**Exhibit 10(g)-2**

** **

**EXECUTION COPY**

 

**ETHAN ALLEN INTERIORS INC. HAS CLAIMED CONFIDENTIAL TREATMENT OFPORTIONS OF THIS DOCUMENT IN ACCORDANCE WITH RULE 24-B UNDER THE SECURITIESEXCHANGE ACT OF 1934**

 

 

 

CREDIT AGREEMENT

 

dated as of

 

May 29, 2009

 

Among

 

ETHAN ALLEN GLOBAL, INC.

as Borrower

 

ETHAN ALLEN INTERIORS INC.

 

The Other Loan Parties Party Hereto

 

The Lenders Party Hereto

 

JPMORGAN CHASE BANK, N.A.as Administrative Agent

 

JPMORGAN CHASE BANK, N.A.as Syndication Agent

 

and

 

CAPITAL ONE LEVERAGE FINANCE CORP.as Documentation Agent

 

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J.P. MORGAN SECURITIES INC.as Sole Bookrunner and Sole Lead Arranger

 

 

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TABLEOF CONTENTS

 
| ARTICLE I Definitions                      | 1                                                                  |
|--------------------------------------------|--------------------------------------------------------------------|
|                                       |                                                               |
| SECTION 1.01.                         | Defined Terms                                                      | 1 |
| SECTION 1.02.                         | Classification of Loans and Borrowings                             | 28 |
| SECTION 1.03.                         | Terms Generally                                                    | 28 |
| SECTION 1.04.                         | Accounting Terms; GAAP                                             | 28 |
|                                       |                                                               |
| ARTICLE II The Credits                     | 29                                                                 |
|                                       |                                                               |
| SECTION 2.01.                         | Commitments                                                        | 29 |
| SECTION 2.02.                         | Loans and Borrowings                                               | 29 |
| SECTION 2.03.                         | Requests for Revolving Borrowings                                  | 29 |
| SECTION 2.04.                         | Protective Advances                                                | 30 |
| SECTION 2.05.                         | Swingline Loans and Overadvances                                   | 31 |
| SECTION 2.06.                         | Letters of Credit                                                  | 32 |
| SECTION 2.07.                         | Funding of Borrowings                                              | 35 |
| SECTION 2.08.                         | Interest Elections                                                 | 36 |
| SECTION 2.09.                         | Termination and Reduction of Commitments; Increase in  Commitments | 37 |
| SECTION 2.10.                         | Repayment and Amortization of Loans; Evidence of Debt              | 38 |
| SECTION 2.11.                         | Prepayment of Loans                                                | 39 |
| SECTION 2.12.                         | Fees                                                               | 40 |
| SECTION 2.13.                         | Interest                                                           | 41 |
| SECTION 2.14.                         | Alternate Rate of Interest                                         | 41 |
| SECTION 2.15.                         | Increased Costs                                                    | 42 |
| SECTION 2.16.                         | Break Funding Payments                                             | 43 |
| SECTION 2.17.                         | Taxes                                                              | 43 |
| SECTION 2.18.                         | Payments Generally; Allocation of Proceeds; Sharing of  Set-offs   | 44 |
| SECTION 2.19.                         | Mitigation Obligations; Replacement of Lenders                     | 47 |
| SECTION 2.20.                         | Defaulting Lenders                                                 | 47 |
| SECTION 2.21.                         | Returned Payments                                                  | 48 |
| SECTION 2.22.                         | Senior Debt                                                        | 49 |
|                                       |                                                               |   |
| ARTICLE III Representations and Warranties | 49                                                                 |
|                                       |                                                               |   |
| SECTION 3.01.                         | Organization; Powers                                               | 49 |
| SECTION 3.02.                         | Authorization; Enforceability                                      | 49 |
| SECTION 3.03.                         | Governmental Approvals; No Conflicts                               | 49 |
| SECTION 3.04.                         | Financial Condition; No Material Adverse Change                    | 49 |
| SECTION 3.05.                         | Properties                                                         | 50 |
| SECTION 3.06.                         | Litigation and Environmental Matters                               | 50 |
| SECTION 3.07.                         | Compliance with Laws and Agreements                                | 51 |
| SECTION 3.08.                         | Investment Company Status                                          | 51 |
| SECTION 3.09.                         | Taxes                                                              | 51 |
| SECTION 3.10.                         | ERISA                                                              | 51 |
| SECTION 3.11.                         | Disclosure                                                         | 51 |
| SECTION 3.12.                         | Material Agreements                                                | 52 |

 

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| SECTION 3.13.                    | Solvency                                                   | 52     |
|---------------------------------------|------------------------------------------------------------|--------|
| SECTION 3.14.                    | Insurance                                                  | 52     |
| SECTION 3.15.                    | Capitalization and Subsidiaries                            | 52     |
| SECTION 3.16.                    | No Burdensome Restrictions                                 | 52     |
| SECTION 3.17.                    | Federal Reserve Regulations                                | 52     |
| SECTION 3.18.                    | Security Interest in Collateral                            | 52     |
| SECTION 3.19.                    | Employment Matters                                         | 53     |
| SECTION 3.20.                    | Common Enterprise                                          | 53     |
| SECTION 3.21.                    | Credit Card Processors                                     | 53     |
|                                  |                                                       |   |
| ARTICLE IV Conditions                 | 53                                                         |
|                                  |                                                       |   |
| SECTION 4.01.                    | Effective Date                                             | 53     |
| SECTION 4.02.                    | Each Credit Event                                          | 56     |
|                                  |                                                       |   |
| ARTICLE V Affirmative Covenants       | 56                                                         |
|                                  |                                                       |
| SECTION 5.01.                    | Financial Statements; Borrowing Base and Other Information | 56     |
| SECTION 5.02.                    | Notices of Material Events                                 | 60     |
| SECTION 5.03.                    | Existence; Conduct of Business                             | 60     |
| SECTION 5.04.                    | Payment of Obligations                                     | 60     |
| SECTION 5.05.                    | Maintenance of Properties                                  | 61     |
| SECTION 5.06.                    | Books and Records; Inspection Rights                       | 61     |
| SECTION 5.07.                    | Compliance with Laws                                       | 61     |
| SECTION 5.08.                    | Use of Proceeds                                            | 61     |
| SECTION 5.09.                    | Insurance                                                  | 61     |
| SECTION 5.10.                    | Casualty and Condemnation                                  | 61     |
| SECTION 5.11.                    | Appraisals                                                 | 61     |
| SECTION 5.12.                    | Field Examinations                                         | 62     |
| SECTION 5.13.                    | [Intentionally Omitted]                                    | 62     |
| SECTION 5.14.                    | Credit Card Processors                                     | 62     |
| SECTION 5.15.                    | Additional Collateral; Further Assurances                  | 62     |
|                                  |                                                       |   |
| ARTICLE VI Negative Covenants         | 64                                                         |
|                                  |                                                       |   |
| SECTION 6.01.                    | Indebtedness                                               | 64     |
| SECTION 6.02.                    | Liens                                                      | 66     |
| SECTION 6.03.                    | Fundamental Changes                                        | 67     |
| SECTION 6.04.                    | Investments, Loans, Advances, Guarantees and Acquisitions  | 68     |
| SECTION 6.05.                    | Asset Sales                                                | 69     |
| SECTION 6.06.                    | Sale and Leaseback Transactions                            | 70     |
| SECTION 6.07.                    | Swap Agreements                                            | 70     |
| SECTION 6.08.                    | Restricted Payments; Certain Payments of Indebtedness      | 70     |
| SECTION 6.09.                    | Transactions with Affiliates                               | 71     |
| SECTION 6.10.                    | Restrictive Agreements                                     | 71     |
| SECTION 6.11.                    | Amendment of Material Documents                            | 72     |
| SECTION 6.12.                    | Financial Covenants                                        | 72     |
|                                  |                                                       |   |
| ARTICLE VII Events of Default         | 72                                                         |
|                                  |                                                       |   |
| ARTICLE VIII The Administrative Agent | 75                                                         |

 

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| ARTICLE IX Miscellaneous | 79                                                         |
|--------------------------|------------------------------------------------------------|
|                     |                                                       |   |
| SECTION 9.01.       | Notices                                                    | 79 |
| SECTION 9.02.       | Waivers; Amendments                                        | 80 |
| SECTION 9.03.       | Expenses; Indemnity; Damage Waiver                         | 82 |
| SECTION 9.04.       | Successors and Assigns                                     | 83 |
| SECTION 9.05.       | Survival                                                   | 86 |
| SECTION 9.06.       | Counterparts; Integration; Effectiveness                   | 86 |
| SECTION 9.07.       | Severability                                               | 87 |
| SECTION 9.08.       | Right of Setoff                                            | 87 |
| SECTION 9.09.       | Governing Law; Jurisdiction; Consent to Service of Process | 87 |
| SECTION 9.10.       | WAIVER OF JURY TRIAL                                       | 87 |
| SECTION 9.11.       | Headings                                                   | 88 |
| SECTION 9.12.       | Confidentiality                                            | 88 |
| SECTION 9.13.       | Several Obligations; Nonreliance; Violation of Law         | 89 |
| SECTION 9.14.       | USA PATRIOT Act                                            | 89 |
| SECTION 9.15.       | Disclosure                                                 | 89 |
| SECTION 9.16.       | Appointment for Perfection                                 | 89 |
| SECTION 9.17.       | Interest Rate Limitation                                   | 89 |
| SECTION 9.18.       | Conflicts                                                  | 90 |
|                     |                                                       |   |
| ARTICLE X Loan Guaranty  | 90                                                         |
|                     |                                                       |   |
| SECTION 10.01.      | Guaranty                                                   | 90 |
| SECTION 10.02.      | Guaranty of Payment                                        | 90 |
| SECTION 10.03.      | No Discharge or Diminishment of Loan Guaranty              | 90 |
| SECTION 10.04.      | Defenses Waived                                            | 91 |
| SECTION 10.05.      | Rights of Subrogation                                      | 91 |
| SECTION 10.06.      | Reinstatement; Stay of Acceleration                        | 91 |
| SECTION 10.07.      | Information                                                | 92 |
| SECTION 10.08.      | Termination                                                | 92 |
| SECTION 10.09.      | Taxes                                                      | 92 |
| SECTION 10.10.      | Maximum Liability                                          | 92 |
| SECTION 10.11.      | Contribution                                               | 92 |
| SECTION 10.12.      | Liability Cumulative                                       | 93 |

 

SCHEDULES:

 

Schedule2.01 — Commitments

Schedule2.06 — Existing Letters of Credit

Schedule3.06 — Disclosed Matters

Schedule3.14 — Insurance

Schedule3.15 — Capitalization and Subsidiaries 

Schedule3.21 — Credit Card Processors

Schedule6.01 — Existing Indebtedness

Schedule6.02 — Existing Liens

Schedule6.04 — Existing Investments

Schedule6.10 — Existing Restrictions

 

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EXHIBITS:

 

Exhibit A— Form of Assignment and Assumption

Exhibit B— Forms of Opinions of Loan Parties’ Counsels

Exhibit C— Form of Borrowing Base Certificate

Exhibit D— Form of Compliance Certificate

Exhibit E— Joinder Agreement

Exhibit F— List of Closing Documents

 

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CREDIT AGREEMENT dated as ofMay 29, 2009 (as it may be amended or modified from time to time, this “Agreement”),among ETHAN ALLEN GLOBAL, INC., ETHAN ALLEN INTERIORS INC., the other LoanParties party hereto, the Lenders party hereto, JPMORGAN CHASE BANK, N.A., asAdministrative Agent, JPMORGAN CHASE BANK, N.A., as Syndication Agent andCAPITAL ONE LEVERAGE FINANCE CORP., as Documentation Agent.

 

The parties hereto agree asfollows:

 

# ARTICLE I

#  

# Definitions

 

## SECTION 1.01.  Defined Terms.  As used in this Agreement, the followingterms have the meanings specified below:

##  

“ABR”, when used in reference to any Loan orBorrowing, refers to a Loan, or the Loans comprising such Borrowing, bearinginterest at a rate determined by reference to the Alternate Base Rate.

 

“Account” has the meaning assigned to such term in theSecurity Agreement.

 

“Account Debtor” means any Person obligatedon an Account.

 

“Adjusted LIBO Rate” means, with respect to anyEurodollar Borrowing for any Interest Period, an interest rate per annum(rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) theLIBO Rate for such Interest Period multiplied by (b) the Statutory ReserveRate.

 

“Administrative Agent” means JPMorgan Chase Bank,N.A., in its capacity as administrative agent for the Lenders hereunder.

 

“Administrative Questionnaire” means an AdministrativeQuestionnaire in a form supplied by the Administrative Agent.

 

“Affected Foreign Subsidiary” means anyForeign Subsidiary to the extent greater than 65% of the Equity Interests ofsuch Foreign Subsidiary being pledged to support the Secured Obligations wouldcause a Deemed Dividend Problem.

 

“Affiliate” means, with respect to a specified Person,another Person that directly, or indirectly through one or more intermediaries,Controls or is Controlled by or is under common Control with the Personspecified.

 

“Aggregate Commitment” the aggregate of the Commitments of all of theLenders, as reduced from time to time pursuant to the terms and conditionshereof.

 

“Aggregate Credit Exposure” means, at anytime, the aggregate Credit Exposure of all the Lenders.

 

“Alternate Base Rate” means, for any day, a rateper annum equal to the greatest of (a) the Prime Rate in effect on suchday, (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1% and (c) theAdjusted LIBO Rate for a one month Interest Period on such day (or if such dayis not a Business Day, the immediately preceding Business Day) plus 1%; providedthat, for the avoidance of doubt, the Adjusted LIBO Rate for any day shall bebased on the rate appearing on the Reuters Screen 

 

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LIBOR01 Page (or on any successor orsubstitute page of such page) at approximately 11:00 a.m. London timeon such day (without any rounding).  Anychange in the Alternate Base Rate due to a change in the Prime Rate, theFederal Funds Effective Rate or the Adjusted LIBO Rate shall be effective fromand including the effective date of such change in the Prime Rate, the FederalFunds Effective Rate or the Adjusted LIBO Rate, respectively.

 

“Applicable Percentage” means, with respect to anyLender, (a) with respect to Revolving Loans, LC Exposure, Swingline Loansor Overadvances, a percentage equal to a fraction the numerator of which issuch Lender’s Commitment and the denominator of which is the aggregateCommitment of all Lenders (if the Commitments have terminated or expired, theApplicable Percentages shall be determined based upon such Lender’s share ofthe aggregate Revolving Exposures at that time); provided that in thecase of Section 2.20 when a Defaulting Lender shall exist, any suchDefaulting Lender’s Commitment shall be disregarded in the calculation and (b) withrespect to Protective Advances or with respect to the Aggregate CreditExposure, a percentage based upon its share of the Aggregate Credit Exposureand the unused Commitments; provided that in the case of Section 2.20when a Defaulting Lender shall exist, any such Defaulting Lender’s Commitmentshall be disregarded in the calculation.

 

“Applicable Pledge Percentage” means 100% but65% in the case of a pledge by Holdings, the Borrower or any DomesticSubsidiary of its Equity Interests in a Foreign Subsidiary that is an AffectedForeign Subsidiary due to a Deemed Dividend Problem.

 

“Applicable Rate” means, for any day, withrespect to any ABR Loan or Eurodollar Revolving Loan, or with respect to thecommitment fees payable hereunder, as the case may be, the applicable rate perannum set forth below under the caption “ABR Spread”, “EurodollarSpread” or “Commitment Fee Rate”, as the case may be, based upon theAverage Quarterly Availability during the most recently ended fiscal quarter ofHoldings:

 
| ** **  | ** ** | **Average Quarterly  Availability**                               | ** ** | **Commitment Fee  Rate** | ** ** | **Eurodollar Spread** | ** ** | **ABR Spread** | ** ** |
|-------------|------------|-------------------------------------------------------------------|------------|--------------------------|------------|-----------------------|------------|----------------|------------|
| Category  1 |       | Greater than  $40,000,000                                         |       | 0.50                     | %          | 3.25                  | %          | 2.25           | %          |
| Category  2 |       | Less than or equal to  $40,000,000 but  greater than  $20,000,000 |       | 0.50                     | %          | 3.75                  | %          | 2.75           | %          |
| Category  3 |       | Less than or equal to  $20,000,000                                |       | 0.50                     | %          | 4.25                  | %          | 3.25           | %          |

 

For purposes of theforegoing, (a) the Applicable Rate shall be determined as of the end ofeach fiscal quarter of Holdings based upon the Borrowing Base Certificates andrelated information that are delivered from time to time pursuant to Section 5.01and (b) each change in the Applicable Rate resulting from a change inAverage Quarterly Availability shall be effective during the period commencingon and including the date of delivery to the Administrative Agent as of the endof the most recent fiscal quarter and ending on the date immediately precedingthe effective date of the next such change, provided that the AverageQuarterly Availability shall be deemed to be (i) in Category 2 during theperiod from the Effective Date to the date of delivery to the AdministrativeAgent of the Borrowing Base Certificate for the fiscal quarter ending on orabout September 30, 2009 and (ii) in Category 3 (A) at 

 

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any time that an Event of Default hasoccurred and is continuing or (B) at the option of the AdministrativeAgent or at the request of the Required Lenders if Holdings or the Borrowerfail to deliver any Borrowing Base Certificate or related information that isrequired to be delivered by them pursuant to Section 5.01, during theperiod from the expiration of the time for delivery thereof until each suchBorrowing Base Certificate and related information pursuant to Section 5.01is so delivered; provided further that if any Borrowing Base Certificateis at any time restated or otherwise revised or if the information set forth inany Borrowing Base Certificate otherwise proves to be false or incorrect suchthat the Applicable Rate would have been higher than was otherwise in effectduring any period, without constituting a waiver of any Default or Event ofDefault arising as a result thereof, the Applicable Rate shall be immediatelyrecalculated at such higher rate for any applicable periods and shall be dueand payable on demand.

 

“Approved Fund” has the meaning assigned tosuch term in Section 9.04.

 

“Assignment and Assumption” means anassignment and assumption agreement entered into by a Lender and an assignee(with the consent of any party whose consent is required by Section 9.04),and accepted by the Administrative Agent, in the form of Exhibit Aor any other form approved by the Administrative Agent.

 

“Availability” means, at any time, an amountequal to (a) the lesser of (i) the Aggregate Commitment and (ii) theBorrowing Base minus (b) the Revolving Exposure of all Lenders.

 

“Availability Period” means the period from andincluding the Effective Date to but excluding the earlier of the Maturity Dateand the date of termination of the Commitments.

 

“Availability Trigger” shall be in effect at any time that the averageAvailability for the most recently ended calendar month is less than an amountequal to the greater of (i) 20% of the Aggregate Commitment at such timeand (ii) $10,000,000.

 

“Available Commitment” means, at any time, theAggregate Commitment then in effect minus the RevolvingExposure of all Lenders at such time; it being understood and agreed that anyLender’s Swingline Exposure shall not be deemed to be a component of theRevolving Exposure for purposes of calculating the commitment fee under Section 2.12(a).

 

“Average QuarterlyAvailability” means, for any fiscal quarter, an amount equal to the averagedaily Availability during such quarter.

 

“Banking Services” means each and any of thefollowing bank services provided to any Loan Party by any Lender or any of itsAffiliates: (a) credit cards for commercial customers (including, withoutlimitation, “commercial credit cards” and purchasing cards), (b) storedvalue cards and (c) treasury management services (including, withoutlimitation, controlled disbursement, automated clearinghouse transactions,return items, overdrafts and interstate depository network services).

 

“Banking Services Obligations” of the LoanParties means any and all obligations of the Loan Parties, whether absolute orcontingent and howsoever and whensoever created, arising, evidenced or acquired(including all renewals, extensions and modifications thereof and substitutionstherefor) in connection with Banking Services.

 

“Banking Services Reserves” means allReserves which the Administrative Agent from time to time establishes in itsPermitted Discretion for Banking Services then provided or outstanding.

 

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“Board” means the Board of Governors of the FederalReserve System of the United States of America.

 

“Borrower” means Ethan Allen Global, Inc., aDelaware corporation.

 

“Borrowing” means (a) Revolving Loans of the sameType, made, converted or continued on the same date and, in the case ofEurodollar Loans, as to which a single Interest Period is in effect, (b) aSwingline Loan, (c) a Protective Advance and (d) an Overadvance.

 

“Borrowing Base” means, at any time, the sumof (a) up to 90% of the Eligible Credit Card Receivables, plus (b) upto 85% of the Eligible Accounts at such time, plus (b) the lesserof (i) up to 70% of the Eligible Inventory, valued at the lower of cost ormarket value, determined on a first-in-first-out basis, at such time and (ii) theproduct of up to 85% multipliedby the Net Orderly LiquidationValue percentage identified in the most recent inventory appraisal ordered bythe Administrative Agent multipliedby the Eligible Inventory,valued at the lower of cost or market value, determined on a first-in-first-outbasis, at such time, minus (c) Reserves.  The Administrative Agent may, in itsPermitted Discretion, reduce the advance rates set forth above, adjust Reservesor reduce one or more of the other elements used in computing the BorrowingBase.

 

“Borrowing Base Certificate” means acertificate, signed and certified as accurate and complete by a FinancialOfficer of the Borrower, in substantially the form of Exhibit C oranother form which is acceptable to the Administrative Agent in its PermittedDiscretion.

 

“Borrowing Request” means a request by theBorrower for a Revolving Borrowing in accordance with Section 2.03.

 

“Burdensome Restrictions” means any consensual encumbrance or restriction ofthe type described in clause (a) or (b) of Section 6.10.

 

“Business Day” means any day that is not aSaturday, Sunday or other day on which commercial banks in New York City areauthorized or required by law to remain closed; provided that, when usedin connection with a Eurodollar Loan, the term “Business Day” shall alsoexclude any day on which banks are not open for dealings in dollar deposits inthe London interbank market.

 

“Capital Expenditures” means, without duplication,any expenditure or commitment to expend money for any purchase or otheracquisition of any asset which would be classified as a fixed or capital asseton a consolidated balance sheet of Holdings and its Subsidiaries prepared inaccordance with GAAP.

 

“Capital Lease Obligations” of any Personmeans the obligations of such Person to pay rent or other amounts under anylease of (or other arrangement conveying the right to use) real or personalproperty, or a combination thereof, which obligations are required to beclassified and accounted for as capital leases on a balance sheet of suchPerson under GAAP, and the amount of such obligations shall be the capitalizedamount thereof determined in accordance with GAAP.

 

“Change in Control” means (a) theacquisition of ownership, directly or indirectly, beneficially or of record, byany Person or group (within the meaning of the Securities Exchange Act of 1934and the rules of the Securities and Exchange Commission thereunder as ineffect on the date hereof), of Equity Interests representing more than 50% ofthe aggregate ordinary voting power represented by the issued and outstandingEquity Interests of Holdings; (b) occupation of a majority of the seats(other than vacant seats) on the board of directors of Holdings by Persons whowere neither (i) nominated by the 

 

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board of directors of the Borrower nor (ii) appointedby directors so nominated; or (c) the acquisition of direct or indirectControl of Holdings by any Person or group; (d) the occurrence of a changein control, or other similar provision, as defined in any agreement orinstrument evidencing any Material Indebtedness (triggering a default ormandatory prepayment, which default or mandatory prepayment has not been waivedin writing); or (e) Holdings shall cease to own, directly or (throughanother Loan Party) indirectly, 100% of the capital stock of the Borrower.

 

“Change in Law” means (a) the adoptionof any law, rule or regulation after the date of this Agreement, (b) anychange in any law, rule or regulation or in the interpretation orapplication thereof by any Governmental Authority after the date of thisAgreement or (c) compliance by any Lender or the Issuing Bank (or, forpurposes of Section 2.15(b), by any lending office of such Lender or bysuch Lender’s or the Issuing Bank’s holding company, if any) with any request,guideline or directive (whether or not having the force of law) of anyGovernmental Authority made or issued after the date of this Agreement.

 

“Chase” means JPMorgan Chase Bank, N.A., a nationalbanking association, in its individual capacity, and its successors.

 

“Class”, when used in reference to any Loan orBorrowing, refers to whether such Loan, or the Loans comprising such Borrowing,are Revolving Loans, Swingline Loans, Protective Advances or Overadvances.

 

“Code” means the Internal Revenue Code of 1986, asamended from time to time.

 

“Collateral” means any and all property owned, leased oroperated by any Loan Party, now existing or hereafter acquired, that may at anytime be or become subject to a security interest or Lien in favor of theAdministrative Agent, on behalf of itself and the Secured Parties, to securethe Secured Obligations; provided that “Collateral” shall notinclude any Excluded Assets.

 

“Collateral Access Agreement” has themeaning assigned to such term in the Security Agreement.

 

“Collateral Documents” means, collectively, theSecurity Agreement and any other documents granting a Lien upon property assecurity for payment of the Secured Obligations.

 

“Collection Account” has the meaning assigned tosuch term in the Security Agreement.

 

“Commercial LC Exposure” means, at any time, the sum of (a) theaggregate undrawn amount of all outstanding Commercial Letters of Credit atsuch time plus (b) the aggregate amount of all LC Disbursements relatingto Commercial Letters of Credit that have not yet been reimbursed by or onbehalf of the Borrower at such time.  TheCommercial LC Exposure of any Lender at any time shall be its Applicable Percentageof the total Commercial LC Exposure at such time.

 

“Commercial Letters of Credit” means all Letters of Creditother than standby Letters of Credit.

 

“Commitment” means, with respect to each Lender, thecommitment, if any, of such Lender to make Revolving Loans and to acquireparticipations in Letters of Credit, Protective Advances, Overadvances andSwingline Loans hereunder, expressed as an amount representing the maximumpossible aggregate amount of such Lender’s Revolving Exposure hereunder, assuch commitment may be reduced or increased from time to time pursuant to (a) Section 2.09and (b) assignments by or to such 

 

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Lender pursuant to Section 9.04.  The initial amount of each Lender’sCommitment is set forth on Schedule 2.01, or in the Assignment andAssumption or other documentation contemplated hereby pursuant to which suchLender shall have assumed its Commitment, as applicable.

 

“Control” means the possession, directly orindirectly, of the power to direct or cause the direction of the management orpolicies of a Person, whether through the ability to exercise voting power, bycontract or otherwise.  “Controlling”and “Controlled” have meanings correlative thereto.

 

“Controlled Disbursement Account” means anyaccounts of any Loan Party maintained with the Administrative Agent as a zerobalance, cash management account pursuant to and under any agreement betweenthe such Loan Party and the Administrative Agent, as modified and amended fromtime to time, and through which all disbursements of such Loan Party, any LoanParty and any designated Subsidiary of Holdings are made and settled on a dailybasis with no uninvested balance remaining overnight.

 

“Credit Card Account Receivables” means any receivables due toany Loan Party on a non-recourse basis (it being understood, for the avoidanceof doubt, that normal return policies of any Loan Party shall not be deemed tobe with recourse) in connection with purchases from and other goods andservices provided by such Loan Party from: Visa, MasterCard, American Expressand such other Credit Card Processor acceptable to the Administrative Agent inits Permitted Discretion, in each case which have been earned by performance bysuch Loan Party but not yet paid to such Loan Party by the Credit CardProcessor; provided, that Credit Card AccountReceivables shall be calculated net of fees and chargebacks owed to credit cardprocessors and deposits, holdbacks or escrows held by credit card processors.

 

“Credit Card Processor” means a Person that provides credit card processingservices for any merchant.

 

“Credit Exposure” means, as to any Lender atany time, the sum of (a) such Lender’s Revolving Exposure at such time, plus(b) an amount equal to its Applicable Percentage, if any, of the aggregateprincipal amount of Protective Advances outstanding at such time.

 

“Deemed Dividend Problem” means, with respect to anyForeign Subsidiary, such Foreign Subsidiary’s accumulated and undistributedearnings and profits being deemed to be repatriated to Holdings, the Borroweror the applicable parent Domestic Subsidiary under Section 956 of the Codeand the effect of such repatriation causing materially adverse tax consequencesto Holdings, the Borrower or such parent Domestic Subsidiary, in each case asdetermined by Holdings and the Borrower in their commercially reasonablejudgment acting in good faith and in consultation with their legal and taxadvisors.

 

“Default” means any event or condition whichconstitutes an Event of Default or which upon notice, lapse of time or bothwould, unless cured or waived, become an Event of Default.

 

“Defaulting Lender” means any Lender, asdetermined by the Administrative Agent, that has (a) failed to fund anyportion of its Loans or participations in Letters of Credit or Swingline Loanswithin three (3) Business Days of the date required to be funded by ithereunder, (b) notified the Borrower, the Administrative Agent, theIssuing Bank, the Swingline Lender or any Lender in writing that it does notintend to comply with any of its funding obligations under this Agreement orhas made a public statement to the effect that it does not intend to complywith its funding obligations under this Agreement or under other agreements inwhich it commits to extend credit, (c) failed, within three (3) BusinessDays after request by the Administrative Agent, to confirm that it will complywith the terms of 

 

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this Agreement relating to its obligations tofund prospective Loans and participations in then outstanding Letters of Creditand Swingline Loans, (d) otherwise failed to pay over to theAdministrative Agent or any other Lender any other amount required to be paidby it hereunder within three (3) Business Days of the date when due,unless the subject of a good faith dispute, or (e) (i) become or isinsolvent or has a parent company that has become or is insolvent or (ii) becomethe subject of a bankruptcy or insolvency proceeding, or has had a receiver,conservator, trustee, administrator, assignee for the benefit of creditors orsimilar Person charged with reorganization or liquidation of its business orcustodian appointed for it, or has taken any action in furtherance of, orindicating its consent to, approval of or acquiescence in any such proceedingor appointment or has a parent company that has become the subject of abankruptcy or insolvency proceeding, or has had a receiver, conservator,trustee, administrator, assignee for the benefit of creditors or similar Personcharged with reorganization or liquidation of its business or custodianappointed for it, or has taken any action in furtherance of, or indicating itsconsent to, approval of or acquiescence in any such proceeding or appointment.

 

“Disclosed Matters” means the actions, suitsand proceedings and the environmental matters disclosed in Schedule 3.06.

 

“Document” has the meaning assigned to such term in theSecurity Agreement.

 

“Documentation Agent” means Capital One LeverageFinance Corp. in its capacity as documentation agent for the credit facilityevidenced by this Agreement.

 

“dollars” or “$”refers to lawful money of the United States of America.

 

“Domestic Subsidiary” means a Subsidiaryorganized under the laws of a jurisdiction located in the United States ofAmerica.

 

“EBITDA” means, for any period, Net Income for suchperiod, before giving effect to any extraordinary gains or losses or any gainsor losses resulting from sales of assets (other than sales of inventory in theordinary course of business), plus, to theextent deducted in computing such Net Income, the sum of (a) income taxexpense (whether paid or deferred), (b) Interest Expense, (c) depreciationand amortization and (d) any non-cash charges resulting from anyrestructuring or consolidation of operations or any grant, exercise orcancellation of stock options or warrants.

 

“Effective Date” means the date on which theconditions specified in Section 4.01 are satisfied (or waived inaccordance with Section 9.02).

 

“Eligible Accounts” means, at any time, theAccounts of any Loan Party which the Administrative Agent determines in itsPermitted Discretion are eligible as the basis for the extension of RevolvingLoans, Swingline Loans and the issuance of Letters of Credit hereunder.  Without limiting the Administrative Agent’sdiscretion provided herein, Eligible Accounts shall not include any Account:

 

(a)           which is not subject to a firstpriority perfected security interest in favor of the Administrative Agent;

 

(b)           which is subject to any Lien otherthan (i) a Lien in favor of the Administrative Agent and (ii) aPermitted Encumbrance which does not have priority over the Lien in favor ofthe Administrative Agent;

 

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(c)           which (i) is unpaid more than 90days after the date of the original invoice therefor or more than 60 days afterthe original due date, or (ii) has been written off the books of such LoanParty or otherwise designated as uncollectible;

 

(d)           which is owing by an Account Debtorfor which more than 50% of the Accounts owing from such Account Debtor and itsAffiliates are ineligible hereunder;

 

(e)           which is owing by an Account Debtorto the extent the aggregate amount of Accounts owing from such Account Debtorand its Affiliates to such Loan Party exceeds 10% of the aggregate amount ofEligible Accounts;

 

(f)            with respect to which any covenant,representation, or warranty contained in this Agreement or in the SecurityAgreement has been breached or is not true in any material respect;

 

(g)           which (i) does not arise fromthe sale of goods or performance of services in the ordinary course ofbusiness, (ii) is not evidenced by an invoice or other documentation theform of which is satisfactory to the Administrative Agent in its PermittedDiscretion and which has been sent to the Account Debtor, (iii) representsa progress billing, (iv) is contingent upon such Loan Party’s completionof any further performance, (v) represents a sale on a bill-and-hold,guaranteed sale, sale-and-return, sale on approval, consignment, cash-on-deliveryor any other repurchase or return basis (other than, for the avoidance ofdoubt, normal wholesale customer return policies in respect of warranty claims)or (vi) relates to payments of interest;

 

(h)           for which the goods giving rise tosuch Account have not been shipped to the Account Debtor or for which theservices giving rise to such Account have not been performed by such Loan Partyor if such Account was invoiced more than once;

 

(i)            with respect to which any check orother instrument of payment has been returned uncollected for any reason;

 

(j)            which is owed by an Account Debtorwhich has (i) applied for, suffered, or consented to the appointment ofany receiver, custodian, trustee, or liquidator of its assets, (ii) hashad possession of all or a material part of its property taken by any receiver,custodian, trustee or liquidator, (iii) filed, or had filed against it,any request or petition for liquidation, reorganization, arrangement,adjustment of debts, adjudication as bankrupt, winding-up, or voluntary orinvoluntary case under any state or federal bankruptcy laws, (iv) hasadmitted in writing its inability, or is generally unable to, pay its debts asthey become due, (v) become insolvent, or (vi) ceased operation ofits business;

 

(k)           which is owed by any Account Debtorwhich has sold all or a substantially all of its assets unless the Account hasbeen assumed by a party of at least equal creditworthiness in theAdministrative Agent’s Permitted Discretion;

 

(l)            which is owed by an Account Debtorwhich (i) does not maintain its chief executive office in the U.S. orCanada or (ii) is not organized under applicable law of the U.S., anystate of the U.S., Canada, or any province of Canada unless, in either case,such Account is backed by (A) a letter of credit acceptable to theAdministrative Agent which is in the possession of, has been assigned to and isdirectly drawable by the Administrative Agent or (B) security equivalentto such a letter of credit and reasonably acceptable to the AdministrativeAgent;

 

(m)          which is owed in any currency otherthan U.S. dollars;

 

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(n)           which is owed by (i) thegovernment (or any department, agency, public corporation, or instrumentalitythereof) of any country other than the U.S. unless such Account is backed by aLetter of Credit acceptable to the Administrative Agent in its PermittedDiscretion and which is in the possession of the Administrative Agent, or (ii) thegovernment of the U.S., or any department, agency, public corporation, orinstrumentality thereof, unless the Federal Assignment of Claims Act of 1940,as amended (31 U.S.C. § 3727 et seq. and 41 U.S.C. § 15 et seq.), and any othersteps necessary to perfect the Lien of the Administrative Agent in such Accounthave been complied with to the Administrative Agent’s satisfaction;

 

(o)           which is owed by any Affiliate,employee, officer, director, agent or stockholder of any Loan Party (to theextent such stockholder owns or controls 5% or more of the Equity Interests ina Loan Party);

 

(p)           which, for any Account Debtor,exceeds a credit limit determined by the Administrative Agent, to the extent ofsuch excess;

 

(q)           which is owed by an Account Debtor orany Affiliate of such Account Debtor to which any Loan Party is indebted, butonly to the extent of such indebtedness or is subject to any security, deposit,progress payment, retainage or other similar advance made by or for the benefitof an Account Debtor, in each case to the extent thereof;

 

(r)            which is subject to any counterclaim(to the extent asserted), deduction, defense, setoff or dispute, but only tothe extent of such counterclaim, deduction, defense, setoff or dispute;

 

(s)           which is evidenced by any promissorynote, chattel paper, or instrument;

 

(t)            which is owed by an Account Debtorlocated in any jurisdiction which requires filing of a “Notice of Business ActivitiesReport” or other similar report in order to permit the applicableLoan Party to seek judicial enforcement in such jurisdiction of payment of suchAccount, unless such Loan Party has filed such report or qualified to dobusiness in such jurisdiction;

 

(u)           with respect to which such Loan Partyhas made any agreement with the Account Debtor for any reduction thereof, otherthan discounts and adjustments given in the ordinary course of business, or anyAccount which was partially paid and such Loan Party created a new receivablefor the unpaid portion of such Account;

 

(v)           which does not comply in all materialrespects with the requirements of all applicable laws and regulations, whetherFederal, state or local, including without limitation the Federal ConsumerCredit Protection Act, the Federal Truth in Lending Act and Regulation Z of theBoard;

 

(w)          which is for goods that have been soldunder a purchase order or pursuant to the terms of a contract or otheragreement or understanding (written or oral) that indicates or purports thatany Person other than such Loan Party has or has had an ownership interest insuch goods, or which indicates any party other than such Loan Party as payee orremittance party;

 

(x)            which was created on cash ondelivery terms;

 

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(y)           which is subject to any limitation onassignments or other security interests (whether arising by operation of law,by agreement or otherwise), unless the Administrative Agent has determined thatsuch limitation is not enforceable;

 

(z)            which is governed by the laws of anyjurisdiction other than the United States, any State thereof or the District ofColumbia;

 

(aa)         in respect of which the Account Debtoris a consumer within applicable consumer protection litigation; or

 

(bb)         which the Administrative Agentdetermines in its Permitted Discretion may not be paid by reason of the AccountDebtor’s inability to pay or which the Administrative Agent otherwisedetermines in its Permitted Discretion is unacceptable.

 

In the event that an Accountwhich was previously an Eligible Account (in an amount of at least $5,000,000)ceases to be an Eligible Account hereunder by virtue of the foregoing clauses(j), (k) or (l), the Borrower shall notify the Administrative Agentthereof on and at the time of submission to the Administrative Agent of thenext Borrowing Base Certificate.  Indetermining the amount of an Eligible Account, the face amount of an Accountmay, in the Administrative Agent’s Permitted Discretion, be reduced by, withoutduplication, to the extent not reflected in such face amount, (i) theamount of all accrued and actual discounts, claims, credits or credits pending,promotional program allowances, price adjustments, finance charges or otherallowances (including any amount that the applicable Loan Party may beobligated to rebate to an Account Debtor pursuant to the terms of any agreementor understanding (written or oral)) and (ii) the aggregate amount of allcash received in respect of such Account but not yet applied by the applicableLoan Party to reduce the amount of such Account.  For the avoidance of doubt, no Credit Card AccountReceivable shall constitute an Eligible Account under this Agreement.

 

“Eligible Credit Card Account Receivables” means any Credit CardAccount Receivable that (i) has been earned and represents the bona fideamounts due to a Loan Party from a Credit Card Processor, and in each caseoriginated in the ordinary course of business of the applicable Loan Party and (ii) isnot excluded as an Eligible Credit Card Receivable pursuant to any of clauses (a) through(l) below.  Without limiting theforegoing, to qualify as an Eligible Credit Card Account Receivable, a CreditCard Account Receivable shall indicate no person other than a Loan Party aspayee or remittance party. Eligible Credit Card Account Receivable shall notinclude any Credit Card Account Receivable if:

 

(a)           such Credit Card Account Receivable is not owned by a LoanParty and such Loan Party does not have good or marketable title to such CreditCard Account Receivable;

 

(b)           such Credit Card Account Receivable does not constitute an“Account” (as defined in the UCC) or such Credit Card Account Receivable hasbeen outstanding more than five (5) Business Days;

 

(c)           the Credit Card Processor of the applicable credit cardwith respect to such Credit Card Account Receivable is the subject of any bankruptcyor insolvency proceedings;

 

(d)           such Credit Card Account Receivable is not a valid,legally enforceable obligation of the applicable credit card issuer withrespect thereto;

 

(e)           such Credit Card Account Receivable is not subject to aproperly perfected security interest in favor of the Administrative Agent, oris subject to any Lien whatsoever other than Permitted Encumbrancescontemplated by the processor agreements and for which 

 

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appropriate reserves (as determined by the AdministrativeAgent in its Permitted Discretion) have been established or maintained by theLoan Parties;

 

(f)            such Credit Card Account Receivable does not conform inall material respects to all representations, warranties or other provisions inthe Loan Documents or in the credit card agreements relating to such CreditCard Account Receivable;

 

(g)           such Credit Card Account Receivable is subject to risk ofset-off, non-collection or not being processed due to unpaid or overdue CreditCard Processor fee balances;

 

(h)           such Credit Card Account Receivable is evidenced by “chattelpaper” or an “instrument” of any kind unless such “chattel paper” or “instrument”is in the possession of the Administrative Agent, and to the extent necessaryor appropriate, endorsed to the Administrative Agent;

 

(i)            such Credit Card Account Receivable has been disputed, orwith respect to which a claim, counterclaim, offset or chargeback has beenasserted, by the related Credit Card Processor;

 

(j)            such Credit Card Account Receivable is due from a CreditCard Processor which the Administrative Agent determines in its PermittedDiscretion to be unlikely to be collected;

 

(k)           other than for the ninety (90) days immediately followingthe Effective Date, such Credit Card Account Receivable is due from a CreditCard Processor with respect to which a Processor Control Agreement has not beenobtained; or

 

(l)            such Credit Card Account Receivable does not meet suchother usual and customary eligibility criteria for Credit Card AccountReceivables as the Administrative Agent may determine from time to time in itsPermitted Discretion.

 

In determining the amount to be soincluded in the calculation of the value of an Eligible Credit Card Receivable,the face amount thereof shall be reduced by, without duplication, to the extentnot reflected in such face amount, (i) the amount of all customary feesand expenses in connection with any credit card arrangements and (ii) theaggregate amount of all cash received in respect thereof but not yet applied bythe applicable Loan Party to reduce the amount of such Eligible Credit CardAccount Receivable.

 

“Eligible Inventory” means, at any time, theInventory of a Loan Party which the Administrative Agent determines in itsPermitted Discretion is eligible as the basis for the extension of RevolvingLoans, Swingline Loans and the issuance of Letters of Credit hereunder.  Without limiting the Administrative Agent’sdiscretion permitted herein, Eligible Inventory shall not include any Inventory:

 

(a)           which is not subject to a firstpriority perfected Lien in favor of the Administrative Agent;

 

(b)           which is subject to any Lien otherthan (i) a Lien in favor of the Administrative Agent and (ii) aPermitted Encumbrance which does not have priority over the Lien in favor ofthe Administrative Agent;

 

(c)           which is, in the determination of theBorrower in its ordinary course of business with the approval of theAdministrative Agent in its Permitted Discretion, unmerchantable, 

 

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defective, used, unfit for sale, not salable at pricesapproximating at least the cost of such Inventory in the ordinary course ofbusiness or unacceptable due to age, type, category and/or quantity;

 

(d)           with respect to which any covenant,representation, or warranty contained in this Agreement or the SecurityAgreement has been breached or is not true in any material respect and whichdoes not conform in all material respects to all standards imposed by anyGovernmental Authority;

 

(e)           in which any Person other than a LoanParty shall (i) have any direct or indirect ownership, interest or titleto such Inventory or (ii) be indicated on any purchase order or invoicewith respect to such Inventory as having or purporting to have an interesttherein;

 

(f)            which constitutes work-in-process,spare or replacement parts, subassemblies, packaging and shipping material,manufacturing supplies, samples, prototypes, displays or display items (exceptto the extent saleable as finished goods in the ordinary course of business),bill-and-hold goods, goods that are returned or marked for return, repossessedgoods, defective or damaged goods, goods held on consignment, or goods whichare not of a type held for sale in the ordinary course of business;

 

(g)           which is not located in the U.S. oris in transit with a common carrier from vendors and suppliers located outsideof the U.S.; provided that Inventory in transit from vendors andsuppliers having a value (based on invoiced amounts) not exceeding $7,000,000in the aggregate at any time shall not be excluded from “Eligible Inventory”pursuant to this clause (g) so long as (i) such Inventory hasbeen paid for in full by the applicable Loan Party, (ii) theAdministrative Agent shall have received evidence that such Inventory iscovered by casualty insurance and the Administrative Agent shall have beennamed as loss payee with respect to such casualty insurance, and (iii) otherthan for the sixty (60) days following the Effective Date, theAdministrative Agent shall have received, to the extent requested by theAdministrative Agent in its Permitted Discretion, a duly executedCollateral Access Agreement from the applicable Loan Party’s customs brokerwith respect to such Inventory;

 

(h)           other than for the sixty (60)days immediately following the Effective Date, which is locatedin a warehouse, distribution center, regional distribution center or depotlocated in any location leased by the applicable Loan Party unless (i) thelessor has delivered to the Administrative Agent a Collateral Access Agreementor (ii) a Reserve for rent, charges, and other amounts due or to becomedue with respect to such facility has been established by the AdministrativeAgent in its Permitted Discretion;

 

(i)            which is located in a store or otherretail location located in any location leased by the applicable Loan Party inany Landlord Lien State unless (i) the lessor has delivered to theAdministrative Agent a Collateral Access Agreement, (ii) a Rent Reservehas been established by the Administrative Agent in its Permitted Discretion or(iii) the landlord has waived any applicable lien pursuant todocumentation satisfactory to the Administrative Agent in its PermittedDiscretion;

 

(j)            other than for the sixty (60)days immediately following the Effective Date, which is locatedin any third party warehouse or is in the possession of a bailee (other than athird party processor) and is not evidenced by a Document, unless (i) suchwarehouseman or bailee has delivered to the Administrative Agent a CollateralAccess Agreement and such other 

 

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documentation as theAdministrative Agent may require in its Permitted Discretion or (ii) aRent Reserve has been established by the Administrative Agent in its PermittedDiscretion;

 

(k)           which is being processed offsite at athird party location or outside processor, or is in-transit to or from saidthird party location or outside processor;

 

(l)            which is a discontinued product orcomponent thereof;

 

(m)          which is the subject of a consignmentby the applicable Loan Party as consignor;

 

(n)           which contains or bears anyintellectual property rights licensed to the applicable Loan Party unless theAdministrative Agent is satisfied in its Permitted Discretion that it may sellor otherwise dispose of such Inventory without (i) the consent of eachapplicable licensor, (ii) infringing the rights of such licensor, (iii) violatingany contract with such licensor, or (iv) incurring any liability withrespect to payment of royalties other than royalties incurred pursuant to saleof such Inventory under the current licensing agreement;

 

(o)           which is not reflected in a currentperpetual inventory report of the applicable Loan Party;

 

(p)           for which reclamation rights havebeen asserted by the seller; or

 

(q)           which the Administrative Agentotherwise determines is unacceptable in its Permitted Discretion.

 

“Environmental Laws” means all laws, rules,regulations, codes, ordinances, orders, decrees, judgments, injunctions,notices or binding agreements issued, promulgated or entered into by anyGovernmental Authority, relating in any way to the environment, preservation orreclamation of natural resources, the management, release or threatened releaseof any Hazardous Material or to health and safety matters.

 

“Environmental Liability” means any liability,contingent or otherwise (including any liability for damages, costs ofenvironmental investigation or remediation, injunctive or equitable relief,fines, penalties or indemnities), of Holdings or any Subsidiary directly orindirectly resulting from or based upon (a) a violation or allegedviolation of any Environmental Law, (b) the generation, use, handling,transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposureto any Hazardous Materials, (d) the Release, presence or threatenedRelease of any Hazardous Materials into the environment or within any facility,building or fixture or (e) any contract, agreement or other consensual arrangementpursuant to which liability is assumed or imposed with respect to any of theforegoing.

 

“Equity Interests” means shares of capitalstock, partnership interests, membership interests in a limited liabilitycompany, beneficial interests in a trust or other equity ownership interests ina Person, and any warrants, options or other rights entitling the holderthereof to purchase or acquire any such equity interest.

 

“ERISA” means the Employee Retirement IncomeSecurity Act of 1974, as amended from time to time.

 

“ERISA Affiliate” means any trade or business(whether or not incorporated) that, together with the Borrower, is treated as asingle employer under Section 414(b) or (c) of the Code or,

 

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solelyfor purposes of Section 302 of ERISA and Section 412 of the Code, istreated as a single employer under Section 414 of the Code.

 

“ERISA Event” means (a) any “reportable event”,as defined in Section 4043 of ERISA or the regulations issued thereunderwith respect to a Plan (other than an event for which the 30 day notice periodis waived); (b) the existence with respect to any Plan of an “accumulatedfunding deficiency” (as defined in Section 412 of the Code or Section 302of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) ofthe Code or Section 303(d) of ERISA of an application for a waiver ofthe minimum funding standard with respect to any Plan; (d) the incurrenceby the Borrower or any of its ERISA Affiliates of any liability under Title IVof ERISA with respect to the termination of any Plan; (e) the receipt bythe Borrower or any ERISA Affiliate from the PBGC or a plan administrator ofany notice relating to an intention to terminate any Plan or Plans or toappoint a trustee to administer any Plan; (f) the incurrence by theBorrower or any of its ERISA Affiliates of any liability with respect to thewithdrawal or partial withdrawal of the Borrower or any of its ERISA Affiliatesfrom any Plan or Multiemployer Plan; or (g) the receipt by the Borrower orany ERISA Affiliate of any notice, or the receipt by any Multiemployer Planfrom the Borrower or any ERISA Affiliate of any notice, concerning theimposition upon the Borrower or any of its ERISA Affiliates of Withdrawal Liabilityor a determination that a Multiemployer Plan is, or is expected to be,insolvent or in reorganization, within the meaning of Title IV of ERISA.

