Document:

Exhibit No. 4.5

 

EXECUTION COPY

 

 

 

CREDIT
AGREEMENT

 

dated as of June 28,
2005

 

among

 

RUSS
BERRIE AND COMPANY, INC.

 

AND CERTAIN SUBSIDIARIES OF THE FOREGOING

as
the Borrowers,

 

THOSE
FINANCIAL INSTITUTIONS PARTY HERETO,

as Facility A Lenders,

 

THOSE
FINANCIAL INSTITUTIONS PARTY HERETO,

as Facility B Lenders,

 

LASALLE
BUSINESS CREDIT, LLC,

as Administrative Agent and Arranger,

 

LASALLE
BANK NATIONAL ASSOCIATION, 

as Issuing Bank,

 

and

 

THOSE
LENDERS DESIGNATED HEREIN

as the “Documentation Agent” or “Syndication Agent”

 

 

 

 

TABLE OF CONTENTS

 

	
  SECTION 1

  	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  1.2

  	
  Other
  Interpretive Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2

  	
  COMMITMENTS
  OF THE LENDERS; BORROWING, CONVERSION AND LETTER OF CREDIT PROCEDURES

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Commitments

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1.1

  	
  Revolving
  Loan Commitment

  	
   

  
	
   

  	
  2.1.2

  	
  Term
  Loan A Commitment

  	
   

  
	
   

  	
  2.1.3

  	
  L/C
  Commitment

  	
   

  
	
   

  	
  2.1.4

  	
  Term
  Loan B Commitment

  	
   

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Loan
  Procedures

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  2.2.1

  	
  Various
  Types of Loans

  	
   

  
	
   

  	
  2.2.2

  	
  Borrowing
  Procedures

  	
   

  
	
   

  	
  2.2.3

  	
  Conversion
  and Continuation Procedures

  	
   

  
	
   

  	
  2.2.4

  	
  Borrowing
  Representations and Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Letter of
  Credit Procedures

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  2.3.1

  	
  L/C
  Applications

  	
   

  
	
   

  	
  2.3.2

  	
  Participations
  in Letters of Credit

  	
   

  
	
   

  	
  2.3.3

  	
  Reimbursement
  Obligations

  	
   

  
	
   

  	
  2.3.4

  	
  Funding by
  Facility A Lenders to Issuing Bank

  	
   

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  Commitments
  Several

  	
   

  
	
   

  	
   

  	
   

  
	
  2.5

  	
  Certain
  Conditions

  	
   

  
	
   

  	
   

  	
   

  
	
  2.6

  	
  Loan Party
  Representative

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3

  	
  EVIDENCING
  OF LOANS

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Notes

  	
   

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Recordkeeping

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4

  	
  INTEREST

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Interest Rates

  	
   

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Interest
  Payment Dates

  	
   

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  Setting and
  Notice of LIBOR Rates

  	
   

  
	
   

  	
   

  	
   

  
	
  4.4

  	
  Computation of
  Interest

  	
   

  

 

i

 

	
  SECTION 5

  	
  FEES

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Non-Use Fee

  	
   

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Letter of
  Credit Fees

  	
   

  
	
   

  	
   

  	
   

  
	
  5.3

  	
  Administrative
  Agent’s Fees

  	
   

  
	
   

  	
   

  	
   

  
	
  5.4

  	
  Termination
  Fee

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6

  	
  REDUCTION,
  TERMINATION AND INCREASES OF THE REVOLVING COMMITMENT LIMIT AND THE REVOLVING
  COMMITMENT; PREPAYMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Reduction,
  Termination and Increases of the Revolving Commitment

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  6.1.1

  	
  Voluntary
  Reduction or Termination of the Revolving Commitment

  	
   

  
	
   

  	
  6.1.2

  	
  Increases
  in Revolving Commitment Limit

  	
   

  
	
   

  	
  6.1.3

  	
  All
  Reductions of the Revolving Commitment

  	
   

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Prepayments

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  6.2.1

  	
  Voluntary
  Prepayments. Revolving Loans

  	
   

  
	
   

  	
  6.2.2

  	
  Mandatory
  Prepayments

  	
   

  
	
   

  	
   

  	
   

  
	
  6.3

  	
  Manner of
  Prepayments

  	
   

  
	
   

  	
   

  	
   

  
	
  6.4

  	
  Repayments

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  6.4.1

  	
  All
  Obligations

  	
   

  
	
   

  	
  6.4.2

  	
  Revolving
  Loans

  	
   

  
	
   

  	
  6.4.3

  	
  Term
  Loan A

  	
   

  
	
   

  	
  6.4.4

  	
  Term Loan B

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7

  	
  MAKING
  AND PRORATION OF PAYMENTS; SETOFF; TAXES

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Making of
  Payments

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1.1

  	
  Manner of
  Payment; Application of Payment

  	
   

  
	
   

  	
  7.1.2

  	
  Payment
  Authorization

  	
   

  
	
   

  	
  7.1.3

  	
  Settlement

  	
   

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  Application of
  Certain Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  7.3

  	
  Due Date
  Extension

  	
   

  
	
   

  	
   

  	
   

  
	
  7.4

  	
  Setoff

  	
   

  
	
   

  	
   

  	
   

  
	
  7.5

  	
  Proration of
  Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  7.6

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8

  	
  INCREASED
  COSTS; SPECIAL PROVISIONS FOR LIBOR LOANS

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Increased
  Costs

  	
   

  

 

ii

 

	
  8.2

  	
  Basis for
  Determining Interest Rate Inadequate or Unfair

  	
   

  
	
   

  	
   

  	
   

  
	
  8.3

  	
  Changes in Law
  Rendering LIBOR Loans Unlawful

  	
   

  
	
   

  	
   

  	
   

  
	
  8.4

  	
  Funding Losses

  	
   

  
	
   

  	
   

  	
   

  
	
  8.5

  	
  Right of
  Lenders to Fund through Other Offices

  	
   

  
	
   

  	
   

  	
   

  
	
  8.6

  	
  Discretion of
  Lenders as to Manner of Funding

  	
   

  
	
   

  	
   

  	
   

  
	
  8.7

  	
  Mitigation of
  Circumstances; Replacement of Lenders

  	
   

  
	
   

  	
   

  	
   

  
	
  8.8

  	
  Conclusiveness
  of Statements; Survival of Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Organization

  	
   

  
	
   

  	
   

  	
   

  
	
  9.2

  	
  Authorization;
  No Conflict

  	
   

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Validity and
  Binding Nature

  	
   

  
	
   

  	
   

  	
   

  
	
  9.4

  	
  Financial
  Condition

  	
   

  
	
   

  	
   

  	
   

  
	
  9.5

  	
  No Material
  Adverse Change

  	
   

  
	
   

  	
   

  	
   

  
	
  9.6

  	
  Litigation and
  Contingent Liabilities

  	
   

  
	
   

  	
   

  	
   

  
	
  9.7

  	
  Ownership of
  Properties; Liens

  	
   

  
	
   

  	
   

  	
   

  
	
  9.8

  	
  Equity
  Ownership; Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  9.9

  	
  Pension Plans

  	
   

  
	
   

  	
   

  	
   

  
	
  9.10

  	
  Investment
  Company Act

  	
   

  
	
   

  	
   

  	
   

  
	
  9.11

  	
  Public
  Utility Holding Company Act

  	
   

  
	
   

  	
   

  	
   

  
	
  9.12

  	
  Regulation U

  	
   

  
	
   

  	
   

  	
   

  
	
  9.13

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  
	
  9.14

  	
  Solvency, etc.

  	
   

  
	
   

  	
   

  	
   

  
	
  9.15

  	
  Environmental
  Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  9.16

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  
	
  9.17

  	
  Real
  Property

  	
   

  
	
   

  	
   

  	
   

  
	
  9.18

  	
  Information

  	
   

  
	
   

  	
   

  	
   

  
	
  9.19

  	
  Intellectual
  Property

  	
   

  
	
   

  	
   

  	
   

  
	
  9.20

  	
  Burdensome
  Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  9.21

  	
  Labor
  Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  9.22

  	
  No Default

  	
   

  
	
   

  	
   

  	
   

  
	
  9.23

  	
  Related
  Agreements, etc.

  	
   

  
	
   

  	
   

  	
   

  
	
  9.24

  	
  Subordinated
  Debt

  	
   

  

 

iii

 

	
  9.25

  	
  Eligible
  Accounts and Eligible Inventory

  	
   

  
	
   

  	
   

  	
   

  
	
  9.26

  	
  Other
  Debt

  	
   

  
	
   

  	
   

  	
   

  
	
  9.27

  	
  Inactive
  Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10

  	
  AFFIRMATIVE
  COVENANTS.

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Reports,
  Certificates and Other Information

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1.1

  	
  Annual
  Report

  	
   

  
	
   

  	
  10.1.2

  	
  Interim
  Reports

  	
   

  
	
   

  	
  10.1.3

  	
  Compliance
  Certificates

  	
   

  
	
   

  	
  10.1.4

  	
  Reports
  to the SEC and to Shareholders

  	
   

  
	
   

  	
  10.1.5

  	
  Notice
  of Default, Litigation and ERISA Matters

  	
   

  
	
   

  	
  10.1.6

  	
  Borrowing
  Base Certificates

  	
   

  
	
   

  	
  10.1.7

  	
  Management
  Reports

  	
   

  
	
   

  	
  10.1.8

  	
  Projections

  	
   

  
	
   

  	
  10.1.9

  	
  Material
  Notices

  	
   

  
	
   

  	
  10.1.10

  	
  Asset
  Dispositions

  	
   

  
	
   

  	
  10.1.11

  	
  Other
  Information

  	
   

  
	
   

  	
   

  	
   

  
	
  10.2

  	
  Books,
  Records and Inspections

  	
   

  
	
   

  	
   

  	
   

  
	
  10.3

  	
  Maintenance
  of Property; Insurance.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  10.3.1

  	
  Obligation
  to Maintain Properties

  	
   

  
	
   

  	
  10.3.2

  	
  Property
  Insurance

  	
   

  
	
   

  	
  10.3.3

  	
  Liability
  Insurance

  	
   

  
	
   

  	
  10.3.4

  	
  Forced
  Place Coverage

  	
   

  
	
   

  	
   

  	
   

  
	
  10.4

  	
  Compliance
  with Laws; Payment of Taxes and Liabilities

  	
   

  
	
   

  	
   

  	
   

  
	
  10.5

  	
  Maintenance
  of Existence, etc.

  	
   

  
	
   

  	
   

  	
   

  
	
  10.6

  	
  Reserved.

  	
   

  
	
   

  	
   

  	
   

  
	
  10.7

  	
  Use of
  Proceeds

  	
   

  
	
   

  	
   

  	
   

  
	
  10.8

  	
  Employee
  Benefit Plans

  	
   

  
	
   

  	
   

  	
   

  
	
  10.9

  	
  Environmental
  Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  10.10

  	
  New
  Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  10.11

  	
  Deposit
  Accounts

  	
   

  
	
   

  	
   

  	
   

  
	
  10.12

  	
  EDA
  Standby L/C Reimbursement Agreement Modification Letter Extension

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11

  	
  NEGATIVE
  COVENANTS.

  	
   

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Debt

  	
   

  
	
   

  	
   

  	
   

  
	
  11.2

  	
  Liens

  	
   

  

 

iv

 

	
  11.3

  	
  Restricted
  Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  11.4

  	
  Mergers,
  Consolidations, Sales and Other Transactions Outside the Ordinary Course of
  Business

  	
   

  
	
   

  	
   

  	
   

  
	
  11.5

  	
  Modification
  of Organizational Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  11.6

  	
  Transactions
  with Affiliates

  	
   

  
	
   

  	
   

  	
   

  
	
  11.7

  	
  Unconditional
  Purchase Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  11.8

  	
  Inconsistent
  Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  11.9

  	
  Business
  Activities; Issuance of Equity

  	
   

  
	
   

  	
   

  	
   

  
	
  11.10

  	
  Investments

  	
   

  
	
   

  	
   

  	
   

  
	
  11.11

  	
  Restriction
  of Amendments to Certain Documents

  	
   

  
	
   

  	
   

  	
   

  
	
  11.12

  	
  Fiscal
  Year

  	
   

  
	
   

  	
   

  	
   

  
	
  11.13

  	
  Financial
  Covenants.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  11.13.1

  	
  Fixed
  Charge Coverage Ratio

  	
   

  
	
   

  	
  11.13.2

  	
  Total
  Debt to EBITDA Ratio

  	
   

  
	
   

  	
  11.13.3

  	
  Excess
  Availability

  	
   

  
	
   

  	
   

  	
   

  
	
  11.14

  	
  Cancellation
  of Debt

  	
   

  
	
   

  	
   

  	
   

  
	
  11.15

  	
  Creation
  of Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  11.16

  	
  Inactive
  Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12

  	
  EFFECTIVENESS;
  CONDITIONS OF LENDING, ETC.

  	
   

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  Initial
  Credit Extension

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1.1

  	
  List of
  Closing Documents

  	
   

  
	
   

  	
  12.1.2

  	
  Consents,
  etc.

  	
   

  
	
   

  	
  12.1.3

  	
  Payment
  of Fees

  	
   

  
	
   

  	
  12.1.4

  	
  Excess
  Availability

  	
   

  
	
   

  	
  12.1.5

  	
  Independent
  Collateral Field Audit Examination Documents

  	
   

  
	
   

  	
  12.1.6

  	
  Material
  Adverse Effect

  	
   

  
	
   

  	
  12.1.7

  	
  Due
  Diligence

  	
   

  
	
   

  	
  12.1.8

  	
  Litigation

  	
   

  
	
   

  	
  12.1.9

  	
  Projections

  	
   

  
	
   

  	
  12.1.10

  	
  Financial
  Statements

  	
   

  
	
   

  	
  12.1.11

  	
  Filings,
  Registrations and Recordings

  	
   

  
	
   

  	
  12.1.12

  	
  Insurance

  	
   

  
	
   

  	
  12.1.13

  	
  Other

  	
   

  
	
   

  	
   

  	
   

  
	
  12.2

  	
  Conditions

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  12.2.1

  	
  Compliance
  with Warranties, No Default, etc.

  	
   

  
	
   

  	
  12.2.2

  	
  Confirmatory
  Certificate

  	
   

  

 

v

 

	
  SECTION 13

  	
  EVENTS
  OF DEFAULT AND THEIR EFFECT.

  	
   

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  Events of
  Default

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  13.1.1

  	
  Non-Payment
  of the Loans, etc.

  	
   

  
	
   

  	
  13.1.2

  	
  Non-Payment
  of Other Debt

  	
   

  
	
   

  	
  13.1.3

  	
  Reserved.

  	
   

  
	
   

  	
  13.1.4

  	
  Bankruptcy,
  Insolvency, etc.

  	
   

  
	
   

  	
  13.1.5

  	
  Non-Compliance
  with Loan Documents

  	
   

  
	
   

  	
  13.1.6

  	
  Representations;
  Warranties

  	
   

  
	
   

  	
  13.1.7

  	
  Pension
  Plans

  	
   

  
	
   

  	
  13.1.8

  	
  Judgments

  	
   

  
	
   

  	
  13.1.9

  	
  Loss of
  Collateral

  	
   

  
	
   

  	
  13.1.10

  	
  Levy,
  Seizure or Attachment

  	
   

  
	
   

  	
  13.1.11

  	
  Invalidity
  of Collateral Documents, etc.

  	
   

  
	
   

  	
  13.1.12

  	
  Invalidity
  of Subordination Provisions, etc.

  	
   

  
	
   

  	
  13.1.13

  	
  Change
  of Control

  	
   

  
	
   

  	
  13.1.14

  	
  Reserved

  	
   

  
	
   

  	
  13.1.15

  	
  EDA
  Standby L/C

  	
   

  
	
   

  	
   

  	
   

  
	
  13.2

  	
  Effect of
  Event of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 14

  	
  THE
  ADMINISTRATIVE AGENT.

  	
   

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  Appointment
  and Authorization

  	
   

  
	
   

  	
   

  	
   

  
	
  14.2

  	
  Issuing Bank

  	
   

  
	
   

  	
   

  	
   

  
	
  14.3

  	
  Delegation
  of Duties

  	
   

  
	
   

  	
   

  	
   

  
	
  14.4

  	
  Exculpation
  of Administrative Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  14.5

  	
  Reliance by
  Administrative Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  14.6

  	
  Notice of
  Default

  	
   

  
	
   

  	
   

  	
   

  
	
  14.7

  	
  Credit
  Decision

  	
   

  
	
   

  	
   

  	
   

  
	
  14.8

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  
	
  14.9

  	
  Administrative
  Agent in Individual Capacity

  	
   

  
	
   

  	
   

  	
   

  
	
  14.10

  	
  Successor
  Administrative Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  14.11

  	
  Collateral
  Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  14.12

  	
  Administrative
  Agent May File Proofs of Claim

  	
   

  
	
   

  	
   

  	
   

  
	
  14.13

  	
  Other
  Agents; Arrangers and Managers

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 15

  	
  GENERAL.

  	
   

  
	
   

  	
   

  	
   

  
	
  15.1

  	
  Waiver;
  Amendments

  	
   

  
	
   

  	
   

  	
   

  
	
  15.2

  	
  Confirmations

  	
   

  

 

vi

 

	
  15.3

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  15.4

  	
  Computations

  	
   

  
	
   

  	
   

  	
   

  
	
  15.5

  	
  Costs,
  Expenses and Taxes

  	
   

  
	
   

  	
   

  	
   

  
	
  15.6

  	
  Assignments;
  Participations.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  15.6.1

  	
  Assignments

  	
   

  
	
   

  	
  15.6.2

  	
  Participations

  	
   

  
	
   

  	
   

  	
   

  
	
  15.7

  	
  Register

  	
   

  
	
   

  	
   

  	
   

  
	
  15.8

  	
  GOVERNING
  LAW

  	
   

  
	
   

  	
   

  	
   

  
	
  15.9

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  
	
  15.10

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  15.11

  	
  Nature of
  Remedies

  	
   

  
	
   

  	
   

  	
   

  
	
  15.12

  	
  Entire
  Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  15.13

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  
	
  15.14

  	
  Successors
  and Assigns

  	
   

  
	
   

  	
   

  	
   

  
	
  15.15

  	
  Captions

  	
   

  
	
   

  	
   

  	
   

  
	
  15.16

  	
  Patriot
  Act Notice

  	
   

  
	
   

  	
   

  	
   

  
	
  15.17

  	
  Indemnification
  by the Loan Parties

  	
   

  
	
   

  	
   

  	
   

  
	
  15.18

  	
  Nonliability
  of Lenders

  	
   

  
	
   

  	
   

  	
   

  
	
  15.19

  	
  FORUM
  SELECTION AND CONSENT TO JURISDICTION

  	
   

  
	
   

  	
   

  	
   

  
	
  15.20

  	
  WAIVER OF
  JURY TRIAL

  	
   

  
	
   

  	
   

  	
   

  
	
  15.21

  	
  Other
  Waivers

  	
   

  
	
   

  	
   

  	
   

  
	
  15.22

  	
  Joint and
  Several Liability.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  15.22.1

  	
  Nature
  of Obligations

  	
   

  
	
   

  	
  15.22.2

  	
  No
  Fraudulent Conveyances

  	
   

  
	
   

  	
   

  	
   

  
	
  15.23

  	
  Revival
  and Reinstatement of Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  15.24

  	
  Intercreditor
  Agreement

  	
   

  

 

vii

 

	
  ANNEXES

  
	
   

  	
   

  
	
  ANNEX A

  	
  Lenders and Pro
  Rata Shares

  
	
  ANNEX B

  	
  Addresses for
  Notices

  
	
   

  	
   

  
	
  SCHEDULES

  
	
   

  	
   

  
	
  SCHEDULE 1.1

  	
  Specified
  Account Debtor

  
	
  SCHEDULE 9.6

  	
  Litigation and
  Contingent Liabilities

  
	
  SCHEDULE 9.8

  	
  Subsidiaries

  
	
  SCHEDULE 9.9

  	
  Pension Plans

  
	
  SCHEDULE 9.15

  	
  Environmental
  Matters

  
	
  SCHEDULE 9.16

  	
  Insurance

  
	
  SCHEDULE 9.17

  	
  Real Property

  
	
  SCHEDULE 9.19

  	
  Intellectual
  Property

  
	
  SCHEDULE 9.21

  	
  Labor Matters

  
	
  SCHEDULE 9.26

  	
  Other Debt

  
	
  SCHEDULE 10.11

  	
  Specified
  Exempted Bank Accounts

  
	
  SCHEDULE 11.2

  	
  Existing Liens

  
	
  SCHEDULE 11.10

  	
  Investments

  
	
  SCHEDULE 12.1

  	
  Debt to be
  Repaid

  
	
  SCHEDULE 12.1.1

  	
  List of Closing
  Documents

  
	
   

  	
   

  
	
  EXHIBITS

  
	
   

  	
   

  
	
  EXHIBIT A-1

  	
  Form of
  Revolving Loan Note (Section 3.1)

  
	
  EXHIBIT A-2

  	
  Form of Term
  Loan A Note (Section 3.1)

  
	
  EXHIBIT A-3

  	
  Form of Term
  Loan B Note (Section 3.1)

  
	
  EXHIBIT B

  	
  Form of
  Compliance Certificate (Section 10.1.3)

  
	
  EXHIBIT C

  	
  Form of
  Borrowing Base Certificate (Section 1.1)

  
	
  EXHIBIT D

  	
  Form of
  Assignment Agreement (Section 15.6.1)

  
	
  EXHIBIT E

  	
  Form of Notice
  of Borrowing (Section 2.2.2)

  
	
  EXHIBIT F

  	
  Form of Notice
  of Conversion/Continuation (Section 2.2.3)

  
	
  EXHIBIT G

  	
  Form of Joinder
  Agreement (Section 10.9)

  
	
  EXHIBIT H

  	
  Form of
  Intercompany Note

  

 

viii

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT
dated as of June 28, 2005 (this “Agreement”) is entered into by and
among Russ Berrie and Company, Inc. (the “Company”), those Domestic
Wholly-Owned Subsidiaries (as defined below) that are or, in accordance with Section 10.10
of this Agreement, may hereafter become parties hereto as “Borrowers” (the
Company and such Domestic Wholly-Owned Subsidiaries are sometimes referred to
herein collectively as the “Borrowers” and individually as a “Borrower”),
the financial institutions that are or may from time to time become parties
hereto as Facility A Lenders (together with their respective successors
and assigns, each being a “Facility A Lender” and collectively, the
“Facility A Lenders”), the financial institutions that are or may
from time to time become parties hereto as Facility B Lenders (together
with their respective successors and assigns, each being a “Facility B
Lender” and collectively, the “Facility B Lenders”), LASALLE
BANK NATIONAL ASSOCIATION, in its capacity as “Issuing Bank” hereunder, LASALLE
BUSINESS CREDIT, LLC (in its individual capacity, “LaSalle”), as
administrative agent (in such capacity, the “Administrative Agent”) for
the Lenders and the Issuing Bank, and those Lenders (as defined below), if any,
designated herein as the “Documentation Agent” or “Syndication Agent.”

 

The Facility A
Lenders have agreed to make available to the Borrowers a certain term loan
facility and a revolving credit facility (which includes letters of credit),
the Issuing Bank has agreed to issue letters of credit for the Borrowers, and
the Facility B Lenders have agreed to make available to the Borrowers an
additional term loan facility in each case, upon the terms and conditions set
forth herein.

 

In consideration of the
mutual agreements herein contained, the parties hereto agree as follows:

 

SECTION 1                                   DEFINITIONS.

 

1.1                                 Definitions.  When used herein the following terms shall
have the following meanings:

 

Account Debtor
is defined in the UCC.

 

Account or Accounts
is defined in the UCC.

 

Account Control Agreement
means a bank agency or other similar agreement with the Administrative Agent,
the applicable Borrower and any financial institution at which such Borrower
maintains a depositary or other account, in form and substance reasonably
satisfactory to the Administrative Agent, in order to give the Administrative
Agent “control” (as defined in the UCC) of such account. 

 

Acquired Debt
means mortgage Debt or Debt with respect to Capital Leases of a Person existing
at the time such Person became a Subsidiary or assumed by the Company or a
Domestic Wholly-Owned Subsidiary of the Company pursuant to a Permitted
Acquisition (and not created or incurred in connection with or in anticipation
of such Permitted Acquisition) which would be permitted pursuant to Section 11.4(f).

 

 

Acquisition
means any transaction or series of related transactions for the purpose of or
resulting, directly or indirectly, in (a) the acquisition of all or
substantially all of the assets of a Person, or of all or substantially all of
any business or division of a Person, (b) the acquisition of all of the
outstanding Capital Securities (including the acquisition or termination of any
rights, warrants or options to acquire the Capital Securities) of any Person,
or otherwise causing any Person to become a Wholly-Owned Subsidiary, or (c) a
merger or consolidation or any other combination with another Person (other
than a Person that is already a Wholly-Owned Subsidiary).

 

Administrative Agent
means LaSalle in its capacity as administrative agent for the Lenders and the
Issuing Bank hereunder and any successor thereto in such capacity.

 

Affected Loan
- see Section 8.3.

 

Affiliate
of any Person means (a) any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person, (b)
any officer or director of such Person and (c) with respect to any Lender, any
entity administered or managed by such Lender or an Affiliate or investment
advisor thereof and which is engaged in making, purchasing, holding or otherwise
investing in commercial loans.  A Person
shall be deemed to be “controlled by” any other Person if such Person
possesses, directly or indirectly, power to vote 10% or more of the securities
(on a fully diluted basis) having ordinary voting power for the election of
directors or managers or power to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise.  Unless expressly stated otherwise herein,
neither the Administrative Agent, the Issuing Bank nor any Lender shall be
deemed an Affiliate of any Loan Party or Subsidiary.

 

Affiliated Account Debtors means,
with respect to any Account Debtor, any other Account Debtor who, to the best
of the Chief Financial Officer’s knowledge (including after written notice
thereof from the Administrative Agent), controls, is controlled by, or is under
common control with, such Account Debtor. 
For purposes of this definition, the meaning of “control” (including,
with correlative meanings, “controlled by” and “under common control with”) is
limited to the direct or indirect legal or beneficial ownership of more than
fifty percent (50%) of the voting control or equity interests of an Account
Debtor or an Affiliated Account Debtor.

 

Agent Account has the meaning set
forth in the Guaranty and Collateral Agreement.

 

Agent Fee Letter
means that certain amended and restated letter agreement dated as of the
Closing Date among the Borrowers and the Administrative Agent regarding fees
payable to the Administrative Agent pursuant hereto and the Canadian Loan
Agreement.

 

Agreement
- see the Preamble.

 

Alternate Term
Loan B Rate means, under those circumstances where the
LIBOR Rate is unavailable or any Facility B Lender determines that the
application of the LIBOR Rate to the Term Loan B would be illegal or would
not adequately compensate such Lender therefor, in any case, in accordance with
Section 8.2 or 8.3, a rate of interest equal to the Base
Rate, plus the

 

2

 

Term Loan B
LIBOR Margin that would otherwise be applicable to such Term Loan B, minus
1.50%.

 

Applicable Margin
means, subject to the provisions of Section 10.1.3, for any day,
the rate per annum set forth below opposite the level (the “Level”) then
in effect, it being understood that the “Applicable Margin” for (i) Revolving
Loans which are designated as LIBOR Loans (the “Revolving Loan LIBOR Margin”)
shall be the percentage set forth under the column “Revolving Loan LIBOR
Margin,” (ii) Revolving Loans which are designated as Base Rate Loans (the “Revolving
Loan Base Rate Margin”) shall be the percentage set forth under the column “Revolving
Loan Base Rate Margin,” (iii) any Term Loan A which is designated as a
LIBOR Loan (the “Term Loan A LIBOR Margin”) shall be the percentage
set forth under the column “Term Loan A LIBOR Margin,” (iv) any Term
Loan A which is designated as a Base Rate Loan (the “Term Loan A
Base Rate Margin”, and together with the Revolving Loan Base Rate Margin,
being collectively, the “Base Rate Margins”) shall be the percentage set
forth under the column “Term Loan A Base Rate Margin,” (v) any Term
Loan B which is designated as a LIBOR Loan (the “Term Loan B LIBOR
Margin,” and together with the Revolving Loan LIBOR Margin and the Term
Loan A LIBOR Margin, being collectively, the “LIBOR Margins”) shall
be the percentage set forth under the column “Term Loan B LIBOR Margin,”
(vi) the Non-Use Fee Rate shall be the percentage set forth under the column “Non-Use
Fee Rate,” and (vii) the L/C Fee Rate shall be the percentage set forth under
the column “L/C Fee Rate”:

 

	
   

  	
   

  	
   

  	
   

  	
  Revolving Loan

  	
   

  	
  Term Loan A

  	
   

  	
  Term Loan B

  	
   

  
	
  Level

  	
   

  	
  Total Debt to

  EBITDA

  Ratio

  	
   

  	
  LIBOR

  Margin

  	
   

  	
  Base

  Rate

  Margin

  	
   

  	
  Non-Use

  Fee

  Rate

  	
   

  	
  L/C Fee

  Rate

  	
   

  	
  Base

  Rate

  Margin

  	
   

  	
  LIBOR

  Margin

  	
   

  	
  LIBOR

  Margin

  	
   

  
	
  I

  	
   

  	
  Greater than or
  equal to 2.75:1

  	
   

  	
  2.25

  	
  %

  	
  0.75

  	
  %

  	
  0.50

  	
  %

  	
  2.25

  	
  %

  	
  1.25

  	
  %

  	
  2.75

  	
  %

  	
  7.50

  	
  %

  
	
  II

  	
   

  	
  Greater than or
  equal to 2.25:1 but less than 2.75:1

  	
   

  	
  2.00

  	
  %

  	
  0.50

  	
  %

  	
  0.50

  	
  %

  	
  2.00

  	
  %

  	
  1.00

  	
  %

  	
  2.50

  	
  %

  	
  7.00

  	
  %

  
	
  III

  	
   

  	
  Greater than or
  equal to 1.75:1 but less than 2.25:1

  	
   

  	
  1.75

  	
  %

  	
  0.25

  	
  %

  	
  0.375

  	
  %

  	
  1.75

  	
  %

  	
  0.75

  	
  %

  	
  2.25

  	
  %

  	
  6.50

  	
  %

  
	
  IV

  	
   

  	
  Less than 1.75:1

  	
   

  	
  1.50

  	
  %

  	
  0.00

  	
  %

  	
  0.375

  	
  %

  	
  1.50

  	
  %

  	
  0.50

  	
  %

  	
  2.00

  	
  %

  	
  6.00

  	
  %

  

 

The Revolving Loan LIBOR
Margin, the Revolving Loan Base Rate Margin, the Term A Loan Base Rate Margin,
the Term Loan A LIBOR Margin, the Term Loan B LIBOR Margin, the
Non-Use Fee Rate and the L/C Fee Rate shall be determined and adjusted, to the
extent applicable, on the first Business Day after the Company provides the
Administrative Agent the annual and quarterly financial statements and other
information pursuant Section 10.1.1 or 10.1.2(a), as
applicable, and the related Compliance Certificate, pursuant to Section 10.1.3.  Notwithstanding anything contained in this
paragraph to the contrary, (a) if the Company fails to deliver such financial
statements and Compliance Certificate in accordance with the provisions of Sections
10.1.1, 10.1.2(a) and 10.1.3, the Revolving Loan LIBOR
Margin, the Revolving

 

3

 

Loan Base Rate
Margin, the Term Loan B LIBOR Margin, the Term Loan A Base Rate
Margin, the Term Loan A LIBOR Margin, the Non-Use Fee Rate and the L/C Fee
Rate shall be based upon Level I above beginning on the date such financial
statements and Compliance Certificate were required to be delivered until the
first Business Day after such financial statements and Compliance Certificate
are actually delivered, whereupon the Applicable Margin shall be determined by
the then applicable Level; and (b) no reduction to any Applicable Margin shall
become effective at any time when an Event of Default or Unmatured Event of
Default has occurred and is continuing. 
Notwithstanding the foregoing, the Applicable Margins to be in effect on
the Closing Date and thereafter, until delivery of the financial statements and
compliance certificate required to be delivered as aforesaid with respect to
the Borrower’s Fiscal Year ending December 31, 2005, shall be based on
Level III, in the case of Revolving Loans, Term Loan A, the Non-Use Fee
Rate and the L/C Fee Rate, and on Level II, in the case of Term Loan B.

