Document:

Amended and Restated Credit Agreement

 Exhibit 4.01 
  
 AMENDED AND RESTATED CREDIT AGREEMENT 
  
 DATED AS OF FEBRUARY 22, 2005 
  

AMONG 
  
 KORN/FERRY INTERNATIONAL, 
  
 as Borrower, 
  
 THE
LENDERS FROM TIME TO TIME PARTY HERETO, 
 as Lenders, 
  
 WELLS FARGO BANK, NATIONAL ASSOCIATION, 
 as Administrative Agent, 
  
 and 
  
 WELLS FARGO BANK, NATIONAL ASSOCIATION,

 as Arranger 

 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page No.

	 Section 1.
	  	DEFINITIONS	  	2
			
	 1.1
	  	Certain Defined Terms	  	2
			
	 1.2
	  	Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement	  	23
			
	 1.3
	  	Other Definitional Provisions and Rules of Construction	  	23
			
	 Section 2.
	  	AMOUNTS AND TERMS OF COMMITMENTS AND LOANS	  	23
			
	 2.1
	  	Commitments; Making of Loans; the Register; Optional Notes	  	23
			
	 2.2
	  	Interest on the Loans	  	26
			
	 2.3
	  	Fees	  	29
			
	 2.4
	  	Repayments, Prepayments and Reductions in Revolving Loan Commitment Amount; General Provisions Regarding Payments; Application of Proceeds of Collateral and Payments Under Subsidiary
Guaranty	  	29
			
	 2.5
	  	Use of Proceeds	  	33
			
	 2.6
	  	Special Provisions Governing Eurodollar Rate Loans	  	33
			
	 2.7
	  	Increased Costs; Taxes; Capital Adequacy	  	35
			
	 2.8
	  	Statement of Lenders; Obligation of Lenders and Issuing Lender to Mitigate	  	39
			
	 2.9
	  	Replacement of a Lender	  	40
			
	 Section 3.
	  	LETTERS OF CREDIT	  	41
			
	 3.1
	  	Issuance of Letters of Credit and Lenders’ Purchase of Participations Therein	  	41
			
	 3.2
	  	Letter of Credit Fees	  	43
			
	 3.3
	  	Drawings and Reimbursement of Amounts Paid Under Letters of Credit	  	43
			
	 3.4
	  	Obligations Absolute	  	46
			
	 3.5
	  	Nature of Issuing Lender’s Duties	  	47
			
	 Section 4.
	  	CONDITIONS TO LOANS AND LETTERS OF CREDIT	  	47
			
	 4.1
	  	Conditions to Initial Revolving Loans	  	48
			
	 4.2
	  	Conditions to All Loans	  	51
			
	 4.3
	  	Conditions to Letters of Credit	  	52
			
	 Section 5.
	  	COMPANY’S REPRESENTATIONS AND WARRANTIES	  	52
			
	 5.1
	  	Organization, Powers, Qualification, Good Standing, Business and Subsidiaries	  	52
			
	 5.2
	  	Authorization of Borrowing, etc	  	53

  

 i 

 TABLE OF CONTENTS 
 (Continued) 
  

					
	 	  	 	  	Page No.

	 5.3  
	  	Financial Condition	  	54
			
	 5.4  
	  	No Material Adverse Change; No Restricted Junior Payments	  	54
			
	 5.5  
	  	Title to Properties; Liens; Real Property; Intellectual Property	  	54
			
	 5.6  
	  	Litigation; Adverse Facts	  	55
			
	 5.7  
	  	Payment of Taxes	  	55
			
	 5.8  
	  	Performance of Agreements	  	56
			
	 5.9  
	  	Governmental Regulation	  	56
			
	 5.10
	  	Securities Activities	  	56
			
	 5.11
	  	Employee Benefit Plans	  	56
			
	 5.12
	  	Certain Fees	  	57
			
	 5.13
	  	Environmental Protection	  	57
			
	 5.14
	  	Employee Matters	  	58
			
	 5.15
	  	Solvency	  	58
			
	 5.16
	  	Matters Relating to Collateral	  	58
			
	 5.17
	  	Disclosure	  	59
			
	 5.18
	  	Subordinated Indebtedness	  	59
			
	 5.19
	  	Foreign Asset Control Regulations, etc.	  	59
			
	 Section 6.
	  	COMPANY’S AFFIRMATIVE COVENANTS	  	60
			
	 6.1  
	  	Financial Statements and Other Reports	  	60
			
	 6.2  
	  	Existence, etc.	  	64
			
	 6.3  
	  	Payment of Taxes and Claims; Tax	  	65
			
	 6.4  
	  	Maintenance of Properties; Insurance; Application of Net Business Interruption Insurance Proceeds	  	65
			
	 6.5  
	  	Inspection Rights; Lender Meeting	  	66
			
	 6.6  
	  	Compliance with Laws, etc.	  	66
			
	 6.7  
	  	Environmental Matters	  	66
			
	 6.8  
	  	Execution of Subsidiary Guaranty and Personal Property Collateral Documents After the Restatement Date	  	68
			
	 6.9  
	  	Post-Closing	  	69
			
	 Section 7.
	  	COMPANY’S NEGATIVE COVENANTS	  	69
			
	 7.1  
	  	Indebtedness	  	70
			
	 7.2  
	  	Liens and Related Matters	  	71

  

 ii 

 TABLE OF CONTENTS 
 (Continued) 
  

					
	 	  	 	  	Page No.

	 7.3  
	  	Investments; Acquisitions	  	73
			
	 7.4  
	  	Contingent Obligations	  	74
			
	 7.5  
	  	Restricted Junior Payments	  	74
			
	 7.6  
	  	Financial Covenants	  	75
			
	 7.7  
	  	Restriction on Fundamental Changes; Asset Sales	  	75
			
	 7.8  
	  	Consolidated Capital Expenditures	  	76
			
	 7.9  
	  	Transactions with Shareholders and Affiliates	  	76
			
	 7.10
	  	Sales and Lease-Backs	  	76
			
	 7.11
	  	Sale or Discount of Receivables	  	77
			
	 7.12
	  	Conduct of Business	  	77
			
	 7.13
	  	Amendments of Documents Relating to Subordinated Indebtedness	  	77
			
	 7.14
	  	Fiscal Year	  	77
			
	 Section 8.
	  	EVENTS OF DEFAULT	  	77
			
	 8.1  
	  	Failure to Make Payments When Due	  	77
			
	 8.2  
	  	Default in Other Agreements	  	77
			
	 8.3  
	  	Breach of Certain Covenants	  	78
			
	 8.4  
	  	Breach of Warranty	  	78
			
	 8.5  
	  	Other Defaults Under Loan Documents	  	78
			
	 8.6  
	  	Involuntary Bankruptcy; Appointment of Receiver, etc.	  	78
			
	 8.7  
	  	Voluntary Bankruptcy; Appointment of Receiver, etc.	  	79
			
	 8.8  
	  	Judgments and Attachments	  	79
			
	 8.9  
	  	Dissolution	  	79
			
	 8.10
	  	Employee Benefit Plans	  	79
			
	 8.11
	  	Material Adverse Effect	  	80
			
	 8.12
	  	Change in Control	  	80
			
	 8.13
	  	Invalidity of Loan Documents; Failure of Security; Repudiation of Obligations	  	80
			
	 Section 9.
	  	ADMINISTRATIVE AGENT	  	81
			
	 9.1  
	  	Appointment	  	81
			
	 9.2  
	  	Powers and Duties; General Immunity	  	82
			
	 9.3  
	  	Independent Investigation by Lenders; No Responsibility For Appraisal of Creditworthiness	  	83

  

 iii 

 TABLE OF CONTENTS 
 (Continued) 
  

					
	 	  	 	  	Page No.

	 9.4  
	  	Right to Indemnity	  	84
			
	 9.5  
	  	Resignation of Agent; Successor Administrative Agent	  	84
			
	 9.6  
	  	Collateral Documents and Subsidiary Guaranty	  	85
			
	 9.7  
	  	Administrative Agent May File Proofs of Claim	  	85
			
	 Section 10.
	  	MISCELLANEOUS	  	86
			
	 10.1
	  	Successors and Assigns; Assignments and Participations in Loans and Letters of Credit	  	86
			
	 10.2
	  	Expenses	  	89
			
	 10.3
	  	Indemnity	  	90
			
	 10.4
	  	Set-Off	  	91
			
	 10.5
	  	Ratable Sharing	  	92
			
	 10.6
	  	Amendments and Waivers	  	92
			
	 10.7
	  	Independence of Covenants	  	93
			
	 10.8
	  	Notices; Effectiveness of Signatures	  	94
			
	 10.9
	  	Survival of Representations, Warranties and Agreements	  	95
			
	 10.10
	  	Failure or Indulgence Not Waiver; Remedies Cumulative	  	95
			
	 10.11
	  	Marshalling; Payments Set Aside	  	95
			
	 10.12
	  	Severability	  	95
			
	 10.13
	  	Obligations Several; Independent Nature of Lenders’ Rights; Damage Waiver	  	96
			
	 10.14
	  	Release of Security Interest or Guaranty	  	96
			
	 10.15
	  	Applicable Law	  	96
			
	 10.16
	  	Construction of Agreement; Nature of Relationship	  	97
			
	 10.17
	  	Consent to Jurisdiction and Service of Process	  	97
			
	 10.18
	  	Waiver of Jury Trial	  	98
			
	 10.19
	  	Confidentiality	  	98
			
	 10.20
	  	Counterparts; Effectiveness	  	99
		
	 Signature pages            S-1
	  	 

  
 EXHIBITS 
  

			
	 I
	  	FORM OF NOTICE OF BORROWING
	 II
	  	FORM OF NOTICE OF CONVERSION/CONTINUATION

  

 iv 

 TABLE OF CONTENTS 
 (Continued) 
  

					
	 III
	  	FORM OF REQUEST FOR ISSUANCE	  	 
	 IV
	  	FORM OF REVOLVING NOTE	  	 
	 V
	  	FORM OF COMPLIANCE CERTIFICATE	  	 
	 VI
	  	FORM OF OPINION OF COMPANY COUNSEL	  	 
	 VII
	  	FORM OF OPINION OF O’MELVENY & MYERS LLP	  	 
	 VIII
	  	FORM OF ASSIGNMENT AGREEMENT	  	 
	 IX
	  	FORM OF AMENDED AND RESTATED SUBSIDIARY GUARANTY	  	 
	 X
	  	FORM OF AMENDED AND RESTATED SECURITY AGREEMENT	  	 

  
 SCHEDULES 
  

			
	 1
	  	APPROVED CASH EQUIVALENT INVESTMENTS
	 2.1
	  	LENDERS’ COMMITMENTS AND PRO RATA SHARES
	 4.1C
	  	CORPORATE AND CAPITAL STRUCTURE; OWNERSHIP; MANAGEMENT
	 5.1
	  	SUBSIDIARIES OF COMPANY
	 5.5B
	  	REAL PROPERTY
	 5.5C
	  	INTELLECTUAL PROPERTY
	 5.6
	  	LITIGATION
	 5.11
	  	CERTAIN EMPLOYEE BENEFIT PLANS
	 7.1
	  	CERTAIN EXISTING INDEBTEDNESS
	 7.2
	  	CERTAIN EXISTING LIENS
	 7.3
	  	CERTAIN EXISTING INVESTMENTS
	 7.4
	  	CONTINGENT OBLIGATIONS

  

 v 

 KORN/FERRY INTERNATIONAL 
  
 AMENDED AND RESTATED CREDIT AGREEMENT 
  
 This AMENDED AND RESTATED CREDIT AGREEMENT is dated as of February 22, 2005 and entered into by and among
KORN/FERRY INTERNATIONAL, a Delaware corporation (“Company”), THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO (each individually referred to herein as a “Lender” and collectively as
“Lenders”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Wells Fargo”), as administrative agent for Lenders (in such capacity, “Administrative Agent”). 
  
 R  E  C  I  T  A  L  S 
  
 WHEREAS, Company, certain lenders and Wells Fargo, as administrative agent, are parties to that certain Credit
Agreement dated as of February 14, 2003 (the “Original Credit Agreement”); 
  
 WHEREAS, Lenders, at the request of Company, have agreed to amend and restate the Original Credit Agreement in its entirety and increase the Commitments (this and other capitalized terms used in these recitals
without definition being used as defined in subsection 1.1), the proceeds of which will be used to provide financing for working capital and other general corporate purposes of Company and its Subsidiaries; 
  
 WHEREAS, Company desires to continue to secure all of the Obligations
hereunder and under the other Loan Documents by a First Priority Lien, granted to Administrative Agent, on behalf of Lenders, on substantially all of its real, personal and mixed property, including a pledge of certain capital stock of its Domestic
Significant Subsidiaries and 66% of the capital stock of its Foreign Significant Subsidiaries; and 
  
 WHEREAS, all of the Domestic Significant Subsidiaries of Company desire to continue to guarantee the Obligations hereunder and under the other Loan
Documents and to continue to secure their guaranties by a First Priority Lien, granted to Administrative Agent, on behalf of Lenders, on substantially all of their real, personal and mixed property, including a pledge of certain capital stock of
their Domestic Significant Subsidiaries and 66% of the capital stock of their Foreign Significant Subsidiaries: 
  
 NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Company, Lenders and Administrative
Agent agree that the Original Credit Agreement is hereby amended and restated to read in its entirety as follows: 
  
 Section 1. DEFINITIONS 
  
 1.1 Certain Defined Terms. 
  
 The following terms used in this Agreement shall have the following meanings: 
  
 “Account” means, with respect to any Person, all present and future rights of such Person to payment for
goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether now existing or hereafter arising and wherever arising, and whether or not they have been earned by performance. 

 “Administrative Agent” has the meaning assigned to that term in the introduction to this
Agreement and also means and includes any successor Administrative Agent appointed pursuant to subsection 9.5A. 
  
 “Affected Lender” has the meaning assigned to that term in subsection 2.6C. 
  
 “Affected Loans” has the meaning assigned to that term in subsection 2.6C. 
  
 “Affiliate”, as applied to any Person, means any other
Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling”, “controlled
by” and “under common control with”), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership
of voting securities or by contract or otherwise. 
  
 “Agreement” means this Amended and Restated Credit Agreement dated as of February 22, 2005, as it may be amended, supplemented or otherwise modified from time to time. 
  
 “Approved Fund” means a Fund that is administered or managed
by (i) a Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an entity that administers or manages a Lender. 
  
 “Asset Sale” means the sale by Company or any of its Subsidiaries to any Person other than Company or any of its wholly-owned
Subsidiaries of (i) any of the stock of any of Company’s Subsidiaries, (ii) substantially all of the assets of any division or line of business of Company or any of its Subsidiaries, or (iii) any other assets (whether tangible or intangible) of
Company or any of its Subsidiaries (other than (a) inventory sold in the ordinary course of business, (b) sales, assignments, transfers or dispositions of accounts in the ordinary course of business for purposes of collection and (c) any such other
assets to the extent that the aggregate value of such assets sold in any single transaction or related series of transactions is equal to $1,000,000 or less). 
  

“Assignment Agreement” means an Assignment Agreement in substantially the form of Exhibit VIII annexed hereto. 
  
 “Bankruptcy Code” means Title 11 of the United States Code
entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute. 
  
 “Base Rate” means, at any time, the higher of (i) the Prime Rate or (ii) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate. Any change in the Base Rate due to a change in the
Prime Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change. 
  
 “Base Rate Loans” means Loans bearing interest at rates determined by reference to the Base Rate as provided in subsection 2.2A.

  

 2 

 “Business Day” means (i) for all purposes other than as covered by clause (ii) below,
any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of California or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to
close, and (ii) with respect to all notices, determinations, fundings and payments in connection with the Eurodollar Rate or any Eurodollar Rate Loans, any day that is a Business Day described in clause (i) above and that is also a day for trading
by and between banks in Dollar deposits in the London interbank market. 
  
 “Capital Lease”, as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person. 
  
 “Capital Stock” means the
capital stock or other equity interests of a Person. 
  
 “Cash” means money, currency or a credit balance in a Deposit Account. 
  
 “Cash Equivalents” means, as at any date of determination, (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 the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one year
after such date; (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 such date and
having, at the time of the acquisition thereof, the highest rating obtainable from either Standard & Poor’s (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”); (iii) commercial paper
maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, 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
maturing within one year after such date and 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 (a) is at least “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 $100,000,000; (v) shares of any money market mutual fund that (a) has at least
95% of its assets invested continuously in the types of investments referred to in clauses (i) and (ii) 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; and (vi)
other investments set forth on Schedule 1 annexed hereto. 
  
 “Change in Control” means any of the following: (i) any Person or group of Persons (other than Richard Ferry, either individually or as a trustee of any trust for which he has sole power to direct and control investments),
shall have acquired beneficial ownership, directly or indirectly, of Securities of Company (or other Securities convertible into such Securities) representing 30% or more of the combined voting power of all Securities of Company entitled to vote in
the election of members of the Governing Body of Company, other than Securities having such power only by reason of the happening of a contingency, (ii) either of the individuals serving, as of the Restatement Date, as chairman of the board or chief
executive officer of Company no longer hold these positions and their successors are not approved by a majority of the members of the Governing Body of Company, (iii) the occurrence of a change in the composition of the Governing Body of Company
such that a majority of the members of any 

  

 3 

 
such Governing Body are not Continuing Members, (iv) the occurrence of any “Change of Control Event” as defined in either the Convertible
Subordinated Notes or the Convertible Series A Preferred Stock, and (v) the occurrence of a “change of control” as defined in any document governing Indebtedness of Company or any of its Subsidiaries in excess of $3,000,000 which gives the
holders of such Indebtedness the right to accelerate or otherwise require payment of such Indebtedness prior to the maturity date thereof. As used herein, the term “beneficially own” or “beneficial ownership” shall have the
meaning set forth in the Exchange Act and the rules and regulations promulgated thereunder. 
  
 “Closing Date” means the date on which the initial Loans were made under the Original Credit Agreement. 
  
 “Collateral” means, collectively, all of the real, personal and mixed property (including Capital Stock) in which Liens are purported to
be granted pursuant to the Collateral Documents as security for the Obligations. 
  
 “Collateral Account” means the Deposit Account established pursuant to Section 10 of the Security Agreement. 
  
 “Collateral Documents” means the Security Agreement, the Foreign Pledge Agreements and all other instruments or documents delivered by
any Loan Party pursuant to this Agreement, the Original Credit Agreement or any of the other Loan Documents in order to grant to Administrative Agent, on behalf of Lenders, a Lien on any real, personal or mixed property of that Loan Party as
security for the Obligations. 
  
 “Commitments”
means the commitments of Lenders to make Loans as set forth in subsection 2.1A and subsection 3.3. 
  
 “Communications” has the meaning assigned to that term in subsection 10.8. 
  
 “Company” has the meaning assigned to that term in the introduction to this Agreement. 
  
 “Compliance Certificate” means a certificate substantially
in the form of Exhibit V annexed hereto. 
  
 “Consolidated Capital Expenditures” means, for any period, the sum of the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases
which is capitalized on the consolidated balance sheet of Company and its Subsidiaries) by Company and its Subsidiaries during that period that, in conformity with GAAP, are included in “additions to property, plant or equipment” or
comparable items reflected in the consolidated statement of cash flows of Company and its Subsidiaries. For purposes of this definition, the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment, with
asset sale proceeds or with insurance proceeds shall be included in Consolidated Capital Expenditures only to the extent of the gross amount of such purchase price less the credit granted by the seller of such equipment for the equipment being
traded in at such time or the amount of such proceeds, as the case may be. 
  

 4 

 “Consolidated Cash Interest Expense” means, for any period, Consolidated Interest
Expense for such period excluding, however, any interest expense not payable in Cash (including amortization of discount and amortization of debt issuance costs). 
  
 “Consolidated Current Assets” means, as at any date of determination, the sum of (i) current Cash and Cash
Equivalents, plus (ii) trade Accounts, in each case of Company and its Subsidiaries on a consolidated basis.  
  
 “Consolidated Current Liabilities” means, as at any date of determination, the total liabilities of Company and its Subsidiaries on a
consolidated basis which may properly be classified as current liabilities in conformity with GAAP, including the aggregate principal amount of all outstanding Revolving Loans.  
  
 “Consolidated EBITDA” means, for any period, the sum, without duplication, of the amounts for such period
of (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) provisions for taxes based on income, (iv) total depreciation expense, (v) total amortization expense, including amortization of goodwill and other intangibles, (vi) other
non-cash items, including non-cash expenses required to be recognized pursuant to Financial Accounting Standards Board Statement No. 123(R), Share-Based Payment, (other than any such non-cash item to the extent it represents an accrual of or
reserve for cash expenditures in any future period), and (vii) equity in earnings of Korn/Ferry International S.A. de C.V., Korn/Ferry Internacional del Norte, S.A. de C.V., Postgraduados y Especialistas S.A. de C.V. and Servicios Romac S.A. de
C.V., except to the extent the amount of any dividends or other distributions actually paid to Company or any of its Subsidiaries by such Subsidiaries during such period have been included in the calculation of Consolidated Net Income, but only, in
the case of clauses (ii)-(vi), to the extent deducted in the calculation of Consolidated Net Income, less non-cash items added in the calculation of Consolidated Net Income (other than any such non-cash item to the extent it will result in
the receipt of cash payments in any future period), all of the foregoing as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP. 
  
 “Consolidated Fixed Charges” means, for any period, the sum of (i) Consolidated Cash Interest Expense for
such period, plus (ii) all scheduled principal payments on all Indebtedness of Company and its Subsidiaries during such period, all of the foregoing as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP.

  
 “Consolidated Interest Expense” means, for
any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of Company and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of
Company and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, net costs under Interest Rate Agreements and amounts referred to in
subsection 2.3 payable to Administrative Agent and Lenders that are considered interest expense in accordance with GAAP. 
  
 “Consolidated Leverage Ratio” means, as of the last day of any Fiscal Quarter, the ratio of (i) Consolidated Total Debt as at such day to
(ii) Consolidated EBITDA for the consecutive four Fiscal Quarters ending on such day. 
  

 5 

 “Consolidated Net Income” means, for any period, the net income (or loss) of Company and
its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP; provided that there shall be excluded (i) the income (or loss) of any Person (other than a Subsidiary of Company)
in which any other Person (other than Company or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to Company or any of its Subsidiaries by such Person during such
period, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Company or is merged into or consolidated with Company or any of its Subsidiaries or that Person’s assets are acquired by Company or any of its
Subsidiaries, (iii) the income of any Subsidiary of Company to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter
or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (iv) any after-tax gains or losses attributable to asset sales or returned surplus assets of any Pension Plan, and (v) (to
the extent not included in clauses (i) through (iv) above) any net extraordinary gains or net extraordinary losses. 
  
 “Consolidated Quick Ratio” means, as of the last day of any Fiscal Quarter, the ratio of (i) Consolidated Current Assets to (ii)
Consolidated Current Liabilities. 
  
 “Consolidated
Total Debt” means, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness of Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, but excluding the Convertible
Series A Preferred Stock and the Convertible Subordinated Notes. 
  
 “Contingent Obligation”, as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any Indebtedness, lease, dividend or other obligation of another if the
primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof, (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, or (iii) under Hedge Agreements. Contingent Obligations shall include (a) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an
agreement, and (c) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (1) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (2) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in
the case of any agreement described under subclauses (1) or (2) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of the obligation
so guaranteed or otherwise supported or, if less, the amount to which such Contingent Obligation is specifically limited. 
  

 6 

 “Continuing Member” means, as of any date of determination any member of the Governing
Body of Company who (i) was a member of such Governing Body on the Closing Date or (ii) was nominated for election or elected to such Governing Body with the affirmative vote of a majority of the members who were either members of such Governing
Body on the Closing Date or whose nomination or election was previously so approved. 
  
 “Contractual Obligation”, as applied to any Person, means any provision of any Security issued by that Person or of any material 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. 
  
 “Control Agreement” means an agreement, satisfactory in form and substance to Administrative Agent and executed by the financial
institution or securities intermediary at which a Deposit Account or a Securities Account, as the case may be, is maintained, pursuant to which such financial institution or securities intermediary confirms and acknowledges Administrative
Agent’s security interest in such account, and agrees that the financial institution or securities intermediary, as the case may be, will comply with instructions originated by Administrative Agent as to disposition of funds in such account,
without further consent by Company or any Subsidiary. 
  
 “Convertible Series A Preferred Stock” means, collectively, (i) 10,000 shares of Company’s Convertible Series A Preferred Stock, (ii) the Certificate of Designation pursuant to which such shares were issued, and (iii)
any shares of additional securities of the same nature issued as payment in kind of dividends in respect thereto. 
  
 “Convertible Subordinated Notes” means the Company’s Convertible Subordinated Notes dated as of June 13, 2002, in an aggregate
principal amount of $40,000,000 and any additional notes of the same nature issued as payment in kind of interest in respect thereto. 
  
 “Currency Agreement” means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or
other similar agreement or arrangement to which Company or any of its Subsidiaries is a party. 
  
 “Deposit Account” means a demand, time, savings, passbook or similar account maintained with a Person engaged in the business of banking, including a savings bank, savings and loan association, credit
union or trust company. 
  
 “Dollars” and the
sign “$” mean the lawful money of the United States of America. 
  
 “Domestic Significant Subsidiary” means any Domestic Subsidiary that is a Significant Subsidiary. 
  
 “Domestic Subsidiary” means any Subsidiary of Company that is incorporated or organized under the laws of the United States of America,
any state thereof or in the District of Columbia. 
  
 “Eligible Assignee” means (i) any Lender, any Affiliate of any Lender and any Approved Fund of any Lender; and (ii) (a) a commercial bank organized under the laws of the 

  

 7 

 
United States or any state thereof; (b) a savings and loan association or savings bank organized under the laws of the United States or any state thereof;
(c) a commercial bank organized under the laws of any other country or a political subdivision thereof; provided that (1) such bank is acting through a branch or agency located in the United States or (2) such bank is organized under the laws
of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; and (d) any other entity that is an “accredited investor” (as defined in Regulation D under the
Securities Act) that extends credit or buys loans as one of its businesses including insurance companies, mutual funds and lease financing companies; provided that neither Company nor any Affiliate of Company shall be an Eligible Assignee.

  
 “Employee Benefit Plan” means any
“employee benefit plan” as defined in Section 3(3) of ERISA which is or was maintained or contributed to by Company, any of its Subsidiaries or any of their respective ERISA Affiliates. 
  
 “Environmental Claim” means any investigation, notice,
notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any Government Authority or any other Person, arising (i) pursuant to or in connection with any actual or
alleged violation of any Environmental Law, (ii) in connection with any Hazardous Materials or any actual or alleged Hazardous Materials Activity, or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety,
natural resources or the environment. 
  
 “Environmental
Laws” means any and all current or future statutes, ordinances, orders, rules, regulations, guidance documents, judgments, Governmental Authorizations, or any other requirements of any Government Authority relating to (i) environmental
matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health, industrial hygiene, land use or the protection of
human, plant or animal health or welfare, in any manner applicable to Company or any of its Subsidiaries or any Facility. 
  
 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto. 

 
 “ERISA Affiliate”, as applied to any Person, means (i)
any corporation that is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) that is a member of a
group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of
the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of a Person or any of its Subsidiaries shall continue to be
considered an ERISA Affiliate of such Person or such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of such Person or such Subsidiary and with respect to liabilities arising after such
period for which such Person or such Subsidiary could be liable under the Internal Revenue Code or ERISA. 
  

 8 

 “ERISA Event” means (i) a “reportable event” within the meaning of Section
4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of
Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of
the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of
intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing
sponsors or the termination of any such Pension Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which
constitutes grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Company, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to
Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the
meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential material liability to Company therefor, or the receipt by Company, any of its Subsidiaries or any of their respective ERISA Affiliates of notice from
any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the assertion of a material claim (other than
routine claims for benefits) against any Employee Benefit Plan maintained or contributed to by Company or any of its Subsidiaries, other than a Multiemployer Plan or the assets thereof, or against Company or any of its Subsidiaries in connection
with any Employee Benefit Plan; (ix) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify
under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code if there is any potential material liability to
Company therefor; or (x) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan. 
  
 “Eurodollar Rate” means, for any Interest Rate Determination Date with respect to an Interest Period for a
Eurodollar Rate Loan, the rate per annum obtained by dividing (i) (A) the rate per annum (rounded upward to the nearest 1/16 of one percent) that appears on the Moneyline Telerate, page 3750 (or such other comparable page as may, in the
opinion of Administrative Agent, replace such page for the purpose of displaying such rate) as the interbank offered rate for Dollar deposits with maturities comparable to such Interest Period as of approximately 11:00 a.m. (London time) on such
Interest Rate Determination Date or (B) if such rate is not available at such time for any reason, the arithmetic average (rounded upward to the nearest 1/16 of one percent) of the offered quotations, if any, to first class banks in the interbank
Eurodollar market by Wells Fargo for Dollar deposits of amounts in same day funds comparable to the principal amount of the Eurodollar Rate Loan of Wells Fargo for which the Eurodollar 

  

 9 

 
Rate is then being determined with maturities comparable to such Interest Period as of approximately 10:00 A.M. (California time) on such Interest Rate
Determination Date by (ii) a percentage equal to 100% minus the stated maximum rate of all reserve requirements (including any marginal, emergency, supplemental, special or other reserves) applicable on such Interest Rate Determination
Date to any member bank of the Federal Reserve System in respect of “Eurocurrency liabilities” as defined in Regulation D (or any successor category of liabilities under Regulation D). 
  
 “Eurodollar Rate Loans” means Loans bearing interest at
rates determined by reference to the Eurodollar Rate as provided in subsection 2.2A. 
  
 “Event of Default” means each of the events set forth in Section 8. 
  
 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. 
  
 “Exchange Rate” means, on any date when an amount expressed
in a currency other than Dollars is to be determined with respect to any Letter of Credit, the nominal rate of exchange of Administrative Agent in the New York foreign exchange market for the sale of such currency in exchange for Dollars at 12:00
noon (New York time) one Business Day prior to such date, expressed as a number of units of such currency per one Dollar. 
  
 “Facilities” means any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or
heretofore owned, leased, operated or used by Company or any of its Subsidiaries or any of their respective predecessors or Affiliates. 
  
 “Federal Funds Effective Rate” means, for any period, a fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Administrative Agent from three Federal funds brokers of
recognized standing selected by Administrative Agent. 
  
 “Financial Plan” has the meaning assigned to that term in subsection 6.1(xii). 
  
 “First Priority” means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that (i)
such Lien is perfected and has priority over any other Lien on such Collateral (other than Liens permitted pursuant to subsection 7.2) and (ii) such Lien is the only Lien (other than Liens permitted pursuant to subsection 7.2) to which such
Collateral is subject. 
  
 “Fiscal Month” means a
fiscal month of any Fiscal Year. 
  
 “Fiscal
Quarter” means a fiscal quarter of any Fiscal Year. 
  

 10 

 “Fiscal Year” means the fiscal year of Company and its Subsidiaries ending on April 30
of each calendar year. For purposes of this Agreement, any particular Fiscal Year shall be designated by reference to the calendar year in which such Fiscal Year ends. 
  
 “Foreign Plan” means any employee benefit plan maintained by Company or any of its Subsidiaries that is
mandated or governed by any law, rule or regulation of any Government Authority other than the United States of America, any state thereof or any other political subdivision thereof. 
  
 “Foreign Pledge Agreement” means each pledge agreement or similar instrument governed by the laws of a
country other than the United States, executed from time to time in accordance with subsection 6.8 by Company or any Domestic Significant Subsidiary that owns Capital Stock of one or more Foreign Significant Subsidiaries organized in such country,
in form and substance satisfactory to Administrative Agent, as such Foreign Pledge Agreement may be amended, supplemented or otherwise modified from time to time. 
  
 “Foreign Significant Subsidiary” means any Foreign Subsidiary that is a Significant Subsidiary. 

 
 “Foreign Subsidiary” means any Subsidiary of Company that
is not a Domestic Subsidiary. 
  
 “Fund” means
any Person (other than a natural Person) that 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. 
  
 “Funding and Payment Office” means (i) the office of
Administrative Agent located at Commercial Banking Loan Center, 201 3rd Street, 8th Floor, San Francisco, California 94103 or (ii) such other office of Administrative Agent as may from time to time hereafter be designated as such in
a written notice delivered by Administrative Agent to Company and each Lender. 
  
 “Funding Date” means the date of the funding of a Loan. 
  
 “GAAP” means, subject to the limitations on the application thereof set forth in subsection 1.2, generally accepted accounting principles
set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting profession, in each case as the same are applicable to the circumstances as of the date of determination. 
  
 “Governing Body” means the board of directors or other body having the power to direct or cause the
direction of the management and policies of a Person that is a corporation, partnership, trust or limited liability company. 
  
 “Government Authority” means the government of the United States or any other nation, or any state, regional or local political
subdivision or department thereof, and any other governmental or regulatory agency, authority, body, commission, central bank, board, bureau, 

  

 11 

 
organ, court, instrumentality or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government, in each case whether federal, state, local or foreign (including supra-national bodies such as the European Union or the European Central Bank). 
  
 “Governmental Authorization” means any permit, license, registration, authorization, plan, directive,
consent, order or consent decree of or from, or notice to, any Government Authority. 
  
 “Hazardous Materials” means (i) any chemical, material or substance at any time defined as or included in the definition of “hazardous substances”, “hazardous wastes”,
“hazardous materials”, “extremely hazardous waste”, “acutely hazardous waste”, “radioactive waste”, “biohazardous waste”, “pollutant”, “toxic pollutant”, “contaminant”,
“restricted hazardous waste”, “infectious waste”, “toxic substances”, or any other term or expression intended to define, list or classify substances by reason of properties harmful to health, safety or the indoor or
outdoor environment (including harmful properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, “TCLP toxicity” or “EP toxicity” or words of similar import under any applicable
Environmental Laws); (ii) any oil, petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or
geothermal resources; (iv) any flammable substances or explosives; (v) any radioactive materials; (vi) any asbestos-containing materials; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which contains any oil or dielectric fluid
containing polychlorinated biphenyls; (ix) pesticides; and (x) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any Government Authority or which may or could pose a hazard to the health and safety
of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment. 
  
 “Hazardous Materials Activity” means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous
Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal,
remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing. 
  
 “Hedge Agreement” means an Interest Rate Agreement or a Currency Agreement designed to hedge against fluctuations in interest rates or
currency values, respectively. 
  
 “Indebtedness”, as applied to any Person, means (i) all indebtedness for borrowed money, (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in
conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (iv) any obligation owed for all or any part of the deferred purchase price of property or
services (excluding any such obligations incurred under ERISA), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument, and (v)
all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured 

  

 12 

 
thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person; provided that allocations for overhead costs made by
Company to any Subsidiary that do not involve the transfer of Cash by Company shall not constitute Indebtedness. Obligations under Interest Rate Agreements and Currency Agreements constitute (1) in the case of Hedge Agreements, Contingent
Obligations, and (2) in all other cases, Investments, and in neither case constitute Indebtedness. 
  
 “Indemnified Liabilities” has the meaning assigned to that term in subsection 10.3. 
  
 “Indemnitee” has the meaning assigned to that term in
subsection 10.3. 
  
 “Insolvency Event” means,
with respect to any Person, the occurrence of any of the events described in subsection 8.6 or 8.7; provided that, solely for purposes of this definition, any references to Company or any of its Subsidiaries in subsection 8.6 or 8.7 shall be
deemed to be a reference to such Person. 
  
 “Intellectual Property” means all patents, trademarks, tradenames, copyrights, technology, software, know-how and processes used in or necessary for the conduct of the business of Company and its Subsidiaries as currently
conducted that are material to the condition (financial or otherwise), business or operations of Company and its Subsidiaries, taken as a whole. 
  
 “Interest Payment Date” means (i) with respect to any Base Rate Loan, each March 31, June 30, September 30 and December 31 of each year,
commencing on the first such date to occur after the Restatement Date, and (ii) with respect to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan; provided that in the case of each Interest Period of six
months “Interest Payment Date” shall also include the date that is three months after the commencement of such Interest Period. 
  
 “Interest Period” has the meaning assigned to that term in subsection 2.2B. 
  
 “Interest Rate Agreement” means any interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement or other similar agreement or arrangement to which Company or any of its Subsidiaries is a party. 
  
 “Interest Rate Determination Date”, with respect to any Interest Period, means the second Business Day prior to the first day of such
Interest Period. 
  
 “Internal Revenue Code”
means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute. 
  
 “Investment” means (i) any direct or indirect purchase or other acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (including any Subsidiary of Company), (ii) any direct or indirect redemption, retirement, purchase or other acquisition for value, by any Subsidiary of Company from any Person other than Company or
any of its Subsidiaries, of any equity Securities of such Subsidiary, (iii) any direct or indirect loan, advance (other than advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the
ordinary course of business) or 

  

 13 

 
capital contribution by Company or any of its 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, or (iv) Interest Rate Agreements or Currency Agreements not constituting Hedge Agreements. As used herein, the term
“Investment” does not include investments relating to the cash surrender value of insurance policies. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment (other than adjustments for the repayment of, or the refund of capital with respect to, the original principal amount of any
such Investment). 
  
 “IP Collateral” means,
collectively, the Intellectual Property that constitutes Collateral under the Security Agreement. 
  
 “Issuing Lender” means Wells Fargo, in its capacity as issuer of any Letter of Credit hereunder. 
  
 “Joint Venture” means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal form. 
  
 “Korn/Ferry Executive Capital Accumulation Plan” means Company’s Executive Capital Accumulation Plan in the form delivered to Administrative Agent on or prior to the Restatement Date, as such
Executive Capital Accumulation Plan may thereafter be amended, supplemented or otherwise modified from time to time. 
  
 “Korn/Ferry International Employee Stock Purchase Plan” means Company’s 2003 Korn/Ferry International Employee Stock Purchase Plan
in the form delivered to Administrative Agent on or prior to the Restatement Date, as such 2003 Korn/Ferry International Employee Stock Purchase Plan may thereafter be amended, supplemented or otherwise modified from time to time. 
  
 “Lender” and “Lenders” means the Persons
identified as “Lenders” and listed on the signature pages of this Agreement, together with their successors and permitted assigns pursuant to subsection 10.1. 
  
 “Letter of Credit” or “Letters of Credit” means any standby letters of credit or similar
instruments issued by Issuing Lender for the account of Company pursuant to subsection 3.1 for the purpose of supporting (i) Indebtedness of Company or any of its Subsidiaries in respect of industrial revenue or development bonds or financings, (ii)
workers’ compensation liabilities of Company or any of its Subsidiaries, (iii) the obligations of third party insurers of Company or any of its Subsidiaries arising by virtue of the laws of any jurisdiction requiring third party insurers, (iv)
obligations with respect to Capital Leases or Operating Leases of Company or any of its Subsidiaries, and (v) performance, payment, deposit or surety obligations of Company or any of its Subsidiaries, in any case if required by law or governmental
rule or regulation or in accordance with custom and practice in the industry. 
  
 “Letter of Credit Usage” means, as at any date of determination, the sum of (i) the maximum aggregate amount which is or at any time thereafter may become available for 

  

 14 

 
drawing under all Letters of Credit then outstanding plus (ii) the aggregate amount of all drawings under Letters of Credit honored by Issuing Lender
and not theretofore reimbursed out of the proceeds of Revolving Loans pursuant to subsection 3.3B or otherwise reimbursed by Company. For purposes of this definition, any amount described in clause (i) or (ii) of the preceding sentence which is
denominated in a currency other than Dollars shall be valued based on the applicable Exchange Rate for such currency as of the applicable date of determination. 
  

“Lien” means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing. 
  
 “Loan” or “Loans” means one or more of the
Revolving Loans. 
  
 “Loan Documents” means this
Agreement, the Notes, the Letters of Credit (and any applications for, or reimbursement agreements or other documents or certificates executed by Company in favor of Issuing Lender relating to, the Letters of Credit), the Subsidiary Guaranty and the
Collateral Documents. 
  
 “Loan Party” means each
of Company and any of Company’s Significant Subsidiaries from time to time executing a Loan Document, and “Loan Parties” means all such Persons, collectively. 
  
 “Margin Stock” has the meaning assigned to that term in Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time. 
  
 “Material Adverse Effect” means (i) a material adverse effect upon the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company and its Subsidiaries taken as a whole or (ii) the
impairment of the ability of any Loan Party to perform, or of Administrative Agent or Lenders to enforce, the Obligations. 
  
 “Multiemployer Plan” means any Employee Benefit Plan that is a “multiemployer plan” as defined in Section 3(37) of ERISA.

  
 “Net Business Interruption Insurance
Proceeds” means any Cash payments or proceeds received by Company or any of its Subsidiaries under any business interruption or similar insurance policy in respect of a covered loss thereunder, net of any actual and reasonable documented
costs incurred by Company or any of its Subsidiaries in connection with the adjustment or settlement of any claims of Company or such Subsidiary in respect thereof. 
  
 “Non-Consenting Lender” has the meaning assigned to that term in subsection 2.9. 
  
 “Non-US Lender” means a Lender that is organized under the
laws of any jurisdiction other than the United States or any state or other political subdivision thereof. 
  
 “Notes” means one or more of the Revolving Notes. 
  

 15 

 “Notice of Borrowing” means a notice substantially in the form of Exhibit I
annexed hereto. 
  
 “Notice of
Conversion/Continuation” means a notice substantially in the form of Exhibit II annexed hereto. 
  
 “Obligations” means all obligations of every nature of each Loan Party from time to time owed to Administrative Agent, Lenders or any of
them under the Loan Documents, whether for principal, interest, reimbursement of amounts drawn under Letters of Credit, fees, expenses, indemnification or otherwise. 
  
