided for herein; over
(ii) the amount of interest (as reasonably determined by the Bank) the Bank would have bid in the
London interbank market for Dollar deposits for amounts comparable to such principal amount and
maturities comparable to such period. A determination of the Bank as to the amounts payable
pursuant to this Section 13.03 shall be conclusive absent manifest error.



Section 13.04 Substitution of Banks. If the Agent made a demand with respect to any claim for
compensation under or pursuant to Section 13.01 hereof on behalf of any Bank (such Bank, a
“Subject Bank”) or any Bank failed to honor its obligation to make, renew or maintain
Eurodollar Rate Loans under or pursuant to Section 13.04 hereof (such Bank, an
“Affected Bank”), then the Borrower shall have the right to replace such Subject Bank or
Affected Bank, as the case may be, by requiring such Subject Bank or Affected Bank, as the case may
be, to promptly assign, without recourse, its Loans and its portion of the Revolving Credit
Commitment hereunder to one or more assignees reasonably acceptable to the Agent, provided
that: (a) all Obligations of the Borrower owing to such Subject Bank or Affected Bank, as
the case may be, being replaced shall be paid in full to such Subject Bank or Affected Bank, as the
case may be, concurrently with such assignment, (b) the replacement Bank shall purchase the
foregoing by paying to such Subject Bank or Affected Bank, as the case may be, a price equal to the
principal amount thereof plus accrued and unpaid interest thereon and (c) the replacement Bank
shall pay the processing and recordation fee referred to in Section 14.04(b) hereof. In
connection with any such assignment, the Borrower, the Agent, such Subject Bank or Affected Bank,
as the case may be, and the replacement Bank shall otherwise comply with Section 14.01
hereof.


 


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ARTICLE XIV




MISCELLANEOUS




Section 14.01 Amendments and Waivers. No amendment or waiver of any provision of this
Agreement or any other Loan Document nor consent to any departure by Borrower or any Guarantor
therefrom, shall in any event be effective unless the same shall be in writing and signed by the
Agent and the Required Banks and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided however, that no
amendment, waiver or consent, shall, unless in writing and signed by all Banks do any of the
following: (a) increase the Revolving Credit Commitment or the Trade Letter of Credit Commitment or
Standby Letter of Credit Commitment; (b) reduce the principal of, or interest on (other than a
waiver of the imposition of the Default Rate), the Notes; (c) postpone the date fixed for the
payment of principal of, or interest on, the Notes or any other amount due hereunder or under any
Loan Document, or waive any default in the payment of principal, interest or any other amount due
hereunder or under any Loan Document; (d) change the definition of “Required Banks” or “Pro Rata
Share”; (e) release any Guarantor or release or subordinate any Collateral (except as contemplated
by the Loan Documents or if such release or subordination relates to Factored Accounts); (f) change
the definition of Borrowing Base or any defined term referenced therein (but with respect to the
advance rates only to the extent such rates are increased above the rates in effect on the Closing
Date); or (g) amend this Section 14.01 or any other provision requiring the consent of all
Banks; provided further, that no amendment, waiver or consent of any matter
relating to a Letter of Credit, shall be effective unless also signed by the Letter of Credit
Issuing Bank that issued such Letter of Credit. No failure on the part of the Agent or any Bank to
exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof or
preclude any other or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by Law.



Section 14.02 Usury. Anything herein to the contrary notwithstanding, the obligations of
Borrower and the Guarantors under this Agreement and the other Loan Documents shall be subject to
the limitation that payments of interest shall not be required to the extent that receipt thereof
would be contrary to provisions of Law applicable to a Bank limiting rates of interest which may be
charged or collected by such Bank.