 

Asset Disposition
means the sale, lease, assignment or other transfer for value by any Loan Party
to any Person (other than a Loan Party) of any asset or right of such Loan
Party (including, the loss, destruction or damage of any thereof or any actual
condemnation, confiscation, requisition, seizure or taking thereof) (each, a “Disposition”),
other than (1) than the sale, lease or other dispositions of Inventory in the
ordinary course of business or any Disposition of Equipment sold in the
ordinary course of the Loan Parties’ business and not having an aggregate book
value of more than $500,000 in any Fiscal Year and (2) the sale and leaseback
in one or more transactions in the ordinary course of business of Equipment
having an aggregate book value of less than $2,500,000.

 

Assignment Agreement
- see Section 15.6.1.

 

Attorney Costs
means, with respect to any Person, all reasonable fees and charges of any
counsel to such Person, the reasonable allocable cost of internal legal
services of such Person, all reasonable disbursements of such internal counsel
and all court costs and similar legal expenses, in each case, without
duplication.

 

Bank Product Agreements
means those certain cash management service agreements entered into from time
to time between any Loan Party and LaSalle Bank, any Facility A Lender or any
of their respective Affiliates in connection with any of the Bank Products.

 

Bank Product Obligations
means all obligations, liabilities, contingent reimbursement obligations, fees,
and expenses owing by the Loan Parties to LaSalle Bank, any Facility A Lender
or any of their respective Affiliates pursuant to or evidenced by the Bank
Product Agreements and irrespective of whether for the payment of money, whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, and including all such amounts that a Loan Party is
obligated to reimburse to the Administrative Agent or LaSalle Bank, any
Facility A Lender or any of their respective Affiliates as a result of the
Administrative Agent or LaSalle Bank, any Facility A Lender or any of their
respective Affiliates purchasing participations or executing indemnities or
reimbursement obligations with respect to the Bank Products provided to the
Loan Parties pursuant to the Bank Product Agreements.

 

4

 

Bank Products
means any service or facility extended to any Loan Party by LaSalle Bank, any
Facility A Lender or any of their respective Affiliates including:  (a) credit cards, (b) credit card processing
services, (c) debit cards, (d) purchase cards, (e) ACH Transactions, or (f)
cash management, including controlled disbursement, accounts or services.

 

Bankruptcy Code
means Section 548 of Chapter 11 of Title II of the United States Code (11
U.S.C. § 101, et seq.).

 

Base Rate
means at any time the greater of (a) the Federal Funds Rate plus 0.5% and
(b) the Prime Rate.

 

Base Rate Loan
means any Loan which bears interest at or by reference to the Base Rate.

 

Base Rate Margin
- see the definition of Applicable Margin.

 

Board of Directors
means the board of directors of the Company or any committee thereof duly
authorized to act on behalf of the board of directors.

 

Borrower and Borrowers
- see Preamble.

 

Borrowing Base
means an amount equal to:

 

(A)                              the
total of (a) up to 85% of the unpaid amount of all Eligible Accounts, plus (b)
the lesser of (x) up to 65% of the value of all Eligible Inventory valued at
the lower of cost or market, (y) up to 85% of the value of all Eligible
Inventory Valued at the Net Orderly Liquidation Value thereof as determined by
the Administrative Agent from time to time in its commercially reasonable
credit judgment after consultation with the Loan Party Representative; and minus

 

(B)                                the
EDA Reserve; and minus

 

(C)                                the
Rent Reserve, if any, in effect at such time; and minus

 

(D)                               the
estimated aggregate amount of the Specified Hedging Obligations as determined
in good faith as between the Administrative Agent, the Loan Party
Representative and the counterparty on such Specified Hedging Agreements; and minus

 

(E)                                 such
other reserves as the Administrative Agent elects, in its commercially
reasonable credit judgment after consultation with the Loan Party Representative,
to establish from time to time.

 

Borrowing Base
Certificate means a certificate substantially in the form of Exhibit
C.

 

Bright of American Note
- see Section 11.14.

 

BSA -
see Section 10.4.

 

5

 

Business Day
means any day on which commercial banks are open for commercial banking
business in Chicago, Illinois and New York, New York and, in the case of a
Business Day which relates to a LIBOR Loan, on which dealings are carried on in
the London interbank eurodollar market.

 

Canadian Agent
means LaSalle Business Credit, a division of ABN AMRO Bank N.V., Canada Branch,
a Canadian branch of a Netherlands bank.

 

Canadian Borrower
means Amram’s Distributing Ltd., a corporation organized under the laws of
Canada.

 

Canadian Guaranty
means that certain Guaranty dated as of June 28, 2005 (as the same may be
amended, restated, supplemented or otherwise modified from time to time),
executed by the Company in favor of the Canadian Agent and guaranteeing the
obligations owing by the Canadian Borrower under the Canadian Loan Documents.

 

Canadian Intercreditor
Agreement means an intercreditor agreement between the
Canadian Agent and the Administrative Agent in form and substance reasonably
satisfactory to the Administrative Agent, pursuant to which the Canadian Agent
shall, among other things, subordinate its rights to payments and to enforce
its remedies, in each case, under the Canadian Guaranty, to those of the
Lenders hereunder and under the other Loan Documents.

 

Canadian Lenders
means the “Lenders” as defined under the Canadian Loan Agreement.

 

Canadian Loan Agreement
means that certain Credit Agreement dated as of June 28, 2005 (as the same
may be amended, restated, supplemented or otherwise modified from time to
time), among the Canadian Agent, the Canadian Lenders and the Canadian Borrower
and acknowledged by the Company.

 

Canadian Loan Documents
means the “Loan Documents” as defined under the Canadian Loan Agreement.

 

Capital Expenditures
means with respect to any Person all expenditures which, in accordance with
GAAP, would be required to be capitalized and shown on the consolidated balance
sheet of such Person, including expenditures in respect of Capital Leases.

 

Capital Lease
means, with respect to any Person, any lease of (or other agreement conveying
the right to use) any real, personal or mixed property by such Person that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of such Person.

 

Capital Securities
means, with respect to any Person, all shares, interests, participations or
other equivalents (however designated, whether voting or non-voting) of such
Person’s capital, whether now outstanding or issued or acquired after the
Closing Date, including common shares, preferred shares, membership interests
in a limited liability company, limited or general partnership interests in a
partnership, interests in a trust, interests in other unincorporated
organizations or any other equivalent of such ownership interest.

 

6

 

Cash Collateralize
means to deliver cash collateral to the Administrative Agent in the amount
equal to 105% of the sum of (x) the Stated Amount plus (y) the amount of
unpaid letter of credit fees then accrued and thereafter scheduled to accrue
for the duration of the outstanding Letters of Credit pursuant to Section 5.2(a)
and (b), to be held as cash collateral for outstanding Letters of Credit
pursuant to documentation reasonably satisfactory to the Administrative
Agent.  Derivatives of such term have
corresponding meanings.

 

Cash Equivalent
Investment means, at any time, (a) any evidence of Debt,
maturing not more than one year after such time, issued or guaranteed by the
United States Government or any agency thereof, (b) commercial paper, maturing
not more than one year from the date of issue, or corporate demand notes, in
each case (unless issued by a Lender, its Affiliate or its holding company)
rated at least A-2 by Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc. or P-2 by Moody’s Investors Service, Inc., (c) any
certificate of deposit, time deposit or banker’s acceptance, maturing not more
than one year after such time, or any overnight Federal Funds transaction that
is issued or sold by LaSalle Bank or its holding company (or by a commercial
banking institution that is a member of the Federal Reserve System and has a
combined capital and surplus and undivided profits of not less than
$250,000,000), (d) any repurchase agreement entered into with any Lender (or
commercial banking institution of the nature referred to in clause (c))
which (i) is secured by a fully perfected security interest in any obligation
of the type described in any of clauses (a) through (c) above and
(ii) has a market value at the time such repurchase agreement is entered into
of not less than 100% of the repurchase obligation of such Lender (or other
commercial banking institution) thereunder and (e) money market accounts or
mutual funds which at least 90% of its assets satisfying the foregoing
requirements, and (f) other short term liquid investments approved in
writing by the Administrative Agent.

 

Change of Control
means each occurrence of any of the following:

 

(a)                                  any
“person” or “group” (within the meaning of Sections 13(d) and 14(d) of the
Exchange Act), other than Permitted Holders, becomes the beneficial owner (as
defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of 50.1% or
more of the Capital Securities of the Company having the right to vote for the
election of members of the Board of Directors,

 

(b)                                 a
majority of the members of the Board of Directors do not constitute Continuing
Directors,

 

(c)                                  the
Company ceases to own and control, directly or indirectly, 100% of the shares
of the Capital Securities of each of the other Loan Parties, unless otherwise
permitted hereunder, or

 

(d)                                 (i)
the Company consolidates with or merges with or into another entity (other than
another Loan Party) and is not the surviving entity or (ii) conveys, transfers
or leases all or substantially all of its property and assets to any Person
(other than a Loan Party).

 

7

 

Chief Financial Officer
means the chief financial officer of the Company.

 

Closing Date
- see Section 12.1.

 

Code
means the Internal Revenue Code of 1986.

 

Collateral
has the meaning set forth in the Guaranty and Collateral Agreement.

 

Collateral Access
Agreement means an agreement in form and substance reasonably
satisfactory to the Administrative Agent pursuant to which a mortgagee or
lessor of real property on which Collateral is stored or otherwise located, or
a warehouseman, processor or other bailee of Inventory or other property owned
by any Loan Party, acknowledges the Liens of the Administrative Agent and
waives or, in the reasonable discretion of the Administrative Agent,
subordinates on terms reasonably acceptable to the Administrative Agent, any
Liens held by such Person on such property, and, in the case of any such
agreement with a mortgagee or lessor, permits the Administrative Agent
reasonable access to and use of such real property following the occurrence and
during the continuance of an Event of Default to assemble, complete and sell
any Collateral stored or otherwise located thereon.

 

Collateral Documents
means, collectively, the Guaranty and Collateral Agreement, the Limited Pledge
Agreement, each Mortgage, each Collateral Access Agreement, each Account
Control Agreement and any other agreement or instrument pursuant to which any
Loan Party, any Subsidiary or any other Person grants or purports to grant
Collateral to the Administrative Agent for the benefit of the Lenders or
otherwise relates to such Collateral.

 

Commitment
means, as to any Lender, such Lender’s commitment to make Revolving Loans, a
Term Loan A or a Term Loan B and/or to issue or participate in
Letters of Credit, in each case as applicable under this Agreement and “Commitments”
means the Revolving Commitments, the Term Loan A Commitments and the Term
Loan B Commitments of all Lenders. 
The initial amount of each Lender’s Commitment to make Loans is set
forth on Annex A.

 

Company
- see the Preamble.

 

Compliance Certificate
means a Compliance Certificate in substantially the form of Exhibit B.

 

Computation Period
means each period of four consecutive Fiscal Quarters ending on the last day of
a Fiscal Quarter.

 

Consolidated Net Income
means, with respect to the Company and its consolidated Subsidiaries, on a
consolidated basis, for any period, the net income (or loss) of the Company and its consolidated Subsidiaries for
such period, in each case, determined in accordance with GAAP, but excluding
any extraordinary after-tax gains and losses, any non-recurring gains or
losses, or any non-cash gains or losses from Asset Dispositions, any non-cash restructuring
charges, any tax refunds, net operating losses
or other net tax benefits and any
after-tax gains and losses from discontinued operations.

 

8

 

Contingent Liability
means, with respect to any Person, each obligation and liability of such Person
and all such obligations and liabilities of such Person incurred pursuant to
any agreement, undertaking or arrangement by which such Person:  (a) guarantees, endorses or otherwise becomes
or is contingently liable upon (by direct or indirect agreement, contingent or
otherwise, to provide funds for payment, to supply funds to, or otherwise to
invest in, a debtor, or otherwise to assure a creditor against loss) the
indebtedness, dividend, obligation or other liability of any other Person in
any manner (other than by endorsement of instruments in the course of
collection), including any indebtedness, dividend or other obligation which may
be issued or incurred at some future time; (b) guarantees the payment of
dividends or other distributions upon the Capital Securities of any other
Person; (c) undertakes or agrees (whether contingently or otherwise):  (i) to purchase, repurchase, or otherwise
acquire any indebtedness, obligation or liability of any other Person or any
property or assets constituting security therefor, (ii) to advance or provide
funds for the payment or discharge of any indebtedness, obligation or liability
of any other Person (whether in the form of loans, advances, stock purchases,
capital contributions or otherwise), or to maintain solvency, assets, level of
income, working capital or other financial condition of any other Person, or
(iii) to make payment to any other Person other than for value received; (d)
agrees to lease property or to purchase securities, property or services from
such other Person with the purpose or intent of assuring the owner of such
indebtedness or obligation of the ability of such other Person to make payment
of the indebtedness or obligation; (e) to induce the issuance of, or in
connection with the issuance of, any letter of credit for the benefit of such
other Person; or (f) undertakes or agrees otherwise to assure a creditor
against loss.  The amount of any Contingent
Liability shall (subject to any limitation set forth herein) be deemed to be
the outstanding principal amount (or maximum permitted principal amount, if
larger) of the indebtedness, obligation or other liability guaranteed or
supported thereby.  The term “Contingent
Liability” shall exclude endorsements of instruments for deposit or collection
in the ordinary course of business and product warranties extended in the
ordinary course of business.

 

Continuing Director
means (a) any member of the Board of Directors who was a director (or comparable
manager) of the Company on the Closing Date, and (b) any individual who becomes
a member of the Board of Directors after the Closing Date if such individual
was appointed or nominated for election to the Board of Directors by a majority
of the Continuing Directors.

 

Controlled Group
means all members of a controlled group of corporations, all members of a
controlled group of trades or businesses (whether or not incorporated) under
common control and all members of an affiliated service group which, together
with the Company or any of its Subsidiaries, are treated as a single employer
under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of
ERISA.

 

Debt  - of any Person means, without duplication, (a) all
indebtedness of such Person, (b) all borrowed money of such Person, whether or
not evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person as lessee under Capital Leases which have been or
should be recorded as liabilities on a balance sheet of such Person in
accordance with GAAP, (d) all obligations of such Person to pay the deferred
purchase price of property or services (excluding trade accounts payable or
other accounts payable incurred in the ordinary

 

9

 

course of such
Person’s business), (e) all indebtedness secured by a Lien on the property of
such Person, whether or not such indebtedness shall have been assumed by such
Person; provided that if such Person has not assumed or otherwise become
liable for such indebtedness, such indebtedness shall be measured at the fair
market value of such property securing such indebtedness at the time of
determination, (f) all obligations, contingent or otherwise, with respect to
the face amount of all letters of credit (whether or not drawn), bankers’
acceptances and similar obligations issued for the account of such Person
(including the Letters of Credit), (g) all Hedging Obligations of such Person,
(h) all Contingent Liabilities of such Person, (i) all Debt of any partnership
of which such Person is a general partner, (j) all monetary obligations of such
Person under (i) so called synthetic, off-balance sheet or tax retention leases
(solely for purposes of calculating compliance with the financial covenants set
forth in Section 11.13 or the Total Debt to EBITDA Ratio for
purposes of determining the Applicable Margin, discounted to present value at a
reasonable capitalization rate fixed reasonably acceptable to the
Administrative Agent), or (ii) an agreement for the use or possession of
property creating obligations that do not appear on the balance sheet of such
Person but which, upon the insolvency or bankruptcy of such Person, would be
characterized as the indebtedness of such Person (without regard to accounting
treatment), (k) any Capital Securities or other equity instrument, whether or
not mandatorily redeemable, that under GAAP is characterized as debt, whether
pursuant to Financial Accounting Standards Board Issuance No. 150 or otherwise,
and (l) the Restricted Debt.

 

Debt to be Repaid
means Debt listed on Schedule 12.1.

 

Defaulting Lender
– see Section 2.1.1(c).

 

Designated Proceeds
- see Section 6.2.2.

 

Disposition
– see the definition of “Asset Disposition.”

 

Disproportionate Advance
– see Section 2.2.2.

 

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

 

Domestic Wholly-Owned
Subsidiary means any wholly-owned direct or indirect
Subsidiary (other than any Inactive Subsidiary) of a Loan Party which is
organized under the laws of any state in the United States of America.  Unless the context otherwise requires, each
reference to a Domestic Wholly-Owned Subsidiary herein shall be a reference to
a Domestic Wholly-Owned Subsidiary of the Company.

 

Earnout Consideration
means the “Earnout Consideration” as defined in the Kids Line Purchase
Agreement as in effect on the date hereof (without giving effect to any
amendment or other modification thereof after the Closing Date, except to the
extent expressly permitted hereunder). As used herein, the term “Earnout
Consideration” shall also include any payments in respect of any guaranty of
the Earnout Consideration.

 

Earnout Sellers
means, collectively, the “Deferred Payout Sellers” as defined in the Kids Line
Purchase Agreement as in effect on the date hereof (without giving effect to
any

 

10

 

amendment or other
modification thereof after the Closing Date, except to the extent expressly
permitted hereunder).

 

Earnout Sellers Agent
means California KL Holdings, Inc., a California corporation, as agent for the
Earnout Sellers.

 

Earnout Sellers Lien
means the Lien in favor of the Earnout Sellers under the Earnout Security
Documents, which Lien shall at all times be junior in priority to the Liens in
favor of the Administrative Agent securing the Obligations.

 

Earnout Security
Documents means, collectively, that certain Guaranty, dated
as of December 15, 2004, executed by the Company and each of its
subsidiaries party thereto in favor of the Earnout Sellers Agent, that certain
Subordinated Security Agreement, dated as of December 15, 2004, executed
by the Company in favor of the Earnout Sellers Agent for the benefit of the
Earnout Sellers as security for the Company’s obligations with respect to
payment of the Earnout Consideration, that certain Subordinated Mortgage by and
from Sassy, Inc. to the Earnout Sellers Agent, dated as of January 28,
2005, and any other agreement, instrument, and other document executed and
delivered pursuant thereto or related to such security interests, in each case
as in effect on the date hereof (without giving effect to any amendment or
other modification thereof after the Closing Date except to the extent
expressly permitted hereunder).

 

Earnout Subordination
Agreement means that certain Subordination Agreement dated as
of the Closing Date (as amended, restated, supplemented or otherwise defined
from time to time in accordance with the terms hereof) among the Administrative
Agent, the Earnout Sellers and the Earnout Seller’s Agent.

 

EBITDA
means, for any period, with respect to the Company and its consolidated
Subsidiaries on a consolidated basis, Consolidated Net Income for such period
plus (minus), to the extent deducted (added) in determining such Consolidated
Net Income, (i) Interest Expense, (ii) income tax expense, (iii)
depreciation, (iv) amortization, (v) other non-cash charges (gains), (vi) to
the extent not prohibited by the terms hereof, payments made with respect to
the Earnout Consideration and/or the Sassy Earnout Consideration, (vii) if
expensed, reasonable costs, expenses and fees incurred in connection with the
negotiation, execution and delivery of the Loan Documents, the Canadian Loan
Documents, and the financings contemplated thereby, and (ix) non-cash transaction
losses (gains) due solely to fluctuations in currency values, in each case,
during such period.  For purposes of
calculating the financial covenants set forth in Sections 11.13.1 and 11.13.2,
EBITDA for Fiscal Quarters ended on September 30, 2004, December 31,
2004 and March 31, 2005 shall be deemed to be $15,253,000, $10,774,000 and
$2,926,000, respectively.

 

EDA
means the New Jersey Economic Development Authority, a public body corporate
and politic constituting an instrumentality of the State of New Jersey.

 

EDA Bondholders
means, collectively, the holders of EDA Bonds.

 

EDA Bonds
means, collectively, the Variable/Fixed Rate Economic Development Bonds
(Russell Berrie – 1983 Project) issued pursuant to the EDA Bond Indenture.

 

11

 

EDA Bond Indenture
means that certain Indenture of Trust dated as of December 1, 1983 by the
EDA and the EDA Bond Trustee with respect to the EDA Bonds.

 

EDA Bond Trustee
means Deutsche Bank Trust Company Americas, as successor trustee to Bankers
Trust Company under the EDA Bond Indenture, or any successor trustee.

 

EDA Borrower
means the Estate of Russell Berrie or its distributee, Angelica Berrie.

 

EDA Documents
means, collectively, the EDA Loan Guarantee, the EDA Standby L/C Reimbursement
Agreement, the EDA Standby L/C, the EDA Bond Indenture, the EDA Loan Agreement,
the EDA Financing Statements, and the EDA Standby L/C Reimbursement Agreement
Modification Letter.

 

EDA Financing Statements
means (i) that certain financing statement naming the Company as debtor and EDA
Standby L/C Issuer as secured party, filed on February 17, 2000 in the UCC
Section, Department of Treasury of the State of New Jersey under file number
1957259 (including any continuations thereof), and (ii) that certain financing
statement (or continuation thereof) naming the Company as debtor and EDA Bond
Trustee as secured party, filed on December 10, 2004 in the UCC Section,
Department of Treasury of the State of New Jersey under file number 22713766.

 

EDA Loan Agreement
means that certain Loan Agreement dated as of December 1, 1983 between EDA
and EDA Borrower.

 

EDA Loan Guarantee
means that certain Guarantee dated as of December 1, 1983, by the Company
in favor of the EDA, the EDA Bond Trustee and EDA Bondholders, purporting to
guaranty the obligations of EDA Borrower under the EDA Loan Agreement or any
substitute guaranty therefor executed by the Company on substantially the same
terms (for purposes of clarity, changes to material terms thereof shall not be
deemed substantially the same terms), or otherwise in form and substance
reasonably satisfactory to the Administrative Agent (in each case, without
giving effect to any amendment or other modification thereof after the Closing
Date, except to the extent expressly permitted hereunder).

 

EDA Lien
means the security interest granted by the Company in favor of the EDA Bond
Trustee and the EDA Standby L/C Issuer on accounts receivable and inventory of
the Company to secure its obligations under the EDA Loan Guarantee and the EDA
Standby L/C Reimbursement Agreement.

 

EDA Reserve
means an amount equal to $2,000,000 (or, if less, the maximum aggregate amount
of the Company’s and any other Loan Party’s obligations under the EDA Loan
Guarantee and the EDA Standby L/C Reimbursement Agreement).

 

EDA Standby L/C Issuer
means The Bank of New York or any successor thereto as the issuer of the EDA
Standby L/C.

 

EDA Standby L/C
means that certain Letter of Credit dated March 25, 1994, as amended as of
the Closing Date issued by the EDA Standby L/C Issuer for the account of the
Company in

 

12

 

a maximum amount
available to be drawn thereunder of $7,388,356.16 or any other letter of credit
issued for the account of the Company upon or following the expiration of the
aforementioned Letter of Credit to secure the payment of the EDA Bonds in an
amount not to exceed $7,388,356.16 and having substantially the same terms as
the aforementioned Letter of Credit (other than the maturity date thereof) (in
each case, without giving effect to any amendment or other modification thereof
after the Closing Date, except to the extent expressly permitted hereunder).

 

EDA Standby L/C
Reimbursement Agreement means that certain Amended and
Restated Letter of Credit and Reimbursement Agreement dated as of March 25,
1994, as amended through the Closing Date, between the EDA Standby L/C Issuer
and the Company or any replacement agreement therefor executed by the Company
in connection with any replacement EDA Standby L/C, on substantially the same
terms (for purposes of clarity, changes to material terms thereof shall not be
deemed substantially the same terms), or otherwise in form and substance
reasonably satisfactory to the Administrative Agent (in each case, without
giving effect to any amendment or other modification thereof after the Closing
Date, except to the extent expressly permitted hereunder).

 

EDA Standby L/C
Reimbursement Agreement Modification Letter means that
certain letter agreement dated as of June 28, 2005 from the EDA Standby
L/C Issuer to the Administrative Agent regarding limitations on the EDA Standby
L/C Issuer’s ability to require additional cash collateral for the Company’s
reimbursement obligations under the EDA Standby L/C Reimbursement Agreement.

