Document:

Filed by Bowne Pure Compliance

 

Exhibit 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (the “Agreement”), dated as of
February 18, 2008 is made by and between APAC Customer Services, Inc., a company
organized under the laws of Illinois (the “Company”) and Michael Marrow
(“Executive”).

WITNESSETH:

WHEREAS, the Company desires to employ Executive pursuant to the terms
and conditions contained in this Agreement; and

WHEREAS, Executive desires to accept such employment pursuant to the
terms and conditions contained in this Agreement;

NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree
as follows:

1. Term. Executive’s employment under this Agreement shall
commence on March 3, 2008 (the “Effective Date”), and shall continue, at will,
until otherwise terminated pursuant to Section 7 below (the “Employment
Period”).

2. Title. During the Employment Period, Executive will serve
as the President and Chief Executive Officer of the Company. Executive shall
also be appointed a director of the Company, effective not sooner that the
Effective Date and as soon as may be practicable on or after the date of
this Agreement. Provided Executive’s employment with the Company has not
been previously terminated, Executive will be nominated for election to the
Board of Directors at each subsequent annual meeting of stockholders during
the Employment Period.

3. Executive’s Duties. Executive will report directly to the
Board of Directors of the Company, and all other employees of the Company
shall report to Executive or Executive’s designee and not directly to the
Board of Directors. Throughout the Employment Period, Executive’s duties,
responsibilities and authority shall include all the duties, responsibilities
and authority normally performed by the President and Chief Executive Officer
of the Company, with such additions thereto as the Board of Directors may,
from time to time, in its discretion delegate.

4. Full Time. Except as provided specifically herein, during the
Employment Period, Executive agrees to devote Executive’s full time,
attention, skill, and energy to the duties set forth herein and to the
business of the Company and to use Executive’s best efforts to promote the
success of the Company’s business. Executive shall not invest in any business
which directly competes with the Company, nor shall Executive engage in any
outside business activity of any nature, including, but not limited to,
activity as a consultant, agent, partner, officer or provider of business
services of any nature, directly or indirectly, to a corporation or other
business enterprise, except as otherwise provided in this Agreement. Nothing
in this Agreement shall be construed to prohibit Executive from investing in
up to 2% of the stock of any company which does not directly compete with the Company and
whose stock is listed on a national securities exchange.

 

 

 

5. Location. Executive shall be based in the Company’s
corporate headquarters currently located in Deerfield, Illinois. However,
Executive acknowledges that in order to effectively perform Executive’s
duties, he will be required to travel for business purposes. Notwithstanding
the foregoing, the Company agrees that Executive shall continue to reside
permanently at his home in Reston, Virginia or other location of his choosing, but will maintain a residence during the work week in reasonable proximity
to the Company’s corporate headquarters and will spend whatever time is
necessary there in order to perform Executive’s obligations under this
Agreement. The Company will reimburse Executive up to $3,000 per month for
the actual and reasonable out-of-pocket expenses related to Executive’s
maintenance of a residence near the Company’s headquarters.

6. Compensation.

(a) Base Salary. Executive’s annual base salary shall
initially be $350,000 (the “Base Salary”), payable in accordance with the
Company’s normal payroll practices as in effect from time to time. Such
Base Salary shall be subject to periodic review, and may be increased from
time to time in the discretion of the Company.

(b) Bonus. Executive shall be eligible to participate in
and earn annual bonus compensation under the Company’s Amended and Restated
2005 Management Incentive Plan or under a successor annual incentive plan (
the “Annual Incentive Plan”), as may be in effect from time to time, in
accordance with the Company’s compensation practices.. Executive shall have a
annual target bonus equal to fifty percent ( 50%) of Executive’s Base Salary
and a maximum annual bonus equal to one hundred (100%) of Executive’s Base
Salary, subject to satisfaction of performance criteria established under the
terms of the Annual Incentive Plan.

(c) Sign-On Bonus. Provided Executive is still employed
by the Company ninety (90) days after the Effective Date, the Company will pay
Executive a signing bonus equal to $100,000.

(d) Sign-On Equity Award: On the Effective Date,
Executive will be awarded a grant of ten (10) year options with respect to
900,000 shares of common stock of the Company (the “Option”) under the
Company’s Amended and Restated Incentive Stock Plan (the “Stock Plan”). The
Option shall vest in five equal installments on the first, second, third,
fourth and fifth anniversaries of the Effective Date, subject to earlier
vesting as provided in the Stock Option Agreement. The exercise price of the
Option shall be the Fair Market Value (as defined in the Stock Plan) of such
 shares on the Effective Date. The Option is otherwise subject to the terms and
conditions of the Stock Plan and shall be substantially in the form of Stock
Option Agreement attached hereto as Exhibit A.

(e) Vacation. Executive shall be entitled to accrue vacation
in accordance with the Company’s vacation pay policy as in effect from time to time.

 

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(f) Benefits. Subject to satisfaction of any plan
eligibility requirements and the terms and conditions of the plans,
Executive shall be entitled to participate in, and receive benefits under,
any pension benefit plan or welfare benefit plans adopted by the Company.

(g) Reimbursement of Business Expenses. The Company
will reimburse Executive for all reasonable and properly documented
expenses incurred or paid by him in connection with the performance of
Executive’s duties hereunder.

(h) Withholdings. All payments made under this Section 6, or
under any

other provision of this Agreement, shall be subject to any and all
federal, state, and local taxes and other withholdings to the extent
required or authorized by applicable law.

7. Termination of Employment.

(a) Due to Death. Executive’s employment with
the Company will automatically terminate immediately upon Executive’s
death.

(b) Due to Disability. If Executive incurs a
“Disability” (as defined below) during the Employment Period, then the
Company, in its sole discretion, shall be entitled to terminate Executive’s
employment immediately upon written notice to Executive of such decision. For
purposes of this Agreement, “Disability” shall mean a physical or mental
impairment that prevents Executive from performing the essential duties of
Executive’s position, with or without reasonable accommodation, for (i) a
period of sixty (60) consecutive calendar days, or (ii) an aggregate of sixty
(60) work days in any six (6) month period. The determination of whether
Executive incurred a Disability shall be made by the Company, in its sole
discretion, after consultation with Executive’s physician. Executive agrees to
submit to an examination by a physician selected by the Company and to
authorize Executive’s physician to disclose and speak with the Company
regarding Executive’s impairment.

(c) By the Company. The Company shall be entitled to terminate
Executive’s employment with or without “Cause” by providing written notice to
Executive of such decision, provided that if the Company terminates
Executive’s employment without Cause (and not as a result of a Disability),
then the Company must provide at least thirty (30) day advance written notice
of such decision to Executive. No advance notice period is required for a
termination by the Company with Cause. The Company reserves the right to
withdraw any and all duties and responsibilities from Executive, and to
exclude Executive from the Company’s premises, during any such notice period.

For purposes of this Agreement, “Cause” shall mean (i) the commission by
Executive of an act of malfeasance, dishonesty, fraud, or breach of trust
against the Company or any of its employees, clients, or suppliers, (ii) the
breach by Executive of any fiduciary or common law duty to the Company, or any
obligations under this Agreement, or any other agreement between Executive and
the Company, (iii) Executive’s willful failure to comply with the Company’s
material written policies, (iv) Executive’s failure, neglect, or refusal to
perform Executive’s duties under this Agreement, or to follow the lawful
written directions of the Company (including, without limitation, from the
Company’s board of directors), which failure is not cured (if curable) within
ten (10) days after written notice has been given by the Company
to Executive, (v) Executive’s conviction of, or plea of guilty or no contest
to, any felony, or (vi) any act or omission by Executive that is, or is
reasonably likely to be, materially injurious to the financial condition,
business reputation or business relationships of the Company, or that
otherwise is materially injurious to the Company’s employees, clients,
customers or suppliers.

 

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(d) By Executive. Executive shall be entitled to terminate Executive’s
employment with the Company by providing the Company with at least sixty (60)
days’ advance written notice, provided that Company may terminate Executive’s
employment at any time thereafter, which shall not be treated as a termination
without Cause and Executive shall be deemed to have resigned under this
Section 7(d).

(e) Change of Control.  Executive shall enter into an
Employment Security Agreement with the Company substantially in the form
attached hereto as Exhibit B. In the event of the Company’s involuntary
termination of Executive’s employment without Cause during the Employment
Period that is not covered by the Employment Security Agreement, then the
terms of Section 8(c) of this Agreement shall govern.

8. Compensation Upon Termination of Employment.

(a) Termination By Reason of Death or Disability. If Executive’s
employment is terminated by reason of Executive’s death or Disability under
Section 7(a) or 7(b) above, then the Company shall pay to Executive (or
Executive’s estate, as appropriate) (i) Executive’s then-current Base Salary
through the termination date to the extent not theretofore paid, and (ii) any
accrued but unused vacation days as of the termination date (collectively the
“Accrued Payments”). Thereafter, the Company shall have no further obligations
to Executive except any statutory obligations that may exist (such as the
right to elect to continue health insurance under the federal law known as
“COBRA” and similar state law).

(b) Termination by the Company with Cause.  If
Executive’s employment is terminated by the Company with Cause under Section
7(c) above, then the Company shall pay to Executive Executive’s Accrued
Payments and thereafter, the Company shall have no further obligations to
Executive except any statutory obligations that may exist (such as the right
to elect to continue health insurance, except in cases of gross misconduct,
under the federal law known as “COBRA” and similar state law).

(c) Termination by the Company without Cause. If Executive’s
employment is terminated by the Company without Cause (and not as a result of a
Disability) under Section 7(c) above, then the Company shall provide
Executive with:

(i) Executive’s Accrued Payments;

(ii) continued payments of an amount equal to twelve months of
Executive’s then-current Base Salary payable in equal amounts in
accordance with the Company’s then current payroll practices in effect
from time to time over a period of two years from the termination date;
and

 

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(iii) provided that Executive (and if applicable Executive’s
dependents) elect(s) continuation coverage under the federal law known as
“COBRA” and similar state law, the Company shall pay Executive monthly for a period of
twelve months the difference between the cost to so continue such
coverage and the cost applicable to active employees of the Company,
subject to immediate cessation (other than as to any preexisting
condition not covered by the new benefits coverage) if Executive is
offered health benefits coverage in connection with new employment.

(d) The payments set forth under clauses (ii) and (iii) of Section 8(c)
are conditioned upon Executive’s execution of a customary general release of
claims against the Company and its affiliates, and their employees, directors,
owners, agents, successors, and similar persons and shall be in lieu of all
other payments and benefits to which Executive otherwise may be entitled under
any severance plan, program or policy of the Company. Other than as set forth
in subsection 8(c), the Company shall have no further obligations to Executive
except any statutory obligations that may exist (such as the right to elect to
continue health insurance under the federal law known as “COBRA” and similar
state law) but not waived under the general release referenced in this
subsection.

(e) Termination by Executive. If Executive terminates
Executive’s employment under Section 7(d), then the Company shall pay to
Executive Executive’s Accrued Payments and thereafter, the Company shall have
no further obligations to Executive except any statutory obligations that may
exist (such as the right to elect to continue health insurance under the
federal law known as “COBRA” and similar state law).

9. Restrictive Covenants. Executive agrees that in order to
protect the business interests of the Company, Executive shall,
contemporaneously with Executive’s execution of this Agreement, execute
and abide by the terms of the Agreement Protecting Company Interests
attached hereto as Exhibit C.

10. No Prior Restrictions. Executive represents and warrants
that Executive’s employment with the Company will not violate, or cause
Executive to be in breach of, any obligation or covenant made to any former
employer or other third party, and that during the course of Executive’s
employment with the Company, Executive will not take any action that would
violate or breach any legal obligation which Executive may have to any former
employer or other third party. Executive will at all times indemnify, defend,
and hold harmless the Company (and each of its officers, directors, employees
and agents) in the event of any breach by Executive of any representation or
warranty made in this Agreement.

11. Non-Disparagement. Both during and after Executive’s
employment with the Company, Executive will not disparage, portray in a
negative light, or take any action that would be harmful to, or lead to
unfavorable publicity for, the Company or any of its current or former
clients, suppliers, officers, directors, employees, agents, consultants,
contractors, owners, parents, subsidiaries, or divisions, whether in public
or private, including without limitation, in any and all interviews, oral
statements, written materials, electronically displayed materials, and
materials or information displayed on Internet-related sites.

12. Equitable Relief. Executive acknowledges that the remedy at
law for Executive’s breach of Section 11 above will be inadequate, and that
the damages flowing from such breach will not be readily susceptible to being
measured in monetary terms. Accordingly, upon a violation of any part of such Section, the Company shall be entitled
to immediate injunctive relief (or other equitable relief) and may obtain a
temporary order restraining any further violation from any court with
jurisdiction to issue such relief. No bond or other security shall be
required in obtaining such equitable relief, and Executive hereby consents to
the issuance of such equitable relief. Nothing in this Section 12 shall be
deemed to limit the Company’s remedies at law or in equity for any breach by
Executive of any of the parts of Section 11 that may be pursued or availed of
by the Company.

 

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13. Cooperation. During the Employment Period and thereafter,
Executive agrees to furnish information as may be in Executive’s possession
and render assistance and cooperation to the Company at its request
regarding any matter, dispute or controversy with which the Company may
become involved and of which Executive has or may have reason to have
knowledge, information or expertise. The Company shall be responsible for
reimbursing Executive for any reasonable expenses incurred by Executive in
connection with furnishing the information or rendering the assistance and
cooperation to the Company under this Section 13.

14. Arbitration. Except as provided in Section 12 above, in the
event that there shall be a dispute among the parties arising out of or
relating to this Agreement, or the breach thereof, the parties agree that
such dispute shall be resolved by final and binding arbitration in Chicago,
Illinois administered by the American Arbitration Association (the
“AAA”), in accordance with AAA’s Commercial Arbitration Rules, to
which shall be added the provisions of the Federal Rules of Civil Procedure
relating to the Production of Evidence, and the parties agree that the
arbitrator may impose sanctions in his or her discretion to enforce
compliance with discovery and other obligations. Such arbitration shall be
presided over by a single arbitrator. Hearings in the arbitration proceedings
shall commence within twenty (20) days of the selection of the arbitrator or
as soon thereafter as the arbitrator is available. The arbitrator shall
deliver his or her opinion within twenty (20) days after the completion of
the arbitration hearings. The arbitrator’s decision shall be final and
binding upon the parties, and may be entered and enforced in any court of
competent jurisdiction by either of the parties. Unless otherwise ordered by
the arbitrator pursuant to this Agreement, the arbitrator’s fees and expenses
shall be shared equally by the parties.

15. Attorney’s Fees. If any arbitration is brought under Section
14, the arbitrator may award the successful or prevailing party reasonable
attorneys’ fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it may be entitled. If any other
proceeding is brought by one party against the other in connection with or
relating in any manner to this Agreement, or to enforce an arbitration award,
the successful or prevailing party (as determined by an independent third
party, e.g. a judge) shall be entitled to recover its reasonable attorneys’
fees and other costs incurred in that action or proceeding, in addition to any
other relief to which it may be entitled.

16. Notices. All notices and other communications provided for
in this Agreement shall be in writing and will be deemed to have been duly
given when hand delivered or dispatched by electronic facsimile transmission
(with receipt thereof orally confirmed), or five business days after having
been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a
nationally recognized overnight courier service such as FedEx, UPS, or DHL,
addressed to the Company (to the attention of the Secretary of the Company) at its principal executive
office and to Executive at Executive’s principal residence (as determined by
the Company’s employment records), or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except
that notices of changes of address shall be effective only upon receipt.

 

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17. Severability.  In the event that any of the
provisions of this Agreement, or the application of any such provisions to
Executive or the Company with respect to obligations hereunder, is held to be
invalid, unlawful or unenforceable, in whole or in part, then such
provision(s) shall be deemed to be modified or restricted to the extent and in
the manner necessary to render the same valid and enforceable or shall be
deemed excised from this Agreement, as the case may require, and this
Agreement shall be construed and enforced to the maximum extent permitted by
law as if such provision(s) had been originally incorporated herein as so
modified or restricted or as if such provision(s) had not been originally
incorporated herein, as the case may be.

18. Survival.  Notwithstanding anything in this Agreement
to the contrary, the obligations of the parties under Sections 8, 9, 11 and 13
(as well as any provisions of this Agreement necessary to give effect thereto)
shall survive any termination of Executive’s employment.

19. Waiver. No waiver by any party hereto of the breach of
any term or covenant contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be, or
construed as, a further or continuing waiver of any such breach, or a
waiver of any other term or covenant contained in this Agreement.

20. Entire Agreement. This Agreement, together with all Exhibits
thereto, contains the entire agreement between Executive and the Company with
respect to the subject matter of this Agreement, and supersedes any and all
prior agreements and understandings, oral or written, between Executive and
the Company with respect to the subject matter of this Agreement. If any
provision of this Agreement conflicts with any other agreement, policy, plan,
practice or other Company document, now existing or hereafter adopted or
amended, the provisions of this Agreement shall control.

21. Amendments. This Agreement may be amended only by an
agreement in writing signed by Executive and an authorized representative of
the Company (other than Executive).

22. Successors and Assigns. Because Executive’s obligations
under this Agreement are personal in nature, Executive’s obligations may only
be performed by Executive and may not be assigned by Executive. This Agreement
is also binding upon Executive’s successors, heirs, executors, administrators,
and other legal representatives, and shall inure to the benefit of the Company
and its subsidiaries, successors, and assigns. This Agreement may be assigned
by the Company at anytime.

 

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23. No Other Representations. Executive acknowledges that the
Company has made no representations or warranties to Executive concerning the
terms, enforceability, or implications of this Agreement other than as
reflected in this Agreement.

24. Arm’s Length Negotiations. The Company and Executive
acknowledge that this Agreement was the result of arm’s length negotiations
between sophisticated parties each afforded the representation of legal
counsel. Each and every provision of this Agreement shall be construed as
though both parties participated equally in the drafting of same, and any rule
of construction that a document shall be construed against the drafting party
shall not be applicable to this Agreement.

25. Headings. The titles and headings of sections and
subsections contained in this Agreement are included solely for convenience
of reference and will not control the meaning or interpretation of any of the
provisions of this Agreement.

26. Counterparts. This Agreement may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
and such counterparts shall together constitute but one agreement.

27. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Illinois, without
giving effect to its conflict of laws principles.

28. 409A. Notwithstanding anything herein to the contrary, to
the maximum extent permitted by applicable law, amounts payable to Executive
pursuant to Section 8(c) herein shall be made in reliance upon Treas. Reg.
Section 1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg. Section
1.409A-1(b)(4) (Short-Term Deferrals). For this purpose each monthly payment
shall be considered a separate and distinct installment payment. However, to
the extent any such payments are treated as non-qualified deferred
compensation subject to Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”), then (i) no amount shall be payable pursuant to Section
8(c) unless Executive’s termination of employment constitutes a “separation
from service” within the meaning of Treas. Reg. Section 1.409A-1(h) and (ii)
if Executive is deemed at the time of Executive’s separation from service to
be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the
Code, then to the extent delayed commencement of any portion of the
termination benefits to which Executive is entitled under this Agreement is
required in order to avoid a prohibited distribution under Section
409A(a)(2)(B)(i) of the Code, such portion of Executive’s termination benefits
shall not be provided to Executive prior to the earlier of (A) the expiration
of the six-month period measured from the date of Executive’s “separation from
service” with the Company (as such term is defined in the Treasury Regulations
issued under Section 409A of the Code) or (B) the date of Executive’s death.
Upon the earlier of such dates, all payments deferred pursuant to this Section
32 shall be paid in a lump sum to Executive, and any remaining payments due
under the Agreement shall be paid as otherwise provided herein. The
determination of whether Executive is a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code as of the time of Executive’s separation
from service shall made by the Company in accordance with the terms of Section
409A of the Code and applicable guidance thereunder (including without
limitation Treas. Reg. Section 1.409A-1(i) and any successor provision
thereto).

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

	 	 	 	 	 
	APAC CUSTOMER SERVICES, INC.	 	MICHAEL MARROW
	 
	 	 	 	 
	By:

	 	/s/John C. Kraft
	 	/s/ Michael Marrow
	 

	 	 
	 	 
	 

	 	Name: John C. Kraft	 	 
	 

	 	Title: Director	 	 

 

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Exhibit A

Form of Stock Option Agreement

 

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APAC CUSTOMER SERVICES, INC.

STOCK OPTION AGREEMENT

This Agreement is entered into and made effective as of «Option Date» by
and between APAC Customer Services, Inc., an Illinois corporation (the
“Company”), and «First Name» «Middle_Name» «Last Name» (the “Optionee”).

WITNESSETH:

WHEREAS, the Compensation Committee of the Board of Directors of the
Company desires to encourage and enable the Optionee to acquire or increase
his or her proprietary interest in the Company by granting the Optionee an
option to purchase common stock of the Company, par value of $.01 per share
(“Shares”), as authorized under the Amended and Restated APAC Customer
Services, Inc. 2005 Incentive Stock Plan, as amended from time to time (the
“Plan”);

NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth in this Agreement, the Company and Optionee hereby agree as follows: ,

1. Grant of Option. Subject to the terms and conditions provided
in this Agreement and the Plan, the Company hereby grants to the Optionee a
nonqualified stock option to purchase all or part of 900,000 Shares of the
Company (the “Option”) at a per share purchase price of «Option_Price»,
effective as of «Option_Date» (the “Grant Date”). The Option shall not be
treated as an incentive stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”).

2. Time of Exercise.

(a) Except as provided below in this paragraph, from and after «Vest_Date
Period 1», as long as the Optionee continues to provide Services to the
Company or of one of its Subsidiaries, the Option shall become exercisable, to
a maximum cumulative extent, in accordance with the following schedule:

	 	 	 
	Exercise Date	 	Cumulative Number of Shares
	On or after 1st anniversary of Grant Date
	 	20% of Shares
	On or after 2nd anniversary of Grant Date
	 	40% of Shares
	On or after 3rd anniversary of Grant Date
	 	60% of Shares
	On or after 4th anniversary of the Grant Date
	 	80% of Shares
	On or after 5th anniversary of the Grant Date
	 	100% of Shares

Notwithstanding the foregoing, the Option may not be exercised for
fractional Shares and the Option may not be exercised for less than 100 Shares
at a time, unless it is for the balance of the Shares available under the
Option.

The exercisability of the Option shall not be affected by leaves of absence
approved in writing by the President of the Company or by any change of
employment, so long as the Optionee continues to provide Services to the
Company or of one of its Subsidiaries.

 

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(b) Notwithstanding paragraph 2(a), the following provisions shall govern:

(i) Disability, Death or Retirement. If the Optionee’s
Service is terminated due to “Disability,” death or “Retirement” (as
each such capitalized term is defined below in paragraph 4 or in the
Plan), the exercisability of the Option shall accelerate and the Option
shall become exercisable, to a maximum cumulative extent, in accordance
with the following schedule:

	 	 	 
	Termination Date	 	Cumulative Number ofShares
	On or after Grant Date, but before 1st 

anniversary of Grant Date
	 	20% of Shares
	On or after 1st anniversary of Grant Date, but 

before 2nd anniversary of Grant Date
	 	40% of Shares
	On or after 2nd anniversary of Grant Date, 

but before 3rd anniversary of Grant Date
	 	60% of Shares
	On or after 3rd anniversary of Grant Date
	 	80% of Shares
	On or after 4th anniversary of Grant Date
	 	100% of Shares

In the event that the Optionee’s Service terminates due to
Optionee’s Retirement, any Shares that first become exercisable as a
result of this provision shall hereinafter be referred to as “Restricted
Shares.”

(ii) Change in Control. If a “Change in Control” (defined below in
paragraph 4) occurs while the Optionee is providing Services to the
Company or one of its Subsidiaries, to the extent that the Option is
then not exercisable, its exercisability shall accelerate as to fifty
percent (50%) of the previously unexercisable portion, and the Option
shall thereafter become additionally exercisable (if at all) to the
extent it would have been exercisable without such acceleration.

(iii) Termination After Change in Control. If the Optionee’s
Service terminates for “Good Reason” (defined below in paragraph 4) or
by the Company other than With Cause, on or within twenty-four (24)
months following a Change in Control, the Option shall become
exercisable with respect to all Shares covered by the Option.

(iv) Other Terminations. The foregoing provisions of this Section
2(b) to the contrary notwithstanding, the Committee (as defined below in
paragraph 11), in its sole discretion, may at any time cause all or part
of Optionee’s unexercisable Option to become exercisable upon a
termination of Optionee’s Service, with or without designating all or
part of such exercisable portion of the Option as Restricted Shares.

3. Term of Option. Except as provided below, the term of
the Option shall be for a ten (10) year period, beginning on the Grant Date
and ending on oExpiration_Date_Period 1» (the “Expiration Date”).

(a) Termination With Cause. If the Company terminates the Optionee’s
Service With Cause, the Option shall expire immediately and all rights to
purchase Shares hereunder shall cease.

(b) Disability or Death. If the Optionee’s Service with the Company or
one of its Subsidiaries terminates due to the Optionee’s Disability or death,
the Option shall expire one (1) year after the date of such termination. In
such circumstance, the Option shall only be exercisable to the extent it was exercisable as of such termination date (as
determined above under paragraph 2) and shall not be exercisable with respect
to any additional Shares.

 

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(c) Other Termination. If the Optionee’s Service with the Company or one
of its Subsidiaries terminates for any reason other than Disability, death, or
With Cause, the Option shall expire 90 days after such termination. In such
circumstance, the Option shall only be exercisable to the extent it was
exercisable as of such termination date (as determined above under paragraph
2) and shall not be exercisable with respect to any additional Shares.

Notwithstanding the foregoing provisions of this paragraph 3, in no event
may the Option be exercised later than the Expiration Date.

4. Definitions. For purposes of this Agreement, the following definitions
shall apply:

(a) A “Change in Control” shall be deemed to have occurred if (i) a
tender offer shall be made and consummated for the ownership of more than 50%
of the outstanding voting securities of the Company, (ii) the Company shall be
merged or consolidated with another corporation and as a result of such merger
or consolidation less than 50% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by the
former shareholders of the Company, as the same shall have existed immediately
prior to such merger or consolidation, (iii) the Company shall sell all or
substantially all of its assets to another corporation which is not a
wholly-owned subsidiary or affiliate, (iv) as the result of, or in connection
with, any contested election for the Board of Directors, or any tender or
exchange offer, merger or business combination or sale of assets, or any
combination of the foregoing (a “Transaction”), the persons who were Directors
of the Company before the Transaction shall cease to constitute a majority of
the Board of Directors of the Company, or any successor thereto, or (v) a
person, within the meaning of Section 3(a)(9) or of Section 13(d)(3) of the
Securities and Exchange Act of 1934 (“Exchange Act”), other than any employee
benefit plan then maintained by the Company, shall acquire more than 50% of
the outstanding voting securities of the Company (whether directly,
indirectly, beneficially or of record). For purposes hereof, ownership of
voting securities shall take into account and shall include ownership as
determined by applying the provisions of Rule 13d-3(d)(1)(i) pursuant to the
Exchange Act. Notwithstanding the foregoing, (i) a Change in Control will not
occur for purposes of this Agreement merely due to the death of Theodore G.
Schwartz, or as a result of the acquisition, by Theodore G. Schwartz, alone or
with one or more affiliates or associates, as defined in the Exchange Act, of
securities of the Company, as part of a going-private transaction or
otherwise, unless Mr. Schwartz or his affiliates, associates, family members
or trusts for the benefit of family members (collectively, the “Schwartz
Entities”) do not control, directly or indirectly, at least twenty-seven
percent (27%) of the resulting entity, and (ii) if the Schwartz Entities
control, directly or indirectly, less than twenty-seven percent (27%) of the
Company’s voting securities while it is a public company, then “33-1/3%” shall
be substituted for “50%” in clauses (i) and (v) of the first sentence of this
paragraph, and “66-2/3%” shall be substituted for “50%” in clause (ii) of the
first sentence of this paragraph.

(b) “Disability” shall mean disability as determined under the Company’s
long term disability benefit plan then in effect covering the Optionee.

 

13

 

(c) “Good Reason” shall mean termination of the Optionee’s Service by the
Optionee (I) in accordance with such term as it may be defined under the
employment agreement or employment security agreement between Optionee and the
Company, if any, and (II) as hereinafter provided in the absence of such
agreement providing for termination for “Good Reason,” but only if, without
Optionee’s consent and after notice by the Optionee to the Company and a
fifteen (15) day opportunity by the Company to cure: (i) the Optionee’s
principal place of work (not including regular business travel) is relocated
by more than fifty (50) miles, (ii) the Optionee’s duties, responsibilities or
authority as an executive employee are materially reduced or diminished;
provided that any reduction or diminishment in any of the foregoing resulting
merely from the acquisition of the Company and its existence as a subsidiary
or division of another entity shall not be sufficient to constitute Good
Reason, (iii) the rate of base salary or bonus opportunity (as a percentage of
base salary) due to the Optionee is reduced, and such reduction is not
remedied within thirty (30) days of the Optionee’s notice to the Company
thereof; or (iv) there is a liquidation, dissolution, consolidation or merger
of the Company or transfer of all or a significant portion of its assets
unless a successor or successors (by merger, consolidation or otherwise) to
which all or a significant portion of its assets have been transferred shall
have assumed all duties and obligations of the Company under such Employment
Agreement, if any.

(d) “Retirement” shall mean a termination of Optionee’s Service(other
than due to Optionee’s Disability, death or With Cause) in which (i) Optionee
has completed at least ten (10) years of continuous active Service with the
Company (including authorized leaves of absence) and (ii) the sum of
Optionee’s age and Service on the date of termination of Service is equal to
or greater than seventy (70).

(e) “Service” shall mean (i) an employee-employer relationship between
the Optionee and the Company or any of its Subsidiaries, (ii) service to the
Company or any of its Subsidiaries provided by the Optionee as a member of the
Company’s or such Subsidiary’s Board of Directors, or (iii) service by the
Optionee as a consultant or independent contractor. Optionee will not be
treated as terminating Service (A) where there is a simultaneous reemployment
or continuing employment of the Optionee by the Company or any of its
Subsidiaries, (B) where there is a simultaneous establishment of a consulting
relationship or continuing consulting relationship between the Optionee and
the Company or any of its Subsidiaries, or (C) if the Optionee continues to
serve as a member of the Board of Directors of the Company or any of its
Subsidiaries after the termination of an employee-employer or consulting
relationship, in which case, the Optionee’s Service will cease on the date the
Optionee no longer is employed by the Company or any of its Subsidiaries, no
longer performs services as a consultant, and is no longer a member of the
Board of Directors of the Company or any of its Subsidiaries. The Committee,
in its sole discretion, shall determine the effect of all matters and
questions relating to terminations of Service, including, but not by way of
limitation, the question of whether a particular leave of absence constitutes
a termination of Service.

(f) Termination “With Cause” shall mean termination of the Optionee’s
Service by the Company (I) in accordance with such term as it may be defined
under the employment agreement between Optionee and the Company, if any, and
(II) as hereinafter provided in the absence of such agreement, due to (i)
gross misconduct or gross negligence in the performance of the Optionee’s
employment duties; (ii) willful disobedience by the Optionee of the lawful
directions received from the Company or from the person to whom the Optionee
directly reports or of established policies of the Company; or (iii) commission by the Optionee
of a crime involving fraud or moral turpitude that can reasonably be expected
to have an adverse effect on the business, reputation or financial situation
of the Company.

 

14

 

5. Method of Exercise.

(a) The Option may be exercised only by delivering written notice to the
Treasurer of the Company. Contemporaneously with such delivery, the Optionee
shall tender the full purchase price of the Shares by any of the following
methods or combination thereof:

(i) A certified or cashier’s check payable to the order of the Company;

(ii) Certificates of Shares of the Company that have been held by
the Optionee for at least (6) six months (or such longer period as may
be required to avoid a charge to earnings for financial reporting
purposes) that have a fair market value equal to such purchase price or
the portion thereof so paid on the date of exercise, or delivery by the
Optionee of a written attestation of the same; and/or

(iii) A copy of irrevocable instructions to a broker to promptly
deliver to the Company the amount of proceeds from a sale of Shares
equal to the exercise price. To facilitate the foregoing, the Company
may enter into agreements for coordinated procedures with one or more
brokerage firms. Exercise of the Option pursuant to this subparagraph
(a)(iii) shall be subject to compliance with federal and state
securities laws and trading policies established by the Company and
applicable to the Optionee.

(b) In addition to tendering payment,

(i) the Optionee shall be required to execute a Restricted Stock
Purchase Agreement substantially in the form of Exhibit A hereto, if the
Optionee purchased Restricted Shares; and

(ii) the Optionee (or the purchaser under paragraph 7 below) shall
furnish such other documents or representations (including, without
limitation, representations as to the intention of the Optionee, or the
purchaser under paragraph 7 below, to acquire Shares for investment) as
the Company may reasonably request in order to comply with securities,
tax or other laws then applicable to the exercise of the Option.

6. Repayment of Option Gain. Subject to the provisions of a
Restricted Stock Purchase Agreement, if applicable pursuant to paragraph
5(b)(i), which shall apply with respect to the Shares subject thereto, if
prior to the occurrence of a Change of Control: (i) the Company terminates the
Optionee’s Service With Cause during the six month period after the Optionee’s
exercise of all or any portion of the Option, or (ii) the Optionee violates
any promise, covenant, or agreement relating to (A) restrictions on the
Optionee’s ability to compete with the Company or solicit its customers or
employees; or (B) the Optionee’s duty to keep information about the
Company confidential, prior to or during the six month period after the
Optionee exercises all or any portion of the Option, then the Company may
rescind the Optionee’s exercise of the Option within two years of the
exercise. In the event of such rescission, the Optionee shall pay to the
Company, with respect to each Share purchased pursuant to the Option, an
amount equal to the excess of the Fair Market Value of such Share on the date
of exercise over the per share purchase price of such Share, in such manner and on such terms and conditions as may be
required, and the Company shall be entitled to a right of set-off against any
amount owed to the Optionee by the Company.

 

15

 

7. Non-Transferability; Death. The Option is not transferable by
the Optionee other than by will or the laws of descent and distribution and is
exercisable during the Optionee’s lifetime only by him. If the Optionee dies
while in Service to the Company or of one of its Subsidiaries, the Option may
be exercised during the period described above in paragraph 3(b) (but in no
event later than the Expiration Date) by his estate or the person to whom the
Option passes by will or the laws of descent and distribution, but only to the
extent that the Optionee could have exercised the Option on the date of his
death as determined above under paragraph 2. Notwithstanding the foregoing,
the Option may be transferred to members of the Optionee’s immediate family
(which for purposes of this Option shall be limited to the Optionee’s spouse,
children and grandchildren), or to one or more trusts for the benefit of the
Optionee’s family members (as defined above) or to one or more partnerships in
which such family members and/or trusts are the only partners.

8. Registration. Any Shares issued pursuant to the Optionee’s
exercise of the Option hereunder shall be Shares that are listed on The NASDAQ
Stock Market or other nationally recognized stock exchange, and registered
under the Securities Act of 1933, as amended.

9. Adjustments.

(a) If the Company shall at any time change the number of issued Shares
without new consideration to the Company (such as by stock dividend, stock
split, recapitalization, reorganization, exchange of shares, liquidation,
combination or other change in corporate structure affecting the Shares) or
make a distribution of cash or property which has a substantial impact on the
value of issued Shares, the total number of Shares hereunder and the per share
purchase price shall be adjusted pursuant to the terms of the Plan.

(b) In the case of any sale of assets, merger, consolidation, combination
or other corporate reorganization or restructuring of the Company with or into
another corporation which results in the outstanding Shares being converted
into or exchanged for different securities, cash or other property, or any
combination thereof (an “Acquisition”), subject to the terms of the Plan, the
Optionee shall have the right thereafter and during the term of the Option
(subject however to all of the terms and conditions set forth herein), to
receive upon exercise thereof the Acquisition Consideration (as defined below)
receivable upon the Acquisition by a holder of the number of Shares which
might have been obtained upon exercise of the Option or portion thereof, as
the case may be, immediately prior to the Acquisition. The term “Acquisition
Consideration” shall mean the kind and amount of securities, cash or other
property or any combination thereof receivable in respect of one Share upon
consummation of an Acquisition.