Section 14.03 Expenses; Indemnification. Borrower agrees to reimburse the Agent, Collateral
Monitor and each of the Banks, on demand for all costs, expenses, and charges (including, without
limitation, all reasonable fees and charges of external legal counsel for the Agent, Collateral
Monitor, HSBC and each Bank) incurred by Agent, Collateral Monitor, or any Bank, in connection with
the preparation of the Loan Documents. Borrower agrees to reimburse the Agent, Collateral Monitor,
each Letter of Credit Issuing Bank, and each of the Banks on demand for all costs, expenses, and
charges (including, without limitation, all fees and charges of external legal counsel for the
Agent, Collateral Monitor, and each Bank) incurred by the Agent, Collateral Monitor, or any Bank in
connection with the performance, or enforcement of this Agreement, the Notes, or any other Loan
Documents. Borrower agrees to indemnify the Agent, Collateral Monitor, each Letter of Credit
Issuing Bank and each Bank and their respective directors, officers, employees and agents
(collectively, the “Indemnified Persons), from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages or expenses incurred by any of them arising out of or by
reason of any investigation or litigation or other proceedings (including any threatened
investigation or litigation or other proceedings) relating to any actual or proposed use by
Borrower of the proceeds of the Revolving Credit Loans or the Letters of Credit or to any violation
or alleged violation of any Environmental Law by Borrower or any Guarantor, including without
limitation, the reasonable fees and disbursements of counsel incurred in connection
with any such investigation or litigation or other proceedings (but excluding any such losses,
liabilities, claims, damages or expenses incurred by reason of the gross negligence or willful
misconduct of any Indemnified Person or any other Indemnified Person of which such Indemnified
Person is an affiliate or agent, as determined by a court of competent jurisdiction in a final and
non-appealable judgment).


 


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The obligations of Borrower under this Section 14.03 shall survive the repayment of
the Obligations and all amounts due under or in connection with any of the Loan Documents and the
termination of the Revolving Credit Commitment.




Section 14.04 Assignment; Participation; Additional Bank.



(a) This Agreement shall be binding upon, and shall inure to the benefit of, Borrower, the
Guarantors, the Agent, the Letter of Credit Issuing Bank and their respective successors and
permitted assigns. No Borrower or Guarantor may assign or transfer its rights or obligations
hereunder (and any attempted assignment or transfer by the Borrower or any Subsidiary signatory
hereto without such consent shall be null and void). Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties hereto) and their
respective successors and assigns permitted hereby (including any Affiliate of the Letter of Credit
Issuing Bank that issues any Letter of Credit) any legal or equitable right, remedy or claim under
or by reason of this Agreement.



(b) Any Bank may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Revolving Credit Commitment and
the Revolving Credit Loans and other Obligations at the time owing to it); provided that (i) except
in the case of an assignment to a Bank or an Affiliate of a Bank, each of the Borrower and the
Agent must give their prior written consent to such assignment (which consent shall not be
unreasonably withheld), (ii) except in the case of an assignment to a Bank or an Affiliate of a
Bank or an assignment of the entire remaining amount of the assigning Bank’s Revolving Credit
Commitment, the amount of the Revolving Credit Commitment of the assigning Bank subject to each
such assignment (determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Agent) shall not be less than Ten Million Dollars ($10,000,000)
unless each of the Borrower and the Agent otherwise consent, (iii) each partial assignment shall be
made as an assignment of a proportionate part of all the assigning Bank’s rights and obligations
under this Agreement, (iv) the parties to each assignment shall execute and deliver to the Agent an
Assignment and Acceptance, together with a processing and recordation fee of Three Thousand Five
Hundred Dollars ($3,500), and (v) the assignee, if it shall not be a Bank, shall deliver to the
Agent an administrative questionnaire in form and substance reasonably satisfactory to the Agent;
and provided further that any consent of the Borrower otherwise required under this paragraph shall
not be required if an Event of Default has occurred and is continuing. Subject to acceptance and
recording thereof pursuant to paragraph (d) of this Section 14.04, from and after the
effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party
hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the
rights and obligations of a Bank under this Agreement, and the assigning Bank thereunder shall, to
the extent of the interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of
the assigning Bank’s rights and obligations under this Agreement, such Bank shall cease to be a
party hereto but shall
continue to be entitled to the benefits of Article XIII hereof and
Section14.03 hereof). Any assignment or transfer by a Bank of rights or obligations under
this Agreement that does not comply with this paragraph shall be treated for purposes of this
Agreement as a sale by such Bank of a participation in such rights and obligations in accordance
with paragraph (e) of this Section 14.04.