 “Officer” means the president, chief executive officer, a vice president, chief financial officer,
treasurer, general partner (if an individual), managing member (if an individual) or other individual appointed by the Governing Body or the Organizational Documents of a corporation, partnership, trust or limited liability company to serve in a
similar capacity as the foregoing. 
  
 “Officer’s
Certificate”, as applied to any Person that is a corporation, partnership, trust or limited liability company, means a certificate executed on behalf of such Person by one or more Officers of such Person or one or more Officers of a general
partner or a managing member if such general partner or managing member is a corporation, partnership, trust or limited liability company. 
  
 “Operating Lease”, as applied to any Person, means any lease (including leases that may be terminated by the lessee at any time) of any
property (whether real, personal or mixed) that is not a Capital Lease other than any such lease under which that Person is the lessor. 
  
 “Organizational Documents” means the documents (including Bylaws, if applicable) pursuant to which a Person that is a corporation,
partnership, trust or limited liability company is organized. 
  
 “Original Credit Agreement” has the meaning assigned to that term in the recitals to this Agreement. 
  
 “Participant” means a purchaser of a participation in the rights and obligations under this Agreement pursuant to subsection 10.1C.

  
 “PBGC” means the Pension Benefit Guaranty
Corporation or any successor thereto. 
  
 “Pension
Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, that is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA, and, for purposes of subsection 8.10, any Foreign Plan. 
  
 “Permitted Acquisition” means the acquisition of assets
(including Capital Stock and including Capital Stock of Subsidiaries formed in connection with any such acquisition) of any Person; provided that (i) such Person is in the same or similar line of business as Company, (ii) after giving effect
to such acquisition, no Event of Default or Potential Event of Default exists at the time such acquisition is agreed upon or consummated (or would result therefrom), (iii) after giving pro forma effect to such acquisition, Company will be in
compliance with the provisions 

  

 16 

 
of subsection 7.6 as of and for the most recently completed period of four consecutive Fiscal Quarters ending prior to such acquisition for which financial
statements required by subsections 6.1(iii), (iv) and (v) have been delivered, and (iv) such Person shall have had positive Consolidated EBITDA (substituting such Person and its Subsidiaries for Company and its Subsidiaries in such definition and in
the definitions of Consolidated Net Income and Consolidated Interest Expense) for the twelve-month period preceding such acquisition. 
  
 “Permitted Encumbrances” means the following types of Liens (excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of
the Internal Revenue Code or by ERISA, any such Lien imposed by a Government Authority in connection with any Foreign Plan, any such Lien relating to or imposed in connection with any Environmental Claim, and any such Lien expressly prohibited by
any applicable terms of any of the Collateral Documents): 
  
 (i) Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time, required by subsection 6.3; 
  
 (ii) statutory Liens of landlords, Liens of collecting banks under the UCC on items in the course of
collection, statutory Liens and rights of set-off of banks, statutory Liens of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law, in each case incurred in the ordinary course of business (a) for
amounts not yet overdue or (b) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of 5 days) are being contested in good faith by appropriate proceedings, so long as (1) such reserves or other
appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts, and (2) in the case of a Lien with respect to any portion of the Collateral, such contest proceedings conclusively operate to stay the
sale of any portion of the Collateral on account of such Lien; 
  
 (iii) deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of statutory obligations,
bids, leases, government contracts, trade contracts, and other similar obligations (exclusive of obligations for the payment of borrowed money), so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion
of the Collateral on account thereof; 
  
 (iv)
any attachment or judgment Lien not constituting an Event of Default under subsection 8.8; 
  
 (v) licenses (with respect to Intellectual Property and other property), leases or subleases granted to third parties in accordance with
any applicable terms of the Collateral Documents and not interfering in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries or resulting in a material diminution in the value of any Collateral as
security for the Obligations; 
  
 (vi) easements,
rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries
or result in a material diminution in the value of any Collateral as security for the Obligations; 
  

 17 

 (vii) any (a) interest or title of a lessor or sublessor under any lease not prohibited
by this Agreement, (b) Lien or restriction that the interest or title of such lessor or sublessor may be subject to, or (c) subordination of the interest of the lessee or sublessee under such lease to any Lien or restriction referred to in the
preceding clause (b), so long as the holder of such Lien or restriction agrees to recognize the rights of such lessee or sublessee under such lease; 
  
 (viii) Liens arising from filing UCC financing statements relating solely to leases not prohibited by this Agreement; 
  
 (ix) any zoning or similar law or right reserved to or
vested in any governmental office or agency to control or regulate the use of any real property; 
  
 (x) Liens granted pursuant to the Collateral Documents; and 
  
 (xi) Liens securing obligations (other than obligations representing Indebtedness for borrowed money) under
operating, reciprocal easement or similar agreements entered into in the ordinary course of business of Company and its Subsidiaries. 
  
 “Person” means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies,
limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments (whether federal,
state or local, domestic or foreign, and including political subdivisions thereof) and agencies or other administrative or regulatory bodies thereof. 
  
 “Platform” means an electronic delivery system (which may be provided by Administrative Agent, an Affiliate of Administrative Agent or
any Person that is not an Affiliate of Administrative Agent), such as IntraLinks or a substantially similar electronic system. 
  
 “Pledged Collateral” means, collectively, the “Pledged Collateral” as defined in the Security Agreement and any Foreign Pledge
Agreement. 
  
 “Potential Event of Default” means
a condition or event that, after notice or lapse of time or both, would constitute an Event of Default. 
  
 “Prime Rate” means the rate that Wells Fargo announces from time to time as its prime lending rate, as in effect from time to time. The
Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Wells Fargo or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime
Rate. 
  
 “Proceedings” means any action, suit,
proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration. 
  

 18 

 “Pro Rata Share” means, with respect to all payments, computations and other matters
relating to the Revolving Loan Commitment or the Revolving Loans of any Lender or any Letters of Credit issued or participations therein deemed purchased by any Lender, the percentage obtained by dividing (x) the Revolving Loan Exposure of
that Lender by (y) the aggregate Revolving Loan Exposure of all Lenders, as the applicable percentage may be adjusted by assignments permitted pursuant to subsection 10.1. The initial Pro Rata Share of each Lender is set forth opposite the
name of that Lender set forth on Schedule 2.1 annexed hereto. 
  
 “PTO” means the United States Patent and Trademark Office or any successor or substitute office in which filings are necessary or, in the opinion of Administrative Agent, desirable in order to create or perfect Liens on any
IP Collateral. 
  
 “Real Property Asset”
means, at any time of determination, any interest then owned by any Loan Party (other than any Foreign Subsidiary) in any real property. 
  
 “Regional Consolidated Financial Statements” means, with respect to the Foreign Subsidiaries located in Europe, Latin America and Asia,
financial statements prepared such that individual Subsidiaries within the above-mentioned geographic areas are consolidated together and presented as consolidated entities (e.g., presented as “consolidated European Subsidiaries”,
“consolidated Asian Subsidiaries”, etc.), each in form satisfactory to Administrative Agent. 
  
 “Register” has the meaning assigned to that term in subsection 2.1D. 
  
 “Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System, as in effect
from time to time. 
  
 “Reimbursement Date” has
the meaning assigned to that term in subsection 3.3B. 
  
 “Release” means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), including the movement of any Hazardous Materials through the air, soil, surface water or groundwater.

  
 “Request for Issuance” means a request
substantially in the form of Exhibit III annexed hereto. 
  
 “Requisite Lenders” means Revolving Lenders having or holding more than 50% of the aggregate Revolving Loan Exposure of all Lenders. 
  

“Restatement Date” means the date on which all conditions set forth in subsections 4.1 and 4.2 are satisfied. 
  
 “Restricted Junior Payment” means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock of Company now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Company now or 

  

 19 

 
hereafter outstanding, (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares
of any class of stock of Company now or hereafter outstanding, and (iv) any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking
fund or similar payment with respect to, any Subordinated Indebtedness. 
  
 “Revolving Lender” means a Lender that has a Revolving Loan Commitment and/or that has an outstanding Revolving Loan. 
  
 “Revolving Loan Commitment” means the commitment of a Revolving Lender to make Revolving Loans to Company pursuant to subsection 2.1A,
and “Revolving Loan Commitments” means such commitments of all Revolving Lenders in the aggregate. 
  
 “Revolving Loan Commitment Amount” means, at any date, the aggregate amount of the Revolving Loan Commitments of all Revolving Lenders.

  
 “Revolving Loan Commitment Termination Date”
means February 14, 2008. 
  
 “Revolving Loan
Exposure”, with respect to any Revolving Lender, means, as of any date of determination (i) prior to the termination of the Revolving Loan Commitments, that Lender’s Revolving Loan Commitment, and (ii) after the termination of the
Revolving Loan Commitments, the sum of (a) the aggregate outstanding principal amount of the Revolving Loans of that Lender plus (b) in the event that Lender is Issuing Lender, the aggregate Letter of Credit Usage in respect of all Letters of
Credit issued by that Lender (in each case net of any participations purchased by other Lenders in such Letters of Credit or in any unreimbursed drawings thereunder) plus (c) the aggregate amount of all participations purchased by that Lender
in any outstanding Letters of Credit or any unreimbursed drawings under any Letters of Credit. 
  
 “Revolving Loans” means the Loans made by Revolving Lenders to Company pursuant to subsection 2.1A. 
  
 “Revolving Notes” means any promissory notes of Company issued pursuant to subsection 2.1E to evidence the Revolving Loans of any
Revolving Lenders, substantially in the form of Exhibit IV annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. 
  

“Securities” means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in
any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated, certificated or uncertificated, or otherwise, or in general any
instruments commonly known as “securities” or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing. 
  
 “Securities Account” means an
account to which a financial asset is or may be credited in accordance with an agreement under which the Person maintaining the account undertakes to treat the Person for whom the account is maintained as entitled to exercise the rights that
comprise the financial asset. 
  

 20 

 “Securities Act” means the Securities Act of 1933, as amended from time to time, and any
successor statute. 
  
 “Security Agreement” means
the Amended and Restated Security Agreement executed and delivered on the Restatement Date and to be executed and delivered by additional Subsidiaries of Company from time to time thereafter in accordance with subsection 6.8, substantially in the
form of Exhibit X annexed hereto, as such Security Agreement may thereafter be amended, supplemented or otherwise modified from time to time. 
  
 “Significant Subsidiary” means, collectively, (i) Korn/Ferry International Futurestep, Inc., Korn/Ferry International GmbH, Korn/Ferry
International, Limited, Nippon Korn/Ferry International, Korn/Ferry International (H.K.) Limited, and (ii), as of any date of determination, each additional Subsidiary of Company that had on the last day of the Fiscal Quarter then most recently
ended, any of the following: (a) total assets (excluding intercompany Indebtedness owing from Company or any of the Significant Subsidiaries) with a book value equal to 5% or greater of the total assets (excluding intercompany Indebtedness) of
Company and its Subsidiaries, on a consolidated basis, or (b) total revenue (excluding intercompany revenue) equal to 5% or greater of the total revenue (excluding intercompany revenue) of Company and its Subsidiaries, on a consolidated basis, in
each case as determined in accordance with GAAP. 
  
 “Solvent”, with respect to any Person, means that as of the date of determination both (i)(a) the then fair saleable value of the property of such Person is (1) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (2) not less than the amount that will be required to pay the probable liabilities on such Person’s then existing debts as they become absolute and due considering all financing alternatives and
potential asset sales reasonably available to such Person; (b) such Person’s capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (c) such Person does not intend to incur, or believe
(nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due; and (ii) such Person is “solvent” within the meaning given that term and similar terms under applicable laws relating to
fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability. 
  
 “Subordinated Indebtedness” means (i) the Convertible Subordinated Notes and the Convertible Series A Preferred Stock, and (ii) any Indebtedness of Company incurred from time to time and subordinated
in right of payment to the Obligations. 
  
 “Subordination
Agreement” has the meaning assigned to that term in subsection 4.1K. 
  
 “Subsidiary”, with respect to any Person, means any corporation, partnership, trust, limited liability company, association, Joint Venture or other business entity of which more than 50% of the total
voting power of shares of stock or other ownership interests entitled (without 

  

 21 

 
regard to the occurrence of any contingency) to vote in the election of the members of the Governing Body is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. 
  
 “Subsidiary Guarantor” means any Domestic Significant Subsidiary of Company that executed and delivered a counterpart of the Subsidiary
Guaranty on the Restatement Date or that executes and delivers a counterpart thereof from time to time thereafter pursuant to subsection 6.8. 
  
 “Subsidiary Guaranty” means the Amended and Restated Subsidiary Guaranty executed and delivered by existing Domestic Significant
Subsidiaries of Company on the Restatement Date and to be executed and delivered by additional Subsidiaries of Company from time to time thereafter in accordance with subsection 6.8, substantially in the form of Exhibit IX annexed hereto, as
such Subsidiary Guaranty may hereafter be amended, supplemented or otherwise modified from time to time. 
  
 “Supplemental Collateral Agent” has the meaning assigned to that term in subsection 9.1B. 
  
 “Tax” or “Taxes” means any present or
future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed, including interest, penalties, additions to tax and
any similar liabilities with respect thereto; except that, in the case of a Lender, there shall be excluded (i) taxes that are imposed on the overall net income or net profits (including franchise taxes imposed in lieu thereof) (a) by the United
States, (b) by any other Government Authority under the laws of which such Lender is organized or has its principal office or maintains its applicable lending office, or (c) by any jurisdiction solely as a result of a present or former connection
between such Lender and such jurisdiction (other than any such connection arising solely from such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, any of the Loan Documents), (ii) any branch
profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which such Lender is located, and (iii) any tax, assessment or other governmental charge that would not have been imposed but for such Lender’s
failure to comply with any certification, identification or other reporting requirements concerning such Lender’s nationality, residence, identity or connection with the United States, if compliance is required as a precondition to exemption
from or reduction of such tax, assessment or other governmental charge. 
  
 “Total Utilization of Revolving Loan Commitments” means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Revolving Loans plus (ii) the Letter of Credit Usage.

  
 “UCC” means the Uniform Commercial Code as in
effect in any applicable jurisdiction. 
  
 “Wells
Fargo” has the meaning assigned to that term in the introduction to this Agreement. 
  

 22 

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

  
 Except as otherwise expressly provided in this Agreement,
all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered by Company to Lenders pursuant to clauses (ii), (iii), (iv) and
(xii) of subsection 6.1 shall be prepared in accordance with GAAP as in effect at the time of such preparation (and delivered together with the reconciliation statements provided for in subsection 6.1(vi)). Calculations in connection with the
definitions, covenants and other provisions of this Agreement shall utilize GAAP as in effect on the date of determination, applied in a manner consistent with that used in preparing the financial statements referred to in subsection 5.3. If at any
time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and Company, Administrative Agent or Requisite Lenders shall so request, Administrative Agent, Lenders and Company shall
negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of Requisite Lenders), provided that, until so amended, such ratio or requirement shall
continue to be computed in accordance with GAAP prior to such change therein and Company shall provide to Administrative Agent and Lenders reconciliation statements provided for in subsection 6.1(vi). 
  
 1.3 Other Definitional Provisions and Rules of Construction.

  
 A. Any of the terms defined herein may, unless the
context otherwise requires, be used in the singular or the plural, depending on the reference. 
  
 B. References to “Sections” and “subsections” shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided. Section and subsection headings in
this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 
  
 C. The use in any of the Loan Documents of the word “include” or “including”, when following any
general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as
“without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such
general statement, term or matter. 
  
 Section 2. AMOUNTS AND TERMS OF
COMMITMENTS AND LOANS 
  
 2.1 Commitments; Making
of Loans; the Register; Optional Notes. 
  
 A.
Commitments. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, each Lender severally agrees, subject to the limitations set forth below with respect to the
maximum amount of Revolving Loans permitted to be outstanding from time to time, to lend to Company from time to time during the period from the Restatement Date to but excluding the Revolving Loan Commitment Termination Date an aggregate amount not
exceeding its Pro Rata Share of the 

  

 23 

 
aggregate amount of the Revolving Loan Commitments to be used for the purposes identified in subsection 2.5A. The amount of each Revolving Lender’s
Revolving Loan Commitment as of the Restatement Date is set forth opposite its name set forth on Schedule 2.1 annexed hereto and the Revolving Loan Commitment Amount as of the Restatement Date is $50,000,000; provided that the
Revolving Loan Commitments of Revolving Lenders shall be adjusted to give effect to any assignments of the Revolving Loan Commitments pursuant to subsection 10.1B and shall be reduced from time to time by the amount of any reductions thereto made
pursuant to subsection 2.4. Each Revolving Lender’s Revolving Loan Commitment shall expire on the Revolving Loan Commitment Termination Date and all Revolving Loans and all other amounts owed hereunder with respect to the Revolving Loans and
the Revolving Loan Commitments shall be paid in full no later than that date. Amounts borrowed under this subsection 2.1A may be repaid and reborrowed to but excluding the Revolving Loan Commitment Termination Date. Anything contained in this
Agreement to the contrary notwithstanding, the Revolving Loans and the Revolving Loan Commitments shall be subject to the limitation that in no event shall the Total Utilization of Revolving Loan Commitments at any time exceed the Revolving Loan
Commitment Amount then in effect. 
  
 B. Borrowing
Mechanics. Revolving Loans made on any Funding Date (other than Revolving Loans made pursuant to subsection 3.3B) shall be in an aggregate minimum amount of $500,000 and multiples of $100,000 in excess of that amount; provided that
Revolving Loans made on any Funding Date as Eurodollar Rate Loans with a particular Interest Period shall be in an aggregate minimum amount of $1,000,000 and multiples of $500,000 in excess of that amount. Whenever Company desires that Lenders make
Revolving Loans it shall deliver to Administrative Agent a duly executed Notice of Borrowing no later than 10:00 A.M. (California time) at least three Business Days in advance of the proposed Funding Date (in the case of a Eurodollar Rate Loan) or
on the proposed Funding Date (in the case of a Base Rate Loan). Revolving Loans may be continued as or converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided in subsection 2.2D. In lieu of delivering a Notice of Borrowing,
Company may give Administrative Agent telephonic notice by the required time of any proposed borrowing under this subsection 2.1B; provided that such notice shall be promptly confirmed in writing by delivery of a duly executed Notice of
Borrowing to Administrative Agent on or before the applicable Funding Date. 
  
 Neither Administrative Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by an Officer
or other person authorized to borrow on behalf of Company or for otherwise acting in good faith under this subsection 2.1B or under subsection 2.2D, and upon funding of Loans by Lenders, and upon conversion or continuation of the applicable basis
for determining the interest rate with respect to any Loans pursuant to subsection 2.2D, in each case in accordance with this Agreement, pursuant to any such telephonic notice Company shall have effected Loans or a conversion or continuation, as the
case may be, hereunder. 
  
 Company shall notify Administrative
Agent prior to the funding of any Loans in the event that any of the matters to which Company is required to certify in the applicable Notice of Borrowing is no longer true and correct as of the applicable Funding Date, and the acceptance by Company
of the proceeds of any Loans shall constitute a re-certification by Company, as of the applicable Funding Date, as to the matters to which Company is required to certify in the applicable Notice of Borrowing. 
  

 24 

 Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a Notice of Borrowing for, or a Notice
of Conversion/Continuation for conversion to, or continuation of, a Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to make a
borrowing or to effect a conversion or continuation in accordance therewith. 
  
 C. Disbursement of Funds. All Revolving Loans shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that neither Administrative Agent nor any
Lender shall be responsible for any default by any other Lender in that other Lender’s obligation to make a Loan requested hereunder nor shall the Commitment of any Lender to make the particular type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender’s obligation to make a Loan requested hereunder. Promptly after receipt by Administrative Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu
thereof), Administrative Agent shall notify each Lender for that type of Loan of the proposed borrowing. Each such Lender shall make the amount of its Loan available to Administrative Agent not later than 1:00 P.M. (California time) on the
applicable Funding Date in same day funds in Dollars at the Funding and Payment Office. Except as provided in subsection 3.3B with respect to Revolving Loans used to reimburse Issuing Lender for the amount of a drawing under a Letter of Credit
issued by it, upon satisfaction or waiver of the conditions precedent specified in subsections 4.1 (in the case of Loans made on the Restatement Date) and 4.2 (in the case of all Loans), Administrative Agent shall make the proceeds of such Loans
available to Company on the applicable Funding Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Loans received by Administrative Agent from Lenders to be credited to the account of Company at the Funding and
Payment Office. 
  
 Unless Administrative Agent shall have been
notified by any Lender prior to a Funding Date for any Loans that such Lender does not intend to make available to Administrative Agent the amount of such Lender’s Loan requested on such Funding Date, Administrative Agent may assume that such
Lender has made such amount available to Administrative Agent on such Funding Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Company a corresponding amount on such Funding Date. If such
corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Administrative Agent, at the customary rate set by Administrative Agent for the correction of errors among banks for three Business Days and thereafter at the Base Rate. If such Lender does not pay
such corresponding amount forthwith upon Administrative Agent’s demand therefor, Administrative Agent shall promptly notify Company and Company shall immediately pay such corresponding amount to Administrative Agent together with interest
thereon, for each day from such Funding Date until the date such amount is paid to Administrative Agent, at the rate payable under this Agreement for Base Rate Loans. Nothing in this subsection 2.1C shall be deemed to relieve any Lender from its
obligation to fulfill its Commitments hereunder or to prejudice any rights that Company may have against any Lender as a result of any default by such Lender hereunder. 
  

 25 

 D. The Register. 
  
 Administrative Agent, acting for these purposes solely as an agent of Company (it being acknowledged that Administrative
Agent, in such capacity, and its officers, directors, employees, agent and affiliates shall constitute Indemnitees under subsection 10.3), shall maintain (and make available for inspection by Company and Lenders upon reasonable prior notice at
reasonable times) at its address referred to in subsection 10.8 a register for the recordation of, and shall record, the names and addresses of Lenders and the Revolving Loan Commitment and Revolving Loans of each Lender from time to time (the
“Register”). Company and Administrative Agent shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof; all
amounts owed with respect to any Commitment or Loan shall be owed to the Lender listed in the Register as the owner thereof; and any request, authority or consent of any Person who, at the time of making such request or giving such authority or
consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans. Each Lender shall record on its internal records the amount of its Loans and
Commitments and each payment in respect hereof, and any such recordation shall be conclusive and binding on Company, absent manifest error, subject to the entries in the Register, which shall, absent manifest error, govern in the event of any
inconsistency with any Lender’s records. Failure to make any recordation in the Register or in any Lender’s records, or any error in such recordation, shall not affect any Loans or Commitments or any Obligations in respect of any Loans.

  
 E. Optional Notes. If so requested by any Lender by
written notice to Company (with a copy to Administrative Agent) at least two Business Days prior to the Restatement Date or at any time thereafter, Company shall execute and deliver to such Lender (and/or, if applicable and if so specified in such
notice, to any Person who is an assignee of such Lender pursuant to subsection 10.1) on the Restatement Date (or, if such notice is delivered after the Restatement Date, promptly after Company’s receipt of such notice) a promissory note or
promissory notes to evidence such Lender’s Revolving Loans, substantially in the form of Exhibit IV annexed hereto, with appropriate insertions. 
  
 2.2 Interest on the Loans. 
  
 A. Rate of Interest. Subject to the provisions of subsections 2.6 and 2.7, each Revolving Loan shall bear interest on the unpaid principal amount
thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Base Rate or the Eurodollar Rate. The applicable basis for determining the rate of interest with respect to any Revolving
Loan shall be selected by Company initially at the time a Notice of Borrowing is given with respect to such Loan pursuant to subsection 2.1B, and the basis for determining the interest rate with respect to any Revolving Loan may be changed from time
to time pursuant to subsection 2.2D. If on any day a Revolving Loan is outstanding with respect to which notice has not been delivered to Administrative Agent in accordance with the terms of this Agreement specifying the applicable basis for
determining the rate of interest, then for that day 

  

 26 

 
that Loan shall bear interest determined by reference to the Base Rate. Subject to the provisions of subsections 2.2E, 2.2G and 2.7, the Revolving Loans
shall bear interest through maturity as follows: (i) if a Base Rate Loan, then at the sum of the Base Rate plus 0.00% per annum or (ii) if a Eurodollar Rate Loan, then at the sum of the Eurodollar Rate plus 1.25% per annum. 

 
 B. Interest Periods. In connection with each Eurodollar Rate Loan,
Company may, pursuant to the applicable Notice of Borrowing or Notice of Conversion/Continuation, as the case may be, select an interest period (each an “Interest Period”) to be applicable to such Loan, which Interest Period shall
be, at Company’s option, either a one, two, three or six month period; provided that: 
  
 (i) the initial Interest Period for any Eurodollar Rate Loan shall commence on the Funding Date in respect of such Loan, in the case of a
Loan initially made as a Eurodollar Rate Loan, or on the date specified in the applicable Notice of Conversion/Continuation, in the case of a Loan converted to a Eurodollar Rate Loan; 
  
 (ii) in the case of immediately successive Interest Periods applicable to a Eurodollar Rate Loan continued
as such pursuant to a Notice of Conversion/Continuation, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires; 
  
 (iii) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period
shall expire on the next succeeding Business Day; provided that, if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day; 
  
 (iv) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall,
subject to clause (v) of this subsection 2.2B, end on the last Business Day of a calendar month; 
  
 (v) no Interest Period with respect to any portion of the Revolving Loans shall extend beyond the Revolving Loan Commitment Termination
Date; 
  
 (vi) there shall be no more than five
Interest Periods outstanding at any time; and 
  
 (vii) in the event Company fails to specify an Interest Period for any Eurodollar Rate Loan in the applicable Notice of Borrowing or Notice of Conversion/Continuation, Company shall be deemed to have selected an Interest Period of one
month. 
  
 C. Interest Payments. Subject to the provisions
of subsection 2.2E, interest on each Loan shall be payable in arrears on and to each Interest Payment Date applicable to that Loan, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid) and at maturity (including final
maturity) provided that in the event any Revolving Loans that are Base Rate Loans are prepaid pursuant to subsection 2.4A(i), interest accrued on such Loans through the date of such prepayment shall be payable on the next succeeding Interest
Payment Date applicable to Base Rate Loans (or, if earlier, at final maturity). 
  

 27 

 D. Conversion or Continuation. Subject to the provisions of subsection 2.6, Company shall have the
option (i) to convert at any time all or any part of its outstanding Revolving Loans equal to $500,000 and multiples of $100,000 in excess of that amount from Loans bearing interest at a rate determined by reference to one basis to Loans bearing
interest at a rate determined by reference to an alternative basis or (ii) upon the expiration of any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any portion of such Loan equal to $1,000,000 and multiples of $500,000 in
excess of that amount as a Eurodollar Rate Loan; provided, however, that a Eurodollar Rate Loan may only be converted into a Base Rate Loan on the expiration date of an Interest Period applicable thereto. 
  
 Company shall deliver a duly executed Notice of Conversion/Continuation to
Administrative Agent no later than 10:00 A.M. (California time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed
conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). In lieu of delivering a Notice of Conversion/Continuation, Company may give Administrative Agent telephonic notice by the required time of
any proposed conversion/continuation under this subsection 2.2D; provided that such notice shall be promptly confirmed in writing by delivery of a duly executed Notice of Conversion/Continuation to Administrative Agent on or before the
proposed conversion/continuation date. Upon receipt of written or telephonic notice of any proposed conversion/continuation under this subsection 2.2D, Administrative Agent shall promptly transmit such notice by telefacsimile or telephone to each
Lender of the Loan subject to the Notice of Conversion/Continuation. 
  
 E. Default Rate. Upon the occurrence and during the continuation of any Event of Default and upon election by Administrative Agent or Requisite Lenders, the outstanding principal amount of all Loans and, to the extent permitted by
applicable law, any interest payments thereon not paid when due and any fees and other amounts then due and payable hereunder, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other
applicable bankruptcy laws) payable upon demand by Administrative Agent at a rate that is 2% per annum in excess of the interest rate otherwise payable under this Agreement with respect to the applicable Loans (or, in the case of any such fees and
other amounts, at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans); provided that, in the case of Eurodollar Rate Loans, upon the expiration of the Interest Period in
effect at the time any such increase in interest rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is 2% per annum in excess of the interest
rate otherwise payable under this Agreement for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this subsection 2.2E is not a permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender. 
  
 F. Computation of Interest. Interest on the Loans shall be computed on the basis of a 360-day year, in each case for the actual number of days
elapsed in the period during which 

  

 28 

 
it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with
respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date
of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded;
provided that if a Loan is repaid on the same day on which it is made, one day’s interest shall be paid on that Loan. 
  
 G. Maximum Rate. Notwithstanding the foregoing provisions of this subsection 2.2, in no event shall the rate of interest payable by Company with
respect to any Loan exceed the maximum rate of interest permitted to be charged under applicable law. 
  
 2.3 Fees. 
  
 A. Commitment Fees. Company agrees to pay to Administrative Agent, for distribution to each Revolving Lender in proportion to that Lender’s
Pro Rata Share, commitment fees for the period from and including the Restatement Date to and excluding the Revolving Loan Commitment Termination Date equal to the average of the daily excess of the Revolving Loan Commitment Amount over the sum of
(i) the aggregate principal amount of outstanding Revolving Loans plus (ii) the Letter of Credit Usage multiplied by 0.25% per annum, such commitment fees to be calculated on the basis of a 360-day year and the actual number of days
elapsed and to be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on the first such date to occur after the Restatement Date, and on the Revolving Loan Commitment Termination Date. 

 
 B. Other Fees. Company agrees to pay to Administrative Agent such
fees in the amounts and at the times separately agreed upon between Company and Administrative Agent from time to time. 
  
 2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitment Amount; General Provisions Regarding Payments; Application of Proceeds of
Collateral and Payments Under Subsidiary Guaranty. 
  
 A. Prepayments and Reductions in Revolving Loan Commitment Amount. 
  
 (i) Voluntary Prepayments. Company may, upon any Business Day with prior written or telephonic notice, in the case of Base Rate
Loans, and three Business Days’ prior written or telephonic notice, in the case of Eurodollar Rate Loans, in each case given to Administrative Agent by 10:00 A.M. (California time) on the date required and, if given by telephone, promptly
confirmed in writing to Administrative Agent (which original written or telephonic notice Administrative Agent will promptly transmit by telefacsimile or telephone to each Lender for the Loans to be prepaid), at any time and from time to time prepay
any Revolving Loans on any Business Day in whole or in part in an aggregate minimum amount of $1,000,000 and multiples of $500,000 in excess of that amount with respect to Eurodollar Rate Loans, and $500,000 and multiples of $100,000 in excess of
that amount with respect to Base Rate Loans. Notice of 

  

 29 

 
prepayment having been given as aforesaid, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date
specified therein. Any such voluntary prepayment shall be applied as specified in subsection 2.4A(iv). 
  
 (ii) Voluntary Reductions of Revolving Loan Commitments. Company may, upon not less than three Business Days’ prior written or
telephonic notice confirmed in writing to Administrative Agent (which original written or telephonic notice Administrative Agent will promptly transmit by telefacsimile or telephone to each Revolving Lender), at any time and from time to time
terminate in whole or permanently reduce in part, without premium or penalty, the Revolving Loan Commitment Amount in an amount up to the amount by which the Revolving Loan Commitment Amount exceed the Total Utilization of Revolving Loan Commitments
at the time of such proposed termination or reduction; provided that any such partial reduction of the Revolving Loan Commitment Amount shall be in an aggregate minimum amount of $1,000,000 and multiples of $1,000,000 in excess of that
amount. Company’s notice to Administrative Agent shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Revolving Loan
Commitments shall be effective on the date specified in Company’s notice and shall reduce the Revolving Loan Commitment of each Revolving Lender proportionately to its Pro Rata Share. Any such voluntary reduction of the Revolving Loan
Commitment Amount shall be applied as specified in subsection 2.4A(iv). 
  
 (iii) Mandatory Prepayments and Mandatory Reductions of Revolving Loan Commitments. The Loans shall be prepaid and/or the Revolving Loan Commitment Amount shall be permanently reduced in the amounts and under
the circumstances set forth below, all such prepayments and/or reductions to be applied as set forth below or as more specifically provided in subsection 2.4A(iv): 
  
 (a) Prepayments and Reductions from Net Business Interruption Insurance Proceeds. No later than the
first Business Day following the date of receipt by Administrative Agent or by Company or any of its Subsidiaries of any Net Business Interruption Insurance Proceeds that are required to be applied to prepay the Loans and/or reduce the Revolving
Loan Commitment Amount pursuant to the provisions of subsection 6.4C, Company shall prepay the Loans and/or the Revolving Loan Commitment Amount shall be permanently reduced in an aggregate amount equal to the amount of such Net Business
Interruption Insurance Proceeds. 
  
 (b)
Calculations of Net Business Interruption Insurance Proceeds Amounts; Additional Prepayments and Reductions Based on Subsequent Calculations. Concurrently with any prepayment of the Loans and/or reduction of the Revolving Loan Commitment Amount
pursuant to subsection 2.4A(iii)(a), Company shall deliver to Administrative Agent an Officer’s Certificate demonstrating the calculation of the amount of the applicable Net Business Interruption Insurance Proceeds that gave rise to such
prepayment and/or reduction. In the event that Company shall subsequently determine that the actual amount was greater than the amount set forth in such Officer’s Certificate, 

  

 30 

 
Company shall promptly make an additional prepayment of the Loans (and/or, if applicable, the Revolving Loan Commitment Amount shall be permanently reduced)
in an amount equal to the amount of such excess, and Company shall concurrently therewith deliver to Administrative Agent an Officer’s Certificate demonstrating the derivation of the additional amount resulting in such excess. 
  
 (c) Prepayments Due to Reductions or Restrictions of
Revolving Loan Commitment Amount. Company shall from time to time prepay the Revolving Loans to the extent necessary so that the Total Utilization of Revolving Loan Commitments shall not at any time exceed the Revolving Loan Commitment Amount
then in effect. 
  
 (iv) Application of
Prepayments. 
  
 (a) Application of Voluntary
Prepayments by Type of Loans and Order of Maturity. Any voluntary prepayments pursuant to subsection 2.4A(i) shall be applied as specified by Company in the applicable notice of prepayment; provided that in the event Company fails to
specify the Loans to which any such prepayment shall be applied, such prepayment shall be applied to repay outstanding Revolving Loans to the full extent thereof. 
  
 (b) Application of Mandatory Prepayments by Type of Loans. Except as provided in subsection 2.4C, any
amount required to be applied as a mandatory prepayment of the Loans and/or a reduction of the Revolving Loan Commitment Amount pursuant to subsection 2.4A(iii)(a) shall be applied first, to prepay the Revolving Loans to the full extent
thereof and to permanently reduce the Revolving Loan Commitment Amount by the amount of such prepayment, and second, to the extent of any remaining portion of such amount, to further permanently reduce the Revolving Loan Commitment Amount to
the full extent thereof. Any mandatory reduction of the Revolving Loan Commitment Amount pursuant to this subsection 2.4A shall be in proportion to each Revolving Lender’s Pro Rata Share. 
  
 (c) Application of Prepayments to Base Rate Loans and
Eurodollar Rate Loans. Any prepayment shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner that minimizes the amount of any payments required to be made by
Company pursuant to subsection 2.6D. 
  
 B. General Provisions
Regarding Payments. 
  
 (i) Manner
and Time of Payment. All payments by Company of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 10:00 A.M. (California time) on the date due at the Funding and Payment Office for the account of Lenders; funds received by Administrative Agent after that time on such due date shall be deemed to have been paid

  

 31 

 
by Company on the next succeeding Business Day. Company hereby authorizes Administrative Agent to charge its accounts with Administrative Agent in order to
cause timely payment to be made to Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose and subject to prior notice to Company of the amount
thereof in the case of expenses in amounts not specified in this Agreement). 
  
 (ii) Application of Payments to Principal and Interest. Except as provided in subsection 2.2C, all payments in respect of the principal amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to such Loan) shall be applied to the payment of interest before
application to principal. 
  
 (iii)
Apportionment of Payments. Aggregate principal and interest payments in respect of Revolving Loans shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to Lenders’ respective Pro
Rata Shares. Administrative Agent shall promptly distribute to each Lender, at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request, its Pro Rata Share of all such
payments received by Administrative Agent and the commitment fees of such Lender, if any, when received by Administrative Agent pursuant to subsection 2.3. Notwithstanding the foregoing provisions of this subsection 2.4B(iii), if, pursuant to the
provisions of subsection 2.6C, any Notice of Conversion/Continuation is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Administrative Agent shall give
effect thereto in apportioning payments received thereafter. 
  
 (iv) Payments on Business Days. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees hereunder, as the case may be. 
  
 (v) Notation of Payment. Each Lender agrees that before disposing of any Note held by it, or any part thereof (other than by
granting participations therein), that Lender will make a notation thereon of all Loans evidenced by that Note and all principal payments previously made thereon and of the date to which interest thereon has been paid; provided that the
failure to make (or any error in the making of) a notation of any Loan made under such Note shall not limit or otherwise affect the obligations of Company hereunder or under such Note with respect to any Loan or any payments of principal or interest
on such Note. 
  
 C. Application of Proceeds of Collateral and
Payments after Event of Default. 
  
 Upon the
occurrence and during the continuation of an Event of Default, if requested by Requisite Lenders, or upon acceleration of the Obligations pursuant to Section 8, (a) all 

  

 32 

 
payments received by Administrative Agent, whether from Company, from any Guarantor or otherwise, and (b) all proceeds received by Administrative Agent in
respect of any sale of, collection from, or other realization upon all or any part of the Collateral under any Collateral Document may, in the discretion of Administrative Agent, be held by Administrative Agent as Collateral for, and/or (then or at
any time thereafter) applied in full or in part by Administrative Agent in the following order of priority: 
  
 (i) to the payment of all costs and expenses of such sale, collection or other realization, all other expenses, liabilities and advances
made or incurred by Administrative Agent in connection therewith, and all amounts for which Administrative Agent is entitled to compensation (including the fees described in subsection 2.3), reimbursement and indemnification under any Loan Document
and all advances made by Administrative Agent thereunder for the account of the applicable Loan Party, and to the payment of all costs and expenses paid or incurred by Administrative Agent in connection with the Loan Documents, all in accordance
with subsections 9.4, 10.2 and 10.3 and the other terms of this Agreement and the Loan Documents; 
  
 (ii) thereafter, to the payment of all other Obligations for the ratable benefit of the holders thereof (subject to the provisions of
subsection 2.4B(ii) hereof); and 
  
 (iii)
thereafter, to the payment to or upon the order of such Loan Party or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. 
  
 2.5 Use of Proceeds. 
  
 A. Revolving Loans. The proceeds of any Revolving Loans shall be applied by Company for working capital and other
general corporate purposes, which may include the making of intercompany loans to any of Company’s Subsidiaries, to the extent permitted pursuant to subsection 7.1, for their own general corporate purposes. 
  
 B. Margin Regulations. No portion of the proceeds of any borrowing
under this Agreement shall be used by Company or any of its Subsidiaries in any manner that might cause the borrowing or the application of such proceeds to violate Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal
Reserve System or any other regulation of such Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds. 
  
 2.6 Special Provisions Governing Eurodollar Rate Loans. 
  
 Notwithstanding any other provision of this Agreement to the contrary, the
following provisions shall govern with respect to Eurodollar Rate Loans as to the matters covered: 
  
 A. Determination of Applicable Interest Rate. As soon as practicable after 10:00 A.M. (California time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest error, be conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined
for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Company and each Lender. 
  

 33 

 B. Inability to Determine Applicable Interest Rate. In the event that Administrative Agent shall
have determined (which determination shall be conclusive and binding upon all parties hereto), on any Interest Rate Determination Date that by reason of circumstances affecting the London interbank market adequate and fair means do not exist for
ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Eurodollar Rate, Administrative Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Company and each
Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans until such time as Administrative Agent notifies Company and Lenders that the circumstances giving rise to such notice no longer exist and
(ii) any Notice of Borrowing or Notice of Conversion/Continuation given by Company with respect to the Loans in respect of which such determination was made shall be deemed to be for a Base Rate Loan. 
  
 C. Illegality or Impracticability of Eurodollar Rate Loans. In the
event that on any date any Lender shall have determined (which determination shall be conclusive and binding upon all parties hereto but shall be made only after consultation with Company and Administrative Agent) that the making, maintaining or
continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental
rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lender material hardship, as a result of contingencies
occurring after the date of this Agreement which materially and adversely affect the London interbank market or the position of such Lender in that market, then, and in any such event, such Lender shall be an “Affected Lender” and
it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Company and Administrative Agent of such determination (which notice Administrative Agent shall promptly transmit to each other Lender). Thereafter (a) the
obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (b) to the extent such determination by the Affected Lender relates to
a Eurodollar Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, the Affected Lender shall make such Loan as (or convert such Loan to, as the case may be) a Base Rate Loan, (c) the
Affected Lender’s obligation to maintain its outstanding Eurodollar Rate Loans (the “Affected Loans”) shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the
Affected Loans or when required by law, and (d) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described
above relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, Company shall have the option, subject to the provisions of subsection 2.6D, to rescind such Notice of
Borrowing or Notice of Conversion/Continuation as to all Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to Administrative Agent of such rescission on the date on which the Affected Lender gives notice of its
determination as described above (which notice of rescission Administrative Agent shall 

  

 34 

 
promptly transmit to each other Lender). Except as provided in the immediately preceding sentence, nothing in this subsection 2.6C shall affect the
obligation of any Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement. 
  