10. Subject to Plan. The Option is subject to all of the terms
and conditions set forth in the Plan. Any capitalized terms not defined herein shall be subject to
the definitions set forth in the Plan. This Agreement hereby incorporates the Plan by reference. In the
event that the Agreement is silent on any term or condition that is contained
in the Plan, such term or condition shall be governed by and administered in
accordance with the terms and conditions of the Plan.

 

16

 

In the event of any discrepancy between the express terms and conditions of
this Agreement and those of the Plan, the terms and conditions of the Plan
shall control.

11. Administration and Interpretation. The Compensation Committee
of the Board of Directors of the Company (the “Committee”) shall administer
and interpret the terms and provisions of this Agreement. Any interpretation
and construction by the Committee of any term or provision of the Plan, this
Agreement, or other matters related to the Plan shall be final, conclusive and
binding upon the Optionee and his or her heirs.

12. Compliance with Code Section 409A. To the extent that any
Award under this Agreement becomes subject to Code Section 409A, it is
intended that such Award be in compliance with Code Section 409A and the terms
of the Plan and this Agreement shall be construed, to the fullest extent
possible, to be in compliance with Code Section 409A.

13. Enforceability. This Agreement shall be binding upon the
Optionee and his estate, assignee, transferee, personal representative and
beneficiaries.

14. Governing Law; Severability. This Agreement shall be
construed, interpreted and enforced in accordance with the laws of the State
of Illinois. If any one provision of this Agreement shall be determined
invalid or unenforceable, such determination shall have no effect on the
remaining provisions.

15. Withholding. The Company shall have the right to require,
prior to the issuance or delivery of any Shares hereunder, payment by the
Optionee of any federal, state or local income taxes required by law to be
withheld upon the exercise of all or any part of the Option. The Company may,
in its discretion and subject to such rules as it may adopt as are necessary
to prevent the withholding from being subject to Section 16(b) of the Exchange
Act, permit the Optionee to satisfy any tax withholding obligation associated
with the exercise of the Option, in whole or in part, by electing to have the
Company withhold from the Shares otherwise deliverable as a result of such
exercise Shares having a value (based on their fair market value on the date
of delivery) equal to the amount required to be withheld.

16. No Employment Rights. Nothing contained herein shall confer
upon the Optionee any right to continue in the Service of the Company or any
of its Subsidiaries, or to interfere with or limit the right of the Company or
of such Subsidiary to terminate the Optionee’s Service at any time.

17. Shareholders Rights. The Optionee or other person or entity
exercising the Option shall have no rights as a shareholder of record of the
Company with respect to Shares issuable upon the exercise of the Option until
such Shares have been issued.

18. Entire Agreement. This Agreement contains the entire
understanding of the Company and the Optionee with respect to the terms of the
Option granted hereunder, and shall not be modified or amended on or after the
Grant Date, except in writing, signed by both parties. A waiver by either
party under this Agreement shall not be deemed to be a waiver of any later
default.

 

17

 

19. Notices. All notices under this Agreement shall be in writing
and shall be deemed to have been made when delivered or mailed by registered, or
certified mail, or by a nationally recognized overnight delivery service, postage or charges prepaid.
All notices to the Company shall be sent to:

APAC Customer Services,

Inc. Six Parkway North

Center First Floor

Deerfield, IL 60015

Attn: General Counsel

All notices to the Optionee shall be sent to the Optionee’s last known
address on the Company’s records, or such other address as the Optionee may
furnish to the Company.

20. Acknowledgment of Agreement Protecting Company Interests. As
additional consideration for the Company granting the Option, the Optionee
acknowledges that Optionee’s rights herein are subject to the terms and
conditions of the Optionee’s Agreement Protecting Company Interests (whether
entered into previously or in connection with this Option grant).

* * *

IN WITNESS WHEREOF, the Company and the Optionee have caused this
Agreement to be executed on the date first above written.

	 	 	 	 	 
	 	 	APAC Customer Services, Inc.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Its:
	 	Senior Vice President and Chief
Financial Officer
	 
	 	 	 	 
	 	 	Optionee:
	 
	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	«First_Name» «Middle_Name» «Last Name»

 

18

 

Exhibit B

Employment Security Agreement

 

19

 

EMPLOYMENT SECURITY AGREEMENT

This Employment Security Agreement (the “Agreement”) is entered into
as of this 3 day of March, 2008 by and between APAC Customer Services,
Inc. (the “Employer”) and Michael Marrow (the “Executive”).

WITNESSETH:

WHEREAS, the Executive is currently employed by the Employer as its
President and Chief Executive Officer;

WHEREAS, in the event of a change in control of the Employer, the
Employer desires to provide certain security to the Employer and the
Executive, and to retain the Executive’s continued devotion of the
Executive’s business time and attention to the Employer’s affairs; and

WHEREAS, the Executive and the Employer desire to enter into this
Agreement, which sets forth the terms of the security the Employer is
providing the Executive with respect to the Executive’s employment in the
event of a change in control of the Employer;

NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Employer
and the Executive agree as follows:

1. Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:

(a) “Base Salary” shall mean the higher of the Executive’s annual
base salary at the rate in effect on (i) the date of a Change in Control,
or (ii) the date the Executive’s Employment terminates without regard to
any reduction made in connection with an event constituting Good Reason
hereunder.

(b) “Bonus” shall mean the bonus based on the Executive’s Base
Salary that is payable to the Executive under the Employer’s annual
incentive bonus plan, as in effect from time to time or under a successor
annual incentive plan, at the target payout level in effect on the date
the Executive’s Employment terminates without regard to any reduction
made in connection with an event constituting Good Reason hereunder or on
the date of a Change in Control, whichever produces a greater result. -

(c) “Cause” shall exist only if:

	 	(i)	 	The Executive is grossly
negligent or engages in gross misconduct in the performance of his employment
duties;

	 	(ii)	 	The Executive willfully
disobeys the lawful directions received from the
Company or from the person to whom the Executive
directly reports or of established policies of the
Company; or

 

20

 

	 	(iii)	 	The Executive commits a crime involving fraud
or moral turpitude that can reasonably be expected
to have an adverse effect on the business,
reputation or financial situation of the Employer.

(d) “Change in Control” shall mean any of the following events:

	 	(i)	 	A tender offer shall be
made and consummated for the ownership of more than
50% of the outstanding voting securities of the
Employer;

	 	(ii)	 	The Employer shall be
merged or consolidated with another corporation and
as a result of such merger or consolidation less
than 50% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in
the aggregate by the former shareholders of the
Employer, as the same shall have existed immediately
prior to such merger or consolidation;

	 	(iii)	 	The Employer shall
sell all or substantially all of its assets to
another corporation which is not a wholly-owned
subsidiary or affiliate;

	 	(iv)	 	As the result of, or in
connection with, any contested election for the
Board of Directors of the Employer, or any tender or
exchange offer, merger or business combination or
sale of assets, or any combination of the foregoing
(a “Transaction”), the persons who were Directors of
the Employer before the Transaction shall cease to
constitute a majority of the Board of Directors of
the Employer, or any successor thereto; or

	 	(v)	 	A person, within
the meaning of Section 3(a)(9) or of Section
13(d)(3) (as in effect on the date hereof) of the
Securities and Exchange Act of 1934 (“Exchange
Act”), other than any employee benefit plan then
maintained by the Employer, shall acquire more than
50% of the outstanding voting securities of the
Employer (whether, directly, indirectly,
beneficially or of record). For purposes hereof,
ownership of voting securities shall take into
account and shall include ownership as determined by
applying the provisions of Rule 13d-3(d)(1)(i) (as
in effect on the date hereof) pursuant to the
Exchange Act.

Notwithstanding the foregoing, (A) a Change in Control will not occur
for purposes of this Agreement merely due to the death of Theodore G.
Schwartz, or as a result of the acquisition by Theodore G. Schwartz,
alone or with one or more affiliates or associates, as defined in the
Exchange Act, of securities of the Employer, as part of a going-private
transaction or otherwise, unless Mr. Schwartz or his affiliates,
associates, family members or trusts for the benefit of family members
(collectively, the “Schwartz Entities”) do not control, directly or indirectly, at least twenty-seven
percent (27%) of the resulting entity, and (B) if the Schwartz Entities
control, directly or indirectly, less than twenty-seven (27%) percent of
the Employer’s voting securities while it is a public company, then
“33-1/3%” shall be substituted for “50%” in clauses (i) and (v) of this
Section 2(d), and “66-2/3%” shall be substituted for “50%” in clause
(ii) of this Section 2(d).

 

21

 

(e) “Disability” shall mean, to the extent such term is not defined
in an Employment Agreement, if any, a physical or mental condition that
entitles the Executive to benefits under the Employer-sponsored long
term disability plan in which the Executive participates.

(f) “Employment” shall mean being in the employ of the Employer.

(g) “Employment Agreement” shall mean a written agreement between
the Executive and the Employer covering the terms and conditions of
Executive’s employment with the Employer.

(h) “Good Reason” shall exist if, after notice by the Executive
within 30 days of the existence of one of the following conditions, such
notice given to the Employer and providing a thirty (30) day opportunity
by the Employer to cure (during which it does not cure the condition):

	 	(i)	 	The principal place of
work (not including regular business travel) is
relocated by more than fifty (50) miles;

	 	(ii)	 	The Executive’s duties,
responsibilities or authority as an executive
employee are materially reduced or diminished from
those in effect immediately prior to a Change in
Control without the Executive’s written consent,
provided that any reduction or diminishment in any
of the foregoing resulting merely from the
acquisition of the Employer and its existence as a
subsidiary or division of another entity shall not
be sufficient to constitute Good Reason;

	 
	 	(iii)	 	Executive’s base salary is reduced;
or

	 	(iv)	 	The Employer violates
the material terms of this Agreement, or an
employment agreement, if any.

2. Term. The term of this Agreement shall be the period commencing
on the effective date first set forth above and terminating on the date
the Executive’s employment with the Employer is terminated; provided
that, if the Executive’s employment is terminated following a Change in
Control under the circumstances described in Section 3, the term shall
continue in effect until all payments and benefits have been made or
provided to the Executive hereunder.

 

22

 

In the event of a liquidation, dissolution, consolidation or merger
of the Employer or transfer of all or a significant portion of its
assets, Employer will cause a successor or successors (by merger,
consolidation or otherwise) to which all or a significant portion of its
assets have been transferred to assume (either by operation of law or
otherwise) all duties and obligations of the Employer under this
Agreement and any employment agreement.

3. Benefits Upon Termination of Employment. If (i) the Employer
terminates the Executive’s Employment without Cause coincident with or
at any time within 12 months following a Change in Control; or (ii) the
Executive terminates the Executive’s Employment by resignation due to an
event constituting Good Reason that occurs coincident with or at any
time within 12 months following a Change in Control, the Executive shall
be entitled to receive the following:

(a) Severance Pay. The Employer shall pay to the Executive an
amount equal to eighteen (18) months of the Executive’s Base Salary and
one and one-half (1.5) times the Executive’s Bonus. Subject to
Subsection (d) below, payment shall be made in a lump sum within thirty
(30) days after termination of the Executive’s Employment.

(b) Stock Options. To the extent the Executive has any outstanding
option or options to purchase common stock of the Employer as of the
date of the Change in Control, the exercisability of such options shall
be determined in accordance with the terms of the Employer’s stock
option plan then in effect, and/or a written agreement entered into by
the Employer and the Executive, which covers the terms and conditions of
the exercise of such option or options.

(c) Health Benefits. The Employer shall provide to the Executive,
the Executive’s spouse or beneficiary continued medical, dental, life,
disability coverages and such other benefits as provided under any other
welfare plans or programs in which he participated immediately prior to
his termination for a period of eighteen (18) months on the same basis
as provided to other employees as of the date of termination. Following
such period, the Employer shall make available to such persons any
benefit continuation or conversion of rights otherwise provided at the
time an employee’s employment terminates (without offset for the
coverage provided pursuant to the previous sentence), under the
Employer’s established welfare plans.

(d) Notwithstanding anything in this Agreement to the contrary, if
Executive is deemed as of the date of Executive’s termination of
Employment to be a “specified employee” for purposes of Section
409A(a)(2)(B)(i) of the Internal Revenue Code (the “Code”), to the
extent delayed commencement of any portion of the severance payments to
which Executive is entitled under this Agreement is required in order to
avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the
Code, such portion of the severance payments will not be provided to
Executive prior to the earlier of (1) the expiration of the six-month
period measured from the date of the Executive’s “separation from
service” with the Company (as such term is defined in the Treasury
Regulations issued under Section 409A of the Code) or (2) Executive’s
death. Upon the expiration of the applicable Code Section
409A(a)(2)(B)(i) deferral period, all payments deferred pursuant to this Section 3 shall be paid in a lump sum to Executive, and
any remaining payments due shall be paid as otherwise provided herein.

 

23

 

In addition, to the extent that an Employment Agreement, if any, or
such other written agreement between the Executive and the Employer,
expressly covers the terms of severance payable, if any, and such other
benefits available to the Executive upon termination of his Employment
following a Change in Control, such Employment Agreement or other
agreement shall govern and supersede the terms of this Agreement if such
severance payable or other benefits are more favorable to the Executive
than those provided in this Agreement.

4. No Setoff.

(a) The payments and benefits made or provided to the Executive,
the Executive’s spouse or other beneficiary under this Agreement shall
not be reduced by the amount of any claim of the Employer against the
Executive or the Executive’s spouse or other beneficiary for any debt or
obligation of the Executive or the Executive’s spouse or other
beneficiary to the Employer.

(b) The Executive shall have no duty to seek employment following
termination of Employment or otherwise to mitigate damages. The amounts
or benefits payable or available to the Executive, the Executive’s
spouse or other beneficiary under this Agreement shall not be reduced by
any amount the Executive may earn or receive from employment with
another employer or from any other source.

5. Existing Rights. Any payments and benefits under this
Agreement are in lieu of benefits to which the Executive may be entitled
under any severance plan or policy of the Employer, but are in addition
to any other benefits due to the Executive, the Executive’s spouse or
other beneficiaries from the Employer, including, but not limited to,
payments under any other welfare or retirement plan maintained by the
Employer in which the Executive is or was eligible to participate. No
provision in this Agreement shall be construed to reduce or impair the
Executive’s rights and benefits under such welfare or retirement plans.

6. Other Termination.

(a) Termination Before Change in Control. If the Executive’s
Employment is terminated for any reason before a Change in Control,
severance payments, if any, due to the Executive shall be determined
under the Employer’s severance plans or policies then in effect, and/or
the Executive’s Employment Agreement, if any. In such circumstances, the
Executive shall not be entitled to any payments or benefits under this
Agreement, and the Employer shall have no further obligation to the
Executive hereunder, except to the extent provided under any welfare,
retirement or other plan, policy or arrangement maintained by the
Employer in which the Executive is or was eligible to participate.

 

24

 

(b) Termination for Cause or Without Good Reason. If, following a
Change in Control, (i) the Executive’s Employment is terminated for
Cause by the Board of Directors acting in good faith by written notice by the Employer to
the Executive specifying the event relied upon for such termination, or
(ii) the Executive terminates the Executive’s Employment without Good
Reason, the Executive shall receive the Executive’s Base Salary at the
rate then in effect on the date the, Executive’s Employment terminates
paid through the date of termination. In such circumstances, the
Executive shall not be entitled to any payments or benefits under this
Agreement, and the Employer shall have no further obligation to the
Executive hereunder, except to the extent provided under any welfare,
retirement or other plan, policy or arrangement maintained by the
Employer in which the Executive is or was eligible to participate.

(c) Death or Disability. If the Executive’s Employment is
terminated by reason of death or Disability, the Executive, the
Executive’s spouse or other beneficiary, as the case may be, shall not
be entitled to any payments or benefits under this Agreement, and the
Employer shall have no further obligation to the Executive hereunder
except to the extent provided under any welfare, retirement or other
plan, policy or arrangement maintained by the Employer in which the
Executive is or was eligible to participate.

7. Section 280G. Notwithstanding any provision of this Agreement to
the contrary, in the event that:

(a) The aggregate payments or benefits to be made or afforded to
the Executive under the this Agreement or from the Company in any other
manner (the “Termination Benefits”) would be deemed to include an
“excess parachute payment” under Section 280G of the Code, or any
successor thereto, and

(b) If such Termination Benefits were reduced to an amount (the
“Non-Triggering Amount”), the value of which is one dollar ($1.00) less
than the amount that would result in an “excess parachute payment” under
Section 280G of the Code, and the Non-Triggering Amount would be greater
than the aggregate value of Termination Benefits (without such
reduction) minus the amount of tax required to be paid by Executive
thereon by Section 4999 of the Code, then the Termination Benefits shall
be reduced so that the Termination Benefits are not more than the
Non-Triggering Amount. The application of said Section 280G, and the
allocation of the reduction required by this Section, shall be
determined by the Company’s auditors.

8. Beneficiaries. If the Executive is entitled to payments and
benefits under the circumstances described above in Section 3, but dies
before all amounts payable and benefits available thereunder have been
paid or provided, the remaining payments and benefits shall be made or
provided to the Executive’s surviving spouse, if any, or other
beneficiary designated in a writing delivered to the Employer (and in
such form as is prescribed by the Employer). If the Executive has no
surviving spouse, and has not designated a beneficiary, the remaining
payments shall be made to the Executive’s estate.

 

25

 

9. Full Satisfaction; Waiver and Release. As a condition to
receiving the payments and benefits hereunder, the Executive shall
execute a document in customary form, releasing and waiving any and all
claims, causes of actions and the like against the Employer, their
respective successors, shareholders, officers, trustees, agents and
employees, regarding all matters relating to the Executive’s service as
an employee of the Employer and to the termination of such relationship.
Such claims include, without limitation, any claims arising under the
Age Discrimination in Employment Act of 1967, as amended (the “ADEA”);
Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights
Act of 1991, as amended; the Equal Pay Act of 1962, as amended; the
Americans With Disabilities Act of 1990, as amended; the Family Medical
Leave Act, as amended; the Employee Retirement Income Security Act of
1974, as amended; or any other federal, state or local statute or
ordinance, but exclude claims arising under the ADEA to challenge the
provisions of this Section 8, and any claims that arise out of an
asserted breach of the terms of this Agreement or claims related to the
matters described in Section 5.