 


79









 





(c) The Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of
its offices in the City of New York a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Bank’s, and the Revolving Credit
Commitment of, and principal amount of the Obligations owing to, each Bank pursuant to the terms
hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the
Borrower, the Agent, the Letter of Credit Issuing Bank and the Banks may treat each Person whose
name is recorded in the Register pursuant to the terms hereof as a Bank hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be available for
inspection by the Borrower, the Agent and any Bank, at any reasonable time and from time to time
upon reasonable prior notice.



(d) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning
Bank and an assignee, the assignee’s completed administrative questionnaire (unless the assignee
shall already be a Bank hereunder), the processing and recordation fee referred to in paragraph (b)
of this Section 14.04 and any written consent to such assignment required by paragraph (b)
of this Section 14.04, the Agent shall accept such Assignment and Acceptance and record the
information contained therein in the Register. No assignment shall be effective for purposes of
this Agreement unless it has been recorded in the Register as provided in this paragraph.



(e) Any Bank may at any time grant to one or more banks or other institutions (each a
“Participant”) participating interests in its portion of the Revolving Credit Loans and the
Participation. In the event of any such grant by a Bank of a participating interest to a
Participant, such Bank shall remain responsible for the performance of its obligations hereunder,
and Borrower and the Agent shall continue to deal solely and directly with such Bank in connection
with such Bank’s rights and obligations hereunder. Any agreement pursuant to which any Bank may
grant such a participating interest shall provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of Borrower and the Guarantors hereunder and under any
other Loan Document including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement or any other Loan Document; provided
that, such participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement that would require the consent of all Banks
under Sections 14.01 (a) through (g) hereof without the consent of the Participant.



(f) A Participant shall not be entitled to receive any greater payment under Article
XIII hereof than the applicable Bank would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to such Participant is
made with the Borrower’s prior written consent. If a Participant is a Foreign Bank such Participant
shall, for the benefit of the Borrower, comply with Section 12.13 hereof as though it were
a Bank.


 


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(g) Any Bank may at any time pledge or assign a security interest in all or any portion of its
rights under this Agreement to secure obligations of such Bank, including any pledge or assignment
to secure obligations to a Federal Reserve Bank, and this Section 14.04(g) shall not apply
to any such pledge or assignment of a security interest; provided that no such pledge or assignment
of a security interest shall release a Bank from any of its obligations hereunder or substitute any
such pledgee or assignee for such Bank as a party hereto.



(h) If any Bank (such Bank, a “Non-Consenting Bank”) has failed to consent to a
proposed amendment, waiver, discharge or termination which pursuant to the terms of
Section 14.01 hereof requires the consent of all of the Banks affected and with respect to
which the Required Banks shall have granted their consent, then the Borrower shall have the right
(unless such Non-Consenting Bank grants such consent) to replace such Non-Consenting Bank by
requiring such Non-Consenting Bank to promptly assign, without recourse, its Loans and its portion
of the Revolving Credit Commitment hereunder to one or more assignees reasonably acceptable to the
Agent that shall consent to such proposed amendment, waiver, discharge or termination,
provided that: (a) all Obligations of the Borrower owing to such Non-Consenting
Bank being replaced shall be paid in full to such Non-Consenting Bank concurrently with such
assignment, (b) the replacement Bank shall purchase the foregoing by paying to such Non-Consenting
Bank a price equal to the principal amount thereof plus accrued and unpaid interest thereon and (c)
the replacement Bank shall pay the processing and recordation fee referred to in
Section 14.04(b) hereof. In connection with any such assignment the Borrower, Agent, such
Non-Consenting Bank and the replacement Bank shall otherwise comply with Section 14.01
hereof