 

Eligible Account
means an Account (other than any portion of which is owing in respect of sales,
excise or similar taxes) owing to a Borrower which is acceptable for lending
purposes to the Administrative Agent in its commercially reasonable credit
judgment.  Without limiting the
Administrative Agent’s aforementioned credit judgment, the Administrative Agent
shall, in general, consider an Account to be an Eligible Account if it meets,
and so long as if continues to meet, the following requirements:

 

(a)                                  it
arises from the final, bona fide sale
or lease of goods or the rendering of services which have been fully performed
by such Borrower; and if it arises from the sale or lease of goods, (i) such
goods comply with the relevant Account Debtor’s specifications (if any) and
have been delivered to such Account Debtor and (ii) such Borrower has
possession of delivery receipts evidencing such delivery;

 

(b)                                 it
(i) is owned by such Borrower, (ii) is subject to a perfected, first priority
Lien in favor of the Administrative Agent and (iii) is not subject to any other
assignment, claim or Lien, other than the Earnout Sellers Lien to the extent
such Lien remains subordinated to the Liens of the Administrative Agent
hereunder pursuant to the Earnout Subordination Agreement; and the EDA Lien to
the extent the full amount thereof is covered by the EDA Reserve; provided
that, if subject to any such other assignment, claim or Lien (other than the
Earnout Sellers Lien and the EDA Lien as aforesaid), such Account shall be
deemed ineligible pursuant to this clause (b) only to the extent of the
amount of such assignment, claim or Lien;

 

13

 

(c)                                  it
(i) is a valid, legally and enforceable obligation of the Account Debtor with
respect thereto, (ii) is not subject to (x) the fulfillment of any condition
whatsoever or any counterclaim, offset, credit, allowance, discount, rebate, or
adjustment by the Account Debtor with respect thereto, or (y) any claim by such
Account Debtor denying liability thereunder in whole or in part; provided that
only such portion of such Account subject to such counterclaim, offset, credit,
allowance, discount, rebate, adjustment or liability shall be deemed ineligible
pursuant to this clause (c)(ii), and (iii) the Account Debtor has not
refused to accept and/or has not returned or offered to return any of the goods
or services which are the subject of such Account;

 

(d)                                 there
is no bankruptcy, insolvency or liquidation proceeding pending by or against
the Account Debtor or any Affiliated Account Debtor with respect thereto;

 

(e)                                  the
Account Debtor with respect thereto is a resident or citizen of, and is located
within, the United States (including Puerto Rico, the U.S. Virgin Islands and
Guam) or Canada (excluding Newfoundland, the Northwest Territories or Nunavut),
unless the sale of goods or rendering of services giving rise to such Account
is on letter of credit, bankers’ acceptance or other credit support terms
reasonably acceptable to the Administrative Agent (any such Account in respect
of which the Account Debtor thereon is a resident of Canada, being a “Canadian
Account”), and such Account is denominated in United States dollars, or in
the case of a Canadian Account, Canadian dollars;

 

(f)                                    it
is not (i) an Account arising from a “sale on approval,” “sale or return,” “consignment”
or “bill and hold” or subject to any other repurchase or return agreement, or
(ii) subject to a reserve or contra-account established by such Borrower
for potential returns or refunds (without duplication of any other reserve or
deductions regarding such returns or refunds); provided that only such portion
of such Account in the amount of such reserve or contra-account shall be deemed
ineligible pursuant to this clause (f)(ii);

 

(g)                                 it
is not an Account with respect to which possession and/or control of the goods
sold giving rise thereto is held, maintained or retained by such Borrower (or
by any agent or custodian of such Borrower) for the account of or subject to
further and/or future direction from the Account Debtor with respect thereto;

 

(h)                                 it
arises in the ordinary course of business of such Borrower;

 

(i)                                     if
the Account Debtor is the United States or any state or local government, or
any department, agency or instrumentality thereof, such Borrower has assigned
its right to payment of such Account to the Administrative Agent pursuant to
the Assignment of Claims Act of 1940 or any comparable state or local law, as
applicable, and evidence (reasonably satisfactory to the Administrative Agent)
of such assignment has been delivered to the Administrative Agent;

 

(j)                                     if
such Borrower maintains a credit limit for an Account Debtor, the aggregate dollar
amount of Accounts due from such Account Debtor and its Affiliated Account
Debtors, including such Account, does not exceed such credit limit; provided 

 

14

 

that only such
portion of such Account that exceeds such credit limit shall be deemed
ineligible pursuant to this clause (j);

 

(k)                                  it
is not an Account evidenced by chattel paper or an instrument;

 

(l)                                     such
Account is evidenced by an invoice delivered to the related Account Debtor and
is not more than (i) 60 days past the due date thereof or (ii) 90 days past the
original invoice date thereof, in each case according to the original terms of
sale; provided that up to $10,000,000 of Accounts evidenced by invoices not
more than (x) 60 days past the due date thereof or (y) 180 days past
the original invoice date thereof but which otherwise meet all other
eligibility criteria hereunder shall not be deemed ineligible pursuant to this clause
(l);

 

(m)                               it
is owing by an Account Debtor in respect of which 35% or more of the aggregate
dollar amount of all Accounts owing by such Account Debtor and its Affiliated
Account Debtors are ineligible pursuant to clause (l) immediately above;

 

(n)                                 it
is not an Account with respect to an Account Debtor that is located in any
jurisdiction which has adopted a statute or other requirement with respect to
which any Person that obtains business from within such jurisdiction must file
a notice of business activities report or make any other required filings in a
timely manner in order to enforce its claims in such jurisdiction’s courts
unless (i) such notice of business activities report has been duly and timely
filed or such Borrower is exempt from filing such report and has provided the
Administrative Agent with reasonably satisfactory evidence of such exemption or
(ii) the failure to make such filings may be cured retroactively by such
Borrower for a nominal fee;

 

(o)                                 the
Account Debtor or Affiliated Account Debtor with respect thereto is not (i) a
Loan Party or an Affiliate of a Loan Party or (ii) a director, officer,
employee or agent of a Loan Party or an Affiliate of a Loan Party;

 

(p)                                 if
the aggregate amount of all Accounts owed by the Account Debtor and its
Affiliated Account Debtors thereon exceeds 15% of the aggregate amount of all
Eligible Accounts at such time, then all Accounts owed by such Account Debtor
or Affiliated Account Debtors in excess of such amount shall be deemed
ineligible; provided, however with respect to each of (1) the
Borrowers’ largest Account Debtor and its Affiliated Account Debtors as set
forth on Schedule 1.1, and (2) any other Account Debtor and its
Affiliated Account Debtors that have a long-term unsecured debt rating of BBB
or better by Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc. or the equivalent rating from Moody’s Investors Services, Inc.
(each Account Debtor described in clause (1) and (2) above, being a “Specified
Account Debtor”), if the aggregate amount of all Accounts owed by such
Specified Account Debtor (including those owned by its Affiliated Account
Debtors) thereon exceeds 35% of the aggregate amount of all Eligible Accounts
at such time, then all Accounts owed by such Specified Account Debtor and its
Affiliated Account Debtors in excess of such amount shall be deemed ineligible;

 

15

 

(q)                                 it
is not an Account (i) with respect to which any representation or warranty
contained in this Agreement or any other Loan Document is untrue in any
material respect (or, if such representation or warranty is qualified by
materiality or Material Adverse Effect, in any respect), (ii) which violates
any of the covenants contained in this Agreement, any other Loan Document or
the agreement or contract under which it arises in any material respect (or, if
such covenant is qualified by materiality or Material Adverse Effect, in any
respect), or (iii) which arises out of a contract or order which fails in
any material respect to comply with the requirements of applicable law;

 

(r)                                    it
is not an Account for which such Borrower has received any prepayment or a
deposit in respect of such Account; provided, that the amount of such Account
in excess of the amount of any such prepayment and/or deposit shall not be
deemed ineligible pursuant to this clause (r); and

 

(s)                                  it
does not arise from the sale of goods covered under any license agreement,
distribution agreement or other similar agreement that prohibits the granting
of Liens in the proceeds of such goods in favor of the Administrative Agent to
secure the Obligations (and such prohibition has not been waived).

 

An Account which is at
any time an Eligible Account, but which subsequently fails to meet any of the
foregoing requirements shall forthwith cease to be an Eligible Account.  Further, with respect to any Account, if the
Administrative Agent or the Required Facility A Lenders at any time
hereafter determine in its or their reasonable credit judgment that the
prospect of payment or performance by the Account Debtor with respect thereto
is materially impaired for any reason whatsoever, such Account shall cease to
be an Eligible Account after consultation with, and notice of such
determination is given to, the Loan Party Representative.

 

Eligible Assignee
means (i) commercial banks organized under the laws of the United States,
or any State thereof, and having combined capital and surplus of at least
$500,000,000; (ii) commercial banks organized under the laws of any other
country that is a member of the OECD or has concluded special lending
arrangements with the International Monetary Fund associated with its General
Arrangements to borrow, or a political subdivision of any such country, and
having combined capital and surplus of at least $500,000,000, so long as any
such bank is acting through a branch or agency located in the United States;
(iii) finance companies, insurance companies or other financial
institutions or funds (whether corporations, partnerships, trusts or other
entities) that are regularly engaged in the United States in making, purchasing
or otherwise investing in commercial loans in the ordinary course of its
business and having combined capital and surplus of at least $500,000,000 or
with respect to any funds with total assets under its management in excess of
$250,000,000; and (iv) any other Person other than an Affiliate of a Loan
Party approved by the Administrative Agent and the Loan Party Representative,
such approval not to be unreasonably withheld or delayed; provided that in no
event shall the Facility B Lender be an Eligible Assignee of any Facility A
Lender with respect to any portion of the Facility A Obligations.

 

16

 

Eligible Inventory
means Inventory of a Borrower which is acceptable for lending purposes to the
Administrative Agent in its commercially reasonable credit judgment.  Without limiting the Administrative Agent’s
aforesaid credit judgment, the Administrative Agent shall, in general, consider
Inventory to be Eligible Inventory if it meets, and for so long as it continues
to meet, each of the following requirements:

 

(a)                                  it
(i) is owned by such Borrower, (ii) is subject to a perfected, first priority
Lien in favor of the Administrative Agent and (iii) is not subject to any other
assignment, claim or Lien, other than the Earnout Sellers Lien, to the extent
such Lien remains subordinated to the Liens of the Administrative Agent
hereunder pursuant to the Earnout Subordination Agreement, and the EDA Lien, to
the extent the full amount thereof is covered by the EDA Reserve; provided
that, if subject to any such other assignment, claim or lien (other than the
Earnout Sellers’ Lien and the EDA Lien as aforesaid), such Inventory shall be
deemed ineligible pursuant to this clause (a) only to the extent of the
amount of such assignment, claim or Lien;

 

(b)                                 it
is salable and not slow-moving, obsolete or discontinued;

 

(c)                                  it
is in the possession and control of a Loan Party and it is stored and held in
facilities owned by a Loan Party (and not subject to a mortgage other than a
mortgage in favor of the Administrative Agent or the Earnout Sellers Agent) or,
if such facilities are not so owned, the Administrative Agent is in possession
of a Collateral Access Agreement from any lessor or mortgagee thereof with
respect thereto or a Rent Reserve is then in effect with respect to such
location;

 

(d)                                 it
is not Inventory produced in violation of the Fair Labor Standards Act and
subject to the “hot goods” provisions contained in Title 29 U.S.C. §215;

 

(e)                                  it
is not subject to any agreement or license which would restrict the
Administrative Agent’s ability to sell or otherwise dispose of such Inventory
or which contains any prohibition on the Administrative Agent’s Lien therein to
secure the Obligations (unless such prohibition shall have been waived);

 

(f)                                    it
is located at one of the owned or leased locations of such Borrower identified
on Schedule 4 of the Guaranty and Collateral Agreement or otherwise
identified to the Administrative Agent pursuant to Section 5.3 thereof
in the United States or in any territory or possession of the United States
that has adopted Article 9 of the Uniform Commercial Code;

 

(g)                                 it
is not “in transit” to such Borrower or held by such Borrower on consignment; provided
that up to $4,000,000 of Inventory which is “in transit” (the “In-Transit
Inventory”) shall be deemed eligible hereunder so long as such In-Transit
Inventory (i) otherwise meets all other criteria for eligibility hereunder,
(ii) the In-Transit Inventory is subject to bills of lading, air bills or other
similar documentation (collectively, the “Shipping Documents”) which are
adequate as determined by the Administrative Agent in its commercially
reasonable credit judgment; (iii) the In-Transit

 

17

 

Inventory is
fully-insured under an insurance policy naming the Administrative Agent as loss
payee, (iv) the applicable Borrower has title to such an In-Transit Inventory,
(v) such In-Transit Inventory shall be listed as such on the report required
pursuant to Section 10.1.6 for the months in which such In-Transit
Inventory is in transit, and (vi) the Borrowers have, if and to the extent
requested by the Administrative Agent at any time during the continuation of an
Unmatured Event of Default or Event of Default, delivered such Shipping
Documents to the Administrative Agent, appropriately endorsed, together with a
power of attorney to allow the Administrative Agent to list itself as “consignee”
thereunder;

 

(h)                                 it
is finished goods and is not work-in-progress, display inventory, supply items, packaging, tooling,
samples or literature;

 

(i)                                     it
is not identified to any purchase order or contract to the extent progress or
advance payments are received with respect to such Inventory; and

 

(j)                                     it
does not breach any of the representations, warranties or covenants pertaining
to Inventory set forth in the Loan Documents in any material respect (or, if
such representation or warranty is qualified by materiality or Material Adverse
Effect, in any respect).

 

Inventory which is at any
time Eligible Inventory but which subsequently fails to meet any of the
foregoing requirements shall forthwith cease to be Eligible Inventory.

 

Environmental Claims
means all claims, however asserted, by any governmental, regulatory or judicial
authority or other Person alleging potential liability or responsibility for
violation of any Environmental Law, or for release or injury to the
environment.

 

Environmental Laws
means all present or future federal, state or local laws, statutes, common law
duties, rules, regulations, ordinances and codes, together with all
administrative or judicial orders, consent agreements, directed duties,
requests, licenses, authorizations and permits of, and agreements with, any
governmental authority, in each case relating to any matter arising out of or
relating to public health and safety, or pollution or protection of the
environment or workplace, including any of the foregoing relating to the
presence, use, production, generation, handling, transport, treatment, storage,
disposal, distribution, discharge, emission, release, threatened release,
control or cleanup of any Hazardous Substance.

 

ERISA
means the Employee Retirement Income Security Act of 1974.

 

Event of Default
means any of the events described in Section 13.1.

 

Excess Revolving Loan
Availability means at any time the difference between
Revolving Loan Availability and the Revolving Outstandings at such time.

 

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

 

18

 

Excluded Taxes
means taxes (i) based upon, or measured by, the Lender’s or Administrative
Agent’s (or a branch of the Lender’s or Administrative Agent’s) overall net
income, overall net receipts, or overall net profits (including franchise taxes
imposed in lieu of such taxes), but only to the extent such taxes are imposed
by a taxing authority (a) in the United States or a jurisdiction (or political
subdivision thereof) under the laws of which such Lender or Administrative
Agent is organized, (b) in a jurisdiction which the Lender’s or Administrative
Agent’s principal office is located, or (c) in a jurisdiction in which such
Lender or Administrative Agent maintains a lending office (or branch),
including the lending office in respect of which payments under this Agreement
are made is located, or in which such Lender or Administrative Agent is a
resident for income tax purposes and (ii) branch profits taxes.

 

Facility A Discharge Date
means the date following the Facility A Termination Date upon which all
Facility A Obligations shall have been repaid in full, in cash, and all Letters
of Credit have been terminated or Cash Collateralized.

 

Facility A Lender
and Facility A Lenders - see Preamble.

 

Facility A Obligations
means all obligations, liabilities and indebtedness (monetary or otherwise,
including post-petition and default interest, allowed or not) of any Loan Party
under this Agreement and any other Loan Document owing to any Facility A
Lender, the Administrative Agent, the Issuing Bank, any Lender Party (that is
related to a Facility A Lender, the Issuing Bank or the Administrative
Agent) (and any permitted successor or assign of any of the foregoing),
including, without limitation, for principal, interest (including post-petition
interest, allowed or not), fees, costs, expenses, indemnification, Attorney
Costs, any reimbursement obligations of each Loan Party in respect of Letters
of Credit and surety bonds, all Hedging Obligations permitted hereunder which
are owed to the Administrative Agent, LaSalle Bank, any Facility A Lender or
any of their respective affiliates, and all Bank Products Obligations incurred
or arising in connection with the transactions contemplated hereby, in each
case, howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to become due.

 

Facility A Termination
Date means the earliest to occur of (i) the Scheduled
Facility A Termination Date, (ii) the termination of the Revolving Commitment
(either automatically or at the Required Facility A Lenders’ election)
pursuant to Section 13.2, and (iii) the termination or reduction to
zero of the Revolving Commitment by the Borrowers pursuant to Section 6.1.1.

 

Facility B Obligations
means all obligations, liabilities and indebtedness (monetary or otherwise,
including post-petition and default interest, allowed or not) of any Loan Party
under this Agreement and any other Loan Document owing to any Facility B
Lender, Administrative Agent, any Lender Party (that is related to a
Facility B Lender or the Administrative Agent) with respect to the
Facility B Loans (and any permitted successor or assign of any of the
foregoing), including, without limitation, for principal, interest (including
post-petition interest, allowed or not), fees, costs, expenses,
indemnification, Attorney Costs.

 

Facility B Lender
and Facility B Lenders - see Preamble. 

 

19

 

Facility B Termination
Date means the earlier to occur of (i) Scheduled Facility B
Termination Date (ii) the termination of the Term Loan B Commitment
(either automatically or, subject to the terms of the Intercreditor Agreement,
at the Required Facility B Lenders’ election) pursuant to Section 13.2
and (iii) the Facility A Discharge Date.

 

Federal Funds Rate
means, for any day, a fluctuating interest rate equal for each day during such
period to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for such day on such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by the Administrative Agent. 
The Administrative Agent’s determination of such rate shall be binding
and conclusive absent manifest error.

 

First-Tier Foreign
Subsidiary means, any direct Foreign Subsidiary (other than
an Inactive Subsidiary) of a Loan Party or Subsidiary organized under the laws
of the United States of America.

 

Fiscal Quarter
means a fiscal quarter of a Fiscal Year.

 

Fiscal Year
means the fiscal year of the Company and its consolidated Subsidiaries ending
on December 31st of each calendar year. 
References to a Fiscal Year with a number corresponding to any calendar
year (e.g., “Fiscal Year 2005”) refers to the Fiscal Year ending on December 31st
of such calendar year.

 

Fixed Charge Coverage
Ratio means, as of the last day of any Fiscal Quarter for the
Computation Period ending on such date for the Company and its consolidated
Subsidiaries on a consolidated basis, the ratio of (a) the total for such
period of EBITDA for the Computation Period ending on such date (calculated,
where applicable, using the EBITDA values set forth in the definition thereof) minus
the sum of (i) income taxes paid (or which should have been paid) in cash by
such Persons during such Computation Period, (ii) all unfinanced Capital
Expenditures of such Persons incurred during such Computation Period, and (iii)
all cash dividends paid during such Computation Period to (b) the sum
for such Computation Period for the
Company and its consolidated Subsidiaries on a consolidated basis of all
scheduled interest and principal payments of Debt (other than the Earnout
Consideration and the Sassy Earnout Consideration), including the principal
component of any Capital Lease (in each case, whether or not in fact paid
during such period).  For purposes of
calculating this ratio for the Fiscal Quarters ending September 30, 2005, December 31,
2005 and March 31, 2006, the amounts to be included in clause (a)(ii)
above for cash dividends and in clause (b) above for scheduled interest
and principal payments, shall be equal to the respective actual amounts thereof
for the three, six and nine month periods ending on such dates of determination
multiplied by (x) 4, in the case of the Fiscal Quarter ending September 30,
2005, (y) 2, in the case of the Fiscal Quarter ending December 31, 2005
and (z) 1.333, in the case of the Fiscal Quarter ending March 31, 2006.

 

20

 

Foreign Subsidiary
means a Subsidiary organized in a jurisdiction outside of the United States of
America.

 

Fraudulent Conveyance
– see Section 15.22.2.

 

FRB
means the Board of Governors of the Federal Reserve System or any successor
thereto.

 

GAAP
means generally accepted accounting principles set forth from time to time in
the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S.
accounting profession), which are applicable to the circumstances as of the
date of determination.

 

Group -
see Section 2.2.1.

 

Guarantor
means a Person that is both a “Grantor” and a “Guarantor” under
and as defined in the Guaranty and Collateral Agreement.

 

Guaranty and Collateral
Agreement means the Guaranty and Collateral Agreement dated
as of the date hereof executed and delivered by the Loan Parties, and such
other parties as may from time to time become parties thereto in accordance
with the terms hereof and/or thereof, and any other guaranty and collateral
agreement executed by a Loan Party, in each case in form and substance
reasonably satisfactory to the Administrative Agent, in each case, as the same
may be amended, restated, supplemented or otherwise modified from time to time.

 

Hazardous Substances
means (a) any petroleum or petroleum products, radioactive materials, asbestos
in any form that is or could become friable, urea formaldehyde foam insulation,
dielectric fluid containing levels of polychlorinated biphenyls, radon gas and
mold; (b) any chemicals, materials, pollutant or substances defined as or
included in the definition of “hazardous substances”, “hazardous waste”, “hazardous
materials”, “extremely hazardous substances”, “restricted hazardous waste”, “toxic
substances”, “toxic pollutants”, “contaminants”, “pollutants” or words of
similar import, under any applicable Environmental Law; and (c) any other
chemical, material or substance, the exposure to, or release of which is
prohibited, limited or regulated by any governmental authority or for which any
duty or standard of care is imposed pursuant to, any Environmental Law.

 

Hedging Agreement
means any interest rate, currency or commodity swap agreement, cap agreement or
collar agreement, and any other agreement or arrangement designed to protect a
Person against fluctuations in interest rates, currency exchange rates or
commodity prices.

 

Hedging Obligation
means, with respect to any Person, the amount of the obligations of such Person
under any Hedging Agreement calculated by reference to the marked-to-market
termination value of such Hedging Agreement.

 

21

 

Inactive Subsidiary
means any domestically organized Subsidiary designated as an “Inactive
Subsidiary” in writing by the Loan Party Representative to the Administrative
Agent and which satisfies all requirements of an “Inactive Subsidiary” set
forth in Section 11.16, and shall include as of the Closing Date,
(and thereafter for so long as such Persons shall continue to meet such
requirements) RBCACQ, Inc., a California corporation, Fluf N’ Stuf, a
Pennsylvania corporation, RBTACQ, Inc., an Ohio corporation, and P/F Done,
Inc., a Pennsylvania corporation, and Inactive Subsidiaries means all
such subsidiaries.

 

Indemnified Liabilities
- see Section 15.17.

 

Intercreditor Agreement
means that certain intercreditor agreement of even date herewith among the
Administrative Agent, the Facility A Lenders and the Facility B
Lenders (as the same may be amended, restated, supplemented or otherwise
modified from time to time).

 

Interest Expense
means for any period the consolidated interest expense of the Company and its
consolidated Subsidiaries, on a consolidated basis, for such period (including
all imputed interest on Capital Leases).

 

Interest Period
means, as to any LIBOR Loan, the period commencing on the date such Loan is
borrowed or continued as, or converted into, a LIBOR Loan and ending on the
date one, two, three or six months thereafter as selected by the Loan Party
Representative pursuant to Section 2.2.2 or 2.2.3, as the
case may be; provided that:

 

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

 

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

 

(c)                                  the
Loan Party Representative may not select any Interest Period which would extend
beyond the Scheduled Facility A Termination Date, in the case of any Interest
Period relating to any Revolving Loan or the Term Loan A, or the Scheduled
Facility B Termination Date, in the case of any Interest Period relating the
Term Loan B; and

 

(d)                                 there
may be no more than nine (9) Interest Periods outstanding at any time.

 

Interim Advance
- see Section 2.1.1(b).

 

Inventory
is defined in the Guaranty and Collateral Agreement.

 

Investment
means, with respect to any Person, any investment in another Person, whether by
acquisition of any debt or Capital Security, by making any loan or advance, by
assuming,

 

22

 

becoming obligated
with respect to a liability, Debt or Contingent Liability in respect of
obligations of such other Person (other than travel, relocation and similar
advances to employees in the ordinary course of business).

 

Issuing Bank
means LaSalle Bank, in its capacity as the issuer of Letters of Credit
hereunder, or any Affiliate of LaSalle that may from time to time issue Letters
of Credit, and in each case, any successor and assign thereof acting in such
capacity.

 

Kids Line
means Kids Line, LLC, a Delaware limited liability company.

 

Kids Line Purchase
Agreement means that certain Membership Interest Purchase
Agreement, dated as of December 15, 2004, among Kids Line, LLC, the Company
and the various seller parties thereto.

 

LaSalle
- see the Preamble.

 

LaSalle Bank
– means LaSalle Bank National Association.

 

L/C Application
means, with respect to any request for the issuance of a Letter of Credit, a
letter of credit application in the form being used by the Issuing Bank at the
time of such request for the type of letter of credit requested.

 

L/C Fee Rate
- see the definition of Applicable Margin.

 

Lender
means any Facility A Lender or Facility B Lender.  In addition, (i) Lender shall include
the Administrative Agent to the extent it makes any loans or advances any
financial accommodations hereunder or under any other Loan Documents and (ii)
for the purpose of identifying the Persons entitled to share in the Collateral
and the proceeds thereof under, and in accordance with the provisions of, this
Agreement and the Collateral Documents and the Persons entitled to
indemnification and exculpation as a Lender or a Lender Party hereunder or
under any of the other Loan Documents, the term Lender and Lender
Party shall include the Issuing Bank.

 

Lenders
means, collectively, each and every Lender.

 

Lender Party
- see Section 15.17 and the definition of Lender above.

 

Letter of Credit
- see Section 2.1.3.

 

LIBOR Loan
means any Loan which bears interest at a rate determined by reference to the
LIBOR Rate.

 

LIBOR Margin
- see the definition of Applicable Margin.

 

LIBOR Office
means with respect to any Lender the office or offices of such Lender which
shall be making or maintaining the LIBOR Loans of such Lender hereunder.  A LIBOR Office of any Lender may be, at the
option of such Lender, either a domestic or foreign office.

 

23

 

LIBOR Rate
means a rate of interest equal to (a) the per annum rate of interest at which
United States dollar deposits in an amount comparable to the amount of the
relevant LIBOR Loan and for a period equal to the relevant Interest Period are
offered in the London Interbank Eurodollar market at 11:00 A.M. (London time)
two (2) Business Days prior to the commencement of such Interest Period (or
three (3) Business Days prior to the commencement of such Interest Period if
banks in London, England were not open and dealing in offshore United States
dollars on such second preceding Business Day), as displayed in the Bloomberg Financial Markets system (or
other authoritative source selected by the Administrative Agent in its sole
discretion) or, if the Bloomberg Financial
Markets system or another authoritative source is not available, as
the LIBOR Rate is otherwise determined by the Administrative Agent in its sole
and absolute discretion, divided by (b) a number determined by subtracting from
1.00 the then stated maximum reserve percentage for determining reserves to be
maintained by member banks of the Federal Reserve System for Eurocurrency
funding or liabilities as defined in Regulation D (or any successor category of
liabilities under Regulation D), such rate to remain fixed for such Interest
Period.  The Administrative Agent’s determination
of the LIBOR Rate shall be conclusive, absent manifest error.

 

Lien
means, with respect to any Person, any interest granted by such Person in any
real or personal property, asset or other right owned or being purchased or
acquired by such Person (including an interest in respect of a Capital Lease)
which secures payment or performance of any obligation and shall include any
mortgage, lien, encumbrance, title retention lien, charge or other security
interest of any kind, whether arising by contract, as a matter of law, by
judicial process or otherwise.

 

Limited Pledge Agreement
means the Limited Pledge Agreement dated as of the Closing Date (as the same
may be amended, restated, supplemented or otherwise modified from time to time)
executed and delivered by the Company in favor of Administrative Agent for the
benefit of the Lenders.

 

Loan Documents
means this Agreement, the Notes, the Letters of Credit, the L/C Applications,
the Agent Fee Letter, the Collateral Documents, the Intercreditor Agreement,
the subordination agreements, if any, relating to any Subordinated Debt
(including the Earnout Subordination Agreement) and all other documents,
instruments and agreements delivered in connection with the foregoing, in each
case, as the same may be amended, restated, supplemented or otherwise modified
from time to time.

 

Loan Party
means, collectively, the Company, each other Borrower and each Guarantor, and Loan
Parties means all such Persons, collectively.  Loan Party and Loan Parties
shall not include the Inactive Subsidiaries.

 

Loan
Party Representative
means the Company in its capacity as Loan Party Representative pursuant to the
provisions of Section 2.6.

 

Loans
means, collectively, the Revolving Loans, the Term Loan A and the Term
Loan B, and Loan means any of the foregoing.

 

24

 

Mandatory Prepayment
Event - see Section 6.2.2(a).

 

Margin Stock
means any “margin stock” as defined in Regulation U.

 

Master Letter of Credit
Agreement means, at any time, with respect to the issuance of
Letters of Credit, a master letter of credit agreement or reimbursement
agreement in the form, if any, being used by the Issuing Bank at such time,
together with any amendments, restatements, supplements or modifications thereto.

 

Material Adverse Effect
means (a) a material adverse change in, or a material adverse effect upon, the
condition (financial or otherwise), operations, assets, liabilities, business,
or properties of the Loan Parties taken as a whole, (b) a material impairment
of the ability of the Loan Parties taken as a whole to perform their
obligations under the Loan Documents or (c) a material adverse effect upon any
material portion of the Collateral or the validity, perfection or priority of
any Lien in favor of the Administrative Agent for the benefit of the Lenders
under the Collateral Documents against any material portion of the Collateral
or upon the legality, validity, binding effect or enforceability against any
Loan Party of any Loan Document, or the rights and remedies, taken as a whole,
of the Administrative Agent or the Lenders under any Loan Document.

 

Maximum Revolving Commitment means, the lesser
of (x) $52,000,000, as such amount may be increased or decreased from time to
time in accordance with Section 6.1.2 (the “Revolving Commitment
Limit”) and (y) the sum of the Revolving Commitments of all Facility A
Lenders as in effect at such time.

 

Mortgage
means a mortgage, deed of trust, leasehold mortgage or similar instrument
granting the Administrative Agent a Lien on real property of any Loan Party, in
each case, as the same may be amended, restated, supplemented or otherwise
modified from time to time.

 

Multiemployer Pension
Plan means a multiemployer plan, as defined in Section 3(37)(A)
of ERISA, to which any Loan Party or any other member of the Controlled Group
maintains, contributes to, or has an obligation to contribute to (or, within
the immediately preceding six (6) years, maintained, contributed to or had an
obligation to contribute to) on behalf of participants who were employed by any
of them.

 

Net Cash Proceeds
means:

 

(a)                                  with
respect to any Asset Disposition relating to any property of any Loan Party,
the aggregate cash proceeds (including cash proceeds received pursuant to
policies of insurance or by way of deferred payment of principal pursuant to a
note, installment receivable or otherwise, but only as and when received)
received by any Loan Party pursuant to such Asset Disposition, net of (i) the
direct reasonable costs, expenses and fees relating to such Asset Disposition
(including reasonable and customary sales commissions and reasonable legal,
accounting and investment banking and other professional and transactional
fees, fees), (ii) taxes paid or reasonably estimated by such Loan Party to be
payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements), (iii) amounts required
to be

 

25

 

applied to the
repayment of any Debt secured by a Permitted Lien having priority over the
Liens of the Administrative Agent under the Loan Documents on the asset subject
to such transaction (other than the Loans); and (iv) amounts reserved in
accordance with GAAP for any indemnification obligations associated with such
sale so long as such reserves are required to be maintained; it being agreed
that the amount of such reserves shall be deemed Net Cash Proceeds of such
transaction received by such Loan Party upon (and in the amount of) the release
or reduction of any such reserve.

 

(b)                                 with
respect to any issuance of Capital Securities, the aggregate cash proceeds
received by any Loan Party pursuant to such issuance, net of the direct
reasonable and customary costs, expenses and fees (including legal, accounting
and other professional fees, costs and expenses) relating to such issuance
(including reasonable and customary sales and underwriters’ commissions); and

 

(c)                                  with
respect to any issuance of Debt, the aggregate cash proceeds received by any
Loan Party pursuant to such issuance, net of the direct reasonable and
customary costs, expenses and fees (including legal, accounting and other
professional fees, costs and expenses) relating to such issuance (including
reasonable and customary up-front, underwriters’ and placement fees).

 

Net Orderly Liquidation
Value means, (i) when used in respect of the Borrowing Base
as it relates to the Borrowers’ Eligible Inventory (and without limiting the
Administrative Agent’s ability to assign any lower value thereto or apply
reserves in accordance with the definition of Borrowing Base), the orderly
liquidation value thereof, net of costs, fees and expenses arising in
connection with such orderly liquidation thereof, determined in accordance with
the methodologies and conclusions set forth in the appraisal of such Inventory
prepared for the Administrative Agent by Hilco Appraisal Services, LLC prior to
the Closing Date or, if elected by the Administrative Agent, any subsequent
field audit or appraisal of such assets conducted for the Administrative Agent
after the Closing Date.

