Document:

Exhibit 10.1

 

SECOND
AMENDMENT

TO

AMENDED
AND RESTATED CREDIT AGREEMENT

 

This Second Amendment to
Amended and Restated Credit Agreement, dated as of July 9, 2010 (this “Amendment”),
is entered into by and among GOLFSMITH INTERNATIONAL, L.P., a Delaware limited
partnership (“GI”), GOLFSMITH NU, L.L.C., a Delaware limited liability
company (“GN”), GOLFSMITH USA, L.L.C. (“GUSA” and together with
GI and GN, the “Borrowers”, and each individually, a “Borrower”),
the other Credit Parties party hereto, and General Electric Capital
Corporation, a Delaware corporation, as a Lender and as Agent for the Lenders
party to the Credit Agreement (in such capacity, “Agent”).

 

RECITALS

 

WHEREAS, Borrowers, Agent
and Lenders are parties to that certain Amended and Restated Credit Agreement,
dated as of June 20, 2006 (as amended by the First Amendment thereto,
dated as of September 26, 2007, and as it may hereafter be further
amended, restated or otherwise modified, the “Credit Agreement”);

 

WHEREAS, Borrowers have
requested that Agent and Lenders agree to amend the Credit Agreement as and to
the extent set forth in this Amendment and Agent and Lenders are willing to do
so as and to the extent, and solely as and to the extent, and subject to the
terms and conditions set forth in this Amendment; and

 

WHEREAS, this Amendment
shall constitute a Loan Document and these Recitals shall be construed as part
of this Amendment.

 

NOW, THEREFORE, in
consideration of the premises and the mutual covenants hereinafter contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

 

1.               Definitions.  Except to the extent otherwise specified
herein, capitalized terms used in this Amendment shall have the same meanings
ascribed to them in the Credit Agreement, including Annex A thereto.

 

2.               Amended Credit Agreement.  Subject to the terms and conditions hereof,
and the occurrence of the Second Amendment Effective Date (as defined in the
amended Credit Agreement attached hereto as Exhibit A), the Credit
Agreement is  hereby amended as
reflected in Exhibit A attached hereto.

 

3.               Representations and
Warranties.

 

3.1 Each Borrower and each
other Credit Party hereby represents and warrants that the execution, delivery
and performance by it of this Amendment has been duly authorized by all
necessary corporate action and that this Amendment is a legal, valid and
binding obligation of it enforceable against it in accordance with its terms,
except as the enforcement hereof may be 

 

 

subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting creditors’
rights generally or to general principles of equity.

 

3.2 The execution, delivery
and performance of this Amendment by each Borrower and each other Credit Party
does not, and will not, contravene or conflict with any provision of (a) law,
(b) any judgment, decree or order, or (c) the certificate or articles
of incorporation or by-laws of any Borrower or any other Credit Party, and does
not, and will not, contravene or conflict with, or cause any Lien to arise
under, any provision of any agreement, mortgage, lease, instrument or other
document binding upon or otherwise affecting any Borrower or any other Credit
Party or any property of any Borrower or any other Credit Party or any
Subsidiary thereof.

 

3.3 Each Borrower and each
other Credit Party hereby certifies that all of the representations and
warranties contained in the Credit Agreement are true and correct in all material
respects on and as of the date hereof as if made on the date hereof (it being
understood and agreed that any representation or warranty which by its terms is
made as of a specified date shall be required to be true and correct only as of
such specified date) and that no Default or Event of Default exists under the
Credit Agreement or any other Loan Document or will exist after or be triggered
by the execution and delivery of this Amendment.

 

4. Conditions to Effectiveness.  The effectiveness of this Amendment is
expressly conditioned upon the satisfaction of the following conditions
precedent in a manner reasonably acceptable to Agent:

 

4.1 Amendment.  Agent’s receipt of counterparts of this
Amendment, duly executed by each Borrower, each other Credit Party, Agent and
Lenders.

 

4.2 No Default.  Both before and after giving effect to this
Amendment, no Default or Event of Default shall have occurred and be continuing
or would result from the effectiveness of this Amendment.

 

4.3 Amendment Fees.  The Borrowers shall have paid to Agent the
fees set forth in a separate agreement entered into among the Borrowers and
Agent.

 

4.4 Reaffirmation of
Collateral Documents.  Agent’s receipt of
a reaffirmation of each existing Collateral Document, duly executed by each Borrower,
each other Credit Party and Agent, in form and substance reasonably
satisfactory to Agent.

 

4.5 Certificates of
Formation and Good Standing For each Credit Party, Agent’s receipt of
(a) its articles or certificate of incorporation or certificate of
formation, as applicable, and all amendments thereto, (b) good standing
certificates (including verification of tax status) in its state of
incorporation or formation, as applicable, and (c) good standing
certificates (including verification of tax status) and certificates of
qualification to conduct business in each jurisdiction where its ownership or
lease of property or the conduct of its business requires such qualification,
each dated a recent date prior to the Second Amendment Effective Date and certified
by the applicable Secretary of State or other authorized Governmental
Authority.

 

4.6 By-laws and Resolutions For
each Credit Party, Agent’s receipt of (a) its by-laws or operating
agreement, as applicable, together with all amendments thereto and (b) resolutions
of 

 

2

 

such Person’s Board of Directors or Board of
Members, as applicable, approving and authorizing the execution, delivery and
performance of this Amendment and the transactions to be consummated in
connection herewith, each certified as of the Second Amendment Effective Date
by such Person’s secretary or an assistant secretary as being in full force and
effect without any modification or amendment.

 

4.7 Incumbency Certificates For
each Credit Party, Agent’s receipt of signature and incumbency certificates of
the officers of such Person executing this Amendment, certified as of the
Second Amendment Effective Date by such Person’s secretary or an assistant
secretary as being true, accurate, correct and complete.

 

5. Reference to and Effect Upon the Credit
Agreement and other Loan Documents.

 

5.1 Except as expressly set
forth herein, the Credit Agreement, the Notes and each other Loan Document
shall remain in full force and effect and each is hereby ratified and confirmed
by each Borrower and each of the other Credit Parties.

 

5.2 The execution, delivery
and effect of this Amendment shall be limited precisely as written and shall
not be deemed to (a) be a consent to any waiver of any term or condition
or an amendment or modification of any term or condition of the Credit
Agreement or any other Loan Document, except as expressly set forth herein or
in Exhibit A attached hereto, or (b) prejudice any right, power or
remedy which the Agent or any Lender now has or may have in the future under or
in connection with the Credit Agreement, the Notes or any other Loan Document.

 

6. Counterparts.  This Amendment may be executed in any number
of counterparts, each of which when so executed shall be deemed an original but
all such counterparts shall constitute one and the same instrument.  A counterpart signature page delivered
by fax or “pdf” transmission shall be as effective as delivery of an originally
executed counterpart.

 

7. GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK.

 

8. Costs and Expenses.  As provided in the Credit Agreement,
Borrowers shall promptly pay on demand all reasonable expenses, costs and other
fees (including attorneys’ fees of counsel for Agent) incurred by Agent in
connection with the documentation and negotiation of this Amendment and the
transactions contemplated hereunder.

 

9. Headings. 
Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

 

[SIGNATURE
PAGES FOLLOW]

 

3

 

IN WITNESS WHEREOF, this
Amendment has been duly executed as of the date first written above.

 

 

	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH INTERNATIONAL, L.P.

  
	
   

  	
  By: Golfsmith GP L.L.C.,
  as General Partner

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name: Sue E. Gove

  
	
   

  	
  Title:
  Executive Vice President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH NU, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name: Sue E. Gove

  
	
   

  	
  Title: Executive Vice
  President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH USA, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name: Sue E. Gove

  
	
   

  	
  Title: Executive Vice
  President, Chief Operating Officer and Chief Financial Officer

  

 

Signature Page to Second Amendment to Credit
Agreement

 

 

	
   

  	
  CREDIT PARTIES:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH
  INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name: Sue E. Gove

  
	
   

  	
  Title: Executive Vice
  President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH INTERNATIONAL
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name: Sue E. Gove

  
	
   

  	
  Title: Executive Vice
  President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH GP, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name: Sue E. Gove

  
	
   

  	
  Title: Executive Vice
  President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH DELAWARE, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Martin E. Hanaka

  
	
   

  	
  Name: Martin E. Hanaka

  
	
   

  	
  Title:
  Chairman and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH CANADA, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name: Sue E. Gove

  
	
   

  	
  Title: Executive Vice
  President, Chief Operating Officer and Chief Financial Officer

  

 

Signature Page to Second Amendment to Credit
Agreement

 

 

	
   

  	
  GOLFSMITH EUROPE, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name: Sue E. Gove

  
	
   

  	
  Title: Executive Vice
  President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH LICENSING, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name: Sue E. Gove

  
	
   

  	
  Title: Executive Vice
  President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH INCENTIVE SERVICES,
  L.L.C.

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name: Sue E. Gove

  
	
   

  	
  Title: Executive Vice
  President, Chief Operating Officer and Chief Financial Officer

  

 

Signature Page to Second Amendment to Credit Agreement

 

 

	
   

  	
  GENERAL ELECTRIC CAPITAL
  CORPORATION,

  
	
   

  	
  as Agent and Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Peter Foley

  
	
   

  	
  Name:
  Peter Foley

  
	
   

  	
  Its
  Duly Authorized Signatory

  

 

Signature Page to Second Amendment to Credit Agreement

 

 

EXHIBIT A TO SECOND AMENDMENT TO

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

	
   

  

 

 

AMENDED
AND RESTATED CREDIT AGREEMENT

 

DATED
AS OF June 20, 2006

 

by
and among

 

GOLFSMITH
INTERNATIONAL, L.P.,

 

GOLFSMITH
NU, L.L.C., and

 

GOLFSMITH
USA, L.L.C.

 

as
Borrowers

 

and

 

THE
OTHER PERSONS PARTY HERETO THAT ARE

 

DESIGNATED
AS CREDIT PARTIES

 

and

 

GENERAL
ELECTRIC CAPITAL CORPORATION

 

as
Agent, L/C Issuer and a Lender

 

and

 

THE
OTHER FINANCIAL INSTITUTIONS PARTY HERETO

 

and

 

GE
CAPITAL MARKETS, INC., 

as Sole Lead Arranger and Bookrunner

 

	
   

  

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section
  1.

  	
  AMOUNTS
  AND TERMS OF LOANS

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1.

  	
  Loans

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.2.

  	
  Interest
  and Applicable Margins

  	
  7

  
	
   

  	
   

  	
   

  
	
  1.3.

  	
  Fees

  	
  10

  
	
   

  	
   

  	
   

  
	
  1.4.

  	
  Payments

  	
  11

  
	
   

  	
   

  	
   

  
	
  1.5.

  	
  Prepayments

  	
  12

  
	
   

  	
   

  	
   

  
	
  1.6.

  	
  Maturity

  	
  12

  
	
   

  	
   

  	
   

  
	
  1.7.

  	
  Eligible
  Accounts

  	
  13

  
	
   

  	
   

  	
   

  
	
  1.8.

  	
  Eligible
  Inventory

  	
  15

  
	
   

  	
   

  	
   

  
	
  1.9.

  	
  Loan
  Accounts

  	
  16

  
	
   

  	
   

  	
   

  
	
  1.10.

  	
  Yield
  Protection; Illegality

  	
  16

  
	
   

  	
   

  	
   

  
	
  1.11.

  	
  Taxes

  	
  17

  
	
   

  	
   

  	
   

  
	
  1.12.

  	
  (Intentionally
  Omitted)

  	
  19

  
	
   

  	
   

  	
   

  
	
  1.13.

  	
  Borrower
  Representative

  	
  19

  
	
   

  	
   

  	
   

  
	
  1.14.

  	
  Credit
  Card Collections

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section
  2.

  	
  AFFIRMATIVE
  COVENANTS

  	
  20

  
	
   

  	
   

  	
   

  
	
  2.1.

  	
  Compliance
  With Laws and Contractual Obligations

  	
  20

  
	
   

  	
   

  	
   

  
	
  2.2.

  	
  Insurance;
  Damage to or Destruction of Collateral

  	
  21

  
	
   

  	
   

  	
   

  
	
  2.3.

  	
  Inspection;
  Lender Meeting

  	
  22

  
	
   

  	
   

  	
   

  
	
  2.4.

  	
  Organizational
  Existence

  	
  22

  
	
   

  	
   

  	
   

  
	
  2.5.

  	
  Environmental
  Matters

  	
  22

  
	
   

  	
   

  	
   

  
	
  2.6.

  	
  Landlords’
  Agreements, Mortgagee Agreements, Bailee Letters and Real Estate Purchases

  	
  23

  
	
   

  	
   

  	
   

  
	
  2.7.

  	
  Conduct
  of Business

  	
  23

  
	
   

  	
   

  	
   

  
	
  2.8.

  	
  Further
  Assurances

  	
  23

  
	
   

  	
   

  	
   

  
	
  2.9.

  	
  (Intentionally
  Omitted)

  	
  19

  
	
   

  	
   

  	
   

  
	
  2.10.

  	
  Cash
  Management Systems

  	
  24

  
	
   

  	
   

  	
   

  
	
  Section
  3.

  	
  NEGATIVE
  COVENANTS

  	
  24

  
	
   

  	
   

  	
   

  
	
  3.1.

  	
  Indebtedness

  	
  24

  
	
   

  	
   

  	
   

  
	
  3.2.

  	
  Liens and
  Related Matters

  	
  25

  
	
   

  	
   

  	
   

  
	
  3.3.

  	
  Investments

  	
  26

  
	
   

  	
   

  	
   

  
	
  3.4.

  	
  Contingent
  Obligations

  	
  27

  
	
   

  	
   

  	
   

  
	
  3.5.

  	
  Restricted
  Payments

  	
  28

  

 

i

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  3.6.

  	
  Restriction
  on Fundamental Changes

  	
  29

  
	
   

  	
   

  	
   

  
	
  3.7.

  	
  Disposal
  of Assets or Subsidiary Stock

  	
  29

  
	
   

  	
   

  	
   

  
	
  3.8.

  	
  Transactions
  with Affiliates

  	
  30

  
	
   

  	
   

  	
   

  
	
  3.9.

  	
  Conduct
  of Business

  	
  30

  
	
   

  	
   

  	
   

  
	
  3.10.

  	
  Changes
  Relating to Indebtedness

  	
  30

  
	
   

  	
   

  	
   

  
	
  3.11.

  	
  Fiscal
  Year

  	
  30

  
	
   

  	
   

  	
   

  
	
  3.12.

  	
  Press
  Release; Public Offering Materials

  	
  30

  
	
   

  	
   

  	
   

  
	
  3.13.

  	
  Subsidiaries

  	
  31

  
	
   

  	
   

  	
   

  
	
  3.14.

  	
  Bank
  Accounts

  	
  31

  
	
   

  	
   

  	
   

  
	
  3.15.

  	
  Hazardous
  Materials

  	
  31

  
	
   

  	
   

  	
   

  
	
  3.16.

  	
  ERISA

  	
  31

  
	
   

  	
   

  	
   

  
	
  3.17.

  	
  (Intentionally
  Omitted)

  	
  31

  
	
   

  	
   

  	
   

  
	
  3.18.

  	
  Prepayments
  of Other Indebtedness

  	
  31

  
	
   

  	
   

  	
   

  
	
  3.19.

  	
  Changes
  to Material Contracts

  	
  32

  
	
   

  	
   

  	
   

  
	
  Section
  4.

  	
  FINANCIAL
  REPORTING

  	
  32

  
	
   

  	
   

  	
   

  
	
  4.1.

  	
  Financial
  Statements and Other Reports

  	
  32

  
	
   

  	
   

  	
   

  
	
  4.2.

  	
  Accounting
  Terms; Utilization of GAAP for Purposes of Calculations Under Agreement

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section
  5.

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  36

  
	
   

  	
   

  	
   

  
	
  5.1.

  	
  Disclosure

  	
  36

  
	
   

  	
   

  	
   

  
	
  5.2.

  	
  No
  Material Adverse Effect

  	
  36

  
	
   

  	
   

  	
   

  
	
  5.3.

  	
  No
  Conflict

  	
  36

  
	
   

  	
   

  	
   

  
	
  5.4.

  	
  Organization,
  Powers, Capitalization and Good Standing

  	
  36

  
	
   

  	
   

  	
   

  
	
  5.5.

  	
  Financial
  Statements and Projections

  	
  37

  
	
   

  	
   

  	
   

  
	
  5.6.

  	
  Intellectual
  Property

  	
  37

  
	
   

  	
   

  	
   

  
	
  5.7.

  	
  Investigations,
  Audits, Etc.

  	
  38

  
	
   

  	
   

  	
   

  
	
  5.8.

  	
  Employee
  Matters

  	
  38

  
	
   

  	
   

  	
   

  
	
  5.9.

  	
  Solvency

  	
  38

  
	
   

  	
   

  	
   

  
	
  5.10.

  	
  Litigation;
  Adverse Facts

  	
  38

  
	
   

  	
   

  	
   

  
	
  5.11.

  	
  Use of
  Proceeds; Margin Regulations

  	
  38

  
	
   

  	
   

  	
   

  
	
  5.12.

  	
  Ownership
  of Property; Liens

  	
  38

  
	
   

  	
   

  	
   

  
	
  5.13.

  	
  Environmental
  Matters

  	
  39

  
	
   

  	
   

  	
   

  
	
  5.14.

  	
  ERISA

  	
  39

  

 

ii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  5.15.

  	
  Brokers

  	
  40

  
	
   

  	
   

  	
   

  
	
  5.16.

  	
  Deposit
  and Disbursement Accounts

  	
  40

  
	
   

  	
   

  	
   

  
	
  5.17.

  	
  Agreements
  and Other Documents

  	
  40

  
	
   

  	
   

  	
   

  
	
  5.18.

  	
  Insurance

  	
  41

  
	
   

  	
   

  	
   

  
	
  5.19.

  	
  Acquisition
  Agreement

  	
  36

  
	
   

  	
   

  	
   

  
	
  Section
  6.

  	
  DEFAULT,
  RIGHTS AND REMEDIES

  	
  41

  
	
   

  	
   

  	
   

  
	
  6.1.

  	
  Event of
  Default

  	
  41

  
	
   

  	
   

  	
   

  
	
  6.2.

  	
  Suspension
  or Termination of Commitments

  	
  43

  
	
   

  	
   

  	
   

  
	
  6.3.

  	
  Acceleration
  and other Remedies

  	
  43

  
	
   

  	
   

  	
   

  
	
  6.4.

  	
  Performance
  by Agent

  	
  43

  
	
   

  	
   

  	
   

  
	
  6.5.

  	
  Application
  of Proceeds

  	
  44

  
	
   

  	
   

  	
   

  
	
  Section
  7.

  	
  CONDITIONS
  TO LOANS

  	
  44

  
	
   

  	
   

  	
   

  
	
  7.1.

  	
  Conditions
  to Initial Loans

  	
  44

  
	
   

  	
   

  	
   

  
	
  7.2.

  	
  Conditions
  to All Loans

  	
  45

  
	
   

  	
   

  	
   

  
	
  Section
  8.

  	
  ASSIGNMENT
  AND PARTICIPATION

  	
  46

  
	
   

  	
   

  	
   

  
	
  8.1.

  	
  Assignment
  and Participations

  	
  46

  
	
   

  	
   

  	
   

  
	
  8.2.

  	
  Agent

  	
  48

  
	
   

  	
   

  	
   

  
	
  8.3.

  	
  Set Off
  and Sharing of Payments

  	
  52

  
	
   

  	
   

  	
   

  
	
  8.4.

  	
  Disbursement
  of Funds

  	
  52

  
	
   

  	
   

  	
   

  
	
  8.5.

  	
  Disbursements
  of Advances; Payment

  	
  53

  
	
   

  	
   

  	
   

  
	
  Section
  9.

  	
  MISCELLANEOUS

  	
  55

  
	
   

  	
   

  	
   

  
	
  9.1.

  	
  Indemnities

  	
  55

  
	
   

  	
   

  	
   

  
	
  9.2.

  	
  Amendments
  and Waivers

  	
  55

  
	
   

  	
   

  	
   

  
	
  9.3.

  	
  Notices

  	
  56

  
	
   

  	
   

  	
   

  
	
  9.4.

  	
  Failure
  or Indulgence Not Waiver; Remedies Cumulative

  	
  58

  
	
   

  	
   

  	
   

  
	
  9.5.

  	
  Marshaling;
  Payments Set Aside

  	
  58

  
	
   

  	
   

  	
   

  
	
  9.6.

  	
  Severability

  	
  59

  
	
   

  	
   

  	
   

  
	
  9.7.

  	
  Lenders’
  Obligations Several; Independent Nature of Lenders’ Rights

  	
  59

  
	
   

  	
   

  	
   

  
	
  9.8.

  	
  Headings

  	
  59

  
	
   

  	
   

  	
   

  
	
  9.9.

  	
  Applicable
  Law

  	
  59

  
	
   

  	
   

  	
   

  
	
  9.10.

  	
  Successors
  and Assigns

  	
  59

  
	
   

  	
   

  	
   

  
	
  9.11.

  	
  No
  Fiduciary Relationship; Limited Liability

  	
  59

  

 

iii

 

TABLE OF CONTENTS

(continued)

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  9.12.

  	
  Construction

  	
  59

  
	
   

  	
   

  	
   

  
	
  9.13.

  	
  Confidentiality

  	
  59

  
	
   

  	
   

  	
   

  
	
  9.14.

  	
  CONSENT
  TO JURISDICTION

  	
  60

  
	
   

  	
   

  	
   

  
	
  9.15.

  	
  WAIVER OF
  JURY TRIAL

  	
  60

  
	
   

  	
   

  	
   

  
	
  9.16.

  	
  Survival
  of Warranties and Certain Agreements

  	
  61

  
	
   

  	
   

  	
   

  
	
  9.17.

  	
  Entire
  Agreement

  	
  61

  
	
   

  	
   

  	
   

  
	
  9.18.

  	
  Counterparts;
  Effectiveness

  	
  61

  
	
   

  	
   

  	
   

  
	
  9.19.

  	
  Replacement
  of Lenders

  	
  61

  
	
   

  	
   

  	
   

  
	
  9.20.

  	
  Delivery
  of Termination Statements

  	
  62

  
	
   

  	
   

  	
   

  
	
  9.21.

  	
  Amendment and Restatement

  	
  62

  
	
   

  	
   

  	
   

  
	
  Section
  10.

  	
  CROSS-GUARANTY

  	
  63

  
	
   

  	
   

  	
   

  
	
  10.1.

  	
  Cross-Guaranty

  	
  63

  
	
   

  	
   

  	
   

  
	
  10.2.

  	
  Waivers
  by Borrowers

  	
  63

  
	
   

  	
   

  	
   

  
	
  10.3.

  	
  Benefit
  of Guaranty

  	
  64

  
	
   

  	
   

  	
   

  
	
  10.4.

  	
  Waiver of
  Subrogation, Etc.

  	
  64

  
	
   

  	
   

  	
   

  
	
  10.5.

  	
  Election
  of Remedies

  	
  64

  
	
   

  	
   

  	
   

  
	
  10.6.

  	
  Limitation

  	
  64

  
	
   

  	
   

  	
   

  
	
  10.7.

  	
  Contribution
  with Respect to Guaranty Obligations

  	
  65

  
	
   

  	
   

  	
   

  
	
  10.8.

  	
  Liability
  Cumulative

  	
  65

  

 

iv

 

INDEX OF APPENDICES

 

	
  Annexes

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annex A

  	
   

  	
  -

  	
   

  	
  Definitions

  
	
  Annex B

  	
   

  	
  -

  	
   

  	
  Pro Rata Shares and
  Commitment Amounts

  
	
  Annex C

  	
   

  	
  -

  	
   

  	
  Closing Checklist

  
	
  Annex D

  	
   

  	
  -

  	
   

  	
  Intentionally Omitted

  
	
  Annex E

  	
   

  	
  -

  	
   

  	
  Lenders’ Wire Transfer
  Information

  
	
  Annex F

  	
   

  	
  -

  	
   

  	
  Cash Management Systems

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibits

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit 1.1(a)(i)

  	
   

  	
  -

  	
   

  	
  Revolving Note

  
	
  Exhibit 1.1(a)(ii)

  	
   

  	
  -

  	
   

  	
  Notice of Revolving Credit
  Advance

  
	
  Exhibit 1.1(c)

  	
   

  	
  -

  	
   

  	
  Swing Line Note

  
	
  Exhibit 1.2(e)

  	
   

  	
  -

  	
   

  	
  Notice of
  Continuation/Conversion

  
	
  Exhibit 1.11(c)

  	
   

  	
  -

  	
   

  	
  Form of Non-Bank
  Certificate

  
	
  Exhibit 4.1(d)

  	
   

  	
  -

  	
   

  	
  Borrowing Base Certificate

  
	
  Exhibit 4.1(k)

  	
   

  	
  -

  	
   

  	
  Compliance Certificate

  
	
  Exhibit 8.1

  	
   

  	
  -

  	
   

  	
  Assignment Agreement

  
	
  Exhibit A1

  	
   

  	
  -

  	
   

  	
  Master Documentary
  Agreement

  
	
  Exhibit A2

  	
   

  	
  -

  	
   

  	
  Master Standby Agreement

  
	
  Exhibit A3

  	
   

  	
  -

  	
   

  	
  Intercompany Subordination
  Agreement

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedules

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule 1.14

  	
   

  	
  -

  	
   

  	
  Credit Card Collections

  
	
  Schedule 2.7

  	
   

  	
  -

  	
   

  	
  Corporate and Trade Names

  
	
  Schedule 3.2

  	
   

  	
  -

  	
   

  	
  Liens

  
	
  Schedule 3.3

  	
   

  	
  -

  	
   

  	
  Investments

  
	
  Schedule 3.4

  	
   

  	
  -

  	
   

  	
  Contingent Obligations

  
	
  Schedule 3.8

  	
   

  	
  -

  	
   

  	
  Affiliate Transactions

  
	
  Schedule 3.9

  	
   

  	
  -

  	
   

  	
  Business Description

  
	
  Schedule 5.4(a)

  	
   

  	
  -

  	
   

  	
  Jurisdictions of
  Organization and Qualifications

  
	
  Schedule 5.4(b)

  	
   

  	
  -

  	
   

  	
  Capitalization

  
	
  Schedule 5.6

  	
   

  	
  -

  	
   

  	
  Intellectual Property

  
	
  Schedule 5.7

  	
   

  	
  -

  	
   

  	
  Investigations and Audits

  
	
  Schedule 5.8

  	
   

  	
  -

  	
   

  	
  Employee Matters

  
	
  Schedule 5.10

  	
   

  	
  -

  	
   

  	
  Litigation

  
	
  Schedule 5.11

  	
   

  	
  -

  	
   

  	
  Use of Proceeds

  
	
  Schedule 5.12

  	
   

  	
  -

  	
   

  	
  Real Estate

  
	
  Schedule 5.13

  	
   

  	
  -

  	
   

  	
  Environmental Matters

  
	
  Schedule 5.14

  	
   

  	
  -

  	
   

  	
  ERISA

  
	
  Schedule 5.16

  	
   

  	
  -

  	
   

  	
  Deposit and Disbursement
  Accounts

  
	
  Schedule 5.17

  	
   

  	
  -

  	
   

  	
  Agreements and Other
  Documents

  
	
  Schedule 5.18

  	
   

  	
  -

  	
   

  	
  Insurance

  

 

v

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

This AMENDED AND RESTATED
CREDIT AGREEMENT is dated as of June 20, 2006 and entered into by and among
GOLFSMITH INTERNATIONAL, L.P., a Delaware limited partnership (“LP”),
GOLFSMITH NU, L.L.C., a Delaware limited liability company (“NU”),
GOLFSMITH USA, L.L.C., a Delaware limited liability company (“USA”) (LP, NU and USA are sometimes referred
to herein as “Borrowers” and individually as a “Borrower”), the
other persons designated as “Credit Parties” on the signature pages hereof, the
financial institutions who are or hereafter become parties to this Agreement as
Lenders, GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation  (in its individual capacity “GE Capital”),
as a Lender, as the initial L/C Issuer and as Agent and GE CAPITAL MARKETS,
INC., as Sole Lead Arranger and Bookrunner (“GECM”).

 

R  E  C  I  T  A  L
S:

 

WHEREAS, Borrowers desire
that Lenders extend a revolving credit facility to Borrowers to retire certain
senior secured notes, to fund certain fees and expenses in connection therewith
and the entering into of this Agreement and to fund working capital and general
corporate purposes of Borrowers; and

 

WHEREAS, Borrowers desire to
secure all of their Obligations under the Loan Documents by granting to Agent,
for the benefit of Agent and Lenders, a security interest in and lien upon
substantially all of their existing and after-acquired real and personal
property; and

 

WHEREAS, Golfsmith
International Holdings, Inc., a Delaware corporation (“Holdings”), that
indirectly owns all of the Stock of Borrowers is willing to guaranty all of the
Obligations and to pledge to Agent, for the benefit of Agent and Lenders, as
security for the Obligations, all of the Stock of Golfsmith International, Inc.
(“GII”), a Delaware corporation, which either directly or indirectly owns all
of the Stock of Borrowers and GII’s other Subsidiaries; and

 

WHEREAS, each of GII, GII’s
Subsidiaries other than Borrowers and Borrowers’ Subsidiaries is willing to
guaranty all of the Obligations of Borrowers and to grant to Agent, for the
benefit of Agent and Lenders, as security for the Obligations, a security
interest in and lien upon substantially all of its existing and after acquired
real and personal property; and

 

WHEREAS, all capitalized
terms herein shall have the meanings ascribed thereto in Annex A hereto
which is incorporated herein by reference.

 

NOW, THEREFORE, in
consideration of the premises and the agreements, provisions and covenants
herein contained, Borrowers, Credit Parties, Lenders and Agent agree as
follows:

 

SECTION 1.

 

AMOUNTS AND TERMS OF LOANS

 

1.1.          Loans.  Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Borrowers
and the other Credit Parties contained herein:

 

 

(a)           Revolving Loans.

 

(i)            Each Revolving
Lender agrees, severally and not jointly, to make available to Borrowers from
time to time from the Closing Date until the Commitment Termination Date its
Pro Rata Share of advances (each a “Revolving Credit Advance”) requested
by Borrower Representative on behalf of the Borrowers hereunder; provided
that no Revolving Credit Advance shall be made in an amount less than $250,000.  The Pro Rata Share of the Revolving Loan of
any Revolving Lender (including, without duplication, Swing Line Loans) shall
not at any time exceed its separate Revolving Loan Commitment.  Revolving Credit Advances may be repaid and
reborrowed; provided that the amount of any Revolving Credit Advance to be made
at any time shall not exceed Borrowing Availability.  Borrowing Availability may be further reduced
by Reserves imposed by Agent after notice to Borrowers in its reasonable credit
judgment.  All Revolving Loans shall be
repaid in full on the Commitment Termination Date.  Each Borrower shall execute and deliver to
each Revolving Lender a promissory note to evidence the Revolving Loan
Commitment of that Revolving Lender. 
Each promissory note shall be in the principal amount of the Revolving
Loan Commitment of the applicable Revolving Lender, dated the Closing Date and
substantially in the form of Exhibit 1.1(a)(i) (each a “Revolving
Note” and, collectively, the “Revolving Notes”).  Other than pursuant to Section 1.1(a)(ii),
if at any time the outstanding Revolving Loans (including Swingline Loans)
exceed the Borrowing Base (any such excess Revolving Loans are herein referred
to collectively as “Overadvances”), Lenders shall not be obligated to
make Revolving Credit Advances, no additional Letters of Credit shall be issued
and, except as provided in Section 1.1(a)(ii) below, Revolving Loans
must be repaid immediately and Letters of Credit cash collateralized in an
amount sufficient to eliminate any Overadvances.  All Overadvances shall constitute Index Rate
Loans and shall bear interest at the Default Rate.  Revolving Loans which are Index Rate Loans
may be requested in any amount with one (1) Business Day prior written notice
required for funding requests equal to or greater than $5,000,000.  For funding requests for such Loans less than
$5,000,000, written notice must be provided by 1:00 p.m. (New York time) on the
Business Day on which the Loan is to be made. 
All LIBOR Loans require three (3) Business Days prior written notice.
Written notices for funding requests shall be in the form attached as Exhibit
1.1(a)(ii) (“Notice of Revolving Credit Advance”).

 

(ii)           If Borrower
Representative on behalf of Borrowers requests that Revolving Lenders make, or permit
to remain outstanding any Overadvances, Agent may, in its sole discretion,
elect to make, or permit to remain outstanding such Overadvances; provided,
however, that Agent may not cause Revolving Lenders to make, or permit
to remain outstanding, (a) aggregate Revolving Loans in excess of the Maximum
Amount or (b) Overadvances in an aggregate amount in excess of 5% of the
Revolving Loan Commitment.  If an
Overadvance is made, or permitted to remain outstanding, pursuant to the
preceding sentence, then all Revolving Lenders shall be bound to make, or
permit to remain outstanding such Overadvance based upon their Pro Rata Shares
of the Revolving Loan Commitments in accordance with the terms of this
Agreement.  If an Overadvance remains
outstanding for more than ninety (90) days during any one hundred eighty (180)
day period, Revolving Loans must be repaid immediately in an amount sufficient
to eliminate all of such Overadvances. 
Furthermore, holders of a majority of the Revolving Loan Commitment may
prospectively revoke Agent’s ability to make or permit Overadvances by written
notice to Agent.  Any Overadvance may be
made as a Swing Line Advance.

 

(b)           [Intentionally Omitted].

 

2

 

(c)           Swing Line Facility.

 

(i)            Agent shall notify
the Swing Line Lender upon Agent’s receipt of any Notice of Revolving Credit
Advance.  Subject to the terms and
conditions hereof, the Swing Line Lender may, in its discretion, make available
from time to time from the Closing Date until the Termination Date advances
(each, a “Swing Line Advance”) in accordance with any such notice. The
provisions of this Section 1.1(c) shall not relieve Revolving Lenders of
their obligations to make Revolving Credit Advances under Section 1.1(a);
provided that if the Swing Line Lender makes a Swing Line Advance
pursuant to any such notice, such Swing Line Advance shall be in lieu of any
Revolving Credit Advance that otherwise may be made by Revolving Lenders
pursuant to such notice.  The aggregate
amount of Swing Line Advances outstanding shall not exceed at any time the
lesser of (A) the Swing Line Commitment and (B) the lesser of the Maximum
Amount and (except for Overadvances) the Borrowing Base, in each case, less the
outstanding balance of the Revolving Loan at such time (“Swing Line
Availability”); provided, that, the amount of any Swing Line Advance to be
made at any time shall not exceed Borrowing Availability.  Until the Termination Date, Borrowers may
from time to time borrow, repay and reborrow under this Section 1.1(c).  Each Swing Line Advance shall be made
pursuant to a Notice of Revolving Credit Advance delivered to Agent by Borrower
Representative on behalf of the applicable Borrower in accordance with Section
1.1(a).  Any such notice must be
given no later than 1:00 p.m. (New York time) on the Business Day of the
proposed Swing Line Advance.  Unless the
Swing Line Lender has received at least one Business Day’s prior written notice
from Requisite Lenders instructing it not to make a Swing Line Advance, the
Swing Line Lender shall, notwithstanding the failure of any condition precedent
set forth in Sections 7.2, be entitled to fund that Swing Line Advance,
and to have each Revolving Lender make Revolving Credit Advances in accordance
with Section 1.1(c)(iii) or purchase participating interests in
accordance with Section 1.1(c)(iv). 
Notwithstanding any other provision of this Agreement or the other Loan
Documents, the Swing Line Loan shall constitute an Index Rate Loan.  Borrowers shall repay the aggregate
outstanding principal amount of the Swing Line Loan upon demand therefor by
Agent.

 

(ii)           Borrowers shall
execute and deliver to the Swing Line Lender a promissory note to evidence the
Swing Line Commitment.  This note shall
be in the principal amount of the Swing Line Commitment of the Swing Line
Lender, dated the Closing Date and substantially in the form of Exhibit
1.1(c) (the “Swing Line Note”). Each Swing Line Note shall represent
the obligation of Borrowers to pay the amount of the Swing Line Commitment or,
if less, the aggregate unpaid principal amount of all Swing Line Advances made
to Borrowers together with interest thereon as prescribed in Section 1.5.  The entire unpaid balance of the Swing Line
Loan and all other noncontingent Obligations shall be immediately due and
payable in full in immediately available funds on the Termination Date if not
sooner paid in full.

 

(iii)          If no Revolving Lender is a Non-Funding
Lender, the Swing Line Lender, at any time and from time to time no less
frequently than once weekly shall on behalf of any Borrower (and each Borrower
hereby irrevocably authorizes the Swing Line Lender to so act on its behalf)
request each Revolving Lender (including the Swing Line Lender) to make a
Revolving Credit Advance to each Borrower (which shall be an Index Rate Loan)
in an amount equal to that Revolving Lender’s Pro Rata Share of the principal
amount of the applicable Borrower’s Swing Line Loan (the “Refunded Swing
Line Loan”) outstanding on the date such notice is given.  Unless any of the events described in Sections
6.1(f) or 6.1(g) has occurred (in which event the procedures of Section
1.1(c)(iv) shall apply) and regardless of whether the conditions precedent
set forth in this Agreement to the making of a Revolving Credit Advance are
then satisfied, each Revolving Lender shall disburse directly to Agent, its Pro
Rata Share of a Revolving Credit Advance on behalf of the Swing Line Lender
prior to 3:00 p.m. (New York time) in immediately available funds on the Business
Day next succeeding the date that notice is given.  The proceeds of those Revolving Credit
Advances shall be immediately paid to the Swing Line Lender and applied to
repay the Refunded Swing Line Loan of the applicable Borrower.  If
any Revolving Lender is a Non-Funding Lender, that Non-Funding Lender’s
reimbursement obligations with respect to the Swing Line Loans shall be
allocated to and assumed by the other Revolving Lenders pro rata in 

 

3

 

accordance with their Pro Rata Share (calculated as
if the Non-Funding Lender’s Pro Rata Share was reduced to zero and each other
Revolving Lender’s Pro Rata Share had been increased proportionately).  If any Revolving Lender is a Non-Funding
Lender, upon receipt of the request described above, each Revolving Lender that
is not a Non-Funding Lender will be obligated to disburse to Agent its Pro Rata
Share (calculated as if the Non-Funding Lender’s Pro Rata Share was reduced to
zero and each other Revolving Lender’s Pro Rata Share had been increased
proportionately) of the Refunded Swing Line Loan; provided that no Revolving
Lender shall be required to fund any amount which would result in the sum of
its outstanding Revolving Loans, outstanding Letter of Credit Obligations
(increased as described in Section 1.1(d)(ii)), the amount of its participation
in Swing Line Loans and its pro rata share of unparticipated amounts in Swing
Line Loans (increased as described above) to exceed its Revolving Loan
Commitment.

 

(iv)          If, prior to
refunding a Swing Line Loan with a Revolving Credit Advance pursuant to Section
1.1(c)(iii), one of the events described in Sections 6.1(f) or 6.1(g)  has occurred, then, subject to the provisions
of Section 1.1(c)(v) below, each Revolving Lender shall, on the date
such Revolving Credit Advance was to have been made for the benefit of the
applicable Borrower, purchase from the Swing Line Lender an undivided
participation interest in the Swing Line Loan to such Borrower in an amount
equal to its Pro Rata Share of such Swing Line Loan.  Upon request, each Revolving Lender shall
promptly transfer to the Swing Line Lender, in immediately available funds, the
amount of its participation interest.

 

(v)           Each Revolving
Lender’s obligation to make Revolving Credit Advances in accordance with Section 1.1(c)(iii)
and to purchase participation interests in accordance with Section
1.1(c)(iv) shall be absolute and unconditional and shall not be affected by
any circumstance, including (A) any setoff, counterclaim, recoupment, defense
or other right that such Revolving Lender may have against the Swing Line
Lender, any Borrower or any other Person for any reason whatsoever; (B) the
occurrence or continuance of any Default or Event of Default; (C) any inability
of any Borrower to satisfy the conditions precedent to borrowing set forth in
this Agreement at any time or (D) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.  If any Revolving Lender does not make
available to Agent or the Swing Line Lender, as applicable, the amount required
pursuant to Sections 1.1(c)(iii) or 1.1(c)(iv), as the case may
be, the Swing Line Lender shall be entitled to recover such amount on demand
from such Revolving Lender, together with interest thereon for each day from
the date of non-payment until such amount is paid in full at the Federal Funds
Rate for the first two Business Days and at the Index Rate thereafter.

 

(d)           Letters of Credit.  The Revolving Loan Commitment may, in
addition to advances under the Revolving Loan, be utilized, upon the request of
Borrower Representative on behalf of the applicable Borrower, for the issuance
of Letters of Credit.  Immediately upon
the issuance by an L/C Issuer of a Letter of Credit, and without further action
on the part of Agent or any of the Lenders, each Revolving Lender shall be
deemed to have purchased from such L/C Issuer a participation in such Letter of
Credit (or in its obligation under a risk participation agreement with respect
thereto) equal to such Revolving Lender’s Pro Rata Share of the aggregate
amount available to be drawn under such Letter of Credit.  Issuance of Letters of Credit shall be
subject to the limits of Section 1.1(a).  Furthermore, GE Capital as an
L/C Issuer may elect only to issue Letters of Credit in its own name and may
only issue Letters of Credit to the extent permitted by requirements of all
applicable laws, rules, regulations and orders of any Governmental Authority,
and such Letters of Credit may not be accepted by certain beneficiaries such as
insurance companies.  If (i) any Lender
is a Non-Funding Lender or Agent determines that any of the Lenders is an
Impacted Lender and (ii) the reallocation of that Non-Funding Lender’s or
Impacted Lender’s Letter of Credit Obligations to the other Revolving Lenders
would reasonably be expected to cause the Letter of Credit Obligations and 

 

4

 

Revolving
Loans of any Lender to exceed its Revolving Loan Commitment, taking into account
the amount of outstanding Revolving Loans and expected advances of Revolving
Loans as determined by Agent, then no Letters of Credit may be issued or
renewed unless the Non-Funding Lender or Impacted Lender has been replaced, the
Letter of Credit Obligations of that Non-Funding Lender or Impacted Lender have
been cash collateralized, or the Revolving Loan Commitments of the other
Lenders have been increased by an amount sufficient to satisfy Agent that all
future Letter of Credit Obligations will be covered by all Revolving Lenders
who are not Non-Funding Lenders or Impacted Lenders.

 

(i)            Maximum Amount.  The aggregate amount of Letter of Credit
Obligations with respect to all Letters of Credit outstanding at any time shall
not exceed $5,000,000 (“L/C Sublimit”).

 

(ii)           Reimbursement.  Borrowers shall be irrevocably and
unconditionally obligated forthwith without presentment, demand, protest or
other formalities of any kind (including for purposes of Section 10), to
reimburse any L/C Issuer on demand in immediately available funds for any
amounts paid by such L/C Issuer with respect to a Letter of Credit, including
all reimbursement payments, Fees, Charges, costs and expenses paid by such L/C
Issuer.  Borrowers hereby authorize and
direct Agent, at Agent’s option, to debit Borrowers’ account (by increasing the
outstanding principal balance of the Revolving Credit Advances or Swing Line
Advances made to Borrower) in the amount of any payment made by an L/C Issuer
with respect to any Letter of Credit. 
All amounts paid by an L/C Issuer with respect to any Letter of Credit
that are not repaid on the same Business Day by Borrowers with the proceeds of
a Revolving Credit Advance, Swing Line Advance or otherwise shall bear interest
at the interest rate applicable to Revolving Loans which are Index Rate Loans
plus, if such amounts are not paid within one (1) Business Day after such
demand, at the election of Agent or Requisite Revolving Lenders, an additional
two percent (2.00%) per annum.  Each
Revolving Lender agrees to fund its Pro Rata Share of any Revolving Loan made
pursuant to this Section 1.1(d)(ii). 
In the event Agent elects not to debit Borrowers’ account and Borrowers
fail to reimburse the L/C Issuer in full on the date of any payment in respect
of a Letter of Credit, Agent shall promptly notify each Revolving Lender of the
amount of such unreimbursed payment and the accrued interest thereon and, if no Revolving Lender is a Non-Funding
Lender (or if the only Non-Funding Lender is the L/C Issuer that issued such
Letter of Credit), each Revolving Lender, on the next Business Day prior
to 3:00 p.m. (New York time), shall deliver to Agent an amount equal to its Pro
Rata Share thereof in same day funds.  If any Revolving Lender (other than the
Revolving Lender that is also the L/C Issuer that issued such Letter of Credit)
is a Non-Funding Lender, that Non-Funding Lender’s Letter of Credit Obligations
shall be reallocated to and assumed by the other Revolving Lenders pro rata in
accordance with their Pro Rata Shares of the Revolving Loan Commitment
(calculated as if the Non-Funding Lender’s Pro Rata Share was reduced to zero
and each other Revolving Lender’s Pro Rata Share had been increased
proportionately).  If any Revolving
Lender (other than the Revolving Lender that is also the L/C Issuer that issued
such Letter of Credit) is a Non-Funding Lender, upon payment by Agent or any
Revolving Lender on or pursuant to any Letter of Credit, each Revolving Lender
that is not a Non-Funding Lender shall pay to Agent for the account of such L/C
Issuer its Pro Rata Share (increased as described above) of the Letter of
Credit Obligations that from time to time remain outstanding; provided that no
Revolving Lender shall be required to fund any amount which would result in the
sum of its outstanding Revolving Loans, outstanding Letter of Credit
Obligations, the amounts of its participation in Swing Loans and its pro rata
share of unparticipated amounts in Swing Line Loans (each as increased as
described in Section 1.1(c)(iii)) to exceed its Revolving Loan Commitment.  Each Revolving Lender hereby
absolutely and unconditionally agrees to pay to the L/C Issuer upon demand by
the L/C Issuer such Revolving Lender’s Pro Rata Share (including as adjusted as provided above) of each payment made by
the L/C Issuer in respect of a Letter of Credit and not

 

5

 

immediately
reimbursed by Borrowers or satisfied through a debit of Borrowers’
account.  Each Revolving Lender
acknowledges and agrees that its obligations pursuant to this subsection in
respect of Letters of Credit are absolute and unconditional and shall not be
affected by any circumstance whatsoever, including setoff, counterclaim, the
occurrence and continuance of a Default or an Event of Default or any failure
by Borrowers to satisfy any of the conditions set forth in Section 7.2.  If any Revolving Lender fails to make
available to the L/C Issuer the amount of such Revolving Lender’s Pro Rata
Share of any payments made by the L/C Issuer in respect of a Letter of Credit
as provided in this Section 1.1(d)(ii), the L/C Issuer shall be entitled
to recover such amount on demand from such Revolving Lender together with
interest at the Index Rate.

 

(iii)                               Request for
Letters of Credit.  Borrower
Representative shall give Agent at least three (3) Business Days prior written
notice specifying the date a Letter of Credit is requested to be issued, the
amount and the name and address of the beneficiary, the name of the Borrower on
whose behalf such Letter of Credit is to be issued and a description of the
transactions proposed to be supported thereby. 
If Agent informs Borrower Representative that the L/C Issuer cannot
issue the requested Letter of Credit directly, such Borrower Representative may
request that L/C Issuer arrange for the issuance of the requested Letter of
Credit under a risk participation agreement with another financial institution
reasonably acceptable to Agent, L/C Issuer and Borrower Representative.  The issuance of any Letter of Credit under
this Agreement shall be subject to the conditions that the Letter of Credit (i)
supports a transaction entered into in the ordinary course of business of
Borrowers and (ii) is in a form and contains such terms and conditions as are
reasonably satisfactory to the L/C Issuer and, in the case of standby letters
of credit, Agent.  The initial notice
requesting the issuance of a Letter of Credit shall be accompanied by the form
of the Letter of Credit and the Master Standby Agreement or Master Documentary
Agreement, as applicable, and an application for a letter of credit, if any,
then required by the L/C Issuer completed in a manner satisfactory to such L/C
Issuer.  If any provision of any
application or reimbursement agreement is inconsistent with the terms of this
Agreement, then the provisions of this Agreement, to the extent of such
inconsistency, shall control.

 

(iv)                              Expiration
Dates of Letters of Credit.  The expiration date of each Letter of Credit
shall be on a date which is not later than the earlier of (a) one year from its
date of issuance or (b) the thirtieth (30th) day prior to the date set forth in
clause (a) of the definition of the term Commitment Termination Date.
Notwithstanding the foregoing, a Letter of Credit may provide for automatic
extensions of its expiration date for one (1) or more successive one (1) year
periods provided that the L/C Issuer has the right to terminate such Letter of
Credit on each such annual expiration date and no renewal term may extend the
term of the Letter of Credit to a date that is later than the thirtieth (30th)
day prior to the date set forth in clause (a) of the definition of the term
Commitment Termination Date.  The L/C
Issuer may elect not to renew any such Letter of Credit and, upon direction by
Agent or Requisite Lenders, shall not renew any such Letter of Credit at any time
during the continuance of an Event of Default, provided that, in the case of a
direction by Agent or Requisite Lenders, the L/C Issuer receives such
directions prior to the date notice of non-renewal is required to be given by
the L/C Issuer and the L/C Issuer has had a reasonable period of time to act on
such notice.

 

(v)                                 Obligations
Absolute.  The
obligation of Borrowers to reimburse the L/C Issuer, Agent and Lenders for
payments made in respect of Letters of Credit issued by the L/C Issuer shall be
unconditional and irrevocable and shall be paid under all circumstances
strictly in accordance with the terms of this Agreement, including the
following circumstances: (a) any lack of validity or enforceability of any
Letter of Credit; (b) any amendment or waiver of or any consent or departure from
all or any of the provisions of any Letter of Credit or any Loan Document; (c)
the existence of any claim, set-off, defense or other right which Borrowers,
any of their Subsidiaries or Affiliates or any other Person may at any time
have against any beneficiary of any Letter of Credit, Agent, any L/C Issuer,
any Lender or any other 

 

6

 

Person,
whether in connection with this Agreement, any other Loan Document or any other
related or unrelated agreements or transactions; (d) any draft or other
document presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; (e) payment under any Letter of Credit against
presentation of a draft or other document that does not substantially comply
with the terms of such Letter of Credit; or (f) any other act or omission to
act or delay of any kind of any L/C Issuer, Agent, any Lender or any other
Person or any other event or circumstance whatsoever that might, but for the
provisions of this Section 1.1(d)(v), constitute a legal or equitable
discharge of Borrowers’ obligations hereunder.

 

(vi)                              Obligations of
L/C Issuers.  Each L/C
Issuer (other than GE Capital) hereby agrees that it will not issue a Letter of
Credit hereunder until it has provided Agent with written notice specifying the
amount and intended issuance date of such Letter of Credit and Agent has
returned a written acknowledgment of such notice to L/C Issuer.  Each L/C Issuer (other than GE Capital)
further agrees to provide to Agent:  (a)
a copy of each Letter of Credit issued by such L/C Issuer promptly after its
issuance; (b) a weekly report summarizing available amounts under Letters of
Credit issued by such L/C Issuer, the dates and amounts of any draws under such
Letters of Credit, the effective date of any increase or decrease in the face
amount of any Letters of Credit during such week and the amount of any
unreimbursed draws under such Letters of Credit; and (c) such additional
information reasonably requested by Agent from time to time with respect to the
Letters of Credit issued by such L/C Issuer. 
Without limiting the generality of the foregoing, it is expressly
understood and agreed by Borrowers that the absolute and unconditional
obligation of Borrowers to Agent and Lenders hereunder to reimburse payments
made under a Letter of Credit will not be excused by the gross negligence or
willful misconduct of the L/C Issuer. 
However, the foregoing shall not be construed to excuse an L/C Issuer
from liability to Borrowers to the extent of any direct damages (as opposed to
consequential damages, with Borrowers hereby waiving all claims for any
consequential damages to the extent permitted by applicable law) suffered by
Borrowers that are subject to indemnification under the Master Standby
Agreement or the Master Documentary Agreement.

 

(e)                                  Funding
Authorization.  The
proceeds of all Loans made pursuant to this Agreement subsequent to the Closing
Date are to be funded by Agent by wire transfer to the account designated by
Borrower Representative (the “Disbursement Account”) or such other
account as Borrower Representative may notify Agent in writing at least three
(3) Business Days before the desired effective date of such change.

 

1.2.                              Interest and
Applicable Margins.

 

(a)                                  Borrowers shall
pay interest to Agent, for the ratable benefit of Lenders, in accordance with
the Loans being made by each Lender (or in the case of the Swing Line Loan, for
the benefit of the Swing Line Lender), in arrears on each applicable Interest
Payment Date, at the following per annum rates: (i) with respect to the
Revolving Credit Advances which are designated as Index Rate Loans, the Index
Rate plus the Applicable Revolver Index Margin or, with respect to Revolving
Credit Advances which are designated as LIBOR Loans, at the election of
Borrower Representative, the applicable LIBOR Rate plus the Applicable Revolver
LIBOR Margin; and (ii) with respect to the Swing Line Loan, the Index Rate plus
the Applicable Revolver Index Margin.

 

7

 

As of the Second Amendment Effective Date, the
Applicable Margins are as follows:

 

	
  Applicable
  Revolver Index Margin

  	
   

  	
  0.25

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable
  Revolver LIBOR Margin 

  	
   

  	
  2.75

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable
  L/C Margin

  	
   

  	
  2.75

  	
  %

  

 

The Applicable Margins shall
be adjusted (up or down) prospectively on a quarterly basis on the first
Business Day of each Fiscal Quarter as determined by average daily Borrowing
Availability for the immediately preceding Fiscal Quarter, commencing January 1, 2011.  Adjustments in Applicable Margins will be
determined by reference to the following grids:

 

	
   

  	
   

  	
  Applicable
  Margins:

  	
   

  
	
  If Average Daily Borrowing
  Availability for

  the Immediately Preceding Fiscal Quarter is:

  	
   

  	
  Revolving
  Index 

  	
   

  	
  Revolving
  LIBOR and

  L/C

  	
   

  
	
  > $20,000,000

  	
   

  	
  0.00

  	
  %

  	
  2.50

  	
  %

  
	
  > $10,000,000 and < $20,000,000

  	
   

  	
  0.25

  	
  %

  	
  2.75

  	
  %

  
	
  < $10,000,000

  	
   

  	
  0.50

  	
  %

  	
  3.00

  	
  %

  

 

In
the event that EBITDA for the Fiscal Year ending on or about December 31, 2010
exceeds $11,800,000, then beginning on the first anniversary of the Second
Amendment Effective Date, the Applicable Margins shall be reset as described
below:

 

	
  If Average
  Daily Borrowing Availability for

  	
   

  	
  Applicable Margins:

  	
   

  
	
  the
  Immediately Preceding Fiscal Quarter

  is:

  	
   

  	
  Revolving Index 

  	
   

  	
  Revolving LIBOR and

  L/C

  	
   

  
	
  > $20,000,000

  	
   

  	
  0.00

  	
  %

  	
  2.25

  	
  %

  
	
  > $10,000,000 and < $20,000,000

  	
   

  	
  0.00

  	
  %

  	
  2.50

  	
  %

  
	
  < $10,000,000

  	
   

  	
  0.25

  	
  %

  	
  2.75

  	
  %

  

 

Borrower shall deliver to
Agent and Lenders a certificate, signed by its chief financial officer, setting
forth in reasonable detail the basis for the continuance of, or any change in,
the Applicable Margins.  If any Default
or an Event of Default has occurred and is continuing at the time any reduction
in the Applicable Margins is to be implemented, that reduction shall be
deferred until the first day of the first calendar month following the date on
which all Defaults or Events of Default are waived or cured.

 

(b)                                 If any payment
on any Loan becomes due and payable on a day other than a Business Day, the
maturity thereof will be extended to the next succeeding Business Day (except
as set forth in the definition of LIBOR Period) and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate during
such extension.

 

8

 

(c)                                  All
computations of Fees calculated on a per annum basis and interest shall be made
by Agent on the basis of a 360-day year, in each case for the actual number of
days occurring in the period for which such Fees and interest are payable.  The Index Rate is a floating rate determined
for each day.  Each determination by
Agent of an interest rate and Fees hereunder shall be final, binding and
conclusive on Borrowers, absent manifest error.

 

(d)                                 So long as an
Event of Default has occurred and is continuing under Section 6.1(a), (f) or
(g) and without notice of any kind, or so long as any other Event of
Default has occurred and is continuing and at the election of Agent (or upon
the written request of Requisite Lenders) confirmed by written notice from
Agent to Borrower Representative, the interest rates applicable to the Loans
and the Letter of Credit Fee shall be increased by two percentage points (2%)
per annum above the rates of interest or the rate of such Fee otherwise
applicable hereunder (“Default Rate”) and all outstanding Obligations
shall bear interest at the Default Rate applicable to such Obligations.  Interest and Letter of Credit Fees at the
Default Rate shall accrue from the initial date of any such Event of Default
until such Event of Default is cured or waived and shall be payable upon
demand, but in any event, shall be payable on the next regularly scheduled
payment date set forth herein for such Obligation.