Section 14.05 Notices. Unless the party to be notified otherwise notifies the other party in
writing as provided in this Section 14.05, and except as otherwise provided in this
Agreement, notices shall be given to the Agent by telephone, confirmed by telex, telecopy or other
writing, and to the Banks and to Borrower by ordinary mail, telecopy or telex addressed to such
party at its address on the signature page of this Agreement. Copies of notices mailed to Borrower
should also be mailed by ordinary mail to Willkie, Farr & Gallagher LLP, 787 Seventh Avenue, New
York, NY 10019, Attention: Leslie M. Mazza, counsel to Borrower. Notices shall be effective: (a)
if given by mail upon receipt; and (b) if given by telex, when the telex is transmitted to the
telex number as aforesaid; provided that, notices to the Agent, and the Banks shall
be effective upon receipt.



Section 14.06 Setoff; Sharing. Borrower agrees that, in addition to, and without limitation
of any right of setoff, bankers’ lien or counterclaim a Bank may otherwise have, each Bank shall be
entitled, at its option, to offset balances (general or special, time or demand, provisional or
final) held by it for the account of Borrower at any of such Bank’s offices, in Dollars or in any
other currency, against any amount payable by Borrower to such Bank under this Agreement or such
Bank’s Note, or any other Loan Document which is not paid when due (regardless of whether such
balances are then due to Borrower), in which case it shall promptly notify Borrower and the Agent
thereof; provided that, such Bank’s failure to give such notice shall not affect
the validity thereof. Each Bank agrees that to the extent any such payment is received by it as
the result of a set-off or otherwise and such payment results in such Bank receiving a greater
payment than it would have been entitled to, had the total amount of
such payment been paid directly to the Agent for disbursement to the Banks, then such Bank
shall immediately purchase for cash from the other Banks participations in the loans sufficient in
amount so that such payment shall effectively be shared pro rata with the other
Banks in accordance with the amount, and to the extent, of their respective interests in all the
Revolving Credit Loans; provided however, that if all or any portion of such
payment is thereafter recovered from such Bank at any time, the purchase shall be rescinded and the
purchase price returned to the extent of such recovery, but without interest or other return
thereof.


 


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Section 14.07 Jurisdiction; Immunities. Borrower and each Guarantor hereby irrevocably submit
to the jurisdiction of any New York State or United States Federal court sitting in New York City
over any action or proceeding arising out of or relating to this Agreement, the Notes, the Letters
of Credit, or any other Loan Document, and Borrower and each Guarantor hereby irrevocably agree
that all claims in respect of such action or proceeding may be heard and determined in such New
York State or Federal court. Borrower and each Guarantor irrevocably consent to the service of any
and all process in any such action or proceeding by the mailing of copies of such process to
Borrower and each Guarantor at their respective addresses specified in Section 14.05
hereof. Borrower and each Guarantor agree that a final non-appealable judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Borrower and each Guarantor further waive any
objection to venue in such State and any objection to an action or proceeding in such State on the
basis of forum non conveniens. Borrower and each Guarantor agree that any action or proceeding
brought against the Agent or any Bank shall be brought only in New York State or United States
Federal Court sitting in New York County.



Nothing in this Section 14.07 hereof shall affect the right of the Agent or any Bank
to serve legal process in any other manner permitted by law or affect the right of the Agent or any
Bank to bring any action or proceeding against any of Borrower or any Guarantor or their property
in the courts of any other jurisdictions.



To the extent that Borrower or any Guarantor has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether from service or notice, attachment
prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself
or its property, Borrower and each Guarantor hereby irrevocably waive such immunity in respect of
its obligations under this Agreement, the Notes, and any other Loan Document.



Section 14.08 Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to agreements made and to be performed entirely
within such State.



Section 14.09 Counterparts. This Agreement may be executed by the parties hereto in separate
counterparts, each of which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument. Each counterpart may consist
of a number of copies hereof, each signed by less than all, but together signed by all of the
parties hereto.