 

“Eurodollar”, when used in reference to any Loan orBorrowing, means that such Loan, or the Loans comprising such Borrowing, bearsinterest at a rate determined by reference to the Adjusted LIBO Rate.

 

“Event of Default” has the meaning assigned tosuch term in Article VII.

 

“Excluded Assets” means (i) any “PrincipalProperty” as defined in  the Indenturedated as of September 27, 2005 by and among  Holdings and certain Subsidiaries and U.S.Bank National Association as in effect on the Effective Date and without givingeffect to any amendments or modifications thereto after the Effective Date, (ii) anyReal Property owned by Holdings or any Subsidiary and (iii) only to theextent that the IP Collateral Trigger Date has not occurred, intellectualproperty owned by Holdings or any Subsidiary.

 

“ExcludedSubsidiary” means, at any time, any Subsidiary of the Borroweridentified on Schedule 3.15 as an “Excluded Subsidiary” and that has not ceasedto be an “Excluded Subsidiary” as provided below; providedthat such Subsidiary does not own assets or properties that, together with theassets and properties owned by all other Subsidiaries that are treated as “ExcludedSubsidiaries”, have a book value, in the aggregate, in excess of $10,000,000, (b) didnot, during the period of four consecutive fiscal quarters of the Borrowerended on the most recent date for which quarterly or annual financialstatements of Holdings are available, have revenues that, together with therevenues of all other Subsidiaries that are treated as “Excluded Subsidiaries”,accounted for more than 5% of the consolidated revenues of the Borrower and itsSubsidiaries during such period, and (c) does not have any Indebtedness orany other material liabilities.  At anytime the Borrower may, and shall if one or more Excluded Subsidiaries fail tosatisfy one or more of the conditions described in clauses (a) through (c) above,notify the Administrative Agent that one or more Excluded Subsidiaries shallcease to constitute an “Excluded Subsidiary”, whereupon such Subsidiary orSubsidiaries shall cease to constitute an “Excluded Subsidiary” for allpurposes hereof.  The Borrower may notdesignate any Subsidiary that is not an Excluded Subsidiary as an ExcludedSubsidiary.

 

“Excluded Taxes” means, with respect to theAdministrative Agent, any Lender, the Issuing Bank or any other recipient ofany payment to be made by or on account of any obligation of the 

 

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Borrower hereunder, (a) income orfranchise taxes imposed on (or measured by) its net income by the United Statesof America, or by the jurisdiction under the laws of which such recipient isorganized or in which its principal office is located or, in the case of anyLender, in which its applicable lending office is located, (b) any branchprofits taxes imposed by the United States of America or any similar taximposed by any other jurisdiction in which the Borrower is located and (c) inthe case of a Foreign Lender (other than an assignee pursuant to a request bythe Borrower under Section 2.19(b)), any withholding tax that is imposedon amounts payable to such Foreign Lender at the time such Foreign Lenderbecomes a party to this Agreement (or designates a new lending office) or isattributable to such Foreign Lender’s failure to comply with Section 2.17(f),except to the extent that such Foreign Lender (or its assignor, if any) wasentitled, at the time of designation of a new lending office (or assignment),to receive additional amounts from the Borrower with respect to suchwithholding tax pursuant to Section 2.17(a).

 

“Existing Credit Agreement” means the Credit Agreement,dated as of July 21, 2005, by and among the Borrower, Holdings, thelenders party thereto from time to time and JPMorgan Chase Bank, N.A., asadministrative agent thereunder, as amended, restated, supplemented orotherwise modified prior to the date hereof.

 

“Existing Letters of Credit” is defined in Section 2.06(a).

 

“Federal Funds Effective Rate” means, for anyday, the weighted average (rounded upwards, if necessary, to the next 1/100 of1%) of the rates on overnight Federal funds transactions with members of theFederal Reserve System arranged by Federal funds brokers, as published on thenext succeeding Business Day by the Federal Reserve Bank of New York, or, ifsuch rate is not so published for any day that is a Business Day, the average(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations forsuch day for such transactions received by the Administrative Agent from threeFederal funds brokers of recognized standing selected by it.

 

“Financial Officer” means the chief financialofficer, principal accounting officer, treasurer or controller of the Borroweror the assistant treasurer or controller for purposes of giving notices.

 

“First Tier Foreign Subsidiary” means eachForeign Subsidiary with respect to which any one or more of the Loan Partiesdirectly owns or Controls more than 50% of such Foreign Subsidiary’s issued andoutstanding Equity Interests.

 

“Fixed Charges” means, with reference toany period, without duplication, cash Interest Expense, plus cashRentals, plus prepayments and scheduled principal payments on Indebtedness madeduring such period, plus expense for taxes paid in cash, plusdividends or distributions paid in cash, plus Capital Lease Obligationpayments, plus cash contributions to any Plan, all calculated forHoldings and its Subsidiaries on a consolidated basis.

 

“Fixed Charge Coverage Ratio” means, for anyperiod, the ratio of (a) EBITDA minus the unfinanced portion of CapitalExpenditures to (b) Fixed Charges, all calculated for the Borrower and itsSubsidiaries on a consolidated basis in accordance with GAAP for such period.

 

“Foreign Lender” means any Lender that isorganized under the laws of a jurisdiction other than that in which theBorrower is located.  For purposes ofthis definition, the United States of America, each State thereof and theDistrict of Columbia shall be deemed to constitute a single jurisdiction.

 

“Foreign Subsidiary” means any Subsidiary whichis not a Domestic Subsidiary.

 

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“Funding Account” has the meaning assigned tosuch term in Section 4.01(h).

 

“GAAP” means generally accepted accountingprinciples in the United States of America.

 

“Governmental Authority” means the government of theUnited States of America, any other nation or any political subdivisionthereof, whether state or local, and any agency, authority, instrumentality,regulatory body, court, central bank or other entity exercising executive,legislative, judicial, taxing, regulatory or administrative powers or functionsof or pertaining to government.

 

“Guarantee” of or by any Person (the “guarantor”)means any obligation, contingent or otherwise, of the guarantor guaranteeing orhaving the economic effect of guaranteeing (x) any Indebtedness of anyother Person (the “primary obligor”) in any manner, whether directly orindirectly, and  (y) any obligationof the guarantor, direct or indirect, (a) to purchase or pay (or advanceor supply funds for the purchase or payment of) Indebtedness  of the primary obligor or to purchase (or toadvance or supply funds for the purchase of) any security for the paymentthereof, (b) to purchase or lease property, securities or services for thepurpose of assuring the owner of  anyIndebtedness of the primary obligor of the payment thereof, (c) tomaintain working capital, equity capital or any other financial statementcondition or liquidity of the primary obligor so as to enable the primaryobligor to pay Indebtedness  of theprimary obligor or (d) as an account party in respect of any letter ofcredit or letter of guaranty issued to support Indebtedness; provided,that the term Guarantee shall not include endorsements for collection ordeposit in the ordinary course of business.

 

“Guaranteed Obligations” has the meaning assigned tosuch term in Section 10.01.

 

“Hazardous Materials”  means all explosive or radioactive substancesor wastes and all hazardous or toxic substances, wastes or other pollutants,including petroleum or petroleum distillates, asbestos or asbestos containingmaterials, polychlorinated biphenyls, radon gas, infectious or medical wastesand all other substances or wastes of any nature regulated pursuant to anyEnvironmental Law.

 

“Holdings” means Ethan Allen Interiors Inc., a Delawarecorporation.

 

“Indebtedness” of any Person means,without duplication, (a) all obligations of such Person for borrowed moneyor with respect to deposits or advances of any kind, (b) all obligationsof such Person evidenced by bonds, debentures, notes or similar instruments, (c) allobligations of such Person upon which interest charges are customarily paid(other than accounts payable incurred in the ordinary course of business), (d) allobligations of such Person under conditional sale or other title retentionagreements relating to property acquired by such Person, (e) allobligations of such Person in respect of the deferred purchase price ofproperty or services (excluding current accounts payable incurred in theordinary course of business), (f) all Indebtedness of others secured by(or for which the holder of such Indebtedness has an existing right, contingentor otherwise, to be secured by) any Lien on property owned or acquired by suchPerson, whether or not the Indebtedness secured thereby has been assumed, (g) allGuarantees by such Person of Indebtedness of others, (h) all Capital LeaseObligations of such Person, (i) all obligations, contingent or otherwise,of such Person as an account party in respect of letters of credit and lettersof guaranty, (j) all obligations, contingent or otherwise, of such Personin respect of bankers’ acceptances, (k) obligations under any liquidatedearn-out and (l) any other Off-Balance Sheet Liability.  The Indebtedness of any Person shall includethe Indebtedness of any other entity (including any partnership in which suchPerson is a general partner) to the extent such Person is liable therefor as aresult of such Person’s ownership interest in or other relationship with suchentity, except to the extent the terms of such Indebtedness provide that suchPerson is not liable therefor.

 

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“Indemnified Taxes” means Taxes other thanExcluded Taxes.

 

“Information Memorandum” means the ConfidentialInformation Memorandum dated April 2009 relating to the Borrower and theTransactions.

 

“Interest Election Request” means arequest by the Borrower to convert or continue a Revolving Borrowing inaccordance with Section 2.08.

 

“Interest Expense” means, with reference toany period, total interest expense (including, but without duplication, thatattributable to Capital Lease Obligations) of the Borrower and its Subsidiariesfor such period with respect to all outstanding Indebtedness of the Borrowerand its Subsidiaries (including all commissions, discounts and other fees andcharges owed with respect to letters of credit and bankers’ acceptancefinancing and net costs under Swap Agreements in respect of interest rates tothe extent such net costs are allocable to such period in accordance with GAAP),calculated on a consolidated basis for the Borrower and its Subsidiaries forsuch period in accordance with GAAP.

 

“Interest Payment Date” means (a) with respectto any ABR Loan (other than a Swingline Loan), the first day of each calendarquarter and the Maturity Date, and (b) with respect to any EurodollarLoan, the last day of the Interest Period applicable to the Borrowing of whichsuch Loan is a part and, in the case of a Eurodollar Borrowing with an InterestPeriod of more than three months’ duration, each day prior to the last day ofsuch Interest Period that occurs at intervals of three months’ duration afterthe first day of such Interest Period and the Maturity Date.

 

“Interest Period” means with respect to anyEurodollar Borrowing, the period commencing on the date of such Borrowing andending on the numerically corresponding day in the calendar month that is one,two, three or six (or, with the consent of each Lender, nine or twelve) monthsthereafter, as the Borrower may elect; provided, that (i) if anyInterest Period would end on a day other than a Business Day, such InterestPeriod shall be extended to the next succeeding Business Day unless, in thecase of a Eurodollar Borrowing only, such next succeeding Business Day wouldfall in the next calendar month, in which case such Interest Period shall endon the next preceding Business Day and (ii) any Interest Period pertainingto a Eurodollar Borrowing that commences on the last Business Day of a calendarmonth (or on a day for which there is no numerically corresponding day in thelast calendar month of such Interest Period) shall end on the last Business Dayof the last calendar month of such Interest Period.  For purposes hereof, the date of a Borrowinginitially shall be the date on which such Borrowing is made and, in the case ofa Revolving Borrowing, thereafter shall be the effective date of the mostrecent conversion or continuation of such Borrowing.

 

“Inventory” has the meaning assigned to such term in theSecurity Agreement.

 

“IP Collateral Trigger Date” means the earliest dateafter the Effective Date on which Availability is less than $17,500,000 and theAdministrative Agent has notified the Borrower in writing of such date.

 

“Issuing Bank” means Chase, in itscapacity as the issuer of Letters of Credit hereunder, and its successors insuch capacity as provided in Section 2.06(i).  The Issuing Bank may, in its discretion,arrange for one or more Letters of Credit to be issued by Affiliates of theIssuing Bank, in which case the term “Issuing Bank” shall include anysuch Affiliate with respect to Letters of Credit issued by such Affiliate.

 

“Joinder Agreement” has the meaning assigned tosuch term in Section 5.11.

 

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“Landlord Lien State” means any jurisdiction the laws of which providefor the liens in favor of the landlords of such jurisdiction to have priorityover the liens of the Administrative Agent on Inventory; provided that if the laws of any such jurisdiction are changedafter the Effective Date so as to provide for the liens in favor of theAdministrative Agent on Inventory to have priority over the liens in favor ofthe landlords of such jurisdiction, then such jurisdiction shall no longer be a“Landlord Lien State” as such term is used herein.

 

“LC Collateral Account” has the meaning assigned tosuch term in Section 2.06(j).

 

“LC Disbursement” means a payment made by theIssuing Bank pursuant to a Letter of Credit.

 

“LC Exposure” means, at any time, the sum of Commercial LCExposure and Standby LC Exposure.  The LCExposure of any Lender at any time shall be its Applicable Percentage of thetotal LC Exposure at such time.

 

“Lenders” means the Persons listed on Schedule 2.01and any other Person that shall have become a party hereto pursuant to anAssignment and Assumption, other than any such Person that ceases to be a partyhereto pursuant to an Assignment and Assumption.  Unless the context otherwise requires, theterm “Lenders” includes the Swingline Lender.

 

“Letter of Credit” means any letter of creditissued pursuant to this Agreement.

 

“LIBO Rate” means, with respect to any EurodollarBorrowing for any Interest Period, the rate appearing on Reuters Screen LIBOR01Page (or on any successor or substitute page of such service, or anysuccessor to or substitute for such service, providing rate quotationscomparable to those currently provided on such page of such service, asdetermined by the Administrative Agent from time to time for purposes ofproviding quotations of interest rates applicable to dollar deposits in theLondon interbank market) at approximately 11:00 a.m., London time, two (2) BusinessDays prior to the commencement of such Interest Period, as the rate for dollardeposits with a maturity comparable to such Interest Period.  In the event that such rate is not availableat such time for any reason, then the “LIBO Rate” with respect to suchEurodollar Borrowing for such Interest Period shall be the rate at which dollardeposits of $5,000,000 and for a maturity comparable to such Interest Periodare offered by the principal London office of the Administrative Agent inimmediately available funds in the London interbank market at approximately11:00 a.m., London time, two (2) Business Days prior to thecommencement of such Interest Period.

 

“Lien” means, with respect to any asset, (a) anymortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge orsecurity interest in, on or of such asset, (b) the interest of a vendor ora lessor under any conditional sale agreement, capital lease or title retentionagreement (or any financing lease having substantially the same economic effectas any of the foregoing) relating to such asset and (c) in the case ofsecurities, any purchase option, call or similar right of a third party withrespect to such securities.

 

“Loan Documents” means this Agreement, anypromissory notes issued pursuant to Section 2.10(f) of thisAgreement, any Letter of Credit applications, the Collateral Documents and allother agreements, instruments, documents and certificates identified in Section 4.01executed and delivered to, or in favor of, the Administrative Agent, anyLenders or any Secured Parties and including all other pledges, powers ofattorney, consents, assignments, contracts, notices, letter of creditagreements and all other written matter whether heretofore, now or hereafterexecuted by or on behalf of any Loan Party, or any employee of any Loan Party,and delivered to the Administrative Agent, any Lender or any 

 

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Secured Party in connection with thisAgreement or the transactions contemplated thereby.  Any reference in this Agreement or any otherLoan Document to a Loan Document shall include all appendices, exhibits orschedules thereto, and all amendments, restatements, supplements or othermodifications thereto, and shall refer to the Agreement or such Loan Documentas the same may be in effect at any and all times such reference becomesoperative.

 

“Loan Guarantor” means each Loan Party(other than the Borrower).

 

“Loan Guaranty” means Article Xof this Agreement.

 

“Loan Parties” means Holdings, theBorrower, the Borrower’s Material Domestic Subsidiaries and any other Personwho becomes a party to this Agreement pursuant to a Joinder Agreement and theirsuccessors and assigns.

 

“Loans” means the loans and advances made by theLenders pursuant to this Agreement, including Swingline Loans, Overadvances andProtective Advances.

 

“Material Adverse Effect” means a material adverseeffect on (a) the business, assets, operations, condition (financial orotherwise) or prospects of Holdings, or the Borrower, or the Borrower and theSubsidiaries taken as a whole, (b) the ability of any Loan Party toperform any of its obligations under the Loan Documents to which it is a party,(c) the Collateral, or the Administrative Agent’s Liens (on behalf ofitself and the Secured Parties) on the Collateral or the priority of suchLiens, or (d) the rights of or benefits available to the AdministrativeAgent, the Issuing Bank, the Lenders or the Secured Parties thereunder.

 

“Material Domestic Subsidiaries” means eachDomestic Subsidiary which, as of the most recent fiscal quarter of Holdings,for the period of four consecutive fiscal quarters then ended, for whichfinancial statements have been delivered pursuant to Section 5.01,contributed greater than ten percent (10%) of Total Assets as of such date; providedthat, if at any time the aggregate amount of the Total Assets of allSubsidiaries that are not Material Domestic Subsidiaries exceeds ten percent(10%) of Total Assets as of the end of any such fiscal quarter, Holdings (or,in the event Holdings has failed to do so within ten (10) days, theAdministrative Agent) shall designate sufficient Subsidiaries as “MaterialDomestic Subsidiaries” to eliminate such excess, and such designatedSubsidiaries shall for all purposes of this Agreement constitute MaterialDomestic Subsidiaries.

 

“Material Foreign Subsidiaries” means eachForeign Subsidiary which, as of the most recent fiscal quarter of Holdings, forthe period of four consecutive fiscal quarters then ended, for which financialstatements have been delivered pursuant to Section 5.01, contributedgreater than ten percent (10%) of Total Assets as of such date; providedthat, if at any time the aggregate amount of the Total Assets of allSubsidiaries that are not Material Foreign Subsidiaries exceeds ten percent(10%) of Total Assets as of the end of any such fiscal quarter, Holdings (or,in the event Holdings has failed to do so within ten (10) days, theAdministrative Agent) shall designate sufficient Subsidiaries as “MaterialForeign Subsidiaries” to eliminate such excess, and such designatedSubsidiaries shall for all purposes of this Agreement constitute MaterialForeign Subsidiaries.

 

“Material Indebtedness” means Indebtedness (otherthan the Loans and Letters of Credit), or obligations in respect of one or moreSwap Agreements, of any one or more of the Borrower and its Subsidiaries in anaggregate principal amount exceeding $10,000,000.  For purposes of determining MaterialIndebtedness, the “obligations” of the Borrower or any Subsidiary inrespect of any Swap Agreement at any time shall be the maximum aggregate amount(giving effect to any netting agreements) 

 

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that the Borrower or such Subsidiary would berequired to pay if such Swap Agreement were terminated at such time.

 

“Maturity Date” means May 29, 2012 orany earlier date on which the Commitments are reduced to zero or otherwiseterminated pursuant to the terms hereof.

 

“Maximum Liability” has the meaning assigned tosuch term in Section 10.10.

 

“Monthly Reporting Trigger” shall be in effect at anytime that (i) an Event of Default is continuing, (ii) any Loans areoutstanding, (iii) LC Exposure is equal to or in excess of $13,500,000 or (iv) averageAvailability for the most recently ended calendar month is equal to or lessthan $25,000,000.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Multiemployer Plan” means a multiemployer planas defined in Section 4001(a)(3) of ERISA.

 

“Negative Covenant Permission Trigger” means (a) no Default orEvent of Default has occurred and is continuing prior to making suchacquisition (in the case of a Permitted Acquisition), Restricted Payment (inthe case of Section 6.08(a)) or payment (in the case of Section 6.08(b))or would arise after giving effect (including pro forma effect) thereto, (b) Availabilityequals or exceeds an amount equal to the greater of (i) 25% of theAggregate Commitment at such time and (ii) $12,000,000, prior thereto aswell as after giving effect (including pro forma effect) thereto and (c) Holdingsand the Borrower are in compliance, on a pro forma basis after giving effectthereto (excluding synergies or cost savings in the case of an acquisition),with the covenant contained in Section 6.12 recomputed as of the last dayof the most recently ended fiscal quarter of Holdings for which financialstatements are available

 

“Net Income” means, for any period, the consolidated netincome (or loss) of Holdings and its Subsidiaries, determined on a consolidatedbasis in accordance with GAAP; provided that there shall be excluded (a) theincome (or deficit) of any Person accrued prior to the date it becomes aSubsidiary or is merged into or consolidated with  Holdings or any of its Subsidiaries, (b) the income (or deficit) of anyPerson (other than a Subsidiary) in which Holdings or any of its Subsidiaries has an ownership interest, except tothe extent that any such income is actually received by Holdings or suchSubsidiary in the form of dividends or similar distributions and (c) theundistributed earnings of any Subsidiary to the extent that the declaration orpayment of dividends or similar distributions by such Subsidiary is not at thetime permitted by the terms of any contractual obligation (other than under anyLoan Document) or Requirement of Law applicable to such Subsidiary. AnyRequirement of Law that a dividend be declared by the board of directors orsimilar governing body of a Subsidiary shall not be deemed a restrictiondescribed in clause (c) above.

 

“Net Orderly Liquidation Value” means, withrespect to Inventory of any Person, the orderly liquidation value thereof asdetermined in a manner acceptable to the Administrative Agent in its PermittedDiscretion by an appraiser acceptable to the Administrative Agent, net of allcosts of liquidation thereof.

 

“Net Proceeds” means, with respect to anyevent, (a) the cash proceeds received in respect of such event including (i) anycash received in respect of any non-cash proceeds (including any cash paymentsreceived by way of deferred payment of principal pursuant to a note orinstallment receivable or purchase price adjustment receivable or otherwise,but excluding any interest payments), but only as and when received, (ii) inthe case of a casualty, insurance proceeds and (iii) in the case of acondemnation or similar event, condemnation awards and similar payments, net of(b) the sum of (i) all 

 

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reasonable fees and out-of-pocket expensespaid to third parties (other than Affiliates) in connection with such event, (ii) inthe case of a sale, transfer or other disposition of an asset (includingpursuant to a sale and leaseback transaction or a casualty or a condemnation orsimilar proceeding), the amount of all payments required to be made as a resultof such event to repay Indebtedness (other than Loans) secured by such asset orotherwise subject to mandatory prepayment as a result of such event and (iii) theamount of all taxes paid (or reasonably estimated to be payable) and the amountof any reserves established to fund contingent liabilities reasonably estimatedto be payable, in each case during the year that such event occurred or thenext succeeding year and that are directly attributable to such event (asdetermined reasonably and in good faith by a Financial Officer).

 

“Non-Consenting Lender” has the meaning assigned tosuch term in Section 9.02(d).

 

“Non-Paying Guarantor” has the meaning assigned tosuch term in Section 10.11.

 

“Obligated Party” has the meaning assigned tosuch term in Section 10.02.

 

“Obligations” means all unpaid principal of and accruedand unpaid interest on the Loans, all LC Exposure, all accrued and unpaid feesand all expenses, reimbursements, indemnities and other obligations andindebtedness (including interest accruing during the pendency of anybankruptcy, insolvency, receivership or other similar proceeding, regardless ofwhether allowed or allowable in such proceeding), obligations and liabilitiesof the Loan Parties to the Lenders or to any of the Lenders, the AdministrativeAgent, the Issuing Bank or any indemnified party, individually or collectively,existing on the Effective Date or arising thereafter, direct or indirect, jointor several, absolute or contingent, matured or unmatured, liquidated orunliquidated, secured or unsecured, arising by contract, operation of law orotherwise, arising or incurred under this Agreement or any of the other LoanDocuments or in respect of any of the Loans made or reimbursement or otherobligations incurred or any of the Letters of Credit or other instruments atany time evidencing any thereof.

 

“Off-Balance Sheet Liability” of a Personmeans (a) any repurchase obligation or liability of such Person withrespect to accounts or notes receivable sold by such Person, (b) anyindebtedness, liability or obligation under any so-called “synthetic lease”transaction entered into by such Person, or (c) any indebtedness,liability or obligation arising with respect to any other transaction which isthe functional equivalent of or takes the place of borrowing but which does notconstitute a liability on the balance sheets of such Person (other thanoperating leases).

 

“Other Taxes” means any and all present or future stamp ordocumentary taxes or any other excise or property taxes, charges or similarlevies arising from any payment made hereunder or from the execution, deliveryor enforcement of, or otherwise with respect to, this Agreement or any otherLoan Document other than Excluded Taxes.

 

“Overadvance” has the meaning assigned to such term in Section 2.05(b).

 

“Participant” has the meaning set forth in Section 9.04.

 

“Paying Guarantor” has the meaning assigned tosuch term in Section 10.11.

 

“PBGC” means the Pension Benefit GuarantyCorporation referred to and defined in ERISA and any successor entityperforming similar functions.

 

“Permitted Acquisition” means any acquisition(whether by purchase, lease (other than a customary real estate lease), merger,consolidation or otherwise) or series of related acquisitions by 

 

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Holdings, the Borrower or any Subsidiary of (i) allor substantially all the assets of or (ii) all or substantially all theEquity Interests in, a Person or division or line of business of a Person, if,at the time of and immediately after giving effect thereto, (a) no Defaulthas occurred and is continuing or would arise after giving effect (includingpro forma effect) thereto, (b) such Person or division or line of businessis engaged in the same or a similar line of business as Holdings and itsSubsidiaries or business reasonably related thereto, (c) all actionsrequired to be taken with respect to such acquired or newly formed Subsidiaryunder Section 5.15 shall have been taken, (d) the Negative CovenantPermission Trigger is satisfied and (e) in the case of an acquisition ormerger involving Holdings, the Borrower or a Subsidiary, Holdings, the Borroweror such Subsidiary is the surviving entity of such merger and/or consolidation.

 

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

 

“Permitted Encumbrances” means:

 

(a)           Liens imposed by law for taxes thatare not yet due or are being contested in compliance with Section 5.04;

 

(b)           carriers’, warehousemen’s, mechanics’,materialmen’s, repairmen’s and other like Liens imposed by law, arising in theordinary course of business and securing obligations that are not overdue bymore than thirty (30) days or are being contested in compliance with Section 5.04;

 

(c)           pledges and deposits made in theordinary course of business in compliance with workers’ compensation,unemployment insurance and other social security laws or regulations;

 

(d)           deposits to secure the performance ofbids, trade contracts, leases, statutory obligations, surety and appeal bonds,performance bonds and other obligations of a like nature, in each case in theordinary course of business;

 

(e)           judgment liens in respect ofjudgments that do not constitute an Event of Default under clause (k) of Article VII;

 

(f)            easements, zoning restrictions,rights-of-way and similar encumbrances on real property imposed by law orarising in the ordinary course of business that do not secure any monetaryobligations and do not materially detract from the value of the affectedproperty or interfere with the ordinary conduct of business of Holdings or anySubsidiary; and

 

(g)           liens arising by virtue of anystatutory, common law or contractual provisions relating to bankers’ liens,right of set-off or similar rights and remedies;

 

provided that the term “PermittedEncumbrances” shall not include any Lien securing Indebtedness.

 

“Permitted Investments” means:

 

(a)           direct obligations of, or obligationsthe principal of and interest on which are unconditionally guaranteed by, theUnited States of America (or by any agency thereof to the extent suchobligations are backed by the full faith and credit of the United States ofAmerica), in each case maturing within one year from the date of acquisitionthereof;

 

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(b)           investments in commercial papermaturing within 270 days from the date of acquisition thereof and having, atsuch date of acquisition, the highest credit rating obtainable from S&P orfrom Moody’s;

 

(c)           investments in certificates ofdeposit, banker’s acceptances and time deposits maturing within 180 days fromthe date of acquisition thereof issued or guaranteed by or placed with, andmoney market deposit accounts issued or offered by, any domestic office of anycommercial bank organized under the laws of the United States of America or anyState thereof which has a combined capital and surplus and undivided profits ofnot less than $500,000,000;

 

(d)           fully collateralized repurchaseagreements with a term of not more than 30 days for securities described inclause (a) above and entered into with a financial institution satisfyingthe criteria described in clause (c) above;

 

(e)           money market funds that (i) complywith the criteria set forth in Securities and Exchange Commission Rule 2a-7under the Investment Company Act of 1940, (ii) are rated AAA by S&Pand Aaa by Moody’s and (iii) have portfolio assets of at least$5,000,000,000; and

 

(f)            other investments made in accordancewith Holdings’ investment policy as in effect on the Effective Date and withoutgiving effect to any amendments, modifications or supplements thereto unlessthe same are approved by the Administrative Agent in its Permitted Discretion.

 

“Person” means any natural person, corporation,limited liability company, trust, joint venture, association, company,partnership, Governmental Authority or other entity.

 

“Plan” means any employee pension benefit plan(other than a Multiemployer Plan) subject to the provisions of Title IV ofERISA or Section 412 of the Code or Section 302 of ERISA, and inrespect of which the Borrower or any ERISA Affiliate is (or, if such plan wereterminated, would under Section 4069 of ERISA be deemed to be) an “employer”as defined in Section 3(5) of ERISA.

 

“Pledge Subsidiary” means (i) each Domestic Subsidiary and (ii) eachFirst Tier Foreign Subsidiary which is a Material Foreign Subsidiary.

 

“Prepayment Event” means:

 

(a)           any sale, transfer or otherdisposition (excluding a sale, transfer or disposition of Real Propertypursuant to a transaction permitted by Sections 6.01(n) and 6.06) of anyCollateral, other than dispositions described in Section 6.05(a); or

 

(b)           any casualty or other insured damageto, or any taking under power of eminent domain or by condemnation or similarproceeding of, any property or asset of any Loan Party with a fair valueimmediately prior to such event equal to or greater than $5,000,000; or

 

(c)           the issuance by Holdings or theBorrower of any Equity Interests, or the receipt by Holdings or the Borrower ofany capital contribution, other than any issuance by the Borrower of commonEquity Interests to, or receipt of any such capital contribution from, Holdingsand other than in connection with employee and director compensation, incentiveand benefit plans and other than in connection with acquisitions or in paymentof or exchange for debt; or

 

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(d)           the incurrence by any Loan Party ofany Indebtedness, other than Indebtedness permitted under Section 6.01 orpermitted by the Required Lenders pursuant to Section 9.02.

 

“Prime Rate” means the rate of interest per annumpublicly announced from time to time by Chase as its prime rate at its officesat 270 Park Avenue in New York City; each change in the Prime Rate shall beeffective from and including the date such change is publicly announced asbeing effective.

 

“Processor Control Agreement” means, with respect to anyCredit Card Processor providing credit card processing services for or onbehalf of any Loan Party, an agreement in form and substance reasonablysatisfactory to the Administrative Agent in its Permitted Discretion, executedand delivered by the applicable Loan Party, such Credit Card Processor and theAdministrative Agent, pursuant to which such Credit Card Processor shall agree,among other things, to follow instructions originated by the AdministrativeAgent regarding amounts payable by such Credit Card Processor to such LoanParty pursuant to the applicable credit card processing agreement without thefurther consent of such Loan Party under circumstances specified therein, assuch agreement may be amended, supplemented or otherwise modified from time totime.

 

“Projections” has the meaning assigned to such term in Section 5.01(f).

 

“Protective Advance” has the meaning assigned tosuch term in Section 2.04.

 

“Real Property” means real property and all related fixtures,cooling, heating and other building systems located thereon and allimprovements thereto (including any parking lot located thereon).

 

“Register” has the meaning set forth in Section 9.04.

 

“Related Parties” means, with respect to anyspecified Person, such Person’s Affiliates and the respective directors,officers, employees, agents and advisors of such Person and such Person’sAffiliates.

 

“Release” means any spilling, leaking, pumping,pouring, emitting, emptying, discharging, injecting, escaping, leaching,dumping, disposing, depositing, dispersing, emanating or migrating of anyHazardous Material in, into, onto or through the environment.

 

“Rentals” means, with reference to any period, theaggregate fixed amounts payable in cash by Holdings and its Subsidiaries underany operating leases, calculated on a consolidated basis for Holdings and itsSubsidiaries for such period in accordance with GAAP.

 

“Rent Reserve” with respect to any store,warehouse distribution center, regional distribution center or depot where anyInventory subject to Liens arising by operation of law is located, a reserveequal to two (2) months’ rent at such store, warehouse distribution center,regional distribution center or depot.

 

“Report” means reports prepared by the AdministrativeAgent or another Person showing the results of appraisals, field examinationsor audits pertaining to the Loan Parties’ assets from information furnished byor on behalf of the Borrower, after the Administrative Agent has exercised itsrights of inspection pursuant to this Agreement, which Reports may bedistributed to the Lenders by the Administrative Agent.

 

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“Required Lenders” means, at any time, Lenders(but at least two (2) such Lenders during such time when there is morethan one (1) Lender but no more than three (3) Lenders) havingRevolving Exposures and unused Commitments representing more than 50% of thesum of the total Revolving Exposures and unused Commitments at such time,except as provided in Section 2.20(b).

 

“Requirement of Law” means, as to any Person,the Certificate of Incorporation and By Laws or other organizational orgoverning documents of such Person, and any law, treaty, rule orregulation or determination of an arbitrator or a court or other GovernmentalAuthority, in each case applicable to or binding upon such Person or any of itsproperty or to which such Person or any of its property is subject.

 

“Reserves” means any and all reserves which theAdministrative Agent deems necessary, in its Permitted Discretion, to maintain(including, without limitation, reserves for accrued and unpaid interest on theSecured Obligations, Banking Services Reserves, Rent Reserves, reserves forrent at locations leased by any Loan Party and for consignee’s, warehousemen’sand bailee’s charges, reserves for dilution of Accounts and/or Credit CardAccount Receivables, reserves for Inventory shrinkage, reserves for customscharges and shipping charges related to any Inventory in transit, reserves forSwap Obligations, reserves for contingent liabilities of any Loan Party,reserves for uninsured losses of any Loan Party, reserves for uninsured,underinsured, unindemnified or underindemnified liabilities or potentialliabilities with respect to any litigation and reserves for taxes, fees,assessments, and other governmental charges) without duplication with respectto the Collateral or any Loan Party.

 

“Restricted Payment” means any dividend or otherdistribution (whether in cash, securities or other property) with respect toany Equity Interests in Holdings, the Borrower or any Subsidiary, or anypayment (whether in cash, securities or other property), including any sinkingfund or similar deposit, on account of the purchase, redemption, retirement,acquisition, cancellation or termination of any such Equity Interests inHoldings or the Borrower  or anySubsidiary or any option, warrant or other right to acquire any such EquityInterests in Holdings or the Borrower or any Subsidiary.

 

“Revolving Exposure” means, with respect to anyLender at any time, the sum of (a) the outstanding principal amount ofsuch Lender’s Revolving Loans and its LC Exposure, plus (b) anamount equal to its Applicable Percentage of the aggregate principal amount ofSwingline Loans at such time, plus (c) an amount equal to itsApplicable Percentage of the aggregate principal amount of Overadvancesoutstanding at such time.

 

“Revolving Loan” means a Loan made pursuantto Section 2.01(a).

 

“S&P” means Standard & Poor’s RatingsServices, a division of The McGraw Hill Companies, Inc.

 

“Secured Obligations” means all Obligations,together with all (i) Banking Services Obligations and (ii) Swap Obligationsowing to one or more Secured Parties or their respective Affiliates; providedthat at or prior to the time that any transaction relating to such SwapObligation is executed, the Secured Party party thereto (other than Chase)shall have delivered written notice to the Administrative Agent that such atransaction has been entered into and that it constitutes a Secured Obligationentitled to the benefits of the Collateral Documents.

 

“Secured Parties” means the holders of the Secured Obligations fromtime to time and shall include (i) each Lender and the Issuing Bank inrespect of its Loans and LC Exposure respectively, (ii) the AdministrativeAgent, the Issuing Bank and the Lenders in respect of all other present andfuture obligations and liabilities of Holdings, the Borrower and eachSubsidiary of every type and description 

 

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arising under or in connectionwith this Agreement or any other Loan Document, (iii) each Lender andAffiliate of such Lender in respect of Swap Obligations and Banking ServicesObligations owed to such Person by Holdings, the Borrower or any Subsidiary, (iv) eachindemnified party under Section 9.03 in respect of the obligations andliabilities of Holdings, the Borrower or any Subsidiary to such Personhereunder and under the other Loan Documents, and (v) their respectivesuccessors and (in the case of a Lender, permitted) transferees and assigns.

 

“Security Agreement” means the Pledge andSecurity Agreement (including any and all supplements thereto), dated as of thedate hereof, between the Loan Parties and the Administrative Agent, for thebenefit of the Administrative Agent and the Secured Parties, and any otherpledge or security agreement entered into, after the date of this Agreement byany other Loan Party (as required by this Agreement or any other LoanDocument), or any other Person, as the same may be amended, restated orotherwise modified from time to time.

 

“Settlement” has the meaning assigned to such term in Section 2.05(d).

 

“Settlement Date” has the meaning assigned tosuch term in Section 2.05(d).

 

“Standby LC Exposure” means, at any time, the sum of (a) theaggregate undrawn amount of all outstanding standby Letters of Credit at suchtime plus (b) the aggregate amount of all LC Disbursements relating tostandby Letters of Credit that have not yet been reimbursed by or on behalf ofthe Borrower at such time.  The StandbyLC Exposure of any Lender at any time shall be its Applicable Percentage of thetotal Standby LC Exposure at such time.

 

“Statutory Reserve Rate” means a fraction (expressedas a decimal), the numerator of which is the number one and the denominator ofwhich is the number one minus the aggregate of the maximum reserve percentages(including any marginal, special, emergency or supplemental reserves) expressedas a decimal established by the Board to which the Administrative Agent issubject with respect to the Adjusted LIBO Rate, for eurocurrency funding(currently referred to as “Eurocurrency Liabilities” in Regulation D ofthe Board).  Such reserve percentagesshall include those imposed pursuant to such Regulation D of the Board.  Eurodollar Loans shall be deemed toconstitute eurocurrency funding and to be subject to such reserve requirementswithout benefit of or credit for proration, exemptions or offsets that may beavailable from time to time to any Lender under such Regulation D of the Boardor any comparable regulation.  TheStatutory Reserve Rate shall be adjusted automatically on and as of theeffective date of any change in any reserve percentage.

 

“Subordinated Indebtedness” of a Personmeans any Indebtedness of such Person the payment of which is subordinated topayment of the Secured Obligations to the written satisfaction of the AdministrativeAgent in its Permitted Discretion.

 

“subsidiary” means, with respect to any Person (the “parent”)at any date, any corporation, limited liability company, partnership,association or other entity the accounts of which would be consolidated with thoseof the parent in the parent’s consolidated financial statements if suchfinancial statements were prepared in accordance with GAAP as of such date, aswell as any other corporation, limited liability company, partnership,association or other entity (a) of which securities or other ownershipinterests representing more than 50% of the equity or more than 50% of theordinary voting power or, in the case of a partnership, more than 50% of thegeneral partnership interests are, as of such date, owned, Controlled or held,or (b) that is, as of such date, otherwise Controlled, by the parent orone or more subsidiaries of the parent or by the parent and one or moresubsidiaries of the parent.

 

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“Subsidiary” means any direct or indirect subsidiary ofHoldings, the Borrower or a Loan Party, as applicable.

 

“Swap Agreement” means any agreement withrespect to any swap, forward, future or derivative transaction or option orsimilar agreement involving, or settled by reference to, one or more rates,currencies, commodities, equity or debt instruments or securities, or economic,financial or pricing indices or measures of economic, financial or pricing riskor value or any similar transaction or any combination of these transactions; providedthat no phantom stock or similar plan providing for payments only on account ofservices provided by current or former directors, officers, employees orconsultants of Holdings or the Subsidiaries shall be a Swap Agreement.

 

“Swap Obligations” of a Person means any andall obligations of such Person, whether absolute or contingent and howsoeverand whensoever created, arising, evidenced or acquired (including all renewals,extensions and modifications thereof and substitutions therefor), under (a) anyand all Swap Agreements permitted hereunder with a Lender or an Affiliate of aLender, and (b) any and all cancellations, buy backs, reversals,terminations or assignments of any such Swap Agreement transaction.

 

“Swingline Exposure” means, at any time, theaggregate principal amount of all outstanding Swingline Loans at suchtime.  The Swingline Exposure of anyLender at any time shall be its Applicable Percentage of the total SwinglineExposure at such time.

 

“Swingline Lender” means JPMorgan Chase Bank,N.A., in its capacity as lender of Swingline Loans hereunder.

 

“Swingline Loan” has the meaning assigned tosuch term in Section 2.05(a).

 

“Syndication Agent” means JPMorgan Chase Bank,N.A. in its capacity as syndication agent for the credit facility evidenced bythis Agreement.

 

“Taxes” means any and all present or future taxes,levies, imposts, duties, deductions, charges or withholdings imposed by anyGovernmental Authority.

 

“Total Assets” means, as of the date ofany determination thereof, total assets of Holdings and its Subsidiariescalculated in accordance with GAAP on a consolidated basis as of such date.

 

“Total Indebtedness” means, at any date, theaggregate principal amount of all Indebtedness of Holdings and its Subsidiariesat such date, determined on a consolidated basis in accordance with GAAP.

 

“Transactions” means the execution,delivery and performance by the Loan Parties of this Agreement and the otherLoan Documents, the borrowing of Loans and other credit extensions, the use ofthe proceeds thereof and the issuance of Letters of Credit hereunder.

 

“Type”, when used in reference to any Loan orBorrowing, refers to whether the rate of interest on such Loan, or on the Loanscomprising such Borrowing, is determined by reference to the Adjusted LIBO Rateor the Alternate Base Rate.

 

“UCC” means the Uniform Commercial Code as ineffect from time to time in the State of New York or any other state the lawsof which are required to be applied in connection with the issue of perfectionof security interests.

 

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“Unliquidated Obligations” means, at any time, anySecured Obligations (or portion thereof) that are contingent in nature orunliquidated at such time, including any Secured Obligation that is: (i) anobligation to reimburse a bank for drawings not yet made under a letter ofcredit issued by it; (ii) any other obligation (including any guarantee)that is contingent in nature at such time; or (iii) an obligation toprovide collateral to secure any of the foregoing types of obligations.

 

“Withdrawal Liability” means liability to aMultiemployer Plan as a result of a complete or partial withdrawal from suchMultiemployer Plan, as such terms are defined in Part I of Subtitle E ofTitle IV of ERISA.

 

## SECTION 1.02.  Classification of Loans and Borrowings.  For purposes of this Agreement, Loans may beclassified and referred to by Class (e.g., a “Revolving Loan”) orby Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a “EurodollarRevolving Loan”).  Borrowings alsomay be classified and referred to by Class (e.g., a “RevolvingBorrowing”) or by Type (e.g., a “Eurodollar Borrowing”) or by Class andType (e.g., a “Eurodollar Revolving Borrowing”).

##  

## SECTION 1.03.    Terms Generally.  The definitions of terms herein shall applyequally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronounshall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes”and “including” shall be deemed to be followed by the phrase “withoutlimitation”.  The word “will”shall be construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise (a) anydefinition of or reference to any agreement, instrument or other documentherein shall be construed as referring to such agreement, instrument or otherdocument as from time to time amended, restated, supplemented or otherwisemodified (subject to any restrictions on such amendments, restatements,supplements or modifications set forth herein), (b) any reference hereinto any Person shall be construed to include such Person’s successors andassigns, (c) the words “herein”, “hereof” and “hereunder”,and words of similar import, shall be construed to refer to this Agreement inits entirety and not to any particular provision hereof, (d) allreferences herein to Articles, Sections, Exhibits and Schedules shall beconstrued to refer to Articles and Sections of, and Exhibits and Schedules to,this Agreement and (e) the words “asset” and “property”shall be construed to have the same meaning and effect and to refer to any andall tangible and intangible assets and properties, including cash, securities,accounts and contract rights.

##  

## SECTION 1.04.  Accounting Terms; GAAP.  Except as otherwise expressly providedherein, all terms of an accounting or financial nature shall be construed inaccordance with GAAP, as in effect from time to time; provided that, ifthe Borrower notifies the Administrative Agent that the Borrower requests anamendment to any provision hereof to eliminate the effect of any changeoccurring after the date hereof in GAAP or in the application thereof on theoperation of such provision (or if the Administrative Agent notifies theBorrower that the Required Lenders request an amendment to any provision hereoffor such purpose), regardless of whether any such notice is given before orafter such change in GAAP or in the application thereof, then such provisionshall be interpreted on the basis of GAAP as in effect and applied immediatelybefore such change shall have become effective until  such notice shall have been withdrawn or suchprovision amended in accordance herewith. Notwithstanding any other provision contained herein, all terms of anaccounting or financial nature used herein shall be construed, and allcomputations of amounts and ratios referred to herein shall be made, withoutgiving effect to any election under Statement of Financial Accounting Standards159 (or any other Financial Accounting Standard having a similar result oreffect) to value any Indebtedness or other liabilities of Holdings, theBorrower or any Subsidiary at “fair value”, as defined therein.

 

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#  

# ARTICLE II

#  

# The Credits

#  

## SECTION 2.01.  Commitments.   Subject to the terms and conditions setforth herein, each Lender agrees to make Revolving Loans to the Borrower indollars from time to time during the Availability Period in an aggregate principalamount that will not result in (a) such Lender’s Revolving Exposureexceeding such Lender’s Commitment or (b) the total Revolving Exposuresexceeding the lesser of (i) the Aggregate Commitment or (ii) theBorrowing Base, subject to the Administrative Agent’s authority, in its solediscretion, to make Protective Advances and Overadvances pursuant to the termsof Section 2.04 and 2.05.  Withinthe foregoing limits and subject to the terms and conditions set forth herein,the Borrower may borrow, prepay and reborrow Revolving Loans.

##  

## SECTION 2.02.  Loans and Borrowings.  (a)  Each Loan (other than a SwinglineLoan) shall be made as part of a Borrowing consisting of Loans of the same Class andType made by the Lenders ratably in accordance with their respectiveCommitments of the applicable Class.  AnyProtective Advance, any Overadvance and any Swingline Loan shall be made inaccordance with the procedures set forth in Section 2.04 and 2.05.  No failure to fund by a Defaulting Lendershall relieve any other Lender of its funding obligations hereunder inaccordance with the terms and conditions hereof.

##  

### (b)  Subject to Section 2.14,each Revolving Borrowing shall be comprised entirely of ABR Loans or EurodollarLoans as the Borrower may request in accordance herewith; provided thatall Borrowings made on the Effective Date must be made as ABR Borrowings butmay be converted into Eurodollar Borrowings in accordance with Section 2.08.Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Eurodollar Loan by causing anydomestic or foreign branch or Affiliate of such Lender to make such Loan; providedthat any exercise of such option shall not affect the obligation of theBorrower to repay such Loan in accordance with the terms of this Agreement.

###  

### (c)  At thecommencement of each Interest Period for any Eurodollar Revolving Borrowing,such Borrowing shall be in an aggregate amount that is an integral multiple of$1,000,000 and not less than $2,000,000. ABR Revolving Borrowings may be in any amount.  Borrowings of more than one Type and Class maybe outstanding at the same time; provided that there shall not at anytime be more than a total of ten (10) Eurodollar Borrowings outstanding.

###  

### (d)  Notwithstandingany other provision of this Agreement, the Borrower shall not be entitled torequest, or to elect to convert or continue, any Borrowing if the InterestPeriod requested with respect thereto would end after the Maturity Date.

###  

## SECTION 2.03.  Requests forRevolving Borrowings.  Torequest a Revolving Borrowing, the Borrower shall notify the AdministrativeAgent of such request either in writing (delivered by hand or facsimile) in aform approved by the Administrative Agent and signed by the Borrower or bytelephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m.,New York City time, three (3) Business Days before the date of theproposed Borrowing or (b) in the case of an ABR Borrowing, not later than1:00 p.m., New York City time, on the date of the proposed Borrowing; providedthat any such notice of an ABR Revolving Borrowing to finance the reimbursementof an LC Disbursement as contemplated by Section 2.06(e) may be givennot later than 10:00 a.m., New York City time, on the date of the proposedBorrowing.  Each such telephonicBorrowing Request shall be irrevocable and shall be confirmed promptly by handdelivery or facsimile to the Administrative Agent of a written BorrowingRequest in a form approved by the Administrative Agent and signed by the 

 

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Borrower. Each such telephonic and written Borrowing Request shall specify thefollowing information in compliance with Section 2.01:

##  

#### (i)  the aggregateamount of the requested Borrowing and a breakdown of the separate wirescomprising such Borrowing;

####  

#### (ii)  the date of suchBorrowing, which shall be a Business Day;

####  

#### (iii)  whether suchBorrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

####  

#### (iv)  in the case of aEurodollar Borrowing, the initial Interest Period to be applicable thereto,which shall be a period contemplated by the definition of the term “InterestPeriod.”

####  

Ifno election as to the Type of Revolving Borrowing is specified, then therequested Revolving Borrowing shall be an ABR Borrowing.  If no Interest Period is specified withrespect to any requested Eurodollar Revolving Borrowing, then the Borrowershall be deemed to have selected an Interest Period of one month’sduration.  Promptly following receipt ofa Borrowing Request in accordance with this Section, the Administrative Agentshall advise each Lender of the details thereof and of the amount of suchLender’s Loan to be made as part of the requested Borrowing.