 D. Compensation For Breakage or Non-Commencement of Interest Periods. Company shall compensate each Lender, upon
written request by that Lender pursuant to subsection 2.8, for all reasonable losses, expenses and liabilities (including any interest paid by that Lender to lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss,
expense or liability sustained by that Lender in connection with the liquidation or re-employment of such funds) which that Lender may sustain: (i) if for any reason (other than a default by that Lender) a borrowing of any Eurodollar Rate Loan does
not occur on a date specified therefor in a Notice of Borrowing or a telephonic request therefor, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of Conversion/Continuation or a
telephonic request therefor, (ii) if any prepayment or other principal payment or any conversion of any of its Eurodollar Rate Loans (including any prepayment or conversion occasioned by the circumstances described in subsection 2.6C) occurs on a
date prior to the last day of an Interest Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Company, or (iv) as a consequence of any other
default by Company in the repayment of its Eurodollar Rate Loans when required by the terms of this Agreement. 
  
 E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender. 
  
 F.
Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all amounts payable to a Lender under this subsection 2.6 and under subsection 2.7A shall be made as though that Lender had funded each of its Eurodollar Rate Loans through
the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant
Interest Period, whether or not its Eurodollar Rate Loans had been funded in such manner. 
  
 G. Eurodollar Rate Loans After Default. After the occurrence of and during the continuation of a Potential Event of Default or an Event of Default, (i) Company may not elect to have a Loan be made or maintained
as, or converted to, a Eurodollar Rate Loan after the expiration of any Interest Period then in effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any Notice of Borrowing or Notice of Conversion/Continuation given by Company
with respect to a requested borrowing or conversion/continuation that has not yet occurred shall be deemed to be for a Base Rate Loan or, if the conditions to making a Loan set forth in subsection 4.2 cannot then be satisfied, to be rescinded by
Company. 
  
 2.7 Increased Costs; Taxes; Capital
Adequacy. 
  
 A. Compensation for Increased
Costs. Subject to the provisions of subsection 2.7B (which shall be controlling with respect to the matters covered thereby), in the event that 

  

 35 

 
any Lender (including Issuing Lender) shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties
hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or
order), or any determination of a court or other Government Authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any
central bank or other Government Authority (whether or not having the force of law): 
  
 (i) subjects such Lender to any additional Tax with respect to this Agreement or any of its obligations hereunder (including with respect
to issuing or maintaining any Letters of Credit or purchasing or maintaining any participations therein or maintaining any Commitment hereunder) or any payments to such Lender of principal, interest, fees or any other amount payable hereunder;

  
 (ii) imposes, modifies or holds applicable
any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition
of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Eurodollar Rate); or 
  
 (iii) imposes any other condition (other than with respect
to Taxes) on or affecting such Lender or its obligations hereunder or the London interbank market; 
  
 and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining its Loans or Commitments or agreeing to issue, issuing or maintaining any Letter of Credit or
agreeing to purchase, purchasing or maintaining any participation therein or to reduce any amount received or receivable by such Lender with respect thereto; then, in any such case, Company shall promptly pay to such Lender, upon receipt of the
statement referred to in subsection 2.8A, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary
to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder. 
  
 B. Taxes. 
  
 (i) Payments to Be Free and Clear. All sums payable by Company under this Agreement and the other Loan Documents shall be paid free
and clear of, and without any deduction or withholding on account of, any Tax imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other
jurisdiction from which a payment is made by or on behalf of Company or by any federation or organization of which the United States of America or any such jurisdiction is a member at the time of payment. 
  
 (ii) Grossing-up of Payments. If Company or any other
Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by Company to Administrative Agent or any Lender under any of the Loan Documents: 
  
 (a) Company shall notify Administrative Agent of any such
requirement or any change in any such requirement as soon as Company becomes aware of it; 
  

 36 

 (b) Company shall pay any such Tax when such Tax is due, such payment to be made (if the
liability to pay is imposed on Company) for its own account or (if that liability is imposed on Administrative Agent or such Lender, as the case may be) on behalf of and in the name of Administrative Agent or such Lender; 
  
 (c) the sum payable by Company in respect of which the
relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Administrative Agent or such Lender, as the case may be, receives on the
due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and 
  
 (d) within 30 days after paying any sum from which it is required by law to make any deduction or withholding, and within 30 days after
the due date of payment of any Tax which it is required by clause (b) above to pay, Company shall deliver to Administrative Agent evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance
thereof to the relevant taxing or other authority; 
  
 provided that no
such additional amount shall be required to be paid to any Lender under clause (c) above except to the extent that any change after the date on which such Lender became a Lender in any such requirement for a deduction, withholding or payment as is
mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect on the date on which such Lender became a Lender, in respect of payments to such Lender. 
  
 (iii) Evidence of Exemption from U.S. Withholding Tax.

  
 (a) Each Non-US Lender shall deliver to
Administrative Agent and to Company, on or prior to the Closing Date (in the case of each Lender listed on the signature pages of the Original Credit Agreement), on or prior to the Restatement Date (in the case of each Lender listed on the signature
pages of this Agreement that became a Lender on the Restatement Date by executing this Agreement and was not a Lender immediately prior to the Restatement Date) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a
Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), two original copies of Internal Revenue Service Form
W-8BEN or W-8ECI (or any successor forms) properly completed and duly 

  

 37 

 
executed by such Lender, or, in the case of a Non-US Lender claiming exemption from United States federal withholding tax under Section 871(h) or 881(c) of
the Internal Revenue Code with respect to payments of “portfolio interest”, a form W-8BEN, and, in the case of a Lender that has certified in writing to Administrative Agent that it is not a “bank” (as defined in Section
881(c)(3)(A) of the Internal Revenue Code), a certificate of such Lender certifying that such Lender is not (i) a “bank” for purposes of Section 881(c) of the Internal Revenue Code, (ii) a ten-percent shareholder (within the meaning of
Section 871(h)(3)(B) of the Internal Revenue Code) of Company or (iii) a controlled foreign corporation related to Company (within the meaning of Section 864(d)(4) of the Internal Revenue Code) in each case together with any other certificate or
statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish that such Lender is not subject to United States withholding tax with respect to any payments to such Lender of interest payable under
any of the Loan Documents. 
  
 (b) Each Non-US
Lender, to the extent it does not act or ceases to act for its own account with respect to any portion of any sums paid or payable to such Lender under any of the Loan Documents (for example, in the case of a typical participation by such Lender),
shall deliver to Administrative Agent and to Company, on or prior to the Closing Date (in the case of each Lender listed on the signature pages of the Original Credit Agreement), on or prior to the Restatement Date (in the case of each Lender listed
on the signature pages of this Agreement that became a Lender on the Restatement Date by executing this Agreement and was not a Lender immediately prior to the Restatement Date), on or prior to the date of the Assignment Agreement pursuant to which
it becomes a Lender (in the case of each other Lender), or on such later date when such Lender ceases to act for its own account with respect to any portion of any such sums paid or payable, and at such other times as may be necessary in the
determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), (1) two original copies of the forms or statements required to be provided by such Lender under subsection 2.7B(iii)(a), properly completed and
duly executed by such Lender, to establish the portion of any such sums paid or payable with respect to which such Lender acts for its own account that is not subject to United States withholding tax, and (2) two original copies of Internal Revenue
Service Form W-8IMY (or any successor forms) properly completed and duly executed by such Lender, together with any information, if any, such Lender chooses to transmit with such form, and any other certificate or statement of exemption required
under the Internal Revenue Code or the regulations issued thereunder, to establish that such Lender is not acting for its own account with respect to a portion of any such sums payable to such Lender. 
  
 (c) Each Non-US Lender hereby agrees, from time to time after
the initial delivery by such Lender of such forms, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence so delivered obsolete or inaccurate in any material respect, that such Lender shall promptly
(1) deliver to Administrative Agent and to Company two original copies of 

  

 38 

 
renewals, amendments or additional or successor forms, properly completed and duly executed by such Lender, together with any other certificate or statement
of exemption required in order to confirm or establish that such Lender is not subject to United States withholding tax with respect to payments to such Lender under the Loan Documents and, if applicable, that such Lender does not act for its own
account with respect to any portion of such payment, or (2) notify Administrative Agent and Company of its inability to deliver any such forms, certificates or other evidence. 
  
 (d) Company shall not be required to pay any additional amount to any Non-US Lender under clause (c) of
subsection 2.7B(ii), (1) with respect to any Tax required to be deducted or withheld on the basis of the information, certificates or statements of exemption such Lender chooses to transmit with an Internal Revenue Service Form W-8IMY pursuant to
subsection 2.7B(iii)(b)(2) or (2) if such Lender shall have failed to satisfy the requirements of clause (a), (b) or (c)(1) of this subsection 2.7B(iii); provided that if such Lender shall have satisfied the requirements of subsection
2.7B(iii)(a) on the date such Lender became a Lender, nothing in this subsection 2.7B(iii)(d) shall relieve Company of its obligation to pay any amounts pursuant to subsection 2.7B(ii)(c) in the event that, as a result of any change in any
applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent
date establishing the fact that such Lender is not subject to withholding as described in subsection 2.7B(iii)(a). 
  
 C. Capital Adequacy Adjustment. If any Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the date
hereof of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any Government Authority charged with the interpretation or administration
thereof, or compliance by any Lender with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Government Authority, has or would have the effect of reducing the rate of return on the
capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender’s Loans or Commitments or Letters of Credit or participations therein or other obligations hereunder with respect to the
Loans or the Letters of Credit to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of
such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Company from such Lender of the statement referred to in subsection 2.8A, Company shall pay to such
Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction. 
  
 2.8 Statement of Lenders; Obligation of Lenders and Issuing Lender to Mitigate. 
  
 A. Statements. Each Lender claiming compensation or reimbursement
pursuant to subsection 2.6D, 2.7 or 2.8B shall deliver to Company (with a copy to Administrative Agent) a 

  

 39 

 
written statement, setting forth in reasonable detail the basis of the calculation of such compensation or reimbursement, which statement shall be conclusive
and binding upon all parties hereto absent manifest error. 
  
 B. Mitigation. Each Lender and Issuing Lender agrees that, as promptly as practicable after the officer of such Lender or Issuing Lender responsible for administering the Loans or Letters of Credit of such Lender or Issuing Lender,
as the case may be, becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender or Issuing Lender to receive payments under subsection 2.7,
it will use reasonable effort to make, issue, fund or maintain the Commitments of such Lender or the Affected Loans or Letters of Credit of such Lender or Issuing Lender through another lending or letter of credit office of such Lender or Issuing
Lender, if (i) as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender or Issuing Lender pursuant to
subsection 2.7 would be materially reduced and (ii) as determined by such Lender or Issuing Lender in its sole discretion, such action would not otherwise be disadvantageous to such Lender or Issuing Lender; provided that such Lender or
Issuing Lender will not be obligated to utilize such other lending or letter of credit office pursuant to this subsection 2.8B unless Company agrees to pay all incremental expenses incurred by such Lender or Issuing Lender as a result of utilizing
such other lending or letter of credit office as described above. 
  
 2.9 Replacement of a Lender. 
  
 If
Company receives a statement of amounts due pursuant to subsection 2.8A from a Lender, a Revolving Lender defaults in its obligations to fund a Revolving Loan pursuant to this Agreement, a Lender (a “Non-Consenting Lender”) refuses
to consent to an amendment, modification or waiver of this Agreement that, pursuant to subsection 10.6, requires consent of 100% of the Lenders or 100% of the Lenders with Obligations directly affected or a Lender becomes an Affected Lender (any
such Lender, a “Subject Lender”), so long as (i) no Potential Event of Default or Event of Default shall have occurred and be continuing (provided that such condition shall not apply to a Non-Consenting Lender) and Company has
obtained a commitment from another Lender or an Eligible Assignee to purchase at par the Subject Lender’s Loans and assume the Subject Lender’s Commitments and all other obligations of the Subject Lender hereunder, (ii) such Lender is not
Issuing Lender with respect to any Letters of Credit outstanding (unless all such Letters of Credit are terminated or arrangements acceptable to Issuing Lender (such as a “back-to-back” letter of credit) are made) and (iii), if applicable,
the Subject Lender is unwilling to withdraw the notice delivered to Company pursuant to subsection 2.8 and/or is unwilling to remedy its default upon 10 days prior written notice to the Subject Lender and Administrative Agent, Company may require
the Subject Lender to assign all of its Loans and Commitments to such other Lender, Lenders, Eligible Assignee or Eligible Assignees pursuant to the provisions of subsection 10.1B; provided that, prior to or concurrently with such
replacement, (1) the Subject Lender shall have received payment in full of all principal, interest, fees and other amounts (including all amounts under subsections 2.6D, 2.7 and/or 2.8B (if applicable)) through such date of replacement and a release
from its obligations under the Loan Documents, (2) the processing fee required to be paid by subsection 10.1B(i) shall have been paid to Administrative Agent, (3) all of the requirements for such assignment contained in 

  

 40 

 
subsection 10.1B, including, without limitation, the consent of Administrative Agent (if required) and the receipt by Administrative Agent of an executed
Assignment Agreement executed by the assignee (Administrative Agent being hereby authorized to execute any Assignment Agreement on behalf of a Subject Lender relating to the assignment of Loans and/or Commitments of such subject Lender) and other
supporting documents, have been fulfilled, and (4) in the event such Subject Lender is a Non-Consenting Lender, each assignee shall consent, at the time of such assignment, to each matter in respect of which such Subject Lender was a Non-Consenting
Lender. For the avoidance of doubt, if a Lender is a Non-Consenting Lender solely because it refused to consent to an amendment, modification or waiver that required the consent of 100% of Lenders with Obligations directly affected thereby (which
amendment, modification or waiver did not accordingly require the consent of 100% of all Lenders), the Loans and Commitments of such Non-Consenting Lender that are subject to the assignments required by this subsection 2.9 shall include only those
Loans and Commitments that constitute the Obligations directly affected by the amendment, modification or waiver to which such Non-Consenting Lender refused to provide its consent. 
  
 Section 3. LETTERS OF CREDIT 
  
 3.1 Issuance of Letters of Credit and Lenders’ Purchase of Participations Therein. 
  
 A. Letters of Credit. In addition to Company requesting that Lenders
make Revolving Loans pursuant to subsection 2.1A, Company may request, in accordance with the provisions of this subsection 3.1, from time to time during the period from the Closing Date to but excluding the 30th day prior to the Revolving Loan Commitment Termination Date, that Issuing Lender issue Letters of Credit payable on a sight basis for the account of
Company for the purposes specified in the definition of Letters of Credit. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, Issuing Lender shall issue such
Letters of Credit in accordance with the provisions of this subsection 3.1; provided that Company shall not request that Issuing Lender issue (and Issuing Lender shall not issue): 
  
 (i) any Letter of Credit if, after giving effect to such issuance, the Total Utilization of Revolving Loan
Commitments would exceed the Revolving Loan Commitment Amount then in effect; 
  
 (ii) any Letter of Credit if, after giving effect to such issuance, the Letter of Credit Usage would exceed $15,000,000; 
  
 (iii) any Letter of Credit having an expiration date later than the earlier of (a) ten days prior to the Revolving Loan Commitment
Termination Date and (b) the date which is one year from the date of issuance of such Letter of Credit; provided that the immediately preceding clause (b) shall not prevent Issuing Lender from agreeing that a Letter of Credit will
automatically be extended for one or more successive periods not to exceed one year each unless Issuing Lender elects not to extend for any such additional period; and provided, further that Issuing Lender shall elect not to extend
such Letter of Credit if it has knowledge that an Event of Default has occurred and is continuing (and has not been waived in accordance with subsection 10.6) at the time Issuing Lender must elect whether or not to allow such extension; 

 

 41 

 (iv) any Letter of Credit issued for the purpose of supporting (a) trade payables or (b)
any Indebtedness constituting “antecedent debt” (as that term is used in Section 547 of the Bankruptcy Code); or 
  
 (v) any Letter of Credit denominated in a currency other than Dollars or Pounds. 
  
 B. Mechanics of Issuance. 
  
 (i) Request for Issuance. Whenever Company desires
the issuance of a Letter of Credit, it shall deliver to Administrative Agent a Request for Issuance no later than 10:00 A.M. (California time) at least three Business Days, or such shorter period as may be agreed to by Issuing Lender in any
particular instance, in advance of the proposed date of issuance. Issuing Lender, in its reasonable discretion, may require changes in the text of the proposed Letter of Credit or any documents described in or attached to the Request for Issuance.
In furtherance of the provisions of subsection 10.8, and not in limitation thereof, Company may submit Requests for Issuance by telefacsimile and Administrative Agent and Issuing Lender may rely and act upon any such Request for Issuance without
receiving an original signed copy thereof. No Letter of Credit shall require payment against a conforming demand for payment to be made thereunder on the same business day (under the laws of the jurisdiction in which the office of Issuing Lender to
which such demand for payment is required to be presented is located) that such demand for payment is presented if such presentation is made after 10:00 A.M. (in the time zone of such office of Issuing Lender) on such business day. 
  
 Company shall notify Issuing Lender prior to the issuance of
any Letter of Credit in the event that any of the matters to which Company is required to certify in the applicable Request for Issuance is no longer true and correct as of the proposed date of issuance of such Letter of Credit, and upon the
issuance of any Letter of Credit Company shall be deemed to have re-certified, as of the date of such issuance, as to the matters to which Company is required to certify in the applicable Request for Issuance. 
  
 (ii) Issuance of Letter of Credit. Upon satisfaction
or waiver (in accordance with subsection 10.6) of the conditions set forth in subsection 4.3, Issuing Lender shall issue the requested Letter of Credit in accordance with Issuing Lender’s standard operating procedures. 
  
 (iii) Notification to Revolving Lenders. Upon the
issuance of or amendment to any Letter of Credit Issuing Lender shall promptly notify Administrative Agent and Company of such issuance or amendment in writing and such notice shall be accompanied by a copy of such Letter of Credit or amendment.
Upon receipt of such notice (or, if Administrative Agent is Issuing Lender, together with such notice), Administrative Agent shall notify each Revolving Lender in writing of such issuance or amendment and the amount of such Revolving Lender’s
respective participation in such 

  

 42 

 
Letter of Credit or amendment, and, if so requested by a Revolving Lender, Administrative Agent shall provide such Lender with a copy of such Letter of
Credit or amendment. 
  
 C. Revolving Lenders’ Purchase of
Participations in Letters of Credit. Immediately upon the issuance of each Letter of Credit, each Revolving Lender shall be deemed to, and hereby agrees to, have irrevocably purchased from Issuing Lender a participation in such Letter of Credit
and any drawings honored thereunder in an amount equal to such Revolving Lender’s Pro Rata Share of the maximum amount that is or at any time may become available to be drawn thereunder. 
  
 3.2 Letter of Credit Fees. 
  
 Company agrees to pay, with respect to Letters of Credit issued hereunder,
(i) a fronting fee, payable directly to Issuing Lender for its own account, equal to the greater of (a) $500 and (b) 0.25% per annum of the daily amount available to be drawn under such Letter of Credit and (ii) a letter of credit fee, payable to
Administrative Agent for the account of Revolving Lenders, equal to 1.25% per annum of the daily amount available to be drawn under such Letter of Credit, each such fronting fee or letter of credit fee to be payable in arrears on and to (but
excluding) each March 31, June 30, September 30 and December 31 of each year and computed on the basis of a 360-day year for the actual number of days elapsed, and (ii) with respect to the issuance, amendment or transfer of each Letter of Credit and
each payment of a drawing made thereunder (without duplication of the fees payable under clauses (i) above), documentary and processing charges payable directly to Issuing Lender for its own account in accordance with Issuing Lender’s standard
schedule for such charges in effect at the time of such issuance, amendment, transfer or payment, as the case may be. For purposes of calculating any fees payable under this subsection 3.2, (1) the daily amount available to be drawn under any Letter
of Credit shall be determined as of the close of business on any date of determination and (2) any amount described in such clauses which is denominated in a currency other than Dollars shall be valued based on the applicable Exchange Rate for such
currency as of the applicable date of determination. Promptly upon receipt by Administrative Agent of any amount described in clause (ii) of this subsection 3.2, Administrative Agent shall distribute to each Revolving Lender its Pro Rata Share of
such amount. 
  
 3.3 Drawings and Reimbursement of Amounts
Paid Under Letters of Credit. 
  
 A.
Responsibility of Issuing Lender With Respect to Drawings. In determining whether to honor any drawing under any Letter of Credit by the beneficiary thereof, Issuing Lender shall be responsible only to examine the documents delivered under such
Letter of Credit with reasonable care so as to ascertain whether they appear on their face to be in accordance with the terms and conditions of such Letter of Credit. 
  
 B. Reimbursement by Company of Amounts Paid Under Letters of Credit. In the event Issuing Lender has determined to
honor a drawing under a Letter of Credit issued by it, Issuing Lender shall immediately notify Company and Administrative Agent, and Company shall reimburse Issuing Lender on or before the Business Day immediately following the date on which such
drawing is honored (the “Reimbursement Date”) in an amount in Dollars (which 

  

 43 

 
amount, in the case of a payment under a Letter of Credit which is denominated in a currency other than Dollars, shall be calculated by reference to the
applicable Exchange Rate) and in same day funds equal to the amount of such payment; provided that, anything contained in this Agreement to the contrary notwithstanding, (i) unless Company shall have notified Administrative Agent and Issuing
Lender prior to 10:00 A.M. (California time) on the date such drawing is honored that Company intends to reimburse Issuing Lender for the amount of such payment with funds other than the proceeds of Revolving Loans, Company shall be deemed to have
given a timely Notice of Borrowing to Administrative Agent requesting Revolving Lenders to make Revolving Loans that are Base Rate Loans on the Reimbursement Date in an amount in Dollars (which amount, in the case of a payment under a Letter of
Credit which is denominated in a currency other than Dollars, shall be calculated by reference to the applicable Exchange Rate) equal to the amount of such payment and (ii) subject to satisfaction or waiver of the conditions specified in subsection
4.2C, Revolving Lenders shall, on the Reimbursement Date, make Revolving Loans that are Base Rate Loans in the amount of such payment, the proceeds of which shall be applied directly by Administrative Agent to reimburse Issuing Lender for the amount
of such payment; and provided, further that if for any reason proceeds of Revolving Loans are not received by Issuing Lender on the Reimbursement Date in an amount equal to the amount of such payment, Company shall reimburse Issuing
Lender, on demand, in an amount in same day funds equal to the excess of the amount of such payment over the aggregate amount of such Revolving Loans, if any, which are so received. Nothing in this subsection 3.3B shall be deemed to relieve any
Revolving Lender from its obligation to make Revolving Loans on the terms and conditions set forth in this Agreement, and Company shall retain any and all rights it may have against any Revolving Lender resulting from the failure of such Revolving
Lender to make such Revolving Loans under this subsection 3.3B. 
  
 C. Payment by Lenders of Unreimbursed Amounts Paid Under Letters of Credit. 
  
 (i) Payment by Revolving Lenders. In the event that Company shall fail for any reason to reimburse Issuing Lender as provided in
subsection 3.3B in an amount (calculated, in the case of a payment under a Letter of Credit denominated in a currency other than Dollars, by reference to the applicable Exchange Rate) equal to the amount of any payment by Issuing Lender under a
Letter of Credit issued by it, Issuing Lender shall promptly notify each other Lender of the unreimbursed amount of such honored drawing and of such other Revolving Lender’s respective participation therein based on such Revolving Lender’s
Pro Rata Share. Each Revolving Lender shall make available to Issuing Lender an amount equal to its respective participation, in Dollars and in same day funds, at the office of Issuing Lender specified in such notice, not later than 10:00 A.M.
(California time) on the first business day (under the laws of the jurisdiction in which such office of Issuing Lender is located) after the date notified by Issuing Lender. In the event that any Revolving Lender fails to make available to Issuing
Lender on such business day the amount of such Revolving Lender’s participation in such Letter of Credit as provided in this subsection 3.3C, Issuing Lender shall be entitled to recover such amount on demand from such Revolving Lender together
with interest thereon at the rate customarily used by Issuing Lender for the correction of errors among banks for three Business Days and thereafter at the Base Rate. Nothing in this subsection 3.3C shall be deemed to prejudice the right of any
Lender to recover from Issuing Lender any 

  

 44 

 
amounts made available by such Revolving Lender to Issuing Lender pursuant to this subsection 3.3C in the event that it is determined by the final judgment
of a court of competent jurisdiction that the payment with respect to a Letter of Credit by Issuing Lender in respect of which payment was made by such Revolving Lender constituted gross negligence or willful misconduct on the part of Issuing
Lender. 
  
 (ii) Distribution to Lenders of
Reimbursements Received From Company. In the event Issuing Lender shall have been reimbursed by other Revolving Lenders pursuant to subsection 3.3C(i) for all or any portion of any payment by Issuing Lender under a Letter of Credit issued by it,
Issuing Lender shall distribute to each other Revolving Lender that has paid all amounts payable by it under subsection 3.3C(i) with respect to such payment such other Revolving Lender’s Pro Rata Share of all payments subsequently received by
Issuing Lender from Company in reimbursement of such payment under the Letter of Credit when such payments are received. Any such distribution shall be made to a Revolving Lender at its primary address set forth below its name on the appropriate
signature page hereof or at such other address as such Revolving Lender may request. 
  
 D. Interest on Amounts Paid Under Letters of Credit. 
  
 (i) Payment of Interest by Company. Company agrees to pay to Issuing Lender, with respect to payments under any Letters of Credit
issued by it, interest on the amount paid by Issuing Lender in respect of each such payment from the date a drawing is honored to but excluding the date such amount is reimbursed by Company (including any such reimbursement out of the proceeds of
Revolving Loans pursuant to subsection 3.3B) at a rate equal to (a) for the period from the date such drawing is honored to but excluding the Reimbursement Date, the rate then in effect under this Agreement with respect to Revolving Loans that are
Base Rate Loans and (b) thereafter, a rate which is 2% per annum in excess of the rate of interest otherwise payable under this Agreement with respect to Revolving Loans that are Base Rate Loans. Interest payable pursuant to this subsection 3.3D(i)
shall be computed on the basis of a 360-day year for the actual number of days elapsed in the period during which it accrues and shall be payable on demand or, if no demand is made, on the date on which the related drawing under a Letter of Credit
is reimbursed in full. 
  
 (ii) Distribution of
Interest Payments by Issuing Lender. Promptly upon receipt by Issuing Lender of any payment of interest pursuant to subsection 3.3D(i) with respect to a payment under a Letter of Credit issued by it, (a) Issuing Lender shall distribute to each
other Revolving Lender, out of the interest received by Issuing Lender in respect of the period from the date such drawing is honored to but excluding the date on which Issuing Lender is reimbursed for the amount of such payment (including any such
reimbursement out of the proceeds of Revolving Loans pursuant to subsection 3.3B), the amount that such other Revolving Lender would have been entitled to receive in respect of the letter of credit fee that would have been payable in respect of such
Letter of Credit for such period pursuant to subsection 3.2 if no drawing had been honored under such Letter of Credit, and (b) in the event Issuing Lender shall have been reimbursed by other Revolving Lenders pursuant to subsection 3.3C(i) for all
or any 

  

 45 

 
portion of such payment, Issuing Lender shall distribute to each other Revolving Lender that has paid all amounts payable by it under subsection 3.3C(i) with
respect to such payment such other Revolving Lender’s Pro Rata Share of any interest received by Issuing Lender in respect of that portion of such payment so reimbursed by other Revolving Lenders for the period from the date on which Issuing
Lender was so reimbursed by other Revolving Lenders to but excluding the date on which such portion of such payment is reimbursed by Company. Any such distribution shall be made to a Revolving Lender at its primary address set forth below its name
on the appropriate signature page hereof or at such other address as such Revolving Lender may request. 
  
 3.4 Obligations Absolute. 
  
 The obligation of Company to reimburse Issuing Lender for payments under the Letters of Credit issued by it and to repay any Revolving Loans made by
Revolving Lenders pursuant to subsection 3.3B and the obligations of Revolving Lenders under subsection 3.3C(i) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances
including any of the following circumstances: 
  
 (i) any lack of validity or enforceability of any Letter of Credit; 
  
 (ii) the existence of any claim, set-off, defense or other right which Company or any Lender may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), Issuing Lender or other Revolving Lender or any other Person or, in the case of a Revolving Lender, against Company, whether in connection with this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between Company or one of its Subsidiaries and the beneficiary for which any Letter of Credit was procured); 
  

(iii) 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; 
  
 (iv) payment by Issuing Lender under any Letter of Credit against presentation of a draft or other document which does not substantially comply with the terms of such Letter of Credit; 
  
 (v) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of Company or any of its Subsidiaries; 
  
 (vi) any breach of this Agreement or any other Loan Document by any party thereto; 
  
 (vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing; or 
  
 (viii) the fact that an Event of Default or a Potential Event of Default shall have occurred and be continuing; 
  

 46 

 provided, in each case, that payment by Issuing Lender under the applicable Letter of Credit shall not have
constituted gross negligence or willful misconduct of Issuing Lender under the circumstances in question (as determined by a final judgment of a court of competent jurisdiction). 
  
 3.5 Nature of Issuing Lender’s Duties. 
  
 As between Company and Issuing Lender, Company assumes all risks of the acts
and omissions of, or misuse of the Letters of Credit issued by Issuing Lender by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, Issuing Lender shall not be responsible for: (i) the
form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit; (iv)
errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the control of Issuing Lender, including any act or omission by a Government Authority, and none of the above shall affect or impair, or prevent the vesting of, any of
Issuing Lender’s rights or powers hereunder. 
  
 In
furtherance and extension and not in limitation of the specific provisions set forth in the first paragraph of this subsection 3.5, any action taken or omitted by Issuing Lender under or in connection with the Letters of Credit issued by it or any
documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put Issuing Lender under any resulting liability to Company. 
  
 Notwithstanding anything to the contrary contained in this subsection 3.5, Company shall retain any and all rights it may have against Issuing Lender for
any liability arising solely out of the gross negligence or willful misconduct of Issuing Lender, as determined by a final judgment of a court of competent jurisdiction. 
  
 Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT 
  
 The obligations of Lenders to amend and restate the Original Credit Agreement on the Restatement Date and to make Loans and
to issue Letters of Credit hereunder are subject to the satisfaction of the following conditions. 
  

 47 

 4.1 Conditions to Initial Revolving Loans. 
  
 The effectiveness of this Agreement and the obligations of Lenders to make
any Revolving Loans to be made on the Restatement Date are, in addition to the conditions precedent specified in subsection 4.2, subject to prior or concurrent satisfaction of the following conditions: 
  
 A. Loan Party Documents. On or before the Restatement Date, Company
shall, and shall cause each other Loan Party to, deliver to Lenders (or to Administrative Agent with sufficient originally executed copies, where appropriate, for each Lender) the following with respect to Company or such Loan Party, as the case may
be, each, unless otherwise noted, dated the Restatement Date: 
  
 (i) Copies of all amendments to the Organizational Documents of such Person executed on or after February 14, 2003 and copies of the Organizational Documents of such Person if such Person was organized on or after
February 14, 2003, in each case, certified by the Secretary of State of its jurisdiction of organization or, if such document is of a type that may not be so certified, certified by the secretary or similar officer of the applicable Loan Party,
together with a good standing certificate from the Secretary of State of its jurisdiction of organization and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar
taxes from the appropriate taxing authority of such jurisdiction, each dated a recent date prior to the Restatement Date; 
  
 (ii) Resolutions of the Governing Body of such Person approving and authorizing the execution, delivery and performance of the Loan
Documents to which it is a party, certified as of the Restatement Date by the secretary or similar officer of such Person as being in full force and effect without modification or amendment; 
  
 (iii) Signature and incumbency certificates of the officers
of such Person executing the Loan Documents to which it is a party; 
  
 (iv) Executed originals of the Loan Documents to which such Person is a party (except for any executed original Loan Documents that have been delivered to Administrative Agent prior to the Restatement Date); and

  
 (v) Such other documents as Administrative
Agent may reasonably request. 
  
 B. Interest and Fees.

  
 (i) Company shall have paid in full all
accrued interest on the loans under the Original Credit Agreement and all accrued fees, costs and expenses thereunder, in each case through the Restatement Date. 
  
 (ii) Company shall have paid to Administrative Agent, for distribution (as appropriate) to Administrative
Agent and Lenders, the fees payable on the Restatement Date referred to in subsection 2.3. 
  

 48 

 C. Corporate and Capital Structure. 
  
 (i) Corporate Structure. The corporate organizational
structure of Company and its Subsidiaries shall be as set forth on Schedule 4.1C annexed hereto. 
  
 (ii) Capital Structure. The capital structure of Company shall be as set forth on Schedule 4.1C annexed hereto. 

 
 D. Representations and Warranties; Performance of Agreements.
Company shall have delivered to Administrative Agent an Officer’s Certificate, in form and substance satisfactory to Administrative Agent, to the effect that the representations and warranties in Section 5 are true, correct and complete in all
material respects on and as of the Restatement Date to the same extent as though made on and as of that date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were
true, correct and complete in all material respects on and as of such earlier date) and that Company shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or
satisfied by it on or before the Restatement Date except as otherwise disclosed to and agreed to in writing by Administrative Agent; provided that, if a representation and warranty, covenant or condition is qualified as to materiality, with
respect to such representation and warranty, covenant or condition the applicable materiality qualifier set forth above shall be disregarded for purposes of this condition. 
  
 E. Opinions of Counsel to Loan Parties. Lenders shall have received originally executed copies of one or more
favorable written opinions of Gibson, Dunn & Crutcher LLP, counsel for Loan Parties, in form and substance reasonably satisfactory to Administrative Agent and its counsel, dated as of the Restatement Date and setting forth substantially the
matters in the opinions designated in Exhibit VI annexed hereto and as to such other matters as Administrative Agent acting on behalf of Lenders may reasonably request (this Agreement constituting a written request by Company to such counsel
to deliver such opinions to Lenders). 
  
 F. Opinion of
Administrative Agent’s Counsel. Lenders shall have received originally executed copies of a favorable written opinion of O’Melveny & Myers LLP, counsel to Administrative Agent, dated as of the Restatement Date, substantially in the
form of Exhibit VII annexed hereto. 
  
 G. Evidence of
Insurance. Administrative Agent shall have received a certificate from Company’s insurance broker or other evidence satisfactory to it that all insurance required to be maintained pursuant to subsection 6.4 is in full force and effect and
that Administrative Agent on behalf of Lenders has been named as additional insured and/or loss payee thereunder to the extent required under subsection 6.4. 
  
 H. Necessary Governmental Authorizations and Consents; Expiration of Waiting Periods, Etc. Company shall have obtained all Governmental
Authorizations and all consents of other Persons, in each case that are necessary or advisable in connection with the transactions contemplated by the Loan Documents and the continued operation of the business conducted by Company and its
Subsidiaries in substantially the same manner as conducted prior 

  

 49 

 
to the Restatement Date. Each such Governmental Authorization and consent shall be in full force and effect, except in a case where the failure to obtain or
maintain a Governmental Authorization or consent, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. All applicable waiting periods shall have expired without any action being taken or
threatened by any competent authority that would restrain, prevent or otherwise impose adverse conditions on the transactions contemplated by the Loan Documents or the financing thereof. No action, request for stay, petition for review or rehearing,
reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable Government Authority to take action to set aside its consent on its own motion shall have expired. There shall not have occurred any
material adverse change in governmental regulation or policy of any Governmental Authority that adversely affects any of the Company, its Subsidiaries or the Lenders. 
  
 I. Security Interests in Personal and Mixed Property. Administrative Agent shall have received evidence satisfactory
to it that Company and Subsidiary Guarantors shall have taken or caused to be taken all such actions, executed and delivered or caused to be executed and delivered all such agreements, documents and instruments, and made or caused to be made all
such filings and recordings (other than the filing or recording of items described in clauses (ii), (iii) and (iv) below) that may be necessary or, in the opinion of Administrative Agent, desirable in order to create in favor of Administrative
Agent, for the benefit of Lenders, a valid and (upon such filing and recording) perfected First Priority security interest in the entire personal and mixed property Collateral. Such actions shall include the following: 
  
 (i) Stock Certificates and Instruments. Delivery to
Administrative Agent of (a) certificates (which certificates shall be accompanied by irrevocable undated stock powers, duly endorsed in blank and otherwise satisfactory in form and substance to Administrative Agent) representing all Capital Stock
pledged pursuant to the Security Agreement and (b) all promissory notes or other instruments (duly endorsed, where appropriate, in a manner satisfactory to Administrative Agent) evidencing any Collateral; 
  
 (ii) Lien Searches and UCC Termination Statements.
Delivery to Administrative Agent of (a) the results of a recent search, by a Person satisfactory to Administrative Agent, of all effective UCC financing statements and fixture filings and all judgment and tax lien filings which may have been made
with respect to any personal or mixed property of any Loan Party, together with copies of all such filings disclosed by such search, and (b) duly completed UCC termination statements and authorizations of the filing thereof from the applicable
secured party as may be necessary to terminate any effective UCC financing statements or fixture filings disclosed in such search (other than any such financing statements or fixture filings in respect of Liens permitted to remain outstanding
pursuant to the terms of this Agreement); 
  
 (iii) UCC Financing Statements and Fixture Filings. Delivery to Administrative Agent of UCC financing statements and, where appropriate, fixture filings, duly executed by each applicable Loan Party (if required) with respect to all
personal and mixed property Collateral of such Loan Party, for filing in all jurisdictions as may be necessary or, in the opinion of Administrative Agent, desirable to perfect the security interests created in such Collateral pursuant to the
Collateral Documents; and 
  

 50 

 (iv) PTO Cover Sheets, Etc. Delivery to Administrative Agent of all cover sheets
or other documents or instruments required to be filed with the PTO in order to create or perfect Liens in respect of any IP Collateral. 
  
 J. Completion of Proceedings. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and
all documents incidental thereto not previously found acceptable by Administrative Agent, acting on behalf of Lenders, and its counsel shall be satisfactory in form and substance to Administrative Agent and such counsel, and Administrative Agent and
such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent may reasonably request. 
  
 K. Subordination Agreement. Administrative Agent, Company and each of the holders of the Convertible Subordinated Notes and the Convertible Series
A Preferred Stock shall have entered into an amended and restated subordination agreement (the “Subordination Agreement”) in form and substance satisfactory to Administrative Agent. 
  
 4.2 Conditions to All Loans. 
  
 The obligations of Lenders to make Loans on each Funding Date are subject to
the following further conditions precedent: 
  
 A.
Administrative Agent shall have received before that Funding Date, in accordance with the provisions of subsection 2.1B, an originally executed Notice of Borrowing, in each case signed by a duly authorized Officer of Company. 
  
 B. As of that Funding Date: 
  
 (i) The representations and warranties contained herein and
in the other Loan Documents shall be true, correct and complete in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically
relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date; provided, that, if a representation and warranty is qualified as
to materiality, with respect to such representation and warranty the materiality qualifier set forth above shall be disregarded for purposes of this condition; 
  

(ii) No event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by such Notice
of Borrowing that would constitute an Event of Default or a Potential Event of Default; 
  
 (iii) Each Loan Party shall have performed in all material respects all agreements and satisfied all conditions which this Agreement
provides shall be performed or satisfied by it on or before that Funding Date; and 
  
 (iv) No order, judgment or decree of any arbitrator or Government Authority shall purport to enjoin or restrain any Lender from making the
Loans to be made by it on that Funding Date. 
  

 51 

 4.3 Conditions to Letters of Credit. 
  
 The issuance of any Letter of Credit hereunder (whether or not Issuing
Lender is obligated to issue such Letter of Credit) is subject to the following conditions precedent: 
  
 A. On or before the date of issuance of such Letter of Credit, Administrative Agent shall have received, in accordance with the provisions of
subsection 3.1B(i), an originally executed Request for Issuance (or a facsimile copy thereof) in each case signed by a duly authorized Officer of Company, together with all other information specified in subsection 3.1B(i) and such other documents
or information as Issuing Lender may reasonably require in connection with the issuance of such Letter of Credit. 
  
 B. On the date of issuance of such Letter of Credit, all conditions precedent described in subsection 4.2B shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Loan and the date of issuance of such Letter of Credit were a Funding Date. 
  
 Section 5. COMPANY’S REPRESENTATIONS AND WARRANTIES 
  
 In order to induce Lenders to enter into this Agreement and to make the Loans, to induce Issuing Lender to issue Letters of Credit and to induce Revolving
Lenders to purchase participations therein, Company represents and warrants to each Lender: 
  
 5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries. 
  
 A. Organization and Powers. Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.
Each of Company and its Subsidiaries has all requisite power and authority to enter into the Loan Documents to which it is a party and to carry out the transactions contemplated thereby. 
  
 B. Qualification and Good Standing. Each of Company and its Subsidiaries is qualified to do business and in good
standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and could not reasonably be
expected to result in a Material Adverse Effect. 
  
 C. Conduct
of Business. Company and its Subsidiaries are engaged only in the businesses permitted to be engaged in pursuant to subsection 7.12. 
  
 D. Subsidiaries. All of the Subsidiaries of Company as of the Restatement Date and their jurisdictions of organization, and the identity of those
Subsidiaries deemed to be Significant Subsidiaries in accordance with the terms hereof, are set forth on Schedule 5.1 annexed hereto, as said Schedule 5.1 may be supplemented from time to time pursuant to the provisions of subsection
6.1(xv). The Capital Stock of each of the Subsidiaries of Company set forth on Schedule 5.1 annexed hereto (as so supplemented) is duly authorized, validly issued, fully paid and nonassessable and none of such Capital Stock constitutes Margin
Stock. Each of the Subsidiaries of Company set forth on Schedule 5.1 annexed hereto (as so supplemented) is a 

  

 52 

 
corporation, partnership, trust or limited liability company duly organized, validly existing and in good standing under the laws of its respective
jurisdiction of organization set forth therein, has all requisite power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and is qualified to do business and in good
standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, in each case except where failure to be so qualified or in good standing or a lack of such power and authority has not had
and could not reasonably be expected to result in a Material Adverse Effect. Schedule 5.1 annexed hereto (as so supplemented) correctly sets forth, as of the Restatement Date, the ownership interest of Company and each of its Subsidiaries in
each of the Subsidiaries of Company identified therein. 
  