 

Borrower Representative shall have the option to (i) request that any
Revolving Credit Advance be made as a LIBOR Loan, (ii) convert at any time all
or any part of outstanding Loans from Index Rate Loans to LIBOR Loans, (iii)
convert any LIBOR Loan to an Index Rate Loan, subject to payment of the LIBOR
Breakage Fee in accordance with Section 1.3(e) if such conversion is
made prior to the expiration of the LIBOR Period applicable thereto, or (iv)
continue all or any portion of any Loan as a LIBOR Loan upon the expiration of
the applicable LIBOR Period and the succeeding LIBOR Period of that continued
Loan shall commence on the first day after the last day of the LIBOR Period of
the Loan to be continued.  Any Loan or
group of Loans having the same proposed LIBOR Period to be made or continued
as, or converted into, a LIBOR Loan must be in a minimum amount of $250,000 and
integral multiples of $100,000 in excess of such amount.  Any such election must be made by 1:00 p.m.
(New York time) on the third Business Day prior to (1) the date of any proposed
Revolving Credit Advance which is to bear interest at the LIBOR Rate, (2) the
end of each LIBOR Period with respect to any LIBOR Loans to be continued as
such, or (3) the date on which Borrower Representative wishes to convert any
Index Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower
Representative in such election.  If no
election is received with respect to a LIBOR Loan by 1:00 p.m. (New York time)
on the third Business Day prior to the end of the LIBOR Period with respect
thereto, that LIBOR Loan shall be converted to an Index Rate Loan at the end of
its LIBOR Period.  Borrower
Representative must make such election by notice to Agent in writing, by fax or
overnight courier.  In the case of any
conversion or continuation, such election must be made pursuant to a written
notice (a “Notice of Conversion/Continuation”) in the form of Exhibit
1.2(e).  No Loan shall be made,
converted into or continued as a LIBOR Loan, if an Event of Default has
occurred and is continuing and Agent or Requisite Lenders have determined not
to make or continue any Loan as a LIBOR Loan as a result thereof.

 

(e)                                  Notwithstanding
anything to the contrary set forth in this Section 1.2, if a court of
competent jurisdiction determines in a final order that the rate of interest
payable hereunder exceeds the highest rate of interest permissible under law
(the “Maximum Lawful Rate”), then so long as the Maximum Lawful Rate
would be so exceeded, the rate of interest payable hereunder shall be equal to
the Maximum Lawful Rate; provided, however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrowers shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest that would have been received had
the interest rate payable hereunder been (but for the operation of this
paragraph) the interest rate payable since the Closing Date as otherwise
provided in this Agreement.  Thereafter,
interest hereunder shall be paid at the rate(s) of interest and in the manner 

 

9

 

provided in Sections
1.2(a) through (e), unless and until the rate of interest again exceeds the
Maximum Lawful Rate, and at that time this paragraph shall again apply.  In no event shall the total interest received
by any Lender pursuant to the terms hereof exceed the amount that such Lender
could lawfully have received had the interest due hereunder been calculated for
the full term hereof at the Maximum Lawful Rate.  If the Maximum Lawful Rate is calculated
pursuant to this paragraph, such interest shall be calculated at a daily rate equal
to the Maximum Lawful Rate divided by the number of days in the year in which
such calculation is made.  If,
notwithstanding the provisions of this Section 1.2(f), a court of
competent jurisdiction shall determine by a final, non-appealable order that a
Lender has received interest hereunder in excess of the Maximum Lawful Rate,
Agent shall, to the extent permitted by applicable law, promptly apply such
excess as specified in Section 1.5(e) and thereafter shall refund any
excess to Borrowers or as such court of competent jurisdiction may otherwise
order.

 

1.3.                              Fees.

 

(a)                                  Fee Letter.  Borrowers shall pay to GE Capital,
individually, the Fees specified in that certain fee letter dated as of June
20, 2006, between Borrowers and GE Capital (as may be amended from time to
time, the “GE Capital Fee Letter”), at the times specified for payment
therein.

 

(b)                                 Unused Line Fee.  As additional compensation for the Revolving
Lenders, Borrowers shall pay to Agent, for the ratable benefit of such Lenders,
in arrears, on the first Business Day of each month prior to the Commitment Termination Date and on the
Commitment Termination Date, a fee for Borrowers’ non-use of available funds in
an amount equal to three-eighths of one percent (0.375%) per annum multiplied
by the difference between (x) the Maximum Amount (as it may be adjusted from
time to time) and (y) the average for the period of the daily closing balances
of the Revolving Loan (including, without duplication, Swing Line Loans)
outstanding during the period for which such Fee is due (the “Average Daily
Loan Balance”).

 

(c)                                  (Intentionally
Omitted).

 

(d)                                 Letter of
Credit Fee.  Borrowers
agree to pay to Agent for the benefit of Revolving Lenders, as compensation to
such Revolving Lenders for Letter of Credit Obligations incurred hereunder, (i)
all costs and expenses incurred by Agent or any Lender on account of such
Letter of Credit Obligations, and (ii) for each month during which any Letter of Credit Obligation shall remain
outstanding, a fee (the “Letter of Credit Fee”) in an amount equal to
the Applicable L/C Margin from time to time in effect multiplied by the maximum
amount available from time to time to be drawn under the applicable Letter of
Credit.  Such fee shall be paid to Agent
for the benefit of the Revolving Lenders in arrears, on the first Business Day
of each month and on the
Commitment Termination Date.  In
addition, Borrowers shall pay to any L/C Issuer, on demand, such fees
(including all per annum fees), charges and expenses of such L/C Issuer in
respect of the issuance, negotiation, acceptance, amendment, transfer and
payment of such Letter of Credit or otherwise payable pursuant to the
application and related documentation under which such Letter of Credit is
issued.

 

(e)                                  LIBOR Breakage
Fee.  Upon (i) any default by any
Borrower in making any borrowing of, conversion into or continuation of any
LIBOR Loan following Borrower Representative’s delivery to Agent of any LIBOR
Loan request in respect thereof or (ii) any payment of a LIBOR Loan on any day
that is not the last day of the LIBOR Period applicable thereto (regardless of
the source of such prepayment and whether voluntary, by acceleration or
otherwise), Borrowers shall pay Agent, for the benefit of all Lenders that
funded or were prepared to fund any such LIBOR Loan, the LIBOR Breakage Fee;
provided, that Agent shall have delivered to Borrowers a statement showing the
calculation of the LIBOR Breakage Fee consistent with the definition thereof.

 

10

 

(f)                                    (Intentionally
Omitted).

 

(g)                                 Expenses and
Attorneys’ Fees.  Borrowers
agree to promptly pay all reasonable fees, charges, costs and expenses
(including reasonable attorneys’ fees and expenses and the allocated cost of
internal legal staff) incurred by Agent and GECM in connection with any matters
contemplated by or arising out of the Loan Documents, in connection with the
examination, review, due diligence investigation, documentation, negotiation,
closing and syndication of the transactions contemplated herein and in
connection with the continued administration of the Loan Documents including
any amendments, modifications, consents and waivers.  Borrowers agree to promptly pay reasonable
documentation charges assessed by Agent for amendments, waivers, consents and
any of the documentation prepared by Agent’s internal legal staff.  Borrowers agree to promptly pay all
reasonable fees, charges, costs and expenses (including reasonable fees,
charges, costs and expenses of attorneys, auditors (whether internal or
external), appraisers, consultants and advisors and the allocated cost of
internal legal staff) incurred by Agent in connection with any Event of
Default, work-out or action to enforce any Loan Document or to collect any
payments due from Borrowers or any other Credit Party.  In addition, in connection with any work-out
or action to enforce any Loan Document or to collect any payments due from
Borrowers or any other Credit Party, Borrowers agree to promptly pay all fees,
charges, costs and expenses incurred by Lenders for one (1) counsel acting for
all Lenders other than Agent.  All
reasonable fees, charges, costs and expenses for which Borrowers are
responsible under this Section 1.3(g) shall be deemed part of the
Obligations when incurred, payable promptly after demand or in accordance with
the final sentence of Section 1.4 and secured by the Collateral. 
Agent and GECM agree to promptly deliver to the Borrower Representative
invoices in respect of audits and appraisals of Inventory or Accounts of the
Credit Parties.

 

1.4.                              Payments.  All payments by Borrowers of the Obligations
shall be without deduction, defense, setoff or counterclaim and shall be made
in same day funds and delivered to Agent, for the benefit of Agent and Lenders,
as applicable, by wire transfer or such other place as Agent may from time to
time designate to Borrowers in writing.

 

Borrowers shall receive
credit on the day of receipt for funds received by Agent by 2:00 p.m. (New York
time).  In the absence of timely receipt,
such funds shall be deemed to have been paid on the next Business Day.  Whenever any payment to be made hereunder
shall be stated to be due on a day that is not a Business Day, the payment may
be made on the next succeeding Business Day and such extension of time shall be
included in the computation of the amount of interest and Fees due hereunder.

 

Borrowers hereby authorize
Lenders to make Revolving Credit Advances or Swing Line Advances, on the basis
of their Pro Rata Shares, for the payment of interest, Fees and expenses,
Letter of Credit reimbursement obligations and any amounts required to be
deposited with respect to outstanding Letter of Credit Obligations pursuant to Sections
1.5(g) or 6.3.

 

11

 

1.5.                              Prepayments.

 

(a)                                  Voluntary
Prepayments of Loans.  At any
time, Borrowers may prepay the Loans, in whole or in part, without premium or
penalty subject to the payment of  LIBOR
Breakage Fees, if applicable.

 

(b)                                 (Intentionally
Omitted).

 

(c)                                  Prepayments
from Asset Dispositions. 
Immediately upon receipt of any Net Proceeds by any Borrower (other than
from Asset Dispositions permitted under Section 3.7(c) or (d), such
Borrower shall prepay the Loans in an amount equal to such Net Proceeds, except
that Borrower or its Subsidiaries may reinvest all Net Proceeds of any such
Asset Disposition, within one hundred eighty (180) days, in fixed assets.  The
payments shall be applied in accordance with Section 1.5(e).

 

(d)                                 Prepayments
from Issuance of Debt. 
Immediately upon the receipt by any Credit Party of proceeds from the
sale or issuance of debt securities of any Credit Party or any other
indebtedness for borrowed money incurred by any Borrower or any Subsidiary of
any Borrower after the Closing Date (other than proceeds from any indebtedness
permitted under Section 3.1, Borrowers shall prepay the Loans in an
amount equal to such proceeds.  The
payments shall be applied in accordance with Section 1.5(e).

 

(e)                                  Application of
Proceeds.  Prepayments
made by any Borrower pursuant to Sections 1.5(c) and Section 1.5(d)
shall be applied to the Revolving Credit Advances outstanding to that Borrower
until the same have been repaid in full and thereafter to the Revolving Credit
Advances of the other Borrowers, but in any event not as a permanent reduction
of the Revolving Loan Commitment.  Any
such prepayment shall be applied first to Index Rate Loans of the type required
to be prepaid before application to LIBOR Loans of the type required to be
prepaid, in each case in a manner which minimizes any resulting LIBOR Breakage
Fee.

 

(f)                                    Application of
Prepayments from Insurance Proceeds.  To the extent not reinvested in the business,
prepayments from insurance in accordance with Section 2.2 or
condemnation proceeds shall be applied in accordance with Section 1.5(e).

 

(g)                                 Letter of Credit
Obligations.  In the
event any Letters of Credit are outstanding at the time that the Revolving Loan
Commitment is terminated, Borrowers shall deposit with Agent for the benefit of
all Revolving Lenders cash in an amount equal to 105% of the aggregate
outstanding Letter of Credit Obligations to be available to Agent to reimburse
payments of drafts drawn under such Letters of Credit and pay any Fees and
expenses related thereto.  Upon
termination of any such Letter of Credit, the unearned portion of such prepaid
fee attributable to such Letter of Credit shall be refunded to Borrowers.

 

1.6.                              Maturity.  All of the Obligations shall become due and
payable as otherwise set forth herein, but in any event all of the remaining
Obligations (other than contingent indemnification obligations to the extent no
unsatisfied claim has been asserted) shall become due and payable upon
termination of this Agreement.  Until all
Obligations have been fully paid and satisfied (other than contingent
indemnification obligations to the extent no unsatisfied claim has been
asserted), the Revolving Loan Commitment has been terminated and all Letters of
Credit have been terminated or otherwise secured to the satisfaction of Agent,
Agent shall be entitled to retain the security interests in the Collateral
granted under the Collateral Documents and the ability to exercise all rights
and remedies available to them under the Loan Documents and applicable
laws.  Notwithstanding anything contained
in this Agreement to the contrary, upon any termination of the Revolving Loan
Commitment, all of the 

 

12

 

Obligations (other than
contingent indemnification obligations to the extent no unsatisfied claim has
been asserted) shall be immediately due and payable.

 

1.7.                              Eligible
Accounts.  All of the
Accounts owned by each Borrower and reflected in the most recent Borrowing Base
Certificate delivered to Agent shall be “Eligible Accounts” for purposes
of this Agreement, except any Account to which any of the exclusionary criteria
set forth below applies.  Agent shall
have the right after notice to Borrower Representative to establish or modify
or eliminate Reserves against Eligible Accounts from time to time in its
reasonable credit judgment.  In addition,
Agent reserves the right, at any time and from time to time after the Closing
Date, after notice to Borrower Representative, to adjust any of the criteria
set forth below, to establish new criteria and to adjust advance rates with
respect to Eligible Accounts, in its reasonable credit judgment, subject to the
approval of Requisite Lenders  in
the case of adjustments or new criteria or changes in advance rates which have
the effect of making more credit available. 
Eligible Accounts shall not include any Account of any Borrower:

 

(a)                                  that does not
arise from the sale of goods or the performance of services by such Borrower in
the ordinary course of its business;

 

(b)                                 (i) upon which
such Borrower’s right to receive payment is not absolute or is contingent upon
the fulfillment of any condition whatsoever or (ii) as to which such Borrower
is not able to bring suit or otherwise enforce its remedies against the Account
Debtor through judicial process, or (iii) if the Account represents a progress
billing consisting of an invoice for goods sold or used or services rendered
pursuant to a contract under which the Account Debtor’s obligation to pay that
invoice is subject to such Borrower’s completion of further performance under
such contract or is subject to the equitable lien of a surety bond issuer;

 

(c)                                  to the extent
that any defense, counterclaim, setoff or dispute is asserted as to such
Account;

 

(d)                                 that is not a
true and correct statement of bona fide indebtedness incurred in the amount of
the Account for merchandise sold to or services rendered and accepted by the
applicable Account Debtor;

 

(e)                                  with respect to
which an invoice, reasonably acceptable to Agent in form and substance, has not
been sent to the applicable Account Debtor;

 

(f)                                    that (i) is not
owned by such Borrower or (ii) is subject to any right, claim, security
interest or other interest of any other Person, other than Liens in favor of
Agent on behalf of itself and Lenders, or other junior Liens that are expressly
permitted hereunder;

 

(g)                                 that arises
from a sale to any director, officer, other employee or Affiliate of any Credit
Party, or to any entity that has any common officer or director with any Credit
Party;

 

(h)                                 that is the
obligation of an Account Debtor that is the United States government or a
political subdivision thereof, or any state, county or municipality or
department, agency or instrumentality thereof unless Agent, in its sole
discretion, has agreed to the contrary in writing and such Borrower, if
necessary or desirable, has complied with respect to such obligation with the
Federal Assignment of Claims Act of 1940, or any applicable state, county or
municipal law restricting the assignment thereof with respect to such
obligation;

 

13

 

(i)                                     that is the
obligation of an Account Debtor located in a foreign country other than Canada
unless payment thereof is assured by a letter of credit assigned and delivered
to Agent, satisfactory to Agent as to form, amount and issuer;

 

(j)                                     to the extent such
Borrower or any Subsidiary thereof is liable for goods sold or services
rendered by the applicable Account Debtor to such Borrower or any Subsidiary
thereof but only to the extent of the potential offset;

 

(k)                                  that arises
with respect to goods that are delivered on a bill-and-hold, credit hold,
cash-on-delivery basis or placed on consignment, guaranteed sale or other terms
by reason of which the payment by the Account Debtor is or may be conditional;

 

(l)                                     that is in
default; provided, that, without limiting the generality of the
foregoing, an Account shall be deemed in default upon the occurrence of any of
the following:

 

(i)                                     the Account is
not paid within the earlier of: 60 days following its due date or 90 days
following its original invoice date;

 

(ii)                                  the Account
Debtor obligated upon such Account suspends business, makes a general
assignment for the benefit of creditors or fails to pay its debts generally as
they come due; or

 

(iii)                               a petition is
filed by or against any Account Debtor obligated upon such Account under any
bankruptcy law or any other federal, state or foreign (including any
provincial) receivership, insolvency relief or other law or laws for the relief
of debtors;

 

(m)                               that is the
obligation of an Account Debtor if 50% or more of the Dollar amount of all
Accounts owing by that Account Debtor are ineligible under the other criteria
set forth in this Section 1.7;

 

(n)                                 as to which
Agent’s Lien thereon, on behalf of itself and Lenders, is not a first priority
perfected Lien;

 

(o)                                 as to which any
of the representations or warranties in the Loan Documents are untrue;

 

(p)                                 to the extent
such Account is evidenced by a judgment, Instrument or Chattel Paper;

 

(q)                                 to the extent
such Account exceeds any credit limit established by Agent, in its reasonable
credit judgment;

 

(r)                                    to the extent
that such Account, together with all other Accounts owing to such Account
Debtor and its Affiliates as of any date of determination exceed 10% of all
Eligible Accounts of all Borrowers;

 

(s)                                  that is payable
in any currency other than Dollars; or

 

(t)                                    that is
otherwise unacceptable to Agent in its reasonable credit judgment.

 

14

 

1.8.                              Eligible
Inventory.  All of the
Inventory owned by the Borrowers and reflected in the most recent Borrowing
Base Certificate delivered to Agent shall be “Eligible Inventory” for
purposes of this Agreement, except any Inventory to which any of the
exclusionary criteria set forth below applies. 
Agent shall have the right after notice to Borrower Representative to
establish, modify, or eliminate Reserves against Eligible Inventory from time
to time in its reasonable credit judgment. 
In addition, Agent reserves the right, at any time and from time to time
after the Closing Date, after notice to Borrower Representative, to adjust any
of the criteria set forth below, to establish new criteria and to adjust
advance rates with respect to Eligible Inventory in its reasonable credit
judgment, subject to the approval of Requisite Lenders in the case of
adjustments or new criteria or changes in advance rates which have the effect
of making more credit available. 
Eligible Inventory shall not include any Inventory of any Borrower that:

 

(a)                                  is not owned by
such Borrower free and clear of all Liens and rights of any other Person
(including the rights of a purchaser that has made progress payments and the
rights of a surety that has issued a bond to assure such Borrower’s performance
with respect to that Inventory), except the Liens in favor of Agent, on behalf
of itself and Lenders and other junior Liens that are expressly permitted
hereunder;

 

(b)                                 (i) is not
located on premises owned, leased or rented by such Borrower and set forth in Disclosure
Schedule (5.12) or (ii) is stored at a leased location (other than those as
to which Agent has given its prior consent thereto) unless on or after the
ninetieth (90th) day following
the Closing Date (x) a reasonably satisfactory landlord waiver has been
delivered to Agent, or (y) Reserves reasonably satisfactory to Agent up to
three months’ rent for such location have been established with respect
thereto, (iii) is stored with a bailee or warehouseman unless a reasonably
satisfactory, acknowledged bailee letter has been received by Agent or Reserves
reasonably satisfactory to Agent up to three months’ rent or storage charges
(as applicable) for such location have been established with respect thereto,
or (iv) is located at an owned location subject to a mortgage in favor of a
lender other than Agent, unless a reasonably satisfactory mortgagee waiver has
been delivered to Agent, or (v) is located at any site if the aggregate book
value of Inventory at any such location is less than $100,000;

 

(c)                                  is placed on
consignment or is in transit, except for Inventory in transit between domestic
locations of Credit Parties as to which Agent’s Liens have been perfected at
origin and destination;

 

(d)                                 is covered by a
negotiable document of title, unless such document has been delivered to Agent
with all necessary endorsements, free and clear of all Liens except those in
favor of Agent and Lenders;

 

(e)                                  is used (other
than trade-ins and other than returns that have been restocked and can be
resold as new), excess, obsolete, unsaleable, shopworn, seconds, damaged or
unfit for sale;

 

(f)                                    consists of
display items or packing or shipping materials, manufacturing supplies,
work-in-process Inventory or replacement parts (excluding from the foregoing,
however, readily saleable golf club components);

 

(g)                                 consists of
goods which have been returned by the buyer (other than trade-ins and other
than returns that have been restocked and can be resold as new);

 

(h)                                 is not of a
type held for sale in the ordinary course of such Borrower’s business;

 

15

 

(i)                                     is not subject
to a first priority lien in favor of Agent on behalf of itself and Lenders
subject to Permitted Encumbrances;

 

(j)                                     breaches any of
the representations or warranties pertaining to Inventory set forth in the Loan
Documents;

 

(k)                                  consists of any
costs associated with “freight-in” charges;

 

(l)                                     consists of
Hazardous Materials or goods that can be transported or sold only with licenses
that are not readily available;

 

(m)                               is not covered
by casualty insurance reasonably acceptable to Agent; or

 

(n)                                 may not be sold
without violation or infringement of the intellectual property rights of
others; or

 

(o)                                 is otherwise
unacceptable to Agent in its reasonable credit judgment.

 

1.9.                              Loan Accounts.  Agent shall maintain a loan account (the “Loan
Account”) on its books to record: all Advances, all payments made by
Borrowers, and all other debits and credits as provided in this Agreement with
respect to the Loans or any other Obligations. 
All entries in the Loan Account shall be made in accordance with Agent’s
customary accounting practices as in effect from time to time.  The balance in the Loan Account, as recorded
on Agent’s most recent printout or other written statement, shall, absent
manifest error, be presumptive evidence of the amounts due and owing to Agent
and Lenders by Borrowers; provided that any failure to so record or any
error in so recording shall not limit or otherwise affect any Borrower’s duty
to pay the Obligations.  Agent shall
render to Borrower Representative a monthly accounting of transactions with
respect to the Loans setting forth the balance of the Loan Account as to each
Borrower for the immediately preceding month. 
Unless Borrower Representative notifies Agent in writing of any objection
to any such accounting (specifically describing the basis for such objection),
within thirty (30) days after the date thereof, each and every such accounting
shall, absent manifest error, be deemed final, binding and conclusive on
Borrowers in all respects as to all matters reflected therein.  Only those items expressly objected to in such
notice shall be deemed to be disputed by Borrowers.  Notwithstanding any provision herein
contained to the contrary, any Lender may elect (which election may be revoked)
to dispense with the issuance of Notes to that Lender and may rely on the Loan
Account as evidence of the amount of Obligations from time to time owing to it.

 

1.10.                        Yield
Protection; Illegality.

 

(a)                                  Capital
Adequacy and Other Adjustments.  In the event that any Lender shall have
determined that the adoption after the date hereof of any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or
compliance by any Lender or any corporation controlling such Lender with any
request or directive regarding capital adequacy, reserve requirements or
similar requirements (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) from any central bank or governmental
agency or body having jurisdiction does or shall have the effect of increasing
the amount of capital, reserves or other funds required to be maintained by
such Lender or any corporation controlling such Lender and thereby reducing the
rate of return on such Lender’s or such corporation’s capital as a consequence
of its obligations hereunder, then Borrowers shall from time to time within
fifteen (15) days after notice and demand from such Lender (together with the
certificate referred to in the next sentence and with a copy to Agent) pay to
Agent, for the account of such Lender, additional amounts sufficient to
compensate such Lender for such reduction. 
A certificate as to the 

 

16

 

amount of such cost and
showing in reasonable detail the basis of the computation of such cost
submitted by such Lender to Borrower Representative and Agent shall, absent
manifest error, be final, conclusive and binding for all purposes.

 

(b)                                 Increased LIBOR
Funding Costs; Illegality. 
Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in any law, rule, regulation, treaty or directive
(or any change in the interpretation thereof) shall make it unlawful, or any
central bank or other Governmental Authority shall assert that it is unlawful,
for any Lender to agree to make or to make or to continue to fund or maintain
any LIBOR Loan, then, unless that Lender is able to make or to continue to fund
or to maintain such LIBOR Loan at another branch or office of that Lender
without, in that Lender’s opinion, adversely affecting it or its Loans or the
income obtained therefrom, on notice thereof and demand therefor by such Lender
to Borrower Representative through Agent, (i) the obligation of such
Lender to agree to make or to make or to continue to fund or maintain LIBOR
Loans shall terminate and (ii) each Borrower shall forthwith prepay in
full all outstanding LIBOR Loans owing by such Borrower to such Lender,
together with interest accrued thereon, unless Borrower Representative
on behalf of such Borrower, within five (5) Business Days after the
delivery of such notice and demand, converts all LIBOR Loans into Index Rate
Loans. If, after the date hereof, the introduction of, change in or
interpretation of any law, rule, regulation, treaty or directive would impose
or increase reserve requirements (other than as taken into account in the
definition of LIBOR) or otherwise increase the cost to any Lender of making or
maintaining a LIBOR Loan, then Borrowers shall from time to time within fifteen
(15) days after notice and demand from Agent to Borrower Representative
(together with the certificate referred to in the next sentence) pay to Agent,
for the account of all such affected Lenders, additional amounts sufficient to
compensate such Lenders for such increased cost.  A certificate as to the amount of such cost
and showing in reasonable detail the basis of the computation of such cost
submitted by Agent on behalf of all such affected Lenders to Borrower
Representative shall, absent manifest error, be final, conclusive and binding
for all purposes.

 

1.11.                        Taxes.

 

(a)                                  No Deductions.  Except as provided in Section 1.11(c),
any and all payments or reimbursements made hereunder (including any payments
made pursuant to Section 10) or under the Notes shall be made free and
clear of and without deduction for any and all taxes, levies, imposts,
deductions or withholdings, and all liabilities with respect thereto of any
nature whatsoever imposed by any taxing authority, excluding such taxes to the
extent imposed on Agent’s or a Lender’s net income by the jurisdiction in which
Agent or such Lender is organized or the jurisdiction in which the principal
office or applicable lending office of Agent or such Lender is located or any
subdivision thereof or therein (all such non-excluded taxes, levies, imposts,
deductions or withholdings being referred to collectively as “Taxes”).  If any Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to any Lender
or Agent, then the sum payable hereunder shall be increased by additional
amounts as may be necessary so that, after making all required deductions, such
Lender or Agent receives an amount equal to the sum it would have received had
no such deductions been made.

 

(b)                                 Changes in Tax
Laws.  In the event that, subsequent
to the Closing Date, (1) any changes in any existing law, regulation,
treaty or directive or in the interpretation or application thereof relating to
Taxes, (2) any new law, regulation, treaty or directive enacted or any
interpretation or application thereof, or (3) compliance by Agent or any
Lender with any request or directive relating to Taxes (whether or not having
the force of law) from any Governmental Authority:

 

(i)                                     does or shall
subject Agent or any Lender to any tax of any kind whatsoever with respect to
this Agreement, the other Loan Documents or any Loans made or Letters of 

 

17

 

Credit
issued hereunder or change the basis of taxation of payments to Agent or such
Lender of principal, fees, interest or any other amount payable hereunder
(except for net income taxes, or franchise taxes imposed in lieu of net income
taxes, imposed generally by taxing authorities with respect to interest or
commitment Fees or other Fees payable hereunder or changes in the rate of tax
on the overall net income of Agent or such Lender); or

 

(ii)                                  does or shall
impose on Agent or any Lender any other condition or increased cost in
connection with the transactions contemplated hereby or participations herein;

 

and the result of any of the
foregoing is to increase the cost to Agent or any such Lender of issuing any
Letter of Credit or making or continuing any Loan hereunder, as the case may
be, or to reduce any amount receivable hereunder, then, in any such case,
Borrowers shall promptly pay to Agent or such Lender, upon its demand, any
additional amounts necessary to compensate Agent or such Lender, on an
after-tax basis, for such additional cost or reduced amount receivable, as
reasonably determined by Agent or such Lender with respect to this Agreement or
the other Loan Documents.  If Agent or
such Lender becomes entitled to claim any additional amounts pursuant to this Section 1.11(b),
it shall promptly notify Borrower Representative of the event by reason of
which Agent or such Lender has become so entitled.  A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Agent or such Lender to
Borrower Representative (with a copy to Agent) shall, absent manifest error, be
final, conclusive and binding for all purposes.

 

(c)                                  Foreign Lenders.  Each Lender that is not a United States
person (as the term is defined in Section 7701 (a)(30) of the IRC) (a “Foreign
Lender”) shall provide to Borrower Representative and Agent two properly
completed and executed original copies of an IRS Form W-8BEN or Form W-8ECI
or other applicable form, certificate or document prescribed by the IRS
certifying as to such Foreign Lender’s entitlement to complete exemption from
United States withholding tax with respect to payments to be made to such
Foreign Lender under this Agreement and under the Notes (a “Certificate of
Exemption”).  Prior to becoming a
Lender under this Agreement and within fifteen (15) days after a reasonable
written request of Borrower Representative or Agent from time to time
thereafter, each Foreign Lender that becomes a Lender under this Agreement
shall provide a Certificate of Exemption to Borrower Representative and
Agent.  In addition to two properly
completed and executed original copies of a Certificate of Exemption, any
Foreign Lender that is not a “bank” within the meaning of Section 881(c)(3)(A) of
the IRC and is relying on the so-called “portfolio interest exemption” shall
also furnish a “Non-Bank Certificate” substantially in the form of Exhibit 1.11(c).  Each Foreign Lender agrees that from time to
time after the Closing Date, when a lapse in time or change in circumstances
renders the previous Certificate of Exemption obsolete or inaccurate in any
material respect, it will deliver to Borrower Representative and Agent two new,
accurate, properly completed and executed original copies of a Certificate of
Exemption.  Notwithstanding anything to
the contrary contained in Section 1.11(a) or Section 1.11(b),
(x) any Borrower shall be entitled, to the extent it is required to do so
by law, to deduct or withhold income or similar taxes imposed by the United
States (or any political subdivision or taxing authority thereof or therein)
from interest, fees or other amounts payable hereunder for the account of any
Foreign Lender to the extent such Lender has not provided to Borrower
Representative and Agent two properly completed and executed original copies of
a Certificate of Exemption establishing complete exemption from such deduction
or withholding and (y) any Borrower shall not be obligated pursuant to Section 1.11(a) or
Section 1.11(b) hereof to gross-up payments to be made to a
Foreign Lender in respect of income or similar taxes imposed by the United
States if (I) such Lender has not provided Borrower Representative and
Agent two properly completed and executed original copies of a Certificate of
Exemption establishing a complete exemption from such taxes as required to be
provided Borrower Representative and Agent pursuant to this Section 1.11(c) or
(II) in the case of a payment, other than interest, to a Foreign Lender
that is not a “bank” within the meaning of Section 881(c)(3)(A) of the
IRC 

 

18

 

and is relying on the “portfolio
interest exemption”, to the extent that such Certificate of Exemption does not
establish a complete exemption from withholding of such taxes.  Notwithstanding anything to the contrary
contained in the preceding sentence, the Borrower agrees to pay additional
amounts to a Foreign Lender in the manner set forth in Section 1.11(a) in
respect of any amounts deducted or withheld by it as described in the
immediately preceding sentence as a result of any changes after the Closing
Date or, in the case of an assignee Lender, after the date such assignee Lender
becomes a Lender under this Agreement, in any applicable law, treaty,
governmental rule, regulation, guideline or order relating to the deducting or
withholding of income or similar taxes, including, without limitation, any such
change as a result of which such Foreign Lender is no longer properly entitled
to deliver forms, certificates or other evidences as to such Foreign Lender’s
entitlement to exemption from U.S. withholding tax.

 

(d)                                 Each Lender
that is a United States person, as defined in Section 7701(a)(30) of the
IRC, shall provide to Borrower Representative and Agent two properly completed
and executed original copies of an IRS Form W-9, or any successor form
that such person is entitled to provide at such time in order to comply with
United States back-up withholding requirements.

 

(e)                                  Notwithstanding
anything to the contrary contained in this Section 1.11, if a
Lender is a conduit entity participating in a conduit financing arrangement (as
defined in Section 7701(1) of the IRC and the Treasury Regulations
issued thereunder) with respect to any payments made by Borrowers under this
Agreement or the Notes, (i) Borrowers shall not be obligated to pay
additional amounts to such Lender pursuant to Sections 1.11(a) and 1.11(b) to
the extent that the amount of Taxes exceeds the amount that would have
otherwise been payable had such Lender not been a conduit entity participating
in a conduit financing arrangement, and (ii) such Lender shall indemnify
Borrowers for the amount of Taxes paid by Borrowers pursuant to this Section 1.11(e)
that exceeds the amount that would have otherwise been payable had such Lender
not been a conduit entity participating in a conduit financing arrangement.

 

(f)                                    If Borrowers
are required to pay a Lender any additional amounts pursuant to Sections
1.11(a) and 1.11(b), such Lender shall, upon the reasonable request of
Borrowers, designate a different office or transfer its rights, benefits and
obligations under this Agreement to an affiliate if such designation or
transfer would reduce or eliminate such obligation to pay additional amounts
and would not, in the reasonable discretion of such Lender, be disadvantageous
to such Lender, it being understood that if such Lender so determines that such
designation or transfer would be disadvantageous, Borrowers shall be required
to pay all additional amounts payable pursuant to Section 1.11(a) and
1.11(b).

 

(g)                                 Each Credit
Party shall jointly and severally indemnify and, within ten (10) days of
demand therefor, pay Agent and each Lender for the full amount of Taxes subject
to gross-up under Section 1.11(a) (including any Taxes imposed
by any jurisdiction on amounts payable under Section 1.11(a)) paid
by Agent or such Lender, as appropriate, and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto.

 

1.12.                        (Intentionally
Omitted).

 

1.13.                        Borrower
Representative.  Each
Borrower hereby designates GII as its representative and agent on its behalf
(in such capacity, the “Borrower Representative”) for the purposes of
issuing Notices of Revolving Credit Advances and Notices of
Conversion/Continuation, giving instructions with respect to the disbursement
of the proceeds of the Loans, selecting interest rate options, requesting
Letters of Credit, giving and receiving all other notices and consents
hereunder or under any of the other Loan Documents and taking all other actions
(including in respect of compliance with covenants) on behalf of any Borrower
or Borrowers under the Loan Documents. 
Borrower Representative hereby accepts such appointment.  Agent and each Lender may regard any notice
or other communication pursuant to any 

 

19

 

Loan Document from Borrower
Representative as a notice or communication from all Borrowers.  Each warranty, covenant, agreement and
undertaking made on its behalf by Borrower Representative shall be deemed for
all purposes to have been made by such Borrower and shall be binding upon and
enforceable against such Borrower to the same extent as it if the same had been
made directly by such Borrower.

 

1.14.                        Credit Card
Collections.

 

(a)                                  Annexed hereto
is Schedule 1.14, which describes all arrangements to which the Credit
Parties are a party as of the date of this Agreement with respect to the
payment to the Credit Parties of the proceeds of all credit card charges for
sales by the Credit Parties.  Borrower
Representative may amend Schedule 1.14 so long as (i) such
amendment occurs by written notice to Agent not less than thirty (30) days
prior to the date on which any new arrangements are to be effective or any
existing arrangements are to be terminated, (ii) Agent is reasonably
satisfied with any such arrangements, and (iii) with respect to any new
arrangement, Agent has received a notification of such arrangement and is
reasonably satisfied therewith.

 

(b)                                 Payment of all
credit card charges submitted by the Credit Parties to credit card
clearinghouses or other processors identified on Schedule 1.14 or
otherwise and any other amounts payable to the Credit Parties by such
clearinghouses or other processors shall be directed to such deposit account as
may be designated by Agent.

 

SECTION 2.

AFFIRMATIVE COVENANTS

 

Each Credit Party executing
this Agreement jointly and severally agrees as to all Credit Parties that from
and after the date hereof and until the Termination Date:

 

2.1.                              Compliance With
Laws and Contractual Obligations.  Each Credit Party will (a) comply with
and shall cause each of its Subsidiaries to comply with (i) the
requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority (including, without limitation, laws, rules, regulations
and orders relating to taxes, employer and employee contributions, securities,
employee retirement and welfare benefits, environmental protection matters and
employee health and safety) as now in effect and which may be imposed in the
future in all jurisdictions in which any Credit Party or any of its
Subsidiaries is now doing business or may hereafter be doing business and (ii) the
obligations, covenants and conditions contained in all Contractual Obligations
of such Credit Party or any of its Subsidiaries, in each case other than those
laws, rules, regulations, orders and provisions of such Contractual Obligations
the noncompliance with which could not be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect, and (b) maintain
or obtain and shall cause each of its Subsidiaries to maintain or obtain all
licenses, qualifications and permits now held or hereafter required to be held
by such Credit Party or any of its Subsidiaries, for which the loss,
suspension, revocation or failure to obtain or renew, could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.  This Section 2.1
shall not preclude any Credit Party or its Subsidiaries from contesting any
taxes or other payments, if they are being diligently contested in good faith
in a manner which stays enforcement thereof and if appropriate expense
provisions have been recorded in conformity with GAAP, subject to Section 3.2.  Each Credit Party represents and warrants
that it (i) is in compliance and each of its Subsidiaries is in compliance
with the requirements of all applicable laws, rules, regulations and orders of
any Governmental Authority and the obligations, covenants and conditions contained
in all Contractual Obligations other than those laws, rules, regulations,
orders and provisions of such Contractual Obligations the noncompliance with
which could not be reasonably expected to have, either individually or in the
aggregate, a Material Adverse Effect, and 

 

20

 

(ii) maintains and each
of its Subsidiaries maintains all licenses, qualifications and permits referred
to in clause (b) above.

 

2.2.                              Insurance;
Damage to or Destruction of Collateral.

 

(a)                                  The Credit
Parties shall, at their sole cost and expense, maintain the policies of
insurance described on Schedule 5.18 as in effect on the date hereof or
otherwise in form and amounts consistent with other similarly situated
businesses.  Such policies of insurance
(or the loss payable and additional insured endorsements delivered to Agent)
shall contain provisions pursuant to which the insurer agrees to provide 30
days prior written notice to Agent in the event of any non-renewal,
cancellation or amendment of any such insurance policy.  If any Credit Party at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required above or to pay all premiums relating thereto, Agent may at any time
or times thereafter obtain and maintain such policies of insurance and pay such
premiums and take any other action with respect thereto that Agent deems
advisable.  Agent shall have no
obligation to obtain insurance for any Credit Party or pay any premiums
therefor.  By doing so, Agent shall not
be deemed to have waived any Default or Event of Default arising from any
Credit Party’s failure to maintain such insurance or pay any premiums
therefor.  All sums so disbursed,
including reasonable attorneys’ fees, court costs and other charges related
thereto, shall be payable on demand by Borrowers to Agent and shall be
additional Obligations hereunder secured by the Collateral.

 

(b)                                 Each Credit
Party shall deliver to Agent, in form and substance reasonably satisfactory to
Agent, endorsements to (i) all “All Risk” and business interruption
insurance naming Agent, on behalf of itself and Lenders, as loss payee, and (ii) all
general liability and other liability policies naming Agent, on behalf of
itself and Lenders, as additional insured. 
Each Credit Party irrevocably makes, constitutes and appoints Agent (and
all officers, employees or agents designated by Agent), so long as any Default
or Event of Default has occurred and is continuing or the anticipated Net
Proceeds from insurance exceed $100,000 per instance for any retail location or
$250,000 per instance for the headquarters facility located in Austin, Texas,
as each Credit Party’s true and lawful agent and attorney-in-fact for the
purpose of making, settling and adjusting claims under such “All Risk” policies
of insurance, endorsing the name of each Credit Party on any check or other
item of payment for the proceeds of such “All Risk” policies of insurance and
for making all determinations and decisions with respect to such “All Risk”
policies of insurance; provided that no such appointment is made with
respect to claims arising from loss or destruction of or damage to Equipment or
Fixtures.  Agent shall have no duty to
exercise any rights or powers granted to it pursuant to the foregoing
power-of-attorney.  Each Credit Party
shall promptly notify Agent of any loss, damage, or destruction to the
Collateral in the amount of $100,000 per instance for any retail location or
$250,000 per instance for the headquarters facility located in Austin, Texas or
more, whether or not covered by insurance. 
After deducting from any insurance proceeds the expenses, if any,
incurred by Agent in the collection or handling thereof, Agent may, at its
option, apply such proceeds to the reduction of the Obligations in accordance
with Section 1.5(f), provided that in the case of insurance
proceeds pertaining to any Credit Party other than a Borrower, such insurance
proceeds shall be applied to the Loans owing by any Borrower,  or permit or require the applicable Credit
Party to use such money, or any part thereof, to replace, repair or restore the
Collateral in a diligent and expeditious manner with materials and workmanship
of substantially the same quality as existed before the loss, damage or
destruction. Notwithstanding the foregoing, if the casualty giving rise to such
insurance proceeds could not reasonably be expected to have a Material Adverse
Effect and Net Proceeds of insurance with respect to such casualty do not
exceed $100,000 per instance for any retail location or $250,000 per instance
for the headquarters facility located in Austin, Texas, Agent shall permit the
applicable Credit Party to replace, restore or repair the Collateral; provided
that if such Credit Party has not completed or entered into binding agreements
to complete such replacement, 

 

21

 

restoration or repair within
180 days of such casualty, Agent may apply such Net Proceeds to the Obligations
in accordance with Section 1.5(f); provided further that in
the case of Net Proceeds pertaining to any Credit Party other than a Borrower,
such insurance proceeds shall be applied to the Loans owing by a Borrower.  All insurance proceeds that are to be made available
to such Borrower to replace, repair or restore the Collateral shall be applied
by Agent to reduce the outstanding principal balance of the Revolving Loan
(which application shall not result in a permanent reduction of the Revolving
Loan Commitment) and upon such application, Agent shall establish a Reserve
against the Borrowing Base of such Borrower or if the loss was of property of a
Credit Party other than a Borrower, to the Aggregate Borrowing Base in an
amount equal to the amount of such proceeds so applied.  All insurance proceeds made available to any
Credit Party that is not a Borrower to replace, repair or restore Collateral
shall be deposited in a cash collateral account or an account subject to a
Blocked Account Agreement.  Thereafter,
such funds shall be made available to such Credit Party to provide funds to
replace, repair or restore the Collateral as follows: (i) such Borrower
shall request a Revolving Credit Advance or release from the cash collateral
account be made to such Borrower or such Credit Party, as applicable, in the
amount requested to be released; (ii) so long as the conditions set forth
in Section 7.2 have been met, Revolving Lenders shall make such
Revolving Credit Advance or Agent shall release funds from the cash collateral
account; and (iii) in the case of insurance proceeds applied against the
Revolving Loan, the Reserve established with respect to such insurance proceeds
shall be reduced by the amount of such Revolving Credit Advance.  To the extent not used to replace, repair or
restore the Collateral, such Net Proceeds shall be applied in accordance with Section 1.5(f);
provided that in the case of insurance proceeds pertaining to any Credit
Party other than a Borrower, such insurance proceeds shall be applied to the
Loans owing by a Borrower.

 

2.3.                              Inspection;
Lender Meeting.  Each Credit
Party shall permit any authorized representatives of Agent to visit, audit and
inspect any of the properties of such Credit Party and its Subsidiaries,
including its and their financial and accounting records, and to make copies
and take extracts therefrom, and to discuss its and their affairs, finances and
business with its and their officers and certified public accountants, at such
reasonable times during normal business hours and as often as may be reasonably
requested.  Representatives of each
Lender will be permitted to accompany representatives of Agent during each
visit, inspection and discussion referred to in the immediately preceding
sentence.  Without in any way limiting
the foregoing, to the extent requested by Agent, each Credit Party will
participate and will cause key management personnel of each Credit Party and
its Subsidiaries to participate in a meeting with Agent and Lenders at least
once during each year, which meeting shall be held at such time and such place
as may be reasonably acceptable to Agent and Borrower Representative.

 

2.4.                              Organizational
Existence.  Except as
otherwise permitted by Section 3.6, each Credit Party will and will
cause its Subsidiaries to at all times preserve and keep in full force and
effect its organizational existence and all rights and franchises related to
its business the loss of which could reasonably be expected to have a Material
Adverse Effect.

 

2.5.                              Environmental
Matters.  Each Credit Party shall and
shall cause each Person within its control to: (a) conduct its operations
and keep and maintain its Real Estate in compliance with all Environmental Laws
and Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions that are appropriate
or necessary (i) to maintain the value and marketability of the owned Real
Estate or (ii) to otherwise comply with Environmental Laws and Environmental
Permits pertaining to the presence, generation, treatment, storage, use,
disposal, transportation or Release of any Hazardous Material on, at, in,
under, above, to, from or about any of its Real Estate; (c) notify Agent
promptly after such Credit Party or any Person within its control becomes aware
of any violation of Environmental Laws or Environmental Permits or any Release
on, at, in, under, above, to, from or about 

 

22

 

any Real Estate that is
reasonably likely to result in Environmental Liabilities to a Credit Party or
its Subsidiaries in excess of $100,000; and (d) promptly forward to Agent
a copy of any order, notice, request for information or any communication or
report received by such Credit Party or any Person within its control in
connection with any such violation or Release or any other matter relating to
any Environmental Laws or Environmental Permits that could reasonably be
expected to result in Environmental Liabilities in excess of $100,000, in each
case whether or not the Environmental Protection Agency or any Governmental
Authority has taken or threatened any action in connection with any such
violation, Release or other matter.  If
Agent at any time has a reasonable basis to believe that there may be a
violation of any Environmental Laws or Environmental Permits by any Credit
Party or any Person under its control or any Environmental Liability arising
thereunder, or a Release of Hazardous Materials on, at, in, under, above, to,
from or about any of its Real Estate, that, in each case, could reasonably be
expected to have a Material Adverse Effect, then each Credit Party and its
Subsidiaries shall, upon Agent’s written request (i) cause the performance
of such environmental audits including subsurface sampling of soil and
groundwater, and preparation of such environmental reports, at Borrowers’
expense, as Agent may from time to time reasonably request, which shall be
conducted by reputable environmental consulting firms reasonably acceptable to
Agent and shall be in form and substance reasonably acceptable to Agent, and (ii) permit
Agent or its representatives to have access to all Real Estate for the purpose
of conducting such environmental audits and testing as Agent deems appropriate,
including subsurface sampling of soil and groundwater.  Borrowers shall reimburse Agent for the costs
of such audits and tests and the same will constitute a part of the Obligations
secured hereunder.

 

2.6.                              Landlords’
Agreements, Mortgagee Agreements, Bailee Letters and Real Estate Purchases.  Each Credit Party shall use commercially
reasonable efforts to obtain a landlord’s agreement, mortgagee agreement or
bailee letter, as applicable, from the lessor of each leased property,
mortgagee of owned property or bailee with respect to any warehouse, processor
or converter facility or other location where Collateral is stored or located,
which agreement or letter shall contain a waiver or subordination of all Liens
or claims that the landlord, mortgagee or bailee may assert against the
Collateral at that location, and shall otherwise be reasonably satisfactory in
form and substance to Agent. With respect to such locations or warehouse space
leased or owned as of the Closing Date or thereafter, if Agent has not received
a landlord or mortgagee agreement or bailee letter as of the Closing Date (or,
if later, as of the date such location is acquired or leased), the Eligible
Inventory at that location shall, in Agent’s discretion, be subject to such
Reserves as may be established by Agent in its reasonable credit judgment up to
three months’ rent or storage charges (as applicable) for each such
location.  Each Credit Party shall and
shall cause its Subsidiaries to timely and fully pay and otherwise perform in
all material respects their obligations under all leases and other agreements
with respect to each leased location or public warehouse where any Collateral
is or may be located.

 

2.7.                              Conduct of
Business.  Each Credit
Party shall at all times maintain, preserve and protect all of its assets and
properties used or useful in the conduct of its business, and keep the same in
good repair, working order and condition in all material respects (taking into
consideration ordinary wear and tear) and from time to time make, or cause to
be made, all necessary or appropriate repairs, replacements and improvements
thereto consistent with industry practices; and transact business only in such
corporate and trade names as are set forth in Schedule 2.7.

 

2.8.                              Further
Assurances.

 

(a)                                  Each Credit
Party shall, from time to time, execute such guaranties, financing statements,
documents, security agreements and reports as Agent or Requisite Lenders at any
time may reasonably request to evidence, perfect or otherwise implement the
guaranties and security for repayment of the Obligations contemplated by the
Loan Documents.

 

23

 

(b)                                 In the event
that after the Closing Date any Credit Party acquires a fee ownership interest
in real property having a fair market value in excess of $1,000,000, such
Credit Party shall deliver to Agent a fully executed Mortgage or deed of trust
over such real property in form and substance reasonably satisfactory to Agent,
together with such title insurance policies, surveys, appraisals, evidence of
insurance, legal opinions, environmental assessments and other documents and
certificates as shall be reasonably required by Agent.

 

(c)                                  Each Credit
Party shall (i) cause each Person, upon its becoming a Subsidiary of such
Credit Party (provided that this shall not be construed to constitute consent
by any of the Lenders to any transaction referred to above which is not
expressly permitted by the terms of this Agreement), promptly to guaranty the
Obligations and to grant to Agent, for the benefit of Agent and Lenders, a
security interest in the real, personal and mixed property of such Person to
secure the Obligations, (ii) pledge, or cause to be pledged, to Agent, for
the benefit of Agent and Lenders, all of the Stock of such Subsidiary to secure
the Obligations (limited, however, in the case of any Foreign Subsidiary, to
65% of the Voting Stock, and all other Stock, of such Subsidiary) and (iii) cause
such Subsidiary to become a party to the Intercompany Subordination Agreement,
and, as a Credit Party, this Agreement. 
The documentation for such guaranty, security and pledge shall be
substantially similar to the Loan Documents executed concurrently herewith with
such modifications as are reasonably requested by Agent.

 

2.9.                                                                              Cash Management
Systems. 
On or prior to the Closing Date each Credit Party shall
establish and will maintain until the Termination Date, the cash management
systems described in Annex F (the “Cash Management Systems”).

 

SECTION 3.

NEGATIVE COVENANTS

 

Each Credit Party executing
this Agreement jointly and severally agrees as to all Credit Parties that from
and after the date hereof until the Termination Date:

 

3.1.                              Indebtedness.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries directly or indirectly to create, incur,
assume, or otherwise become or remain directly or indirectly liable with
respect to any Indebtedness (other than pursuant to a Contingent Obligation
permitted under Section 3.4) except:

 

(a)                                  the
Obligations;

 

(b)                                 Hedging
obligations under Rate Contracts
arranged by GE Capital or any other Lender (or an Affiliate thereof) entered
into for the sole purpose of hedging in the normal course of business and
consistent with industry practices.

 

(c)                                  Indebtedness
consisting of intercompany loans and advances made by any Borrower to any
Credit Party, other than Holdings, that is a Borrower or Guarantor or by such
Guarantor to any Borrower or other Guarantor; provided, that: (i) except
in the case of unpaid amounts for intercompany sales of inventory in the
ordinary course of business, each Borrower shall have executed and delivered to
each Guarantor, and each Guarantor shall have executed and delivered to each
Borrower, on the Closing Date, a demand note (the “Intercompany Note”) to
evidence any such intercompany Indebtedness owing at any time by any Borrower
to any Guarantor or by any Guarantor to any Borrower, which Intercompany Notes
shall be in form and substance reasonably satisfactory to Agent and shall be 

 

24

 

pledged and delivered to
Agent pursuant to the applicable Pledge Agreement or Security Agreement as
additional collateral security for the Obligations; (ii) such Borrower
shall record all intercompany transactions on its books and records; (iii) the
obligations of such Borrower under any such Intercompany Notes shall be
subordinated to the Obligations of such Borrower hereunder pursuant to the
Intercompany Subordination Agreement; (iv) at the time any such
intercompany loan or advance is made by such Borrower and after giving effect
thereto, such Borrower shall be Solvent; (v) no Default or Event of
Default would occur and be continuing after giving effect to any such proposed
intercompany loan; (vi) in the case of any such intercompany loans made by
any Borrower, Borrowing Availability shall be not less than $200,000 after
giving effect to such intercompany loan; (vii) the aggregate amount of
such intercompany loans owing to Borrowers by other Credit Parties shall not
exceed $2,500,000 at any one time outstanding; and (viii) the recipient of
any such intercompany loans shall be creditworthy as determined by Agent;

 

(d)                                 Indebtedness
not to exceed $5,000,000 in the aggregate at any time outstanding secured by
purchase money Liens or incurred with respect to Capital Leases;

 

(e)                                  any other
unsecured Indebtedness not to exceed $2,500,000 in the aggregate at any time
outstanding; and

 

(f)                                    any other
unsecured Subordinated Debt if at the time of the incurrence of such
Subordinated Debt, the Credit Parties have, on a pro forma basis after giving
effect to the incurrence of such Indebtedness, a Consolidated Fixed Charge
Coverage Ratio as at the end of, and for, the most recently ended twelve-month
period, of at least 1.25:1.00 and shall have delivered an officer’s certificate
to Agent (with such supporting documentation as Agent shall reasonably request)
as to the calculation of such Consolidated Fixed Charge Coverage Ratio.

 

3.2.                              Liens and
Related Matters.

 

(a)                                  No Liens.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly create, incur,
assume or permit to exist any Lien on or with respect to any property or asset
of such Credit Party or any such Subsidiary, whether now owned or hereafter
acquired, or any income or profits therefrom, except Permitted Encumbrances
(including, without limitation, those Liens constituting Permitted Encumbrances
existing on the date hereof and renewals and extensions thereof, as set forth
on Schedule 3.2).

 

(b)                                 No Negative
Pledges.  The Credit Parties shall not
and shall not cause or permit their Subsidiaries to directly or indirectly
enter into or assume any agreement (other than the Loan Documents and
provisions contained in agreements expressly permitted under Section 3.2(c))
prohibiting the creation or assumption of any Lien in favor of Agent, for the
benefit of itself and Lenders, upon its properties or assets, whether now owned
or hereafter acquired.

 

(c)                                  No Restrictions
on Subsidiary Distributions to Borrowers.  Except as provided herein the Credit Parties
shall not and shall not cause or permit their Subsidiaries to directly or
indirectly create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any such
Subsidiary to: (1) pay dividends or make any other distribution on any of
such Subsidiary’s Stock owned by any Borrower or any other Subsidiary; (2) pay
any Indebtedness owed to any Borrower or any other Subsidiary; (3) make loans
or advances to any Borrower or any other Subsidiary; or (4) transfer any
of its property or assets to any Borrower or any other Subsidiary, except for
such encumbrances or restrictions existing under or by reason of (i) mandatory
provisions of applicable law, if any, (ii) this Agreement and the other
Loan Documents, (iii) customary provisions restricting subletting or
assignment of any lease governing any leasehold interest of Holdings or any of
its

 

25

 

Subsidiaries, (iv) customary
provisions restricting assignment of any licensing agreement (in which Holdings
or any of its Subsidiaries is the licensee) or other contract entered into by
Holdings or any of its Subsidiaries in the ordinary course of business, (v) restrictions
on the transfer of any asset pending the close of the sale of such asset, (vi) any
operating lease or capital lease, insofar as the provisions thereof limit
grants of a security interest in, or other assignments of, the related leasehold
interest to any other Person, (vii) customary provisions in partnership
agreements, limited liability company organizational documents, joint venture
agreements and other similar agreements entered into the ordinary course of
business in connection with an Investment expressly permitted under Section 3.3
that restrict the transfer of capital stock in partnership, limited liability
companies, joint ventures or similar Persons and (viii) restrictions
contained in agreements for Subordinated Debt permitted under Section 3.1(f),
provided, that restrictions in any such Subordinated Debt agreement shall not
be more restrictive than any contained in this Agreement.