10. Assignment. Except as provided above in Section 8, the Employer
may not assign this Agreement, or any rights, duties or obligations
hereunder, except that the Employer’s rights, duties, and obligations
shall be binding obligations of any successor, as provided in Section 2.
No interest of the Executive (or the Executive’s spouse or other
beneficiary) nor any right to receive any payment or distribution
hereunder shall be subject to sale, transfer, assignment, pledge,
attachment or garnishment or otherwise be assigned or encumbered. No
such interest or right shall be taken, voluntarily or involuntarily, for
the satisfaction of the obligations or debts of, or other claims
against, the Executive (or the Executive’s spouse or other beneficiary),
including claims for alimony, child support, separate maintenance and
claims in bankruptcy.

11. Source of Payment. The rights created under this Agreement are
unfunded promises to provide severance pay and other benefits described
herein in the event of the termination of the Executive’s Employment
under the circumstances described above in Section 3. The Employer shall
not segregate assets for purposes of payment for any amounts due
hereunder, nor shall any provision contained herein be interpreted to
require the Employer to segregate assets for purposes of providing
payment of any benefit hereunder. The Executive, the Executive’s spouse,
or other beneficiary shall not have any interest in or right against any
specific assets of the Employer, and any rights shall be limited to
those of a general unsecured creditor.

12. Miscellaneous.

(a) Entire Agreement; Amendment. This Agreement contains
the entire Agreement and understanding between the Employer and the
Executive and, except for any employment agreement and stock option
agreements, supersedes all other agreements, written or oral, relating
to the payment of severance or any other benefit in the event of a
Termination of Employment Without Cause or with Good Reason in the event
of a Change of Control, as described herein. Any amendment or
modification of the terms of this Agreement must be in writing and
signed by the Employer and the Executive to have any binding effect upon
the parties.

 

26

 

(b) Applicable Law. Except to the extent preempted by federal law,
this Agreement is governed by, and shall be construed and interpreted in
accordance with the substantive laws of the State of Illinois, not
including the choice of law provisions thereof.

(c) No Employment Rights. Nothing contained herein shall be
construed to confer upon the Executive any right to continue in the
employment of the Employer, or to limit the right of the Employer to
terminate the Executive’s employment at any time, with or without Cause,
subject to the Executive’s rights hereunder with respect to such
termination.

(d) Notices. All notices under this Agreement shall be in writing
and shall be deemed to have been made when delivered or mailed by
registered, or certified mail, or by a nationally recognized overnight
delivery service, postage or charges prepaid. All notices to the Company
shall be sent to:

APAC Customer Services,

Inc. Six Parkway North Center

First Floor

Deerfield, IL 60015

Attention: Chief Executive Officer

All notices to the Executive shall be sent to the Executive’s last
known address on the Company’s records, or such other address as
the Executive may furnish to the Company.

(e) Severability. If any provision contained herein shall be found
invalid an unenforceable, the remaining provisions of this Agreement
shall remain in full force and effect.

(f) Successors. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs,
representatives, and successors.

(g) Headings. The headings and subheadings contained in this
Agreement are provided solely for convenience of reference and shall not
be construed or interpreted in any way as affecting the meaning of any
provision of this Agreement.

*    *    *

 

27

 

IN WITNESS WHEREOF, the Executive and the Employer have executed as of
the date set forth above.

	 	 	 	 	 
	 	 	APAC CUSTOMER SERVICES, INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	MICHAEL MARROW
	 
	 	 	 	 
	 	 	 
	 

	 	Name	 	 

 

28

 

Exhibit C

Agreement Protecting Company Interests

 

29

 

AGREEMENT PROTECTING

COMPANY INTERESTS

	 	 	 	 	 
	Employee’s Last
	 	First Name:
	 	Middle Initial:
	Name: Marrow
	 	Michael	 	 

In order for APAC Customer Services, Inc. (hereinafter referred to as the
“Company”) to maintain a competitive edge, the Company must protect its
confidential information and customer relationships.

Therefore, as a condition of employment with the Company, I agree as follows:

DEFINITIONS

	1.	 	“Confidential Information” means information (i) disclosed to or known
by me as a consequence of my employment with the Company, (ii) not
generally known to others outside the Company, and (iii) which relates to
the Company’s marketing, sales, finances, operations, business processes
and methodologies, techniques, devices, software programs, projections,
strategies and plans, personnel information, and client information,
including client needs, contacts, particular projects, particularized
needs and preferences and contract cycles.

NONDISCLOSURE OF CONFIDENTIAL INFORMATION

	2.	 	I will not disclose or use any Confidential Information for the
benefit of myself or another, unless directed or authorized in writing by
the Company to do so, until such time as the information becomes known to
the public through no fault of mine.

COMPANY PROPERTY

	3.	 	All documents and other tangible property relating in any way to the
business of the Company are the exclusive property of the Company (even
if I authored or created them). All business processes, methodologies
and techniques created during my employment (even if I authored or
created them) are similarly the property of the Company. I agree to
return all such documents and tangible property to the Company upon
termination of employment or at such earlier time as the Company may
request.

NON-SOLICITATION OF CLIENTS

	4.	 	During my employment with the Company and for two years after
termination of employment with the Company for any reason, I shall not
provide outsourced business services, including inbound, outbound and
interactive telephone and web based services, business process
outsourcing services, or any other services that the Company provided to
clients, to any client of the Company which I had direct contact, direct
supervisory responsibility or access to confidential information, nor
will I solicit, induce, or attempt to induce any such client to: (a) stop
doing business with or through the Company, or (b) do business with any
other person, firm, partnership, corporation or other entity that
provides products or services materially similar to those provided by the
Company.

 

30

 

NON-SOLICITATION OF EMPLOYEES

	5.	 	For two years following termination of my employment with the Company
for any reason, I shall not, directly or indirectly, induce or attempt
to induce any employee of the Company to terminate his/her employment
with the Company, nor will I hire or assist in the hiring of any such
employee by any firm or entity of which I am an employee, owner, partner
or consultant.

NON-COMPETITION COVENANT

	6.	 	During my employment with the Company and for the greater of two
years after termination of my employment with the Company for any reason
or any period over which the Company pays me, I shall not consult with
or be employed by any business offering outsourced business services,
including, without limitation, inbound, outbound and interactive
telephone and web based services, business process outsourcing services,
customer relationship management services, business processing services,
or any other services offered by the Company, in any geographic area or
market in which the Company does business, because to do so would
inevitably involve the use or disclosure by me of Company trade secrets
and other Confidential Information.

SEVERABILITY/MODIFICATION

	7.	 	If a provision of this Agreement is held invalid by a court of
competent jurisdiction, the remaining provisions will nonetheless be
enforceable according to their terms. Further, if any provision is held
to be over broad as written, that provision should be amended to narrow
its application to the extent necessary to make the provision enforceable
according to applicable law and enforced as amended.

GOVERNING LAW

	8.	 	This Agreement shall be construed, interpreted and enforced in
accordance with the internal laws of the State of Illinois. I agree to
submit to the personal jurisdiction of any state court in Lake County,
Illinois or federal court in Illinois, and consent to service of process
in connection with any action arising out of this Agreement.

ASSIGNMENT

	9.	 	The Company may assign its rights under this Agreement to any
successor in interest, whether by merger, consolidation, sale of assets,
or otherwise. This Agreement shall be binding whether it is between me
and the Company or between me and any successor or assigns of the
Company.

NO EFFECT ON TERM OF EMPLOYMENT

	10.	 	Nothing in this Agreement prevents or limits my right to terminate my
employment at any time for any reason, and nothing in this Agreement
prevents or limits the Company from terminating my employment at any time
for any reason. I understand and agree that there exist no promises or
guarantees of permanent employment or employment for any specified term
by the Company.

REMEDIES

	11.	 	I agree that irreparable harm would result from my breach or threat
to breach this Agreement, and monetary damages would not provide adequate relief. I agree that the Company
shall be entitled to seek and obtain temporary, preliminary, and
permanent injunctive relief restraining me from committing or continuing
any breach without the Company’s posting a bond. I further agree that I
will liable for the amount of reasonable attorney’s fees incurred by the
Company if the Company retains a lawyer to protect its rights under this
agreement.

 

31

 

ENTIRE AGREEMENT

	12.	 	I understand that this Agreement contains the entire agreement and
understanding between the Company and me with respect to the provisions
contained in this Agreement, and that no representations, promises, agreements,
or understandings, written or oral, related thereto which are not contained in
this Agreement will be given any force or effect. No change or modification of
this Agreement will be valid or binding unless it is in writing and signed by
the party against whom the change or modification is sought to be enforced. I
further understand that even if the Company waives or fails to enforce any
provision of this Agreement in one instance, that will not constitute a waiver
of any other provisions of this Agreement at this time, or a waiver of that
provision at any other time.

	 	 	 
	 

	 	Michael Marrow
	 
	 	 
	 

	 	 
	 

	 	Michael Marrow
	 
	 	 
	 

	 	 
	 

	 	Date
	 
	 	 
	 

	 	APAC Customer Services, Inc.
	 
	 	 
	 

	 	 
	 

	 	By:
	 
	 	 
	 

	 	 
	 

	 	Date :

 

32Filed by Bowne Pure Compliance

 

Exhibit 10.1

AMENDED AND RESTATED CREDIT AGREEMENT AND GUARANTY

dated as of

February 15, 2008

among

HAMPSHIRE GROUP, LIMITED,

as Borrower,

HAMPSHIRE GROUP, LIMITED,

HAMPSHIRE DESIGNERS, INC.,

ITEM-EYES, INC.,

SB CORPORATION

and

SHANE HUNTER, INC.

as Letter of Credit Account Parties,

HAMPSHIRE DESIGNERS, INC.,

ITEM-EYES, INC.,

and

SHANE HUNTER, INC.

as Guarantors,

and

HSBC BANK USA, NATIONAL ASSOCIATION,

JPMORGAN CHASE BANK, N.A.,

ISRAEL DISCOUNT BANK OF NEW YORK,

WACHOVIA BANK, NATIONAL ASSOCIATION,

BANK LEUMI USA,

and

SOVEREIGN BANK

as Banks,

and

HSBC BANK USA, NATIONAL ASSOCIATION,

as Agent

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	 
	ARTICLE I DEFINITIONS, ACCOUNTING TERMS AND RULES OF CONSTRUCTION
	 	 	2	 
	Section 1.01 Definitions
	 	 	2	 
	Section 1.02 Accounting Terms
	 	 	23	 
	Section 1.03 Computation of Time Periods
	 	 	23	 
	Section 1.04 Rules of Construction
	 	 	23	 
	ARTICLE II REVOLVING CREDIT LOANS
	 	 	23	 
	Section 2.01 Revolving Credit
	 	 	23	 
	Section 2.02 Term Loan Conversion
	 	 	25	 
	Section 2.03 Notice and Manner of Borrowing
	 	 	26	 
	Section 2.04 Conversions and Continuation
	 	 	26	 
	Section 2.05 Non-Receipt of Funds by Agent
	 	 	27	 
	Section 2.06 Interest
	 	 	27	 
	Section 2.07 Notes
	 	 	28	 
	Section 2.08 Optional and Mandatory Prepayments
	 	 	28	 
	Section 2.09 Method of Payment
	 	 	30	 
	Section 2.10 Use of Proceeds
	 	 	30	 
	Section 2.11 Minimum Amounts
	 	 	31	 
	Section 2.12 Establishment of Loan Account; Collection of Accounts
	 	 	31	 
	Section 2.13 Closing Fee
	 	 	31	 
	Section 2.14 Commitment Fee
	 	 	31	 
	ARTICLE III LETTERS OF CREDIT
	 	 	31	 
	Section 3.01 Trade Letters of Credit; Cash Collateral for Letters of Credit Expiring After
Termination Date
	 	 	31	 
	Section 3.02 Reimbursement Obligation
	 	 	32	 
	Section 3.03 Payment of Commissions, Expenses and Interest
	 	 	33	 
	Section 3.04 Proper Drawing; Letter of Credit Issuing Bank’s Honoring
	 	 	33	 
	Section 3.05 Standby Letters of Credit
	 	 	33	 
	Section 3.06 Amendment; Change; Modification; No Waiver
	 	 	34	 
	Section 3.07 U.C.P. and I.S.P.; Agreements and Acknowledgments; Indemnification
	 	 	34	 
	Section 3.08 Licenses; Insurance; Regulations
	 	 	36	 
	Section 3.09 Airway and Steamship Guaranties
	 	 	36	 
	Section 3.10 Additional Security
	 	 	36	 
	Section 3.11 Continuing Rights and Obligations
	 	 	36	 
	Section 3.12 Instructions; No Liability
	 	 	37	 
	Section 3.13 Steamship Guaranty
	 	 	37	 
	Section 3.14 Letter of Credit Application and Agreement
	 	 	37	 
	Section 3.15 Existing Letters of Credit; Use of Term “Letter of Credit Issuing Bank”
	 	 	38	 
	Section 3.16 Borrower’s Obligations Under Letters of Credit
	 	 	38	 
	ARTICLE IV PARTICIPATION
	 	 	38	 
	Section 4.01 Participating Banks’ Pro Rata Shares
	 	 	38	 
	Section 4.02 Sale and Purchase of Participation
	 	 	38	 

 

i

 

	 	 	 	 	 
	 	 	Page	 
	 
	Section 4.03 Participation in Fees and Collateral; Relationship
	 	 	39	 
	Section 4.04 Procedures
	 	 	39	 
	Section 4.05 Collections and Remittances
	 	 	39	 
	Section 4.06 Sharing of Setoffs and Collections
	 	 	40	 
	Section 4.07 Indemnification; Costs and Expense
	 	 	40	 
	Section 4.08 Administration; Standard of Care
	 	 	41	 
	Section 4.09 Independent Investigation by the Participating Banks
	 	 	42	 
	Section 4.10 Participating Banks’ Ownership of Interests in the Participation; Repurchases by
the Letter of Credit Issuing Banks
	 	 	42	 
	ARTICLE V GUARANTY
	 	 	43	 
	Section 5.01 Guaranty
	 	 	43	 
	Section 5.02 Guarantor’s Guaranty Obligations Unconditional
	 	 	43	 
	Section 5.03 Waivers
	 	 	44	 
	Section 5.04 Subrogation
	 	 	44	 
	Section 5.05 Limitation of Liability
	 	 	44	 
	ARTICLE VI CONDITIONS PRECEDENT
	 	 	45	 
	Section 6.01 Conditions Precedent to Use of a Credit Facility on and after the Restatement Date
	 	 	45	 
	Section 6.02 Conditions Precedent to All Credit Facilities
	 	 	46	 
	Section 6.03 Deemed Representation
	 	 	47	 
	ARTICLE VII REPRESENTATIONS AND WARRANTIES
	 	 	47	 
	Section 7.01 Incorporation
	 	 	47	 
	Section 7.02 Corporate Power and Authority; No Conflicts
	 	 	47	 
	Section 7.03 Legally Enforceable Agreements
	 	 	48	 
	Section 7.04 Litigation
	 	 	48	 
	Section 7.05 Financial Statements
	 	 	48	 
	Section 7.06 Ownership and Liens
	 	 	48	 
	Section 7.07 Taxes
	 	 	49	 
	Section 7.08 ERISA
	 	 	49	 
	Section 7.09 Subsidiaries; Ownership of Guarantors; Investments
	 	 	49	 
	Section 7.10 Operation of Business
	 	 	49	 
	Section 7.11 No Default on Outstanding Judgments or Orders
	 	 	49	 
	Section 7.12 No Defaults on Other Agreements
	 	 	50	 
	Section 7.13 Labor Disputes and Acts of God
	 	 	50	 
	Section 7.14 Governmental Regulation
	 	 	50	 
	Section 7.15 Partnerships
	 	 	50	 
	Section 7.16 Environmental Protection
	 	 	50	 
	Section 7.17 Solvency
	 	 	50	 
	Section 7.18 Properties; Priority of Liens
	 	 	50	 
	Section 7.19 No Burdensome Restrictions
	 	 	51	 
	Section 7.20 Federal Regulations
	 	 	51	 
	Section 7.21 Deposit and Securities Accounts
	 	 	51	 
	Section 7.22 Disclosure
	 	 	51	 
	Section 7.23 Security Interests
	 	 	51	 
	Section 7.24 Patriot Act
	 	 	52	 

 

 

 

	 	 	 	 	 
	 	 	Page	 
	 
	ARTICLE VIII AFFIRMATIVE COVENANTS
	 	 	52	 
	Section 8.01 Maintenance of Existence
	 	 	52	 
	Section 8.02 Conduct of Business
	 	 	52	 
	Section 8.03 Maintenance of Properties
	 	 	52	 
	Section 8.04 Maintenance of Records
	 	 	52	 
	Section 8.05 Maintenance of Insurance
	 	 	52	 
	Section 8.06 Compliance with Laws
	 	 	52	 
	Section 8.07 Right of Inspection
	 	 	53	 
	Section 8.08 Reporting Requirements
	 	 	53	 
	Section 8.09 Compliance With Environmental Laws
	 	 	56	 
	Section 8.10 Contractual Obligations
	 	 	56	 
	Section 8.11 Inactive Subsidiaries
	 	 	56	 
	ARTICLE IX NEGATIVE COVENANTS
	 	 	56	 
	Section 9.01 Debt
	 	 	56	 
	Section 9.02 Guaranties
	 	 	57	 
	Section 9.03 Liens
	 	 	57	 
	Section 9.04 Sale of Assets
	 	 	59	 
	Section 9.05 Transactions with Affiliates
	 	 	59	 
	Section 9.06 Investments; Acquisitions
	 	 	60	 
	Section 9.07 Mergers
	 	 	61	 
	Section 9.08 Leases
	 	 	61	 
	Section 9.09 Dividends
	 	 	61	 
	Section 9.10 Restricted Payments
	 	 	61	 
	Section 9.11 Fiscal Year
	 	 	62	 
	Section 9.12 Changes, Amendments or Modifications
	 	 	62	 
	Section 9.13 Nature of Business
	 	 	62	 
	Section 9.14 Double Negative Pledge
	 	 	62	 
	Section 9.15 Factoring Agreements
	 	 	62	 
	Section 9.16 Deposit and Securities Accounts
	 	 	62	 
	ARTICLE X FINANCIAL COVENANTS
	 	 	63	 
	Section 10.01 Consolidated Tangible Net Worth
	 	 	63	 
	Section 10.02 Consolidated Fixed Charge Coverage Ratio
	 	 	63	 
	Section 10.03 Consolidated Leverage Ratio
	 	 	63	 
	Section 10.04 Consolidated Capital Expenditures
	 	 	63	 
	Section 10.05 Revolving Credit Loan Coverage
	 	 	64	 
	ARTICLE XI EVENTS OF DEFAULT
	 	 	64	 
	Section 11.01 Events of Default
	 	 	64	 
	Section 11.02 Remedies
	 	 	66	 
	ARTICLE XII THE AGENT AND COLLATERAL MONITOR
	 	 	66	 
	Section 12.01 Appointment, Powers and Immunities of Agent
	 	 	66	 
	Section 12.02 Reliance by Agent
	 	 	67	 
	Section 12.03 Defaults
	 	 	67	 
	Section 12.04 Rights of Agent as a Bank
	 	 	68	 
	Section 12.05 Indemnification of Agent
	 	 	68	 
	Section 12.06 Documents
	 	 	68	 