 5.2
Authorization of Borrowing, etc. 
  
 A.
Authorization of Borrowing. The execution, delivery and performance of the Loan Documents have been duly authorized by all necessary action on the part of each Loan Party that is a party thereto. 
  
 B. No Conflict. The execution, delivery and performance by Loan
Parties of the Loan Documents to which they are parties and the consummation of the transactions contemplated by the Loan Documents do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Company
or any of its Subsidiaries, the Organizational Documents of Company or any of its Subsidiaries or any order, judgment or decree of any court or other Government Authority binding on Company or any of its Subsidiaries, (ii) conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries (other than any Liens created under any of the Loan Documents in favor of Administrative Agent on behalf of Lenders), or (iv) require any approval of stockholders or any approval or consent of any Person
under any Contractual Obligation of Company or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the Restatement Date and disclosed in writing to Lenders. 
  
 C. Governmental Consents. The execution, delivery and performance by
Loan Parties of the Loan Documents to which they are parties and the consummation of the transactions contemplated by the Loan Documents do not and will not require any Governmental Authorization other than filings and recordings pursuant to this
Agreement and the Loan Documents relating to the Collateral. 
  
 D. Binding Obligation. Each of the Loan Documents has been duly executed and delivered by each Loan Party that is a party thereto and is the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party
in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability.

  

 53 

 5.3 Financial Condition. 
  
 Company has heretofore delivered to Lenders, at Lenders’ request,
financial statements and information for the Fiscal Year ended April 30, 2004 and interim statements for the Fiscal Quarters ended July 31, 2004 and October 31, 2004. All such statements were prepared in conformity with GAAP and fairly present, in
all material respects, the financial position (on a consolidated and, where applicable, consolidating basis) of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows (on a
consolidated and, where applicable, consolidating basis) of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end
adjustments. Neither Company nor any of its Subsidiaries has (and will not have following the funding of the Loans made on the Restatement Date) any Contingent Obligation, contingent liability or liability for taxes, long-term lease or unusual
forward or long-term commitment that, as of the Restatement Date, is not reflected in the foregoing financial statements or the notes thereto and, as of any Funding Date subsequent to the Restatement Date, is not reflected in the most recent
financial statements delivered to Lenders pursuant to subsection 6.1 or the notes thereto and that, in any such case, is material in relation to the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company
and its Subsidiaries, taken as a whole. 
  
 5.4 No Material
Adverse Change; No Restricted Junior Payments. 
  
 Since April 30, 2004, no event or change has occurred that has resulted in or evidences, either in any case or in the aggregate, a Material Adverse Effect, and neither Company nor any of its Subsidiaries has directly or indirectly declared,
ordered, paid or made, or set apart any sum or property for, any Restricted Junior Payment or agreed to do so, except as permitted by subsection 7.5. 
  
 5.5 Title to Properties; Liens; Real Property; Intellectual Property. 
  
 A. Title to Properties; Liens. Company and its Subsidiaries have (i) good, sufficient and legal title to (in the case
of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective properties and
assets reflected in the financial statements referred to in subsection 5.3 or in the most recent financial statements delivered pursuant to subsection 6.1, in each case except for assets disposed of since the date of such financial statements in the
ordinary course of business or as otherwise permitted under subsection 7.7, and except for such defects in title and interests that do not interfere with the ability of Company and its Subsidiaries to conduct their business. Except as permitted by
this Agreement, all such properties and assets are free and clear of Liens. 
  
 B. Real Property. As of the Restatement Date, Schedule 5.5B annexed hereto contains a true, accurate and complete list of (i) all fee interests in any Real Property Assets and (ii) all leases, subleases
or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affecting each Real Property Asset, regardless of whether a Loan Party is the landlord or tenant (whether directly or as an
assignee or successor in interest) under such lease, sublease or assignment. Except as set forth on 

  

 54 

 
Schedule 5.5B annexed hereto, as of the Restatement Date, each agreement listed in clause (ii) of the immediately preceding sentence is in full force
and effect and Company does not have knowledge of any material default that has occurred and is continuing thereunder, and each such agreement constitutes the legally valid and binding obligation of each applicable Loan Party, enforceable against
such Loan Party in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles. 

 
 C. Intellectual Property. As of the Restatement Date, Company and
its Subsidiaries own or have the right to use, all Intellectual Property used in the conduct of their business, except where the failure to own or have such right to use in the aggregate could not reasonably be expected to result in a Material
Adverse Effect. No claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does Company know of any valid basis
for any such claim, except for such claims that in the aggregate could not reasonably be expected to result in a Material Adverse Effect. The use of such Intellectual Property by Company and its Subsidiaries does not infringe on the rights of any
Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. All federal and state and all foreign registrations of and applications for Intellectual Property that
are owned or licensed by Company or any of its Subsidiaries on the Restatement Date are set forth on Schedule 5.5C annexed hereto. 
  
 5.6 Litigation; Adverse Facts. 
  
 Except as set forth in Schedule 5.6 annexed hereto, there are no Proceedings (whether or not purportedly on behalf of Company or any of its
Subsidiaries) at law or in equity, or before or by any court or other Government Authority (including any Environmental Claims) that are pending or, to the knowledge of Company, threatened against or affecting Company or any of its Subsidiaries or
any property of Company or any of its Subsidiaries and that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither Company nor any of its Subsidiaries (i) is in violation of any applicable
laws (including Environmental Laws) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, or (ii) is subject to or in default with respect to any final judgments, writs, injunctions, decrees,
rules or regulations of any court or other Government Authority that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. 
  
 5.7 Payment of Taxes. 
  
 Except to the extent permitted by subsection 6.3, all material tax returns and reports of Company and its Subsidiaries
required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable and all assessments, fees and other governmental charges upon Company and its Subsidiaries and upon their respective
properties, assets, income, businesses and franchises that are due and payable have been paid when due and payable, expect where the failure to pay could not reasonably be expected to result in a Material Adverse Effect. Company knows of no material
proposed tax assessment against Company or any of its Subsidiaries that is not being actively contested by Company or such Subsidiary in 

  

 55 

 
good faith and by appropriate proceedings and for which such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP
shall have been made or provided therefor unless such proposed tax assessment could not reasonably be expected to result in a Material Adverse Effect. 
  
 5.8 Performance of Agreements. 
  
 Neither Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions
contained in any of its Contractual Obligations, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default, except where the consequences, direct or indirect, of such default or defaults,
if any, could not reasonably be expected to result in a Material Adverse Effect. 
  
 5.9 Governmental Regulation. 
  
 Neither Company nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or
under any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable. 
  
 5.10 Securities Activities. 
  
 A. Neither Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying any Margin Stock. 
  
 B. Following application of the proceeds of each Loan, not more than 25% of the value of the assets (either of Company only or of Company and its Subsidiaries on a consolidated basis) subject to the provisions
of subsection 7.2 or 7.7 or subject to any restriction contained in any agreement or instrument, between Company and any Lender or any Affiliate of any Lender, relating to Indebtedness and within the scope of subsection 8.2, will be Margin Stock.

  
 5.11 Employee Benefit Plans. 

 
 A. Company, each of its Subsidiaries and each of their respective
ERISA Affiliates are in compliance with all applicable provisions and requirements of ERISA and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed all their obligations under each
Employee Benefit Plan, except for any failure to comply that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. Each Employee Benefit Plan that is intended to qualify under Section 401(a) of the
Internal Revenue Code is so qualified. 
  
 B. No ERISA
Event has occurred or is reasonably expected to occur. 
  
 C.
Except to the extent required under Section 4980B of the Internal Revenue Code, or except as set forth in Schedule 5.11 annexed hereto, no Employee Benefit Plan provides 

  

 56 

 
health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of Company, any of its Subsidiaries or any of
their respective ERISA Affiliates. 
  
 D. As of the most
recent valuation date for any Pension Plan, the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans
with respect to which assets exceed benefit liabilities), does not exceed $2,000,000. 
  
 E. As of the most recent valuation date for each Multiemployer Plan for which the actuarial report is available, the potential liability of Company, its Subsidiaries and their respective ERISA Affiliates for a
complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with such potential liability for a complete withdrawal from all Multiemployer Plans, based on information available pursuant to Section
4221(e) of ERISA, does not exceed $2,000,000. 
  
 F. As of
the date hereof, Company and its Subsidiaries have made full payment when due of all material required contributions to any Foreign Plan. 
  
 5.12 Certain Fees. 
  
 No broker’s or finder’s fee or commission will be payable with respect to this Agreement or any of the transactions contemplated hereby, and
Company hereby indemnifies Lenders against, and agrees that it will hold Lenders harmless from, any claim, demand or liability for any such broker’s or finder’s fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel) arising in connection with any such claim, demand or liability. 
  
 5.13 Environmental Protection. 
  
 (i) To Company’s knowledge, neither Company nor any of its Subsidiaries nor any of their respective Facilities or operations are
subject to any outstanding written order, consent decree or settlement agreement with any Person relating to (a) any Environmental Law, (b) any Environmental Claim, or (c) any Hazardous Materials Activity that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect; 
  
 (ii) To Company’s knowledge, neither Company nor any of its Subsidiaries has received any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. § 9604) or any comparable state law that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect; 
  
 (iii) To Company’s knowledge, there are and have been no conditions, occurrences, or Hazardous
Materials Activities that could be reasonably expected to form the basis of an Environmental Claim against Company or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse
Effect; 
  

 57 

 (iv) To Company’s knowledge, neither Company nor any of its Subsidiaries nor any
predecessor of Company or any of its Subsidiaries has filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, and none of Company’s or any of its Subsidiaries’ operations
involves the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent; and 
  
 (v) To Company’s knowledge, compliance with all current or reasonably foreseeable future requirements
pursuant to or under Environmental Laws would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. 
  
 5.14 Employee Matters. 
  
 There is no strike or work stoppage in existence or threatened involving Company or any of its Subsidiaries that could reasonably be expected to result in
a Material Adverse Effect. 
  
 5.15 Solvency.

  
 Each Loan Party is and, upon the incurrence of any
Obligations by such Loan Party on any date on which this representation is made, will be, Solvent. 
  
 5.16 Matters Relating to Collateral. 
  
 A. Creation, Perfection and Priority of Liens. The execution and delivery of the Collateral Documents by Loan Parties, together with (i) the
actions taken on or prior to the date hereof and (ii) the delivery to Administrative Agent of any Pledged Collateral not delivered to Administrative Agent at the time of execution and delivery of the applicable Collateral Document are effective to
create in favor of Administrative Agent for the benefit of Lenders, as security for the respective Secured Obligations (as defined in the applicable Collateral Document in respect of any Collateral), a valid First Priority Lien on all of the
Collateral (other than Collateral in which a security interest may not be perfected by delivery of such Collateral to Administrative Agent or the filing of UCC financing statements by or on behalf of Administrative Agent), and all filings and other
actions necessary or desirable to perfect and maintain the perfection and First Priority status of such Liens have been duly made or taken and remain in full force and effect, other than the periodic filing of UCC continuation statements in respect
of UCC financing statements filed by or on behalf of Administrative Agent. 
  
 B. Governmental Authorizations. No authorization, approval or other action by, and no notice to or filing with, any Government Authority is required for either (i) the pledge or grant by any Loan Party of the
Liens purported to be created in favor of Administrative Agent pursuant to any of the Collateral Documents or (ii) the exercise by Administrative Agent of any rights or remedies in respect of any Collateral (whether specifically granted or created
pursuant to any of the Collateral Documents or created or provided for by applicable law), except for filings or recordings contemplated by subsection 5.16A and except as may be required, in connection with the disposition of any Pledged Collateral,
by laws generally affecting the offering and sale of securities. 
  

 58 

 C. Absence of Third-Party Filings. Except such as may have been filed in favor of Administrative
Agent as contemplated by subsection 5.16A and to evidence permitted lease obligations and other Liens permitted pursuant to subsection 7.2, (i) no effective UCC financing statement, fixture filing or other instrument similar in effect covering all
or any part of the Collateral is on file in any filing or recording office and (ii) no effective collateral filing covering all or any part of the IP Collateral is on file in the PTO. 
  
 D. Margin Regulations. The pledge of the Pledged Collateral pursuant to the Collateral Documents does not violate
Regulation T, U or X of the Board of Governors of the Federal Reserve System. 
  
 E. Information Regarding Collateral. All information supplied to Administrative Agent by or on behalf of any Loan Party with respect to any of the Collateral (in each case taken as a whole with respect to any
particular Collateral) is accurate and complete in all material respects. 
  
 5.17 Disclosure. 
  
 No representation or warranty of Company or any of its Subsidiaries contained in any Loan Document or in any other document, certificate or written statement furnished to Lenders by or on behalf of Company or any of its Subsidiaries for use
in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact (known to Company, in the case of any document not furnished by it) necessary in order to make the
statements contained herein or therein not misleading in light of the circumstances in which the same were made. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions
believed by Company to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may
differ from the projected results. There are no facts known to Company (other than matters of a general economic nature) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect and that have not
been disclosed herein or in such other documents, certificates and statements furnished to Lenders for use in connection with the transactions contemplated hereby. 
  
 5.18 Subordinated Indebtedness. 
  
 The Obligations constitute senior indebtedness that is entitled to the benefits of the subordination provisions, if any, of
all Subordinated Indebtedness of Company and its Subsidiaries, including, without limitation, any subordination provisions contained in the Subordination Agreement. 
  
 5.19 Foreign Asset Control Regulations, etc. 
  
 Neither the making of the Loans to, or issuance of Letters of Credit on
behalf of, Company nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or
any enabling legislation or executive order relating thereto. Without limiting the foregoing, neither Company nor any of its 

  

 59 

 
Subsidiaries or Affiliates (a) is or will become a Person whose property or interests in property are blocked pursuant to Section 1 of Executive Order 13224
of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) engages or will engage in any dealings or transactions, or be otherwise
associated, with any such Person. Company and its Subsidiaries and Affiliates are in compliance, in all material respects, with the Uniting And Strengthening America By Providing Appropriate Tools Required To Intercept And Obstruct Terrorism (USA
Patriot Act of 2001). 
  
 Section 6. COMPANY’S AFFIRMATIVE
COVENANTS 
  
 Company covenants and agrees that, so long
as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6. 
  
 6.1 Financial Statements and Other Reports. 
  

Company will maintain, and cause each of its 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. Company will deliver to Administrative Agent and Lenders: 
  
 (i) Events of Default, etc.: promptly upon any officer of Company obtaining knowledge (a) of any condition or event that
constitutes an Event of Default or Potential Event of Default, or becoming aware that any Lender has given any notice (other than to Administrative Agent) or taken any other action with respect to a claimed Event of Default or Potential Event of
Default, (b) that any Person has given any notice to Company or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in subsection 8.2, or (c) of the occurrence of any
event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, an Officer’s Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice
given or action taken by any such Person and the nature of such claimed Event of Default, Potential Event of Default, default, event or condition, and what action Company has taken, is taking and proposes to take with respect thereto; 
  
 (ii) Monthly Financials: as soon as available and in
any event within 30 days after the end of each Fiscal Month, the consolidated and consolidating balance sheets of Company and its Subsidiaries as at the end of such Fiscal Month and the related consolidated and consolidating statements of income of
Company and its Subsidiaries for such Fiscal Month and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Month (provided that Company shall be permitted, unless otherwise requested by Administrative Agent,
to provide Regional Consolidating Financial Statements in lieu of consolidating statements) setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year and the corresponding
figures from the Financial Plan for the current Fiscal Year, to the extent prepared for such Fiscal Month, all in reasonable detail; 
  

 60 

 (iii) Quarterly Financials: as soon as available and in any event within 45 days
after the end of each of the first three Fiscal Quarters of each Fiscal Year, (a) the consolidated and consolidating balance sheets of Company and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated and consolidating
statements of income, stockholders’ equity and cash flows of Company and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each
case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year and the corresponding figures from the Financial Plan for the current Fiscal Year, all in reasonable detail and certified by the chief
financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated,
subject to changes resulting from audit and normal year-end adjustments, and (b) a narrative report describing the operations of Company and its Subsidiaries in the form prepared for presentation to senior management for such Fiscal Quarter and for
the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter; 
  
 (iv) Year-End Financials: as soon as available and in any event within 90 days after the end of each Fiscal Year, (a) the
consolidated and consolidating balance sheets of Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated and consolidating statements of income, stockholders’ equity and cash flows of Company and its
Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year and the corresponding figures from the Financial Plan for the Fiscal Year covered by such financial statements,
all in reasonable detail and certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, (b) a narrative report describing the operations of Company and its Subsidiaries in the form prepared for presentation to senior management for such Fiscal Year, and (c) in the case of such
consolidated financial statements, a report thereon of Ernst & Young LLP or other independent certified public accountants of recognized national standing selected by Company and satisfactory to Administrative Agent, which report shall be
unqualified, shall express no doubts about the ability of Company and its Subsidiaries to continue as a going concern, and shall state that such consolidated financial statements fairly present, in all material respects, the consolidated financial
position of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise
disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; 
  

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 (v) Compliance Certificates: together with each delivery of financial statements
pursuant to subdivisions (iii) and (iv) above, (a) an Officer’s Certificate of Company stating that the signers have reviewed the terms of this Agreement and have made, or caused to be made under their supervision, a review in reasonable detail
of the transactions and condition of Company and its Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the
signers do not have knowledge of the existence as at the date of such Officer’s Certificate, of any condition or event that constitutes an Event of Default or Potential Event of Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action Company has taken, is taking and proposes to take with respect thereto; and (b) a Compliance Certificate demonstrating in reasonable detail compliance during and at the end of the
applicable accounting periods with the restrictions contained in Section 7, in each case to the extent compliance with such restrictions is required to be tested at the end of the applicable accounting period; 
  
 (vi) Reconciliation Statements: if, as a result of
any change in accounting principles and policies from those used in the preparation of the audited financial statements referred to in subsection 5.3, the consolidated financial statements of Company and its Subsidiaries delivered pursuant to
subdivision (ii), (iii), (iv) or (xii) of this subsection 6.1 will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such subdivisions had no such change in accounting principles and
policies been made, then (a) together with the first delivery of financial statements pursuant to subdivision (ii), (iii), (iv) or (xii) of this subsection 6.1 following such change, consolidated financial statements of Company and its Subsidiaries
for (y) the current Fiscal Year to the effective date of such change and (z) the two full Fiscal Years immediately preceding the Fiscal Year in which such change is made, in each case prepared on a pro forma basis as if such change had been in
effect during such periods, and (b) together with each delivery of financial statements pursuant to subdivision (ii), (iii), (iv) or (xii) of this subsection 6.1 following such change, if required pursuant to subsection 1.2, a written statement of
the chief accounting officer or chief financial officer of Company setting forth the differences (including any differences that would affect any calculations relating to the financial covenants set forth in subsection 7.6) which would have resulted
if such financial statements had been prepared without giving effect to such change; 
  
 (vii) Accountants’ Reports: promptly upon receipt thereof (unless restricted by applicable professional standards), copies of
all reports submitted to Company by independent certified public accountants in connection with each annual, interim or special audit of the financial statements of Company and its Subsidiaries made by such accountants, including any comment letter
submitted by such accountants to management in connection with their annual audit; 
  
 (viii) SEC Filings and Press Releases: promptly upon their becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by Company to its security holders or by any Subsidiary of Company to its security holders other than Company or another Subsidiary of Company, (b) all 

  

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regular and periodic reports and all registration statements (other than on Form S-8 or a similar form) and prospectuses, if any, filed by Company or any of
its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority, and (c) all press releases and other statements made available generally by Company or any of its
Subsidiaries to the public concerning material developments in the business of Company or any of its Subsidiaries; 
  
 (ix) Litigation or Other Proceedings: (a) promptly upon any Officer of Company obtaining knowledge of (1) the institution of, or
non-frivolous threat of, any Proceeding against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries not previously disclosed in writing by Company to Lenders or (2) any material development in any
Proceeding that, in any case: 
  
 (x) if
adversely determined, has a reasonable possibility of giving rise to a Material Adverse Effect; or 
  
 (y) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions
contemplated hereby; 
  
 written notice thereof together with
such other information as may be reasonably available to Company to enable Lenders and their counsel to evaluate such matters; and (b) within twenty days after the end of each Fiscal Quarter, a schedule of all Proceedings involving an alleged
liability of, or claims against or affecting, Company or any of its Subsidiaries equal to or greater than $5,000,000, and promptly after request by Administrative Agent such other information as may be reasonably requested by Administrative Agent to
enable Administrative Agent and its counsel to evaluate any of such Proceedings; 
  
 (x) ERISA Events: promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event, a written notice
specifying the nature thereof, what action Company, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the PBGC with respect thereto; 
  
 (xi) ERISA Notices: with reasonable promptness, copies of (a) all notices received by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an
ERISA Event; and (b) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as Administrative Agent shall reasonably request; 
  
 (xii) Financial Plans: as soon as practicable and in any event no later than 30 days after the
beginning of each Fiscal Year, a consolidated and consolidating plan and financial forecast for such Fiscal Year (the “Financial Plan” for such Fiscal Year), including (a) a forecasted consolidated balance sheet and forecasted
consolidated statements of income and cash flows of Company and its Subsidiaries for such Fiscal 

  

 63 

 
Year, together with a pro forma Compliance Certificate for such Fiscal Year and an explanation of the assumptions on which such forecasts are
based, (b) forecasted consolidated statements of income and cash flows of Company and its Subsidiaries for each Fiscal Quarter of such Fiscal Year, together with an explanation of the assumptions on which such forecasts are based, and (c) such other
information and projections as any Lender may reasonably request; 
  
 (xiii) Insurance: as soon as practicable after any material change in insurance coverage maintained by Company and its Subsidiaries notice thereof to Administrative Agent specifying the changes and reasons
therefor; 
  
 (xiv) Governing Body: with
reasonable promptness, written notice of any change in the Governing Body of Company; 
  
 (xv) New Subsidiaries: promptly upon any Person becoming a Subsidiary of Company or any Subsidiary becoming, or ceasing to be, a
Significant Subsidiary, a written notice setting forth with respect to such Person or Subsidiary (a) the date on which such Person or Subsidiary (x) became a Subsidiary of Company or (y) became, or ceased to be, a Significant Subsidiary, as the case
may be, and (b) all of the data required to be set forth in Schedule 5.1 annexed hereto with respect to all Subsidiaries of Company (it being understood that such written notice shall be deemed to supplement Schedule 5.1 annexed hereto
for all purposes of this Agreement); provided that except in the case of any Person becoming a Domestic Significant Subsidiary, such written notice shall not be required until delivery of the next Officer’s Certificate required to be
delivered under subsection 6.1(v); 
  
 (xvi)
Good Standing Certificates: upon request by Administrative Agent, good standing certificates as to each Loan Party from its jurisdiction of organization; 
  
 (xvii) Subordinated Indebtedness Notices: with reasonable promptness, and in any event within one
Business Day of the receipt of any notice of acceleration of the Convertible Subordinated Notes, copies of all notices received by Company from holders of the Convertible Subordinated Notes or the Convertible Series A Preferred Stock; and

  
 (xviii) Other Information: with
reasonable promptness, such other information and data with respect to Company or any of its Subsidiaries as from time to time may be reasonably requested by any Lender. 
  
 6.2 Existence, etc. 
  
 Except as permitted under subsection 7.7, Company will, and will cause each of its Significant Subsidiaries to, at all times
preserve and keep in full force and effect its existence in the jurisdiction of organization set forth on Schedule 5.1 annexed hereto and all rights and franchises material to its business; provided, however, that neither
Company nor any of its Subsidiaries shall be required to preserve its existence or any such right or franchise if the Governing Body of Company or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of
the business of Company and its Subsidiaries taken as a whole and that the loss thereof is not disadvantageous in any material respect to Company and its Subsidiaries taken as a whole or Lenders. 
  

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 6.3 Payment of Taxes and Claims; Tax . 
  
 A. Company will, and will cause each of its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty accrues thereon, and all claims (including claims for labor,
services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto;
provided that no such tax, assessment, charge or claim need be paid if it is de minimis in amount or it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as (i) such reserve or
other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor (unless the amount is not material to Company’s financial condition) and (ii) in the case of a tax, assessment, charge or claim
which has or may become a Lien against any of the Collateral, such proceedings conclusively operate to stay the sale of any material portion of the Collateral to satisfy such charge or claim. 
  
 B. Company will not, nor will it permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return with any Person (other than Company or any of its Subsidiaries). 
  
 6.4 Maintenance of Properties; Insurance; Application of Net Business Interruption Insurance Proceeds. 
  
 A. Maintenance of Properties. Company will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Company and its Subsidiaries (including all Intellectual
Property) and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof, except to the extent that any failure to maintain could not reasonably be expected to have a Material Adverse Effect.

  
 B. Insurance. Company will maintain or cause to be
maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the
assets, properties and businesses of Company and its Subsidiaries as may customarily be carried or maintained under similar circumstances by corporations of established reputation engaged in similar businesses, in each case in such amounts (giving
effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for corporations similarly situated in the industry. Each such policy of insurance shall (i) name Administrative
Agent for the benefit of Lenders as an additional insured thereunder as its interests may appear, and (ii) contain a loss payable clause or endorsement, satisfactory in form and substance to Administrative Agent, that names Administrative Agent for
the benefit of Lenders as the loss payee thereunder for any covered loss and provides for at least 30 days prior written notice to Administrative Agent of any modification or cancellation of such policy. 
  

 65 

 C. Application of Net Business Interruption Insurance Proceeds. Upon receipt by Company or any of
its Subsidiaries of any Net Business Interruption Insurance Proceeds, (a) so long as no Event of Default or Potential Event of Default shall have occurred and be continuing, Company or such Subsidiary may retain and apply such Net Business
Interruption Insurance Proceeds for working capital purposes, and (b) if an Event of Default or Potential Event of Default shall have occurred and be continuing, Company shall apply an amount equal to such Net Business Interruption Insurance
Proceeds to prepay the Loans (and/or the Revolving Loan Commitment Amount shall be reduced) as provided in subsection 2.4A. 
  
 6.5 Inspection Rights; Lender Meeting. 
  
 A. Inspection Rights. Company shall, and shall cause each of its Subsidiaries to, permit any authorized representatives designated by any Lender to
visit and inspect any of the properties of Company or of any of its Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their
officers and independent public accountants (provided that Company may, if it so chooses, be present at or participate in any such discussion), all upon reasonable notice and at such reasonable times during normal business hours and as often as may
reasonably be requested. 
  
 B. Lender Meeting. Company
will, upon the request of Administrative Agent or Requisite Lenders, participate in a meeting of Administrative Agent and Lenders once during each Fiscal Year to be held at Company’s principal offices (or at such other location as may be agreed
to by Company and Administrative Agent) at such time as may be agreed to by Company and Administrative Agent. 
  
 6.6 Compliance with Laws, etc. 
  
 Company shall comply, and shall cause each of its Subsidiaries to comply, with the requirements of all applicable laws, rules, regulations and orders of
any Government Authority (including all Environmental Laws), noncompliance with which could reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect. 
  
 6.7 Environmental Matters. 
  
 A. Environmental Disclosure. Company will deliver to Administrative
Agent and Lenders: 
  
 (i) Environmental
Audits and Reports. As soon as practicable following receipt thereof, copies of all environmental audits, investigations, analyses and reports of any kind or character, whether prepared by personnel of Company or any of its Subsidiaries or by
independent consultants, governmental authorities or any other Persons, with respect to significant environmental matters at any Facility that, individually or in the aggregate, could reasonably be expected to result in a Material 

  

 66 

 
Adverse Effect or with respect to any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect; 
  
 (ii) Notice of Certain
Releases, Remedial Actions, Etc. Promptly upon the occurrence thereof, written notice describing in reasonable detail (a) any Release required to be reported to any federal, state or local governmental or regulatory agency under any applicable
Environmental Laws, (b) any remedial action taken by Company or any other Person in response to (1) any Hazardous Materials Activities the existence of which could reasonably be expected to result in one or more Environmental Claims having,
individually or in the aggregate, a Material Adverse Effect, or (2) any Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, and (c) Company’s discovery of any
occurrence or condition on any real property adjoining or in the vicinity of any Facility that could cause such Facility or any part thereof to be subject to any material restrictions on the ownership, occupancy, transferability or use thereof under
any Environmental Laws. 
  
 (iii) Written
Communications Regarding Environmental Claims, Releases, Etc. As soon as practicable following the sending or receipt thereof by Company or any of its Subsidiaries, a copy of any and all written communications with respect to (a) any
Environmental Claims that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, (b) any Release required to be reported to any federal, state or local governmental or regulatory agency, and (c) any
request for information from any governmental agency that suggests such agency is investigating whether Company or any of its Subsidiaries may be potentially responsible for any Hazardous Materials Activity. 
  
 (iv) Notice of Certain Proposed Actions Having
Environmental Impact. Prompt written notice describing in reasonable detail (a) any proposed acquisition of stock, assets, or property by Company or any of its Subsidiaries that could reasonably be expected to (1) expose Company or any of its
Subsidiaries to, or result in, Environmental Claims that could reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect or (2) affect the ability of Company or any of its Subsidiaries to maintain in full force
and effect all material Governmental Authorizations required under any Environmental Laws for their respective operations and (b) any proposed action to be taken by Company or any of its Subsidiaries to commence manufacturing or other industrial
operations or to modify current operations in a manner that could reasonably be expected to subject Company or any of its Subsidiaries to any material additional obligations or requirements under any Environmental Laws that could reasonably be
expected to result in, individually or in the aggregate, a Material Adverse Effect. 
  
 B. Company’s Actions Regarding Hazardous Materials Activities, Environmental Claims and Violations of Environmental Laws. 
  
 (i) Remedial Actions Relating to Hazardous Materials Activities. Company shall, in compliance with
all applicable Environmental Laws, promptly undertake, and shall cause each of its Subsidiaries promptly to undertake, any and all investigations, studies, sampling, testing, abatement, cleanup, removal, remediation or other response 

  

 67 

 
actions necessary to remove, remediate, clean up or abate any Hazardous Materials Activity on, under or about any Facility that is in violation of any
Environmental Laws or that presents a material risk of giving rise to an Environmental Claim, except where the failure could not reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect. 
  
 (ii) Actions with Respect to Environmental Claims and
Violations of Environmental Laws. Company shall promptly take, and shall cause each of its Subsidiaries promptly to take, any and all actions necessary to (i) cure any material violation of applicable Environmental Laws by Company or its
Subsidiaries that could reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect and (ii) make an appropriate response to any Environmental Claim against Company or any of its Subsidiaries and discharge any
obligations it may have to any Person thereunder where failure to do so could reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect. 
  
 6.8 Execution of Subsidiary Guaranty and Personal Property Collateral Documents After the Restatement Date.

  
 A. Execution of Subsidiary Guaranty and Personal
Property Collateral Documents. In the event that any Person becomes a Domestic Significant Subsidiary of Company after the Restatement Date, Company will promptly notify Administrative Agent of that fact and cause such Domestic Significant
Subsidiary to execute and deliver to Administrative Agent a counterpart of the Subsidiary Guaranty and Security Agreement and to take all such further actions and execute all such further documents and instruments as may be necessary or, in the
opinion of Administrative Agent, desirable to create in favor of Administrative Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on all of the personal and mixed property assets of such Domestic Significant Subsidiary
described in the applicable forms of Collateral Documents. In addition, as provided in the Security Agreement, Company shall, or shall cause the Subsidiary that owns the Capital Stock of such Person to, execute and deliver to Administrative Agent a
supplement to the Security Agreement and to deliver to Administrative Agent all certificates representing such Capital Stock of such Person (accompanied by irrevocable undated stock powers, duly endorsed in blank). 
  
 B. Foreign Significant Subsidiaries. If requested by
Administrative Agent, Company shall execute and deliver Foreign Pledge Agreements with respect to 66% of the Capital Stock owned by Company or a Domestic Subsidiary of some or all Foreign Significant Subsidiaries with respect to which Administrative
Agent deems a Foreign Pledge Agreement necessary or advisable to perfect or otherwise protect the First Priority Liens granted to Administrative Agent on behalf of Lenders in such Capital Stock, and take all such other actions under the laws of such
jurisdictions as Administrative Agent may deem necessary or advisable to perfect or otherwise protect such Liens. In addition, in the event that any Person becomes a Foreign Significant Subsidiary of Company after the date hereof, Company will
promptly notify Administrative Agent of that fact and, if requested by Administrative Agent, if such Foreign Significant Subsidiary is directly owned by Company or a Domestic Subsidiary, cause such Foreign Significant Subsidiary to execute and
deliver to Administrative Agent such documents and instruments and take such further actions (including actions, documents and instruments 

  

 68 

 
comparable to those described above in this subsection 6.8B) as may be necessary or, in the reasonable opinion of Administrative Agent, desirable to create
in favor of Administrative Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on 66% of the capital stock of such Foreign Significant Subsidiary. 
  
 C. Subsidiary Organizational Documents, Legal Opinions, Etc. Company shall deliver to Administrative Agent, together
with such Loan Documents, (i) certified copies of such Significant Subsidiary’s Organizational Documents, together with, if such Significant Subsidiary is a Domestic Significant Subsidiary, a good standing certificate from the Secretary of
State of the jurisdiction of its organization and each other state in which such Person is qualified to do business and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or
similar taxes from the appropriate taxing authority of each of such jurisdictions, each to be dated a recent date prior to their delivery to Administrative Agent, (ii) a certificate executed by the secretary or similar officer of such Significant
Subsidiary as to (a) the fact that the attached resolutions of the Governing Body of such Significant Subsidiary approving and authorizing the execution, delivery and performance of such Loan Documents are in full force and effect and have not been
modified or amended and (b) the incumbency and signatures of the officers of such Significant Subsidiary executing such Loan Documents, (iii) an executed supplement to the Security Agreement evidencing the pledge of the Capital Stock of such
Significant Subsidiary by Company or a Significant Subsidiary of Company that owns such Capital Stock, accompanied by a certificate evidencing such Capital Stock, together with irrevocable undated stock powers duly endorsed in blank and satisfactory
in form and substance to Administrative Agent, and (iv) a favorable opinion of counsel to such Significant Subsidiary, in form and substance satisfactory to Administrative Agent and its counsel, as to (a) the valid existence and good standing of
such Significant Subsidiary, (b) the due authorization, execution and delivery by such Significant Subsidiary of such Loan Documents, (c) the enforceability of such Loan Documents against such Significant Subsidiary and (d) such other matters
(including matters relating to the creation and perfection of Liens in any Collateral pursuant to such Loan Documents) as Administrative Agent may reasonably request, all of the foregoing to be satisfactory in form and substance to Administrative
Agent and its counsel. 
  
 6.9 Post-Closing.

  
 Within 30 days of the Restatement Date or such later date
agreed by Administrative Agent in its sole discretion, Company shall execute and deliver to Administrative Agent a Control Agreement and take all other steps necessary or, in the opinion of Administrative Agent, desirable to ensure that
Administrative Agent has a perfected security interest in Company’s Securities Account maintained by Wells Capital Management. 
  
 Section 7. COMPANY’S NEGATIVE COVENANTS 
  
 Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and
other Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this
Section 7. 
  

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 7.1 Indebtedness. 
  
 Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or
guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: 
  
 (i) Company may become and remain liable with respect to the Obligations; 
  
 (ii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations
permitted by subsection 7.4 and, upon any matured obligations actually arising pursuant thereto, the Indebtedness corresponding to the Contingent Obligations so extinguished; 
  
 (iii) Company and its Subsidiaries may become and remain liable with respect to Indebtedness in respect of
Capital Leases, Indebtedness secured by Liens permitted by subsection 7.2A(ii) and Indebtedness that refinances or replaces such Indebtedness, aggregating not in excess of $3,000,000 at any one time; 
  
 (iv) Company may become and remain liable with respect to
Indebtedness to any Subsidiary Guarantor, and any Subsidiary Guarantor may become and remain liable with respect to Indebtedness to Company or any other Subsidiary Guarantor; provided that (a) a Lien on all such intercompany Indebtedness to
Company or any Subsidiary Guarantor shall have been granted to Administrative Agent for the benefit of Lenders and (b) if such intercompany Indebtedness to Company or any Subsidiary Guarantor is evidenced by a promissory note or other instrument,
such promissory note or instrument shall have been pledged to Administrative Agent pursuant to the Security Agreement; 
  
 (v) Company or any Subsidiary Guarantor may become and remain liable with respect to Indebtedness to any Foreign Subsidiary of Company,
and any Foreign Subsidiary of Company may become and remain liable with respect to Indebtedness to Company or any Subsidiary Guarantor, in an aggregate principal amount not to exceed $10,000,000; provided that (a) a Lien on all such
intercompany Indebtedness to Company or any Subsidiary Guarantor shall have been granted to Administrative Agent for the benefit of Lenders and (b) if such intercompany Indebtedness to Company or any Subsidiary Guarantor is evidenced by a promissory
note or other instrument, such promissory note or instrument shall have been pledged to Administrative Agent pursuant to the Security Agreement; 
  
 (vi) Company or any Subsidiary Guarantor may become and remain liable with respect to Indebtedness to any of their respective Domestic
Subsidiaries (other than Subsidiary Guarantors), and any of their respective Domestic Subsidiaries (other than Subsidiary Guarantors) may become and remain liable with respect to Indebtedness to Company or any Subsidiary Guarantor; provided
that (a) notwithstanding anything to the contrary contained in the definition of Significant Subsidiaries and considering all such Indebtedness and all equity Investments permitted by subsection 7.3(vi) to be assets of the recipient of such
Indebtedness or equity Investment for purposes of the definition of Significant Subsidiary, any such Domestic Subsidiary, together with all other Domestic 

  

 70 

 
Subsidiaries of Company (other than Domestic Significant Subsidiaries) in which Company and its Subsidiaries have made additional Investments (in the form of
Indebtedness or equity Investments), would not collectively constitute a Domestic Significant Subsidiary, (b) a Lien on all such intercompany Indebtedness to Company or any Subsidiary Guarantor shall have been granted to Administrative Agent for the
benefit of Lenders and (c) if such intercompany Indebtedness to Company or any Subsidiary Guarantor is evidenced by a promissory note or other instrument, such promissory note or instrument shall have been pledged to Administrative Agent pursuant to
the Security Agreement; 
  
 (vii) Company and its
Subsidiaries, as applicable, may remain liable with respect to Indebtedness set forth on Schedule 7.1 annexed hereto, including any Indebtedness that refinances or replaces such Indebtedness; 
  
 (viii) Company may remain liable with respect to
Indebtedness pursuant to the Convertible Subordinated Notes and Indebtedness in respect of the conversion of the Convertible Series A Preferred Stock; 
  
 (ix) Foreign Subsidiaries of Company may become and remain liable with respect to other Indebtedness in an aggregate principal amount not
to exceed $3,000,000 at any time outstanding; 
  
 (x) Company and its Domestic Subsidiaries may become and remain liable with respect to other Indebtedness in an aggregate principal amount not to exceed $3,000,000 at any time outstanding; 
  
 (xi) Foreign Subsidiaries of Company may become and remain
liable with respect to Indebtedness to any other Foreign Subsidiary of Company, to the extent incurred in the ordinary course of business and consistent with past practices of such Subsidiaries; 
  
 (xii) Company may become and remain liable with respect to
Indebtedness secured by the cash surrender value of life insurance policies in an amount not to exceed, at any time, 95% of the aggregate cash surrender value of such policies; and 
  
 (xiii) Company may become and remain liable with respect to Indebtedness subordinated to the Obligations
subject to terms, including, without limitation, subordination provisions, satisfactory in form and substance to Administrative Agent in an aggregate principal amount not to exceed $75,000,000 at any time outstanding. 
  
 7.2 Liens and Related Matters. 
  
 A. Prohibition on Liens. Company shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Company or
any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any Lien with respect to any
such property, asset, income or profits under the UCC or under any similar recording or notice statute, except: 
  
 (i) Permitted Encumbrances; 
  

 71 

 (ii) Liens on any asset existing at the time of acquisition of such asset by Company or a
Subsidiary of Company, or Liens to secure the payment of all or any part of the purchase price of an asset upon the acquisition of such asset by Company or a Subsidiary of Company or to secure any Indebtedness permitted by subsection 7.1(iii)
incurred by Company or a Subsidiary of Company at the time of or within ninety days after the acquisition of such asset, which Indebtedness is incurred for the purpose of financing all or any part of the purchase price thereof; provided,
however, that the Lien shall apply only to the asset so acquired and proceeds thereof; and 
  
 (iii) Liens set forth on Schedule 7.2 annexed hereto. 
  
 B. Equitable Lien in Favor of Lenders. If Company or any of its Subsidiaries shall create or assume any Lien upon any
of its properties or assets, whether now owned or hereafter acquired, other than Liens excepted by the provisions of subsection 7.2A, it shall make or cause to be made effective provision whereby the Obligations will be secured by such Lien equally
and ratably with any and all other Indebtedness secured thereby as long as any such Indebtedness shall be so secured; provided that, notwithstanding the foregoing, this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of subsection 7.2A. 
  