 

3.3.                              Investments.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly make or own any
Investment in any Person except:

 

(a)                                  GII and its  Subsidiaries may make and own Investments
in Cash Equivalents subject to account control agreements in favor of Agent; provided
that such Cash Equivalents are not subject to setoff rights other than any such
setoff rights permitted under the terms of the respective control agreement;

 

(b)                                 GII and its  Subsidiaries may make intercompany loans
to other Credit Parties to the extent permitted under Section 3.1;

 

(c)                                  Rate Contracts entered into in compliance with Section 3.1;

 

(d)                                 GII and its  Subsidiaries may make loans and advances
to employees for moving, entertainment, travel and other similar expenses in
the ordinary course of business not to exceed $500,000 in the aggregate at any
time outstanding; and

 

(e)                                  GII and its  Subsidiaries may make capital
contributions to their wholly-owned Domestic Subsidiaries in an amount not to
exceed $500,000 in the aggregate in addition to the amount of Investments made
pursuant to Section 3.1(c);

 

(f)                                    Any Credit
Party may make an Investment in Golfsmith Europe; provided that the
aggregate amount of such Investments does not exceed $1,500,000 during any
Fiscal Year or $5,000,000 at any time; and

 

(g)                                 Any Credit
Party may acquire Inventory from bankruptcy estates, if such Inventory (i) is
in good condition and salable as new in accordance with such Credit Party’s
normal practices, (ii) is acquired by such Credit Party free and clear of
any Liens and claims of others and (iii) is acquired by such Credit Party
on terms that are commercially reasonable or advantageous to such Credit Party
and do not impose any burdensome condition or restriction on such Credit Party;

 

(h)                                 Borrowers and
their Subsidiaries may hold accounts receivables or similar receivable
obligations owing to any of them, if created in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms of such
Borrower or such Subsidiary;

 

(i)                                     Holdings and
its Subsidiaries may hold the Investments held by them on the Closing Date and
described on Schedule 3.3;

 

26

 

(j)                                     Borrowers and
their Subsidiaries may acquire and own investments (including debt obligations)
received in connection with the bankruptcy or reorganization of suppliers and
customers or received pursuant to a plan or reorganization of any supplier or
customer, in each case in good faith settlement of delinquent obligations of,
and other disputes with, customers and suppliers arising in the ordinary course
of business;

 

(k)                                  Borrowers and
their Subsidiaries may consummate the Related Transactions;

 

(l)                                     Borrowers and
their Subsidiaries may acquire and hold Investments consisting of notes
received in connection with Asset Dispositions permitted under Section 3.7;
provided, that such notes shall be pledged and delivered to Agent, for
the benefit of Agent and Lenders, as security for the Obligations;

 

(m)                               Borrowers and
any of their Subsidiaries may convey, lease, license, sell or otherwise transfer
or acquire assets and properties to the extent permitted by Section 3.7;

 

(n)                                 Holdings may
make cash common equity contributions to Borrowers and Borrowers and their
Subsidiaries may establish Subsidiaries to the extent permitted by Section 3.13;

 

(o)                                 Borrowers and
their Subsidiaries may consummate Permitted Acquisitions; and

 

(p)                                 Borrowers and
their Subsidiaries may make Investments not otherwise permitted by this Section 3.3
in an aggregate amount not to exceed $500,000 (net of cash repayments of
principal in the case of loans and cash equity returns (whether as a dividend
or redemption) in the case of equity investments).

 

3.4.                              Contingent
Obligations.  The Credit
Parties shall not and shall not cause or permit their Subsidiaries to directly
or indirectly create or become or be liable with respect to any Contingent
Obligation except:

 

(a)                                  Letter of
Credit Obligations;

 

(b)                                 those arising
under Rate Contracts entered
into in compliance with Section 3.1

 

(c)                                  those resulting
from endorsement of negotiable instruments for collection in the ordinary
course of business;

 

(d)                                 those existing
on the Closing Date and described in Schedule 3.4;

 

(e)                                  those arising
under indemnity agreements to title insurers to cause such title insurers to
issue to Agent mortgagee title insurance policies;

 

(f)                                    those arising
with respect to customary indemnification obligations incurred in connection
with Asset Dispositions permitted hereunder;

 

(g)                                 those incurred
in the ordinary course of business with respect to surety and appeal bonds,
performance and return-of-money bonds and other similar obligations not
exceeding at any time outstanding $1,000,000 in aggregate liability;

 

27

 

(h)                                 those incurred
with respect to Indebtedness permitted by Section 3.1 provided that
any such Contingent Obligation is subordinated to the Obligations to the same
extent as the Indebtedness to which it relates is subordinated to the
Obligations;

 

(i)                                     those arising
under the Acquisition Agreement, whether for indemnification, purchase price
adjustments, compensation or otherwise;

 

(j)                                     Contingent
Obligations of any Credit Party of the obligations of any Credit Party which
are permitted under this Agreement; and

 

(k)                                  any other
Contingent Obligation not expressly permitted by clauses (a) through (j) above,
so long as any such other Contingent Obligations, in the aggregate at any time
outstanding, do not exceed $250,000.

 

3.5.                              Restricted
Payments.  The Credit
Parties shall not and shall not cause or permit their Subsidiaries to directly
or indirectly declare, order, pay, make or set apart any sum for any Restricted
Payment, except that:

 

(a)                                  GII may pay
dividends to Holdings that are used by Holdings (i) to pay federal and
state income taxes then due and owing, franchise taxes and other similar
licensing expenses incurred in the ordinary course of business; provided
that GII’s aggregate contribution to taxes as a result of the filing of a
consolidated or combined return by Holdings shall not be greater, nor the aggregate
receipt of tax benefits less, than they would have been had GII not filed a
consolidated or combined return with Holdings, or (ii) to pay other
reasonable out of pocket costs and expenses incurred in the ordinary course of
business;

 

(b)                                 Wholly-owned
Subsidiaries of GII may make Restricted Payments to GII or to a wholly-owned
Subsidiary of GII;

 

(c)                                  GII may pay
fees due to First Atlantic on the Closing Date;

 

(d)                                 Borrowers may
pay dividends to Holdings to permit Holdings to repurchase, redeem, acquire,
cancel or otherwise retire Stock owned by employees of Holdings and its
Subsidiaries whose employment with Holdings and/or its Subsidiaries has been
terminated pursuant to death, disability, retirement or otherwise, provided
that such dividend payments shall not exceed $500,000  in any fiscal year and provided that no Event of Default
exists at the time of such Restricted Payment or would occur as a result
thereof; provided, further, that, if in any Fiscal Year, any portion of the
permitted $500,000 amount is not utilized, up to $250,000 of such unused amount
may be carried forward to the next succeeding Fiscal Year to increase the
permitted amount for such succeeding Fiscal Year;

 

(e)                                  Borrowers may
pay dividends to Holdings to permit Holdings to repurchase, redeem, acquire,
cancel or otherwise retire Stock owned by employees of Holdings and its
Subsidiaries who will incur tax liabilities as a result of the consummation of
the Initial Public Offering; provided, that, (i) such dividend payments
shall not exceed $1,200,000  in the
aggregate, (ii) such dividend payments are made within one year after the
Closing Date and (iii) no Event of Default exists at the time of such
Restricted Payment or would occur as a result thereof;

 

(f)                                    GII and
Holdings may make any Restricted Payment required to be made by them pursuant
to the Acquisition Agreement, whether in respect of purchase price adjustment,
indemnification or otherwise;

 

28

 

(g)                                 any Subsidiary
of a Borrower may pay dividends to its shareholders, in each case so long as
such Borrower or any Subsidiary of such Borrower which owns an equity interest
in such Subsidiary receives a percentage of any such dividend which is at least
equal to its percentage equity interest in the respective Subsidiary paying
such dividend; and

 

(h)                                 Borrowers may
make Restricted Payments to Holdings and Holdings may make Restricted Payments
so long as (i) average daily Borrowing Availability for the 30 day period
prior to the making of any such Restricted Payment, and projected average daily
Borrowing Availability for the 30 day period after the making of any such
Restricted Payment (after giving effect to such Restricted Payment), shall be
not less than $15,000,000 and (ii) at the time any such Restricted Payment
is made, the sum of all Restricted Payments made under this clause (h) since
the Closing Date (including such Restricted Payment) shall not exceed 50% of
the cumulative Consolidated Net Income since the Closing Date.

 

3.6.                              Restriction on
Fundamental Changes.  The Credit
Parties shall not and shall not cause or permit their Subsidiaries to directly
or indirectly:  (a) amend, modify or
waive any term or provision of its organizational documents, including its
articles of incorporation, certificates of designations pertaining to preferred
stock, by-laws, partnership agreement or operating agreement unless required by
law or if such amendment, modification or waiver could not adversely impact the
interests of Agent or the Lenders in any material respect; (b) enter into
any transaction of merger or consolidation except, upon not less than five (5) Business
Days prior written notice to Agent, (i) any
Borrower may merge with or into another Borrower and (ii) any wholly-owned Domestic
Subsidiary of a Borrower may be merged with or into such Borrower (provided
that such Borrower is the surviving entity) or any other wholly-owned Domestic
Subsidiary of such Borrower that is a Guarantor; (c) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), except, upon not
less than five (5) Business Days prior written notice to Agent, any
wholly-owned Domestic Subsidiary of a Borrower may be merged with or into such
Borrower (provided that such Borrower is the surviving entity) or any
other wholly-owned Domestic Subsidiary of such Borrower that is a Guarantor; or
(d) acquire by purchase or otherwise all or any substantial part of the
business or assets of any other Person. 
Notwithstanding the foregoing, Borrowers may consummate Permitted
Acquisitions.

 

3.7.                              Disposal of
Assets or Subsidiary Stock.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly convey, sell,
lease, sublease, transfer or otherwise dispose of, or grant any Person an
option to acquire, in one transaction or a series of related transactions, any
of its property, business or assets, whether now owned or hereafter acquired,
except for (a) sales of inventory in good faith to customers for fair
value in the ordinary course of business and dispositions of obsolete equipment
not used or useful in the business, (b) closures of individual retail
stores, if, in the judgment of the relevant Credit Party’s board of directors
such closure is appropriate and any inventory held therein having a value in
excess of $100,000 is transferred to other stores for sale in the ordinary
course of business or returned to such Credit Party’s warehouse (c) asset
transfers from (i) a Borrower to another Borrower or (ii) any
Subsidiary of a Borrower (that is not itself a Borrower) to a Borrower or
another wholly-owned domestic Subsidiary of a Borrower, (d) sales of Cash
Equivalents and (e) Asset Dispositions if all of the following conditions
are met:  (i) the market value of
assets sold or otherwise disposed of in any single transaction or series of
related transactions does not exceed $500,000 and the aggregate market value of
assets sold or otherwise disposed of in any Fiscal Year does not exceed
$1,000,000; (ii) the consideration received is at least equal to the fair
market value of such assets; (iii) the sole consideration received is cash
or a note subject to Section 3.3; and (iv) no Default or Event of
Default then exists or would result from such Asset Disposition.

 

29

 

3.8.                              Transactions
with Affiliates.  The Credit
Parties shall not and shall not cause or permit their Subsidiaries to directly
or indirectly enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
management, consulting, investment banking, advisory or other similar services)
with any Affiliate or with any director, officer or employee of any Credit
Party, except (a) as set forth on Schedule 3.8, (b) transactions
in the ordinary course of and pursuant to the reasonable requirements of the
business of any such Credit Party or any of its Subsidiaries and upon fair and
reasonable terms which are fully disclosed to Agent and are no less favorable
to any such Credit Party or any of its Subsidiaries than would be obtained in a
comparable arm’s length transaction with a Person that is not an Affiliate, (c) payment
of reasonable compensation to officers and employees for services actually
rendered to any such Credit Party or any of its Subsidiaries (d) payment
of director’s fees in the ordinary course of business, plus expenses, (e) payment
of reasonable compensation (including compensation under employee benefit
plans, stock option plans and other similar compensatory arrangements) to
officers, directors and employees in the ordinary course of business for
services actually rendered to any such Credit Party or any of its Subsidiaries,
(f) the issuance of Stock of Holdings as compensation to employees,
officers and directors, (g) transactions permitted under Sections 3.1,
3.3, 3.4, 3.5, 3.6 or 3.7, (h) Holdings and its Subsidiaries may enter
into and make payments under customary indemnification provisions with
officers, employees and directors of Holdings and its Subsidiaries, (i) employment
arrangements entered into by the Credit Parties with respect to the procurement
of services of their respective officers and employees in the ordinary course
of business, (j) the issuance of Stock of Holdings to the Permitted Holders
and (k) the reimbursement of any out-of-pocket expenses incurred by First
Atlantic in connection with providing services to the Credit Parties.

 

3.9.                              Conduct of
Business.  The Credit
Parties shall not and shall not cause or permit their Subsidiaries to directly
or indirectly engage in any business other than businesses of the type currently
engaged in or proposed to be engaged in as of the Closing Date or any business
substantially related thereto.  Holdings
shall engage in no business other than owning Stock in GII and activities
related thereto, the performance of its obligations under the Loan Documents to
which it is a party and the maintenance of its corporate existence and
corporate governance.  GII shall engage
in no business other than owning Stock of its Subsidiaries and activities
related thereto, the performance of its obligations under the Loan Documents to
which it is a party and the maintenance of its corporate existence and
corporate governance.

 

3.10.                        [Intentionally
Omitted].

 

3.11.                        Fiscal Year.  No Credit Party shall change its Fiscal Year
or permit any of its Subsidiaries to change their respective fiscal years.

 

3.12.                        Press Release;
Public Offering Materials.  Each
Credit Party executing this Agreement agrees that neither it nor its Affiliates
will in the future issue any press releases or other public disclosure,
including any prospectus, proxy statement or other materials filed with any
Governmental Authority relating to a public offering of the Stock of any Credit
Party, using the name of GE Capital or its affiliates or referring to this
Agreement, the other Loan Documents or the Related Transactions Documents
without at least two (2) Business Days’ prior notice to GE Capital and
without the prior written consent of GE Capital unless (and only to the extent
that) such Credit Party or Affiliate is required to do so under law and then,
in any event, such Credit Party or Affiliate will consult with GE Capital
before issuing such press release or other public disclosure.  Each Credit Party consents to the publication
by Agent or any Lender of a tombstone or similar advertising material relating
to the financing transactions contemplated by this Agreement.  Agent or such Lender shall provide a draft of
any such tombstone or similar advertising material to each Credit Party for
review and comment prior to the publication thereof.  Agent 

 

30

 

reserves the right to
provide to industry trade organizations information necessary and customary for
inclusion in league table measurements.

 

3.13.                        Subsidiaries.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly establish, create
or acquire any new Subsidiary; provided, that, Borrowers or any wholly-owned
Subsidiary of a Borrower may acquire, establish or create one or more
wholly-owned Subsidiaries so long as, upon the creation, establishment or
acquisition thereof (i) 100% of the Stock of each such wholly-owned
Subsidiary is pledged pursuant to the Pledge Agreement (and, if certificated,
delivered to Agent, for the benefit of Lenders), and (ii) each such
domestic wholly-owned Subsidiary executes the Security Agreement and a Guaranty
in form and substance reasonably satisfactory to Agent; provided, further, that
(x) Subsidiaries created or acquired in connection with Investments
permitted under Section 3.3(p) may be less than wholly owned
by Borrowers or one of their Subsidiaries and (y) Borrowers or one of
their wholly-owned Subsidiaries may establish transitory special purpose
Subsidiaries for the purpose of effecting Permitted Acquisitions (which
Subsidiaries shall own no assets (other than nominal capitalization and any
contract rights pursuant to the acquisition agreement relating to any such
Permitted Acquisition and other than cash held on a transitory basis not to
exceed two (2) Business Days which is used to pay the purchase price and
transaction fees and expenses for such Permitted Acquisition; provided, that
Agent maintains a first priority perfected Lien in such cash) prior to giving
effect to any such Permitted Acquisition) without having to comply with
preceding clauses (i) and (ii).

 

3.14.                        Bank Accounts.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to establish any new bank accounts without
prior written notice to Agent and unless Agent and the bank at which the
account is to be opened enter into a tri-party agreement regarding such bank
account pursuant to which such bank acknowledges the security interest of Agent
in such bank account, agrees to comply with instructions originated by Agent
directing disposition of the funds in the bank account without further consent
from such Credit Party or Subsidiary, and agrees to subordinate and limit any
security interest the bank may have in the bank account on terms satisfactory
to Agent.

 

3.15.                        Hazardous
Materials.  The Credit
Parties shall not and shall not cause or permit their Subsidiaries to cause or
permit a Release of any Hazardous Material on, at, in, under, above, to, from
or about any of the Real Estate where such Release would (a) violate in
any respect, or form the basis for any Environmental Liabilities by the Credit
Parties or any of their Subsidiaries under, any Environmental Laws or
Environmental Permits or (b) otherwise adversely impact the value or
marketability of any of the Real Estate or any of the Collateral, other than
such violations or Environmental Liabilities that could not reasonably be
expected to have a Material Adverse Effect.

 

3.16.                        ERISA.  The Credit Parties shall not and shall not
cause or permit any ERISA Affiliate to, cause or permit to occur an ERISA Event
to the extent such ERISA Event could reasonably be expected to have a Material
Adverse Effect.

 

3.17.                        Sale-Leaseback.  No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.

 

3.18.                        Prepayments of
Other Indebtedness.  The Credit
Parties shall not, directly or indirectly, voluntarily purchase, redeem,
defease or prepay any principal of, premium, if any, interest or other amount
payable in respect of any Indebtedness, other than (i) the Obligations; (ii) Indebtedness
secured by a Permitted Encumbrance if the asset securing such Indebtedness has
been sold or otherwise disposed of in accordance with Section 3.7(b);
(iii) intercompany Indebtedness reflecting amounts owing to Borrowers; (iv) Indebtedness
permitted under Section 3.1(d); and (v) Indebtedness permitted
under Sections 3.1(e) and (f) so long as average daily
Borrowing Availability for the 30 day period prior to the 

 

31

 

making of any such
prepayment, and projected average daily Borrowing Availability for the 30 day
period after the making of any such prepayment (after giving effect to such
prepayment), shall be not less than $15,000,000.

 

3.19.                        Minimum Borrowing Availability. 
The Credit Parties shall not permit Borrowing Availability at any time
to be less than $3,500,000.

 

SECTION 4.

FINANCIAL REPORTING

 

The Credit Parties covenant
and agree that from and after the date hereof until the Termination Date, the
Credit Parties shall perform and comply with, and shall cause each of the other
Credit Parties to perform and comply with, all covenants in this Section 4
applicable to such Person.

 

4.1.                                                                              Financial
Statements and Other Reports.  Holdings and its Subsidiaries will maintain,
and cause each of their Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to permit
preparation of Financial Statements in conformity with GAAP (it being
understood that monthly Financial Statements are not required to have footnote
disclosures and are subject to year end adjustments).  Borrower Representative will deliver each of the
Financial Statements and other reports described below to Agent (and each
Lender in the case of the Financial Statements and other reports described in Sections
(4.1)(a), (b), (d), (f), (g), (h), and (k)).

 

(a)                                  Monthly
Financials.  As soon as
available and in any event within thirty (30) days after the end of each Fiscal Month (other than the last Fiscal Month of Holdings’ Fiscal Year)
and within sixty (60) days after the end of the last Fiscal Month of Holdings’ Fiscal Year, Borrower Representative will
deliver (1) the consolidated balance sheets of Holdings and its
Subsidiaries, as at the end of such Fiscal
Month, and the related consolidated statements of income, stockholders’
equity and cash flow for such Fiscal
Month and for the period from the beginning of the then current Fiscal
Year of Holdings to the end of such Fiscal
Month and (2) a report setting forth in comparative form the
corresponding figures for the corresponding periods of the previous Fiscal Year
and the corresponding figures from the most recent Projections for the current
Fiscal Year delivered pursuant to Section 4.1(f).

 

(b)                                 Year-End
Financials.  As soon as
available and in any event within ninety (90) days after the end of each Fiscal
Year of Holdings, Borrower Representative will deliver (1) the
consolidated balance sheets of Holdings and its Subsidiaries, as at the end of
such year, and the related consolidated statements of income, stockholders’
equity and cash flow for such Fiscal Year (it being understood that the
delivery of Holdings’ SEC Form 10-K for such Fiscal Year shall satisfy the
requirement of this clause (1)), and (2) a report with respect to the
consolidated Financial Statements from a firm of Certified Public Accountants
of recognized national standing selected by Borrowers, which report shall be
prepared in accordance with Statement of Auditing Standards No. 58 (the “Statement”)
“Reports on Audited Financial Statements” and such report shall be “Unqualified”
(as such term is defined in such Statement).

 

(c)                                  Accountants’
Reports.  Promptly upon receipt thereof,
Borrower Representative will deliver copies of all significant reports
submitted by Borrowers’ firm of certified public accountants in connection with
each annual, interim or special audit or review of any type of the Financial
Statements or related internal control systems of Holdings  or its Subsidiaries  made by such accountants, including any
comment letter submitted by such accountants to management in connection with
their services.

 

32

 

(d)                                 Additional
Deliveries.

 

(i)                                     To Agent, upon
its request, and in any event no less frequently than noon New York time, six (6) Business Days after the end of each Fiscal Month (together with
a copy of any of the following reports requested by any Lender in writing after
the Closing Date), and, so long as an Event of Default has occurred and is
continuing from time to time more frequently upon the request of Agent, each of
the following reports, each of which shall be prepared by Borrowers as of the
last day of the immediately preceding Fiscal Month or the date 2 days prior to
the date of any such request:

 

(A)                              a Borrowing
Base Certificate, accompanied by such supporting detail and documentation as
shall be requested by Agent in its reasonable discretion (in substantially the
same form as Exhibit 4.1(d) (“Borrowing Base Certificate”);

 

(B)                                a summary of
Inventory by location and type with a supporting perpetual Inventory report, in
each case accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion; and

 

(C)                                a monthly trial
balance showing Accounts outstanding aged from invoice date as follows:  1 to 30 days, 31 to 60 days, 61 to 90 days
and 91 days or more, accompanied by such supporting detail and documentation as
shall be requested by Agent in its reasonable discretion.

 

(ii)                                  To Agent, at
the time of delivery of each of the monthly Financial Statements delivered
pursuant to this Section 4.1:

 

(A)                              a
reconciliation of the Borrowing Base for the most recently ended Fiscal Month,
general ledger and month-end Inventory reports to Holdings’ consolidated
general ledger and monthly Financial Statements delivered pursuant to this Section 4.1,
in each case accompanied by such supporting detail and documentation as shall
be requested by Agent in its reasonable discretion;

 

(B)                                a
reconciliation of the perpetual inventory by location to the Borrowing Base
Certificate for the most recently ended Fiscal Month, general ledger and
monthly Financial Statements delivered pursuant to this Section 4.1,
in each case accompanied by such supporting detail and documentation as shall
be requested by Agent in its reasonable discretion; and

 

(C)                                an aging of
accounts payable and a reconciliation of that accounts payable aging to each
Borrower’s general ledger and monthly Financial Statements delivered pursuant
to this Section 4.1, in each case accompanied by such supporting
detail and documentation as shall be requested by Agent in its reasonable
discretion.

 

(iii)                               To Agent, at
the time of delivery of each of the annual Financial Statements delivered
pursuant to Section 4.1, (i) a listing of government contracts
of each Borrower subject to the Federal Assignment of Claims Act of 1940; and (ii) a
list of any new applications for the registration of any Patent, Trademark or
Copyright filed by any Credit Party with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency in
the prior Fiscal Year.

 

33

 

(e)                                  Appraisals;
Inspections.

 

(i)                                     At Borrower’s
expense, at any time while and so long as an Event of Default shall have
occurred and be continuing, and in the absence of a Default or Event of Default, in the cases of clauses (x) and (y),
not more than twice during each
calendar year, and in the case of clause (z) not more than once
during each calendar year, Agent shall be entitled to (x) conduct or cause
to be conducted, a field examination or
audit of the Collateral, (y) obtain
appraisal reports in form and substance and from appraisers satisfactory to
Agent stating the then current liquidation
values of the Inventory of the Credit
Parties and (z) obtain appraisal reports in form and substance and from
appraisers satisfactory to Agent stating the then current liquidation values of
the Real Estate of the Credit Parties.

 

(ii)                                  Borrowers, at
their own expense, shall deliver to Agent the results of each physical
verification, if any, that Borrowers or any other Credit Party may in their
discretion have made, or caused any other Person to have made on their behalf,
of all or any portion of their Inventory (and, if a Default or an Event of
Default has occurred and is continuing, Borrowers shall, upon the request of
Agent, conduct, and deliver the results of, such physical verifications as
Agent may require).

 

(f)                                    Projections.  As soon as available and in any event no
later than the sixtieth day after the beginning of each of Holdings’ Fiscal
Years, Borrower Representative will deliver Projections of Holdings and its
Subsidiaries for the forthcoming fiscal year on a month by month basis

 

(g)                                 SEC Filings and
Press Releases.  Promptly
upon their becoming available, Borrower Representative will deliver copies of (1) all
Financial Statements, reports, notices and proxy statements sent or made
available by Holdings to its Stockholders, (2) all regular and periodic
reports and all registration statements and prospectuses, if any, filed by
Holdings, or any of its Subsidiaries with any securities exchange or with the
Securities and Exchange Commission, any Governmental Authority or any private
regulatory authority, and (3) all press releases and other statements made
available by Holdings or any of its Subsidiaries to the public concerning
developments in the business of any such Person.

 

(h)                                 Events of
Default, Etc.  Promptly
upon any officer of any Credit Party obtaining knowledge of any of the
following events or conditions, Borrower Representative shall deliver copies of
all notices given or received by Holdings or any of its Subsidiaries with
respect to any such event or condition and a certificate of Borrower
Representative’s chief executive officer specifying the nature and period of
existence of such event or condition and what action Holdings or any of its
Subsidiaries has taken, is taking and proposes to take with respect
thereto:  (1) any condition or event
that constitutes, or which could reasonably be expected to result in the
occurrence of, an Event of Default or Default; (2) any notice that any
Person has given to Holdings or any of its Subsidiaries or any other action
taken with respect to a claimed default or event or condition of the type
referred to in Section 6.1(b); (3) any event or condition that
could reasonably be expected to result in any Material Adverse Effect; or (4) any
default or event of default with respect to any Indebtedness of Holdings or any
of its Subsidiaries in a principal amount in excess of $1,000,000.

 

(i)                                     Litigation.  Promptly upon any officer of any Credit Party
obtaining knowledge of (1) the institution of any material action, charge,
claim, demand, suit, proceeding, petition, governmental investigation, tax
audit or arbitration now pending or, to the best knowledge of such Credit
Party, threatened against or affecting any Credit Party or any of its
Subsidiaries or any property of any Credit Party or any of its Subsidiaries (“Litigation”)
not previously disclosed by Borrower Representative to Agent or (2) any
material development in any action, suit, proceeding, governmental
investigation or arbitration at any time pending against or affecting any
Credit Party or any property of any Credit Party 

 

34

 

which, in each case, could
reasonably be expected to have a Material Adverse Effect, Borrower
Representative will promptly give notice thereof to Agent and provide such
other information as may be reasonably available to them to enable Agent and
its counsel to evaluate such matter.

 

(j)                                     Notice of
Corporate and other Changes.  Borrower Representative shall provide prompt
written notice of (1) all jurisdictions in which a Credit Party becomes
qualified after the Closing Date to transact business in which Inventory having
a value of $100,000 or more is located, (2) any change after the Closing
Date in the authorized and issued Stock of any Credit Party or any Subsidiary
of any Credit Party or any amendment to their articles or certificate of
incorporation, by-laws, partnership agreement or other organizational
documents, (3) any Subsidiary created or acquired by any Credit Party or
any of its Subsidiaries after the Closing Date, such notice, in each case, to
identify the applicable jurisdictions, capital structures or Subsidiaries, as
applicable, and (4) any other event that occurs after the Closing Date
which would cause any of the representations and warranties in Section 5
of this Agreement or in any other Loan Document to be untrue or misleading in
any material respect.  The foregoing
notice requirement shall not be construed to constitute consent by any of the
Lenders to any transaction referred to above which is not expressly permitted
by the terms of this Agreement.

 

(k)                                  Compliance
Certificate.  Together
with each delivery of Financial Statements of Holdings and its Subsidiaries
pursuant to Sections 4.1(a) and (b), Borrower Representative will
deliver a fully and properly completed Compliance Certificate (in substantially
the same form as Exhibit 4.1(k) (the “Compliance
Certificate”) signed by Holdings’ chief executive officer or chief
financial officer.

 

(l)                                     (Intentionally
Omitted).

 

(m)                               Other
Information.  With
reasonable promptness, Borrower Representative will deliver such other
information and data with respect to any Credit Party or any Subsidiary of any
Credit Party as from time to time may be reasonably requested by Agent.

 

(n)                                 Taxes.  Borrower Representative shall provide prompt
written notice of (i) the execution or filing with the IRS or any other
Governmental Authority of any agreement or other document extending, or having
the effect of extending, the period for assessment or collection of any Charges
by any Credit Party or any of its Subsidiaries and (ii) any agreement by
any Credit Party or any of its Subsidiaries or request directed to any Credit
Party or any of its Subsidiaries to make any adjustment under IRC Section 481(a),
by reason of a change in accounting method or otherwise, which in each case,
could reasonably be expected to have a Material Adverse Effect.

 

4.2.                              Accounting
Terms; Utilization of GAAP for Purposes of Calculations Under Agreement.  For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to such terms in conformity with GAAP. 
Financial statements and other information furnished to Agent pursuant
to Section 4.1 or any other section (unless specifically indicated
otherwise) shall be prepared in accordance with GAAP as in effect at the time
of such preparation; provided that no Accounting Change shall affect
financial covenants, standards or terms in this Agreement; provided
further that Borrowers shall prepare footnotes to the Financial Statements
required to be delivered hereunder that show the differences between the
Financial Statements delivered (which reflect such Accounting Changes) and the
basis for calculating financial covenant compliance (without reflecting such
Accounting Changes).  All such
adjustments described in clause (c) of the definition of the term
Accounting Changes resulting from expenditures made subsequent to the Closing
Date (including capitalization of costs and expenses or payment of pre-Closing
Date liabilities) shall be treated as expenses in the period the expenditures
are made.

 

35

 

SECTION 5.

REPRESENTATIONS AND WARRANTIES

 

To induce Agent and Lenders
to enter into the Loan Documents, to make Loans and to issue or cause to be
issued Letters of Credit, Borrowers and the other Credit Parties executing this
Agreement, jointly and severally, represent, warrant and covenant to Agent and
each Lender that the following statements are and, after giving effect to the
Related Transactions, will remain true, correct and complete until the
Termination Date with respect to all Credit Parties:

 

5.1.                              Disclosure.  No representation or warranty of any Credit
Party contained in this Agreement, the Financial Statements referred to in Section 5.5,
the other Related Transactions Documents or any other document, certificate or
written statement furnished to Agent or any Lender by or on behalf of any such
Person for use in connection with the Loan Documents or the Related
Transactions Documents contains any untrue statement of a material fact or
omitted, omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein (taken as a whole) not misleading in
light of the circumstances in which the same were made.  It is understood that, as to the financial
projections delivered to Agent and the Lenders by or on behalf of Holdings
and/or Borrowers, no representation or warranty is being made pursuant to this
Agreement other than that such financial projections are based on good faith
estimates and assumptions believed by such Persons to be reasonable at the time
made, it being recognized by Agent and the Lenders that projections as to
future events are not to be viewed as facts or factual information and that
actual results during the period or periods covered thereby may differ from the
projected results and such differences may be material.

 

5.2.                              No Material
Adverse Effect.  Since December 31,
2005 there have been no events or changes in facts or circumstances affecting
any Credit Party or any of its Subsidiaries which individually or in the
aggregate have had or could reasonably be expected to have a Material Adverse
Effect and that have not been disclosed herein or in the attached Disclosure
Schedules.

 

5.3.                              No Conflict.  The consummation of the Related Transactions
does not and will not violate or conflict with any laws, rules, regulations or
orders of any Governmental Authority or violate, conflict with, result in a
breach of, or constitute a default (with due notice or lapse of time or both)
under any Contractual Obligation or organizational documents of any Credit
Party or any of its Subsidiaries except if such violations, conflicts, breaches
or defaults could not reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect.

 

5.4.                              Organization,
Powers, Capitalization and Good Standing.

 

(a)                                  Organization
and Powers.  Each of the
Credit Parties and each of their Subsidiaries is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization and qualified to do business in all states where such
qualification is required except where failure to be so qualified could not
reasonably be expected to have a Material Adverse Effect.  The jurisdiction of organization and all
jurisdictions in which each Credit Party is qualified to do business are set
forth on Schedule 5.4(a).  Each of
the Credit Parties and each of their Subsidiaries has and, immediately prior to
the consummation of the Related Transactions, Acquisition Co. had, all
requisite organizational power and authority to own, pledge, mortgage or
otherwise encumber and operate its properties, to carry on its business as now
conducted and proposed to be conducted, to enter into each Related Transactions
Document to which it is a party and to incur the Obligations, grant liens and
security interests in the Collateral and carry out the Related Transactions.

 

(b)                                 Capitalization.  As of the Closing Date:  (i) the authorized Stock of each of the
Credit Parties and each of their Subsidiaries is as set forth on Schedule
5.4(b); (ii) all issued and 

 

36

 

outstanding Stock of each of
the Credit Parties and each of their Subsidiaries is duly authorized and
validly issued, fully paid, nonassessable, free and clear of all Liens other
than those in favor of Agent for the benefit of Agent and Lenders, and such
Stock was issued in compliance with all applicable state, federal and foreign
laws concerning the issuance of securities; (iii) the identity of the
holders of the Stock of each of the Holding’ direct and indirect Subsidiaries
and the percentage of their fully-diluted ownership of the Stock of and each
such Subsidiary is set forth on Schedule 5.4(b); and (iv) no Stock
of any such Subsidiary, other than those described above, is issued and
outstanding.  Except as provided in Schedule
5.4(b),  as of the Closing
Date, there are no preemptive or other outstanding rights, options, warrants,
conversion rights or similar agreements or understandings for the purchase or
acquisition from any Credit Party or any of its Subsidiaries of any Stock of
any such entity.

 

(c)                                  Binding
Obligation.  This
Agreement is, and the other Related Transactions Documents when executed and
delivered will be, the legally valid and binding obligations of the Credit
Parties party thereto, each enforceable against each of such Credit Parties, as
applicable, in accordance with their respective terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or other laws affecting,
creditors’ rights generally and the effects of general principles of equity.

 

5.5.                              Financial
Statements and Projections.  All Financial Statements concerning Holdings
and its Subsidiaries (including GII and its Subsidiaries) which have been or
will hereafter be furnished to Agent pursuant to this Agreement, including
those listed below, have been or will be prepared in accordance with GAAP
consistently applied (except as disclosed therein) and do or will present
fairly the financial condition of the entities covered thereby as at the dates
thereof and the results of their operations for the periods then ended, subject
to, in the case of unaudited Financial Statements, the absence of footnotes and
normal year-end adjustments.

 

(a)                                  The
consolidated balance sheets at December 31, 2005 and the related statement
of income of Holdings, on a consolidated basis, for the Fiscal Year then ended,
audited by Ernst & Young LLP.

 

(b)                                 The
consolidated balance sheet at April 1, 2006 and the related statement of
income of Holdings, on a consolidated basis, for the three (3) months then
ended.

 

The Projections delivered on
or prior to the Closing Date and the updated Projections delivered pursuant to Section 4.1(f) represent
and will represent as of the date thereof the good faith estimate of Credit
Parties and their senior management concerning the most probable course of
their business; provided, that, no representation or warranty is made as to the
impact of future general economic conditions or as to whether the projections
contained in the Projections will actually be realized and Agent and Lenders
understand that the Projections may differ from actual results and such
differences may be material.

 

5.6.                              Intellectual
Property. GII or another Credit Party owns, is licensed to
use or otherwise has the right to use, all Intellectual Property that is used
in and necessary for the conduct of each Credit Party’s business as currently
conducted and that is material to the condition (financial or other), business
or operations of such Credit Party and its Subsidiaries and all such
Intellectual Property that is registered as of the Closing Date is identified
on Schedule 5.6.  Each of the
registrations shown on Schedule 5.6 has been registered or applied for,
as the case may be, in accordance with the intellectual property laws of the
particular countries. Except as disclosed in Schedule 5.6, the use of
such Intellectual Property by the Credit Parties and their Subsidiaries and the
conduct of their businesses does not and, immediately prior to the consummation
of the Related Transactions, did not, and has not been alleged by any Person
to, infringe on the rights of any Person except for such infringement which
could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.

 

37

 

5.7.                              Investigations,
Audits, Etc.  As of the
Closing Date, except as set forth on Schedule 5.7, neither any Credit
Party nor any of its Subsidiaries is the subject of any review or audit by the
IRS or any governmental investigation concerning the violation or possible
violation of any law.

 

5.8.                              Employee
Matters.  Except as set forth on Schedule
5.8, (a) no Credit Party or Subsidiary of a Credit Party nor any of
their respective employees is subject to any collective bargaining agreement, (b) no
petition for certification or union election is pending with respect to the
employees of any Credit Party or any of their Subsidiaries and no union or
collective bargaining unit has sought such certification or recognition with
respect to the employees of any Credit Party or any Subsidiary of a Credit
Party, (c) there are no strikes, slowdowns, work stoppages or
controversies pending or, to the best knowledge of any Credit Party after due
inquiry, threatened between any Credit Party or any Subsidiary of a Credit
Party and its respective employees, other than employee grievances which could
not reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect, (d) hours worked by and payment made to employees
of each Credit Party and each of its Subsidiaries comply with the Fair Labor
Standards Act and (e) hours worked by and payment made to employees of
each Credit Party and each of its Subsidiaries comply with each other federal,
state, local or foreign law applicable to such matters, other than
noncompliance which could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.  As of the Closing Date, except as set forth
on Schedule 3.8 or 5.8, neither any Credit Party nor any of its
Subsidiaries is party to an employment contract.

 

5.9.                              Solvency.  Each Credit Party and each Subsidiary of a
Credit Party is Solvent.

 

5.10.                        Litigation;
Adverse Facts.  Except as
set forth on Schedule 5.10, there are no judgments outstanding against
any Credit Party or any of its Subsidiaries or affecting any property of any
Credit Party or any of its Subsidiaries, nor is there any Litigation pending,
or to the best knowledge of any Credit Party threatened, against any Credit
Party or any of its Subsidiaries which in any such case could reasonably be
expected to result in any Material Adverse Effect.

 

5.11.                        Use of
Proceeds; Margin Regulations.  No part of the proceeds of any Loan will be
used for “buying” or “carrying” “margin stock” within the respective meanings
of such terms under Regulation U of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect or for any
other purpose that violates the provisions of the regulations of the Board of
Governors of the Federal Reserve System. 
If requested by Agent, each Credit Party will furnish to Agent and each
Lender a statement to the foregoing effect in conformity with the requirements
of FR Form G-3 or FR Form U-1, as applicable, referred to in
Regulation U.

 

(a)                                  Borrowers shall
utilize the proceeds of the Loans solely to retire certain senior secured notes
and to fund certain fees and expenses in connection therewith, pay any
transaction expenses relating to this Agreement, and for the financing of
Borrowers’ ordinary working capital and general corporate needs.  Schedule 5.11 contains a description
of Borrowers’ sources and uses of funds as of the Closing Date, including Loans
and Letter of Credit Obligations to be made or incurred on that date, and a
funds flow memorandum detailing how funds from each source are to be
transferred for particular uses.

 

5.12.                        Ownership of
Property; Liens.  As of the
Closing Date, the real estate (“Real Estate”) listed in Schedule 5.12
constitutes all of the real property owned, leased or subleased, by any Credit
Party or any of its Subsidiaries.  Each
of the Credit Parties and each of its Subsidiaries owns good and insurable fee
simple title to all of its owned Real Estate, and valid leasehold interests in
all of its leased Real Estate, all as described on Schedule 5.12.  Schedule 5.12 further describes any
Real Estate with respect to which any Credit Party or any of its Subsidiaries
is a lessor, sublessor or assignor as of the Closing Date.  Each of the Credit Parties and each of its
Subsidiaries also has valid title to, or valid leasehold interests in, all of
its personal property and assets.  As of
the Closing Date, none of the properties and assets of any 

 

38

 

Credit Party or any of its
Subsidiaries are subject to any Liens other than Permitted Encumbrances, and
there are no facts, circumstances or conditions known to any Borrower that may
result in any Liens (including Liens arising under Environmental Laws) other
than Permitted Encumbrances against the properties or assets of any Credit
Party or any of its Subsidiaries.

 

5.13.                        Environmental
Matters.

 

(a)                                  Except as set
forth in Schedule 5.13, as of the Closing Date: (i) the Real Estate
is free of contamination from any Hazardous Material except for such
contamination that could not reasonably be expected to adversely impact the
value or marketability of such Real Estate and that could not reasonably be
expected to result in Environmental Liabilities of the Credit Parties or their
Subsidiaries in excess of $100,000 in the aggregate; (ii) no Credit Party
and no Subsidiary of a Credit Party has caused or suffered to occur any Release
of Hazardous Materials on, at, in, under, above, to, from or about any of their
Real Estate; (iii) the Credit Parties and their Subsidiaries are and have
been in compliance with all Environmental Laws, except for such noncompliance
that could not reasonably be expected to result in Environmental Liabilities of
the Credit Parties or their Subsidiaries in excess of $100,000 in the
aggregate; (iv) the Credit Parties and their Subsidiaries have obtained,
and are in compliance with, all Environmental Permits required by Environmental
Laws for the operations of their respective businesses as presently conducted
or as proposed to be conducted, except where the failure to so obtain or comply
with such Environmental Permits could not reasonably be expected to result in
Environmental Liabilities of the Credit Parties or their Subsidiaries in excess
of $100,000 in the aggregate, and all such Environmental Permits are valid,
uncontested and in good standing; (v) no Credit Party and no Subsidiary of
a Credit Party is involved in operations or knows of any facts, circumstances
or conditions, including any Releases of Hazardous Materials, that are likely
to result in any Environmental Liabilities of such Credit Party or Subsidiary
which could reasonably be expected to be in excess of $100,000 in the
aggregate, and no Credit Party or Subsidiary of a Credit Party has permitted
any current or former tenant or occupant of the Real Estate to engage in any
such operations; (vi) there is no Litigation arising under or related to
any Environmental Laws, Environmental Permits or Hazardous Material that seeks
damages, penalties, fines, costs or expenses in excess of $100,000 in the
aggregate or injunctive relief against, or that alleges criminal misconduct by
any Credit Party or any Subsidiary of a Credit Party; (vii) no notice has
been received by any Credit Party or any Subsidiary of a Credit Party
identifying any of them as a “potentially responsible party” or requesting
information under CERCLA or analogous state statutes, and to the knowledge of
the Credit Parties, there are no facts, circumstances or conditions that may
result in any of the Credit Parties or their Subsidiaries being identified as a
“potentially responsible party” under CERCLA or analogous state statutes; and (viii) the
Credit Parties have provided to Agent copies of all existing environmental
reports, reviews and audits and all written information pertaining to actual or
potential Environmental Liabilities, in each case relating to any of the Credit
Parties or their Subsidiaries.

 

(b)                                 Each Credit
Party hereby acknowledges and agrees that Agent (i) is not now, and has
not ever been, in control of any of the Real Estate or affairs of such Credit
Party or its Subsidiaries and (ii) does not have the capacity through the
provisions of the Loan Documents or otherwise to influence any Credit Party’s or
its Subsidiaries’ conduct with respect to the ownership, operation or
management of any of their Real Estate or compliance with Environmental Laws or
Environmental Permits.

 

5.14.                        ERISA.

 

(a)                                  Schedule 5.14 lists, as of
the Closing Date, all Plans and separately identifies, as of the Closing Date,
all Pension Plans, including Title IV Plans, Multiemployer Plans, ESOPs and
Welfare Plans, including all Retiree Welfare Plans.  Copies of all such listed Plans, (other than
a 

 

39

 

Multiemployer Plan) together
with a copy of the latest form IRS/DOL 5500-series for each such Plan have been
delivered, or made available to Agent. 
Except with respect to Multiemployer Plans, each Qualified Plan has been
determined by the IRS to qualify under Section 401 of the IRC (or is
comprised of a master or prototype Plan that has received a favorable opinion
letter from the IRS), the trusts created thereunder have been determined to be
exempt from tax under the provisions of Section 501 of the IRC, and to the
knowledge of any Borrower nothing has occurred that would cause the loss of
such qualification or tax-exempt status. 
Each Plan is in substantial compliance with the applicable provisions of
ERISA and the IRC, including the timely filing of all reports required under
the IRC or ERISA, including the statement required by 29 CFR Section 2520.104-23.  Except as would not result in any liability
in excess of $100,000, neither any Credit Party nor ERISA Affiliate has failed
to make any contribution or pay any amount due as required by either Section 412
of the IRC or Section 302 of ERISA or the terms of any such Plan.  Neither any Credit Party nor ERISA Affiliate
has engaged in a “prohibited transaction,” as defined in Section 406 of ERISA
and Section 4975 of the IRC, in connection with any Plan, that would
subject any Credit Party to a material tax on prohibited transactions imposed
by Section 502(i) of ERISA or Section 4975 of the IRC.

 

(b)                                 Except as set
forth in Schedule 5.14 or as would not reasonably expected to result, either
individually or in the aggregate, in liabilities in excess of $100,000: (i) no
Title IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or
event described in Section 4062(e) of ERISA with respect to any Title
IV Plan has occurred or is reasonably expected to occur; (iii) there are
no pending, or to the knowledge of any Borrower, threatened claims (other than
claims for benefits in the normal course), sanctions, actions or lawsuits,
asserted or instituted against any Plan or any Person as fiduciary or sponsor
of any Plan; (iv) no Credit Party or ERISA Affiliate has incurred or
reasonably expects to incur any liability as a result of a complete or partial
withdrawal from a Multiemployer Plan; (v) within the last five years no
Title IV Plan of any Credit Party or ERISA Affiliate has been terminated,
whether or not in a “standard termination” as that term is used in Section 4041(b)(1) of
ERISA, nor has any Title IV Plan of any Credit Party or ERISA Affiliate
(determined at any time within the past five years) with Unfunded Pension
Liabilities been transferred outside of the “controlled group” (within the
meaning of Section 4001(a)(14) of ERISA) of any Credit Party or ERISA
Affiliate; (vi) except in the case of any ESOP, Stock of all Credit
Parties and their ERISA Affiliates makes up, in the aggregate, no more than 10%
of fair market value of the assets of any Plan measured on the basis of fair
market value as of the latest valuation date of any Plan; and (vii) no
liability under any Title IV Plan has been satisfied with the purchase of a
contract from an insurance company that is not rated AAA by the S&P or an
equivalent rating by another nationally recognized rating agency.

 

5.15.                        Brokers.  Except, in each case, in connection with the
Initial Public Offering, no broker or finder acting on behalf of any Credit
Party or Affiliate thereof brought about the obtaining, making or closing of
the Loans or the Related Transactions, and no Credit Party or Affiliate thereof
has any obligation to any Person in respect of any finder’s or brokerage fees
in connection therewith.

 

5.16.                        Deposit and
Disbursement Accounts.  Schedule
5.16 lists all banks and other financial institutions at which any Credit
Party maintains deposit or other accounts as of the Closing Date, including any
Disbursement Accounts, and such Schedule correctly identifies the name, address
and telephone number of each depository, the name in which the account is held,
a description of the purpose of the account, and the complete account number
therefor.

 

5.17.                        Agreements and
Other Documents.  As of the
Closing Date, each Credit Party has provided to Agent or its counsel, on behalf
of Lenders, accurate and complete copies (or summaries) of all of the following
agreements or documents to which it is subject and each of which is listed in Schedule
5.17:  supply agreements and purchase
agreements not terminable by such Credit Party within sixty (60) 

 

40

 

days following written
notice issued by such Credit Party and involving transactions in excess of
$1,000,000 per annum; licenses and permits held by the Credit Parties, the
absence of which could reasonably be expected to have a Material Adverse
Effect; instruments and documents evidencing any Indebtedness or Guaranteed
Indebtedness of such Credit Party in an amount in excess of $250,000 and any
Lien granted by such Credit Party with respect thereto; and instruments and
agreements evidencing the issuance of any equity securities, warrants, rights
or options to purchase equity securities of such Credit Party.  Notwithstanding the foregoing, each Credit
Party has provided to Agent or its counsel, on behalf of Lenders, accurate and
complete copies (or summaries) of all other agreements, instruments, and other
documents that Agent or its counsel has requested.

 

5.18.                        Insurance.  Schedule 5.18 lists all insurance
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party, as well as a summary of the key business
terms of each such policy such as deductibles, coverage limits and term of
policy.

 

SECTION 6.

 

DEFAULT, RIGHTS AND REMEDIES

 

6.1.                              Event of
Default.  “Event of Default”
shall mean the occurrence or existence of any one or more of the following:

 

(a)                                  Payment.  (1) Failure by any Credit Party to pay
any principal of any Loan when due, or to repay Revolving Loans to reduce their
balance to the maximum amount of Revolving Loans then permitted to be
outstanding or to reimburse any L/C Issuer for any payment made by such L/C
Issuer under or in respect of any Letter of Credit when due or to provide cash
collateral for any Letter of Credit when due or (2) failure to pay, within
three (3) Business Days after the due date, any interest on any Loan or
any other amount due under this Agreement or any of the other Loan Documents;
or

 

(b)                                 Default in
Other Agreements.  (1) Any
Credit Party or any of its Subsidiaries fails to pay when due or within any
applicable grace period any principal or interest on Indebtedness (other than
the Loans) or any Contingent Obligations or (2) breach or default of any
Credit Party or any of its Subsidiaries, or the occurrence of any condition or
event, with respect to any Indebtedness (other than the Loans) or any
Contingent Obligations, if the effect of such breach, default or occurrence is
to cause or to permit the holder or holders then to cause, Indebtedness
and/or Contingent Obligations having an individual principal amount in excess
of $5,000,000 or having an aggregate principal amount in excess of $5,000,000
to become (other than as a result of a voluntary Asset Disposition securing
Indebtedness permitted under the definitive documentation thereof) or be
declared due prior to their stated maturity; or

 

(c)                                  Breach of
Certain Provisions; Breach of Warranty.  Failure of any Credit Party to perform or
comply with any term or condition contained in that portion of Section 2.2
relating to the Credit Parties’ obligation to maintain insurance, Section 2.3,
Section 3 or Section 4 (other than Sections 4.1(a), (b),
(d)(ii), (d)(iii), (f) and (k), as to which an Event of Default shall
occur if the Credit Parties’ failure to comply with the provisions of such
Sections shall continue for a period of five (5) days); or

 

(d)                                 Borrowing Base
Certificate; Breach of Warranty.  Any information contained in any Borrowing
Base Certificate is untrue or incorrect in any respect in the aggregate in any
Borrowing Base, or any representation or warranty herein or in any Loan Document
or in any written statement, report, financial statement or certificate (other
than a Borrowing Base Certificate) made or delivered to Agent or any Lender by
any Credit Party is untrue or incorrect in any material respect (without
duplication of materiality qualifiers contained therein) as of the date when
made or deemed made; or

 

41

 

(e)                                  Other Defaults
Under Loan Documents. Any Credit Party defaults in the performance of or
compliance with any term contained in this Agreement or the other Loan
Documents (other than occurrences described in other provisions of this Section 6.1
for which a different grace or cure period is specified, or for which no cure
period is specified and which constitute immediate Events of Default) and such
default is not remedied or waived within thirty (30) days after the earlier of (1) receipt
by Borrower Representative of notice from Agent or Requisite Lenders of such
default or (2) actual knowledge of any Borrower or any other Credit Party
of such default; or

 

(f)                                    Involuntary
Bankruptcy; Appointment of Receiver, Etc.  (1) A court enters a decree or order for
relief with respect to any Credit Party in an involuntary case under the
Bankruptcy Code, which decree or order is not stayed or other similar relief is
not granted under any applicable federal or state law; or (2) the
continuance of any of the following events for forty-five (45) days unless
dismissed, bonded or discharged:  (a) an
involuntary case is commenced against  any
Credit Party, under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect; or (b) a decree or order of a court for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over  any
Credit Party, or over all or a substantial part of its property, is entered; or
(c) a receiver, trustee or other custodian is appointed without the
consent of a Credit Party, for all or a substantial part of the property of  the Credit Party; or

 

(g)                                 Voluntary
Bankruptcy; Appointment of Receiver, Etc.  (1) any Credit Party commences a
voluntary case under the Bankruptcy Code, or consents to the entry of an order
for relief in an involuntary case or to the conversion of an involuntary case
to a voluntary case under any such law or consents to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or (2) any Credit Party makes any
assignment for the benefit of creditors; or (3) the Board of Directors of
any Credit Party adopts any resolution or otherwise authorizes action to
approve any of the actions referred to in this Section 6.1(g); or

 

(h)                                 Judgment and
Attachments.  Any money
judgment, writ or warrant of attachment, or similar process (other than those
described elsewhere in this Section 6.1) involving (1) an
amount in any individual case in excess of $1,000,000 or (2) an amount in
the aggregate at any time in excess of $5,000,000 (in either case to the extent
not adequately covered by insurance as to which the insurance company has
acknowledged coverage) is entered or filed against one or more of the Credit
Parties or any of their respective assets and remains undischarged, unvacated,
unbonded or unstayed for a period of thirty (30) days or in any event later
than five (5) Business Days prior to the date of any proposed sale
thereunder; or

 

(i)                                     Dissolution.  Any order, judgment or decree is entered
against any Credit Party decreeing the dissolution or split up of such Credit Party
and such order remains undischarged or unstayed for a period in excess of
fifteen (15) days; or

 

(j)                                     Solvency.  Any Credit Party ceases to be Solvent, fails
to pay its debts as they become due or admits in writing its present or
prospective inability to pay its debts as they become due; or

 

(k)                                  Invalidity of
Loan Documents.  Any of the
Loan Documents for any reason, other than a partial or full release in
accordance with the terms thereof, ceases to be in full force and effect or is
declared to be null and void, or any Credit Party denies that it has any
further liability under any Loan Documents to which it is party, or gives
notice to such effect; or

 

(l)                                     Business
Activities.  Holdings
engages in any type of business activity other than the ownership of Stock of
GII and activities relating thereto and performance of its obligations under
the 

 

42

 

Related Transaction
Documents to which it is a party and the maintenance of its corporate existence
and corporate governance; or

 

(m)                               Change of
Control.  A Change of Control occurs.

 

6.2.                              Suspension or
Termination of Commitments.  Upon the occurrence and continuance of any
Event of Default, Agent may, and at the request of Requisite Lenders Agent
shall, without notice or demand, immediately suspend or terminate all or any
portion of Lenders’ obligations to make additional Loans or issue or cause to
be issued Letters of Credit under the Revolving Loan Commitment.   Upon the occurrence of any Default, Agent
may, and at the request of Requisite Lenders Agent shall, without notice or
demand, immediately suspend all or any portion of Lenders’ obligations to make
additional Loans or issue or cause to be issued Letters of Credit under the
Revolving Loan Commitment; provided that, if the subject Default is
waived by Requisite Lenders or cured within any applicable grace or cure
period, the Revolving Loan Commitment shall be reinstated.

 

6.3.                              Acceleration
and other Remedies.  Upon the
occurrence of any Event of Default described in Sections 6.1(f) or
6.1(g), the Commitments shall be immediately terminated and all of the
Obligations, including the Revolving Loans, shall automatically become
immediately due and payable, without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration or other requirements of any kind,
all of which are hereby expressly waived (including for purposes of Section 10)
by Borrowers, and the Commitments shall thereupon terminate.  Upon the occurrence and during the continuance
of any other Event of Default, Agent may, and at the request of the Requisite
Lenders, Agent shall, by written notice to Borrower Representative (a) reduce
the aggregate amount of the Commitments from time to time, (b) declare all
or any portion of the Loans and all or any portion of the other Obligations to
be, and the same shall forthwith become, immediately due and payable together
with accrued interest thereon, (c) terminate all or any portion of the
obligations of Agent, L/C Issuers and Lenders to make Revolving Credit Advances
and issue Letters of Credit, (d) demand that Borrowers immediately deliver
cash to Agent for the benefit of L/C Issuers (and Borrowers shall then
immediately so deliver) in an amount equal to 105% of the aggregate outstanding
Letter of Credit Obligations and (e) exercise any other remedies which may
be available under the Loan Documents or applicable law.  Borrowers hereby grant to Agent, for the
benefit of L/C Issuers and each Lender with a participation in any Letters of Credit
then outstanding, a security interest in such cash collateral to secure all of
the Letter of Credit Obligations.  Any
such cash collateral shall be made available by Agent to L/C Issuers to
reimburse L/C Issuers for payments of drafts drawn under such Letters of Credit
and any Fees, Charges and expenses of L/C Issuers with respect to such Letters
of Credit, and the unused portion thereof, after all such Letters of Credit
shall have expired or been fully drawn upon, shall be applied to repay any
other Obligations.  After all such
Letters of Credit shall have expired or been fully drawn upon and all
Obligations shall have been satisfied and paid in full, the balance, if any, of
such cash collateral shall be returned to Borrowers.  Borrowers shall from time to time execute and
deliver to Agent such further documents and instruments as Agent may request
with respect to such cash collateral.

 

6.4.                              Performance by
Agent.  If any Credit Party shall fail
to perform any covenant, duty or agreement contained in any of the Loan
Documents, Agent may perform or attempt to perform such covenant, duty or
agreement on behalf of such Credit Party after the expiration of any cure or
grace periods set forth herein.  In such
event, such Credit Party shall, at the request of Agent, promptly pay any
amount reasonably expended by Agent in such performance or attempted
performance to Agent, together with interest thereon at the highest rate of
interest in effect upon the occurrence of an Event of Default as specified in Section 1.2(d) from
the date of such expenditure until paid. 
Notwithstanding the foregoing, it is expressly agreed that Agent shall
not have any liability or responsibility for the performance of any obligation
of any Credit Party under this Agreement or any other Loan Document.