 

## SECTION 2.04.  Protective Advances.  (a)  Subject to the limitations set forthbelow, the Administrative Agent is authorized by the Borrower and the Lenders,from time to time in the Administrative Agent’s sole discretion (but shall haveabsolutely no obligation to), to make Loans to the Borrower, on behalf of allLenders, which the Administrative Agent, in its Permitted Discretion, deemsnecessary or desirable (i) to preserve or protect the Collateral, or anyportion thereof, (ii) to enhance the likelihood of, or maximize the amountof, repayment of the Loans and other Obligations, or (iii) to pay anyother amount chargeable to or required to be paid by the Borrower pursuant tothe terms of this Agreement, including payments of reimbursable expenses(including costs, fees, and expenses as described in Section 9.03) andother sums payable under the Loan Documents (any of such Loans are hereinreferred to as “Protective Advances”); provided that, theaggregate amount of Protective Advances outstanding at any time shall not atany time exceed $5,000,000; providedfurther that, the aggregateamount of outstanding Protective Advances plus the aggregate Revolving Exposureshall not exceed the Aggregate Commitment. Protective Advances may be made even if the conditions precedent setforth in Section 4.02 have not been satisfied.  The Protective Advances shall be secured bythe Liens in favor of the Administrative Agent in and to the Collateral andshall constitute Obligations hereunder. All Protective Advances shall be ABR Borrowings.  The Administrative Agent’s authorization tomake Protective Advances may be revoked at any time by 100% of the Lenders(other than the Lender  that is (or whoseAffiliate is) the Administrative Agent). Any such revocation must be in writing and shall become effectiveprospectively upon the Administrative Agent’s receipt thereof.  At any time that there is sufficientAvailability and the conditions precedent set forth in Section 4.02 havebeen satisfied, the Administrative Agent may request the Lenders to make aRevolving Loan to repay a Protective Advance. At any other time the Administrative Agent may require the Lenders tofund their risk participations described in Section 2.04(b).

##  

### (b)  Upon the making ofa Protective Advance by the Administrative Agent (whether before or after theoccurrence of a Default), each Lender shall be deemed, without further actionby any party hereto, to have unconditionally and irrevocably purchased from theAdministrative Agent without recourse or warranty, an undivided interest andparticipation in such Protective Advance in proportion to its ApplicablePercentage.  From and after the date, ifany, on which any Lender is required to fund its participation in anyProtective Advance purchased hereunder, the Administrative Agent shall promptlydistribute to such Lender, such Lender’s Applicable Percentage of all payments 

 

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of principal and interest and all proceeds ofCollateral received by the Administrative Agent in respect of such ProtectiveAdvance.

###  

## SECTION 2.05.  Swingline Loans andOveradvances.  (a)  TheAdministrative Agent, the Swingline Lender and the Lenders agree that in orderto facilitate the administration of this Agreement and the other LoanDocuments, promptly after the Borrower requests an ABR Borrowing, the SwinglineLender may elect to have the terms of this Section 2.05(a) apply tosuch Borrowing Request by advancing, on behalf of the Lenders and in the amountrequested, same day funds to the Borrower on the applicable Borrowing date tothe Funding Account (each such Loan made solely by the Swingline Lenderpursuant to this Section 2.05(a) is referred to in this Agreement asa “Swingline Loan”), with settlement among them as to the SwinglineLoans to take place on a periodic basis as set forth in Section 2.05(d).  Each Swingline Loan shall be subject to allthe terms and conditions applicable to other ABR Loans funded by the Lenders,except that all payments thereon shall be payable to the Swingline Lendersolely for its own account.  In addition,the Borrower hereby authorizes the Swingline Lender to, and the SwinglineLender shall, subject to the terms and conditions set forth herein (but withoutany further written notice required), not later than 2:00 p.m., New YorkCity time, on each Business Day, make available to the Borrower by means of acredit to the Funding Account, the proceeds of a Swingline Loan to the extentnecessary to pay items to be drawn on any Controlled Disbursement Account thatday (as determined based on notice from the Administrative Agent).  The aggregate amount of Swingline Loansoutstanding at any time shall not exceed $6,000,000.  The Swingline Lender shall not make anySwingline Loan if the requested Swingline Loan exceeds Availability (beforegiving effect to such Swingline Loan). All Swingline Loans shall be ABR Borrowings.

##  

### (b)  Any provision ofthis Agreement to the contrary notwithstanding, at the request of the Borrower,the Administrative Agent may in its sole discretion (but with absolutely noobligation), make Revolving Loans to the Borrower, on behalf of the Lenders, inamounts that exceed Availability (any such excess Revolving Loans are hereinreferred to collectively as “Overadvances”); providedthat, no Overadvance shall result in a Default due to Borrower’s failure tocomply with Section 2.01 for so long as such Overadvance remainsoutstanding in accordance with the terms of this paragraph, but solely withrespect to the amount of such Overadvance. In addition, Overadvances may be made even if the condition precedentset forth in Section 4.02(c) has not been satisfied.  All Overadvances shall constitute ABRBorrowings.  The authority of theAdministrative Agent to make Overadvances is limited to an aggregate amount notto exceed $5,000,000 at any time, no Overadvance may remain outstanding formore than forty-five (45) days and no Overadvance shall cause any Lender’sRevolving Exposure to exceed its Commitment; providedthat, the Required Lenders may at any time revoke the Administrative Agent’sauthorization to make Overadvances.  Anysuch revocation must be in writing and shall become effective prospectivelyupon the Administrative Agent’s receipt thereof.

###  

### (c)  Upon the making ofa Swingline Loan or an Overadvance (whether before or after the occurrence of aDefault and regardless of whether a Settlement has been requested with respectto such Swingline Loan or Overadvance), each Lender shall be deemed, withoutfurther action by any party hereto, to have unconditionally and irrevocablypurchased from the Swingline Lender or the Administrative Agent, as the casemay be, without recourse or warranty, an undivided interest and participationin such Swingline Loan or Overadvance in proportion to its ApplicablePercentage of the Commitment.    TheSwingline Lender or the Administrative Agent may, at any time, require theLenders to fund their participations. From and after the date, if any, on which any Lender is required to fundits participation in any Swingline Loan or Overadvance purchased hereunder, theAdministrative Agent shall promptly distribute to such Lender, such Lender’sApplicable Percentage of all payments of principal and interest and allproceeds of Collateral received by the Administrative Agent in respect of suchLoan.

 

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###  

### (d)  The AdministrativeAgent, on behalf of the Swingline Lender, shall request settlement (a “Settlement”)with the Lenders on at least a weekly basis or on any date that theAdministrative Agent elects, by notifying the Lenders of such requestedSettlement by facsimile, telephone, or e-mail no later than 1:00 p.m., NewYork City time, on the date of such requested Settlement (the “SettlementDate”).  Each Lender (other than theSwingline Lender, in the case of the Swingline Loans) shall transfer the amountof such Lender’s Applicable Percentage of the outstanding principal amount ofthe applicable Loan with respect to which Settlement is requested to theAdministrative Agent, to such account of the Administrative Agent as theAdministrative Agent may designate, not later than 3:00 p.m., New YorkCity time, on such Settlement Date. Settlements may occur during the existence of a Default and whether ornot the applicable conditions precedent set forth in Section 4.02 havethen been satisfied.  Such amountstransferred to the Administrative Agent shall be applied against the amounts ofthe Swingline Lender’s Swingline Loans and, together with Swingline Lender’sApplicable Percentage of such Swingline Loan, shall constitute Revolving Loansof such Lenders, respectively.  If anysuch amount is not transferred to the Administrative Agent by any Lender onsuch Settlement Date, the Swingline Lender shall be entitled to recover suchamount on demand from such Lender together with interest thereon as specifiedin Section 2.07.

###  

## SECTION 2.06.  Letters of Credit.  (a) General.  Subject to the terms and conditions set forthherein, the Borrower may request the issuance of Letters of Credit for its ownaccount, in a form reasonably acceptable to the Administrative Agent and theIssuing Bank, at any time and from time to time during the AvailabilityPeriod.  In the event of anyinconsistency between the terms and conditions of this Agreement and the termsand conditions of any form of letter of credit application or other agreementsubmitted by the Borrower to, or entered into by the Borrower with, the IssuingBank relating to any Letter of Credit, the terms and conditions of thisAgreement shall control.  The letters ofcredit identified on Schedule 2.06 (the “Existing Letters of Credit”)shall be deemed to be “Letters of Credit” issued on the Effective Date for allpurposes of the Loan Documents.

##  

### (b)  Notice of Issuance, Amendment, Renewal, Extension; CertainConditions.  To request theissuance of a Letter of Credit (or the amendment, renewal or extension of anoutstanding Letter of Credit), the Borrower shall hand deliver or facsimile (ortransmit by electronic communication, if arrangements for doing so have beenapproved by the Issuing Bank) to the Issuing Bank and the Administrative Agent(reasonably in advance of the requested date of issuance, amendment, renewal orextension) a notice requesting the issuance of a Letter of Credit, oridentifying the Letter of Credit to be amended, renewed or extended, and specifyingthe date of issuance, amendment, renewal or extension (which shall be aBusiness Day), the date on which such Letter of Credit is to expire (whichshall comply with paragraph (c) of this Section), the amount of suchLetter of Credit, the name and address of the beneficiary thereof and suchother information as shall be necessary to prepare, amend, renew or extend suchLetter of Credit.  If requested by theIssuing Bank, the Borrower also shall submit a letter of credit application and(in the case of a commercial Letter of Credit) a master agreement for theissuance of commercial Letters of Credit, in each case on the Issuing Bank’sstandard form in connection with any request for a Letter of Credit.  A Letter of Credit shall be issued, amended,renewed or extended only if (and upon issuance, amendment, renewal or extensionof each Letter of Credit the Borrower shall be deemed to represent and warrantthat), after giving effect to such issuance, amendment, renewal or extension (i) theLC Exposure shall not exceed $30,000,000, (ii) the Standby LC Exposureshall not exceed $25,000,000 and (iii) the total Revolving Exposures shallnot exceed the lesser of the Aggregate Commitment and the Borrowing Base.

###  

### (c)  Expiration Date. Each Letter of Credit shall expire at or prior to the close of businesson the earlier of (i) the date one year after the date of the issuance ofsuch Letter of Credit (or, in the case of any renewal or extension thereof, oneyear after such renewal or extension) and (ii) the date that is five (5) BusinessDays prior to the Maturity Date.

 

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### (d)  Participations.  By the issuance of a Letter of Credit (or anamendment to a Letter of Credit increasing the amount thereof) and without anyfurther action on the part of the Issuing Bank or the Lenders, the Issuing Bankhereby grants to each Lender, and each Lender hereby acquires from the IssuingBank, a participation in such Letter of Credit equal to such Lender’sApplicable Percentage of the aggregate amount available to be drawn under suchLetter of Credit.  In consideration andin furtherance of the foregoing, each Lender hereby absolutely andunconditionally agrees to pay to the Administrative Agent, for the account ofthe Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursementmade by the Issuing Bank and not reimbursed by the Borrower on the date due asprovided in paragraph (e) of this Section, or of any reimbursement paymentrequired to be refunded to the Borrower for any reason.  Each Lender acknowledges and agrees that itsobligation to acquire participations pursuant to this paragraph in respect ofLetters of Credit is absolute and unconditional and shall not be affected byany circumstance whatsoever, including any amendment, renewal or extension ofany Letter of Credit or the occurrence and continuance of a Default or reductionor termination of the Commitments, and that each such payment shall be madewithout any offset, abatement, withholding or reduction whatsoever.

###  

### (e)  Reimbursement.  If the Issuing Bank shall make any LCDisbursement in respect of a Letter of Credit, the Borrower shall reimbursesuch LC Disbursement by paying to the Administrative Agent an amount equal tosuch LC Disbursement not later than 12:00 noon, New York City time, on the datethat such LC Disbursement is made, if the Borrower shall have received noticeof such LC Disbursement prior to 10:00 a.m., New York City time, on suchdate, or, if such notice has not been received by the Borrower prior to suchtime on such date, then not later than 12:00 noon, New York City time, on (i) theBusiness Day that the Borrower receives such notice, if such notice is receivedprior to 10:00 a.m., New York City time, on the day of receipt, or (ii) theBusiness Day immediately following the day that the Borrower receives suchnotice, if such notice is not received prior to such time on the day ofreceipt; provided that, subject to the conditions to borrowing set forthherein, request in accordance with Section 2.03 or 2.05 that such paymentbe financed with an ABR Revolving Borrowing or Swingline Loan in an equivalentamount and, to the extent so financed, the Borrower’s obligation to make suchpayment shall be discharged and replaced by the resulting ABR RevolvingBorrowing or Swingline Loan.  If theBorrower fails to make such payment when due, the Administrative Agent shallnotify each Lender of the applicable LC Disbursement, the payment then due fromthe Borrower in respect thereof and such Lender’s Applicable Percentagethereof.  Promptly following receipt ofsuch notice, each Lender shall pay to the Administrative Agent its ApplicablePercentage of the payment then due from the Borrower, in the same manner asprovided in Section 2.07 with respect to Loans made by such Lender (and Section 2.07shall apply, mutatis mutandis, to the payment obligations of the Lenders), andthe Administrative Agent shall promptly pay to the Issuing Bank the amounts soreceived by it from the Lenders. Promptly following receipt by the Administrative Agent of any paymentfrom the Borrower pursuant to this paragraph, the Administrative Agent shalldistribute such payment to the Issuing Bank or, to the extent that Lenders havemade payments pursuant to this paragraph to reimburse the Issuing Bank, then tosuch Lenders and the Issuing Bank as their interests may appear.  Any payment made by a Lender pursuant to thisparagraph to reimburse the Issuing Bank for any LC Disbursement (other than thefunding of ABR Revolving Loans or a Swingline Loan as contemplated above) shallnot constitute a Loan and shall not relieve the Borrower of its obligation toreimburse such LC Disbursement.

###  

### (f)  ObligationsAbsolute.  The Borrower’sobligation to reimburse LC Disbursements as provided in paragraph (e) ofthis Section shall be absolute, unconditional and irrevocable, and shallbe performed strictly in accordance with the terms of this Agreement under anyand all circumstances whatsoever and irrespective of (i) any lack ofvalidity or enforceability of any Letter of Credit or this Agreement, or anyterm or provision therein, (ii) any draft or other document presentedunder a Letter of Credit proving to be forged, fraudulent or invalid in anyrespect or any statement therein being 

 

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### untrue or inaccurate in any respect, (iii) payment by the IssuingBank under a Letter of Credit against presentation of a draft or other documentthat does not comply with the terms of such Letter of Credit, or (iv) anyother event or circumstance whatsoever, whether or not similar to any of theforegoing, that might, but for the provisions of this Section, constitute alegal or equitable discharge of, or provide a right of setoff against, theBorrower’s obligations hereunder. Neither the Administrative Agent, the Lenders nor the Issuing Bank, norany of their Related Parties, shall have any liability or responsibility byreason of or in connection with the issuance or transfer of any Letter ofCredit or any payment or failure to make any payment thereunder (irrespectiveof any of the circumstances referred to in the preceding sentence), or anyerror, omission, interruption, loss or delay in transmission or delivery of anydraft, notice or other communication under or relating to any Letter of Credit(including any document required to make a drawing thereunder), any error ininterpretation of technical terms or any consequence arising from causes beyondthe control of the Issuing Bank; provided that the foregoing shall notbe construed to excuse the Issuing Bank from liability to the Borrower to theextent of any direct damages (as opposed to consequential damages, claims inrespect of which are hereby waived by the Borrower to the extent permitted byapplicable law) suffered by the Borrower that are caused by the Issuing Bank’sfailure to exercise care when determining whether drafts and other documentspresented under a Letter of Credit comply with the terms thereof.  The parties hereto expressly agree that, inthe absence of gross negligence or willful misconduct on the part of theIssuing Bank (as finally determined by a court of competent jurisdiction), theIssuing Bank shall be deemed to have exercised care in each suchdetermination.  In furtherance of theforegoing and without limiting the generality thereof, the parties agree that,with respect to documents presented which appear on their face to be insubstantial compliance with the terms of a Letter of Credit, the Issuing Bankmay, in its sole discretion, either accept and make payment upon such documentswithout responsibility for further investigation, regardless of any notice orinformation to the contrary, or refuse to accept and make payment upon suchdocuments if such documents are not in strict compliance with the terms of suchLetter of Credit.

###  

### (g)  DisbursementProcedures.  The Issuing Bankshall, promptly following its receipt thereof, examine all documents purportingto represent a demand for payment under a Letter of Credit.  The Issuing Bank shall promptly notify theAdministrative Agent and the Borrower by telephone (confirmed by facsimile) ofsuch demand for payment and whether the Issuing Bank has made or will make anLC Disbursement thereunder; provided that any failure to give or delayin giving such notice shall not relieve the Borrower of its obligation toreimburse the Issuing Bank and the Lenders with respect to any such LCDisbursement.

###  

### (h)  InterimInterest.  If the Issuing Bankshall make any LC Disbursement, then, unless the Borrower shall reimburse suchLC Disbursement in full on the date such LC Disbursement is made, the unpaidamount thereof shall bear interest, for each day from and including the datesuch LC Disbursement is made to but excluding the date that the Borrowerreimburses such LC Disbursement, at the rate per annum then applicable to ABRRevolving Loans; provided that, if the Borrower fails to reimburse suchLC Disbursement when due pursuant to paragraph (e) of this Section, then Section 2.13(d) shallapply.  Interest accrued pursuant to thisparagraph shall be for the account of the Issuing Bank, except that interestaccrued on and after the date of payment by any Lender pursuant to paragraph (e) ofthis Section to reimburse the Issuing Bank shall be for the account ofsuch Lender to the extent of such payment.

###  

### (i)  Replacementof the Issuing Bank.  TheIssuing Bank may be replaced at any time by written agreement among theBorrower, the Administrative Agent, the replaced Issuing Bank and the successorIssuing Bank.  The Administrative Agentshall notify the Lenders of any such replacement of the Issuing Bank.  At the time any such replacement shall becomeeffective, the Borrower shall pay all unpaid fees accrued for the account ofthe replaced Issuing Bank pursuant to 

 

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### Section 2.12(b).  From andafter the effective date of any such replacement, (i) the successorIssuing Bank shall have all the rights and obligations of the Issuing Bankunder this Agreement with respect to Letters of Credit to be issued thereafterand (ii) references herein to the term “Issuing Bank” shall be deemedto refer to such successor or to any previous Issuing Bank, or to suchsuccessor and all previous Issuing Banks, as the context shall require.  After the replacement of an Issuing Bankhereunder, the replaced Issuing Bank shall remain a party hereto and shallcontinue to have all the rights and obligations of an Issuing Bank under thisAgreement with respect to Letters of Credit issued by it prior to suchreplacement, but shall not be required to issue additional Letters of Credit.

###  

### (j)  CashCollateralization.  If anyEvent of Default shall occur and be continuing, on the Business Day that theBorrower receives notice from the Administrative Agent or the Required  Lenders (or, if the maturity of the Loans hasbeen accelerated, Lenders with LC Exposure representing greater than 50% of thetotal LC Exposure) demanding the deposit of cash collateral pursuant to thisparagraph, the Borrower shall deposit in an account with the AdministrativeAgent, in the name of the Administrative Agent and for the benefit of theSecured Parties (the “LC Collateral Account”), an amount in cash equalto 103% of the LC Exposure as of such date plus accrued and unpaid interestthereon; provided that the obligation to deposit such cash collateralshall become effective immediately, and such deposit shall become immediatelydue and payable, without demand or other notice of any kind, upon theoccurrence of any Event of Default with respect to the Borrower described inclause (h) or (i) of Article VII.  Such deposit shall be held by theAdministrative Agent as collateral for the payment and performance of theSecured Obligations.  The AdministrativeAgent shall have exclusive dominion and control, including the exclusive rightof withdrawal, over such account and the Borrower hereby grants theAdministrative Agent a security interest in the LC Collateral Account.  Other than any interest earned on theinvestment of such deposits, which investments shall be made at the option andPermitted Discretion of the Administrative Agent and at the Borrower’s risk andexpense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate insuch account.  Moneys in such accountshall be applied by the Administrative Agent to reimburse the Issuing Bank forLC Disbursements for which it has not been reimbursed and, to the extent not soapplied, shall be held for the satisfaction of the reimbursement obligations ofthe Borrower for the LC Exposure at such time or, if the maturity of the Loanshas been accelerated (but subject to the consent of Lenders with LC Exposurerepresenting greater than 50% of the total LC Exposure), be applied to satisfyother Secured Obligations.  If theBorrower is required to provide an amount of cash collateral hereunder as a resultof the occurrence of an Event of Default, such amount (to the extent notapplied as aforesaid) shall be returned to the Borrower within three (3) BusinessDays after all such Defaults have been cured or waived.

###  

## SECTION 2.07.  Funding ofBorrowings.  (a)  EachLender shall make each Loan to be made by it hereunder on the proposed datethereof by wire transfer of immediately available funds by 2:00 p.m., NewYork City time, to the account of the Administrative Agent most recentlydesignated by it for such purpose by notice to the Lenders in an amount equalto such Lender’s Applicable Percentage; provided that, Swingline Loansshall be made as provided in Section 2.05. The Administrative Agent will make such Loans available to the Borrowerby promptly crediting the amounts so received, in like funds, to the FundingAccount; provided that ABR Revolving Loans made to finance thereimbursement of (i) an LC Disbursement as provided in Section 2.06(e) shallbe remitted by the Administrative Agent to the Issuing Bank and (ii) aProtective Advance or an Overadvance shall be retained by the AdministrativeAgent.

##  

### (b)  Unless the Administrative Agentshall have received notice from a Lender prior to the proposed date of anyBorrowing that such Lender will not make available to the Administrative Agentsuch Lender’s share of such Borrowing, the Administrative Agent may assume thatsuch Lender has made such share available on such date in accordance withparagraph (a) of this Section and may, 

 

35

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### in reliance upon such assumption, make available to the Borrower acorresponding amount.  In such event, ifa Lender has not in fact made its share of the applicable Borrowing availableto the Administrative Agent, then the applicable Lender and the Borrowerseverally agree to pay to the Administrative Agent forthwith on demand suchcorresponding amount with interest thereon, for each day from and including thedate such amount is made available to the Borrower to but excluding the date ofpayment to the Administrative Agent, at (i) in the case of such Lender,the greater of the Federal Funds Effective Rate and a rate determined by theAdministrative Agent in accordance with banking industry rules oninterbank compensation or (ii) in the case of the Borrower, the interestrate applicable to ABR Loans.  If suchLender pays such amount to the Administrative Agent, then such amount shallconstitute such Lender’s Loan included in such Borrowing.

###  

## SECTION 2.08.  Interest Elections.  (a)  Each Revolving Borrowing initiallyshall be of the Type specified in the applicable Borrowing Request and, in thecase of a Eurodollar Revolving Borrowing, shall have an initial Interest Periodas specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to adifferent Type or to continue such Borrowing and, in the case of a EurodollarRevolving Borrowing, may elect Interest Periods therefor, all as provided inthis Section.  The Borrower may electdifferent options with respect to different portions of the affected Borrowing,in which case each such portion shall be allocated ratably among the Lendersholding the Loans comprising such Borrowing, and the Loans comprising each suchportion shall be considered a separate Borrowing.  This Section shall not apply toSwingline Borrowings, Overadvances or Protective Advances, which may not beconverted or continued.

##  

### (b)  To make an election pursuant tothis Section, the Borrower shall notify the Administrative Agent of suchelection by telephone by the time that a Borrowing Request would be requiredunder Section 2.03 if the Borrower were requesting a Revolving Borrowingof the Type resulting from such election to be made on the effective date ofsuch election.  Each such telephonicInterest Election Request shall be irrevocable and shall be confirmed promptlyby hand delivery or facsimile to the Administrative Agent of a written InterestElection Request in a form approved by the Administrative Agent and signed bythe Borrower.

###  

### (c)  Each telephonic and writtenInterest Election Request shall specify the following information in compliancewith Section 2.02:

###  

#### (i)  the Borrowing to which suchInterest Election Request applies and, if different options are being electedwith respect to different portions thereof, the portions thereof to beallocated to each resulting Borrowing (in which case the information to bespecified pursuant to clauses (iii) and (iv) below shall be specifiedfor each resulting Borrowing);

####  

#### (ii)  the effective date of the electionmade pursuant to such Interest Election Request, which shall be a Business Day;

####  

#### (iii)  whether the resulting Borrowingis to be an ABR Borrowing or a Eurodollar Borrowing; and

####  

#### (iv)  if the resulting Borrowing is aEurodollar Borrowing, the Interest Period to be applicable thereto after givingeffect to such election, which shall be a period contemplated by the definitionof the term “Interest Period”.

####  

If any such InterestElection Request requests a Eurodollar Borrowing but does not specify anInterest Period, then the Borrower shall be deemed to have selected an InterestPeriod of one month’s duration.

 

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### (d)  Promptly following receipt of anInterest Election Request, the Administrative Agent shall advise each Lender ofthe details thereof and of such Lender’s portion of each resulting Borrowing.

###  

### (e)  If the Borrower fails to deliver atimely Interest Election Request with respect to a Eurodollar RevolvingBorrowing prior to the end of the Interest Period applicable thereto, then,unless such Borrowing is repaid as provided herein, at the end of such InterestPeriod such Borrowing shall be converted to an ABR Borrowing.  Notwithstanding any contrary provisionhereof, if an Event of Default has occurred and is continuing and theAdministrative Agent, at the request of the Required Lenders, so notifies theBorrower, then, so long as an Event of Default is continuing (i) nooutstanding Revolving Borrowing may be converted to or continued as aEurodollar Borrowing and (ii) unless repaid, each Eurodollar RevolvingBorrowing shall be converted to an ABR Borrowing at the end of the InterestPeriod applicable thereto.

###  

## SECTION 2.09.  Termination andReduction of Commitments; Increase in Commitments.  (a)  Unless previously terminated, theCommitments shall terminate on the Maturity Date.

##  

### (b)  The Borrower may at any timeterminate the Commitments upon (i) the payment in full of all outstandingLoans, together with accrued and unpaid interest thereon and on any Letters ofCredit, (ii) the cancellation and return of all outstanding Letters ofCredit (or alternatively, with respect to each such Letter of Credit, thefurnishing to the Administrative Agent of a cash deposit (or at the discretionof the Administrative Agent a back up standby letter of credit satisfactory tothe Administrative Agent) equal to 103% of the LC Exposure as of such date), (iii) thepayment in full of the accrued and unpaid fees and (iv) the payment infull of all reimbursable expenses and other Obligations together with accruedand unpaid interest thereon.

###  

### (c)  The Borrower may from time to timereduce the Commitments; provided that (i) each reduction of theCommitments shall be in an amount that is an integral multiple of $1,000,000and not less than $5,000,000 and (ii) the Borrower shall not reduce theCommitments if, after giving effect to any concurrent prepayment of theRevolving Loans in accordance with Section 2.10, the sum of the RevolvingExposures would exceed the lesser of the total Commitments and the BorrowingBase.

###  

### (d)  The Borrower shall notify theAdministrative Agent of any election to terminate or reduce the Commitmentsunder paragraph (b) or (c) of this Section at least three (3) BusinessDays prior to the effective date of such termination or reduction, specifyingsuch election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shalladvise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shallbe irrevocable; provided that a notice of termination of the Commitmentsdelivered by the Borrower may state that such notice is conditioned upon theeffectiveness of other credit facilities, in which case such notice may berevoked by the Borrower (by notice to the Administrative Agent on or prior tothe specified effective date) if such condition is not satisfied.  Any termination or reduction of theCommitments shall be permanent.  Eachreduction of the Commitments shall be made ratably among the Lenders inaccordance with their respective Commitments.

###  

### (e)  The Borrower shall have the rightto increase the Aggregate Commitment by obtaining additional Commitments,either from one or more of the Lenders or another lending institution providedthat (i) any such request for an increase shall be in a minimum amount of$5,000,000, (ii) the Borrower may make a maximum of two (2) suchrequests, (iii) after giving effect thereto, the Aggregate Commitment doesnot exceed $60,000,000, (iv) the Administrative Agent has approved theidentity of any such new Lender, such approval not to be unreasonably withheld,(v) any 

 

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### such new Lender assumes all of the rights and obligations of a “Lender”hereunder, (vi) the procedure described in Section 2.09(f) havebeen satisfied and (vii) solely during the period commencing on theEffective Date and ending 90 days thereafter, the percentage rate on anyupfront or similar fee paid to such new Lender in respect of its Commitment(the “New Upfront Fee Rate”) shall not exceed the percentage rate onupfront fees paid to the other Lenders in respect of their Commitments (the “OriginalUpfront Fee Rate”) unless the Borrower pays the incremental difference (ifpositive) in percentage between the New Upfront Fee Rate and the OriginalUpfront Fee Rate to such other Lenders in respect of their Commitments.

###  

### (f)  Any amendment hereto for such anincrease or addition shall be in form and substance satisfactory to theAdministrative Agent and shall only require the written signatures of theAdministrative Agent, the Borrower and the Lender(s) being added orincreasing their Commitment.  As acondition precedent to such an increase, Borrower shall deliver to theAdministrative Agent (i) a certificate of each Loan Party signed by anauthorized officer of such Loan Party (A) certifying and attaching theresolutions adopted by such Loan Party approving or consenting to suchincrease, and (B) in the case of the Borrower, certifying that, before andafter giving effect to such increase, (1) the representations andwarranties contained in Article III and the other Loan Documentsare true and correct, except to the extent that such representations and warrantiesspecifically refer to an earlier date, in which case they are true and correctas of such earlier date, and (2) no Default exists and (ii) legalopinions and documents consistent with those delivered on the Effective Date asto the corporate power and authority of the Loan Parties.

###  

### (g)  Within a reasonable time after theeffective date of any increase, the Administrative Agent shall, and is herebyauthorized and directed to, revise Schedule 2.01 to reflect suchincrease and shall distribute such revised Schedule 2.01 to each of theLenders and the Borrower, whereupon such revised Schedule 2.01 shallreplace the old Schedule 2.01 and become part of this Agreement.  On the Business Day following any suchincrease, all outstanding ABR Loans shall be reallocated among the Lenders(including any newly added Lenders) in accordance with the Lenders’ respectiverevised Applicable Percentages. Eurodollar Loans shall not be reallocated among the Lenders prior to theexpiration of the applicable Interest Period in effect at the time of any suchincrease.

###  

## SECTION 2.10.  Repayment andAmortization of Loans; Evidence of Debt.  (a)  The Borrower hereby unconditionallypromises to pay (i) to the Administrative Agent for the account of eachLender the then unpaid principal amount of each Revolving Loan on the MaturityDate, (ii) to the Administrative Agent the then unpaid amount of eachProtective Advance on the earlier of the Maturity Date and demand by theAdministrative Agent and (iii) to the Administrative Agent the then unpaidprincipal amount of each Overadvance on the earlier of the Maturity Date anddemand by the Administrative Agent.

##  

### (b)  At all times that full cashdominion is in effect pursuant to Section 7.3 of the Security Agreement,on each Business Day, the Administrative Agent shall apply all funds creditedto the Collection Account the previous Business Day (whether or not immediatelyavailable) first to prepay any Protective Advances and Overadvances thatmay be outstanding, pro rata, and second to prepay the Revolving Loans(including Swing Line Loans) and to cash collateralize outstanding LCExposure.  If no Default is continuing,the amount of such cash collateral securing outstanding LC Exposure shall bereturned to the Borrower within three (3) Business Days.

###  

### (c)  Each Lender shall maintain inaccordance with its usual practice an account or accounts evidencing theindebtedness of the Borrower to such Lender resulting from each Loan made 

 

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### by such Lender, including the amounts of principal and interest payableand paid to such Lender from time to time hereunder.

###  

### (d)  The Administrative Agent shallmaintain accounts in which it shall record (i) the amount of each Loanmade hereunder, the Class and Type thereof and the Interest Periodapplicable thereto, (ii) the amount of any principal or interest due andpayable or to become due and payable from the Borrower to each Lender hereunderand (iii) the amount of any sum received by the Administrative Agenthereunder for the account of the Lenders and each Lender’s share thereof.

###  

### (e)  The entries made in the accountsmaintained pursuant to paragraph (c) or (d) of this Section shallbe prima facie evidence of the existence and amounts of the obligations recordedtherein; provided that the failure of any Lender or the AdministrativeAgent to maintain such accounts or any error therein shall not in any manneraffect the obligation of the Borrower to repay the Loans in accordance with theterms of this Agreement.

###  

### (f)  Any Lender may request that Loansmade by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to suchLender a promissory note payable to the order of such Lender (or, if requestedby such Lender, to such Lender and its registered assigns) and in a formapproved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interestthereon shall at all times (including after assignment pursuant to Section 9.04)be represented by one or more promissory notes in such form payable to theorder of the payee named therein (or, if such promissory note is a registerednote, to such payee and its registered assigns).

###  

## SECTION 2.11.  Prepayment of Loans.  (a)  The Borrower shall have the rightat any time and from time to time to prepay any Borrowing in whole or in part,subject to prior notice in accordance with paragraph (f) of this Section.

##  

### (b)  Except for Overadvances permittedunder Section 2.05, in the event and on such occasion that the totalRevolving Exposure exceeds (the amount of such excess, the “Excess”) thelesser of (A) the Aggregate Commitment or (B) the Borrowing Base, theBorrower shall prepay the Revolving Loans, LC Exposure and/or Swingline Loansin an aggregate amount equal to such Excess. If such Excess is subsequently reduced and no Default is continuing, anysuch cash collateral so provided by the Borrower shall be returned to theBorrower (in an amount equal to the lesser of (i) any such reduction inthe Excess and (ii) the amount of such cash collateral) within three (3) BusinessDays after such reduction.

###  

### (c)  In the event and on each occasionthat any Net Proceeds are received by or on behalf of any Loan Party in respectof any Prepayment Event, the Borrower shall, within three (3) BusinessDays after such Net Proceeds are received by any Loan Party, prepay theObligations as set forth in Section 2.11(e) below in an aggregateamount equal to 100% of such Net Proceeds.

###  

### (d)  [Intentionally Omitted].

###  

### (e)  All such amounts pursuant to Section 2.11(c) shallbe applied, first to prepay any Protective Advances and Overadvancesthat may be outstanding, pro rata, and second to prepay the RevolvingLoans (including Swing Line Loans) without a corresponding reduction in theCommitment and, so long as a Default is continuing, to cash collateralizeoutstanding LC Exposure.

###  

### (f)  The Borrower shall notify theAdministrative  Agent (and, in the caseof prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmedby facsimile) of any 

 

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### prepayment hereunder (i) in the case of prepayment of a EurodollarRevolving Borrowing, not later than 11:00 a.m., New York City time, three (3) BusinessDays before the date of prepayment, or (ii) in the case of prepayment ofan ABR Revolving Borrowing, not later than 11:00 a.m., New York City time,one (1) Business Day before the date of prepayment.  Each such notice shall be irrevocable andshall specify the prepayment date and the principal amount of each Borrowing orportion thereof to be prepaid; provided that, if a notice of prepaymentis given in connection with a conditional notice of termination of theCommitments as contemplated by Section 2.09, then such notice ofprepayment may be revoked if such notice of termination is revoked inaccordance with Section 2.09. Promptly following receipt of any such notice relating to a RevolvingBorrowing, the Administrative Agent shall advise the Lenders of the contentsthereof.   Each partial prepayment of anyRevolving Borrowing shall be in an amount that would be permitted in the caseof an advance of a Revolving Borrowing of the same Type as provided in Section 2.02.  Each prepayment of a Revolving Borrowingshall be applied ratably to the Revolving Loans included in the prepaidBorrowing.  Prepayments shall beaccompanied by accrued interest to the extent required by Section 2.13.

###  

## SECTION 2.12.  Fees.  (a)  The Borrower agrees to pay to theAdministrative Agent for the account of each Lender a commitment fee, whichshall accrue at the Applicable Rate on the average daily amount of theAvailable Commitment of such Lender during the period from and including theEffective Date to but excluding the date on which the Lenders’ Commitmentsterminate.  Accrued commitment fees shallbe payable in arrears on the first day of each calendar quarter and on the dateon which the Commitments terminate, commencing on the first such date to occurafter the date hereof.  All commitmentfees shall be computed on the basis of a year of 360 days and shall be payablefor the actual number of days elapsed.

##  

### (b)  The Borrower agrees to pay (i) tothe Administrative Agent for the account of each Lender a participation feewith respect to its participations in Letters of Credit, which shall accrue, inthe case of standby Letters of Credit at the same Applicable Rate and, in thecase of Commercial Letters of Credit at 50% of such Applicable Rate, in eachcase used to determine the interest rate applicable to Eurodollar RevolvingLoans on the average daily amount of such Lender’s LC Exposure (excluding anyportion thereof attributable to unreimbursed LC Disbursements) during theperiod from and including the Effective Date to but excluding the later of thedate on which such Lender’s Commitment terminates and the date on which suchLender ceases to have any LC Exposure, and (ii) to the Issuing Bank afronting fee, which shall accrue at the rate of 0.125% per annum on the averagedaily amount of the LC Exposure (excluding any portion thereof attributable tounreimbursed LC Disbursements) during the period from and including theEffective Date to but excluding the later of the date of termination of theCommitments and the date on which there ceases to be any LC Exposure, as wellas the Issuing Bank’s standard fees and commissions (including withoutlimitation standard commissions with respect to Commercial Letters of Credit,payable at the time of invoice of such amounts) with respect to the issuance,amendment, renewal or extension of any Letter of Credit or processing ofdrawings thereunder.  Participation feesand fronting fees accrued through and including the last day of each calendarquarter shall be payable on the first day of each calendar quarter followingsuch last day, commencing on the first such date to occur after the EffectiveDate; provided that all such fees shall be payable on the date on whichthe Commitments terminate and any such fees accruing after the date on whichthe Commitments terminate shall be payable on demand.  Any other fees payable to the Issuing Bankpursuant to this paragraph shall be payable within ten (10) days afterdemand.  All participation fees andfronting fees shall be computed on the basis of a year of 360 days and shall bepayable for the actual number of days elapsed.

###  

### (c)  The Borrower agrees to pay to theAdministrative Agent, for its own account, fees payable in the amounts and atthe times separately agreed upon between the Borrower and the AdministrativeAgent.

 

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### (d)  All fees payable hereunder shall bepaid on the dates due, in immediately available funds, to the AdministrativeAgent (or to the Issuing Bank, in the case of fees payable to it) fordistribution, in the case of commitment fees and participation fees, to theLenders.  Fees paid shall not berefundable under any circumstances.

###  

## SECTION 2.13.  Interest.  (a)  The Loans comprising each ABRBorrowing (including each Swingline Loan) shall bear interest at the AlternateBase Rate plus the Applicable Rate.

##  

### (b)  The Loans comprising eachEurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for theInterest Period in effect for such Borrowing plus the Applicable Rate.

###  

### (c)  Each Protective Advance and eachOveradvance shall bear interest at the Alternate Base Rate plus the ApplicableRate for Revolving Loans plus 2%.

###  

### (d)  Notwithstanding the foregoing,during the occurrence and continuance of an Event of Default, theAdministrative Agent or the Required Lenders may, at their option, by notice tothe Borrower (which notice may be revoked at the option of the Required Lendersnotwithstanding any provision of Section 9.02 requiring the consent of “eachLender directly affected thereby” for reductions in interestrates), declare that (i) all Loans shall bear interest at 2% plus the rateotherwise applicable to such Loans as provided in the preceding paragraphs ofthis Section or (ii) in the case of any other amount outstandinghereunder, such amount shall accrue at 2% plus the rate applicable to such feeor other obligation as provided hereunder.

###  

### (e)  Accrued interest on each Loan (forABR Loans, accrued through the last day of the prior calendar month) shall bepayable in arrears on each Interest Payment Date for such Loan and upontermination of the Commitments; provided that (i) interest accruedpursuant to paragraph (d) of this Section shall be payable on demand,(ii) in the event of any repayment or prepayment of any Loan (other than aprepayment of an ABR Revolving Loan prior to the end of the AvailabilityPeriod), accrued interest on the principal amount repaid or prepaid shall bepayable on the date of such repayment or prepayment and (iii) in the eventof any conversion of any Eurodollar Loan prior to the end of the currentInterest Period therefor, accrued interest on such Loan shall be payable on theeffective date of such conversion.

###  

### (f)  All interest hereunder shall becomputed on the basis of a year of 360 days, except that interest computed byreference to the Alternate Base Rate at times when the Alternate Base Rate isbased on the Prime Rate shall be computed on the basis of a year of 365 days(or 366 days in a leap year), and in each case shall be payable for the actualnumber of days elapsed.  The applicableAlternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by theAdministrative Agent, and such determination shall be conclusive absentmanifest error.

###  

## SECTION 2.14.  Alternate Rate ofInterest.  If prior to thecommencement of any Interest Period for a Eurodollar Borrowing:

##  

### (a)  the Administrative Agent determines(which determination shall be conclusive absent manifest error) that adequateand reasonable means do not exist for ascertaining the Adjusted LIBO Rate orthe LIBO Rate, as applicable, for such Interest Period; or

###  

### (b) the Administrative Agent is advisedby the Required Lenders that the Adjusted LIBO Rate or the LIBO Rate, asapplicable, for such Interest Period will not adequately and fairly reflect thecost to such Lenders (or Lender) of making or maintaining their Loans (or itsLoan) included in such Borrowing for such Interest Period;

 

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then the AdministrativeAgent shall give notice thereof to the Borrower and the Lenders by telephone orfacsimile as promptly as practicable thereafter and, until the AdministrativeAgent notifies the Borrower and the Lenders that the circumstances giving riseto such notice no longer exist, (i) any Interest Election Request thatrequests the conversion of any Revolving Borrowing to, or continuation of anyRevolving Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) ifany Borrowing Request requests a Eurodollar Revolving Borrowing, such Borrowingshall be made as an ABR Borrowing.

 

## SECTION 2.15.  Increased Costs.  (a)  If any Change in Law shall:

##  

#### (i)   impose, modify or deem applicable any reserve, special deposit orsimilar requirement against assets of, deposits with or for the account of, orcredit extended by, any Lender (except any such reserve requirement reflectedin the Adjusted LIBO Rate) or the Issuing Bank; or

####  

#### (ii)   impose on any Lender or the Issuing Bank or the London interbank marketany other condition affecting this Agreement or Eurodollar Loans made by suchLender or any Letter of Credit or participation therein;

####  

and the result of any of theforegoing shall be to increase the cost to such Lender of making or maintainingany Eurodollar Loan (or of maintaining its obligation to make any such Loan) orto increase the cost to such Lender or the Issuing Bank of participating in,issuing or maintaining any Letter of Credit or to reduce the amount of any sumreceived or receivable by such Lender or the Issuing Bank hereunder (whether ofprincipal, interest or otherwise), then the Borrower will pay to such Lender orthe Issuing Bank, as the case may be, such additional amount or amounts as willcompensate such Lender or the Issuing Bank, as the case may be, for suchadditional costs incurred or reduction suffered.

 

### (b)  If any Lender or the Issuing Bankdetermines that any Change in Law regarding capital requirements has or wouldhave the effect of reducing the rate of return on such Lender’s or the IssuingBank’s capital or on the capital of such Lender’s or the Issuing Bank’s holdingcompany, if any, as a consequence of this Agreement or the Loans made by, orparticipations in Letters of Credit held by, such Lender, or the Letters ofCredit issued by the Issuing Bank, to a level below that which such Lender orthe Issuing Bank or such Lender’s or the Issuing Bank’s holding company couldhave achieved but for such Change in Law (taking into consideration such Lender’sor the Issuing Bank’s policies and the policies of such Lender’s or the IssuingBank’s holding company with respect to capital adequacy), then from time totime the Borrower will pay to such Lender or the Issuing Bank, as the case maybe, such additional amount or amounts as will compensate such Lender or theIssuing Bank or such Lender’s or the Issuing Bank’s holding company for anysuch reduction suffered.

###  

### (c)  A certificate of a Lender or theIssuing Bank setting forth the amount or amounts necessary to compensate suchLender or the Issuing Bank or its holding company, as the case may be, asspecified in paragraph (a) or (b) of this Section shall bedelivered to the Borrower and shall be conclusive absent manifest error.  The Borrower shall pay such Lender or theIssuing Bank, as the case may be, the amount shown as due on any such certificatewithin ten (10) days after receipt thereof.

###  

### (d)  Failure or delay on the part of anyLender or the Issuing Bank to demand compensation pursuant to this Section shallnot constitute a waiver of such Lender’s or the Issuing Bank’s right to demandsuch compensation; provided that the Borrower shall not be required tocompensate a Lender or the Issuing Bank pursuant to this Section for anyincreased costs or reductions incurred more than 270 days prior to the datethat such Lender or the Issuing Bank, as the case may be, notifies the Borrowerof the Change in Law giving rise to such increased costs or reductions and ofsuch Lender’s or the Issuing Bank’s intention to claim compensation therefor; providedfurther that, if 

 

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### the Change in Law giving rise to such increased costs or reductions isretroactive, then the 270-day period referred to above shall be extended toinclude the period of retroactive effect thereof.

###  

## SECTION 2.16.  Break Funding Payments.  In the event of (a) the payment of anyprincipal of any Eurodollar Loan other than on the last day of an InterestPeriod applicable thereto (including as a result of an Event of Default), (b) theconversion of any Eurodollar Loan other than on the last day of the InterestPeriod applicable thereto, (c) the failure to borrow, convert, continue orprepay any Eurodollar Loan on the date specified in any notice deliveredpursuant hereto (regardless of whether such notice may be revoked under Section 2.09(d) andis revoked in accordance therewith), or (d) the assignment of anyEurodollar Loan other than on the last day of the Interest Period applicablethereto as a result of a request by the Borrower pursuant to Section 2.19,then, in any such event, the Borrower shall compensate each Lender for theloss, cost and expense attributable to such event.  In the case of a Eurodollar Loan, such loss,cost or expense to any Lender shall be deemed to include an amount determinedby such Lender to be the excess, if any, of (i) the amount of interestwhich would have accrued on the principal amount of such Loan had such eventnot occurred, at the Adjusted LIBO Rate that would have been applicable to suchLoan, for the period from the date of such event to the last day of the thencurrent Interest Period therefor (or, in the case of a failure to borrow,convert or continue, for the period that would have been the Interest Periodfor such Loan), over (ii) the amount of interest which would accrue onsuch principal amount for such period at the interest rate which such Lenderwould bid were it to bid, at the commencement of such period, for dollardeposits of a comparable amount and period from other banks in the eurodollarmarket.  A certificate of any Lendersetting forth any amount or amounts that such Lender is entitled to receivepursuant to this Section shall be delivered to the Borrower and shall beconclusive absent manifest error.  TheBorrower shall pay such Lender the amount shown as due on any such certificatewithin ten (10) days after receipt thereof.

##  

## SECTION 2.17.  Taxes.  (a) Any and all payments by or onaccount of any obligation of the Borrower hereunder shall be made free andclear of and without deduction for any Indemnified Taxes or Other Taxes; providedthat if the Borrower shall be required to deduct any Indemnified Taxes or OtherTaxes from such payments, then (i) the sum payable shall be increased asnecessary so that after making all required deductions (including deductionsapplicable to additional sums payable under this Section) the AdministrativeAgent, Lender or Issuing Bank (as the case may be) receives an amount equal tothe sum it would have received had no such deductions been made, (ii) theBorrower shall make such deductions and (iii) the Borrower shall pay thefull amount deducted to the relevant Governmental Authority in accordance withapplicable law.

##  

### (b)  In addition, the Borrower shall payany Other Taxes to the relevant Governmental Authority in accordance withapplicable law.

###  

### (c)  The Borrower shall indemnify theAdministrative Agent, each Lender and the Issuing Bank, within ten (10) daysafter written demand therefor, for the full amount of any Indemnified Taxes orOther Taxes paid by the Administrative Agent, such Lender or the Issuing Bank,as the case may be, on or with respect to any payment by or on account of anyobligation of the Borrower hereunder (including Indemnified Taxes or OtherTaxes imposed or asserted on or attributable to amounts payable under thisSection) and any penalties, interest and reasonable expenses arising therefromor with respect thereto, whether or not such Indemnified Taxes or Other Taxeswere correctly or legally imposed or asserted by the relevant GovernmentalAuthority.  A certificate as to the amountof such payment or liability delivered to the Borrower by a Lender or theIssuing Bank, or by the Administrative Agent on its own behalf or on behalf ofa Lender or the Issuing Bank, shall be conclusive absent manifest error.

 

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### (d)  Each Lender and the Issuing Bankshall indemnify the Borrower and the Administrative Agent, within ten (10) daysafter written demand therefor, against any and all Taxes and any and allrelated losses, claims, liabilities, penalties, interest and reasonableexpenses (including the fees, charges and disbursements of any counsel for theBorrower or the Administrative Agent) incurred by or asserted against theBorrower or the Administrative Agent by any Governmental Authority as a resultof the failure by such Lender or the Issuing Bank, as the case may be, todeliver, or as a result of the inaccuracy, inadequacy or deficiency of, anydocumentation required to be delivered to the Borrower or the AdministrativeAgent pursuant to Section 2.17(f). Each Lender and the Issuing Bank hereby authorizes the AdministrativeAgent to set off and apply any and all amounts at any time owing to such Lenderor the Issuing Bank, as the case may be, under this Agreement or any other LoanDocument against any amount due to the Administrative Agent under this Section 2.17(d).

###  

### (e)  As soon as practicable after anypayment of Indemnified Taxes or Other Taxes by the Borrower to a GovernmentalAuthority, the Borrower shall deliver to the Administrative Agent the originalor a certified copy of a receipt issued by such Governmental Authorityevidencing such payment, a copy of the return reporting such payment or otherevidence of such payment reasonably satisfactory to the Administrative Agent.