 C. No Further Negative Pledges. Neither Company nor any of its Subsidiaries shall enter into any agreement (other than an agreement prohibiting only the creation of Liens securing Subordinated Indebtedness)
prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired, except with respect to specific property encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an executed agreement with respect to an asset sale and except for customary provisions contained in contracts, leases, licenses and similar agreements entered into in the ordinary course of business restricting assignment, subletting or other
transfers of rights under such contracts, leases, licenses and similar agreements. 
  
 D. No Restrictions on Subsidiary Distributions to Company or Other Subsidiaries. Company will not, and will not permit any of its Subsidiaries to, 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 (i) pay dividends or make any other distributions on any of such Subsidiary’s Capital Stock owned by Company or any other Subsidiary of
Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or advances to Company or any other Subsidiary of Company, or (iv) transfer any of its property or assets to
Company or any other Subsidiary of Company, except (a) as provided in this Agreement, (b) with respect to specific property encumbered to secure payment of particular Indebtedness or to be sold pursuant to an executed agreement with respect to an
asset sale, and (c) for customary provisions contained in contracts, leases, licenses and similar agreements entered into in the ordinary course of business restricting assignment, subletting or other transfers of rights under such contracts,
leases, licenses and similar agreements. 
  

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 7.3 Investments; Acquisitions. 
  
 Company shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, make or own any Investment in any Person, including any Joint Venture, or acquire, by purchase or otherwise, all or substantially all the business, property or fixed assets of, or Capital Stock or other ownership interest of any
Person, or any division or line of business of any Person except: 
  
 (i) Company and its Subsidiaries may make and own Investments in Cash Equivalents; 
  
 (ii) Company and its Subsidiaries may make intercompany loans to the extent permitted under subsection 7.1; 
  
 (iii) Company and its Subsidiaries may make Consolidated
Capital Expenditures permitted by subsection 7.8; 
  
 (iv) Company and its Subsidiaries may continue to own the Investments owned by them and set forth on Schedule 7.3 annexed hereto; 
  
 (v) Company and its Subsidiaries may make additional Investments in their respective Foreign Subsidiaries; provided that (a) the
amount of all such Investments constituting equity Investments (other than the conversion to equity of the intercompany Indebtedness set forth on Schedule 7.1 annexed hereto) does not exceed $10,000,000 in the aggregate for all such
Investments since the Restatement Date and (b) the amount of all such Investments constituting loans or advances permitted under subsection 7.1(v) does not exceed $10,000,000 in aggregate principal amount at any time outstanding; 
  
 (vi) Company and its Subsidiaries may make additional
Investments in their respective Domestic Subsidiaries; provided that (a) any such Domestic Subsidiary is a Subsidiary Guarantor or (b) notwithstanding anything to the contrary contained in the definition of Significant Subsidiaries and
considering all such equity Investments and all such Investments constituting loans or advances permitted by subsection 7.1(vi) to be assets of the recipient of such equity Investment or Investment constituting loans or advances for purposes of the
definition of Significant Subsidiary, any such Domestic Subsidiary, together with all other Domestic Subsidiaries of Company (other than Domestic Significant Subsidiaries) in which Company and its Subsidiaries have made additional Investments (in
the form of equity Investments or Investments constituting loans or advances), would not collectively constitute a Domestic Significant Subsidiary; 
  
 (vii) Company may make and own Investments in an aggregate amount equal to the amount of compensation deferred by officers and employees
of Company pursuant to the Korn/Ferry Executive Capital Accumulation Plan; 
  
 (viii) Company and its Subsidiaries may make Permitted Acquisitions in an aggregate amount not to exceed $100,000,000 for all such Permitted Acquisitions since 

  

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the Restatement Date; provided that Company has delivered to Administrative Agent an Officer’s Certificate stating that the proposed acquisition
complies with clauses (iii) and (iv) of the definition of Permitted Acquisition and attaching financial information and calculations in form and substance reasonably satisfactory to Administrative Agent required to confirm such statement; and

  
 (ix) Company and its Subsidiaries may make
and own other Investments in an aggregate amount not to exceed at any time $2,500,000. 
  
 7.4 Contingent Obligations. 
  
 Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or become or remain liable with respect to any Contingent Obligation, except: 
  
 (i) Company may become and remain liable with respect to
Contingent Obligations in respect of Letters of Credit; 
  
 (ii) Subsidiaries of Company may become and remain liable with respect to Contingent Obligations in respect of the Subsidiary Guaranty; 
  
 (iii) Company and its Subsidiaries, as applicable, may become and remain liable with respect to Contingent
Obligations set forth on Schedule 7.4 annexed hereto; and 
  
 (iv) Company and its Subsidiaries may become and remain liable with respect to other Contingent Obligations; provided that the maximum aggregate liability, contingent or otherwise, of Company and its
Subsidiaries in respect of all such Contingent Obligations shall at no time exceed $4,000,000. 
  
 7.5 Restricted Junior Payments. 
  
 Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Junior Payment; provided that Company may make
mandatory payments in respect of the Convertible Subordinated Notes and the Convertible Series A Preferred Stock in accordance with the terms of, and only to the extent required by, and subject to the subordination provisions contained in, the
indenture or other agreement pursuant to which such Subordinated Indebtedness was issued, as such indenture or other agreement may be amended from time to time to the extent permitted under subsection 7.13, and the Subordination Agreement, as the
case may be; provided, further, that Company may make payments for acquisitions of shares of its common stock from any Person in an aggregate amount not to exceed $50,000,000 in any Fiscal Year so long as (i) after giving effect to
such payment, no Event of Default or Potential Event of Default exists at the time such payment is agreed upon or made (or would result therefrom) and (ii) except in the case of payments for acquisitions of its common stock (a) from its current or
former employees in an aggregate amount not to exceed $1,500,000 in any Fiscal Year and (b) from any Person in an aggregate amount not to exceed $7,500,000 in any Fiscal Year acquired for purposes of delivery to eligible employees in connection with
purchases made pursuant to the Korn/Ferry International Employee Stock Purchase Plan, after giving pro forma effect to such payment, 

  

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Company will be in compliance with the provisions of subsection 7.6 as of and for the most recently completed period of four consecutive Fiscal Quarters
ending prior to such payment for which financial statements required by subsections 6.1(iii), (iv) and (v) have been delivered (and Company has delivered to Administrative Agent an Officer’s Certificate so stating and attaching financial
information and calculations in form and substance reasonably satisfactory to Administrative Agent required to confirm such statement). 
  
 7.6 Financial Covenants. 
  
 A. Minimum Consolidated Fixed Charge Coverage Ratio. Company shall not permit the ratio of (i) (a) Consolidated EBITDA for any four Fiscal Quarter
period ending on or after July 31, 2003 minus (b) Consolidated Capital Expenditures made during such period, minus (c) income taxes payable for such period to (ii) Consolidated Fixed Charges for such period to be less than 1.40:1.00. 
  
 B. Maximum Consolidated Leverage Ratio. Company shall not permit the
Consolidated Leverage Ratio, as of the last day of any Fiscal Quarter, to exceed 2.00:1.00. 
  
 C. Minimum Consolidated EBITDA. Company shall not permit Consolidated EBITDA for any four Fiscal Quarter period to be less than $15,000,000. 
  
 D. Minimum Consolidated Quick Ratio. Company shall not permit the Consolidated Quick Ratio, as of the last day of any
Fiscal Quarter, to be less than 1.25:1.00. 
  
 7.7
Restriction on Fundamental Changes; Asset Sales. 
  
 Company shall not, and shall not permit any of its Subsidiaries to, alter the corporate, capital or legal structure of Company or any of its Subsidiaries, or enter into any transaction of merger or consolidation, or liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of its business, property or
assets (including its notes or receivables and Capital Stock of a Subsidiary, whether newly issued or outstanding), whether now owned or hereafter acquired, except: 
  
 (i) any Subsidiary of Company may be merged with or into Company or any Subsidiary Guarantor, or be
liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to Company or any Subsidiary Guarantor;
provided that, in the case of such a merger, Company or such Subsidiary Guarantor shall be the continuing or surviving Person; 
  
 (ii) Company and its Subsidiaries may sell or otherwise dispose of assets in transactions that do not constitute Asset Sales;
provided that the consideration received for such assets shall be in an amount at least equal to the fair market value thereof; 
  
 (iii) Company and its Subsidiaries may dispose of obsolete, worn out or surplus property in the ordinary course of business; 

 

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 (iv) Company and its Subsidiaries may make Asset Sales of assets having a fair market
value not in excess of $5,000,000; provided that (a) the consideration received for such assets shall be in an amount at least equal to the fair market value thereof and (b) the sole consideration received shall be Cash or an Investment
permitted by subsection 7.3; 
  
 (v) Company may
sublease or assign leases in the ordinary course of business; 
  
 (vi) in order to resolve disputes that occur in the ordinary course of business, Company and its Subsidiaries may discount or otherwise compromise for less than the face value thereof, notes or accounts receivable;
and 
  
 (vii) Company or a Subsidiary of Company
may sell or dispose of shares of Capital Stock of any of its Subsidiaries in order to qualify members of the Governing Body of the Subsidiary if required by applicable law. 
  
 7.8 Consolidated Capital Expenditures. 
  
 Company shall not, and shall not permit its Subsidiaries to, make or incur Consolidated Capital Expenditures, in any Fiscal
Year, in an aggregate amount in excess of $10,000,000. 
  
 7.9
Transactions with Shareholders and Affiliates. 
  
 Company shall not, and shall not permit any of its 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 service) with
any holder of 5% or more of any class of equity Securities of Company or with any Affiliate of Company or of any such holder, on terms that are less favorable to Company or that Subsidiary, as the case may be, than those that might be obtained at
the time from Persons who are not such a holder or Affiliate; provided that the foregoing restriction shall not apply to (i) any transaction between Company and any of its wholly-owned Subsidiaries or between any of its wholly-owned
Subsidiaries, (ii) reasonable and customary fees and customary indemnities and reimbursements paid to members of the Governing Bodies, and customary indemnities and reimbursements paid to officers, employees and consultants, of Company and its
Subsidiaries or (iii) subject to the terms of the Subordination Agreement, any transaction under or contemplated by the documents, instruments or agreements governing or evidencing the Subordinated Indebtedness. 
  
 7.10 Sales and Lease-Backs. 
  
 Company shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, become or remain liable as lessee or as a guarantor or other surety with respect to any lease, whether an Operating Lease or a Capital Lease, of any property (whether real, personal or mixed), whether now owned or hereafter acquired,
(i) that Company or any of its Subsidiaries has sold or transferred or is to sell or transfer to any other Person (other than Company or any of its Subsidiaries) or (ii) that Company or any of its Subsidiaries intends to use for substantially the
same purpose as any other property that has been or is to be sold or transferred by Company or any of its Subsidiaries to any Person (other than Company or any of its Subsidiaries) in connection with such lease. 
  

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 7.11 Sale or Discount of Receivables . 
  
 Company shall not, and shall not permit any of its Subsidiaries to, directly
or indirectly, sell with recourse, or discount or otherwise sell for less than the face value thereof, any of its notes or Accounts, except in connection with bona fide efforts to collect Accounts which are past due 120 days or more. 
  
 7.12 Conduct of Business. 
  
 From and after the Closing Date, Company shall not, and shall not permit any
of its Subsidiaries to, engage in any business other than the businesses engaged in by Company and its Subsidiaries on the Closing Date and similar or related businesses. 
  
 7.13 Amendments of Documents Relating to Subordinated Indebtedness. 
  
 Company shall not, and shall not permit any of its Subsidiaries to, amend or
otherwise change the terms of any Subordinated Indebtedness, or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to increase the interest rate on such Subordinated Indebtedness,
change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or increase any
grace period related thereto), change the redemption, prepayment or defeasance provisions thereof (other than in favor of Company and not adverse to Lenders), change the subordination provisions thereof (or of any guaranty thereof), or change any
collateral therefor (other than to release such collateral). 
  
 7.14 Fiscal Year. 
  
 Company shall
not change its Fiscal Year-end from April 30. 
  
 Section 8. EVENTS OF
DEFAULT 
  
 If any of the following conditions or events
(“Events of Default”) shall occur: 
  
 8.1
Failure to Make Payments When Due. 
  
 Failure
by Company to pay any installment of principal of any Loan when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; failure by Company to pay when due any amount payable to
Issuing Lender in reimbursement of any drawing under a Letter of Credit; or failure by Company to pay any interest on any Loan or any fee or any other amount due under this Agreement within five days after the date due; or 
  
 8.2 Default in Other Agreements. 
  
 (i) Failure of Company or any of its Subsidiaries to pay
when due (a) any principal of or interest on or any other amount payable in respect of one or more items of Indebtedness (other than Indebtedness referred to in subsection 8.1) or Contingent 

  

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Obligations in an individual principal amount of $1,000,000 or more or with an aggregate principal amount of $1,000,000 or more, in each case beyond the end
of any grace period provided therefor, or (b) any dividends on or any other amounts payable in respect of the Convertible Series A Preferred Stock; or 
  
 (ii) breach or default by Company or any of its Subsidiaries with respect to any other material term of (a) one or more items of
Indebtedness or Contingent Obligations in the individual or aggregate principal amounts referred to in clause (i) above or (b) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness or Contingent
Obligation(s), if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be (upon the giving or receiving of notice, lapse of time, both, or otherwise); or 

 
 8.3 Breach of Certain Covenants. 
  
 Failure of Company to perform or comply with any term or condition contained
in subsection 2.5 or 6.2 or Section 7 of this Agreement; or 
  
 8.4 Breach of Warranty. 
  
 Any
representation, warranty, certification or other statement made by Company or any of its Subsidiaries in any Loan Document or in any statement or certificate at any time given by Company or any of its Subsidiaries in writing pursuant hereto or
thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made; or 
  
 8.5 Other Defaults Under Loan Documents. 
  
 Any Loan Party shall default in the performance of or compliance with any term contained in this Agreement or any of the other Loan Documents, other than
any such term referred to in any other subsection of this Section 8, and such default shall not have been remedied or waived within 30 days after the earlier of (i) an Officer of Company or such Loan Party becoming aware of such default or (ii)
receipt by Company and such Loan Party of notice from Administrative Agent or any Lender of such default; or 
  
 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.. 
  
 (i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of
Company or any of its Significant Subsidiaries in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar
relief shall be granted under any applicable federal or state law; or 
  
 (ii) an involuntary case shall be commenced against Company or any of its Significant Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in
effect; or a decree or order of a 

  

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court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar
powers over Company or any of its Subsidiaries, or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of Company or any
of its Significant Subsidiaries for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Company or any of its Significant
Subsidiaries, and any such event described in this clause (ii) shall continue for 60 days unless dismissed, bonded or discharged; or 
  
 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.. 
  
 (i) Company or any of its Significant Subsidiaries shall have an order for relief entered with respect to it
or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent 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 shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or Company or any of its Significant
Subsidiaries shall make any assignment for the benefit of creditors; or 
  
 (ii) Company or any of its Significant Subsidiaries shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the Governing Body of Company or any
of its Significant Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (i) above or this clause (ii); or 
  
 8.8 Judgments and Attachments. 
  
 Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $500,000 or (ii) in the aggregate at any time an amount in excess of $1,000,000 (in either case not adequately covered by insurance as to which a solvent and unaffiliated insurance company
has acknowledged coverage) shall be entered or filed against Company or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any event later than five
days prior to the date of any proposed sale thereunder); or 
  
 8.9 Dissolution. 
  
 Any order,
judgment or decree shall be entered against Company or any of its Significant Subsidiaries decreeing the dissolution or split up of Company or that Significant Subsidiary and such order shall remain undischarged or unstayed for a period in excess of
30 days; or 
  
 8.10 Employee Benefit Plans.

  
 There shall occur one or more ERISA Events or similar
events in respect of any Foreign Plans, that individually or in the aggregate results in or might reasonably be expected to result in liability of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in excess 

  

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of $2,000,000 during the term of this Agreement; or there shall exist an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA)
and unfunded liabilities in respect of Foreign Plans, individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), which exceeds
$2,000,000; or 
  
 8.11 Material Adverse Effect.

  
 Any event or change shall occur that has caused or
evidences, either in any case or in the aggregate, a Material Adverse Effect; or 
  
 8.12 Change in Control. 
  
 A Change in Control shall have occurred; or 
  
 8.13 Invalidity of Loan Documents; Failure of Security; Repudiation of Obligations. 
  
 At any time after the execution and delivery thereof, (i) any Loan Document or any material provision thereof, for any reason other than the satisfaction
in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void, (ii) Administrative Agent shall not have or shall cease to have a valid First Priority Lien in
any material Collateral purported to be covered by the Collateral Documents, in each case for any reason other than the failure of Administrative Agent or any Lender to take any action within its control, or (iii) any Loan Party shall contest the
validity or enforceability of any Loan Document or any material provision thereof in writing or deny in writing that it has any further liability, including with respect to future advances by Lenders, under any Loan Document or any provision thereof
to which it is a party: 
  
 THEN (i) upon the occurrence of any Event of
Default described in subsection 8.6 or 8.7, each of (a) the unpaid principal amount of and accrued interest on the Loans, (b) an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether
or not any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit), and (c) all other Obligations
shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Company, and the obligation of each Lender to make any Loan, the obligation
of Administrative Agent to issue any Letter of Credit and the right of any Lender to issue any Letter of Credit hereunder shall thereupon terminate, and (ii) upon the occurrence and during the continuation of any other Event of Default,
Administrative Agent shall, upon the written request or with the written consent of Requisite Lenders, by written notice to Company, declare all or any portion of the amounts described in clauses (a) through (c) above to be, and the same shall
forthwith become, immediately due and payable, and the obligation of each Lender to make any Loan, the obligation of Administrative Agent to issue any Letter of Credit and the right of any Lender to issue any Letter of Credit hereunder shall
thereupon terminate; provided that the foregoing shall not affect in any way the obligations of Revolving Lenders under subsection 3.3C(i). 
  

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 Any amounts described in clause (b) above, when received by Administrative Agent, shall be held by
Administrative Agent pursuant to the terms of the Security Agreement and shall be applied as therein provided. 
  
 Section 9. ADMINISTRATIVE AGENT 
  
 9.1 Appointment. 
  
 A. Appointment of Administrative Agent. Wells Fargo is hereby appointed Administrative Agent hereunder and under the other Loan Documents. Each Lender hereby authorizes Administrative Agent to act as its agent in accordance with the
terms of this Agreement and the other Loan Documents. Administrative Agent agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. The provisions of this Section 9 are solely for the benefit
of Administrative Agent and Lenders and no Loan Party shall have rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties under this Agreement, Administrative Agent (other than as provided in
subsection 2.1D) shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Company or any other Loan Party. 
  
 B. Appointment of Supplemental Collateral Agents. It is the purpose of
this Agreement and the other Loan Documents that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is
recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case Administrative Agent deems that by reason of any present or future
law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, it may be necessary that
Administrative Agent appoint an additional individual or institution as a separate trustee, co-trustee, collateral agent or collateral co-agent (any such additional individual or institution being referred to herein individually as a
“Supplemental Collateral Agent” and collectively as “Supplemental Collateral Agents”). 
  
 In the event that Administrative Agent appoints a Supplemental Collateral Agent with respect to any Collateral, (i) each and every right, power, privilege
or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to Administrative Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Collateral
Agent to the extent, and only to the extent, necessary to enable such Supplemental Collateral Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every
covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by such Supplemental Collateral Agent shall run to and be enforceable by either Administrative Agent or such Supplemental Collateral Agent,
and (ii) the provisions of this Section 9 and of subsections 10.2 and 10.3 that refer to Administrative Agent shall inure to the benefit of such Supplemental Collateral Agent and all references therein to Administrative Agent shall be deemed to be
references to Administrative Agent and/or such Supplemental Collateral Agent, as the context may require. 
  

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Should any instrument in writing from Company or any other Loan Party be required by any Supplemental Collateral Agent so appointed by Administrative Agent
for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, Company shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by
Administrative Agent. In case any Supplemental Collateral Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Collateral Agent, to the extent
permitted by law, shall vest in and be exercised by Administrative Agent until the appointment of a new Supplemental Collateral Agent. 
  
 9.2 Powers and Duties; General Immunity. 
  
 A. Powers; Duties Specified. Each Lender irrevocably authorizes Administrative Agent to take such action on such Lender’s behalf and to
exercise such powers, rights and remedies hereunder and under the other Loan Documents as are specifically delegated or granted to Administrative Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably
incidental thereto. Administrative Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents. Administrative Agent may exercise such powers, rights and remedies and perform
such duties by or through its agents or employees. Administrative Agent shall not have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender or Company; and nothing in this Agreement or
any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon Administrative Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth
herein or therein. 
  
 B. No Responsibility for Certain
Matters. Administrative Agent shall not be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Loan Document or for any representations,
warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by Administrative Agent to
Lenders or by or on behalf of Company to Administrative Agent or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of Company or any other Person liable for
the payment of any Obligations, nor shall Administrative Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as
to the use of the proceeds of the Loans or the use of the Letters of Credit or as to the existence or possible existence of any Event of Default or Potential Event of Default. Anything contained in this Agreement to the contrary notwithstanding,
Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the Letter of Credit Usage or the component amounts thereof. 
  

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 C. Exculpatory Provisions. None of Administrative Agent or any of its officers, directors,
employees or agents shall be liable to Lenders for any action taken or omitted by Administrative Agent under or in connection with any of the Loan Documents except to the extent caused by Administrative Agent’s gross negligence or willful
misconduct. Administrative Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the other Loan Documents or from the exercise of any power,
discretion or authority vested in it hereunder or thereunder unless and until Administrative Agent shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under
subsection 10.6) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), Administrative Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power,
discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication (including any
communication posted on a Platform), instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and
judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against Administrative Agent as a
result of Administrative Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of Requisite Lenders (or such other Lenders as may be required to give
such instructions under subsection 10.6). 
  
 D. Administrative
Agent Entitled to Act as Lender. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, Administrative Agent in its individual capacity as a Lender hereunder. With
respect to its participation in the Loans and the Letters of Credit, Administrative Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term “Lender” or “Lenders” or any similar term shall, unless the context clearly otherwise indicates, include Administrative Agent in its individual capacity. Administrative Agent and its
Affiliates may accept deposits from, lend money to, acquire equity interests in and generally engage in any kind of commercial banking, investment banking, trust, financial advisory or other business with Company or any of its Affiliates as if it
were not performing the duties specified herein, and may accept fees and other consideration from Company for services in connection with this Agreement and otherwise without having to account for the same to Lenders. 
  
 9.3 Independent Investigation by Lenders; No Responsibility For
Appraisal of Creditworthiness. 
  
 Each Lender
agrees that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the making of the Loans and the issuance of Letters of Credit hereunder and that it has made and
shall continue to make its own appraisal of the creditworthiness of Company and its Subsidiaries. Administrative Agent shall have no duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such
appraisal on behalf of Lenders or to provide any Lender with any 

  

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credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and
Administrative Agent shall have no responsibility with respect to the accuracy of or the completeness of any information provided to Lenders. 
  
 9.4 Right to Indemnity. 
  
 Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify Administrative Agent and its officers, directors, employees, agents,
attorneys, professional advisors and Affiliates to the extent that any such Person shall not have been reimbursed by Company, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including counsel fees and disbursements and fees and disbursements of any financial advisor engaged by Administrative Agent) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against
Administrative Agent or and other such Persons in exercising the powers, rights and remedies of Administrative Agent or performing duties of Administrative Agent hereunder or under the other Loan Documents or otherwise in its capacity as
Administrative Agent in any way relating to or arising out of this Agreement or the other Loan Documents; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of Administrative Agent resulting solely from Administrative Agent’s gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. If any
indemnity furnished to Administrative Agent or any other such Person for any purpose shall, in the opinion of Administrative Agent, be insufficient or become impaired, Administrative Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is furnished. 
  
 9.5 Resignation of Agent; Successor Administrative Agent. 
  
 Administrative Agent may resign at any time by giving 30 days’ prior written notice thereof to Lenders and Company. Upon any such notice of
resignation, Requisite Lenders shall have the right, upon five Business Days’ notice to Company, to appoint a successor Administrative Agent. If no such successor shall have been so appointed by Requisite Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, the retiring Administrative Agent may, on behalf of Lenders, appoint a successor Administrative Agent. If Administrative Agent shall notify Lenders
and Company that no Person has accepted such appointment as successor Administrative Agent, such resignation shall nonetheless become effective in accordance with Administrative Agent’s notice and (i) the retiring Administrative Agent shall be
discharged from its duties and obligations under the Loan Documents, except that any Collateral held by Administrative Agent will continue to be held by it until a Person shall have accepted the appointment of successor Administrative Agent, and
(ii) all payments, communications and determinations provided to be made by, to or through Administrative Agent shall instead be made by, to or through each Lender directly, until such time as Requisite Lenders appoint a successor Administrative
Agent in accordance with this subsection 9.5. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, 

  

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privileges and duties of the retiring Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement. 
  
 9.6
Collateral Documents and Subsidiary Guaranty. 
  
 Each Lender hereby further authorizes (and, with respect to actions taken prior to the Restatement Date, ratifies the actions taken by) Administrative Agent, on behalf of and for the benefit of Lenders, to enter into each Collateral
Document as secured party and to be the agent for and representative of Lenders under the Subsidiary Guaranty, and each Lender agrees to be bound by the terms of each Collateral Document and the Subsidiary Guaranty; provided that
Administrative Agent shall not (i) enter into or consent to any material amendment, modification, termination or waiver of any provision contained in any Collateral Document or the Subsidiary Guaranty or (ii) release any Collateral (except as
otherwise expressly permitted or required pursuant to the terms of this Agreement or the applicable Collateral Document), in each case without the prior consent of Requisite Lenders (or, if required pursuant to subsection 10.6, all Lenders);
provided further, however, that, without further written consent or authorization from Lenders, Administrative Agent may execute any documents or instruments necessary to (a) release any Lien encumbering any item of Collateral
that is the subject of a sale or other disposition of assets permitted by this Agreement or to which Requisite Lenders have otherwise consented, (b) release any Subsidiary Guarantor from the Subsidiary Guaranty if all of the Capital Stock of such
Subsidiary Guarantor is sold to any Person (other than an Affiliate of Company) pursuant to a sale or other disposition permitted hereunder or to which Requisite Lenders have otherwise consented or (c) subordinate the Liens of Administrative Agent,
on behalf of Lenders, to any Liens permitted by subsection 7.2; provided that, in the case of a sale of such item of Collateral or stock referred to in subdivision (a) or (b), the requirements of subsection 10.14 are satisfied. Anything
contained in any of the Loan Documents to the contrary notwithstanding, Company, Administrative Agent and each Lender hereby agree that (1) no Lender shall have any right individually to realize upon any of the Collateral under any Collateral
Document or to enforce the Subsidiary Guaranty, it being understood and agreed that all powers, rights and remedies under the Collateral Documents and the Subsidiary Guaranty may be exercised solely by Administrative Agent for the benefit of Lenders
in accordance with the terms thereof, and (2) in the event of a foreclosure by Administrative Agent on any of the Collateral pursuant to a public or private sale, Administrative Agent or any Lender may be the purchaser of any or all of such
Collateral at any such sale and Administrative Agent, as agent for and representative of Lenders (but not any Lender or Lenders in its or their respective individual capacities unless Requisite Lenders shall otherwise agree in writing) shall be
entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price
for any collateral payable by Administrative Agent at such sale. 
  
 9.7 Administrative Agent May File Proofs of Claim. 
  
 In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to 

  

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Company or any of the Subsidiaries of Company, Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as
herein expressed or by declaration or otherwise and irrespective of whether Administrative Agent shall have made any demand on Company) shall be entitled and empowered, by intervention in such proceeding or otherwise 
  
 (i) to file and prove a claim for the whole amount of
principal and interest owing and unpaid in respect of the Loans and any other Obligations that are owing and unpaid and to file such other papers or documents as may be necessary or advisable in order to have the claims of Lenders and Administrative
Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of Lenders and Administrative Agent and their agents and counsel and all other amounts due Lenders and Administrative Agent under subsections 2.3 and
10.2) allowed in such judicial proceeding, and 
  
 (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; 
  
 and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to
make such payments to Administrative Agent and, in the event that Administrative Agent shall consent to the making of such payments directly to Lenders, to pay to Administrative Agent any amount due for the reasonable compensation, expenses,
disbursements and advances of Administrative Agent and its agents and counsel, and any other amounts due Administrative Agent under subsections 2.3 and 10.2. 
  
 Nothing herein contained shall be deemed to authorize Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lenders or to authorize Administrative Agent to vote in respect of the claim of any Lender in any such proceeding. 
  
 Section 10. MISCELLANEOUS 
  
 10.1 Successors and Assigns; Assignments and Participations in Loans
and Letters of Credit. 
  
 A. General. This
Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders (it being understood that Lenders’ rights of
assignment are subject to the further provisions of this subsection 10.1). Neither Company’s rights or obligations hereunder nor any interest therein may be assigned or delegated by Company without the prior written consent of all Lenders (and
any attempted assignment or transfer by Company without such consent shall be null and void). No sale, assignment or transfer or participation of any Letter of Credit or any participation therein may be made separately from a sale, assignment,
transfer or participation of a corresponding interest in the Revolving Loan Commitment and the Revolving Loans of the Revolving Lender effecting such sale, assignment, transfer or participation. Nothing in this Agreement, expressed or implied, shall
be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted 

  

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hereby and, to the extent expressly contemplated hereby, the Affiliates of each of Administrative Agent and Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement. 
  
 B.
Assignments. 
  
 (i) Amounts and
Terms of Assignments. Any Lender may assign to one or more Eligible Assignees all or any portion of its rights and obligations under this Agreement; provided that (a), except (1) in the case of an assignment of the entire remaining amount
of the assigning Lender’s rights and obligations under this Agreement or (2) in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund of a Lender, the aggregate amount of the Revolving Loan Exposure of the
assigning Lender and the assignee subject to each such assignment shall not be less than $2,000,000 unless each of Administrative Agent and, so long as no Event of Default has occurred and is continuing, Company otherwise consents, each such consent
not to be unreasonably withheld or delayed), (b) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loan or the Commitment
assigned, (c) the parties to each assignment shall execute and deliver to Administrative Agent an Assignment Agreement, together with a processing and recordation fee of $3,500 (unless the assignee is an Affiliate or an Approved Fund of the
assignor, in which case no fee shall be required), and the Eligible Assignee, if it shall not be a Lender, shall deliver to Administrative Agent information reasonably requested by Administrative Agent, including such forms, certificates or other
evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to Administrative Agent pursuant to subsection 2.7B(iii) and (d), except in the case of
an assignment to another Lender, an Affiliate of a Lender or an Approved Fund of a Lender, Administrative Agent and, if no Event of Default has occurred and is continuing, Company, shall have consented thereto (which consent shall not be
unreasonably withheld). Upon such execution, delivery and consent, from and after the effective date specified in such Assignment Agreement, (y) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder and (z) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination of this Agreement under subsection 10.9B) and be released from its obligations under this Agreement (and, in the case of an Assignment
Agreement covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto; provided that, anything contained in any of the Loan Documents to the
contrary notwithstanding, if such Lender is Issuing Lender with respect to any outstanding Letters of Credit such Lender shall continue to have all rights and obligations of Issuing Lender with respect to such Letters of Credit until the
cancellation or expiration of such Letters of Credit and the reimbursement of any amounts drawn thereunder). The assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its Notes, if any,
to Administrative Agent for cancellation, and thereupon new Notes shall, if 

  

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so requested by the assignee and/or the assigning Lender in accordance with subsection 2.1E, be issued to the assignee and/or to the assigning Lender,
substantially in the form of Exhibit IV annexed hereto, with appropriate insertions, to reflect the new Commitments and/or outstanding Revolving Loans of the assignee and/or the assigning Lender. Other than as provided in subsection 10.5, any
assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection 10.1B shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with subsection 10.1C. 
  
 (ii) Acceptance by Administrative Agent; Recordation in Register. Upon its receipt of an Assignment Agreement executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the processing
and recordation fee referred to in subsection 10.1B(i) and any forms, certificates or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to Administrative Agent pursuant
to subsection 2.7B(iii), Administrative Agent shall, if Administrative Agent and Company have consented to the assignment evidenced thereby (in each case to the extent such consent is required pursuant to subsection 10.1B(i)), (a) accept such
Assignment Agreement by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of Administrative Agent to such assignment), (b) record the information contained therein in the Register, and (c) give
prompt notice thereof to Company. Administrative Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it as provided in this subsection 10.1B(ii). 
  
 (iii) Deemed Consent by Company. If the consent of Company to an assignment or to an Eligible
Assignee is required hereunder (including a consent to an assignment which does not meet the minimum assignment thresholds specified in subsection 10.1B(i)), Company shall be deemed to have given its consent five Business Days after the date notice
thereof has been delivered by the assigning Lender (through Administrative Agent) unless such consent is expressly refused by Company prior to such fifth Business Day. 
  
 C. Participations. Any Lender may, without the consent of, or notice to, Company or Administrative Agent, sell
participations to one or more Persons (other than a natural Person or Company or any of its Affiliates) in all or a portion of such Lender’s rights and/or obligations under this Agreement; provided that (i) such Lender’s obligations
under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) Company, Administrative Agent and Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right
to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver directly affecting (i) the extension of the scheduled final maturity date of any Loan allocated to such participation or (ii) a reduction of the principal amount of or the rate of interest payable on any Loan
allocated to such participation. Subject to the further provisions of this subsection 10.1C, 

  

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Company agrees that each Participant shall be entitled to the benefits of subsections 2.6D and 2.7 to the same extent as if it were a Lender and had acquired
its interest by assignment pursuant to subsection 10.1B. To the extent permitted by law, each Participant also shall be entitled to the benefits of subsection 10.4 as though it were a Lender, provided such Participant agrees to be subject to
subsection 10.5 as though it were a Lender. A Participant shall not be entitled to receive any greater payment under subsections 2.6D and 2.7 than the applicable Lender would have been entitled to receive with respect to the participation sold to
such Participant unless the sale of the participation to such Participant is made with Company’s prior written consent. A Participant that would be a Non-US Lender if it were a Lender shall not be entitled to the benefits of subsection 2.7
unless Company is notified of the participation sold to such Participant and such Participant agrees, for the benefit of Company, to comply with subsection 2.7B(iii) as though it were a Lender. 
  
 D. Pledges and Assignments. Any Lender may at any time pledge or
assign a security interest in all or any portion of its Loans, and the other Obligations owed to such Lender, to secure obligations of such Lender, including, without limitation, any pledge or assignment to secure obligations to any Federal Reserve
Bank; provided that (i) no Lender shall be relieved of any of its obligations hereunder as a result of any such assignment or pledge and (ii) in no event shall any assignee or pledgee be considered to be a “Lender” or be entitled to
require the assigning Lender to take or omit to take any action hereunder. 
  
 E. Information. Each Lender may furnish any information concerning Company and its Subsidiaries in the possession of that Lender from time to time to assignees and participants (including prospective assignees
and participants), subject to subsection 10.19. 
  
 F.
Agreements of Lenders. Each Lender listed on the signature pages hereof hereby agrees (i) that it is an Eligible Assignee described in clause (ii) of the definition thereof; (ii) that it has experience and expertise in the making of loans such
as the Loans; and (iii) that it will make its Loans for its own account in the ordinary course of its business and without a view to distribution of such Loans within the meaning of the Securities Act or the Exchange Act or other federal securities
laws (it being understood that, subject to the provisions of this subsection 10.1, the disposition of such Loans or any interests therein shall at all times remain within its exclusive control). Each Lender that becomes a party hereto pursuant to an
Assignment Agreement shall be deemed to agree that the agreements of such Lender contained in Section 2(c) of such Assignment Agreement are incorporated herein by this reference. 
  
 10.2 Expenses. 
  
 Whether or not the transactions contemplated hereby shall be consummated, Company agrees to pay promptly (i) all reasonable
costs and expenses incurred by Administrative Agent in negotiating, preparing and executing the Loan Documents and any consents, amendments, waivers or other modifications thereto; (ii) all costs and expenses of furnishing all opinions by counsel
for Company (including any opinions requested by Administrative Agent or Lenders as to any legal matters arising hereunder) and of Company’s performance of and compliance with all agreements and conditions on its part to be performed or
complied with under this Agreement and the other Loan Documents including with respect to confirming compliance with environmental, insurance and solvency requirements; (iii) all reasonable fees, expenses and 

  

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disbursements of counsel to Administrative Agent (including allocated costs of internal counsel) in connection with the negotiation, preparation, execution
and administration of the Loan Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requested by Company; (iv) all costs and expenses of creating and perfecting Liens in favor of
Administrative Agent on behalf of Lenders pursuant to any Collateral Document, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums, and reasonable fees, expenses and
disbursements of counsel to Administrative Agent and of counsel providing any opinions that Administrative Agent or Requisite Lenders may request in respect of the Collateral Documents or the Liens created pursuant thereto; (v) all costs and
expenses incurred by Administrative Agent in connection with the custody or preservation of any of the Collateral; (vi) all other costs and expenses incurred by Administrative Agent in connection with the syndication of the Commitments; (vii) all
costs and expenses, including reasonable attorneys’ fees (including allocated costs of internal counsel) and fees, costs and expenses of accountants, advisors and consultants, incurred by Administrative Agent and its counsel relating to efforts
to (a) evaluate or assess any Loan Party, its business or financial condition and (b) protect, evaluate, assess or dispose of any of the Collateral; and (viii) all costs and expenses, including reasonable attorneys’ fees (including allocated
costs of internal counsel), fees, costs and expenses of accountants, advisors and consultants and costs of settlement, incurred by Administrative Agent and Lenders in enforcing any Obligations of or in collecting any payments due from any Loan Party
hereunder or under the other Loan Documents (including in connection with the sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Loan Documents) or in connection with any refinancing or restructuring
of the credit arrangements provided under this Agreement in the nature of a “work-out” or pursuant to any insolvency or bankruptcy proceedings. 
  
 10.3 Indemnity. 
  
 In addition to the payment of expenses pursuant to subsection 10.2, whether or not the transactions contemplated hereby shall be consummated, Company
agrees to defend (subject to Indemnitees’ selection of counsel), indemnify, pay and hold harmless Administrative Agent and Lenders (including Issuing Lender), and the officers, directors, employees, agents and Affiliates of Administrative Agent
and Lenders (collectively called the “Indemnitees”), from and against any and all Indemnified Liabilities (as hereinafter defined); provided that Company shall not have any obligation to any Indemnitee hereunder with respect
to any Indemnified Liabilities to the extent such Indemnified Liabilities arise from the gross negligence or willful misconduct of that Indemnitee as determined by a final judgment of a court of competent jurisdiction. 
  
 As used herein, “Indemnified Liabilities” means,
collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including Environmental Claims), costs (including the costs of any investigation, study,
sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the
reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a
potential party thereto, 

  

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and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal,
state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby (including Lenders’ agreement to make the Loans hereunder
or the use or intended use of the proceeds thereof or the issuance of Letters of Credit hereunder or the use or intended use of any thereof, the failure of Issuing Lender to honor a drawing under a Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de facto Government Authority, or any enforcement of any of the Loan Documents (including any sale of, collection from, or other realization upon any of the Collateral or
the enforcement of the Subsidiary Guaranty)), (ii) the statements contained in the commitment letter delivered by any Lender to Company with respect thereto, or (iii) any Environmental Claim or any Hazardous Materials Activity relating to or arising
from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Company or any of its Subsidiaries. 
  
 To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this subsection 10.3 may be unenforceable in whole or in part
because they are violative of any law or public policy, Company shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees
or any of them. 
  
 10.4 Set-Off. 

 
 In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, upon the occurrence of any Event of Default each Lender is hereby authorized by Company at any time or from time to time, with the prior written consent of Administrative Agent or Requisite Lenders
but without notice to Company or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, time or demand, provisional or final, including Indebtedness
evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by that Lender or any Affiliate of that Lender to or for the credit or the account of Company
and each other Loan Party against and on account of the Obligations of Company or any other Loan Party to that Lender (or any Affiliate of that Lender) or to any other Lender (or any Affiliate of any other Lender) under this Agreement, the Letters
of Credit and participations therein and the other Loan Documents, including all claims of any nature or description arising out of or connected with this Agreement, the Letters of Credit and participations therein or any other Loan Document,
irrespective of whether or not (i) that Lender shall have made any demand hereunder or (ii) the principal of or the interest on the Loans or any amounts in respect of the Letters of Credit or any other amounts due hereunder shall have become due and
payable pursuant to Section 8 and although said obligations and liabilities, or any of them, may be contingent or unmatured. 
  

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 10.5 Ratable Sharing. 
  
 Lenders hereby agree among themselves that if any of them shall, whether by voluntary or mandatory payment (other than a
payment or prepayment of Loans made and applied in accordance with the terms of this Agreement), by realization upon security, through the exercise of any right of set-off or banker’s lien, by counterclaim or cross action or by the enforcement
of any right under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts
payable in respect of Letters of Credit, fees and other amounts then due and owing to that Lender hereunder or under the other Loan Documents (collectively, the “Aggregate Amounts Due” to such Lender) that is greater than the
proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall, unless such proportionately greater payment is required by the terms of this
Agreement, (i) notify Administrative Agent and each other Lender of the receipt of such payment and (ii) apply a portion of such payment to purchase assignments (which it shall be deemed to have purchased from each seller of an assignment
simultaneously upon the receipt by such seller of its portion of such payment) of the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate
Amounts Due to them; provided that (A) if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of Company or otherwise, those
purchases shall be rescinded and the purchase prices paid for such assignments shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest and (B) the foregoing provisions shall not apply to (1) any
payment made by Company pursuant to and in accordance with the express terms of this Agreement or (2) any payment obtained by a Lender as consideration for the assignment (other than an assignment pursuant to this subsection 10.5) of or the sale of
a participation in any of its Obligations to any Eligible Assignee or Participant pursuant to subsection 10.1B. Company expressly consents to the foregoing arrangement and agrees that any purchaser of an assignment so purchased may exercise any and
all rights of a Lender as to such assignment as fully as if that Lender had complied with the provisions of subsection 10.1B with respect to such assignment. In order to further evidence such assignment (and without prejudice to the effectiveness of
the assignment provisions set forth above), each purchasing Lender and each selling Lender agree to enter into an Assignment Agreement at the request of a selling Lender or a purchasing Lender, as the case may be, in form and substance reasonably
satisfactory to each such Lender. 
  