 

Non-U.S. Participant
- see Section 7.6(d)(i).

 

Non-Use Fee Rate
- see the definition of Applicable Margin.

 

Notes
means, collectively, the Revolving Loan Notes, the Term Loan A Notes, and the
Term Loan B Notes.

 

Notice of Borrowing
- see Section 2.2.2.

 

Notice of Control –
see Section 10.11.

 

Notice of
Conversion/Continuation - see Section 2.2.3.

 

Obligations
means all obligations, liabilities and indebtedness (monetary or otherwise,
including post-petition and default interest, allowed or not) of any Loan Party
under this Agreement and any other Loan Document owing to any Lender, the
Administrative Agent, the Issuing Bank, any Lender Party or any other party to
or beneficiary of this Agreement or any

 

26

 

other Loan
Document (and any successor or assign of any of the foregoing), including,
without limitation, for principal, interest (including post-petition interest,
allowed or not), fees, costs, expenses, indemnification, Attorney Costs, any
reimbursement obligations of each Loan Party in respect of Letters of Credit
and surety bonds, all Specified Hedging Obligations permitted hereunder and
incurred in connection herewith which are owed to the Administrative Agent,
LaSalle Bank or any Lender and each of their respective Affiliates, and all
Bank Products Obligations permitted hereunder and incurred in connection
herewith which are owed to the Administrative Agent, LaSalle Bank or any Lender
and each of their respective Affiliates, in each case, howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, now
or hereafter existing, or due or to become due; provided, that
(i) obligations of any Loan Party under any Specified Hedging Agreement
shall be secured and guaranteed pursuant to the provisions of this Agreement
and the Loan Documents only to the extent that, and for so long as, the other
Obligations are so secured and guaranteed and (ii) any release of Collateral
or guarantors effected in the manner permitted by this Agreement shall not
require the consent of any counterparty on any Specified Hedging Agreement or
the holder of any Specified Hedging Obligations.

 

OFAC -
see Section 10.4.

 

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

 

Participant
- see Section 15.6.2.

 

Pension Plan
means a “pension plan”, as such term is defined in Section 3(2) of ERISA,
which is subject to Title IV of ERISA or the minimum funding standards of ERISA
(other than a Multiemployer Pension Plan), which any Loan Party or any member
of the Controlled Group maintains, contributes to, or has an obligation to
contribute to (or, within the immediately preceding six (6) years, maintained,
contributed to or had an obligation to contribute to) on behalf of participants
who were employed by any of them.  The
term Pension Plan shall also include any other plan providing retirement
income that is not governed by the laws of the United States.

 

Permitted Acquisition
– see Section 11.4.

 

Permitted Holder
means (i) Angelica Berrie, (ii) any lineal descendant of Russell Berrie, (iii)
the Estate of Russell Berrie, (iv) The Russell Berrie 2002A Trust, (v) The
Russell Berrie Foundation, a New Jersey Nonprofit Corporation, (vi) any trust
created pursuant to the terms of the instruments governing or creating any of
the Persons referred to in clause (iii), (iv), or (v), and (vii) any fiduciary
of any of the Persons referred to in clause (iii) (iv), (v) or (vi).

 

Permitted Lien
means a Lien expressly permitted hereunder pursuant to Section 11.2.

 

Person
means any natural person, corporation, partnership, trust, limited liability
company, association, governmental authority or unit, or any other entity,
whether acting in an individual, fiduciary or other capacity.

 

27

 

Pre-Settlement
Determination Date – see Section 7.1.3.

 

Prime Rate
means, for any day, the rate of interest in effect for such day as publicly
announced from time to time by the Administrative Agent as its prime rate
(whether or not such rate is actually charged by the Administrative Agent),
which is not intended to be the Administrative Agent’s lowest or most favorable
rate of interest at any one time.  Any
change in the Prime Rate announced by the Administrative Agent shall take
effect at the opening of business on the day specified in the public
announcement of such change; provided that the Administrative Agent shall not
be obligated to give notice of any change in the Prime Rate.

 

Pro Rata Share
means:

 

(a)                                  with
respect to a Facility A Lender’s obligation to make Revolving Loans,
participate in Letters of Credit, reimburse the Issuing Bank, and/or receive
payments of principal, interest, fees, costs, and expenses with respect
thereto, (x) prior to the Revolving Commitment being terminated or reduced to
zero, the percentage obtained by dividing (i) such Facility A Lender’s
Revolving Commitment at such time, by (ii) the aggregate Revolving Commitment
of Lenders at such time and (y) from and after the time the Revolving
Commitment has been terminated or reduced to zero, the percentage obtained by
dividing (i) the aggregate unpaid principal amount of such Facility A
Lender’s Revolving Outstandings at such time by (ii) the aggregate unpaid
principal amount of all Revolving Outstandings at such time;

 

(b)                                 with
respect to a Facility A Lender’s obligation to make a Term Loan A and
receive payments of interest, fees, and principal with respect thereto, (x)
prior to the making of such Term Loan A, the percentage obtained by
dividing (i) such Facility A Lender’s Term Loan A Commitment at such
time, by (ii) the aggregate amount of all Facility A Lenders’ Term
Loan A Commitments at such time, and (y) from and after the making of any
Term Loan A, the percentage obtained by dividing (i) the unpaid principal
amount of such Lender’s Term Loan A by (ii) the unpaid aggregate principal
amount of each Term Loan A of all Lenders;

 

(c)                                  with
respect to (i) a Facility B Lender’s obligation to make the Term
Loan B and receive payments of interest, fees, and principal with respect
thereto and (ii) all other matters as to any Facility B Lender, (x) prior
to the making of the Term Loan B, the percentage obtained by dividing (i)
such Facility B Lender’s Term Loan B Commitment at such time, by (ii)
the aggregate amount of all Facility B Lenders’ Term Loan B
Commitments at such time, and (y) from and after the making of the Term
Loan B, the percentage obtained by dividing (i) the aggregate unpaid
principal amount of Term Loan B owing to such Facility B Lender at
such time by (ii) the aggregate unpaid principal amount of Term
Loan B owing to all Facility B Lenders at such time;

 

(d)                                 with
respect to all other matters as to a particular Facility A Lender other
than as set forth in clauses (a) and (b), the percentage obtained by dividing
(i) such Facility A Lender’s Revolving Commitment plus such
Facility A Lender’s Term Loan A Commitment at such time by (ii) the
aggregate amount of the Revolving Commitments

 

28

 

and Term
Loan A Commitments of all Facility A Lenders at such time; provided
that in the event such Commitments have been terminated or reduced to zero, Pro
Rata Share in such case shall be the percentage obtained by dividing (A) the
principal amount of such Facility A Lender’s Revolving Outstandings plus
the unpaid principal amount of such Facility A Lender’s Term Loan A
at such time by (B) the principal amount of the Revolving Outstandings and
the outstanding Term Loan A owing to all Facility A Lenders at such
time; and

 

(e)                                  with
respect to all other matters as to any Lender, in aggregate, the percentage
obtained by dividing (i) the aggregate amount of all such Lender’s
Commitments hereunder by (ii) the aggregate amount of the Commitments of all
Lenders at such time; provided that in the event any such Commitments
have been terminated or reduced to zero, Pro Rata Share in such case shall be
the percentage obtained by dividing (A) the principal amount of such Lender’s
outstanding Loans (which in the case of the Facility A Lenders, shall be
calculated using Revolving Outstandings) at such time by (B) the aggregate
principal amount of all Loans (which in the case of the Facility A
Lenders, shall be calculated using Revolving Outstandings) owing to all Lenders
at such time.

 

Regulation D
means Regulation D of the FRB.

 

Regulation U
means Regulation U of the FRB.

 

Related Agreements
means, collectively, the Kids Line Purchase Agreement, the Earnout Security
Documents and any other security agreement, pledge agreement, collateral
assignments, account control agreements, if any, or other security documents,
and employment agreement entered into in connection therewith, in each case, as
the same may be amended, restated, supplemented or otherwise modified in
accordance with Section 11.11.

 

Rent Reserve
means a dollar amount equal to three times the monthly lease or mortgage
payments of each leased or owned and mortgaged facility of the Borrowers where
any Inventory intended to be classified as Eligible Inventory is maintained and
in respect of which the Administrative Agent has not received a Collateral
Access Agreement with respect to such facility.

 

Replacement Lender
- see Section 8.7(b).

 

Reportable Event
means a reportable event as defined in Section 4043 of ERISA and the
regulations issued thereunder as to which the PBGC has not waived the
notification requirement of Section 4043(a), or the failure of a Pension
Plan to meet the minimum funding standards of Section 412 of the Code
(without regard to whether the Pension Plan is a plan described in Section 4021(a)(2)
of ERISA) or under Section 302 of ERISA.

 

Required Facility A Lenders means, at any
time, those Facility A Lenders whose Pro Rata Shares (as determined in
accordance with clause (d) of the definition thereof) exceed
66 2/3%.

 

29

 

Required Facility B
Lenders means, at any time, those Facility B Lenders
whose Pro Rata Shares (as determined in accordance clause (c) of the
definition thereof) exceed 66 2/3%.

 

Required Lenders
means until the Facility A Discharge Date, the Required Facility A Lenders
and after the Facility A Discharge Date, the Required Facility B Lenders.

 

Restricted Debt
means (a) the Earnout Consideration, (b) the
obligations of the Company or any other Loan Party with respect to the EDA Loan
Guarantee, (c) the Sassy Earnout Consideration, and (d) any other Subordinated
Debt.

 

Revolving Commitment
means with respect to each Facility A Lender, such Facility A Lender’s
Revolving Commitment set forth on Annex A hereto or in the most recent
Assignment Agreement relating hereto to which such Facility A Lender is a
party, and Revolving Commitments means the sum of all such Commitments
of all such Facility A Lenders, in each case, as the same may be reduced
from time to time pursuant to Sections 6.1.1 and 6.1.3.

 

Revolving Commitment
Limit - see the definition of Maximum Revolving Commitment.

 

Revolving Loan
- see Section 2.1.1(a).

 

Revolving Loan Availability means at any time
(a) the lesser of (i) the Maximum Revolving Commitment in effect as such
time and (ii) the Borrowing Base at such time.

 

Revolving Loan Base Rate
Margin see the definition of “Applicable Margin.”

 

Revolving Loan Libor
Margin -see the definition of “Applicable Margin.”

 

Revolving Loan Notes
– see Section 3.1.

 

Revolving Outstandings
means, at any time, the sum of (a) the aggregate principal amount of all
outstanding Revolving Loans, plus (b) the Stated Amount of all Letters of
Credit.

 

Sassy Earnout
Consideration means the amount of deferred purchase price
(including any payments required under Exhibits 8.3(b)(i) or (b)(ii) to the
Sassy Purchase Agreement) or management retention payments payable in
connection with the Sassy Purchase Agreement (and any employment agreements
entered into in connection therewith) as in effect on the date hereof (without
giving effect to any amendment or other modification thereof after the Closing
Date, except to the extent expressly consented to by the Required Lenders in
their reasonable discretion or those that would not be adverse to the Lenders).

 

Sassy Purchase Agreement
means that certain Asset Purchase Agreement by and among RBSACQ, Inc. and
Sassy, Inc. and its shareholders dated July 26, 2002.

 

Scheduled Facility A
Termination Date means June 28, 2010.

 

Scheduled Facility B
Termination Date means December 28, 2010.

 

30

 

SEC
means the Securities and Exchange Commission or any other governmental
authority succeeding to any of the principal functions thereof.

 

Second-Tier Foreign
Subsidiary means any direct or indirect Subsidiary of any
First-Tier Foreign Subsidiary.

 

Senior Officer
means, with respect to any Loan Party, any of the chief executive officer, the
chief financial officer, the chief operating officer or the treasurer or
controller or vice president of finance, of such Loan Party.

 

Settlement Date
– see Section 7.1.3.

 

Specified
Hedging Agreement means any Hedging Agreement (a) entered
into by (i) a Borrower and (ii) any Facility A Lender (as determined as of the
date such Hedging Agreement is entered into) or any affiliate thereof, as
counterparty and (b)(i) the covered transactions thereunder are the Loans or
Obligations hereunder or (ii) that has otherwise been designated by the
Administrative Agent, such Facility A Lender or such affiliate, as the case may
be, and the Loan Party Representative, on behalf of such Borrower, by notice to
the Administrative Agent, as a Specified Hedging Agreement.  The designation of any Hedging Agreement as a
Specified Hedging Agreement shall not create in favor of the Administrative
Agent, any Facility A Lender or affiliate thereof that is a party thereto any
rights in connection with the management or release of any Collateral or of the
obligations of any guarantor under this Agreement or the Loan Documents.

 

Specified
Hedging Obligation means
any Hedging Obligations of any of the Borrowers under any Specified Hedging
Agreement and Specified Hedging
Obligations means all
such obligations and liabilities collectively.

 

Stated Amount
means, with respect to any Letter of Credit at any date of determination, (a)
the maximum aggregate amount available for drawing thereunder under any and all
circumstances plus (b) the aggregate amount of all unreimbursed payments and
disbursements under such Letter of Credit which have not been converted to
Revolving Loans pursuant to Section 2.3.2.

 

Subordinated Debt
means (a) the obligations of the Company with respect to payment of the Earnout
Consideration, and (b) any Debt of the Company and its consolidated
Subsidiaries on a consolidated basis that is unsecured and is expressly
subordinated to the prior payment in full, in cash, of the Obligations pursuant
to an agreement in form and substance reasonably satisfactory to the
Administrative Agent; it being agreed that the Term Loan B shall not be
deemed Subordinated Debt for purposes of this Agreement.

 

Subsidiary
means, with respect to any Person, a corporation, partnership, limited
liability company or other entity of which such Person owns, directly or
indirectly, such number of outstanding Capital Securities as have more than 50%
of the ordinary voting power for the election of directors or other managers of
such corporation, partnership, limited liability company or other entity.  Unless the context otherwise requires, each
reference to Subsidiaries herein shall be a reference to Subsidiaries of the
Company.

 

31

 

Taxes
means any and all present and future taxes, duties, levies, imposts,
deductions, assessments, charges or withholdings imposed by the United States,
any state or locality or any political subdivision thereof, and any and all
liabilities (including interest and penalties and other additions to taxes)
with respect to the foregoing, but excluding Excluded Taxes.

 

Termination Fee
- see Section 5.4.

 

Term Loan means either Term Loan A or
Term Loan B, and Term Loans means the Term Loan A and Term
Loan B, collectively.

 

Term Loan A
- see Section 2.1.2.

 

Term Loan A Commitment means, with
respect to each Facility A Lender, that amount set forth opposite such
Facility A Lender’s name on Annex A or in the most recent
Assignment Agreement, if any, to which such Lender is a party, and with respect
to all Facility A Lenders, $13,000,000.

 

Term Loan A Notes - see Section 3.1.

 

Term Loan B - see Section 2.1.4.

 

Term Loan B Commitment means, with
respect to each Facility B Lender, that amount set forth opposite such
Facility B Lender’s name on Annex A or in the most recent
Assignment Agreement, if any, to which such Lender is a party, and with respect
to all Facility B Lenders, $40,000,000.

 

Term Loan B Notes - see Section 3.1.

 

Termination Event
means, with respect to a Pension Plan, (a) a Reportable Event, (b) the
withdrawal of any member of the Controlled Group from such Pension Plan during
a plan year in which any member of the Controlled Group was a “substantial
employer” as defined in Section 4001(a)(2) of ERISA or was deemed such
under Section 4068(f) of ERISA, (c) the termination of such Pension Plan,
the filing of a notice of intent to terminate the Pension Plan or the treatment
of an amendment of such Pension Plan as a termination under Section 4041
of ERISA, (d) the institution by the PBGC of proceedings to terminate such
Pension Plan or (e) any event or condition that might constitute grounds under Section 4042
of ERISA for the termination of, or appointment of a trustee to administer,
such Pension Plan.

 

Total Debt
means the outstanding principal amount of all Debt (including Debt of Capital
Leases plus undrawn face amount of all Letters of Credit, but excluding the
amount of the Earnout Consideration and the Sassy Earnout Consideration) of the
Company and its consolidated Subsidiaries on a consolidated basis.

 

Total Debt to EBITDA
Ratio means, as of the last day of any Fiscal Quarter, the
ratio of (a) Total Debt as of such day to (b) EBITDA for the Computation Period
ending on such day (calculated, where applicable, using the EBITDA values set
forth in the definition thereof).

 

32

 

type -
see Section 2.2.1.

 

UCC is
defined in the Guaranty and Collateral Agreement.

 

Unfunded Liability
means the amount (if any) by which the present value of all vested and unvested
accrued benefits under all Pension Plans of the Loan Parties and each other
member of the Controlled Group exceeds the fair market value of all assets
allocable to those benefits, all determined as of the then most recent
valuation date for each Pension Plan, using the actuarial assumptions used by
the Pension Plans for purposes of determining the minimum funding contributions
under Section 412 of the Code to the extent applicable.

 

Unmatured Event of
Default means any event that, if it continues uncured, will,
with lapse of time, giving of notice or both, constitute an Event of Default.

 

Voidable Transfer
– see Section 15.23.

 

Wholly-Owned Subsidiary
means, as to any Person, a Subsidiary all of the Capital Securities of which
(except directors’ qualifying Capital Securities) are at the time directly or
indirectly owned by such Person and/or another Wholly-Owned Subsidiary of such
Person. Unless the context otherwise requires, each reference to a Wholly-Owned
Subsidiary herein shall be a reference to a Wholly-Owned Subsidiary of the
Company.

 

1.2                                 Other
Interpretive Provisions.

 

(a)                                  The
meanings of defined terms are equally applicable to the singular and plural
forms of the defined terms.

 

(b)                                 Section,
Annex, Schedule and Exhibit references are to this
Agreement unless otherwise specified.

 

(c)                                  The
term “including” is not limiting and means “including without limitation.”

 

(d)                                 In
the computation of periods of time from a specified date to a later specified
date, the word “from” means “from and including”; the words “to” and “until”
each mean “to but excluding”, and the word “through” means “to and including.”

 

(e)                                  Unless
otherwise expressly provided herein, (i) references to agreements (including this
Agreement and the other Loan Documents) and other contractual instruments shall
be deemed to include all subsequent amendments, restatements, supplements and
other modifications thereto, but only to the extent such amendments,
restatements, supplements and other modifications are not prohibited by the
terms of any Loan Documents, and (ii) references to any statute or regulation
shall be construed as including all statutory and regulatory provisions
amending, replacing, supplementing or interpreting such statute or regulation
and the regulations promulgated thereunder.

 

33

 

(f)                                    This
Agreement and the other Loan Documents may use several different limitations,
tests or measurements to regulate the same or similar matters.  All such limitations, tests and measurements
are cumulative and each shall be performed in accordance with its terms.

 

(g)                                 This
Agreement and the other Loan Documents are the result of negotiations among and
have been reviewed by counsel to the Administrative Agent, the Loan Parties,
the Lenders, the Issuing Bank and the other parties hereto and thereto and are
the products of all parties. 
Accordingly, they shall not be construed against the Administrative
Agent, the Lenders or the Issuing Bank merely because of the Administrative
Agent’s, Lenders’ or the Issuing Bank’s involvement in their preparation.

 

SECTION 2                                   COMMITMENTS OF THE
LENDERS; BORROWING, CONVERSION AND LETTER OF CREDIT PROCEDURES.

 

2.1                                 Commitments.  On and subject to the terms and conditions of
this Agreement, each of the Facility A Lenders, in the case of Sections
2.1.1, 2.1.2 and 2.1.3, and the Facility B Lenders, in
the case of Section 2.1.4, severally and for itself alone, agrees
to make loans to, and to issue or participate in letters of credit for the
account of, the Company as follows:

 

2.1.1                      Revolving
Loan Commitment.

 

(a)                                  Revolving
Loans.  Subject to the terms and
conditions of this Agreement, each Facility A Lender with a Revolving
Commitment agrees to make loans on a revolving basis (“Revolving Loans”)
from time to time until the Facility A Termination Date in such Facility A
Lender’s Pro Rata Share (as determined pursuant to clause (a) of the
definition thereof) of such aggregate amounts as the Loan Party Representative
may request from the Administrative Agent in accordance with Section 2.2.2;
provided that, except as and to the extent set forth in clause (b)
below, the Revolving Outstandings will not at any time exceed Revolving Loan
Availability or result in the violation of Section 11.13.3.

 

(b)                                 Interim
Advances.  If at any time the
Revolving Outstandings exceeds the Borrowing Base or Section 11.13.3
is violated, and without limiting the other rights and remedies of the
Administrative Agent and the Facility A Lenders hereunder and under the
other Loan Documents, the Borrowers shall immediately, and without the
necessity of demand by the Administrative Agent, make the mandatory prepayment
required pursuant to Section 6.2.2(b) to the Administrative Agent;
provided, that the Administrative Agent may, at its option and in its sole
discretion, permit such excess (the “Interim Advance”) to remain
outstanding and continue to advance Revolving Loans to the Borrowers on behalf
of the Facility A Lenders without the consent of any Lender for a period
of up to thirty (30) calendar days, so long as (i) the amount of the Interim
Advances does not exceed at any time Three Million Five Hundred Thousand and
No/100 Dollars ($3,500,000.00), (ii) the Revolving Outstanding do not exceed the
Revolving Commitment, and (iii) in the case of any subsequent Interim Advances,
the Administrative Agent has not been notified by the Facility A Required
Lenders to cease making such Revolving Loans. 
If the Interim Advance is not repaid (or otherwise eliminated) in full
within thirty (30) days of the initial occurrence of the Interim Advance, no
future advances may be made to the Borrowers without the consent of all
Facility A Lenders until the Interim Advance is repaid in full.

 

34

 

(c)                                  Defaulting
Lender.  If and to the extent that a
Facility A Lender does not settle with the Administrative Agent as
required under this Agreement (a “Defaulting Lender”), the Borrowers and
such Defaulting Lender severally agree to repay to the Administrative Agent
forthwith on demand such amount required to be paid by such Defaulting Lender
to the Administrative Agent, together with interest thereon, for each day from
the date such amount is made available to the Borrowers until the date such
amount is repaid to the Administrative Agent (x) in the case of a Defaulting
Lender at the Federal Funds Rate, and (y) in the case of the Borrowers, at the
interest rate applicable at such time for such Loans; provided, that the
Borrowers’ obligation to repay such advance to the Administrative Agent shall
not relieve such Defaulting Lender of its liability to the Administrative Agent
for failure to settle as provided in this Agreement.

 

2.1.2                        Term
Loan A Commitment.  Subject to
the terms and conditions of this Agreement, each Facility A Lender with a
Term Loan A Commitment agrees to make a loan to the Borrowers (each such
loan, a “Term Loan A”) on the Closing Date in such Facility A
Lender’s Pro Rata Share of the Term Loan A Commitment. The Commitments of
the Facility A Lenders to make the Term Loan A shall be satisfied
fully upon the making of the Term Loan A on the Closing Date. Amounts
repaid with respect to any Term Loan A may not be reborrowed.

 

2.1.3                        L/C
Commitment.  Subject to Section 2.3.1
and the other terms and conditions of this Agreement, the Issuing Bank agrees
to issue letters of credit, in each case containing such terms and conditions
as are permitted by this Agreement and are reasonably satisfactory to the
Issuing Bank (each, a “Letter of Credit”), at the request of the Loan
Party Representative and for the account of the Borrowers from time to time
before the Termination Date and, as more fully set forth in Section 2.3.2,
each Facility A Lender (which shall not include the Issuing Bank) agrees
to purchase a participation in each such Letter of Credit; provided that
(a) the aggregate Stated Amount of all Letters of Credit (after giving effect
to the Stated Amount of any Letter of Credit so requested) shall not at any
time exceed $10,000,000, and (b) the Revolving Outstandings (after giving
effect to the Stated Amount of any Letter of Credit so requested) shall not at
any time exceed Revolving Loan Availability or result in a violation of Section 11.13.3.

 

2.1.4                        Term
Loan B Commitment.  Subject to
the terms and conditions of this Agreement, each Facility B Lender with a
Term Loan B Commitment agrees to make a loan to the Borrowers (each such
loan, a “Term Loan B”) on the Closing Date in such Facility B
Lender’s Pro Rata Share of the Term Loan B Commitment. The Commitments of
the Facility B Lenders to make the Term Loan B shall be satisfied
fully upon the making of the Term Loan B on the Closing Date. Amounts
repaid with respect to any Term Loan B may not be reborrowed.

 

2.2                                 Loan
Procedures.

 

2.2.1                      Various
Types of Loans.  Each Revolving Loan
and Term Loan shall be divided into tranches which are, either a Base Rate Loan
or a LIBOR Loan (each a “type” of Loan), as the Loan Party
Representative shall specify in the related notice of borrowing or conversion
pursuant to Section 2.2.2 or 2.2.3.  LIBOR Loans having the same Interest Period
which expire on the same day are sometimes called a “Group” or
collectively “Groups”.  Base Rate
Loans and LIBOR Loans may be outstanding at the same time, provided that
not more than nine (9)

 

35

 

different Groups of LIBOR Loans, in aggregate, shall be outstanding at
any one time.  All borrowings,
conversions and repayments of Revolving Loans shall be effected so that each
Facility A Lender will have a ratable share (according to its Pro Rata
Share as determined in accordance with clause (a) of the definition
thereof) of all types and Groups of Revolving Loans.

 

2.2.2                      Borrowing
Procedures.  The Loan Party Representative
shall give written notice (each such written notice, a “Notice of Borrowing”)
substantially in the form of Exhibit E or telephonic notice (followed
immediately by a Notice of Borrowing) to the Administrative Agent of each
proposed borrowing not later than (a) in the case of a Base Rate borrowing,
11:00 A.M., Chicago time, on the proposed date of such borrowing, and (b) in
the case of a LIBOR borrowing, 11:00 A.M., Chicago time, at least three (3)
Business Days prior to the proposed date of such borrowing.  Each such notice shall be effective upon
receipt by the Administrative Agent, shall be irrevocable, and shall specify
the date, amount and type of borrowing and, in the case of a LIBOR borrowing,
the initial Interest Period therefor. 
Upon its receipt of any such notice, the Administrative Agent, at its
option and in its sole discretion, shall do either of the following:

 

(i)                                     advance
the amount of the proposed Revolving Loan to the Loan Party Representative on
behalf of the applicable Borrower disproportionately (a “Disproportionate
Advance”) out of the Administrative Agent’s own funds on behalf of
Facility A Lenders, which advance shall be made (x) in the case of a Base
Rate Loan, on the same day as the Loan Party Representative’s request therefor
if the Loan Party Representative notifies the Administrative Agent of such
request by 11:00 A.M. (Chicago time) on such day or (y) in the case of a LIBOR
Rate Loan, on the third Business Day following such request therefor if the
Loan Party Representative notifies the Administrative Agent of such request by
11:00 A.M. (Chicago time) on such third Business Day preceding such day, and,
in either case, thereafter request settlement in accordance with Section 7.1.3
such that upon such settlement each Facility A Lender’s share of the
outstanding Revolving Loans (including, without limitation, the amount of any
Disproportionate Advance) equals its Pro Rata Share (as determined in
accordance with clause (a) of the definition thereof); or

 

(ii)                                  Notify
each Facility A Lender by telecopy, electronic mail or other similar form
of teletransmission of the proposed advance on the same day the Administrative
Agent is notified or deemed notified by the Loan Party Representative of the
Loan Party Representative’s request for an advance pursuant to this Section 2.2.2.  Each Facility A Lender shall remit, to
the demand deposit account designated by the Loan Party Representative (x) with
respect to Base Rate Loans, at or prior to 1:00 P.M., Chicago time, on the date
of the proposed borrowing, if such notification is made before 11:00 A.M.,
Chicago time, or (y) with respect to LIBOR Rate Loans, at or prior to 10:30
A.M., Chicago time, on the date such LIBOR Rate Loans are to be advanced,
immediately available funds in an amount equal to such Facility A Lender’s
Pro Rata Share of such proposed advance.

 

36

 

Each borrowing shall be
on a Business Day.  Each Base Rate
borrowing shall be in an aggregate amount of at least $100,000 and integral
multiples of $100,000 in excess thereof, and each LIBOR borrowing shall be in
an aggregate amount of at least $500,000 and integral multiples of at least
$100,000 in excess thereof.  Delivery of
any Notice of Borrowing, any request for a Letter of Credit, and the acceptance
of any Loan or any Letter of Credit, shall be deemed a representation and
warranty by the Loan Parties that all conditions precedent to the making of any
Loans or other financial accommodations set forth in Sections 12.1 (in
the case of the initial Loans to be made or Letter of Credit to be issued
hereunder) and 12.2 have been satisfied as of the date of such request,
notice or borrowing hereunder.

 

2.2.3                      Conversion
and Continuation Procedures.

 

(a)                                  Subject
to Section 2.2.1, the Borrowers may, upon irrevocable written
notice to the Administrative Agent in accordance with clause (b) below:

 

(i)                                     elect,
as of any Business Day, to convert any Loans of one type or any part thereof
into Loans of the other type (provided, in the case of any conversion to a
LIBOR Loan, such part thereof is in an aggregate amount not less than $500,000
or a higher integral multiple of $100,000); or

 

(ii)                                  elect,
as of the last day of the applicable Interest Period thereof, to continue any
LIBOR Loans having Interest Periods expiring on such day (or any part thereof
in an aggregate amount not less than $500,000 or a higher integral multiple of
$100,000) for a new Interest Period or convert such LIBOR Loans to Base Rate
Loans;

 

provided
that after giving effect to any conversion or continuation, the aggregate
principal amount of each Group of LIBOR Loans shall be at least $500,000 and an
integral multiple of $100,000 in excess thereof.