 


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Section 14.10 Exhibits and Schedules. The Exhibits and Schedules are a part of this Agreement
as if fully set forth herein.



Section 14.11 Table of Contents; Headings. The headings in the Table of Contents and in this
Agreement are for reference only, and shall not affect the interpretation or construction of this
Agreement.



Section 14.12 Severability. If any word, phrase, sentence, paragraph, provision or section of
this Agreement shall be held, declared, pronounced or rendered invalid, void, unenforceable or
inoperative for any reason by any court of competent jurisdiction, governmental authority, statute
or otherwise, such holding, declaration, pronouncement or rendering shall not adversely affect any
other word, phrase, sentence, paragraph, provision or section of this Agreement, which shall
otherwise remain in full force and effect and be enforced in accordance with its terms.



Section 14.13 Integration; Conflicts. The Loan Documents set forth the entire agreement among
the parties hereto relating to the transactions contemplated thereby and supersede any prior oral
or written statements or agreements with respect to such transactions. Any conflicts between the
terms and conditions set forth in this Agreement and any other Loan Document shall be governed by
this Agreement.



Section 14.14 Jury Trial Waiver. The Agent, the Banks, Borrower and its Restricted
Subsidiaries each waive any right it may have to a jury trial in any action or proceeding which
pertains directly or indirectly to this Agreement, the Obligations, the Collateral or, in any way,
directly or indirectly, arises out of or relates to the relationship between or among Borrower, the
Restricted Subsidiaries, the Agent and the Banks.



Section 14.15 HSBC. Notwithstanding the definition of the name “HSBC” and notwithstanding
anything to the contrary contained in this Agreement or any other Loan Document, no obligations of
HSBC Bank USA, National Association as Agent or HSBC Bank USA, National Association as Letter of
Credit Issuing Bank may be delegated to any Affiliate of HSBC Bank USA, National Association (other
than in compliance with Section 3.12) unless such Affiliate is either HSBC Business Credit
(USA) Inc. or has the same or better credit rating as HSBC Bank USA, National Association based on
the credit rating assigned by Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Group (a
division of The McGraw Hill Companies, Inc.) (or any successor or assignee of the business of each
such company in the business of rating securities credit rating).



Section 14.16 USA PATRIOT Act Notice. Each Bank that is subject to the Act (as hereinafter
defined) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act
(Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is
required to obtain, verify and record information that identifies each of the Borrower, the
Guarantors and the Letter of Credit Account Parties, which information includes the name and
address of each Loan Party and other information that will allow such Bank to identify each of the
Borrower, the Guarantors and the Letter of Credit Account Parties in accordance with the Act.


 


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Section 14.17 Amendment and Restatement. This Agreement is an amendment and restatement of
the Existing Agreement and the Loan Documents (as defined in the Existing Agreement) and does not
constitute a novation of the Existing Agreement. All indebtedness owing by the Borrower under the
Existing Agreement and all security interests and Liens granted to the Agent under the Existing
Agreement or any of the other Loan Documents (as defined in the Existing Agreement) hereby are
renewed and continued in full force and effect (other than security interests and Liens upon
Excluded Collateral) and hereafter shall be governed by this Agreement or, to the extent
appropriate, such other Loan Documents as further amended or modified from time to time. All
existing Loan Documents (as defined in the Existing Agreement) previously executed in connection
with the Existing Agreement shall continue in full force and effect, except to the extent such
agreement is amended, restated or replaced in connection with this Agreement, and any and all
references therein to the Existing Agreement shall refer to and mean this Agreement.



[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]





 


84









 







IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by the
respective officers hereunder duly authorized as of the day and year first above written.