 10.6 Amendments and
Waivers. 
  
 No amendment, modification,
termination or waiver of any provision of this Agreement or of the Notes, and no consent to any departure by Company therefrom, shall in any event be effective without the written concurrence of Requisite Lenders; provided that no such
amendment, modification, termination, waiver or consent shall, without the consent of (a) each Lender with Obligations directly affected thereby (whose consent shall be sufficient for any such amendment, modification, termination or waiver without
the consent of Requisite Lenders), (1) reduce the principal amount of any Loan, (2) increase the maximum aggregate amount of Letters of Credit, (3) postpone the date or reduce the amount of any scheduled payment (but not prepayment) of principal of
any Loan, (4) postpone the date on which any interest or any fees are 

  

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payable, (5) decrease the interest rate borne by any Loan (other than any waiver of any increase in the interest rate applicable to any of the Loans pursuant
to subsection 2.2E) or the amount of any fees payable hereunder, (6) reduce the amount or postpone the due date of any amount payable in respect of any Letter of Credit, (7) extend the Revolving Commitment Termination Date, (8) extend the expiration
date of any Letter of Credit beyond the Revolving Loan Commitment Termination Date or (9) change in any manner the obligations of Revolving Lenders relating to the purchase of participations in Letters of Credit; (b) each Lender, (1) change in any
manner the definition of “Pro Rata Share” or the definition of “Requisite Lenders” or the definition of “Requisite Lenders” (except for any changes resulting solely from an increase in the aggregate amount of the
Commitments approved by Requisite Lenders), (2) change in any manner any provision of this Agreement that, by its terms, expressly requires the approval or concurrence of all Lenders, (3) increase the maximum duration of Interest Periods permitted
hereunder, (4) release any Lien granted in favor of Administrative Agent with respect to all or substantially all of the Collateral or more in aggregate fair market value of the Collateral or release all or substantially all of the Subsidiary
Guarantors from their obligations under the Subsidiary Guaranty, in each case other than in accordance with the terms of the Loan Documents, or (5) change in any manner or waive the provisions contained in subsection 8.1, subsection 10.5 or this
subsection 10.6. In addition, (i) any amendment, modification, termination or waiver of any of the provisions contained in Section 4 shall be effective only if evidenced by a writing signed by or on behalf of Administrative Agent and Requisite
Lenders, (ii) no amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the Lender which is the holder of that Note, (iii) no amendment, modification, termination or waiver
of any provision of Section 3 shall be effective without the written concurrence of Administrative Agent and, with respect to the purchase of participations in Letters of Credit, without the written concurrence of Issuing Lender that has issued an
outstanding Letter of Credit or has not been reimbursed for a payment under a Letter of Credit, (iv) no amendment, modification, termination or waiver of any provision of Section 9 or of any other provision of this Agreement which, by its terms,
expressly requires the approval or concurrence of Administrative Agent shall be effective without the written concurrence of Administrative Agent, and (v) no Commitment of a Lender shall be increased without the consent of such Lender.
Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent shall be effective only in the specific instance
and for the specific purpose for which it was given. No notice to or demand on Company in any case shall entitle Company 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 subsection 10.6 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by Company, on Company. 
  
 10.7 Independence of Covenants. 
  
 All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by
any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is
taken or condition exists. 
  

 93 

 10.8 Notices; Effectiveness of Signatures. 
  
 Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and may be personally served, or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier
service, upon receipt during normal business hours on a Business Day of telefacsimile in complete and legible form, or three Business Days after depositing it in the United States mail (certified or registered if any such notice relates to
non-compliance with the terms hereof) with postage prepaid and properly addressed; provided that notices to Administrative Agent and Issuing Lender shall not be effective until received. For the purposes hereof, the address of each party
hereto shall be as set forth under such party’s name on the signature pages hereof or (i) as to Company and Administrative Agent, such other address as shall be designated by such Person in a written notice delivered to the other parties hereto
and (ii) as to each other party, such other address as shall be designated by such party in a written notice delivered to Administrative Agent. 
  
 Loan Documents and notices under the Loan Documents may be transmitted and/or signed by telefacsimile. The effectiveness of any such documents and
signatures shall, subject to applicable law, have the same force and effect as an original copy with manual signatures and shall be binding on all Loan Parties, Administrative Agent and Lenders. Administrative Agent may also require that any such
documents and signature be confirmed by a manually-signed copy thereof; provided, however, that the failure to request or deliver any such manually-signed copy shall not affect the effectiveness of any facsimile document or signature.

  
 Notwithstanding the foregoing, Company agrees that
Administrative Agent may make any material delivered by Company to Administrative Agent, as well as any amendments, waivers, consents and other written information, documents, instruments and other materials relating to Company, any of its
Subsidiaries, or any other materials or matters relating to the Loan Documents or any of the transactions contemplated hereby that Administrative Agent is required or authorized pursuant to the terms hereof or of any Loan Document to provide to
Lenders (collectively, the “Communications”) available to Lenders by posting such notices on a Platform. Company acknowledges that (a) the distribution of material through an electronic medium is not necessarily secure and that
there are confidentiality and other risks associated with such distribution, (b) a Platform is provided “as is” and “as available” and (c) neither Administrative Agent nor any of its Affiliates warrants the accuracy,
completeness, timeliness, sufficiency, or sequencing of the Communications posted on a Platform. Administrative Agent and its Affiliates expressly disclaim with respect to a Platform any liability for errors in transmission, incorrect or incomplete
downloading, delays in posting or delivery, or problems accessing the Communications posted on such Platform and any liability for any losses, costs, expenses or liabilities that may be suffered or incurred in connection with such Platform. No
warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by
Administrative Agent or any of its Affiliates in connection with any Platform. 
  
 Each Lender agrees that notice to it (as provided in the next sentence) specifying that any Communication has been posted to a Platform shall for purposes of this Agreement constitute 

  

 94 

 
effective delivery to such Lender of such information, documents or other materials comprising such Communication. Each Lender agrees (1) to notify, on or
before the date such Lender becomes a party to this Agreement, Administrative Agent in writing of such Lender’s e-mail address to which a notice may be sent (and from time to time thereafter to ensure that Administrative Agent has on record an
effective e-mail address for such Lender) and (2) that any notice may be sent to such e-mail address. 
  
 10.9 Survival of Representations, Warranties and Agreements. 
  
 A. All representations, warranties and agreements made herein shall survive the execution and delivery of this
Agreement and the making of the Loans and the issuance of the Letters of Credit hereunder. 
  
 B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 10.2, 10.3, 10.4, 10.17 and 10.18 and the agreements of Lenders set
forth in subsections 9.2C, 9.4, 10.5 and 10.18 shall survive the payment of the Loans, the cancellation or expiration of the Letters of Credit and the reimbursement of any amounts drawn thereunder, and the termination of this Agreement. 

 
 10.10 Failure or Indulgence Not Waiver; Remedies
Cumulative. 
  
 No failure or delay on the part of
Administrative Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor
shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available. 
  
 10.11 Marshalling; Payments Set Aside. 
  
 Neither Administrative Agent nor any Lender shall be under any obligation to marshal any assets in favor of Company or any other party or against or in payment of any or all of the Obligations. To the extent that
Company makes a payment or payments to Administrative Agent or Lenders (or to Administrative Agent for the benefit of Lenders), or Administrative Agent or any Lender enforces any security interests or exercises its rights of setoff, and such payment
or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related
thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred. 
  
 10.12 Severability. 
  
 In case any provision in or obligation under this Agreement or the Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 
  

 95 

 10.13 Obligations Several; Independent Nature of Lenders’ Rights; Damage Waiver.

  
 The obligations of Lenders hereunder are several and no
Lender shall be responsible for the obligations or Commitments of any other Lender hereunder. Nothing contained herein or in any other Loan Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders,
or Lenders and Company, as 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, and each Lender shall be entitled to protect
and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 
  
 To the extent permitted by law, Company shall not assert, and hereby waives, any claim against any Indemnitee, on any theory
of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with or as a result of this Agreement (including, without limitation, subsection 2.1C hereof), any other
Loan Document, any transaction contemplated by the Loan Documents, any Loan or the use of proceeds thereof. 
  
 10.14 Release of Security Interest or Guaranty. 
  
 Upon the proposed sale or other disposition of any Collateral to any Person (other than Company or a Subsidiary of Company)
that is permitted by this Agreement or to which Requisite Lenders have otherwise consented, or the sale or other disposition of all of the Capital Stock of a Subsidiary Guarantor to any Person (other than Company or a Subsidiary of Company)
permitted by this Agreement or to which Requisite Lenders have otherwise consented, for which a Loan Party desires to obtain a security interest release or a release of the Subsidiary Guaranty from Administrative Agent, such Loan Party shall deliver
an Officer’s Certificate (i) stating that the Collateral or the Capital Stock subject to such disposition is being sold or otherwise disposed of in compliance with the terms hereof and (ii) specifying the Collateral or Capital Stock being sold
or otherwise disposed of in the proposed transaction. Upon the receipt of such Officer’s Certificate, Administrative Agent shall, at such Loan Party’s expense, so long as Administrative Agent has no reason to believe that the facts stated
in such Officer’s Certificate are not true and correct, execute and deliver such releases of its security interest in such Collateral or such Subsidiary Guaranty, as may be reasonably requested by such Loan Party. 
  
 10.15 Applicable Law. 
  
 THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA (INCLUDING SECTION 1646.5 OF THE CIVIL CODE OF THE STATE OF CALIFORNIA), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT
WOULD REQUIRE APPLICATION OF ANOTHER LAW. 
  

 96 

 10.16 Construction of Agreement; Nature of Relationship. 
  
 Each of the parties hereto acknowledges that (i) it has been represented by
counsel in the negotiation and documentation of the terms of this Agreement, (ii) it has had full and fair opportunity to review and revise the terms of this Agreement, (iii) this Agreement has been drafted jointly by all of the parties hereto, and
(iv) neither Administrative Agent nor any Lender or other Agent has any fiduciary relationship with or duty to Company arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between
Administrative Agent and Lenders, on one hand, and Company, on the other hand, in connection herewith or therewith is solely that of debtor and creditor. Accordingly, each of the parties hereto acknowledges and agrees that the terms of this
Agreement shall not be construed against or in favor of another party. 
  
 10.17 Consent to Jurisdiction and Service of Process. 
  
 ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF CALIFORNIA, COUNTY AND CITY OF LOS ANGELES. BY EXECUTING AND DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY 
  
 (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE
NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; 
  
 (II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; 
  
 (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 10.8; 
  
 (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; 
  
 (V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY
IN THE COURTS OF ANY OTHER JURISDICTION; AND 
  
 (VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 410.40 OR OTHERWISE.

  

 97 

 10.18 Waiver of Jury Trial. 
  
 EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN
ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS
SUBSECTION 10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 
  
 10.19 Confidentiality. 
  
 Each Lender shall hold all non-public information obtained pursuant to the requirements of this Agreement in accordance with
such Lender’s customary procedures for handling confidential information of this nature, it being understood and agreed by Company that in any event a Lender may make disclosures (a) to its and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such
information confidential), (b) to the extent requested by any Government Authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection
with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (f) subject to an agreement containing 

  

 98 

 
provisions substantially the same as those of this subsection 10.19, to (i) any Eligible Assignee of or participant in, or any prospective Eligible Assignee
of or Participant in, any of its rights or obligations under this Agreement or (ii) any direct or indirect contractual counterparty or prospective counterparty (or such contractual counterparty’s or prospective counterparty’s professional
advisor) to any credit derivative transaction relating to obligations of Company, (g) with the consent of Company, (h) to the extent such information (i) becomes publicly available other than as a result of a breach of this subsection 10.19 or (ii)
becomes available to Administrative Agent or any Lender on a nonconfidential basis from a source other than Company or (i) to the National Association of Insurance Commissioners or any other similar organization or any nationally recognized rating
agency that requires access to information about a Lender’s or its Affiliates’ investment portfolio in connection with ratings issued with respect to such Lender or its Affiliates and that no written or oral communications from counsel to
Administrative Agent and no information that is or is designated as privileged or as attorney work product may be disclosed to any Person unless such Person is a Lender or a participant hereunder; provided that, unless specifically prohibited
by applicable law or court order, each Lender shall notify Company of any request by any Government Authority or representative thereof (other than any such request in connection with any examination of the financial condition of such Lender by such
Government Authority) for disclosure of any such non-public information prior to disclosure of such information; and provided, further that in no event shall any Lender be obligated or required to return any materials furnished by
Company or any of its Subsidiaries. In addition, Administrative Agent and Lenders may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry, and
service providers to Administrative Agent and Lenders. 
  
 10.20 Counterparts; Effectiveness. 
  
 This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith 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 such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto. 
  
 [Remainder of page intentionally left blank] 
  

 99 

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

					
	 COMPANY:
	 	 	 	 
	 	 	KORN/FERRY INTERNATIONAL
			
	 	 	 By:
	 	 /s/ Gary D. Burnison

	 	 	 Title:
	 	 Chief Operating Officer, Chief

	 	 	 	 	 Financial Officer and Executive

	 	 	 	 	 Vice-President

		
	 	 	 Notice Address:

			
	 	 	 	 	 1900 Avenue of the Stars

	 	 	 	 	 Suite 2600

	 	 	 	 	 Los Angeles, CA 90067

	 	 	 	 	 Attention: Gary D. Burnison

	 LENDERS:
	 	 	 	 
		
	 	 	 WELLS FARGO BANK, NATIONAL ASSOCIATION,

	 	 	 individually and as Administrative Agent

			
	 	 	 By:
	 	 /s/ Geoff Headington

	 	 	 Title:
	 	 Vice President

		
	 	 	 Notice Address:

			
	 	 	 	 	 Wells Fargo Bank, National Association

	 	 	 	 	 555 Montgomery Street, 17th Floor

	 	 	 	 	 San Francisco, California 94111

	 	 	 	 	 Attention: Geoff Headington

  

 S-1<PAGE>

                                                                     Exhibit 4.1

kpmg

                 Consolidated Financial Statements of

                 NEUROCHEM INC.
                 (A DEVELOPMENT STAGE COMPANY)

                 Year ended December 31, 2004, six-month period ended
                 December 31, 2003, year ended June 30, 2003 and for the period
                 from inception (June 17, 1993) to December 31, 2004

<PAGE>

[KPMG LOGO]

            KPMG LLP
            Chartered Accountants
            2000 McGill College Avenue               Telephone (514) 840-2100
            Suite 1900                               Telefax (514) 840-2187
            Montreal (Quebec)  H3A 3H8               www.kpmg.ca

AUDITORS' REPORT TO THE SHAREHOLDERS

We have audited the consolidated balance sheets of Neurochem Inc. as at December
31, 2004 and 2003 and the consolidated statements of operations, deficit and
cash flows for the year ended December 31, 2004, the six-month period ended
December 31, 2003, the year ended June 30, 2003 and for the period from
inception (June 17, 1993) to December 31, 2004. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2004
and 2003 and the results of its operations and its cash flows for the year ended
December 31, 2004, the six-month period ended December 31, 2003, the year ended
June 30, 2003 and for the period from inception (June 17, 1993) to December 31,
2004 in accordance with Canadian generally accepted accounting principles.

(signed) KPMG LLP

Chartered Accountants

Montreal, Canada

February 11, 2005 (except as to note 22,
   which is as of February 14, 2005)

[LOGO]           KPMG LLP, a Canadian limited liability partnership is the
                 Canadian member firm of KPMG International, a Swiss
                 cooperative.

<PAGE>

NEUROCHEM INC.
Consolidated Financial Statements

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004

<TABLE>
<CAPTION>

FINANCIAL STATEMENTS

<S>                                                                                                          <C>
     Consolidated Balance Sheets..........................................................................   1

     Consolidated Statements of Operations................................................................   2

     Consolidated Statements of Deficit...................................................................   3

     Consolidated Statements of Cash Flows................................................................   4

     Notes to Consolidated Financial Statements...........................................................   5
</TABLE>

<PAGE>

NEUROCHEM INC.
Consolidated Balance Sheets

December 31, 2004 and 2003
(in thousands of Canadian dollars)
(in accordance with Canadian GAAP)

<TABLE>
<CAPTION>
===============================================================================================================
                                                        December 31,         December 31,         December 31,
                                                                2004                 2004                 2003
---------------------------------------------------------------------------------------------------------------
                                                               (US$ -              (Cdn$)               (Cdn$)
                                                          note 2 (l))
<S>                                                    <C>                  <C>                  <C>
Assets

Current assets:
     Cash and cash equivalents                         $       5,988        $       7,207        $      14,869
     Marketable securities                                    18,249               21,966               62,725
     Amount receivable under collaboration agreement
       (note 4)                                               12,000               14,443                  --
     Sales taxes and other receivables                           650                  782                  721
     Research tax credits receivable                           1,121                1,349                2,111
     Prepaid expenses and deposits                             3,187                3,836                1,671
---------------------------------------------------------------------------------------------------------------
                                                              41,195               49,583               82,097

Long-term prepaid expenses and deposits                        1,131                1,361                  226
Long-term investment (note 5)                                  3,673                4,421                4,421
Property and equipment (note 6)                               13,866               16,690                4,539
Patents (note 7)                                               3,650                4,393                2,942

---------------------------------------------------------------------------------------------------------------
                                                       $      63,515        $      76,448        $      94,225
===============================================================================================================

Liabilities and Shareholders' Equity

Current liabilities:
     Accounts payable                                  $       3,373        $       4,060        $       2,070
     Accrued liabilities                                       5,337                6,424                3,749
     Deferred revenue (note 4)                                 4,005                4,820                  --
     Current portion of obligations under
       capital leases (note 8)                                   346                  416                  425
     Current portion of long-term debt (note 9)                  570                  686                  --
---------------------------------------------------------------------------------------------------------------
                                                              13,631               16,406                6,244

Obligations under capital leases (note 8)                        --                   --                   416
Deferred revenue (note 4)                                      8,119                9,772                  --
Long-term accrued liabilities (note 12)                          105                  126                  --
Long-term debt (note 9)                                        7,851                9,450                  --
---------------------------------------------------------------------------------------------------------------
                                                              29,706               35,754                6,660

---------------------------------------------------------------------------------------------------------------
Shareholders' equity:
     Share capital (note 10)                                 146,100              175,855              173,930
     Additional paid-in capital (notes 3 and 11)               4,790                5,765                  --
     Deficit                                                (117,081)            (140,926)             (86,365)
---------------------------------------------------------------------------------------------------------------
                                                              33,809               40,694               87,565

Commitments and contingencies (note 13)
Subsequent event (note 22)

---------------------------------------------------------------------------------------------------------------
                                                       $      63,515        $      76,448        $      94,225
===============================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

On behalf of the Board of Directors by:

(Signed) Graeme K. Rutledge                              (Signed) John Molloy
Director                                                 Director

                                      - 1 -

<PAGE>

NEUROCHEM INC.
Consolidated Statements of Operations

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)
(in accordance with Canadian GAAP)

<TABLE>
<CAPTION>
====================================================================================================================
                                                                    Six-month
                                              Year ended         period ended         Year ended          Cumulative
                                             December 31,        December 31,           June 30,               since
                                       ----------------------    ------------      -------------        inception of
                                            2004         2004            2003               2003          operations
--------------------------------------------------------------------------------------------------------------------
                                          (US$ -       (Cdn$)          (Cdn$)             (Cdn$)              (Cdn$)
                                     note 2 (l))
<S>                                  <C>             <C>         <C>               <C>                <C>
Revenues:
     Collaboration agreement
       (note 4)                        $     110     $    132      $      --          $      --       $          132
     Research contracts                      --           --              --                 --                9,216
     License fees                            --           --              --                 --                1,106
--------------------------------------------------------------------------------------------------------------------
                                             110          132             --                 --               10,454

Expenses:
     Research and development             25,881       31,152           8,661             18,782             107,921
     Research tax credits                 (1,216)      (1,463)           (914)            (1,410)            (11,753)
     Research grants                        (279)        (336)           (208)            (1,895)             (8,152)
--------------------------------------------------------------------------------------------------------------------
                                          24,386       29,353           7,539             15,477              88,016

     General and administrative           14,915       17,953           7,454              7,184              47,628
     Stock-based compensation
       (note 11)                           3,355        4,038             --                 --                4,038
     Special charges (note 12)             1,393        1,676             --                 --                1,676
     Depreciation of property and
       equipment                           1,496        1,801             557              1,019               5,393
     Amortization of patent costs            204          245              89                178                 875
     Interest and bank charges               230          277              46                144               1,185
--------------------------------------------------------------------------------------------------------------------
                                          45,979       55,343          15,685             24,002             148,811

--------------------------------------------------------------------------------------------------------------------
Net loss before undernoted items         (45,869)     (55,211)        (15,685)           (24,002)           (138,357)

Investment and other income:
     Interest income                         856        1,030             520                800               6,514
     Foreign exchange                      1,078        1,298          (1,747)               100                (201)
     Gain on disposal of intellectual
       property (note 5)                     --           --              --               3,484               3,484
     Other income                            402          484             139                --                  623
--------------------------------------------------------------------------------------------------------------------
                                           2,336        2,812          (1,088)             4,384              10,420

--------------------------------------------------------------------------------------------------------------------
Net loss before income taxes             (43,533)     (52,399)        (16,773)           (19,618)           (127,937)

Income taxes:
     Quebec credit for losses                --           --              --                 --                  700

--------------------------------------------------------------------------------------------------------------------
Net loss                               $ (43,533)    $(52,399)     $  (16,773)        $  (19,618)          $(127,237)
====================================================================================================================

Net loss per share (note 16):
     Basic and diluted                 $   (1.44)    $   (1.74)    $   (0.63)         $    (0.90)
=====================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                      - 2 -

<PAGE>

NEUROCHEM INC.
Consolidated Statements of Deficit

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars)
(in accordance with Canadian GAAP)

<TABLE>
<CAPTION>
======================================================================================================================
                                                 Year ended              Six-month                          Cumulative
                                                 December 31,         period ended        Year ended             since
                                            -------------------       December 31,          June 30,      inception of
                                              2004         2004               2003              2003        operations
======================================================================================================================
                                            (US$ -       (Cdn$)             (Cdn$)            (Cdn$)            (Cdn$)
                                       note 2 (l))
<S>                                    <C>          <C>               <C>                <C>               <C>
Deficit, beginning of period:
     As previously reported            $   (71,752) $   (86,365)      $    (62,779)      $   (42,624)      $       --
     Adjustment to reflect
       change in accounting
       for employee stock
       options (note 3)                     (1,796)      (2,162)               --                --             (2,162)
----------------------------------------------------------------------------------------------------------------------
     Deficit, beginning of period,
       as restated                         (73,548)     (88,527)           (62,779)          (42,624)           (2,162)

Net loss                                   (43,533)     (52,399)           (16,773)          (19,618)         (127,237)

Share issue costs                              --           --              (6,813)             (537)          (11,527)

----------------------------------------------------------------------------------------------------------------------
Deficit, end of period                 $  (117,081) $  (140,926)      $    (86,365)      $   (62,779)      $  (140,926)
======================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                     - 3 -

<PAGE>

NEUROCHEM INC.
Consolidated Statements of Cash Flows

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars)
(in accordance with Canadian GAAP)
<TABLE>
<CAPTION>
=============================================================================================================================
                                                       Year ended            Six-month                             Cumulative
                                                      December 31,        period ended         Year ended               since
                                                ----------------------    December 31,           June 30,        inception of
                                                     2004         2004            2003               2003          operations
=============================================================================================================================
                                                   (US$ -       (Cdn$)          (Cdn$)             (Cdn$)              (Cdn$)
                                              note 2 (l))
<S>                                           <C>             <C>            <C>                 <C>                <C>
Cash flows from operating activities:
     Net loss                                   $ (43,533)    $(52,399)      $ (16,773)          $(19,618)          $(127,237)
     Adjustments for:
         Depreciation and amortization              1,700        2,046             646              1,197               6,268
         Stock-based compensation                   3,355        4,038             --                 --                4,038
         Write-off of leasehold
           improvements and other
           property and equipment                     988        1,189             --                 --                1,189
         Provision for lease exit obligations         405          487             --                 --                  487
         Accretion expense                             16           19             --                 --                   19
         Write-off of patents                         --           --              --                 --                  119
         Gain on disposal of
           intellectual property                      --           --              --              (3,484)             (3,484)
         Shares issued for services                   --           --              --                 --                   41
     Changes in operating assets and liabilities:
         Grants receivable                            --           --              529                488                 --
         Amount receivable under
           collaboration agreement                (12,000)     (14,443)            --                 --              (14,443)
         Sales taxes and other receivables            (51)         (61)            161               (477)               (782)
         Research tax credits receivable              633          762            (937)              (456)             (1,349)
         Prepaid expenses and deposits             (1,799)      (2,165)           (733)              (689)             (4,061)
         Long-term prepaid expenses and
           deposits                                  (943)      (1,135)            --                 --               (1,135)
         Deferred revenue                          12,123       14,592             --                 --               14,592
         Accounts payable and
           accrued liabilities                      3,133        3,771             590              1,086               9,809
-----------------------------------------------------------------------------------------------------------------------------
                                                  (35,973)     (43,299)        (16,517)           (21,953)           (115,929)

-----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
     Proceeds from issue of share capital           1,237        1,490          86,448             17,981             175,378
     Share issue costs                                --           --           (6,813)              (537)            (11,527)
     Proceeds from sale-leaseback                     --           --              --                 --                2,168
     Repayment of obligations under
       capital lease                                 (353)        (425)           (203)              (552)             (2,746)
     Proceeds from long-term debt                   8,723       10,500             --                 --               10,500
     Repayment of long-term debt                     (302)        (364)            --                 --                 (364)
-----------------------------------------------------------------------------------------------------------------------------
                                                    9,305       11,201          79,432             16,892             173,409

-----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
     Additions to property and equipment          (12,254)     (14,750)           (916)            (1,638)            (21,946)
     Additions to patents                          (1,328)      (1,599)           (739)              (538)             (5,796)
     Long-term investment                             --           --              --                (591)               (591)
     Proceeds from (investment in)
       marketable securities                       33,863       40,759         (52,841)            13,129             (21,966)
     Proceeds from disposal of property
       and equipment                                   22           26             --                 --                   26
-----------------------------------------------------------------------------------------------------------------------------
                                                   20,303       24,436         (54,496)            10,362             (50,273)

-----------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and
   cash equivalents                                (6,365)      (7,662)          8,419              5,301               7,207

Cash and cash equivalents,
   beginning of period                             12,353       14,869           6,450              1,149                 --

-----------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents,
   end of period                                $   5,988     $  7,207       $  14,869           $  6,450           $   7,207
=============================================================================================================================
</TABLE>

Supplemental disclosures to cash flow statements (note 17)

See accompanying notes to consolidated financial statements.

                                     - 4 -
<PAGE>
NEUROCHEM INC.
Notes to Consolidated Financial Statements

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

1.   ORGANIZATION AND BUSINESS ACTIVITIES:

     Neurochem Inc. (the "Company" or "Neurochem"), incorporated under the
     Canada Business Corporations Act in 1993, is a Canadian biopharmaceutical
     company focused on the development and commercialization of innovative
     therapeutics for neurological disorders. The Company's pipeline of
     proprietary, disease-modifying oral product candidates addresses critical
     unmet medical needs.

     Since inception, the business activities of the Company have been devoted
     principally to the development of the Company's core technology platform,
     amyloid inhibitors, which focuses on the design and synthesis of chemical
     compounds that inhibit the formation, deposition and toxicity of amyloid
     fibrils implicated as the underlying causes of certain diseases. The
     diseases currently targeted by the Company include Alzheimer's Disease,
     Hemorrhagic Stroke due to Cerebril Amyloid Angiopathy ("CAA"), and Amyloid
     A Amyloidosis. In addition, the Company is also conducting research
     programs for other neurological disorders principally Epileptic Seizures
     induced by Traumatic Brain Injury. In the fiscal period ended June 30,
     2003, the Company disposed of its intellectual property rights for Diabetes
     Type II (see note 5). The status of the Company's principal product
     candidates are as follows:
<TABLE>
<CAPTION>
     ==============================================================================================================
     Disease indication                               Product candidates                  Stage of development
     --------------------------------------------------------------------------------------------------------------
     <S>                                          <C>                         <C>
     Amyloid A (AA) Amyloidosis                           Fibrillex(TM)       Phase II/III clinical trial completed
     Alzheimer's Disease                                   Alzhemed(TM)                    Phase III clinical trial
     Hemorrhagic Stroke due to CAA                         Cerebril(TM)                     Phase II clinical trial
     Epileptic Seizures induced by
       Traumatic Brain Injury                     Lead compound NC-1461                        Pre-clinical testing

    ===============================================================================================================
</TABLE>

     Neurochem is considered to be in the development stage, with a significant
     emphasis on clinical trials for three of its product candidates. Since
     inception, substantially all of the Company's research and development
     expenditures, capital expenditures, including costs incurred to secure
     patents, and all revenues from milestone payments and research contracts,
     relate to the Company's core technology platform.

2.   SIGNIFICANT ACCOUNTING POLICIES:

     The consolidated financial statements have been prepared in accordance with
     Canadian generally accepted accounting principles ("GAAP"). A
     reconciliation of the net loss and shareholders' equity to US GAAP is
     presented in note 20.

     (a) Principles of consolidation:

         The consolidated financial statements include the accounts of Neurochem
         Inc. and its subsidiaries (the "Company"). All significant intercompany
         balances and transactions have been eliminated on consolidation.

                                      - 5 -
<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     (b) Cash and cash equivalents:

         The Company considers all investments with maturities of three months
         or less at inception, that are highly liquid and readily convertible
         into cash, to be cash equivalents.

     (c) Marketable securities:

         Marketable securities are investments with maturities greater than
         three months and less than a year, and consist principally of
         commercial paper. Interest bearing financial assets are intended to be
         held to maturity and are carried at amortized cost. Interest is
         recognized on an effective yield basis. These investments are written
         down to their estimated fair market value when this amount is less than
         amortized cost, unless the Company has reason to believe it will be
         able to recover the carrying amount. Estimated fair market value is
         based on quoted market prices.

     (d) Long-term investment:

         The long-term investment is recorded at cost. When, in the opinion of
         management, a permanent decline in value has occurred, the investment
         is written down to its estimated realizable value. In determining the
         estimated realizable value, management relies on its judgment and
         knowledge of the investment and of general business and economic
         conditions that prevail and are expected to prevail. These estimates
         are limited due to the uncertainty of predictions concerning future
         events.

     (e) Property and equipment:

         Property and equipment are stated at cost. Equipment under capital
         leases is stated at the present value of minimum lease payments.
         Depreciation and amortization are provided at the following annual
         rates:
<TABLE>
<CAPTION>
         ==========================================================================================================
         Asset                                                                      Basis          Rate/period
         ----------------------------------------------------------------------------------------------------------
         <S>                                                            <C>                        <C>
         Building                                                           Straight-line             20 years
         Research equipment                                             Declining balance                  20%
         Office equipment                                               Declining balance                  20%
         Computer hardware                                              Declining balance                  30%
         Computer software                                                  Straight-line                 100%
         Equipment under capital leases                                 Declining balance               20-30%
         Leasehold improvements                                             Straight-line        Over the term
                                                                                                  of the lease

         ==========================================================================================================
</TABLE>

     (f) Patents:

         The capitalized amount with respect to patents relates to direct costs
         incurred in connection with securing the patents. Patents are stated at
         cost and are amortized using the straight-line method over the
         remaining life of the patent.

                                      - 6 -
<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     (g) Impairment and disposal of long-lived assets:

         Long-lived assets, including property and equipment and purchased
         intangibles subject to amortization, are reviewed for impairment
         whenever events or changes in circumstances indicate that the carrying
         amount of an asset may not be recoverable. Recoverability of assets to
         be held and used is measured by a comparison of the carrying amount of
         an asset to estimated undiscounted future cash flows expected to be
         generated by the asset. If the carrying amount of an asset exceeds its
         estimated future cash flows, an impairment charge is recognized by the
         amount by which the carrying amount of the asset exceeds the fair value
         of the asset. Assets to be disposed of would be separately presented in
         the balance sheet and reported at the lower of the carrying amount or
         fair value less costs to sell, and would no longer be depreciated. The
         assets and liabilities of a disposed group classified as held-for-sale
         would be presented separately in the appropriate asset and liability
         sections of the balance sheet.

     (h) Revenue recognition:

         Revenue from collaboration agreement that includes multiple elements is
         considered to be a revenue arrangement with multiple deliverables.
         Under this type of arrangement, the identification of separate units of
         accounting is required and revenue is allocated among the separate
         units based on their relative fair values. Payments received under the
         collaboration agreement may include upfront payments, regulatory and
         sales-based milestone payments for specific achievements as well as
         distribution fees. Upfront and regulatory milestone payments, which
         require the Company's ongoing involvement, are deferred and amortized
         into income on a straight-line basis over the estimated period of
         service. Sales-based milestone payments, for which the Company has no
         future involvement or obligations to perform related to that specified
         element of the arrangement, are recognized into income upon the
         achievement of the specified milestones. Distribution fees are
         recognized when the amount is determinable and collection is reasonably
         assured.

         License fees are recorded when conditions and events under the license
         agreement have been met or occurred, and collectibility is reasonably
         assured.

         Interest income is recognized as earned.

     (i) Research and development:

         Research expenditures are expensed as incurred and include a reasonable
         allocation of overhead expenses. Development expenditures are deferred
         when they meet the criteria for capitalization in accordance with
         Canadian GAAP, and the future benefits could be regarded as being
         reasonably certain. At December 31, 2004 and 2003, no development costs
         were deferred.

     (j) Government assistance:

         Government assistance, consisting of grants and research tax credits,
         is recorded as a reduction of the related expense or the cost of the
         asset acquired. Grants are recorded when there is reasonable assurance
         that the Company has complied with the terms and conditions of the
         approved grant program. Research tax credits are recorded when there is
         reasonable assurance of their recovery.

                                     - 7 -
<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     (k) Foreign exchange:

         Monetary assets and liabilities denominated in foreign currencies are
         translated at year-end exchange rates. Non-monetary assets and
         liabilities denominated in foreign currencies are translated at
         exchange rates in effect at the transaction date. Income and expenses
         denominated in foreign currencies are translated at exchange rates in
         effect at the transaction date. Translation gains and losses are
         included in income.

         The Company's foreign subsidiaries are considered to be integrated
         foreign operations and their accounts have been translated using the
         temporal method with translation gains and losses included in the
         consolidated statements of operations.

     (l) Translation of convenience:

         The Company's functional currency is the Canadian dollar. The Company
         has also presented the consolidated financial statements as at and for
         the period ended December 31, 2004 in US dollars, using the convenience
         translation method whereby all Canadian dollar amounts were converted
         into US dollars at the noon exchange rate quoted by the Bank of Canada
         as at December 31, 2004, which was $0.8308 US dollar per Canadian
         dollar. The information in US dollars is presented only for the
         convenience of some readers and thus has limited usefulness. This
         translation should not be viewed as a representation that such Canadian
         dollar amounts actually represent such US dollar amounts or could be or
         would have been converted into US dollars at the rate indicated.

     (m) Income taxes:

         Income taxes are provided for using the liability method. Under this
         method, differences between the financial reporting bases and the
         income tax bases of the Company's assets and liabilities are recorded
         using the substantively enacted tax rates anticipated to be in effect
         when the tax differences are expected to reverse. A valuation allowance
         is recorded against any future tax asset, if it is more likely than not
         that the asset will not be realized.

     (n) Guarantees:

         In the normal course of business, the Company enters into various
         agreements that may contain features that meet the definition of a
         guarantee. A guarantee is defined to be a contract (including an
         indemnity) that contingently requires the Company to make payments to a
         third party based on (i) changes in an underlying interest rate,
         foreign exchange rate, equity or commodity instrument, index or other
         variable that is related to an asset, a liability or an equity security
         of the guaranteed party, (ii) failure or another party to perform under
         an obligating agreement, or (iii) failure of another party to pay its
         indebtedness when due.

         A liability is recorded when the Company considers probable that a
         payment relating to a guarantee has to be made to the other party of
         the contract or agreement.

                                     - 8 -
<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

2.   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

     (o) Costs associated with lease exit activities:

         Costs associated with lease obligations for leased premises that are no
         longer being used by the Company are recognized and measured at fair
         value as of the cease-use date. The face value of the liability at the
         cease-use date is determined based on the remaining lease rentals,
         reduced by estimated sublease rentals that could reasonably be obtained
         for the property, measured using the credit-adjusted risk-free rate.

     (p) Earnings per share:

         Basic earnings per share are determined using the weighted average
         number of common shares outstanding during the period. Diluted earnings
         per share are computed in a manner consistent with basic earnings per
         share, except that the weighted average shares outstanding are
         increased to include additional shares from the assumed exercise of
         options and warrants, if dilutive. The number of additional shares is
         calculated by assuming that outstanding options and warrants were
         exercised, and that the proceeds from such exercises were used to
         acquire shares of common stock at the average market price during the
         reporting period.

     (q) Use of estimates:

         The preparation of financial statements in conformity with GAAP
         requires management to make estimates and assumptions that affect the
         reported amounts of assets and liabilities and disclosure of contingent
         assets and liabilities at the date of the financial statements and the
         reported amounts of revenues and expenses during the reporting periods.
         Significant areas requiring the use of management estimates include
         estimating the useful lives of long-lived assets, including property
         and equipment and patent costs, estimating accruals for clinical trial
         expenses and lease exit costs, estimating the timing of regulatory
         approvals for revenue recognition purposes, as well as assessing the
         recoverability of research tax credits and future tax assets. The
         reported amounts and note disclosures are determined to reflect the
         most probable set of economic conditions and planned course of actions.
         Actual results could differ from these estimates.

3.   CHANGE IN ACCOUNTING POLICY:

     Stock-based compensation:

     Effective January 1, 2004, the Company adopted the recommendations of the
     CICA Handbook Section 3870, Stock-based Compensation and Other Stock-based
     Payments. The new recommendations require entities to account for employee
     stock options using the fair value based method, whereby compensation cost
     is measured at fair value at the date of grant and is expensed over the
     award's vesting period. In accordance with one of the transitional options
     permitted under amended Section 3870, the Company has retroactively applied
     the fair value based method to all employee stock options granted on or
     after July 1, 2002 without restatement of prior periods. The cumulative
     effect of the change in accounting policy of $2,162 has been recorded as an
     increase in the opening deficit and additional paid-in capital at January
     1, 2004.

                                     - 9 -
<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

3.   CHANGE IN ACCOUNTING POLICY (CONTINUED):

     Stock-based compensation (continued):

     Prior to January 1, 2004, the Company applied the fair value based method
     of accounting prescribed by the CICA to stock-based payments to
     non-employees, employee awards that were direct awards of stock or called
     for settlement in cash or other assets, and to employee stock appreciation
     rights; the Company applied the settlement method of accounting to employee
     stock options. Under the settlement method, any consideration paid by
     employees on the exercise of stock options or purchase of stock was
     credited to share capital and no compensation expense was recognized.

4.   COLLABORATION AGREEMENT:

     In December 2004, the Company concluded an exclusive collaboration
     agreement with Centocor, Inc. ("Centocor") for Fibrillex(TM), the
     Company's most advanced product candidate designed to treat Amyloid A (AA)
     Amyloidosis. Under this agreement, Neurochem granted to Centocor, a
     wholly-owned subsidiary of Johnson & Johnson, Inc., worldwide exclusive
     distribution rights for Fibrillex(TM), with the exception of Canada,
     Switzerland, China, Japan, Taiwan and South Korea for which the
     distribution rights remain with Neurochem. The agreement includes up-front,
     regulatory and sales-based milestone payments valued up to $65 million
     (US$54 million) as well as tiered distribution fees which will be based
     upon annual sales of Fibrillex(TM) in the applicable territories over the
     life of the agreement. Neurochem will be responsible for the product
     approval activities in the United States and in Europe as well as for
     global manufacturing activities. Centocor will manage the marketing and
     sales of Fibrillex(TM) in the applicable territories.

     At December 31, 2004, the Company recorded a receivable for the upfront
     payment due from Centocor upon signing of the agreement in the amount of
     $14,443 (US$12,000). One half of the upfront payment to be received by the
     Company is potentially refundable in specified circumstances. All of the
     deferred revenue at December 31, 2004 relates to amounts to be received
     under this agreement.

     The Company recognized $132 of revenue under the agreement in 2004,
     representing the amortization of the non-refundable upfront payment for the
     period from signing the agreement, December 21, 2004, over the remaining
     estimated period to obtaining the regulatory approvals of the product.

5.   LONG-TERM INVESTMENT:

     In May 2003, the Company entered into the following transactions with
     respect to its Diabetes Type II pre-clinical program:

     (i) the Company disposed of its intellectual property rights relating to
         the pre-clinical diabetes program, including an exclusive perpetual,
         royalty-free, worldwide license to Innodia Inc. ("Innodia"), a
         privately held Canadian biopharmaceutical company. The carrying value
         of these rights, which amounted to $346, was exchanged for 1,904,464
         Innodia common shares having a fair market value of $5,400. The fair
         market value of the Innodia common shares was determined based on the
         pricing of a $7,000 private placement financing completed by Innodia
         concurrently with this transaction.