 

(b)                                 The
Loan Party Representative shall give written notice (each such written notice,
a “Notice of Conversion/Continuation”) substantially in the form of Exhibit
F or telephonic notice (followed immediately by a Notice of
Conversion/Continuation) to the Administrative Agent of each proposed
conversion or continuation not later than (i) in the case of conversion into
Base Rate Loans, 11:00 A.M., Chicago time, on the proposed date of such
conversion and (ii) in the case of conversion into or continuation of LIBOR
Loans, 11:00 A.M., Chicago time, at least three Business Days prior to the
proposed date of such conversion or continuation, specifying in each case:

 

(i)                                     the
proposed date of conversion or continuation;

 

(ii)                                  the
aggregate amount of Loans to be converted or continued;

 

(iii)                               the type of Loans
resulting from the proposed conversion or continuation; and

 

37

 

(iv)                              in
the case of conversion into, or continuation of, LIBOR Loans, the duration of
the requested Interest Period therefor.

 

(c)                                  If
upon the expiration of any Interest Period applicable to LIBOR Loans, the Loan
Party Representative has failed to select timely a new Interest Period to be
applicable to such LIBOR Loans, the Loan Party Representative shall be deemed
to have elected to convert such LIBOR Loans into Base Rate Loans effective on
the last day of such Interest Period.

 

(d)                                 The
Administrative Agent will promptly notify each Lender of its receipt of a
notice of conversion or continuation pursuant to this Section 2.2.3
or, if no timely notice is provided by the Loan Party Representative, of the
details of any automatic conversion.

 

(e)                                  Any
conversion of a LIBOR Loan on a day other than the last day of an Interest
Period therefor shall be subject to Section 8.4.

 

2.2.4                      Borrowing
Representations and Warranties.  Each
and every request (or deemed request) by the Borrowers (through the Loan Party
Representative) for, and acceptance by the Borrowers of, a Revolving Loan
shall, in each case, constitute the Borrowers’ representation and warranty that
(and the Administrative Agents’ and the Lenders’ obligation to make any such
Revolving Loan shall be subject to the conditions precedent that), both on the
date of such request for such Revolving Loan and on the date any such Revolving
Loan is made, (i) no Unmatured Event of Default or Event of Default has
occurred and is continuing, (ii) the Borrowers’ representations and warranties
set forth in this Agreement, as supplemented from time to time, are true and
correct in all material respects (or, if such representations and warranties are
qualified by materiality or Material Adverse Effect, in all respects) except to
the extent any such representation and warranty expressly speaks to an earlier
date, and (iii) after giving effect to such Revolving Loan, Excess Revolving
Loan Availability equals or exceeds $2,500,000.

 

2.3                                 Letter
of Credit Procedures.

 

2.3.1                      L/C
Applications.  The Borrowers shall
execute and deliver to the Issuing Bank the Master Letter of Credit Agreement
on the Closing Date. The Loan Party Representative shall give notice to the
Administrative Agent and the Issuing Bank of the requested issuance of each
Letter of Credit on a Business Day which is at least three Business Days (or
such lesser number of days as the Administrative Agent and the Issuing Bank
shall agree in any particular instance in their sole discretion) prior to the
proposed date of issuance of such Letter of Credit.  Each such notice shall be accompanied by an
L/C Application, duly executed by the Loan Party Representative and in all
respects satisfactory to the Administrative Agent and the Issuing Bank,
together with such other documentation as the Administrative Agent or the
Issuing Bank may reasonably request in support thereof, it being understood
that each L/C Application shall specify, among other things, the date on which
the proposed Letter of Credit is to be issued, the expiration date of such
Letter of Credit (which shall not be later than thirty (30) days prior to the
Scheduled Facility A Termination Date (unless such Letter of Credit is Cash
Collateralized) and shall in no event exceed more than one year from the date
of issuance, provided such Letter of Credit may provide for annual renewals
subject to Issuing Bank consent thereto) and whether

 

38

 

such Letter of Credit is to be transferable in whole or in part.  Any Letter of Credit outstanding after the
scheduled Termination Date which is Cash Collateralized for the benefit of the
Issuing Bank shall be the sole responsibility of the Issuing Bank and the
Issuing Bank shall be solely entitled to the benefits of such Cash
Collateral.  The Issuing Bank shall
promptly advise the Administrative Agent of the issuance of each Letter of
Credit and of any amendment thereto, extension thereof or event or circumstance
changing the amount available for drawing thereunder.  In the event of any inconsistency between the
terms of the Master Letter of Credit Agreement, any L/C Application and the
terms of this Agreement, the terms of this Agreement shall control.

 

2.3.2                      Participations
in Letters of Credit.  Concurrently
with the issuance of each Letter of Credit, the Issuing Bank shall be deemed to
have sold and transferred to each Facility A Lender with a Revolving
Commitment, and each such Facility A Lender (which term shall not, for
purposes of this Section 2.3.2, include the Issuing Bank) shall be
deemed irrevocably and unconditionally to have purchased and received from the
Issuing Bank, without recourse or warranty, an undivided interest and
participation, to the extent of such Facility A Lender’s Pro Rata Share
(aggregating to 100% as among all such Facility A Lenders), in such Letter
of Credit and the Borrowers’ reimbursement obligations with respect
thereto.  Upon the incurrence of any
reimbursement obligation under any Letter of Credit, the Borrowers shall be
deemed to have immediately requested that the Facility A Lenders make a
Revolving Loan which is a Base Rate Loan in a principal amount equal to such
reimbursement obligations.  The
Administrative Agent shall promptly notify such Facility A Lenders of such
deemed request and, without the necessity of compliance with the requirements
of Section 2.2.2, 12.2 or otherwise such Facility A
Lender shall make available to the Administrative Agent its Pro Rata Share of
such Loan.  The proceeds of such Loan
shall be paid over by the Administrative Agent to the Issuing Bank for the
account of the Borrowers in satisfaction of such reimbursement obligations.  The Issuing Bank hereby agrees, upon request
of the Administrative Agent, to deliver to the Administrative Agent or
Facility A Lender a list of all outstanding Letters of Credit issued by
the Issuing Bank, together with such information related thereto as the
Administrative Agent or any Facility A Lender may reasonably request.

 

2.3.3                      Reimbursement
Obligations.

 

(a)                                  Each
of the Borrowers hereby jointly and severally unconditionally and irrevocably
agrees to reimburse the Issuing Bank for each payment or disbursement made by
the Issuing Bank under any Letter of Credit honoring any demand for payment
made by the beneficiary thereunder, in each case on the date that such payment
or disbursement is made.  If any such
amounts can not be reimbursed by the making of a Revolving Loan for any reason,
any amount not reimbursed on the date of such payment or disbursement shall
bear interest from the date of such payment or disbursement to the date that
the Issuing Bank is reimbursed by any Borrower therefor, payable on demand, at
a rate per annum equal to the Base Rate from time to time in effect plus
the Revolving Loan Base Rate Margin from time to time in effect plus, beginning
on the third Business Day after receipt of notice from the Issuing Bank of such
payment or disbursement, 2%.  The Issuing
Bank shall notify the Loan Party Representative and the Administrative Agent
whenever any demand for payment is made under any Letter of Credit by the
beneficiary thereunder; provided that the failure of the Issuing Bank to
so notify the Loan

 

39

 

Party Representative or the Administrative Agent shall
not affect the rights of the Issuing Bank or the Facility A Lenders in any
manner whatsoever.

 

(b)                                 The
Borrowers’ reimbursement obligations hereunder shall be irrevocable and
unconditional under all circumstances, including (a) any lack of validity or
enforceability of any Letter of Credit, this Agreement or any other Loan
Document, (b) the existence of any claim, set-off, defense or other right which
any Loan Party may have at any time against a beneficiary named in a Letter of
Credit, any transferee of any Letter of Credit (or any Person for whom any such
transferee may be acting), the Administrative Agent, the Issuing Bank, any
Lender or any other Person, whether in connection with any Letter of Credit,
this Agreement, any other Loan Document, the transactions contemplated herein
or any unrelated transactions (including any underlying transaction between any
Loan Party and the beneficiary named in any Letter of Credit), (c) the
validity, sufficiency or genuineness of any document which the Issuing Bank has
determined complies on its face with the terms of the applicable Letter of
Credit, even if such document should later prove to have been forged,
fraudulent, invalid or insufficient in any respect or any statement therein
shall have been untrue or inaccurate in any respect, or (d) the surrender or
impairment of any security for the performance or observance of any of the
terms hereof.  Without limiting the foregoing,
no action or omission whatsoever by the Administrative Agent or any Lender
(excluding, for purposes hereof, the Issuing Bank) under or in connection with
any Letter of Credit or any related matters shall, absent gross negligence or
willful misconduct, result in any liability of the Administrative Agent or any
Lender to any Loan Party, or relieve any Loan Party of any of its obligations
hereunder to any such Person.

 

2.3.4                      Funding
by Facility A Lenders to Issuing Bank. 
If the Issuing Bank makes any payment or disbursement under any Letter
of Credit and (a) (i) a Revolving Loan may not be made in accordance with Section 2.3.2
and (ii) the Loan Parties have not reimbursed the Issuing Bank in full for such
payment or disbursement by 11:00 A.M., Chicago time on the date of such payment
or disbursement or (b) any reimbursement that was received by the Issuing Bank
from a Loan Party or any other Person on behalf of the Loan Parties is or must
be returned or rescinded upon or during any bankruptcy or reorganization of any
Loan Party, such other Person or otherwise, each Facility A Lender with a
Revolving Commitment shall be obligated to pay to the Administrative Agent for
the account of the Issuing Bank, in full or partial payment of the purchase
price of its participation in such Letter of Credit, its Pro Rata Share
(aggregating to 100% as among all such Facility A Lenders (exclusive of
the Issuing Bank)) of such payment or disbursement (but no such payment shall
diminish the obligations of the Borrowers under Section 2.3.3),
and, upon notice from the Issuing Bank, the Administrative Agent shall promptly
notify each Facility A Lender thereof. 
Each Facility A Lender irrevocably and unconditionally agrees to so
pay to the Administrative Agent in immediately available funds for the Issuing
Bank’s account the amount of such Facility A Lender’s Pro Rata Share of
such payment or disbursement.  If and to
the extent any Facility A Lender shall not have made such amount available
to the Administrative Agent by 2:00 P.M., Chicago time, on the Business Day on
which such Facility A Lender receives notice from the Administrative Agent
of such payment or disbursement (it being understood that any such notice
received after noon, Chicago time, on any Business Day shall be deemed to have
been received on the next following Business Day), such Facility A Lender
agrees to pay interest on such amount to the Administrative Agent for the
Issuing Bank’s account forthwith on demand, for each day from the date such
amount was to

 

40

 

have been delivered to the Administrative Agent to the date such amount
is paid, at a rate per annum equal to (a) for the first three days after
demand, the Federal Funds Rate from time to time in effect and (b) thereafter,
the Base Rate from time to time in effect. 
Any Facility A Lender’s failure to make available to the
Administrative Agent its Pro Rata Share of any such payment or disbursement
shall not relieve the Borrowers or any other Lender of its obligation hereunder
to make available to the Administrative Agent, the Borrowers’ or such other
Lender’s Pro Rata Share of such payment, but no Facility A Lender shall be
responsible for the failure of any other Facility A Lender to make
available to the Administrative Agent such other Facility A Lender’s Pro
Rata Share of any such payment or disbursement.

 

2.4                                 Commitments
Several.  The failure of any Lender
to make a requested Loan on any date shall not relieve any other Lender of its
obligation (if any) to make a Loan on such date, but no Lender shall be
responsible for the failure of any other Lender to make any Loan to be made by
such other Lender.

 

2.5                                 Certain
Conditions.  Except with respect to
the making of Loans in Sections 2.3.2 and 2.3.4 of this
Agreement, no Lender shall have an obligation to make any Loan, or to permit
the continuation of or any conversion into any LIBOR Loan, and the Issuing Bank
shall not have any obligation to issue any Letter of Credit, if an Event of
Default or Unmatured Event of Default exists or would result therefrom.

 

2.6                                 Loan
Party Representative.  Each Loan
Party hereby designates the Company as its representative and agent on its
behalf (in such capacity, the “Loan Party Representative”) to act as specified
herein. Each Loan Party hereby authorizes the Loan Party Representative to take
such actions on its behalf under the terms of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties hereunder and
thereunder as are specified in such agreements or are reasonably incidental
thereto, including issuing Notices of Borrowing and Notices of
Conversion/Continuation, acceptance of amounts borrowed hereunder, giving
instructions with respect to the disbursement of the proceeds of the Loans,
requesting an increase in the Revolving Commitment Limit hereunder, selecting
interest rate options, requesting Letters of Credit, giving and receiving all
other notices and consents hereunder or under any of the other Loan Documents
and taking all other actions (including in respect of compliance with
covenants), in each case, on behalf of the Borrowers and the Loan Parties under
the Loan Documents.  The Loan Party
Representative hereby accepts such appointment. 
The Administrative Agent and the Lenders shall be entitled to rely on
all notices, requests, consents, certifications and/or authorizations or other
similar acts delivered or taken by the Loan Party Representative for or on
behalf of any Borrower pursuant hereto or the other Loan Documents without
inquiry and as if such notices, requests, consents, certifications and/or
authorizations or other similar acts were delivered by such Borrower.  Each warranty, covenant, agreement and
undertaking made on its behalf by the Loan Party Representative shall be deemed
for all purposes to have been made by all Borrowers and Loan Parties (or any of
the them, as applicable) and shall be binding upon and enforceable against such
Borrower or Loan Party to the same extent as it if the same had been made
directly by such Borrower or Loan Party. The Company shall not be permitted to
resign as the Loan Party Representative and the Borrowers shall not be
permitted to remove the Company as Loan Party Representative without the
consent of the Administrative Agent; provided that if the Company notifies the
Administrative Agent in

 

41

 

writing that it (or any successor Loan Party
Representative) shall no longer be able to act as Loan Party Representative in
accordance with the terms hereof, the Administrative Agent and the Borrowers
shall appoint a successor to act as Loan Party Representative, which successor
shall be a Borrower designated by the Administrative Agent therefor (and the
Borrowers hereby agree that such Person thereafter shall be vested with all
rights, powers, privileges and authority of the Loan Party Representative
hereunder).

 

SECTION 3                                   EVIDENCING OF LOANS.

 

3.1                                 Notes.  The Loans of each Lender shall be evidenced
by a Note in the form set forth as Exhibit A-1, in the case of the Notes
evidencing the Revolving Loans (the “Revolving Loan Notes”), in the form
set forth as Exhibit A-2, in the case of the Notes evidencing the Term
Loan A (the “Term Loan A Notes”), and in the form set forth as
Exhibit A-3, in the case of the Notes evidencing the Term Loan B
(the “Term Loan B Notes”). 
Each such Note shall have appropriate insertions and shall be payable to
the order of such Lender in a face principal amount equal to such Lender’s
Revolving Commitment, Term Loan A Commitment or Term Loan B
Commitment, as applicable.  However, if
such Loans are not so evidenced, such Loans may be evidenced solely by entries
upon the books and records maintained by the Administrative Agent, which books
and records shall be conclusively presumed correct absent manifest error.

 

3.2                                 Recordkeeping.  The Administrative Agent, on behalf of each
Lender, shall record in its records, the date and amount of each Loan made by
each Lender, each repayment or conversion thereof and, in the case of each
LIBOR Loan, the dates on which each Interest Period for such Loan shall begin
and end.  The aggregate unpaid principal
amount so recorded shall be rebuttably presumptive evidence of the principal
amount of the Loans owing and unpaid. 
The failure to so record any such amount or any error in so recording
any such amount shall not, however, limit or otherwise affect the Obligations
of the Borrowers hereunder or under any Note to repay the principal amount of
the Loans hereunder, together with all interest accruing thereon.

 

SECTION 4                                   INTEREST.

 

4.1                                 Interest
Rates.  The Borrowers hereby jointly
and severally promise to pay interest on the unpaid principal amount of each
Loan for the period commencing on the date of such Loan until such Loan is paid
in full as follows:

 

(a)                              at
all times while such Loan is a Base Rate Loan, at a rate per annum equal to the
sum of the Base Rate from time to time in effect plus the applicable Base Rate
Margin from time to time in effect; and

 

(b)                             at
all times while such Loan is a LIBOR Loan, at a rate per annum equal to the sum
of the LIBOR Rate applicable to each Interest Period for such Loan plus the
applicable LIBOR Margin from time to time in effect;

 

provided that
any time an Event of Default exists, at the Required Facility A Lenders’
election, in the case of the Revolving Loan and Term Loan A, and at the
Required Facility B Lenders election, in the case of Term Loan B, the
interest rate applicable to each such Loan shall be increased by 2%; and provided,
further, that any such increase may thereafter be rescinded by the

 

42

 

Required Facility A
Lenders, in the case of the Revolving Loans and Term Loan A, or the
Required Facility B Lenders, in the case of Term Loan B,
notwithstanding Section 15.1. 
Notwithstanding the foregoing, upon the occurrence of an Event of
Default under Section 13.1.1 or 13.1.4, such increase shall
occur automatically.

 

4.2                                 Interest
Payment Dates.  Accrued interest on
each Base Rate Loan shall be payable in arrears on the last day of each
calendar month and at maturity.  Accrued
interest on each LIBOR Loan shall be payable on the last day of each Interest
Period relating to such Loan, upon a prepayment of such Loan (and, in the case
of a LIBOR Loan with an Interest Period in excess of three (3) months, on the
three-month anniversary of the first day of such Interest Period), and at maturity. 
After maturity, and at any time an Event of Default exists, accrued
interest on all Loans shall be payable on demand.

 

4.3                                 Setting
and Notice of LIBOR Rates.  The applicable
LIBOR Rate for each Interest Period shall be determined by the Administrative
Agent, and notice thereof shall be given by the Administrative Agent promptly
to the Loan Party Representative and each applicable Lender.  Each determination of the applicable LIBOR
Rate by the Administrative Agent shall be conclusive and binding upon the
parties hereto, in the absence of demonstrable error.  The Administrative Agent shall, upon written
request of the Loan Party Representative or any Lender, promptly deliver to the
Loan Party Representative or such Lender a statement showing the computations
used by the Administrative Agent in determining any applicable LIBOR Rate
hereunder.

 

4.4                                 Computation
of Interest.  Interest shall be
computed for the actual number of days elapsed on the basis of a year of
360 days.  The applicable interest
rate for each Base Rate Loan shall change simultaneously with each change in
the Base Rate.

 

SECTION 5                                   FEES.

 

5.1                                 Non-Use
Fee.  The Borrowers hereby jointly
and severally agree to pay to the Administrative Agent, for the account of each
Facility A Lender, a non-use fee, for the period from the Closing Date to
the Facility A Termination Date, at the Non-Use Fee Rate in effect from time to
time of such Facility A Lender’s Pro Rata Share (as adjusted from time to
time) of the daily average of the unused amount of the Maximum Revolving
Commitment.  For purposes of calculating
usage under this Section, the Maximum Revolving Commitment shall be deemed used
to the extent of Revolving Outstandings. 
Such non-use fee shall be payable in arrears on the last day of each
calendar month and on the Facility A Termination Date for any period then
ending for which such non-use fee shall not have previously been paid.  The non-use fee shall be computed for the
actual number of days elapsed on the basis of a year of 360 days.

 

5.2                                 Letter
of Credit Fees.

 

(a)                                  The
Borrowers hereby jointly and severally agree to pay to the Administrative
Agent, for the account of each Facility A Lender, a letter of credit fee
for each Letter of Credit equal to the L/C Fee Rate in effect from time to time
of such Facility A Lender’s Pro Rata Share (as adjusted from time to time)
of the undrawn amount of such Letter of Credit (computed for the

 

43

 

actual number of days elapsed on the basis of a year
of 360 days); provided that, upon the election of the Required
Facility A Lenders (or automatically upon the occurrence of an Event of
Default under Section 13.1.1 or 13.1.4), the rate applicable
to each Letter of Credit shall be increased by 2% at any time that an Event of
Default exists.  Such letter of credit
fee shall be payable in arrears on the last day of each calendar month and on
the Facility A Termination Date (or such later date on which such Letter of
Credit expires or is terminated) for the period from the date of the issuance
of each Letter of Credit (or the last day on which the letter of credit fee was
paid with respect thereto) to the date such payment is due or, if earlier, the
date on which such Letter of Credit expired or was terminated.

 

(b)                                 In
addition, with respect to each Letter of Credit, the Borrowers hereby jointly
and severally agree to pay to the Issuing Bank, for its own account,
(i) such fees and expenses as the Issuing Bank customarily requires in
connection with the issuance, negotiation, processing and/or administration of
letters of credit in similar situations, and (ii) letter of credit
fronting fee in the amount and at the time agreed to by the Company and the Issuing
Bank.

 

5.3                                 Administrative
Agent’s Fees.  The Borrowers hereby
jointly and severally agree to pay to the Administrative Agent such agent’s
fees as are set forth in the Agent Fee Letter.

 

5.4                                 Termination
Fee.  In the event that the Facility
A Termination Date shall occur at any time prior to the first year anniversary
of the Closing Date for any reason whatsoever, the Borrowers hereby jointly and
severally hereby agree to pay to the Administrative Agent, for the ratable
benefit of each of the Facility A Lenders, a termination fee (the “Termination
Fee”) equal to one percent (1.00%) of the sum of (i) the highest Maximum
Revolving Commitment that had been in effect at any time prior to such
termination, plus (ii) the original principal balance of Term
Loan A.  For clarification purposes,
it is hereby acknowledged that no Termination Fee shall be due as a result of
the Revolving Outstandings being reduced to zero from time to time.

 

SECTION 6                                   REDUCTION,
TERMINATION AND INCREASES OF THE REVOLVING COMMITMENT LIMIT AND THE REVOLVING
COMMITMENT; PREPAYMENTS.

 

6.1                                 Reduction,
Termination and Increases of the Revolving Commitment.

 

6.1.1                      Voluntary
Reduction or Termination of the Revolving Commitment.  The Loan Party Representative may from time
to time on at least three Business Days’ prior written notice received by the
Administrative Agent (which shall promptly advise each Lender thereof)
permanently reduce the Revolving Commitment Limit to an amount not less than
the Revolving Outstandings plus the required Excess Revolving Loan
Availability pursuant to Section 11.13.3.  Any such reduction shall be in an amount not
less than $1,000,000 or a higher integral multiple of $1,000,000 and such
reduction shall be applied Pro Rata as a reduction to each Lender’s Revolving
Commitment such that the sum of such Revolving Commitments equal the Revolving
Commitment Limit.  Concurrently with any
reduction of the Revolving Commitment Limit to zero, the Facility A Termination
Date shall be deemed to have occurred, and the Borrowers shall be required to
repay all Obligations and shall terminate or Cash Collateralize all outstanding
Letters of Credit.  Any such termination
of the Revolving Commitment Limit occurring on or

 

44

 

prior to the first year anniversary of the Closing Date shall be
accompanied by the Termination Fee required pursuant to Section 5.4.

 

6.1.2                      Increases
in Revolving Commitment Limit.  Upon
the Loan Party Representative’s request made at any time (i) prior to the
Scheduled Facility A Termination Date and (ii) that any existing
Facility A Lender has agreed to increase its Revolving Commitment or any
other financial institution meeting the requirements of an Eligible Assignee
and approved by the Loan Party Representative and the Administrative Agent has
become a party hereto as a Facility A Lender and has agreed to accept an
additional Revolving Commitment (in each case, pursuant to documentation in
form and substance reasonably satisfactory to the Administrative Agent), then,
provided that no Unmatured Event of Default or Event of Default then exists and
is continuing and without the consent of any other Lender or the Issuing Bank,
the Revolving Commitment Limit shall be increased by the amount of the
additional or supplemental Revolving Commitment(s) of such Facility A
Lender(s); provided that the Revolving Commitment Limit may not be increased to
an amount in excess of $75,000,000 without the prior written consent of all
Lenders, the Issuing Bank and the Administrative Agent.  Upon the increase in the Revolving Commitment
Limit, the Pro Rata Shares of each Facility A Lender in respect of the
Revolving Commitment shall be adjusted automatically to reflect such new or
supplemental Revolving Commitment. Any such increase in the Revolving
Commitment Limit shall be conditioned on the payment of the applicable fees set
forth in the Agent Fee Letter.

 

6.1.3                      All
Reductions of the Revolving Commitment. 
All reductions of the Revolving Commitment shall reduce the Revolving
Commitment Limit and shall reduce the Revolving Commitments ratably among the
Facility A Lenders according to their respective Pro Rata Shares (as
defined under clause (a) thereof).

 

6.2                                 Prepayments.

 

6.2.1                      Voluntary
Prepayments. Revolving Loans. 
Revolving Loans may be prepaid at any time and, subject to the terms and
conditions hereof, reborrowed.  Any such
prepayment shall be applied first to accrued but unpaid interest owing on the
Revolving Loans.

 

(a)                                  Term
Loans.  The Borrowers may at any time
prepay Term Loan A, in whole or in part without premium or penalty (but
subject to payment of costs associated with breakfunding on LIBOR loans
pursuant to Section 8.4). 
Prior to the Facility A Discharge Date, the Borrowers may not prepay
Term Loan B, in whole or in part except with the consent of all Facility A
Lenders and the Issuing Bank, in each case, in their sole discretion, which
prepayment, if allowed, shall be subject to payment of the Prepayment Premium
set forth in clause (b) below, if applicable, and payment of costs
associated with breakfunding on LIBOR loans pursuant to Section 8.4.  In either case, the Loan Party Representative
shall give the Administrative Agent (which shall promptly advise each Lender)
notice thereof not later than 11:00 A.M., Chicago time, on the day (which shall
be a Business Day) of such prepayment, specifying the Term Loans to be prepaid
and the date and amount of prepayment. 
Any such voluntary partial prepayment shall be in a principal amount
equal to $1,000,000 or a higher integral multiple of $100,000 and shall be
accompanied by payment of all accrued but unpaid interest on the Term Loan, any

 

45

 

breakfunding costs, if any, pursuant to Section 8.4,
the Prepayment Fee, if any, owing with respect thereto.

 

(b)                                 Facility
B Prepayment Fee.  In the event that
any principal of the Term Loan B (or any portion thereof) is repaid
(including pursuant to any mandatory repayment thereof) or the Term Loan B
Commitment is terminated, in each case, for any reason whatsoever on or prior
to the second anniversary of the Closing Date, the Borrowers hereby jointly and
severally agree to pay to the Administrative Agent, for the ratable benefit of
each of the Term Loan B Lenders, a prepayment fee (the “Prepayment Fee”)
equal to the following percentages of any such amount so prepaid:

 

	
  If such payment occurs on or prior to the first
  anniversary date of the Closing Date

  	
   

  	
  2.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  If such payment occurs on or prior to the second
  anniversary date of the Closing Date

  	
   

  	
  1.00

  	
  %;

  

 

it being agreed,
that no such Prepayment Fee shall be payable if such payment occurs at any time
after the second anniversary date of the Closing Date.

 

6.2.2                      Mandatory
Prepayments.

 

(a)                                  The
Borrowers shall make a prepayment of the Obligations until paid in full upon
the occurrence of any of the following (each a “Mandatory Prepayment Event”)
at the following times and in the following amounts, which amounts shall be
applied in accordance with this Section 6.2.2 and Section 6.3
as follows (such proceeds being the “Designated Proceeds”):

 

(i)                                     Subject
to Section 10.3.2, concurrently with the receipt by any Loan Party
of any Net Cash Proceeds from any Asset Disposition (or financing or
refinancing of any Obligations with Debt permitted under Section 11.1(b)),
in an amount equal to 100% of such Net Cash Proceeds therefrom, which amounts
shall be applied (1) first, to the prepayment of the outstanding principal
balance of Term Loan A until paid in full, (2) second, to the Revolving
Outstandings until paid in full (including delivery to the Administrative Agent
of Cash Collateral for all outstanding Letters of Credit), (3) third, against
all Bank Products Obligations due and owing to any Facility A Lender or
its Affiliates, pro-rata, until paid in full, (4) fourth, subject to the
Intercreditor Agreement against all other Facility A Obligations due and owing
to each Facility A Lender and the Administrative Agent, pro-rata, until
paid in full, (5) fifth, to the payment of any Specified Hedging Obligations
due and owing to any Facility A Lenders, pro-rata, until paid in full, (6)
sixth, to the prepayment of the outstanding principal balance of Term
Loan B until paid in full, (7) seventh, against all other Facility B
Obligations owing to any Facility B Lender, the Administrative Agent or
any Affiliate of any of the foregoing, (8) eighth, against any other
Obligations owing to the Facility A

 

46

 

Lenders and the
Administrative Agent or their Affiliates, pro rata, until paid in full, and (9)
ninth, any amounts remaining thereafter, shall be delivered to the Loan Party
Representative for remittance to the Borrowers; and

 

(ii)                                  Within
three (3) Business Days after its receipt by any Loan Party of any Net Cash
Proceeds from any issuance of Capital Securities of any Loan Party (excluding
(x) any issuance of Capital Securities to employees or directors of the Company
or any Subsidiary with respect to their compensation or benefits, whether
pursuant to a formal stock and/or option plan, benefit program or otherwise and
(y) any such issuance by a Subsidiary to the Company or another Subsidiary) or
the issuance of any Debt of any Loan Party (excluding Debt permitted by clauses
(a) -  (m) of Section 11.1), in an amount equal to 100%
of such Net Cash Proceeds therefrom, which amounts shall be applied as set
forth in clause (i) immediately above.

 

Nothing in this Section 6.2.2(a)
shall be deemed to authorize any Asset Disposition or the sale or issuance of
any Capital Securities or Debt not otherwise permitted hereunder.  In addition, each of the Facility B
Lenders acknowledges and agrees that it shall not be entitled to receive any
prepayments of any of the Facility B Obligations at anytime that any Facility A
Obligations shall be outstanding.