 

43

 

6.5.                              Application of
Proceeds. 
Notwithstanding anything to the contrary contained in this Agreement,
upon the occurrence and during the continuance of an Event of Default, (a) Borrowers
irrevocably waive the right to direct the application of any and all payments
at any time or times thereafter received by Agent from or on behalf of
Borrowers, and Agent shall have the continuing and exclusive right to apply and
to reapply any and all payments received at any time or times after the
occurrence and during the continuance of an Event of Default against the
Obligations in such manner as Agent may deem advisable notwithstanding any
previous application by Agent and (b) in the absence of a specific
determination by Agent with respect thereto, the proceeds of any sale of, or
other realization upon, all or any part of the Collateral shall be
applied:  first, to Fees and
reimbursable expenses of Agent and GECM then due and payable pursuant to any of
the Loan Documents; second, to interest then due and payable on that
Borrower’s Swing Line Loan; third, to the principal balance of the Swing
Line Loan outstanding to that Borrower until the same has been repaid in full; fourth,
to interest then due and payable on Revolving Loans made to that Borrower and
unpaid Obligations under any Secured
Rate Contract, ratably in proportion to the interest accrued as to each
Revolving Loan and unpaid Obligations
under any Secured Rate Contract, as applicable; fifth to principal
payments on the Revolving Loans of such Borrower and unpaid Obligations  under
any Secured Rate Contract and to provide cash collateral for Letter of
Credit Obligations ratably to the combined principal balance of the Revolving
Loans, unpaid Obligations under any
Secured Rate Contract and outstanding Letter of Credit Obligations, sixth,
to interest then due and payable on the Swing Line Loan of each other Borrower,
pro rata; seventh, to the principal balances of the Swing Line Loan
outstanding to each other Borrower, pro rata, until the same have been repaid
in full; eighth, to interest then due and payable on the Revolving Loans
outstanding and unpaid Obligations
under any Secured Rate Contract accrued as to each Revolving Loan and
unpaid Obligations under any Secured
Rate Contract ratably in proportion to interest then due and payable on
Revolving Loans and unpaid Obligations
under any Secured Rate Contract of each other Borrower, pro rata, until
the same has been paid in full and last, to the principal balance of the
Revolving Loans made to each other Borrower, pro rata and unpaid Obligations  under
any Secured Rate Contract and to provide cash collateral for the Letter
of Credit Obligations ratably to the combined principal balance of the
Revolving Loans, unpaid Obligations
under any Secured Rate Contract and outstanding Letter of Credit
Obligations of each other Borrower, pro rata until the same has been paid in
full.  Any balance remaining shall be
delivered to Borrowers or to whomever may be lawfully entitled to receive such
balance or as a court of competent jurisdiction may direct.

 

SECTION 7.

 

CONDITIONS TO LOANS

 

The obligations of Lenders
and L/C Issuers to make Loans and to issue or cause to be issued Letters of
Credit are subject to satisfaction of all of the applicable conditions set
forth below.

 

7.1.                              Conditions to
Initial Loans.  The
obligations of Lenders and L/C Issuers to make the initial Loans and to the
initial issuance of Letters of Credit, whichever occurs first, are, in addition
to the conditions precedent specified in Section 7.2, subject to:

 

(a)                                  The delivery of
all documents listed on, the taking of all actions set forth on and the
satisfaction of all other conditions precedent listed in the Closing Checklist
attached hereto as Annex C, all in form and substance, or in a manner,
satisfactory to Agent and Lenders.

 

(b)                                 Agent shall
have received a fully executed original of a pay-off letter, reasonably
satisfactory to Agent, confirming that all obligations in connection with the
Senior Notes will be satisfied simultaneously with the Closing Date in full
through the payment of cash in accordance with the 

 

44

 

provisions of the indenture
governing the Senior Notes and all Liens upon any property of any Credit Party
in connection with the Senior Notes shall be terminated immediately upon such
payment.

 

(c)                                  The Eligible
Accounts, Eligible Inventory and Eligible Real Estate supporting the initial
Revolving Credit Advance and the initial Letter of Credit Obligations incurred
and the amount of the Reserves to be established on the Closing Date shall be
sufficient in value, as determined by Agent, to provide Borrowers,
collectively, with Borrowing Availability, (after giving effect to the initial Revolving
Credit Advance made to each Borrower, the incurrence of any initial Letter of
Credit Obligations, the consummation of the Related Transactions and the
payment of all costs and expenses related thereto) of at least $10,000,000.

 

(d)                                 Consummation of
the Initial Public Offering with net proceeds of not less than $70,000,000.

 

(e)                                  Receipt by
Agent of acceptable (i) real estate appraisals prepared by an appraiser
retained by Agent and (ii) inventory appraisals prepared by an appraiser
retained by Agent.

 

(f)                                    Receipt by
Agent of the Company’s available unaudited statements for each monthly period
from January 2006 through April 2006.

 

(g)                                 Borrowers, on a
consolidated basis, will have a minimum EBITDA for the trailing twelve months
ended April 30, 2006 of at least $20,000,000.

 

(h)                                 Borrowers shall
not make a request for a Revolving Credit Advance on the Closing Date for more
than $25,000,000.

 

7.2.                              Conditions to
All Loans.  Except as
otherwise expressly provided herein, no Lender or L/C Issuer shall be obligated
to fund any Advance or incur any Letter of Credit Obligation, if, as of the
date thereof (the “Funding Date”):

 

(a)                                  any
representation or warranty by any Credit Party contained herein or in any other
Loan Document is untrue or incorrect in any material respect (without
duplication of any materiality qualifier contained therein) as of such date
(except to the extent that such representation or warranty expressly relates to
an earlier date), and Agent or Requisite Revolving Lenders have determined not to
make such Advance or incur such Letter of Credit Obligation as a result of the
fact that such warranty or representation is so untrue or incorrect;

 

(b)                                 any Default or
Event of Default has occurred and is continuing or would result after giving
effect to any Advance (or the incurrence of any Letter of Credit Obligation),
and Agent or Requisite Revolving Lenders shall have determined not to make any
Advance or incur any Letter of Credit Obligation as a result of that Default or
Event of Default; or

 

(c)                                  after giving
effect to any Advance (or the incurrence of any Letter of Credit Obligations),
the outstanding amount of the aggregate Revolving Loan would exceed remaining
Borrowing Availability (except as provided in Section 1.1(a)(ii)).

 

The request and acceptance
by any Borrower of the proceeds of any Advance, the incurrence of any Letter of
Credit Obligations or the conversion or continuation of any Loan into, or as, a
LIBOR Loan shall be deemed to constitute, as of the date thereof, (i) a
representation and warranty by Borrowers that the conditions in this Section 7.2  have been satisfied and (ii) a
reaffirmation by Borrowers of the cross

 

45

 

guaranty provisions set
forth in Section 10 and of the granting and continuance of Agent’s Liens,
on behalf of itself and Lenders, pursuant to the Collateral Documents.

 

SECTION 8.

 

ASSIGNMENT AND PARTICIPATION

 

8.1.                              Assignment and
Participations.

 

(a)                                  Subject to the
terms of this Section 8.1, any Lender may make an assignment to a
Qualified Assignee of, or sale of participations in, at any time or times, the
Loan Documents, Loans, Letter of Credit Obligations and any Commitment or any
portion thereof or interest therein, including any Lender’s rights, title,
interests, remedies, powers or duties thereunder.  Any assignment by a Lender shall:  (i) require the consent of Agent (which
consent shall not be unreasonably withheld or delayed with respect to a Qualified
Assignee, and which consent is not required for an assignment between Lenders
or from a Lender to an Affiliate or a Lender) and the execution of an
assignment agreement (an “Assignment Agreement” substantially in the
form attached hereto as Exhibit 8.1 and otherwise in form and
substance reasonably satisfactory to, and acknowledged by, Agent); provided, however, that assignments by
Non-Funding Lenders shall be subject to Agent’s prior written consent in all
instances in the sole discretion of Agent; (ii) be conditioned on
such assignee Lender representing to the assigning Lender and Agent that it is
purchasing the applicable Loans to be assigned to it for its own account, for
investment purposes and not with a view to the distribution thereof; (iii) except
with respect to any assignment by a Lender to an Affiliate of such Lender,
after giving effect to any such partial assignment, the assignee Lender shall
have Commitments in an amount at least equal to $2,500,000  and the assigning Lender shall have retained
Commitments in an amount at least equal to $2,500,000; (iv) require a
payment to Agent of an assignment fee of $3,500 and (v) provided, that, no
Event of Default shall have occurred or be continuing, require the consent of
Borrower Representative (which consent shall not be unreasonably withheld or
delayed).  In the case of an assignment
by a Lender under this Section 8.1, the assignee shall have, to the
extent of such assignment, the same rights, benefits and obligations as all
other Lenders hereunder.  The assigning
Lender shall be relieved of its obligations hereunder with respect to its
Commitments or assigned portion thereof from and after the date of such
assignment.  Borrowers hereby acknowledge
and agree that any assignment shall give rise to a direct obligation of
Borrowers to the assignee and that the assignee shall be considered to be a “Lender.”  In all instances, each Lender’s liability to
make Loans hereunder shall be several and not joint and shall be limited to
such Lender’s Pro Rata Share of the applicable Commitment.  In the event Agent or any Lender assigns or
otherwise transfers all or any part of the Obligations, Agent or any such
Lender shall so notify Borrowers and Borrowers shall, upon the request of Agent
or such Lender, execute new Notes in exchange for the Notes, if any, being
assigned.  Notwithstanding the foregoing
provisions of this Section 8.1(a), (a) any Lender may at any
time pledge the Obligations held by it and such Lender’s rights under this
Agreement and the other Loan Documents to a Federal Reserve Bank, (b) any
Lender that is an investment fund may assign the Obligations held by it and
such Lender’s rights under this Agreement and the other Loan Documents to
another investment fund managed by the same investment advisor or pledge such
Obligations and rights to trustee for the benefit of its investors and (c) any
Lender may assign the Obligations to an Affiliate of such Lender or to a Person
that is a Lender prior to the date of such assignment.

 

(b)                                 Any
participation by a Lender of all or any part of its Commitments shall be made
with the understanding that all amounts payable by Borrowers hereunder shall be
determined as if that Lender had not sold such participation, and that the
holder of any such participation shall not be 

 

46

 

entitled to require such
Lender to take or omit to take any action hereunder except actions directly
affecting (i) any reduction in the principal amount of, or interest rate
or Fees payable with respect to, any Loan in which such holder participates, (ii) any
extension of the scheduled amortization of the principal amount of any Loan in
which such holder participates or the final maturity date thereof, and (iii) any
release of all or substantially all of the Collateral (other than in accordance
with the terms of this Agreement, the Collateral Documents or the other Loan
Documents).  Solely for purposes of Sections
1.10, 1.11, 8.3 and 9.1, Borrowers acknowledge and agree that a
participation shall give rise to a direct obligation of Borrowers to the
participant and the participant shall be considered to be a “Lender.”  Notwithstanding the foregoing, at the time of
each assignment or sale of a participation pursuant to this Section 8.1 to
a Person which is not already a Lender hereunder and which is not a United
States person (as such term is defined in Section 7701(a)(30) of the IRC)
for U.S. Federal income tax purposes, the assignee Lender or holder of such
participation shall, to the extent legally entitled to do so, provide to the
relevant Borrower the appropriate Certificate of Exemption and “Non Bank
Certificate” described in Section 1.11(c). 
To the extent that an assignment or sale of a participation of all or
any portion of a Lender’s Commitments and related outstanding Obligations
pursuant to this Section 8.1 would, at the time of such assignment, result
in increased costs under Section 1.10 or 1.11 from those being charged by
the assigning or selling Lender prior to such assignment, then such Borrowers
shall not be obligated to pay such additional amounts (although the relevant
Borrowers, in accordance with and pursuant to the other provisions of this
Agreement, shall be obligated to pay any other increased costs of the type
described above resulting from changes after the date of the respective
assignment or sale of participation). 
Except as set forth in the preceding sentence no Borrower or any other
Credit Party shall have any obligation or duty to any participant.  Neither Agent nor any Lender (other than the
Lender selling a participation) shall have any duty to any participant and may
continue to deal solely with the Lender selling a participation as if no such
sale had occurred.

 

(c)                                  Except as
expressly provided in this Section 8.1, no Lender shall, as between
Borrowers and that Lender, or Agent and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender.

 

(d)                                 Each Credit
Party shall assist each Lender permitted to sell assignments or participations
under this Section 8.1 as required to enable the assigning or
selling Lender to effect any such assignment or participation, including the
execution and delivery of any and all agreements, notes and other documents and
instruments as shall be reasonably requested and the prompt preparation of
informational materials for, and the participation of management in meetings
with, potential assignees or participants, all on a timetable established by
Agent in its sole discretion.  Each
Credit Party executing this Agreement shall certify the correctness,
completeness and accuracy of all descriptions of the Credit Parties and their
respective affairs contained in any selling materials provided by it and all
other information provided by it and included in such materials, except that
any Projections delivered by Borrowers shall only be certified by Borrowers as
having been prepared by Borrowers in compliance with the representations
contained in Section 5.5. 
Agent shall maintain, on behalf of Borrowers, in its offices located at
500 West Monroe Street, Chicago, Illinois or such other office as Agent
shall determine a “register” for recording the name, address, commitment and
Loans owing to each Lender.  The entries
in such register shall be presumptive evidence of the amounts due and owing to
each Lender in the absence of manifest error. 
Borrowers, Agent and each Lender may treat each Person whose name is
recorded in such register pursuant to the terms hereof as a Lender for all
purposes of this Agreement.  The register
described herein shall be available for inspection by Borrower and any Lender,
at any reasonable time upon reasonable prior notice.

 

47

 

(e)                                  A Lender may
furnish any information concerning Credit Parties in the possession of such
Lender from time to time to assignees and participants (including prospective
assignees and participants); provided that such Lender shall obtain from
assignees or participants confidentiality covenants substantially equivalent to
those contained in Section 9.13.

 

(f)                                    So long as no
Event of Default has occurred and is continuing, no Lender shall assign or sell
participations in any portion of its Loans or Commitments to a potential Lender
or participant, if, as of the date of the proposed assignment or sale, the
assignee Lender or participant would be subject to capital adequacy or similar
requirements under Section 1.10(a), increased costs or an inability
to fund LIBOR Loans under Section 1.10(b), or withholding taxes in
accordance with Section 1.11.

 

8.2.                              Agent.

 

(a)                                  Appointment.  Each Lender hereby designates and appoints GE
Capital as its Agent under this Agreement and the other Loan Documents, and
each Lender hereby irrevocably authorizes Agent to execute and deliver the
Collateral Documents and to take such action or to refrain from taking such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers as are set forth herein or therein,
together with such other powers as are reasonably incidental thereto.  Agent is authorized and empowered to amend,
modify, or waive any provisions of this Agreement or the other Loan Documents
on behalf of Lenders subject to the requirement that certain of Lenders’
consent be obtained in certain instances as provided in this Section 8.2
and Section 9.2.  The
provisions of this Section 8.2 are solely for the benefit of Agent
and Lenders and neither Borrowers nor any other Credit Party shall have any
rights as a third party beneficiary of any of the provisions hereof.  In performing its functions and duties under
this Agreement, Agent shall act solely as agent of Lenders and does not assume
and shall not be deemed to have assumed any obligation toward or relationship
of agency or trust with or for Borrowers or any other Credit Party.  Agent may perform any of its duties
hereunder, or under the Loan Documents, by or through its agents or employees.

 

(b)                                 Nature of
Duties.  The duties of Agent shall be
mechanical and administrative in nature. 
Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender. 
Nothing in this Agreement or any of the Loan Documents, express or
implied, is intended to or shall be construed to impose upon Agent any
obligations in respect of this Agreement or any of the Loan Documents except as
expressly set forth herein or therein. 
Each Lender shall make its own independent investigation of the
financial condition and affairs of each Credit Party in connection with the
extension of credit hereunder and shall make its own appraisal of the
creditworthiness of each Credit Party, and Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any
Lender with any credit or other information with respect thereto (other than as
expressly required herein).  If Agent
seeks the consent or approval of any Lenders to the taking or refraining from
taking any action hereunder, then Agent shall send notice thereof to each
Lender.  Agent shall promptly notify each
Lender any time that the Requisite Lenders have instructed Agent to act or
refrain from acting pursuant hereto.

 

(c)                                  Rights,
Exculpation, Etc. 
Neither Agent nor any of its officers, directors, employees or agents
shall be liable to any Lender for any action taken or omitted by them hereunder
or under any of the Loan Documents, or in connection herewith or therewith,
except that Agent shall be liable to the extent of its own gross negligence or
willful misconduct as determined by a final non-appealable order by a court of
competent jurisdiction.  Agent shall not
be liable for any apportionment or distribution of payments made by it in good
faith and if any such apportionment or distribution is subsequently determined
to have been made in error the sole recourse of any Lender to whom payment was
due but not made, shall be to recover from other Lenders any payment in excess
of the amount to 

 

48

 

which they are determined to
be entitled (and such other Lenders hereby agree to return to such Lender any
such erroneous payments received by them). 
In no event shall Agent be liable for punitive, special, consequential,
incidental, exemplary or other similar damages. 
In performing its functions and duties hereunder, Agent shall exercise
the same care which it would in dealing with loans for its own account, but
neither Agent nor any of its agents or representatives shall be responsible to
any Lender for any recitals, statements, representations or warranties herein
or for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, or sufficiency of this Agreement or any of the Loan Documents
or the transactions contemplated thereby, or for the financial condition of any
Credit Party.  Agent shall not be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement or any of the Loan
Documents or the financial condition of any Credit Party, or the existence or
possible existence of any Default or Event of Default.  Agent may at any time request instructions
from Requisite Lenders or all affected Lenders with respect to any actions or
approvals which by the terms of this Agreement or of any of the Loan Documents
Agent is permitted or required to take or to grant.  If such instructions are promptly requested,
Agent shall be absolutely entitled to refrain from taking any action or to
withhold any approval and shall not be under any liability whatsoever to any
Person for refraining from any action or withholding any approval under any of
the Loan Documents until it shall have received such instructions from the
Requisite Lenders or such other portion of the Lenders as shall be prescribed
by this Agreement.  Without limiting the
foregoing, no Lender shall have any right of action whatsoever against Agent as
a result of Agent acting or refraining from acting under this Agreement or any
of the other Loan Documents in accordance with the instructions of Requisite
Lenders or all affected Lenders, as applicable; and, notwithstanding the
instructions of Requisite Lenders or all affected Lenders, as applicable, Agent
shall have no obligation to take any action if it believes, in good faith, that
such action is deemed to be illegal by Agent or exposes Agent to any liability
for which it has not received satisfactory indemnification in accordance with Section 8.2(e).

 

(d)                                 Reliance.  Agent shall be entitled to rely, and shall be
fully protected in relying, upon any written or oral notices, statements,
certificates, orders or other documents or any telephone message or other
communication (including any writing, telex, fax or telegram) believed by it in
good faith to be genuine and correct and to have been signed, sent or made by
the proper Person, and with respect to all matters pertaining to this Agreement
or any of the Loan Documents and its duties hereunder or thereunder.  Agent shall be entitled to rely upon the
advice of legal counsel, independent accountants, and other experts selected by
Agent in its sole discretion.

 

(e)                                  Indemnification.  Lenders will reimburse and indemnify Agent
for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, attorneys’ fees and expenses), advances or disbursements of any
kind or nature whatsoever (including, without limitation, Taxes required to be
paid to Agent by Borrowers under Section 1.11) which may be imposed on,
incurred by, or asserted against Agent in any way relating to or arising out of
this Agreement or any of the Loan Documents or any action taken or omitted by
Agent under this Agreement or any of the Loan Documents, in proportion to each
Lender’s Pro Rata Share, but only to the extent that any of the foregoing is
not reimbursed by Borrowers; provided, however, that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses, advances or
disbursements to the extent resulting from Agent’s gross negligence or willful
misconduct as determined by a final non-appealable order by a court of
competent jurisdiction.  If any indemnity
furnished to Agent for any purpose shall, in the opinion of Agent, be
insufficient or become impaired, Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against even if so directed
by the Requisite Lenders or such other portion of the Lenders as shall be
prescribed by this Agreement until such additional indemnity is furnished.  The obligations of Lenders under this Section 8.2(e) shall
survive the payment in full of the Obligations and the termination of this
Agreement.

 

49

 

(f)                                    GE Capital
Individually.  With
respect to its Commitments hereunder, GE Capital shall have and may exercise
the same rights and powers hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any other Lender.  The terms “Lenders”, “Requisite Lenders” or
any similar terms shall, unless the context clearly otherwise indicates,
include GE Capital in its individual capacity as a Lender or one of the
Requisite Lenders.  GE Capital, either
directly or through strategic affiliations, may lend money to, acquire equity
or other ownership interests in, provide advisory services to and generally engage
in any kind of banking, trust or other business with any Credit Party as if it
were not acting as Agent pursuant hereto and without any duty to account
therefor to Lenders.  GE Capital, either
directly or through strategic affiliations, may accept fees and other
consideration from any Credit Party for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.

 

(g)                                 Successor Agent.

 

(i)                                     Resignation.  Agent may resign from the performance of all
its agency functions and duties hereunder at any time by giving at least thirty
(30) Business Days’ prior written notice to Borrower Representative and
Lenders.  Such resignation shall take
effect upon the acceptance by a successor Agent of appointment pursuant to clause
(ii) below or as otherwise provided in clause (ii) below.

 

(ii)                                  Appointment of
Successor.  Upon any
such notice of resignation pursuant to clause (i) above, Requisite
Lenders shall appoint a successor Agent which, unless an Event of Default has
occurred and is continuing, shall be reasonably acceptable to Borrowers.  If a successor Agent shall not have been so
appointed within the thirty (30) Business Day period referred to in clause (i) above,
the retiring Agent, upon notice to Borrower Representative, shall then appoint
a successor Agent which, unless an Event of Default has occurred and is
continuing, shall be reasonably acceptable to Borrowers and who shall serve as
Agent until such time, if any, as Requisite Lenders appoint a successor Agent
as provided above.

 

(iii)                               Successor Agent.  Upon the acceptance of any appointment as
Agent under the Loan Documents by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under the Loan Documents.  After any retiring Agent’s resignation as
Agent, the provisions of this Section 8.2 shall continue to inure
to its benefit as to any actions taken or omitted to be taken by it in its
capacity as Agent.

 

(h)                                 Collateral
Matters.

 

(i)                                     Release of
Collateral.  Lenders
hereby irrevocably authorize Agent, at its option and in its discretion, to
release any Lien granted to or held by Agent upon any Collateral (x) upon
termination of the Commitments and payment and satisfaction of all Obligations and all Obligations arising under Secured
Rate Contracts (other than contingent indemnification obligations to the
extent no claims giving rise thereto have been asserted) or (y) constituting
property being sold or disposed of if Borrowers (or any of them) or the
Borrower Representative certify to Agent that the sale or disposition is made
in compliance with the provisions of this Agreement (and Agent may rely in good
faith conclusively on any such certificate, without further inquiry).

 

(ii)                                  Confirmation of
Authority; Execution of Releases.  Without in any manner limiting Agent’s
authority to act without any specific or further authorization or consent by
Lenders (as set forth in Section 8.2(h)(i)), each Lender agrees to
confirm in writing, upon request by Agent or Borrower Representative, the
authority to release any Collateral conferred upon Agent under 

 

50

 

clauses
(x) and (y) of Section 8.2(h)(i).  Upon receipt by Agent of any required
confirmation from the Requisite Lenders of its authority to release any
particular item or types of Collateral, and upon at least ten (10) Business
Days’ prior written request by Borrower Representative, Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the Liens granted to Agent upon such
Collateral; provided, however, that (x) Agent shall not be
required to execute any such document on terms which, in Agent’s opinion, would
expose Agent to liability or create any obligation or entail any consequence
other than the release of such Liens without recourse or warranty, and (y) such
release shall not in any manner discharge, affect or impair the Obligations or
any Liens upon (or obligations of any Credit Party, in respect of), all
interests retained by any Credit Party, including the proceeds of any sale, all
of which shall continue to constitute part of the Collateral.

 

(iii)                               Absence of Duty.  Agent shall have no obligation whatsoever to
any Lender or any other Person to assure that the property covered by the
Collateral Documents exists or is owned by Borrowers or any other Credit Party
or is cared for, protected or insured or has been encumbered or that the Liens
granted to Agent have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this Section 8.2(h) or
in any of the Loan Documents, it being understood and agreed that in respect of
the property covered by the Collateral Documents or any act, omission or event
related thereto, Agent may act in any manner it may deem appropriate, in its
discretion, given Agent’s own interest in property covered by the Collateral
Documents as one of the Lenders and that Agent shall have no duty or liability
whatsoever to any of the other Lenders, provided that Agent shall
exercise the same care which it would in dealing with loans for its own
account.

 

(i)                                     Agency for
Perfection.  Agent and
each Lender hereby appoint each other Lender as agent for the purpose of
perfecting Agent’s security interest in assets which, in accordance with the
Code in any applicable jurisdiction, can be perfected by possession or
control.  Should any Lender (other than
Agent) obtain possession or control of any such assets, such Lender shall
notify Agent thereof, and, promptly upon Agent’s request therefor, shall
deliver such assets to Agent or in accordance with Agent’s instructions or
transfer control to Agent in accordance with Agent’s instructions.  Each Lender agrees that it will not have any
right individually to enforce or seek to enforce any Collateral Document or to
realize upon any collateral security for the Loans unless instructed to do so
by Agent in writing, it being understood and agreed that such rights and
remedies may be exercised only by Agent.

 

(j)                                     Notice of
Default.  Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
except with respect to defaults in the payment of principal, interest and Fees
required to be paid to Agent for the account of Lenders, unless Agent shall
have received written notice from a Lender or Borrower Representative referring
to this Agreement, describing such Default or Event of Default and stating that
such notice is a “notice of default”. 
Agent will use reasonable efforts to notify each Lender of its receipt
of any such notice, unless such notice is with respect to defaults in the
payment of principal, interest and fees, in which case Agent will notify each
Lender of its receipt of such notice. 
Agent shall take such action with respect to such Default or Event of
Default as may be requested by Requisite Lenders in accordance with Section 6.  Unless and until Agent has received any such
request, Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable or in the best interests of Lenders.

 

51

 

(k)                                  Lender Actions
Against Collateral.  Each Lender
agrees that it will not take any action, nor institute any actions or
proceedings, with respect to the Loans, against any Borrower or any Credit
Party hereunder or under the other Loan Documents or against any of the Real
Estate encumbered by Mortgages without the consent of the Requisite
Lenders.  With respect to any action by
Agent to enforce the rights and remedies of Agent and the Lenders under this
Agreement and the other Loan Documents, each Lender hereby consents to the
jurisdiction of the court in which such action is maintained, and agrees to
deliver its Notes to Agent to the extent necessary to enforce the rights and
remedies of Agent for the benefit of the Lenders under the Mortgages in
accordance with the provisions hereof.

 

8.3.                              Set Off and
Sharing of Payments.  In addition
to any rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, during the continuance of any Event of Default,
each Lender is hereby authorized by Borrowers at any time or from time to time,
with reasonably prompt subsequent notice to Borrower Representative (any prior
or contemporaneous notice being hereby expressly waived) to set off and to
appropriate and to apply any and all (A) balances held by such Lender at
any of its offices for the account of any Borrower or any of its Subsidiaries
(regardless of whether such balances are then due to Borrower or its
Subsidiaries), and (B) other property at any time held or owing by such
Lender to or for the credit or for the account of any Borrower or any of its
Subsidiaries, against and on account of any of the Obligations; except that no
Lender shall exercise any such right without the prior written consent of Agent.  If a
Non-Funding Lender or Impacted Lender receives any such payment as described in
the previous sentence, such Lender shall turn over such payments to Agent up to
such amount as would satisfy the cash collateral requirements set forth in Section 8.5(a)(ii).  Any Lender exercising a right to set
off shall purchase for cash (and the other Lenders shall sell) interests in
each of such other Lender’s Pro Rata Share of the Obligations as would be
necessary to cause all Lenders to share the amount so set off with each other
Lender in accordance with their respective Pro Rata Shares.  Borrowers agree, to the fullest extent
permitted by law, that any Lender may exercise its right to set off with
respect to amounts in excess of its Pro Rata Share of the Obligations and upon
doing so shall deliver such amount so set off to the Agent for the benefit of
all Lenders in accordance with their Pro Rata Shares.

 

8.4.                              Disbursement of
Funds.  Agent may, on behalf of
Lenders, disburse funds to Borrowers for Loans requested.  Each Lender shall reimburse Agent on demand
for all funds disbursed on its behalf by Agent, or if Agent so requests, each
Lender will remit to Agent its Pro Rata Share of any Loan before Agent
disburses same to Borrowers.  If Agent
elects to require that each Lender make funds available to Agent prior to a
disbursement by Agent to Borrowers, Agent shall advise each Lender by telephone
or fax of the amount of such Lender’s Pro Rata Share of the Loan requested by
Borrower Representative no later than 1:00 p.m. (New York time) on the
Funding Date applicable thereto, and each such Lender shall pay Agent such
Lender’s Pro Rata Share of such requested Loan, in same day funds, by wire
transfer to Agent’s account on such Funding Date.  If any Lender fails to pay the amount of its
Pro Rata Share within one (1) Business Day after Agent’s demand, Agent
shall promptly notify Borrower Representative, and Borrowers shall immediately
repay such amount to Agent.  Any
repayment required pursuant to this Section 8.4 shall be without
premium or penalty.  Nothing in this Section 8.4
or elsewhere in this Agreement or the other Loan Documents, including the
provisions of Section 8.5, shall be deemed to require Agent to
advance funds on behalf of any Lender or to relieve any Lender from its
obligation to fulfill its commitments hereunder or to prejudice any rights that
Agent or Borrowers may have against any Lender as a result of any default by
such Lender hereunder.

 

52

 

8.5.                              Disbursements
of Advances; Payment.

 

(a)                                  Advances;
Payments.

 

(i)                                     Revolving
Lenders shall refund or participate in the Swing Line Loan in accordance with
clauses (iii) and (iv) of Section 1.1(c).  If the Swing Line Lender declines to make a
Swing Line Advance or if Swing Line Availability is zero, Agent shall notify
Revolving Lenders, promptly after receipt of a Notice of Revolving Credit
Advance and in any event prior to 1:00 p.m. (New York time)  on the date such Notice of a Revolving
Credit Advance is received, by fax, telephone or other similar form of
transmission.  Each Revolving Lender
shall make the amount of such Lender’s Pro Rata Share of such Revolving Credit
Advance available to Agent in same day funds by wire transfer to Agent’s
account as set forth in Section 1.1(e) not later than 3:00 p.m. (New York time)  on the requested Funding Date in the case
of an Index Rate Loans and not later than 11:00 a.m. (New York time)  on the requested Funding Date in the case
of a LIBOR Loan.  After receipt of such
wire transfers (or, in the Agent’s sole discretion, before receipt of such wire
transfers), subject to the terms hereof, Agent shall make the requested
Revolving Credit Advance to Borrowers as designated by Borrower Representative
in the Notice of Revolving Credit Advance. 
All payments by each Revolving Lender shall be made without setoff,
counterclaim or deduction of any kind.

 

(ii)                                  At least once
each calendar week or more frequently at Agent’s election (each, a “Settlement
Date”), Agent shall advise each Lender by telephone or fax of the amount of
such Lender’s Pro Rata Share of principal, interest and Fees paid for the
benefit of Lenders with respect to each applicable Loan.  Provided that each Lender has funded all
payments and Advances required to be made by it and purchased all
participations required to be purchased by it under this Agreement and the
other Loan Documents as of such Settlement Date, Agent shall pay to each Lender
such Lender’s Pro Rata Share of principal, interest and Fees paid by Borrowers
since the previous Settlement Date for the benefit of such Lender on the Loans
held by it. Such payments shall be made by wire transfer to such Lender’s
account (as specified by such Lender in Annex E or the applicable
Assignment Agreement) not later than 2:00 p.m. (New York time)  on the next Business Day following each
Settlement Date. To the extent that any Lender (a “Non-Funding Lender”)
has failed to fund all such payments and Advances or failed to fund the
purchase of all such participations, Agent shall be entitled to set off the
funding shortfall against that Non-Funding Lender’s Pro Rata Share of all
payments received from Borrowers  and hold, in a non-interest bearing account,
all payments received by Agent for the benefit of any Non-Funding Lender
pursuant to this Agreement as cash collateral for any unfunded reimbursement
obligations of such Non-Funding Lender until the Obligations are paid in full
in cash, all Letter of Credit Obligations have been discharged or cash
collateralized and all Commitments have been terminated, and upon such unfunded
obligations owing by a Non-Funding Lender becoming due and payable, Agent shall
be authorized to use such cash collateral to make such payment on behalf of
such Non-Funding Lender.  Any amounts
owing by a Non-Funding Lender to Agent which are not paid when due shall accrue
interest at the interest rate applicable during such period to Revolving Loans
that are Index Rate Loans..

 

(b)                                 Availability of
Lender’s Pro Rata Share. 
Agent may assume that each Revolving Lender will make its Pro Rata Share
of each Revolving Credit Advance available to Agent on each Funding Date.  If such Pro Rata Share is not, in fact, paid
to Agent by such Revolving Lender when due, Agent will be entitled to recover
such amount on demand from such Revolving Lender without setoff, counterclaim
or deduction of any kind.  If any
Revolving Lender fails to pay the amount of its Pro Rata Share forthwith upon
Agent’s demand, Agent shall promptly notify Borrower Representative and
Borrowers shall immediately repay such amount to Agent.  Nothing in this Section 8.5(b) or
elsewhere in this Agreement or the other Loan Documents shall be deemed to
require Agent to advance funds on behalf of any Revolving Lender or to relieve
any Revolving Lender from its obligation to fulfill its Commitments hereunder
or to prejudice any rights that Borrowers may have against any Revolving Lender
as a result of any default by such Revolving Lender hereunder.  To the extent that Agent advances funds to
Borrowers on behalf of any Revolving Lender and is not reimbursed therefor on
the same 

 

53

 

Business Day as such Advance
is made, Agent shall be entitled to retain for its account all interest accrued
on such Advance until reimbursed by the applicable Revolving Lender.

 

(c)                                  Return of
Payments.

 

(i)                                     If Agent pays
an amount to a Lender under this Agreement in the belief or expectation that a
related payment has been or will be received by Agent from Borrowers and such
related payment is not received by Agent, then Agent will be entitled to
recover such amount from such Lender on demand without setoff, counterclaim or
deduction of any kind.

 

(ii)                                  If Agent
determines at any time that any amount received by Agent under this Agreement
must be returned to any Borrower or paid to any other Person pursuant to any
insolvency law or otherwise, then, notwithstanding any other term or condition
of this Agreement or any other Loan Document, Agent will not be required to
distribute any portion thereof to any Lender. 
In addition, each Lender will repay to Agent on demand any portion of
such amount that Agent has distributed to such Lender, together with interest
at such rate, if any, as Agent is required to pay to any Borrower or such other
Person, without setoff, counterclaim or deduction of any kind.

 

(d)                                 Non-Funding
Lenders.  The failure of any Non Funding
Lender to make any Revolving Credit Advance, pay any Letter of Credit Obligation or make
any other payment required by it
hereunder or to purchase any participation in any Swing Line Loan to be made or
purchased by it on the date
specified therefor shall not relieve any other Lender (each such other
Revolving Lender, an “Other
Lender”) of its obligations
to make such Advance or payment or
purchase such participation on such date, but neither Agent nor, other than as expressly set forth herein, any Other
Lender shall be responsible for the failure of any Non-Funding Lender to make
an Advance, purchase a participation or make any other payment required
hereunder.  Notwithstanding anything set
forth herein to the contrary, a Non-Funding Lender shall not have any voting or
consent rights under or with respect to any Loan Document or constitute a “Lender” or a “Revolving
Lender” (or be, or have its Loans and Commitments,
included in the determination of
“Requisite Lenders” or “Lenders directly affected” pursuant to Section 9.2)
for any voting or consent rights under or with respect to any Loan Document. 
Moreover, for the purposes of determining Requisite Lenders, the Loans
and Commitments held by Non-Funding Lenders shall be excluded from the total
Loans and Commitments outstanding.  At
Borrower Representative’s request, Agent or a Person reasonably acceptable to
Agent shall have the right with Agent’s consent and in Agent’s sole discretion
(but shall have no obligation) to purchase from any Non-Funding Lender, and
each Non-Funding Lender agrees that it shall, at Agent’s request, sell and
assign to Agent or such Person, all of the Commitments of that Non-Funding
Lender for an amount equal to the principal balance of all Loans held by such
Non-Funding Lender and all accrued interest and fees with respect thereto
through the date of sale, such purchase and sale to be consummated pursuant to
an executed Assignment Agreement.

 

(e)                                  Dissemination
of Information.  Agent shall
use reasonable efforts to provide Lenders with any notice of Default or Event
of Default received by Agent from, or delivered by Agent to, any Credit Party,
with notice of any Event of Default of which Agent has actually become aware
and with notice of any action taken by Agent following any Event of Default;
provided, that Agent shall not be liable to any Lender for any failure to do
so.

 

(f)                                    Actions in
Concert.  Anything in this Agreement to
the contrary notwithstanding, each Lender hereby agrees with each other Lender
that no Lender shall take any action to protect or enforce its rights arising
out of this Agreement or the Notes (including exercising any rights of setoff)
without first obtaining the prior written consent of Agent and Requisite
Lenders, it being the intent of Lenders that any such action to protect or
enforce rights under this Agreement and the Notes shall be 

 

54

 

taken in concert and at the
direction or with the consent of Agent or Requisite Lenders.  Agent is authorized to issue all notices to
be issued by or on behalf of the Lenders with respect to any Subordinated Debt.

 

SECTION 9.

 

MISCELLANEOUS

 

9.1.                              Indemnities.  Borrowers agree, jointly and severally, to
indemnify, pay, and hold Agent, each Lender, each L/C Issuer and their
respective officers, directors, employees, agents, and attorneys (the “Indemnitees”)
harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs and expenses
(including all reasonable fees and expenses of counsel to such Indemnitees) of
any kind or nature whatsoever that may be imposed on, incurred by, or asserted
against the Indemnitee as a result of such Indemnitees being a party to this
Agreement or the transactions consummated pursuant to this Agreement or
otherwise relating to any of the Related Transactions; any other act, event or
transaction related, contemplated in or attendant to any of the foregoing; provided,
that Borrowers shall have no obligation to an Indemnitee hereunder with respect
to liabilities to the extent resulting from the gross negligence or willful
misconduct of that Indemnitee as determined by a court of competent
jurisdiction.  If and to the extent that
the foregoing undertaking may be unenforceable for any reason, Borrowers agree
to make the maximum contribution to the payment and satisfaction thereof which
is permissible under applicable law.

 

9.2.                              Amendments and
Waivers.

 

(a)                                  Except for
actions expressly permitted to be taken by Agent, no amendment, modification,
termination or waiver of any provision of this Agreement or any other Loan
Document, or any consent to any departure by any Credit Party therefrom, shall
in any event be effective unless the same shall be in writing and signed by
Borrowers, and by Requisite Lenders or all affected Lenders, as
applicable.  Except as set forth in
clause (b) below, all such amendments, modifications, terminations or
waivers requiring the consent of any Lenders shall require the written consent
of Requisite Lenders.

 

(b)                                 No amendment,
modification, termination or waiver shall, unless in writing and signed by
Agent and each Lender directly affected thereby:  (i) increase the principal amount of any
Lender’s Commitment (which action shall be deemed only to affect those Lenders
whose Commitments are increased and may be approved by Requisite Lenders,
including those Lenders whose Commitments are increased); (ii) reduce the
principal of, rate of interest on or Fees payable with respect to any Loan or
Letter of Credit Obligations of any affected Lender; (iii) extend any
scheduled payment date or final maturity date of the principal amount of any
Loan of any affected Lender; (iv) waive, forgive, defer, extend or
postpone any payment of interest or Fees as to any affected Lender (which
action shall be deemed only to affect those Lenders to whom such payments are
made); (v)  all or substantially all of the Guarantees or all or
substantially all of the Collateral (which action shall be deemed to directly
affect all Lenders); (vi) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Loans that shall be required for
Lenders or any of them to take any action hereunder; and (vii) amend or
waive this Section 9.2 or the definition of the term “Requisite
Lenders” insofar as such definition affects the substance of this Section 9.2.  Furthermore, no amendment, modification,
termination or waiver affecting the rights or duties of Agent or L/C Issuer under
this Agreement or any other Loan Document, including any release of any
Guarantee or Collateral requiring a writing signed by all Lenders, shall be
effective unless in writing and signed by Agent or L/C Issuer, as the case may
be, in addition to Lenders required hereinabove to take such action.  No
amendment, modification or waiver of this Agreement or any Loan Document
altering the ratable treatment of Obligations arising under

 

55

 

Secured
Rate Contracts resulting in such Obligations being junior in right of payment
to principal on the Loans or resulting in Obligations owing to any Secured Swap
Provider becoming unsecured (other than releases of Liens permitted in
accordance with the terms hereof), in each case in a manner adverse to any
Secured Swap Provider, shall be effective without the written consent of such
Secured Swap Provider or, in the case of a Secured Rate Contract provided or
arranged by GE Capital or an Affiliate of GE Capital, GE Capital.  Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given.  No amendment, modification, termination or
waiver shall be required for Agent to take additional Collateral pursuant to
any Loan Document.  No amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the holder of that Note.  No notice to or demand on any Credit Party in
any case shall entitle such Credit Party or any other Credit Party to any other
or further notice or demand in similar or other circumstances.  Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 9.2
shall be binding upon each holder of the Notes at the time outstanding and each
future holder of the Notes.

 

9.3.                              Notices.

 

(a)                                  Addresses.  All notices, demands, requests, directions
and other communications required or expressly authorized to be made by this
Agreement shall, whether or not specified to be in writing but unless otherwise
expressly specified to be given by any other means, be given in writing and (i) addressed
to the respective party as set forth below and otherwise to the party to be notified
at its address specified opposite its name on the signature page of any
applicable Assignment Agreement, (ii) posted to Intralinks® (to the extent
such system is available and set up by or at the direction of the Agent or
(prior to posting) in an appropriate location by uploading such notice, demand,
request, direction or other communication to www.intralinks.com, faxing it to
866-545-6600 with an appropriate bar-coded fax coversheet or using such other
means of posting to Intralinks® as may be available and reasonably acceptable
to the Agent prior to such posting, (iii) posted to any other E-System set
up by or at the direction of the Agent in an appropriate location or (iv) addressed
to such other address as shall be notified in writing (A) in the case of
the Borrowers, the Agent and the Swing Line Lender, to the other parties hereto
and (B) in the case of all other parties, to the Borrowers and the
Agent.  Transmission by electronic mail
(including E-Fax, even if transmitted to the fax numbers set forth in clause
(i) above) shall not be sufficient or effective to transmit any such
notice unless such transmission is an available means to post to any E-System.

 

Notices shall be addressed
as follows:

 

	
  If to Borrower
  Representative:

  	
  GOLFSMITH INTERNATIONAL, INC.

  
	
   

  	
  11000 North IH-35

  
	
   

  	
  Austin, Texas 78753

  
	
   

  	
  ATTN: Sue Gove

  
	
   

  	
  Fax: (512) 821-4992

  
	
   

  	
   

  
	
  With a copy to:

  	
  First Atlantic
  Capital, Ltd.

  
	
   

  	
  135 East 57th Street

  
	
   

  	
  New York, New York 10022

  
	
   

  	
  ATTN: James Grover

  
	
   

  	
  Fax: (212) 207-8842

  

 

56

 

	
  With a copy to:

  	
  White & Case LLP

  
	
   

  	
  1155 Avenue of the
  Americas

  
	
   

  	
  New York, New York 10036

  
	
   

  	
  ATTN: Joseph
  Brazil

  
	
   

  	
  Fax: (212) 354-8113

  
	
   

  	
   

  
	
  If to Agent or GE Capital:

  	
  GENERAL ELECTRIC CAPITAL
  CORPORATION

  
	
   

  	
  125
  Summer Street, 12th Floor

  
	
   

  	
  Boston,
  MA 02110

  
	
   

  	
  ATTN: Golfsmith Account
  Officer

  
	
   

  	
  Fax: (617) 261-1222

  
	
   

  	
   

  
	
  With a copy to:

  	
  GENERAL ELECTRIC CAPITAL
  CORPORATION

  
	
   

  	
  201 Merritt 7

  
	
   

  	
  P.O. Box 5201

  
	
   

  	
  Norwalk, CT 06856-5201

  
	
   

  	
  ATTN: General Counsel

  
	
   

  	
  Fax: (203) 956-4216

  
	
   

  	
   

  
	
  If to a Lender:

  	
  To the address set forth
  on the signature page hereto or in the applicable Assignment Agreement

  

 

(b)                                 Effectiveness.  All communications described in Subsection
(a) above and all other notices, demands, requests and other
communications made in connection with this Agreement shall be effective and be
deemed to have been received (i) if delivered by hand, upon personal
delivery, (ii) if delivered by overnight courier service, one Business Day
after delivery to such courier service, (iii) if delivered by mail, when
deposited in the mails and, (iv) if delivered by facsimile (other than to
post to an E-System pursuant to Subsection (a)(ii) or (a)(iii) above),
upon sender’s receipt of confirmation of proper transmission, and (v) if
delivered by posting to any E-System, on the later of the date of such posting
in an appropriate location and the date access to such posting is given to the
recipient thereof in accordance with the standard procedures applicable to such
E-System; provided, however, that no communications to the Agent
pursuant to Section 2 or Section 8 shall be effective
until received by the Agent.

 

(c)                                  Electronic
Transmissions.

 

(i)                                     Authorization.  Subject to the provisions of Subsection
(a), each of the Agent, the Borrowers, the Lenders, the L/C Issuers and
each of their authorized representatives is authorized (but not required) to
transmit, post or otherwise make or communicate, in its sole discretion,
Electronic Transmissions in connection with any Loan Document and the
transactions contemplated therein.  Each
of Holdings, the Borrowers and each Credit Party hereby acknowledges and
agrees, and each of Holdings and the Borrowers shall cause each other Credit
Party to acknowledge and agree, that the use of Electronic Transmissions is not
necessarily secure and that there are risks associated with such use, including
risks of interception, disclosure and abuse and each indicates it assumes and
accepts such risks by hereby authorizing the transmission of Electronic
Transmissions.

 

(ii)                                  Signatures.  Subject to the provisions of Subsection (a) above,
(A) no posting to any E-System shall be denied legal effect merely because
it is made electronically, (B) each E-Signature on any such posting shall
be deemed sufficient to satisfy any requirement for a “signature” and 

 

57

 

(C) each
such posting shall be deemed sufficient to satisfy any requirement for a “writing”,
in each case including pursuant to any Loan Document, any applicable provision
of any UCC, the federal Uniform Electronic Transactions Act, the Electronic
Signatures in Global and National Commerce Act and any substantive or
procedural requirement of law governing such subject matter, (ii) each
such posting that is not readily capable of bearing either a signature or a
reproduction of a signature may be signed, and shall be deemed signed, by
attaching to, or logically associating with such posting, an E-Signature, upon
which each Credit Party may rely and assume the authenticity thereof, (iii) each
such posting containing a signature, a reproduction of a signature or an
E-Signature shall, for all intents and purposes, have the same effect and
weight as a signed paper original and (iv) each party hereto or
beneficiary hereto agrees not to contest the validity or enforceability of any
posting on any E-System or E-Signature on any such posting under the provisions
of any applicable requirement of law requiring certain documents to be in
writing or signed; provided, however, that nothing herein shall limit
such party’s or beneficiary’s right to contest whether any posting to any
E-System or E-Signature has been altered after transmission.

 

(iii)                               Separate
Agreements.  All uses of
an E-System shall be governed by and subject to, in addition to Subsections (a) and
(b) and this Subsection (c), separate terms and conditions
posted or referenced in such E-System and related contractual obligations
executed by Credit Parties in connection with the use of such E-System.

 

(iv)                              LIMITATION OF
LIABILITY.  ALL E-SYSTEMS
AND ELECTRONIC TRANSMISSIONS SHALL BE PROVIDED “AS IS” AND “AS AVAILABLE”.  NONE OF AGENT OR ANY OF ITS AFFILIATES
WARRANTS THE ACCURACY, ADEQUACY OR COMPLETENESS OF ANY E-SYSTEMS OR ELECTRONIC TRANSMISSION, AND
EACH DISCLAIMS ALL LIABILITY FOR ERRORS OR OMISSIONS THEREIN.  NO WARRANTY OF ANY KIND IS MADE BY THE AGENT
OR ANY OF ITS AFFILIATES IN CONNECTION WITH ANY E-SYSTEMS OR ELECTRONIC
COMMUNICATION, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD-PARTY RIGHTS OR FREEDOM FROM
VIRUSES OR OTHER CODE DEFECTS.  Each of
Holdings, the Borrowers and each Credit Party agrees (and each of Holdings and
the Borrowers shall cause each other Credit Party to agree) that the Agent has
no responsibility for maintaining or providing any equipment, software,
services or any testing required in connection with any Electronic Transmission
or otherwise required for any E-System.

 

9.4.                              Failure or
Indulgence Not Waiver; Remedies Cumulative.  No failure or delay on the part of Agent or
any Lender to exercise, nor any partial exercise of, any power, right or
privilege hereunder or under any other Loan Documents shall impair such power,
right, or privilege or be construed to be a waiver of any Default or Event of
Default.  All rights and remedies
existing hereunder or under any other Loan Document are cumulative to and not
exclusive of any rights or remedies otherwise available.

 

9.5.                              Marshaling;
Payments Set Aside.  Neither
Agent nor any Lender shall be under any obligation to marshal any assets in
payment of any or all of the Obligations. 
To the extent that Borrowers make payment(s) or Agent enforces its
Liens or Agent or any Lender exercises its right of set-off, and such payment(s) or
the proceeds of such enforcement or set-off is subsequently invalidated,
declared to be fraudulent or preferential, set aside, or required to be repaid
by anyone, then to the extent of such recovery, the Obligations or part thereof
originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or set-off had not occurred.

 

58

 

9.6.                              Severability.  The invalidity, illegality, or
unenforceability in any jurisdiction of any provision under the Loan Documents
shall not affect or impair the remaining provisions in the Loan Documents.

 

9.7.                              Lenders’
Obligations Several; Independent Nature of Lenders’ Rights.  The obligation of each Lender hereunder is
several and not joint and no Lender shall be responsible for the obligation or
commitment of any other Lender hereunder. 
In the event that any Lender at any time should fail to make a Loan as
herein provided, the Lenders, or any of them, at their sole option, may make
the Loan that was to have been made by the Lender so failing to make such
Loan.  Nothing contained in any Loan
Document and no action taken by Agent or any Lender pursuant hereto or thereto
shall be deemed to constitute Lenders to be a partnership, an association, a
joint venture or any other kind of entity. 
The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt.

 

9.8.                              Headings.  Section and subsection headings are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purposes or be given substantive effect.

 

9.9.                              Applicable Law.  THIS AGREEMENT AND EACH OF THE OTHER LOAN
DOCUMENTS WHICH DOES NOT EXPRESSLY SET FORTH APPLICABLE LAW SHALL BE GOVERNED
BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.

 

9.10.                        Successors and
Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns except that Borrowers may not
assign their rights or obligations hereunder without the written consent of all
Lenders which assignment without such consent shall be void.

 

9.11.                        No Fiduciary
Relationship; Limited Liability.  No provision in the Loan Documents and no
course of dealing between the parties shall be deemed to create any fiduciary
duty owing to any Credit Party by Agent or any Lender.  Each Credit Party agrees that neither Agent
nor any Lender shall have liability to any Credit Party (whether sounding in
tort, contract or otherwise) for losses suffered by any Credit Party in
connection with, arising out of, or in any way related to the transactions contemplated
and the relationship established by the Loan Documents, or any act, omission or
event occurring in connection therewith, unless and to the extent that it is
determined that such losses resulted from the gross negligence or willful
misconduct of the party from which recovery is sought as determined by a final
non-appealable order by a court of competent jurisdiction.  Neither Agent nor any Lender shall have any
liability with respect to, and each Credit Party hereby waives, releases and
agrees not to sue for, any special, indirect or consequential damages suffered
by any Credit Party in connection with, arising out of, or in any way related
to the Loan Documents or the transactions contemplated thereby.

 

9.12.                        Construction.  Agent, each Lender, Borrowers and each other
Credit Party acknowledge that each of them has had the benefit of legal counsel
of its own choice and has been afforded an opportunity to review the Loan
Documents with its legal counsel and that the Loan Documents shall be construed
as if jointly drafted by Agent, each Lender, Borrowers and each other Credit
Party.

 

9.13.                        Confidentiality.  Agent and each Lender agree to keep
confidential any non-public information delivered pursuant to the Loan
Documents and not to disclose such information to Persons other than to
potential assignees or participants or to direct or contractual counterparties to any Secured Rate Contracts or to Persons
employed by or engaged by Agent,
a Lender, a Lender’s assignees or
participants or direct or contractual
counterparties to any Secured Rate Contracts including 

 

59

 

attorneys, auditors,
professional consultants, rating agencies, insurance industry associations and
portfolio management services in each case who agree to be bound to the
provisions of this Section 9.13. 
The confidentiality provisions contained in this Section 9.13
shall not apply to disclosures (i) required to be made by Agent or any
Lender to any regulatory or governmental agency or pursuant to legal process or
(ii) consisting of general portfolio information that does not identify
Borrowers.  The obligations of Agent and
Lenders under this Section 9.13 shall supersede and replace the
obligations of Agent and Lenders under any confidentiality agreement in respect
of this financing executed and delivered by Agent or any Lender prior to the
date hereof.

 

9.14.                        CONSENT TO
JURISDICTION.  BORROWERS
AND CREDIT PARTIES HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN NEW YORK COUNTY, STATE OF NEW YORK AND IRREVOCABLY AGREE
THAT, SUBJECT TO AGENT’S  ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS   SHALL BE LITIGATED IN SUCH COURTS.  BORROWERS AND CREDIT PARTIES EXPRESSLY SUBMIT
AND CONSENT TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE
OF FORUM NON CONVENIENS.  BORROWERS AND
CREDIT PARTIES HEREBY WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREE THAT
ALL SUCH SERVICE OF PROCESS  MAY BE
MADE UPON BORROWERS AND CREDIT PARTIES BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, ADDRESSED TO BORROWER REPRESENTATIVE, AT THE ADDRESS SET
FORTH IN THIS AGREEMENT AND SERVICE  SO
MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.  IN ANY LITIGATION, TRIAL, ARBITRATION OR
OTHER DISPUTE RESOLUTION PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS, ALL DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS OF
BORROWERS, CREDIT PARTIES OR ANY OF THEIR AFFILIATES SHALL BE DEEMED TO BE
EMPLOYEES OR MANAGING AGENTS OF BORROWERS OR SUCH CREDIT PARTIES FOR PURPOSES
OF ALL APPLICABLE LAW OR COURT RULES REGARDING THE PRODUCTION OF WITNESSES BY
NOTICE FOR TESTIMONY (WHETHER IN A DEPOSITION, AT TRIAL OR OTHERWISE).  BORROWERS AND CREDIT PARTIES AGREE THAT AGENT’S
OR ANY LENDER’S COUNSEL IN ANY SUCH DISPUTE RESOLUTION PROCEEDING MAY EXAMINE
ANY OF THESE INDIVIDUALS AS IF UNDER CROSS-EXAMINATION AND THAT ANY DISCOVERY
DEPOSITION OF ANY OF THEM MAY BE USED IN THAT PROCEEDING AS IF IT WERE AN
EVIDENCE DEPOSITION.  BORROWERS AND
CREDIT PARTIES IN ANY EVENT WILL USE ALL COMMERCIALLY REASONABLE EFFORTS TO
PRODUCE IN ANY SUCH DISPUTE RESOLUTION PROCEEDING, AT THE TIME AND IN THE
MANNER REQUESTED BY AGENT OR ANY LENDER, ALL PERSONS, DOCUMENTS (WHETHER IN
TANGIBLE, ELECTRONIC OR OTHER FORM) OR OTHER THINGS UNDER THEIR CONTROL AND
RELATING TO THE DISPUTE.

 

9.15.                        WAIVER OF JURY
TRIAL.  BORROWERS, CREDIT PARTIES,
AGENT  AND EACH LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.  BORROWERS, CREDIT PARTIES, AGENT AND EACH
LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. 
BORROWERS, CREDIT PARTIES, AGENT AND EACH LENDER WARRANT AND REPRESENT
THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH 

 

60

 

LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

9.16.                        Survival of
Warranties and Certain Agreements.  All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement, the making of the Loans, issuances of Letters of Credit and the
execution and delivery of the Notes. 
Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Borrowers set forth in Sections 1.3(g), 1.10,
1.11 and 9.1 shall survive the repayment of the Obligations and the
termination of this Agreement.

 

9.17.                        Entire
Agreement.  This
Agreement, the Notes and the other Loan Documents embody the entire agreement
among the parties hereto and supersede all prior commitments, agreements,
representations, and understandings, whether oral or written, relating to the
subject matter hereof, and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto.  All Exhibits, Schedules
and Annexes referred to herein are incorporated in this Agreement by reference and
constitute a part of this Agreement.

 

9.18.                        Counterparts;
Effectiveness.  This
Agreement and any amendments, waivers, consents or supplements may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which counterparts together shall constitute but one in
the same instrument.  This Agreement
shall become effective upon the execution of a counterpart hereof by each of
the parties hereto.