                                     - 10 -
<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

5.   LONG-TERM INVESTMENT (CONTINUED):

     In May 2003, the Company entered into the following transactions with
     respect to its Diabetes Type II pre-clinical program (continued):

     (i)  (continued):

          Since the Company transferred its ownership of a controlled productive
          asset to Innodia in exchange for a non-controlling equity interest of
          31% in Innodia, the Company accounted for this transaction as a
          partial sale and recognized a gain on the transaction only to the
          extent of the interest of the other shareholders in Innodia.
          Accordingly, the gain on sale of intellectual property rights of
          $3,484, included in the June 30, 2003 statement of operations,
          represents approximately 69% of the total gain of $5,054 on the
          transaction;

     (ii) the Company subscribed for 176,339 Class A1 preferred shares of
          Innodia as part of a private placement for a cash consideration of
          $500, plus related costs of $91.

     In June 2003, the Company transferred its interest in Innodia to a holding
     company which is controlled indirectly by a shareholder. As consideration
     for this transfer, Neurochem received 176,339 non-voting Class A1
     participating preferred shares, 1,904,464 non-voting, participating Class A
     common shares and 352,537 voting, non-participating Class V preferred
     shares of the holding company. The Class A1 preferred shares are
     convertible into common shares on a one-for-one basis at any time at the
     option of the holder and automatically convertible under specified
     circumstances. At December 31, 2004 and 2003, the Company's long-term
     investment represents voting rights of approximately 12% and equity
     ownership of approximately 70% in the holding company.

     Effective January 1, 2005, the Company will adopt the new recommendations
     of the CICA relating to the consolidation of variable interest entities
     ("VIE"). The standard requires the Company to identify VIEs in which it has
     an interest, determine whether it is a primary beneficiary of such entities
     and, if so, to consolidate the VIE. The Company has determined that its
     long-term investment in Innodia holding company meets the criteria for
     being a VIE and that the Company is the primary beneficiary. Accordingly,
     the Company will consolidate this investment as of January 1, 2005. The
     cumulative effect of the change in policy of $2,501 will be recorded as an
     increase to the opening deficit at January 1, 2005.

6.   PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>

     =========================================================================================================
                                                                                                  December 31,
                                                                                                          2004
     ---------------------------------------------------------------------------------------------------------
                                                                              Accumulated
                                                                             depreciation             Net book
                                                            Cost         and amortization                value
     ---------------------------------------------------------------------------------------------------------
     <S>                                           <C>                   <C>                     <C>
     Land                                          $       1,646            $         --         $       1,646
     Building                                              9,486                      307                9,179
     Research equipment                                    5,641                    1,901                3,740
     Computer hardware and software                        2,606                    1,582                1,024
     Office equipment                                        772                      239                  533
     Equipment under capital leases                        1,198                      630                  568

     ---------------------------------------------------------------------------------------------------------
                                                   $      21,349            $       4,659        $      16,690
     =========================================================================================================
</TABLE>

                                     - 11 -
<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

6.   PROPERTY AND EQUIPMENT (CONTINUED):

<TABLE>
<CAPTION>

     =========================================================================================================
                                                                                                  December 31,
                                                                                                          2003
     ---------------------------------------------------------------------------------------------------------
                                                                              Accumulated
                                                                             depreciation             Net book
                                                            Cost         and amortization                value
     ---------------------------------------------------------------------------------------------------------
     <S>                                           <C>                   <C>                     <C>
     Research equipment                            $       2,900            $       1,383        $       1,517
     Computer hardware and software                        1,820                      964                  856
     Office equipment                                        654                      229                  425
     Equipment under capital leases                        1,198                      503                  695
     Leasehold improvements                                1,559                      513                1,046

     ---------------------------------------------------------------------------------------------------------
                                                   $       8,131            $       3,592        $       4,539
     =========================================================================================================
</TABLE>

     Included in "depreciation of property and equipment" in the consolidated
     statements of operations is depreciation of equipment under capital leases
     of $127 (December 31, 2003 - $74; June 30, 2003 - $251).

     In May 2004, the Company purchased property and equipment for a total cash
     consideration of $10,500, plus $713 of acquisition-related costs. Assets
     acquired, including acquisition costs, consisted of land in the amount of
     $1,646, buildings in the amount of $9,476 and equipment of $91. As part of
     the purchase, the Company acquired a previously negotiated in-place
     operating lease that had a nominal value. The tenant is a company in which
     a shareholder has an equity interest. This lease expires in April 2005.

     All of the operations of the Company were moved into newly-acquired
     premises on May 8, 2004. See notes 12 and 13.

7.   PATENTS:

<TABLE>
<CAPTION>
     =========================================================================================================
                                                                                     2004                 2003
     ---------------------------------------------------------------------------------------------------------
     <S>                                                                    <C>                  <C>
     Cost                                                                   $       5,088        $       3,391
     Accumulated amortization                                                         695                  449

     ---------------------------------------------------------------------------------------------------------
                                                                            $       4,393        $       2,942
     =========================================================================================================
</TABLE>

     The remaining weighted average amortization period of patent costs at
     December 31, 2004 is 15.4 years (December 31, 2003 - 15.6 years; June 30,
     2003 - 15.4 years). The estimated amortization expense for each of the next
     five years is approximately $340 per annum or $1,700 in the aggregate.

                                     - 12 -
<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

8.   OBLIGATIONS UNDER CAPITAL LEASES:

     Minimum lease payments under capital leases expiring in November 2005 are
as follows:

<TABLE>
<CAPTION>
     =========================================================================================================
                                                                                     2004                 2003
     ---------------------------------------------------------------------------------------------------------
     <S>                                                                    <C>                  <C>
     2004                                                                   $         --         $         470
     2005                                                                             431                  431
     ---------------------------------------------------------------------------------------------------------
                                                                                      431                  901

     Less amount representing interest at a rate of 6.88%                              15                   60
     ---------------------------------------------------------------------------------------------------------
                                                                                      416                  841

     Less current portion                                                             416                  425

     ---------------------------------------------------------------------------------------------------------
                                                                            $         --         $         416
     =========================================================================================================
</TABLE>

     Interest expense related to obligations under capital leases for the year
     ended December 31, 2004 was $45 (six-month period ended December 31,
     2003 - $33; year ended June 30, 2003 - $92) and is included in "interest
     and bank charges" in the consolidated statements of operations.

9.   LONG-TERM DEBT:

     In July 2004, the Company entered into a revolving decreasing term credit
     agreement in the amount of $10,500 in order to finance the newly-acquired
     premises (see note 6). The financing may be drawn in the form of either
     advances or discounted bankers' acceptances. Advances bear interest at the
     bank's prime rate plus 0.25%, and the bankers' acceptances bear interest at
     bankers' acceptances rate plus stamping fees of 1.25%. Since the Company
     has a contractual right, exercisable at its sole discretion, to continue to
     roll over the short-term obligations for a period extending for more than a
     year from the balance sheet date, the debt has been classified as
     long-term, except for the annual reductions in the authorized credit. Under
     the terms of the agreement, the maximum authorized credit is reduced by
     $175 per quarter. The agreement requires certain ratios and covenants to be
     respected. As at December 31, 2004, the Company was in compliance with
     these ratios and covenants. The loan is guaranteed by a first ranking
     hypothec on the universality of the Company's movable and immovable
     property. The agreement is for a term of five years and expires on June 30,
     2009.

     As of December 31, 2004, the credit was drawn in the form of discounted
     bankers' acceptances bearing interest at 2.59%, plus stamping fees.
     Principal repayments for the next five years are as follows:

<TABLE>
    ==========================================================================================================
<S>                                                                                              <C>

     2005                                                                                        $         686
     2006                                                                                                  700
     2007                                                                                                  700
     2008                                                                                                  700
     2009                                                                                                7,350

    ----------------------------------------------------------------------------------------------------------
                                                                                                 $      10,136
    ==========================================================================================================
</TABLE>

                                     - 13 -
<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

9.   LONG-TERM DEBT (CONTINUED):

     Interest on long-term debt including stamping fees amounted to $174 for the
     year ended December 31, 2004 (nil in 2003).

10.  SHARE CAPITAL:

     (a) The authorized share capital of the Company consists of:

         o    an unlimited number of voting common shares

         o    an unlimited number of non-voting preferred shares, issuable in
              one or more series

     (b) Issued and outstanding:

         The issued and outstanding share capital consists of:

<TABLE>
<CAPTION>
         ======================================================================================================
                                                                                     2004                 2003
         ------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                  <C>
         30,320,419 common shares (December 31, 2003 -
           29,775,127 common shares)                                        $     175,855        $     173,930

         ======================================================================================================
</TABLE>

         Changes in the issued and outstanding common shares for the year ended
         June 30, 2003, the six-month period ended December 31, 2003 and the
         year ended December 31, 2004 were as follows:

<TABLE>
<CAPTION>
         ======================================================================================================
                                                                                    Number              Dollars
         ------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                  <C>
         Balance, June 30, 2002                                                18,028,344          $    69,501

         Issued for cash from private placement (i)                             4,000,000               15,148
         Exercise of warrants                                                     836,644                1,904
         Exercise of stock options                                                618,036                  929

         ------------------------------------------------------------------------------------------------------
         Balance, June 30, 2003                                                23,483,024               87,482

         Issued for cash from public offering (ii)                              5,750,000               84,956
         Exercise of warrants                                                     106,785                  192
         Exercise of stock options                                                435,318                1,300

         ------------------------------------------------------------------------------------------------------
         Balance, December 31, 2003                                            29,775,127              173,930

         Exercise of stock options:
              For cash                                                            545,292                1,490
              Ascribed value from additional paid-in capital                          --                   435

         ------------------------------------------------------------------------------------------------------
         Balance, December 31, 2004                                            30,320,419          $   175,855
         ======================================================================================================
</TABLE>

                                     - 14 -
<PAGE>
NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

10.  SHARE CAPITAL (CONTINUED):

     (b) Issued and outstanding (continued):

         June 30, 2003:

         (i)  On July 25, 2002 and February 18, 2003, the Company completed
              equity financing agreements with Picchio Pharma Inc. In July 2002,
              the Company issued 2.8 million units at a cost of $2.50 per unit,
              and received aggregate proceeds of $7,000. The units were
              comprised of one common share and one warrant exercisable any time
              within a three-year period at the exercise price of $3.13. The
              warrants expire on July 25, 2005.

              In February 2003, the Company issued 1.2 million units at a cost
              of $6.79 per unit and received aggregate proceeds of $8,148. The
              units were comprised of one common share and one warrant
              exercisable any time within a three-year period at an exercise
              price of $7.81. The warrants expire on February 18, 2006.

              Share issue costs related to these transactions were charged to
              the deficit.

         December 31, 2003:

         (ii) In September 2003, the Company completed a public offering for the
              issuance and sale of 5.75 million common shares at a price of
              $14.77 (US$10.87) per share. The total proceeds of the offering to
              the Company was $84,956. Total share issue expenses of $6,813 were
              charged to the deficit.

     (c) Stock option plan:

         Under its stock option plan, the Company may grant options to purchase
         common shares to employees, directors, officers, consultants and
         members of the Scientific and Clinical Advisory Boards of the Company.
         The terms, number of common shares covered by each option, as well as
         the permitted frequency of the exercise of such options are determined
         by the Board of Directors. In general, options vest over periods of up
         to five years. In the period ended December 31, 2003, the shareholders
         approved an increase of 1,241,794 in the number of common shares
         reserved for issuance under the plan, from 3,196,973 common shares to
         4,438,767 common shares. The maximum number of common shares which may
         be optioned in favor of any single individual shall not exceed 5% of
         the issued and outstanding common shares of the Company. The option
         price per share will, in no circumstances, be lower than the fair
         market value of the common shares at the date of the grant of the
         option, less any discount permitted by any regulatory authority. In no
         event may the term of any option exceed ten years from the date of the
         grant of the option.

                                     - 15 -
<PAGE>
NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

10.  SHARE CAPITAL (CONTINUED):

     (c) Stock option plan (continued):

         Changes in outstanding options issued under the stock option plan for
         the year ended June 30, 2003, the six-month period ended December 31,
         2003 and the year ended December 31, 2004 were as follows:

<TABLE>
<CAPTION>
         ======================================================================================================
                                                                                                      Weighted
                                                                                                       average
                                                                                   Number       exercise price
         ------------------------------------------------------------------------------------------------------
<S>                                                                             <C>              <C>
         Options outstanding, June 30, 2002                                     1,963,500        $        2.32

         Granted                                                                  909,000                 7.22

         Exercised                                                               (577,036)                1.59

         Cancelled or expired                                                      (3,620)                3.25

         ------------------------------------------------------------------------------------------------------
         Options outstanding, June 30, 2003                                     2,291,844                 4.48

         Granted                                                                  342,000                21.70

         Exercised                                                               (335,318)                2.87

         ------------------------------------------------------------------------------------------------------
         Options outstanding, December 31, 2003                                 2,298,526                 7.23

         Granted                                                                  797,000                25.65

         Exercised                                                               (545,292)                2.73

         Cancelled or expired                                                    (186,450)                6.90

         ------------------------------------------------------------------------------------------------------
         Options outstanding, December 31, 2004                                 2,363,784        $       14.51
         ======================================================================================================
</TABLE>

         The following table summarizes information about options outstanding
         and exercisable at December 31, 2004:

<TABLE>
<CAPTION>
         ===========================================================================================================
                                                                                                   Weighted average
                                                                                                          remaining
                                                               Options            Options          contractual life
         Exercise price/share                              outstanding        exercisable                   (years)
         -----------------------------------------------------------------------------------------------------------
<S>                                                         <C>                <C>                  <C>
         $ 0.36 - $ 0.65                                        25,500             25,500                  2.7
         $ 2.99 - $ 3.75                                       525,120            394,708                  6.0
         $ 5.30 - $ 6.79                                       201,264             79,889                  7.9
         $ 8.11 - $ 9.85                                       505,000            191,667                  8.1
         $17.81 - $23.35                                       494,900            143,017                  9.4
         $27.90 - $33.00                                       612,000            174,250                  9.3

         -----------------------------------------------------------------------------------------------------------
                                                             2,363,784          1,009,031                  8.1
         ===========================================================================================================
</TABLE>

                                     - 16 -
<PAGE>
NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

10.  SHARE CAPITAL (CONTINUED):

     (d) Other outstanding options at December 31, 2004:

         The Company had previously issued 400,000 options to purchase common
         shares at prices ranging from US$0.20 to US$2.50 per share which are
         not covered by the stock option plan. These options were all exercised
         prior to January 1, 2004. In the year ended December 31, 2003, 100,000
         of these options were exercised for gross proceeds of $337. In the
         six-month period ended June 30, 2003, 41,000 of these options were
         exercised for gross proceeds of $12.

     (e) Outstanding warrants at December 31, 2004:

         Each warrant entitles the holder to purchase one common share. Changes
         in outstanding warrants issued in connection with various private
         placements were as follows:

<TABLE>
<CAPTION>
         ======================================================================================================
                                                                                                      Weighted
                                                                                                       average
                                                                                   Number       exercise price
         ------------------------------------------------------------------------------------------------------
<S>                                                                             <C>             <C>
         Warrants outstanding, June 30, 2002                                      943,429        $         2.22

         Issued in connection with private placement (note 10 (b) (i))          4,000,000                  4.53

         Exercised                                                               (836,644)                 2.28

         ------------------------------------------------------------------------------------------------------
         Warrants outstanding, June 30, 2003                                    4,106,785                  4.46

         Exercised                                                               (106,785)                 1.80

         ------------------------------------------------------------------------------------------------------
         Warrants outstanding, December 31, 2003 and 2004                       4,000,000        $         4.53
         ======================================================================================================
</TABLE>

         The following table summarizes information about outstanding warrants
         at December 31, 2004:

<TABLE>
<CAPTION>
         ======================================================================================================
            Warrants                                              Exercise price                         Expiry
         ------------------------------------------------------------------------------------------------------
<S>                                                               <C>                           <C>
           2,800,000                                                    $   3.13                     July 2005
           1,200,000                                                    $   7.81                 February 2006

         ------------------------------------------------------------------------------------------------------
           4,000,000                                                    $   4.53
         ======================================================================================================
</TABLE>

         See subsequent event note 22.

                                     - 17 -
<PAGE>
NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

10.  SHARE CAPITAL (CONTINUED):

     (f) Agreement to issue shares:

         On December 1, 2004, the Company entered into an agreement with its
         Chief Executive Officer to issue to him up to 220,000 common shares
         upon the execution of the agreement and upon achievement of specified
         performance targets. The agreement is subject to regulatory and
         shareholders' approval in 2005. Upon regulatory and shareholders'
         approval, shares will be issued and stock-based compensation will be
         recorded in 2005 related to this agreement.

11.  STOCK-BASED COMPENSATION:

     For the year ended December 31, 2004, the Company recorded total
     stock-based compensation of $4,038 related to stock options granted to
     employees after July 1, 2002 in accordance with the change in accounting
     policy detailed in note 3.

     If the fair value-based accounting method had been used to account for and
     measure stock-based compensation costs relating to options granted to
     employees after July 1, 2002 but prior to January 1, 2004, date at which
     the fair value method was applied to all stock-based compensation, the net
     loss and related loss per share figures would be as follows:

<TABLE>
<CAPTION>
     ==============================================================================================================
                                                                              December 31,             June 30,
                                                                                      2003                 2003
     --------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                  <C>
     Reported net loss                                                      $     (16,773)       $     (19,618)
     Pro forma adjustments to compensation expense                                 (1,444)                (718)

     ---------------------------------------------------------------------------------------------------------------
     Pro forma net loss                                                     $     (18,217)       $     (20,336)
     ===============================================================================================================

     Pro forma loss per share:
         Basic                                                              $      (0.68)        $      (0.93)
         Diluted                                                                   (0.68)               (0.93)
     ===============================================================================================================
</TABLE>

     The fair value of the options granted were determined using the following
     method and assumptions.

     The fair value of each option granted is estimated on the date of grant
     using the Black-Scholes pricing model. The weighted average assumptions for
     the fiscal periods ended December 31, 2004 and 2003 were as follows:

<TABLE>
<CAPTION>
     ==============================================================================================================
                                                                                      2004                2003
     ---------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                 <C>
     Risk free interest rate                                                         3.82%               4.30%
     Expected volatility                                                               43%                 36%
     Expected life in years                                                             7                    7
     Expected dividend yield                                                          nil                  nil
     ===============================================================================================================
</TABLE>

                                     - 18 -
<PAGE>
NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

11.  STOCK-BASED COMPENSATION (CONTINUED):

     The following table summarizes the weighted average grant-date fair value
     per share for options granted during the fiscal periods ended December 31,
     2004 and 2003:

<TABLE>
<CAPTION>
     ===============================================================================================================
                                                                                               Weighted average
                                                                                Number of            grant-date
                                                                                  options            fair value
     ---------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>           <C>
     Fiscal periods ended:
         December 31, 2004                                                        797,000        $       12.83
         December 31, 2003 (6 months)                                             342,000                 9.93
     ===============================================================================================================
</TABLE>

     Dividend yield was excluded from the calculation, since it is the present
     policy of the Company to retain all earnings to finance operations and
     future growth.

12.  SPECIAL CHARGES:

     Special charges consist of:

<TABLE>
     ==============================================================================================================
<S>                                                                                              <C>
     Provision for lease exit obligations                                                        $         487
     Write-off of leasehold improvements and other
       property and equipment                                                                            1,189

     --------------------------------------------------------------------------------------------------------------
                                                                                                 $       1,676
     ==============================================================================================================
</TABLE>

     The Company had previously entered into lease obligation contracts for
     space located in the City of Montreal, through February 28, 2011. As a
     result of the Company's move to new premises during the second quarter
     ended June 30, 2004 referred to in note 6, a liability of $896 was
     recognized in the second quarter for the future lease costs of the vacated
     premises, net of estimated sublease rentals that could reasonably be
     obtained for the properties. In the fourth quarter, the Company revised its
     estimate of the cost associated with the lease exit activities as a result
     of entering into a sublease agreement for its former premises. A
     reconciliation of the beginning and ending liability balances is presented
     below:

<TABLE>
     ==============================================================================================================
<S>                                                                                              <C>
     Initial provision                                                                           $         896
     Payments made                                                                                        (217)
     Accretion expense                                                                                      19
     Adjustment to record change in estimate as a result
       of sublease agreement                                                                              (409)

     --------------------------------------------------------------------------------------------------------------
     Ending provision at December 31, 2004                                                       $         289
     ==============================================================================================================
</TABLE>

                                     - 19 -
<PAGE>
NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

12.  SPECIAL CHARGES (CONTINUED):

     As at December 31, 2004, the remaining liability related to future lease
     payments was $289, of which $126 is included in long-term accrued
     liabilities and $163 is included in accrued liabilities.

     In addition, the Company wrote off $965 of related leasehold improvements,
     $211 of furniture and fixtures and $13 of lab equipment related to the
     vacated premises.

13.  COMMITMENTS AND CONTINGENCIES:

     (a) Operating leases:

         Minimum annual lease payments for the next five years and thereafter
         under operating leases relating to vacated premises are as follows:

<TABLE>
      =============================================================================================================
<S>                                                                                              <C>
         2005                                                                                    $         303
         2006                                                                                              168
         2007                                                                                              159
         2008                                                                                              152
         2009                                                                                              144
         Thereafter                                                                                        168

      -------------------------------------------------------------------------------------------------------------
                                                                                                 $       1,094
      =============================================================================================================
</TABLE>

         In addition, the Company is also responsible for operating costs and
         taxes under the operating leases.

     (b) License agreements and research collaborations:

         Effective January 1, 1994, the Company entered into a number of license
         agreements (the "License Agreements") with Parteq Research and
         Development Innovations ("Parteq"), the commercialization arm and
         exclusive worldwide licensee of Queen's University. Pursuant to these
         agreements, the Company was granted the worldwide exclusive license,
         with the right to sublicense, to certain technologies, patents and
         patent applications developed and belonging to Queen's University (the
         "Intellectual Property") and to develop, make, have made, use, sell and
         have sold certain products using the Intellectual Property. While
         Parteq and Queen's University retain the title to the Intellectual
         Property, the Company, directly or through its subsidiaries, has the
         exclusive right to exploit the Intellectual Property. All improvement
         to the Intellectual Property developed or invented by the Company are
         owned by the Company, directly or through its subsidiaries. Pursuant to
         the terms of the License Agreements, the Company has agreed to pay
         certain fees (including milestone payments) and royalties, and to
         assume all expenses related to the protection of the intellectual
         property rights.

         Each of the License Agreements will terminate upon the later of (i) the
         expiry date of the last-to-expire of the licensed patents or (ii) ten
         years after its first sales of products that use the license, should no
         patent be issued.

                                     - 20 -
<PAGE>
NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

13.  COMMITMENTS AND CONTINGENCIES (CONTINUED):

     (b) License agreements and research collaborations (continued):

         Under the terms of an agreement with the federal Ministry of Industry
         (Technology Partnerships Canada Program), the Company is committed to
         pay the federal government royalties equal to 7.24% of gross revenues
         realized from the commercialization of effective orally-administered
         therapeutics for the treatment of Alzheimer's Disease until June, 30,
         2010. After June 30, 2010, the Company may have to continue to pay
         royalties until such time as the aggregate amount of royalties paid
         pursuant to the agreement reaches $20,540.

         The Company and its subsidiaries are party to research and license
         agreements under which they have obtained rights to use certain
         technologies to develop certain of its product candidates. These
         agreements impose various milestones, commercialization, sublicensing,
         royalty and other payment, insurance, indemnification and other
         obligations and are subject to certain reservations of rights.

         The Company outsources clinical trials in the normal course of
         business. As at December 31, 2004, the Company's future obligations
         with respect to these clinical trial agreements amount to $6,152.

     (c) Management services agreement:

         The payments under a management services agreement with a
         shareholder-affiliated entity (see note 14 (a)) are as follows:
         2005 - $2,400; 2006 - $2,400 and 2007 - $2,200.

     (d) Guarantees:

         At December 31, 2004, the Company is contingently liable for letters of
         guarantee granted in favor of a landlord in the amount of $450.
         Security deposits of $450 are pledged under the letters of guarantee.
         The Company has also granted a movable hypothec in the amount of $100
         under a lease agreement covering the universality of movable property
         at a leased location.

         In December 2004, the Company obtained a new credit facility in the
         amount of $7,222 (US$6,000) to be used for the issuance of a letter of
         guarantee in connection with the collaboration agreement with Centocor
         referred to in note 4. At December 31, 2004, no letter of guarantee was
         issued under this facility.

     (e) Litigation:

         In 2002, the Company executed an agreement with Immtech International,
         Inc. ("Immtech") of Vernon Hills, Illinois, pursuant to which Immtech
         provided the Company with certain compounds for testing and granted the
         Company an option to license such compounds (the "CTA"). In August
         2003, Immtech filed certain legal proceedings with the Federal District
         Court for the Southern District of New York, U.S.A., with respect to
         the CTA. The parties entered into settlement discussions in September
         2003 and, as settlement did not occur, in January 2004, the Company
         brought a motion to compel arbitration under the term of the CTA. The
         dispute has now been submitted to an arbitral tribunal convened in
         accordance with the rules of the International Court of Arbitration.

                                     - 21 -
<PAGE>
NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

13.  COMMITMENTS AND CONTINGENCIES (CONTINUED):

     (e) Litigation (continued):

         The Company continues to vigorously defend against the claims brought
         by Immtech. The arbitral proceedings are at the early stages and the
         outcome of this matter, or the likelihood and the amount of loss, if
         any, is not determinable. No provision for possible loss has been
         recorded by the Company in connection with this matter.

14.  RELATED PARTY TRANSACTIONS:

     (a) Under the terms of a management services agreement entered into in
         March 2003 and amended in December 2004 with Picchio International Inc.
         ("Picchio"), a company related to a shareholder, director and officer,
         the Company recorded a management fee of $1,080 (six-month period ended
         December 31, 2003 - $480; year ended June 2003 - $320). In addition,
         the Company paid nil in performance incentive fees for the year ended
         December 31, 2004 (December 31, 2003 - $250; June 30, 2003 - nil). As
         at December 31, 2004, accounts payable and accrued liabilities include
         $200 due to Picchio (December 31, 2003 - $20; June 30, 2003 - $13).

     (b) The Company paid Parteq Research and Development Innovations, a company
         related to a director, the following amounts for patent fees in the
         normal course of operations:

<TABLE>
     ==============================================================================================================
<S>                                                                                              <C>
         Period ended:
              December 31, 2004                                                                  $          10
              December 31, 2003                                                                             --
              June 30, 2003                                                                                 10
     ==============================================================================================================
</TABLE>

     (c) Included in research and development are the following amounts paid to
         Queen's University at Kingston, under various research agreements:

<TABLE>
     ==============================================================================================================
<S>                                                                                              <C>
         Period ended:
              December 31, 2004                                                                  $          --
              December 31, 2003                                                                             --
              June 30, 2003                                                                                 10
     ==============================================================================================================
</TABLE>

     (d) Legal fees paid to a firm in which a former director is a partner were
         $332 during his period of service (December 31, 2003 - $1,303; June 30,
         2003 - $1,208).

     (e) The Company purchased equipment in the amount of $500 from a company in
         which Picchio also has an equity interest. As at December 31, 2004, the
         balance due to that company amounted to $414.

     These transactions are measured at the exchange amount, which is the amount
     of consideration established and agreed to by the related parties.

                                     - 22 -
<PAGE>
NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

15.  INCOME TAXES:

     (a) Details of the components of income taxes are as follows:

<TABLE>
<CAPTION>
     ==============================================================================================================
                                                                                 Six-month
                                                           Year ended         period ended           Year ended
                                                         December 31,         December 31,             June 30,
                                                                 2004                 2003                 2003
     --------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                  <C>                  <C>
         Loss before income taxes:
              Canadian operations                      $     (10,935)       $      (4,120)       $     (15,974)
              Foreign operations                             (41,464)             (12,653)              (3,644)
     --------------------------------------------------------------------------------------------------------------
                                                             (52,399)             (16,773)             (19,618)

         Basic income tax rate                                   31%                   33%                  34%

     --------------------------------------------------------------------------------------------------------------
         Computed income tax recovery                        (16,254)              (5,535)              (6,670)

         Adjustment in income taxes resulting from:
              Non-recognition of losses and other
                deductions                                     7,379                2,936                6,582
              Difference in tax rate of a foreign
                subsidiary                                     8,262                2,720                  820
              Non deductible stock option expenses             1,251                  --                   --
              Permanent differences                             (638)                (121)                (732)

     --------------------------------------------------------------------------------------------------------------
                                                       $          -         $          -         $          -
     ==============================================================================================================
</TABLE>

     (b) Future income taxes:

         The temporary differences that give rise to future tax assets and
         liabilities at December 31, 2004 and 2003 are as follows:

<TABLE>
<CAPTION>
     ==============================================================================================================
                                                                                     2004                 2003
     --------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                  <C>
        Future tax assets:
              Patent costs                                                  $      10,154        $      10,012
              Unclaimed scientific research and experimental
                development expenditures for tax purposes                          10,990                7,533
              Share issue costs                                                     1,574                2,171
              Net operating losses                                                  6,653                1,874
              Long-term investment                                                    271                  271
              Other                                                                   131                   74
     --------------------------------------------------------------------------------------------------------------
                                                                                   29,773               21,935

         Less: valuation allowance                                                (28,701)             (21,272)
     --------------------------------------------------------------------------------------------------------------
                                                                                    1,072                  663

         Future tax liabilities:
              Property and equipment                                               (1,072)                (663)

     --------------------------------------------------------------------------------------------------------------
         Net future tax assets                                              $          -         $          -
     ==============================================================================================================
</TABLE>

                                     - 23 -
<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

15.  INCOME TAXES (CONTINUED):

     (b) Future income taxes (continued):

         In assessing the realizability of future tax assets, management
         considers whether it is more likely than not that some portion or all
         of the future income tax assets will be realized. The ultimate
         realization of future tax assets is dependent upon the generation of
         future taxable income and/or tax planning strategies. Since the Company
         is a development stage enterprise, the generation of future taxable
         income is dependent on the successful commercialization of its products
         and technologies.

     (c) The Company has the following unclaimed deductions available to reduce
         future taxable income in Canada:
<TABLE>
<CAPTION>
===================================================================================================================
                                                                                  Federal               Quebec
-------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                 <C>

         Research expenditure pool (no expiry)                              $      43,019       $       15,338
===================================================================================================================
</TABLE>

         The Company also has approximately $9,514 in federal research
         investment tax credits that can be used to reduce future federal taxes
         payable and which expire as follows:
<TABLE>
===================================================================================================================
<S>                                                                                             <C>

         2011                                                                                    $         637
         2012                                                                                            2,251
         2013                                                                                            1,799
         2014                                                                                            4,827

-------------------------------------------------------------------------------------------------------------------
                                                                                                 $       9,514
===================================================================================================================
</TABLE>

16.  EARNINGS PER SHARE:

     The reconciliation between basic and diluted earnings per share is as
follows:
<TABLE>
<CAPTION>

===================================================================================================================
                                                                                       Six-month
                                                                Year ended          period ended        Year ended
                                                              December 31,          December 31,          June 30,
                                                                      2004                  2003              2003
-------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                    <C>                 <C>

     Basic weighted average
       number of common shares
       outstanding                                              30,156,194            26,813,836        21,770,541
===================================================================================================================

     Basic net loss per share                                $       (1.74)        $       (0.63)    $       (0.90)
===================================================================================================================
</TABLE>

                                     - 24 -

<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

16.  EARNINGS PER SHARE (CONTINUED):

<TABLE>
<CAPTION>
====================================================================================================================
                                                                                Six-month
                                                          Year ended         period ended           Year ended
                                                        December 31,         December 31,             June 30,
                                                                2004                 2003                 2003
-------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                  <C>                  <C>
     Diluted:
       Basic weighted average
         number of common shares
         outstanding                                      30,156,194           26,813,836           21,770,541
       Plus impact of stock options
         and warrants (1)                                  4,389,005            4,476,940            2,858,010

-------------------------------------------------------------------------------------------------------------------
     Diluted common shares                                34,545,199           31,290,776           24,628,551
===================================================================================================================

     Diluted net loss per share (1)                    $       (1.74)       $       (0.63)       $       (0.90)
===================================================================================================================
</TABLE>

     (1) The impact of stock options and warrants is anti-dilutive because the
         Company incurred losses in 2004 and 2003. All outstanding options and
         warrants included in this computation could potentially be dilutive in
         the future. At December 31, 2004, 903,500 options were not considered
         in the computation of the diluted weighted average number of shares
         outstanding, since the exercise price of these options was higher than
         the average market price.

17.  STATEMENTS OF CASH FLOWS - SUPPLEMENTARY DISCLOSURE:

     (a) Cash and cash equivalents:

         Cash and cash equivalents consist of cash balances with banks and
         short-term investments:
<TABLE>
<CAPTION>
===================================================================================================================
                                                                                     2004                 2003
-------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                  <C>
         Cash balances with banks                                           $       1,215        $       1,079
         Short-term investments (yielding interest between
           2.51% to 2.56% (December 31, 2003:  1.06% to 2.75%))                     5,992               13,790

-------------------------------------------------------------------------------------------------------------------
                                                                            $       7,207        $      14,869
===================================================================================================================
</TABLE>

                                     - 25 -

<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

17.  STATEMENTS OF CASH FLOWS - SUPPLEMENTARY DISCLOSURE (CONTINUED):

     (b) Interest and income taxes:

<TABLE>
<CAPTION>
===================================================================================================================
                                                                                Six-month
                                                          Year ended         period ended           Year ended
                                                        December 31,         December 31,             June 30,
                                                                2004                 2003                 2003
-------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                  <C>                  <C>

         Cash paid in the year for:
              Interest                                 $         151        $          35        $          92
              Income taxes                                       --                   --                   --
===================================================================================================================
</TABLE>

     (c) Non-cash transactions:

<TABLE>
<CAPTION>
===================================================================================================================
                                                                                Six-month
                                                          Year ended         period ended           Year ended
                                                        December 31,         December 31,             June 30,
                                                                2004                 2003                 2003
-------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                 <C>                   <C>
         Disposal of intellectual property
           to Innodia in exchange
           for an equity interest (note 5)             $         --         $         --         $       3,830

         Additions to property and equipment
           and patent costs included in
           accounts payable and accrued
           liabilities at year-end                               916                  406                  590
===================================================================================================================
</TABLE>

18.  SEGMENT DISCLOSURES:

     (a) Business segment:

         The Company operates in one business segment, namely the development
         and commercialization of innovative therapeutics for neurological
         disorders. The Company's operations are conducted principally in Canada
         and Europe.

     (b) Property and equipment and intangible assets (patent costs) by
         geographic area are as follows:

<TABLE>
<CAPTION>
===================================================================================================================
                                                                                     2004                 2003
-------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                   <C>
         Canada                                                             $      16,745        $       4,599
         Europe                                                                     4,338                2,882

-------------------------------------------------------------------------------------------------------------------
                                                                            $      21,083        $       7,481
===================================================================================================================
</TABLE>

                                     - 26 -

<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

18.  SEGMENT DISCLOSURES (CONTINUED):

     (c) Major customers:

         All revenues recognized in 2004 and the amount receivable at December
         31, 2004 were derived from one customer under the collaboration
         agreement referred to in note 4.

19.  FINANCIAL INSTRUMENTS:

     (a) Fair value disclosure:

         Fair value estimates are made as of a specific point in time, using
         available information about the financial instrument. These estimates
         are subjective in nature and often cannot be determined with precision.

         The Company has determined that the carrying value of its short-term
         financial assets and liabilities, including cash and cash equivalents,
         the amount receivable under collaboration agreement, sales taxes and
         other receivables, research tax credits receivable as well as accounts
         payable and accrued liabilities, approximates their fair value because
         of the relatively short periods to maturity of these instruments.

         Marketable securities are comprised of fixed income instruments with a
         high credit rating (not less than R1 mid rating). As at December 31,
         2004, the weighted average effective interest rate of the marketable
         securities is approximately 2.15% (December 31, 2003 - 1.71%). The fair
         market value of the marketable securities amounts to $21,964 as at
         December 31, 2004 ($62,726 as at December 31, 2003).

         The fair value of the long-term debt approximates the carrying value
         because interest is based on market-related variable rates. The fair
         values of obligations under capital leases, calculated at the present
         value of future contractual payments of principal and interest,
         discounted at the current market rates of interest available to the
         Company for debt instruments with similar terms and maturity, and the
         long-term accrued liabilities also approximate their carrying values.

     (b) Credit risk:

         Credit risk results from the possibility that a loss may occur from the
         failure of another party to perform according to the terms of the
         contract. The Company regularly monitors the credit risk exposure and
         takes steps to mitigate the likelihood of these exposures from
         resulting in actual loss.

         Financial instruments that potentially subject the Company to
         significant concentrations of credit risk consist principally of
         marketable securities and amount receivable under collaboration
         agreement. The Company has investment policies that ensure the safety
         and preservation of principal, that ensure the Company's liquidity
         needs are met and that optimize yields. Authorized investments include
         bankers' acceptances, bearer deposit notes, corporate and government
         bonds, certificates of deposit, commercial paper and treasury bills,
         and shall not exceed 10% per issuer. All of the amount receivable under
         collaboration agreement is due from one customer.

                                     - 27 -

<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

19.  FINANCIAL INSTRUMENTS (CONTINUED):

     (c) Foreign currency risk management:

         A substantial portion of the Company's revenues, as well as expenses,
         are denominated in US dollars. This results in financial risk due to
         fluctuations in the value of the Canadian dollar relative to the US
         dollar. The Company does not use derivative financial instruments to
         reduce its foreign exchange exposure. Fluctuations in foreign exchange
         rates could cause unanticipated fluctuations in the Company's operating
         results.

     (d) Interest rate risk:

         The Company's exposure to interest rate risk is as follows:

<TABLE>
========================================================================================
<S>                                           <C>
         Cash and cash equivalents                        Short-term fixed interest rate
         Marketable securities                            Short-term fixed interest rate
         Obligations under capital leases                            Fixed interest rate
         Long-term debt                       Short-term fixed or variable interest rate

========================================================================================
</Table>

20.  CANADIAN/US REPORTING DIFFERENCES:

     (a) Consolidated statements of operations:

         The reconciliation of earnings reported in accordance with Canadian
GAAP with US GAAP is as follows:
<TABLE>
<CAPTION>
===================================================================================================================
                                                                  Six-month                         Cumulative
                                             Year ended        period ended        Year ended            since
                                           December 31,        December 31,          June 30,     inception of
                                                   2004                2003              2003       operations
-------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                <C>                 <C>             <C>

         Net loss in accordance with
           Canadian GAAP                    $   (52,399)        $   (16,773)      $   (19,618)     $  (127,237)

         Adjustment for:
              Stock-based compensation (1):
                - Canadian GAAP                   4,038                 --                --             4,038
                - US GAAP                            (8)                 (8)              (83)          (1,983)
              Long-term investment (2)           (1,730)               (771)              --            (2,501)

-------------------------------------------------------------------------------------------------------------------
         Net loss in accordance with
           US GAAP                          $   (50,099)        $   (17,552)      $   (19,701)     $  (127,683)
===================================================================================================================

         Loss per share under US GAAP:
              Basic and diluted             $     (1.66)        $     (0.65)      $    (0.90)
==================================================================================================
</TABLE>

         The weighted average number of common shares outstanding for purposes
         of determining basic and diluted loss per share is the same amount as
         the one used for Canadian GAAP purposes.

                                     - 28 -

<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

20.  CANADIAN/US REPORTING DIFFERENCES (CONTINUED):

     (b) Consolidated balance sheets:

         A reconciliation of balance sheet items in accordance with Canadian
GAAP with US GAAP is as follows:

         (i)  Share capital:
<TABLE>
<CAPTION>
===================================================================================================================
                                                                                           December 31,
                                                                             --------------------------------------
                                                                                     2004                 2003
-------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                  <C>

              Share capital, Canadian GAAP                                    $   175,855          $   173,930

              Adjustment for:
                  Stock-based compensation (1)                                       (435)                 --
                  Share issue costs (3)                                           (11,527)             (11,527)

-------------------------------------------------------------------------------------------------------------------
              Share capital, US GAAP                                          $   163,893          $   162,403
===================================================================================================================
</TABLE>

         (ii) Additional paid-in capital:
<TABLE>
<CAPTION>
===================================================================================================================
                                                                                           December 31,
                                                                             --------------------------------------
                                                                                     2004                 2003
-------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                 <C>

              Additional paid-in capital, Canadian GAAP                       $     5,765          $       --

              Adjustment for:
                  Stock-based compensation (1):
                      Canadian GAAP - current reversed                             (5,765)                 --
                      US GAAP - current                                                 8                    8
                      Cumulative effect of prior years                              1,701                1,693

-------------------------------------------------------------------------------------------------------------------
              Additional paid-in capital, US GAAP                             $     1,709          $     1,701
===================================================================================================================
</TABLE>

                                     - 29 -

<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

20.  CANADIAN/US REPORTING DIFFERENCES (CONTINUED):

     (b) Consolidated balance sheets (continued):

         (iii)    Deficit:
<TABLE>
<CAPTION>
===================================================================================================================
                                                                                           December 31,
                                                                              -------------------------------------
                                                                                     2004                 2003
-------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>                 <C>

              Deficit, Canadian GAAP                                          $  (140,926)         $   (86,365)

              Adjustment for:
                  Stock-based compensation (1):
                      Canadian GAAP - cumulative effect of prior years reversed     2,162                  --
                      Canadian GAAP - current year reversed                         4,038                  --
                      US GAAP - current year                                           (8)                  (8)
                      Cumulative effect of prior years                             (1,701)              (1,693)
-------------------------------------------------------------------------------------------------------------------
                                                                                    4,491               (1,701)

                  Long-term investment (2)                                         (2,501)                (771)

                  Share issue expenses (3)                                         11,527               11,527

-------------------------------------------------------------------------------------------------------------------
              Deficit, US GAAP                                                $  (127,409)         $   (77,310)
===================================================================================================================
</TABLE>

              (1) Stock-based compensation:

                  Employees

                  For US GAAP purposes, the Company has elected to follow the
                  intrinsic value method of Accounting Principles Board Opinion
                  No. 25, "Accounting for Stock Issued to Employees" ("APB 25")
                  in accounting for stock options granted to employees and
                  directors. Under the intrinsic value method, compensation cost
                  is recognized for the difference, if any, between the quoted
                  market price of the stock as at the grant date and the amount
                  the individual must pay to acquire the stock. The Company
                  recorded a compensation expense of $8 (December 31, 2003 - $8;
                  June 30, 2003 - $83) in respect of options granted to
                  employees prior to the Company's initial public offering at
                  prices other than the quoted market price at date of grant.