	 	 	 	 	 
	 	HAMPSHIRE GROUP, LIMITED, as a Borrower,

a Letter of Credit Account Party and a Guarantor

 	 
	 	By:  	/s/ Jonathan W. Norwood
 	 
	 	 	Name:  	Jonathan W. Norwood 	 
	 	 	Title:  	Treasurer and Chief Financial Officer 	 
	 
	 	HAMPSHIRE DESIGNERS, INC., as a
Letter of Credit Account Party and a Guarantor

 	 
	 	By:  	/s/ Jonathan W. Norwood
 	 
	 	 	Name:  	Jonathan W. Norwood 	 
	 	 	Title:  	Treasurer 	 
	 
	 	ITEM-EYES , INC., as a Letter of Credit

Account Party and a Guarantor

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



	 	 	 
	 

	 	Address of Borrower, each Letter of Credit Account Party
and each Guarantor for Notices:
	 
	 	 
	 

	 	c/o Hampshire Group, Limited

1924 Pearman Dairy Road

Anderson, SC 29625

Attention: Jonathan Norwood

Fax Number: 864 231-1201





[Signature Page to Second Amended and Restated Credit Agreement and Guaranty]


 


 









 








	 	 	 	 	 
	 	HSBC BANK USA, NATIONAL ASSOCIAION,

as a Bank, as Letter of Credit Issuing Bank

and as Agent

 	 
	 	By:  	/s/
Thomas G. Getty, Jr. 	 
	 	 	Name:  	Thomas G. Getty, Jr.	 
	 	 	Title:  	Vice President	 



	 	 	 	 	 	 	 
	 

	 	Address for Notices:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	HSBC Bank USA, National Association

452 Fifth Avenue

New York, New York 1 0018

Attention: Thomas G. Getty, Jr.

Fax Number: 212-525-5676	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Pro Rata Share of Revolving Credit 

Commitment and Letters of Credit
	 	 	38.2	%





[Signature Page to Second Amended and Restated Credit Agreement and Guaranty]



 


 









 







	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A.

as a Bank

 	 
	 	By:  	/s/
Joseph A. Lisack	 
	 	 	Name:  	Joseph A. Lisack	 
	 	 	Title:  	Vice President	 



	 	 	 	 	 	 	 
	 

	 	Address for Notices:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	JPMORGAN CHASE BANK, N.A.	 	 	 	 
	 

	 	270 Park Avenue, 44th Floor

New York, NY 10017	 	 	 	 
	 

	 	Attention: Joseph Lisack	 	 	 	 
	 

	 	Fax Number: 646 534-2270	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Pro Rata Share of Revolving Credit 

Commitment and Letters of Credit
	 	 	35	%






[Signature Page to Second Amended and Restated Credit Agreement and Guaranty]



 


 









 





	 	 	 	 	 
	 	WACHOVIA BANK, NATIONAL ASSOCIATION

as a Bank

 	 
	 	By:  	/s/
Jeff Reeves	 
	 	 	Name:  	Jeff Reeves	 
	 	 	Title:  	Senior Vice President	 



	 	 	 	 	 	 	 
	 

	 	Address for Notices:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	WACHOVIA BANK, NATIONAL ASSOCIATION	 	 	 	 
	 

	 	Specialized Loans, 7711 Plantation Rd.

Roanoke, VA 24019

Attention: Specialized Loans	 	 	 	 
	 

	 	Fax Number: 704 715-0099	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Pro Rata Share of Revolving Credit 

Commitment and Letters of Credit
	 	 	18	%






[Signature Page to Second Amended and Restated Credit Agreement and Guaranty]



 


 









 





	 	 	 	 	 
	 	BANK LEUMI USA

as a Bank

 	 
	 	By:  	/s/
Paul J. DeChagas	 
	 	 	Name:  	Paul J. DeChagas	 
	 	 	Title:  	Vice President	 



	 	 	 	 	 	 	 
	 

	 	Address for Notices:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	BANK LEUMI USA	 	 	 	 
	 

	 	562 Fifth Avenue

New York, NY 10036

Attention: Paul J. DeChagas	 	 	 	 
	 

	 	Fax Number: 212 626-1329	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Pro Rata Share of Revolving Credit 

 Commitment and Letters of Credit
	 	 	8.8	%






[Signature Page to Second Amended and Restated Credit Agreement and Guaranty]