 

 

 

	 	 	 	 	 
	 	 	Page	 
	 
	Section 12.07 Non-Reliance on Agent and Other Banks
	 	 	68	 
	Section 12.08 Failure of Agent to Act
	 	 	69	 
	Section 12.09 Resignation or Removal of Agent
	 	 	69	 
	Section 12.10 Amendments Concerning Agency Function
	 	 	69	 
	Section 12.11 Liability of Agent
	 	 	69	 
	Section 12.12 Transfer of Agency Function
	 	 	70	 
	Section 12.13 Withholding Taxes
	 	 	70	 
	Section 12.14 Collateral Monitor
	 	 	70	 
	ARTICLE XIII YIELD PROTECTION
	 	 	71	 
	Section 13.01 Additional Costs
	 	 	71	 
	Section 13.02 Illegality
	 	 	72	 
	Section 13.03 Certain Compensation
	 	 	72	 
	Section 13.04 Substitution of Banks
	 	 	73	 
	ARTICLE XIV MISCELLANEOUS
	 	 	73	 
	Section 14.01 Amendments and Waivers
	 	 	73	 
	Section 14.02 Usury
	 	 	74	 
	Section 14.03 Expenses; Indemnification
	 	 	74	 
	Section 14.04 Assignment; Participation; Additional Bank
	 	 	74	 
	Section 14.05 Notices
	 	 	77	 
	Section 14.06 Setoff; Sharing
	 	 	77	 
	Section 14.07 Jurisdiction; Immunities
	 	 	77	 
	Section 14.08 Governing Law
	 	 	78	 
	Section 14.09 Counterparts
	 	 	78	 
	Section 14.10 Exhibits and Schedules
	 	 	78	 
	Section 14.11 Table of Contents; Headings
	 	 	78	 
	Section 14.12 Severability
	 	 	78	 
	Section 14.13 Integration; Conflicts
	 	 	78	 
	Section 14.14 Jury Trial Waiver
	 	 	78	 
	Section 14.15 HSBC
	 	 	78	 
	Section 14.16 USA PATRIOT Act Notice
	 	 	79	 
	Section 14.17 Amendment and Restatement
	 	 	79	 

 

 

 

EXHIBITS AND SCHEDULES

Exhibits

	 	 	 
	Exhibit A

	 	Form of Pledge Agreement
	Exhibit B

	 	Form of Security Agreement
	Exhibit C

	 	Form of Trademark Security Agreement
	Exhibit D

	 	Form of Borrowing Notice
	Exhibit E

	 	Form of Borrowing Base Certificate
	Exhibit F

	 	Form of Revolving Credit Note
	Exhibit G

	 	Form of Term Note
	Exhibit H

	 	Form of Assignment and Acceptance
	Exhibit I

	 	Form of Reaffirmation Agreement

Schedules

	 	 	 
	Schedule 1.01(a)

	 	Eligible Inventory Locations
	Schedule 1.01(b)

	 	Eligible Trade Letter of Credit Locations
	Schedule 1.01(c)

	 	Existing Letters of Credit
	Schedule 7.04

	 	Litigation
	Schedule 7.06

	 	Trademarks
	Schedule 7.09

	 	Direct and Indirect Subsidiaries; Inactive Subsidiaries; Ownership of Guarantors,
Investments
	Schedule 7.13

	 	Labor Disputes and Acts of God
	Schedule 7.21

	 	Deposit and Securities Accounts
	Schedule 9.03

	 	Permitted Liens

 

 

 

AMENDED
AND RESTATED CREDIT AGREEMENT AND GUARANTY dated as of February 15, 2008, among
HAMPSHIRE GROUP, LIMITED, (“Borrower”), HAMPSHIRE DESIGNERS, INC., (“Designers”), ITEM-EYES, INC.
(“Item-Eyes”), SB CORPORATION (“SB”) and SHANE HUNTER, INC. (“Shane Hunter”), HSBC BANK USA,
NATIONAL ASSOCIATION, (“HSBC”), JPMORGAN CHASE BANK, N.A. (“Chase”), ISRAEL DISCOUNT BANK OF NEW
YORK (“IDB”), WACHOVIA BANK, NATIONAL ASSOCIATION (“Wachovia”), BANK LEUMI USA (“Bank Leumi”),
and SOVEREIGN BANK (“Sovereign”, and together with HSBC, Chase, IDB, Wachovia, Bank Leumi,
individually a “Bank” and collectively the “Banks”), HSBC as Letter of Credit Issuing Bank for all
Letters of Credit, and HSBC, as Agent for the Banks (in such capacity, together with any successors
in such capacity, the “Agent”).

RECITALS:

(1) The Borrower, the Guarantors, HSBC, Chase, IDB, Wachovia, Sovereign (as assignee of Bank
of America, N.A. (“BofA”)) and Bank Leumi (as assignee of The CIT Group/Commercial Services, Inc.
(“CIT”)) and the Agent have entered into a Credit Agreement and Guaranty dated as of August 15,
2003, as amended by Amendment No. 1 dated as of December 29, 2004, by Amendment No. 2 dated as of
November 10, 2005, by Amendment No. 3 and Waiver dated as of August 8, 2006, by Waiver dated as of
October 13, 2006, by Amendment No. 4 and Waiver dated as of December 29, 2006, by Amendment No. 5
and Waiver dated as of March 30, 2007, by Amendment No. 6 dated as of July 11, 2007, by Waiver
dated as of July 25, 2007, by Waiver dated as of August 31, 2007, by Amendment No. 7 dated as of
September 17, 2007, by Consent and Waiver to Credit Agreement and Amendment to Security Agreement,
dated as of November 1, 2007, by Amendment No. 8 dated as of December 13, 2007, and by Waiver dated
as of January 7, 2008 (as amended, the “Existing Agreement”).

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

(3) The Borrower, the Guarantors, the Banks and the Agent wish to amend the Existing Agreement
to make certain changes in the terms of the Existing Agreement, acknowledge and admit Bank Leumi
and Sovereign as the Banks, release and remove CIT and BofA as Banks, and to restate the Existing
Agreement in its entirety.

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

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

 

 

 

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

ARTICLE I

DEFINITIONS, ACCOUNTING TERMS AND RULES OF CONSTRUCTION

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

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

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

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

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

“Agreement” means this Amended and Restated Credit Agreement and Guaranty.

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

“Applicable Margin” means (a) with respect to a Revolving Eurodollar Loan, one and twenty five
hundredths percent (1.25%), and (b) with respect to the Term Loan, one and seventy five hundredths
percent (1.75%).

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

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

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

 

 

 

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

“Augmenting Bank” has the meaning set forth in Section 2.01(b)(ii) hereof.

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

“Availability for Revolving Credit Loans” means the lesser of (a) the Revolving Credit
Commitment minus the sum of: (i) the outstanding aggregate principal amount of the Term Loan, if
any, and (ii) the Letter of Credit Obligations and (b) the Borrowing Base minus the Letter of
Credit Obligations.

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

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

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

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

“Banking Day” means any day on which commercial banks are not authorized or required to close
in London, England, New York City, New York, Greenville, South Carolina or Anderson, South
Carolina.

“Blocked Person Annex” has the meaning set forth in Section 7.24 hereof.

 

 

 

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

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

“Borrower Pledge Agreement” means the Pledge Agreement dated August 15, 2003 executed by
Borrower in favor of Agent for the ratable benefit of the Bank Parties, as amended by the First
Amendment dated as of December 6, 2006, as amended and reaffirmed by the Borrower pursuant to the
Reaffirmation Agreement.

“Borrower Trademark Security Agreement” means the Collateral Assignment and Trademark
Collateral Assignment and Security Agreement dated August 15, 2003 executed by Borrower in favor of
Agent for the ratable benefit of the Bank Parties, as amended by the First Amendment dated as of
December 6, 2006 and by the Consent and Waiver to Credit Agreement and Amendment to Security
Agreement dated as of November 1, 2007, and as amended and reaffirmed by the Borrower pursuant to
the Reaffirmation Agreement.

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

(a) the aggregate amount of the Revolving Credit Commitment minus the outstanding
aggregate principal amount of the Term Loan; or

(b) the sum of (without duplication):

(i) the Applicable Percentage of Cash Collateral (provided, however,
that notwithstanding any other provision of this Agreement, the value of such Cash
Collateral shall be the value of Cash Collateral as of the date of the Borrowing Base
Certificate in which such Borrowing Base calculation appears), plus

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

(iii) fifty percent (50%) of Net Amount of Eligible Inventory, plus

(iv) fifty percent (50%) of the aggregate undrawn amount of all outstanding Eligible
Trade Letters of Credit, plus

(v) fifty percent (50%) of the amount of Eligible In-Transit Inventory, plus

(vi) the Supplemental Amount, less

(vii) Availability Reserves.

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

 

 

 

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

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

“Cash Collateral” means cash and Cash Equivalents, and any interest or other income earned
thereon, that is delivered to Agent as Collateral for the Obligations and held in the Cash
Collateral Account.

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

“Cash Equivalents” means the first 16 types of investments set forth in the definition of
“Permitted Investments”.

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

“Code” means the Internal Revenue Code of 1986.

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

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

“Commitment Increase Amount” has the meaning set forth in Section 2.01(b)(i) hereof.

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

“Consolidated Capital Expenditures” means the Dollar amount of gross expenditures (including
the principal portion of payments under Capital Leases, net of any sublease income) made for real
property, fixed assets, property, plant and equipment, and all renewals, improvements and
replacements thereto (including, but not limited to, maintenance and repairs thereof but only to
the extent required to be capitalized in accordance with GAAP) incurred or paid by Borrower and the
Restricted Subsidiaries. Notwithstanding anything to the contrary in the foregoing, such
expenditures made for non-real estate
Capital Leases in an amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) per
Fiscal Year shall be excluded.

 

 

 

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

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

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

“Consolidated Fixed Charge Ratio” means a ratio of: (i) (a) Consolidated Earnings Before
Interest, Taxes, Depreciation and Amortization for such period, less (b) Consolidated Capital
Expenditures made by the Borrower or any Restricted Subsidiary during such period, less (c)
Consolidated Taxes paid during such period, to (ii) the sum of (a) Consolidated Interest Expense
for such period, plus (b) Consolidated Principal Amortization for such period.

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

“Consolidated Leverage Ratio” means, at any date of determination, the ratio of (a)
Consolidated Debt as of such date to (b) Consolidated Earnings Before Interest, Taxes,
Depreciation and Amortization for the Test Period in respect of such date.

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

“Consolidated Principal Amortization” means scheduled consolidated principal payments of all
funded debt of Borrower and the Restricted Subsidiaries.

“Consolidated Tangible Net Worth” means the sum of (a) Consolidated Total Tangible Assets
less (b) Consolidated Total Liabilities.

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

“Consolidated Total Liabilities” means total liabilities and all mandatorily redeemable
preferred stock of Borrower and its Restricted Subsidiaries, on a consolidated basis, all as
determined in accordance with GAAP.

“Consolidated Total Tangible Assets” means the total assets of Borrower and its Restricted
Subsidiaries, on a consolidated basis, minus all intangible assets (other than deferred taxes),
including, but not limited to, non-compete contracts, employment contracts, deferred or prepaid
transactions cost,
capitalized research and development cost, capitalized interest, debt discount and expenses,
goodwill, patents, trademarks, copyrights, franchises, licenses and other intangible assets, all as
determined in accordance with GAAP.

 

 

 

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

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

“Conversion Date” shall have the meaning set forth in Section 2.02(a) hereof.

“Credit Facilities” means, collectively, the Revolving Credit Loans, the Term Loan (if any)
and the Letters of Credit.

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

“Declined Share” has the meaning set forth in Section 2.01(b)(ii) hereof.

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

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

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

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

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

 

 

 

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

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

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

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

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

(a) delivery of the merchandise has been completed;

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

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

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

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

 

 

 

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

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

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

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

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

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

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

The aggregate amount of all Eligible Accounts of Designers, Item-Eyes, Shane Hunter and, with
the approval of Agent and the Required Banks, any other existing or future Subsidiary of the
Borrower, shall be reduced by any reserves deemed necessary by Agent in good faith, including a
reserve in an amount which would represent the historical or anticipated ratio of dilution (i.e.
returns, discounts, claims, credits, and allowances) to collections to the extent that such amounts
are not already included in the Availability Reserves.

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

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

 

 

 

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

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

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

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

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

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

(g) the inventory is not samples;

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

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

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

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

 

 

 

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

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

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

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

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

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

 

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

 

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

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

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

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

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

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

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

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

“Glamourette” means Glamourette Fashion Mills, Inc., a Delaware corporation.

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

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

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

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

 

 

 

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

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

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

“HSBC” means HSBC Bank USA, National Association and its successors and assigns and any Person
acting as agent or nominee for HSBC Bank USA, National Association and any corporation the stock of
which is owned or controlled directly or indirectly by, or is under common control with, HSBC Bank
USA, National Association and/or HSBC Holdings plc.

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

“Increasing Bank” has the meaning set forth in Section 2.01(b)(i) hereof.

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

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

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

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

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

 

 

 

(c) No Interest Period with respect to the Term Loan shall extend beyond the Term Loan
Maturity Date.

“Interest Rate” means either (a) with respect to a Prime Rate Loan, the Prime Rate
minus one percent (1%) or (b) with respect to a Eurodollar Loan, the Eurodollar Rate plus
the Applicable Margin.

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

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

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

“Investigation Expenses” means expenses arising out of or resulting from the investigation by
the Audit Committee of the Borrower’s Board of Directors and related matters, including, without
limitation, costs related to the restatement of the Borrower’s financial statements, the assessment
and remediation of certain tax exposures, investigations by the Securities and Exchange Commission
and the United States Attorney’s office, certain stockholder derivative suits, Nasdaq Global Market
listing related costs, and arbitration and other legal fees.

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

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

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

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

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

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

 

 

 

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

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

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

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

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

“Loan Document(s)” means this Agreement, the Notes, the Letters of Credit, the Security
Documents and any and all documents executed in connection with the Letters of Credit.

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

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

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

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

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

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

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

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

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

 

 

 

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

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

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

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

“Optional Prepayment” has the meaning set forth in Section 2.08(b) hereof.

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

“Participating Banks” means each Bank other than HSBC.

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

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

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

 

 

 

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

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

“Permitted Investments” means any of the following:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Maximum	 	 	Minimum	 	 	Applicable	 
	Investment Type	 	Maturity	 	 	Rating	 	 	Percentage	 
	Cash
	 	N/A	 	N/A	 	 	100	%
	T Bills
	 	6 months	 	N/A	 	 	100	%
	T Notes
	 	1 year	 	N/A	 	 	100	%
	US
Government Agency Bills, Notes and Bonds 
	 	1 year	 	N/A	 	 	100	%
	Commercial Paper
	 	9 months	 	A2/P2	 	 	95	%
	Asset Backed Commercial Paper
	 	9 months	 	A2/P2	 	 	95	%
	Bankers Acceptances
	 	6 months	 	N/A	 	 	95	%
	Repurchase Agreements
	 	1 month	 	N/A	 	 	95	%
	Domestic Certificate of Deposit
	 	1 year	 	N/A	 	 	95	%
	Euro Certificate of Deposit
	 	1 year	 	N/A	 	 	95	%
	Medium Term Notes
	 	1 year	 	AAA	 	 	95	%
	Prime Rate Demand Notes
	 	3 months	 	AAA	 	 	95	%
	Corporate Bonds
	 	1 year	 	AAA	 	 	95	%
	Municipal Notes/ Bonds
	 	1 year	 	AAA	 	 	95	%
	Tax Exempt or Taxable Money
Market Funds
	 	N/A	 	AAA	 	 	95	%
	Auction Rate Securities
	 	1 year	 	AAA	 	 	95	%
	Stock, obligations or
securities received in
settlement of debts (created
in the ordinary course of
business) owing to the
Borrower.
	 	N/A	 	N/A	 	 	0	%

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

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

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

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

 

 

 

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

“Prime Rate” means that rate of interest from time to time announced by HSBC at its Principal
Office as its prime commercial lending rate. The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate being charged to any customer. The interest rate for
Prime Rate Loans shall change when and as the Prime Rate changes and which changes in the rate of
interest resulting from changes in the Prime Rate shall take effect immediately without notice or
demand of any kind.

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

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

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

“Pro Rata Share” means (a) with respect to each Bank’s Revolving Credit Commitment, a
fraction, the numerator of which is such Bank’s portion of the Revolving Credit Commitment and the
denominator of which is the total of all the Bank’s Revolving Credit Commitments; (b) with respect
to each payment on the Revolving Credit Loans, a fraction, the numerator of which is the
outstanding principal amount of all such Revolving Credit Loans owed to such Bank, and the
denominator of which is the outstanding principal amount of all such Revolving Credit Loans owed to
all Banks; and (c) with respect to Letters of Credit, the percentages set forth in Section
4.01 hereof.