###  

### (f)  Any Foreign Lender that is entitledto an exemption from or reduction of withholding tax under the law of thejurisdiction in which the Borrower is located, or any treaty to which suchjurisdiction is a party, with respect to payments under this Agreement shalldeliver to the Borrower (with a copy to the Administrative Agent), at the timeor times prescribed by applicable law, such properly completed and executeddocumentation prescribed by applicable law or reasonably requested by theBorrower as will permit such payments to be made without withholding or at areduced rate.

###  

### (g)  If the Administrative Agent or aLender determines, in its sole good faith discretion, that it has received arefund of any Taxes or Other Taxes as to which it has been indemnified by theBorrower or with respect to which the Borrower has paid additional amountspursuant to this Section 2.17, it shall pay over such refund to theBorrower (but only to the extent of indemnity payments made, or additionalamounts paid, by the Borrower under this Section 2.17 with respect to theTaxes or Other Taxes giving rise to such refund), net of all out-of-pocketexpenses of the Administrative Agent or such Lender and without interest (otherthan any interest paid by the relevant Governmental Authority with respect tosuch refund); provided, that the Borrower, upon the request of theAdministrative Agent or such Lender, agrees to repay the amount paid over tothe Borrower (plus any penalties, interest or other charges imposed by therelevant Governmental Authority) to the Administrative Agent or such Lender inthe event the Administrative Agent or such Lender is required to repay suchrefund to such Governmental Authority. This Section shall not be construedto require the Administrative Agent or any Lender to make available its taxreturns (or any other information relating to its taxes which it deemsconfidential) to the Borrower or any other Person.

###  

## SECTION 2.18.  Payments Generally;Allocation of Proceeds; Sharing of Set-offs.  (a)  The Borrower shall make eachpayment required to be made by it hereunder (whether of principal, interest,fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15,2.16 or 2.17, or otherwise) prior to 3:00 p.m., New York City time, on thedate when due, in immediately available funds, without set off orcounterclaim.  Any amounts received aftersuch time on any date may, in the discretion of the Administrative Agent, bedeemed to have been received on the next succeeding Business Day for purposesof calculating interest thereon.  Allsuch payments shall be made to the Administrative Agent at its offices at 10South Dearborn Street, 22nd Floor, Chicago, Illinois, exceptpayments to be made directly to the Issuing Bank or Swingline Lender asexpressly provided herein and 

 

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## except that payments pursuant to Sections2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitledthereto.  The Administrative Agent shalldistribute any such payments received by it for the account of any other Personto the appropriate recipient promptly following receipt thereof.  If any payment hereunder shall be due on aday that is not a Business Day, the date for payment shall be extended to thenext succeeding Business Day, and, in the case of any payment accruinginterest, interest thereon shall be payable for the period of suchextension.  All payments hereunder shallbe made in dollars.

##  

### (b)  Any proceeds of Collateralreceived by the Administrative Agent (i) not constituting either (A) aspecific payment of principal, interest, fees or other sum payable under theLoan Documents (which shall be applied as specified by the Borrower), (B) amandatory prepayment (which shall be applied in accordance with Section 2.11)or (C) amounts to be applied from the Collection Account when full cashdominion is in effect pursuant to Section 7.3 of the Security Agreement(which shall be applied in accordance with Section 2.10(b)) or (ii) afteran Event of Default has occurred and is continuing and the Administrative Agentso elects or the Required Lenders so direct, such proceeds shall be appliedratably first, to pay any fees, indemnities, or expense reimbursementsincluding amounts then due to the Administrative Agent and the Issuing Bankfrom the Borrower (other than in connection with Banking Services or SwapObligations), second, to pay any fees or expense reimbursements then dueto the Lenders from the Borrower (other than in connection with BankingServices or Swap Obligations), third, to pay interest due in respect ofthe Overadvances and Protective Advances, fourth, to pay the principalof the Overadvances and Protective Advances, fifth, to pay interest thendue and payable on the Loans (other than the Overadvances and ProtectiveAdvances) ratably, sixth, to prepay principal on the Loans (other thanthe Overadvances and Protective Advances) and unreimbursed LC Disbursementsratably, seventh, to pay an amount to the Administrative Agent equal toone hundred three percent (103%) of the aggregate undrawn face amount of alloutstanding Letters of Credit and the aggregate amount of any unpaid LCDisbursements, to be held as cash collateral for such Obligations, eighth,to payment of any amounts owing with respect to Banking Services and Swap Obligations,and ninth, to the payment of any otherSecured Obligation due to the Administrative Agent or any Lender by theBorrower. Notwithstanding anything to the contrary contained in this Agreement,unless so directed by the Borrower, or unless a Default is in existence,neither the Administrative Agent nor any Lender shall apply any payment whichit receives to any Eurodollar Loan of a Class, except (a) on theexpiration date of the Interest Period applicable to any such Eurodollar Loanor (b) in the event, and only to the extent, that there are no outstandingABR Loans of the same Class and, in any such event, the Borrower shall paythe break funding payment required in accordance with Section 2.16. TheAdministrative Agent and the Lenders shall have the continuing and exclusiveright to apply and reverse and reapply any and all such proceeds and paymentsto any portion of the Secured Obligations.

###  

### (c)  At the election of theAdministrative Agent, all payments of principal, interest, LC Disbursements,fees, premiums, reimbursable expenses (including, without limitation, allreimbursement for fees and expenses pursuant to Section 9.03), and othersums payable under the Loan Documents, may be paid from the proceeds ofBorrowings made hereunder whether made following a request by the Borrowerpursuant to Section 2.03 or a deemed request as provided in this Section ormay be deducted from any deposit account of the Borrower maintained with theAdministrative Agent.  The Borrowerhereby irrevocably authorizes (i) the Administrative Agent to make aBorrowing for the purpose of paying each payment of principal, interest andfees as it becomes due hereunder or any other amount due under the LoanDocuments and agrees that all such amounts charged shall constitute Loans(including Swingline Loans and Overadvances, but such a Borrowing may onlyconstitute a Protective Advance if it is to reimburse costs, fees and expensesas described in Section 9.03) and that all such Borrowings shall be deemedto have been requested pursuant to Sections 2.03, 2.04 or 2.05, as applicableand (ii) the Administrative Agent to charge any deposit 

 

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### account of the Borrower maintained with the Administrative Agent foreach payment of principal, interest and fees as it becomes due hereunder or anyother amount due under the Loan Documents.

###  

### (d)  If any Lender shall, by exercisingany right of set off or counterclaim or otherwise, obtain payment in respect ofany principal of or interest on any of its Loans or participations in LCDisbursements resulting in such Lender receiving payment of a greaterproportion of the aggregate amount of its Loans and participations in LCDisbursements and accrued interest thereon than the proportion received by anyother Lender, then the Lender receiving such greater proportion shall purchase(for cash at face value) participations in the Loans and participations in LCDisbursements of other Lenders to the extent necessary so that the benefit ofall such payments shall be shared by the Lenders ratably in accordance with theaggregate amount of principal of and accrued interest on their respective Loansand participations in LC Disbursements; providedthat (i) if any such participations are purchased and all or any portionof the payment giving rise thereto is recovered,  such participations shall be rescinded andthe purchase price restored to the extent of such recovery, without interest,and (ii) the provisions of this paragraph shall not be construed to applyto any payment made by the Borrower pursuant to and in accordance with theexpress terms of this Agreement or any payment obtained by a Lender asconsideration for the assignment of or sale of a participation in any of itsLoans or participations in LC Disbursements to any assignee or participant,other than to the Borrower or any Subsidiary or Affiliate thereof (as to whichthe provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it mayeffectively do so under applicable law, that any Lender acquiring aparticipation pursuant to the foregoing arrangements may exercise against theBorrower rights of set-off and counterclaim with respect to such participationas fully as if such Lender were a direct creditor of the Borrower in the amountof such participation.

###  

### (e)  Unless the Administrative Agentshall have received notice from the Borrower prior to the date on which anypayment is due to the Administrative Agent for the account of the Lenders orthe Issuing Bank hereunder that the Borrower will not make such payment, theAdministrative Agent may assume that the Borrower has made such payment on suchdate in accordance herewith and may, in reliance upon such assumption,distribute to the Lenders or the Issuing Bank, as the case may be, the amountdue.  In such event, if the Borrower hasnot in fact made such payment, then each of the Lenders or the Issuing Bank, asthe case may be, severally agrees to repay to the Administrative Agentforthwith on demand the amount so distributed to such Lender or Issuing Bankwith interest thereon, for each day from and including the date such amount isdistributed to it to but excluding the date of payment to the AdministrativeAgent, at the greater of the Federal Funds Effective Rate and a rate determinedby the Administrative Agent in accordance with banking industry rules oninterbank compensation.

###  

### (f)  If any Lender shall fail to makeany payment required to be made by it pursuant to Section 2.05, 2.06(d) or(e), 2.07(b), 2.18(e) or 9.03(c), then the Administrative Agent may, inits discretion (notwithstanding any contrary provision hereof), (i) applyany amounts thereafter received by the Administrative Agent for the account ofsuch Lender and for the benefit of the Administrative Agent, the SwinglineLender or the Issuing Bank to satisfy such Lender’s obligations under suchSections until all such unsatisfied obligations are fully paid, and/or (ii) holdany such amounts in a segregated account as cash collateral for, andapplication to, any future funding obligations of such Lender under suchSections; in the case of each of (i) and (ii) above, in any order asdetermined by the Administrative Agent in its discretion.

 

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## SECTION 2.19.  MitigationObligations; Replacement of Lenders.

##  

### (a)  If any Lender requests compensationunder Section 2.15, or if the Borrower is required to pay any additionalamount to any Lender or any Governmental Authority for the account of any Lenderpursuant to Section 2.17, then such Lender shall use reasonable efforts todesignate a different lending office for funding or booking its Loans hereunderor to assign its rights and obligations hereunder to another of its offices,branches or affiliates, if, in the judgment of such Lender, such designation orassignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15or 2.17, as the case may be, in the future and (ii) would not subject suchLender to any unreimbursed cost or expense and would not otherwise bedisadvantageous to such Lender.  TheBorrower hereby agrees to pay all reasonable costs and expenses incurred by anyLender in connection with any such designation or assignment.

###  

### (b)  If any Lender requests compensationunder Section 2.15, or if the Borrower is required to pay any additionalamount to any Lender or any Governmental Authority for the account of anyLender pursuant to Section 2.17, or if any Lender becomes a DefaultingLender, then the Borrower may, at its sole expense and effort, upon notice tosuch Lender and the Administrative Agent, require such Lender to assign anddelegate, without recourse (in accordance with and subject to the restrictionscontained in Section 9.04), all its interests, rights and obligationsunder this Agreement to an assignee that shall assume such obligations (whichassignee may be another Lender, if a Lender accepts such assignment); providedthat (i) the Borrower shall have received the prior written consent of theAdministrative Agent (and if a Commitment is being assigned, the Issuing Bank),which consent shall not unreasonably be withheld, (ii) such Lender shallhave received payment of an amount equal to the outstanding principal of itsLoans and participations in LC Disbursements and Swingline Loans, accruedinterest thereon, accrued fees and all other amounts payable to it hereunder,from the assignee (to the extent of such outstanding principal and accruedinterest and fees) or the Borrower (in the case of all other amounts) and (iii) inthe case of any such assignment resulting from a claim for compensation under Section 2.15or payments required to be made pursuant to Section 2.17, such assignmentwill result in a reduction in such compensation or payments.  A Lender shall not be required to make anysuch assignment and delegation if, prior thereto, as a result of a waiver bysuch Lender or otherwise, the circumstances entitling the Borrower to requiresuch assignment and delegation cease to apply.

###  

## SECTION 2.20.  Defaulting Lenders.  Notwithstanding any provision of thisAgreement to the contrary, if any Lender becomes a Defaulting Lender, then thefollowing provisions shall apply for so long as such Lender is a DefaultingLender:

##  

### (a)  fees shall cease to accrue on theunfunded portion of the Commitment of such Defaulting Lender pursuant to Section 2.12(a);

###  

### (b)  the Commitment and RevolvingExposure of such Defaulting Lender shall not be included in determining whetherall Lenders or the Required Lenders have taken or may take any action hereunder(including any consent to any amendment or waiver pursuant to Section 9.02);provided that any waiver, amendment or modification requiring theconsent of all Lenders or each affected Lender which affects such DefaultingLender differently than other affected Lenders shall require the consent ofsuch Defaulting Lender;

###  

### (c)  if any Swingline Exposure or LCExposure exists at the time a Lender becomes a Defaulting Lender then:

###  

#### (i)  all or any part of such SwinglineExposure and LC Exposure shall be reallocated among the non-Defaulting Lendersin accordance with their respective Applicable Percentages but only to theextent (x) the sum of all non-Defaulting Lenders’ Revolving Exposures plussuch

 

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#### Defaulting Lender’s Swingline Exposure and LC Exposure does not exceedthe total of all non-Defaulting Lenders’ Commitments and (y) theconditions set forth in Section 4.02 are satisfied at such time; and

####  

#### (ii)  if the reallocation described inclause (i) above cannot, or can only partially, be effected, the Borrowershall within one (1) Business Day following notice by the AdministrativeAgent (x) first, prepay such Swingline Exposure and (y) second,cash collateralize such Defaulting Lender’s LC Exposure (after giving effect toany partial reallocation pursuant to clause (i) above) in accordance withthe procedures set forth in Section 2.06(j) for so long as such LCExposure is outstanding;

####  

#### (iii)  if the Borrower cashcollateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to Section 2.20(c),the Borrower shall not be required to pay any fees to such Defaulting Lenderpursuant to Section 2.12(b) with respect to such Defaulting Lender’sLC Exposure during the period such Defaulting Lender’s LC Exposure is cashcollateralized;

####  

#### (iv)  if the LC Exposure of thenon-Defaulting Lenders is reallocated pursuant to Section 2.20(c), thenthe fees payable to the Lenders pursuant to Section 2.12(a) and Section 2.12(b) shallbe adjusted in accordance with such non-Defaulting Lenders’ ApplicablePercentages; or

####  

#### (v)  if any Defaulting Lender’s LCExposure is neither cash collateralized nor reallocated pursuant to Section 2.20(c),then, without prejudice to any rights or remedies of the Issuing Bank or anyLender hereunder, all letter of credit fees payable under Section 2.12(b) withrespect to such Defaulting Lender’s LC Exposure shall be payable to the IssuingBank until such LC Exposure is cash collateralized and/or reallocated; and

####  

### (d)  so long as any Lender is aDefaulting Lender, the Issuing Bank shall not be required to issue, amend orincrease any Letter of Credit, unless it is satisfied that the related exposurewill be 100% covered by the Commitments of the non-Defaulting Lenders and/or cashcollateral will be provided by the Borrower in accordance with Section 2.20(c),and participating interests in any such newly issued or increased Letter ofCredit or newly made Swingline Loan shall be allocated among non-DefaultingLenders in a manner consistent with Section 2.20(c)(i) (andDefaulting Lenders shall not participate therein).

###  

In the event that theAdministrative Agent, the Borrower, the Issuing Bank and the Swingline Lendereach agrees that a Defaulting Lender has adequately remedied all matters thatcaused such Lender to be a Defaulting Lender, then the Swingline Exposure andLC Exposure of the Lenders shall be readjusted to reflect the inclusion of suchLender’s Commitment and on such date such Lender shall purchase at par such ofthe Loans of the other Lenders (other than Swingline Loans) as theAdministrative Agent shall determine may be necessary in order for such Lenderto hold such Loans in accordance with its Applicable Percentage.

 

## SECTION 2.21.  Returned Payments.  If after receipt of any payment which isapplied to the payment of all or any part of the Obligations, theAdministrative Agent or any Lender is for any reason compelled to surrendersuch payment or proceeds to any Person because such payment or application ofproceeds is invalidated, declared fraudulent, set aside, determined to be voidor voidable as a preference, impermissible setoff, or a diversion of trustfunds, or for any other reason, then the Obligations or part thereof intendedto be satisfied shall be revived and continued and this Agreement shallcontinue in full force as if such payment or proceeds had not been received bythe Administrative Agent or such Lender. The provisions of this Section 2.21 shall be and remain effectivenotwithstanding any contrary action which may have been taken by theAdministrative Agent or any Lender in reliance 

 

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## upon such payment or application ofproceeds.  The provisions of this Section 2.21shall survive the termination of this Agreement.

##  

## SECTION 2.22.  Senior Debt.  The Borrower hereby designates all SecuredObligations now or hereinafter incurred or otherwise outstanding, and agreesthat the Secured Obligations shall at all times constitute, senior indebtednessand designated senior indebtedness, or terms of similar import, which areentitled to the benefits of the subordination provisions of all SubordinatedIndebtedness.

##  

# ARTICLEIII

#  

# Representations and Warranties

#  

Each Loan Party representsand warrants to the Lenders that:

 

## SECTION 3.01.  Organization; Powers.  Each of the Loan Parties and each of itsSubsidiaries (other than Excluded Subsidiaries) is duly organized, validlyexisting and in good standing under the laws of the jurisdiction of itsorganization, has all requisite power and authority to carry on its business asnow conducted, except where the failure to do so, individually or in theaggregate, could not reasonably be expected to result in a Material AdverseEffect, and is qualified to do business in, and is in good standing in, everyjurisdiction where such qualification is required, except where the failure toso qualify could not, individually or in the aggregate, reasonably be expectedto result in a Material Adverse Effect.

##  

## SECTION 3.02.  Authorization;Enforceability.  TheTransactions are within each Loan Party’s organizational powers and have beenduly authorized by all necessary organizational actions and, if required,actions by equity holders.  The LoanDocuments to which each Loan Party is a party have been duly executed anddelivered by such Loan Party and constitute a legal, valid and bindingobligation of such Loan Party, enforceable in accordance with its terms,subject to applicable bankruptcy, insolvency, reorganization, moratorium orother laws affecting creditors’ rights generally and subject to generalprinciples of equity, regardless of whether considered in a proceeding inequity or at law.

##  

## SECTION 3.03.  GovernmentalApprovals; No Conflicts.  TheTransactions (a) do not require any consent or approval of, registrationor filing with, or any other action by, any Governmental Authority, except suchas have been obtained or made and are in full force and effect and except forfilings necessary to perfect Liens created pursuant to the Loan Documents, (b) willnot violate in any material respect any Requirement of Law applicable to anyLoan Party or any of its Subsidiaries, (c) will not violate or result in adefault under any indenture, material agreement or other material instrumentbinding upon any Loan Party or any of its Subsidiaries or its assets, or giverise to a right thereunder to require any payment to be made by any Loan Partyor any of its Subsidiaries, and (d) will not result in the creation orimposition of any Lien on any asset of any Loan Party or any of itsSubsidiaries, except Liens created pursuant to the Loan Documents.

##  

## SECTION 3.04.  Financial Condition;No Material Adverse Change.  (a) Holdings has heretofore furnished to the Lenders its consolidated balance sheetand statements of income, stockholders equity and cash flows (i) as of andfor the fiscal year ended June 30, 2008, reported on by KPMG LLP,independent public accountants, and (ii) as of and for the fiscal quarterended March 31, 2009, certified by its chief financial officer.  Such financial statements present fairly, inall material respects, the financial position and results of operations andcash flows of Holdings and its consolidated Subsidiaries as of such dates andfor such periods in accordance with GAAP, subject to year end audit adjustmentsand the absence of footnotes in the case of the statements referred to inclause (ii) above.

 

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### (b)  No event, change or condition hasoccurred that has had, or could reasonably be expected to have, a MaterialAdverse Effect, since March 31, 2009.

###  

## SECTION 3.05.  Properties.  (a)  Each of the Loan Parties and itsSubsidiaries has good and marketable title to, or valid leasehold interests in,all its material real and personal property, free of all Liens other than thosepermitted by Section 6.02.

##  

### (b)  Each Loan Party and itsSubsidiaries owns, or is licensed to use, all trademarks, tradenames,copyrights, patents and other intellectual property necessary to its businessas currently conducted, and the use thereof by the Loan Parties and itsSubsidiaries does not infringe in any material respect upon the rights of anyother Person, and the Loan Parties’ rights thereto are not subject to anylicensing agreement or similar arrangement (other than customary licensingagreements and arrangements in respect of software, technology andadvertising).

###  

## SECTION 3.06.  Litigation andEnvironmental Matters.  (a) Except for the Disclosed Matters, there are not any actions, suits orproceedings at law or in equity or by or before any Governmental Authority nowpending or, to the knowledge of Holdings or the Borrower, threatened against oraffecting Holdings or the Borrower or any Subsidiary or any business, propertyor rights of any such Person (i) which involve any Loan Document or theTransactions or (ii) as to which there is a reasonable possibility of anadverse determination and which (A) if adversely determined, wouldindividually result in a loss of greater than $300,000 or (B) if adverselydetermined (excluding any actions, suits or proceedings at law or in equity orby or before any Governmental Authority that would individually result in aloss of $300,000 or less), in the aggregate could reasonably be expected toresult in a Material Adverse Effect.

##  

### (b)  None of Holdings, the Borrower orany of the Subsidiaries or any of their respective material properties orassets is in violation of, nor will the continued operation of their materialproperties and assets as currently conducted violate, any law, rule orregulation (including any zoning, building, Environmental Law, ordinance, codeor approval or any building permits), or is in default with respect to anyjudgment, writ, injunction or decree of any Governmental Authority, except anysuch violations or defaults that, individually or in the aggregate, could notreasonably be expected to result in a Material Adverse Effect.

###  

### (c)  Except for the Disclosed Matters,the soils and groundwater beneath the properties and facilities owned oroperated by Holdings, the Borrower and the Subsidiaries (the “Properties”) do not contain any HazardousMaterials in amounts or concentrations which (i) constitute a violationof, or (ii) give rise to liability under, Environmental Laws, which violationsand liabilities, in the aggregate, could reasonably be expected to result in aMaterial Adverse Effect.

###  

### (d) Except for the Disclosed Matters,the Properties and all operations of Holdings, the Borrower and theSubsidiaries are in compliance, and in the last three years have been incompliance, with all Environmental Laws and all necessary Environmental Permitshave been obtained and are in effect, except to the extent that suchnon-compliance or failure to obtain any necessary permits, in the aggregate,could not reasonably be expected to result in a Material Adverse Effect.

###  

### (e) Except for the Disclosed Matters,there have been no Releases or threatened Releases at, from, under or proximateto the Properties or otherwise in connection with the operations of Holdings,the Borrower or the Subsidiaries, which Releases or threatened Releases, in theaggregate, could reasonably be anticipated to result in a Material AdverseEffect.

 

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### (f) Except for the Disclosed Matters,none of Holdings, the Borrower or any of the Subsidiaries has received anywritten notice of an Environmental Claim in connection with the Properties orthe operations of the Borrower or the Subsidiaries or with regard to any personwhose liabilities for environmental matters Holdings, the Borrower or theSubsidiaries has retained or assumed, in whole or in part, contractually, byoperation of law or otherwise, which, in the aggregate, could reasonably beanticipated to result in a Material Adverse Effect, nor do Holdings, theBorrower or the Subsidiaries have reason to believe that any such notice willbe received or is being threatened.

###  

### (g)  Since the date of this Agreement,there has been no change in the status of the Disclosed Matters that,individually or in the aggregate, has resulted in, or materially increased thelikelihood of, a Material Adverse Effect.

###  

## SECTION 3.07.  Compliance with Lawsand Agreements.  Each LoanParty and its Subsidiaries is in compliance with all Requirements of Lawapplicable to it or its property and all indentures, agreements and otherinstruments binding upon it or its property, except where the failure to do so,individually or in the aggregate, could not reasonably be expected to result ina Material Adverse Effect.  No Defaulthas occurred and is continuing.

##  

## SECTION 3.08.  Investment CompanyStatus.  No Loan Party nor anyof its Subsidiaries is an “investment company” as defined in, orsubject to regulation under, the Investment Company Act of 1940.

##  

## SECTION 3.09.  Taxes.  Each Loan Party and its Subsidiaries hastimely filed or caused to be filed all Tax returns and reports required to havebeen filed by it and has paid or caused to be paid all Taxes required to havebeen paid by it as shown thereon, except (a) Taxes that are beingcontested in good faith by appropriate proceedings and for which such LoanParty or such Subsidiary, as applicable, has set aside on its books adequatereserves or (b) to the extent that the failure to do so could not be expectedto result in a Material Adverse Effect. No material tax liens have been filed and no material claims are beingasserted with respect to any such taxes.

##  

## SECTION 3.10.  ERISA.  No ERISA Event has occurred or is reasonablyexpected to occur that, when taken together with all other such ERISA Eventsfor which liability is reasonably expected to occur, could reasonably beexpected to result in a Material Adverse Effect.

##  

## SECTION 3.11.  Disclosure.  As of the date hereof, Holdings and theBorrower have disclosed to the Lenders or in their filings with the Securitiesand Exchange Commission and available on their website, all agreements,instruments and corporate or other restrictions to which it or any Subsidiaryis subject, and all other matters known to it, that, individually or in theaggregate, could reasonably be expected to result in a Material AdverseEffect.  Neither the InformationMemorandum nor any of the other reports, financial statements, certificates orother information furnished by or on behalf of the any Loan Party to theAdministrative Agent or any Lender in connection with the negotiation of thisAgreement or any other Loan Document (as modified or supplemented by otherinformation so furnished and considered as a whole) contains any materialmisstatement of fact or omits to state any material fact necessary to make thestatements therein, in the light of the circumstances under which they weremade, not misleading; provided that, with respect to projected financialinformation, the Borrower and Holdings represent only that such information wasprepared in good faith based upon assumptions believed to be reasonable at thetime delivered and, if such projected financial information was delivered priorto the Effective Date, as of the Effective Date.

 

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## SECTION 3.12.  Material Agreements.  No Loan Party is in default in theperformance, observance or fulfillment of any of the obligations, covenants orconditions contained in any agreement to which it is a party which couldreasonably be expected to result in a Material Adverse Effect.

##  

## SECTION 3.13.  Solvency.  (a)  Immediately after the consummationof the Transactions to occur on the Effective Date, (i) the fair value ofthe assets of each Loan Party, at a fair valuation, will exceed its debts andliabilities, subordinated, contingent or otherwise; (ii) the present fairsaleable value of the property of each Loan Party will be greater than theamount that will be required to pay the probable liability of its debts andother liabilities, subordinated, contingent or otherwise, as such debts andother liabilities become absolute and matured; (iii) each Loan Party willbe able to pay its debts and liabilities, subordinated, contingent orotherwise, as such debts and liabilities become absolute and matured; and (iv) eachLoan Party will not have unreasonably small capital with which to conduct thebusiness in which it is engaged as such business is now conducted and isproposed to be conducted after the Effective Date.

##  

(b)   No Loan Party intends to, or will permit anyof its Subsidiaries to, and no Loan Party believes that it or any of itsSubsidiaries will, incur debts beyond its ability to pay such debts as theymature, taking into account the timing of and amounts of cash to be received byit or any such Subsidiary and the timing of the amounts of cash to be payableon or in respect of its Indebtedness or the Indebtedness of any suchSubsidiary.

 

## SECTION 3.14.  Insurance.  Schedule 3.14 sets forth a descriptionof all insurance maintained by or on behalf of the Loan Parties and theSubsidiaries as of the Effective Date. As of the Effective Date, all premiums in respect of such insurance havebeen paid.  The Borrower and Holdingsbelieve that the insurance maintained by or on behalf of the Borrower and theSubsidiaries is adequate.

##  

## SECTION 3.15.  Capitalization andSubsidiaries.  Schedule3.15 sets forth (a) a correct and complete list of the name andrelationship to the Borrower of each and all of the Borrower’s Subsidiaries, (b) atrue and complete listing of each class of each of the Borrower’s authorizedEquity Interests, of which all of such issued shares are validly issued,outstanding, fully paid and non-assessable, and owned beneficially and ofrecord by the Persons identified on Schedule 3.15, and (c) the typeof entity of the Borrower  and each ofits Subsidiaries.  All of the issued andoutstanding Equity Interests owned by any Loan Party has been (to the extentsuch concepts are relevant with respect to such ownership interests) dulyauthorized and issued and is fully paid and non assessable.

##  

## SECTION 3.16.  No BurdensomeRestrictions.  No Loan Party  is a party to any agreement or instrument orsubject to any corporate restriction that has resulted or could reasonably beexpected to result in a Material Adverse Effect.

##  

## SECTION 3.17.  Federal ReserveRegulations.  None of Holdings,the Borrower or any of the Subsidiaries is engaged principally, or as one ofits important activities, in the business of extending credit for the purposeof purchasing or carrying Margin Stock. No part of the proceeds of any Loan have been used or will be used,whether directly or indirectly, for any purpose that entails a violation of anyof the Regulations of the Board, including Regulations T, U and X.

##  

## SECTION 3.18.  Security Interest inCollateral.  The provisions ofthis Agreement and the other Loan Documents create legal and valid Liens on allthe Collateral in favor of the Administrative Agent, for the benefit of theAdministrative Agent and the Lenders, and upon the filing of required financingstatements by the Administrative Agent, such Liens constitute perfected andcontinuing Liens on the Collateral, securing the Secured Obligations,enforceable against the applicable Loan Party and all third parties, and havingpriority over all other Liens on the Collateral except in the case of (a) Permitted

 

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## Encumbrances, to the extent any suchPermitted Encumbrances would have priority over the Liens in favor of theAdministrative Agent pursuant to any applicable law and (b) Liensperfected only by possession (including possession of any certificate of title)to the extent the Administrative Agent has not obtained or does not maintainpossession of such Collateral.

##  

## SECTION 3.19.  Employment Matters.  As of the Effective Date, there are nostrikes, lockouts or slowdowns against any Loan Party or any Subsidiary pendingor, to the knowledge of the Borrower, threatened.  The hours worked by and payments made toemployees of the Loan Parties and the Subsidiaries have not been in violationof the Fair Labor Standards Act or any other applicable Federal, state, localor foreign law dealing with such matters except where such violation could not,individually or in the aggregate, reasonably be expected to result in aMaterial Adverse Effect.  All materialpayments due from any Loan Party or any Subsidiary, or for which any claim maybe made against any Loan Party or any Subsidiary, on account of wages andemployee health and welfare insurance and other benefits, have been paid oraccrued as a liability on the books of the Loan Party or such Subsidiary.

##  

## SECTION 3.20.  Common Enterprise.  The successful operation and condition ofeach of the Loan Parties is dependent on the continued successful performanceof the functions of the group of the Loan Parties as a whole and the successfuloperation of each of the Loan Parties is dependent on the successfulperformance and operation of each other Loan Party.  Each Loan Party expects to derive benefit(and its board of directors or other governing body has determined that it mayreasonably be expected to derive benefit), directly and indirectly, from (i) successfuloperations of each of the other Loan Parties and (ii) the credit extendedby the Lenders to the Borrower hereunder, both in their separate capacities andas members of the group of companies. Each Loan Party has determined that execution, delivery, and performanceof this Agreement and any other Loan Documents to be executed by such LoanParty is within its purpose, will be of direct and indirect benefit to suchLoan Party, and is in its best interest.

##  

## SECTION 3.21.  Credit Card Processors.  As of the Effective Date, Schedule 3.21lists all Credit Card Processors that provide any Loan Party with credit cardprocessing services, and such Schedule correctly identifies the name andaddress of each Credit Card Processor, and the name in which such services areprovided. True and complete copies of each agreement listed on Schedule 3.21have been delivered to the Administrative Agent, together with all amendments,waivers and other modifications thereto. All such agreements are valid,subsisting, in full force and effect, are currently binding upon each LoanParty that is a party thereto and binding upon the other parties thereto inaccordance with their terms. The Loan Parties are in compliance in all materialrespects under such agreements.

##  

# ARTICLEIV

#  

# Conditions

#  

## SECTION 4.01.  Effective Date.  The obligations of the Lenders to make Loansand of the Issuing Bank to issue Letters of Credit hereunder shall not becomeeffective until the date on which each of the following conditions is satisfied(or waived in accordance with Section 9.02):

##  

### (a)  CreditAgreement and Loan Documents. The Administrative Agent (or its counsel) shall have received (i) fromeach party hereto either (A) a counterpart of this Agreement signed onbehalf of such party or (B) written evidence satisfactory to theAdministrative Agent (which may include facsimile or electronic transmission ofa signed signature page of this Agreement) that such party has signed acounterpart of this Agreement and (ii) duly executed copies of the LoanDocuments and such other certificates, documents, instruments and agreements asthe Administrative

 

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Agent shall reasonably request in connection withthe transactions contemplated by this Agreement and the other Loan Documents,including any promissory notes requested by a Lender pursuant to Section 2.10payable to the order of each such requesting Lender and written opinions of theLoan Parties’ counsels, addressed to the Administrative Agent, the Issuing Bankand the Lenders in substantially the form of Exhibit B, all in formand substance satisfactory to the Administrative Agent and its counsel and asfurther described in the list of closing documents attached as Exhibit F.

###  

### (b)  FinancialStatements and Projections. The Lenders shall have received (i) satisfactory auditedconsolidated financial statements of Holdings and the Borrower for the 2007 and2008 fiscal years, (ii) satisfactory unaudited interim consolidatedfinancial statements of Holdings and the Borrower for each fiscal quarterlyperiod ended after the date of the latest applicable financial statementsdelivered pursuant to clause (i) of this paragraph and (iii) theBorrower’s most recent projected income statement, balance sheet and cashflows, prepared on a quarterly basis for the 2009 and 2010 fiscal years and onan annual basis for the 2011 and 2012 fiscal years (including, without limitation,a reasonably detailed description of the assumptions used in preparing suchprojections), all in form and detail reasonably satisfactory to theAdministrative Agent.

###  

### (c)  ClosingCertificates; Certified Certificate of Incorporation; Good Standing Certificates.  The Administrative Agent shall have received (i) acertificate of each Loan Party, dated the Effective Date and executed by itsSecretary or Assistant Secretary, which shall (A) certify the resolutionsof its Board of Directors, members or other body authorizing the execution,delivery and performance of the Loan Documents to which it is a party, (B) identifyby name and title and bear the signatures of the Financial Officers and anyother officers of such Loan Party authorized to sign the Loan Documents towhich it is a party, and (C) contain appropriate attachments, includingthe certificate or articles of incorporation or organization of each Loan Partycertified by the relevant authority of the jurisdiction of organization of suchLoan Party and a true and correct copy of its by laws or operating, managementor partnership agreement, and (ii) a good standing certificate for eachLoan Party from its jurisdiction of organization.

###  

### (d)  No DefaultCertificate.  TheAdministrative Agent shall have received a certificate, signed by the chieffinancial officer of Holdings, on the initial Borrowing date (i) statingthat no Default has occurred and is continuing, (ii) stating that therepresentations and warranties contained in Article III are true andcorrect as of such date, and (iii) certifying any other factual matters asmay be reasonably requested by the Administrative Agent.

###  

### (e)  Fees.  The Lenders and the Administrative Agentshall have received all fees required to be paid, and all reasonable expensesfor which reasonably detailed invoices have been presented (including thereasonable fees and expenses of legal counsel), on or before the EffectiveDate.

###  

### (f)  LienSearches.  The AdministrativeAgent shall have received the results of a recent lien search in each of thejurisdictions where the Loan Parties are located, and such search shall revealno liens on any of the assets of the Loan Parties except for liens permitted bySection 6.02 or discharged on or prior to the Effective Date pursuant to apay-off letter or other documentation satisfactory to the Administrative Agent.

###  

### (g)  Pay-OffLetter.  Unless the same haspreviously been terminated, the Administrative Agent shall have receivedsatisfactory pay-off letter for the Existing Credit Agreement, confirming thatall Liens upon any of the property of the Loan Parties constituting Collateralwill be terminated concurrently with such payment and all letters of credit(other than the Existing Letters of Credit) issued or guaranteed as part ofsuch Existing Credit Agreement shall have been cash 

 

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###  

### collateralized or supported by a Letter of Credit or otherwisesatisfied in a manner satisfactory to the Administrative Agent.

###  

### (h)  FundingAccount.  The AdministrativeAgent shall have received a notice setting forth the deposit account of theBorrower (the “Funding Account”) to which the Administrative Agent isauthorized by the Borrower to transfer the proceeds of any Borrowings requestedor authorized pursuant to this Agreement.

###  

### (i)  Solvency.  The Administrative Agent shall have receiveda solvency certificate from the chief financial officer of the Borrower in formand substance satisfactory to the Administrative Agent.

###  

### (j)  BorrowingBase Certificate.  TheAdministrative Agent shall have received a Borrowing Base Certificate whichcalculates the Borrowing Base as of the end of the calendar quarter immediatelypreceding the Effective Date.

###  

### (k)  ClosingAvailability.  After givingeffect to all Borrowings to be made on the Effective Date and the issuance ofany Letters of Credit on the Effective Date and payment of all fees andexpenses due hereunder, and with all of the Loan Parties’ indebtedness,liabilities, and obligations current, Availability shall not be less than$25,000,000.

###  

### (l)  Pledged Stock; Stock Powers;Pledged Notes.  The AdministrativeAgent shall have received (i) the certificates representing the shares ofEquity Interests pledged pursuant to the Security Agreement, together with anundated stock power for each such certificate executed in blank by a dulyauthorized officer of the pledgor thereof and (ii) each promissory note(if any) pledged to the Administrative Agent pursuant to the Security Agreementendorsed (without recourse) in blank (or accompanied by an executed transferform in blank) by the pledgor thereof.

###  

### (m)  Filings, Registrations andRecordings.  Each document (includingany UCC financing statement) required by the Collateral Documents or under lawor reasonably requested by the Administrative Agent to be filed, registered orrecorded in order to create in favor of the Administrative Agent, for thebenefit of the Secured Parties, a perfected Lien on the Collateral describedtherein and being provided on the Effective Date, prior and superior in rightto any other Person (other than with respect to Liens expressly permitted by Section 6.02),shall be in proper form for filing, registration or recordation.

###  

### (n)  Insurance.  The Administrative Agent shall have receivedevidence of insurance coverage in form, scope, and substance reasonablysatisfactory to the Administrative Agent and otherwise in compliance with theterms of Section 5.09 and Section 4.12 of the Security Agreement.

###  

### (o) Letter of CreditApplication.  The AdministrativeAgent shall have received a properly completed letter of credit application ifthe issuance of a Letter of Credit will be required on the Effective Date.

###  

### (p) Other Documents.  The Administrative Agent shall have receivedsuch other documents and information as the Administrative Agent, the IssuingBank, any Lender or their respective counsel may have reasonably requested.

###  

The Administrative Agentshall notify the Borrower and the Lenders of the Effective Date, and suchnotice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the Lenders to makeLoans and of the Issuing Bank to issue Letters of Credit hereunder shall notbecome effective unless 

 

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each of the foregoingconditions is satisfied (or waived pursuant to Section 9.02) at or priorto 3:00 p.m., New York City time, on May 29, 2009 (and, in the eventsuch conditions are not so satisfied or waived, the Commitments shall terminateat such time).

 

## SECTION 4.02.  Each Credit Event.  The obligation of each Lender to make a Loanon the occasion of any Borrowing, and of the Issuing Bank to issue, amend,renew or extend any Letter of Credit, is subject to the satisfaction of thefollowing conditions:

##  

### (a)  The representations and warrantiesof the Borrower set forth in this Agreement shall be true and correct on and asof the date of such Borrowing or the date of issuance, amendment, renewal orextension of such Letter of Credit, as applicable.

###  

### (b)  At the time of and immediatelyafter giving effect to such Borrowing or the issuance, amendment, renewal orextension of such Letter of Credit, as applicable, no Default shall haveoccurred and be continuing.

###  

### (c)  After giving effect to anyBorrowing or the issuance of any Letter of Credit, Availability is not lessthan zero.

###  

Each Borrowing and eachissuance, amendment, renewal or extension of a Letter of Credit shall be deemedto constitute a representation and warranty by the Borrower on the date thereofas to the matters specified in paragraphs (a), (b) and (c) of thisSection.

 

Notwithstanding the failureto satisfy the conditions precedent set forth in paragraphs (a) or (b) ofthis Section, unless otherwise directed by the Required Lenders, the AdministrativeAgent may, but shall have no obligation to, continue to make Loans and anIssuing Bank may, but shall have no obligation to, issue or cause to be issuedany Letter of Credit for the ratable account and risk of Lenders from time totime if the Administrative Agent believes that making such Loans or issuing orcausing to be issued any such Letter of Credit is in the best interests of theLenders.

 

# ARTICLEV

#  

# Affirmative Covenants

#  

Until the Commitments haveexpired or been terminated and the principal of and interest on each Loan andall fees payable hereunder shall have been paid in full and all Letters ofCredit shall have expired or terminated and all LC Disbursements shall havebeen reimbursed, each Loan Party executing this Agreement covenants and agrees,jointly and severally with all of the Loan Parties, with the Lenders that:

 

## SECTION 5.01.  FinancialStatements; Borrowing Base and Other Information.  The Borrower will furnish to theAdministrative Agent and each Lender:

##  

### (a)  within ninety (90) days after theend of each fiscal year of Holdings, its audited consolidated and consolidatingbalance sheets and related consolidated and consolidating statements ofoperations and consolidated statements of shareholders’ equity and cash flowsas of the end of and for such year, setting forth in each case in comparativeform the figures for the previous fiscal year, all reported on by KPMG LLP orother independent public accountants of recognized national standing (without a“goingconcern” or like qualification or exception and without anyqualification or exception as to the scope of such audit) to the effect thatsuch consolidated financial statements present fairly in all material respectsthe financial condition and results of operations of Holdings and its 

 

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### consolidated Subsidiaries on a consolidated basis in accordance withGAAP consistently applied, accompanied by any management letter prepared bysaid accountants;

###  

### (b)  within forty-five (45) days afterthe end of each of the first three fiscal quarters of each fiscal year ofHoldings, its consolidated and consolidating balance sheets and relatedconsolidated and consolidating statements of operations and consolidatedstatements of shareholders’ equity and cash flows as of the end of and for suchfiscal quarter and the then elapsed portion of the fiscal year, setting forthin each case in comparative form the figures for the corresponding period orperiods of (or, in the case of the balance sheet, as of the end of) theprevious fiscal year, all certified by one of its Financial Officers aspresenting fairly in all material respects the financial condition and resultsof operations of Holdings and its consolidated Subsidiaries on a consolidatedbasis in accordance with GAAP consistently applied, subject to normal year-endaudit adjustments and the absence of footnotes;

###  

### (c)  if and so long as the AvailabilityTrigger is in effect, within twenty (20) days after the end of each calendarmonth, Holdings’ consolidated and consolidating balance sheets and relatedconsolidated and consolidating statements of operations and consolidatedstatements of shareholders’ equity and cash flows as of the end of and for suchcalendar month and the then elapsed portion of the fiscal year, setting forthin each case in comparative form the figures for the corresponding period orperiods of (or, in the case of the balance sheet, as of the end of) theprevious fiscal year, all certified by one of its Financial Officers as presentingfairly in all material respects the financial condition and results ofoperations of Holdings and its consolidated Subsidiaries on a consolidatedbasis in accordance with GAAP consistently applied, subject to normal year-endaudit adjustments and the absence of footnotes;

###  

### (d)  concurrently with any delivery offinancial statements under clause (a) or (b) above, a certificate ofa Financial Officer of the Borrower in substantially the form of Exhibit D  (i) certifying, in the case of thefinancial statements delivered under clause (b), as presenting fairly in allmaterial respects the financial condition and results of operations of theBorrower and its consolidated Subsidiaries on a consolidated basis inaccordance with GAAP consistently applied, subject to normal year-end auditadjustments and the absence of footnotes, (ii) certifying as to whether aDefault has occurred and, if a Default has occurred, specifying the detailsthereof and any action taken or proposed to be taken with respect thereto, (iii) settingforth reasonably detailed calculations demonstrating compliance with Section 6.12and (iv) to the extent not discussed in the footnotes to financialstatements delivered pursuant to clauses (a) and (b) above, statingwhether any change in GAAP or in the application thereof has occurred since thedate of the audited financial statements referred to in Section 3.04 and,if any such change has occurred, specifying the effect of such change on thefinancial statements accompanying such certificate;

###  

### (e)  concurrently with any delivery offinancial statements under clause (a) above, a certificate of theaccounting firm that reported on such financial statements stating whether theyobtained knowledge during the course of their examination of such financialstatements of any Default (which certificate may be limited to the extentrequired by accounting rules or guidelines);

###  

### (f)  as soon as available, but in anyevent not more than thirty (30) days prior to the end of each fiscal year ofthe Holdings, a copy of the plan and forecast (including a projectedconsolidated balance sheet, income statement and funds flow statement) ofHoldings for each quarter of the upcoming fiscal year (the “Projections”)in form reasonably satisfactory to the Administrative Agent;

 

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### (g)  as soon as available but in anyevent within twenty (20) days after the end of each fiscal quarter of eachfiscal year of Holdings ((or within twenty (20) days of the end of eachcalendar month if and so long as the Monthly Reporting Trigger is in effect)(or within four (4) days of the end of each calendar week if and so longas the Availability Trigger is in effect)), and at such other times as may berequested by the Administrative Agent upon at least four (4) days’ priornotice to the Borrower, as of the period then ended, a Borrowing BaseCertificate and supporting information in connection therewith (including, inrespect of any Borrowing Base Certificate delivered for a month which is alsothe end of any fiscal quarter of Holdings, a calculation of Average QuarterlyAvailability for such quarter then ended and an indication of what theApplicable Rate is as a result of such Average Quarterly Availability),together with any additional reports with respect to the Borrowing Base as theAdministrative Agent may reasonably request; provided that if, at thetime the Lenders make any Loan to the Borrower hereunder and the Borrower shallnot have delivered a Borrowing Base Certificate within the preceding twenty(20) days, the Borrower shall deliver a Borrowing Base Certificate to theAdministrative Agent as soon as available but in any event within ten (10) daysof the funding of such Loan, which Borrowing Base Certificate shall set forththe Borrowing Base as of the last day of the calendar month most recentlyended;

###  

### (h)  as soon as available but in anyevent within twenty (20) days after the end of each fiscal quarter of eachfiscal year of Holdings ((or within twenty (20) days of the end of eachcalendar month if and so long as the Monthly Reporting Trigger is in effect)(or within four (4) days of the end of each calendar week if and so longas the Availability Trigger is in effect)), and at such other times as may berequested by the Administrative Agent upon at least four (4) days’ priornotice to the Borrower, as of the period then ended, all deliveredelectronically in a text formatted file acceptable to the Administrative Agent:

###  

#### (i)  a detailed aging of the each LoanParty’s Accounts (but only a detailed schedule in the case of Credit CardAccount Receivables) (1) including all invoices aged by invoice date anddue date (with an explanation of the terms offered if not then standard) and (2) reconciledto the Borrowing Base Certificate delivered as of such date prepared in amanner reasonably acceptable to the Administrative Agent, together with asummary specifying the name, address, and balance due for each Account Debtor;

####  

#### (ii)  a schedule detailing each LoanParty’s Inventory, in form satisfactory to the Administrative Agent, (1) bylocation (showing Inventory in transit, any Inventory located with a thirdparty under any consignment, bailee arrangement, or warehouse agreement), byclass (raw material, work-in-process and finished goods), by product type, andby volume on hand, which Inventory shall be valued at the lower of cost(determined on a first-in, first-out basis) or market and adjusted for Reservesas the Administrative Agent has previously indicated to the Borrower are deemedby the Administrative Agent to be appropriate, (2) including a report ofany variances or other results of Inventory counts performed by such Loan Partysince the last Inventory schedule (including information regarding sales orother reductions, additions, returns, credits issued by such Loan Party andcomplaints and claims made against such Loan Party which in the aggregateexceed $100,000 in such month), and (3) reconciled to the Borrowing BaseCertificate delivered as of such date;

####  

#### (iii)  a worksheet of calculationsprepared by each Loan Party to determine Eligible Accounts, Eligible CreditCard Account Receivables and Eligible Inventory, such worksheets detailing theAccounts, Credit Card Account Receivables and Inventory excluded from EligibleAccounts, Eligible Credit Card Account Receivables and Eligible Inventory andthe reason for such exclusion;

 

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#### (iv)  a reconciliation of each LoanParty’s Accounts, Credit Card Account Receivables and Inventory between theamounts shown in such Loan Party’s general ledger and financial statements andthe reports delivered pursuant to clauses (i) and (ii) above; and

####  

#### (v)  a reconciliation of the loanbalance per each Loan Party’s general ledger to the loan balance under thisAgreement;

####  

### (i)  as soon as available but in anyevent within twenty (20) days after the end of each fiscal quarter of eachfiscal year of Holdings ((or within twenty (20) days of the end of eachcalendar month if and so long as the Monthly Reporting Trigger is in effect)(or within four (4) days of the end of each calendar week if and so longas the Availability Trigger is in effect)), and at such other times as may berequested by the Administrative Agent upon at least four (4) days’ priornotice to the Borrower, as of the fiscal quarter (or month or week, ifapplicable) then ended, a detailed schedule of each Loan Party’s accountspayable, delivered electronically in a text formatted file acceptable to theAdministrative Agent;

###  

### (j)  promptly upon the AdministrativeAgent’s request:

###  

#### (i)  copies of invoices in connectionwith the invoices issued by each Loan Party in connection with any Accounts(including, without limitation, Credit Card Account Receivables), credit memos,shipping and delivery documents, and other information related thereto;

####  

#### (ii)  copies of purchase orders,invoices, and shipping and delivery documents in connection with any Inventoryor Equipment purchased by any Loan Party; and

####  

#### (iii)  a schedule detailing the balanceof all intercompany accounts of the Loan Parties;

####  

### (k)  to the extent requested by theAdministrative Agent, copies of all tax returns filed by any Loan Party withthe U.S. Internal Revenue Service;

###  

### (l)  promptly after the same becomepublicly available, copies of all periodic and other reports, proxy statementsand other materials filed by Holdings, the Borrower or any Subsidiary with theSecurities and Exchange Commission, or any Governmental Authority succeeding toany or all of the functions of said Commission, or with any national securitiesexchange, or distributed by Holdings or the Borrower to its shareholdersgenerally, as the case may be; and

###  

### (m)  promptly following any requesttherefor, such other information regarding the operations, business affairs andfinancial condition of Holdings, the Borrower or any Subsidiary, or compliancewith the terms of this Agreement, as the Administrative Agent or any Lender mayreasonably request.