 

9.19.                        Replacement of
Lenders.

 

(a)                                  Within ninety
(90) days after receipt by Borrower Representative of written notice and demand
from any Lender for payment pursuant to Section 1.10 or 1.11 or, as
provided in this Section 9.19(c), in the case of certain refusals
by any Lender to consent to certain proposed amendments, modifications,
terminations or waivers with respect to this Agreement that have been approved
by Requisite Lenders (any such Lender demanding such payment or refusing to so
consent being referred to herein as an “Affected Lender”), Borrowers
may, at their option, notify Agent and such Affected Lender of its intention to
do one of the following:

 

(i)                                     Borrowers may
obtain, at Borrowers’ expense, a replacement Lender (“Replacement Lender”)
for such Affected Lender, which Replacement Lender shall be a Qualified
Assignee or otherwise reasonably satisfactory to Agent.  In the event Borrowers obtain a Replacement
Lender that will purchase all outstanding Obligations owed to such Affected Lender
and assume its Commitments hereunder within ninety (90) days following notice
of Borrowers’ intention to do so, the Affected Lender shall sell and assign all
of its rights and delegate all of its obligations under this Agreement to such
Replacement Lender in accordance with the provisions of Section 8.1,
provided that Borrowers have reimbursed such Affected Lender for any
administrative fee payable pursuant to Section 8.1 and, in any case
where such replacement occurs as the result of a demand for payment pursuant to
Section 1.10 or 1.11, paid all amounts required to be paid to such
Affected Lender pursuant to Section 1.10 or 1.11 through the date
of such sale and assignment; or

 

(ii)                                  Borrowers may,
with Agent’s consent, prepay in full all outstanding Obligations owed to such
Affected Lender and terminate such Affected Lender’s Pro Rata Share of the
Revolving Loan Commitment, in which case the Revolving Loan Commitment will be
reduced by the amount of such Pro Rata Share. 
Borrowers shall, within ninety (90) days following notice of their intention
to do so, prepay in full all outstanding Obligations owed to such Affected
Lender (including, in any case where such prepayment occurs as the result of a
demand for payment for increased costs, such 

 

61

 

Affected
Lender’s increased costs for which it is entitled to reimbursement under this
Agreement through the date of such prepayment), and terminate such Affected
Lender’s obligations under the Revolving Loan Commitment.

 

(b)                                 In the case of
a Non-Funding Lender pursuant to Section 8.5(a), at Borrower
Representative’s request, Agent (without any obligation to do so), a Qualified
Assignee or a Person reasonably acceptable to Agent shall have the right with
Agent’s consent (such consent not to be unreasonably withheld or delayed) to
purchase from any Non-Funding Lender, and each Non-Funding Lender agrees that
it shall, at Agent’s request, sell and assign to Agent, such Qualified Assignee
or such Person, all of the Loans and Commitments of that Non-Funding Lender for
an amount equal to the principal balance of all Loans held by such Non-Funding
Lender and all accrued interest and Fees with respect thereto through the date
of sale, such purchase and sale to be consummated pursuant to an executed
Assignment Agreement.  Notwithstanding the foregoing, with respect
to a Lender that is a Non-Funding Lender or an Impacted Lender, the Borrowers
or Agent may obtain a Replacement Lender and execute an Assignment on  behalf of such Non-Funding Lender or Impacted
Lender at any time and without prior notice to such Non-Funding Lender or
Impacted Lender and cause its Loans and Commitments to be sold and assigned at
par.

 

(c)                                  If, in
connection with any proposed amendment, modification, waiver or termination
pursuant to Section 9.2 (a “Proposed Change”) requiring the
consent of all affected Lenders, the consent of Requisite Lenders is obtained,
but the consent of Lenders whose consent is required is not obtained (any such
Lender whose consent is not obtained as described in this clause (c) being
referred to as a “Non-Consenting Lender”), then, so long as Agent is not
a Non-Consenting Lender, at Borrower Representative’s request, Agent (without
any obligation to do so), a Qualified Assignee, or another Person reasonably
acceptable to Agent, shall have the right with Agent’s consent (such consent
not to be unreasonably withheld or delayed) to purchase from such
Non-Consenting Lenders, and such Non-Consenting Lenders agree that they shall
sell and assign to Agent, the respective Qualified Assignee or such other
Person, as applicable, all of the Loans and Commitments of such Non-Consenting
Lenders for an amount equal to the principal balance of all Loans held by the
Non-Consenting Lenders and all accrued interest and Fees with respect thereto
through the date of sale, such purchase and sale to be consummated pursuant to
an executed Assignment Agreement.

 

9.20.                        Delivery of
Termination Statements.  Upon
payment in full in cash and performance of all of the Obligations (other than
indemnification Obligations), termination of the Commitments and a release of
all claims against Agent and Lenders, and so long as no suits, actions
proceedings, or claims are pending or threatened against any Indemnitee
asserting any damages, losses or liabilities that are indemnified liabilities
hereunder, Agent shall deliver to Borrower Representative termination
statements, and other documents necessary or appropriate to evidence the
termination of the Liens securing payment of the Obligations.

 

9.21.                        Amendment and
Restatement.  This
Agreement amends and restates in its entirety the Credit Agreement, dated as of
October 15, 2002 (as amended, supplemented or otherwise modified to the
date hereof, the “Existing Credit Agreement”), among Borrowers, the
Credit Parties party thereto, Agent and the Lenders party thereto, and upon the
effectiveness of this Agreement, the terms and provisions of the Existing
Credit Agreement shall, subject to this Section 9.21, be superseded
hereby.  All references to the “Credit
Agreement” contained in the Loan Documents delivered in connection with the
Existing Credit Agreement or this Agreement shall, and shall be deemed to,
refer to this Agreement.  Notwithstanding
the amendment and restatement of the Existing Credit Agreement by this
Agreement, the Obligations of the Borrowers and the other Credit Parties
outstanding under the Existing Credit Agreement and the other Loan Documents as
of the Closing Date shall remain outstanding and shall 

 

62

 

constitute continuing
Obligations and shall continue as such to be secured by the Collateral.  Such Obligations shall in all respects be
continuing and this Agreement shall not be deemed to evidence or result in a novation
or repayment and reborrowing of such Obligations.  The Liens securing payment of the Obligations
under the Existing Credit Agreement, as amended and restated in the form of
this Agreement, shall in all respects be continuing, securing the payment of
all Obligations.

 

SECTION 10.

 

CROSS-GUARANTY

 

10.1.                        Cross-Guaranty.  Each Borrower hereby agrees that such
Borrower is jointly and severally liable for, and hereby absolutely and
unconditionally guarantees to Agent and Lenders and their respective successors
and assigns, the full and prompt payment (whether at stated maturity, by
acceleration or otherwise) and 
performance of, all Obligations owed or hereafter owing to Agent and
Lenders by each other Borrower.  Each
Borrower agrees that its guaranty obligation hereunder is a continuing guaranty
of payment and performance and not of collection, that its obligations under
this Section 10 shall not be discharged until payment and
performance, in full, of the Obligations has occurred, and that its obligations
under this Section 10 shall be absolute and unconditional,
irrespective of, and unaffected by,

 

(a)                                  the
genuineness, validity, regularity, enforceability or any future amendment of,
or change in, this Agreement, any other Loan Document or any other agreement,
document or instrument to which any Borrower is or may become a party;

 

(b)                                 the absence of
any action to enforce this Agreement (including this Section 10) or
any other Loan Document or the waiver or consent by Agent and Lenders with
respect to any of the provisions thereof;

 

(c)                                  the existence,
value or condition of, or failure to perfect its Lien against, any security for
the Obligations or any action, or the absence of any action, by Agent and
Lenders in respect thereof (including the release of any such security);

 

(d)                                 the insolvency
of any Credit Party; or

 

(e)                                  any other
action or circumstances that might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor.

 

Each Borrower shall be
regarded, and shall be in the same position, as principal debtor with respect
to the Obligations guaranteed hereunder.

 

10.2.                        Waivers by
Borrowers.  Each
Borrower expressly waives all rights it may have now or in the future under any
statute, or at common law, or at law or in equity, or otherwise, to compel
Agent or Lenders to marshal assets or to proceed in respect of the Obligations
guaranteed hereunder against any other Credit Party, any other party or against
any security for the payment and performance of the Obligations before
proceeding against, or as a condition to proceeding against, such
Borrower.  It is agreed among each
Borrower, Agent and Lenders that the foregoing waivers are of the essence of
the transaction contemplated by this Agreement and the other Loan Documents and
that, but for the provisions of this Section 10 and such waivers,
Agent and Lenders would decline to enter into this Agreement.

 

63

 

10.3.                        Benefit of
Guaranty.  Each
Borrower agrees that the provisions of this Section 10 are for the
benefit of Agent and Lenders and their respective successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between
any other Borrower and Agent or Lenders, the obligations of such other Borrower
under the Loan Documents.

 

10.4.                        Waiver of
Subrogation, Etc. 
Notwithstanding anything to the contrary in this Agreement or in any
other Loan Document, and except as set forth in Section 10.7, each
Borrower hereby expressly and irrevocably waives any and all rights at law or
in equity to subrogation, reimbursement, 
exoneration, contribution, indemnification or set off and any and all
defenses available to a surety, guarantor or accommodation co-obligor.  Each Borrower acknowledges and agrees that
this waiver is intended to benefit Agent and Lenders and shall not limit or
otherwise affect such Borrower’s liability hereunder or the enforceability of
this Section 10, and that Agent, Lenders and their respective
successors and assigns are intended third party beneficiaries of the waivers
and agreements set forth in this Section 10.4.

 

10.5.                        Election of
Remedies.  If Agent or
any Lender may, under applicable law, proceed to realize its benefits under any
of the Loan Documents giving Agent or such Lender a Lien upon any Collateral,
whether owned by any Borrower or by any other Person, either by judicial
foreclosure or by non-judicial sale or enforcement, Agent or any Lender may, at
its sole option, determine which of its remedies or rights it may pursue
without affecting any of its rights and remedies under this Section 10.  If, in the exercise of any of its rights and
remedies, Agent or any Lender shall forfeit any of its rights or remedies,
including its right to enter a deficiency judgment against any Borrower or any
other Person, whether because of any applicable laws pertaining to “election of
remedies” or the like, each Borrower hereby consents to such action by Agent or
such Lender and waives any claim based upon such action, even if such action by
Agent or such Lender shall result in a full or partial loss of any rights of
subrogation that each Borrower might otherwise have had but for such action by
Agent or such Lender.  Any election of
remedies that results in the denial or impairment of the right of Agent or any
Lender to seek a deficiency judgment against any Borrower shall not impair any
other Borrower’s obligation to pay the full amount of the Obligations.  In the event Agent or any Lender shall bid at
any foreclosure or trustee’s sale or at any private sale permitted by law or
the Loan Documents, Agent or such Lender may bid all or less than the amount of
the Obligations and the amount of such bid need not be paid by Agent or such
Lender but shall be credited against the Obligations.  The amount of the successful bid at any such
sale, whether Agent, Lender or any other party is the successful bidder, shall
be conclusively deemed to be the fair market value of the Collateral and the
difference between such bid amount and the remaining balance of the Obligations
shall be conclusively deemed to be the amount of the  Obligations guaranteed under this Section 10,
notwithstanding that any present or future law or court decision or ruling may
have the effect of reducing the amount of any deficiency claim to which Agent
or any Lender might otherwise be entitled but for such bidding at any such
sale.

 

10.6.                        Limitation.  Notwithstanding any provision herein
contained to the contrary, each Borrower’s liability under this Section 10
(which liability is in any event in addition to amounts for which such Borrower
is primarily liable under Section 1) shall be limited to an amount
not to exceed as of any date of determination the greater of:

 

(a)                                  the net amount
of all Loans advanced to any other Borrower under this Agreement and then
re-loaned or otherwise transferred to, or for the benefit of, such Borrower;
and

 

(b)                                 the amount that
could be claimed by Agent and Lenders from such Borrower under this Section 10
without rendering such claim voidable or avoidable under Section 548 of
Chapter 11 of the Bankruptcy Code or under any applicable state Uniform
Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute
or common law after taking into account, among other 

 

64

 

things, such Borrower’s right
of contribution and indemnification from each other Borrower under Section 10.7.

 

10.7.                        Contribution
with Respect to Guaranty Obligations.

 

(a)                                  To the extent
that any Borrower shall make a payment under this Section 10 of all
or any of the Obligations (other than Loans made to that Borrower for which it
is primarily liable) (a “Guarantor Payment”) that, taking into account
all other Guarantor Payments then previously or concurrently made by any other
Borrower, exceeds the amount that such Borrower would otherwise have paid if
each Borrower had paid the aggregate Obligations satisfied by such Guarantor
Payment in the same proportion that such Borrower’s “Allocable Amount” (as
defined below) (as determined immediately prior to such Guarantor Payment) bore
to the aggregate Allocable Amounts of each of the Borrowers as determined
immediately prior to the making of such Guarantor Payment, then, following
indefeasible payment in full in cash of the Obligations and termination of the
Commitments, such Borrower shall be entitled to receive contribution and
indemnification payments from, and be reimbursed by, each other Borrower for
the amount of such excess, pro rata based upon their respective Allocable
Amounts in effect immediately prior to such Guarantor Payment.

 

(b)                                 As of any date
of determination, the “Allocable Amount” of any Borrower shall be equal
to the maximum amount of the claim that could then be recovered from such
Borrower under this Section 10 without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law.

 

(c)                                  This Section 10.7
is intended only to define the relative rights of Borrowers and nothing set
forth in this Section 10.7 is intended to or shall impair the
obligations of Borrowers,  jointly and
severally, to pay any amounts as and when the same shall become due and payable
in accordance with the terms of this Agreement, including Section 10.1.  Nothing contained in this Section 10.7
shall limit the liability of any Borrower to pay the Loans made directly or
indirectly to that Borrower and accrued interest, Fees and expenses with
respect thereto for which such Borrower shall be primarily liable.

 

(d)                                 The parties
hereto acknowledge that the rights of contribution and indemnification
hereunder shall constitute assets of the Borrower to which such contribution
and indemnification is owing.

 

(e)                                  The rights of
the indemnifying Borrowers against other Credit Parties under this Section 10.7
shall be exercisable upon the full and indefeasible payment of the Obligations
and the termination of the Commitments.

 

10.8.                        Liability
Cumulative.  The
liability of Borrowers under this Section 10 is in addition to and
shall be cumulative with all liabilities of each Borrower to Agent and Lenders
under this Agreement and the other Loan Documents to which such Borrower is a
party or in respect of any Obligations or obligation of the other Borrower, without
any limitation as to amount, unless the instrument or agreement evidencing or
creating such other liability specifically provides to the contrary.

 

[SIGNATURES CONTINUE ON FOLLOWING PAGES.]

 

65

 

Witness the due execution
hereof by the respective duly authorized officers of the undersigned as of the
date first written above.

 

	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH INTERNATIONAL,
  L.P.

  
	
   

  	
  By: Golfsmith GP L.L.C.,
  as General Partner

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name:  Sue E.
  Gove

  
	
   

  	
  Title:   Executive
  Vice President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  GOLFSMITH NU, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name:  Sue E.
  Gove

  
	
   

  	
  Title:    Executive
  Vice President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  GOLFSMITH USA, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name:  Sue E.
  Gove

  
	
   

  	
  Title:    Executive
  Vice President, Chief Operating Officer and Chief Financial Officer

  

 

SIGNATURE PAGE TO GOLFSMITH CREDIT AGREEMENT

 

 

	
   

  	
  CREDIT PARTIES:

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH
  INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name:  Sue E.
  Gove

  
	
   

  	
  Title:   Executive
  Vice President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH INTERNATIONAL
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name:  Sue E.
  Gove

  
	
   

  	
  Title:   Executive
  Vice President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH GP
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name:  Sue E.
  Gove

  
	
   

  	
  Title:   Executive
  Vice President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH HOLDINGS, L.P.

  
	
   

  	
  By Golfsmith GP
  Holdings, Inc., as General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name:  Sue E.
  Gove

  
	
   

  	
  Title:   Executive
  Vice President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH GP, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name:  Sue E.
  Gove

  
	
   

  	
  Title:   Executive
  Vice President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH DELAWARE, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Martin E. Hanaka

  
	
   

  	
  Name:

  	
  Martin E. Hanaka

  
	
   

  	
  Title:

  	
  Chairman and Chief
  Executive Officer

  
				

 

SIGNATURE PAGE TO GOLFSMITH CREDIT AGREEMENT

 

 

	
   

  	
  GOLFSMITH CANADA, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name:  Sue E.
  Gove

  
	
   

  	
  Title:   Executive
  Vice President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH EUROPE, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name:  Sue E.
  Gove

  
	
   

  	
  Title:   Executive
  Vice President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH LICENSING,
  L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name:  Sue E.
  Gove

  
	
   

  	
  Title:   Executive
  Vice President, Chief Operating Officer and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH
  INCENTIVE SERVICES, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sue E. Gove

  
	
   

  	
  Name:  Sue E. Gove

  
	
   

  	
  Title:   Executive
  Vice President, Chief Operating Officer and Chief Financial Officer

  

 

SIGNATURE PAGE TO GOLFSMITH CREDIT AGREEMENT

 

 

	
   

  	
  GENERAL ELECTRIC CAPITAL
  CORPORATION,

  
	
   

  	
  as Agent, an L/C Issuer
  and a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Peter Foley

  
	
   

  	
  Name:   Peter
  Foley

  
	
   

  	
  its Duly Authorized
  Signatory

  

 

SIGNATURE PAGE TO GOLFSMITH CREDIT AGREEMENT

 

 

ANNEX A

 

to

 

CREDIT AGREEMENT

 

DEFINITIONS

 

Capitalized terms used in
the Loan Documents shall have (unless otherwise provided elsewhere in the Loan
Documents) the following respective meanings and all references to Sections,
Exhibits, Schedules or Annexes in the following definitions shall refer to
Sections, Exhibits, Schedules or Annexes of or to the Agreement:

 

“Account Debtor”
means any Person who may become obligated to any Credit Party under, with
respect to, or on account of, an Account, Chattel Paper or General Intangibles
(including a payment intangible).

 

“Accounting Changes”
means:  (a) changes in accounting
principles required by GAAP and implemented by Holdings or any of its
Subsidiaries; (b) changes in accounting principles recommended by Holdings’
certified public accountants and implemented by Holdings or any of its
Subsidiaries; and (c) changes in carrying value of Holdings’ or any of its
Subsidiaries’ assets, liabilities or equity accounts resulting from (i) the
application of purchase accounting principles (A.P.B. 16 and/or 17 and EITF
88-16 and FASB 109) to the Related Transactions or (ii) as the result of
any other adjustments that, in each case, were applicable to, but not included
in, the Pro Forma.

 

“Accounts” means all “accounts,”
as such term is defined in the Code, now owned or hereafter acquired by any
Credit Party, including (a) all accounts receivable, other receivables,
book debts and other forms of obligations (other than forms of obligations
evidenced by Chattel Paper or Instruments), (including any such obligations
that may be characterized as an account or contract right under the Code), (b) all
of each Credit Party’s rights in, to and under all purchase orders or receipts
for goods or services, (c) all of each Credit Party’s rights to any goods
represented by any of the foregoing (including unpaid sellers’ rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods), (d) all rights to payment due
to any Credit Party for property sold, leased, licensed, assigned or otherwise
disposed of, for a policy of insurance issued or to be issued, for a secondary
obligation incurred or to be incurred, for energy provided or to be provided,
for the use or hire of a vessel under a charter or other contract, arising out
of the use of a credit card or charge card, or for services rendered or to be
rendered by such Credit Party or in connection with any other transaction
(whether or not yet earned by performance on the part of such Credit Party), (e) all
healthcare insurance receivables, and (f) all collateral security of any
kind, now or hereafter in existence, given by any Account Debtor or other
Person with respect to any of the foregoing.

 

“Acquisition Agreement”
means the Agreement and Plan of Merger, dated September 23, 2002, between
Holdings, BGA Acquisition Corp. and GII.

 

“Activation Event”
has the meaning ascribed to it in Annex F.

 

“Activation Notice”
has the meaning ascribed to it in Annex F.

 

“Advances” means any
Revolving Credit Advance or Swing Line Advance, as the context may require.

 

A-1

 

“Affected Lender” has
the meaning ascribed to it in Section 9.19(a).

 

“Affiliate” means,
with respect to any Person, (a) each Person that, directly or indirectly,
owns or controls, whether beneficially, or as a trustee, guardian or other
fiduciary, 10% or more of the Stock having ordinary voting power in the
election of directors of such Person, (b) each Person that controls, is
controlled by or is under common control with such Person, (c) each of
such Person’s officers, directors, joint venturers and partners and (d) in
the case of Borrowers, the immediate family members, spouses and lineal
descendants of individuals who are Affiliates of any Borrower.  For the purposes of this definition, “control”
of a Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether through
the ownership of voting securities, by contract or otherwise; provided, however,
that the term “Affiliate” shall specifically exclude Agent and each
Lender.

 

“Agent” means GE
Capital in its capacity as Agent for Lenders or its successor appointed
pursuant to Section 8.2.

 

“Agreement” means the
Credit Agreement (including all schedules, subschedules, annexes and exhibits
hereto), as the same may be amended, supplemented, restated or otherwise
modified from time to time.

 

“Allocable Amount”
has the meaning ascribed to it in Section 10.7.

 

“Applicable L/C Margin”
means the per annum fee, from time to time in effect, payable with respect to
outstanding Letter of Credit Obligations as determined by reference to Section 1.2(a).

 

“Applicable Margins”
means collectively the Applicable L/C Margin, the Applicable Revolver Index
Margin and the Applicable Revolver LIBOR Margin.

 

“Applicable Revolver
Index Margin” means the per annum interest rate margin from time to time in
effect and payable in addition to the Index Rate applicable to the Revolving
Loan, as determined by reference to Section 1.2(a).

 

“Applicable Revolver
LIBOR Margin” means the per annum interest rate from time to time in effect
and payable in addition to the LIBOR Rate applicable to the Revolving Loan, as
determined by reference to Section 1.2(a).

 

“Approved Fund”
means, with respect to any Lender, any Person (other than a natural Person)
that (a) is or will be engaged in making, purchasing, holding or otherwise
investing in commercial loans and similar extensions of credit in the ordinary
course of its business and (b) is advised or managed by (i) such
Lender, (ii) any Affiliate of such Lender or (iii) any Person (other
than an individual) or any Affiliate of any Person (other than an individual)
that administers or manages such Lender.

 

“Asset Disposition”
means the disposition whether by sale, lease, transfer, loss, damage,
destruction, casualty, condemnation or otherwise of any of the following:  (a) any of the Stock or other equity or
ownership interest of any of Holdings or any of its Subsidiaries or (b) any
or all of the assets of Holdings or any of its Subsidiaries other than sales of
Inventory in the ordinary course of business.

 

“Assignment Agreement”
has the meaning ascribed to it in Section 8.1(a).

 

A-2

 

“Base Real Estate
Appraisal” means, as to each parcel of Eligible Real Estate, the appraisal
conducted by Cushman & Wakefield of the value of such parcel of
Eligible Real Estate, each such appraisal dated as of a date prior to the Closing
Date.

 

“Bankruptcy Code”
means the provisions of Title 11 of the United States Code, 11 U.S.C. §§ 101 et
seq. or other applicable bankruptcy, insolvency or similar laws.

 

“Blocked Account
Agreement” has the meaning ascribed to it in Annex F.

 

“Blocked Accounts”
has the meaning ascribed to it in Annex F.

 

“Borrower” and “Borrowers”
have the respective meanings ascribed to them in the preamble to the Agreement.

 

“Borrower Representative”
means GII in its capacity as Borrower Representative pursuant to the provisions
of Section 1.13.

 

“Borrowing Availability”
means as of any date of determination the lesser of (i) the Maximum Amount
and (ii) the Borrowing Base, in each case, less the sum of (a) the
Revolving Loans then outstanding (including, without duplication, the
outstanding balance of Letter of Credit Obligations and the Swing Line Loan
then outstanding), and (b) Reserves required by Agent in
its reasonable credit judgment.

 

“Borrowing Base”
means, as of any date of determination by Agent, from time to time, an amount
equal to:

 

(a)           90% of the
book value of Borrowers’ Eligible Accounts at such time; plus

 

(b)           the lesser of (i) 70% of the cost of Borrowers’
Eligible Inventory or (y) up to 90% of the “net orderly liquidation value”
of Borrowers’ Eligible Inventory; plus

 

(c)           63% of the
Fair Market Value (as shown on the Most Recent Appraisal) of Eligible Real
Estate; minus

 

(d)           any Reserves except to the extent already deducted
therefrom.

 

“Borrowing Base
Certificate” has the meaning ascribed to it in Section 4.1(d).

 

“Business Day” means
any day that is not a Saturday, a Sunday or a day on which banks are required
or permitted to be closed in the States of New York, Texas or Illinois and in
reference to LIBOR Loans shall mean any such day that is also a LIBOR Business
Day.

 

“Cash Management Systems”
has the meaning ascribed to it in Section 2.10.

 

“Capital Expenditures”
means, with respect to any Person, all expenditures (by the expenditure of cash
or the incurrence of Indebtedness) by such Person during any measuring period
for any fixed assets or improvements or for replacements, substitutions or
additions thereto, that have a useful life of more than one year and that are
required to be capitalized under GAAP.

 

“Capital Lease”
means, with respect to any Person, any lease of any property (whether real,
personal or mixed) by such Person as lessee that, in accordance with GAAP,
would be required to be classified and accounted for as a capital lease on a
balance sheet of such Person.

 

A-3

 

“Capital Lease Obligation”
means, with respect to any Capital Lease of any Person, the amount of the
obligation of the lessee thereunder that, in accordance with GAAP, would appear
on a balance sheet of such lessee in respect of such Capital Lease.

 

“Cash Equivalents”
means:  (i) marketable securities (A) issued
or directly and unconditionally guaranteed as to interest and principal by the
United States government or (B) issued by any agency of the United States
government the obligations of which are backed by the full faith and credit of
the United States, in each case maturing within one (1) year after
acquisition thereof; (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof, in each case maturing within one
year after acquisition thereof and having, at the time of acquisition, a rating
of at least A-1 from S&P or at least P-1 from Moody’s; (iii) commercial
paper maturing no more than one year from the date of acquisition and, at the
time of acquisition, having a rating of at least A-1 from S&P or at least
P-1 from Moody’s; (iv) certificates of deposit or bankers’ acceptances
issued or accepted by any Lender or by any commercial bank organized under the
laws of the United States of America or any state thereof or the District of
Columbia that is at least (A) “adequately capitalized” (as defined in the
regulations of its primary Federal banking regulator) and (B) has Tier 1
capital (as defined in such regulations) of not less than $250,000,000, in each
case maturing within one year after issuance or acceptance thereof; and (v) shares
of any money market mutual or similar funds that (A) has substantially all
of its assets invested continuously in the types of investments referred to in
clauses (i) through (iv) above, (B) has net assets of not less
than $500,000,000 and (C) has the highest rating obtainable from either
S&P or Moody’s.

 

“Certificate of Exemption”
has the meaning ascribed to it in Section 1.11(c).

 

“Change of Control”
means any of the following:  (a) any
person or group of persons, (within the meaning of the Securities Exchange Act
of 1934), other than Atlantic Equity Partners III, L.P. and/or other investment
funds controlled by First Atlantic, shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of 30% or more
of the issued and outstanding shares of Stock of Holdings having the right to
vote for the election of directors of Holdings under ordinary circumstances; (b) during
any period of twelve consecutive calendar months, individuals who at the
beginning of such period constituted the board of directors of Holdings
(together with any new directors whose election by the board of directors of
Holdings or whose nomination for election by the Stockholders of Holdings was
approved by a vote of at least a majority of the directors then still in office
who either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason other
than death or disability to constitute a majority of the directors then in
office; or (c) Holdings ceases to own and control all of the economic and
voting rights associated with all of the outstanding Stock of Borrowers.

 

“Charges” means all
federal, state, county, city, municipal, local, foreign or other governmental
taxes (including premiums and other amounts owed to the PBGC at the time due
and payable), levies, assessments, charges, liens, claims or encumbrances upon
or relating to (a) the Collateral, (b) the Obligations, (c) the
employees, payroll, income or gross receipts of any Credit Party, (d) any
Credit Party’s ownership or use of any properties or other assets, or (e) any
other aspect of any Credit Party’s business.

 

“Chattel Paper” means
any “chattel paper,” as such term is defined in the Code, including electronic
chattel paper, now owned or hereafter acquired by any Credit Party, wherever
located.

 

“Closing Checklist”
means the schedule, including all appendices, exhibits or schedules thereto,
listing certain documents and information to be delivered in connection with
the Agreement, the 

 

A-4

 

other Loan Documents and the
transactions contemplated thereunder, substantially in the form attached hereto
as Annex C.

 

“Closing Date” means June 20,
2006.

 

“Code” means the
Uniform Commercial Code as the same may, from time to time, be enacted and in
effect in the State of New York; provided, that to the extent that the
Code is used to define any term herein or in any Loan Document and such term is
defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern; provided
further, that in the event that, by reason of mandatory provisions of law,
any or all of the attachment, perfection or priority of, or remedies with
respect to, Agent’s or any Lender’s Lien on any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other than
the State of New York, the term “Code” shall mean the Uniform Commercial
Code as enacted and in effect in such other jurisdiction solely for purposes of
the provisions thereof relating to such attachment, perfection, priority or
remedies and for purposes of definitions related to such provisions.

 

“Collateral” means
the property covered by the Security Agreement, the Mortgages and the other
Collateral Documents and any other property, real or personal, tangible or
intangible, now existing or hereafter acquired, that may at any time be or
become subject to a security interest or Lien in favor of Agent, on behalf of
itself and Lenders, to secure the Obligations or any portion thereof.

 

“Collateral Documents”
means the Security Agreement, the Pledge Agreements, the Guaranties, the
Mortgages, the Patent Security Agreements, the Trademark Security Agreements,
the Copyright Security Agreements and all similar agreements entered into
guaranteeing payment of, or granting a Lien upon property as security for
payment of, the Obligations or any portion thereof.

 

“Commitment Termination
Date” means the earliest of (a) June 9, 2014, (b) the date of termination of Lenders’ obligations
to make Advances and to incur Letter of Credit Obligations or permit existing
Loans to remain outstanding pursuant to Section 6.3, and (c) the
date of (i) indefeasible prepayment in full by Borrowers of the Loans, (ii) the
cancellation and return (or stand-by guarantee) of all Letters of Credit or the
cash collateralization of all Letter of Credit Obligations pursuant to Section 1.5(g),
and (iii) the permanent reduction of the Commitments to zero dollars ($0).

 

“Commitments” means (a) as
to any Lender, the aggregate of such Lender’s Revolving Loan Commitment as set
forth on Annex B to the Agreement or in the most recent Assignment
Agreement executed by such Lender and (b) as to all Lenders, the aggregate
of all Lenders’ Revolving Loan Commitments which aggregate commitment shall be
Ninety Million Dollars ($90,000,000) on the First Amendment Effective Date, as
such Commitments may be reduced, amortized or adjusted from time to time in
accordance with the Agreement.

 

“Compliance Certificate”
has the meaning ascribed to it in Section 4.1(k).

 

“Consolidated Fixed
Charges” means, with respect to the Credit Parties on a consolidated basis
for any applicable period of twelve months, (a) the aggregate of all cash
interest expense paid or accrued during such period, plus (b) scheduled
payments of principal with respect to Indebtedness during such period, plus (c) Capital
Expenditures during such period plus (d) income taxes paid or payable in
cash with respect to such fiscal period.

 

“Consolidated Fixed
Charge Coverage Ratio” means, with respect to the Credit Parties on a
consolidated basis for any applicable period of twelve months, the ratio of
EBITDA to Consolidated Fixed Charges.

 

A-5

 

“Consolidated Net Income”
means, consolidated net income of Holdings during the measuring period
excluding: (i) the income (or deficit) of any Person accrued prior to the
date it became a Subsidiary of, or was merged or consolidated into, Holdings or
any of Holdings’ Subsidiaries; (ii) the income (or deficit) of any Person
(other than a Subsidiary) in which Holdings have an ownership interest, except
to the extent any such income has actually been received by Borrowers or any of
their Subsidiaries in the form of cash dividends or distributions; (iii) the
undistributed earnings of any Subsidiary of Holdings to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted by the
terms of any contractual obligation or requirement of law applicable to such
Subsidiary; (iv) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out of income
accrued during such period; (v) any net gain attributable to the write-up
of any asset; (vi) any net gain from the collection of the proceeds of
life insurance policies; (vii) any net gain arising from the acquisition
of any securities, or the extinguishment of any Indebtedness, of Holdings or
any of their Subsidiaries; (viii) in the case of a successor to Holdings
or any of their Subsidiaries by consolidation or merger or as a transferee of
its assets, any earnings of such successor prior to such consolidation, merger
or transfer of assets and (ix) any deferred credit representing the excess
of equity in any Subsidiary of Holdings at the date of acquisition of such
Subsidiary over the cost to Holdings of the investment in such Subsidiary.

 

“Contingent Obligation”
means, as applied to any Person, any direct or indirect liability of that
Person:  (i) with respect to
Guaranteed Indebtedness and with respect to any Indebtedness, lease, dividend
or other obligation of another Person if the purpose or intent of the Person
incurring such liability, or the effect thereof, is to provide assurance to the
obligee of such liability that such liability will be paid or discharged, or
that any agreements relating thereto will be complied with, or that the holders
of such liability will be protected (in whole or in part) against loss with
respect thereto; (ii) with respect to any letter of credit issued for the
account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings; (iii) under any foreign exchange contract,
currency swap agreement, interest rate swap agreement or other similar
agreement or arrangement designed to alter the risks of that Person arising
from fluctuations in currency values or interest rates, (iv) any
agreement, contract or transaction involving commodity options or future
contracts, (v) to make take-or-pay or similar payments if required
regardless of nonperformance by any other party or parties to an agreement, or (vi) pursuant
to any agreement to purchase, repurchase or otherwise acquire any obligation or
any property constituting security therefor, to provide funds for the payment
or discharge of such obligation or to maintain the solvency, financial
condition or any balance sheet item or level of income of another.  The amount of any Contingent Obligation shall
be equal to the amount of the obligation so guaranteed or otherwise supported
or, if not a fixed and determined amount, the maximum amount so guaranteed.

 

“Contractual Obligations”
means, as applied to any Person, any indenture, mortgage, deed of trust,
contract, undertaking, agreement or other instrument to which that Person is a
party or by which it or any of its properties is bound or to which it or any of
its properties is subject including the Related Transactions Documents.

 

“Copyright License”
means any and all rights nor owned or hereafter acquired by any Credit Party
under any written agreement granting any right to use any Copyright or
Copyright registration.

 

“Copyright Security
Agreements” means the Copyright Security Agreements made in favor of Agent,
on behalf of itself and Lenders, by each applicable Credit Party.

 

“Copyrights” means
all of the following now owned or hereafter adopted or acquired by any Credit
Party: (a) all copyrights and General Intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith,

 

A-6

 

including all registrations,
recordings and applications in the United States Copyright Office or in any
similar office or agency of the United States, any state or territory thereof,
or any other country or any political subdivision thereof; and (b) all reissues,
extensions or renewals thereof.

 

“Credit Parties”
means Holdings, Borrowers, each Subsidiary of each Borrower, GII, each other
Subsidiary of GII that executes this Agreement as a “Credit Party” or executes
a Guaranty or who grants a Lien on all or part of its assets to secure all of
part of the Obligations.

 

“Default” means any
event that, with the passage of time or notice or both, would, unless cured or
waived, become an Event of Default.

 

“Default Rate” has
the meaning ascribed to it in Section 1.2(d).

 

“Disbursement Account”
has the meaning ascribed to it in Section 1.1(e).

 

“Disclosure Schedules”
means the Schedules prepared by Borrower Representative and denominated as Schedules
1.1(b) through 5.18 in the index to the Agreement.

 

“Documents” means any
“document,” as such term is defined in the Code, including electronic
documents, now owned or hereafter acquired by any Credit Party, wherever
located.

 

“Dollars” or “$”
means lawful currency of the United States of America.

 

“Domestic Subsidiary”
means each Subsidiary of Holdings that is organized under the laws of the
United States or a state thereof.

 

“EBITDA” shall mean
Consolidated Net Income, less (in each case to the extent included in
the calculation of Consolidated Net Income, but without duplication): (i)
income tax credits; (ii) interest income; (iii) gain from extraordinary items
(net of loss from extraordinary items); (iv) any aggregate net gain (but not
any aggregate net loss) arising from the sale, exchange or other disposition of
capital assets (including any fixed assets, whether tangible or intangible, all
inventory sold in conjunction with the disposition of fixed assets and all
securities); and (v) any other non-cash gains, plus (in each case to the
extent deducted in the calculation of Consolidated Net Income, but without
duplication): (i) any provision for income taxes; (ii) cash interest expense;
(iii) depreciation and amortization; (iv) amortized debt discount; and (v) any
deduction as the result of any grant to any members of the management of
Holdings or any of its Subsidiaries of any Stock.

 

“Electronic Transmission”
means each document, instruction, authorization, file, information and any
other communication transmitted, posted or otherwise made or communicated by
e-mail or E-Fax, or otherwise to or from an E-System or other equivalent
service.

 

“Eligible Accounts”
has the meaning ascribed to it in Schedule 1 to Exhibit 4.1(d).

 

“Eligible Inventory”
has the meaning ascribed to it in Schedule 1 to Exhibit 4.1(d).

 

“Eligible Real Estate”
means all Real Estate which meets all of the following criteria: (a) such Real
Estate is owned by a Borrower, (b) such Real Estate is subject to a valid and
enforceable first priority lien (subject to Permitted Encumbrances) in favor of
Agent for the benefit of itself and Lenders (or in favor of such other trustee
as may be required or desired under local law), (c) to the extent requested by
Agent, the applicable Borrower shall have delivered to Agent title insurance
policies, current as-built surveys, zoning letters or an opinion of local
counsel with respect to compliance with zoning 

 

A-7

 

matters and certificates of
occupancy or such other evidence of the absence of outstanding notices of violations
and other building code regulation issues as Agent shall otherwise require, in
each case reasonably satisfactory in form and substance to Agent, and (d) such
Real Estate is not otherwise unacceptable to Agent in its reasonable credit
judgment, whether for environmental reasons or otherwise.  Agent shall have the right to establish,
modify, or eliminate Reserves against Eligible Real Estate from time to time in
its reasonable credit judgment after notice to Borrowers.  In addition, Agent reserves the right, at any
time and from time to time after the Closing Date after notice to Borrowers, to
adjust any of the criteria set forth above, to establish new criteria in its
reasonable credit judgment, subject to the approval of Requisite Lenders, in
the case of new criteria which have the effect of making more credit available.

 

“Environmental Laws”
means all applicable federal, state, local and foreign laws, statutes,
ordinances, codes, rules, standards and regulations, now or hereafter in
effect, and any applicable judicial or administrative interpretation thereof,
including any applicable judicial or administrative order, consent decree,
order or judgment, imposing liability or standards of conduct for or relating
to the regulation and protection of human health, safety, the environment and
natural resources (including ambient air, surface water, groundwater, wetlands,
land surface or subsurface strata, wildlife, aquatic species and
vegetation).  Environmental Laws include
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980 (42 U.S.C. §§ 9601 et seq.) (“CERCLA”); the Hazardous
Materials Transportation Authorization Act of 1994 (49 U.S.C. §§ 5101 et
seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§
136 et seq.); the Solid Waste Disposal Act (42 U.S.C. §§ 6901 et seq.);
the Toxic Substance Control Act (15 U.S.C. §§ 2601 et seq.); the Clean
Air Act (42 U.S.C. §§ 7401 et seq.); the Federal Water Pollution Control
Act (33 U.S.C. §§ 1251 et seq.); the Occupational Safety and Health Act
(29 U.S.C. §§ 651 et seq.); and the Safe Drinking Water Act (42 U.S.C.
§§ 300(f) et seq.), and any and all regulations promulgated thereunder,
and all analogous state, local and foreign counterparts or equivalents and any
transfer of ownership notification or approval statutes.

 

“Environmental
Liabilities” means, with respect to any Person, all liabilities,
obligations, responsibilities, response, remedial and removal costs,
investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand
by any Person, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute or common law, including any
arising under or related to any Environmental Laws, Environmental Permits, or
in connection with any Release or threatened Release or presence of a Hazardous
Material whether on, at, in, under, from or about or in the vicinity of any
real or personal property.

 

“Environmental Permits”
means all permits, licenses, authorizations, certificates, approvals or
registrations required by any Governmental Authority under any Environmental
Laws.

 

“Equipment” means all
“equipment,” as such term is defined in the Code, now owned or hereafter
acquired by any Credit Party, wherever located and, in any event, including all
such Credit Party’s machinery and equipment, including processing equipment,
conveyors, machine tools, data processing and computer equipment, including
embedded software and peripheral equipment and all engineering, processing and
manufacturing equipment, office machinery, furniture, materials handling
equipment, tools, attachments, accessories, automotive equipment, trailers,
trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other
equipment of every kind and nature, trade fixtures and fixtures not forming a
part of real property, together with all additions and accessions thereto, replacements
therefor, all parts therefor, all substitutes for any of the foregoing, fuel
therefor, and all 

 

A-8

 

manuals, drawings,
instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.

 

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

 

“ERISA Affiliate”
means, with respect to any Credit Party, any trade or business (whether or not
incorporated) that, together with such Credit Party, are treated as a single
employer within the meaning of Sections 414(b) of the IRC, and for the purpose
of Section 302 of ERISA and/or Section 412, 4971, 4977 and/or each “applicable
Section” under Section 414 (t)(2) of the IRC, within the meaning of Sections
414(b), (c), (m) or (o) of the IRC.

 

“ERISA Event” means,
with respect to any Credit Party or any ERISA Affiliate, (a) any event
described in Section 4043(c) of ERISA with respect to a Title IV Plan; (b) the
withdrawal of any Credit Party or ERISA Affiliate from a Title IV Plan subject
to Section 4063 of ERISA during a plan year in which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (c) the complete or
partial withdrawal of any Credit Party or any ERISA Affiliate from any
Multiemployer Plan; (d) the filing of a notice of intent to terminate a Title
IV Plan or the treatment of a plan amendment as a termination under Section
4041 of ERISA; (e) the institution of proceedings to terminate a Title IV Plan
or Multiemployer Plan by the PBGC; (f) the failure by any Credit Party or ERISA
Affiliate to make when due required contributions to a Multiemployer Plan or
Title IV Plan unless such failure is cured within 30 days; (g) any other event
or condition that might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Title IV Plan or Multiemployer Plan or for the imposition of
liability under Section 4069 or 4212(c) of ERISA; (h) the termination of a
Multiemployer Plan under Section 4041A of ERISA or the reorganization or
insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA; or (i)
the revocation of a Qualified Plan’s qualification or tax exempt status by the
IRS; or (j) the termination of a Plan described in Section 4064 of ERISA.

 

“E-Signature” means
the process of attaching to or logically associating with an Electronic
Transmission an electronic symbol, encryption, digital signature or process
(including the name or an abbreviation of the name of the party transmitting
the Electronic Transmission) with the intent to sign, authenticate or accept
such Electronic Transmission.

 

“E-System” means any
electronic system, including Intralinks® and any other
Internet or extranet-based site, whether such electronic system is owned,
operated or hosted by the Agent or any other Person, providing for access to
data protected by passcodes or other security system.

 

“ESOP” means a Plan
that is intended to satisfy the requirements of Section 4975(e)(7) of the IRC.

 

“Event of Default”
has the meaning ascribed to it in Section 6.1.

 

“Existing Credit
Agreement” has the meaning ascribed to it in Section 9.21.

 

“Fair Labor Standards Act”
means the Fair Labor Standards Act, 29 U.S.C. §201 et seq.

 

“Federal Funds Rate”
means, for any day, a floating rate equal to the weighted average of the rates
on overnight federal funds transactions among members of the Federal Reserve
System, as determined by Agent in its sole discretion, which determination
shall be final, binding and conclusive (absent manifest error).

 

A-9

 

“Federal Reserve Board”
means the Board of Governors of the Federal Reserve System.

 

“Fees” means any and
all fees payable to Agent or any Lender pursuant to the Agreement or any of the
other Loan Documents.

 

“Fee Letters” means
the GE Capital Fee Letter.

 

“Financial Statements”
means the consolidated income statements, statements of cash flows and balance
sheets of Holdings and its Subsidiaries delivered in accordance with Section
4.1.

 

“First Amendment to
Credit Agreement” means that certain First Amendment to Amended and Restated
Credit Agreement, dated as of September 26,
2007, by and among Borrowers, the other Credit Parties, Agent and Lenders.”

 

“First Amendment
Effective Date means the date on which the conditions precedent to the
effectiveness of the First Amendment to Credit Agreement are satisfied and the
First Amendment to Credit Agreement becomes effective.”

 

“First Atlantic”
means First Atlantic Capital, Ltd., a Delaware corporation.

 

“Fiscal Month” means
any of the monthly accounting periods of Holdings of each Fiscal Year measured on a 4-4-5 basis such that the
first and second Fiscal Months of each Quarter consist of 4 weeks and the third
Fiscal Month of each Fiscal Quarter consists of 5 weeks and each month ends on
a Saturday.

 

“Fiscal Quarter”
means any of the quarterly accounting periods of Holdings measured on a 4-4-5
basis such that each Fiscal Quarter consists of precisely 13 weeks and each
month ends on a Saturday, such Fiscal Quarters ending on or about March 31,
June 30, September 30 and December 31 of each year.

 

“Fiscal Year” means
any of the annual accounting periods of Holdings ending on the Saturday closest
to December 31 of each year.

 

“Fixtures” means all “fixtures”
as such term is defined in the Code, now owned or hereafter acquired by any
Credit Party.

 

“Foreign Lender” has
the meaning ascribed to it in Section 1.11(c).

 

“Foreign Subsidiary”
means any Subsidiary of Holdings that is not a Domestic Subsidiary.

 

“Funding Date” has
the meaning ascribed to it in Section 7.2.

 

“GAAP” means
generally accepted accounting principles in the United States of America,
consistently applied.

 

“GE Capital” has the
meaning ascribed to it in the preamble of the Agreement.

 

“GECM” has the
meaning ascribed to it in the preamble of this Agreement.

 

“GE Capital Fee Letter”
has the meaning ascribed to it in Section 1.3(a).

 

A-10

 

“General Intangibles”
means “general intangibles,” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, including all right, title and interest
that such Credit Party may now or hereafter have in or under any Contractual
Obligation, all payment intangibles, customer lists, Licenses, Copyrights,
Trademarks, Patents, and all applications therefor and reissues, extensions or
renewals thereof, rights in Intellectual Property, interests in partnerships,
joint ventures and other business associations, licenses, permits, copyrights,
trade secrets, proprietary or confidential information, inventions (whether or
not patented or patentable), technical information, procedures, designs,
knowledge, know-how, software, data bases, data, skill, expertise, experience,
processes, models, drawings, materials and records, goodwill (including the
goodwill associated with any Trademark or Trademark License), all rights and
claims in or under insurance policies (including insurance for fire, damage,
loss and casualty, whether covering personal property, real property, tangible
rights or intangible rights, all liability, life, key man and business
interruption insurance, and all unearned premiums), uncertificated securities,
chooses in action, deposit, checking and other bank accounts, rights to receive
tax refunds and other payments, rights to receive dividends, distributions,
cash, Instruments and other property in respect of or in exchange for pledged
Stock and Investment Property, rights of indemnification, all books and
records, correspondence, credit files, invoices and other papers, including all
tapes, cards, computer runs and other papers and documents in the possession or
under the control of such Credit Party or any computer bureau or service
company from time to time acting for such Credit Party.

 

“GII” has the meaning
ascribed thereto in the recitals to the Agreement.

 

“GII Guaranty” means
the Amended and Restated Guaranty
of even date herewith executed by GII in favor of Agent, on behalf of itself
and the Lenders.

 

“Golfsmith Europe”
means Golfsmith Europe, LLC, a Delaware limited liability company.

 

“Golfsmith Licensing”
means Golfsmith Licensing, LLC, a Delaware limited liability company.

 

“Goods” means any “goods,”
as such term is defined in the Code, now owned or hereafter acquired by any
Credit Party, wherever located, including embedded software to the extent
included in “goods” as defined in the Code, manufactured homes, standing timber
that is cut and removed for sale and unborn young of animals.

 

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

 

“Guaranteed Indebtedness”
means, as to any Person, any obligation of such Person guaranteeing, providing
comfort or otherwise supporting any Indebtedness, lease, dividend, or other
obligation (“primary obligation”) of any other Person (the “primary
obligor”) in any manner, including any obligation or arrangement of such
Person to (a) purchase or repurchase any such primary obligation, (b) advance
or supply funds (i) for the purchase or payment of any such primary obligation
or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet condition
of the primary obligor, (c) purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation, (d)
protect the beneficiary of such arrangement from loss (other than product
warranties given in the ordinary course of business) or (e) indemnify the owner
of such primary obligation against loss in respect thereof.  The amount of any 

 

A-11

 

Guaranteed Indebtedness at
any time shall be deemed to be an amount equal to the lesser at such time of
(x) the stated or determinable amount of the primary obligation in respect of
which such Guaranteed Indebtedness is incurred and (y) the maximum amount for
which such Person may be liable pursuant to the terms of the instrument
embodying such Guaranteed Indebtedness, or, if not stated or determinable, the
maximum reasonably anticipated liability (assuming full performance) in respect
thereof.

 

“Guaranties” means,
collectively, the Amended and Restated Holdings Guaranty, the Amended and
Restated GII Guaranty, each Amended and Restated Subsidiary Guaranty and any other guaranty executed by any
Guarantor in favor of Agent and Lenders in respect of the Obligations.

 

“Guarantor Payment”
has the meaning ascribed to it on Section 10.7.

 

“Guarantors” means
Holdings, GII, each Domestic Subsidiary of GII (other than a Borrower), and
each other Person, if any, that executes a guaranty or other similar agreement
in favor of Agent, for itself and the ratable benefit of Lenders, in connection
with the transactions contemplated by the Agreement and the other Loan
Documents.

 

“Hazardous Material”
means any substance, material or waste that is regulated by, or forms the basis
of liability now or hereafter under, any Environmental Laws, including any
material or substance that is (a) defined as a “solid waste,” “hazardous waste,”
“hazardous material,” “hazardous substance,” “dangerous goods,” “extremely hazardous
waste,”  “restricted hazardous waste,” “pollutant,”
“contaminant,” “hazardous constituent,” “special waste,” “toxic substance” or
other similar term or phrase under any Environmental Laws, or (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s),
or any radioactive substance.

 

“Holdings” has the
meaning ascribed thereto in the recitals to the Agreement.

 

“Holdings Guaranty”
means the Amended and Restated  Guaranty
of even date herewith executed by Holdings in favor of Agent, on behalf of
itself and Lenders.

 

“Impacted
Lender” means any Lender that fails promptly to provide Agent, upon Agent’s
request, satisfactory assurance that such Lender will not become a Non-Funding
Lender.

 

“Indebtedness” means,
with respect to any Person, without duplication (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property
payment for which is deferred six (6) months or more, but excluding obligations
to trade creditors incurred in the ordinary course of business that are
unsecured and not overdue by more than six (6) months unless being contested in
good faith, (b) all reimbursement and other obligations with respect to letters
of credit, bankers’ acceptances and surety bonds, whether or not matured, (c)
all obligations evidenced by notes, bonds, debentures or similar instruments,
(d) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all Capital Lease Obligations and the present value (discounted at the Index
Rate as in effect on the Closing Date) of future rental payments under all
synthetic leases, (f) all obligations of such Person under commodity purchase
or option agreements or other commodity price hedging arrangements, in each
case whether contingent or matured, (g) all obligations of such Person under
any foreign exchange contract, currency swap agreement, interest rate swap, cap
or collar agreement or other similar agreement or arrangement designed to alter
the risks of that Person arising from fluctuations in currency values or
interest rates, in each case whether contingent or matured, (h) all
Indebtedness referred to above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property or other assets (including 

 

A-12

 

accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, (i) “earnouts” and similar payment
obligations, and (j) the Obligations.

 

“Indemnitees” has the
meaning ascribed to it in Section 9.1.

 

“Indenture” means the
senior secured notes trust indenture by and between the U.S. Bank Trust
National Association as trustee and GII, dated as of October 15, 2002.

 

“Index Rate” means,
for any day, a floating rate equal to the highest of (i) the rate publicly quoted from time to time by The
Wall Street Journal as the “base rate on corporate loans posted by at least
75% of the nation’s 30 largest banks” (or, if The Wall Street Journal
ceases quoting a base rate of the type described, the highest per annum rate of
interest published by the Federal Reserve Board in Federal Reserve statistical
release H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan
rate or its equivalent), (ii) the Federal Funds Rate plus 300 basis points per annum, and (iii) the sum of the LIBOR Rate for a
LIBOR Period of three months plus the excess of the Applicable Revolver LIBOR
Margin over the Applicable Revolver Index Margin.  Each change in any interest rate provided for
in the Agreement based upon the Index Rate shall take effect at the time of
such change in the Index Rate.

 

“Index Rate Loan”
means a Loan or portion thereof bearing interest by reference to the Index
Rate.

 

“Initial Public Offering”
means the initial public offering of Holdings’ Stock pursuant to an effective
registration statement filed with the SEC .

 

“Instruments” means
all “instruments,” as such term is defined in the Code, now owned or hereafter
acquired by any Credit Party, wherever located, and, in any event, including
all certificated securities, all certificates of deposit, and all promissory
notes and other evidences of indebtedness, other than instruments that
constitute, or are a part of a group of writings that constitute, Chattel
Paper.

 

“Intellectual Property”
means any and all Licenses, Patents, Copyrights, Trademarks, and the goodwill
associated with such Trademarks.

 

“Intercompany Note”
has the meaning ascribed to it in Section 3.1.

 

“Intercompany
Subordination Agreement” means the subordination agreement, substantially
in the form of Exhibit A3 hereto, of even date herewith, by and among the
Credit Parties.

 

“Interest Payment Date”
means (a) as to any Index Rate Loan, the first Business Day of each month to occur while such Loan is
outstanding, and (b) as to any LIBOR Loan, the last day of the applicable LIBOR
Period;  provided, that in
the case of any LIBOR Period greater than one month in duration, interest shall be payable at one month intervals and on the last
day of such LIBOR Period; and provided,
further, that, in addition to the foregoing, each of (x) the date upon
which all of the Commitments have been terminated and the Loans have been paid
in full and (y) the Commitment Termination Date shall be deemed to be an “Interest
Payment Date” with respect to any interest that has then accrued under the
Agreement.

 

“Inventory” means any
“inventory,” as such term is defined in the Code, now owned or hereafter
acquired by any Credit Party, wherever located, including inventory,
merchandise, goods and other personal property that are held by or on behalf of
any Credit Party for sale or lease or are furnished 

 

A-13

 

or are to be furnished under
a contract of service, or that constitute raw materials, work in process,
finished goods, returned goods, supplies or materials of any kind, nature or
description used or consumed or to be used or consumed in such Credit Party’s
business or in the processing, production, packaging, promotion, delivery or
shipping of the same, including all supplies and embedded software.

 

“Investment” means
(i) any direct or indirect purchase or other acquisition by Borrowers or any of
their Subsidiaries of any Stock, or other ownership interest in, any other
Person, and (ii) any direct or indirect loan, advance or capital contribution
by Borrowers or any of their Subsidiaries to any other Person, including all
indebtedness and accounts receivable from that other Person that are not
current assets or did not arise from sales to that other Person in the ordinary
course of business.

 

“Investment Property”
means all “investment property,” as such term is defined in the Code, now owned
or hereafter acquired by any Credit Party, wherever located, including: (i) all
securities, whether certificated or uncertificated, including stocks, bonds,
interests in limited liability companies, partnership interests, treasuries,
certificates of deposit, and mutual fund shares; (ii) all securities
entitlements of any Credit Party, 
including the rights of such Credit Party to any securities account and
the financial assets held by a securities intermediary in such securities
account and any free credit balance or other money owing by any securities
intermediary with respect to that account; (iii) all securities accounts of any
Credit Party; (iv) all commodity contracts of any Credit Party; and (v) all
commodity accounts held by any Credit Party.

 

“IRC” means the
Internal Revenue Code of 1986, as amended, and all regulations promulgated
thereunder.

 

“IRS” means the
United States Internal Revenue Service.

 

“L/C Issuer” means GE
Capital or a Subsidiary thereof or a bank or other legally authorized Person
selected by or reasonably acceptable to Agent in its sole discretion, in such
Person’s capacity as an issuer of Letters of Credit hereunder.

 

“L/C Sublimit” has
the meaning ascribed to it in Section 1.1(d).

 

“Lenders” means,
collectively, the Swingline Lender and any other financial institution or other
Person that (a) is listed on the signature pages hereof as a “Lender” or (b) from time to time becomes a
party hereto by execution of an Assignment Agreement, in each case together
with its successors.

 

“Letter of Credit Fee”
has the meaning ascribed to it in Section 1.3(d).

 

“Letter of Credit
Obligations” means all outstanding obligations incurred by Agent and
Lenders at the request of Borrower Representative, whether direct or indirect,
contingent or otherwise, due or not due, in connection with the issuance of
Letters of Credit by L/C Issuers or the purchase of a participation as set
forth in Section 1.1(d) with respect to any Letter of Credit.  The amount of such Letter of Credit
Obligations shall equal the maximum amount that may be payable by Agent and
Lenders thereupon or pursuant thereto.

 

“Letters of Credit”
means documentary or standby letters of credit issued for the account of
Borrowers by L/C Issuers, and bankers’ acceptances issued by Borrowers, for
which Agent and Lenders have incurred Letter of Credit Obligations.