As of the date of this Agreement, the amount of each Bank’s Revolving Credit Commitment and
its Pro Rata Share of such Revolving Credit Commitment is as follows:

	 	 	 	 	 	 	 	 	 
	Bank	 	Commitment	 	 	Pro Rata Share	 
	HSBC
	 	$	31,000,000	 	 	 	24.8	%
	Chase
	 	$	27,000,000	 	 	 	21.6	%
	IDB
	 	$	22,500,000	 	 	 	18.0	%
	Wachovia
	 	$	22,500,000	 	 	 	18.0	%
	Bank Leumi
	 	$	11,000,000	 	 	 	8.8	%
	Sovereign
	 	$	11,000,000	 	 	 	8.8	%

 

 

 

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

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

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

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

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

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

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

“Reserve Requirement” means, for any Eurodollar Loan for any Interest Period therefor, the
rate at which reserves (including any marginal, supplemental or emergency reserves) are required to
be maintained during such Interest Period under Regulation D by member banks of the Federal Reserve
System in New York City with deposits exceeding One Billion Dollars ($1,000,000,000) against in the
case of Eurodollar Loans, “Eurocurrency Liabilities” (as such term is used in Regulation D).
Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other
reserves required to

be maintained by such member banks by reason of any Regulatory Change against (a) any category
of liabilities which includes deposits by reference to which the Eurodollar Base Rate is to be
determined as provided in the definition of “Eurodollar Base Rate” in this Section 1.01
hereof or (b) any category of extensions of credit or other assets which include Eurodollar Loans.
Agent will use its best efforts to promptly notify Borrower of any change of such Reserve
Requirement.

 

 

 

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

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

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

“Revolving Credit Commitment” means the commitment of the Banks to lend, pursuant to their Pro
Rata Share, One Hundred Twenty Five Million Dollars ($125,000,000) to Borrower pursuant to the
terms of this Agreement as such commitment may be (x) increased in accordance with Section
2.01(b) hereof or (y) reduced in accordance with Section 2.08 hereof.

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

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

“Revolving Credit Termination Date” means April 30, 2013.

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

“SB” means SB Corporation, a Delaware corporation.

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

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

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

“Shane Hunter” means Shane Hunter, Inc., a Delaware corporation.

“Shane Hunter Trademark Security Agreement” means the Trademark Collateral Assignment and
Security Agreement dated as of even date herewith executed by Shane Hunter in favor of Agent for
the ratable benefit of the Bank Parties.

 

 

 

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

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

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

“Standby Letter of Credit Fee” has the meaning set forth in Section 3.05 hereof.

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

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

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

“Supplemental Amount” shall mean an amount, if any, determined pursuant to Section
8.08(i) hereof.

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

“Term Loan” shall have the meaning set forth in Section 2.02(a) hereof.

“Term Loan Maturity Date” shall mean the date which is the earlier of (x) the fifth
anniversary of the Conversion Date and (y) the Revolving Credit Termination Date.

“Term Loan Principal Amount” shall have the meaning set forth in Section 2.02(a)
hereof.

 

 

 

“Term Notes” shall have the meaning set forth in Section 2.07(b) hereof.

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

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

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

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

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

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

“Uniform Customs and Practices” means, with regard to each Letter of Credit, the Uniform
Customs and Practices for Documentary Letters of Credit (2007 Revisions), International Chamber of
Commerce Publication No. 600, and any subsequent revision thereof adhered to by HSBC on the date
such Letter of Credit is issued.

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

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

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

 

 

 

ARTICLE II

REVOLVING CREDIT LOANS

Section 2.01 Revolving Credit.

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

(b) Provided that no Default or Event of Default is then occurring or would be caused thereby,
and provided that the aggregate principal amount of all Revolving Credit Loans outstanding at any
time does not exceed the Availability for Revolving Credit Loans, at any time prior to the
Revolving Credit Termination Date, the Borrower may request from time to time in writing to the
Agent that the Revolving Credit Commitment be increased, by an amount not less than Five Million
Dollars ($5,000,000) or a higher integral multiple of Five Million Dollars ($5,000,000), to an
amount, in any event, not to exceed One Hundred Fifty Million Dollars ($150,000,000), according to
the following procedures:

(i) The Borrower shall offer the existing Banks the opportunity to participate in any
such increased amount of the Revolving Credit Commitment (such increased amount being
referred to as the “Commitment Increase Amount”) in accordance with each Bank’s Pro Rata
Share (each participating Bank being referred to as an “Increasing Bank”). The existing
Banks shall be under no obligation to participate in any such Commitment Increase Amount and
any agreement by any Bank to so participate will be in the sole discretion of such Bank.

(ii) If any Bank declines to, or within fifteen (15) days of the delivery of such offer
by the Borrower does not, commit in writing to its Pro Rata Share of any such Commitment
Increase Amount (such declined portion of the Commitment Increase Amount being referred to
as a “Declined Share”), then the Agent may join a new Person (or Persons) to this Agreement
(each such Person, an “Augmenting Bank”), who shall be acceptable to the Borrower, or permit
an existing Bank which has already agreed to commit to its Pro Rata Share of any such
Commitment Increase Amount, to commit to the Declined Share. If a new Person (or Persons)
commits to the Declined Share, it (or they) shall join this Agreement pursuant to a bank
joinder and assumption agreement in form and substance reasonably satisfactory to the Agent,
setting forth the Revolving Credit Commitment of such new Bank (or Banks), pursuant to which
such new Bank (or Banks) will become party hereto as of the effective date thereof.

 

 

 

(iii) On the effective date of any increase in the Revolving Credit Commitment as
contemplated herein (A) each Increasing Bank and Augmenting Bank shall make available to the
Agent, for the benefit of the other Banks, such amounts in immediately available funds as
the Agent shall determine as being required in order to cause, after giving effect to such
increase and the use of such amounts to make payments to such other Banks, each Bank’s
portion of the outstanding Revolving Credit Loans of all the Banks to equal its Pro Rata
Share of such outstanding Revolving Credit Loans (after giving effect to the increase in the
Revolving Credit Commitment occasioned by the addition of the Increasing Bank(s) or
Augmenting Bank(s), or

both, as the case may be) and (ii) the Borrower shall be deemed to have repaid and
reborrowed all outstanding Revolving Credit Loans as of the date of any increase in the
Revolving Credit Commitment (with such reborrowing to consist of Revolving Credit Loans
subject to the same interest rate options provided herein, with related Interest Periods if
applicable, specified in a notice delivered by the Borrower in accordance with the
requirements of Section 2.03). Upon the request of the Agent, the Borrower shall
execute and deliver to the Agent for the benefit of the Banks any and all Notes and other
documents, instruments, and agreements necessary or advisable in the reasonable judgment of
the Agent to evidence or document the increase in the Revolving Credit Commitment, including
any amendments hereto, and each of the Banks and each of the Borrower and the Guarantors
hereby provides its consent hereto and thereto and each Bank hereby authorizes the Agent,
and each of the Borrower and the Guarantors hereby authorizes the Borrower, to execute any
such documents, instruments, and agreements consistent with the terms of this Section
2.01 on its behalf without the necessity of any further consent of any Bank or any of
the Borrower and the Guarantors.

(iv) On the effective date of any increase in the Revolving Credit Commitment as
contemplated herein, each Increasing Bank and Augmenting Bank shall irrevocably and
unconditionally purchase, and each other Bank shall sell, a Participation and an interest in
each outstanding Letter of Credit, any amounts drawn thereunder and in the obligations of
the Letter of Credit Account Parties in respect of each such Letter of Credit under this
Agreement and the Letter of Credit as the Agent shall determine as being required in order
to cause, after giving effect to such increase, each Bank’s Participation and portion of
each outstanding Letter of Credit to equal its Pro Rata Share of such outstanding Letter of
Credit (after giving effect to the increase in the Revolving Credit Commitment occasioned by
the addition of the Increasing Bank(s) or Augmenting Bank(s), or both, as the case may be).

(c) The failure of any Bank to make any requested Revolving Credit Loan to be made by it on
the date specified for such Revolving Credit Loan shall not relieve any other Bank of its
obligation (if any) to make such Revolving Credit Loan on such date, but no Bank shall be
responsible for the failure by any other Bank to make such Revolving Credit Loans.

Section 2.02 Term Loan Conversion.

(a) Upon the terms and subject to the conditions hereinafter set forth, each of the Banks
severally agrees to permit the Borrower to elect a one-time conversion of a portion of the
Revolving Credit Commitment in the aggregate principal amount of up to Twenty Five Million Dollars
($25,000,000) (the “Term Loan Principal Amount”) into a term loan (the “Term Loan”)and to borrow
the Term Loan Principal Amount and/or convert outstanding Revolving Credit Loans in an aggregate
principal amount not to exceed the Term Loan Principal Amount into a Term Loan at any time prior to
the first anniversary of the Restatement Date (the date of such conversion and/or borrowing, the
“Conversion Date”), in accordance with such Bank’s Pro Rata Share of Revolving Credit Commitment,
provided that (i) no Default or Event of Default then exists, (ii) the Banks shall have received
payment of any interest due on the then outstanding Revolving Credit Loans, if any are to be
converted hereunder, and (iii) the Banks shall have received the Term Notes, duly executed by the
Borrower, in accordance with Section 2.07(b). Upon any such conversion, the term of the
then outstanding Revolving Credit Loans, if any, that have been converted shall be deemed to have
been extended and the payment
terms thereof modified, as provided herein. Any Term Loan shall not be deemed to be new
indebtedness hereunder.

 

 

 

(b) During the term of the Term Loan, amounts repaid or prepaid in respect of such Term Loan
may not be reborrowed as a Term Loan, but such amounts may be reborrowed as a Revolving Credit Loan
under the Revolving Credit Commitment in accordance with the terms and conditions set forth herein
with respect to the Revolving Credit Loans.

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

Section 2.04 Conversions and Continuation.

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

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

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

 

 

 

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

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

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

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

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

 

 

 

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

Section 2.07 Notes.

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

(b) Upon the Conversion Date, the Term Loan shall be evidenced by a single promissory note of
Borrower in substantially the form of Exhibit G duly completed, in the principal amount
equal to such Bank’s Pro Rata Share of the total Term Loan Principal Amount, dated the Conversion
Date, payable to such Bank and maturing as to principal on the Term Loan Maturity Date (the “Term
Notes”). The Term Loan shall be payable as to principal monthly on the last day of each month
following the Conversion Date, in consecutive equal monthly installments until the Term Loan
Maturity Date when the entire remaining principal balance shall be due and payable. Each such
installment prior to the Term Loan Maturity Date shall be in an amount equal to 1/60th of the
original principal amount of the Term Loan. The Term Loan shall bear interest at the Interest
Rate, and such interest shall be payable in accordance with Section 2.06 hereof, including,
without limitation, on the Term Loan Maturity Date.

Section 2.08 Optional and Mandatory Prepayments.

(a) Borrower may prepay without premium or penalty a Prime Rate Loan, in whole or in part,
with accrued interest to the date of such prepayment on the amount prepaid, provided
that, each partial prepayment shall be in a principal amount of not less than One Hundred
Thousand Dollars ($100,000) (each such payment, a “Prime Rate Optional Prepayment”).

 

 

 

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

(c) During the term of this Agreement, Borrower shall make mandatory prepayments (i) in an
amount equal to the net proceeds received in any Fiscal Year in excess of Fifteen Million Dollars
($15,000,000) in the aggregate, from the sale (other than a sale in the ordinary course of
business) of all or any part of the assets of the Borrower or any Restricted Subsidiary; (ii) in an
amount equal to the net proceeds received by Borrower or any Restricted Subsidiary from the sale or
issuance of any debt instrument, and (iii) in an amount equal to the net proceeds received by
Borrower or any Restricted Subsidiary under any insurance policy, to the extent that, in the case
of property and casualty insurance, such proceeds are not used by Borrower or such Restricted
Subsidiary to repair or replace the property which was the subject of such insurance claim, with a
reasonable period of time but in no event later than six (6) months from the date such proceeds are
received by the Borrower or such Subsidiary, unless Borrower or such Subsidiary has taken action to
effect such repair or replacement, as determined by the Agent in good faith, or unless otherwise
agreed to by the Agent. With respect to prepayments received by the Agent for the ratable benefit
of Banks under this Section 2.08(c), such prepayments shall be applied first, to the then
outstanding Revolving Credit Loans, second, to the repayment of the Term Loan if it remains
outstanding, and third, at the discretion of Agent, to be held as Cash Collateral to secure Letter
of Credit Obligations.

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

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

 

 

 

(f) Borrower may, without premium or penalty, reduce the Revolving Credit Commitment to an
amount not less than the sum of the aggregate unpaid principal amount of all Revolving Credit
Loans, the Term Loan and the Letter of Credit Obligations then outstanding. Each such reduction
(i) shall be in an amount which is an integral multiple of One Million Dollars ($1,000,000), (ii)
shall be made providing not less than ten (10) Banking Days written notice to Agent, which notice
shall state the amount of the payment to be made and shall conform to the amount of the Revolving
Credit Commitment after giving effect to such payment, (iii) shall reduce, on a permanent basis,
the Revolving Credit Commitment by an amount equal to the amount of such reduction, and (iv) shall
be irrevocable. Except as otherwise provided in Section 2.01(b) hereof, once reduced the
Revolving Credit Commitment may not be increased. Borrower may reduce the Revolving Credit
Commitment to Zero Dollars ($0) provided the Revolving Credit Termination Date occurs
simultaneously therewith.

(g) Any prepayments of the Term Loan pursuant hereto shall be applied to reduce scheduled
principal payments required under Section 2.07(b) hereof, on a pro-rata basis among the
scheduled principal payments remaining to be made.

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

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

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

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

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

 

 

 

Section 2.11 Minimum Amounts. Each Prime Rate Loan shall be in an amount at least equal to
One Hundred Thousand ($100,000) Dollars and each Eurodollar Loan shall be in an amount at least
equal to One Million Five Hundred Thousand ($1,500,000) Dollars.

Section 2.12 Establishment of Loan Account; Collection of Accounts.

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

(b) Upon and during the continuance of any Event of Default, all proceeds of Collateral shall
be deposited by Borrower and Restricted Subsidiaries into lockbox accounts with or under the
control of Agent (for the ratable benefit of the Bank Parties).

Section 2.13 Closing Fee. Borrower shall pay to Agent, for the ratable benefit of Banks, a
closing fee in the amount of One Hundred Thousand Dollars ($100,000), which fee shall be fully
earned and payable as of the date hereof.

Section 2.14 Commitment Fee. If, for any Agreement Quarter (as defined below) during the term
of this Agreement, the average daily unpaid balance of the Revolving Credit Loans plus Letter of
Credit Obligations for Borrower for each day of such quarter does not equal the Revolving Credit
Commitment less the outstanding principal amount of the Term Loan, if any, then Borrower shall pay
to Agent, for the ratable benefit of Banks, a fee at a rate equal to one eighth of one percent
(.125%) per annum on the amount by which the Revolving Credit Commitment less the outstanding
principal amount of the Term Loan, if any, exceeds such aggregate average daily unpaid balance of
the Revolving Credit Loans plus Letter of Credit Obligations for Borrower. Such fee shall be
payable by Borrower to Agent in arrears on the last day of each calendar quarter, shall be fully
earned as of the date of payment and shall not be subject to refund, rebate or proration for any
reason whatsoever. For the purposes of this Section 2.14 only, the term “Agreement
Quarter” shall mean each calendar quarter of each calendar year.

ARTICLE III

LETTERS OF CREDIT

Section 3.01 Trade Letters of Credit; Cash Collateral for Letters of Credit Expiring After
Termination Date. Letter of Credit Issuing Bank agrees, on the terms and conditions hereinafter
set forth, to issue trade letters of credit payable at sight with a maturity date of up to one
hundred eighty (180) days from the date of issuance (such Letters of Credit issued by Letter of
Credit Issuing Bank after the Restatement Date, and all the Existing Letters of Credit are
collectively referred to herein as the “Trade Letters of Credit”) for the account of a Letter of
Credit Account Party, during the period from the Restatement Date to five (5) Banking Days prior to
the Revolving Credit Termination Date; provided that, at no time will the
outstanding Trade Letter of Credit Obligations exceed the lesser of (a) the Revolving Credit
Commitment less outstanding Revolving Credit Loans, the outstanding principal

 

 

 

amount of the Term Loan and Letter of Credit Obligations (other than Trade Letter of Credit
Obligations) or (b) the Borrowing Base less outstanding Revolving Credit Loans and Letter of Credit
Obligations (other than Trade Letter of Credit Obligations) (the “Trade Letter of Credit
Commitment”); provided further that, Letter of Credit Issuing Bank will not
be required to issue a Trade Letter of Credit with a maturity (expiration) date of more than 90
days after the Revolving Credit Termination Date and, with respect to all Letters of Credit with a
maturity (expiration) date after the Revolving Credit Termination Date, all of such outstanding
Trade Letters of Credit Obligations and/or Standby Letters of Credit Obligations, as of five (5)
Banking Days prior to the Revolving Credit Termination Date, shall be secured by Cash Collateral at
one hundred and five percent (105%) of the face amount thereof.

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

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

 

 

 

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

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

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

In addition to other expenses to be paid by the Letter of Credit Account Parties with respect
to a Letter of Credit (all of which shall be for the Letter of Credit Issuing Bank’s own account),
each Letter of Credit Account Party shall pay to Agent, for the ratable benefit of the Banks, under
a Trade Letter of Credit issued for its account a fee for each draw in the amount of fifteen
hundredths of one percent (.15%) of the amount drawn under such Trade Letter of Credit
(collectively the “Trade Letter of Credit Fee). All such fees shall be due and payable at the time
of drawing.

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

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

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

 

 

 

Section 3.05 Standby Letters of Credit. During the period from the Restatement Date to five
(5) Banking Days prior to the Revolving Credit Termination Date, Letter of Credit Issuing Bank may
open, at the request of and for the account of a Letter of Credit Account Party, Standby
Letters of Credit; provided, that, at no time will the outstanding Standby Letter
of Credit Obligations exceed the lesser of (a) Ten Million Dollars ($10,000,000), or (b) the
Revolving Credit Commitment less outstanding Revolving Credit Loans and Letter of Credit
Obligations (other than Standby Letter of Credit Obligations) or (c) the Borrowing Base less
outstanding Revolving Credit Loans and Letter of Credit Obligations (other than Standby Letter of
Credit Obligations) (the “Standby Letter of Credit Commitment”). No Standby Letter of Credit shall
have a stated expiration date later than the earlier of (a) the Revolving Credit Termination Date
(unless collateralized as provided in Section 3.01 hereof) or (b) 364 days from the date of
issuance. For the purpose of calculating the Net Availability and the Availability for Revolving
Credit Loans as such term is used in the definition of Net Availability, Standby Letters of Credit
shall be deemed Revolving Credit Loans and not Letters of Credit. In addition to the Letter of
Credit Issuing Bank’s standard fees and charges for Letters of Credit and all other fees,
commissions and other amounts otherwise payable with respect to issuance of Letters of Credit (all
of which shall be for the Letter of Credit Issuing Bank’s own account), each Letter of Credit
Account Party shall pay to Agent (for the pro rata benefit of the Banks) an amount equal to one and
twenty five hundredths (1.25%) percent per annum of the face amount of each Standby Letter of
Credit issued for the account of such Letter of Credit Account Party, payable quarterly in advance
upon issuance (the “Standby Letter of Credit Fee”).