###  

Documentsrequired to be delivered pursuant to clauses (a) and (b) of this Section 5.01may be delivered electronically and if so delivered, shall be deemed to havebeen delivered on the date on which such documents (i) shall have beenposted by the Administrative Agent on IntraLinks or similar site to which theLenders have been granted access or (ii) shall be available on the websiteof the Securities and Exchange Commission at www.sec.gov, provided thatHoldings shall have delivered a notice to the Administrative Agent that suchinformation is so available.  Informationrequired to be delivered pursuant to this Section may be delivered byelectronic communications pursuant to procedures approved by the AdministrativeAgent.  Notwithstanding anythingcontained herein, in every instance the Borrower shall 

 

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berequired to provide copies of the compliance certificates required by clause (d) ofthis Section 5.01 to the Administrative Agent.

 

## SECTION 5.02.  Notices of MaterialEvents.  The Borrower andHoldings will furnish to the Administrative Agent and each Lender promptwritten notice of the following:

##  

### (a)  the occurrence of any Default;

###  

### (b)  receipt of any notice of anygovernmental investigation or any litigation or proceeding commenced orthreatened against any Loan Party that (i) seeks damages in excess of$10,000,000, (ii) seeks injunctive relief, (iii) is asserted orinstituted against any Plan, its fiduciaries or its assets, (iv) allegescriminal misconduct by any Loan Party, (v) alleges the violation of anylaw regarding, or seeks remedies in connection with, any Environmental Laws,that could reasonably be expected to result in liabilities in excess of$10,000,000 (vi) contests any tax, fee, assessment, or other governmentalcharge in excess of $10,000,000, or (vii) involves any product recall;

###  

### (c)  any Lien (other than PermittedEncumbrances) or claim made or asserted against any of the Collateral;

###  

### (d)  any and all default notices received under or with respect to any leasedlocation or public warehouse where Collateral (with a book value in excess of$10,000,000) is located (which shall be delivered within five (5) BusinessDays after receipt thereof);

###  

### (e)  the occurrence of any ERISA Eventthat, alone or together with any other ERISA Events that have occurred, couldreasonably be expected to result in a Material Adverse Effect; and

###  

### (f)  any other development that resultsin, or could reasonably be expected to result in, a Material Adverse Effect.

###  

Each notice delivered underthis Section shall be accompanied by a statement of a Financial Officer orother executive officer of Holdings setting forth the details of the event ordevelopment requiring such notice and any action taken or proposed to be takenwith respect thereto.

 

## SECTION 5.03.  Existence; Conductof Business.  Each Loan Partywill, and will cause each Subsidiary (other than Excluded Subsidiaries) to, (a) door cause to be done all things necessary to preserve, renew and keep in fullforce and effect its legal existence and the rights, qualifications, licenses,permits, privileges, franchises, governmental authorizations and intellectualproperty rights material to the conduct of its business, and maintain allrequisite authority to conduct its business in each jurisdiction in which itsbusiness is conducted except where failure to be so qualified could notreasonably be expected to have a Material Adverse Effect; provided thatthe foregoing shall not prohibit any merger, consolidation, liquidation ordissolution permitted under Section 6.03 and (b) carry on and conductits business in substantially the same manner and in substantially the samefields of enterprise as it is presently conducted.

##  

## SECTION 5.04.  Payment ofObligations.  Each Loan Partywill, and will cause each  Subsidiary to,pay or discharge all Material Indebtedness and all other material liabilitiesand obligations, including Taxes, before the same shall become delinquent or indefault, except where (a) the validity or amount thereof is beingcontested in good faith by appropriate proceedings, (b) such Loan Party orsuch Subsidiary has set aside on its books adequate reserves with respectthereto in accordance with GAAP and (c) the failure to make paymentpending such contest could not reasonably be expected to result in a MaterialAdverse Effect.

 

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## SECTION 5.05.  Maintenance ofProperties.  Each Loan Partywill, and will cause each Subsidiary to, keep and maintain all propertymaterial to the conduct of its business in good working order and condition,ordinary wear and tear excepted.

##  

## SECTION 5.06.  Books and Records;Inspection Rights.  Withoutlimiting Sections 5.11 or 5.12 hereof, each Loan Party will, and will causeeach Subsidiary to, maintain all financial records in accordance with GAAP andpermit any representatives designated by any Lender, upon reasonable priornotice (except that no prior notice shall be required if an Event of Defaulthas occurred and is continuing) to visit and inspect the financial records andthe properties of Holdings, the Borrower or any Subsidiary at reasonable times(during normal business hours) and as often as requested and to make extractsfrom and copies of such financial records, and permit any representativesdesignated by any Lender to discuss the affairs, finances and condition ofHoldings, the Borrower or any Subsidiary with the officers thereof andindependent accountants therefor; providedthat any such visitation and inspection rights shall be exercised in areasonable manner that does not disrupt the business activities of Holdings,the Borrower and its Subsidiaries.  TheLoan Parties acknowledge that the Administrative Agent, after exercising itsrights of inspection, may prepare and distribute to the Lenders certain Reportspertaining to the Loan Parties’ assets for internal use by the AdministrativeAgent and the Lenders.

##  

## SECTION 5.07.  Compliance with Laws.  Each Loan Party will, and will cause eachSubsidiary to, comply with all Requirements of Law applicable to it or itsproperty, except where the failure to do so, individually or in the aggregate,could not reasonably be expected to result in a Material Adverse Effect.

##  

## SECTION 5.08.  Use of Proceeds.  The proceeds of the Loans will be used onlyfor general corporate purposes of the Borrower and its Subsidiaries in theordinary course of business.  No part ofthe proceeds of any Loan and no Letter of Credit will be used, whether directlyor indirectly, for any purpose that entails a violation of any of theRegulations of the Board, including Regulations T, U and X.

##  

## SECTION 5.09.  Insurance.  Each Loan Party will, and will cause eachSubsidiary to, maintain with financially sound and reputable carriers having afinancial strength rating of at least A- by A.M. Best Company (a) insurancein such amounts (with no greater risk retention) and against such risks(including loss or damage by fire and loss in transit; theft, burglary,pilferage, larceny, embezzlement, and other criminal activities; businessinterruption; and general liability) and such other hazards, as is customarilymaintained by companies of established repute engaged in the same or similarbusinesses operating in the same or similar locations and (b) allinsurance required pursuant to the Collateral Documents.  The Borrower will furnish to the Lenders,upon request of the Administrative Agent, information in reasonable detail asto the insurance so maintained.

##  

## SECTION 5.10.  Casualty andCondemnation.  The Borrower (a) willfurnish to the Administrative Agent and the Lenders prompt written notice ofany casualty or other insured damage to any material portion of the Collateralor the commencement of any action or proceeding for the taking of any materialportion of the Collateral or interest therein under power of eminent domain or bycondemnation or similar proceeding and (b) will ensure that the NetProceeds of any such event (whether in the form of insurance proceeds,condemnation awards or otherwise) are collected and applied in accordance withthe applicable provisions of this Agreement and the Collateral Documents.

##  

## SECTION 5.11.  Appraisals.  At any time that the Administrative Agentrequests, the Loan Parties will provide the Administrative Agent withappraisals or updates thereof of their Inventory from an appraiser selected andengaged by the Administrative Agent, and prepared on a basis satisfactory tothe Administrative Agent, such appraisals and updates to include, withoutlimitation, information 

 

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## required by applicable law andregulations.  It is anticipated that upto three (3) appraisals per year will be conducted; provided that (i) nomore than one (1) appraisal per year will be conducted unless theAdministrative Agent elects to conduct a second appraisal in its solediscretion, (ii) no more than three (3) appraisals per year will beconducted if any Loans are outstanding, and average monthly Availability isless than an amount equal to the greater of (x) 20% of the AggregateCommitment and (y) $10,000,000 at such time, and (iii) there shall beno limitation on the number or frequency of appraisals if an Event of Defaultshall have occurred and be continuing. For purposes of this Section 5.11, it is understood and agreed thata single Inventory appraisal may consist of examinations conducted at multiplerelevant sites and involve one or more relevant Loan Parties and theirassets.  All such appraisals shall be atthe sole expense of the Loan Parties.

##  

## SECTION 5.12.  Field Examinations.  At any time that the Administrative Agentrequests, the Loan Parties will permit, upon reasonable notice, theAdministrative Agent to conduct a field examination to ensure adequacy ofCollateral included in the Borrowing Base and related reporting and controlsystems.  It is anticipated that up tothree (3) field examinations per year will be conducted; providedthat (i) no more than one (1) field examination per year will beconducted unless the Administrative Agent elects to conduct a second fieldexamination in its sole discretion, (ii) no more than three (3) fieldexaminations per year will be conducted if any Loans are outstanding, andaverage monthly Availability is less than an amount equal to the greater of (x) 20%of the Aggregate Commitment and (y) $10,000,000, at such time, and (iii) thereshall be no limitation on the number or frequency of field examinations if anEvent of Default shall have occurred and be continuing.  For purposes of this Section 5.12, it isunderstood and agreed that a single field examination may consist ofexaminations conducted at multiple relevant sites and involve one or morerelevant Loan Parties and their assets. All such field examinations shall be at the sole expense of the LoanParties.

##  

## SECTION 5.13.  [IntentionallyOmitted].

##  

## SECTION 5.14.  Credit CardProcessors.  Each Loan Partywill (a) comply in all material respects with all obligations of such LoanParty under each credit card processing agreement to which such Loan Party is aparty, (b) maintain each credit card processing agreement set forth on Schedule 3.21 and each credit card processing agreement enteredinto after the Effective Date in full force and effect (except to the extentsuch Loan Party elects to terminate the same and so notifies the AdministrativeAgent) and take or cause to be taken all actions necessary to maintain,preserve and protect the rights and interests of the Administrative Agent inall material respects with respect to all such agreements, (c) usecommercially reasonable efforts to obtain a Processor Control Agreement withrespect to each Credit Card Processor providing any credit card processingservices for or on behalf of such Loan Party and listed on Schedule 3.21 within sixty (60) days after the Effective Date and (d) promptlynotify the Administrative Agent of the entry by such Loan Party into any creditcard processing agreement with any Credit Card Processor after the EffectiveDate and (subject to Section 5.15(e) with respect to any credit cardprocessing agreement acquired by such Loan Party in connection with theconsummation of a Permitted Acquisition) obtain a Processor Control Agreementwith respect to each such Credit Card Processor contemporaneously with theentry by such Loan Party into such credit processing agreement.

##  

## SECTION 5.15.  Additional Collateral;Further Assurances.  (a) Holdings shall cause each of its Material Domestic Subsidiaries formed oracquired after the Effective Date, and each Domestic Subsidiary which is not aMaterial Domestic Subsidiary on the Effective Date but which qualifies as aMaterial Domestic Subsidiary after the Effective Date, in accordance with theterms of this Agreement to become a Loan Party by executing the JoinderAgreement set forth as Exhibit E hereto (the “Joinder Agreement”)within thirty (30) days (or such later date as may be agreed upon by theAdministrative Agent) of such formation, acquisition or qualification, suchJoinder Agreement to be accompanied by appropriate corporate resolutions, othercorporate organizational and authorization 

 

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## documentation and legal opinions in form andsubstance reasonably satisfactory to the Administrative Agent. Upon executionand delivery thereof, each such Person (i) shall automatically become aLoan Guarantor hereunder and thereupon shall have all of the rights, benefits,duties, and obligations in such capacity under the Loan Documents and (ii) willgrant Liens to the Administrative Agent, for the benefit of the SecuredParties, in any property of such Loan Party which constitutes Collateral.

##  

### (b)  Without limiting the generality ofthe foregoing, Holdings will cause the Applicable Pledge Percentage of theissued and outstanding Equity Interests of each Pledge Subsidiary directlyowned by Holdings or any other Loan Party to be subject at all times to a firstpriority, perfected Lien in favor of the Administrative Agent, for the benefitof the Administrative Agent and the Lenders, to secure the Secured Obligationsin accordance with the terms and conditions of the Collateral Documents or suchother security documents as the Administrative Agent shall reasonablyrequest.  Notwithstanding the foregoing,no such pledge agreement in respect of the Equity Interests of a ForeignSubsidiary shall be required hereunder (i) (A) until the date that issixty (60) days immediately following the Effective Date (or such later date asmay be agreed upon by the Administrative Agent) in the case of Material ForeignSubsidiaries in existence on the Effective Date and (B) within sixty (60)days (or such later date as may be agreed upon by the Administrative Agent) inthe case of a Material Foreign Subsidiary formed or acquired, or a ForeignSubsidiary otherwise qualifying as a Material Foreign Subsidiary, after theEffective Date and (ii) to the extent the Administrative Agent or itscounsel determines that, in light of the cost and expense associated therewith,such pledge would not provide material credit support for the benefit of theSecured Parties pursuant to legally valid, binding and enforceable pledgeagreements.

###  

### (c)  Without limiting the foregoing,each Loan Party will, and will cause each Subsidiary to, execute and deliver,or cause to be executed and delivered, to the Administrative Agent suchdocuments, agreements and instruments (including, without limitation, themaking of commercially reasonably efforts in respect of deposit account controlagreements and securities account control agreements), and will take or causeto be taken such further actions (including the filing and recording offinancing statements and other documents and such other actions or deliveriesof the type required by Section 4.01, as applicable), which may berequired by law or which the Administrative Agent may, from time to time,reasonably request to carry out the terms and conditions of this Agreement andthe other Loan Documents and to ensure perfection and priority of the Lienscreated or intended to be created by the Collateral Documents, all in form andsubstance reasonably satisfactory to the Administrative Agent and all at theexpense of the Loan Parties.

###  

### (d)  If any material assets (other thanExcluded Assets) are acquired by any Loan Party after the Effective Date (otherthan assets constituting Collateral under the Security Agreement that becomesubject to the Lien in favor of the Administrative Agent upon acquisitionthereof), the Borrower will notify the Administrative Agent and the Lendersthereof, and, if requested by the Administrative Agent or the Required Lenders,the Borrower will cause such assets to be subjected to a Lien securing theSecured Obligations and will take, and cause the Loan Parties to take, suchactions as shall be necessary or reasonably requested by the AdministrativeAgent to grant and perfect such Liens, including actions described in paragraph(c) of this Section, all at the expense of the Loan Parties.

###  

### (e)  Each Loan Party will usecommercially reasonable efforts to obtain a Processor Control Agreement withrespect to each Credit Card Processor party to a credit card processingagreement acquired by any Loan Party in connection with the consummation of anyPermitted Acquisition, within sixty (60) days after the consummation of suchPermitted Acquisition.

 

63

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###  

### (f)  On or prior to the Effective Date,each Loan Party shall deliver to the Administrative Agent executed signature pages andexhibits to Confirmatory Grants of Security Interest with respect to itspatents, trademarks and copyrights to be held in escrow by the AdministrativeAgent until the occurrence of the IP Collateral Trigger Date.  Upon the occurrence of the IP CollateralTrigger Date, each Loan Party acknowledges and agrees that (i) allsignature pages, exhibits, documents, instruments and other deliveries providedto the Administrative Agent by such Loan Party to evidence a first prioritysecurity interest of the Administrative Agent in such Loan Party’s patents,trademarks, and copyrights, shall be automatically and irrevocably released, (ii) theAdministrative Agent shall be authorized to (A) date any such items thedate of the IP Collateral Trigger Date, (B) attach the executed signature pages ofsuch Loan Party thereto, and (C) make all filings and take any otheractions contemplated thereby in connection with creating and perfecting theAdministrative Agent’s Lien on the patents, trademarks and copyrights of suchLoan Party, and (iii) it shall promptly execute and deliver to theAdministrative Agent a reaffirmation agreement, in form and substancesatisfactory to the Administrative Agent, that reaffirms its obligations underthe Loan Documents (including, without limitation, such Loan Party’s grant tothe Administrative Agent of a first priority security interest in all of suchLoan Party’s patents, trademarks and copyrights).

###  

### (g) If an agreement with respect to ajoint venture (that is not a Subsidiary) entered into by a Loan Party otherwisepermitted hereunder contains customary restrictions on the granting of Liens onits assets or Equity Interests of such joint venture, no Lien need be providedto the Administrative Agent to the extent that such Lien would not be permittedby the terms of the joint venture agreements.

###  

# ARTICLEVI

#  

# Negative Covenants

#  

Until the Commitments haveexpired or terminated and the principal of and interest on each Loan and allfees, expenses and other amounts payable under any Loan Document have been paidin full and all Letters of Credit have expired or terminated and all LCDisbursements shall have been reimbursed, the Loan Parties covenant and agree,jointly and severally, with the Lenders that:

 

## SECTION 6.01.  Indebtedness.  No Loan Party will, nor will it permit anySubsidiary to, create, incur or suffer to exist any Indebtedness, except:

##  

### (a)  the Secured Obligations;

###  

### (b)  Indebtedness existing on the datehereof and set forth in Schedule 6.01 and extensions, renewals andreplacements of any such Indebtedness in accordance with clause (f) hereof;

###  

### (c)  Indebtedness of Holdings or theBorrower to any Subsidiary and of any Subsidiary to Holdings, the Borrower orany other Subsidiary; provided that (i) Indebtedness of anySubsidiary that is not a Loan Party to Holdings, the Borrower or any Subsidiarythat is a Loan Party shall be subject to Section 6.04 and (ii) Indebtednessof Holdings or the Borrower to any Subsidiary and Indebtedness of anySubsidiary that is a Loan Party to any Subsidiary that is not a Loan Partyshall be subordinated to the Secured Obligations on terms reasonablysatisfactory to the Administrative Agent;

###  

### (d)  Guarantees by Holdings or theBorrower of Indebtedness or other obligations of any Subsidiary and by anySubsidiary of Indebtedness of the Borrower or any other Subsidiary; providedthat (i) the Indebtedness so Guaranteed is permitted by this Section 6.01,(ii) Guarantees by Holdings, the Borrower or any Subsidiary that is a LoanParty of Indebtedness of any Subsidiary that 

###  

### 64

### 

###  

### is not a Loan Party shall be subject to Section 6.04 and (iii) Guaranteespermitted under this clause (d) shall be subordinated to the SecuredObligations of the applicable Subsidiary on the same terms as the Indebtednessso Guaranteed is subordinated to the Secured Obligations;

###  

### (e)  Indebtedness of the Borrower or anySubsidiary incurred to finance the acquisition, construction or improvement ofany fixed or capital assets (whether or not constituting purchase moneyIndebtedness), including Capital Lease Obligations and any Indebtedness assumedin connection with the acquisition of any such assets or secured by a Lien onany such assets prior to the acquisition thereof, and extensions, renewals andreplacements of any such Indebtedness in accordance with clause (f) hereof;provided that (i) such Indebtedness is incurred prior to or onehundred eighty (180) days after such acquisition or the completion of suchconstruction or improvement and (ii) the aggregate principal amount ofIndebtedness permitted by this clause (e) shall not exceed $35,000,000 atany time outstanding;

###  

### (f)  Indebtedness which represents anextension, refinancing, or renewal of any of the Indebtedness described inclauses (b), (e) and (i) hereof; provided that, (i) theprincipal amount of such Indebtedness is not increased, (ii) any Lienssecuring such Indebtedness are not extended to any additional property of anyLoan Party, (iii) no Loan Party that is not originally obligated withrespect to repayment of such Indebtedness is required to become obligated withrespect thereto, (iv) such extension, refinancing or renewal does notresult in a shortening of the average weighted maturity of the Indebtedness soextended, refinanced or renewed, (v) the material terms (taken as a whole)of any such extension, refinancing, or renewal are not less favorable to theobligor thereunder than the original terms of such Indebtedness and (iv) ifthe Indebtedness that is refinanced, renewed, or extended was subordinated inright of payment to the Secured Obligations, then the terms and conditions ofthe refinancing, renewal, or extension Indebtedness must include subordinationterms and conditions that are at least as favorable to the Administrative Agentand the Lenders as those that were applicable to the refinanced, renewed, orextended Indebtedness;

###  

### (g)  Indebtedness owed to any personproviding workers’ compensation, health, disability or other employee benefitsor property, casualty or liability insurance, pursuant to reimbursement orindemnification obligations to such person, in each case incurred in the ordinarycourse of business;

###  

### (h)  Indebtedness of the Borrower or anySubsidiary in respect of performance bonds, bid bonds, appeal bonds, suretybonds and similar obligations, in each case provided in the ordinary course ofbusiness;

###  

### (i)  Indebtedness of any Person thatbecomes a Subsidiary after the date hereof; provided that (i) suchIndebtedness exists at the time such Person becomes a Subsidiary and is notcreated in contemplation of or in connection with such Person becoming aSubsidiary and (ii) the aggregate principal amount of Indebtednesspermitted by this clause (i) shall not exceed $25,000,000 at any timeoutstanding;

###  

### (j) Indebtedness owed in respect of anyoverdrafts and related liabilities arising in the ordinary course of businessfrom treasury, depository and cash management services or from any automatedclearing-house transfers of funds;

###  

### (k) obligations under Swap Agreementspermitted under this Agreement;

###  

### 65

### 

###  

### (l) Indebtedness of Foreign Subsidiariesincurred for working capital purposes provided that the aggregate principalamount of Indebtedness permitted by this clause (l) shall not exceed$10,000,000 at any time outstanding;

###  

### (m) Guarantees of obligations ofindependent licensed Ethan Allen dealers in an aggregate principal amount notexceeding $5,000,000 at any time outstanding;

###  

### (n) Indebtedness under sale-leasebacktransactions, and other financing arrangements, in respect of Real Property andin an aggregate principal amount not exceeding $50,000,000 at any timeoutstanding; and

###  

### (o)  other unsecured Indebtedness in anaggregate principal amount not exceeding $100,000,000 at any time outstanding.

###  

## SECTION 6.02.  Liens.  No Loan Party will, nor will it permit anySubsidiary to, create, incur, assume or permit to exist any Lien on anyproperty or asset now owned or hereafter acquired by it, or assign or sell anyincome or revenues (including accounts receivable) or rights in respect of anythereof, except:

##  

### (a)  Liens created pursuant to any LoanDocument;

###  

### (b)  Permitted Encumbrances;

###  

### (c)  any Lien on any property or assetof Holdings or any Subsidiary existing on the date hereof and set forth in Schedule6.02; provided that (i) such Lien shall not apply to any otherproperty or asset of Holdings or Subsidiary (other than additions thereto thatbecome part thereof) and (ii) such Lien shall secure only thoseobligations which it secures on the date hereof and extensions, renewals andreplacements thereof that do not increase the outstanding principal amountthereof;

###  

### (d)  Liens on fixed or capital assetsacquired, constructed or improved by Holdings or any Subsidiary; providedthat (i) such security interests secure Indebtedness permitted by clause (e) ofSection 6.01, (ii) such security interests and the Indebtednesssecured thereby are incurred prior to or within one hundred eighty (180) daysafter such acquisition or the completion of such construction or improvement, (iii) theIndebtedness secured thereby does not exceed 90% of the cost of acquiring,constructing or improving such fixed or capital assets and (iv) suchsecurity interests shall not apply to any other property or assets of theBorrower or Subsidiary;

###  

### (e)  any Lien existing on any propertyor asset (other than Accounts (including, without limitation, Credit CardAccount Receivables) and Inventory) prior to the acquisition thereof by anyLoan Party or any Subsidiary or existing on any property or asset (other thanAccounts (including, without limitation, Credit Card Account Receivables) andInventory) of any Person prior to the acquisition of such Person by any LoanParty or any Subsidiary; provided that (i) such Lien is not createdin contemplation of or in connection with such acquisition, (ii) such Lienshall not apply to any other property or assets of a Loan Party and (iii) suchLien shall secure only those obligations which it secures on the date of suchacquisition or the date such Person becomes a Loan Party, as the case may beand extensions, renewals and replacements thereof that do not increase theoutstanding principal amount thereof;

###  

### (f)  Liens of a collecting bank arisingin the ordinary course of business under Section 4-208 of the UniformCommercial Code in effect in the relevant jurisdiction covering only the itemsbeing collected upon;

###  

### 66

### 

###  

### (g)  Liens on Real Property arising outof sale and leaseback transactions, and other financing arrangements, permittedby Sections 6.01(n) and 6.06;

###  

### (h) customary rights and restrictionscontained in agreements relating to a sale, transfer or other dispositionapplicable pending completion thereof and customary post-closing escrow andsimilar arrangements;

###  

### (i) in the case of any Subsidiary thatis not a wholly-owned Subsidiary, any put, call, right of first refusal andsimilar arrangements, and customary transfer restrictions, set forth in itsorganizational documents or any related joint venture or similar agreement;

###  

### (j) leases, subleases, licenses andsublicenses of assets, in each case entered into by Holdings or any otherSubsidiary in the ordinary course of business, that do not materially interferewith the conduct of the business of the Holdings and its Subsidiaries taken asa whole;

###  

### (k) Liens arising by virtue of UCCfinancing statement filings (or similar filings under applicable law) regardingoperating leases entered into by Holdings or any Subsidiary in the ordinarycourse of business;

###  

### (l)Liens consisting of interests of lessorsunder capital leases permitted under Section 6.01;

###  

### (m) Liens on assets of ForeignSubsidiaries securing Indebtedness permitted by Section 6.01(l);

###  

### (n)  Liens granted by a Subsidiary thatis not a Loan Party in favor of the Borrower or another Loan Party in respectof Indebtedness owed by such Subsidiary; and

###  

### (o)  other Liens on Excluded Assetssecuring Indebtedness or other obligations in an aggregate principal amount notexceeding $1,000,000 at any time outstanding.

###  

Notwithstanding theforegoing, none of the Liens permitted pursuant to this Section 6.02 mayat any time attach to any Loan Party’s (1) Accounts (including, withoutlimitation, Credit Card Account Receivables), other than those permitted underclause (a) of the definition of Permitted Encumbrance and clause (a) aboveand (2) Inventory, other than those permitted under clauses (a) and (b) ofthe definition of Permitted Encumbrance and clause (a) above.

 

## SECTION 6.03.  Fundamental Changes.  (a)  No Loan Party will, nor will itpermit any Subsidiary to, merge into or consolidate with any other Person, orpermit any other Person to merge into or consolidate with it, or liquidate ordissolve, except that, if at the time thereof and immediately after givingeffect thereto no Event of Default shall have occurred and be continuing (i) anySubsidiary of Holdings may merge into the Borrower in a transaction in whichthe Borrower is the surviving corporation, (ii) any Subsidiary of Holdings(other than the Borrower) may merge into any Loan Party in a transaction inwhich the surviving entity is a Loan Party and (iii) any Subsidiary thatis not a Loan Party may liquidate or dissolve if the Borrower determines ingood faith that such liquidation or dissolution is in the best interests of theBorrower and is not materially disadvantageous to the Lenders; providedthat any such merger involving a Person that is not a wholly owned Subsidiaryimmediately prior to such merger shall not be permitted unless also permittedby Section 6.04.

##  

## 67

## 

##  

### (b)  No Loan Party will, nor will itpermit any of its Subsidiaries to, engage in any business other than businessesof the type conducted by the Borrower and its Subsidiaries on the date ofexecution of this Agreement and businesses reasonably related thereto.

###  

### (c)  Holdings will not engage in anybusiness or activity other than business conducted as of the Effective Date(and activities incidental thereto) as the parent company of the Borrower andthe other Subsidiaries, as a public company under securities laws.

###  

## SECTION 6.04.  Investments, Loans,Advances, Guarantees and Acquisitions.   No Loan Party will, nor will it permit anySubsidiary to, purchase, hold or acquire (including pursuant to any merger withany Person that was not a Loan Party and a wholly owned Subsidiary prior tosuch merger) any capital stock, evidences of indebtedness or other securities(including any option, warrant or other right to acquire any of the foregoing)of, make or permit to exist any loans or advances to, Guarantee anyIndebtedness of, or make or permit to exist any investment or any otherinterest in, any other Person, or purchase or otherwise acquire (in onetransaction or a series of transactions) any assets of any other Personconstituting a business unit (whether through purchase of assets, merger orotherwise), except:

##  

### (a)  Permitted Investments, subject, tothe extent requested by the Administrative Agent, to control agreements infavor of the Administrative Agent for the benefit of the Secured Parties orotherwise subject to a perfected security interest in favor of theAdministrative Agent for the benefit of the Secured Parties;

###  

### (b)  investments, loans and advances inexistence on the date of this Agreement and described in Schedule6.04;

###  

### (c)  investments by Holdings in the Borrower and by the Borrower and theSubsidiaries in Equity Interests in their respective Subsidiaries; providedthat (A) any such Equity Interests held by a Loan Party shall be pledgedpursuant to, and to the extent required by, the Security Agreement and theother Collateral Documents (subject to the limitations applicable to commonstock of an Affected Foreign Subsidiary referred to in Section 5.12) and (B) theaggregate amount of investments by Loan Parties in Subsidiaries that are notLoan Parties (together with outstanding intercompany loans permitted under theproviso to Section 6.04(d) and outstanding Guarantees permitted underthe proviso to Section 6.04(e)) shall not exceed $15,000,000 at any timeoutstanding (in each case determined without regard to any write-downs orwrite-offs);

###  

### (d)  loans or advances made by a LoanParty to any Subsidiary and made by any Subsidiary to any Loan Party or anyother Subsidiary; provided that the amount of such loans and advancesmade by Loan Parties to Subsidiaries that are not Loan Parties (together withoutstanding investments permitted under clause (B) to the proviso to Section 6.04(c) andoutstanding Guarantees permitted under the proviso to Section 6.04(e))shall not exceed $15,000,000 at any time outstanding (in each case determinedwithout regard to any write-downs or write-offs);

###  

### (e)  Guarantees constitutingIndebtedness permitted by Section 6.01; provided that the aggregateprincipal amount of Indebtedness of Subsidiaries that are not Loan Parties thatis Guaranteed by any Loan Party shall (together with outstanding investmentspermitted under clause (B) to the proviso to Section 6.04(c) andoutstanding intercompany loans permitted under the proviso to Section 6.04(d))shall not exceed $15,000,000 at any time outstanding (in each case determinedwithout regard to any write-downs or write-offs);

###  

### (f)  loans or advances made by a LoanParty to its employees on an arms-length basis in the ordinary course ofbusiness consistent with past practices for travel and entertainment expenses, 

###  

### 68

### 

###  

### relocation costs and similar purposes up to a maximum of $1,000,000 inthe aggregate at any one time outstanding;

###  

### (g)  subject to Sections 4.2(a) and4.4 of the Security Agreement, notes payable, or stock or other securitiesissued by account debtors or other obligors to a Loan Party pursuant tonegotiated agreements with respect to settlement of such Account Debtor’sAccounts in the ordinary course of business, consistent with past practices orreceived in connection with the bankruptcy or reorganization of an accountdebtor or other obligor;

###  

### (h)  investments in the form of SwapAgreements permitted by Section 6.07;

###  

### (i)  investments of any Person existingat the time such Person becomes a Subsidiary or consolidates or merges withHoldings or any of its Subsidiaries (including in connection with a PermittedAcquisition) so long as such investments were not made in contemplation of suchPerson becoming a Subsidiary or of such merger;

###  

### (j)  investments received in connectionwith the dispositions of assets permitted by Section 6.05;

###  

### (k) accounts receivable arising andtrade credit granted in the ordinary course of business and prepayments andother credits granted to suppliers in the ordinary course of business;

###  

### (l) loans or advances to, or forthe benefit of, independent licensed dealers in products and services ofHoldings and its Subsidiaries in an aggregate outstanding amount not exceeding$5,000,000;

###  

### (m)  investments constitutingdeposits described in clauses (c) and (d) of the definition of theterm “Permitted Encumbrances”; and

###  

### (n)  Permitted Acquisitions.

###  

## SECTION 6.05.  Asset Sales.  No Loan Party will, nor will it permit anySubsidiary to, sell, transfer, lease or otherwise dispose of any asset,including any Equity Interest owned by it, nor will the Borrower permit anySubsidiary to issue any additional Equity Interest in such Subsidiary (otherthan to the Borrower or another Subsidiary in compliance with Section 6.04),except:

##  

### (a)  sales, transfers and dispositionsof (i) inventory in the ordinary course of business and (ii) used,obsolete, worn out or surplus equipment or property in the ordinary course ofbusiness;

###  

### (b)  sales, transfers and dispositionsto any Loan Party or any Subsidiary; provided that any such sales,transfers or dispositions involving a Subsidiary that is not a Loan Party shallbe made in compliance with Sections 6.04 and 6.09;

###  

### (c)  sales, transfers and dispositionsof accounts receivable in connection with the compromise, settlement orcollection thereof;

###  

### (d)  sales, transfers and dispositionsof Permitted Investments and other investments permitted by clauses (i) and(k) of Section 6.04;

###  

### 69

### 

###  

### (e)  sale and leaseback transactions,and other financing arrangements, permitted by Sections 6.01(n) and 6.06,and any other sale of Real Property not involving the incurrence ofIndebtedness;

###  

### (f)  dispositions resulting from anycasualty or other insured damage to, or any taking under power of eminentdomain or by condemnation or similar proceeding of, any property or asset ofany Loan Party or any Subsidiary;

###  

### (g) leases, subleases, licenses andsublicenses entered into in the ordinary course of business; and

###  

### (h)  sales, transfers and otherdispositions of assets (other than Equity Interests in a Subsidiary unless allEquity Interests in such Subsidiary are sold) that are not permitted by anyother paragraph of this Section; provided that the aggregate fair marketvalue of all assets sold, transferred or otherwise disposed of in reliance uponthis paragraph (h) shall not exceed $30,000,000;

###  

provided that allsales, transfers, leases and other dispositions permitted hereby (other thanthose permitted by paragraphs (b) and (f) above) shall be made forfair value and for at least 75% cash consideration.

 

## SECTION 6.06.  Sale and LeasebackTransactions.  Except for RealProperty financing transactions existing on the Effective Date and set forth onSchedule 6.01 or otherwise permitted pursuant to Section 6.01(n),no Loan Party will, nor will it permit any Subsidiary to, enter into anyarrangement, directly or indirectly, whereby it shall sell or transfer anyproperty, real or personal, used or useful in its business, whether now ownedor hereafter acquired, and thereafter rent or lease such property or otherproperty that it intends to use for substantially the same purpose or purposesas the property sold or transferred, except for any such sale of any fixed orcapital assets by any Loan Party or any Subsidiary that is made for cashconsideration in an amount not less than the fair value of such fixed orcapital asset and, in the case of an acquisition or construction of any fixedor capital asset as provided for in Section 6.01(e), is consummated withinone hundred eighty (180) days after such Loan Party or such Subsidiary acquiresor completes the construction of such fixed or capital asset.

##  

## SECTION 6.07.  Swap Agreements.  No Loan Party will, nor will it permit any  Subsidiary to, enter into any Swap Agreement,except (a) Swap Agreements entered into to hedge or mitigate risks towhich any Loan Party or any Subsidiary has actual exposure (other than those inrespect of Equity Interests of the Borrower or any of its Subsidiaries), and (b) SwapAgreements entered into in order to effectively cap, collar or exchangeinterest rates (from fixed to floating rates, from one floating rate to anotherfloating rate or otherwise) with respect to any interest-bearing liability orinvestment of any Loan Party or any Subsidiary.

##  

## SECTION 6.08.  Restricted Payments;Certain Payments of Indebtedness. (a) No Loan Party will, nor will it permit any Subsidiary to,declare or make, or agree to pay or make, directly or indirectly, any RestrictedPayment, or incur any obligation (contingent or otherwise) to do so, except (i) Holdingsmay declare and pay dividends with respect to its common stock payable solelyin additional shares of its common stock, and, with respect to its preferred stock,payable solely in additional shares of such preferred stock or in shares of itscommon stock, (ii) Holdings may make any dividend or distribution to allholders of its common stock to redeem rights issued pursuant to any stockholderrights plan, “poison pill” or a similar arrangement, provided that theaggregate amount of such dividends and distributions shall not exceed $750,000,(iii) the Borrower and the Subsidiaries may declare and pay dividendsratably with respect to their Equity Interests, (iv) Holdings may makeRestricted Payments pursuant to and in accordance with (A) equityincentive plans or other benefit plans for management or 

##  

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## 

##  

## employees of Holdings and its Subsidiaries solong as the Negative Covenant Permission Trigger is satisfied and (B) theemployment agreement, and related restricted stock agreements, with M. FarooqKathwari, as specified in Holdings’ publicly filed proxy statement dated October 17,2008 and (v) Holdings, the Borrower and its Subsidiaries may make anyRestricted Payment so long as the Negative Covenant Permission Trigger issatisfied.

##  

### (b)  No Loan Party will, nor will itpermit any Subsidiary to, make or agree to pay or make, directly or indirectly,any payment or other distribution (whether in cash, securities or otherproperty) of or in respect of principal of or interest on any Indebtedness, orany payment or other distribution (whether in cash, securities or otherproperty), including any sinking fund or similar deposit, on account of thepurchase, redemption, retirement, acquisition, cancellation or termination ofany Indebtedness, except:

###  

#### (i)  payment of Indebtedness createdunder the Loan Documents;

####  

#### (ii)  payment of regularly scheduledinterest and principal payments as and when due in respect of any Indebtedness,other than payments in respect of the Subordinated Indebtedness prohibited bythe subordination provisions thereof;

####  

#### (iii)  refinancings of Indebtedness tothe extent permitted by Section 6.01; and

####  

#### (iv)  payment of secured Indebtednessthat becomes due as a result of the voluntary sale or transfer of the propertyor assets securing such Indebtedness;

####  

provided that, Holdings, the Borrower and its Subsidiariesmay make any payment described in clause (b) above so long as the NegativeCovenant Permission Trigger is satisfied.

 

## SECTION 6.09.  Transactions withAffiliates.  No Loan Partywill, nor will it permit any Subsidiary to, sell, lease or otherwise transferany property or assets to, or purchase, lease or otherwise acquire any propertyor assets from, or otherwise engage in any other transactions with, any of itsAffiliates, except (a) transactions that (i) are in the ordinarycourse of business and (ii) are at prices and on terms and conditions not lessfavorable to the Loan Party or such Subsidiary than could be obtained on an arm’s-lengthbasis from unrelated third parties, (b) transactions between or among theLoan Party and any Subsidiary that is a Loan Party not involving any otherAffiliate, (c) any investment permitted by Sections 6.04(c) or6.04(d), (d) any Indebtedness permitted under Section 6.01(c), (e) anyRestricted Payment permitted by Section 6.08, (f) loans or advancesto employees permitted under Section 6.04, (g) the payment of reasonablefees to directors of Holdings or any Subsidiary who are not employees ofHoldings or any Subsidiary, and compensation and benefit arrangements(including reasonable and customary expense advancements) paid to, andindemnities provided for the benefit of, directors, officers or employees ofHoldings or its Subsidiaries in the ordinary course of business and (h) anyissuances of securities or other payments, awards or grants in cash, securitiesor otherwise pursuant to, or the funding of, employment agreements, equityincentive and employee benefit plans approved by Holdings’ board of directors.

##  

## SECTION 6.10.  RestrictiveAgreements.  No Loan Partywill, nor will it permit any Subsidiary to, directly or indirectly, enter into,incur or permit to exist any agreement or other arrangement that prohibits,restricts or imposes any condition upon (a) the ability of such Loan Partyor any of its Subsidiaries to create, incur or permit to exist any Lien uponany of its property or assets, or (b) the ability of any Subsidiary to paydividends or other distributions with respect to any shares of its capitalstock or to make or repay loans or advances to the Borrower or any otherSubsidiary or to Guarantee Indebtedness of the Borrower or any otherSubsidiary; provided that (i) the foregoing shall not 

##  

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## 

##  

## apply to restrictions and conditions imposedby law or by any Loan Document, (ii) the foregoing shall not apply torestrictions and conditions existing on the date hereof identified on Schedule6.10 (but shall apply to any extension or renewal of, or any amendment ormodification, in each case expanding the scope of, any such restriction orcondition), (iii) the foregoing shall not apply to customary restrictionsand conditions contained in agreements relating to the sale of a Subsidiary oran asset pending such sale; provided such restrictions and conditionsapply only to the Subsidiary or asset that is to be sold and such sale ispermitted hereunder, (iv) clause (a) of the foregoing shall not applyto restrictions or conditions imposed by any agreement relating to securedIndebtedness permitted by this Agreement if such restrictions or conditionsapply only to the property or assets securing such Indebtedness, (v) clause(a) of the foregoing shall not apply to customary provisions in licensesor leases restricting the assignment thereof and (vi) the foregoing shallnot apply to (1) any restriction in any agreement of any Person in effectat the time such Person becomes a Subsidiary so long as such restriction is notentered into in contemplation of such Person becoming a Subsidiary, (2) customaryrestrictions and conditions in joint ventures or similar arrangements and (3) customaryrestrictions on then-market terms (for the applicable Indebtedness) under anyIndebtedness permitted under Section 6.01 (so long as, in the case ofIndebtedness under clauses (b) or (f) of Section 6.01, therestrictions imposed by any such Indebtedness which constitutes extended,renewed, replaced or refinanced Indebtedness are not more restrictive than therestrictions in the applicable original Indebtedness).

##  

## SECTION 6.11.  Amendment ofMaterial Documents.  No LoanParty will, nor will it permit any Subsidiary to, amend, modify or waive any ofits rights under (a) agreement relating to any Subordinated Indebtednessor any Material Indebtedness or (b) its certificate of incorporation,by-laws, operating, management or partnership agreement or other organizationaldocuments, to the extent any such amendment, modification or waiver would bematerially adverse to the Lenders.

##  

## SECTION 6.12.  Financial Covenants.

##  

### (a) FixedCharge Coverage Ratio.  TheBorrower will not, at any time when average monthly Availability is less thanan amount equal to the greater of (i) 15% of the Aggregate Commitment atsuch time and (ii) $9,000,000, permit the Fixed Charge Coverage Ratio,determined for any period of four consecutive fiscal quarters ending on thelast day of each fiscal quarter, to be less than 1.00 to 1.00.

###  

# ARTICLEVII

#  

# Events of Default

#  

If any of the followingevents (“Events of Default”)shall occur:

 

### (a)  the Borrower shall fail to pay anyprincipal of any Loan or any reimbursement obligation in respect of any LCDisbursement when and as the same shall become due and payable, whether at thedue date thereof or at a date fixed for prepayment thereof or otherwise;

###  

### (b)  the Borrower shall fail to pay anyinterest on any Loan or any fee or any other amount (other than an amountreferred to in clause (a) of this Article) payable under this Agreement,when and as the same shall become due and payable, and such failure shallcontinue unremedied for a period of three (3) Business Days;

###  

### (c)  any representation or warranty madeor deemed made by or on behalf of any Loan Party or any Subsidiary in or inconnection with this Agreement or any Loan Document or any amendment ormodification thereof or waiver thereunder, or in any report, certificate,financial 

###  

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### 

###  

### statement or other document furnished pursuant to or in connection withthis Agreement or any Loan Document or any amendment or modification thereof orwaiver thereunder, shall prove to have been incorrect in any material respectwhen made or deemed made;

###  

### (d)  any Loan Party shall fail toobserve or perform any covenant, condition or agreement contained in Section 5.02(a),5.03 (with respect to a Loan Party’s existence), 5.08, 5.15 or in Article VI;

###  

### (e)  any Loan Party shall fail toobserve or perform any covenant, condition or agreement contained in thisAgreement (other than those which constitute a default under another Section ofthis Article), and such failure shall continue unremedied for a period of (i) five(5) days after the earlier of any Loan Party’s knowledge of such breach ornotice thereof from the Administrative Agent (which notice will be given at therequest of any Lender) if such breach relates to terms or provisions of Section 5.01,5.02 (other than Section 5.02(a)), 5.03 through 5.07, 5.09, 5.10 or 5.13of this Agreement or (ii) fifteen (15) days after the earlier of any LoanParty’s knowledge of such breach or notice thereof from the AdministrativeAgent (which notice will be given at the request of any Lender) if such breachrelates to terms or provisions of any other Section of this Agreement;

###  

### (f)  any Loan Party or any Subsidiaryshall fail to make any payment (whether of principal or interest and regardlessof amount) in respect of any Material Indebtedness, when and as the same shallbecome due and payable;

###  

### (g)  any event or condition occurs thatresults in any Material Indebtedness becoming due prior to its scheduledmaturity or that enables or permits (with or without the giving of notice, thelapse of time or both) the holder or holders of any Material Indebtedness orany trustee or agent on its or their behalf to cause any Material Indebtednessto become due, or to require the prepayment, repurchase, redemption ordefeasance thereof, prior to its scheduled maturity; provided that thisclause (g) shall not apply to secured Indebtedness that becomes due as aresult of the voluntary sale or transfer of the property or assets securingsuch Indebtedness;

###  

### (h)  an involuntary proceeding shall becommenced or an involuntary petition shall be filed seeking (i) liquidation,reorganization or other relief in respect of a Loan Party or any Subsidiary ofany Loan Party or its debts, or of a substantial part of its assets, under anyFederal, state or foreign bankruptcy, insolvency, receivership or similar lawnow or hereafter in effect or (ii) the appointment of a receiver, trustee,custodian, sequestrator, conservator or similar official for any Loan Party orany Subsidiary of any Loan Party or for a substantial part of its assets, and,in any such case, such proceeding or petition shall continue undismissed forsixty (60) days or an order or decree approving or ordering any of theforegoing shall be entered;

###  

### (i)  any Loan Party or any Subsidiary ofany Loan Party shall (i) voluntarily commence any proceeding or file anypetition seeking liquidation, reorganization or other relief under any Federal,state or foreign bankruptcy, insolvency, receivership or similar law now orhereafter in effect, (ii) consent to the institution of, or fail to contestin a timely and appropriate manner, any proceeding or petition described inclause (h) of this Article, (iii) apply for or consent to theappointment of a receiver, trustee, custodian, sequestrator, conservator orsimilar official for such Loan Party or Subsidiary of any Loan Party or for asubstantial part of its assets, (iv) file an answer admitting the materialallegations of a petition filed against it in any such proceeding, (v) makea general assignment for the benefit of creditors or (vi) take any actionfor the purpose of effecting any of the foregoing;

 

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###  

### (j)  any Loan Party or any Subsidiary ofany Loan Party shall become unable, admit in writing its inability or failgenerally to pay its debts as they become due;

###  

### (k)  one or more judgments for thepayment of money in an aggregate amount in excess of $10,000,000 shall berendered against any Loan Party, any Subsidiary of any Loan Party or anycombination thereof and the same shall remain undischarged for a period ofthirty (30) consecutive days during which execution shall not be effectivelystayed, or any action shall be legally taken by a judgment creditor to attachor levy upon any assets of any Loan Party or any Subsidiary of any Loan Partyto enforce any such judgment or any Loan Party or any Subsidiary of any LoanParty shall fail within thirty (30) days to discharge one or more non-monetaryjudgments or orders which, individually or in the aggregate, could reasonablybe expected to have a Material Adverse Effect, which judgments or orders, inany such case, are not stayed on appeal or otherwise being appropriatelycontested in good faith by proper proceedings diligently pursued;

###  

### (l)  an ERISA Event shall have occurredthat, in the opinion of the Required Lenders, when taken together with allother ERISA Events that have occurred, could reasonably be expected to resultin a Material Adverse Effect;

###  

### (m)  a Change in Control shall occur;

###  

### (n)  the occurrence of any defaultor “Event of Default” as defined in any Loan Document (other thanthis Agreement) or the breach of any of the terms or provisions of any LoanDocument (other than this Agreement), which default or breach continues beyondany period of grace therein provided;

###  

### (o)  the Loan Guaranty shall fail toremain in full force or effect or any action shall be taken to discontinue orto assert the invalidity or unenforceability of the Loan Guaranty, or any LoanGuarantor shall fail to comply with any of the terms or provisions of the LoanGuaranty to which it is a party, or any Loan Guarantor shall deny that it hasany further liability under the Loan Guaranty to which it is a party, or shallgive notice to such effect;

###  

### (p)  any Collateral Document shall forany reason fail to create a valid and perfected first priority securityinterest in any material portion of Collateral purported to be covered thereby,except as permitted by the terms of any Collateral Document, or any CollateralDocument shall fail to remain in full force or effect or any action shall betaken to discontinue or to assert the invalidity or unenforceability of anyCollateral Document, or any Loan Party shall fail to comply in any materialrespect with any of the terms or provisions of any Collateral Document; or

###  

### (q)  any material provision of any LoanDocument for any reason ceases to be valid, binding and enforceable in accordancewith its terms (or any Loan Party shall challenge the enforceability of anyLoan Document or shall assert in writing, or engage in any action or inactionbased on any such assertion, that any provision of any of the Loan Documentshas ceased to be or otherwise is not valid, binding and enforceable inaccordance with its terms);

###  

then, and in every suchevent (other than an event with respect to the Borrower described in clause (h) or(i) of this Article), and at any time thereafter during the continuance ofsuch event, the Administrative Agent may, and at the request of the RequiredLenders shall, by notice to the Borrower, take either or both of the followingactions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shallterminate immediately, and (ii) declare the Loans then outstanding to bedue and payable in whole (or in part, in which case any principal not sodeclared to be due and payable may thereafter be declared to be due andpayable), and thereupon the principal of the Loans so declared to 

 

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be due and payable, togetherwith accrued interest thereon and all fees and other obligations of theBorrower accrued hereunder, shall become due and payable immediately, withoutpresentment, demand, protest or other notice of any kind, all of which arehereby waived by the Borrower; and in case of any event with respect to theBorrower described in clause (h) or (i) of this Article, theCommitments shall automatically terminate and the principal of the Loans thenoutstanding, together with accrued interest thereon and all fees and otherobligations of the Borrower accrued hereunder, shall automatically become dueand payable, without presentment, demand, protest or other notice of any kind,all of which are hereby waived by the Borrower. Upon the occurrence and during the continuance of an Event of Default,the Administrative Agent may, and at the request of the Required Lenders shall,exercise any rights and remedies provided to the Administrative Agent under theLoan Documents or at law or equity, including all remedies provided under theUCC.