 

A-14

 

“LIBOR Breakage Fee”
means an amount equal to the amount of any losses, expenses, liabilities
(including, without limitation, any loss (including interest paid) and lost
opportunity cost in connection with the re-employment of such funds) that any
Lender may sustain as a result of (i) any default by any Borrower in making any
borrowing of, conversion into or continuation of any LIBOR Loan following
Borrower Representative’s delivery to Agent of any LIBOR Loan request in
respect thereof or (ii) any payment of a LIBOR Loan on any day that is not the
last day of the LIBOR Period applicable thereto (regardless of the source of
such prepayment and whether voluntary, by acceleration or otherwise). For
purposes of calculating amounts payable to a Lender under Section 1.3(e),
each Lender shall be deemed to have actually funded its relevant LIBOR Loan
through the purchase of a deposit bearing interest at LIBOR in an amount equal to
the amount of that LIBOR Loan and having a maturity and repricing
characteristics comparable to the relevant LIBOR Period; provided, however,
that each Lender may fund each of its LIBOR Loans in any manner it sees fit,
and the foregoing assumption shall be utilized only for the calculation of
amounts payable under Section 1.3(e).

 

“LIBOR Business Day”
means a Business Day on which banks in the City of London are generally open
for interbank or foreign exchange transactions.

 

“LIBOR Loans” means a
Loan or any portion thereof bearing interest by reference to the LIBOR Rate.

 

“LIBOR Period” means,
with respect to any LIBOR Loan, each period commencing on a LIBOR Business Day
selected by Borrower Representative pursuant to the Agreement and ending one,
two or three months thereafter,
as selected by Borrower Representative’s irrevocable notice to Agent as set
forth in Section 1.2(e); provided, that the foregoing provision
relating to LIBOR Periods is subject to the following:

 

(a)           if any LIBOR Period would otherwise
end on a day that is not a LIBOR Business Day, such LIBOR Period shall be
extended to the next succeeding LIBOR Business Day unless the result of such
extension would be to carry such LIBOR Period into another calendar month in
which event such LIBOR Period shall end on the immediately preceding LIBOR
Business Day;

 

(b)           any LIBOR Period that would otherwise
extend beyond the date set forth in clause (a) of the definition of “Commitment
Termination Date” shall end two (2) LIBOR Business Days prior to such date;

 

(c)           any LIBOR Period that begins on the
last LIBOR Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such LIBOR
Period) shall end on the last LIBOR Business Day of a calendar month;

 

(d)           Borrower Representative shall select
LIBOR Periods so that there shall be no more than 7 separate LIBOR Loans in
existence at any one time.

 

“LIBOR Rate” means
for each LIBOR Period:

 

(a)           a rate of interest determined by Agent equal to the
offered rate per annum for deposits in United States Dollars for the applicable
LIBOR Period that appears on Reuters
Screen LIBOR01 Page as of 11:00 a.m. (London time), two (2) LIBOR
Business Days prior to the first day of such LIBOR Period (unless such date is
not a Business Day, in which event the next succeeding Business Day will be
used).

 

A-15

 

(b)           a number equal to 1.0 minus the aggregate (but
without duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day that is two (2) LIBOR Business Days prior to
the beginning of such LIBOR Period (including basic, supplemental, marginal and
emergency reserves under any regulations of the Federal Reserve Board or other
Governmental Authority having jurisdiction with respect thereto, as now and
from time to time in effect) for Eurocurrency funding (currently referred to as
“Eurocurrency Liabilities” in Regulation D of the Federal Reserve Board that
are required to be maintained by a member bank of the Federal Reserve System.

 

If such interest rates shall
cease to be available from Telerate News Service, the LIBOR Rate shall be
determined from such financial reporting service or other information as shall
be available to Agent.

 

“License” means any
Copyright License, Patent License, Trademark License or other license of rights
or interests now held or hereafter acquired by any Credit Party.

 

“Lien” means any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement (other than the arrangements with respect to cash deposits made on
the Closing Date in connection with the satisfaction and payment in full of the
Senior Notes), lien, charge, claim, security interest, easement or encumbrance,
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever (including any lease or title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of, or agreement to give, any financing
statement perfecting a security interest under the Code or comparable law of
any jurisdiction).

 

“Litigation” has the
meaning ascribed to it in Section 4.1(i).

 

“Loan Account” has
the meaning ascribed to it in Section 1.9.

 

“Loan Documents”
means the Agreement, the Notes, the Collateral Documents, the Fee Letters and
all other agreements, instruments, documents and certificates identified in the
Closing Checklist executed and delivered to, or in favor of, Agent or any
Lenders and including all other pledges, powers of attorney, consents,
assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of any Credit Party, or
any employee of any Credit Party, and delivered to Agent or any Lender in
connection with the Agreement or the transactions contemplated thereby.  Any reference in the Agreement or any other
Loan Document to a Loan Document shall include all appendices, exhibits or
schedules thereto, and all amendments, restatements, supplements or other
modifications thereto, and shall refer to the Agreement or such Loan Document
as the same may be in effect at any and all times such reference becomes
operative.

 

“Loans” means the
Revolving Loan and the Swing Line Loan.

 

“LP” means Golfsmith
International, L.P., a Delaware limited partnership.

 

“Master Documentary
Agreement” means a Master Agreement for Documentary Letters of Credit
between an L/C Issuer and Borrowers, substantially in the form of Exhibit A1.

 

“Master Standby Agreement”
means a Master Agreement for Standby Letters of Credit between an L/C Issuer
and Borrowers, substantially in the form of Exhibit A2.

 

“Material Adverse Effect”
means a material adverse effect on (a) the business, assets, results of
operations, or financial condition of the Credit Parties taken as a whole, (b)
Borrowers’ ability to

 

A-16

 

pay any of the Loans or any
of the other Obligations in accordance with the terms of the Agreement, (c) the
Collateral or Agent’s Liens, on behalf of itself and Lenders, on the Collateral
or the priority of such Liens, or (d) Agent’s or any Lender’s rights and
remedies under the Agreement and the other Loan Documents.

 

“Maximum Amount”
means, as of any date of determination, an amount equal to the Revolving Loan
Commitment of all Lenders as of that date.

 

“Maximum Lawful Rate”
has the meaning ascribed to it in Section 1.2(f).

 

“Moody’s” means Moody’s
Investor’s Services, Inc.

 

“Mortgaged Properties”
has the meaning assigned to it in Annex C.

 

“Mortgages” means
each of the mortgages, deeds of trust, leasehold mortgages, leasehold deeds of
trust, collateral assignments of leases or other real estate security documents
delivered by any Credit Party to Agent on behalf of itself and Lenders with
respect to the Mortgaged Properties, all in form and substance reasonably
satisfactory to Agent.

 

“Most Recent Real Estate
Appraisal” means for each of the Eligible Real Estate properties, the Base
Real Estate Appraisal of such Eligible Real Estate, or if an updated appraisal
has been obtained, the most recently dated appraisal of such Eligible Real
Estate.

 

“Multiemployer Plan”
means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA, and to
which any Credit Party or ERISA Affiliate is making, is obligated to make or,
for the five year period immediately following the latest date on which any
Credit Party or ERISA Affiliate, made or had been obligated to make,
contributions on behalf of participants who are or were employed by any of
them.

 

“Net Proceeds” means
cash proceeds received by Borrowers or any of their Subsidiaries from any Asset
Disposition (including insurance proceeds, awards of condemnation, and payments
under notes or other debt securities received in connection with any Asset
Disposition), net of (i) the costs of such Asset Disposition (including taxes
attributable to such sale, lease or transfer) and (ii) amounts applied to
repayment of Indebtedness (other than the Obligations) secured by a Lien on the
asset or property disposed.

 

“Non-Consenting Lender”
has the meaning ascribed to it in Section 9.19(c).

 

“Non-Funding Lender”
has the meaning ascribed to it in Section 8.5(a).

 

“Notes” means,
collectively, the Revolving Notes and the Swing Line Note.

 

“Notice of
Conversion/Continuation” has the meaning ascribed to it in Section
1.2(e).

 

“Notice of Revolving
Credit Advance” has the meaning ascribed to it in Section 1.1(a).

 

“NU” means Golfsmith
NU, LLC, a Delaware limited liability company.

 

“Obligations” means
all loans, advances, debts, liabilities and obligations, for the performance of
covenants, tasks or duties or for payment of monetary amounts (whether or not
such performance is then required or contingent, or such amounts are liquidated
or determinable), including 

 

A-17

 

obligations pursuant to
Letter of Credit Obligations, owing by any Credit Party to Agent, any Lender or any Secured Swap Provider, and all
covenants and duties regarding such amounts, of any kind or nature, present or
future, whether or not evidenced by any note, agreement, letter of credit
agreement or other instrument, arising under the Agreement, any of the other Loan Documents or any Secured Rate Contract.  This term includes all principal, interest
(including all interest that accrues after the commencement of any case or
proceeding by or against any Credit Party in bankruptcy, whether or not allowed
in such case or proceeding), Fees, Charges, expenses, attorneys’ fees and any
other sum chargeable to any Credit Party under the Agreement, any of the other Loan Documents or any Secured Rate Contract.

 

“Other Lender” has
the meaning ascribed to it in Section 8.5(d).

 

“Overadvance” has the
meaning ascribed to it in Section 1.1(a).

 

“Patent License”
means rights under any written agreement now owned or hereafter acquired by any
Credit Party granting any right with respect to any invention on which a Patent
is in existence.

 

“Patent Security
Agreements” means the Patent Security Agreements made in favor of Agent, on
behalf of itself and Lenders, by each applicable Credit Party.

 

“Patents” means all
of the following in which any Credit Party now holds or hereafter acquires any
interest: (a) all letters patent of the United States or any other country, all
registrations and recordings thereof, and all applications for letters patent
of the United States or of any other country, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State or any other
country, and (b) all reissues, continuations, continuations-in-part or extensions
thereof.

 

“Payment Account” has
the meaning ascribed to it in Annex F.

 

“PBGC” means the
Pension Benefit Guaranty Corporation.

 

“Pension Plan” means
a Plan described in Section 3(2) of ERISA.

 

“Permitted Acquisition”
means any acquisition by a Borrower or a wholly-owned transitory special
purpose domestic Subsidiary of a Borrower (created in accordance with the
provisions of Section 3.13) of (i) all or substantially all of the
assets of a Target, which assets are located in the United States or (ii) 100%
of the Stock of a Target incorporated under the laws of any State in the United
States or the District of Columbia to the extent that each of the following
conditions shall have been satisfied:

 

(a)           to the extent the Permitted Acquisition will be financed
in whole or in part with the proceeds of any Loan, the conditions set forth in
Section 7.2 and, if applicable, Section 7.3, shall have been satisfied;

 

(b)           Borrowers shall have furnished to Agent and Lenders at
least ten (10) Business Days prior to the consummation of such Permitted
Acquisition an executed term sheet and/or commitment letter (setting forth in
reasonable detail the terms and conditions of such Permitted Acquisition) and,
at the reasonable request of Agent, such other information and documents that
Agent may reasonably request, including, without limitation, executed
counterparts of the respective agreements, documents or instruments pursuant to
which such Permitted Acquisition is to be 

 

A-18

 

consummated (including,
without limitation, any related management, non-compete, employment, option or
other material agreements), any schedules to such agreements, documents or
instruments and all other material ancillary agreements, instruments and documents
to be executed or delivered in connection therewith;

 

(c)           the Credit Parties (including the Target and any new
Subsidiary that shall become a Credit Party) shall execute and deliver such
Collateral Documents and other documents reasonably requested by Agent in order
to create, perfect and protect Agent’s Lien, for the benefit of Lenders, on the
assets of the Target;

 

(d)           such Permitted Acquisition shall not be hostile and shall
have been approved by the board of directors (or other similar body) and/or the
stockholders or other equityholders of the Target;

 

(e)           no Default or Event of Default shall then exist or would
exist after giving effect thereto;

 

(f)            average daily Borrowing Availability for the 30 day
period prior to the consummation of such Permitted Acquisition, and projected
average daily Borrowing Availability for the 30 day period after the
consummation of such Permitted Acquisition (after giving effect to such
Acquisition), shall be not less than $10,000,000;

 

(g)           the total consideration paid or payable (including without
limitation, any deferred payment but excluding consideration in the form of (or
from proceeds of issuances of) Holdings common Stock) for all Permitted
Acquisitions consummated during any year shall not exceed $7,500,000; and

 

(h)           the Target has EBITDA, subject to proforma adjustments
reasonably acceptable to the Agent, for the most recent four quarters prior to
the acquisition date for which financial statements are available, greater than
or equal to zero.

 

Notwithstanding the
consummation of any Permitted Acquisition, no Inventory, Accounts or Real
Estate acquired as part of any Permitted Acquisition shall be included in the
Borrowing Base until such time as Agent shall have completed a Collateral field
audit with respect to such Collateral, with results satisfactory to Agent.

 

“Permitted Encumbrances”
means the following encumbrances: (a) Liens for taxes or assessments or other
governmental Charges not yet due and payable; (b) pledges or deposits of money
securing statutory obligations under workmen’s compensation, unemployment
insurance, social security or public liability laws or similar legislation
(excluding Liens under ERISA); (c) pledges or deposits of money  securing bids, tenders, contracts (other than
contracts for the payment of money) or leases to which any Credit Party is a
party as lessee made in the ordinary course of business; (d) inchoate and
unperfected workers’, mechanics’  or
similar liens arising in the ordinary course of business, so long as such Liens
attach only to Equipment, Fixtures and/or Real Estate; (e) carriers’,
warehousemen’s, suppliers’ or other similar possessory liens arising in the
ordinary course of business and securing liabilities in an outstanding
aggregate amount not in excess of $50,000 at any time, so long as such Liens
attach only to Inventory; (f) deposits securing, or in lieu of, surety, appeal
or customs bonds in proceedings to which any Credit Party is a party; (g) any
attachment or judgment lien not constituting an Event of Default under Section
6.1; (h) zoning restrictions, easements, licenses, or other restrictions on
the use of any Real Estate or other minor irregularities in title (including
leasehold title) thereto, so long as the same do not materially impair the use,
value, or marketability of such Real Estate; (i) presently existing or
hereafter created Liens in favor of Agent, on behalf of Lenders; (j) Liens
existing on the date hereof and renewal, and extensions thereof which Liens are
set forth on Schedule 3.2; (k) Liens securing Indebtedness 

 

A-19

 

permitted by Section
3.1(d), provided that the Liens attach only to the assets financed by such
Indebtedness; (l) any Lien (i) existing on Equipment prior to the acquisition
thereof by any Borrower or any of its Subsidiaries, or existing on Equipment of
any Person that becomes a Subsidiary after the date hereof prior to the time
such Person becomes a Subsidiary; provided that (A) such Lien is not created in
contemplation of or in connection with such acquisition or such Person becoming
a Subsidiary, as the case may be, (B) such Lien shall not attach or apply to
any other property or assets of any Borrower or any of its Subsidiaries, and
(C) such Lien shall secure only those obligations which it secures on the date
of such acquisition or the date such Person becomes a Subsidiary, as the case
may be; or (ii) arising out of the refinancing, extension, renewal or refunding
of any Indebtedness secured by any such Liens; (m) Licenses, sublicenses,
leases or subleases involving Intellectual Property not otherwise in violation
of this Agreement; (n) deposits in escrow accounts for customary purchase price
adjustments, earn-outs and indemnities in connection with Permitted
Acquisitions; and (o) Liens arising from precautionary financing statement
filings with respect to operating leases entered into by any Credit Party in
the ordinary course of business.

 

“Person” means any
individual, sole proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company, institution,
public benefit corporation, other entity or government (whether federal, state,
county, city, municipal, local, foreign, or otherwise, including any
instrumentality, division, agency, body or department thereof).

 

“Plan” means, at any
time, an “employee benefit plan,” as defined in Section 3(3) of ERISA, that any
Credit Party or ERISA Affiliate maintains, contributes to or has an obligation
to contribute to on behalf of participants who are or were employed by any
Credit Party.

 

“Pledge Agreement”
means the various Amended and Restated Pledge
Agreements, each dated on or after the date hereof executed by Holdings, GII,
each Borrower and each other Credit Party in favor of Agent, on behalf of
itself and Lenders, pledging all Stock of any Credit Party owned by such Person
and the Intercompany Note.

 

“Pro Forma” means the
unaudited consolidated balance sheets of Holdings  and its Subsidiaries prepared in accordance with GAAP as of
the Closing Date after giving effect to the Related Transactions, a copy of
which has been provided to the Agent.

 

“Pro Rata Share”
means with respect to all matters relating to any Lender (a) with respect to
the Revolving Loan, the percentage obtained by dividing (i) the Revolving Loan
Commitment of that Lender by (ii) the aggregate Revolving Loan Commitments of
all Lenders and (b) with respect to all Loans on and after the Commitment
Termination Date, the percentage obtained by dividing (i) the aggregate
outstanding principal balance of the Loans held by that Lender, by (ii) the
outstanding principal balance of the Loans held by all Lenders, as such
percentages may be adjusted by assignments pursuant to Section 8.1.

 

“Projections” means
Holdings’, and its Subsidiaries’  forecasted
consolidated and consolidating: (a) balance sheets; (b) profit and loss
statements and; (c) cash flow statements consistent with the historical
Financial Statements of Borrowers, together with appropriate supporting details
and a statement of underlying assumptions.

 

“Proposed Change” has
the meaning ascribed to it in Section 9.19(c).

 

“Qualified Assignee”
means (a) any Lender, any Affiliate of any Lender and, with respect to any
Lender that is an investment fund that invests in commercial loans, any other
investment fund that invests in commercial loans and that is managed or advised
by the same investment advisor as such 

 

A-20

 

Lender or by an Affiliate of
such investment advisor, and (b) any commercial bank, savings and loan
association or savings bank or any other entity which is an “accredited
investor” (as defined in Regulation D under the Securities Act of 1933) which
extends credit or buys loans as one of its businesses, including insurance
companies, mutual funds, lease financing companies and commercial finance
companies, in each case, which has a rating of BBB or higher from S&P and a
rating of Baa2 or higher from Moody’s at the date that it becomes a Lender and
which, through its applicable lending office, is capable of lending to
Borrowers without the imposition of any withholding or similar taxes; provided
that no Person determined by Agent to be acting in the capacity of a vulture
fund or distressed debt purchaser shall be a Qualified Assignee and no Person
or Affiliate of such Person (other than a Person that is already a Lender)
holding Subordinated Debt or Stock issued by any Credit Party shall be a
Qualified Assignee.

 

“Qualified Plan”
means a Pension Plan that is intended to be tax-qualified under Section 401(a)
of the IRC.

 

“Rate
Contracts” means swap agreements (as such term is defined in Section 101 of the
Bankruptcy Code) and any other agreements or arrangements designed to provide
protection against fluctuations in interest or currency exchange rates.

 

“Real Estate” has the
meaning ascribed to it in Section 5.12.

 

“Refunded Swing Line Loan”
has the meaning ascribed to it in Section 1.1(c)(iii).

 

“Related Transactions”
means the incurrence of Loans on the Closing Date, the retirement of the Senior
Notes, the consummation of Initial Public Offering, the execution and delivery
of the Loan Documents, the payment of all Fees, costs and expenses associated
with all of the foregoing and the execution and delivery of all of the Related
Transactions Documents.

 

“Related Transactions
Documents” means the Loan Documents and all security agreements, mortgages,
deeds of trust and other agreements or instruments executed in connection with
the Related Transactions.

 

“Relationship Bank”
has the meaning ascribed to it in Annex F.

 

“Release” means any
release, threatened release, spill, emission, leaking, pumping, pouring,
emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Material in the indoor or outdoor
environment, including the movement of Hazardous Material through or in the
air, soil, surface water, ground water or property.

 

“Replacement Lender”
has the meaning ascribed to it in Section 9.19(a).

 

“Requisite Lenders”
means Lenders having (a) more than 50% of the Commitments of all Lenders, or
(b) if the Commitments have been terminated, more than 50% of the aggregate
outstanding amount of the Loans.

 

“Reserves” means,
with respect to the Borrowing Base (a) reserves established by Agent from time
to time after notice to Borrowers against Eligible Accounts and Eligible
Inventory pursuant to Exhibit 4.1(d) and (b) such other reserves against
Eligible Accounts, Eligible Inventory or Borrowing Availability that Agent may,
in its reasonable credit judgment after notice to Borrowers, establish from
time to time; provided, that Reserves
associated with (i) gift card liability shall be equal to 25% of Borrowers’
book value thereof and (ii) customer deposits shall be equal to 50% of
Borrowers’ book value thereof. 
Without limiting the generality of the foregoing, Reserves established
to ensure the 

 

A-21

 

payment of accrued Interest
Expenses or Indebtedness shall be deemed to be a reasonable exercise of Agent’s
credit judgment.

 

“Restricted Payment”
means, with respect to any Credit Party (a) the declaration or payment of any
dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of Stock; (b) any
payment on account of the purchase, redemption, defeasance, sinking fund or
other retirement of such Credit Party’s Stock or any other payment or
distribution made in respect thereof, either directly or indirectly; (c) any
payment or prepayment of principal of, premium, if any, or interest, fees or
other charges on or with respect to, and any redemption, purchase, retirement,
defeasance, sinking fund or similar payment and any claim for rescission with
respect to, any Subordinated Debt; (d) any payment made to redeem, purchase,
repurchase or retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire Stock of such Credit Party now or hereafter
outstanding; (e) any payment of a claim for the rescission of the purchase or
sale of, or for material damages arising from the purchase or sale of, any
shares of such Credit Party’s Stock or of a claim for reimbursement,
indemnification or contribution arising out of or related to any such claim for
damages or rescission; (f) any payment, loan, contribution, or other transfer
of funds or other property to any Stockholder of such Credit Party other than
payment of compensation in the ordinary course of business to Stockholders who
are employees of such Credit Party; and (g) any payment of management fees (or
other fees of a similar nature), indemnification payments and out-of-pocket
expenses in connection therewith by such Credit Party to any Stockholder of
such Credit Party or its Affiliates.

 

“Retiree Welfare Plan”
means, at any time, a Welfare Plan that provides for continuing coverage or
benefits for any participant or any beneficiary of a participant after such
participant’s termination of employment, other than continuation coverage
provided pursuant to Section 4980B of the IRC and at the sole expense of the
participant or the beneficiary of the participant.

 

“Revolving Credit Advance”
has the meaning ascribed to it in Section 1.1(a).

 

“Revolving Lenders”
means those Lenders having a Revolving Loan Commitment.

 

“Revolving Loan(s)”
means, at any time, the sum of (i) the aggregate amount of Revolving Credit
Advances outstanding to Borrowers (including Swing Line Advances) plus
(ii) the aggregate Letter of Credit Obligations incurred on behalf of
Borrowers.  Unless the context otherwise
requires, references to the outstanding principal balance of the Revolving Loan
shall include the outstanding balance of Letter of Credit Obligations.

 

“Revolving Loan
Commitment” means (a) as to any Lender, the commitment of such Lender to
make its Pro Rata Share of Revolving Credit Advances or incur its Pro Rata
Share of Letter of Credit Obligations (including, in the case of the Swing Line
Lender, its commitment to make Swing Line Advances as a portion of its
Revolving Loan Commitment) as set forth on Annex B or in the most recent
Assignment Agreement, if any, executed by such Lender and (b) as to all
Lenders, the aggregate commitment of all Lenders to make the Revolving Credit
Advances (including, in the case of the Swing Line Lender, Swing Line Advances)
or incur Letter of Credit Obligations, which aggregate commitment shall be
Ninety Million Dollars ($90,000,000) on the First Amendment Effective Date, as
such amount may be adjusted, if at all, from time to time in accordance with
the Agreement.

 

“Revolving Notes” has
the meaning ascribed to it in Section 1.1(a).

 

“S&P” means
Standard & Poor’s Ratings Services, a division of the McGraw-Hill
Companies, Inc.

 

A-22

 

“Second
Amendment to Credit Agreement” means that certain Second Amendment to Amended
and Restated Credit Agreement, dated as of July 9, 2010, by and among
Borrowers, the other Credit Parties, Agent and Lenders.

 

“Second
Amendment Effective Date” means the date on which the conditions precedent to
the effectiveness of the Second Amendment to Credit Agreement are satisfied and
the Second Amendment to Credit Agreement becomes effective.

 

“Secured
Rate Contract” means any Rate Contract between a Borrower and the counterparty
thereto, which (i) has been provided or arranged by GE Capital or an Affiliate
of GE Capital, or (ii) Agent has acknowledged in writing constitutes a “Secured
Rate Contract” hereunder.

 

“Secured
Swap Provider” means (i) a Lender or an Affiliate of a Lender (or a Person who
was a Lender or an Affiliate of a Lender at the time of execution and delivery
of a Rate Contract) who has entered into a Secured Rate Contract with a
Borrower, or (ii) a Person with whom Borrower has entered into a Secured Rate
Contract provided or arranged by GE Capital or an Affiliate of GE Capital, and
any assignee thereof.

 

“Security Agreement”
means the various Amended and Restated Security
Agreements dated on or after the Closing Date entered into by and among Agent,
on behalf of itself and Lenders, Holdings, GII and the other Credit Parties
signatory thereto.

 

“Senior Notes” means
the 8.375% senior secured notes of GII due 2009 issued pursuant to the
Indenture in the original aggregate principal amount of not more than
$93,750,000, together with any “Exchange Notes” (as defined in the Indenture)
issued in exchange therefor so long as any such Exchange Notes replace such
Senior Notes dollar for dollar.

 

“Settlement Date” has
the meaning ascribed to it in Section 8.5(a)(ii).

 

“Software” means all “software”
as such term is defined in the Code, now owned or hereafter acquired by any
Credit Party, other than software embedded in any category of Goods, including
all computer programs and all supporting information provided in connection
with a transaction related to any program.

 

“Solvent” means, with
respect to any Person on a particular date, that on such date (a) the fair
value of the property of such Person is greater than the total amount of
liabilities, including subordinated and contingent liabilities, of such Person;
(b) the present fair saleable value of the assets of such Person is not less
than the amount that will be required to pay the probable liability of such
Person on its debts and liabilities, including subordinated and contingent
liabilities as they become absolute and matured; (c) such Person does not
intend to, and does not believe that it will, incur debts or liabilities beyond
such Person’s ability to pay as such debts and liabilities mature; and (d) such
Person is not engaged in a business or transaction, and is not about to engage
in a business or transaction, for which such Person’s property would constitute
an unreasonably small capital.  The
amount of contingent liabilities (such as Litigation, guaranties and pension
plan liabilities) at any time shall be computed as the amount that, in light of
all the facts and circumstances existing at the time, represents the amount
that can be reasonably be expected to become an actual or matured liability.

 

“Statement” has the
meaning ascribed to it in Section 4.1(b).

 

A-23

 

“Stock” means all
shares, options, warrants, general or limited partnership interests, membership
interests or other equivalents (regardless of how designated and regardless
whether represented by a certificate or not) of or in a corporation,
partnership, limited liability company or equivalent entity whether voting or
nonvoting, including common stock, preferred stock or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934).

 

“Stockholder” means,
with respect to any Person, each holder of Stock of such Person.

 

“Subordinated Debt”
means any Indebtedness of any Credit Party subordinated to the Obligations in a
manner and form reasonably satisfactory to Agent, as to right and time of
payment and as to any other rights and remedies thereunder.

 

“Subsidiary” means,
with respect to any Person, (a) any corporation of which an aggregate of more
than 50% of the outstanding Stock having ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether,
at the time, Stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency) is at
the time, directly or indirectly, owned legally or beneficially by such Person
or one or more Subsidiaries of such Person, or with respect to which any such
Person has the right to vote or designate the vote of 50% or more of such Stock
whether by proxy, agreement, operation of law or otherwise, and (b) any
partnership or limited liability company in which such Person and/or one or
more Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than 50% or
of which any such Person is a general partner or may exercise the powers of a
general partner.  Unless the context
otherwise requires, each reference to a Subsidiary shall be a reference to a
Subsidiary of a Borrowers.

 

“Subsidiary Guaranty”
means the Amended and Restated  Subsidiary
Guaranty of even date herewith executed by one or more Subsidiaries of Holdings
in favor of Agent, on behalf of itself and Lenders.

 

“Swing Line Advance”
has the meaning ascribed to it in Section 1.1(c).

 

“Swing Line Availability”
has the meaning ascribed to it in Section 1.1(c).

 

“Swing Line Commitment”
means the commitment of the Swing Line Lender to make Swing Line Advances as
set forth on Annex B to the Agreement, which commitment constitutes a
subfacility of the Revolving Loan Commitment of the Swing Line Lender.

 

“Swing Line Lender”
means GE Capital.

 

“Swing Line Loan”
means at any time, the aggregate amount of Swing Line Advances outstanding to
Borrower.

 

“Swing Line Note” has
the meaning ascribed to it in Section 1.1(c).

 

“Target” means any
other Person or business unit or asset group of any other Person acquired or
proposed to be acquired in a Permitted Acquisition.

 

“Taxes” has the
meaning ascribed to it in Section 1.11.

 

A-24

 

“Termination Date”
means the date on which (a) the Loans have been indefeasibly repaid in full,
(b) all other Obligations (other than contingent indemnification obligations to
the extent no unsatisfied claim has been asserted) under the Agreement and the
other Loan Documents have been paid in full in cash, (c) all Letter of Credit
Obligations have been cash collateralized in the amount set forth in Section
1.5(g), cancelled or backed by standby letters of credit acceptable to
Agent and (d) no Borrower shall have any further right to borrow any monies
under the Agreement.

 

“Title IV Plan” means
a Pension Plan (other than a Multiemployer Plan), that is covered by Title IV
of ERISA, and that any Credit Party or ERISA Affiliate maintains, contributes
to or has an obligation to contribute to on behalf of participants who are or
were employed by any of them.

 

“Trademark Security
Agreements” means the Trademark Security Agreements made in favor of Agent,
on behalf of itself and Lenders, by each applicable Credit Party.

 

“Trademark License”
means rights under any written agreement now owned or hereafter acquired by any
Credit Party granting any right to use any Trademark.

 

“Trademarks” means
all of the following now owned or hereafter adopted or acquired by any Credit
Party: (a) all trademarks, trade names, corporate names, business names, trade
styles, service marks, logos, internet domain names, other source or business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, designs and general intangibles of like nature (whether registered or
unregistered), all registrations and recordings thereof, and all applications
in connection therewith, including registrations, recordings and applications
in the United States Patent and Trademark Office or in any similar office or
agency of the United States, any state or territory thereof, or any other
country or any political subdivision thereof; (b) all reissues, extensions or
renewals thereof; and (c) all goodwill associated with or symbolized by any of
the foregoing.

 

“Unfunded Pension
Liability” means, at any time, the aggregate amount, if any, of the sum of
(a) the amount by which the present value of all accrued benefits under each
Title IV Plan exceeds the fair market value of all assets of such Title IV Plan
allocable to such benefits in accordance with Title IV of ERISA, all determined
as of the most recent valuation date for each such Title IV Plan using the
actuarial assumptions for funding purposes in effect under such Title IV Plan,
and (b) for a period of 5 years following a transaction which might reasonably
be expected to be covered by Section 4069 of ERISA, the liabilities (whether or
not accrued) that could be avoided by any Credit Party or any ERISA Affiliate
as a result of such transaction.

 

“USA” means Golfsmith
USA, LLC, a Delaware limited liability company.

 

“Welfare Plan” means
a Plan described in Section 3(1) of ERISA.

 

Rules of construction with
respect to accounting terms used in the Agreement or the other Loan Documents
shall be as set forth or referred to in this Annex A.  All other undefined terms contained in any of
the Loan Documents shall, unless the context indicates otherwise, have the
meanings provided for by the Code to the extent the same are used or defined
therein; in the event that any term is defined differently in different
Articles or Divisions of the Code, the definition contained in Article or
Division 9 shall control.  Unless
otherwise specified, references in the Agreement or any of the Appendices to a
Section, subsection or clause refer to such Section, subsection or clause as
contained in the Agreement.  The words “herein,”
“hereof” and “hereunder” and other words of similar import refer to the
Agreement as a whole, including all Annexes, Exhibits and Schedules, as the
same may from time to time be amended, restated, modified or supplemented, and
not to any particular section, subsection or clause contained in the Agreement
or any such Annex, Exhibit or Schedule.

 

A-25

 

Wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and the plural, and pronouns stated in the masculine,
feminine or neuter gender shall include the masculine, feminine and neuter
genders.  The words “including”, “includes”
and “include” shall be deemed to be followed by the words “without limitation”;
the word “or” is not exclusive; references to Persons include their respective
successors and assigns (to the extent and only to the extent permitted by the
Loan Documents) or, in the case of governmental Persons, Persons succeeding to
the relevant functions of such Persons; and all references to statutes and
related regulations shall include any amendments of the same and any successor
statutes and regulations.  Whenever any
provision in any Loan Document refers to the knowledge (or an analogous phrase)
of any Credit Party, such words are intended to signify that such Credit Party
has actual knowledge or awareness of a particular fact or circumstance or that
such Credit Party, if it had exercised reasonable diligence, would have known
or been aware of such fact or circumstance. 
Except as otherwise provided therein, all definitions of agreements and
instruments shall mean such agreements or instruments as amended, modified or supplemented
(and in the case of instruments, replaced, renewed or substituted) from time to
time in accordance with their respective terms and the terms of the Loan
Documents.

 

A-26

 

ANNEX B

to

CREDIT AGREEMENT

 

PRO RATA SHARES AND COMMITMENT AMOUNTS

 

	
   

  	
   

  	
  Lender(s)

  
	
  Revolving Loan Commitment
  (including a Swing Line Commitment of $10,000,000)

  $90,000,000 (100%)

  	
   

  	
  General Electric Capital
  Corporation

  

 

B-1

 

ANNEX C

to

CREDIT AGREEMENT

 

CLOSING CHECKLIST

 

A.            DOCUMENTS

 

1.             Credit
Agreement:  This
Agreement or counterparts hereof shall have been duly executed by, and
delivered to, each Credit Party, Agent and Lenders.

 

2.             Notes:  Duly executed originals of the Revolving
Notes and the Swing Line Note for each Lender, dated the Closing Date, if
requested by such Lender.

 

3.             Security
Agreements:  Duly
executed originals of Security Agreements executed by each Credit Party, dated
the Closing Date, and all instruments, documents and agreements executed
pursuant thereto.

 

4.             Mortgages:  Within 45 days following the Closing Date:
Mortgages covering all of the Real Estate (the “Mortgaged Properties”)
together with: (a) title insurance policies, current as-built surveys,
zoning letters and certificates of occupancy, in each case reasonably
satisfactory in form and substance to Agent, in its sole discretion; (b) evidence
that counterparts of the Mortgages have been recorded in all places to the
extent necessary or desirable, in the reasonable judgment of Agent, to create a
valid and enforceable first priority lien (subject to Permitted Encumbrances)
on each Mortgaged Property in favor of Agent for the benefit of itself and
Lenders (or in favor of such other trustee as may be required or desired under
local law); and (c) an opinion of counsel in each state in which any
Mortgaged Property is located in form and substance and from counsel reasonably
satisfactory to Agent.;

 

5.             Appraisals.  Agent shall have received appraisals as to
all Inventory and as to each parcel of Real Estate owned by each Credit Party,
each of which shall be in form and substance reasonably satisfactory to Agent.

 

6.             Insurance:  Satisfactory evidence that the insurance
policies required by Section 2.2 are in full force and effect,
together with appropriate evidence showing loss payable and/or additional
insured clauses or endorsements, as reasonably requested by Agent, in favor of
Agent, on behalf of Lenders.

 

7.             Security
Interests and Code Filings

 

(a)           Evidence satisfactory to Agent that Agent (for the
benefit of itself and Lenders) has a valid and perfected first priority
security interest in the Collateral, including (i) such documents duly
executed (and/or authorized for filing) by each Credit Party (including
financing statements under the Code and other applicable documents under the
laws of any jurisdiction with respect to the perfection of Liens) as Agent may
request in order to perfect its security interests in the Collateral and (ii) copies
of Code search reports listing all effective financing statements that name any
Credit Party as debtor, together with copies of such financing statements, none
of which shall cover the Collateral, except for those relating to Permitted
Encumbrances.

 

C-1

 

(b)           UCC-3 or other appropriate termination statements,
in form and substance reasonably satisfactory to Agent releasing all liens on
the Collateral of each Credit Party, and termination of all blocked account
agreements, bank agency agreements or other similar agreements or arrangements
or arrangements in favor of any creditors other than Lenders.

 

8.             Intellectual
Property Security Agreements:  Duly executed originals of a Patent Security
Agreement and Trademark Security Agreement, each dated the Closing Date and
signed by each Credit Party that owns Trademarks.

 

9.             Initial
Borrowing Base Certificate:  Duly executed originals of an initial
Borrowing Base Certificate.

 

10.           Cash Management Systems; Blocked
Account Agreements:  Evidence
satisfactory to Agent that, as of the Closing Date, Cash Management Systems
complying with Annex F have been established and are currently being
maintained in the manner set forth in such Annex F.

 

11.           Certificate of Formation and Good
Standing:  For each
Credit Party, (a) its articles or certificate of incorporation or
certificate of formation, as applicable, and all amendments thereto, (b) good
standing certificates (including verification of tax status) in its state of
incorporation or formation, as applicable, and (c) good standing
certificates (including verification of tax status) and certificates of
qualification to conduct business in each jurisdiction where its ownership or
lease of property or the conduct of its business requires such qualification,
each dated a recent date prior to the Closing Date and certified by the
applicable Secretary of State or other authorized Governmental Authority.

 

12.           By-laws and Resolutions:  For each Credit Party, (a) its by-laws or
operating agreement, as applicable, together with all amendments thereto and (b) resolutions
of such Person’s Board of Directors or Board of Members, as applicable,
approving and authorizing the execution, delivery and performance of the Loan
Documents to which it is a party and the transactions to be consummated in
connection therewith, each certified as of the Closing Date by such Person’s
secretary or an assistant secretary as being in full force and effect without
any modification or amendment.

 

13.           Incumbency Certificates:  For each Credit Party, signature and
incumbency certificates of the officers of such Person executing any of the
Loan Documents, certified as of the Closing Date by such Person’s secretary or
an assistant secretary as being true, accurate, correct and complete.

 

14.           Opinions of Counsel:  Duly executed originals of an opinion of
White & Case LLP, counsel for the Credit Parties, dated the Closing
Date.

 

15.           Pledge Agreements:  Duly executed originals of each of the Pledge
Agreements accompanied by (as applicable) share certificates representing all
of the outstanding Stock being pledged pursuant to such Pledge Agreement and
stock powers for such share certificates executed in blank, and duly executed
control letters from each of the Credit Parties that is a limited partnership
or a limited liability company in form and substance reasonably satisfactory to
Agent.

 

16.           Intercompany Subordination
Agreement:  Duly
executed originals of the Intercompany Subordination Agreement.

 

17.           Accountants’ Letter:  A letter from the Credit Parties to the
independent auditors authorizing the independent certified public accountants
of the Credit Parties to communicate with Agent and 

 

C-2

 

Lenders in accordance with Section 2.3 and acknowledging
Lenders’ reliance on the auditor’s certification of past and future Financial
Statements.

 

18.           Appointment of Agent for Service:  Evidence that CT Corporation has been
appointed as each Credit Party’s agent for service of process in New York.

 

19.           Guaranties:  Duly executed originals of each Guaranty
dated the Closing Date, and all documents, instruments and agreements executed
pursuant thereto.

 

20.           Officer’s Certificate:  Duly executed originals of a certificate of
an authorized officer of each Credit Party, dated the Closing Date, stating
that, since December 31, 2005 (a) no event or condition has occurred
or is existing which could reasonably be expected to have a Material Adverse
Effect; or (b) no Litigation has been commenced against such Credit Party
which could reasonably be expected to have a Material Adverse Effect or
challenge any of the transactions contemplated by the Agreement and the other
Loan Documents.

 

21.           Waivers:  Within 90 days after the Closing Date,
landlord waivers and consents, bailee letters and mortgagee agreements, in each
case as required pursuant to Section 2.6.

 

22.           Environmental Reports:  Agent shall have received such environmental
review and audit reports with respect to the Real Estate of any Credit Party as
Agent shall have requested.

 

23.           Audited Financials; Financial
Condition:  The
Financial Statements, Projections and other materials set forth in Section 5.5,
all certified by an authorized officer of Holdings or a Borrower, as appropriate.  Agent shall have further received a
certificate of an authorized officer of each Credit Party, based on the Pro
Forma and Projections, to the effect that (a) such Borrower will be
Solvent upon the consummation of the transactions contemplated herein; (b) the
Pro Forma fairly presents the financial condition of such Credit Party as of
the date thereof after giving effect to the transactions contemplated by the
Loan Documents and the Related Transactions; and (c) the Projections are
based upon estimates and assumptions stated therein, all of which such Credit
Party believes to be reasonable and fair in light of current conditions and
current facts known to such Credit Party and, as of the Closing Date, reflect
such Credit Party’s good faith and reasonable estimates of its future financial
performance and of the other information projected therein for the period set
forth therein.

 

24.           Pro Forma:  Copies of the Pro Forma in form and substance
reasonably satisfactory to the Agent.

 

25.           Approvals:  Copies of any third-party, Governmental
Authority or other regulatory approvals and consents necessary to consummate
the Revolving Credit Facility and the Related Transactions.

 

26.           Related Transaction Documents:

 

(a)           Evidence that the Senior Notes have been satisfied
through the payment of cash in accordance with the provisions of the Indenture.

 

(b)           Lien releases with respect to each Lien held by or
for the benefit of the holders of the Senior Notes.

 

27.           Other Documents:  Such other certificates, documents and
agreements respecting any Credit Party as Agent may reasonably request.

 

C-3

 

B.            NON-DOCUMENTARY
CONDITIONS

 

28.           Payment of Fees:  Borrowers shall have paid the Fees required
to be paid on the Closing Date, including but not limited to such Fees
specified in the GE Capital Fee Letter and reasonable expenses and attorneys’
fees described in Section 1.3(g).

 

29.           Consummation of Related
Transactions

 

(a)           Initial Public Offering:  Agent shall have received evidence
satisfactory to it that (i) the Initial Public Offering shall have
occurred and (ii) Holdings shall have received proceeds in an amount not
less than $70,000,000.

 

(b)           Retirement of Senior Notes:  Agent shall have received evidence
satisfactory to it that the Senior Notes shall have been satisfied
simultaneously with the Closing Date in full through the payment of cash in
accordance with the provisions of the indenture governing the Senior Notes and
all obligations thereunder and all Liens on Collateral in connection therewith
shall have been terminated.

 

Other
Requirements:  Such other
requirements of any Credit Party as Agent may reasonably request.

 

C-4

 

ANNEX D

to

CREDIT AGREEMENT

 

PRO FORMA

 

[Insert Pro Forma]

 

D-1

 

ANNEX F

 

to

 

CREDIT AGREEMENT

 

CASH MANAGEMENT SYSTEMS

 

Borrowers shall, and shall
cause each other Credit Party to, establish and maintain the Cash Management
Systems described below:

 

(a)           On or before the Closing
Date and until the Termination Date, the Credit Parties shall establish blocked
accounts (“Blocked Accounts”) at one or more of the banks set forth in Disclosure
Schedule (5.16) (each, a “Relationship Bank”) and shall deposit and
cause each of their Subsidiaries to deposit or cause to be deposited promptly,
and in any event no later than the first Business Day after the date of receipt
thereof, all cash, checks, drafts or other similar items of payment relating to
or constituting payments made in respect of any and all Collateral into such
Blocked Accounts.

 

(b)           On or before the Closing
Date, each Relationship Bank at which a Blocked Account is maintained shall
have entered into tri-party blocked account agreements with Agent, for the
benefit of itself and Lenders, and the applicable Borrower and Subsidiaries
thereof, as applicable, in form and substance reasonably acceptable to Agent
(each a “Blocked Account Agreement”). 
Each such Blocked Account Agreement shall provide, among other things,
that (i) all items of payment deposited in such Blocked Account and proceeds
thereof deposited in the applicable Blocked Account are held by such bank as
agent or bailee-in-possession for Agent, on behalf of itself and Lenders, (ii)
the bank executing such agreement has no rights of setoff or recoupment or any other
claim against such account, as the case may be, other than for payment of its
service fees and other charges directly related to the administration of such
account and for returned checks or other items of payment, and (iii) such bank
agrees, from and after the receipt of a notice (an “Activation Notice”)
from Agent (which Activation Notice Agent covenants and agrees may be given by
Agent only at any time at which (1) Borrowing Availability is less than fifteen percent (15%) of the Borrowing Base,
or (2) an Event of Default has occurred and is continuing (any of the foregoing
being referred to herein as an “Activation Event”) and which Activation
Notice shall be revoked by Agent, if the Activation Event was of the type
described in clause (1) above, at such time, if any, as Borrowing Availability
shall have been greater than fifteen
percent (15%) of the Borrowing Base for 30 consecutive days and, if the
Activation Event was of the type described in clause (2) above, upon the cure
or waiver, if any, of the Event of Default causing the Activation Event, so
long as in each case, no additional or other Events of Default shall have
occurred and be continuing), to forward immediately all amounts in each Blocked
Account to a deposit account designated by Agent (the “Payment Account”).

 

(c)           So long as no Default or
Event of Default has occurred and is continuing, Credit Parties may amend Schedule
5.16 to add or replace a Relationship Bank or Blocked Account; provided,
that (i) Agent shall have consented in writing in advance to the opening of
such deposit account with the relevant bank and (ii) prior to the time of the
opening of such account, the applicable Credit Party and such bank shall have
executed and delivered to Agent a Blocked Account Agreement, in the form
required by this Annex F or otherwise in form and substance reasonably
satisfactory to Agent. Each Credit Party shall close any of its deposit
accounts (and establish replacement deposit accounts in accordance with the
foregoing sentence) promptly and in any event within thirty (30) days following
notice from Agent that the creditworthiness of any bank holding a deposit
account is no longer acceptable in Agent’s reasonable judgment, or as promptly
as practicable and in any event within sixty (60) days following notice from
Agent that the operating performance, funds transfer or availability procedures
or performance with 

 

F-1

 

respect to deposit accounts
of the bank holding such deposit accounts or Agent’s liability under any
Blocked Account Agreement with such bank is no longer acceptable in Agent’s
reasonable judgment.

 

(d)           The Blocked Accounts shall
be cash collateral accounts, with all cash, checks and other similar items of
payment in such accounts securing payment of the Loans and all other
Obligations, and in which the applicable Credit Party shall have granted a Lien
to Agent, on behalf of itself and Lenders, pursuant to the Security Agreement.

 

(e)           All amounts deposited in the
Payment Account shall be deemed received by Agent in accordance with Section
1.4 and shall be applied (and allocated) by Agent in accordance with Section
1.5(e).  In no event shall any amount
be so applied unless and until such amount shall have been credited in
immediately available funds to the Payment Account.

 

(f)            Notwithstanding the
provisions of this Annex F, the Credit Parties may maintain bank accounts in
the ordinary course of business other than Blocked Accounts which (i) if
maintained in the United States, may at any time contain funds not to exceed
the minimum amounts required to be maintained in such accounts plus such
additional amounts as shall be forwarded to a Blocked Account within one
Business Day of deposit in such account, (ii) if maintained in Canada, may at
any time contain funds not to exceed the Canadian dollar equivalent of $500,000
in the aggregate for all such accounts maintained in Canada and (iii) if
maintained in Europe, may at any time contain funds not to exceed the local
currency equivalent of $750,000 in the aggregate for all such accounts
maintained in Europe.

 

F-2

 

EXHIBIT
4.1(d)

 

BORROWING BASE CERTIFICATE

 

Date:      \                  ,

 

This Certificate is given by
[Golfsmith International, Inc., a Delaware
corporation (“Borrower Representative”)] pursuant to
subsection 4.1(d) of that certain Amended and Restated Credit Agreement dated
as of June 20, 2006 among Holdings, Borrowers, the other Credit Parties party
thereto, the Lenders from time to time party thereto and General Electric
Capital Corporation, as agent for the Lenders (as such agreement may be further
amended, restated, supplemented or otherwise modified from time to time the “Credit
Agreement”).  Capitalized terms used
herein without definition shall have the meanings set forth in the Credit
Agreement.

 

The undersigned is duly
authorized to execute and deliver this Certificate on behalf of Holdings.  By executing this Certificate such officer
hereby certifies to Agent and Lenders that:

 

(a)           Attached hereto as Schedule
1 is a calculation of the proposed Borrowing Base as of the above date;

 

(b)           Based on such schedule, the
proposed Borrowing Base as of the above date is:

 

$                       

 

(c)           Agent shall have the right
to establish or modify or eliminate Reserves against Eligible Accounts and
Eligible Inventory from time to time in its reasonable credit judgment based on
events or occurrences after the Closing Date that adversely affect the
collectibility of Accounts or the saleability of Inventory.  In addition, Agent reserves the right at any
time after notice to Borrowers to adjust any of the criteria set forth below
and to establish new criteria in its reasonable credit judgment, subject to the
approval of Requisite Lenders in the case of adjustments which have the effect
of making more credit available. 
Borrower Representative acknowledges that the exercise by Agent of any
right pursuant to this clause (c) shall have the effect of adjusting the
proposed Borrowing Base set forth above.

 

IN WITNESS WHEREOF, Borrower
has caused this Certificate to be executed by its
                                
this          day of
                      ,
        .

 

	
   

  	
  GOLFSMITH INTERNATIONAL,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  

 

 

EXHIBIT
4.1(k)

 

COMPLIANCE CERTIFICATE

 

GOLFSMITH INTERNATIONAL [HOLDINGS], INC. AND ITS SUBSIDIARIES

 

Date:             ,     

 

This Certificate is given by
[Golfsmith International [Holdings], Inc.] (“Borrower
Representative”) pursuant to Section 4.1(k) of that certain Amended and
Restated Credit Agreement dated as of June 20, 2006 among Borrower
Representative, Borrowers, the other Credit Parties party thereto, the Lenders
from time to time party thereto and General Electric Capital Corporation, as
agent for the Lenders (as such agreement may be further amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”).  Capitalized terms used herein without
definition shall have the meanings set forth in the Credit Agreement.

 

The undersigned is duly
authorized to execute and deliver this Certificate on behalf of Borrower
Representative.  By executing this
Certificate such officer hereby certifies to Agent and Lenders that:

 

(a)           the financial statements
delivered with this Certificate in accordance with Section 4.1(a) and/or 4.1(b)
of the Credit Agreement fairly present in all material respects the results of
operations and financial condition of Holdings and its Subsidiaries as of the
dates of such financial statements, subject in the case of interim financial
statements, the absence of footnotes and normal year-end adjustments;

 

(b)           I have reviewed the terms of
the Credit Agreement and have made, or caused to be made under my supervision,
a review in reasonable detail of the transactions and conditions of the Credit
Parties during the accounting period covered by such financial statements;

 

(c)           such review has not
disclosed the existence during or at the end of such accounting period, and I
have no knowledge of the existence as of the date hereof, of any condition or
event that constitutes a Default or an Event of Default, except as set forth on
Schedule 1 hereto, which includes a description of the nature and period
of existence of such Default or an Event of Default and what action Borrower has
taken, is taking and proposes to take with respect thereto;

 

(d)           except as set forth on Schedule
1 hereto, each Borrower is in compliance with the covenants contained in
Sections 3.1, 3.3, 3.4, 3.5, 3.7 and 3.8 of the Credit Agreement, as
demonstrated on Schedule 1 hereto;

 

(e)           Omitted.

 

(f)            Omitted.

 

(g)           except as set forth on Schedule
3 hereto, subsequent to the date of the most recent Certificate submitted
by Borrower Representative pursuant to Section 4.1(k) of the Credit Agreement,
no Credit Party has (i) changed its name as it appears in official filings in
the jurisdiction of its organization, (ii) changed its chief executive office,
principal place of business, corporate offices, warehouses or locations at
which Collateral is held or stored, or the location of its records concerning
Collateral, (iii) changed the type of entity that it is, (iv) changed (or has
had changed) its organization identification number, if any, issued by its
jurisdiction of organization, (v) changed its jurisdiction of organization,
(vi) 

 

 

changed the end of its
Fiscal Year, or (vii) formed any new Subsidiary or entered into any partnership
or joint venture with any other Person; and

 

(h)           except as set forth on Schedule
4 hereto, subsequent to the date of the most recent Certificate submitted
by Borrower pursuant to Section 4.1(k) of the Credit Agreement, there has been
no event which would alter any of the disclosures set forth on Schedule 5.4(b)
of the Credit Agreement.

 

IN WITNESS WHEREOF, Borrower
Representative has caused this Certificate to be executed by its
                                    
this          day of
                      ,
        .

 

	
   

  	
   

  	
  GOLFSMITH
  INTERNATIONAL, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Its

  	
   

  

 

 

INVESTMENTS

(Section 3.3)

 

	
  Section
  3.3(d): Loans and advances to employees for moving, traveling and other
  similar expenses in the ordinary course of business:

  
	
   

  
	
   

  	
  Actual in the aggregate

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Permitted in the aggregate

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  In Compliance

  	
   

  	
  Yes/No

  
	
   

  	
   

  	
   

  	
   

  
	
  Section
  3.3(e): Capital contributions to wholly-owned domestic Subsidiaries:

  
	
   

  
	
   

  	
  Actual in the aggregate

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Permitted in the aggregate

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  In Compliance

  	
   

  	
  Yes/No

  
	
   

  	
   

  	
   

  	
   

  
	
  Section
  3.3(f): Investments in Golfsmith Europe:

  
	
   

  
	
   

  	
  Actual in the aggregate

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Permitted in the aggregate

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  In Compliance

  	
   

  	
  Yes/No

  
	
   

  	
   

  	
   

  	
   

  
	
  Section
  3.3(o): Other permitted Investments:

  
	
   

  
	
   

  	
  Actual in the aggregate

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Permitted in the aggregate

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  In Compliance

  	
   

  	
  Yes/No

  

 

 

CONTINGENT OBLIGATIONS 

(Section 3.4)

 

	
  Section
  3.4(g): Contingent Obligations incurred in the ordinary course of business
  with respect to surety and appeal bonds, performance and return-of-money
  bonds and other similar obligations:

  
	
   

  
	
   

  	
  Actual in the aggregate

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Permitted in the aggregate

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  In Compliance

  	
   

  	
  Yes/No

  
	
   

  	
   

  	
   

  	
   

  
	
  Section
  3.4(k): Other Contingent Obligations not otherwise permitted in Sections
  3.4(a) through (j):

  
	
   

  
	
   

  	
  Actual in the aggregate

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Permitted in the aggregate

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  In Compliance

  	
   

  	
  Yes/No

  

 

7

 

RESTRICTED JUNIOR PAYMENTS

(Section 3.5)

 

	
  Dividends
  paid to Holdings to permit repurchase of Stock:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Actual (current Fiscal
  Year)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Current (current Fiscal
  Year)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  In Compliance

  	
   

  	
  Yes/No

  

 

8

 

DISPOSAL OF ASSETS 

(Section 3.7)

 

	
  Describe
  any Asset Dispositions made during the period (list each transaction by
  market value of assets sold):

  
	
   

  
	
   

  	
   

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  Permitted Asset
  Dispositions in a single transaction or series of related transactions (asset
  market value)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  In
  Compliance

  	
   

  	
  Yes/No

  
	
   

  	
   

  	
   

  
	
  Aggregate
  market value of Asset Dispositions in Fiscal Year

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  Permitted
  aggregate market value of Asset Dispositions in Fiscal Year

  	
   

  	
  $

  
	
   

  	
   

  	
   

  
	
  In
  Compliance

  	
   

  	
  Yes/No

  

 

9

 

CONDITIONS OR EVENTS WHICH CONSTITUTE A DEFAULT OR

EVENT OF DEFAULT

 

[If any condition or event exists that constitutes a Default or Event of
Default, specify nature and period of existence and what action Borrowers have
taken, is taking or proposes to take with respect thereto; if no condition or
event exists, state “None.”]

 

10

 

EXHIBIT
1.1(a)(i)

to

CREDIT AGREEMENT

 

FORM
OF REVOLVING NOTE

(Multi-Borrower)

 

New York, New York

 

$65,000,000

 

FOR VALUE RECEIVED, each of
the undersigned (each individually a “Borrower” and collectively, the “Borrowers”),
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of
                                              
(“Lender”), at the offices of GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation, as Agent for Lenders (“Agent”), at its address at
335 Madison Avenue, New York, New York, or at such other place as Agent may
designate from time to time in writing, in lawful money of the United States of
America and in immediately available funds, the amount of SIXTY-FIVE MILLION
DOLLARS AND NO CENTS ($65,000,000) or, if less, the aggregate unpaid amount of
all Revolving Credit Advances made to the undersigned under the “Credit
Agreement” (as hereinafter defined).  All
capitalized terms used but not otherwise defined herein have the meanings given
to them in the Credit Agreement or in Annex A thereto.