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

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

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

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

 

 

 

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

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

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

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

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

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

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

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

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

 

 

 

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

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

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

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

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

 

 

 

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

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

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

 

 

 

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

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

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

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

ARTICLE IV

PARTICIPATION

Section 4.01 Participating Banks’ Pro Rata Shares. Subject to the terms and conditions
hereinafter set forth in this Article IV, Letter of Credit Issuing Bank hereby agrees to
sell and each Participating Bank hereby agrees to purchase a risk participation (“Participation”)
from Letter of Credit Issuing Bank in each Letter of Credit to the extent of the percentage set
forth below opposite such Bank’s name (as such percentage may be reduced or otherwise modified from
time to time in accordance with the terms of this Article IV):

	 	 	 	 	 	 	 	 	 
	Bank	 	Commitment	 	 	Pro Rata Share	 
	 
	 	 	 	 	 	 	 	 
	HSBC
	 	$	31,000,000	 	 	 	24.8	%
	Chase
	 	$	27,000,000	 	 	 	21.6	%
	IDB
	 	$	22,500,000	 	 	 	18.0	%
	Wachovia
	 	$	22,500,000	 	 	 	18.0	%
	Bank Leumi
	 	$	11,000,000	 	 	 	8.8	%
	Sovereign
	 	$	11,000,000	 	 	 	8.8	%

 

 

 

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

Section 4.03 Participation in Fees and Collateral; Relationship. Agent shall pay each
Participating Bank its Pro Rata Share of each Trade Letter of Credit Fee and Standby Letter of
Credit Fee. This fee shall be due and payable promptly, after such Fee is paid to Agent, in
arrears on each Quarterly Date.

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

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

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

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

 

 

 

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

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

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

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

Section 4.07 Indemnification; Costs and Expense. To the extent not reimbursed by a Letter of
Credit Account Party, and without limiting the obligation of the Letter of Credit Account Parties
to do so, each Participating Bank agrees to, on demand, reimburse each Letter of Credit Issuing
Bank for, indemnify each Letter of Credit Issuing Bank against, and hold each Letter of Credit
Issuing Bank harmless from, to the extent of each such Participating Banks Pro Rata Share of, any
and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, or disbursements of any kind whatsoever (including, without limitation, disbursements
necessary, in the reasonable judgment of such Letter of Credit Issuing Bank, to preserve or protect
the Collateral), that may, at any time, be imposed on, incurred by, or asserted against such Letter
of Credit Issuing Bank in any way relating to

 

 

 

this Agreement, a Letter of Credit, the Collateral or any other Revolving Credit Loan Document
or other instrument relating to any of the foregoing, or the transactions contemplated thereby and
hereby, or any action taken or omitted by such Letter of Credit Issuing Bank under or in connection
with any of the foregoing; provided however, that no Participating Bank shall be
liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, or disbursements resulting from such Letter of Credit
Issuing Bank’s gross negligence or willful misconduct, as determined by a court of competent
jurisdiction in a final and non-appealable judgment. The covenants contained in this Section
4.07 hereof shall survive the termination of this Agreement.

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

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

 

 

 

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

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

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

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

 

 

 

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

ARTICLE V

GUARANTY

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

Section 5.02 Guarantor’s Guaranty Obligations Unconditional.

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

 

 

 

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

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

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

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

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

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

 

 

 

ARTICLE VI

CONDITIONS PRECEDENT

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

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

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

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

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

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

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

 

 

 

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

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

(i) Payment of Fees. Payment in full to the Agent of all fees required to be paid to the
Agent and payment in full of all other fees required to be paid in accordance with the Loan
Documents;

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

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

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

(k) Terminations. Termination or Assignment of UCC Financing Statements terminating or
assigning Liens other than Permitted Liens;

(l) Pre-Closing Borrowing Base Certificate. After giving effect to any existing Revolving
Credit Loans and Letter of Credit Obligations and any other extension of credit to be made by the
Banks on the date of this Agreement, a Borrowing Base Certificate of Borrower and its Restricted
Subsidiaries showing Net Availability of a positive amount (the Borrowing Base Certificate shall
reflect all extensions of credit to be made on the Restatement Date and other than such extensions
of credit to be made on the Restatement Date, all information in the Borrowing Base Certificate
shall be as of December 31, 2007);

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

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

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

 

 

 

(a) The following statements shall be true:

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

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

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

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

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

Borrower and each Guarantor hereby represents and warrants that:

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

 

 

 

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

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

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

Section 7.05 Financial Statements. Each of: (a) the consolidated balance sheets of Borrower
and its Subsidiaries as of December 31, 2006 and the related consolidated statements of income and
retained earnings, and consolidated statements of cash flows of Borrower and its Subsidiaries for
the Fiscal Year, then ended, and the accompanying footnotes, together, with the opinion thereon,
dated September 12, 2007 of Deloitte & Touche LLP, independent certified public accountants, copies
of which have been furnished to the Banks, and (b) the internally prepared financial statements as
of September 30, 2007 showing Borrower and the Restricted Subsidiaries, fairly present the
financial condition of Borrower and its Subsidiaries as at such dates and the results of the
operations of Borrower and its Subsidiaries for the periods covered by such statements, all in
accordance with GAAP consistently applied except as set forth in the notes thereto and subject in
the case of interim financials statements to normal year end adjustments. There has been no
Material Adverse Change since September 30, 2007. There are no liabilities of Borrower or any of
the Subsidiaries, fixed or contingent, which are material but are not reflected in the financial
statements referred to above or in the notes thereto, other than liabilities arising in the
ordinary course of business since September 30, 2007.

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

 

 

 

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

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

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

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

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

 

 

 

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

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

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

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

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

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

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

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

 

 

 

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

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

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

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

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

 

 

 

Section 7.24 Patriot Act. Each of the Borrower and its Subsidiaries, or any of them, is: (i)
not a “blocked” person listed in the Annex to Executive Order Nos. 12947, 13099 and 13224 and all
modifications thereto or thereof (the “Blocked Person Annex”); (ii) not in receipt of any notice
from the Secretary of State or the Attorney General of the United States or any other department,
agency or office of the United States claiming a violation or possible violation of the Patriot
Act; (iii) not listed as a Specially Designated Terrorist (as defined in the Patriot Act) or as a
“blocked” person on any lists maintained by the Office of Foreign Assets Control, Department of the
Treasury (“OFAC”) pursuant to the Patriot Act or any other list of terrorists or terrorist
organizations maintained pursuant to any of the rules and regulations of the OFAC issued pursuant
to the Patriot Act or on any other list of terrorists or terrorist organizations maintained
pursuant to the Patriot Act; and (iv) not wholly owned or controlled by or now acting or will in
the future act for or on behalf of any Person named in the Blocked Person Annex or any other list
promulgated under the Patriot Act or any other Person who has been determined to be subject to the
prohibitions contained in the Patriot Act.

ARTICLE VIII

AFFIRMATIVE COVENANTS

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

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

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

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

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

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

 

 

 

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

Section 8.07 Right of Inspection.

(a) Permit Collateral Monitor and/or its designee, at any time and from time to time, upon
reasonable prior notice, to examine and make copies of the extracts from the books and records of
Borrower and its Subsidiaries, and visit the properties of Borrower and its Subsidiaries, and
discuss the affairs, finances and accounts of Borrower and its Subsidiaries with any of their
respective employees, officers, directors and independent accountants and examine and audit the
inventory and receivables of Borrower and each Subsidiary (such foregoing right of inspection and
review to be referred to as the “Field Examination”), with the cost of one such Field Examination
during each twelve month period from and after the Restatement Date being borne by the Borrower;
provided that, for each such Field Examination the Borrower shall not be required
to pay more than Eight Hundred Fifty Dollars ($850) per day per examiner plus the reasonable
out-of-pocket costs incurred by Collateral Monitor in conducting such Field Examination, capped at
Thirty Thousand Dollars ($30,000) for each such Field Examination; provided further
that, if an Event of Default has not occurred, only one such Field Examination may be
conducted in any twelve month period from and after the Restatement Date and at any time an Event
of Default has occurred and is continuing, Collateral Monitor and/or its designee shall be
authorized to conduct at any time and from time to time (without any requirement for prior notice)
as many Field Examinations as it, the Agent or the Required Banks reasonably request and the
Borrower shall be required to pay the entire cost of all such Field Examinations (even if more than
one Field Examination is conducted in a twelve month period).

(b) In consideration for serving as Collateral Monitor, pay to Collateral Monitor (i) a fee of
Twenty Thousand Dollars ($20,000), non-refundable and earned regardless of circumstances, on the
date of this Agreement and (ii) an additional Twenty Thousand Dollars ($20,000) on each anniversary
thereof. Such fee is in addition to the payment to Collateral Monitor of any other fees referred
to in this Section 8.07.

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

(a) Borrower’s Quarterly Financial Statements. As soon as available and in any event within
sixty (60) days after the end of each of the first three quarters of each Fiscal Year of Borrower,
the consolidating balance sheets of Borrower, and (i) its Restricted Subsidiaries, and (ii) all of
its Subsidiaries as of the end of such quarter, consolidated and consolidating statements of
income, statements of stockholders’ equity and cash flow statements of Borrower and (A) its
Restricted Subsidiaries and (B) all of its Subsidiaries both for such quarter and for the period
commencing at the end of the previous Fiscal Year and ending with the end of such quarter, all in
reasonable detail and stating in comparative form corresponding unaudited consolidated figures for
the corresponding date and period in the previous Fiscal Year and all prepared in accordance with
GAAP consistently applied and certified by the chief financial officer of Borrower (subject to
year-end adjustments).

 

 

 

(b) Borrower’s Annual Financial Statements. As soon as available and in any event
within one hundred twenty (120) days after the end of each Fiscal Year of Borrower: (i) for
Borrower and its Subsidiaries, on a consolidated and consolidating basis, the balance sheets,
statements of changes in stockholders’ equity, income statements and statements of cash flow for
such Fiscal Year, all in reasonable detail and stating in comparative form the respective
consolidated figures for the corresponding date and period in the Fiscal Year and all prepared in
accordance with GAAP consistently applied, and the consolidated financials referenced in this
Section 8.08(b)(i) shall be audited by such independent certified public accountants
selected by Borrower and reasonably acceptable to Banks and the consolidating financial statements
referenced in this Section 8.08(b)(i) shall be certified by the chief financial officer of
Borrower; and (ii) for Borrower and the Restricted Subsidiaries, on a consolidated and
consolidating basis, the balance sheets, statements of changes in stockholders’ equity, income
statements and statements of cash flow for such Fiscal Year, all in reasonable detail and stating
in comparative form the respective consolidated figures for the corresponding date and period for
such Fiscal Year and all prepared in accordance with GAAP consistently applied, and which shall be
certified by the chief financial officer of Borrower, and (iii) for Borrower and the Restricted
Subsidiaries, the balance sheets and income statements prepared on a consolidated basis in
accordance with GAAP consistently applied, and which shall be audited by such independent certified
public accountants registered by the PCAOB as selected by the Borrower and acceptable to the Banks,
such acceptance not to be unreasonably withheld.

(c) Borrowing Base Certificate. Within twenty-five (25) days after each Fiscal Month End
Date, a Borrowing Base Certificate, in form and substance satisfactory to the Agent reporting that
all Revolving Credit Loans, the Term Loan (if any) and all Letter of Credit Obligations as of such
Fiscal Month End Date are in compliance with the Borrowing Base as of such Fiscal Month End Date
and such Borrowing Base Certificate shall be accompanied by a summary accounts receivable aging.

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

(e) Certificate of No Default. Within sixty (60) days after the end of the first three (3)
quarters of each Fiscal Year of Borrower and within seventy five (75) days after the end of each
Fiscal Year of Borrower, a certificate of the chief financial officer of Borrower (i) certifying
that no Default or Event of Default has occurred and is continuing or, if a Default or Event of
Default has occurred and is continuing, a statement as to the nature thereof and the action which
is proposed to be taken with respect thereto, and (ii) with computations demonstrating compliance
with the covenants contained in Article X, as of the end of that fiscal period.

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

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

 

 

 

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

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

(j) Insurance. Upon the occurrence of any casualty, damage or loss, whether or not giving
rise to a claim under any insurance policy, in an amount greater than Five Hundred Thousand Dollars
($500,000), notice thereof, together with copies of any document relating thereto (including copies
of any such claim) in possession or control of Borrower and any Restricted Subsidiary or any agent
of Borrower and any Restricted Subsidiary; and immediately after the occurrence thereof, written
notice of any cancellation of any insurance policy required to be maintained by Borrower and any
Restricted Subsidiary pursuant to Section 8.05 hereof.

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

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

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

 

 

 

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

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

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

Section 8.11 Inactive Subsidiaries. At such time as (i) any Inactive Subsidiary ceases to
constitute an “Inactive Subsidiary” or (ii) MC Inc. has (A) revenues in a Fiscal Year that exceed
Two Hundred Fifty Thousand Dollars ($250,000) or (B) assets that exceed Two Hundred Fifty Thousand
Dollars ($250,000), such Subsidiary will execute and deliver all of the applicable documentation
required to be executed and delivered by a newly acquired Restricted Subsidiary pursuant to
sub-clauses (i) and (ii) of the proviso to Section 9.06(c) hereof.

ARTICLE IX

NEGATIVE COVENANTS

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

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

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

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

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

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

 

 

 

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

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

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

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

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

(j) Guaranties permitted under Section 9.02 hereof; and

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

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

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

(b) the Guaranty Obligations;

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

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

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

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

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

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

 

 

 

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

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

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

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

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

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

(i) bankers’ Liens, right of setoff and other similar Liens existing solely with respect to
cash and Cash Equivalents on deposit in one or more accounts maintained by the Borrower;

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

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

 

 

 

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

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

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

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

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

Section 9.04 Sale of Assets. Sell, lease, assign, transfer or otherwise dispose of any of its
now owned or hereafter acquired assets to any Person or any capital stock of the Borrower’s
Subsidiaries to any Person, except for (a) inventory disposed of in the ordinary course of
business; (b) the sale or other disposition of worn out or obsolete assets or no longer necessary
for the conduct of its business; (c) provided no Default or Event of Default has occurred and is
continuing, the sale or other dispositions of assets not exceeding Fifteen Million Dollars
($15,000,000) per Fiscal Year; (d) the leasing of assets having an aggregate book value at any one
time not exceeding Five Hundred Thousand Dollars ($500,000); (e) accounts receivable pursuant to a
Factoring Agreement, subject to compliance with Section 9.15 hereof; (f) Borrower’s
issuance of capital stock or other equity interest or options to purchase such capital stock or
equity interests; (g) provided no Default or Event of Default has occurred and is continuing, the
licensing to third-parties of any of the Borrower’s or its Subsidiaries’ intellectual property,
including, without limitation, any trademarks; (h) provided no Default or Event of Default has
occurred and is continuing, the sale or disposition of any Cash Equivalents or securities held for
investment purposes; (i) provided no Default or Event of Default has occurred and is continuing,
the release of any claims that the Borrower or any of its Subsidiaries may have against any
third-party pursuant to a settlement thereof; and (j) any payments or transfer of assets among the
Borrower and its Subsidiaries permitted under Sections 9.05, 9.06 and 9.10.

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

 

 

 

Section 9.06 Investments; Acquisitions. Except as provided in Sections 9.05 and
9.10 hereof, make any loan or advance or purchase or otherwise acquire any capital stock,
assets, obligations or other securities of, make any capital contribution to, or otherwise invest
in, or acquire any interest in, any Person in an amount in excess of Five Million Dollars
($5,000,000) per Fiscal Year for all such Persons (which for purposes of acquisitions shall include
the amount of any Debt assumed), except the following: (a) Permitted Investments; (b) investments
made in accordance with Section 9.10 hereof; (c) the formation (but not by way of
acquisition, except for acquisitions for which the consideration consists of equity securities of
the Borrower) of additional wholly owned Subsidiaries of Borrower or the Restricted Subsidiaries;
provided, that, in connection therewith, unless Agent shall waive such requirements
or such Subsidiary shall be an Inactive Subsidiary or a foreign Subsidiary, (i) each such
Subsidiary shall become a Guarantor hereunder by delivering to Agent a joinder to this Agreement,
the joinder to the Master Security Agreement, the capital stock or other equity interest of each
such Subsidiary shall be pledged to Agent for the benefit of Banks and such Subsidiary shall
deliver to Agent a Security Agreement and, to the extent such Subsidiary owns stock of another
Person, a Pledge Agreement, and, to the extent such Subsidiary owns any intellectual property, a
Trademark Security Agreement and shares of stock, stock powers and powers of attorney and each
other agreement, document or instrument reasonably requested by Agent in connection with the
foregoing, including, without limitation, a certificate from such Subsidiary’s insurance carriers
evidencing the coverage required by Section 8.05 hereof (which certificate(s) shall show
that the Agent is an additional insured and loss payee), (ii) such Subsidiary shall satisfy the
conditions precedent set forth in Sections 6.01(a), (b), (c), (f), (h) and (i) to
the same extent as if such Subsidiary were an original party to this Agreement, and (iii) if the
Accounts and/or Inventory of such Subsidiary are to be in the Borrowing Base, then Collateral
Monitor and/or its designee shall conduct an examination of the books and records of such
Subsidiary, at the expense of the Borrower (provided, however, that Borrower shall
not be liable for any such expenses in excess of Thirty Thousand Dollars ($30,000) for each such
examination), and the results of such examination shall be in form and substance reasonably
satisfactory to the Required Banks; (d) investments in Borrower’s common stock made with director,
officer and employee deferred compensation pursuant to the terms Borrower’s common stock purchase
plan and investments made with director, officer or employee deferred compensation pursuant to
Borrower’s deferred compensation plan; (e) loans or advances to any employees of Borrower or a
Restricted Subsidiary or guaranties made by Borrower and the Restricted Subsidiaries of
indebtedness or obligations of any of their employees not to exceed Two Hundred Thousand Dollars
($200,000) in the aggregate during any Fiscal Year outstanding in the ordinary course of business
for reasonable and necessary work-related, moving, entertainment and other ordinary business
expenses to be incurred by such employee(s) in connection with their employment; and (f)
investments in or capital contributions to the Borrower’s Restricted Subsidiaries, provided
that, as of the date of such loan or guarantee and after giving effect thereto, no Event of
Default shall exist or have occurred; provided further that, with respect
to the Permitted Investments (1) all certificates of deposit, bankers acceptances and money market
funds shall be issued or offered by a domestic office of a commercial bank organized under the laws
of the United States of America or any State thereof which has a combined capital and surplus and
undivided profits (“Bank Equity”) of not less than Five Hundred Million Dollars ($500,000,000),
except that amounts up to the aggregate of Five Million Dollars ($5,000,000) are permitted with
banks with Bank Equity of less than Five Hundred Million Dollars ($500,000,000) but greater than
Fifty Million Dollars ($50,000,000); (2) all money market funds shall comply with the criteria set
forth in Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940 and
have portfolio assets of at least Five Billion

Dollars ($5,000,000,000); (3) the aggregate amount of commercial paper rated less than A1/P1,
asset backed commercial paper rated less than A1/P1, medium term notes, variable rate demand notes,
corporate bonds and municipal notes/bonds shall not exceed Twenty Million Dollars ($20,000,000) at
any time; and (4) the aggregate amount of Permitted Investments of the type referred to in the
preceding clause (3) with respect to any individual issuer shall not exceed Ten Million Dollars
($10,000,000) at any time.