 

# ARTICLEVIII

#  

# The Administrative Agent

#  

Each of the Lenders and theIssuing Bank hereby irrevocably appoints the Administrative Agent as its agentand authorizes the Administrative Agent to take such actions on its behalf,including execution of the other Loan Documents, and to exercise such powers asare delegated to the Administrative Agent by the terms of the Loan Documents,together with such actions and powers as are reasonably incidental thereto.

 

The bank serving as theAdministrative Agent hereunder shall have the same rights and powers in itscapacity as a Lender as any other Lender and may exercise the same as though itwere not the Administrative Agent, and such bank and its Affiliates may acceptdeposits from, lend money to and generally engage in any kind of business withthe Loan Parties or any Subsidiary of a Loan Party or other Affiliate thereofas if it were not the Administrative Agent hereunder.

 

The Administrative Agentshall not have any duties or obligations except those expressly set forth inthe Loan Documents.  Without limiting thegenerality of the foregoing, (a) the Administrative Agent shall not besubject to any fiduciary or other implied duties, regardless of whether aDefault has occurred and is continuing, (b) the Administrative Agent shallnot have any duty to take any discretionary action or exercise anydiscretionary powers, except discretionary rights and powers expresslycontemplated by the Loan Documents that the Administrative Agent is required toexercise in writing as directed by the Required Lenders (or such other numberor percentage of the Lenders as shall be necessary under the circumstances asprovided in Section 9.02), and (c) except as expressly set forth inthe Loan Documents, the Administrative Agent shall not have any duty todisclose, and shall not be liable for the failure to disclose, any informationrelating to any Loan Party or any of its Subsidiaries that is communicated toor obtained by the bank serving as Administrative Agent or any of itsAffiliates in any capacity.  TheAdministrative Agent shall not be liable for any action taken or not taken byit with the consent or at the request of the Required Lenders (or such othernumber or percentage of the Lenders as shall be necessary under thecircumstances as provided in Section 9.02) or in the absence of its owngross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of anyDefault unless and until written notice thereof is given to the AdministrativeAgent by the Borrower or a Lender, and the Administrative Agent shall not beresponsible for or have any duty to ascertain or inquire into (i) anystatement, warranty or representation made in or in connection with any LoanDocument, (ii) the contents of any certificate, report or other documentdelivered hereunder or in connection with any Loan Document, (iii) theperformance or observance of any of the covenants, agreements or other terms orconditions set forth in any Loan Document, (iv) the validity,enforceability, effectiveness or genuineness of any Loan Document or any otheragreement, instrument or document, (v) the creation, perfection orpriority of Liens on the Collateral or the existence of the Collateral, or (vi) the

 

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satisfactionof any condition set forth in Article IV or elsewhere in any LoanDocument, other than to confirm receipt of items expressly required to bedelivered to the Administrative Agent.

 

The Administrative Agentshall be entitled to rely upon, and shall not incur any liability for relyingupon, any notice, request, certificate, consent, statement, instrument,document or other writing believed by it to be genuine and to have been signedor sent by the proper Person.  TheAdministrative Agent also may rely upon any statement made to it orally or bytelephone and believed by it to be made by the proper Person, and shall notincur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may becounsel for the Borrower), independent accountants and other experts selected byit, and shall not be liable for any action taken or not taken by it inaccordance with the advice of any such counsel, accountants or experts.

 

The Administrative Agent mayperform any and all its duties and exercise its rights and powers by or throughany one or more sub-agents appointed by the Administrative Agent.  The Administrative Agent and any suchsub-agent may perform any and all its duties and exercise its rights and powersthrough their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply toany such sub-agent and to the Related Parties of the Administrative Agent andany such sub-agent, and shall apply to their respective activities inconnection with the syndication of the credit facilities provided for herein aswell as activities as Administrative Agent.

 

Subject to the appointmentand acceptance of a successor Administrative Agent as provided in thisparagraph, the Administrative Agent may resign at any time by notifying theLenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right, inconsultation with the Borrower, to appoint a successor.  If no successor shall have been so appointedby the Required Lenders and shall have accepted such appointment within thirty(30) days after the retiring Administrative Agent gives notice of itsresignation, then the retiring Administrative Agent may, on behalf of theLenders and the Issuing Bank, appoint a successor Administrative Agent whichshall be a commercial bank or an Affiliate of any such commercial bank.  Upon the acceptance of its appointment asAdministrative Agent hereunder by a successor, such successor shall succeed toand become vested with all the rights, powers, privileges and duties of the retiringAdministrative Agent, and the retiring Administrative Agent shall be dischargedfrom its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agentshall be the same as those payable to its predecessor unless otherwise agreedbetween the Borrower and such successor. After the Administrative Agent’s resignation hereunder, the provisionsof this Article, Section 2.17(d) and Section 9.03 shall continuein effect for the benefit of such retiring Administrative Agent, its sub agentsand their respective Related Parties in respect of any actions taken or omittedto be taken by any of them while it was acting as Administrative Agent.

 

Each Lender acknowledgesthat it has, independently and without reliance upon the Administrative Agentor any other Lender and based on such documents and information as it hasdeemed appropriate, made its own credit analysis and decision to enter intothis Agreement.  Each Lender alsoacknowledges that it will, independently and without reliance upon theAdministrative Agent or any other Lender and based on such documents andinformation as it shall from time to time deem appropriate, continue to makeits own decisions in taking or not taking action under or based upon thisAgreement, any other Loan Document or related agreement or any documentfurnished hereunder or thereunder.

 

Each Lender hereby agreesthat (a) it has requested a copy of each Report prepared by or on behalfof the Administrative Agent; (b) the Administrative Agent (i) makesno representation or warranty, express or implied, as to the completeness oraccuracy of any Report or any of the information contained therein or anyinaccuracy or omission contained in or relating to a Report and (ii) shallnot be liable for any information contained in any Report; (c) the Reportsare not comprehensive audits or 

 

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examinations,and that any Person performing any field examination will inspect only specificinformation regarding the Loan Parties and will rely significantly upon theLoan Parties’ books and records, as well as on representations of the LoanParties’ personnel and that the Administrative Agent undertakes no obligationto update, correct or supplement the Reports; (d) it will keep all Reportsconfidential and strictly for its internal use, not share the Report with anyLoan Party or any other Person except as otherwise permitted pursuant to thisAgreement; and (e) without limiting the generality of any otherindemnification provision contained in this Agreement, it will pay and protect,and indemnify, defend, and hold the Administrative Agent and any such otherPerson preparing a Report harmless from and against, the claims, actions,proceedings, damages, costs, expenses, and other amounts (including reasonableattorney fees) incurred by as the direct or indirect result of any thirdparties who might obtain all or part of any Report through the indemnifyingLender.

 

None of the Lenders, if any,identified in this Agreement as a Syndication Agent or Documentation Agentshall have any right, power, obligation, liability, responsibility or dutyunder this Agreement other than those applicable to all Lenders as such.  Without limiting the foregoing, none of suchLenders shall have or be deemed to have a fiduciary relationship with anyLender.  Each Lender hereby makes thesame acknowledgments with respect to the relevant Lenders in their respectivecapacities as Syndication Agent or Documentation Agent, as applicable, as it makeswith respect to the Administrative Agent in the preceding paragraph.

 

Except with respect to theexercise of setoff rights of any Lender, in accordance with Section 9.08,the proceeds of which are applied in accordance with this Agreement, eachLender agrees that it will not take any action, nor institute any actions orproceedings, against the Borrower or with respect to any Loan Document, withoutthe prior written consent of the Required Lenders or, as may be provided inthis Agreement or the other Loan Documents, with the consent of the AdministrativeAgent.

 

The Lenders are not partnersor co-venturers, and no Lender shall be liable for the acts or omissions of, or(except as otherwise set forth herein in case of the Administrative Agent)authorized to act for, any other Lender. The Administrative Agent shall have the exclusive right on behalf of theLenders to enforce the payment of the principal of and interest on any Loanafter the date such principal or interest has become due and payable pursuantto the terms of this Agreement.

 

In its capacity, theAdministrative Agent is a “representative” of the Secured Parties withinthe meaning of the term “secured party” as defined in the New YorkUniform Commercial Code.  Each Lenderauthorizes the Administrative Agent to enter into each of the CollateralDocuments to which it is a party and to take all action contemplated by suchdocuments.  Each Lender agrees that noSecured Party (other than the Administrative Agent) shall have the rightindividually to seek to realize upon the security granted by any CollateralDocument, it being understood and agreed that such rights and remedies may beexercised solely by the Administrative Agent for the benefit of the SecuredParties upon the terms of the Collateral Documents.  In the event that any Collateral is hereafterpledged by any Person as collateral security for the Secured Obligations, theAdministrative Agent is hereby authorized, and hereby granted a power ofattorney, to execute and deliver on behalf of the Secured Parties any LoanDocuments necessary or appropriate to grant and perfect a Lien on suchCollateral in favor of the Administrative Agent on behalf of the SecuredParties.  The Lenders hereby authorizethe Administrative Agent, at its option and in its discretion, to release anyLien granted to or held by the Administrative Agent upon any Collateral (i) asdescribed in Section 9.02(c); (ii) as permitted by, but only inaccordance with, the terms of the applicable Loan Document; or (iii) ifapproved, authorized or ratified in writing by the Required Lenders, unlesssuch release is required to be approved by all of the Lenders hereunder.  Upon request by the Administrative Agent atany time, the Lenders will confirm in writing the Administrative Agent’sauthority to release particular types or items of Collateral pursuanthereto.  Upon any sale or transfer ofassets constituting Collateral which is permitted pursuant to the terms of anyLoan 

 

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Document,or consented to in writing by the Required Lenders or all of the Lenders, asapplicable, and upon at least five (5) Business Days’ prior writtenrequest by the Borrower to the Administrative Agent, the Administrative Agentshall (and is hereby irrevocably authorized by the Lenders to) execute suchdocuments as may be necessary to evidence the release of the Liens granted tothe Administrative Agent for the benefit of the Secured Parties herein orpursuant hereto upon the Collateral that was sold or transferred; provided,however, that (i) the Administrative Agent shall not be required toexecute any such document on terms which, in the Administrative Agent’sopinion, would expose the Administrative Agent to liability or create anyobligation or entail any consequence other than the release of such Lienswithout recourse or warranty, and (ii) such release shall not in anymanner discharge, affect or impair the Secured Obligations or any Liens upon(or obligations of the Borrower or any Subsidiary in respect of) all interestsretained by the Borrower or any Subsidiary, including (without limitation) theproceeds of the sale, all of which shall continue to constitute part of theCollateral.

 

The Borrower, on its behalfand on behalf of its Subsidiaries, and each Lender, on its behalf and on thebehalf of its affiliated Secured Parties, hereby irrevocably constitute theAdministrative Agent as the holder of an irrevocable power of attorney (*fondé de pouvoir* within the meaning of Article 2692 ofthe Civil Code of Québec) in order to hold hypothecs and security granted bythe Borrower or any Subsidiary on property pursuant to the laws of the Provinceof Quebec to secure obligations of the Borrower or any Subsidiary under anybond, debenture or similar title of indebtedness issued by the Borrower or anySubsidiary in connection with this Agreement, and agree that the AdministrativeAgent may act as the bondholder and mandatary with respect to any bond,debenture or similar title of indebtedness that may be issued by the Borroweror any Subsidiary and pledged in favor of the Secured Parties in connectionwith this Agreement.  Notwithstanding theprovisions of Section 32 of the An Act respecting the special powers oflegal persons (Quebec), JPMorgan Chase Bank, N.A. as Administrative Agent mayacquire and be the holder of any bond issued by the Borrower or any Subsidiaryin connection with this Agreement (i.e., the fondé de pouvoir may acquire andhold the first bond issued under any deed of hypothec by the Borrower or anySubsidiary).

 

The Administrative Agent ishereby authorized to execute and deliver any documents necessary or appropriateto create and perfect the rights of pledge for the benefit of the SecuredParties including a right of pledge with respect to the entitlements toprofits, the balance left after winding up and the voting rights of theBorrower as ultimate parent of any subsidiary of the Borrower which isorganized under the laws of the Netherlands and the Equity Interests of whichare pledged in connection herewith (a “Dutch Pledge”).  Without prejudice to the provisions of thisAgreement and the other Loan Documents, the parties hereto acknowledge andagree with the creation of parallel debt obligations of the Borrower or anyrelevant Subsidiary as will be described in any Dutch Pledge (the “ParallelDebt”), including that any payment received by the Administrative Agent inrespect of the Parallel Debt will conditionally upon such payment notsubsequently being avoided or reduced by virtue of any provisions or enactmentsrelating to bankruptcy, insolvency, preference, liquidation or similar laws ofgeneral application be deemed a satisfaction of a pro rata portion of thecorresponding amounts of the Obligations, and any payment to the Secured Parties in satisfaction ofthe Obligations shall conditionally upon such payment not subsequently beingavoided or reduced by virtue of any provisions or enactments relating tobankruptcy, insolvency, preference, liquidation or similar laws of generalapplication be deemed as satisfaction of the corresponding amount of theParallel Debt.  The parties heretoacknowledge and agree that, for purposes of a Dutch Pledge, any resignation bythe Administrative Agent is not effective until its rights under the ParallelDebt are assigned to the successor Administrative Agent.

 

The parties heretoacknowledge and agree for the purposes of taking and ensuring the continuingvalidity of German law governed pledges (*Pfandrechte*)with the creation of parallel debt obligations of the Borrower as will befurther described in a separate German law governed parallel debtundertaking.  The Administrative Agentshall (i) hold such parallel debt undertaking as fiduciary agent 

 

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(*Treuhaender*) and (ii) administer and hold as fiduciaryagent (Treuhaender) any pledge created under a German law governed CollateralDocument which is created in favor of any Holder of the Secured Obligations ortransferred to any Holder of the Secured Obligations due to its accessorynature (*Akzessorietaet*), in each case in its ownname and for the account of the Holders of the Secured Obligations.  Each Lender, on its own behalf and on behalfof its affiliated Secured Parties, hereby authorizes the Administrative Agentto enter as its agent in its name and on its behalf into any German lawgoverned Collateral Document, to accept as its agent in its name and on itsbehalf any pledge under such Collateral Document and to agree to and execute asagent its in its name and on its behalf any amendments, supplements and otheralterations to any such Collateral Document and to release any such CollateralDocument and any pledge created under any such Collateral Document inaccordance with the provisions herein and/or the provisions in any suchCollateral Document

 

# ARTICLEIX

#  

# Miscellaneous

#  

## SECTION 9.01.  Notices.  (a) Except in the case of notices andother communications expressly permitted to be given by telephone (and subjectto paragraph (b) below), all notices and other communications provided forherein shall be in writing and shall be delivered by hand or overnight courierservice, mailed by certified or registered mail or sent by facsimile, asfollows:

##  

#### (i)  if to any Loan Party, to it atEthan Allen Drive, Danbury, Connecticut 06811, Attention of Chief FinancialOfficer or Treasurer (Telecopy No. (203) 743-8469; Telephone No. (203)743-8305), with copies to, in the case of any notice or communication otherthan routine notices and communications under Article II, the attention ofGeneral Counsel at the aforesaid address (Telecopy No. (203) 743-8254);

####  

#### (ii)  if to the Administrative Agent, toJPMorgan Chase Bank, N.A., 270 Park Avenue, 44th Floor, New York, NY 10017,Attention of Joseph A. Lisack (Telecopy No. (646) 534-2288);

####  

#### (iii)  if to the Issuing Bank, toJPMorgan Chase Bank, N.A., 270 Park Avenue, 44th Floor, New York, NY 10017,Attention of Joseph A. Lisack (Telecopy No. (646) 534-2288);

####  

#### (iv)  if to the Swingline Lender, toJPMorgan Chase Bank, N.A., 270 Park Avenue, 44th Floor, New York, NY 10017, Attentionof Joseph A. Lisack (Telecopy No. (646) 534-2288); and

####  

#### (v)  if to any other Lender, to it atits address (or telecopy number) set forth in its Administrative Questionnaire.

####  

All such notices and othercommunications (i) sent by hand or overnight courier service, or mailed bycertified or registered mail, shall be deemed to have been given when receivedor (ii) sent by facsimile, shall be deemed to have been given when sent,provided that if not given during normal business hours for the recipient,shall be deemed to have been given at the opening of business on the nextBusiness Day for the recipient.

 

### (b)  Notices and other communications tothe Lenders hereunder may be delivered or furnished by electroniccommunications (including e-mail and internet or intranet websites) pursuant toprocedures approved by the Administrative Agent; provided that theforegoing shall not apply to notices pursuant to Article II or tocompliance and no Event of Default certificates delivered pursuant to Section 5.01(d) unlessotherwise agreed by the Administrative Agent and the applicable Lender.  The Administrative Agent or the Borrower (onbehalf of the Loan Parties) may, in its discretion, agree 

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###  

### to accept notices and other communications to it hereunder byelectronic communications pursuant to procedures approved by it; providedthat approval of such procedures may be limited to particular notices orcommunications. All such notices and other communications (i) sent to ane-mail address shall be deemed received upon the sender’s receipt of anacknowledgement from the intended recipient (such as by the “return receiptrequested” function, as available, return e-mail or other writtenacknowledgement); provided that if not given during the normal businesshours of the recipient, such notice or communication shall be deemed to havebeen given at the opening of business on the next Business Day for therecipient, and (ii) posted to an Internet or intranet website shall bedeemed received upon the deemed receipt by the intended recipient at its e-mailaddress as described in the foregoing clause (b)(i) of notification thatsuch notice or communication is available and identifying the website addresstherefor.

###  

### (c)  Any party hereto may change itsaddress or facsimile number for notices and other communications hereunder bynotice to the other parties hereto.

###  

## SECTION 9.02.  Waivers; Amendments.  (a)  No failure or delay by theAdministrative Agent, the Issuing Bank or any Lender in exercising any right orpower hereunder or under any other Loan Document shall operate as a waiverthereof, nor shall any single or partial exercise of any such right or power,or any abandonment or discontinuance of steps to enforce such a right or power,preclude any other or further exercise thereof or the exercise of any otherright or power.  The rights and remediesof the Administrative Agent, the Issuing Bank and the Lenders hereunder andunder any other Loan Document are cumulative and are not exclusive of anyrights or remedies that they would otherwise have.  No waiver of any provision of any LoanDocument or consent to any departure by any Loan Party therefrom shall in anyevent be effective unless the same shall be permitted by paragraph (b) ofthis Section, and then such waiver or consent shall be effective only in thespecific instance and for the purpose for which given.  Without limiting the generality of theforegoing, the making of a Loan or issuance of a Letter of Credit shall not beconstrued as a waiver of any Default, regardless of whether the AdministrativeAgent, any Lender or the Issuing Bank may have had notice or knowledge of suchDefault at the time.

##  

### (b)  Neither this Agreement nor anyprovision hereof may be waived, amended or modified except pursuant to anagreement or agreements in writing entered into by the Borrower and theRequired Lenders; provided that no such agreement shall (i) increasethe Commitment of any Lender without the written consent of such Lender (providedthat the Administrative Agent may make Protective Advances as set forth in Section 2.04),(ii) reduce or forgive the principal amount of any Loan or LC Disbursementor reduce the rate of interest thereon, or reduce or forgive any interest orfees payable hereunder, without the written consent of each Lender directlyaffected thereby, (iii) postpone any scheduled date of payment of theprincipal amount of any Loan or LC Disbursement, or any date for the payment ofany interest, fees or other Obligations payable hereunder, or reduce the amountof, waive or excuse any such payment, or postpone the scheduled date ofexpiration of any Commitment, without the written consent of each Lenderdirectly affected thereby, (iv) change Section 2.18(b) or (d) ina manner that would alter the manner in which payments are shared, without thewritten consent of each Lender, (v) increase the advance rates set forthin the definition of Borrowing Base or add new categories of eligible assets,without the written consent of each Lender, (vi) change any of theprovisions of this Section or the definition of “Required Lenders”or any other provision of any Loan Document specifying the number or percentageof Lenders required to waive, amend or modify any rights thereunder or make anydetermination or grant any consent thereunder, without the written consent ofeach Lender, (vii) change Section 2.20, without the consent of eachLender (other than any Defaulting Lender), (viii) release any LoanGuarantor from its obligation under its Loan Guaranty (except as otherwisepermitted herein or in the other Loan Documents), without the written consentof each Lender, or (ix) except as provided in clauses (d) and (e) ofthis Section or in any 

###  

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###  

### Collateral Document, release all or substantially all of theCollateral, without the written consent of each Lender; providedfurtherthat no such agreement shall amend, modify or otherwise affect the rights orduties of the Administrative Agent, the Issuing Bank or the Swingline Lenderhereunder without the prior written consent of the Administrative Agent, theIssuing Bank or the Swingline Lender, as the case may be (it being understoodthat any change to Section 2.20 shall require the consent of theAdministrative Agent, the Swingline Lender and the Issuing Bank).  The Administrative Agent may also amend Schedule2.01 to reflect assignments entered into pursuant to Section 9.04

###  

### (c)  (1) The Lenders herebyirrevocably authorize the Administrative Agent, at its option and in its solediscretion, to release any Liens granted to the Administrative Agent by theLoan Parties on any Collateral (i) upon the termination of the allCommitments, payment and satisfaction in full in cash of all Secured Obligations(other than Unliquidated  Obligations),and the cash collateralization of all Unliquidated Obligations in a mannersatisfactory to the Administrative Agent, (ii) constituting property beingsold or disposed of if the Loan Party disposing of such property certifies tothe Administrative Agent that the sale or disposition is made in compliancewith the terms of this Agreement (and the Administrative Agent may relyconclusively on any such certificate, without further inquiry), and to theextent that the property being sold or disposed of constitutes 100% of theEquity Interest of a Subsidiary, the Administrative Agent is authorized torelease any Loan Guaranty provided by such Subsidiary, (iii) constitutingproperty leased to a Loan Party under a lease which has expired or beenterminated in a transaction permitted under this Agreement, (iv) asrequired to effect any sale or other disposition of such Collateral inconnection with any exercise of remedies of the Administrative Agent and theLenders pursuant to Article VII and (v) as otherwise contemplatedhereunder in connection with cash collateral securing LC Exposure.  Except as provided in the preceding sentenceand the following clause (2), the Administrative Agent will not release any Lienson Collateral without the prior written authorization of the Required Lenders; providedthat, the Administrative Agent may in its discretion, release its Liens onCollateral valued in the aggregate not in excess of $5,000,000 during anycalendar year without the prior written authorization of the RequiredLenders.  Any such release shall not inany manner discharge, affect, or impair the Obligations or any Liens (otherthan those expressly being released) upon (or obligations of the Loan Partiesin respect of) all interests retained by the Loan Parties, including theproceeds of any sale, all of which shall continue to constitute part of theCollateral.

###  

### (2)  Notwithstanding the foregoingclause (1), any Loan Party that is a Subsidiary (other than the Borrower) shallbe automatically released from its obligations under the Loan Documents and allsecurity interests in the Collateral of such Loan Party created by the LoanDocuments shall be automatically released upon the consummation of anytransaction permitted by this Agreement as a result of which such Loan Partyceases to be a Subsidiary.  Upon anysale, lease, transfer or other disposition by any Loan Party of any Collateralthat is permitted under this Agreement to any Person other than Holdings or aSubsidiary, or upon the effectiveness of any written consent to the release ofthe security interest created under any Loan Document in any Collateralpursuant to Section 9.02, the security interest in such Collateral shallbe automatically released. In connection with any termination or releasepursuant to this Section, the Administrative Agent, upon receipt of anycertificates or other documents reasonably requested by it to confirmcompliance with this Agreement, shall promptly execute and deliver to any LoanParty, at such Loan Party’s expense, all documents that such Loan Party shallreasonably request to evidence such termination or release. The Lenders herebyirrevocably authorize the Administrative Agent to take all actions specified inthis Section 9.02(c)(2).  Any executionand delivery of documents pursuant to this Section shall be withoutrecourse to or warranty by the Administrative Agent.

###  

### (d)  If, in connection with any proposedamendment, waiver or consent  requiringthe consent of “each Lender” or “each Lender directly affectedthereby,” the consent of the Required 

###  

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### 

###  

### Lenders is obtained, but the consent of other necessary Lenders is notobtained (any such Lender whose consent is necessary but not obtained beingreferred to herein as a “Non-Consenting Lender”), then the Borrower mayelect to replace a Non-Consenting Lender as a Lender party to this Agreement; providedthat, concurrently with such replacement, (i) another bank or other entitywhich is reasonably satisfactory to the Borrower and the Administrative Agentshall agree, as of such date, to purchase for cash the Loans and otherObligations due to the Non-Consenting Lender pursuant to an Assignment andAssumption and to become a Lender for all purposes under this Agreement and toassume all obligations of the Non-Consenting Lender to be terminated as of suchdate and to comply with the requirements of clause (b) of Section 9.04,and (ii) the Borrower shall pay to such Non-Consenting Lender in same dayfunds on the day of such replacement (1) all interest, fees and otheramounts then accrued but unpaid to such Non-Consenting Lender by the Borrowerhereunder to and including the date of termination, including withoutlimitation payments due to such Non-Consenting Lender under Sections 2.15 and2.17, and (2) an amount, if any, equal to the payment which would havebeen due to such Lender on the day of such replacement under Section 2.16had the Loans of such Non-Consenting Lender been prepaid on such date ratherthan sold to the replacement Lender.

###  

## SECTION 9.03.  Expenses; Indemnity;Damage Waiver.  (a)  TheBorrower shall pay (i) all reasonable out of pocket expenses incurred bythe Administrative Agent and its Affiliates, including the reasonable fees,charges and disbursements of counsel for the Administrative Agent, inconnection with the syndication and distribution (including, withoutlimitation, via the internet or through a service such as Intralinks) of thecredit facilities provided for herein, the preparation and administration ofthe Loan Documents or any amendments, modifications or waivers of theprovisions of the Loan Documents (whether or not the transactions contemplatedhereby or thereby shall be consummated), (ii) all reasonable out-of-pocketexpenses incurred by the Issuing Bank in connection with the issuance,amendment, renewal or extension of any Letter of Credit or any demand forpayment thereunder and (iii) all out-of-pocket expenses incurred by theAdministrative Agent, the Issuing Bank or any Lender, including the fees,charges and disbursements of any counsel for the Administrative Agent, theIssuing Bank or any Lender, in connection with the enforcement, collection orprotection of its rights in connection with the Loan Documents, including itsrights under this Section, or in connection with the Loans made or Letters ofCredit issued hereunder, including all such out-of pocket expenses incurredduring  any workout, restructuring ornegotiations in respect of such Loans or Letters of Credit. Expenses beingreimbursed by the Borrower under this Section include, without limitingthe generality of the foregoing, reasonable fees, costs and expenses incurredin connection with:

##  

#### (i)  appraisals and insurance reviewsand environmental reviews;

####  

#### (ii)  field examinations and thepreparation of Reports based on the fees charged by a third party retained bythe Administrative Agent or the internally allocated fees for each Personemployed by the Administrative Agent with respect to each field examination;

####  

#### (iii)  taxes, fees and other charges for(A) lien searches and (B) filing financing statements andcontinuations, and other actions to perfect, protect, and continue theAdministrative Agent’s Liens;

####  

#### (iv)  sums paid or incurred to take anyaction required of any Loan Party under the Loan Documents that such Loan Partyfails to pay or take; and

####  

#### (v)  forwarding loan proceeds,collecting checks and other items of payment, and establishing and maintainingthe accounts and lock boxes, and costs and expenses of preserving andprotecting the Collateral.

####  

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#### 

####  

All of the foregoing fees,costs and expenses may be charged to the Borrower as Revolving Loans or toanother deposit account, all as described in Section 2.18(c).

 

### (b)  The Borrower shall indemnify theAdministrative Agent, the Issuing Bank and each Lender, and each Related Partyof any of the foregoing Persons (each such Person being called an “Indemnitee”)against, and hold each Indemnitee harmless from, any and all losses, claims,damages, penalties, incremental taxes, liabilities and related expenses,including the fees, charges and disbursements of any counsel for anyIndemnitee, incurred by or asserted against any Indemnitee arising out of, in connectionwith, or as a result of (i) the execution or delivery of the LoanDocuments or any agreement or instrument contemplated thereby, the performanceby the parties hereto of their respective obligations thereunder or theconsummation of the Transactions or any other transactions contemplated hereby,(ii) any Loan or Letter of Credit or the use of the proceeds therefrom(including any refusal by the Issuing Bank to honor a demand for payment undera Letter of Credit if the documents presented in connection with such demand donot strictly comply with the terms of such Letter of Credit), (iii) anyactual or alleged presence or release of Hazardous Materials on or from anyproperty owned or operated by the Borrower or any of its Subsidiaries, or anyEnvironmental Liability related in any way to the Borrower or any of itsSubsidiaries, (iv) the failure of the Borrower to deliver to theAdministrative Agent the required receipts or other required documentaryevidence with respect to a payment made by the Borrower for Taxes pursuant to Section 2.17,or (v) any actual or prospective claim, litigation, investigation orproceeding relating to any of the foregoing, whether based on contract, tort orany other theory and regardless of whether any Indemnitee is a party thereto; providedthat such indemnity shall not, as to any Indemnitee, be available to the extentthat such losses, claims, damages, penalties, liabilities or related expensesare determined by a court of competent jurisdiction by final and nonappealablejudgment to have resulted from the gross negligence or willful misconduct ofsuch Indemnitee.

###  

### (c)  To the extent that the Borrowerfails to pay any amount required to be paid by it to the Administrative Agent,the Issuing Bank or the Swingline Lender under paragraph (a) or (b) ofthis Section, each Lender severally agrees to pay to the Administrative Agent,the Issuing Bank or the Swingline Lender, as the case may be, such Lender’sApplicable Percentage (determined as of the time that the applicable unreimbursedexpense or indemnity payment is sought) of such unpaid amount (it beingunderstood that the Borrower’s failure to pay any such amount shall not relievethe Borrower of any default in the payment thereof); provided that theunreimbursed expense or indemnified loss, claim, damage, penalty, liability orrelated expense, as the case may be, was incurred by or asserted against theAdministrative Agent, the Issuing Bank or the Swingline Lender in its capacityas such.

###  

### (d)  To the extent permitted by applicablelaw, no Loan Party shall assert, and each hereby waives, any claim against anyIndemnitee, on any theory of liability, for special, indirect, consequential orpunitive damages (as opposed to direct or actual damages) arising out of, inconnection with, or as a result of, this Agreement or any agreement orinstrument contemplated hereby, the Transactions, any Loan or Letter of Creditor the use of the proceeds thereof.

###  

### (e)  All amounts due under this Section shallbe payable not later than fifteen (15) days after written demand therefor.

###  

## SECTION 9.04.  Successors andAssigns.  (a)  Theprovisions of this Agreement shall be binding upon and inure to the benefit ofthe parties hereto and their respective successors and assigns permitted hereby(including any Affiliate of the Issuing Bank that issues any Letter of Credit),except that (i) the Borrower may not assign or otherwise transfer any ofits rights or obligations hereunder without the prior written consent of eachLender (and any attempted assignment or transfer by the Borrower without suchconsent shall be null and void) and (ii) no Lender may assign or otherwisetransfer its rights 

##  

## 83

## 

##  

## or obligations hereunder except in accordancewith this Section.  Nothing in thisAgreement, expressed or implied, shall be construed to confer upon any Person(other than the parties hereto, their respective successors and assignspermitted hereby (including any Affiliate of the Issuing Bank that issues anyLetter of Credit), Participants (to the extent provided in paragraph (c) ofthis Section) and, to the extent expressly contemplated hereby, the RelatedParties of each of the Administrative Agent, the Issuing Bank and the Lenders)any legal or equitable right, remedy or claim under or by reason of thisAgreement.

##  

### (b)(i)  Subject to the conditions setforth in paragraph (b)(ii) below, any Lender may assign to one or moreassignees all or a portion of its rights and obligations under this Agreement(including all or a portion of its Commitment and the Loans at the time owingto it) with the prior written consent (such consent not to be unreasonablywithheld) of:

###  

(A)  the Borrower; providedthat no consent of the Borrower shall be required for an assignment to a Lender,an Affiliate of a Lender, an Approved Fund or, if an Event of Default hasoccurred and is continuing, any other assignee;

 

(B)  the AdministrativeAgent; and

 

(C)  the Issuing Bank.

 

#### (ii)  Assignments shall be subject tothe following additional conditions:

####  

(A)  except in the caseof an assignment to a Lender or an Affiliate of a Lender or an assignment ofthe entire remaining amount of the assigning Lender’s Commitment or Loans ofany Class, the amount of the Commitment or Loans of the assigning Lendersubject to each such assignment (determined as of the date the Assignment andAssumption with respect to such assignment is delivered to the AdministrativeAgent) shall not be less than $5,000,000 unless each of the Borrower and theAdministrative Agent otherwise consent; provided that no such consent ofthe Borrower shall be required if an Event of Default has occurred and iscontinuing;

 

(B)  each partialassignment shall be made as an assignment of a proportionate part of all theassigning Lender’s rights and obligations under this Agreement;

 

(C)  the parties toeach assignment shall execute and deliver to the Administrative Agent anAssignment and Assumption, together with a processing and recordation fee of$3,500, such fee to be paid by either the assigning Lender or the assigneeLender or shared between such Lenders; and

 

(D)  the assignee, ifit shall not be a Lender, shall deliver to the Administrative Agent anAdministrative Questionnaire in which the assignee designates one or moreCredit Contacts to whom all syndicate-level information (which may containmaterial non-public information about the Borrower, the Loan Parties and theirRelated Parties or their respective securities) will be made available and whomay receive such information in accordance with the assignee’s complianceprocedures and applicable laws, including Federal and state securities laws.

 

For the purposes of this Section 9.04(b),the term “Approved Fund” has the following meaning:

 

“Approved Fund” means any Person (otherthan a natural person) that is engaged in making, purchasing, holding orinvesting in bank loans and similar extensions of credit in the ordinary courseof its business and that is administered or managed by (a) a Lender, (b) anAffiliate of a Lender or (c) an entity or an Affiliate of an entity thatadministers or manages a Lender.

 

84

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####  

#### (iii)  Subject to acceptance andrecording thereof pursuant to paragraph (b)(iv) of this Section, from andafter the effective date specified in each Assignment and Assumption theassignee thereunder shall be a party hereto and, to the extent of the interestassigned by such Assignment and Assumption, have the rights and obligations ofa Lender under this Agreement, and the assigning Lender thereunder shall, tothe extent of the interest assigned by such Assignment and Assumption, bereleased from its obligations under this Agreement (and, in the case of anAssignment and Assumption covering all of the assigning Lender’s rights andobligations under this Agreement, such Lender shall cease to be a party heretobut shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17and 9.03).  Any assignment or transfer bya Lender of rights or obligations under this Agreement that does not complywith this Section 9.04 shall be treated for purposes of this Agreement asa sale by such Lender of a participation in such rights and obligations inaccordance with paragraph (c) of this Section.

####  

#### (iv)  The Administrative Agent, actingfor this purpose as an agent of the Borrower, shall maintain at one of itsoffices a copy of each Assignment and Assumption delivered to it and a registerfor the recordation of the names and addresses of the Lenders, and theCommitment of, and principal amount of the Loans and LC Disbursements owing to,each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall beconclusive, and the Borrower, the Administrative Agent, the Issuing Bank andthe Lenders may treat each Person whose name is recorded in the Registerpursuant to the terms hereof as a Lender hereunder for all purposes of thisAgreement, notwithstanding notice to the contrary.  The Register shall be available forinspection by the Borrower, the Issuing Bank and any Lender, at any reasonabletime and from time to time upon reasonable prior notice.

####  

#### (v)  Upon its receipt of a dulycompleted Assignment and Assumption executed by an assigning Lender and anassignee, the assignee’s completed Administrative Questionnaire (unless theassignee shall already be a Lender hereunder), the processing and recordationfee referred to in paragraph (b) of this Section and any writtenconsent to such assignment required by paragraph (b) of this Section, theAdministrative Agent shall accept such Assignment and Assumption and record theinformation contained therein in the Register; provided that if eitherthe assigning Lender or the assignee shall have failed to make any paymentrequired to be made by it pursuant to Section 2.05, 2.06(d) or (e),2.07(b), 2.18(d) or 9.03(c), the Administrative Agent shall have noobligation to accept such Assignment and Assumption and record the informationtherein in the Register unless and until such payment shall have been made infull, together with all accrued interest thereon.  No assignment shall be effective for purposesof this Agreement unless it has been recorded in the Register as provided inthis paragraph.

####  

### (c)(i)  Any Lender may, without theconsent of the Borrower, the Administrative Agent, the Issuing Bank or theSwingline Lender, sell participations to one or more banks or other entities (a“Participant”) in all or aportion of such Lender’s rights and obligations under this Agreement (includingall or a portion of its Commitment and the Loans owing to it); providedthat (A) such Lender’s obligations under this Agreement shall remainunchanged, (B) such Lender shall remain solely responsible to the otherparties hereto for the performance of such obligations and (C) theBorrower, the Administrative Agent, the Issuing Bank and the other Lendersshall continue to deal solely and directly with such Lender in connection withsuch Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to whicha Lender sells such a participation shall provide that such Lender shall retainthe sole right to enforce this Agreement and to approve any amendment,modification or waiver of any provision of this Agreement; provided thatsuch agreement or instrument may provide that such Lender will not, without theconsent of the Participant, agree to any amendment, modification or waiver describedin the first proviso to Section 9.02(b) that affects suchParticipant.  Subject to paragraph (c)(ii) ofthis Section, the Borrower agrees that each Participant 

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###  

### shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 tothe same extent as if it were a Lender and had acquired its interest byassignment pursuant to paragraph (b) of this Section.  To the extent permitted by law, eachParticipant also shall be entitled to the benefits of Section 9.08 asthough it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) asthough it were a Lender.

###  

#### (ii)  A Participant shall not beentitled to receive any greater payment under Section 2.15 or 2.17 thanthe applicable Lender would have been entitled to receive with respect to theparticipation sold to such Participant, unless the sale of the participation tosuch Participant is made with the Borrower’s prior written consent.  A Participant that would be a Foreign Lenderif it were a Lender shall not be entitled to the benefits of Section 2.17unless the Borrower is notified of the participation sold to such Participantand such Participant agrees, for the benefit of the Borrower, to comply with Section 2.17(f) asthough it were a Lender.

####  

### (d)  Any Lender may at any time pledgeor assign a security interest in all or any portion of its rights under thisAgreement to secure obligations of such Lender, including without limitationany pledge or assignment to secure obligations to a Federal Reserve Bank, andthis Section shall not apply to any such pledge or assignment of asecurity interest; provided that no such pledge or assignment of asecurity interest shall release a Lender from any of its obligations hereunderor substitute any such pledgee or assignee for such Lender as a party hereto.

###  

## SECTION 9.05.  Survival.  All covenants, agreements, representationsand warranties made by the Loan Parties in the Loan Documents and in thecertificates or other instruments delivered in connection with or pursuant tothis Agreement or any other Loan Document shall be considered to have beenrelied upon by the other parties hereto and shall survive the execution anddelivery of the Loan Documents and the making of any Loans and issuance of anyLetters of Credit, regardless of any investigation made by any such other partyor on its behalf and notwithstanding that the Administrative Agent, the IssuingBank or any Lender may have had notice or knowledge of any Default or incorrectrepresentation or warranty at the time any credit is extended hereunder, andshall continue in full force and effect as long as the principal of or anyaccrued interest on any Loan or any fee or any other amount payable under thisAgreement is outstanding and unpaid or any Letter of Credit is outstanding andso long as the Commitments have not expired or terminated.  The provisions of Sections 2.15, 2.16, 2.17and 9.03 and Article VIII shall survive and remain in full force andeffect regardless of the consummation of the transactions contemplated hereby,the repayment of the Loans, the expiration or termination of the Letters ofCredit and the Commitments or the termination of this Agreement or any otherLoan Document or any provision hereof or thereof.

##  

## SECTION 9.06.  Counterparts;Integration; Effectiveness. This Agreement may be executed in counterparts (and by different partieshereto on different counterparts), each of which shall constitute an original,but all of which when taken together shall constitute a single contract.  This Agreement, the other Loan Documents andany separate letter agreements with respect to fees payable to theAdministrative Agent constitute the entire contract among the parties relatingto the subject matter hereof and supersede any and all previous agreements andunderstandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01, thisAgreement shall become effective when it shall have been executed by theAdministrative Agent and when the Administrative Agent shall have receivedcounterparts hereof which, when taken together, bear the signatures of each ofthe other parties hereto, and thereafter shall be binding upon and inure to thebenefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of asignature page of this Agreement by facsimile shall be effective asdelivery of a manually executed counterpart of this Agreement.

##  

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##  

## SECTION 9.07.  Severability.  Any provision of any Loan Document held to beinvalid, illegal or unenforceable in any jurisdiction shall, as to suchjurisdiction, be ineffective to the extent of such invalidity, illegality orunenforceability without affecting the validity, legality and enforceability ofthe remaining provisions thereof; and the invalidity of a particular provisionin a particular jurisdiction shall not invalidate such provision in any otherjurisdiction.

##  

## SECTION 9.08.  Right of Setoff.  If an Event of Default shall have occurredand be continuing, each Lender and each of its Affiliates is hereby authorizedat any time and from time to time, to the fullest extent permitted by law, toset off and apply any and all deposits (general or special, time or demand,provisional or final) at any time held and other obligations at any time owingby such Lender or Affiliate to or for the credit or the account of the Borroweror any Loan Guarantor against any of and all the Secured Obligations held bysuch Lender, irrespective of whether or not such Lender shall have made anydemand under the Loan Documents and although such obligations may beunmatured.  The applicable Lender shallnotify the Borrower and the Administrative Agent of such set-off orapplication; provided that any failure to give or any delay in givingsuch notice shall not affect the validity of any such set-off or applicationunder this Section.  The rights of eachLender under this Section are in addition to other rights and remedies(including other rights of setoff) which such Lender may have.

##  

## SECTION 9.09.  Governing Law;Jurisdiction; Consent to Service of Process.  (a)  The Loan Documents shall beconstrued in accordance with and governed by the law of the State of New York,but giving effect to federal laws applicable to national banks.

##  

### (b)  Each Loan Party hereby irrevocablyand unconditionally submits, for itself and its property, to the nonexclusivejurisdiction of any U.S. Federal or New York State court sitting in New YorkCounty, New York in any action or proceeding arising out of or relating to anyLoan Document, or for recognition or enforcement of any judgment, and each ofthe parties hereto hereby irrevocably and unconditionally agrees that allclaims in respect of any such action or proceeding may be heard and determinedin such New York State or, to the extent permitted by law, in such Federalcourt.  Each of the parties hereto agreesthat a final judgment in any such action or proceeding shall be conclusive andmay be enforced in other jurisdictions by suit on the judgment or in any othermanner provided by law.  Nothing in thisAgreement or any other Loan Document shall affect any right that theAdministrative Agent, the Issuing Bank or any Lender may otherwise have tobring any action or proceeding relating to this Agreement or any other LoanDocument against any Loan Party or its properties in the courts of anyjurisdiction.

###  

### (c)  Each Loan Party hereby irrevocablyand unconditionally waives, to the fullest extent it may legally andeffectively do so, any objection which it may now or hereafter have to thelaying of venue of any suit, action or proceeding arising out of or relating tothis Agreement or any other Loan Document in any court referred to in paragraph(b) of this Section.  Each of theparties hereto hereby irrevocably waives, to the fullest extent permitted bylaw, the defense of an inconvenient forum to the maintenance of such action orproceeding in any such court.

###  

### (d)  Each party to this Agreementirrevocably consents to service of process in the manner provided for noticesin Section 9.01.  Nothing in thisAgreement or any other Loan Document will affect the right of any party to thisAgreement to serve process in any other manner permitted by law.

###  

## SECTION 9.10.  WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THEFULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ATRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF ORRELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR 

##  

## 87

## 

##  

## THE TRANSACTIONS CONTEMPLATED HEREBY ORTHEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NOREPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLYOR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEKTO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHERPARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHERTHINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

##  

## SECTION 9.11.  Headings.  Article and Section headings andthe Table of Contents used herein are for convenience of reference only, arenot part of this Agreement and shall not affect the construction of, or betaken into consideration in interpreting, this Agreement.

##  

## SECTION 9.12.  Confidentiality.  Each of the Administrative Agent, the IssuingBank and the Lenders agrees to maintain the confidentiality of the Information(as defined below), except that Information may be disclosed (a) to itsand its Affiliates’ directors, officers, employees and agents, includingaccountants, legal counsel and other advisors (it being understood that thePersons to whom such disclosure is made will be informed of the confidentialnature of such Information and instructed to keep such Informationconfidential), (b) to the extent requested by any regulatory authority, (c) tothe extent required by Requirement of Law or by any subpoena or similar legal process,(d) to any other party to this Agreement, (e) in connection with theexercise of any remedies hereunder or any suit, action or proceeding relatingto this Agreement or any other Loan Document or the enforcement of rightshereunder or thereunder, (f) subject to an agreement containing provisionssubstantially the same as those of this Section, to (i) any assignee of orParticipant in, or any prospective assignee of or Participant in, any of itsrights or obligations under this Agreement or (ii) any actual orprospective counterparty (or its advisors) to any swap or derivativetransaction relating to the Loan Parties and their obligations, (g) withthe consent of the Borrower or (h) to the extent such Information (i) becomespublicly available other than as a result of a breach of this Section or (ii) becomesavailable to the Administrative Agent, the Issuing Bank or any Lender on anon-confidential basis from a source other than the Borrower.  For the purposes of this Section, “Information” means all informationreceived from the Borrower relating to the Borrower or its business, other thanany such information that is available to the Administrative Agent, the IssuingBank or any Lender on a non-confidential basis prior to disclosure by theBorrower; provided that, in the case of information received from theBorrower after the date hereof, such information is clearly identified at thetime of delivery as confidential.  AnyPerson required to maintain the confidentiality of Information as provided inthis Section shall be considered to have complied with its obligation todo so if such Person has exercised the same degree of care to maintain theconfidentiality of such Information as such Person would accord to its ownconfidential information.

##  

**EACH LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINEDIN SECTION 9.12 FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDEMATERIAL NON-PUBLIC INFORMATION CONCERNING THE BORROWER AND ITS AFFILIATESAND  THEIR RELATED PARTIES OR THEIRRESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURESREGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLESUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES ANDAPPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.**

 

**ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS ANDAMENDMENTS, FURNISHED BY THE BORROWER OR THE ADMINISTRATIVE AGENT PURSUANT TO,OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE**

 

88

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** **

**SYNDICATE-LEVEL INFORMATION,WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE BORROWER, THELOAN PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES.  ACCORDINGLY, EACH LENDER REPRESENTS TO THEBORROWER AND THE ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITSADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATIONTHAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITSCOMPLIANCE PROCE****DURES AND APPLICABLE LAW, INCLUDING FEDERALAND STATE SECURITIES LAWS.**

 

## SECTION 9.13.  Several Obligations;Nonreliance; Violation of Law. The respective obligations of the Lenders hereunder are several and notjoint and the failure of any Lender to make any Loan or perform any of itsobligations hereunder shall not relieve any other Lender from any of itsobligations hereunder. Each Lender hereby represents that it is not relying onor looking to any margin stock for the repayment of the Borrowings provided forherein.  Anything contained in thisAgreement to the contrary notwithstanding, neither the Issuing Bank nor anyLender shall be obligated to extend credit to the Borrower in violation of anyRequirement of Law.

##  

## SECTION 9.14.  USA PATRIOT Act.  Each Lender that is subject to therequirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed intolaw October 26, 2001)) (the “Act”) hereby notifies the Borrowerthat pursuant to the requirements of the Act, it is required to obtain, verifyand record information that identifies the Borrower, which information includesthe name and address of the Borrower and other information that will allow suchLender to identify the Borrower in accordance with the Act.

##  

## SECTION 9.15.  Disclosure.  Each Loan Party and each Lender herebyacknowledges and agrees that the Administrative Agent and/or its Affiliatesfrom time to time may hold investments in, make other loans to or have otherrelationships with any of the Loan Parties and their respective Affiliates.