 

This Revolving Note is one
of the Revolving Notes issued pursuant to that certain Amended and Restated
Credit Agreement dated as of June 20, 2006, by and among Borrowers, the other
Persons named therein as Credit Parties, Agent, Lender and the other Persons
signatory thereto from time to time as Lenders (including all annexes, exhibits
and schedules thereto, and as from time to time further amended, restated,
supplemented or otherwise modified, the “Credit Agreement”), and is
entitled to the benefit and security of the Credit Agreement, the Security
Agreement and all of the other Loan Documents referred to therein.  Reference is hereby made to the Credit
Agreement for a statement of all of the terms and conditions under which the
Loans evidenced hereby are made and are to be repaid.  The date and amount of each Revolving Credit
Advance made by Lenders to Borrowers, the rates of interest applicable thereto
and each payment made on account of the principal thereof, shall be recorded by
Agent on its books; provided that the failure of Agent to make any such
recordation shall not affect the obligations of Borrowers to make a payment
when due of any amount owing under the Credit Agreement or this Revolving Note
in respect of the Revolving Credit Advances made by Lender to Borrowers.

 

The principal amount of the
indebtedness evidenced hereby shall be payable in the amounts and on the dates
specified in the Credit Agreement, the terms of which are hereby incorporated
herein by reference.  Interest thereon
shall be paid until such principal amount is paid in full at such interest
rates and at such times, and pursuant to such calculations, as are specified in
the Credit Agreement. The terms of the Credit Agreement are hereby incorporated
herein by reference.

 

If any payment on this Revolving
Note becomes due and payable on a day other than a Business Day, the payment
thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.

 

Upon the occurrence and
during the continuance of any Event of Default, this Revolving Note may, as
provided in the Credit Agreement, and without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or other legal
requirement of any kind (all of which are hereby expressly waived by
Borrowers), be declared, and immediately shall become, due and payable.

 

 

Time is of the essence of
this Revolving Note.

 

Except as provided in the
Credit Agreement, this Revolving Note may not be assigned by Lender to any
Person.

 

THIS
REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF
LAW PRINCIPLES (EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

 

	
   

  	
  GOLFSMITH INTERNATIONAL,
  L.P.

  
	
   

  	
  By: Golfsmith GP L.L.C.,
  as General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH NU, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH USA, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

EXHIBIT
1.1(a)(ii)

to

CREDIT AGREEMENT

 

FORM OF NOTICE OF REVOLVING CREDIT ADVANCE

 

                      ,

 

General
Electric Capital Corporation,

for itself, as Lender, and as Agent

for Lenders

500 West Monroe Street

Chicago, Illinois 60661

 

	
  Attention:

  	
   

  	
  Golfsmith International,
  Inc.

  
	
   

  	
   

  	
  Account Manager

  

 

Ladies
and Gentlemen:

 

The undersigned, Golfsmith
International, Inc. (“Borrower Representative”) refers to the Credit
Agreement, dated as of June 20, 2006 (the “Credit Agreement,” the terms
defined therein being used herein as therein defined), by and among the
undersigned, the other persons named therein as Borrowers, the other Credit
Parties signatory thereto, General Electric Capital Corporation, for itself, as
a Lender, and as Agent for Lenders, and other Lenders, and hereby gives you
notice, irrevocably, pursuant to Section 1.1(a) of the Credit Agreement,
that the undersigned hereby requests a Revolving Credit Advance under the
Credit Agreement, and in that connection sets forth below the information
relating to such Revolving Credit Advance as required by Section 1.1(a)
of the Credit Agreement:

 

(i)            The date of the requested
Revolving Credit Advance is
                    ,
        .

 

(ii)           The aggregate amount of the
requested Revolving Credit Advance is
$                        .

 

(iii)          The requested Revolving
Credit Advance is [an Index Rate Loan]
[a LIBOR Loan with a LIBOR Period of
                ].

 

(iv)          The requested Revolving
Credit Advance is to be sent to:

 

[Name of Bank]

[City of Bank]

Beneficiary:

Account No.:  [number]

ABA No.:  [number]

Attn:  [name]

 

(v)           The Requested Revolving
Credit Advance is made on behalf of [Golfsmith International, L.P./Golfsmith
NU, L.L.C./Golfsmith USA, L.L.C.] and is not made on behalf of any other Person.

 

 

The undersigned hereby
certifies that all of the statements contained in Section 7.2 of the
Credit Agreement are true and correct in all material respects on the date
hereof, and will be true in all material respects on the date of the requested
Revolving Credit Advance, before and after giving effect thereto and to the
application of the proceeds therefrom.

 

	
   

  	
  GOLFSMITH
  INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
					

 

 

EXHIBIT
1.1(c)

to

CREDIT
AGREEMENT

 

FORM
OF SWING LINE NOTE

(Multi-Borrower)

 

	
   

  	
   

  	
  New
  York, New York

  
	
  $10,000,000

  	
   

  	
  June
  20, 2006

  

 

FOR VALUE RECEIVED, each of
the undersigned (each individually a “Borrower” and collectively, the “Borrowers”),
HEREBY JOINTLY AND SEVERALLY PROMISES TO PAY to the order of GENERAL ELECTRIC
CAPITAL CORPORATION, a Delaware corporation (“Swing Line Lender”) at the
offices of GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as
Agent (in such capacity, the “Agent”) at the Agent’s address at 335
Madison Avenue, New York, New York, or at such other place as Agent may
designate from time to time in writing, in lawful money of the United States of
America and in immediately available funds, the amount of TEN MILLION DOLLARS
AND NO CENTS ($10,000,000) or, if less, the aggregate unpaid amount of all Swing
Line Advances made to the undersigned under the “Credit Agreement” (as
hereinafter defined).  All capitalized
terms used but not otherwise defined herein have the meanings given to them in
the Credit Agreement or in Annex A thereto.

 

This Swing Line Note is
issued pursuant to that certain Amended and Restated Credit Agreement dated as
of June 20, 2006 by and among Borrowers, the other Persons named therein as
Credit Parties, Agent, Swing Line Lender and the other Persons signatory
thereto from time to time as Lenders (including all annexes, exhibits and
schedules thereto and as from time to time further amended, restated,
supplemented or otherwise modified, the “Credit Agreement”), and is
entitled to the benefit and security of the Credit Agreement, the Security
Agreement and all of the other Loan Documents. 
Reference is hereby made to the Credit Agreement for a statement of all
of the terms and conditions under which the Loans evidenced hereby are made and
are to be repaid.  The date and amount of
each Swing Line Advance made by Swing Line Lender to Borrowers, the rate of
interest applicable thereto and each payment made on account of the principal
thereof, shall be recorded by Agent on its books; provided that the failure of
Agent to make any such recordation shall not affect the obligations of
Borrowers to make a payment when due of any amount owing  under the Credit Agreement or this Swing Line
Note in respect of the Swing Line Advances made by Swing Line Lender to
Borrowers.

 

The principal amount of the
indebtedness evidenced hereby shall be payable in the amounts and on the dates
specified in the Credit Agreement, the terms of which are hereby incorporated
herein by reference.  Interest thereon
shall be paid until such principal amount is paid in full at such interest
rates and at such times, and pursuant to such calculations, as are specified in
the Credit Agreement.  The terms of the
Credit Agreement are hereby incorporated herein by reference.

 

If any payment on this Swing
Line Note becomes due and payable on a day other than a Business Day, the
payment thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.

 

Upon the occurrence and
during the continuance of any Event of Default, this Swing Line Note may, as
provided in the Credit Agreement, and without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or other legal
requirement of any kind (all of which are hereby expressly waived by
Borrowers), be declared, and immediately shall become, due and payable.

 

 

Time is of the essence of
this Swing Line Note.

 

Except as provided in the
Credit Agreement, this Swing Line Note may not be assigned by Lender to any
Person.

 

THIS SWING
LINE NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES (EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

 

 

	
   

  	
  GOLFSMITH INTERNATIONAL,
  L.P.

  
	
   

  	
  By: Golfsmith GP L.L.C.,
  as General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH NU, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  GOLFSMITH USA, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

EXHIBIT
1.2(e)

to

CREDIT AGREEMENT

 

FORM
OF NOTICE OF CONVERSION/CONTINUATION

 

Reference is made to that
certain Amended and Restated Credit Agreement dated as of June 20, 2006 by and
among the undersigned (“Borrower Representative”), the other Persons
named therein as Borrowers, the other Persons named therein as Credit Parties,
General Electric Capital Corporation (“Agent”) and the Lenders from time
to time signatory thereto (including all annexes, exhibits or schedules
thereto, and as from time to time further amended, restated, supplemented or
otherwise modified, the “Credit Agreement”).  Capitalized terms used herein without
definition are so used as defined in the Credit Agreement.

 

Borrower Representative
hereby gives irrevocable notice, pursuant to Section 1.2(e) of the
Credit Agreement, of its request to:

 

(a)           on [  date  ]
convert
$[                ]of
the aggregate outstanding principal amount of the
[              ]
Loan, bearing interest at the
[                ]
Rate, into a(n)
[                ]
Loan [and, in the case of a LIBOR Loan, having a LIBOR Period of
[          ] month(s)];

 

[(b)          on [  date  ]
continue
$[                ]of
the aggregate outstanding principal amount of the
[              ]
Loan, bearing interest at the LIBOR Rate, as a LIBOR Loan having a LIBOR Period
of [          ] month(s)].

 

Borrower Representative
certifies that the conversion and/or continuation of the Loans requested above
is for the separate account(s) of the following Borrowers[s] in the following
[respective] amount[s]:  [Name: 
$                          ]
and [Name: 
$                              ].

 

Borrower Representative
hereby (i) certifies that all of the statements contained in Section 7.2
of the Credit Agreement are true and correct in all material respects on the
date hereof, and will be true in all material respects on the date of the
requested conversion/continuation, before and after giving effect thereto and
(ii) reaffirms the cross-guaranty provisions set forth in Section 10 of
the Credit Agreement and the guaranty and continuance of Agent’s Liens, on
behalf of itself and Lenders, pursuant to the Collateral Documents.

 

	
   

  	
  GOLFSMITH
  INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

Exhibit
1.11(c)

 

NON-BANK
CERTIFICATE

 

Reference is hereby made to
the Credit Agreement, dated as of June 20, 2006, among Golfsmith International,
L.P., Golfsmith NU L.L.C., and Golfsmith
USA L.L.C.as Borrowers, the other persons party thereto that are designated as
credit parties, General Electric Capital Corporation as Agent, L/C Issuer and a
Lender, the other financial institutions party thereto, and GE Capital Markets,
Inc., as Sole Lead Arranger and Bookrunner (as amended from time to time, the “Credit
Agreement”).  Pursuant to the provisions
of Section 1.11(c) of the Credit Agreement, the undersigned hereby certifies
that it is not (i) a “bank” as such term is used in Section 881(c)(3)(A) of the
Internal Revenue Code of 1986, as amended (the “Code”), (ii) a 10-percent
shareholder within the meaning of Section 871(h)(3)(B) of the Code, and (iii) a
controlled foreign corporation receiving interest from a related person within
the meaning of Section 881(c)(3)(C) of the Code.

 

The undersigned shall
promptly notify the Borrowers and the Agent if any of the representations and
warranties made herein are no longer true and correct.

 

 

	
   

  	
  [NAME OF LENDER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Date:                           ,
             

  	
   

  	
   

  

 

 

EXHIBIT
8.1

to

CREDIT AGREEMENT

 

ASSIGNMENT
AGREEMENT

 

This Assignment Agreement
(this “Agreement”) is made as of
                      
    ,          by
and between                                                                     
(“Assignor Lender”) and
                                                
(“Assignee Lender”) and acknowledged and consented to by GENERAL
ELECTRIC CAPITAL CORPORATION, as agent (“Agent”).  All capitalized terms used in this Agreement
and not otherwise defined herein will have the respective meanings set forth in
the Credit Agreement as hereinafter defined.

 

RECITALS:

 

WHEREAS, Golfsmith
International Holdings, Inc., a Delaware corporation, Golfsmith International,
Inc., a Delaware corporation, and all domestic subsidiaries thereof (“Credit
Parties”), Agent, Assignor Lender and other Persons signatory thereto as
Lenders have entered into that certain Amended and Restated Credit Agreement
dated as of June 20, 2006 (as further amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”) pursuant
to which Assignor Lender has agreed to make certain Loans to, and incur certain
Letter of Credit Obligations for, Borrowers;

 

WHEREAS, Assignor Lender
desires to assign to Assignee Lender [all/a
portion] of its interest in the Loans (as described below), the
Letter of Credit Obligations and the Collateral and to delegate to Assignee
Lender [all/a portion] of its
Commitments and other duties with respect to such Loans, Letter of Credit
Obligations and Collateral;

 

WHEREAS, Assignee Lender
desires to become a Lender under the Credit Agreement and to accept such
assignment and delegation from Assignor Lender; and

 

WHEREAS, Assignee Lender
desires to appoint Agent to serve as agent for Assignee Lender under the Credit
Agreement.

 

NOW, THEREFORE, in
consideration of the premises and the agreements, provisions, and covenants
herein contained, Assignor Lender and Assignee Lender agree as follows:

 

1.             ASSIGNMENT, DELEGATION, AND
ACCEPTANCE

 

1.1           Assignment.  Assignor Lender hereby transfers and assigns
to Assignee Lender, without recourse and without representations or warranties
of any kind (except as set forth in Section 3.2), [all/such percentage]
of Assignor Lender’s right, title, and interest in the Revolving Loan,
including Letter of Credit Obligations, Loan Documents and the Collateral as
will result in Assignee Lender having as of the Effective Date (as hereinafter
defined) a Pro Rata Share thereof, as follows:

 

	
  Assignee Lender’s Loans

  	
   

  	
  Principal
  Amount

  	
   

  	
  Pro
  Rata Share

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revolving
  Loan

  	
   

  	
  $

  	
                          

  	
   

  	
   

  	
  %

  
							

 

 

1.2           Delegation.  Assignor Lender hereby irrevocably assigns
and delegates to Assignee Lender [all/a
portion] of its Commitments and its other duties and obligations as
a Lender under the Loan Documents equivalent to  the Pro Rata Shares set forth above.

 

1.3           Acceptance by Assignee Lender.  By its execution of this Agreement, Assignee
Lender irrevocably purchases, assumes and accepts such assignment and
delegation and agrees to be a Lender with respect to the delegated interest
under the Loan Documents and to be bound by the terms and conditions
thereof.  By its execution of this
Agreement, Assignor Lender agrees, to the extent provided herein, to relinquish
its rights and be released from its obligations and duties under the Credit
Agreement.

 

1.4           Effective Date.  Such assignment and delegation by Assignor
Lender and acceptance by Assignee Lender will be effective and Assignee Lender
will become a Lender under the Loan Documents as of [the date of this
Agreement][          
    ,         ]
(“Effective Date”) and upon payment of the Assigned Amount and the
Assignment Fee (as each term is defined below). 
[Interest and Fees accrued prior to
the Effective Date are for the account of Assignor Lender, and Interest and
Fees accrued from and after the Effective Date are for the account of Assignee
Lender.]

 

2.             INITIAL PAYMENT AND DELIVERY
OF NOTES

 

2.1           Payment of the Assigned
Amount.  Assignee Lender will pay to
Assignor Lender, in immediately available funds, not later than 12:00 noon (New
York time) on the Effective Date, an amount equal to its Pro Rata Share of the
then outstanding principal amount of the Loans as set forth above in Section
1.1  [together with accrued interest, fees
and other amounts as set forth on Schedule 2.1] (the “Assigned
Amount”).

 

2.2           Payment of Assignment Fee.  [Assignor Lender and/or Assignee Lender] will
pay to Agent, for its own account in immediately available funds, not later
than 12:00 noon (New York time) on the Effective Date, the assignment fee in
the amount of $3,500 (the “Assignment Fee”) as required pursuant to
Section 8.1(a) of the Credit Agreement.

 

2.3           Execution and Delivery of
Notes.  Following payment of the
Assigned Amount and the Assignment Fee, Assignor Lender will deliver to Agent
the Notes previously delivered to Assignor Lender for redelivery to Borrowers
and Agent will obtain from Borrowers for delivery to [Assignor Lender and] Assignee Lender, new executed Notes
evidencing Assignee Lender’s [and Assignor
Lender’s respective] Pro Rata Share[s] in the Revolving Loan after
giving effect to the assignment described in Section 1.  Each new Note will be issued in the aggregate
maximum principal amount of the [applicable]
Commitment [of the Lender to whom such Note
is issued]  OR
[the Assignee Lender].

 

3.             REPRESENTATIONS, WARRANTIES
AND COVENANTS

 

3.1           Assignee Lender’s
Representations, Warranties and Covenants.  Assignee Lender hereby represents, warrants,
and covenants the following to Assignor Lender and Agent:

 

(a)           This Agreement is a legal,
valid, and binding agreement of Assignee Lender, enforceable according to its
terms;

 

(b)           The execution and
performance by Assignee Lender of its duties and obligations under this
Agreement and the Loan Documents will not require any registration with, notice
to, or consent or approval by any Governmental Authority;

 

 

(c)           Assignee Lender is familiar
with transactions of the kind and scope reflected in the Loan Documents and in
this Agreement;

 

(d)           Assignee Lender has made its
own independent investigation and appraisal of the financial condition and
affairs of each Credit Party, has conducted its own evaluation of the Loans and
Letter of Credit Obligations, the Loan Documents and each Credit Party’s
creditworthiness, has made its decision to become a Lender to Borrowers under
the Credit Agreement independently and without reliance upon Assignor Lender or
Agent, and will continue to do so;

 

(e)           Assignee Lender is entering
into this Agreement in the ordinary course of its business, and is acquiring
its interest in the Loans and Letter of Credit Obligations for its own account
and not with a view to or for sale in connection with any subsequent
distribution; provided, however, that at all times the distribution of Assignee
Lender’s property shall, subject to the terms of the Credit Agreement, be and
remain within its control;

 

(f)            No future assignment or
participation granted by Assignee Lender pursuant to Section 8.1 of the Credit
Agreement will require Assignor Lender, Agent, or Borrower to file any
registration statement with the Securities and Exchange Commission or to apply
to qualify under the blue sky laws of any state;

 

(g)           Assignee Lender has no loans
to, written or oral agreements with, or equity or other ownership interest in
any Credit Party;

 

(h)           Assignee Lender will not
enter into any written or oral agreement with, or acquire any equity or other
ownership interest in, any Credit Party without the prior written consent of
Agent; and

 

(i)            As of the Effective Date,
Assignee Lender (i) is entitled to receive payments of principal and interest
in respect of the Obligations without deduction for or on account of any taxes
imposed by the United States of America or any political subdivision thereof,
(ii) is not subject to capital adequacy or similar requirements under Section
1.10(a) of the Credit Agreement, (iii) does not require the payment of any
increased costs under Section 1.10(b) of the Credit Agreement, and (iv) is not
unable to fund LIBOR Loans under Section 1.10(b) of the Credit Agreement, and
Assignee Lender will indemnify Agent from and against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, or
expenses that result from Assignee Lender’s failure to fulfill its obligations
under the terms of Section 1.11(c) of the Credit Agreement or from any other
inaccuracy in the foregoing.

 

3.2           Assignor Lender’s
Representations, Warranties and Covenants.  Assignor Lender hereby represents, warrants
and covenants the following to Assignee Lender:

 

(a)           Assignor Lender is the legal
and beneficial owner of the Assigned Amount;

 

(b)           This Agreement is a legal,
valid and binding agreement of Assignor Lender, enforceable according to its
terms;

 

(c)           The execution and
performance by Assignor Lender of its duties and obligations under this
Agreement and the Loan Documents will not require any registration with, notice
to or consent or approval by any Governmental Authority;

 

 

(d)           Assignor Lender has full
power and authority, and has taken all action necessary to execute and deliver
this Agreement and to fulfill the obligations hereunder and to consummate the
transactions contemplated hereby;

 

(e)           Assignor Lender is the legal
and beneficial owner of the interests being assigned hereby, free and clear of
any adverse claim, lien, encumbrance, security interest, restriction on
transfer, purchase option, call or similar right of a third party; and

 

(f)            This Assignment by Assignor
Lender to Assignee Lender complies, in all material respects, with the terms of
the Loan Documents.

 

4.             LIMITATIONS OF LIABILITY

 

Neither Assignor Lender
(except as provided in Section 3.2) nor Agent makes any representations
or warranties of any kind, nor assumes any responsibility or liability
whatsoever, with regard to (a) the Loan Documents or any other document or
instrument furnished pursuant thereto or the Loans, Letter of Credit
Obligations or other Obligations, (b) the creation, validity, genuineness,
enforceability, sufficiency, value or collectibility of any of them, (c) the
amount, value or existence of the Collateral, 
(d) the perfection or priority of any Lien upon the Collateral, or (e)
the financial condition of any Credit Party or other obligor or the performance
or observance by any Credit Party of its obligations under any of the Loan
Documents.  Neither Assignor Lender nor
Agent has or will have any duty, either initially or on a continuing basis, to
make any investigation, evaluation, appraisal of, or any responsibility or
liability with respect to the accuracy or completeness of, any information
provided to Assignee Lender which has been provided to Assignor Lender or Agent
by any Credit Party.  Nothing in this
Agreement or in the Loan Documents shall impose upon the Assignor Lender or
Agent any fiduciary relationship in respect of the Assignee Lender.

 

5.             FAILURE TO ENFORCE

 

No failure or delay on the
part of Agent or Assignor Lender in the exercise of any power, right, or
privilege hereunder or under any Loan Document will impair such power, right,
or privilege or be construed to be a waiver of any default or acquiescence
therein.  No single or partial exercise
of any such power, right, or privilege will preclude further exercise thereof
or of any other right, power, or privilege. 
All rights and remedies existing under this Agreement are cumulative
with, and not exclusive of, any rights or remedies otherwise available.

 

6.             NOTICES

 

Unless otherwise
specifically provided herein, any notice or other communication required or
permitted to be given will be in writing and addressed to the respective party
as set forth below its signature hereunder, or to such other address as the
party may designate in writing to the other.

 

7.             AMENDMENTS AND WAIVERS

 

No amendment, modification,
termination, or waiver of any provision of this Agreement will be effective
without the written concurrence of Assignor Lender, Agent and Assignee Lender.

 

8.             SEVERABILITY

 

Whenever possible, each
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law. 
In the event any provision of this Agreement is or is held to be 

 

 

invalid, illegal, or
unenforceable under applicable law, such provision will be ineffective only to
the extent of such invalidity, illegality, or unenforceability, without
invalidating the remainder of such provision or the remaining provisions of the
Agreement.  In addition, in the event any
provision of or obligation under this Agreement is or is held to be invalid,
illegal, or unenforceable in any jurisdiction, the validity, legality, and
enforceability of the remaining provisions or obligations in any other jurisdictions
will not in any way be affected or impaired thereby.

 

9.             SECTION TITLES

 

Section and Subsection
titles in this Agreement are included for convenience of reference only, do not
constitute a part of this Agreement for any other purpose, and have no substantive
effect.

 

10.           SUCCESSORS AND ASSIGNS

 

This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.

 

11.           APPLICABLE LAW

 

THIS AGREEMENT WILL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF  NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE.

 

12.           COUNTERPARTS

 

This Agreement and any
amendments, waivers, consents, or supplements may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which, when so executed and delivered, will be deemed an original and all of
which shall together constitute one and the same instrument.

 

[Signature page follows]

 

 

IN WITNESS WHEREOF, this
Agreement has been duly executed as of the date first written above.

 

	
  ASSIGNEE
  LENDER:

  	
   

  	
  ASSIGNOR
  LENDER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Notice Address:

  	
   

  	
  Notice Address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

	
  ACKNOWLEDGED AND CONSENTED
  TO:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GENERAL ELECTRIC CAPITAL

  	
   

  	
   

  
	
  CORPORATION, AS AGENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [GOLFSMITH
  INTERNATIONAL, INC.] (If Borrower Representative consent is required,
  pursuant to Section 8.1 of the Credit Agreement)

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Title:Exhibit 10.1

 

EXECUTION

 

	
  CREDIT SUISSE SECURITIES (USA) LLC

  CREDIT SUISSE AG

  Eleven Madison Avenue

  New York, NY 10010

  	
   

  	
  MORGAN STANLEY SENIOR FUNDING, INC.

  1585 Broadway

  New York, NY 10036

  

 

CONFIDENTIAL

 

July 11, 2010

 

AON CORPORATION

200 E. 
Randolph Street

Chicago, Illinois 60601

Attention:
Christa Davies, Chief Financial Officer

 

PROJECT TWIN PEAKS

$1,000,000,000 Senior Term Credit Facility

$1,500,000,000 Senior 364-Day Bridge Facility

Commitment Letter

 

Ladies
and Gentlemen:

 

You
have advised Credit Suisse AG (acting through such of its affiliates or
branches as it deems appropriate, “CS”),
Credit Suisse Securities (USA) LLC (“CS Securities”
and, together with CS and their respective affiliates, “Credit
Suisse”) and Morgan Stanley Senior Funding, Inc. (“MSSF” and, together with Credit
Suisse, “we,” “us”
or the “Commitment Parties”) that you
intend to acquire all of the equity interests of Hewitt Associates, Inc.,
a Delaware corporation (the “Company”),
and to consummate the other Transactions (such term and each other capitalized
term used but not defined herein having the meaning assigned to such term in
the Summary of Principal Terms and Conditions attached hereto as Exhibit A
(the “Term Facility Term Sheet”) or
in the Summary of Principal Terms and Conditions attached hereto as
Exhibit B (the “Bridge Facility Term Sheet”
and, together with the Term Facility Term Sheet, the “Term
Sheets”)).

 

You
have further advised us that, in connection therewith, (a) you will obtain
the senior credit facility (the “Term Facility”)
described in the Term Facility Term Sheet, in an aggregate principal amount of
up to $1 billion, and (b) you will (i) issue up to $1.5 billion in
aggregate principal amount of senior unsecured notes (the “Notes”)
in a public offering or in a Rule 144A or other private placement and
(ii) to the extent you are unable to issue the Notes on or prior to the
Closing Date, borrow up to $1.5 billion in aggregate principal amount of senior
increasing rate loans under the senior bridge credit facility (the “Bridge Facility”) described in the
Bridge Facility Term Sheet.  The Term
Facility and the Bridge Facility are collectively referred to herein as the “Facilities”.

 

1.             Commitments.

 

In
connection with the foregoing, each of CS and MSSF (each, in such capacity, an “Initial Lender”) is pleased to
advise you of its commitment to provide 50% of the entire principal amount of
the Facilities, upon the terms and subject to the conditions set forth or
referred to in this commitment letter (including the Term Sheets and other
attachments hereto, this “Commitment Letter”).  The commitments of the Initial Lenders
hereunder are several and not joint.

 

 

2.             Titles and Roles.

 

You
hereby appoint (a) CS Securities and MSSF (each, in such capacity, an “Arranger”) to act, and CS Securities
and MSSF hereby agree to act, as exclusive joint bookrunners and joint lead
arrangers for the Facilities, and (b) CS to act, and CS hereby agrees to
act, as sole administrative agent for the Facilities upon the terms and subject
to the conditions set forth or referred to in this Commitment Letter.  Each of the Arrangers and CS, in such
capacities, will perform the duties and exercise the authority customarily
performed and exercised by it in such roles. 
You agree that Credit Suisse will have “left” placement in any and all
marketing materials or other documentation used in connection with the
Facilities.  You agree that no other
titles will be awarded and no compensation (other than that expressly contemplated
by this Commitment Letter and the Fee Letter referred to below) will be paid in
connection with the Facilities unless you and we shall so agree (such consent
not to be unreasonably withheld or delayed); provided that
no other Person may be awarded the title of “joint bookrunner” or “joint lead
arranger” without our consent.

 

3.             Syndication.

 

We
reserve the right, prior to and/or after the execution of definitive
documentation for the Facilities, to syndicate all or a portion of the Initial
Lenders’ commitments with respect to the Facilities to a group of banks,
financial institutions and other institutional lenders (together with the
Initial Lenders, the “Lenders”)
identified by us in consultation with you and you agree to provide us with a
period of at least 30 consecutive days following the launch of the general
syndication of the Facilities and immediately prior to the Closing Date to
syndicate the Facilities (provided that
such period shall not include any day from and including August 20, 2010
through and including September 6, 2010). 
We intend to commence syndication efforts promptly upon the execution of
this Commitment Letter and you agree to actively assist us in completing a
satisfactory syndication.  Such
assistance shall include (a) your using commercially reasonable efforts to
ensure that any syndication efforts benefit materially from your existing
lending and investment banking relationships (and your using commercially
reasonable efforts to cause the benefit of the existing lending and investment
banking relationships of the Company), (b) direct contact between your
senior management (and your using commercially reasonable efforts to obtain
direct contact between senior management of the Company and representatives and
advisors of the Borrower and the Company) and the proposed Lenders,
(c) your assistance (and your using commercially reasonable efforts to
cause the assistance by the Company) in the preparation of a Confidential
Information Memorandum for each of the Facilities and other marketing materials
and presentations to be used in connection with the syndication (the “Information Materials”),
(d) the hosting, with the Arrangers, of one or more meetings of
prospective Lenders at times and locations to be mutually agreed and (e) your
using commercially reasonable efforts to execute and deliver definitive
documentation with respect to the Facilities (the “Facilities
Documentation”) consistent with the terms set forth herein and
in the Term Sheets (as modified pursuant to the “Market Flex” provision of the
Fee Letter) or, if applicable, one or more Joinder Agreements (as defined
below) and otherwise on terms to be mutually agreed as soon as reasonably
practicable following the date hereof.

 

You
agree, at the request of the Arrangers, to assist in the preparation of a version
of the Information Materials to be used in connection with the syndication of
the Facilities, consisting exclusively of information and documentation that is
either (i) publicly available (or contained in the prospectus or other
offering memorandum for the Notes) or (ii) not material with respect to
you and your subsidiaries or the Company and its subsidiaries or any of their
respective securities for purposes of foreign, United States Federal and state
securities laws (all such Information 

 

2

 

Materials
being “Public Lender
Information”).  Any
information and documentation that is not Public Lender Information is referred
to herein as “Private
Lender Information”. 
Before distribution of any Information Materials, you agree to execute
and deliver to the Arrangers, either (i) a letter in which you authorize
distribution of the Information Materials to Lenders’ employees willing to
receive Private Lender Information or (ii) a separate letter in which you
authorize distribution of Information Materials containing solely Public Lender
Information and represent that such Information Materials do not contain any
Private Lender Information.  You further
agree that each document to be disseminated by the Arrangers to any Lender in
connection with the Facilities will, at the request of the Arrangers, be
identified by you as either (i) containing Private Lender Information or (ii) containing
solely Public Lender Information.  You
acknowledge that the following documents contain solely Public Lender
Information (unless you notify us (including by email) promptly prior to their
intended distribution that any such document contains Private Lender
Information): (a) drafts and final definitive documentation with respect to
the Facilities, including term sheets; (b) administrative materials
prepared by the Commitment Parties for prospective Lenders (such as a lender
meeting invitation, bank allocation, if any, and funding and closing
memoranda); (c) notification of changes in the terms of the Facilities;
and (d) other materials (excluding the Projections (as defined below))
intended for prospective Lenders after the initial distribution of Information
Materials.

 

The
Arrangers will manage all aspects of any syndication in consultation with you,
including decisions as to the selection of institutions to be approached and
when they will be approached, when their commitments will be accepted, which
institutions will participate, the allocation of the commitments among the Lenders,
any naming rights and, subject to the terms of the Fee Letter, the amount and
distribution of fees among the Lenders. 
To assist the Arrangers in their syndication efforts, you
agree promptly to prepare and provide (and to use commercially reasonable
efforts to cause the Company promptly to provide) to the Arrangers all
customary information with respect to you and your subsidiaries and the Company
and its subsidiaries, the Transactions and the other transactions contemplated
hereby, including all financial information and projections (the “Projections”), as the Arrangers may
reasonably request in connection with the arrangement and syndication of the
Facilities.  Unless otherwise agreed by
each Arranger and subject to Section 9, at all times prior to the
occurrence of a Successful Syndication, all commitments received with respect
to any Facility shall be applied to the commitments of each Initial Lender
under such Facility on a pro rata basis.

 

Without
limiting your obligation to assist with the syndication efforts as set forth
above, it is understood and agreed that completion of such syndication is not a
condition to the Initial Lenders’ commitments hereunder.

 

You
further agree to use commercially reasonable efforts to (a) provide the
Commitment Parties and one or more investment banks reasonably satisfactory to
the Arrangers (collectively, the “Investment Bank”),
not later than 30 days prior to the Closing Date (provided that
such period shall not include any day from and including August 20, 2010
through and including September 6, 2010), a complete printed preliminary
prospectus or preliminary offering memorandum or preliminary private placement
memorandum (collectively, an “Offering Document”) suitable for use in a customary (for
investment grade securities) road show relating to the Notes, which contains
all financial statements and other data to be included therein (including all
audited financial statements, all unaudited financial statements (which shall
have been reviewed by the independent accountants for the Borrower as provided
in the procedures specified by the Public Company Accounting Oversight Board in
AU 722) and all appropriate pro forma
financial statements prepared in accordance with, or reconciled to, generally
accepted accounting principles in the United States and prepared in accordance
with Regulation S-X under 

 

3

 

the
Securities Act of 1933, as amended), and all other data (including selected
financial data) that the Securities and Exchange Commission (“SEC”) would require in a registered
offering of the Notes or that would be necessary for the Investment Bank to
receive customary “comfort” (including “negative assurance” comfort) from
independent accountants in connection with the offering of the Notes and
(b) afford the Investment Bank a period of at least 30 consecutive
days (provided that such period shall not
include any day from and including August 20, 2010 through and including September 6,
2010) following receipt of an Offering Document including the information
described in clause (a) to seek to place the Notes with qualified
purchasers thereof.

 

4.             Information.

 

You
hereby represent and covenant that (with respect to Information (as defined
below) and Projections relating to the Company and its affiliates, to the best
of your knowledge) (a) all written information and all oral communications
made in Lender meetings and due diligence sessions held in connection with the
Facilities (other than the Projections) (the “Information”)
that has been or will be made available to us by or on behalf of you or any of
your representatives, when furnished and taken as a whole (including together
with the Borrower’s and the Company’s public filings with the SEC that have
been delivered to us or are otherwise publicly available prior to the date such
Information is furnished), (i) is or will be complete and correct in all
material respects and (ii) does not or will not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements contained therein not materially misleading in
light of the circumstances under which such statements are made and
(b) the Projections that have been or will be made available to us by or
on behalf of you or any of your representatives have been or will be prepared
in good faith based upon accounting principles consistent with the historical
audited financial statements of you and the Company (except as otherwise
expressly disclosed in such Projections) and upon assumptions that you believe
to have been reasonable at the time made and at the time the related
Projections are made available to us (it being understood that any such
Projections are subject to significant uncertainties and contingencies, many of
which are beyond your control, that no assurance can be given that such
Projections will be realized and that actual results may differ from such
Projections and that such differences may be material).  You agree that if at any time prior to the
Closing Date (or, if a Successful Syndication (as defined in the Fee Letter
referred to below) shall not have been completed prior to the Closing Date,
then prior to the earlier of (i) the date on which a Successful
Syndication shall have been completed and (ii) the date that is 60 days
after the Closing Date), you determine that any of the representations in the
preceding sentence would be incorrect in any material respect if the
Information and Projections were being furnished, and such representations were
being made, at such time, then you will promptly supplement the Information and
the Projections so that (with respect to Information and Projections relating
to the Company and its subsidiaries, to the best of your knowledge) such
representations will be correct in all material respects under those
circumstances.  In arranging and
syndicating the Facilities, we will be entitled to use and rely primarily on
the Information and the Projections without responsibility for independent verification
thereof.

 

5.             Fees.

 

As
consideration for the Initial Lenders’ commitments hereunder, and our
agreements to perform the services described herein, you agree to pay to CS
Securities, CS and MSSF the fees set forth in this Commitment Letter and in the
Fee Letter dated the date hereof (the “Signing Date”)
and delivered herewith with respect to the Facilities (the “Fee Letter”).

 

4

 

6.             Conditions Precedent.

 

Each
Initial Lender’s commitment hereunder, and our agreements to perform the services
described herein, are subject to (a)(x) except (A) as disclosed in
the Company SEC Documents (as defined in the Merger Agreement as in effect on
the date hereof) filed with the SEC prior to the date hereof (excluding any
risk factor disclosures contained under the heading “Risk Factors,” any
disclosure of risk included in any “forward-looking statements” disclaimer or
any other statements that are similarly predictive or forward-looking in
nature) and (B) as disclosed in Section 3.07(a) of the Company
Disclosure Letter (as defined in the Merger Agreement as in effect on the date
hereof), since September 30, 2009, there has not occurred any event,
change, effect, development, state of facts, condition, circumstance or
occurrence that has had or would reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect (as defined below) (a “Company Material Adverse Change”)
and (y) except (A) as disclosed in the Parent SEC Documents (as
defined in the Merger Agreement as in effect on the date hereof) filed with the
SEC prior to the date hereof (excluding any risk factor disclosures contained
under the heading “Risk Factors,” any disclosure of risk included in any “forward-looking
statements” disclaimer or any other statements that are similarly predictive or
forward-looking in nature) and (B) as disclosed in Section 4.07(a) of
the Parent Disclosure Letter (as defined in the Merger Agreement as in effect
on the date hereof), since December 31, 2009, there has not occurred any
event, change, effect, development, state of facts, condition, circumstance or
occurrence that has had or would reasonably be expected to have, individually
or in the aggregate, a Borrower Material Adverse Effect (as defined below) (a “Borrower Material Adverse Change”), (b) our
reasonable satisfaction that, prior to the date on which Successful Syndication
shall have been completed, there shall be no other issues of debt securities or
commercial bank or other credit facilities of you or your subsidiaries or the
Company or its subsidiaries being announced, offered, placed or arranged
without the Initial Lenders’ consent (other than (i) the issuance of
commercial paper by the Borrower, the Company or their respective subsidiaries
in the ordinary course of business, (ii) borrowings under the existing
credit facilities of the Borrower, the Company and their respective
subsidiaries, (iii) the Notes and (iv) after September 13, 2010,
the amendment or refinancing of that certain €650,000,000 Facility Agreement
dated as of February 7, 2005 by and among the Borrower, the subsidiaries
of the Borrower party thereto, Citibank International plc, as agent and the
financial institutions parties thereto as lenders (the “Euro
Facility”)); provided that
prior to such date, you shall be permitted to assign lead and co-lead agency
titles and to negotiate documentation with such lead and co-lead agents in
connection with the Euro Facility, (c) compliance by you with your
agreements in Section 2 and the first paragraph of Section 3 of this
Commitment Letter, except to the extent noncompliance therewith has not
materially impeded the syndication of the Facilities, and (d) the other
conditions set forth under the heading “Conditions Precedent to Borrowing” in
Exhibits A and B and as set forth in Exhibit D.

 

“Borrower Material Adverse Effect”
means any event, change, effect, development, state of facts, condition,
circumstance or occurrence that is or would reasonably be expected to be
materially adverse to the business, assets, liabilities, condition (financial
or otherwise) or results of operations of you and your subsidiaries, taken as a
whole, but shall not be deemed to include any event, change, effect,
development, state of facts, condition, circumstance or occurrence: (i) in
or affecting economic conditions (including changes in interest rates) or the
financial or securities markets in the United States or elsewhere in the world,
to the extent you and your subsidiaries are not adversely effected in a
disproportionate manner relative to other participants in the industries in
which you and your subsidiaries operate, (ii) in or affecting the
industries in which you and your subsidiaries operate generally (but, for the
avoidance of doubt, not including the industries in which your or any of your
subsidiaries’ clients or customers operate), to the 

 

5

 

extent
you and your subsidiaries are not adversely effected in a disproportionate
manner relative to other participants in the industries in which you and your
subsidiaries operate or (iii) resulting from or arising out of (A) the
announcement or the existence of, or compliance with, or taking any action
required by the Merger Agreement or the Transactions (as defined in the Merger
Agreement), (B) any taking of any action at the written request of the
Company (and, with respect to any material action, with the prior written
consent of the Arrangers, not to be unreasonably withheld), (C) any
litigation arising from allegations of a breach of fiduciary duty or other
violation of applicable Law relating to the Merger Agreement or the
Transactions (as defined in the Merger Agreement), (D) any adoption,
implementation, promulgation, repeal, modification, reinterpretation or
proposal, in each case after the date of the Merger Agreement, of any rule,
regulation, ordinance, order, protocol or any other Law of or by any national,
regional, state or local Governmental Entity, to the extent you and your
subsidiaries are not adversely effected in a disproportionate manner relative
to other participants in the industries in which you and your subsidiaries
operate, (E) any changes in GAAP or accounting standards or
interpretations thereof, to the extent you and your subsidiaries are not
adversely effected in a disproportionate manner relative to other participants
in the industries in which you and your subsidiaries operate, (F) any
outbreak or escalation of hostilities or acts of war or terrorism, to the
extent you and your subsidiaries are not adversely effected in a
disproportionate manner relative to other participants in the industries in
which you and your subsidiaries operate or (G) any change in the share
price or trading volume of the Parent Common Stock, in your credit rating or in
any analyst’s recommendations, in each case in and of itself, or your failure
to meet projections or forecasts (including any analyst’s projections), in and
of itself (provided, in each case, that the event,
change, effect, development, condition, circumstance or occurrence underlying
such change or failure shall not be excluded, and may be taken into account, in
determining whether there is or would reasonably be expected to be a Borrower
Material Adverse Effect).  The
capitalized terms used in this paragraph and not otherwise defined in this
Commitment Letter shall have the meanings set forth in the Merger Agreement as
in effect on the date hereof.

 

“Company Material Adverse Effect”
means any event, change, effect, development, state of facts, condition,
circumstance or occurrence that is or would be reasonably expected to be
materially adverse to the business, assets, liabilities, condition (financial
or otherwise) or results of operations of the Company and its subsidiaries,
taken as a whole, but shall not be deemed to include any event, change, effect,
development, state of facts, condition, circumstance or occurrence: (i) in
or affecting economic conditions (including changes in interest rates) or the
financial or securities markets in the United States or elsewhere in the world,
to the extent the Company and its subsidiaries are not adversely affected in a
disproportionate manner relative to other participants in the industries in
which the Company or its subsidiaries operate, (ii) in or affecting the
industries in which the Company or its subsidiaries operate generally (but, for
the avoidance of doubt, not including the industries in which the Company’s or
any of its subsidiaries’ clients or customers operate), to the extent the
Company and its subsidiaries are not adversely affected in a disproportionate
manner relative to other participants in the industries in which the Company or
its subsidiaries operate or (iii) resulting from or arising out of (A) the
announcement or the existence of, or compliance with, or taking any action
required by the Merger Agreement or the Transactions (as defined in the Merger
Agreement), (B) any taking of any action at the written request of you,
Merger Sub or Merger LLC (and, with respect to any material action, with the
prior written consent of the Arrangers, not to be unreasonably withheld), (C) any
litigation arising from allegations of a breach of fiduciary duty or other
violation of applicable Law relating to the Merger Agreement or the
Transactions (as defined in the Merger Agreement), (D) any adoption,
implementation, promulgation, repeal, modification, reinterpretation or
proposal, in each case after the date of the Merger Agreement, of any rule,
regulation, ordinance, order, protocol or any other Law of or by any national,
regional, state or 

 

6

 

local
Governmental Entity, to the extent the Company and its subsidiaries are not
adversely affected in a disproportionate manner relative to other participants
in the industries in which the Company or its subsidiaries operate, (E) any
changes in GAAP or accounting standards or interpretations thereof, to the
extent the Company or its subsidiaries are not adversely affected in a
disproportionate manner relative to other participants in the industries in
which the Company and its subsidiaries operate, (F) any outbreak or
escalation of hostilities or acts of war or terrorism, to the extent the
Company and its subsidiaries are not adversely affected in a disproportionate
manner relative to other participants in the industries in which the Company or
its subsidiaries operate, or (G) any change in the share price or trading
volume of the shares of Company Common Stock, in the Company’s credit rating or
in any analyst’s recommendations, in each case in and of itself, or the failure
of the Company to meet projections or forecasts (including any analyst’s
projections), in and of itself (provided, in
each case, that the event, change, effect, development, condition, circumstance
or occurrence underlying such change or failure shall not be excluded, and may
be taken into account, in determining whether there is or would reasonably be
expected to be a Company Material Adverse Effect).  The capitalized terms used in this paragraph
and not otherwise defined in this Commitment Letter shall have the meanings set
forth in the Merger Agreement as in effect on the date hereof.

 

Notwithstanding anything in this Commitment Letter,
the Fee Letter, the Term Facility Documentation or the Bridge Facility
Documentation to the contrary, (a) the only representations relating to
you and your subsidiaries or the Company and its subsidiaries the accuracy of
which shall be a condition to availability of the Facilities on the Closing
Date shall be (i) such of the representations made in the Merger Agreement
as are material to the interests of the Lenders, but only to the extent that
any of the parties thereto has the right to terminate its obligations under the
Merger Agreement as a result of a breach of such representations in the Merger Agreement
(the “Merger Agreement Representations”)
and (ii) the Specified Representations (as defined below) and (b) the
Facilities Documentation shall be in a form such that they do not impair the
availability of the Facilities on the Closing Date if the conditions set forth
in this Section 6, under the heading “Conditions to Borrowing” in Exhibits
A and B and as set forth in Exhibit D are satisfied.  For purposes hereof, “Specified Representations” means the representations and
warranties referred to in the Term Sheets relating to corporate existence,
power and authority, due authorization, execution and delivery, no conflicts
and the enforceability of the Term Facility Documentation and the Bridge
Facility Documentation, Federal Reserve margin regulations, the Investment
Company Act, status of the Facilities as senior debt, solvency of the Borrower
and its subsidiaries on a consolidated basis after giving effect to the
Transactions and the other transactions contemplated hereby and accuracy of
information and financial statements. 
This paragraph and the provisions herein shall be referred to as the “Certain Funds Provision.”

 

7.             Indemnification; Expenses.

 

You
agree (a) to indemnify and hold harmless each of us and our respective
officers, directors, employees, agents, advisors, controlling persons, members
and successors and assigns (each, an “Indemnified Person”) from and against any and
all losses, claims, damages, liabilities and expenses, joint or several, to
which any such Indemnified Person may become subject arising out of or in
connection with this Commitment Letter, the Fee Letter, the Transactions, the
Facilities or any related transaction or any claim, litigation, investigation
or proceeding relating to any of the foregoing, regardless of whether any such
Indemnified Person is a party thereto (and regardless of whether such matter is
initiated by a third party or by you or any of your affiliates or equity
holders or the Company or any of its affiliates or equity holders), and to
reimburse each such Indemnified Person upon demand for any reasonable legal or
other expenses incurred in connection with investigating or defending any of
the foregoing; provided that the
foregoing 

 

7

 

indemnity
will not, as to any Indemnified Person, apply to losses, claims, damages,
liabilities or related expenses to the extent (x) they are found in a
final, non-appealable judgment of a court of competent jurisdiction to have
resulted from (i) the willful misconduct or gross negligence of such
Indemnified Person or (ii) a material breach in bad faith by the relevant
Indemnified Person of the express contractual obligations of such Indemnified
Person under this Commitment Letter or (y) arising out of or in connection
with any claim, litigation, investigation or proceeding that does not involve
an act or omission of you or any of your affiliates and that is brought by an
Indemnified Person against any other Indemnified Person, and (b) to
reimburse each of us from time to time, promptly following presentation of a
summary statement, for all reasonable out-of-pocket expenses (including, but
not limited to, expenses of our due diligence investigation solely in
connection with the Facilities, consultants’ fees, syndication expenses, travel
expenses and reasonable fees, disbursements and other charges of one counsel
for all Indemnified Persons (and, if reasonably necessary, of one regulatory
counsel and one local counsel in any relevant jurisdiction for all Indemnified
Persons and additional counsel if, in the opinion of an Indemnified Person,
representation of all Indemnified Persons by one counsel would be inappropriate
due to the existence of an actual or potential conflict of interest), in each
case, incurred in connection with the Facilities and the preparation,
negotiation and enforcement of this Commitment Letter, the Fee Letter, the
definitive documentation for the Facilities and any ancillary documents in
connection therewith.  Notwithstanding
any other provision of this Commitment Letter, no Indemnified Person shall be
liable for any indirect, special, punitive or consequential damages in
connection with its activities related to the Facilities.

 

8.             Sharing Information; Absence
of Fiduciary Relationship; Affiliate Activities.

 

You
acknowledge that each of us may be providing debt financing, equity capital or
other services (including financial advisory services) to other companies in
respect of which you may have conflicting interests regarding the transactions
described herein or otherwise.  We will
not furnish confidential information obtained from you by virtue of the
transactions contemplated by this Commitment Letter or our other relationships
with you to other companies.  You also
acknowledge that we do not have any obligation to use in connection with the
transactions contemplated by this Commitment Letter, or to furnish to you,
confidential information obtained by us from other companies.

 

You
further acknowledge and agree that (a) no fiduciary, advisory or agency
relationship between you and any of us is intended to be or has been created
pursuant to this Commitment Letter or the Fee Letter in respect of any of the
transactions contemplated by this Commitment Letter or the Fee Letter,
irrespective of whether any of us have advised or are advising you on other
matters, (b) we, on the one hand, and you, on the other hand, have an arm’s-length
business relationship pursuant to this Commitment Letter and the Fee Letter
that does not directly or indirectly give rise to, nor do you rely on, any
fiduciary duty on the part of any of us, (c) you are capable of evaluating
and understanding, and you understand and accept, the terms, risks and
conditions of the transactions contemplated by this Commitment Letter, (d) you
have been advised that each of us is engaged in a broad range of transactions
that may involve interests that differ from your interests and that none of us
have any obligation to disclose such interests and transactions to you by
virtue of any fiduciary, advisory or agency relationship and (e) you
waive, to the fullest extent permitted by law, any claims you may have against
any of us for breach of fiduciary duty or alleged breach of fiduciary duty in
connection with this Commitment Letter, the Fee Letter and the Facilities and
agree that none of us shall have any liability (whether direct or indirect) to
you in respect of such a fiduciary duty claim or to any person asserting a
fiduciary duty claim on behalf of or in right of you, including your
stockholders, employees or creditors. 
Additionally, you acknowledge and agree that none of us are advising you
as to any legal, tax, 

 

8

 

investment,
accounting or regulatory matters in any jurisdiction (including, without
limitation, with respect to any consents needed in connection with the
transactions contemplated hereby).  You
shall consult with your own advisors concerning such matters and shall be
responsible for making your own independent investigation and appraisal of the
transactions contemplated hereby (including, without limitation, with respect
to any consents needed in connection therewith), and none of us shall have any
responsibility or liability to you with respect thereto.  Any review by us of you, the Company, the Transactions,
the other transactions contemplated hereby or other matters relating to such
transactions will be performed solely for our benefit and shall not be on
behalf of you or any of your affiliates.

 

You
further acknowledge that each of us is a full service securities firm engaged
in securities trading and brokerage activities as well as providing investment
banking and other financial services.  In
the ordinary course of business, each of us may provide investment banking and
other financial services to, and/or acquire, hold or sell, for our own accounts
and the accounts of customers, equity, debt and other securities and financial
instruments (including bank loans and other obligations) of, you, the Company
and other companies with which you or the Company may have commercial or other
relationships.  With respect to any
securities and/or financial instruments so held by any of us or any of our
respective customers, all rights in respect of such securities and financial
instruments, including any voting rights, will be exercised by the holder of
the rights, in its sole discretion.

 

9.             Assignments; Amendments;
Governing Law, Etc.

 

This
Commitment Letter shall not be assignable by you without the prior written
consent of each Commitment Party (and any attempted assignment without such
consent shall be null and void), is intended to be solely for the benefit of
the parties hereto (and Indemnified Persons), and is not intended to confer any
benefits upon, or create any rights in favor of, any person other than the
parties hereto (and Indemnified Persons). 
Each Commitment Party may assign all or a portion of its commitment
hereunder (i) with your consent, such consent not to be unreasonably
withheld or delayed or (ii) to one or more prospective Lenders that you
have identified to us in writing on or prior to the date hereof (each, a “Permitted Assignee”),
whereupon such Commitment Party shall be released from the portion of its
commitment hereunder so assigned; provided
that no such assignment shall relieve the Commitment Parties of their
obligations hereunder, except to the extent such assignment is evidenced by, at
our election, (i) a customary joinder agreement (a “Joinder Agreement”)
pursuant to which such lender agrees to become party to this agreement and
extend commitments directly to you on the terms set forth herein, and which
shall not add any conditions to the availability of the Facilities or change
the terms of the Facilities or increase compensation payable by you in
connection therewith except as set forth in the Commitment Letter and the Fee
Letter and which shall otherwise be reasonably satisfactory to you and us, or (ii) the
Term Facility Documentation or the Bridge Facility Documentation (as
applicable).  Any and all obligations of,
and services to be provided by, the Commitment Parties hereunder (including,
without limitation, the Commitment Parties’ commitments) may be performed and
any and all rights of the Commitment Parties hereunder may be exercised by or
through any of their respective affiliates or branches; provided that
no Commitment Party shall be relieved of any of its obligations hereunder or
under the applicable financing documentation, including of any obligation in
respect of its commitment in respect of the Facilities, in the event such
affiliate shall fail to perform such obligation in accordance with the terms
hereof.  Without limiting the provisions
of Section 12, each Commitment Party may exchange with its affiliates or
branches information concerning you and your affiliates that may be the subject
of the transactions contemplated hereby and, to the extent so employed, such
affiliates and branches shall be entitled to the benefits afforded to the
Commitment Parties hereunder.  This Commitment
Letter may not 

 

9

 

be
amended or any provision hereof waived or modified except by an instrument in
writing signed by each Commitment Party and you.  This Commitment Letter may be executed in any
number of counterparts, each of which shall be an original and all of which,
when taken together, shall constitute one agreement.  Delivery of an executed counterpart of a
signature page of this Commitment Letter by facsimile or other electronic
transmission shall be effective as delivery of a manually executed counterpart
hereof.  Section headings used
herein are for convenience of reference only, are not part of this Commitment
Letter and are not to affect the construction of, or to be taken into
consideration in interpreting, this Commitment Letter.  Without limiting the provisions of Section 12,
you acknowledge that information and documents relating to the Facilities may
be transmitted through SyndTrak, Intralinks, the internet, e-mail or similar
electronic transmission systems, and that none of us shall be liable for any
damages arising from the unauthorized use by others of information or documents
transmitted in such manner except to the extent such damages are found in a
final, non-appealable judgment of a court of competent jurisdiction to have
resulted from the willful misconduct or gross negligence of the Commitment
Parties (it being understood that actions consistent with industry practice in
the leveraged lending market shall not constitute gross negligence or willful
misconduct).  We may place advertisements
in financial and other newspapers and periodicals or on a home page or
similar place for dissemination of information on the Internet or worldwide web
as we may choose, and circulate similar promotional materials, after the
closing of the Transactions in the form of a “tombstone” or otherwise
describing the names of you and your affiliates (or any of them), and the
amount, type and closing date of such Transactions, all at our expense.  This Commitment Letter and the Fee Letter
supersede all prior understandings, whether written or oral, between us with
respect to the Facilities.  THIS COMMITMENT LETTER AND ANY
CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS COMMITMENT
LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK; provided,
however, that the interpretation of the definitions of “Borrower Material
Adverse Change” and “Company Material Adverse Change” for purposes of this
Commitment Letter shall be governed by, and construed in accordance with, the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws.

 

10.           Jurisdiction.

 

Each
of the parties hereto hereby irrevocably and unconditionally (a) submits,
for itself and its property, to the exclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in the
Borough of Manhattan in New York City, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Commitment Letter, the Fee Letter or the transactions contemplated hereby or
thereby, and agrees that all claims in respect of any such action or proceeding
may be heard and determined only in such New York State court or, to the
extent permitted by law, in such Federal court, (b) waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Commitment Letter, the Fee Letter or the
transactions contemplated hereby or thereby in any New York State court or
in any such Federal court, (c) waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court and (d) to the fullest extent permitted by
law, agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. 
Service of any process, summons, notice or 

 

10

 

document
by registered mail addressed to you at the address above shall be effective
service of process against you for any suit, action or proceeding brought in
any such court.

 

11.           Waiver of Jury Trial.

 

EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON
BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF THIS COMMITMENT LETTER, THE
FEE LETTER OR THE PERFORMANCE OF SERVICES HEREUNDER OR THEREUNDER.

 

12.           Confidentiality.

 

This
Commitment Letter is delivered to you on the understanding that neither this
Commitment Letter nor the Fee Letter nor any of their terms or substance, nor
the activities of any of us pursuant hereto, shall be disclosed, directly or
indirectly, to any other person except (a) to your officers, directors,
employees, attorneys, accountants and advisors on a confidential and
need-to-know basis or (b) as required by applicable law or compulsory
legal process (in which case, to the extent permitted by applicable law, you
agree to inform us promptly thereof prior to such disclosure); provided that (a) you may
disclose this Commitment Letter and the contents hereof (but not the Fee
Letter or the contents thereof) (i) to the Company and its officers,
directors, employees, attorneys, accountants and advisors on a confidential and
need-to-know basis (except that the Fee Letter may be disclosed to the Company
and its officers, directors, employees, attorneys, accountants and advisors in
a mutually agreed upon redacted form), (ii) in any prospectus or other
offering memorandum relating to the Notes, (iii) to the extent you
reasonably determine that such disclosure is advisable to comply with your
obligations under securities and other applicable laws, in any public filing in
connection with the Transactions or the financing thereof (in which case you
agree to inform the Commitment Parties promptly thereof) and (iv) with our
prior written consent and (b) you may disclose the contents of the Term
Sheets to any rating agency in connection with the Transactions; provided, that the foregoing restrictions shall cease to
apply (except in respect of the Fee Letter and its terms and substance) after
this Commitment Letter has been accepted by you and it has become publicly
available as a result of disclosure in accordance with the terms of this
paragraph.