 

(b)                                 In
addition to the payments required pursuant to clause (a) immediately
above, from and after the giving of any Notice of Control directing collections
of Accounts to the Agent Account (unless and until such Notice of Control is
rescinded in accordance with the provisions of Section 10.11), the
outstanding principal balance of the Revolving Loans shall be repaid daily from
available funds in the Agent Account as determined in accordance with Section 7.1.1
and Section 10.11 hereof.  In
addition, subject to Section 2.1.1(b) and without limiting any of
the other rights and remedies of the Administrative Agent and the Lenders in
respect thereof, if on any day the Revolving Outstandings exceeds the Revolving
Loan Availability on such day or a violation of Section 11.13.3
then exists, the Borrowers shall immediately prepay the Revolving Loans and/or
Cash Collateralize the outstanding Letters of Credit, or do a combination of
the foregoing, in an amount sufficient to eliminate such excess or violation.

 

(c)                                  Nothing
in this Section 6.2.2 shall be deemed to authorize the taking of
any action by any Loan Party which is not otherwise permitted hereunder.

 

6.3                                 Manner
of Prepayments.  Any partial
prepayment of a Group of LIBOR Loans shall be subject to the proviso to Section 2.2.3(a).  Any prepayment of a LIBOR Loan on a day other
than the last day of an Interest Period therefor shall include interest on the
principal amount being repaid and shall be subject to Section 8.4.  Except as otherwise provided by this
Agreement, all principal payments in respect of the Loans shall be applied
first, to repay outstanding Base Rate Loans, if any, and then to repay
outstanding LIBOR Rate Loans in direct order of Interest Period maturities.  All prepayments of the Term Loans pursuant to
Section 6.2.1 or 6.2.2 shall be applied ratably to all
remaining installments of principal. 
Term Loans that are prepaid may not be reborrowed.

 

47

 

6.4                                 Repayments.

 

6.4.1                      All
Obligations.  NOTWITHSTANDING
ANYTHING CONTAINED HEREIN TO THE CONTRARY, (I) ALL FACILITY A OBLIGATIONS
(OTHER THAN UNASSERTED CONTINGENT AND INDEMNIFICATION OBLIGATIONS) SHALL BE AND
BECOME IMMEDIATELY DUE AND PAYABLE AND ALL LETTERS OF CREDIT SHALL IMMEDIATELY
BE REQUIRED TO BE TERMINATED OR CASH COLLATERALIZED UPON THE OCCURRENCE OF THE
FACILITY A TERMINATION DATE FOR ANY REASON WHATSOEVER, AND (II) ALL FACILITY B
OBLIGATIONS (OTHER THAN UNASSERTED CONTINGENT AND INDEMNIFICATION OBLIGATIONS)
SHALL BE AND BECOME IMMEDIATELY DUE AND PAYABLE UPON THE OCCURRENCE OF THE
FACILITY B TERMINATION DATE FOR ANY REASON WHATSOEVER.

 

6.4.2                      Revolving
Loans.  The Revolving Loans of each
Facility A Lender shall be paid in full and the Revolving Commitment shall
terminate on the Facility A Termination Date.

 

6.4.3                      Term
Loan A.  The principal of Term
Loan A shall be repaid in equal monthly installments of Two Hundred
Sixteen Thousand Six Hundred Sixty-Six and 67/100 Dollars ($216,666.67) each
(subject to reduction by prepayments applied thereto in accordance with Section 6.2.1(a)
or Section 6.2.2), to be made on the last day of each month (with
the first such payment being due on July 31, 2005) and a final installment
in the aggregate amount of the unpaid principal balance thereof which shall be
due and payable on the Scheduled Facility A Termination Date.  Unless sooner paid in full, the outstanding
principal balance of Term Loan A shall be paid in full on the Facility A
Termination Date.

 

6.4.4                      Term
Loan B.  The principal of Term
Loan B shall be due and payable in its entirety on the Scheduled Facility
B Termination Date.

 

SECTION 7                                   MAKING AND PRORATION
OF PAYMENTS; SETOFF; TAXES.

 

7.1                                 Making
of Payments.

 

7.1.1                      Manner of
Payment; Application of Payment.  All
payments of principal or interest on the Notes, and of all fees, shall be made
by the Borrowers to the Administrative Agent in immediately available funds at
the office specified by the Administrative Agent not later than 1:00 p.m.,
Chicago time, on the date due; and funds received after that hour shall be
deemed to have been received by the Administrative Agent on the following
Business Day.  For purposes of
calculating interest and fees, the Administrative Agent shall, within one and
one-quarter (1-1/4) Business Days after its receipt (as set forth above) in the
Agent Account of any items of payment or proceeds of any Collateral (other than
cash or other immediately available funds, which amounts shall be credited
immediately upon the Administrative Agent’s receipt (as set forth above) in the
Agent Account) to be applied against the Obligations in accordance with the
terms hereof, apply the whole or any part of such collections or proceeds
against the Obligations in such order as is specified in this Agreement and the
other Loan Documents.  For purposes of
determining Revolving Loan Availability and Excess Revolving Loan Availability

 

48

 

for borrowing purposes, the Administrative Agent shall, immediately
upon its receipt thereof in the Agent Account, credit any items of payment or
proceeds of any Collateral to be applied against the Obligations in accordance
with the terms hereof, against the Obligations in such order as is specified in
this Agreement, subject to actual collection. 
The Administrative Agent shall remit to each Lender its share of all
such payments received in collected funds by the Administrative Agent for the
account of such Lender entitled thereto in the manner and at the times set
forth in Section 7.1.3 below. 
All payments shall be made by the Borrowers directly to the
Administrative Agent without setoff, counterclaim, deduction, withholding or
other defense.

 

7.1.2                      Payment
Authorization.  The Borrowers hereby
authorize the Administrative Agent, in its sole discretion, to charge any of
the Borrowers’ accounts or advance Revolving Loans to make any payments of
principal, interest, fees, costs or expenses required to be made under this
Agreement or the other Loan Documents.

 

7.1.3                      Settlement.  On a weekly basis (or more frequently if
requested by the Administrative Agent (a “Settlement Date”), the
Administrative Agent shall provide each Lender with a statement of the
outstanding balance of the Obligations as of the end of the Business Day
immediately preceding the Settlement Date (the “Pre-Settlement Determination
Date”) and the current balance of the Loans funded by such Lender (whether
made directly by such Lender to any Borrower or constituting a settlement by
such Lender of a previous Disproportionate Advance made by the Administrative
Agent on behalf of such Lender to any Borrower).  If such statement discloses that such Lender’s
current balance of the Loans as of the Pre-Settlement Determination Date
exceeds such Lender’s Pro Rata Share of the applicable Obligations outstanding
as of the Pre-Settlement Determination Date, then the Administrative Agent
shall, on the Settlement Date, transfer, by wire transfer, the net amount due
to such Lender in accordance with such Lender’s instructions, and if such
statement discloses that such Lender’s current balance of the Loans as of the
Pre-Settlement Determination Date is less than such Lender’s Pro Rata Share of
the applicable Obligations outstanding as of the Pre-Settlement Determination
Date, then such Lender shall, on the Settlement Date, transfer, by wire
transfer the net amount due to the Administrative Agent in accordance with the
Administrative Agent’s instructions.  In
addition, payments actually received by the Administrative Agent with respect
to the following items shall be distributed by the Administrative Agent to the
Lenders as follows:

 

(a)                                  Within
one (1) Business Day of receipt thereof by the Administrative Agent, payments
to be applied to interest on the Loans shall be paid to each Lender in
proportion to its Pro Rata Share of the Loans in respect of which such interest
is being paid, subject to any adjustments for any Disproportionate Advances as
provided in Section 2.2.2, so that the Administrative Agent shall
receive interest on the Disproportion Advances and each Lender shall only
receive interest on the amount of funds actually advanced by such Lender;

 

(b)                                 Within
one (1) Business Day of receipt thereof by the Administrative Agent, payments
to be applied to the Non-Use Fee as provided in Section 5.1 shall
be paid to each Facility A Lender in proportion to its Pro Rata Share of
the daily average of the unused amount of the Revolving Commitment; and

 

49

 

(c)                                  Within
one (1) Business Day of receipt thereof by the Administrative Agent, payments
to be applied to the letter of credit fee for each Letter of Credit as provided
in Section 5.2 shall be paid to each Facility A Lender in
proportion to its Pro Rata Share of the undrawn amount of such Letter of
Credit.

 

Notwithstanding the
foregoing, the Administrative Agent shall not be obligated to transfer to any
Defaulting Lender any payment made by any Borrower to the Administrative Agent,
nor shall such Defaulting Lender be entitled to share any interest, fees or
other payment hereunder, until payment is made by such Defaulting Lender to the
Administrative Agent as required in this Agreement.

 

7.2                                 Application
of Certain Payments.  So long as no
Event of Default has occurred and is continuing and subject to the
Intercreditor Agreement, (a) payments matching specific scheduled payments then
due shall be applied to those scheduled payments and (b) voluntary and
mandatory prepayments shall be applied as set forth in Sections 6.2 and 6.3.  After the occurrence and during the continuance
of an Event of Default, all amounts collected or received by the Administrative
Agent or any Lender as proceeds from the sale of, or other realization upon,
all or any part of the Collateral shall, subject to the Intercreditor Agreement
be applied as the Administrative Agent shall determine in its reasonable
discretion or, in the absence of a specific determination by the Administrative
Agent, as set forth in the Guaranty and Collateral Agreement.  Concurrently with each remittance to any
Lender of its share of any such payment, the Administrative Agent shall advise
such Lender as to the application of such payment.

 

7.3                                 Due
Date Extension.  If any payment of
principal or interest with respect to any of the Loans, or of any fees, falls
due on a day which is not a Business Day, then such due date shall be extended
to the immediately following Business Day (unless, in the case of a LIBOR Loan,
such immediately following Business Day is the first Business Day of a calendar
month, in which case such due date shall be the immediately preceding Business
Day) and, in the case of principal, additional interest shall accrue and be
payable for the period of any such extension.

 

7.4                                 Setoff.  The Borrowers and the other Loan Parties each
agree that the Administrative Agent and each Lender have all rights of set-off
and bankers’ lien provided by applicable law, and in addition thereto, the
Borrowers and each other Loan Party agrees that at any time any Event of
Default exists and is continuing, the Administrative Agent and each Lender may
apply to the payment of any Obligations of the Borrowers and each other Loan
Party hereunder, whether or not then due, any and all balances, credits,
deposits, accounts or moneys of the Borrowers and each other Loan Party then or
thereafter with the Administrative Agent or such Lender.

 

7.5                                 Proration
of Payments.  If any Lender shall
obtain any payment or other recovery (whether voluntary, involuntary, by
application of offset or otherwise, on account of (a) principal of or interest
on any Loan (but excluding (i) any payment pursuant to Section 8.7
or 15.6 and (ii) payments of interest on any Affected Loan) or (b)
its participation in any Letter of Credit) in excess of its applicable Pro Rata
Share of those payments and other recoveries obtained by all other applicable
Lenders on account of principal of and interest on the respective Loans (or
such participation) then held by them, then such Lender shall purchase from the
other applicable

 

50

 

Lenders such participations in the respective affected
Loans (or sub-participations in Letters of Credit) held by them as shall be
necessary to cause such purchasing Lender to share the excess payment or other
recovery ratably with each of them; provided that if all or any portion of the
excess payment or other recovery is thereafter recovered from such purchasing
Lender, the purchase shall be rescinded and the purchase price restored to the
extent of such recovery.  Nothing in this
Section shall be deemed to require the Facility A Lenders to purchase
a participation in any Facility B Obligation or the interest, principal, fees
or expenses owing to any Facility B Lender.

 

7.6                                 Taxes.

 

(a)                                  Except
as expressly otherwise provided in this Section 7.6, all payments
made by each Loan Party hereunder or under any Loan Documents (including any
payment of principal, interest, or fees) to, or for the benefit, of any person
(i) shall be made without setoff, counterclaim, or other defense and (ii) shall
be made by each Loan Party free and clear of and without deduction or
withholding for, or account of, any Taxes now or hereinafter imposed by any
taxing authority.

 

(b)                                 If
any Borrower makes any payment hereunder or under any Loan Document in respect
of which it is required by applicable law to deduct or withhold any Taxes, such
Loan Party shall increase the payment hereunder or under any such Loan Document
such that after the reduction for the amount of Taxes withheld (and any taxes
withheld or imposed with respect to the additional payments required under this
Section 7.6(b)), the amount paid to the Lenders, the Issuing Bank
or the Administrative Agent equals the amount that was payable hereunder or
under any such Loan Document without regard to this Section 7.6(b).  To the extent any Loan Party withholds any
Taxes on payments hereunder or under any Loan Document, such Loan Party shall
pay the full amount deducted to the relevant taxing authority within the time
allowed for payment under applicable law and shall deliver to the
Administrative Agent within 30 days after it has made payment to such authority
a receipt issued by such authority (or other evidence satisfactory to the
Administrative Agent) evidencing the payment of all amounts so required to be
deducted or withheld from such payment.

 

(c)                                  If
any Lender, the Issuing Bank or the Administrative Agent is required by law to
make any payments of any Taxes on or in relation to any amounts received or
receivable hereunder or under any other Loan Document, or any Tax is assessed
against a Lender, the Issuing Bank or the Administrative Agent with respect to
amounts received or receivable hereunder or under any other Loan Document, each
Borrower hereby jointly and severally agrees to indemnify such person against
(i) such Tax (and any reasonable counsel fees and expenses associated with such
Tax) and (ii) any Taxes imposed as a result of the receipt of the payment under
this Section 7.6(c).  A
certificate prepared in good faith as to the amount of such payment by such
Lender, the Issuing Bank or the Administrative Agent shall, absent manifest
error, be final, conclusive, and binding on all parties.

 

(d)                                 (i)  Each
Lender that is not a United States person within the meaning of Code Section 7701(a)(30)
(a “Non-U.S. Participant”) shall deliver to the Loan Party
Representative and the Administrative Agent on or prior to the Closing Date (or
in the case of a change in the

 

51

 

funding office or a Lender that is an Assignee, on the
date of such change in funding office or assignment to such Lender) two
accurate and complete original signed copies of Internal Revenue Service (“IRS”)
Form W-8BEN, W-8ECI, or W-8IMY (or any successor or other applicable form
prescribed by the IRS) certifying to such Lender’s entitlement to a complete
exemption from United States withholding tax on payments to be made hereunder
or any Loan.  If a Lender that is a
Non-U.S. Participant is claiming a complete exemption from withholding on interest
pursuant to Code Sections 871(h) or 881(c), such Lender shall deliver (along
with two accurate and complete original signed copies of IRS Form W-8BEN) a
certificate in form and substance reasonably acceptable to Administrative Agent
(any such certificate, a “Withholding Certificate”).  In addition, each Lender that is a Non-U.S.
Participant agrees that, from time to time after the Closing Date (or in the
case of a Lender that is an Assignee, after the date of the assignment to such
Lender), when a lapse in time (or change in circumstances or in any applicable
law, rule or regulation by any governmental authority, or compliance by any
Lender with any request or directive (whether or not having force of law) of
any such authority occurs) renders the prior certificates hereunder obsolete or
inaccurate in any material respect, such Lender shall promptly deliver to the
Loan Party Representative and the Administrative Agent two new and accurate and
complete original signed copies of an IRS Form W-8BEN, W-8ECI, or W-8IMY (or
any successor or other applicable forms prescribed by the IRS) and, if
applicable, a new Withholding Certificate, to confirm or establish the
entitlement of such Lender or the Administrative Agent to an exemption from, or
reduction in, United States withholding tax on payments to be made hereunder or
any Loan but only to the extent permitted at the time by applicable law.

 

(ii)                                  Each
Lender that is not a Non-U.S. Participant (other than any such Lender which is
taxed as a corporation for U.S. Federal income tax purposes) shall provide two
properly completed and duly executed copies of IRS Form W-9 (or any successor
or other applicable form) to the Loan Party Representative and the
Administrative Agent certifying that such Lender is exempt from United States
backup withholding tax.  Thereafter, from
time to time, to the extent that a form provided pursuant to this Section 7.6(d)(ii)
is rendered obsolete or inaccurate in any material respects as result of change
in circumstances with respect to the status of a Lender, such Lender shall
promptly deliver to the Loan Party Representative and the Administrative Agent
revised forms necessary to confirm or establish the entitlement to such Lender’s
or Administrative Agent’s exemption from United States backup withholding tax.

 

(iii)                               No Borrower shall be
required to pay additional amounts to a Lender (or under Section 7.6(b)),
or indemnify any Lender, under this Section 7.6 to the extent that
such obligations would not have arisen but for the failure of such Lender to
comply with Section 7.6(d).

 

(e)                                  Each
Lender agrees to indemnify the Administrative Agent and hold the Administrative
Agent harmless for the full amount of any and all present or future Taxes and
related liabilities (including penalties, interest, additions to tax and
expenses, and any Taxes imposed by any jurisdiction on amounts payable to the
Administrative Agent under this Section 7.6) which are imposed on
or with respect to principal, interest or fees payable to such

 

52

 

Lender hereunder and which are not paid by the
Borrower pursuant to this Section 7.6, whether or not such Taxes or
related liabilities were correctly or legally asserted.  This indemnification shall be made within 30
days from the date the Administrative Agent makes written demand therefor.

 

SECTION 8                                   INCREASED COSTS;
SPECIAL PROVISIONS FOR LIBOR LOANS.

 

8.1                                 Increased
Costs.

 

(a)                                  If,
after the date hereof, the adoption of, or any change in, any applicable law,
rule or regulation, or any change in the interpretation or administration of
any applicable law, rule or regulation by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender with any request or directive (whether or
not having the force of law) of any such authority, central bank or comparable
agency:  (i) shall impose, modify or deem
applicable any reserve (including any reserve imposed by the FRB, but excluding
any reserve included in the determination of the LIBOR Rate pursuant to the
definition thereof or Section 4), special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by any Lender; or (ii) shall impose on any Lender any other condition
affecting its LIBOR Loans, its Notes or its obligation to make LIBOR Loans; and
the result of anything described in clauses (i) and (ii) above is
to increase the cost to (or to impose a cost on) such Lender (or any LIBOR
Office of such Lender) of making or maintaining any LIBOR Loan, or to reduce
the amount of any sum received or receivable by such Lender (or its LIBOR
Office) under this Agreement or under its Notes with respect thereto (other
than any such increased cost or reduction on account of taxes of any kind,
including Excluded Taxes and Taxes, as to which Section 7.6 shall
govern), then upon demand by such Lender (which demand shall be accompanied by
a statement setting forth the basis for such demand and a calculation of the
amount thereof in reasonable detail, a copy of which shall be furnished to the
Administrative Agent), the Borrowers hereby jointly and severally agree to pay
directly to such Lender such additional amount as will compensate such Lender
for such increased cost or such reduction, so long as such amounts have accrued
on or after the day which is 180 days prior to the date on which such Lender
first made demand therefor.

 

(b)                                 If
any Lender or the Issuing Bank shall reasonably determine that any change in,
or the adoption or phase-in of, any applicable law, rule or regulation
regarding capital adequacy, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
the compliance by any Lender or the Issuing Bank, or any Person controlling
such Lender or the Issuing Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Lender’s, the Issuing Bank’s or such controlling Person’s
capital as a consequence of such Person’s obligations hereunder or under any
Letter of Credit to a level below that which such Lender, or the Issuing Bank
or such controlling Person could have achieved but for such change, adoption,
phase-in or compliance (taking into consideration such Lender’s, or the Issuing
Bank’s or such controlling Person’s policies with respect to capital adequacy)
by an amount deemed by such Lender, or the Issuing Bank or such

 

53

 

controlling Person to be material, then from time to
time, upon demand by such Lender or the Issuing Bank (which demand shall be
accompanied by a statement setting forth the basis for such demand and a
calculation of the amount thereof in reasonable detail, a copy of which shall
be furnished to the Administrative Agent), the Borrowers hereby jointly and
severally agree to pay to such Lender or the Issuing Bank, as applicable, such
additional amount as will compensate such Lender, or the Issuing Bank, or such
controlling Person for such reduction so long as such amounts have accrued on
or after the day which is 180 days prior to the date on which such Lender or
the Issuing Bank, as applicable, first made demand therefor.

 

8.2                                 Basis
for Determining Interest Rate Inadequate or Unfair.  If:

 

(a)                                  the
Administrative Agent reasonably determines (which determination shall be
binding and conclusive on each Borrower) absent manifest error that by reason
of circumstances affecting the interbank LIBOR market, adequate and reasonable
means do not exist for ascertaining the applicable LIBOR Rate; or

 

(b)                                 the
Required Lenders advise the Administrative Agent that the LIBOR Rate as
determined by the Administrative Agent will not adequately and fairly reflect
the cost to such Lenders of maintaining or funding LIBOR Loans for the relevant
Interest Period (taking into account any amount to which such Lenders may be
entitled under Section 8.1) or that the making or funding of LIBOR
Loans has become impracticable as a result of an event occurring after the date
of this Agreement which in the opinion of such Lenders materially affects such
Loans;

 

then the
Administrative Agent shall promptly notify the other parties thereof and, so
long as such circumstances shall continue, (i) in the case of the
Facility A Lenders, no such Lender shall be under any obligation to make
or convert any Base Rate Loans into LIBOR Loans and (ii) on the last day of the
current Interest Period for each LIBOR Loan, such Loan shall, unless then
repaid in full, (x) in the case of the Revolving Loans and Term Loan A,
automatically convert to a Base Rate Loan and (y) in the case of Term
Loan B, automatically convert to a Term Loan B which bears interest at or
by reference to the Alternate Term Loan B Rate.

 

8.3                                 Changes
in Law Rendering LIBOR Loans Unlawful. 
If any change in, or the adoption of any new, law or regulation, or any
change in the interpretation of any applicable law or regulation by any
governmental or other regulatory body charged with the administration thereof,
should make it (or in the good faith judgment of any Lender cause a substantial
question as to whether it is) unlawful for any Lender to make, maintain or fund
LIBOR Loans, then such Lender shall promptly notify each of the other parties
hereto and, so long as such circumstances shall continue, (a) (x) in the case
of the Facility A Lenders, no such Lender shall have any obligation to
make or convert any Base Rate Loan into a LIBOR Loan (but shall make Base Rate
Loans concurrently with the making of or conversion of Base Rate Loans into
LIBOR Loans by such Lenders which are not so affected, in each case in an amount
equal to the amount of LIBOR Loans which would be made or converted into by
such Lender at such time in the absence of such circumstances) and (b) on the
last day of the current Interest Period for each LIBOR Loan of such Lender (or,
in any event, on such earlier date as may be required by the relevant law,
regulation or interpretation), such LIBOR Loan shall, unless then repaid in
full, (x) in the case of the Revolving Loans and Term Loan A,
automatically convert to a Base Rate Loan and (y) in the

 

54

 

case of Term Loan B, automatically convert to a
Term Loan B which bears interest at or by reference to the Alternate Term Loan
B Rate.  Each Base Rate Loan made by a
Facility A Lender which, but for the circumstances described in the
foregoing sentence, would be a LIBOR Loan (an “Affected Loan”) shall
remain outstanding for the period corresponding to the Group of LIBOR Loans of
which such Affected Loan would be a part absent such circumstances.

 

8.4                                 Funding
Losses.  The Borrowers hereby jointly
and severally agrees that upon written demand by any Lender (which demand shall
be accompanied by a statement setting forth in reasonable detail the basis for
the amount being claimed, a copy of which shall be furnished to the
Administrative Agent), each Borrower will indemnify such Lender against any net
loss or expense which such Lender may sustain or incur (including any net loss
or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to fund or maintain any LIBOR Loan), as
reasonably determined by such Lender, as a result of (a) any payment,
prepayment or conversion of any LIBOR Loan of such Lender on a date other than
the last day of an Interest Period for such Loan (including any conversion
pursuant to Section 8.3) or (b) any failure of any Borrower to
borrow, convert or continue any Loan on a date specified therefor in a notice
of borrowing, conversion or continuation pursuant to this Agreement.  For this purpose, all such notices to the
Administrative Agent pursuant to this Agreement shall be deemed irrevocable.

 

8.5                                 Right
of Lenders to Fund through Other Offices. 
Each Lender may, if it so elects, fulfill its commitment as to any LIBOR
Loan by causing a foreign branch or Affiliate of such Lender to make such Loan;
provided that in such event for the purposes of this Agreement such Loan
shall be deemed to have been made by such Lender and the obligation of the
Borrowers to repay such Loan shall nevertheless be to such Lender and shall be
deemed held by it, to the extent of such Loan, for the account of such branch
or Affiliate.

 

8.6                                 Discretion
of Lenders as to Manner of Funding. 
Notwithstanding any provision of this Agreement to the contrary, each
Lender shall be entitled to fund and maintain its funding of all or any part of
its Loans in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder shall be made as if
such Lender had actually funded and maintained each LIBOR Loan during each
Interest Period for such Loan through the purchase of deposits having a
maturity corresponding to such Interest Period and bearing an interest rate
equal to the LIBOR Rate for such Interest Period.

 

8.7                                 Mitigation
of Circumstances; Replacement of Lenders.

 

(a)                                  Each
Lender or the Issuing Bank, as applicable, shall promptly notify the Loan Party
Representative and the Administrative Agent of any event of which it has
knowledge which will or is likely to result in, and will use reasonable
commercial efforts available to it (other than the taking of any such action
which, in such Lender’s or the Issuing Bank’s sole judgment, imposes any
expense upon or is otherwise disadvantageous to such Lender or the Issuing
Bank, as applicable) to mitigate or avoid, (i) any obligation by the Borrowers
to pay any amount pursuant to Section 7.6 or 8.1 or (ii) the
occurrence of any circumstances described in Section 8.2 or 8.3
(and, if any Lender or the Issuing Bank has given notice of any such event
described in clause (i) or (ii) above and thereafter such event
ceases to exist, such Lender or the

 

55

 

Issuing Bank, as applicable, shall promptly so notify
the Loan Party Representative and the Administrative Agent); provided that the
failure by any Lender to provide pay prospective notice of any such possible
event shall not reduce or diminish such Lender’s remedies or the Loan Parties’
obligations hereunder.  Without limiting
the foregoing, each Lender or the Issuing Bank, as applicable, will designate a
different funding office if such designation will avoid (or reduce the cost to
the Borrowers of) any event described in clause (i) or (ii) above
and such designation will not, in such Lender’s sole judgment, impose aggregate
expenses in excess of $1,000 on such Lender or be otherwise disadvantageous to
such Lender.

 

(b)                                 If
any Borrower becomes obligated to pay additional amounts to any Lender pursuant
to Section 7.6 or 8.1, any Lender gives notice of the
occurrence of any circumstances described in Section 8.2 or 8.3,
or any Defaulting Lender pursuant to Section 2.1.1(c)
does not make payment to the Administrative Agent of such amounts giving rise
to its becoming a Defaulting Lender within 15 days of the date such payment is
required under this Agreement, the Loan Party Representative may
designate another bank which is acceptable to the Administrative Agent and the
Issuing Bank in their reasonable discretion (such other bank being called a “Replacement
Lender”) to purchase the Loans of such Lender and such Lender’s rights
hereunder, without recourse to or warranty by, or expense to, such Lender, for
a purchase price equal to the outstanding principal amount of the Loans payable
to such Lender plus any accrued but unpaid interest on such Loans and all
accrued but unpaid fees owed to such Lender and any other amounts payable to
such Lender under this Agreement, and to assume all the obligations of such
Lender hereunder, and, upon such purchase and assumption (pursuant to an
Assignment Agreement), such Lender shall no longer be a party hereto or have
any rights hereunder (other than rights with respect to indemnities and similar
rights applicable to such Lender prior to the date of such purchase and assumption)
and shall be relieved from all obligations to the Borrowers hereunder, and the
Replacement Lender shall succeed to the rights and obligations of such Lender
hereunder.

 

8.8                                 Conclusiveness
of Statements; Survival of Provisions. 
Determinations and statements of any Lender or the Issuing Bank pursuant
to Section 7.6, 8.1, 8.2, 8.3 or 8.4
shall be conclusive absent demonstrable error. 
Lenders and the Issuing Bank may use reasonable averaging and
attribution methods in determining compensation under Sections 7.6, 8.1
and 8.4, and the provisions of such Sections shall survive repayment of
the Obligations (other than unasserted contingent indemnification obligations),
cancellation of any Notes, expiration or termination of the Letters of Credit
and termination of this Agreement.

 

SECTION 9                                   REPRESENTATIONS AND
WARRANTIES.

 

To induce the
Administrative Agent, the Lenders and the Issuing Bank to enter into this
Agreement and to induce the Issuing Bank to issue Letters of Credit and the
Lenders to make Loans and, the case of Facility A Lenders, to participate
in Letters of Credit hereunder, the Loan Parties hereby jointly and severally
represent and warrant to the Administrative Agent, the Lenders and the Issuing
Bank that:

 

9.1                                 Organization.  Each Loan Party is validly existing and in
good standing under the laws of its jurisdiction of organization and each is
duly qualified to do business in each

 

56

 

jurisdiction where, because of the nature of its
activities or properties, such qualification is required, except for such
jurisdictions where the failure to so qualify would not have or could not
reasonably be expected to have a Material Adverse Effect.

 

9.2                                 Authorization;
No Conflict.  Each Loan Party is duly
authorized to execute and deliver each Loan Document to which it is a party,
each Borrower is duly authorized to borrow monies hereunder and each Loan Party
is duly authorized to perform its obligations under each Loan Document to which
it is a party.  The execution, delivery
and performance by each Loan Party of each Loan Document to which it is a
party, and the borrowings by each Borrower hereunder, do not and will not (a)
require any consent or approval of any governmental agency or authority (other
than any consent or approval which has been obtained and is in full force and
effect, except such as would not have and reasonably could not be expected to
have a Material Adverse Effect), (b) conflict with (i) any provision of law,
(ii) the charter, by-laws or other organizational documents of any Loan Party
or (iii) any material agreement, indenture, instrument or other material
document, or any judgment, order or decree, which is binding upon any Loan
Party or any of their respective properties or (c) require, or result in, the
creation or imposition of any Lien on any asset of any Loan Party (other than
Permitted Liens and Liens in favor of the Administrative Agent created pursuant
to the Collateral Documents).