##  

## SECTION 9.16.  Appointment forPerfection.  Each Lenderhereby appoints each other Lender as its agent for the purpose of perfectingLiens, for the benefit of the Administrative Agent and the Lenders, in assetswhich, in accordance with Article 9 of the UCC or any other applicable lawcan be perfected only by possession. Should any Lender (other than the Administrative Agent) obtainpossession of any such Collateral, such Lender shall notify the AdministrativeAgent thereof, and, promptly upon the Administrative Agent’s request thereforshall deliver such Collateral to the Administrative Agent or otherwise dealwith such Collateral in accordance with the Administrative Agent’sinstructions.

##  

## SECTION 9.17.  Interest RateLimitation.  Notwithstandinganything herein to the contrary, if at any time the interest rate applicable toany Loan, together with all fees, charges and other amounts which are treatedas interest on such Loan under applicable law (collectively the “Charges”),shall exceed the maximum lawful rate (the “Maximum Rate”) which may becontracted for, charged, taken, received or reserved by the Lender holding suchLoan in accordance with applicable law, the rate of interest payable in respectof such Loan hereunder, together with all Charges payable in respect thereof,shall be limited to the Maximum Rate and, to the extent lawful, the interestand Charges that would have been payable in respect of such Loan but were notpayable as a result of the operation of this Section shall be cumulatedand the interest and Charges payable to such Lender in respect of other Loansor periods shall be increased (but not above the Maximum Rate therefor) untilsuch cumulated amount, together with interest thereon at the Federal FundsEffective Rate to the date of repayment, shall have been received by suchLender.

##  

## 89

## 

##  

## SECTION 9.18.  Conflicts.  In the event of any conflict between theterms of this Agreement and the terms of any other Loan Document, the terms ofthis Agreement shall, to the extent of such conflict, prevail.

##  

# ARTICLEX

#  

# Loan Guaranty

#  

## SECTION 10.01.  Guaranty.  Each Loan Guarantor (other than those thathave delivered a separate Guaranty) hereby agrees that it is jointly andseverally liable for, and, as primary obligor and not merely as surety,absolutely and unconditionally guarantees to the Lenders the prompt paymentwhen due, whether at stated maturity, upon acceleration or otherwise, and atall times thereafter, of the Secured Obligations and all costs and expensesincluding, without limitation, all court costs and attorneys’ and paralegals’fees (including allocated costs of in-house counsel and paralegals) andexpenses paid or incurred by the Administrative Agent, the Issuing Bank and theLenders in endeavoring to collect all or any part of the Secured Obligationsfrom, or in prosecuting any action against, the Borrower, any Loan Guarantor orany other guarantor of all or any part of the Secured Obligations (such costsand expenses, together with the Secured Obligations, collectively the “GuaranteedObligations”). Each Loan Guarantor further agrees that the GuaranteedObligations may be extended or renewed in whole or in part without notice to orfurther assent from it, and that it remains bound upon its guaranteenotwithstanding any such extension or renewal. All terms of this Loan Guarantyapply to and may be enforced by or on behalf of any domestic or foreign branchor Affiliate of any Lender that extended any portion of the GuaranteedObligations.

##  

## SECTION 10.02.  Guaranty of Payment.  This Loan Guaranty is a guaranty of paymentand not of collection. Each Loan Guarantor waives any right to require theAdministrative Agent, the Issuing Bank or any Lender to sue the Borrower, anyLoan Guarantor, any other guarantor, or any other person obligated for all orany part of the Guaranteed Obligations (each, an “Obligated Party”), orotherwise to enforce its payment against any collateral securing all or anypart of the Guaranteed Obligations.

##  

## SECTION 10.03.  No Discharge orDiminishment of Loan Guaranty. (a) Except as otherwise provided for herein, the obligations ofeach Loan Guarantor hereunder are unconditional and absolute and not subject toany reduction, limitation, impairment or termination for any reason (other thanthe indefeasible payment in full in cash of the Guaranteed Obligations),including:  (i) any claim of waiver,release, extension, renewal, settlement, surrender, alteration, or compromiseof any of the Guaranteed Obligations, by operation of law or otherwise; (ii) anychange in the corporate existence, structure or ownership of the Borrower orany other guarantor of or other person liable for any of the GuaranteedObligations; (iii) any insolvency, bankruptcy, reorganization or othersimilar proceeding affecting any Obligated Party, or their assets or anyresulting release or discharge of any obligation of any Obligated Party; or (iv) theexistence of any claim, setoff or other rights which any Loan Guarantor mayhave at any time against any Obligated Party, the Administrative Agent, theIssuing Bank, any Lender, or any other person, whether in connection herewithor in any unrelated transactions.

##  

### (b)  The obligations of each LoanGuarantor hereunder are not subject to any defense or setoff, counterclaim,recoupment, or termination whatsoever by reason of the invalidity, illegality,or unenforceability of any of the Guaranteed Obligations or otherwise, or anyprovision of applicable law or regulation purporting to prohibit payment by anyObligated Party, of the Guaranteed Obligations or any part thereof.

###  

### 90

### 

###  

### (c)  Further, the obligations of anyLoan Guarantor hereunder are not discharged or impaired or otherwise affectedby: (i) the failure of the Administrative Agent, the Issuing Bank or anyLender to assert any claim or demand or to enforce any remedy with respect toall or any part of the Guaranteed Obligations; (ii) any waiver ormodification of or supplement to any provision of any agreement relating to theGuaranteed Obligations; (iii) any release, non-perfection, or invalidityof any indirect or direct security for the obligations of the Borrower for allor any part of the Guaranteed Obligations or any obligations of any otherguarantor of or other person liable for any of the Guaranteed Obligations; (iv) anyaction or failure to act by the Administrative Agent, the Issuing Bank or anyLender with respect to any collateral securing any part of the GuaranteedObligations; or (v) any default, failure or delay, willful or otherwise,in the payment or performance of any of the Guaranteed Obligations, or anyother circumstance, act, omission or delay that might in any manner or to anyextent vary the risk of such Loan Guarantor or that would otherwise operate asa discharge of any Loan Guarantor as a matter of law or equity (other than theindefeasible payment in full in cash of the Guaranteed Obligations).

###  

## SECTION 10.04.  Defenses Waived.  To the fullest extent permitted by applicablelaw, each Loan Guarantor hereby waives any defense based on or arising out ofany defense of the Borrower or any Loan Guarantor or the unenforceability ofall or any part of the Guaranteed Obligations from any cause, or the cessationfrom any cause of the liability of the Borrower or any Loan Guarantor, otherthan the indefeasible payment in full in cash of the Guaranteed Obligations.Without limiting the generality of the foregoing, each Loan Guarantorirrevocably waives acceptance hereof, presentment, demand, protest and, to thefullest extent permitted by law, any notice not provided for herein, as well asany requirement that at any time any action be taken by any person against anyObligated Party, or any other person. The Administrative Agent may, at its election, foreclose on any Collateralheld by it by one or more judicial or nonjudicial sales, accept an assignmentof any such Collateral in lieu of foreclosure or otherwise act or fail to actwith respect to any collateral securing all or a part of the GuaranteedObligations, compromise or adjust any part of the Guaranteed Obligations, makeany other accommodation with any Obligated Party or exercise any other right orremedy available to it against any Obligated Party, without affecting orimpairing in any way the liability of such Loan Guarantor under this LoanGuaranty except to the extent the Guaranteed Obligations have been fully andindefeasibly paid in cash.  To thefullest extent permitted by applicable law, each Loan Guarantor waives anydefense arising out of any such election even though that election may operate,pursuant to applicable law, to impair or extinguish any right of reimbursementor subrogation or other right or remedy of any Loan Guarantor against anyObligated Party or any security.

##  

## SECTION 10.05.  Rights ofSubrogation.  No LoanGuarantor will assert any right, claim or cause of action, including, withoutlimitation, a claim of subrogation, contribution or indemnification that it hasagainst any Obligated Party, or any collateral, until the Loan Parties and theLoan Guarantors have fully performed all their obligations to theAdministrative Agent, the Issuing Bank and the Lenders.

##  

## SECTION 10.06.  Reinstatement; Stayof Acceleration.  If at anytime any payment of any portion of the Guaranteed Obligations is rescinded ormust otherwise be restored or returned upon the insolvency, bankruptcy, orreorganization of the Borrower or otherwise, each Loan Guarantor’s obligationsunder this Loan Guaranty with respect to that payment shall be reinstated atsuch time as though the payment had not been made and whether or not theAdministrative Agent, the Issuing Bank and the Lenders are in possession ofthis Loan Guaranty. If acceleration of the time for payment of any of theGuaranteed Obligations is stayed upon the insolvency, bankruptcy orreorganization of the Borrower, all such amounts otherwise subject toacceleration under the terms of any agreement relating to the GuaranteedObligations shall nonetheless be payable by the Loan Guarantors forthwith ondemand by the Lender.

##  

## 91

## 

##  

## SECTION 10.07.  Information.  Each Loan Guarantor assumes allresponsibility for being and keeping itself informed of the Borrower’sfinancial condition and assets, and of all other circumstances bearing upon therisk of nonpayment of the Guaranteed Obligations and the nature, scope andextent of the risks that each Loan Guarantor assumes and incurs under this LoanGuaranty, and agrees that neither the Administrative Agent, the Issuing Banknor any Lender shall have any duty to advise any Loan Guarantor of informationknown to it regarding those circumstances or risks.

##  

## SECTION 10.08.  Termination.  The Lenders may continue to make loans orextend credit to the Borrower based on this Loan Guaranty until five (5) daysafter it receives written notice of termination from any Loan Guarantor.  Notwithstanding receipt of any such notice,each Loan Guarantor will continue to be liable to the Lenders for anyGuaranteed Obligations created, assumed or committed to prior to the fifth dayafter receipt of the notice, and all subsequent renewals, extensions,modifications and amendments with respect to, or substitutions for, all or anypart of that Guaranteed Obligations.

##  

## SECTION 10.09.  Taxes.  All payments of the Guaranteed Obligationswill be made by each Loan Guarantor free and clear of and without deduction forany Indemnified Taxes or Other Taxes; provided that if any LoanGuarantor shall be required to deduct any Indemnified Taxes or Other Taxes fromsuch payments, then (i) the sum payable shall be increased as necessary sothat after making all required deductions (including deductions applicable toadditional sums payable under this Section) the Administrative Agent, Lender orIssuing Bank (as the case may be) receives an amount equal to the sum it wouldhave received had no such deductions been made, (ii) such Loan Guarantorshall make such deductions and (iii) such Loan Guarantor shall pay thefull amount deducted to the relevant Governmental Authority in accordance withapplicable law.

##  

## SECTION 10.10.  Maximum Liability.  The provisions of this Loan Guaranty areseverable, and in any action or proceeding involving any state corporate law,or any state, federal or foreign bankruptcy, insolvency, reorganization orother law affecting the rights of creditors generally, if the obligations ofany Loan Guarantor under this Loan Guaranty would otherwise be held ordetermined to be avoidable, invalid or unenforceable on account of the amountof such Loan Guarantor’s liability under this Loan Guaranty, then,notwithstanding any other provision of this Loan Guaranty to the contrary, theamount of such liability shall, without any further action by the LoanGuarantors or the Lenders, be automatically limited and reduced to the highestamount that is valid and enforceable as determined in such action or proceeding(such highest amount determined hereunder being the relevant Loan Guarantor’s “MaximumLiability”.  This Section withrespect to the Maximum Liability of each Loan Guarantor is intended solely topreserve the rights of the Lenders to the maximum extent not subject toavoidance under applicable law, and no Loan Guarantor nor any other person orentity shall have any right or claim under this Section with respect tosuch Maximum Liability, except to the extent necessary so that the obligationsof any Loan Guarantor hereunder shall not be rendered voidable under applicablelaw. Each Loan Guarantor agrees that the Guaranteed Obligations may at any timeand from time to time exceed the Maximum Liability of each Loan Guarantorwithout impairing this Loan Guaranty or affecting the rights and remedies ofthe Lenders hereunder; provided that, nothing in this sentence shall beconstrued to increase any Loan Guarantor’s obligations hereunder beyond itsMaximum Liability.

##  

## SECTION 10.11.  Contribution.  In the event any Loan Guarantor (a “PayingGuarantor”) shall make any payment or payments under this Loan Guaranty orshall suffer any loss as a result of any realization upon any collateralgranted by it to secure its obligations under this Loan Guaranty, each otherLoan Guarantor (each a “Non-Paying Guarantor”) shall contribute to suchPaying Guarantor an amount equal to such Non-Paying Guarantor’s “ApplicablePercentage” of such payment or payments made, or losses suffered, by suchPaying Guarantor.  For purposes of this Article X,each Non-Paying Guarantor’s “Applicable Percentage” with respect to anysuch payment or loss by a Paying Guarantor shall be determined as of the dateon which such payment or loss was made by reference to the ratio of (i) such

##  

## 92

## 

##  

## Non-Paying Guarantor’s Maximum Liability asof such date (without giving effect to any right to receive, or obligation tomake, any contribution hereunder) or, if such Non-Paying Guarantor’s MaximumLiability has not been determined, the aggregate amount of all monies receivedby such Non-Paying Guarantor from the Borrower after the date hereof (whetherby loan, capital infusion or by other means) to (ii) the aggregate MaximumLiability of all Loan Guarantors hereunder (including such Paying Guarantor) asof such date (without giving effect to any right to receive, or obligation tomake, any contribution hereunder), or to the extent that a Maximum Liability hasnot been determined for any Loan Guarantor, the aggregate amount of all moniesreceived by such Loan Guarantors from the Borrower after the date hereof(whether by loan, capital infusion or by other means).  Nothing in this provision shall affect anyLoan Guarantor’s several liability for the entire amount of the GuaranteedObligations (up to such Loan Guarantor’s Maximum Liability).  Each of the Loan Guarantors covenants andagrees that its right to receive any contribution under this Loan Guaranty froma Non-Paying Guarantor shall be subordinate and junior in right of payment tothe payment in full in cash of the Guaranteed Obligations.  This provision is for the benefit of both theAdministrative Agent, the Issuing Bank, the Lenders and the Loan Guarantors andmay be enforced by any one, or more, or all of them in accordance with theterms hereof.

##  

## SECTION 10.12.  Liability Cumulative.  The liability of each Loan Party as a LoanGuarantor under this Article X is in addition to and shall be cumulativewith all liabilities of each Loan Party to the Administrative Agent, theIssuing Bank and the Lenders under this Agreement and the other Loan Documentsto which such Loan Party is a party or in respect of any obligations orliabilities of the other Loan Parties, without any limitation as to amount,unless the instrument or agreement evidencing or creating such other liabilityspecifically provides to the contrary.

##  

[Signature Pages Follow]

 

93

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

 
|   | ETHAN  ALLEN GLOBAL, INC.,  |
|--------|-----------------------------|
|   | as  the Borrower            |
|   |                        |   |
|   | By:                         | /s/  M. Farooq Kathwari |
|   | Name:                       | M.  Farooq Kathwari |
|   | Title:                      | President |
|   |                        |   |
|   | ETHAN  ALLEN INTERIORS INC. |
|   |                        |   |
|   | By:                         | /s/  M. Farooq Kathwari |
|   | Name:                       | M.  Farooq Kathwari |
|   | Title:                      | President |
|        |                             |  |  |

 

Signature Page to Credit Agreement

Ethan Allen Global, Inc.

 

----

 
|   | ETHAN  ALLEN OPERATIONS, INC. |
|--------|-------------------------------|
|   |                          |   |
|   |                          | By: | /s/  M. Farooq Kathwari |
|   |                          | Name: | M.  Farooq Kathwari |
|   |                          | Title: | President |
|   |                          |   |   |
|   |                          |   |   |
|   | ETHAN  ALLEN REALTY, LLC      |
|   |                          |   |   |
|   |                          | By: | /s/  M. Farooq Kathwari |
|   |                          | Name: | M.  Farooq Kathwari |
|   |                          | Title: | President |
|   |                          |   |   |
|   |                          |   |   |
|   | ETHAN  ALLEN RETAIL, INC.     |
|   |                          |   |   |
|   |                          | By: | /s/  M. Farooq Kathwari |
|   |                          | Name: | M.  Farooq Kathwari |
|   |                          | Title: | President |
|   |                          |   |   |
|   |                          |   |   |
|   | LAKE  AVENUE ASSOCIATES, INC. |
|   |                          |   |   |
|   |                          | By: | /s/  M. Farooq Kathwari |
|   |                          | Name: | M.  Farooq Kathwari |
|   |                          | Title: | President |
|   |                          |   |   |
|   |                          |   |   |
|   | MANOR  HOUSE, INC.            |
|   |                          |   |   |
|   |                          | By: | /s/  M. Farooq Kathwari |
|   |                          | Name: | M.  Farooq Kathwari |
|   |                          | Title: | President |

 

Signature Page to CreditAgreementEthan Allen Global, Inc.

 

----

 
|   | JPMORGAN  CHASE BANK, N.A., individually as a Lender, as the Swingline Lender, as the  Issuing Bank and as Administrative Agent |
|--------|---------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                            |   |   |
|   |                                                                                                                            | By: | /s/  Joseph A. Lisack |
|   |                                                                                                                            | Name: | Joseph A. Lisack |
|   |                                                                                                                            | Title: | Vice  President |

 

Signature Page to CreditAgreementEthan Allen Global, Inc.

 

----

 
|   | CAPITAL  ONE LEVERAGE FINANCE CORP., |
|--------|--------------------------------------|
|   |                                 |   |   |
|   |                                 | By: | /s/  Nick Malatestinic |
|   |                                 | Name: | Nick Malatestinic |
|   |                                 | Title: | SVP |

 

Signature Page to CreditAgreementEthan Allen Global, Inc.

 

----

 

**SCHEDULE 2.01**

** **

COMMITMENTS

 
| **Lender**                         | ** ** | **Commitment** | ** **     |
|------------------------------------|------------|----------------|----------------|
|                               |       |           |           |
| JPMorgan Chase Bank, N.A           |       | $              | 25,000,000     |   |
| Capital One Leverage Finance Corp. |       | $              | 15,000,000     |   |
|                               |       |           |           |
| **Aggregate Commitment:**          | ** ** | **$**          | **40,000,000** | ** ** |

 

----

 

**SCHEDULE 2.06**

** **

EXISTING LETTERS OF CREDIT

 
| **JPMorgan Chase Bank  Letter of Credit Number** | ** ** | **Outstanding  Amount** | ** **    | **Expiry / Maturity  Date** | ** **         | **Beneficiary Name** | ** **                          |
|--------------------------------------------------|------------|-------------------------|---------------|-----------------------------|--------------------|----------------------|-------------------------------------|
|                                             |       |                    |          |                        |               |                 |                                |
| T-244580                                         |       | $                       | 579,174.00    |                        | AUG 19, 2009       |                 | INSURANCE  COMPANY OF NORTH AMERICA |   |
| T-249589                                         |       | $                       | 11,300,000.00 |                        | JUL 12, 2010       |                 | THE TRAVELERS  INDEMNITY COMPANY    |   |
| T-250558                                         |       | $                       | 300,000.00    |                        | AUG 19, 2009       |                 | U.S. BANK  NATIONAL ASSOCIATION     |   |
| TPTS-233492                                      |       | $                       | 15,000.00     |                        | OCT 31, 2009       |                 | SOUTHGATE WATER  AND                |   |
| TPTS-277995                                      |       | $                       | 3,500.00      |                        | DEC 31, 2009       |                 | SOUTHEAST METRO  STORMWATER         |   |
| TPTS-312139                                      |       | $                       | 49,517.10     |                        | FEB 28, 2010       |                 | CITY OF  CENTENNIAL                 |   |
| TPTS-334627                                      |       | $                       | 10,734.00     |                        | MAR 31, 2010       |                 | CITY OF  BROOKFIELD                 |   |
| TPTS-334723                                      |       | $                       | 1,867.00      |                        | MAR 31, 2010       |                 | CITY OF  BROOKFIELD                 |   |
| TPTS-344509                                      |       | $                       | 7,000.00      |                        | JUL 31, 2009       |                 | SOUTHGATE WATER  DISTRICT           |   |
| TPTS-344510                                      |       | $                       | 2,960.00      |                        | JUL 31, 2009       |                 | SOUTHGATE  SANITATION DISTRICT      |   |
| TPTS-380846                                      |       | $                       | 36,000.00     |                        | AUG 31, 2009       |                 | CITY OF PALM  BEACH GARDENS         |   |
| TPTS-381645                                      |       | $                       | 10,000.00     |                        | AUG 31, 2009       |                 | TORGERSON  PROPERTIES, INC          |   |
| TPTS-674070                                      |       | $                       | 135,000.00    |                        | AUG 31, 2009       |                 | CITY OF ARTESIA                     |   |
| TTTS-259870                                      |       | $                       | 9,000.00      |                        | MAY 31,  2010 |                 | COUNTY OF  PULASKI                  |   |

 

----

 

**ETHAN ALLEN INTERIORS INC. HAS CLAIMED CONFIDENTIAL TREATMENT OFPORTIONS OF THIS DOCUMENT IN ACCORDANCE WITH RULE 24-B UNDER THE SECURITIESEXCHANGE ACT OF 1934**

 

**SCHEDULE 3.06**

To Credit Agreement

 

**Disclosed Matters (Litigation)**

 

**List of Pending or Threatened Litigation in Excess of $1,000,000**

 

*

 

----

*CONFIDENTIALINFORMATION AHS BEEN OMITTED AND FURNISHED SEPARATELY TO THE COMMISSION

 

----

** **

**SCHEDULE 3.14**

To Credit Agreement

 

**Insurance**

 

 

**SEE ATTACHED**

 

----

 

**Schedule ofInsurance**

 
| **Lockton - NY**                    | ** ** | ** **   | ** ** | **Ethan Allen Interiors, Inc**     |
|-------------------------------------|------------|--------------|------------|------------------------------------|
| **7 Times Square, Suite 3802** | ** ** | **Property** | ** ** | **Ethan Allen Drive, PO Box 1966** |
| **New York, NY 10036**              | ** ** | ** **   | ** ** | **Danbury, CT 06813**              |
| **Phone: 646-572-7300**             |       |         |       |                               |

 
| ** **               | ** ** | **Amount or** | ** ** | ** **                                                         | ** ** | **Policy**      | ** ** | ** **  | ** ** | **Policy** | ** ** |
|--------------------------|------------|---------------|------------|--------------------------------------------------------------------|------------|-----------------|------------|-------------|------------|------------|------------|
| **Coverage**             | ** ** | **Limits**    | ** ** | **Location**                                                       | ** ** | **Term**        | ** ** | **Company** | ** ** | **Number** | ** ** |
| ** **               | ** ** | ** **    | ** ** | ** **                                                         | ** ** | ** **      | ** ** | ** **  | ** ** | ** ** | ** ** |
| All Risk - Manufacturing |       | *             |       | All  Manufacturing and distribution locations as on file.          |       | 7/1/2008  - 09  |       | Zurich      |       | *          |       |
|                     |       |          |       |                                                               |       |            |       |        |       |       |       |
| All Risk - Retail        |       | *             |       | All  Retail locations as on file.                                  |       | 7/1/2008  - 09  |       | Travelers   |       | *          |       |
|                     |       |          |       |                                                               |       |            |       |        |       |       |       |
| Flood                    |       | *             |       | Rough  Mill  27 Railroad Ave.  Orleans, VT 05860                   |       | 6/20/2008  - 09 |       | Selective   |       | *          |       |
|                     |       |          |       |                                                               |       |            |       |        |       |       |       |
| Flood                    |       | *             |       | Rub &  Pack Building  27 Railroad Ave.  Orleans, VT 05860 |       | 6/20/2008  - 09 |       | Selective   |       | *          |       |
|                     |       |          |       |                                                               |       |            |       |        |       |       |       |
| Flood                    |       | *             |       | Boiler  House  27 Railroad Ave.

Orleans,  VT 05860                |       | 6/20/2008  - 09 |       | Selective   |       | *          |       |
|                     |       |          |       |                                                               |       |            |       |        |       |       |       |
| Flood                    |       | *             |       | Saw  Mill  217 Main St.  Beecher Falls, VT 05902                   |       | 6/20/2008  - 09 |       | Selective   |       | *          |       |
|                     |       |          |       |                                                               |       |            |       |        |       |       |       |
| Flood                    |       | *             |       | Main  Building  217 Main St.Beecher Falls, VT 05902                |       | 6/20/2008  - 09 |       | Selective   |       | *          |       |
|                     |       |          |       |                                                               |       |            |       |        |       |       |       |
| Flood                    |       | *             |       | 1800  Banks Rd.  Margate, FL 33063                                 |       | 6/28/2008  - 09 |       | Selective   |       | *          |       |
|                     |       |          |       |                                                               |       |            |       |        |       |       |       |
| Flood                    |       | *             |       | 13680  Pines Blvd.  Pembroke Pines, FL 33027                       |       | 6/28/2008  - 09 |       | Selective   |       | *          |       |
|                     |       |          |       |                                                               |       |            |       |        |       |       |       |
| Flood                    |       | *             |       | 5139 Manheim Pike  East Petersburg, PA 17520                       |       | 7/1/2008  - 09  |       | Selective   |       | *          |       |
|                     |       |          |       |                                                               |       |            |       |        |       |       |       |
| Flood                    |       | *             |       | 16240  S. Tamiami Trl, Fort  Myers, FL 33908                       |       | 7/22/2008  - 09 |       | Selective   |       | *          |       |
|                     |       |          |       |                                                               |       |            |       |        |       |       |       |
| Flood                    |       | *             |       | Finish  Mill  27 Railroad Ave.  Orleans, VT 05860                  |       | 7/1/2008  - 09  |       | Selective   |       | *          |       |
|                     |       |          |       |                                                               |       |            |       |        |       |       |       |
| Flood                    |       | *             |       | 200  Murray Hill Parkway  East Rutherford, NJ 07073                |       | 7/1/2008  - 09  |       | Selective   |       | *          |       |

 

----

*CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FURNISHED SEPARATELY TO THECOMMISSION

 

ThisRecord of Insurance is intended to be used as a quick reference; please referto your actual policies for exact terms and conditions

 
| Revised  5/21/2009 | ** ** | **SCHEDULE 3.14** |
|--------------------|------------|-------------------|

 

----

 

**SCHEDULE 3.15**

To Credit Agreement

 

**Capitalization and Subsidiaries**

 

 

**SEE ATTACHED**

 

----

 

**ETHAN ALLEN**

 
| **Name of Entity**                                                                                                                                                                                                                                                | ** ** | **State  of  Domicile** | ** ** | **Inc/Qual  Date** | ** ** | ** ** | ** ** | **Tax ID** | ** ** | **Mailing  Address of  CEO and Principal  Place of Business** | ** ** | **Former  Business  Name**                                        | ** ** | **Current  or  Former Trade  Name(s)**   | ** ** | **Owner  & % of  Ownership**                | ** ** | **Number  of Shares  Authorized to  Issue**                                                                                                                                              |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|--------------------|------------|------------|------------|------------|------------|---------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|------------------------------------------|------------|-------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Ethan Allen Global, Inc.                                                                                                                                                                                                                                          |       | DE                      |       | 6/27/2005          |       | *          | ** ** | 20-2991357 |       | Ethan Allen Drive,  Danbury, CT 06811                         |       |                                                              |       | Ethan Allen                              |       | Ethan Allen Interiors Inc.  - 100% (100 shares) |       | 1,000 - $0.01 par value  per share                                                                                                                                                       |
|                                                                                                                                                                                                                                                              |       |                    |       |               | ** ** | ** ** | ** ** |       |       |                                                          |       |                                                              |       |                                     |       |                                            |       |                                                                                                                                                                                     |
| Ethan Allen Retail, Inc.                                                                                                                                                                                                                                          |       | DE                      |       | 6/16/1989          | ** ** | *****      | ** ** | 06-1273300 |       | Ethan Allen Drive,  Danbury, CT 06811                         |       | Changed Name 6/29/05 from Ethan Allen Inc.                        |       | Ethan Allen, Ethan Allen  Home Interiors |       | Ethan Allen Global, Inc.  - 100%                |       | 1,000 - $0.01 par value  per share                                                                                                                                                       |
|                                                                                                                                                                                                                                                              |       |                    |       |               | ** ** | ** ** | ** ** |       |       |                                                          |       |                                                              |       |                                     |       |                                            |       |                                                                                                                                                                                     |
| Ethan Allen Interiors Inc.                                                                                                                                                                                                                                        |       | DE                      |       | 5/25/1989          | ** ** | *****      | ** ** | 06-1275288 |       | Ethan Allen Drive,  Danbury, CT 06811                         |       |                                                              |       |                                     |       | Publicly Held                                   |       | 151,655,000 (see  footnote 1 below)                                                                                                                                                      |
|                                                                                                                                                                                                                                                              |       |                    |       |               | ** ** | ** ** | ** ** |       |       |                                                          |       |                                                              |       |                                     |       |                                            |       |                                                                                                                                                                                     |
| Ethan Allen Operations, Inc.                                                                                                                                                                                                                                      |       | DE                      |       | 12/27/1994         | ** ** | *****      | ** ** | 06-1420986 |       | Ethan Allen Drive,  Danbury, CT 06811                         |       | Ethan Allen Manufacturing Corporation; Name change  filed 8/19/05 |       | Ethan Allen  Manufacturing Corporation   |       | Ethan Allen Global, Inc.  - 100%                |       | 1,000 - $0.01 par value  per share                                                                                                                                                       |
|                                                                                                                                                                                                                                                              |       |                    |       |               | ** ** | ** ** | ** ** |       |       |                                                          |       |                                                              |       |                                     |       |                                            |       |                                                                                                                                                                                     |
| Ethan Allen Realty, LLC                                                                                                                                                                                                                                           |       | DE                      |       | 6/24/2005          | ** ** | *****      | ** ** | 06-1753714 |       | Ethan Allen Drive,  Danbury, CT 06811                         |       |                                                              |       |                                     |       | Ethan Allen Operations,  Inc. - 100%            |       | None                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                              |       |                    |       |               | ** ** | ** ** | ** ** |       |       |                                                          |       |                                                              |       |                                     |       |                                            |       |                                                                                                                                                                                     |
| Lake Avenue Associates, Inc.                                                                                                                                                                                                                                      |       | CT                      |       | 11/2/1973          | ** ** | *****      | ** ** | 06-0901325 |       | Ethan Allen Drive,  Danbury, CT 06811                         |       |                                                              |       | Ethan Allen Hotel                        |       | Ethan Allen Global, Inc.  - 100% (250 shares)   |       | 500 (see footnote 2  below)                                                                                                                                                              |
|                                                                                                                                                                                                                                                              |       |                    |       |               | ** ** | ** ** | ** ** |       |       |                                                          |       |                                                              |       |                                     |       |                                            |       |                                                                                                                                                                                     |
| Manor House, Inc.                                                                                                                                                                                                                                                 |       | DE                      |       | 10/4/1974          | ** ** | *****      | ** ** | 06-0919150 |       | Ethan Allen Drive,  Danbury, CT 06811                         |       |                                                              |       |                                     |       | Ethan Allen Retail, Inc.  - 100%                |       | 1,000 - $100 par value  per share                                                                                                                                                        |
|                                                                                                                                                                                                                                                              | ** ** | ** **              |       |               |       |       |       |       |       |                                                          |       |                                                              |       |                                     |       |                                            |       |                                                                                                                                                                                     |
| Excluded Subsidiaries: Ethan Allen (UK) Ltd.  (currently undergoing liquidation/dissolution), Cut and Sew Manufacturing  Operations, S de R.L. de C.V., Cut and Sew Manufacturing Realty, S. de R.L.  de C.V., Ethan Allen (Canada) Inc., Ethan Allen Carriage Ho | ** ** | ** **              |       |               |       |       |       |       |       |                                                          |       |                                                              |       |                                     |       |                                            |       | Footnote 1 - 150,000,000 - Common Stock - $.01 par  value per share; 600,000 Class B Common Stock - $.01 par value per share; and  1,055,000 Preferred Stock - $0.01 par value per share |
|                                                                                                                                                                                                                                                              |       |                    |       |               | ** ** | ** ** | ** ** | ** ** |       |                                                          |       |                                                              |       |                                     |       |                                            |       |                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                              |       |                    |       |               | ** ** | ** ** | ** ** | ** ** |       |                                                          |       |                                                              |       |                                     |       |                                            |       | Footnote 2 - 250 Class A Common Stock - $10 par value  per share; and 250 Class B Common Stock - $10.00 par value per share                                                              |

 

----

* CONFIDENTIAL INFORMATION HAS BEEN OMITTEDAND FURNISHED SEPARATELY TO THE COMMISSION

** **

**SCHEDULE 3.15**

 

----

 

**SCHEDULE 3.21**

To Credit Agreement

 

**Credit Card Processors**

 

Nameand Address of Processing Agents for Ethan Allen

 

A.              American Express

AmericanExpress Travel Related Services Company, Inc.

WorldFinancial Center

NewYork, NY 10285

KimGoodman, Executive Vice President Merchant Services, North America

 

B.                Elavon

OneConcourse Parkway, Suite 200

Atlanta,Georgia

 

C.                Paymentech LLC  (Credit Card and Gift Cards)

4221Dallas Parkway

Dallas,Texas  75254

 

D.               G.E. Money Bank

950Forrer Boulevard

Kettering,Ohio   45420

Attn:  Paul Beekman

 

----

 

**SCHEDULE 6.01**

 

**Existing Indebtedness**

 

1.                                       WesternPennsylvania Teamsters and Employers Pension Fund - Notice of Withdrawal andDemand for Payment of Withdrawal Liability (related to a closed facility).  $0.38 million, matures 01/01/23.

2.                                       10-year SeniorUnsecured Notes - $200 million, matures 10/1/15

3.                                       Ethan AllenHotel IRB (US Bank) - $4 million, matures 6/1/11

4.                                       Beecher Falls -Town of Cannan (Building) - $0.3 million, matures 10/15/26

5.                                       Beecher Falls -Town of Cannan (M&E) - $0.4 million, matures 10/15/11

6.                                       Private LabelConsumer Credit Card Program Agreement with GE (imbedded guarantee)

7.                                       Fratco Banksubordination agreement / guarantee inventory repurchase of up to $0.9 million

8.                                       Letters ofCredit outstanding of $12.5 million (see schedule 2.06)

9.                                       Obligations topay M Farooq Kathwari under past and present employment agreements

 

----

 

**SCHEDULE 6.02**

To Credit Agreement

 

**Existing Liens**

 

I.              See AttachedUCC Lien Search Summary (as of April 20, 2009)

 

II.            Town of CanaanLoans – Security Agreement dated 26th day of June 1996– Balance as of 3/31/09 is $306,218 ($224,820 maturity date 10/15/2026(Building); $81,398 maturity date 10/15/11 (Machinery and Equipment))

 

III.           ConnecticutDevelopment Authority – Indenture dated May 1, 1993.  Payment of interest only on outstanding debtof $3,855,000.  Maturity date 6/1/11.

 

----

 

**ETHAN ALLEN UCC LIEN SEARCH SUMMARY**

**AS OF APRIL 20, 2009**

 
| **Secured  Party**                                                               | ** ** | **File Number** | ** ** | **File Date** | ** ** | **Filing Type** | ** ** | **Filing Jurisdiction********and Office**    | ** ** | **Collateral Description**                                                                                                                                                                                                                                 |
|----------------------------------------------------------------------------------|------------|-----------------|------------|---------------|------------|-----------------|------------|----------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                                                       | ** ** | ** **      | ** ** | ** **    | ** ** | ** **      | ** ** | ** **                                   | ** ** | ** **                                                                                                                                                                                                                                                 |
| **I.         ETHAN  ALLEN GLOBAL, INC.** | ** ** | ** **      | ** ** | ** **    |
|                                                                             |       |            |       |          |       |            |       |                                         |       |                                                                                                                                                                                                                                                       |
| IBM Credit LLC                                                                   |       | 54051869        |       | 12/29/2005    |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 74088208        |       | 10/29/2007    |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 74125901        |       | 10/30/2007    |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 900119601       |       | 1/5/2009      |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
| NMHG Financial Services  Inc.                                                    |       | 63315983        |       | 9/26/2006     |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
| GE Money Bank                                                                    |       | 71109783        |       | 3/26/2007     |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Informational filing  against all of the Debtor’s rights in the Secured Party’s property and  related accounts, indebtedness and related documentation with respect to the  credit card program offered by the Secured Party through the Debtor. |
|                                                                             |       | 72945060        |       | 8/2/2007      |       | Amendment       |       | Secretary of State of  the State of Delaware |       | Amendment and  restatement of collateral description                                                                                                                                                                                                       |
| Banc of America  Leasing & Capital, LLC                                 |       | 72108727        |       | 6/5/2007      |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 72361706        |       | 6/21/2007     |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 72803020        |       | 7/25/2007     |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 73112546        |       | 8/15/2007     |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 73910824        |       | 10/17/2007    |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 74234364        |       | 11/6/2007     |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 74417597        |       | 11/20/2007    |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 74648555        |       | 12/10/2007    |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 80199198        |       | 1/16/2008     |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 81976958        |       | 6/10/2008     |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 82803110        |       | 8/15/2008     |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 82891370        |       | 8/25/2008     |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 82902623        |       | 8/26/2008     |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 82933107        |       | 8/28/2008     |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                             |       | 83293873        |       | 9/29/2008     |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |

 

----

 
| **Secured  Party**                                                                     | ** ** | **File Number** | ** ** | **File Date** | ** ** | **Filing Type** | ** ** | **Filing Jurisdiction********and Office**    | ** ** | **Collateral Description**                                                                                                                                                                                                                                 |
|----------------------------------------------------------------------------------------|------------|-----------------|------------|---------------|------------|-----------------|------------|----------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                                                             | ** ** | ** **      | ** ** | ** **    | ** ** | ** **      | ** ** | ** **                                   | ** ** | ** **                                                                                                                                                                                                                                                 |
| Bashian  Bros., Inc.                                                              |       | 74919105        |       | 12/26/2007    |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Informational filing  against oriental rugs held on consignment basis.                                                                                                                                                                                     |
| General Electric Capital  Corp.                                                        |       | 82961645        |       | 9/2/2008      |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Specific Equipment                                                                                                                                                                                                                                         |
|                                                                                   |       |            |       |          |       |            |       |                                         |       |                                                                                                                                                                                                                                                       |
| **II.        ETHAN  ALLEN INTERIORS INC.**          |       |            |       |          |
| ** **                                                                             | ** ** | ** **      | ** ** | ** **    | ** ** | ** **      | ** ** | ** **                                   | ** ** | ** **                                                                                                                                                                                                                                                 |
| *No UCC filings found by search  with Secretary of State of the State of Delaware.*    |       |            |
| * *                                                                               | * *   | * *        | * *   | * *      | * *   | * *        | * *   | * *                                     | * *   | * *                                                                                                                                                                                                                                                   |
| **III.      ETHAN  ALLEN OPERATIONS, INC.**                   |       |            |
|                                                                                   |       |            |       |          |       |            |       |                                         |       |                                                                                                                                                                                                                                                       |
| *No UCC filings found by search  with Secretary of State of the State of Delaware.*    |       |            |
| * *                                                                               | * *   | * *        | * *   | * *      | * *   | * *        | * *   | * *                                     | * *   | * *                                                                                                                                                                                                                                                   |
| **IV.      ETHAN  ALLEN REALTY, LLC**                         |       |            |
| ** **                                                                             | ** ** | ** **      |
| *No UCC filings found by search  with Secretary of State of the State of Delaware.*    |       |            |
|                                                                                   |       |            |
| **V.       ETHAN  ALLEN RETAIL, INC.**                   |       |            |
| ** **                                                                             | ** ** | ** **      | ** ** | ** **    | ** ** | ** **      | ** ** | ** **                                   | ** ** | ** **                                                                                                                                                                                                                                                 |
| GE Money Bank                                                                          |       | 71109783        |       | 3/26/2007     |       | UCC-1           |       | Secretary of State of  the State of Delaware |       | Informational filing  against all of the Debtor’s rights in the Secured Party’s property and  related accounts, indebtedness and related documentation with respect to the  credit card program offered by the Secured Party through the Debtor. |
|                                                                                   |       | 72945060        |       | 8/2/2007      |       | Amendment       |       | Secretary of State of  the State of Delaware |       | Amendment and  restatement of collateral description                                                                                                                                                                                                       |
| **VI.      LAKE  AVENUE ASSOCIATES, INC.**                    |       |            |
| ** **                                                                             | ** ** | ** **      |
| *No UCC filings found by search  with Secretary of State of the State of Connecticut.* |       |            |
|                                                                                   |       |            |       |          |       |            |       |                                         |       |                                                                                                                                                                                                                                                       |
| **VII.     MANOR  HOUSE, INC.**                                    |       |            |
|                                                                                   |       |            |
| *No UCC filings found by search  with Secretary of State of the State of Delaware.*    |       |            |

 

----

 

**Ethan Allen Interiors Inc.**

ABL Revolver - May 2009(data as of 3/31/09 in millions)

**Schedule 6.04**

 

**ExistingInvestments, Loans and Advances**

 
| ** **                                                 | ** ** | **Investments** | ** ** | **Loans &  Advances** | ** ** |
|------------------------------------------------------------|------------|-----------------|------------|--------------------------------|------------|
|                                                       |       |            |       |                           |       |
| Ethan Allen Canada                                         |       | $               | 4.4        |                           | $          | 3.9 |   |
|                                                       |       |            |       |                           |       |
| Lake Ave Assoc (EA  Hotel)                                 |       | $               | 0.7        |                           | $          | 1.8 |   |
|                                                       |       |            |       |                           |       |
| Cut & Sew -  Mexico                               |       | $               | 3.1        |                           | $          | 0.4 |   |
|                                                       |       |            |       |                           |       |
| Cash & Cash  Equivalents (Permitted Investments): |       |            |       |                           |       |
| JPMorgan                                                   |       | *****           |       |                           |       |
| Citizens                                                   |       | *****           |       |                           |       |
| PNC                                                        |       | *****           |       |                           |       |
| Wachovia                                                   |       | *****           |       |                           |       |
| BoA                                                        |       | *****           |       |                           |       |
| Scotia                                                     |       | *****           |       |                           |       |
| Other                                                      |       | *****           |       |                           |       |
|                                                       |       | $               |  51.2 |                           |       |   |
|                                                       |       |            |       |                           |       |
| Notes Receivable:                                          |       |            |       |                           |       |
| *****                                                      |       |            |       | *****                          |       |
| *****                                                      |       |            |       | *****                          |       |
| *****                                                      |       |            |       | *****                          |       |
| *****                                                      |       |            |       | *****                          |       |
|                                                       |       |            |       | $                              |  0.7  |   |

 

----

*  CONFIDENTIAL INFORMATION HAS BEEN OMITTED ANDFURNISHED SEPARATELY TO THE COMMISSION

 

----

 

**SCHEDULE 6.10**

To Credit Agreement

 

**Existing Restrictions**

 

1.               None

 

----

 

EXHIBIT A

 

ASSIGNMENT AND ASSUMPTION

 

This Assignment and Assumption (the “Assignment and Assumption”)is dated as of the Effective Date set forth below and is entered into by andbetween [*Insert name of Assignor*] (the “Assignor”)and [*Insert name of Assignee*] (the “Assignee”).  Capitalized terms used but not defined hereinshall have the meanings given to them in the Credit Agreement identified below(as amended, the “Credit Agreement”), receipt of a copy of which ishereby acknowledged by the Assignee.  TheStandard Terms and Conditions set forth in Annex 1 attached hereto are herebyagreed to and incorporated herein by reference and made a part of thisAssignment and Assumption as if set forth herein in full.

 

For an agreed consideration,the Assignor hereby irrevocably sells and assigns to the Assignee, and theAssignee hereby irrevocably purchases and assumes from the Assignor, subject toand in accordance with the Standard Terms and Conditions and the CreditAgreement, as of the Effective Date inserted by the Administrative Agent ascontemplated below (i) all of the Assignor’s rights and obligations in itscapacity as a Lender under the Credit Agreement and any other documents orinstruments delivered pursuant thereto to the extent related to the amount andpercentage interest identified below of all of such outstanding rights andobligations of the Assignor under the respective facilities identified below(including any letters of credit, guarantees, and swingline loans included insuch facilities) and (ii) to the extent permitted to be assigned underapplicable law, all claims, suits, causes of action and any other right of theAssignor (in its capacity as a Lender) against any Person, whether known orunknown, arising under or in connection with the Credit Agreement, any otherdocuments or instruments delivered pursuant thereto or the loan transactionsgoverned thereby or in any way based on or related to any of the foregoing,including contract claims, tort claims, malpractice claims, statutory claimsand all other claims at law or in equity related to the rights and obligationssold and assigned pursuant to clause (i) above (the rights and obligationssold and assigned pursuant to clauses (i) and (ii) above beingreferred to herein collectively as the “Assigned Interest”).  Such sale and assignment is without recourseto the Assignor and, except as expressly provided in this Assignment andAssumption, without representation or warranty by the Assignor.

 
| 1.     |   | Assignor:              |   |                                                                                                                                                                                                                   |
|--------|--------|------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                   |   |                                                                                                                                                                                                                   |
| 2.     |   | Assignee:              |   |                                                                                                                                                                                                                   |
|   |   |                   |   | [and  is an Affiliate/Approved Fund of [*identify Lender*](1)]                                                                                                                                                         |
|   |   |                   |   |                                                                                                                                                                                                                   |
| 3.     |   | Borrower:              |   | Ethan  Allen Global, Inc.                                                                                                                                                                                         |
|   |   |                   |   |                                                                                                                                                                                                                   |
| 4.     |   | Administrative  Agent: |   | JPMorgan  Chase Bank, N.A., as the administrative agent under the Credit Agreement                                                                                                                                     |
|   |   |                   |   |                                                                                                                                                                                                                   |
| 5.     |   | Credit  Agreement:     |   | The  Credit Agreement dated as of May 29, 2009 among Ethan Allen  Global, Inc., the other Loan Parties parties thereto, the Lenders  parties thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. |

 

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(1) Select as applicable.

 

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6.                                       AssignedInterest:

 
| **Facility Assigned(2)** | ** ** | **Aggregate Amount of  Commitment/Loans for  all Lenders** | ** ** | **Amount of  Commitment/Loans  Assigned** | ** ** | **Percentage Assigned of  Commitment/Loans(3)** | ** ** |
|--------------------------|------------|------------------------------------------------------------|------------|-------------------------------------------|------------|-------------------------------------------------|------------|
|                     |       | $                                                          |       |                                      | $          |                                            |       |   | % |
|                     |       | $                                                          |       |                                      | $          |                                            |       |   | % |
|                     |       | $                                                          |       |                                      | $          |                                            |       |   | % |

 

EffectiveDate:                                  , 20      [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATEOF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

 

The Assignee agrees to deliver to theAdministrative Agent a completed Administrative Questionnaire in which theAssignee designates one or more Credit Contacts to whom all syndicate-levelinformation (which may contain material non-public information about theBorrower, the Loan Parties and their Related Parties or their respectivesecurities) will be made available and who may receive such information inaccordance with the Assignee’s compliance procedures and applicable laws,including Federal and state securities laws.

 

The terms set forth in thisAssignment and Assumption are hereby agreed to:

 
|   | ASSIGNOR            |
|--------|---------------------|
|   |                |
|   | [NAME OF ASSIGNOR]  |
|   |                |
|   |                |   |
|   | By:                 |   |
|   |                | Title: |
|   |                |
|   |                |
|   | ASSIGNEE            |
|   |                |
|   | [NAME  OF ASSIGNEE] |
|   |                |
|   |                |   |
|   | By:                 |   |
|   |                | Title: |

 

 

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(2) Fill in the appropriate terminologyfor the types of facilities under the Credit Agreement that are being assignedunder this Assignment.

(3) Set forth, to at least 9 decimals,as a percentage of the Commitment/Loans of all Lenders thereunder.

 

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| [Consented to  and](4) Accepted:    |   |
|------------------------------------------|--------|
|                                     |   |
| JPMORGAN  CHASE BANK, N.A., as           |   |
| Administrative Agent and as Issuing Bank |   |
|                                     |   |   |
|                                     |   |   |
| By                                       |   |   |
| Title:                                   |   |
|                                     |   |
|                                     |   |
| [Consented  to:](5)                      |   |
|                                     |   |
| ETHAN  ALLEN GLOBAL, INC.                |   |
|                                     |   |   |
|                                     |   |   |
| By                                       |   |   |
| Title:                                   |   |

 

 

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(4) To be added only if the consent ofthe Administrative Agent and/or the Issuing Bank is required by the terms ofthe Credit Agreement.

(5) To be added only if the consent ofthe Borrower is required by the terms of the Credit Agreement.

 

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ANNEX 1

 

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

 

1.  Representations andWarranties.

 

1.1   Assignor.  The Assignor (a) represents and warrantsthat (i) it is the legal and beneficial owner of the Assigned Interest, (ii) theAssigned Interest is free and clear of any lien, encumbrance or other adverseclaim and (iii) it has full power and authority, and has taken all actionnecessary, to execute and deliver this Assignment and Assumption and toconsummate the transactions contemplated hereby; and (b) assumes noresponsibility with respect to (i) any statements, warranties orrepresentations made in or in connection with the Credit Agreement or any otherLoan Document, (ii) the execution, legality, validity, enforceability,genuineness, sufficiency or value of the Loan Documents or any collateralthereunder, (iii) the financial condition of the Borrower, any of itsSubsidiaries or Affiliates or any other Person obligated in respect of any LoanDocument or (iv) the performance or observance by the Borrower, any of itsSubsidiaries or Affiliates or any other Person of any of their respectiveobligations under any Loan Document.