 

 

 

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

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

Section 9.09 Dividends. Declare or pay any cash dividends on capital stock of Borrower; or
purchase, redeem, retire, or otherwise acquire for value any of the capital stock or securities
convertible into capital stock of Borrower now or hereafter outstanding or make any distribution of
assets to its stockholders as such whether in cash, assets, or in obligations of Borrower or any
Restricted Subsidiary, or allocate or otherwise set apart any sum for the payment of any dividend
or distribution on, or for the purchase, redemption, or retirement of any shares of its capital
stock, except in all cases for (a) transactions that are made in common stock of Borrower, (b)
transactions that are otherwise permitted under Section 9.10 hereof or (c) so long as no
Default exists and is continuing, dividends paid by the Borrower to its stockholders in an
aggregate amount not to exceed Seven Million Five Hundred Thousand Dollars ($7,500,000) per Fiscal
Year minus any Restricted Payments made by the Borrower as may be permitted by Section 9.10
hereof during such Fiscal Year.

Section 9.10 Restricted Payments. Notwithstanding anything to the contrary contained in this
Article IX, make any Restricted Payment; except that, so long as no Default
exists and is continuing, (i) Borrower may repurchase treasury stock in an aggregate amount not to
exceed Seven Million Five Hundred Thousand Dollars ($7,500,000) per Fiscal Year minus any dividends
paid by the Borrower as may be permitted by Section 9.09 hereof during such Fiscal Year,
from the date of this Agreement and all times thereafter as long as this Agreement remains in
effect, net of amounts received by Borrower upon the sale of its capital stock, including capital
stock of Borrower which may be sold including those through its stock plans and (ii) Borrower may
make advances or payments to or investments in, or issue guaranties for any Restricted Subsidiary.

 

 

 

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

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

Section 9.13 Nature of Business.

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

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

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

Section 9.15 Factoring Agreements. Enter into, amend or modify any Factoring Agreement with a
Factor unless (a) subject to the proviso set forth in this Section below, the Factoring Agreement
has been approved in writing by Agent and the conditions set forth in Section 9.03(e)(i),
(ii) and (iii) hereof have been satisfied or (b) such amendment or modification
thereof does not adversely affect the interest of the Agent (for purposes hereof, any change in
fees, the rate of interest or the commissions charged by the Factor under the Factoring Agreement,
or in the extension of the term of the Factoring Agreement, shall not be deemed to adversely affect
the interest of the Agent); provided, that, with respect to Factoring Agreements
entered into after the Restatement Date that provide that the Factor(s) may purchase
certain Accounts from the Borrower or any Restricted Subsidiary in an amount not to exceed One
Million Five Hundred Thousand Dollars ($1,500,000) in the aggregate, the conditions set forth in
subclause (a) above (provided that the Borrower provide the Agent with a copy of the relevant
Factoring Agreement) do not have to be satisfied until the 75th day after the date of the Factoring
Agreement. 

Section 9.16 Deposit and Securities Accounts. The Borrower and each Guarantor shall not,
directly or indirectly, after the date hereof, establish or maintain any Deposit Account or
Securities Account other than Excluded Accounts unless each of the following conditions is
satisfied: (a) the Agent shall receive not more than thirty (30) days after such Deposit Account
or Securities Account has been established written notice thereof, which notice shall specify in
reasonable detail the name of the

account, the owner of the account, the name and address of the bank or financial institution
at which such account is to be opened or established and the purpose of the account, (b) the bank
or financial institution where such account is opened or maintained shall be an Eligible Bank, and
(c) the Borrower shall, within 60 days of the opening or establishing of such account, either (i)
deliver to the Agent a Control Agreement with respect to such Deposit Account or Securities Account
or (ii) arrange for the Agent to become the customer of the bank or financial institution with
respect to the Deposit Account or Securities Account on terms and conditions acceptable to the
Agent.

 

 

 

ARTICLE X

FINANCIAL COVENANTS

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

Section 10.01 Consolidated Tangible Net Worth. Borrower and its Restricted Subsidiaries shall
maintain at all times a Consolidated Tangible Net Worth of not less than Eighty Five Million
Dollars ($85,000,000).

Section 10.02 Consolidated Fixed Charge Coverage Ratio. Borrower and its Restricted
Subsidiaries will maintain as at the last day of each Fiscal Quarter of the Borrower, in each case
calculated on a rolling four (4) quarter basis, a Consolidated Fixed Charge Ratio in a proportion
of not less than 1.25 to 1. Notwithstanding anything herein to the contrary, for all purposes of
this Section 10.02, the Borrower and its Restricted Subsidiaries may expend (a) an
aggregate of up to Eight Million Five Hundred Thousand Dollars ($8,500,000) for tenant improvements
(the “Tenant Improvements”) to certain premises leased to the Borrower at the building (the
“Building”) known as 114 West 41st Street, New York, New York (in addition to certain
tenant improvements to be funded by the owner of the Building), (b) an aggregate of up to Eight
Million Dollars ($8,000,000) for Investigation Expenses for Fiscal Year ending on December 31,
2008, and (c) an aggregate of up to Four Million Dollars ($4,000,000) for Investigation Expenses
for Fiscal Year ending on December 31, 2009. For the purpose of calculating the Consolidated Fixed
Charge Ratio, (x) such expenditures in clause (a) above by the Borrower and its Restricted
Subsidiaries shall be excluded from the definition of Consolidated Capital Expenditures; and (y)
such expenditures in clauses (b) and (c) above by the Borrower and its Restricted Subsidiaries
shall be excluded from the definition of Consolidated Earnings Before Interest, Taxes, Depreciation
and Amortization.

Section 10.03 Consolidated Leverage Ratio. Borrower and its Restricted Subsidiaries shall
maintain a Consolidated Leverage Ratio equal to or less than 3.00 to 1.00, determined as at the
last day of each Fiscal Quarter of the Borrower on an average basis with respect to the most recent
four Fiscal Quarters then ending.

 

 

 

Section 10.04 Consolidated Capital Expenditures. Borrower and its Restricted Subsidiaries
shall not, in any Fiscal Year, make Consolidated Capital Expenditures in the aggregate amount in
excess of Four Million Dollars ($4,000,000). Notwithstanding anything in the foregoing to the
contrary, for all
purposes of this Section 10.04 hereof, the Borrower and its Restricted Subsidiaries
may expend an additional sum in an aggregate of up to Eight Million Five Hundred Thousand Dollars
($8,500,000) for the Tenant Improvements (in addition to certain tenant improvements to be funded
by the owner of the Building as defined in Section 10.02 hereof).

Section 10.05 Revolving Credit Loan Coverage. During a single period comprised of any sixty
(60) consecutive days during each calendar year, the sum of the aggregate amount of outstanding
Revolving Credit Loans shall not exceed eighty-five (85%) percent of the Net Amount of Eligible
Accounts of Borrower and the Restricted Subsidiaries.

ARTICLE XI

EVENTS OF DEFAULT

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

(a) (i) Borrower shall fail to pay the principal of any Note as and when due and payable, or
any Letter of Credit Account Party shall fail to reimburse the Letter of Credit Issuing Bank on a
Letter of Credit as and when due and payable; (ii) Borrower shall fail to pay interest on any Note
within five (5) Banking Days of when such interest is due and payable; (iii) Borrower or any Letter
of Credit Account Party shall fail to pay within ten (10) days after the request for payment is
made any fees or expenses or other payments required to be paid under the terms of any of the Loan
Documents; (iv) Borrower shall fail to make any payments or prepayments under Section 2.08
(c) hereof within three (3) Banking Days; (iv) Borrower shall fail to make any payments under
Section 2.08 (d) hereof on the date required by that Section or (v) Borrower shall fail to
deliver, in accordance with Section 8.08(c) hereof, a Borrowing Base Certificate showing
all Revolving Credit Loans, the Term Loan (if any) and all Letter of Credit Obligations as of such
Fiscal Month End Date are in compliance with the Borrowing Base as of such Fiscal Month End Date;
or

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

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

 

 

 

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

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

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

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

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

 

 

 

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

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

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

 

 

 

ARTICLE XII

THE AGENT AND COLLATERAL MONITOR

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

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

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

 

 

 

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

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

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

Section 12.07 Non-Reliance on Agent and Other Banks. Each Bank agrees that it has,
independently and without reliance on the Agent, HSBC or any other Bank, and based on such
documents and information as it has deemed appropriate, made its own credit analysis of Borrower
and each Guarantor and the decision to enter into this Agreement and that it will, independently
and without reliance upon the Agent, HSBC or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any other Loan Document. The
Agent shall not be required to keep itself informed as to the performance or observance by Borrower
or any Guarantor of this Agreement or any other Loan Document or any other document referred to or
provided for herein or therein or to inspect the properties or books of Borrower or any guarantor.
Except for notices, reports and other documents and information expressly required to be furnished
to the Banks by the Agent hereunder, the Agent shall not have any duty or responsibility to provide
any Bank with any credit or

 

 

 

other information concerning the affairs, financial condition or business of Borrower or any
Guarantor (or any of their Affiliates) which may come into the possession of the Agent or any of
its Affiliates. The Agent shall not be required to file this Agreement, any other Loan Document or
any document or instrument referred to herein or therein, for record or give notice of this
Agreement, any other Loan Document or any document or instrument referred to herein or therein, to
anyone; provided however, the Agent shall (a) file each Trademark Security
Agreement with the United States Patent and Trademark Office, and (b) with respect to Borrower and
the Restricted Subsidiaries that are parties to a Security Agreement, file financing statements
(UCC-1) set forth in Section 6.01 hereof in the state where such Borrower and Restricted
Subsidiary is organized.

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

Section 12.09 Resignation or Removal of Agent. Subject to the appointment and acceptance of a
successor Agent as provided below, the Agent may resign at any time by giving written notice
thereof to the Banks, Borrower and each Guarantor, and the Agent may be removed at any time with or
without cause by the Required Banks; provided that, Borrower, each Guarantor and
the other Banks shall be promptly notified thereof. Upon any such resignation or removal, the
Required Banks shall have the right to appoint a successor Agent, which, unless an Event of Default
shall have occurred and be continuing, shall be reasonably acceptable to Borrower. If no successor
Agent shall have been so appointed by the Required Banks and shall have accepted such appointment
within thirty (30) days after the retiring Agent’s giving of notice of resignation or the Required
Banks’ removal of the retiring Agent, then the retiring Agent may, on behalf of the Banks, appoint
a successor Agent, which shall be a bank which has an office in New York, New York and assets in an
amount not less than One Billion ($1,000,000,000) Dollars, which, unless an Event of Default shall
have occurred and be continuing, shall be reasonably acceptable to Borrower. The Required Banks or
the retiring Agent, as the case may be, shall upon the appointment of a successor Agent promptly so
notify Borrower and the other Banks. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring Agent’s resignation or
removal hereunder as Agent, the provisions of this Article XII shall continue in effect for
its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the
Agent.

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

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

 

 

 

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

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

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

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

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

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

 

 

 

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

ARTICLE XIII

YIELD PROTECTION

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

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

 

 

 

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

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

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

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

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

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

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

 

 

 

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

ARTICLE XIV

MISCELLANEOUS

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

 

 

 

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

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

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

Section 14.04 Assignment; Participation; Additional Bank.

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

 

 

 

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

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

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

 

 

 

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

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

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

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

 

 

 

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

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

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

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

 

 

 

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

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

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

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

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

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

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

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

 

 

 

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

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

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

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

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

	 	 	 	 	 	 	 
	 	 	HAMPSHIRE GROUP, LIMITED, as a Borrower,	 	 
	 	 	     a Letter of Credit Account Party and a Guarantor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Heath L. Golden
	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Heath L. Golden

Title: Vice President, General Counsel & Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	HAMPSHIRE DESIGNERS,
INC., as a Letter of Credit 	 	 
	 	 	     Account Party and a Guarantor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Heath L. Golden
	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Heath L. Golden 

Title: Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	ITEM-EYES , INC., as a Letter of Credit	 	 
	 	 	     Account Party and a Guarantor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Heath L. Golden
	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Heath L. Golden 

Title: Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	SHANE HUNTER,
INC., as a Letter of Credit
	 	 
	 	 	     Account Party and a Guarantor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Heath L. Golden
	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Heath L. Golden 

Title: Secretary	 	 

S1 to Credit Agreement and Guaranty

 

 

 

	 	 	 	 	 	 	 
	 	 	SB CORPORATION, as a Letter of Credit
Account Party	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Heath L. Golden
	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Heath L. Golden

Title: Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	Address of Borrower, each Letter of Credit Account Party

and each Guarantor for Notices:	 	 
	 
	 	 	 	 	 	 
	 	 	c/o Hampshire Group, Limited

1924 Pearman Dairy Road

Anderson, SC 29625

Attention: Jonathan Norwood

Fax Number: 864.231.1201	 	 

S1 to Credit Agreement and Guaranty

 

 

 

	 	 	 	 	 	 	 
	 	 	HSBC BANK USA, NATIONAL ASSOCIAION,	 	 
	 

	 	 	 	as a Bank, as Letter of Credit Issuing Bank
(for all Letters of Credit other than Existing Letters
of Credit) and as Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Richard J. Elias 	 	 
	 

	 	Name:
	 	Richard J. Elias 
	 	 
	 

	 	Title:	 	Vice President 	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notices:	 	 
	 
	 	 	 	 	 	 
	 	 	HSBC Bank USA, National Association

452 Fifth Avenue

New York, New York 1 0018

Attention:

Fax Number: 212-525-5676	 	 

S2 to Credit Agreement and Guaranty

 

 

 

	 	 	 	 	 	 	 
	 	 	JPMORGAN CHASE BANK, N.A.

     as a Bank	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Joseph J. Nastri
	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Joseph J. Nastri

Title: Senior Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notices:	 	 
	 
	 	 	 	 	 	 
	 	 	JPMORGAN CHASE BANK, N.A.	 	 
	 
	 	 	 	 	 
	 
	 	 	 	 	 
	 	 	Attention:

Fax Number:	 	 

S3 to Credit Agreement and Guaranty

 

 

 

	 	 	 	 	 	 	 
	 	 	ISRAEL DISCOUNT BANK OF NEW YORK

     as a Bank	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Juan C. Zaino
	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Juan C. Zaino

Title: First Vice President	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ R. David Korngruen
	 	 
	 

	 	 	 	 	 	 
	 	 	Name: R. David Korngruen

Title: Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notices:	 	 
	 
	 	 	 	 	 	 
	 	 	ISRAEL DISCOUNT BANK OF NEW YORK	 	 
	 
	 	 	 	 	 
	 
	 	 	 	 	 
	 	 	Attention:

Fax Number:	 	 

S4 to Credit Agreement and Guaranty

 

 

 

	 	 	 	 	 	 	 
	 	 	WACHOVIA BANK, NATIONAL ASSOCIATION

     as a Bank	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Jeff Reeves
	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Jeff Reeves

Title: SVP	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notices:	 	 
	 
	 	 	 	 	 	 
	 	 	WACHOVIA BANK, NATIONAL ASSOCIATION

1426 Main Street

Columbia, SC 29226

Attention: Nancy Rouse

Fax Number: 803-765-3630	 	 

S5 to Credit Agreement and Guaranty

 

 

 

	 	 	 	 	 	 	 
	 	 	BANK LEUMI USA

     as a Bank	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Paul J. DeChagas
	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Paul J. DeChagas

Title: Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notices:	 	 
	 
	 	 	 	 	 	 
	 	 	BANK LEUMI USA

562 Fifth Avenue

New York, NY 10036

Attention: Paul J. DeChagas

Fax Number: 212-626-1329	 	 

S6 to Credit Agreement and Guaranty

 

 

 

	 	 	 	 	 	 	 
	 	 	SOVEREIGN BANK

     as a Bank	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Matilde Reyes 	 	 
	 

	 	Name:
	 	Matilde Reyes 
	 	 
	 

	 	Title:	 	SVP 	 	 
	 
	 	 	 	 	 	 
	 	 	Address for Notices:	 	 
	 
	 	 	 	 	 	 
	 	 	SOVEREIGN BANK

551 Fifth Avenue

New York, New York 10176

Attention: Matilde Reyes - 26th Floor

Fax Number:	 	 

S7 to Credit Agreement and Guaranty

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00136-of-00352.parquet"}]]