 

We
will, until the earlier of (i) the date that is one year after the date
hereof and (ii) the Effective Date (as defined in the Term Facility Term
Sheet), treat as confidential all confidential information provided to us by or
on behalf of you hereunder; provided that
nothing herein shall prevent us from disclosing any such information (a) pursuant
to the order of any court or administrative agency or in any pending legal or
administrative proceeding, or otherwise as required by applicable law or
compulsory legal process, (b) upon the request or demand of any regulatory
authority having jurisdiction over us, (c) to the extent that such
information becomes publicly available other than by reason of disclosure by us
in violation of this paragraph, (d) to our affiliates and to our and their
respective employees, legal counsel, independent auditors and other experts or
agents who are informed of the confidential nature of such information, (e) to
actual or potential assignees, participants or derivative investors in the
Facilities who agree to be bound by the terms of this paragraph or
substantially similar confidentiality provisions, (f) to the extent
permitted by Section 9 or (g) for purposes of establishing a “due
diligence” defense.

 

Notwithstanding
anything herein to the contrary, any party to this Commitment Letter (and any
employee, representative or other agent of such party) may disclose to any and
all persons, without limitation of any kind, the tax treatment and tax
structure of the transactions 

 

11

 

contemplated
by this Commitment Letter and the Fee Letter and all materials of any kind
(including opinions or other tax analyses) that are provided to it relating to
such tax treatment and tax structure, except that (i) tax treatment and
tax structure shall not include the identity of any existing or future party
(or any affiliate of such party) to this Commitment Letter or the Fee Letter
and (ii) no party shall disclose any information relating to such tax
treatment and tax structure to the extent nondisclosure is reasonably necessary
in order to comply with applicable securities laws.  For this purpose, the tax treatment of the
transactions contemplated by this Commitment Letter and the Fee Letter is the
purported or claimed U.S.  Federal income
tax treatment of such transactions and the tax structure of such transactions
is any fact that may be relevant to understanding the purported or claimed
U.S.  Federal income tax treatment of
such transactions.

 

13.           Surviving Provisions.

 

The
compensation, reimbursement, indemnification, confidentiality, syndication,
jurisdiction, governing law and waiver of jury trial provisions contained
herein and in the Fee Letter and the provisions of Section 8 of this
Commitment Letter shall remain in full force and effect regardless of whether
definitive financing documentation shall be executed and delivered and (other
than in the case of the syndication provisions) notwithstanding the termination
of this Commitment Letter or the Initial Lenders’ commitment hereunder and our
agreements to perform the services described herein; provided
that your obligations under this Commitment Letter, other than those relating
to confidentiality, compensation and to the syndication of the Facilities
(which shall remain in full force and effect), shall, to the extent covered by
the definitive documentation relating to the Facilities, automatically
terminate and be superseded by the applicable provisions contained in such
definitive documentation upon the occurrence of the Closing Date.

 

14.           PATRIOT Act Notification.

 

We
hereby notify you that, pursuant to the requirements of the USA PATRIOT Act,
Title III of Pub.  L.  107-56 (signed into law October 26,
2001) (the “PATRIOT Act”),
each of us and each Lender is required to obtain, verify and record information
that identifies you, which information includes the name, address, tax
identification number and other information regarding you that will allow each
of us or such Lender to identify you in accordance with the PATRIOT Act.  This notice is given in accordance with the
requirements of the PATRIOT Act and is effective as to each of us and each
Lender.  You hereby acknowledge and agree
that we shall be permitted to share any or all such information with the
Lenders.

 

15.           Acceptance and Termination.

 

If
the foregoing correctly sets forth our agreement with you, please indicate your
acceptance of the terms of this Commitment Letter and of the Fee Letter by
returning to us executed counterparts hereof and of the Fee Letter not later
than 5:00 p.m., New York City time, on July 13, 2010.  The Initial Lenders’ offer hereunder, and our
agreements to perform the services described herein, will expire automatically
and without further action or notice and without further obligation to you at
such time in the event that the Arrangers have not received such executed
counterparts in accordance with the immediately preceding sentence.  This Commitment Letter will become a binding
commitment on the Initial Lenders only after it has been duly executed and delivered
by you in accordance with the first sentence of this Section 15.  In the event that the Closing Date does not
occur on or before 5:00 p.m., New York City time, on March 31, 2011  or (ii) such earlier date on which
the Merger Agreement terminates or either party thereto publicly announces its
intention not to proceed with the Merger, then this Commitment Letter and the
Initial Lenders’ commitment hereunder, and our agreements to 

 

12

 

perform
the services described herein, shall automatically terminate without further
action or notice and without further obligation to you unless the Arrangers
shall, in their discretion, agree to an extension.  Before such date and subject to Section 13,
you may terminate the commitments hereunder by written notice to each of us at
any time.

 

[Remainder of this page intentionally left blank]

 

13

 

We are pleased to have been given the opportunity to assist you in
connection with the financing for the Merger.

 

	
   

  	
  Very
  truly yours,

  

 

14

 

	
   

  	
   

  	
  CREDIT
  SUISSE SECURITIES (USA) LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/
  Robert S. Murley

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Robert
  Murley

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  Chairman

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CREDIT
  SUISSE AG, CAYMAN ISLANDS BRANCH

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/
  Shaheen Malik

  
	
   

  	
   

  	
   

  	
  Name:
  Shaheen Malik

  
	
   

  	
   

  	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/
  Vipul Dhadda

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Vipul
  Dhadda

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Associate

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MORGAN
  STANLEY SENIOR FUNDING, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/
  Anish M. Shah

  
	
   

  	
   

  	
   

  	
  Name:
  Anish M. Shah

  
	
   

  	
   

  	
   

  	
  Title:
  Vice President

  
	
   

  	
   

  	
   

  
	
  Accepted
  and agreed to as of

  	
   

  	
   

  
	
  the
  date first above written:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AON CORPORATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/
  Greg Case

  	
   

  	
   

  
	
   

  	
  Name:
  Gregory C. Case

  	
   

  	
   

  
	
   

  	
  Title: President and Chief
  Executive Officer

  	
   

  	
   

  

 

15

 

	
  CONFIDENTIAL

  	
   

  	
   

  
	
  July 11,
  2010

  	
   

  	
  EXHIBIT A

  

 

PROJECT TWIN PEAKS

$1,000,000,000 Senior Term Credit Facility

Summary of Principal Terms and Conditions

 

	
  Borrower:

  	
   

  	
  Aon
  Corporation, a Delaware corporation (the “Borrower”).

  
	
   

  	
   

  	
   

  
	
  Transactions:

  	
   

  	
  The
  Borrower intends to acquire all of the equity interests of Hewitt
  Associates, Inc. (the “Company”)
  pursuant to an agreement and plan of merger (the “Merger Agreement”)
  to be entered into among the Borrower, a newly-formed wholly-owned subsidiary
  of the Borrower (“Merger Sub”), a second
  newly formed, wholly-owned subsidiary of the Borrower (“Merger
  LLC”) and the Company. Pursuant to the Merger Agreement
  (a) Merger Sub will be merged with and into the Company, with the
  Company surviving as a wholly-owned subsidiary of the Borrower (the “Merger”), with the equity holders
  of the Company receiving an aggregate amount of approximately $2.45 billion
  in cash (the “Merger Cash Consideration”)
  and approximately 64 million  shares
  of common stock of the Borrower (the “Merger Equity
  Consideration”, and together with the Merger Cash
  Consideration, the “Merger Consideration”),
  (b) immediately following the completion of the Merger, the surviving
  corporation in the Merger will be merged with and into Merger LLC, with
  Merger LLC surviving as a wholly-owned subsidiary of Borrower (the “Subsequent Merger”), (c) the
  Borrower will obtain the three-year term loan described below under the
  caption “Term
  Facility”, (d) the Borrower will (i) issue up to $1.5
  billion in aggregate principal amount of its senior unsecured notes (the “Notes”) in a public offering or in
  a Rule 144A or other private placement and (ii) to the extent the
  Borrower is unable to issue the Notes on or prior to the date the Merger is
  consummated, borrow up to $1.5 billion in aggregate principal amount of
  senior increasing rate loans (the “Bridge Loans”)
  under the new senior credit facility (the “Bridge
  Facility”) described in Exhibit B to the Commitment
  Letter, (e) certain of the existing indebtedness of the Company and its
  subsidiaries outstanding as of the Closing Date (as defined below) (the “Existing Debt”)
  shall be repaid and (f) fees and expenses incurred in connection with
  the foregoing in an aggregate amount not to exceed $50 million (the “Transaction Costs”) will be paid.
  The transactions described in this paragraph are collectively referred to
  herein as the “Transactions”. The “Closing Date” 

  

 

 

	
   

  	
   

  	
  shall
  mean the date on which the Merger is consummated and all the conditions
  precedent to closing under the Facilities have been satisfied or waived.

  
	
   

  	
   

  	
   

  
	
  Sources
  and Uses:

  	
   

  	
  The
  approximate sources and uses of the funds necessary to consummate the
  Transactions are set forth in Exhibit C to the Commitment Letter (the “Commitment Letter”) to which this
  Term Sheet is attached.

  
	
   

  	
   

  	
   

  
	
  Agent:

  	
   

  	
  Credit
  Suisse AG, acting through one or more of its branches or affiliates (“CS”), will act as sole
  administrative agent (in such capacity, the “Agent”)
  for a syndicate of banks, financial institutions and other institutional
  lenders (together with CS, the “Lenders”),
  and will perform the duties customarily associated with such role.

  
	
   

  	
   

  	
   

  
	
  Joint
  Bookrunner and Joint Lead Arranger:

  	
   

  	
  Credit
  Suisse Securities (USA) LLC and Morgan Stanley Senior Funding, Inc. will
  act as joint bookrunners and joint lead arrangers for the Term Facility
  described below (collectively, in such capacities, the “Arrangers”),
  and will perform the duties customarily associated with such roles.

  
	
   

  	
   

  	
   

  
	
  Syndication
  Agent:

  	
   

  	
  Morgan
  Stanley Senior Funding, Inc. (in such capacity, the “Syndication Agent”).

  
	
   

  	
   

  	
   

  
	
  Documentation
  Agent:

  	
   

  	
  One
  or more financial institutions reasonably acceptable to the Borrower and the
  Arrangers (collectively in such capacity, the “Documentation Agent”).

  
	
   

  	
   

  	
   

  
	
  Term
  Facility:

  	
   

  	
  A
  three-year senior unsecured term loan facility in an aggregate principal
  amount of up to $1 billion (the “Term Facility”
  and the loans made pursuant thereto, the “Term
  Loans”).

  
	
   

  	
   

  	
   

  
	
  Purpose:

  	
   

  	
  The
  proceeds of the Term Facility will be used by the Borrower, on the Closing
  Date, together with the proceeds of the Notes or the Bridge Loans, solely
  (a) to pay a portion of the Merger Cash Consideration, (b) to
  refinance certain of the Existing Debt and (c) to
  pay the Transaction Costs.

  
	
   

  	
   

  	
   

  
	
  Availability:

  	
   

  	
  The
  full amount of the Term Facility must be drawn in a single drawing on the
  Closing Date. Amounts borrowed under the Term Facility that are repaid or
  prepaid may not be reborrowed.

  
	
   

  	
   

  	
   

  
	
  Interest
  Rates and Fees:

  	
   

  	
  As
  set forth on Annex A-I hereto.

  
	
   

  	
   

  	
   

  
	
  Default
  Rate:

  	
   

  	
  At
  the option of the Required Lenders (to be defined) 

  

 

A-2

 

	
   

  	
   

  	
  (or
  automatically, in the case of a bankruptcy Event of Default), the applicable
  rate plus 2.00%.

  
	
   

  	
   

  	
   

  
	
  Final
  Maturity and Amortization:

  	
   

  	
  The Term Facility will mature on the date that is
  three years after the
  Closing Date, and will amortize in an aggregate quarterly amount equal to
  2.5% of the original principal amount of the Term Facility with the balance payable on the maturity date of the Term
  Facility.

  
	
   

  	
   

  	
   

  
	
  Voluntary
  Prepayments and Reductions in Commitments:

  	
   

  	
  Voluntary
  reductions in the unutilized portion of the commitments under the Term
  Facility and prepayments of borrowings under the Term Facility will be
  permitted at any time, in minimum principal amounts to be agreed upon,
  without premium or penalty, subject to reimbursement of the Lenders’
  redeployment costs in the case of a prepayment of Adjusted LIBOR borrowings
  other than on the last day of the relevant interest period. All voluntary
  prepayments of the Term Facility will be applied as directed by the Borrower.

  
	
   

  	
   

  	
   

  
	
  Representations
  and Warranties:

  	
   

  	
  Substantially
  similar to the Three-Year Credit Agreement, dated December 4, 2009,
  among the Borrower, Citibank, N.A., as Administrative Agent, and the Lenders
  party thereto as in effect on the Signing Date (the “Existing
  Credit Agreement”) (subject to materiality thresholds and
  exceptions to be mutually agreed between the Arrangers and the Borrower), and
  shall include: corporate status; legal, valid and binding documentation;
  government consents; accuracy of financial statements, confidential
  information memorandum and other information; no Borrower Material Adverse
  Change or Company Material Adverse Change; absence of undisclosed
  liabilities, litigation and investigations; no violation of, or conflicts
  with, agreements or instruments; compliance with laws (including PATRIOT Act,
  ERISA, margin regulations, environmental laws, laws applicable to sanctioned
  persons and the Foreign Corrupt Practices Act); payment of taxes; ownership
  of properties; Investment Company Act; solvency; environmental and other
  regulatory matters; no default; and insurance and insurance licenses; and
  treatment as senior debt under all subordinated debt and as sole designated
  senior debt thereunder (other than the Bridge Facility).

  
	
   

  	
   

  	
   

  
	
  Conditions
  Precedent to Effectiveness:

  	
   

  	
  Limited
  to (i) execution and delivery of definitive documentation with respect
  to the Term Facility consistent with the terms set forth in the Commitment
  Letter and otherwise mutually agreed by the Borrower 

  

 

A-3

 

	
   

  	
   

  	
  and
  the Arrangers (the “Term Facility Documentation”),
  (ii) delivery of customary legal opinions, secretary’s certificates,
  corporate organizational documents, good standing certificates and
  resolutions of the Borrower (in each case in customary form),
  (iii) payment of fees and expenses required to be paid on or prior to
  the date of effectiveness of the Term Facility Documentation (the “Effective Date) and, with regard
  to expenses, for which invoices have been presented not less than one
  business day prior to the Effective Date and (iv) delivery of all documentation
  and other information requested by the Arrangers at least 5 business days
  prior to the Effective Date and required by regulatory authorities under
  applicable “know your customer” and anti-money laundering rules and
  regulations including, without limitation, the PATRIOT Act; provided that if any such request was received by the
  Borrower 10 or more business days prior to the Effective Date, the Borrower
  shall have provided such information or documents at least 5 business days
  prior to the Effective Date.

  
	
   

  	
   

  	
   

  
	
  Conditions
  Precedent to Borrowing:

  	
   

  	
  Limited to effectiveness of the Term Facility
  Documentation; payment of fees and expenses required to be paid on or prior
  to the Closing Date and, with regard to expenses, for which invoices have
  been presented not less than one business day prior to the Closing Date;
  delivery of notice; accuracy of representations and warranties (subject to
  the Certain Funds Provision) (provided that
  to the extent any of the foregoing are qualified or subject to “Material
  Adverse Effect,” the definition thereof shall be Borrower Material Adverse
  Effect or Company Material Adverse Effect for purposes of satisfying these
  Conditions Precedent to Borrowing); absence of default; and the applicable
  conditions precedent set forth in Exhibit D to the Commitment Letter.

  
	
   

  	
   

  	
   

  
	
  Affirmative
  Covenants:

  	
   

  	
  Substantially similar to the Existing Credit
  Agreement (subject to materiality thresholds and exceptions to be mutually
  agreed between the Arrangers and the Borrower), and shall include: maintenance
  of corporate existence and rights; delivery of consolidated financial
  statements and other information, including information required under the
  PATRIOT Act; delivery of notices of default, litigation, ERISA events, change
  in senior unsecured long term debt rating and material adverse change;
  maintenance of properties in good working order; maintenance of satisfactory
  insurance; compliance 

  

 

A-4

 

	
   

  	
   

  	
  with
  laws; inspection of books and properties; payment of taxes; and conduct of
  business.

  
	
   

  	
   

  	
   

  
	
  Negative
  Covenants:

  	
   

  	
  Substantially similar to the Existing Credit
  Agreement (subject to materiality thresholds and exceptions to be mutually
  agreed between the Arrangers and the Borrower), and shall include: limitations
  on dividends on, and redemptions and repurchases of, equity interests;
  limitations on liens; limitations on subsidiary debt, guarantees and hedging
  arrangements; limitations on mergers and consolidations; limitations on asset
  sales; limitations on transactions with affiliates; limitations on changes in
  fiscal year; limitations on inconsistent agreements; and ERISA.

  
	
   

  	
   

  	
   

  
	
  Financial
  Covenants:

  	
   

  	
  Subject to definitions substantially similar to
  the Existing Credit Agreement (provided that additional add-backs shall be
  permitted to consolidated EBITDA for fees and expenses and other one-time
  charges related to the Transactions), the following financial covenants,
  which shall be tested quarterly commencing with the first fiscal quarter
  ending immediately after the Closing Date: (a) maximum
  consolidated leverage ratio and (b) minimum interest coverage ratio.

  
	
   

  	
   

  	
   

  
	
  Events
  of Default:

  	
   

  	
  Substantially
  similar to the Existing Credit Agreement relating to the Borrower and its
  subsidiaries (subject to materiality thresholds, grace periods and exceptions
  to be mutually agreed between the Arrangers and the Borrower), and shall
  include: nonpayment of principal, interest or other amounts; violation of
  covenants; incorrectness of representations and warranties in any material
  respect; cross acceleration to indebtedness other than the Bridge Facility;
  cross event of default to the Bridge Facility; bankruptcy; material
  judgments; ERISA events; and Change of Control.

  
	
   

  	
   

  	
   

  
	
  Voting:

  	
   

  	
  Amendments
  and waivers of the definitive credit documentation will require the approval
  of Lenders holding more than 50% of the aggregate amount of the loans and
  commitments under the Term Facility, except that the consent of each Lender
  shall be required with respect to, among other things, (a) increases in
  the commitment of such Lender, (b) reductions or forgiveness of
  principal, interest or fees payable to such Lender, (c) extensions of
  final maturity or scheduled amortization of the loans or commitments of such
  Lender or of the date for payment to such Lender of any interest or fees,
  (d) modifications to any provision requiring pro rata
  

  

 

A-5

 

	
   

  	
   

  	
  treatment
  of the Lenders and (e) modifications to voting requirements or
  percentages. The Term Facility Documentation will contain customary
  provisions permitting additional or replacement tranches of Term Loans with
  the approval of Lenders holding more than 50% of the aggregate amount of the
  then existing loans and commitments under the Term Facility and each Lender
  providing such additional or replacement tranche.

  
	
   

  	
   

  	
   

  
	
  Cost
  and Yield Protection:

  	
   

  	
  Substantially
  similar to the Existing Credit Agreement, including customary tax gross-up
  provisions (but excluding gross-up for any withholding or other taxes or liabilities
  imposed pursuant to the Foreign Account Tax Compliance Act).

  
	
   

  	
   

  	
   

  
	
  Assignments
  and Participations:

  	
   

  	
  Prior
  to the Closing Date, the Lenders will be permitted to assign commitments
  under the Term Facility with the consent of the Borrower, not to be unreasonably
  withheld or delayed; provided that
  such consent of the Borrower shall not be required (i) if such
  assignment is made to another Lender or any affiliate or approved fund of a
  Lender or (ii) to a Permitted Assignee. From the Closing Date, the Lenders
  will be permitted to assign loans under the Term Facility with the consent of
  the Borrower, not to be unreasonably withheld or delayed; provided that such consent of the Borrower (x) shall
  not be required (i) if such assignment is made to another Lender or an
  affiliate or approved fund of a Lender, (ii) to a Permitted Assignee or
  (iii) after the occurrence and during the continuance of a default and
  (y) shall be deemed to have been given if the Borrower has not responded
  within five business days of a request for such consent. All assignments will
  require the consent of the Agent, not to be unreasonably withheld or delayed.
  Each assignment will be in an amount of an integral multiple of $1,000,000.
  Assignments will be by novation.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The
  Lenders will be permitted to sell participations in the Term Loan without
  restriction. Voting rights of participants shall be limited to matters in
  respect of (a) increases in commitments of such participant,
  (b) reductions or forgiveness of principal, interest or fees payable to
  such participant and (c) extensions of final maturity or scheduled
  amortization of the loans or commitments in which such participant
  participates.

  
	
   

  	
   

  	
   

  
	
  Expenses
  and Indemnification:

  	
   

  	
  The
  Borrower will indemnify the Arrangers, the 

  

 

A-6

 

	
   

  	
   

  	
  Agent,
  the Syndication Agent, the Documentation Agent, the Lenders, their respective
  affiliates, successors and assigns and the officers, directors, employees,
  agents, advisors, controlling persons and members of each of the foregoing
  (each, an “Indemnified
  Person”) and hold them harmless from and against all costs,
  expenses (including reasonable fees, disbursements and other charges of
  counsel and liabilities of such Indemnified Person arising out of or relating
  to any claim or any litigation or other proceeding (regardless of whether
  such Indemnified Person is a party thereto and regardless of whether such
  matter is initiated by a third party or by the Borrower, the Company or any
  of their respective affiliates or equity holders) that relates to the
  Transactions, including the financing contemplated hereby, the Merger or any
  transactions in connection therewith; provided
  that no Indemnified Person will be indemnified for any cost, expense or
  liability to the extent (x) found in a final, non-appealable judgment of
  a court of competent jurisdiction to have resulted from (i) the willful
  misconduct or gross negligence of such Indemnified Person or (ii) a
  material breach in bad faith by the relevant Indemnified Person of the
  express contractual obligations of such Indemnified Person under the Term
  Facility Documentation, or (y) arising out of or in connection with any
  claim, litigation, investigation or proceeding that does not involve an act
  or omission of you or any of your affiliates and that is brought by an
  Indemnified Person against any other Indemnified Person (excluding any claim
  brought against either Arrangers, the Agent, the Syndication Agent or the
  Documentation Agent in its capacity as such). In addition, the Borrower shall
  pay all reasonable out-of-pocket expenses (including, without limitation,
  fees, disbursements and other charges of counsel (limited, in the case of
  clause (a), to one counsel for all Indemnified Persons (and, if reasonably
  necessary, of one regulatory counsel and one local counsel in any relevant
  jurisdiction for all Indemnified Persons and additional counsel if, in the
  opinion of an Indemnified Person, representation of all Indemnified Persons
  by one counsel would be inappropriate due to the existence of an actual or
  potential conflict of interest)) of (a) the Arrangers, the Agent, the
  Syndication Agent and the Documentation Agent in connection with the
  syndication of the Term Facility, the preparation and administration of the
  definitive documentation, and amendments, modifications and waivers thereto,
  and (b) the Arrangers, the Agent, the Syndication Agent, the 

  

 

A-7

 

	
   

  	
   

  	
  Documentation
  Agent and the Lenders for enforcement costs and documentary taxes associated
  with the Term Facility.

  
	
   

  	
   

  	
   

  
	
  Governing
  Law and Forum:

  	
   

  	
  New
  York; provided, however, that the interpretation of the definitions of
  “Borrower Material Adverse Change” and “Company Material Adverse Change”
  shall be governed by, and construed in accordance with, the laws of the State
  of Delaware, regardless of the laws that might otherwise govern under
  applicable principles of conflicts of laws.

  
	
   

  	
   

  	
   

  
	
  Counsel
  to Agent and Arrangers:

  	
   

  	
  Davis Polk & Wardwell LLP.

  

 

A-8

 

ANNEX
A-I

 

	
  Interest
  Rates:

  	
   

  	
  At
  the option of the Borrower, the Term Loan will bear interest at a rate equal
  to (i) Adjusted LIBOR plus the Applicable Margin or (ii) ABR plus
  the Applicable Margin.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “Applicable Margin” means the
  percentage per annum determined in accordance with the pricing grid (the “Term Pricing Grid”) attached
  hereto as Annex A-I-1.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The
  Borrower may elect interest periods of 1, 2, 3 or 6 months for Adjusted LIBOR
  borrowings.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Calculation
  of interest shall be on the basis of the actual days elapsed in a year of 360
  days (or 365 or 366 days, as the case may be, in the case of ABR loans based
  on the Prime Rate) and interest shall be payable at the end of each interest
  period and, in any event, at least every three months.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ABR
  is the Alternate Base Rate, which is the highest of (i) the Agent’s
  Prime Rate, (ii) the Federal Funds Effective Rate plus 1⁄2 of 1.0% and
  (iii) the one-month Adjusted LIBOR plus 1.0%.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Adjusted
  LIBOR will at all times include statutory reserves.

  
	
   

  	
   

  	
   

  
	
  Term
  Undrawn Commitment Fee:

  	
   

  	
  Prior
  to the date that is 45 days from the Signing Date, 0% per annum, and
  thereafter 0.375% per annum on the undrawn portion of the commitments in
  respect of the Term Facility, payable upon the earlier of the termination of
  the commitments under the Term Facility and the Closing Date, calculated
  based on the number of days elapsed in a 360 day year.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For
  the avoidance of doubt, it is understood and agreed that the Term Undrawn
  Commitment Fee shall replace the Term Ticking Fee (as defined in the Fee
  Letter) from the Effective Date.

  

 

 

TERM PRICING GRID

 

	
   

  	
   

  	
  Applicable Margin for LIBOR

  Loans

  	
   

  	
  Applicable Margin

  for ABR Loans

  	
   

  
	
  Level I

  	
   

  	
  2.00

  	
  %

  	
  1.00

  	
  %

  
	
  Level II

  	
   

  	
  2.50

  	
  %

  	
  1.50

  	
  %

  
	
  Level III

  	
   

  	
  3.00

  	
  %

  	
  2.00

  	
  %

  
	
  Level IV

  	
   

  	
  3.50

  	
  %

  	
  2.50

  	
  %

  
	
  Level V

  	
   

  	
  4.00

  	
  %

  	
  3.00

  	
  %

  

 

Level
I pricing shall apply if, on any date of determination, the Debt Rating is A-
or higher by Standard & Poor’s Ratings Service (“S&P”)
or is A3 or higher by Moody’s Investors Service, Inc. (“Moody’s”).

 

Level
II pricing shall apply if, on any date of determination, Level I pricing does
not apply and the Debt Rating is BBB+ or higher by S&P or is Baa1 or higher
by Moody’s.

 

Level
III pricing shall apply if, on any date of determination, Level I and Level II
pricing does not apply and the Debt Rating is BBB or higher by S&P or is
Baa2 or higher by Moody’s.

 

Level
IV pricing shall apply if, on any date of determination, Level I, Level II and
Level III pricing does not apply and the Debt Rating is BBB- or higher by
S&P or is Baa3 or higher by Moody’s.

 

Level
V pricing shall apply if, on any date of determination, Level I, Level II,
Level III and Level IV pricing does not apply.

 

 For purposes of the
foregoing, “Debt Rating” means, as of any date of determination, the rating as determined by S&P
or Moody’s, as the case may be, of the Borrower’s senior unsecured non-credit
enhanced long-term indebtedness for borrowed money; provided
that if a Debt Rating is issued by each of S&P and Moody’s, then the higher
of such Debt Ratings shall apply, unless there is
a split in Debt Ratings of more than one level, in which case the level that is
one level lower than the higher Debt Rating shall apply.  The Debt Ratings shall be determined from the
most recent public announcement of any changes in the Debt Ratings.  

 

1

 

EXHIBIT B

 

PROJECT TWIN PEAKS

$1,500,000,000 Senior 364-Day Bridge Facility

Summary of Principal Terms and Conditions(1)

 

	
  Borrower:

  	
   

  	
  The
  Borrower under the Term Facility.

  
	
   

  	
   

  	
   

  
	
  Agent:

  	
   

  	
  Credit
  Suisse AG, acting through one or more of its branches or affiliates (“CS”), will act as sole
  administrative agent (in such capacity, the “Agent”)
  for a syndicate of banks, financial institutions and other institutional
  lenders (together with CS, the “Lenders”),
  and will perform the duties customarily associated with such role.

  
	
   

  	
   

  	
   

  
	
  Joint
  Bookrunners and Joint Lead Arrangers:

  	
   

  	
  Credit
  Suisse Securities (USA) LLC and Morgan Stanley Senior Funding, Inc. will
  act as joint bookrunners and joint lead arrangers for the Bridge Facility
  described below (collectively, in such capacities, the “Arrangers”),
  and will perform the duties customarily associated with such roles.

  
	
   

  	
   

  	
   

  
	
  Syndication
  Agent:

  	
   

  	
  Morgan
  Stanley Senior Funding, Inc. (the “Syndication Agent”).

  
	
   

  	
   

  	
   

  
	
  Documentation
  Agent:

  	
   

  	
  One
  or more financial institutions identified by the Borrower and reasonably
  acceptable to the Arrangers (in such capacity, the “Documentation Agent”).

  
	
   

  	
   

  	
   

  
	
  Bridge
  Facility:

  	
   

  	
  Senior
  unsecured increasing rate bridge loans in an aggregate principal amount of up
  to $1.5 billion (the “Bridge Loans”).

  
	
   

  	
   

  	
   

  
	
  Purpose:

  	
   

  	
  The
  proceeds of the Bridge Loans will be used by the Borrower on the Closing
  Date, together with the proceeds of the Term Facility, solely (a) to pay
  a portion of the Merger Cash Consideration, (b) to refinance the
  Existing Debt and (c) to pay the Transaction Costs.

  
	
   

  	
   

  	
   

  
	
  Availability:

  	
   

  	
  The
  full amount of the Bridge Facility must be drawn in a single drawing on the
  Closing Date. Amounts borrowed under the Bridge Facility that are repaid or
  prepaid may not be reborrowed.

  
	
   

  	
   

  	
   

  
	
  Ranking:

  	
   

  	
  The
  Bridge Loans will rank pari passu
  with the Term Facility and the other senior indebtedness of the Borrower.

  

 

(1)                                  All capitalized
terms used but not defined herein have the meanings given to them in the
Commitment Letter to which this term sheet is attached, including
Exhibit A thereto (the “Term Facility Term Sheet”).

 

 

	
  Interest
  Rates:

  	
   

  	
  As
  set forth in Annex B-I.

  
	
   

  	
   

  	
   

  
	
  Default
  Rate:

  	
   

  	
  At
  the option of the Required Lenders (to be defined)(or automatically, in the
  case of a bankruptcy Event of Default), the applicable rate plus 2.00%. 

   

  Notwithstanding
  anything to the contrary set forth herein, in no event shall any cap or limit
  on the yield or interest rate payable with respect to the Bridge Loans affect
  the payment in cash of any default rate of interest in respect of any Bridge
  Loan.

  
	
   

  	
   

  	
   

  
	
  Final
  Maturity:

  	
   

  	
  364
  days after the Closing Date.

  
	
   

  	
   

  	
   

  
	
  Mandatory
  Prepayments and Reductions in Commitments:

  	
   

  	
  On
  or prior to the Closing Date, the aggregate commitments in respect of the
  Bridge Facility under the Commitment Letter or under the definitive credit
  agreement for the Bridge Facility (the “Bridge Credit Agreement”),
  as applicable, shall be permanently reduced by and, after the Closing Date,
  the Bridge Loans shall be prepaid with (i) the net cash proceeds from
  the issuance, offering or placement of the Notes or any other debt
  obligations or equity securities by the Borrower or any of its subsidiaries,
  with such proceeds being applied to repay the Bridge Loans prior to the
  repayment of loans outstanding under the Term Facility (subject to customary
  exceptions and other exceptions to be mutually agreed between the Arrangers
  and the Borrower); and (ii) the net cash proceeds from any asset sales
  or other disposition of property by Borrower or any of its subsidiaries (including
  proceeds from the sale of stock of any subsidiary of the Borrower and from
  any casualty or condemnation proceeds) (subject to customary exceptions and
  reinvestment rights and other exceptions to be mutually agreed between the
  Arrangers and the Borrower). The Borrower will also be required to offer to
  prepay the Bridge Loans following the occurrence of a Change of Control (to
  be defined) at 100% of the outstanding principal amount thereof.

  
	
   

  	
   

  	
   

  
	
  Voluntary
  Prepayments and Reductions in Commitments:

  	
   

  	
  Voluntary
  reductions in the unutilized portion of the commitment under the Bridge
  Facility and prepayments of borrowings under the Bridge Facility will be
  permitted at any time, in minimum principal amounts to be agreed upon,
  without premium or penalty, subject to reimbursement of the Lender’s
  redeployment costs in the case of prepayment of Adjusted LIBOR borrowings
  other than on the last day of the relevant interest period.

  
	
   

  	
   

  	
   

  
	
  Conditions
  Precedent to Effectiveness

  	
   

  	
  Limited
  to (i) execution and delivery of definitive documentation with respect
  to the Bridge Facility consistent with the terms set forth in the Commitment
  Letter and 

  

 

B-2

 

	
   

  	
   

  	
  otherwise
  mutually agreed by the Borrower and the Arrangers (the “Bridge
  Facility Documentation”), (ii) delivery of customary
  legal opinions, secretary’s certificates, corporate organizational documents,
  good standing certificates and resolutions of the Borrower (in each case in
  customary form), (iii) payment of fees and expenses required to be paid
  on or prior to the date of effectiveness of the Bridge Facility Documentation
  (the “Effective Date) and, with
  regard to expenses, for which invoices have been presented not less than one
  business day prior to the Effective Date and (iv) delivery of all
  documentation and other information requested by the Arrangers at least 5
  business days prior to the Effective Date and required by regulatory
  authorities under applicable “know your customer” and anti-money laundering
  rules and regulations including, without limitation, the PATRIOT Act; provided that if any such request was received by the
  Borrower 10 or more business days prior to the Effective Date, the Borrower
  shall have provided such information or documents at least 5 business days prior
  to the Effective Date.

  
	
   

  	
   

  	
   

  
	
  Conditions
  Precedent to Borrowing:

  	
   

  	
  Limited to effectiveness of the Bridge Facility
  Documentation; payment of fees and expenses required to be paid on or prior
  to the Closing Date and, with regard to expenses, for which invoices have
  been presented not less than one business day prior to the Closing Date;
  delivery of notice; accuracy of representations and warranties (subject to
  the Certain Funds Provision) (provided that
  to the extent any of the foregoing are qualified or subject to “Material
  Adverse Effect,” the definition thereof shall be Borrower Material Adverse
  Effect or Company Material Adverse Effect (each as defined in the Commitment
  Letter) for purposes of satisfying these Conditions Precedent to Borrowing);
  absence of default; and the applicable conditions precedent set forth in
  Exhibit D to the Commitment Letter.

  
	
   

  	
   

  	
   

  
	
  Representations
  and Warranties:

  	
   

  	
  Substantially
  similar to those specified under the caption “Representation and Warranties”
  in the Term Facility Term Sheet, with such changes as are appropriate in
  connection with the Bridge Loans.

  
	
   

  	
   

  	
   

  
	
  Covenants:

  	
   

  	
  Substantially
  similar to those specified under the captions “Affirmative Covenants,”
  “Negative Covenants” and “Financial Covenants” in the Term Facility Term Sheet,
  with such changes as are appropriate in connection with the Bridge Loans (including customary cooperation
  covenants); provided that the debt, lien
  and restricted payments covenants may be on terms that are more restrictive
  than those applicable to the Term Facility and the Bridge Facility shall
  include an investments covenant and limitations on 

  

 

B-3

 

	
   

  	
   

  	
  debt
  prepayment (other than in respect of the Existing Credit Agreement or the
  Euro Facility), in each case to be mutually agreed by the Borrower and the
  Arrangers.

  
	
   

  	
   

  	
   

  
	
  Events
  of Default:

  	
   

  	
  Substantially
  similar to those specified under the caption “Events of Default” in the Term
  Facility Term Sheet, with such changes as are appropriate in connection with
  the Bridge Loans, excluding the Change of Control default and including a
  cross event of default to the Term Facility.

  
	
   

  	
   

  	
   

  
	
  Voting:

  	
   

  	
  Amendments
  and waivers of the Bridge Facility Documentation will require the approval of
  Lenders holding more than 50% of the aggregate amount of the loans and
  commitments under the Bridge Facility, except that the consent of each Lender
  shall be required with respect to, among other things, (a) increases in
  the commitment of such Lender, (b) reductions or forgiveness of principal,
  interest or fees payable to such Lender, (c) extensions of final
  maturity or scheduled amortization of the loans or commitments of such Lender
  or of the date for payment to such Lender of any interest or fees,
  (d) modifications to any provision requiring pro rata
  treatment of the Lenders and (e) modifications to voting requirements or
  percentages.

  
	
   

  	
   

  	
   

  
	
  Cost
  and Yield Protection:

  	
   

  	
  Substantially
  similar to the Existing Credit Agreement, including customary tax gross-up
  provisions (but excluding gross-up for any withholding or other taxes or
  liabilities imposed pursuant to the Foreign Account Tax Compliance Act).

  
	
   

  	
   

  	
   

  
	
  Assignments
  and Participations

  	
   

  	
  Prior
  to the Closing Date, the Lenders will be permitted to assign commitments
  under the Bridge Facility with the consent of the Borrower, not to be
  unreasonably withheld or delayed; provided that
  such consent of the Borrower shall not be required (i) if such
  assignment is made to another Lender or any affiliate or approved fund of a
  Lender or (ii) to a Permitted Assignee. From the Closing Date, the
  Lenders will be permitted to assign loans under the Bridge Facility without
  the consent of (but with notice to) the Borrower; provided
  that any assignment to a competitor of the Borrower identified to the
  Arrangers prior to the signing Date shall require the prior written consent
  of the Borrower. All assignments will require the consent of the Agent, not
  to be unreasonably withheld or delayed. Each assignment will be in an amount
  of an integral multiple of $1,000,000. Assignments will be by novation.

  
	
   

  	
   

  	
   

  
	
  Expenses
  and Indemnification:

  	
   

  	
  The
  Borrower will indemnify the Arrangers, the Agent, the Syndication Agent, the
  Documentation Agent, the Lenders, their respective affiliates, successors and
  assigns and the officers, directors, employees, agents, advisors, controlling
  persons and members of each of the foregoing (each, an 

  

 

B-4

 

	
   

  	
   

  	
  “Indemnified Person”)
  and hold them harmless from and against all costs, expenses (including
  reasonable fees, disbursements and other charges of counsel and liabilities
  of such Indemnified Person arising out of or relating to any claim or any
  litigation or other proceeding (regardless of whether such Indemnified Person
  is a party thereto and regardless of whether such matter is initiated by a
  third party or by the Borrower, the Company or any of their respective
  affiliates or equity holders) that relates to the Transactions, including the
  financing contemplated hereby, the Merger or any transactions in connection
  therewith; provided that no
  Indemnified Person will be indemnified for any cost, expense or liability to
  the extent (x) found in a final, non-appealable judgment of a court of
  competent jurisdiction to have resulted from (i) the willful misconduct
  or gross negligence of such Indemnified Person or (ii) a material breach
  in bad faith by the relevant Indemnified Person of the express contractual
  obligations of such Indemnified Person under the Bridge Facility
  Documentation, or (y) arising out of or in connection with any claim,
  litigation, investigation or proceeding that does not involve an act or
  omission of you or any of your affiliates and that is brought by an
  Indemnified Person against any other Indemnified Person (excluding any claim
  brought against either Arrangers, the Agent, the Syndication Agent or the
  Documentation Agent in its capacity as such). In addition, the Borrower shall
  pay all reasonable out-of-pocket expenses (including, without limitation,
  fees, disbursements and other charges counsel (limited, in the case of clause
  (a), to one counsel for all Indemnified Persons (and, if reasonably
  necessary, of one regulatory counsel and one local counsel in any relevant
  jurisdiction for all Indemnified Persons and additional counsel if, in the
  opinion of an Indemnified Person, representation of all Indemnified Persons
  by one counsel would be inappropriate due to the existence of an actual or
  potential conflict of interest)) of (a) the Arrangers, the Agent, the
  Syndication Agent and the Documentation Agent in connection with the
  syndication of the Bridge Facility, the preparation and administration of the
  definitive documentation, and amendments, modifications and waivers thereto,
  and (b) the Arrangers, the Agent, the Syndication Agent, the
  Documentation Agent and the Lenders for enforcement costs and documentary
  taxes associated with the Bridge Facility.

  
	
   

  	
   

  	
   

  
	
  Governing
  Law:

  	
   

  	
  New
  York; provided, however, that the interpretation of the definitions of
  “Borrower Material Adverse Change” and “Company Material Adverse Change”
  shall be governed by, and construed in accordance with, the laws of the State
  of Delaware, regardless of the laws that might otherwise 

  

 

B-5

 

	
   

  	
   

  	
  govern
  under applicable principles of conflicts of laws.

  
	
   

  	
   

  	
   

  
	
  Counsel
  to the Agent and the Arrangers:

  	
   

  	
  Davis Polk & Wardwell LLP.

  

 

B-6

 

EXHIBIT B-I

 

	
  Interest
  Rates:

  	
   

  	
  At
  the option of the Borrower, the Bridge Loans will bear interest at a rate
  equal to (i) Adjusted LIBOR plus the Applicable Margin or
  (ii) (x) ABR plus (to the extent greater than 0) (y) the
  Applicable Margin minus 1.0%. 

   

  “Applicable Margin” means a
  percentage determined in accordance with the pricing grid (the “Bridge  Pricing Grid”) attached hereto as Annex B-I-1. 

   

  The
  Borrower may elect interest periods of 1, 2, 3 or 6 months for Adjusted LIBOR
  borrowings.

   

  Calculation
  of interest shall be on the basis of the actual days elapsed in a year of 360
  days (or 365 or 366 days, as the case may be, in the case of ABR loans based
  on the Prime Rate) and interest shall be payable at the end of each interest
  period and, in any event, at least every three months.

   

  ABR
  is the Alternate Base Rate, which is the highest of (i) the Agent’s Prime
  Rate, (ii) the Federal Funds Effective Rate plus 1⁄2 of 1.0% and
  (iii) the one-month Adjusted LIBOR plus 1.0%.

   

  Adjusted
  LIBOR will at all times include statutory reserves and shall be deemed to be
  not less than 1.00% per annum.

  
	
   

  	
   

  	
   

  
	
  Bridge
  Undrawn Commitment Fee:

  	
   

  	
  Prior
  to the date that is 45 days after the Signing Date, 0% per annum, and
  thereafter 0.25% per annum on the undrawn portion of the commitments in
  respect of the Bridge Facility, payable upon the earlier of the termination
  of the commitments under the Bridge Facility and the Closing Date.

   

  For
  the avoidance of doubt, it is understood and agreed that the Bridge Undrawn
  Commitment Fee shall replace the Bridge Ticking Fee (as defined in the Fee
  Letter) from the Effective Date.

  
	
   

  	
   

  	
   

  
	
  Duration
  Fees:

  	
   

  	
  The
  Borrower shall pay for the ratable benefit of the Lenders the following fees
  and on the following dates, calculated as a percentage of the aggregate
  principal amount outstanding under the Bridge Loans on such dates:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  90th day after the Closing Date

  	
  0.75%

  
	
   

  	
   

  	
  180th day after the Closing Date

  	
  1.25%

  
	
   

  	
   

  	
  270th day
  after the Closing Date

  	
  1.75%

  

 

 

BRIDGE PRICING GRID

 

	
   

  	
   

  	
  Level I

  	
   

  	
  Level II

  	
   

  	
  Level III

  	
   

  	
  Level IV

  	
   

  	
  Level V

  
	
   

  	
   

  	
  Applicable

  Margin

  	
   

  	
  Applicable

  Margin

  	
   

  	
  Applicable

  Margin

  	
   

  	
  Applicable

  Margin

  	
   

  	
  Applicable

  Margin

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0-89 days from the Closing Date

  	
   

  	
  2.00%

  	
   

  	
  2.50%

  	
   

  	
  3.00%

  	
   

  	
  3.50%

  	
   

  	
  4.00%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  90-179 days from the Closing Date

  	
   

  	
  CDS Margin + 0.25%

  	
   

  	
  CDS Margin + 0.50%

  	
   

  	
  CDS Margin
  + 0.75%

  	
   

  	
  CDS Margin
  + 1.00%

  	
   

  	
  CDS Margin
  + 1.25%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  180-269 days from the Closing Date

  	
   

  	
  CDS Margin + 0.75%

  	
   

  	
  CDS Margin + 1.00%

  	
   

  	
  CDS Margin
  + 1.25%

  	
   

  	
  CDS Margin
  + 1.50%

  	
   

  	
  CDS Margin
  + 1.75%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  270-364 days from the Closing Date

  	
   

  	
  CDS Margin + 1.25%

  	
   

  	
  CDS Margin + 1.50%

  	
   

  	
  CDS Margin
  + 1.75%

  	
   

  	
  CDS Margin
  + 2.00%

  	
   

  	
  CDS Margin
  + 2.25%

  

 

Level
I pricing shall apply if, on any date of determination, the Debt Rating is A-
or higher by S&P or is A3 or higher by Moody’s.

 

Level
II pricing shall apply if, on any date of determination, Level I pricing does
not apply and the Debt Rating is BBB+ or higher by S&P or is Baa1 or higher
by Moody’s.

 

Level
III pricing shall apply if, on any date of determination, Level I and Level II
pricing does not apply and the Debt Rating is BBB or higher by S&P or is
Baa2 or higher by Moody’s.

 

Level
IV pricing shall apply if, on any date of determination, Level I, Level II and
Level III pricing does not apply and the Debt Rating is BBB- or higher by
S&P or is Baa3 or higher by Moody’s.

 

Level
V pricing shall apply if, on any date of determination, Level I, Level II,
Level III and Level IV pricing does not apply.

 

For
purposes of the foregoing:

 

“CDS Margin” means a rate per annum
equal to the arithmetic average determined by the Agent on the second business
day prior to the 90th day after the Closing Date, and reset on the second
business day prior to the date that is 30 days after the date on which the
previous CDS Margin was set (each such date, a “Determination
Date”) of the rates obtained by the Agent from the CDS Data for
the 30 Business Days immediately preceding such Determination Date; provided that the CDS Margin shall in no event be less than
the CDS Margin Floor or greater than the CDS Margin Cap.  If the Agent is unable to obtain the CDS Data
for any Determination Date, the Agent shall give notice thereof to the Borrower
and each Lender as soon as practicable thereafter.  In such event, the Borrower and the Agent
shall use commercially reasonable efforts to promptly agree on an alternative
source of data and/or calculation methodology to determine 

 

1

 

the CDS Margin, which alternative source and/or methodology must be
reasonably acceptable to the Required Lenders. 
If no such alternative source of data and/or methodology is agreed within
30 days after such Determination Date, the CDS Margin shall be equal to the
midpoint between the CDS Margin Floor and the CDS Margin Cap for such
Determination Date, unless and until the CDS Margin can be determined in
accordance with this definition.

 

“CDS Data” means, with respect to any
date, the trailing 30-day average of the composite end of day credit default
swap spread for the five year point on the trading convention credit default
curve that is the most liquid and/or widely followed credit default swap curve
for the Borrower’s senior unsecured obligations for the immediately preceding
30 business days, as determined by the Agent.

 

“CDS Margin Floor” means, (i) in
the case of Level I pricing, 2.00% and (ii) in the case of Level II, Level
III, Level IV or Level V pricing, 2.25%.

 

“CDS Margin Cap” means, (i) in
the case of Level I pricing, 4.50% and (ii) in the case of Level II, Level
III, Level IV or Level V pricing, 5.00%.

 

“Debt Rating” means, as of any date
of determination, the rating as determined by S&P or Moody’s, as the case
may be, of the Borrower’s senior unsecured non-credit enhanced long-term
indebtedness for borrowed money; provided that if a Debt Rating is issued by each of S&P and Moody’s, then the
higher of such Debt Ratings shall apply, unless there is
a split in Debt Ratings of more than one level, in which case the level that is
one level lower than the higher Debt Rating shall apply.  The Debt Ratings shall be
determined from the most recent public announcement of any changes in the Debt
Ratings.

 

2

 

EXHIBIT C

 

Sources and Uses of Cash
Funds

(in millions of dollars)

(all figures are approximate)

 

Sources of
Cash Funds

 

	
  Company Existing Cash

  	
   

  	
  $

  	
  610

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Borrower Existing Cash

  	
   

  	
  $

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Term Facility

  	
   

  	
  $

  	
  1,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Notes or Bridge Loans

  	
   

  	
  $

  	
  1,500

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Sources

  	
   

  	
  $

  	
  3,110

  	
   

  

 

Uses of Cash Funds

 

	
  Merger Cash Consideration

  	
   

  	
  $

  	
  2,450

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Repayment/Retirement of Existing Debt, Related
  Make-Whole Payments and Hedging Termination Expense

  	
   

  	
  $

  	
  610

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Transaction Costs

  	
   

  	
  $

  	
  50

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Uses

  	
   

  	
  $

  	
  3,110

  	
   

  

 

 

EXHIBIT D

 

PROJECT TWIN PEAKS

$1,000,000,000 Senior Term Credit Facility

$1,500,000,000 Senior 364-Day Bridge Facility

Summary of Additional Conditions Precedent(2)

 

The
borrowing under each of the Facilities shall be subject to the following additional
conditions precedent:

 

1.                                       The Merger and
the other Transactions shall be consummated simultaneously (or substantially
simultaneously or concurrently) with the closing under the Term Facility in
accordance with applicable law and on the terms described in the Term Sheets
and in the Merger Agreement (other than the Subsequent Merger which shall be
consummated immediately following the Merger). 
The Merger Agreement shall not have been amended or modified, and no condition
shall have been waived or consent granted, in any respect that is materially
adverse to the Arrangers, the Lenders or the Borrower without the Arrangers’
prior written consent, it being understood and agreed that any change to the
transaction structure or the Merger Consideration shall be deemed to be
materially adverse to the Lenders.

 

2.                                       With respect to
the Term Facility, the Borrower shall have received (or shall substantially
simultaneously or concurrently therewith receive) not less than $1.5 billion in
gross cash proceeds from (a) the issuance of the Notes in a public
offering or in a Rule 144A or other private placement and (b) the
borrowings under the Bridge Facility.

 

3.                                       All amounts due
or outstanding in respect of the Existing Debt shall have been (or
substantially simultaneously with the closing under the Term Facility shall be)
paid in full, all commitments (if any) in respect thereof terminated and all
guarantees (if any) thereof and security (if any) therefor discharged and
released.  After giving effect to the
Transactions and the other transactions contemplated hereby, the Borrower and
its subsidiaries shall have outstanding no indebtedness having an aggregate
outstanding principal amount in excess of $50 million or preferred stock other
than (a) the loans and other extensions of credit under the Term Facility,
(b) the Notes or the Bridge Facility and (c) the indebtedness listed
on Exhibit E hereto and (d) other limited indebtedness to be agreed.

 

4.                                       The Arrangers
shall have received U.S. GAAP unaudited consolidated and (to the extent
available) consolidating balance sheets and related statements of income,
stockholders’ equity and cash flows of the Borrower and the Company for each
fiscal quarter ended after the most recently concluded fiscal year of such
person and at least 30 days before the Closing Date.

 

5.                                       The Arrangers
shall have received a pro forma
consolidated balance sheet and related pro forma
consolidated statements of income and cash flows of the Borrower as of and for
the twelve-month period ending on the last day of the most recently completed
four-fiscal quarter period for which financial statements have been delivered
pursuant to paragraph 4 above, prepared after giving effect to the Transactions
as if the Transactions had occurred as of such date (in the case of such
balance sheet) or at the beginning of such period (in the case of such other
financial statements).

 

(2)                                  All capitalized
terms used but not defined herein have the meanings given to them in the
Commitment Letter to which this Exhibit D is attached, including Exhibits
A and B thereto.  Unless the context
requires otherwise, references herein to the Agent shall be deemed to be
references to each of the Agent as defined in such Exhibit A and the Agent
as defined in such Exhibit B.

 

 

6.                                       The Arrangers
shall be satisfied that, on the Closing Date and giving pro forma effect
to the Transactions, the Borrower’s maximum consolidated leverage ratio shall
not exceed 3.0 to 1.0, subject to definitions substantially similar to the
Existing Credit Agreement (provided that
additional add-backs shall be permitted to consolidated EBITDA for fees and
expenses and other one-time charges related to the Transactions to be agreed by
the Arrangers).

 

7.                                       The Arrangers
shall have received a certificate from the chief financial officer of the
Borrower in form and substance reasonably satisfactory to the Arrangers (or, at
the Borrower’s option, a solvency opinion from an independent investment bank
or valuation firm of nationally recognized standing, such opinion to be in form
and substance reasonably satisfactory to the Arrangers) certifying that the
Borrower and its subsidiaries, on a consolidated basis after giving effect to
the Transactions and the other transactions contemplated hereby, are solvent.

 

8.                                       All requisite
governmental authorities and third parties shall have approved or consented to
the execution, delivery and performance of the Bridge Facility Documentation
and the Term Facility Documentation to the extent required, all applicable
appeal periods shall have expired and there shall be no litigation,
governmental, administrative or judicial action, actual or threatened, that
could reasonably be expected to restrain, prevent or impose burdensome
conditions on the Facilities.

 

9.                                       With respect to
the Bridge Facility, the Term Facility shall have become (or shall
substantially simultaneously or concurrently therewith become) effective and
the Borrower shall have borrowed on the Closing Date not more than $1 billion
thereunder.

 

10.                                 As of the
Closing Date, the Borrower shall have received a rating for its senior
unsecured non-credit enhanced long-term indebtedness for borrowed money of BBB-
(with no negative outlook) or higher from S&P and Baa3 (with no negative
outlook) or higher from Moody’s.

 

2

 

EXHIBIT E

 

CONTINUING INDEBTEDNESS

 

1.               7.375% Senior Notes due 2012
issued by Aon Corporation, with $225,000,000 in aggregate principal amount
currently outstanding.

 

2.               $375,000,000 in original
aggregate principal amount of 5.05% Senior Unsecured Debentures due 2011 issued
by Aon Finance N.S. 1, ULC and guaranteed by Aon Corporation, with $361,962,000
in aggregate principal amount currently outstanding.

 

3.               8.205% Junior Subordinated
Deferrable Interest Debentures Due January 2027 issued by Aon Corporation,
with $686,995,000 in aggregate principal amount currently outstanding.

 

4.               €500,000,000 in original
aggregate principal amount of 6.25% Guaranteed Notes due July 2014 issued
by Aon Financial Services Luxembourg S.A. and guaranteed by Aon Corporation,
with $618,450,000 in aggregate principal amount currently outstanding.

 

5.               Facility Agreement, dated as
of February 7, 2005, among Aon Corporation, the subsidiaries of Aon
Corporation party thereto, the financial institutions party thereto a lenders
and Citibank International plc, as agent, providing for a €650,000,000
revolving loan facility.

 

6.               Three-Year Credit Agreement,
dated as of December 4, 2009, among Aon Corporation, the financial
institutions party thereto as lenders and Citibank, N.A., as administrative
agent, providing for a $400,000,000 revolving loan facility.

 

7.               Credit Agreement, dated as
of October 9, 2009, among Hewitt Associates L.L.C., as borrower, Hewitt
Associates, Inc., as a guarantor, the lenders from time to time party
thereto and JPMorgan Chase Bank, N.A., as administrative agent, providing for a
$250,000,000 revolving loan facility.

 

8.               Loan Agreement, dated as of August 8,
2008, among Hewitt Associates L.L.C., as borrower, Hewitt Associates, Inc.,
as a guarantor, the lenders from time to time party thereto and JPMorgan Chase
Bank, N.A., as administrative agent, providing for a $270,000,000 term loan
facility (with $270,000,000 currently outstanding).

 

9.               $35,000,000 in original
aggregate principal amount of 8.08% Senior Notes, Series A, Tranche 2 due March 30,
2012 issued by Hewitt Associates L.L.C., with $14,000,000 in aggregate
principal amount currently outstanding.

 

10.         $15,000,000 in original
aggregate principal amount of 7.90% Senior Notes, Series E, due October 15,
2010 issued by Hewitt Associates L.L.C., with $15,000,000 in aggregate
principal amount currently outstanding.

 

11.         $175,000,000 in original
aggregate principal amount of 6.57% Series F Senior Notes due August 21,
2015 issued by Hewitt Associates L.L.C. and guarantied by

 

 

Hewitt Associates, Inc.,
with $175,000,000 in aggregate principal amount currently outstanding.

 

12.         $55,000,000 in original
aggregate principal amount of 6.98% Series G Senior Notes due August 21,
2018 issued by Hewitt Associates L.L.C. and guarantied by Hewitt Associates, Inc.,
with $55,000,000 in aggregate principal amount currently outstanding.

 

2

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