 

1.2.  Assignee.  The Assignee (a) represents and warrantsthat (i) it has full power and authority, and has taken all actionnecessary, to execute and deliver this Assignment and Assumption and toconsummate the transactions contemplated hereby and to become a Lender underthe Credit Agreement, (ii) it satisfies the requirements, if any,specified in the Credit Agreement that are required to be satisfied by it inorder to acquire the Assigned Interest and become a Lender, (iii) from andafter the Effective Date, it shall be bound by the provisions of the CreditAgreement as a Lender thereunder and, to the extent of the Assigned Interest,shall have the obligations of a Lender thereunder, (iv) it has received a copyof the Credit Agreement, together with copies of the most recent financialstatements delivered pursuant to Section       thereof, as applicable, and such other documents and information as it hasdeemed appropriate to make its own credit analysis and decision to enter intothis Assignment and Assumption and to purchase the Assigned Interest on thebasis of which it has made such analysis and decision independently and withoutreliance on the Administrative Agent or any other Lender, and (v) if it isa Foreign Lender, attached to the Assignment and Assumption is anydocumentation required to be delivered by it pursuant to the terms of theCredit Agreement, duly completed and executed by the Assignee; and (b) agreesthat (i) it will, independently and without reliance on the AdministrativeAgent, the Assignor or any other Lender, and based on such documents andinformation as it shall deem appropriate at the time, continue to make its owncredit decisions in taking or not taking action under the Loan Documents, and (ii) itwill perform in accordance with their terms all of the obligations which by theterms of the Loan Documents are required to be performed by it as a Lender.

 

2.   Payments.    From and after the Effective Date, theAdministrative Agent shall make all payments in respect of the AssignedInterest (including payments of principal, interest, fees and other amounts) tothe Assignor for amounts which have accrued to but excluding the Effective Dateand to the Assignee for amounts which have accrued from and after the EffectiveDate.

 

3.  General Provisions.This Assignment and Assumption shall be binding upon, and inure to the benefitof, the parties hereto and their respective successors and assigns.  This Assignment and Assumption may beexecuted in any number of counterparts, which together shall constitute oneinstrument.  Delivery of an executedcounterpart of a signature page of this Assignment and Assumption byfacsimile shall be effective as delivery of a manually executed counterpart ofthis Assignment and Assumption.  ThisAssignment and Assumption shall be construed in accordance with and governed bythe law of the State of New York, but giving effect to federal laws applicableto national banks.

 

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EXHIBITB

 

OPINION OF LOAN PARTIES’COUNSEL

 

[Attached]

 

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May 29, 2009

 

Tothe Lenders and the Administrative

AgentReferred to Below

c/oJPMorgan Chase Bank, N.A. As Administrative Agent 270 Park AvenueNew York, New York 10017

 

Ladies and Gentlemen:

 

We have acted as specialcounsel to Ethan Allen Interiors Inc., a Delaware corporation (“Holdings”),and certain of its subsidiaries, including Ethan Allen Global, Inc., aDelaware corporation (the “Borrower”), Ethan Allen Retail, Inc., aDelaware corporation (“Retail”), Ethan Allen Operations, Inc., aDelaware corporation (“Operations”), Lake Avenue Associates, Inc.,a Connecticut corporation (“Lake Avenue”) , Manor House, Inc., aDelaware corporation (“Manor House”), Ethan Allen Realty, LLC, aDelaware limited liability company (“Realty”, and collectively withHoldings, the Borrower, Retail, Operations, Lake Avenue, and Manor House, the “LoanParties”)  in connection with CreditAgreement dated as of May 29, 2009, (the “Credit Agreement”) amongthe Borrower, Holdings, the other Loan Parties party thereto, JPMorgan ChaseBank, N.A., a national banking association, in its capacity as contractualrepresentative (the “Administrative Agent”), and the Lenders partythereto (the “Lenders”).  Thisopinion is delivered to you at the request of Holdings and the Borrowerpursuant to Section 4.01 of the Credit Agreement.  Unless otherwise indicated herein,capitalized terms used herein and not defined herein shall have the meaningsgiven to them in the Credit Agreement.

 

In connection with thisopinion, we have examined and relied upon copies, certified or otherwiseidentified to our satisfaction, of (i) the Credit Agreement, (ii) thePledge and Security Agreement, dated as of May 29, 2009 (the “SecurityAgreement”), among Holdings, the Borrower, the other Loan Parties, and theAdministrative Agent for itself and for the Lenders, (iii) the FinancingStatements (as hereinafter defined), related to the security interests grantedby the Loan Parties pursuant to the Security Agreement, and (iv) suchother

 

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records, agreements,certificates and instruments, and information from officers and otherrepresentatives of the Loan Parties and governmental and regulatory officialsas we have deemed necessary as a basis for this opinion.  The documents described in clauses (i) and(ii) of the immediately preceding sentence are sometimes referred toherein as the “Agreements.”

 

In our examination, we haveassumed the genuineness of all signatures, the authenticity of all documentssubmitted to us as originals, the conformity of any documents submitted to usas copies to their respective originals, the authenticity of the originals ofsuch copies and the legal capacity of all natural persons.  We have also assumed, with your consent andwithout undertaking, or having any duty to undertake, any independentinvestigation or inquiry, that the representations, warranties and statementsas to factual matters (except any of the foregoing expressly covered by theopinions set forth below) made in the Credit Agreement and the SecurityAgreement by the Loan Parties or in the respective certificates of the LoanParties and their respective officers mentioned above, are true and correct andhave assumed the compliance by each of the Lenders and the Administrative Agentwith the terms of the Agreements to which it is a party.

 

In rendering the opinionsexpressed below, we have assumed the following:

 

(a)           the accuracy and completeness of all reports andcertificates received from public officials and others;

 

(b)           the absence of fraud, misrepresentation, omission ordeceit on the part of any party to the Agreements;

 

(c)           the absence of any mutual mistake of fact ormisunderstanding, duress or undue influence involved in the negotiation,execution, delivery or performance of the Agreements;

 

(d)           neither the Administrative Agent orany Lender nor any of the representatives of any thereof has any notice orknowledge (actual or constructive) of any adverse claim, lien, securityinterest, encumbrance, interest or other condition of title affecting anyinvestment property or instruments (as each such term is defined in Article 9-102of the UCC, as hereinafter defined) that are part of the Collateral;

 

(e)           all items of Collateral for whichpossession must be taken by a secured party in order to perfect its securityinterest under Section 9-313 of the Uniform Commercial Code of New York(the “New York UCC”) or the Uniform Commercial Code of Delaware (the “DelawareUCC”) or the Uniform Commercial Code of Connecticut (Connecticut UCC”,and collectively with the New York UCC and the Delaware UCC, the “UCC”)shall be in the possession or constructive possession of the AdministrativeAgent and not in the possession of any Loan Party, or any Affiliate, agent orany other Person acting on behalf of any Loan Party;

 

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(f)            each Loan Party has acquired goodand sufficient title to each existing item of Collateral existing on the datehereof and has “rights” in and to such Collateral within the meaning of Section 9-203of the UCC consistent with and sufficient for purposes of the Agreements, andthe same will be true of each item of Collateral arising after the date hereof;

 

(g)           the Collateral is (A) eitherlocated in the State of New York or is of a type as to which the creation andenforcement of a security interest therein is governed solely by Article 9of the New York UCC and (B) except as expressly stated in paragraph (5) below,is of a type as to which a security interest can be perfected solely by filinga financing statement; and

 

(h)           each Loan Party has received legallysufficient consideration and that “value” (as defined in Section 1-201 ofthe UCC) “has been given” (as required by Section 9-203 of the UCC) forthe execution of the Agreements to which it is a party and the granting ofsecurity interests in its property pursuant thereto.

 

We have also assumed thatthere is no other agreement or understanding among the parties to theAgreements, written or oral, or any waiver of a right or remedy, or any usageof trade or course of dealing between the parties to each of the Agreements,that would, in any case, modify, define, supplement or qualify any of the termsof the Agreements.

 

As to various questions offact material to the opinions rendered herein, we have relied upon thestatements, representations and warranties in the documents examined by us, andnothing has come to our attention which would indicate that we are notjustified in relying on such statements, representations and warranties.  We have assumed the due execution anddelivery, pursuant to due authorization, of the documents that we have examinedby each party thereto, that each such party is existing and (to the extentapplicable) in good standing under the laws of its jurisdiction of organizationor formation and has the full power, authority and legal right to enter intoand perform its obligations under each such document to which it is a party,and that all necessary consents, licenses, approvals, authorizations,registrations, declarations,  filings andother acts (governmental or otherwise) and all other conditions precedent withrespect to the legal and valid execution and delivery of, and performanceunder, the documents that we have examined by each party thereto, in each caseother than, with respect to the laws of the State of New York, each of the LoanParties, have been made or satisfied or have occurred and are in full force andeffect.  We have also assumed that all ofthe documents we have examined are binding and enforceable obligations of eachparty thereto other than the Loan Parties.

 

We do not assume anyresponsibility for the accuracy, completeness or fairness of any information,including, but not limited to, financial information, furnished to you by anyof the Loan Parties or any of their Affiliates concerning the business, assetsand affairs of the Loan Parties or any of their Affiliates or any otherinformation furnished to you by or on behalf of any of the Loan Parties or anyof their Affiliates or furnished by us to you, except for our conclusions oflaw in this opinion letter.

 

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References in this opinionto our “knowledge” or “known to us” or similar phrases mean the actualknowledge (i.e., conscious awareness) of the attorneys currently in this firmwho our records indicate have devoted substantive attention to matters directlyrelating to the Agreements and the transactions contemplated thereby, and meanthat such attorneys have not been informed by the Loan Parties that the mattersstated are factually incorrect and have no actual knowledge (i.e*.,* conscious awareness) that the matters stated arefactually incorrect.  Except as expresslyset forth herein, we have not undertaken any independent investigation,examination, or inquiry to determine the existence or absence of any facts (andhave not caused the review of any court file or indices) and no inference as toour knowledge concerning any facts should be drawn as a result of the limitedrepresentation undertaken by us.

 

We express no opinion on anymatter not specifically set forth herein and we understand that you are relyingupon, and receiving contemporaneously with the delivery of this opinion, thelegal opinion of Pamela A. Banks of Holdings (the “Other Opinion”),addressing various matters set forth therein and that you are not relying uponus with respect to matters covered in the Other Opinion.  In rendering this opinion, we have reliedupon the Other Opinion solely as to the matters opined upon in the OtherOpinion.

 

Basedupon and subject to the foregoing, and to the limitations and qualificationsstated herein, it is our opinion that:

 

(1)           Assumingdue authorization, execution and delivery thereof by the parties thereto, eachof the Credit Agreement and the Security Agreement is a valid and legallybinding agreement of each Loan Party that is a party thereto, enforceableagainst it in accordance with its terms.

 

(2)           NoLender is required to obtain or effect any registration or filing with, consentor approval of or other action by any Governmental Authority of the UnitedStates of America or the State of New York in connection with the transactionscontemplated by the Credit Agreement and the Security Agreement, other than (a) suchfilings, registrations, consents, approvals and other actions which may berequired in order to perfect the liens and security interests granted pursuantto the Credit Agreement and the Security Agreement and (b) those that havebeen made or obtained and are in full force and effect or as to which thefailure to be made or obtained or to be in full force and effect would notreasonably be expected to result, individually or in the aggregate, in aMaterial Adverse Effect.

 

(3)           Underthe New York UCC, the Security Agreement is effective to create in favor of theAdministrative Agent, for the benefit of the Secured Parties, a valid securityinterest in the Collateral described therein, to the extent that the creationof security interests in the Collateral is governed by Article 9 of theNew York UCC.

 

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(4)           TheUCC-1 financing statements (the “Financing Statements”) in the formsattached as Annex A hereto are in appropriate form for filing in theoffice of the Secretary of the State of the jurisdiction of incorporation ororganization of the Loan Parties indicated on Exhibit B (the “FilingOffices”).  Upon filing and properindexing of the Financing Statements in the Filing Offices of the jurisdictionof incorporation or organization of each Loan Party, the security interest ofthe Administrative Agent, for the benefit of the Secured Parties, in theCollateral described therein will be perfected under the Uniform CommercialCode in effect in the states of incorporation or organization indicated on Exhibit Bof such Loan Parties (the “State UCCs”) to the extent that a securityinterest in such Collateral can be perfected by the filing of a financingstatement in the Filing Offices (such Collateral, “Article 9 Collateral”).

 

(5)           Underthe New York UCC, the execution and delivery of the Security Agreement,together with delivery and the continued possession by the AdministrativeAgent, in the State of New York, of certificates evidencing all Collateralconsisting of instruments or investment property, issued or endorsed in thename of the Administrative Agent, or in blank or together with stock powers orother instruments of transfer properly executed in the name of theAdministrative Agent, or in blank with respect thereto, will create a valid andduly perfected lien on and a security interest in such Collateral pledged onthe date hereof under the Security Agreement. Subject to the limitations contained in Section 9-331 of the NewYork UCC, the Administrative Agent will acquire such lien and security interestfree of adverse claims (as defined in Section 8-102 of the New York UCC).

 

(6)           Noneof the Loan Parties is an “investment company” as defined in, or subject toregulation under, the Investment Company Act of 1940, as amended.

 

The foregoing opinionsare subject to the following limitations and qualifications:

 

The opinions set forth inthe numbered paragraphs above are subject to the following limitations andqualifications:

 

(a)           Except as expresslyset forth in paragraph 4 above, we express no opinion concerning any lawof any jurisdiction other than (i) the laws of the State of New York, (ii) thelaws of the State of Connecticut and (iii) the Federal laws of the UnitedStates of America. Without limiting the foregoing, we express no opinion withrespect to the applicability or the effect of the laws of any otherjurisdiction, municipal laws or rules, ordinances, regulations or orders of anyagency within any state or municipality. Our opinions set forth below are based upon our consideration of thosestatutes, rules and regulations which, in our experience, are normallyapplicable to the transactions contemplated by the Agreements.

 

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(b)           We express noopinion with respect to the enforceability of any agreement, contract ordocument or any provision thereof (i) to the extent such enforceabilitymay be subject to, or affected by, applicable bankruptcy, insolvency,reorganization, receivership, moratorium, arrangement, assignment for thebenefit of creditors or similar laws affecting the rights and remedies ofcreditors generally (including, without limitation, fraudulent transfer orconveyance laws) and judicially developed doctrines relevant to any such lawsand which are in effect at the time when enforcement is sought or generalprinciples of equity (regardless of whether enforceability is considered in aproceeding at law or in equity), including, without limitation, commercialreasonableness, good faith and fair dealing and the requirement that the right,remedy or penalty sought be proportionate to the breach, default or injury, (ii) tothe extent that such enforceability may be affected by requirements as tocompliance with, and limitations imposed by, procedural requirements relatingto the exercise of remedies, (iii) providing for specific performance,injunctive relief or other equitable remedies, regardless of whether suchenforceability is sought in a proceeding in equity or at law, (iv) to theextent such enforceability may be limited by Article 9 of the UCC as ineffect on the date hereof limiting the right or ability of a person to waive orvary certain provisions of Article 9 of the UCC, (v) with respect toapplicable law limiting certain rights and remedies of the Administrative Agentand the Lenders (but, assuming that the Administrative Agent and the Lendersact in accordance with the general principles of equity in enforcing theirrights and remedies, the matters identified in this paragraph do not, in ouropinion, render the Agreements invalid as a whole or substantially interferewith the realization by the Administrative Agent, for the benefit of theSecured Parties, of the principal benefits intended to be provided by theCredit Agreement and the Security Agreement), (vi) providing forindemnification and contribution, which provisions may be limited by applicablefederal and state securities laws and general principles of public policy, (vii) requiringany waiver of stay or extension laws, diligent performance or other acts whichmay be unenforceable under principles of public policy, or (viii) providingfor a choice of jurisdiction.

 

(c)           We express noopinion with respect to the enforceability of any agreement, contract ordocument or any provision thereof (i) to the effect that failure toexercise or delay in exercising a right or remedy will not operate as a waiverof the right or remedy, (ii) releasing, exculpating or exempting a partyfrom, or requiring indemnification of any Person for, liability for its ownaction or inaction, to the extent the action or inaction involves grossnegligence, recklessness, willful misconduct or wrongful or unlawful conduct, (iii) purportingto preclude modification thereof through conduct, custom or course ofperformance, action or dealing, (iv) requiring the payment orreimbursement of

 

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fees, costs, expenses, orother amounts without regard to whether they are reasonable in nature or amount or (v) thatpurportedly waives any right granted pursuant to statute which may not belegally waived or the effectiveness of any purported waiver by any Person of anyright granted pursuant to statute which may not be legally waived.

 

(d)           We express noopinion as to the enforceability of any agreement, contract or document or anyprovision thereof, with respect to (i) the choice of New York law in anyaction or proceeding in a Federal court or state court outside the State of NewYork, or in any action or proceeding in any forum outside the United States, (ii) anyconsent to jurisdiction of any Federal court, (iii) any consent to venueor an inconvenient forum, (iv) provisions which purport to change or alterthe manner in which service of process may be effected under applicable law or (v) relateto setoffs in respect of participations purchased in Loans.

 

(e)           We express noopinion as to compliance with applicable state and federal antifraud statutes, rules orregulations,

 

(f)            We express noopinion as to compliance with applicable tax, environmental, pension, employeebenefit, zoning, land use, anti-money laundering or antitrust statutes, laws, rules orregulations of state or federal law or any matters, statutes, regulations, lawsor proceedings pertaining to patents, trademarks or copyrights.

 

(g)           Any reference toperformance of a document by a party means performance of the obligations ofsuch party thereunder.

 

(h)           With respect to theopinions in paragraphs 3, 4 and 5, the security interests of theAdministrative Agent, for the benefit of the Secured Parties, are subject to orlimited by (i) the requirement to file a continuation statement within sixmonths before the fifth anniversary of the date of filing of the originalfinancing statement perfecting a security interest, (ii) the requirementto file a new financing statement under the circumstances set forth in Section 9-316or Section 9-507 of the UCC, (iii) the rights of purchasers andholders of instruments, documents and chattel paper under Section 9-330and Section 9-331 of the UCC, (iv) the provisions of Section 9-315of the UCC relating to proceeds, and (v) the rights of buyers of goodsunder Section 9-320 and 9-323 of the UCC. We express no opinion as to the creation, validity or enforceability ofany security interests in consumer goods, motor vehicles, minerals,health-care-insurance receivables, commercial tort claims arising after thedate hereof, claims arising in tort other than commercial tort claims or timberto be cut or growing crops.

 

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(i)            in the case ofproperty which becomes Collateral after the date hereof, Section 552 ofTitle 11 of the United States Code (the “Bankruptcy Code”) limits theextent to which property acquired by a debtor after the commencement of a caseunder the Bankruptcy Code may be subject to a security interest arising fromthe Security Agreement entered into by the debtor before the commencement ofsuch case;

 

(j)            we express noopinion as to the validity or enforceability of any security interests in goods(as defined by the UCC) which have been bought by a buyer in the ordinarycourse of business (as defined in Section 1-201 of the UCC);

 

(k)           We express no opinion with respect to anyPerson’s rights in or title to any property or the priority of any securityinterest or lien created under the Agreements, including without limitation,the relative priority of any security interest or lien as against (i) anyclaim or lien in favor of the United States of America or any agency orinstrumentality thereof (including, without limitation, federal tax liens andliens under Title IV f the Employee Retirement Income Security Act of 1974, asamended) or (ii) the claim of a lien creditor to the extent set forth in Section 9-317of the New York UCC.

 

(l)            In rendering the opinions in thisparagraphs 3 and 4, insofar as they are based upon the State UCCs, withyour consent, we have relied solely on our review of the CCH SecuredTransactions Guide, without any investigation of the legal decisions or otherstatutory provisions in effect that may affect the interpretation of the StateUCCs.

 

(m)          Except as expressly set forth inparagraphs 3, 4 and 5, we express no opinion as to (i) the creation,validity or perfection of any security interest or lien,  on any item of Collateral other than theCollateral existing on the date hereof and the Article 9 Collateral, (ii) theeffect of perfection or priority purported to be created by any agreement,contract or document, or (iii) the sufficiency of the description of anycollateral contained in any agreement, contract or document or any financingstatements or other documents delivered in connection therewith.  Without limiting the foregoing, we express noopinion as to the creation, validity or perfection of any security interest in (i) inany item of Collateral which is expressly excluded from the application of Article 9of the UCC, (ii) in any item of Collateral which consists of fixtures (asdefined in Section 9-102 of the UCC) or (iii) in any item ofCollateral which is subject to (A) a statute or treaty of the UnitedStates which provides for a national or international registration or anational or international certificate of title for the perfection of a securityinterest therein or which specifies a place of filing 

 

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different fromthat specified in the UCC for filing to perfect such security interest or (B) acertificate of title statute.

 

(n)           We express no opinion as to theperfection of any security interest in any proceeds other than identifiablecash proceeds to the extent set forth in Section 9-315 of the New YorkUCC.

 

(o)           We express no opinion as to (i) anyprovision of any agreement, contract or document which is intended (A) toestablish any standard as the measure of the performance by any party theretoof such party’s obligations of good faith, diligence, fair dealing,reasonableness or care or the fulfillment of the duties imposed on any securedcreditor with respect to the disposition or redemption of collateral,accounting for surplus proceeds of collateral, or accepting collateral indischarge of liabilities owed to any creditor or unsecured creditor or (B) topermit modification thereof only by means of an agreement in writing signed bythe parties thereto, (ii) any provision of any agreement, contract ordocument requiring payment of attorneys’ fees, except to the extent that acourt determines such fees to be reasonable, (iii) any provision of anyagreement, contract or document insofar as it relates to post-judgment ordefault interest rates or interest rates or interest on overdue amounts, (iv) anyprovision of any agreement, contract or document which purports to require thatany collateral or property be held in trust or imposes fiduciary duties on anyparty thereto and (v) the enforceability of any provision in anyagreement, contract or document which provides for the appointment of a processagent for suits, actions or proceedings brought in the State of New York to theextent that such process agent is not located in the State of New York.

 

This opinion is beingfurnished to you solely for your benefit in connection with the CreditAgreement.  This opinion may not berelied upon by you for any other purpose or relied upon by any other Personwithout our prior written consent.  Atyour request, we hereby consent to reliance hereon by any assignee under theCredit Agreement pursuant to an assignment that is made and consented to inaccordance with the express provisions of the Credit Agreement, on thecondition and understanding that (i) this letter speaks only as of thedate hereof, (ii) we have no responsibility or obligation to update thisletter, to consider its applicability or correctness to other than itsaddressee(s), or to take into account changes in law, facts or any otherdevelopments of which we may later become aware, and (iii) any suchreliance by a future assignee must be actual and reasonable under thecircumstances existing at the time of assignment, including any changes in law,facts or any other developments known to or

 

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reasonably knowable by theassignee at such time.  Our opinions inthis letter are based upon the facts in existence and the laws in effect on thedate hereof.  We have no obligation toupdate this opinion for events or changes in law or fact occurring after thedate hereof.

 

Verytruly yours,

 

10

----

 

Annex A

 

Forms of UCC-1 Financing Statements

 

----

 

Annex B

 

Jurisdictions of Holdings, the Borrower and the Loan Parties(6)

 
| **Entity**                         | ** ** | **Jurisdiction of Incorporation / Organization** |
|------------------------------------|------------|--------------------------------------------------|
|                               |       |                                             |
| Ethan  Allen Interiors, Inc.  |       | Delaware                                         |
|                               |       |                                             |
| Ethan  Allen Global Inc.           |       | Delaware                                         |
|                               |       |                                             |
| Ethan  Allen Operations, Inc. |       | Delaware                                         |
|                               |       |                                             |
| Lake  Avenue Associates, Inc. |       | Connecticut                                      |
|                               |       |                                             |
| Manor  House, Inc.            |       | Delaware                                         |
|                               |       |                                             |
| Ethan  Allen Realty LLC            |       | Delaware                                         |
|                               |       |                                             |
| Ethan  Allen Retail, Inc.     |       | Delaware                                         |

 

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*Writer’s Direct Number:  (203) 743-8496*

*Writer’sDirect Facsimile: (203) 743-8254*

 

OPINION OF COUNSEL FOR THE LOAN PARTIES

 

May 29, 2009

 

To the Lenders and theAdministrativeAgent Referred to Belowc/o JPMorgan Chase Bank N.A., asAdministrative Agent270 Park AvenueNew York, New York 10017

 

Ladies and Gentlemen:

 

This opinion is furnished to you pursuant toparagraph (a) of Section 4.01 of the Credit Agreement, dated asof May 29, 2009, among Ethan Allen Interiors Inc., a Delaware corporation(“Holdings”), Ethan Allen Global, Inc., a Delaware corporation (the “Borrower”),Ethan Allen Retail, Inc., a Delaware corporation (“Retail”), EthanAllen Operations, Inc., a Delaware corporation (“Operations”), LakeAvenue Associates, Inc., a Connecticut corporation (“Lake Avenue”), Manor House, Inc., a Delaware corporation (“Manor House”), EthanAllen Realty, LLC, a Delaware limited liability company (“Realty”, andcollectively with Holdings, the Borrower, Retail, Operations, Lake Avenue, andManor House, the “Loan Parties”), the banks and other financialinstitutions identified therein as Lenders, and JPMorgan Chase Bank, asAdministrative Agent.  Unless otherwisedefined herein, terms used herein have the meanings provided in the CreditAgreement.

 

I am general counsel of Holdings and theBorrower and, in that capacity, have acted as counsel for the Loan Parties inconnection with (i) the Credit Agreement, (ii) the Pledge andSecurity Agreement, dated as of May 29, 2009 (the “Security Agreement”;collectively with the Credit Agreement, the “Agreements”), among Holdings,the Borrower, the other Loan Parties, and the Administrative Agent and (iii) theother Loan Documents.  For purposes ofthis opinion, I have examined originals or copies, certified or otherwise identifiedto my satisfaction, of such documents, corporate records, certificates ofpublic officials and other instruments and have conducted such otherinvestigations of fact and law as I have deemed necessary or advisable.

 

Upon the basis of the foregoing, I am of theopinion that:

 

1.     Each Loan Party (a) is a corporation (or in the case ofRealty, a limited liability company) duly organized, validly existing and ingood standing under the laws of the jurisdiction of its

 

----

 

organization, (b) hasall requisite power and authority to own its property and assets and to carryon its business as now conducted, (c) is qualified to do business in everyjurisdiction where such qualification is required, except where the failure todo so could not reasonably be expected to result in a Material Adverse Effect,and (d) has the corporate or other organizational power and authority toexecute, deliver and perform its obligations under each Agreement.

 

2.     The execution, delivery and performance by each Loan Party(collectively, the “Transactions”) (a) have been duly authorized by allrequisite corporate (or other organizational) and, if required, stockholder (ormember) action and (b) will not (i) violate (A) any provision oflaw, statute, rule or regulation, or of the certificate or articles ofincorporation or other constitutive documents, by-laws or operating agreementof any of the Loan Parties, (B) any order of any Governmental Authority or(C) any provision of any indenture, agreement or other instrument to whichany of the Loan Parties is a party or by which any of them or any of theirproperty is or may be bound, or (ii) be in conflict with, result in abreach of or constitute (alone or with notice or lapse of time or both) adefault under any such indenture, agreement or other instrument.

 

3.     Each Agreement has been duly executed and delivered by each ofthe Loan Parties.

 

I am a member of the bar of the State of NewYork and the foregoing opinion is limited to the laws of the State of New York,the General Corporation Law of the State of Delaware and the Federal laws ofthe United States of America.  Thisopinion is rendered solely to you in connection with the above matter.  This opinion may not be relied upon by youfor any other purpose or relied upon by any other Person (other than yoursuccessors and assigns as Lenders and Persons that acquire participations inyour Loans) without my prior written consent. My opinions in this letter are based upon the facts in existence and thelaws in effect on the date hereof.  Ihave no obligation to update this opinion for events or changes in law or factoccurring after the date hereof.

 
| Very  truly yours,               |   |
|----------------------------------|--------|
|                             |   |
|                             |   |
| Pamela  A. Banks                 |   |
| Vice  President, General Counsel |   |
| and Secretary                    |   |

 

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EXHIBITC

 

BORROWING BASE CERTIFICATE

 

[Attached]

 

----

 
|  |   | **BORROWING BASE REPORT**as of |   |
|--|--------|--------------------------------|--------|

 

Obligor Number:

Loan Number:

 

Ethan AllenGlobal, Inc.

**(in $,000 omitted)**

 
| ** ** | ** ** | ** **                                                     | ** ** | **US**   | ** ** |
|------------|------------|----------------------------------------------------------------|------------|----------|------------|
|       |       |                                                           | ** ** |     |       |
| 1          | ** ** | **Retail A/R (credit card)**                                   |       |     |       |
| 2          | * *   | *Less ineligibles*                                             |       | —   |       |
| 3          |       | Eligible retail A/R                                            |       | —   |       |
| 4          | * *   | *Advance rate %*                                               | * *   | * * | * *   |
| 5          |       | Retail A/R availability                                        |       | —   |       |
|       |       |                                                           |       |     |       |
| 6          | ** ** | **Wholesale A/R**                                              |       |     |       |
| 7          | * *   | *Less ineligibles*                                             |       |     |       |
| 8          |       | Eligible wholesale A/R                                         |       | —   |       |
| 9          | * *   | *Advance rate %*                                               | * *   | * * | * *   |
| 10         |       | Wholesale A/R availability                                     |       | —   |       |
|       |       |                                                           |       |     |       |
| 11         |       | Total A/R availability                                         |       | —   |       |
|       |       |                                                           |       |     |       |
| 12         | ** ** | **Wholesale and Retail Finished Goods  Inventory**             |       |     |       |
| 13         | * *   | *Less ineligibles*                                             |       |     |       |
| 14         |       | Eligible FG/Retail inventory                                   |       | —   |       |
| 15         |       | NOLV calculation:                                              |       |     |       |
| 16         |       | Eligible FG inventory  as per above                            |       | —   |       |
| 17         |       | NOLV rate                                                      |       |     |       |
| 18         |       | Cost rate                                                      |       |     |       |
| 19         | * *   | *Effective advance rate %*                                     | * *   | * * | * *   |
| 20         |       | FG inventory availability at 85% of NOLV                       |       | —   |       |
|       |       |                                                           |       |     |       |
| 21         | ** ** | **Plant  Inventory**                                           |       |     |       |
| 22         | * *   | *Less ineligibles*                                             |       |     |       |
| 23         |       | Eligible plant inventory                                       |       | —   |       |
| 24         |       | NOLV calculation:                                              |       |     |       |
| 25         |       | NOLV rate                                                      |       |     |       |
| 26         |       | Cost rate                                                      |       |     |       |
| 27         | * *   | *Effective  advance rate %*                                    | * *   | * * | * *   |
| 28         |       | Raw Material inventory  availability                           |       | —   |       |
|       |       |                                                           |       |     |       |
| 29         | ** ** | **Total inventory availability**                               |       | —   |       |
|       |       |                                                           |       |     |       |
| 30         | ** ** | **Total Borrowing Base Availability  before reserves**         |       | —   |       |
|       |       |                                                           |       |     |       |
| 31         |       | Less availability reserves:                                    |       |     |       |
| 32         |       | Rent Reserve                                                   |       | —   |       |
| 33         |       | Customer Deposits @ 50%                                        |       |     |       |
| 34         |       | Other Reserves                                                 |       | —   |       |
|       |       |                                                           |       |     |       |
| 35         |       | Total availability reserves                                    |       | —   |       |
|       |       |                                                           |       |     |       |
| 36         | ** ** | **Total Borrowing Base Availablility**                         |       | —   |       |
| 37         | ** ** | **Revolver Line**                                              |       |     |       |
| 38         | ** ** | **Lesser of Borrowing Base  Availabiliy & Commiment** | ** ** | —   |       |
| 39         | ** ** | **Loan Balance**                                               |       | —   |       |
| 40         | ** ** | **Letters of Credit Outstanding**                              |       |     |       |
| 41         | ** ** | **Availability**                                               |       | —   |       |

 

Pursuant to, and inaccordance with, the terms and provisions of that certain Credit Agreement(“Agreement”), between JPMorgan Chase Bank, N.A. (“Chase”), as administrativeagent for the Lenders, the Loan Parties and Ethan Allen Global, Inc.(“Borrower”), Borrower is executing and delivering to Chase this CollateralReport accompanied by supporting data (collectively referred to as the“Report”). Borrower warrants and represents to Chase that this Report is trueand correct, and is based on information contained in Borrower’s own financialaccounting records.  Borrower, by theexecution of this Report, hereby ratifies, confirms and affirms all of theterms, conditions and provisions of the Agreement, and further certifies onthis            day of                              ,20    , that the Borrower is in compliance with saidAgreement.

 
|   | BORROWER NAME: |   |   | AUTHORIZED SIGNATURE: |
|--------|----------------|--------|--------|-----------------------|
|   |           |   |   |                  |
|   |           |   |   |                  |

 

----

 

EXHIBIT D

 

COMPLIANCE CERTIFICATE

 
| To:    | The  Lenders parties to the       |
|--------|-----------------------------------|
|   | Credit  Agreement Described Below |

 

This Compliance Certificate is furnished pursuant to that certainCredit Agreement dated as of May 29, 2009 (as amended, modified, renewedor extended from time to time, the “Agreement”) among Ethan Allen Global, Inc.(the “Borrower”), Ethan Allen Interiors Inc., the other Loan Parties,the Lenders party thereto and JPMorgan Chase Bank, N.A., as AdministrativeAgent for the Lenders and as the Issuing Bank. Unless otherwise defined herein, capitalized terms used in thisCompliance Certificate have the meanings ascribed thereto in the Agreement.

 

THE UNDERSIGNED HEREBY CERTIFIES THAT:

 

1.     I am the duly elected                        ofthe Borrower;

 

2.  I have reviewed the terms ofthe Agreement and I have made, or have caused to be made under my supervision,a detailed review of the transactions and conditions of the Borrower and itsSubsidiaries during the accounting period covered by the attached financialstatements [**for quarterly or monthlyfinancial statements add:** and such financial statements presentfairly in all material respects the financial condition and results ofoperations of the Borrower and its consolidated Subsidiaries on a consolidatedbasis in accordance with GAAP consistently applied, subject to normal year-endaudit adjustments and the absence of footnotes];

 

3.   The examinations describedin paragraph 2 did not disclose, except as set forth below, and I have noknowledge of (i) the existence of any condition or event which constitutesa Default during or at the end of the accounting period covered by the attachedfinancial statements or as of the date of this Certificate or (ii) anychange in GAAP or in the application thereof that has occurred since the dateof the audited financial statements referred to in Section 3.04 of theAgreement;

 

4.   I hereby certify that no Loan Party haschanged (i) its name, (ii) its chief executive office, (iii) principalplace of business, (iv) the type of entity it is or (v) its state ofincorporation or organization without having given the Agent the noticerequired by Section 4.15 of the Security Agreement;

 

5. Schedule I attached hereto sets forth financial data andcomputations evidencing the Borrower’s compliance with certain covenants of theAgreement, all of which data and computations are true, complete andcorrect;  and

 

6.   Schedule II heretosets forth the computations necessary to determine the Applicable Ratecommencing on the Business Day this certificate is delivered.

 

Described below are the exceptions, if any, to paragraph 3 by listing,in detail, the (i) nature of the condition or event, the period duringwhich it has existed and the action which the Borrower has taken, is taking, orproposes to take with respect to each such condition or event or (i) thechange in GAAP or the application thereof and the effect of such change on theattached financial statements:

 

----

 

The foregoing certifications, together with the computations set forthin Schedule I and Schedule II hereto and the financial statements deliveredwith this Certificate in support hereof, are made and delivered this      dayof               ,       .

 
|   |   | ETHAN  ALLEN GLOBAL, INC. |
|--------|--------|---------------------------|
|   |   |                      |
|   |   | By:                       |   |
|   |   |                      | Name: |   |
|   |   |                      | Title: |   |

 

----

 

SCHEDULE I

 

Compliance as of                  ,         with

Provisions of      and       of

the Agreement

 

----

 

SCHEDULE II

 

Borrower’s Applicable RateCalculation

 

----

 

EXHIBIT E

 

JOINDER AGREEMENT

 

THISJOINDER AGREEMENT (this “Agreement”), dated as of[                    ],20[    ], is entered into between                                                                ,a                                  (the “New Subsidiary”) and JPMORGAN CHASE BANK, N.A., in its capacity asadministrative agent (the “Administrative Agent”) under that certainCredit Agreement, dated as of May 29, 2009, among Ethan Allen Global, Inc.(the “Borrower”), Ethan Allen Interiors Inc., the Loan Parties partythereto, the Lenders party thereto and the Administrative Agent (as the samemay be amended, modified, extended or restated from time to time, the “CreditAgreement”).  All capitalized terms usedherein and not otherwise defined shall have the meanings set forth in theCredit Agreement.

 

TheNew Subsidiary and the Administrative Agent, for the benefit of the Lenders,hereby agree as follows:

 

1.             The New Subsidiary herebyacknowledges, agrees and confirms that, by its execution of this Agreement, theNew Subsidiary will be deemed to be a Loan Party under the Credit Agreement anda “Loan Guarantor” for all purposes of the Credit Agreement and shall have allof the obligations of a Loan Party and a Loan Guarantor thereunder as if it hadexecuted the Credit Agreement.  The NewSubsidiary hereby ratifies, as of the date hereof, and agrees to be bound by,all of the terms, provisions and conditions contained in the Credit Agreement,including without limitation (a) all of the representations and warrantiesof the Loan Parties set forth in Article III of the Credit Agreement, ***[**and**]*** (b) allof the covenants set forth in Articles V and VI of the Credit Agreement ***[**and (c) all of the guaranty obligations set forth in Article Xof the Credit Agreement.  Withoutlimiting the generality of the foregoing terms of this paragraph 1, the NewSubsidiary, subject to the limitations set forth in Section 10.10 of theCredit Agreement, hereby guarantees, jointly and severally with the other LoanGuarantors, to the Administrative Agent and the Lenders, as provided in Article Xof the Credit Agreement, the prompt payment and performance of the GuaranteedObligations in full when due (whether at stated maturity, as a mandatoryprepayment, by acceleration or otherwise) strictly in accordance with the termsthereof and agrees that if any of the Guaranteed Obligations are not paid orperformed in full when due (whether at stated maturity, as a mandatoryprepayment, by acceleration or otherwise), the New Subsidiary will, jointly andseverally together with the other Loan Guarantors, promptly pay and perform thesame, without any demand or notice whatsoever, and that in the case of anyextension of time of payment or renewal of any of the Guaranteed Obligations,the same will be promptly paid in full when due (whether at extended maturity,as a mandatory prepayment, by acceleration or otherwise) in accordance with theterms of such extension or renewal.**]*  *[**The New Subsidiary has deliveredto the Administrative Agent an executed Loan Guaranty.**]***

 

2.             If required, the New Subsidiary is,simultaneously with the execution of this Agreement, executing and deliveringsuch Collateral Documents (and such other documents and instruments) asrequested by the Administrative Agent in accordance with the Credit Agreement.

 

3.             The New Subsidiary hereby waivesacceptance by the Administrative Agent and the Lenders of the guaranty by theNew Subsidiary upon the execution of this Agreement by the New Subsidiary.

 

4.             This Agreement may be executed inany number of counterparts, each of which when so executed and delivered shallbe an original, but all of which shall constitute one and the same instrument.

 

----

 

5.             THIS AGREEMENT AND THE RIGHTS ANDOBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH ANDGOVERNED BY THE LAW OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWSAPPLICABLE TO NATIONAL BANKS.

 

INWITNESS WHEREOF, the New Subsidiary has caused this Agreement to be dulyexecuted by its authorized officer, and the Administrative Agent, for thebenefit of the Lenders, has caused the same to be accepted by its authorizedofficer, as of the day and year first above written.

 
|   |   | [NEW  SUBSIDIARY]                             |
|--------|--------|-----------------------------------------------|
|   |   |                                          |   |
|   |   | By:                                           |   |
|   |   | Name:                                         |   |
|   |   | Title:                                        |   |
|   |   |                                          |
|   |   | Acknowledged  and accepted:                   |
|   |   |                                          |
|   |   | JPMORGAN  CHASE BANK, N.A., as Administrative |
|   |   | Agent                                         |
|   |   |                                          |   |
|   |   | By:                                           |   |
|   |   | Name:                                         |   |
|   |   | Title:                                        |   |

 

----

 

EXHIBIT F

 

LIST OF CLOSING DOCUMENTS

 

Attached

 

----

 

**ETHAN ALLEN GLOBAL, INC.**

 

**CREDIT FACILITIES**

 

May 29, 2009

 

LIST OF CLOSING DOCUMENTS(7)

 

A.            **LOAN DOCUMENTS**

 

1.                                       CreditAgreement (the “Credit Agreement”) by and among Ethan Allen Global, Inc.,a Delaware corporation (the “Borrower”), Ethan Allen Interiors Inc., aDelaware corporation (“Holdings”), the other Loan Parties party thereto,the financial institutions from time to time parties thereto as Lenders (the “Lenders”)and JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent foritself and the other Lenders (the “Administrative Agent”), evidencing arevolving credit facility to the Borrower from the Lenders in an initialaggregate principal amount of $40,000,000.

 

SCHEDULES

 
| Schedule 2.01       | —       | Commitments                           |
|---------------------|--------------|---------------------------------------|
| Schedule 2.06       | —       | Existing Letters of Credit            |
| ***Schedule 3.06*** | ***—*** | ***Disclosed Matters***               |
| ***Schedule 3.14*** | ***—*** | ***Insurance***                       |
| ***Schedule 3.15*** | ***—*** | ***Capitalization and Subsidiaries*** |
| ***Schedule 3.21*** | ***—*** | ***Credit Card Processors***          |
| ***Schedule 6.01*** | ***—*** | ***Existing Indebtedness***           |
| ***Schedule 6.02*** | ***—*** | ***Existing Liens***                  |
| ***Schedule 6.04*** | ***—*** | ***Existing Investments***            |
| ***Schedule 6.10*** | ***—*** | ***Existing Restrictions***           |

 

EXHIBITS

 
| Exhibit A | — | Form of Assignment and Assumption           |
|----------------|--------|--------------------------------------------------|
| Exhibit B | — | Forms of Opinions of Loan Parties’ Counsels |
| Exhibit C | — | Form of Borrowing Base Certificate          |
| Exhibit D | — | Form of Compliance Certificate              |
| Exhibit E | — | Joinder Agreement                                |
| Exhibit F | — | List of Closing Documents                        |

 

2.                                     Promissorynotes executed by the Borrower in favor of each of the Lenders, if any, whichhas requested a note pursuant to Section 2.10(f) of the CreditAgreement.

 

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(7) Each capitalized term used herein and notdefined herein shall have the meaning assigned to such term in theabove-defined Credit Agreement.  Itemsappearing in bold and italics shall be prepared and/or provided by the Borrowerand/or Borrower’s counsel.

 

----

 

3.                                       Pledge andSecurity Agreement executed by the Loan Parties, ***togetherwith pledged instruments and allonges, stock certificates, stock powersexecuted in blank, pledge instructions and acknowledgments, as appropriate***.

 
| ***Exhibit A*** | ***—*** | ***Type of Entity; Principal Place of Business or  Chief Executive Office; FEIN; State Organization Number; Jurisdiction of  Incorporation; Properties Leased by the Grantors; Properties Owned by the  Grantors; Public Warehouses or Other Locations*** |
|----------------------|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ***Exhibit B*** | ***—*** | ***Deposit Accounts; Lock Boxes; Securities Accounts***                                                                                                                                                                                                   |
| ***Exhibit C*** | ***—*** | ***Letter of Credit Rights; Chattel Paper***                                                                                                                                                                                                              |
| ***Exhibit D*** | ***—*** | ***Patents; Trademarks; Copyrights***                                                                                                                                                                                                                     |
| Exhibit E       | ***—*** | [Intentionally Omitted]                                                                                                                                                                                                                                   |
| Exhibit F       | ***—*** | [Intentionally Omitted]                                                                                                                                                                                                                                   |
| ***Exhibit G*** | ***—*** | ***List of Pledged Collateral, Securities and other  Investment Property***                                                                                                                                                                               |
| Exhibit H       | —       | UCC Financing Statement Filing Locations                                                                                                                                                                                                                  |
| Exhibit I       | —       | Form of Amendment                                                                                                                                                                                                                                    |
| Exhibit J       | ***—*** | [Intentionally Omitted]                                                                                                                                                                                                                                   |
| ***Exhibit K*** | ***—*** | ***Commercial Tort Claims***                                                                                                                                                                                                                              |

 

4.                                       ConfirmatoryGrant of Security Interest in United States Patents made by certain of the LoanParties in favor of the Administrative Agent for the benefit of the Lenders.(8)

 
| ***Schedule A*** | ***—*** | ***Registered Patents; Patent Applications; Other  Patents*** |
|------------------|--------------|---------------------------------------------------------------|
| ***Schedule B*** | ***—*** | ***License Agreements***                                      |

 

5.                                       ConfirmatoryGrant of Security Interest in United States Trademarks made by certain of theLoan Parties in favor of the Administrative Agent for the benefit of theLenders.(2)

 
| ***Schedule A*** | ***—*** | ***Registered Trademarks; Trademark and Service Mark  Applications; Other Trademarks*** |
|------------------|--------------|-----------------------------------------------------------------------------------------|
| ***Schedule B*** | ***—*** | ***License Agreements***                                                                |

 

6.                                       ***Certificatesof Insurance listing the Administrative Agent as (x) lender loss payee forthe property, casualty and business interruption insurance policies of the LoanParties, together with long-form lender loss payable endorsements orassignments, as appropriate, and (y) additional insured with respect tothe liability insurance of the Loan Parties, together with additional insuredendorsements.***

 

B.            **UCC/INTELLECTUAL PROPERTY DOCUMENTS**

 

7.                                       UCC, tax lienand name variation search reports naming each Loan Party from the appropriateoffices in relevant jurisdictions.

 

8.                                       UCC financingstatements naming each Loan Party as debtor and the Administrative Agent assecured party as filed with the appropriate offices in applicablejurisdictions.

 

9.                                       Intellectualproperty search reports under the name of each Loan Party in each of the U.S.Copyright Office and the U.S. Patent and Trademark Office.

 

----

(8) Executed copies of confirmatory grants tobe delivered by the Borrower (or its counsel) at closing, but shall be held inescrow until IP Collateral Trigger Date.

 

----

 

C.            **CORPORATE DOCUMENTS**

 

10.                                 ***Certificateof the Secretary or an Assistant Secretary of each Loan Party certifying (i) thatthere have been no changes in the Certificate of Incorporation or other charterdocument of such Loan Party, as attached thereto and as certified as of arecent date by the Secretary of State (or the equivalent thereof) of thejurisdiction of its organization, since the date of the certification thereofby such Secretary of State (or the equivalent thereof), (ii) the By-Lawsor other applicable organizational document, as attached thereto, of such LoanParty as in effect on the date of such certification, (iii) resolutions ofthe Board of Directors or other governing body of such Loan Party authorizingthe execution, delivery and performance of each Loan Document to which it is aparty, and (iv) the names and true signatures of the incumbent officers ofeach Loan Party authorized to sign the Loan Documents to which it is a party,and (in the case of the Borrower) authorized to request a Borrowing or theissuance of a Letter of Credit under the Credit Agreement.***

 

11.                                 ***GoodStanding Certificate (or analogous documentation if applicable) for each LoanParty from the Secretary of State (or the equivalent thereof) of thejurisdiction of its organization, to the extent generally available in suchjurisdiction.***

 

D.            **OPINIONS**

 

12.                                 ***Opinionof Kelley Drye and Warren LLP, counsel for the Loan Parties.***

 

13.                                 ***Opinionof Pamela A. Banks, General Counsel for the Loan Parties.***

 

E.             **CLOSING CERTIFICATES AND MISCELLANEOUS**

 

14.                                 ***Acertificate signed by the chief financial officer of Holdings, dated as of theEffective Date, stating: (i) that no Default has occurred and iscontinuing; (ii) that the representations and warranties contained in Article IIIof the Credit Agreement are true and correct as of such date, (iii) certifyingany other factual matters as may be reasonably requested by the AdministrativeAgent and (iv) that, after giving effect to the Transactions, the LoanParties, taken as a whole, are solvent and will be solvent subsequent toincurring the Indebtedness in connection with the Transactions.***

 

15.                                 Funding Accountnotice.

 

16.                                 Borrowing BaseCertificate.

 

17.                                 Letter ofCredit application.

 

F.             POST-CLOSINGDOCUMENTS

 

18.                                 ***CollateralAccess Agreements***.

 

19.                                 ***ProcessorControl Agreements***.

 

----

 

20.                                 ***DepositAccount Control Agreements, with respect to each deposit account of each LoanParty, in form and substance satisfactory to the Administrative Agent, executedby such Loan Party, the financial institution at which such deposit account ismaintained, and the Administrative Agent.***

 

21.                                 ***SecuritiesAccount Control Agreements, with respect to each securities account of eachLoan Party, in form and substance satisfactory to the Administrative Agent,executed by such Loan Party, the financial institution at which such securitiesaccount is maintained, and the Administrative Agent.***

 

----