 

9.3                                 Validity
and Binding Nature.  Each of this Agreement
and each other Loan Document to which any Loan Party is a party is the legal,
valid and binding obligation of such Person, enforceable against such Person in
accordance with its terms, subject to bankruptcy, insolvency and similar laws
affecting the enforceability of creditors’ rights generally and to general
principles of equity regardless of whether considered in a proceeding in equity
or law.

 

9.4                                 Financial
Condition.  The audited consolidated
financial statements of the Company and its Subsidiaries for Fiscal Years 2002,
2003 and 2004 and the unaudited consolidated financial statements of the
Company and its Subsidiaries as at the fiscal months and Fiscal Quarters ended
after Fiscal Year 2004, copies of each of which have been delivered to the Administrative
Agent, were prepared in accordance with GAAP (subject, in the case of such
unaudited statements, to the absence of footnotes and to normal year-end
adjustments) and present fairly in all material respects the consolidated
financial condition of the Company and its Subsidiaries as at such dates and
the results of their operations for the periods then ended.

 

9.5                                 No
Material Adverse Change.  Since December 31,
2004, no event or circumstance exists and/or has occurred that has had or could
reasonably be expected to have, either alone or in conjunction with any other
circumstances, events or occurrences, a Material Adverse Effect on the Loan
Parties taken as a whole; it being agreed, however, that the results of
operations of the Company and its Subsidiaries for the quarter ended March 31,
2005, as reported on its Form 10-Q filed with the SEC on or about May 10, 2005
shall not, in and of themselves, be deemed a Material Adverse Effect.

 

9.6                                 Litigation
and Contingent Liabilities.  No
litigation (including derivative actions), arbitration proceeding or
governmental investigation or proceeding is pending or, to the Company’s
knowledge, threatened against any Loan Party which has had, or could reasonably
be expected to have, a Material Adverse Effect. 
Other than any liability incident to such litigation

 

57

 

or proceedings, no Loan Party has any material
Contingent Liabilities not listed on Schedule 9.6 or permitted by Section 11.1.

 

9.7                                 Ownership
of Properties; Liens.  Each Loan
Party owns good and, in the case of real property, marketable title to all of
its properties and assets, real and personal, tangible and intangible, of any
nature whatsoever (including patents, trademarks, trade names, service marks
and copyrights) material to its business free and clear of all Liens, charges
and claims (including infringement claims with respect to patents, trademarks,
service marks, copyrights and the like) other than Permitted Liens and other
charges or claims which would not have nor could not reasonably be expected to
have a Material Adverse Effect.

 

9.8                                 Equity
Ownership; Subsidiaries.  All issued
and outstanding Capital Securities of each Loan Party and each Subsidiary are
duly authorized and validly issued, fully paid, non-assessable, and free and
clear of all Liens other than Permitted Liens and Liens in favor of the
Administrative Agent, and such securities were issued in compliance with all
applicable state and federal laws concerning the issuance of securities.  Schedule 9.8 sets forth the
authorized Capital Securities of each Loan Party and each Subsidiary as of the
Closing Date.  All of the issued and
outstanding Capital Securities of each Loan Party (other than the Company) and
each Subsidiary are owned as set forth on Schedule 9.8 as of the
Closing Date, and all of the issued and outstanding Capital Securities of each
Wholly-Owned Subsidiary is, directly or indirectly, owned by such Loan
Party.  As of the Closing Date, except as
set forth on Schedule 9.8, there are no pre-emptive or other
outstanding rights, options, warrants, conversion rights or other similar
agreements or understandings for the purchase or acquisition of any Capital
Securities of any Loan Party or any Subsidiary.

 

9.9                                 Pension
Plans.

 

(a)                                  There
is no Unfunded Liability which would have or could reasonably be expected to
have a Material Adverse Effect.  Each
Pension Plan complies in all material respects with its terms and all
applicable requirements of law and regulations. 
No contribution failure under Section 412 of the Code, Section 302
of ERISA, any other applicable law or the terms of any Pension Plan has
occurred with respect to any Pension Plan, sufficient to give rise to a Lien
under Section 302(f) of ERISA, or otherwise would have or could reasonably
be expected to have a Material Adverse Effect. 
There are no pending or, to the knowledge of any Loan Party, threatened,
claims, actions, investigations or lawsuits against any Pension Plan, any fiduciary
of any Pension Plan, or Loan Party or any other member of the Controlled Group
with respect to a Pension Plan or a Multiemployer Pension Plan which would have
or could reasonably be expected to have a Material Adverse Effect.  No Loan Party nor any other member of the
Controlled Group has engaged in any prohibited transaction (as defined in Section 4975
of the Code or Section 406 of ERISA) in connection with any Pension Plan
or any Multiemployer Pension Plan which would subject any Loan Party or any
other member of the Controlled Group to any material liability.  Within the past five years, no Loan Party nor
any other member of the Controlled Group has engaged in a transaction which
resulted in a Pension Plan with an Unfunded Liability being transferred out of
the Controlled Group which would have or could reasonably be expected to have a
Material Adverse Effect.  No Termination
Event has occurred

 

58

 

or is reasonably expected to occur with respect to any
Pension Plan which would have or could reasonably be expected to have a
Material Adverse Effect.

 

(b)                                 All
contributions (if any) have been made to any Multiemployer Pension Plan that
are required to be made by the Loan Parties or any other member of the
Controlled Group under the terms of the plan or of any collective bargaining
agreement or by applicable law; no Loan Party nor any other member of the
Controlled Group has withdrawn or partially withdrawn from any Multiemployer
Pension Plan, incurred any material withdrawal liability with respect to any
such plan or received notice of any claim or demand for withdrawal liability or
partial withdrawal liability from any such plan, and no condition has occurred
which, if continued, could result in a withdrawal or partial withdrawal from
any such plan; and no Loan Party nor any other member of the Controlled Group
has received any notice that any Multiemployer Pension Plan is in
reorganization, that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of any excise tax, that any such
plan is or has been funded at a rate less than that required under Section 412
of the Code, that any such plan is or may be terminated, or that any such plan
is or may become insolvent.

 

(c)                                  All
Other Plans.  All other “pension
plans,” as such term is defined in Section 3(2) of ERISA, maintained by
any Loan Party or any member of the Controlled Group that are not Pension Plans
and all other non-qualified deferred compensation plans comply in all respects
with their terms and with all applicable requirements of law and regulations,
except to the extent that any failure to comply could not be reasonably
expected to have, either individually or in the aggregate, a Material Adverse
Effect.

 

(d)                                 Disclosure.  Except as set forth on Schedule 9.9
(as the same may be updated from time to time to reflect changes occurring
after the Closing Date), no Loan Party maintains or contributes to a Pension
Plan that is a defined benefit plan or Multiemployer Pension Plan that is
governed by United States law.

 

9.10                           Investment
Company Act.  No Loan Party or
Subsidiary is an “investment company” or a company “controlled” by an “investment
company” or a “subsidiary” of an “investment company,” within the meaning of
the Investment Company Act of 1940.

 

9.11                           Public
Utility Holding Company Act.  No Loan
Party or Subsidiary is a “holding company”, or a “subsidiary company” of a “holding
company,” or an “affiliate” of a “holding company” or of a “subsidiary company”
of a “holding company,” within the meaning of the Public Utility Holding
Company Act of 1935.

 

9.12                           Regulation
U.  No Loan Party or Subsidiary is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying Margin Stock.

 

9.13                           Taxes.  Each Loan Party has timely filed all federal
and state income and all other material tax returns and reports required by law
to have been filed by it and has paid all taxes and governmental charges due
and payable with respect to such return, except any such taxes or charges which
are being diligently contested in good faith by appropriate proceedings and for

 

59

 

which adequate reserves in accordance with GAAP shall
have been set aside on its books and in respect of which no Lien has been filed
against the assets of any Loan Party. 
The Loan Parties and the Subsidiaries have made adequate reserves on
their books and records in accordance with GAAP for all federal and state
income and all other material taxes that have accrued but which are not yet due
and payable.  No Loan Party or Subsidiary
has participated in any transaction that relates to a year of the taxpayer
(which is still open under the applicable statute of limitations) which is a “reportable
transaction” within the meaning of Treasury Regulation Section 1.6011-4(b)(2)
(irrespective of the date when the transaction was entered into).

 

9.14                           Solvency,
etc.  On the Closing Date, both
immediately before and after giving effect to the transactions contemplated
hereby and by the other Loan Documents, and thereafter immediately prior to and
after giving effect to the issuance of each Letter of Credit and each borrowing
hereunder and the use of the proceeds thereof, the fair value of the assets of
the Loan Parties and their Subsidiaries on a consolidated basis, at a fair
valuation, will exceed the debts and liabilities, as determined in accordance
with GAAP, of the Loan Parties and their Subsidiaries on a consolidated basis;
the present fair saleable value of the assets of the Loan Parties and their
Subsidiaries on a consolidated basis will be greater than the amount that will
be required to pay the probable liability of the Loan Parties and their
Subsidiaries on a consolidated basis on their debts and other liabilities, as
determined in accordance with GAAP, as such debts and other liabilities become
absolute and matured; the Loan Parties and their Subsidiaries on a consolidated
basis will be able to pay their debts and liabilities, as determined in
accordance with GAAP, as such debts and liabilities become absolute and
matured; and the Loan Parties and their Subsidiaries on a consolidated basis
will not have unreasonably small capital with which to conduct the businesses
in which they are engaged as such businesses are now conducted and are proposed
to be conducted after the date hereof. 
The Loan Parties do not intend to, or to permit any of their
Subsidiaries to, and do not believe that they or any of their Subsidiaries
will, on a consolidated basis, incur debts beyond their ability to pay such
debts as they mature, taking into account the timing of and amounts of cash to
be received by them or any such Subsidiary and the timing of the amounts of
cash to be payable on or in respect of their Debt or the Debt of such
Subsidiaries.

 

9.15                           Environmental
Matters.  The on-going operations of
each Loan Party and each Subsidiary comply in all respects with all
Environmental Laws, except such non-compliance which has not had, and could not
(if enforced in accordance with applicable law) reasonably be expected to
result in, either individually or in the aggregate, a Material Adverse
Effect.  Each Loan Party and each
Subsidiary has obtained, and maintained in good standing, all licenses,
permits, authorizations, registrations and other approvals required under any
Environmental Law for their respective ordinary course operations, and for
their reasonably anticipated future operations, and each Loan Party and each
Subsidiary is in compliance with all terms and conditions thereof, except where
the failure to do so has not had and could not reasonably be expected to result
in material liability to any Loan Party or Subsidiary and has not had, and
could not reasonably be expected to result in, either individually or in the
aggregate, a Material Adverse Effect. 
Except as set forth on Schedule 9.15, no Loan Party or any
Subsidiary or any of their properties or operations is subject to, or
reasonably anticipates the issuance of, any written order from or agreement
with any Federal, state or local governmental authority, nor subject to any
judicial or docketed administrative or other proceeding, respecting any
Environmental Law,

 

60

 

Environmental Claim or Hazardous Substance any of
which has had, or could reasonably be expected to result in, individually or in
the aggregate, a Material Adverse Effect. 
There are no Hazardous Substances or other conditions or circumstances
existing with respect to any property, arising from operations prior to the
Closing Date, or relating to any waste disposal, of any Loan Party or any
Subsidiary that has had, or could reasonably be expected to result in, either
individually or in the aggregate, a Material Adverse Effect.  No Loan Party or Subsidiary has any
underground storage tanks that are not properly registered or permitted under
applicable Environmental Laws or that at any time have released, leaked,
disposed of or otherwise discharged Hazardous Substances any of which has had,
or could reasonably be expected to result in, individually or in the aggregate,
a Material Adverse Effect.

 

9.16                           Insurance.  Set forth on Schedule 9.16 is a
complete and accurate summary of the property and casualty insurance program of
the Loan Parties as of the Closing Date (including the names of all insurers,
policy numbers, expiration dates, amounts and types of coverage, annual
premiums, exclusions, deductibles, self-insured retention, and a description in
reasonable detail of any self-insurance program, retrospective rating plan,
fronting arrangement or other risk assumption arrangement involving any Loan
Party or Subsidiary).  Each Loan Party
and each Subsidiary and their respective properties are insured with financially
sound and reputable insurance companies which are not Affiliates of the Loan
Parties, in such amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses and owning
similar properties in localities where any such Loan Party and/or Subsidiary
operates.

 

9.17                           Real
Property.  Set forth on Schedule 9.17
is a complete and accurate list, as of the Closing Date, of the address of all
real property owned or leased by any Loan Party, together with, in the case of
leased property, the name and mailing address of the lessor of such property.

 

9.18                           Information.  None of the representations or warranties
made by any Loan Party in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the statements
contained in each exhibit, report, statement or certificate furnished by or on
behalf of any Loan Party in connection with the Loan Documents (including the
offering and disclosure materials, if any, delivered by such Loan Party to the
Administrative Agent prior to the Closing Date), contains any untrue statement
of a material fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or
delivered.  It being recognized by the
Administrative Agent and the Lenders that any projections and forecasts
provided by the Company or any other Loan Party are subject to uncertainties
and contingencies, are based on good faith estimates and assumptions believed
by the Company to be reasonable as of the date of the applicable projections or
forecasts and upon the best information then reasonably available to the
Company and the Loan Parties and that actual results during the period or
periods covered by any such projections and forecasts may differ materially
from projected or forecasted results; provided  however that if,
during the period or periods covered by any such projections and forecasts,
management of the Company or any other Loan Party determines that the
projections and forecasts no longer accurately reflect in any material respect
the projected financial results for such period or periods, as the case may be
the

 

61

 

Chief Financial Officer shall, as soon as is
reasonably practicable, provide to the Administrative Agent revised projections
and forecasts for such period or periods).

 

9.19                           Intellectual
Property.  Each Loan Party and each
Subsidiary owns and possesses or has a license or other right to use all
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, service marks, service mark rights and copyrights as are necessary for
the conduct of the businesses of such Loan Party or Subsidiary as currently
conducted except for the failure to so own or license which would not have or
could not reasonably be expected to have a Material Adverse Effect, as
applicable, without any infringement upon rights of others which would have or
could reasonably be expected to have a Material Adverse Effect. Except as set
forth on Schedule 9.19, or with respect to any such licensing or
distribution agreements entered into after the date hereof, as otherwise
disclosed to the Administrative Agent promptly after its written request
(including by way of updating and replacing such Schedule), no Loan Party is
party to any licensing agreement or distribution agreement relating to any
Inventory which contains any restrictions or prohibitions on the Administrative
Agent (or its agents) from selling or disposing such Inventory on substantially
the same terms as the Loan Party to such license agreement or distribution
agreement or which contains a right in favor of the licensor or distributor to
repurchase such Inventory (other than for non-payment of invoices related to
the purchase by the Loan Party thereof).

 

9.20                           Burdensome
Obligations.  No Loan Party or
Subsidiary is a party to any agreement or contract or subject to any
restriction contained in its organizational documents which could reasonably be
expected to have a Material Adverse Effect.

 

9.21                           Labor
Matters.  Except as set forth on Schedule 9.21,
no Loan Party or Subsidiary is subject to any labor or collective bargaining
agreement.  Except as set forth on Schedule 9.21,
there are no existing or, to the knowledge of any Loan Party or Subsidiary,
threatened strikes, lockouts or other labor disputes involving any Loan Party
or Subsidiary.  Hours worked by and
payment made to employees of the Loan Parties or the Subsidiaries are not in
violation in any material respect of the Fair Labor Standards Act or any other
applicable law, rule or regulation dealing with such matters.

 

9.22                           No
Default.  No Event of Default or
Unmatured Event of Default exists or would result from the execution, delivery
or performance hereof or of the other Loan Documents, including as a result of
the incurrence by any Loan Party or any Subsidiary of any Debt hereunder or
under any other Loan Document.

 

9.23                           Related
Agreements, etc.  The Loan Party
Representative has heretofore furnished the Administrative Agent a true and
correct copy of each of the Related Agreements, the EDA Documents and the Sassy
Purchase Agreement, in each case, as in effect as of the date of this
Agreement.

 

9.24                           Subordinated
Debt.  All Obligations constitute
senior Debt entitled to the priority and benefits of the subordination
provisions contained in the Earnout Subordination Agreement. The Borrowers each
acknowledges that the Administrative Agent, each Lender and the Issuing Bank
are entering into this Agreement and are extending the Commitments and making
the

 

62

 

Loans in reliance upon the subordination provisions of
the Earnout Subordination Agreement and this Section 9.24.

 

9.25                           Eligible
Accounts and Eligible Inventory.  All
Accounts and Inventory represented by the Borrowers or the Loan Party
Representative at any time as being eligible for lending purposes hereunder
including, upon each borrowing hereunder, shall constitute Eligible Accounts
and Eligible Inventory, respectively.

 

9.26                           Other Debt.  Except as otherwise set forth on Schedule 9.26
or permitted pursuant to Section 11.1, no Loan Party is now
obligated for any Debt other than the Obligations.

 

9.27                           Inactive Subsidiaries.  None of Inactive Subsidiaries owns any
material properties or assets, has any Investments, Debt or other material
liabilities or conducts any operations or businesses.  As of the Closing Date, the
only Inactive Subsidiaries of the Company and the Loan Parties are Fluf N’
Stuf, Inc., P/F Done, Inc., RBTACQ, Inc. and RBCACQ, Inc.

 

SECTION 10                             AFFIRMATIVE COVENANTS.

 

Until the expiration or
termination of the Commitments and thereafter until all Obligations (other than
unasserted contingent and indemnification obligations) hereunder and under the
other Loan Documents are paid in full in cash and all Letters of Credit have
been terminated (or Cash Collateralized), each of the Loan Parties agree that,
unless at any time the Required Lenders shall otherwise expressly consent in
writing, it will:

 

10.1                           Reports,
Certificates and Other Information. 
Deliver to the Administrative Agent:

 

10.1.1                Annual
Report.  Promptly when available and
in any event within 90 days after the close of each Fiscal Year (or such
earlier or later date as Form 10-Ks are required to be filed with the SEC
taking into account any extension granted by the SEC, provided the Company
gives the Administrative Agent prompt written notice of such extension):
(a) a copy of the annual audit report of the Company and its Subsidiaries
for such Fiscal Year, including therein consolidated balance sheets and
statements of earnings and cash flows of the Company and its Subsidiaries as at
the end of such Fiscal Year, certified without adverse reference to going
concern value and without qualification by independent auditors of recognized
standing selected by the Company and reasonably acceptable to the
Administrative Agent, together with (i) a written statement from such
accountants to the effect that in making the examination necessary for the
signing of such annual audit report by such accountants, nothing came to their
attention that caused them to believe that the Loan Parties were not in
compliance with any provision of Section 11.13 of this Agreement
insofar as such provision relates to accounting matters or, if something has
come to their attention that caused them to believe that the Loan Parties were
not in compliance with such provision, describing such non-compliance in
reasonable detail and (ii) a comparison with the budget for such Fiscal Year
and a comparison with the previous Fiscal Year; and (b) a consolidating balance
sheet of the Company and its Subsidiaries as of the end of such Fiscal Year and
consolidating statement of earnings and cash flows for the Company and its
Subsidiaries for such Fiscal Year, in each case, prepared in accordance with
GAAP (other than with respect to the absence of footnotes) certified by the
Chief Financial Officer as fairly and

 

63

 

accurately presenting in all material respects the financial condition
and results of such entities as at the date and for the period covered;
provided that to the extent the Company’s annual report on Form 10-K shall
satisfy the requirements of this Section 10.1.1, the Administrative
Agent will accept such Form 10-K in lieu of such item.

 

10.1.2                Interim
Reports.  (a) Promptly when available
and in any event within 45 days after the end of each of the first three Fiscal
Quarters of each Fiscal Year (or such earlier or later date as Form 10-Qs are
required to be field by the SEC taking into account any extension granted by
the SEC, provided the Company gives the Administrative Agent prompt written
notice of such extension), unaudited consolidated financial statements of the
Company and its Subsidiaries for such Fiscal Quarter, including therein
consolidated balance sheets and statements of earnings and cash flows as of the
end of such Fiscal Quarter and for the period beginning with the first day of
such Fiscal Year and ending on the last day of such Fiscal Quarter, in each
case, prepared in accordance with GAAP, consistently applied and certified by
the Chief Financial Officer as fairly presenting in all material respects the
financial condition of the Company and its Subsidiaries as at the date thereof,
together with (i) a comparison with the corresponding period of the previous
Fiscal Year and a comparison with the budget for such period of the current
Fiscal Year and (ii) and (ii) a consolidating balance sheet of the Company and
its Subsidiaries as of the end of such Fiscal Quarter and consolidating
statement of earnings and cash flows for the Company and its Subsidiaries for
such Fiscal Quarter, in each case, prepared in accordance with GAAP (other than
with respect to the absence of footnotes and normal year end audit adjustments)
certified by the Chief Financial Officer as fairly presenting in all material
respects the financial condition of such entities as at the date and for the
period covered; and (b) promptly when available and in any event within 30 days
after the end of each fiscal month of the Company (other than the end of a
fiscal month which is also a Fiscal Quarter or Fiscal Year end), unaudited
consolidated financial statements of the Company and its Subsidiaries for such
fiscal month, including therein consolidated balance sheets and statements of
earnings and cash flows as of the end of such fiscal month and for the period
beginning with the first day of such Fiscal Year and ending on the last day of
such fiscal month, in each case, prepared in accordance with GAAP, consistently
applied and certified by the Chief Financial Officer as fairly presenting in
all material respects the financial condition of the Company and its
Subsidiaries as at the date thereof, together with (i) a comparison with the
corresponding period of the previous Fiscal Year and a comparison with the
budget for such period of the current Fiscal Year and (ii) and (ii) a
consolidating balance sheet of the Company and its Subsidiaries as of the end
of such month and consolidating statement of earnings and cash flows for the
Company and its Subsidiaries for such month, in each case, prepared in
accordance with GAAP (other than with respect to the absence of footnotes and
normal year-end audit adjustments) certified by the Chief Financial Officer as
fairly presenting in all material respects the financial condition of such
entities as at the date and for the period covered; provided that to the extent
that the Company’s quarterly report on Form 10-Q shall satisfy the
requirement of this Section 10.1.2, the Administrative Agent will
accept such Form 10-Q in lieu of such item.

 

10.1.3                Compliance
Certificates.  Contemporaneously with
the furnishing of a copy of each annual audit report pursuant to Section 10.1.1
and each set of quarterly statements pursuant to Section 10.1.2(a),
a duly completed compliance certificate in the form of Exhibit B, with
appropriate insertions, dated the date of such annual report or such quarterly
statements and

 

64

 

signed by a Senior Officer of the Company, containing (i) if required
pursuant to the terms hereof, a computation of each of the financial ratios and
restrictions set forth in Section 11.13 and to the effect that such
officer has not become aware of any Event of Default or Unmatured Event of
Default that has occurred and is continuing or, if there is any such event,
describing it and the steps, if any, taken or being taken to cure it and (ii) a
written statement of the Company’s management setting forth a discussion of the
financial condition of the Company and its Subsidiaries and any material
changes in their financial condition and/or results of operations; provided
that, with respect to this clause (ii), to the extent that the Company’s
quarterly report on Form 10-Q or annual report on Form 10-K shall satisfy the
requirements of this Section 10.1.3, the Administrative Agent will
accept such Form 10-Q or Form 10-K, as applicable, in lieu of such item.

 

10.1.4                Reports
to the SEC and to Shareholders. 
Promptly upon the filing or sending thereof, without duplication, copies
of all regular, periodic or special reports, if any, of any Loan Party filed
with the SEC; copies of all registration statements of any Loan Party or
Subsidiary filed with the SEC (other than on Form S-8), if any; and copies of
all proxy statements or other communications made to security holders
generally.

 

10.1.5                Notice
of Default, Litigation and ERISA Matters. 
Promptly upon becoming aware of any of the following, written notice
describing the same and the steps being taken by the Loan Party or Subsidiary
affected thereby with respect thereto:

 

(a)                                  the
occurrence of an Event of Default or an Unmatured Event of Default;

 

(b)                                 any
litigation, arbitration or governmental investigation or proceeding not
previously disclosed by any Loan Party or Subsidiary to the Administrative
Agent which has been instituted or, to the knowledge of any Loan Party or
Subsidiary, is threatened against any Loan Party or to which any of the
properties of any thereof is subject which would have or could reasonably be
expected to have a Material Adverse Effect;

 

(c)                                  the
institution of any steps by any member of the Controlled Group or any other
Person to terminate any Pension Plan, or the failure of any member of the
Controlled Group to make a required contribution to any Pension Plan (if such
failure is sufficient to give rise to a Lien under Section 302(f) of
ERISA) or to any Multiemployer Pension Plan, or the taking of any action with
respect to a Pension Plan which could result in the requirement that the any
Loan Party or any other member of the Controlled Group furnish a bond or other
security to the PBGC or such Pension Plan, or the occurrence of any event with
respect to any Pension Plan or Multiemployer Pension Plan which could result in
the incurrence by any member of the Controlled Group of any material liability,
fine or penalty (including any claim or demand for withdrawal liability or
partial withdrawal from any Multiemployer Pension Plan), or any material
increase in the contingent liability of any Loan Party or any other member of
the Controlled Group with respect to any post-retirement welfare benefit plan
or other employee benefit plan of any Loan Party or any other member of the
Controlled Group which would have or could reasonably be expected to have a
Material Adverse Effect, or any notice that any Multiemployer Pension Plan is
in reorganization, that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of an excise tax, that any such
plan is or has been

 

65

 

funded at a rate less than that required under Section 412
of the Code, that any such plan is or may be terminated, or that any such plan
is or may become insolvent;

 

(d)                                 any
other event (including (i) any violation of any Environmental Law or the
assertion of any Environmental Claim or (ii) the enactment or effectiveness of
any law, rule or regulation) which would have or could reasonably be expected
to have a Material Adverse Effect; or

 

(e)                                  any
cancellation, material change or any increase in the deductible in any
insurance policy or coverage maintained by any Loan Party or Subsidiary.

 

10.1.6                Borrowing
Base Certificates.  (a) By the
thirteenth Business Day of each fiscal month for the immediately preceding
month, a Borrowing Base Certificate executed by a Senior Officer of the Loan
Party Representative on behalf of the Borrowers (provided that (i) the Loan
Party Representative may deliver a Borrowing Base Certificate more frequently
if it chooses, (ii) after the occurrence and during the continuance of an Event
of Default, the Administrative Agent may require the Loan Party Representative
to deliver Borrowing Base Certificates more frequently upon its request and
(iii) notwithstanding the foregoing, if Excess Revolving Loan Availability
shall at any time be less than $18,000,000, the Borrowers shall be required to
deliver Borrowing Base Certificates on a weekly basis (by no later than
Wednesday of each week for the immediately preceding week) but only during such
time as Excess Revolving Loan Availability is less than $18,000,000.  Upon the request by the Administrative Agent,
the Loan Parties (at their sole expense) shall provide the Administrative Agent
with full access to copies of the Borrowers’ sales journals, cash receipts
journals and credit memo journals for the relevant period and shall provide the
Administrative Agent with such other additional information concerning Accounts
and Inventory as may be reasonably requested by the Administrative Agent from
time to time.  Each Borrowing Base
Certificate shall reflect the actual, aggregate Account balance and book
Inventory balance as of such date.

 

10.1.7                Management
Reports.  Promptly upon receipt
thereof, copies of all detailed financial and management reports submitted to
the Company or any other Loan Party by its independent auditors in connection
with each annual or interim audit made by such auditors of the books of the
Company and its Subsidiaries.

 

10.1.8                Projections.  As soon as practicable, and in any event not
later than 45 days after the commencement of each Fiscal Year (commencing with
Fiscal Year 2006), financial projections for the Company and its Subsidiaries
for such Fiscal Year (including monthly operating and cash flow budgets)
prepared in a manner consistent with the projections delivered by the Company
to the Administrative Agent prior to the Closing Date or otherwise in a manner
reasonably satisfactory to the Administrative Agent, accompanied by a
certificate of the Chief Financial Officer on behalf of the Company and its
Subsidiaries to the effect that (a) such projections were prepared by the
Company and its Subsidiaries in good faith, (b) the Company and its
Subsidiaries had a reasonable basis for the assumptions contained in such
projections and (c) such projections have been prepared in accordance with such
assumptions (it being recognized that any projections provided hereunder by the
Company or any other Loan Party are subject to uncertainties and contingencies,
are based on good faith estimates and assumptions

 

66

 

believed by the Company to be reasonable as of the date of the
applicable projections and
upon the best information then reasonably available to the Company and the Loan
Parties and that actual results during the period or periods covered by
any such projections may differ materially from projected results; provided
however that if, during the period or periods covered by any such
projections, management of the Company or any other Loan Party determines that
the projections no longer accurately reflect in any material respect the
projected financial results for such period or periods, as the case may be, the
Chief Financial Officer shall, as soon as practicable, provide to the
Administrative Agent revised projections for such period or periods

 

10.1.9                Material
Notices.  Promptly following receipt,
copies of any notices of default, termination or acceleration or any other
material notices received from any holder or trustee of, under or with respect
to any Subordinated Debt, the EDA Documents, the Kids Line Purchase Agreement,
the Earnout Subordination Agreement, the Sassy Purchase Agreement, the Earnout
Security Documents or any other material agreement.

 

10.1.10          Asset
Dispositions.  Promptly upon learning
thereof, notice of any Asset Disposition.

 

10.1.11          Other
Information.  Promptly from time to
time, such other information concerning the Loan Parties (or any of them) as
any Lender or the Administrative Agent may reasonably request.