                  For Canadian GAAP purposes, the Company adopted the fair value
                  method of accounting for stock options granted to employees
                  effective January 1, 2004 (see note 3).

                                     - 30 -

<PAGE>

NEUROCHEM INC.
Notes to Consolidated Financial Statements, Continued

Year ended December 31, 2004, six-month period ended December 31, 2003, year
ended June 30, 2003 and for the period from inception (June 17, 1993) to
December 31, 2004
(in thousands of Canadian dollars, except per share data)

================================================================================

20.  CANADIAN/US REPORTING DIFFERENCES (CONTINUED):

     (b) Consolidated balance sheets (continued):

         (iii) Deficit (continued):

               (2) Long-term investment:

                   For US GAAP purposes, the Company's long-term investment
                   would be considered a variable interest entity (VIE) as
                   defined in FIN46R, Consolidation of Variable Interest
                   Entities. An enterprise consolidates a VIE if that enterprise
                   has a variable interest that will absorb a majority of the
                   VIE's expected losses if they occur, receive a majority of
                   the VIE's expected returns if they occur, or both. The
                   Company's long-term investment represents a holding, the sole
                   purpose of which is to hold the investment in Innodia Inc.
                   The maximum amount at risk for the Company is the Company's
                   carrying value of the investment. For Canadian GAAP, similar
                   guidance has been issued, but is only effective for fiscal
                   years beginning on or after November 1, 2004.

               (3) Share issue costs:

                   For US GAAP purposes, share issue costs are recorded as a
                   reduction of the proceeds raised from the issuance of share
                   capital. For Canadian GAAP purposes, share issue costs were
                   charged to the deficit.

21.  COMPARATIVE FIGURES:

     Certain of the comparative figures have been reclassified to conform to the
     presentation adopted in the current year.

22.  SUBSEQUENT EVENT:

     On February 14, 2005, a corporate shareholder confirmed its commitment to
     exercise 2,800,000 warrants to purchase common shares due to expire on July
     25, 2005. Total proceeds to the Company from this exercise will be $8,764.

                                     - 31 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The statements contained in the following Management's Discussion and Analysis
of Consolidated Financial Condition and Results of Operations of Neurochem Inc.
and subsidiaries ("Neurochem" or "the Company"), other than statements of fact
that are independently verifiable at the date hereof, may be forward-looking
statements regarding the industry in which Neurochem operates, Neurochem's
expectations as to its future performance, liquidity and capital resources. Such
statements, based as they are on the current expectations of management,
inherently involve numerous risks and uncertainties, known and unknown,
including but not limited to those set forth in the "Risks and Uncertainties"
section. Consequently, actual future results may differ materially from the
anticipated results expressed in the forward-looking statements.

In 2003, the Company changed its fiscal year-end to December 31 from June 30 to
be consistent with most companies in its industry. The following analysis
explains the material variations in the audited consolidated statements of
operations, financial position and cashflows of Neurochem for the year ended
December 31, 2004, compared to the unaudited twelve-month period ended December
31, 2003. The Company has also explained the variations between the six-month
period ended December 31, 2003, and the unaudited six-month period ended
December 31, 2002.

This analysis should be read in conjunction with the audited consolidated
financial statements of Neurochem and related notes, included herein, which have
been prepared in accordance with Canadian generally accepted accounting
principles ("GAAP"). A reconciliation to US GAAP of earnings and balance sheet
items is presented in note 20 of the audited consolidated financial statements.
Unless otherwise indicated, amounts are presented in Canadian dollars.

OVERVIEW

Neurochem is a biopharmaceutical company focused on the development and
commercialization of innovative therapeutics for neurological disorders. The
Company's pipeline of proprietary, disease-modifying, oral products addresses
critical, unmet medical needs. The Company currently has three programs in
clinical trials: Fibrillex(TM), Alzhemed(TM) and Cerebril(TM).

In December 2004, the Company concluded an exclusive collaboration and
distribution agreement with Centocor, Inc. ("Centocor") for Fibrillex(TM)
(1,3-propanedisulfonate), the Company's most advanced product candidate designed
to treat Amyloid A (AA) Amyloidosis. Under this agreement, Neurochem
(International) Limited, a wholly-owned subsidiary of Neurochem Inc, granted to
Centocor, a wholly-owned subsidiary of Johnson & Johnson, Inc., worldwide
exclusive distribution rights for Fibrillex(TM), with the exception of Canada,
Switzerland, China, Japan, Taiwan and South Korea, for which the distribution
rights remain with Neurochem. The agreement includes up-front, regulatory and
sales-based milestone payments valued up to US$54 million, as well as tiered
distribution fees which will be based upon net annual sales of Fibrillex(TM) in
the applicable territories over the life of the agreement. Neurochem will be
responsible for the product approval activities in the United States and in
Europe, as well as for global manufacturing activities. Centocor will manage the
marketing and sales of Fibrillex(TM) in the applicable territories. The
Fibrillex(TM) Phase II/III clinical trial with a total of 183 patients enrolled
was completed in December 2004 and the results are expected to be issued during
the second quarter of 2005.

                                       1

<PAGE>

Fibrillex(TM) has been designated as an orphan drug in the US and Europe, which
designation usually provides for market exclusivity of seven years and ten
years, respectively, once the drug is approved. Fibrillex(TM) has also received
the Fast Track Product ("FTP") designation by the U.S. Food and Drug
Administration ("FDA") and was selected for the FDA Pilot 2 program by the
Cardio-Renal Drug Product Division of the FDA. As a result of the FTP
designation, Neurochem will submit a schedule for a rolling New Drug
Application, enabling the FDA to commence review of portions of the application
before the filing of the New Drug Application; under this designation, the
Company is also eligible for priority review by the FDA. The FDA Pilot 2 program
designation enables Fibrillex(TM) to be part of the Continuous Marketing
Applications Pilot 2 program which is aimed at expediting the development and
availability to the patients of investigational drugs.

Alzhemed(TM) (3-amino-1-propanesulfonic acid), designed to stop the progression
of Alzheimer's Disease ("AD"), is the Company's next most advanced product
candidate. The Company launched, in June 2004, a North American Phase III
clinical trial to investigate the safety and efficacy of Alzhemed(TM) for the
treatment of AD. The trial will include approximately 950 mild-to-moderate AD
patients and will be conducted at 50 U.S. and 20 Canadian clinical centers
across North America over a period of 18 months. As of December 31, 2004, over
550 patients have been screened and of these approximately 430 were randomized
and are receiving study medication, either placebo or one of two doses of
Alzhemed(TM). The primary endpoint of this study includes the evaluation of
cognitive and functional abilities with the Alzheimer's Disease Assessment
Scale, cognitive subpart ("ADAS-cog"), the Clinical Dementia Rating Scale-Sum of
Boxes ("CDR-SB") and a measure of changes in brain volume by Magnetic Resonance
Imaging. The Alzhemed(TM) European Phase III clinical trial is expected to be
launched in 2005. Alzhemed(TM) is Neurochem's first generation product candidate
for AD.

Neurochem also reported that its two-year open-label Phase II extension study
for Alzhemed(TM) continued to produce promising interim results in AD patients.
The 20-month data showed that the large majority of the mild AD patients
responded well to treatment with Alzhemed(TM) and continued to stabilize or
improve as measured by well validated cognitive and functional tests such as
ADAS-cog, MMSE (Mini Mental State Exam) and CDR-SB.

Cerebril(TM) (3-amino-1-propanesulfonic acid), the Company's product candidate
for the treatment of Hemorrhagic Stroke due to Cerebral Amyloid Angiopathy,
completed a Phase IIa clinical trial to evaluate safety in January 2004. The
Company continues to work towards the preparation of a Phase IIb trial to test
the safety and efficacy of Cerebril(TM) for the prevention of the recurrence of
Hemorrhagic Stroke due to Cerebral Amyloid Angiopathy.

Neurochem signed two important agreements in January 2004 related to its vaccine
programs. A strategic alliance was signed with National Research Council of
Canada's Institute for Biological Sciences, and more specifically Dr. Harold J.
Jennings, a world leader in the development of innovative conjugated vaccines.
Also, the Company entered into an in-license agreement with PRAECIS
PHARMACEUTICALS INCORPORATED, a biopharmaceutical company, relating to A(Beta)
amyloid peptides for use in the development of a novel synthetic vaccine to
prevent and treat AD.

In May 2004, the Company acquired from Shire BioChem, Inc. (Shire BioChem)
facilities located in the Parc Scientifique et de haute technologie de Laval for
$10,500,000 and incurred $713,000 of acquisition related expenses. This
acquisition enabled the Company to regroup corporate and scientific employees in
the same location, and provided the infrastructure and support required for
current and future growth. The facilities consist of buildings with
approximately 160,000 square feet, 40% of which are state-of-the-art research
and development space to support Neurochem's advancing R&D programs. To finance
this capital expenditure, the Company entered into a revolving decreasing term
credit agreement in the amount of $10,500,000. The credit agreement expires in
June 2009.

In September 2003, Neurochem completed the initial public offering of its common
shares in the USA and a new issue of common shares in Canada for total proceeds
of $84,956,000 (US$62,502,500). The Company issued 5.75 million common shares at
a price of $14.77 (US$10.87) per share and incurred share issue expenses in the
amount of $6,813,000. The net

                                       2

<PAGE>

proceeds from the offering are being used to fund clinical trials of the
Company's lead product candidates, other research and development programs,
capital expenditures, working capital and general corporate activities. Picchio
Pharma Inc. ("Picchio Pharma"), a company established between a trust of which
Dr. Francesco Bellini, O.C., is a beneficiary and Power Technology Investment
Corporation, a subsidiary of Power Corporation of Canada, acquired 1,346,800
shares of the offering. As at December 31, 2004, Picchio Pharma is the principal
shareholder of the Company with an ownership of approximately 30% on a fully
diluted basis, including four million warrants expiring in 2005 and 2006.

In November 2003, Neurochem was added to the NASDAQ Biotechnology Index ("NBI").
All securities in the NBI are listed on the NASDAQ National Market and meet
minimum requirements, including market value, average daily share volume and
seasoning as a public company. In December 2003, the Company was also added to
the S&P/TSX Composite Index, the S&P/TSX Capped Health Care Index and the Global
Industry Classification Standard (GICS) Index. Inclusion in these indexes offers
the benefit of additional visibility on financial markets, as well as potential
increased trading volume.

In May 2003, in a strategic move aimed at focusing on core expertise, the
Company completed a technology transfer pertaining to its diabetes program to
Innodia Inc. ("Innodia"), a company focused exclusively on the development of
therapeutic treatments for Diabetes, in exchange for an equity interest in
Innodia. This strategy eliminates funding requirements associated with the
diabetes program, while allowing Neurochem to share in the program's economic
potential as an indirect shareholder of Innodia.

The Company places importance on obtaining and maintaining patent and trade
secret protection for significant discoveries. In 2002, Neurochem executed an
agreement with Immtech International, Inc. (Immtech) pursuant to which Immtech
provided the Company with certain compounds for testing and granted Neurochem an
option to license such compounds (the "CTA"). In August 2003, Immtech filed
certain legal proceedings with the Federal District Court for the Southern
District of New York, U.S.A. with respect to the CTA. The parties entered into
settlement discussions in September 2003 and, as settlement did not occur, in
January 2004, the Company brought a motion to compel arbitration under the terms
of the CTA. The dispute has now been submitted to an arbitral tribunal convened
in accordance with the rules of the International Court of Arbitration. The
Company continues to vigorously defend against the claims brought by Immtech.
The arbitral proceedings are in the early stages and the outcome of this matter,
or the likelihood and the amount of loss, if any, is not determinable. No
provision for possible loss has been recorded by the Company in connection with
this matter. As a result of this litigation, Neurochem has incurred legal
expenses associated with its defence in the fiscal year ended December 31, 2004
and expects to continue to incur such expenses into its 2005 fiscal year.

As at December 31, 2004, Neurochem's workforce consisted of 165 employees.

                                       3

<PAGE>

SELECTED FINANCIAL INFORMATION

(in thousand of Canadian dollars, except per share data)

<TABLE>
<CAPTION>
                                             Twelve-month periods ended           Six-month periods ended
                                                     December 31                        December 31
-------------------------------------------------------------------------     -------------------------------
                                               2004            2003                2003             2002
                                            (audited)       (unaudited)         (audited)        (unaudited)
                                          -------------    --------------     -------------     -------------
<S>                                       <C>              <C>                <C>               <C>
REVENUE:
Collaboration agreement                   $        132                 -                 -                 -
                                          -------------------------------------------------------------------

EXPENSES:
Research and development                  $     31,152     $      17,993      $      8,661      $      9,450
Research tax credits                            (1,463)           (1,901)             (914)             (423)
Research grants and other                         (336)             (953)             (208)           (1,150)
                                          -------------------------------------------------------------------
                                                29,353            15,139             7,539             7,877

General and administrative                      17,953            12,169             7,454             2,469
Stock-based compensation                         4,038                 -                 -                 -
Special charges                                  1,676                 -                 -                 -
Depreciation and amortization                    2,046             1,287               646               556
Interest and bank charges                          277               100                46                90
                                          -------------------------------------------------------------------
                                                55,343            28,695            15,685            10,992
                                          -------------------------------------------------------------------
Loss before undernoted items                   (55,211)          (28,695)          (15,685)          (10,992)
                                          -------------------------------------------------------------------

INVESTMENT AND OTHER INCOME:
Interest income                                  1,030               838               520               482
Foreign exchange gain (loss)                     1,298            (1,618)           (1,747)              (29)
Gain on disposal of intellectual
property                                             -             3,484                 -                 -
Other income                                       484               139               139                 -
                                          -------------------------------------------------------------------
                                                 2,812             2,843            (1,088)              453
                                          -------------------------------------------------------------------
Net loss                                  $    (52,399)    $     (25,852)     $    (16,773)     $    (10,539)
                                          ===================================================================
Net loss per share: Basic and diluted     $      (1.74)    $       (1.04)     $      (0.63)     $      (0.52)
                                          ===================================================================

<CAPTION>

                                          December 31,      December 31,      December 31,      December 31,
                                                  2004              2003              2003              2002
                                             (audited)       (unaudited)         (audited)       (unaudited)
<S>                                       <C>              <C>                <C>               <C>
Total assets                              $     76,448     $      94,225      $     94,225      $     30,294
                                          ===================================================================
Total long-term financial liabilities     $      9,576     $         416      $        416      $        842
                                          ===================================================================
</TABLE>

                                       4

<PAGE>

RESULTS OF OPERATIONS

TWELVE-MONTH PERIOD ENDED DECEMBER 31, 2004 (AUDITED) COMPARED TO TWELVE-MONTH
PERIOD ENDED DECEMBER 31, 2003 (UNAUDITED)

Collaboration agreement revenue amounted to $132,000 for the year ended December
31, 2004, and consists of revenue earned under the agreement with Centocor in
respect of Fibrillex(TM), as described previously. Revenue recognized in 2004
represents the amortization of the non-refundable upfront payment due from
Centocor for the period from signing of the agreement December 21, 2004, over
the remaining estimated period to obtaining the regulatory approvals of the
product.

Research and development expenses, before research tax credits and grants,
amounted to $31,152,000 for the year ended December 31, 2004, compared to
$17,993,000 for the same period last year. The increase is mainly due to
expenses incurred in relation to the Alzhemed(TM) Phase III clinical trials,
which began in North America in the second quarter of 2004 and the Fibrillex(TM)
Phase II/III clinical trials, as well as the hiring of additional employees
primarily in the clinical development group. For the year ended December 31,
2004, research and development expenses were incurred to support the
Fibrillex(TM) Phase II/III clinical trials and the open-label extension study,
the Alzhemed(TM) Phase III clinical trials and the on-going Phase II open-label
extension study, as well as on-going drug discovery programs.

The Company expects research and development expenditures to increase as product
candidates progress through more advanced stages of clinical development.

Research tax credits amounted to $1,463,000 for the year ended December 31,
2004, compared to $1,901,000 for the same period last year. Research tax credits
represent refundable tax credits earned under the Quebec Scientific Research and
Experimental Development program. The decrease is primarily attributable to the
fact that during the year ended December 31, 2003, credit claims from prior
years were resolved and recorded during that year.

Research grants amounted to $336,000 for the year ended December 31, 2004,
compared to $953,000 for the same period last year. Research grants consist
primarily of those grants received from the FDA for the development of
Fibrillex(TM) and from the Natural Sciences and Engineering Research Council
(NSERC). The decrease in 2004 is primarily due to the fact that during the year
ended December 31, 2003, research grants also included contributions under the
Technology Partnerships Canada (TPC) Program received by the Company for the
development of Alzhemed(TM).

General and administrative expenses amounted to $17,953,000 for the year ended
December 31, 2004, compared to $12,169,000 for the corresponding period last
year. The increase is attributable to the expansion of the corporate
infrastructure in order to support growth and the increase in overall activity
levels at the Company. More specifically, the increase is due to the hiring of
additional senior management team members, as well as operating costs related to
the facilities acquired during the second quarter of 2004, higher legal fees
incurred in relation to the Immtech litigation and other corporate matters,
higher Directors' and Officers' insurance costs resulting from the Company's US
financing and NASDAQ listing, and increased awareness, educational and medical
conference activities related to AA Amyloidosis, Fibrillex(TM)'s target
indication, as well as Alzheimer's Disease, Alzhemed(TM)'s target indication.

Stock-based compensation amounted to $4,038,000 for the year ended December 31,
2004. Effective January 1, 2004, the Company adopted the recommendations of the
Canadian Institute of Chartered Accountants ("CICA") Section 3870, Stock-based
Compensation and Other Stock-based Payments. The new recommendations require
entities to account for employee stock options using the fair value-based
method, whereby compensation cost is measured at fair value at the date of grant
and is expensed over the award's vesting period. The Company implemented the
transitional alternative to retroactively apply the fair value-based method to
all employee stock options granted on or after July 1, 2002, without restatement
of prior periods. As a result, an

                                       5

<PAGE>
amount of $2,162,000 was recorded as an adjustment to the opening deficit and
additional paid-in capital on January 1, 2004.

Special charges of $1,676,000 were recorded during the year ended December 31,
2004, and are related to the relocation to facilities acquired from Shire
BioChem in May 2004. These charges include $487,000 of future lease payments due
in connection with the former premises, net of estimated sublease income that
could reasonably be obtained. Special charges also include the write-off of
certain property and equipment, mainly leasehold improvements in respect of the
prior facilities, in the amount of $1,189,000.

Depreciation and amortization amounted to $2,046,000 for the year ended December
31, 2004, compared to $1,287,000 for the same period last year. The increase
reflects the depreciation and amortization associated with the acquisition of
additional property and equipment during the year, including the facilities
acquired in the second quarter of 2004, and the increase in patent costs.

Interest and bank charges amounted to $277,000 for the year ended December 31,
2004, compared to $100,000 for the corresponding period last year. The increase
is due to interest expense on the $10,500,000 revolving decreasing term credit
entered into by the Company to finance the acquisition of the facilities during
the year.

Interest income amounted to $1,030,000 for the year ended December 31, 2004,
compared to $838,000 for the comparable period last year. The increase results
from higher average cash balances in the current year, compared to the same
period last year.

Foreign exchange gains amounted to $1,298,000 for the year ended December 31,
2004, compared to foreign exchange losses of $1,618,000 for the comparable
period last year. Foreign exchange gains recorded in 2004 are primarily
attributable to a gain realized during the year on the conversion of US dollars
into Canadian dollars.

Gain on disposal of intellectual property amounted to $3,484,000 in year ended
December 31, 2003, and represents the gain realized on the technology transfer
related to the Company's pre-clinical Diabetes program to Innodia.

Other income amounted to $484,000 for the year ended December 31, 2004, compared
to $139,000 for the corresponding period last year and consists of non-operating
revenue, such as leasing revenue and expenses recharged to third parties.

Net loss for the year ended December 31, 2004 amounted to $52,399,000 ($1.74 per
share), compared to $25,852,000 for the same period last year ($1.04 per share).

FOURTH QUARTER

For the fourth quarter ended December 31, 2004, the Company recorded a net loss
of $15,388,000 ($0.51 per share), compared to $9,986,000 for the same period
last year ($0.34 per share).

The increase in net loss is primarily attributable to higher research and
development expenses (before research tax credits and grants), which amounted to
$10,807,000 for the fourth quarter ended December 31, 2004, compared to
$4,821,000 for the same period last year. The increase is mainly due to expenses
incurred in relation to the Alzhemed(TM) Phase III clinical trial, which began
in North America during the second quarter of 2004.

Collaboration agreement revenue consist of revenue earned under the agreement
with Centocor in respect of Fibrillex(TM) and represents the amortization of the
non-refundable upfront payment due from Centocor for the period from signing of
the agreement December 21, 2004, over the remaining estimated period to
obtaining the regulatory approvals of the product.

                                       6

<PAGE>
SIX-MONTH PERIOD ENDED DECEMBER 31, 2003 (AUDITED) COMPARED TO SIX-MONTH PERIOD
ENDED DECEMBER 31, 2002 (UNAUDITED)

Research and development expenses, before research tax credits and grants,
amounted to $8,661,000 for the six-month period ended December 31, 2003,
compared to $9,450,000 for the prior year six-month period. The decrease is due
to a reduction in clinical trial expenses related to Alzhemed(TM), following the
completion of the Phase II clinical trial in June 2003. For the six month-period
ended December 31, 2003, research and development expenses were incurred to
support the on-going Fibrillex(TM) Phase II/III clinical trials and open-label
study, Alzhemed(TM) open-label Phase II extension study and advancement towards
its Phase III clinical trials, Cerebril(TM) Phase II clinical trial as well as
on-going research programs. As at December 31, 2003, Neurochem had 171 patients
in its various clinical trials.

Research tax credits amounted to $914,000 for the six-month period ended
December 31, 2003, compared to $423,000 for the corresponding period last year.
Research tax credits represent refundable tax credits earned under the Quebec
Scientific Research and Experimental Development program. The increase is due to
higher eligible expenses, as well as prior years credit claims resolved during
the current six-month period.

Research grants and other amounted to $208,000 for the six-month period ended
December 31, 2003, compared to $1,150,000 for the corresponding period last
year. In the prior year, research grants refer principally to investment
contributions under the Technology Partnerships Canada ("TPC") Program received
by the Company for the development of Alzhemed(TM)($919,000), as well as
payments received from the FDA for the development of Fibrillex(TM)($231,000),
whereas the current six-month period consists of only grants received from the
FDA for Fibrillex(TM).

General and administrative ("G&A") expenses amounted to $7,454,000 for the
six-month period ended December 31, 2003, compared to $2,469,000 for the same
period last year. The increase year-over-year is due to the expansion of the
corporate infrastructure necessary to support the growth and the increase in the
overall activity level at the Company, in particular, in the accounting, legal,
administrative, marketing and senior management functions of the organization.
G&A expenses in the six-month period ended December 31, 2003, include legal fees
incurred in relation with the Immtech litigation, expenses associated with
increased awareness and educational activities related to AA Amyloidosis,
Fibrillex(TM)'s target indication, the setting-up of a marketing team as well as
management and performance-based fees paid to Picchio International Inc.
("Picchio International"), a related party, for the services of Dr. Francesco
Bellini, O.C., as Chairman and Chief Executive Officer of the Company and
services of other members of Picchio International and Picchio Pharma.

Depreciation and amortization expense for the six-month period ended December
31, 2003, increased to $646,000, compared to $556,000 for the same period in
2002. The increase reflects the depreciation and amortization associated with
the acquisition of additional property and equipment, as well as additions to
patent costs.

Interest income for the six-month-period ended December 31, 2003, amounted to
$520,000, compared to $482,000 for the same period the previous year. The
increase results from higher average cash balances in the current period,
compared to the same period last year offset by a larger portion of the
investment portfolio denominated in US dollar earning lower yields.

Foreign exchange losses amounted to $1,747,000 for the six-month period ended
December 31, 2003, compared to $29,000 for the comparable period the previous
year. The increase is attributable to foreign exchange losses recognized on the
US dollar denominated investments held by the Company, due to the strengthening
of the Canadian dollar versus the US dollar during the period.

Other income amounted to $139,000 for the six-month period ended December 31,
2004, and consists of non operating revenue, such as expenses recharged to third
parties.

Net loss for the six-month period ended December 31, 2003 amounted to
$16,773,000 ($0.63 per share), compared to $10,539,000 for the same period last
year ($0.52 per share).

                                       7
<PAGE>
QUARTERLY RESULTS (UNAUDITED)

(in thousand of Canadian dollars, except per share data)

<TABLE>
<CAPTION>
                                                                   Net loss per share

Quarter                                     Revenue    Net loss    Basic and diluted
-------                                     -------    --------    -----------------
<S>                                         <C>        <C>         <C>

Year ended December 31, 2004

First                                          -        (9,164)          (0.31)

Second                                         -       (14,072)          (0.47)

Third                                          -       (13,775)          (0.45)

Fourth                                       132       (15,388)          (0.51)

Six-month period ended December 31, 2003

First                                          -        (6,787)          (0.28)

Second                                         -        (9,986)          (0.34)

Year ended June 30, 2003

First                                          -        (3,962)          (0.20)

Second                                         -        (6,577)          (0.31)

Third                                          -        (5,609)          (0.25)

Fourth                                         -        (3,470)          (0.15)
</TABLE>

PICCHIO MANAGEMENT SERVICES AGREEMENT

On March 1, 2003, Neurochem entered into a management services agreement with
Picchio International into which Picchio Pharma, the Company's largest
shareholder, intervened. Picchio International is wholly-owned by Dr. Bellini
and his spouse. The management services agreement stipulates that Picchio
International provides the services of Dr. Bellini, O.C., as Chairman and Chief
Executive Officer of the Company and services of other members of Picchio
International and Picchio Pharma. Under the agreement, Picchio International and
Picchio Pharma, provide regular consulting and advisory services, including
services related to reviewing existing and potential research and development
activities, and potential clinical programs, financing activities, partnering
and licensing opportunities, commercialization plans and programs, and advising
and assisting in investor relations activities. In consideration of all services
rendered under the agreement, Picchio International received a monthly fee of
$80,000 up to November 30, 2004. The management services agreement was amended
as of December 1, 2004, and the monthly fee was increased to $200,000. This
amount includes all direct and indirect costs and expenses, including travel and
all other out-of-pocket expenses, incurred by Dr. Bellini, Picchio International
and Picchio Pharma relating to the services provided pursuant to such agreement.
The agreement also provides for performance-based fees determined at the
discretion of the Board of Directors.

                                       8

<PAGE>
FINANCIAL CONDITION

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENT

As at December 31, 2004, Neurochem's future contractual commitments are
principally for obligations under capital leases related to research equipment
acquisition, the revolving decreasing term credit agreement, operating leases
for facilities and office equipment, clinical trial outsourcing agreements, as
well as management fees with Picchio International. Future contractual
commitments by year of maturity are presented below. The Company has not engaged
in off-balance sheet financing or commodity contract trading.

<TABLE>
<CAPTION>
                                               Payments Due by Period
                                           (in thousand Canadian dollars)
                   ----------------------------------------------------------------------------------
 Contractual
 Obligations          Total       Less than 1 year     1-3 years      3-5 years    More than 5 years
-----------------------------------------------------------------------------------------------------

<S>                   <C>         <C>                  <C>            <C>          <C>
 Obligations under        416            416               Nil            Nil              Nil
 capital leases
 Long- term debt       10,136            686             1,400          8,050              Nil
 Operating leases       1,094            303               327            296              168

 Clinical Trials        6,152          2,222             3,930            Nil              Nil
 agreements
 Management             7,000          2,400             4,600            Nil              Nil
 fees
</TABLE>

On December 1, 2004, the Company entered into an agreement with its Chief
Executive Officer, Dr Francesco Bellini, to issue to him up to 220,000 common
shares upon the execution of the agreement and upon achievement of specified
performance targets. The agreement is subject to regulatory and shareholder
approval in 2005.

LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2004, the Company had cash, cash equivalents and marketable
securities in the amount of $29,173,000 as well as a non-refundable amount
receivable from the collaboration agreement with Centocor, Inc. of $7,418,000,
compared to $77,594,000 and Nil at December 31, 2003. The decrease is due to
funds used for operating and investing activities, including the acquisition of
facilities as previously discussed, net of proceeds received from the revolving
decreasing term credit agreement and the issue of additional share capital
pursuant to the exercise of employee stock options.

Additions to property and equipment for the year ended December 31, 2004,
amounted to $14,750,000, compared to $916,000 for the six-month period ended
December 31, 2003 and $1,638,000 for the year ended June 30, 2003. The main
additions to property and equipment for the year ended December 31, 2004, were
facilities acquired from Shire BioChem as discussed previously ($11,213,000), as
well as research equipment ($2,254,000). For the six-month period ended December
31, 2003, the main additions were composed of research equipment ($354,000) and
software ($223,000). For the year ended June 30, 2003, additions to property and
equipment consisted mainly of research equipment ($790,000) and software
($532,000). Additions to patent costs for the year ended December 31, 2004,
amounted to $1,599,000, compared to $739,000 for the six-month period ended
December 31, 2003, and $538,000 for the year ended June 30, 2003. The Company
expects that patent costs should increase as intellectual property protection
activities increase.

                                       9

<PAGE>

Proceeds from the issue of share capital for the year ended December 31, 2004,
amounted to $1,490,000 and are related to the issue of additional share capital
pursuant to the exercise of employee stock options. Proceeds from the issue of
share capital for the six month period ended December 31, 2003, amounted to
$86,448,000 and are mainly related to the US and Canadian public offering, as
discussed previously.

Proceeds from long-term debt amounted to $10,500,000 for the year ended December
31, 2004, and are related to the financing of the facilities acquisition, as
discussed previously.

On February 14, 2005, the Company received notice from a shareholder of a
commitment to exercise 2,800,000 warrrants to purchase common shares due to
expire on July 25, 2005. Total proceeds to the Company from this exercise will
be $8,764,000.

As at January 31, 2005, the Company had 30,411,272 common shares outstanding, as
well as 2,272,931 options outstanding granted under the stock option plan. In
addition, warrants to purchase 4,000,000 common shares of the Company were
outstanding.

The Company invests available cash resources, in a manner consistent with a goal
of capital preservation, liquidity and with limited credit risk, in liquid
securities with varying terms to maturity not exceeding twelve months, selected
with regard to the expected timing of expenditures to be incurred from
continuing operations and prevailing interest rates.

Since inception in 1993, Neurochem has devoted its resources principally to
funding research and development programs and the related infrastructure and
support activities. As at December 31, 2004, the Company has incurred a
cumulative deficit since inception of $140,926,000 of which research and
development expenditures totaled $107,921,000 before research tax credits and
grants of $19,905,000. The Company expects operating expenses to increase going
forward as product candidates enter more advanced stages of clinical
development, as the Company continues to invest in product research and
development and as it prepares for commercialization.

The Company signed a collaboration and distribution agreement with Centocor in
respect of Fibrillex(TM) in December 2004. However, the Company has not yet
generated any revenues from the sale of products and has not been profitable to
date. Neurochem has funded its operations primarily through private and public
offerings of common shares, payments received under research and development
agreements as well as interest income, tax credits and grants. Until the Company
is in its commercialization phase, it expects to fund operations with proceeds
from equity or debt financing, interest income, revenues from collaborative
research, license, product development and co-marketing agreements, research tax
credits and grants.

The Company believes that its available cash and short-term investments,
expected interest income, potential funding from research, potential
partnerships and licensing agreements, research tax credits, grants, access to
capital markets and support from its principal shareholder should be sufficient
to finance the Company's operations and capital needs for the coming year.
However, in light of the inherent uncertainties associated with the regulatory
approval process and the Company's ability to secure additional research,
partnerships and/or licensing agreements, further financing may be required to
support the Company's operations in the future.

Supplementary information about the Company, including its Annual Information
Form, is available on SEDAR's website (www.sedar.com).

CRITICAL ACCOUNTING POLICIES

In preparing the Company's consolidated financial statements in conformity with
GAAP, management is required to make certain estimates, judgements and
assumptions that the Company believes are reasonable based upon the information
available. These estimates and assumptions affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the periods presented. The accounting policies
which the Company considers to be critical are those that require the

                                       10

<PAGE>

most difficult, subjective, or complex judgments and that are the most important
to aid in fully understanding and evaluating its consolidated financial
statements. These accounting policies are discussed in the following paragraphs.

Revenue recognition: Revenue from collaboration and distribution agreements that
includes multiple elements is considered to be a revenue arrangement with
multiple deliverables. Under this type of arrangement, identification of
separate units of accounting is required and revenue is allocated among the
separate units based on their relative fair value. Payments received under the
collaboration and distribution agreements may include upfront payments,
regulatory and sales-based milestone payments for specific achievements as well
as distribution fees. Upfront and regulatory milestone payments, which require
the Company's ongoing involvement are deferred and amortized into income on a
straight-line basis over the estimated period of service. Sales-based milestone
payments, for which the Company has no future involvement or obligations to
perform related to that specific element of the arrangement, are recognized into
income upon the achievement of the specified milestones. Distribution fee
revenue is recognized when the amount is determinable and collection is
reasonably assured.

Research and development costs consist of direct and indirect expenditures,
including a reasonable allocation of overhead expenses, associated with the
Company's various research and development programs. Research and development
costs are expensed as incurred. Overhead expenses comprise general and
administrative support provided to the research and development programs and
involve costs associated with support activities such as facility operating
costs, office services, information technology and human resources. The Company
accrues clinical trials expenses based on work performed, which relies on
estimates of total costs incurred based on completion of patient studies and
other events. The Company follows this method since reasonable dependable
estimates of the costs applicable to various stages of a research agreement or
clinical trial can be made. Accrued clinical costs are subject to revisions as
trials progress to completion.

Income taxes are accounted for under the asset and liability method. Future tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carry forwards. Future tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on future tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Management provides valuation allowances against the future tax asset for
amounts which are not considered "more likely than not" to be realized. In
assessing the realizability of tax assets, management considers whether it is
more likely than not that some portion or all of the tax assets will not be
realized. The ultimate realization of future tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
tax liabilities, projected future taxable income, and tax planning strategies in
making this assessment. The Company has determined that a 100% tax valuation
allowance is necessary at December 31, 2004. In the event the Company were to
determine that it would be able to realize its tax asset, an adjustment to the
tax asset would increase income in the period such determination is made.

Property, equipment and patents costs are stated at cost and are amortized on a
straight-line or declining balance basis. The Company regularly reviews
property, equipment and patent costs for impairment as well as whenever events
or changes in business circumstances indicate that the carrying value of the
assets may not be recoverable. Impairment is assessed by comparing the carrying
amount of an asset with its expected future net undiscounted cash flows from use
together with its residual value (net recoverable value). If such assets are
considered impaired, the impairment to be recognized is measured by the amount
by which the carrying amount exceeds its recoverable value. Management's
judgment regarding the existence of impairment indicators are based on legal
factors, market conditions and operating performances. Future

                                       11

<PAGE>

events could cause management to conclude that impairment indicators exist and
that the carrying values of the Company's property, equipment or patent costs
are impaired. Any resulting impairment loss could have a material adverse impact
on the Company's financial position and results of operations.

RECENT ACCOUNTING PRONOUNCEMENTS

Stock-based compensation

Effective January 1, 2004, the Company adopted the recommendations of the
Canadian Institute of Chartered Accountants ("CICA") issued Handbook Section
3870, Stock-based Compensation and Other Stock-based Payments. The new
recommendations require entities to account for employee stock options using the
fair value based method, whereby compensation cost is measured at fair value at
the date of grant and is expensed over the award's vesting period. In accordance
with one of the transitional options permitted under amended Section 3870, the
Company has retroactively applied the fair value based method to all employee
stock options granted on or after July 1, 2002 without restatement of prior
periods. The cumulative effect of the change in accounting policy of $2,162,000
has been recorded as an increase in the opening deficit and additional paid-in
capital at January 1, 2004.

Prior to January 1, 2004, the Company applied the fair value based method of
accounting prescribed by the Canadian Institute of Chartered Accountants to
stock-based payments to non-employees, employee awards that were direct awards
of stock or called for settlement in cash or other assets, and to employee stock
appreciation rights; the Company applied the settlement method of accounting to
employee stock options. Under the settlement method, any consideration paid by
employees on the exercise of stock options or purchase of stock was credited to
share capital and no compensation expense was recognized.

Variable interest entities
The CICA has issued Accounting Guideline 15 -- Consolidation of Variable
Interest Entities (AcG-15), which provides guidance for determining when an
enterprise consolidate the assets, liabilities and results of activities of
entities that are subject to control on a basis other than ownership of voting
interests (a "variable interest entity" ("VIE")). This guideline requires the
Company to identify VIEs in which it has an interest, determine whether it is
the primary beneficiary of such entities and, if so, to consolidate the VIE. A
primary beneficiary is an enterprise that will absorb a majority of the VIE's
expected losses, receive a majority of its expected residual return, or both.
AcG-15 is effective for fiscal periods beginning on or after November 1, 2004.
The Company has performed an analysis of the characteristics of its long-term
investment. It was determined that its investment in a holding company that owns
Innodia's shares meets the criteria for being a VIE and that the Company is the
primary beneficiary of Innodia. The implementation of AcG-15 will result in the
consolidation of the Company's interest in Innodia's holding company starting
January 1, 2005. The cumulative effect of the implementation of this accounting
guideline in the amount of $2,501,000 will be applied retroactively and recorded
as an increase in the opening deficit at January 1, 2005.

RISKS AND UNCERTAINTIES

Since inception, Neurochem has experienced operating losses and products have
not yet been marketed commercially. The Company's product candidates are in
development and have not yet been approved for commercialization by regulatory
authorities in any jurisdiction. The Company's business entails significant
risks, including the costs and time involved in obtaining the required
regulatory approvals, the adequacy of patent protection, the uncertainties
involved in clinical testing, the availability of capital to continue
development and commercialization of the products, and competition from
pharmaceutical and other biotechnology companies.

                                       12

<PAGE>

Product research and development involves a high degree of risk and returns to
investors are dependent upon successful development and commercialization of the
Company's products. There can be no assurance that development of any product
will be successfully completed or that regulatory approval of any of the
Company's products under development will be obtained. Furthermore, there can be
no assurance that existing products or new products developed by competitors
will not be more effective, or more effectively marketed and sold, than any that
may be developed by the Company. There can be no assurance that the Company's
future potential products will gain market acceptance among physicians,
patients, healthcare payers and the medical community.

Because of the length of time and expense associated with bringing new products
through development, obtaining regulatory approval and bringing products to
market, the Company places considerable importance on obtaining and maintaining
patent and trade secret protection for significant discoveries. There can be no
assurance that any pending patent application filed by the Company will mature
into an issued patent. Furthermore, there can be no assurance that existing or
pending patent claims will offer protection against competition, or will not be
designed around or infringed upon by others. Commercial success will also depend
in part on the Company not infringing patents or proprietary rights of others.

The Company is currently dependent on third parties for a variety of functions
and may enter into future collaborations for the development, manufacture and
commercialization of products. There is no assurance that the arrangements with
these third parties will provide benefits the Company expects. There can also be
no assurance that the Company will be successful in manufacturing, marketing and
distributing products, or that the Company will be able to make adequate
arrangements with third parties for such purposes. There can be no assurance
that the Company will generate revenue or achieve profitability.

Significant funding is required for ongoing research and development, clinical
trials, commercial manufacturing of products and the establishment of sales and
marketing teams necessary for the launch and ongoing sales of new products. In
addition, major financial resources are necessary until such time as the
products are commercialized and sold successfully, and sales are sufficient to
generate profits. The Company intends to raise additional financing, as
required, through research, partnership and licensing agreements, the exercise
of options and warrants, and through equity and/or debt financing. However,
there can be no assurance that these financing efforts will be successful or
that the Company will continue to be able to meet its ongoing cash requirements.
It is possible that financing will not be available or, if available, may not be
on favorable terms. The availability of financing will be affected by the
results of scientific and clinical research, the Company's ability to attain
regulatory approvals, the market acceptance of the Company's products, the state
of the capital markets generally (with particular reference to pharmaceutical,
biotechnology and medical companies), the status of strategic alliance
agreements, and other relevant commercial considerations.

On behalf of Management,

MARIANO RODRIGUEZ, C.A., C.P.A.

Vice President, Finance

& Chief Financial Officer

Laval, Quebec, Canada

February 16, 2005

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