 

10.2                           Books,
Records and Inspections.  Keep, and
cause each other Loan Party and Subsidiary to keep, its books and records in
accordance with sound business practices sufficient to allow the preparation of
financial statements in accordance with GAAP; permit, and cause each other Loan
Party and Subsidiary to permit, the Administrative Agent, any Lender or any
representative thereof to inspect the properties and operations of the Loan
Parties and the Subsidiaries during regular business hours and with reasonable
prior notice (or any time without notice if an Event of Default exists); and
permit, and cause each other Loan Party and Subsidiary to permit, during
regular business hours and with reasonable prior notice (or at any time without
notice if an Event of Default exists), the Administrative Agent or any
representative thereof to visit any or all of its offices, to discuss its
financial matters with its officers and its independent auditors (and the Loan
Parties each hereby authorizes such independent auditors to discuss such
financial matters with any Lender or the Administrative Agent or any
representative thereof), and to examine (and, at the expense of the Loan
Parties) photocopy extracts from any of its books or other records; and permit,
and cause each other Loan Party to permit, during regular business hours and
with reasonable prior notice (or at any time without notice if an Event of
Default exists), the Administrative Agent and its representatives to inspect
the Collateral and other tangible assets of the Loan Parties, to perform
appraisals of the Collateral and real property of the Loan Parties, and to
inspect, audit, check and make copies of and extracts from the books, records,
computer data, computer programs, journals, orders, receipts, correspondence
and other data relating to Inventory, Accounts and any other Collateral.  The Loan Parties shall be jointly and severally
liable for all reasonable expenses of the Administrative Agent incurred in
connection with such inspections or audits, including the reasonable fees and
expenses of its representatives and/or agents (it being agreed that any Lender
may accompany the Administrative Agent at its own expense); provided, however, that other
than with respect to

 

67

 

audits, inspections and
appraisals conducted at any time that an Event of Default exists, the Loan
Parties shall not be required to
reimburse the Administrative Agent for more than two inspections and/or audits
and more than two appraisals in any Fiscal Year; it being acknowledged that a
single inspection, audit and/or appraisal may entail visits to the multiple
locations of books, records and assets of the Loan Parties; and it being
further agreed that the costs for each inspection/audit shall not exceed
$35,000, in aggregate, and the costs for each appraisal shall not exceed
$20,000, in aggregate, in each case, plus reasonable out of pocket expenses and
disbursements (and, in each case, inclusive of any such amounts expended in
connection with audits or appraisals of the Canadian Borrower pursuant to the
Canadian Loan Agreement and the other Canadian Loan Documents).

 

10.3                           Maintenance
of Property; Insurance.

 

10.3.1                Obligation
to Maintain Properties.  Keep, and
cause each other Loan Party and Subsidiary to keep, all Collateral and all
other property useful and necessary in the business of the Loan Parties and the
Subsidiaries in good working order and condition, ordinary wear and tear
excepted and shall make all necessary replacements of, and repairs to, the
equipment so that the operating efficiency and the value thereof shall at all
times be preserved and maintained.

 

10.3.2                Property
Insurance.  Keep, and cause each
other Loan Party and Subsidiary to keep, the Collateral and all other property
insured for the full insurable value thereof against loss or damage by fire,
theft, explosion, sprinklers, collision and such other risks as are customarily
insured against by Persons engaged in businesses similar to that of the Loan
Parties, with such companies, in such amounts, with such deductibles, and under
policies in such form, as shall be reasonably satisfactory to the
Administrative Agent.  Copies of all such
policies of insurance covering the property and operations of the Loan Parties
have been and shall promptly hereafter be delivered to the Administrative
Agent, together with evidence of payment of all premiums therefor, and shall
contain an endorsement, in form and substance reasonably acceptable to the
Administrative Agent, showing loss under such insurance policies (other than
losses with respect to properties subject to prior Permitted Liens of the type
described in Section 11.2(d) in favor of Persons other than the
Administrative Agent or the Lenders) payable to the Administrative Agent, for
the benefit of the Administrative Agent and the Lenders.  Such endorsement, or an independent instrument
furnished to the Administrative Agent, shall provide that the insurance company
shall give the Administrative Agent at least thirty (30) days’ prior written
notice before any such policy of insurance is altered or canceled and that no
act, whether willful or negligent, or default of any Loan Party or any other
Person shall affect the right of the Administrative Agent to recover under such
policy of insurance in case of loss or damage. 
In addition, the Loan Parties shall cause to be executed and delivered
to the Administrative Agent an assignment of proceeds of its business
interruption insurance policies.  Each
Loan Party hereby directs all insurers under all policies of property insurance
to pay all proceeds payable thereunder directly to the Administrative Agent;
provided that, so long as no Event of Default then exists or thereafter occurs,
if the Loan Party Representative notifies the Administrative Agent within 20
days after such casualty event that it intends to repair, rebuild or replace
any such damaged or destroyed equipment or real property with other property of
comparable quality, value and use within 180 days after any such casualty
event, then the Administrative Agent shall hold such proceeds received by it in
a non-interest bearing account at LaSalle Bank and, subject to its

 

68

 

receipt of plans, specifications and budgets reasonably acceptable to
it, will agree to disburse such proceeds as needed to effect such repair,
reconstruction or replacement; it being agreed that (i) funds paid to and held
by the Administrative Agent as aforesaid shall not be deemed to reduce the
outstanding Obligations; and (ii) if such repairs, replacement or
reconstruction have not been substantially completed within such 180 day period
(or such earlier time as the Administrative Agent reasonably determines that
such repair, replacement or reconstruction is no longer being diligently
pursued), then Administrative Agent shall have the right to apply all such
funds being held by it to the Obligations as provided herein.  Each Loan Party irrevocably makes,
constitutes and appoints the Administrative Agent (and all officers, employees
or agents designated by the Administrative Agent) as such Loan Party’s true and
lawful attorney (and agent-in-fact) for the purpose of, following the
occurrence and during the continuance of an Event of Default, making, settling
and adjusting claims under such policies of property and/or business
interruption insurance, endorsing the name of such Loan Party on any check,
draft, instrument or other item of payment for the proceeds of such policies of
insurance and making all determinations and decisions with respect to such
policies of insurance.

 

10.3.3                Liability
Insurance.  Maintain, and cause each
other Loan Party and Subsidiary to maintain, at its expense, such public
liability and third party property damage insurance as is customary for Persons
engaged in businesses similar to that of the Loan Parties and such Subsidiaries
with such companies and in such amounts, with such deductibles and under
policies in such form as shall be reasonably satisfactory to the Administrative
Agent and copies of all such policies have been and shall promptly hereafter be
delivered to the Administrative Agent, together with evidence of payment of all
premiums therefor; each such policy relating to the Loan Parties shall contain
an endorsement showing the Administrative Agent as an additional insured
thereunder and providing that the insurance company shall give the Administrative
Agent at least thirty (30) days’ prior written notice before any such policy
shall be altered or canceled (or ten (10) days in the case of cancellation for
non-payment of premiums).

 

10.3.4                Forced
Place Coverage.  UNLESS THE BORROWERS
PROVIDE THE ADMINISTRATIVE AGENT WITH EVIDENCE OF THE INSURANCE COVERAGE
REQUIRED BY THIS AGREEMENT AND AFTER THE ADMINISTRATIVE AGENT’S WRITTEN DEMAND
THEREFOR, THE ADMINISTRATIVE AGENT MAY (BUT SHALL HAVE NO OBLIGATION TO)
PURCHASE INSURANCE AT THE BORROWERS’ EXPENSE TO PROTECT THE ADMINISTRATIVE
AGENT’S AND THE LENDERS’ INTERESTS IN THE COLLATERAL.  THIS INSURANCE MAY, BUT NEED NOT, PROTECT ANY
LOAN PARTY’S INTERESTS.  THE COVERAGE
THAT THE ADMINISTRATIVE AGENT PURCHASES MAY NOT PAY ANY CLAIM THAT IS MADE
AGAINST ANY LOAN PARTY IN CONNECTION WITH THE COLLATERAL.  THE BORROWERS MAY LATER CANCEL ANY INSURANCE
PURCHASED BY THE ADMINISTRATIVE AGENT, BUT ONLY AFTER PROVIDING THE
ADMINISTRATIVE AGENT WITH EVIDENCE THAT THE BORROWERS HAVE OBTAINED INSURANCE
AS REQUIRED BY THIS AGREEMENT.  IF THE
ADMINISTRATIVE AGENT PURCHASES INSURANCE FOR THE COLLATERAL, THE BORROWERS WILL
BE JOINTLY AND SEVERALLY RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING
INTEREST AND ANY OTHER CHARGES THAT MAY BE IMPOSED WITH THE PLACEMENT OF THE
INSURANCE, UNTIL THE EFFECTIVE DATE OF THE

 

69

 

CANCELLATION OR EXPIRATION OF THE INSURANCE.  THE COSTS OF THE INSURANCE MAY BE ADDED TO
THE PRINCIPAL AMOUNT OF THE LOANS OWING HEREUNDER.  THE COSTS OF THE INSURANCE MAY BE MORE THAN
THE COST OF THE INSURANCE THE LOAN PARTIES MAY BE ABLE TO OBTAIN ON THEIR OWN.

 

10.4                           Compliance
with Laws; Payment of Taxes and Liabilities.  (a) Comply, and cause each other Loan Party
and Subsidiary to comply, in all material respects with all applicable laws,
rules, regulations, decrees, orders, judgments, licenses and permits, except
where failure to comply would not have or could not reasonably be expected to
have a Material Adverse Effect; (b) without limiting clause (a) above,
ensure, and cause each other Loan Party and Subsidiary to ensure, that no
person who owns a controlling interest in or otherwise controls a Loan Party or
Subsidiary is or shall be (i) listed on the Specially Designated Nationals and
Blocked Person List maintained by the Office of Foreign Assets Control (“OFAC”),
Department of the Treasury, and/or any other similar lists maintained by OFAC
pursuant to any authorizing statute, Executive Order or regulation or (ii) a
person designated under Section 1(b), (c) or (d) of Executive Order No.
13224 (September 23, 2001), any related enabling legislation or any other
similar Executive Orders, (c) without limiting clause (a) above, comply,
and cause each other Loan Party and Subsidiary to comply in all material
respects, with all applicable Bank Secrecy Act (“BSA”) and anti-money
laundering laws and regulations and (d) pay, and cause each other Loan Party to
pay, prior to delinquency, all federal and state income taxes and all other
material taxes and other governmental charges against it or any Collateral, as
well as claims of any kind which, if unpaid, could become a Lien (other than a
Permitted Lien) on any of its property; provided that the foregoing clause (d)
shall not require any Loan Party or Subsidiary to pay any such tax or charge so
long as it shall contest the validity thereof in good faith by appropriate
proceedings and shall set aside on its books adequate reserves with respect
thereto in accordance with GAAP and, in the case of a claim which could become
a Lien on any Collateral, such contest proceedings shall stay the foreclosure
of such Lien or the sale of any portion of the Collateral to satisfy such
claim.

 

10.5                           Maintenance
of Existence, etc.  Maintain and
preserve, and (subject to Section 11.4) cause each other Loan Party
and Subsidiary to maintain and preserve, (a) its existence and good standing in
the jurisdiction of its organization and (b) its qualification to do business
and good standing in each jurisdiction where the nature of its business makes such
qualification necessary (other than such jurisdictions in which the failure to
be qualified or in good standing would not have or could not reasonably be
expected to have a Material Adverse Effect); provided that the Loan Parties
shall be entitled to dissolve the Inactive Subsidiaries.

 

10.6                           Reserved.

 

10.7                           Use
of Proceeds.  In the case of
Revolving Loans and the Term A Loan, use the proceeds of such Loans, and the
Letters of Credit, solely to refinance the Debt to be Repaid, for working
capital purposes, and for other general business purposes. In the case of the
Term Loan B Loan, use the proceeds of such Loan to refinance the Debt to
be Repaid. In no event shall any of the Loans or the Letters of Credit be used,
either directly or indirectly, for the purpose, whether immediate, incidental
or ultimate, of “purchasing or carrying” any Margin Stock.

 

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10.8                           Employee
Benefit Plans.  Maintain, and cause
each other member of the Controlled Group to maintain, each Pension Plan in
substantial compliance with all applicable requirements of law and regulations.

 

(a)                                  Make,
and cause each other member of the Controlled Group to make, on a timely basis,
all required contributions to any Multiemployer Pension Plan.

 

(b)                                 Not,
and not permit any other member of the Controlled Group to (i) seek a waiver of
the minimum funding standards of ERISA, (ii) terminate or withdraw from any
Pension Plan or Multiemployer Pension Plan or (iii) take any other action with
respect to any Pension Plan that would, or could reasonably be expected to,
entitle the PBGC to terminate, impose liability in respect of, or cause a
trustee to be appointed to administer, any Pension Plan, unless the actions or
events described in clauses (i), (ii) and (iii) above
individually or in the aggregate would not have or could not reasonably be
expected to have a Material Adverse Effect.

 

10.9                           Environmental
Matters.  (a) If any release or
threatened release or other disposal of Hazardous Substances shall occur or
shall have occurred on any real property or any other assets of any Loan Party
or Subsidiary, each Loan Party and Subsidiary shall, or shall cause the
applicable Loan Party or Subsidiary to, cause the prompt containment and
removal of such Hazardous Substances and the remediation of such real property
or other assets as necessary to comply with all Environmental Laws and to
preserve the material value of such real property or other assets.  Without limiting the generality of the
foregoing, each Loan Party shall, and shall cause each other Loan Party and
Subsidiary to, comply with any Federal or state judicial or administrative
order requiring the performance at any real property of any Loan Party of
activities in response to the release or threatened release of a Hazardous
Substance.  To the extent that the
transportation of Hazardous Substances is permitted by this Agreement, each
Loan Party shall, and shall cause each of its Subsidiaries to, dispose of such
Hazardous Substances, or of any other wastes, only at licensed disposal
facilities operating to its knowledge in compliance with Environmental Laws.

 

(b) The Loan Parties
shall promptly notify the Administrative Agent in writing upon learning there
is or are, in each case, which are reasonably likely to result in material
liability to a Loan Party under any applicable Environmental Law (i) any
Hazardous Substances other than those used by the Loan Parties or tenants under
leases at any real property of any Loan Party or Subsidiary in the ordinary
course of their businesses and in compliance with all Environmental Laws,
present on such real property; (ii) any Release of Hazardous Substances in, on,
under, from or migrating towards such real property; (iii) any material
non-compliance with Environmental Laws related in any way to such real
property; (iv) any actual or reasonably likely liens and other
encumbrances imposed pursuant to any Environmental Law; (v) any
investigation or action or claim, whether threatened or pending, by any
governmental agency or third party pertaining to the release of Hazardous
Substances in, on, under, from, or migrating towards such real property; and
(vi) any installation of wells, piping, or other equipment at such real
property to investigate, remediate or otherwise address any release of
Hazardous Substances at, on, in or in the vicinity of such real property.

 

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10.10                     New
Subsidiaries.  If, after the Closing
Date, any Loan Party creates or acquires, either directly or indirectly, any
Subsidiary in accordance with Section 11.4 or 11.15, or if
the Loan Parties elect to commence business operations through a Subsidiary
that was previously an Inactive Subsidiary, it will upon such creation or
acquisition thereof:

 

(a)                                  if
such Subsidiary is a Domestic Wholly-Owned Subsidiary (x) cause such Subsidiary
to become either a Borrower or a Guarantor; provided, that such Subsidiary may
become a Borrower hereunder only with the prior written approval of the
Administrative Agent (upon its review of such Subsidiary including, without
limitation, its review of such field examinations, audits, appraisals and other
due diligence as the Administrative Agent shall reasonably require) and, if
such approval is not provided, such Subsidiary shall become a Guarantor, (y)
cause such Subsidiary to execute and deliver to the Administrative Agent (1) a
Joinder Agreement in the form of Exhibit G hereto, in its capacity as a
Borrower or a Guarantor, as applicable and (2) any further documents,
instruments or agreements as the Administrative Agent may reasonably require in
order to grant the Administrative Agent a perfected first priority security
interest (subject only to Permitted Liens) in substantially all of the assets
of such Subsidiary; or

 

(b)                                 if
such Subsidiary is a First-Tier Foreign Subsidiary, cause to be pledged to the
Administrative Agent (pursuant to the Guaranty and Collateral Agreement) a
security interest in the Capital Securities of such Subsidiary owned by such
Loan Party (provided, that with respect to any such Subsidiary, such Loan Party
shall only be required to grant to the Administrative Agent a first-priority
security interest in the Capital Securities thereof to the extent owned by any
such Loan Party and not exceeding sixty-five percent (65%), in the aggregate,
of the issued and outstanding Capital Securities of such Subsidiary; and

 

(c)                                  in
either of the cases in (a) or (b) above, (i) deliver to the Administrative
Agent (1) revised schedules to the Loan Documents reflecting such Loan Party’s
ownership interest in such Subsidiary and (2) the certificates, if any,
representing the Capital Securities of such Subsidiary required to be pledged
hereunder, together with undated stock powers and an irrevocable proxy (or
equivalent instruments, as applicable), or if such interest is uncertificated,
evidence of the registration of the Administrative Agent’s lien on and security
interest in such interest on the books and records of such entity and (ii)
execute and deliver all such other instruments, documents and agreements and
take such other actions, and cause all Subsidiaries to execute and deliver all
such other instruments, documents and agreements and to take such other
actions, as in either case, the Administrative Agent may reasonably request or
require to fully evidence and consummate the transactions contemplated in clauses
(a) and (b) above and to ensure the enforceability, perfection and
first-priority (subject only to Permitted Liens) of the interests and
undertakings thereunder, including, without limitation, (i) the execution and
delivery of guaranties, security agreements, pledge agreements, mortgages,
deeds of trust, financing statements and other documents, and the filing or
recording of any of the foregoing, (ii) the delivery of certificated securities
and other Collateral with respect to which perfection is obtained by possession
and (iii) legal opinions in form and substance and from such counsel reasonably
satisfactory to the Administrative Agent to be addressed to (or permit reliance
upon by) the Administrative Agent, the Lenders and the Issuing Bank.

 

72

 

Without limiting the
foregoing, the Loan Parties shall have no obligations pursuant to this Section 10.10
with respect to any Second-Tier Foreign Subsidiary.

 

10.11                     Deposit
Accounts.  (a) Unless the
Administrative Agent otherwise consents in writing, in order to facilitate the
Administrative Agent’s and the Lenders’ maintenance and monitoring of their
security interests in the Collateral, (i) maintain all of their
lock-boxes, collection accounts, deposit accounts, securities accounts,
operating accounts, checking accounts, disbursement accounts and other accounts
(other than payroll accounts and accounts maintained by the Company for the
sole benefit of its employees as listed on Schedule 10.11 attached
hereto) (collectively, the “Subject Accounts”) with LaSalle Bank;
provided that, the Borrowers can continue to maintain their current Subject
Accounts with JPMorgan Chase Bank, The Bank of New York, Cole Taylor Bank and
Union Bank of California for a period of time following the Closing Date as
shall be mutually agreeable to the Loan Party Representative and the
Administrative Agent as being a commercially reasonable time to effect the orderly
transition of the Loan Parties’ cash management to LaSalle Bank, and (ii) the
Borrowers can continue to maintain accounts (other than lockboxes, collection
accounts or other accounts to which collections and proceeds of Accounts and
other customer payments are remitted or deposited (collectively, “Collection
Accounts”)) at other financial institutions in which the average monthly
balance does not exceed $2,000,000 in the aggregate for all such accounts for
all Borrowers.  With respect to any
Subject Accounts maintained with LaSalle Bank, although no compensating balance
will be required, the Borrowers and Loan Parties shall keep monthly balances in
order to merit earnings credits which will cover LaSalle Bank’s service charges
for Bank Products.  With respect to any
such Subject Accounts with LaSalle Bank, each Loan Party shall enter into Bank
Product Agreements relating thereto.  The
Borrowers and the Loan Parties shall be responsible for nominal charges assessed
thereon.

 

(b) Other than with
respect to the accounts referred to in clause (a)(ii) above, with respect to
any Subject Accounts maintained by the Borrowers at financial institutions
other than LaSalle Bank on the Closing Date, the Borrowers agree to cooperate
with the Administrative Agent to transition such accounts and cash management
services to LaSalle Bank and, in accordance with a mutually agreeable schedule to
be developed by the Loan Party Representative and the Administrative Agent,
open appropriate Subject Accounts (including Collection Accounts) with LaSalle
Bank, notify all Account Debtors to remit payments on Accounts to such
Collection Accounts and, subject to the exceptions in this Section, close any
such other Subject Accounts maintained at financial institutions other than LaSalle
Bank. With respect to the Borrowers’ existing Subject Accounts, the Borrowers
shall deliver, on or prior to the Closing Date, Account Control Agreements
executed by the applicable Borrowers, the applicable financial institution and
the Administrative Agent relating to each such Subject Account.  No Borrower shall open any Subject Account
unless such Borrower shall have given the Administrative Agent 10 days’ prior
written notice of its intention to open any such new account and shall have
delivered a fully-executed copy of an Account Control Agreement covering such
account in accordance with the last sentence of this Section.  The Borrowers shall deliver to the
Administrative Agent a revised schedule showing any changes to its Subject
Accounts within 5 Business Days of any such change.  Each Borrower hereby authorizes the financial
institutions at which such Borrower maintains a Subject Account to provide the
Administrative Agent with a copy of such financial institution’s regular
statements and such other more frequent statements or advices as the

 

73

 

Administrative
Agent may reasonably request, in each case, covering the remittances, deposits,
and withdrawals from and balances of such account, and each Borrower hereby
consents to such information being provided to the Administrative Agent.  Each Borrower shall cause each financial
institution at which such Borrower maintains a Subject Account (other than
accounts (excluding Collection Accounts) in which the average monthly balances
do not exceed $2,000,000 in the aggregate for all such accounts for all
Borrowers) to enter into an Account Control Agreement in order to give the
Administrative Agent “control” thereof (as defined in the UCC) for perfection
purposes. Notwithstanding anything contained herein or in any other Loan
Document to the contrary, (i) with respect to any Collection Accounts, upon the
earlier of (x) the occurrence and continuance of an Event of Default and (y)
Excess Revolving Loan Availability becoming less than $10,000,000, and (ii)
with respect to any other Subject Account, after the occurrence and during the
continuance of an Event of Default, the Administrative Agent may instruct any
or all of the financial institutions at which any such accounts are maintained
(A) to cease honoring the Loan Parties’ directions as to the handling,
disposition and disbursement of funds or remittance to or any deposit in any
such accounts covered by an Account Control Agreement and (B) to remit all
amounts on deposit in or remittance to such accounts to accounts designated by
the Administrative Agent (in each case of clause (A) or (B) above, a “Notice
of Control”).  The Administrative
Agent agrees that it shall not give a Notice of Control to any financial institution
party to an Account Control Agreement unless, in the case of any Collection
Account, an event described in either clause (i)(x) or (i)(y) above has
occurred, and in the case of any Subject Account, an Event of Default has
occurred and is continuing.  Upon the
written request of the Loan Party Representative delivered to the
Administrative Agent at any time (1) after the waiver, if any, of any existing
Events of Default (other than an Event of Default described in clause (2)
immediately below) or the re-establishment of Excess Revolving Loan
Availability above $10,000,000 or (2) six (6) months after the waiver, if any,
of any existing Event of Default under Section 13.1.1 or resulting
from the violation of any of the financial covenants in Section 11.13,
and provided that no other Event of Default has occurred and is then
continuing, the Administrative Agent shall promptly notify all financial
institutions to which it had previously delivered a Notice of Control that such
notice is rescinded and that such financial institution is again entitled to
rely on the instruction and direction of the applicable Loan Party with respect
to such accounts. The Administrative Agent shall copy the Loan Party
Representative on any Notice of Control and any notices of rescission given to
a financial institution but the failure to do so shall in no event effect the
validity of any such Notice of Control, nor subject the Administrative Agent to
any liability.

 

10.12                     EDA
Standby L/C Reimbursement Agreement Modification Letter Extension.  Concurrently with the reissuance, extension
or replacement of the EDA Standby L/C, the Borrowers shall use commercially
reasonable efforts to require the applicable EDA Standby L/C Issuer to enter
into an extension of, or a new agreement on terms substantially similar to, the
EDA Standby L/C Reimbursement Agreement Modification Letter extending the
agreed limitation on the EDA Standby L/C Issuer’s ability to require additional
cash collateral for the reimbursement obligations under the EDA Standby L/C
from March 24, 2009 to the Scheduled Facility B Termination Date (subject
to the other caveats thereto as set forth in the current version of such
letter).

 

74

 

SECTION 11                             NEGATIVE COVENANTS.

 

Until the expiration or
termination of the Commitments and thereafter until all Obligations (other than
unasserted contingent and indemnification obligations) hereunder and under the
other Loan Documents are paid in full in cash and all Letters of Credit have
been terminated, each Loan Party agrees that, unless at any time the Required
Lenders shall otherwise expressly consent in writing, it will:

 

11.1                           Debt.  Not, and not permit any other Loan Party to,
create, incur, assume or suffer to exist any Debt, except:

 

(a)                                  Obligations
under this Agreement and the other Loan Documents;

 

(b)                                 Debt
secured by Liens permitted by Section 11.2(d); provided that the
aggregate amount of all such Debt at any time outstanding shall not exceed
$2,000,000;

 

(c)                                  (i)
unsecured Debt owing by any Borrower to any other Borrower or to any Domestic
Wholly-Owned Subsidiary; (ii) Debt owing by any Domestic Wholly-Owned
Subsidiary (other than a Borrower) that is a Guarantor to the Borrowers or to
any other Domestic Wholly-Owned Subsidiary (other than the Borrowers); provided
that in each of the cases of clause (i) and (ii) any such Debt shall be
evidenced by a demand note in the form of Exhibit H attached hereto and
pledged and delivered to the Administrative Agent pursuant to the Collateral
Documents as additional collateral security for the Obligations, and the
obligations under such demand note shall be subordinated to the Obligations of
the Loan Parties hereunder in a manner reasonably satisfactory to the
Administrative Agent; and (iii) unsecured Debt owing by a Loan Party to a
First-Tier Foreign Subsidiary, provided such Debt is subordinated to the prior
payment in full, in cash, of the Obligations on terms reasonably acceptable to
Administrative Agent; and (iv) Debt owing by a Foreign Subsidiary to any other
Foreign Subsidiary;

 

(d)                                 unsecured
Subordinated Debt (other than Debt owing by a Loan Party to any other Loan
Party or any Affiliate thereof) in an amount at any time outstanding not to
exceed $10,000,000;

 

(e)                                  Hedging
Obligations approved by Administrative
Agent and incurred in favor of a Lender or an Affiliate thereof (other
than any Hedging Agreement existing as of the Closing Date, which can be with
any Person) for bona fide hedging purposes and not for speculation;

 

(f)                                    Debt
existing on the date hereof described on Schedule 9.26 and any
extension, renewal or refinancing thereof so long as neither the principal
amount thereof is increased, the weighted average life to maturity decreased
or, if secured, any additional collateral is granted as security therefor;

 

(g)                                 the
Debt to be Repaid (so long as such Debt is repaid on the Closing Date with the
proceeds of the initial Loans hereunder);

 

75

 

(h)                                 unsecured
Contingent Liabilities arising with respect to customary indemnification
obligations in favor of sellers in
connection with Permitted Acquisitions and purchasers in connection with
dispositions permitted under Section 11.4;

 

(i)                                     up to $5,000,000 at any time outstanding of
Acquired Debt assumed in Permitted Acquisitions;

 

(j)                                     unsecured Debt in respect of bid, performance
or surety, appeal or similar bonds issued for the account of and completion
guarantees provided by the Loan Parties in the ordinary course of business;

 

(k)                                  Debt arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently drawn against insufficient funds in the ordinary course of
business; provided, however, that such Debt is
extinguished within five Business Days of incurrence;

 

(l)                                     Debt arising in connection with endorsement
of instruments for deposit in the ordinary course of business; and

 

(m)                               Debt
of the Company under the Canadian Guaranty.

 

11.2                           Liens.  Not, and not permit any other Loan Party, to
create or permit to exist any Lien on any of its real or personal properties,
assets or rights of whatsoever nature (whether now owned or hereafter
acquired), except:

 

(a)                                  Liens
for taxes or other governmental charges not at the time delinquent or
thereafter payable without penalty or being contested in good faith by
appropriate proceedings and, in each case, for which it maintains adequate
reserves;

 

(b)                                 Liens
arising in the ordinary course of business (such as (i) Liens of carriers,
warehousemen, mechanics and materialmen and other similar Liens imposed by law
and (ii) Liens in the form of deposits or pledges incurred in connection with
worker’s compensation, unemployment compensation and other types of social
security (excluding Liens arising under ERISA) or in connection with surety
bonds, bids, performance bonds and similar obligations) for sums not overdue or
being contested in good faith by appropriate proceedings and not involving any
advances or borrowed money or the deferred purchase price of property or
services and, in each case, for which it maintains adequate reserves;

 

(c)                                  Liens
described on Schedule 11.2 existing as of the Closing Date;

 

(d)                                 subject
to the dollar limitation set forth in Section 11.1(b), (i) Liens (including
Liens having priority over the Liens pursuant to the Loan Documents) arising in
connection with Capital Leases (and attaching only to the property being
leased), (ii) Liens (including Liens having priority over the Liens pursuant to
the Loan Documents) of the type described in subclauses (i) and (iii)
of this clause (d) existing on property at the time of the acquisition
thereof by any Loan Party (and not created in contemplation of such
acquisition) pursuant to any Permitted Acquisition and (iii) Liens (including
Liens having priority over the Liens pursuant to

 

76

 

the Loan Documents) that constitute purchase money
security interests on any capital asset securing debt incurred for the purpose
of financing all or any part of the cost of acquiring such capital asset,
provided that any such Lien attaches solely to the capital asset so acquired
and secures no more than the purchase price (or portion) thereof financed
thereby;

 

(e)                                  easements,
rights of way, restrictions, minor defects or irregularities in title and other
similar Liens not interfering in any material respect with the ordinary conduct
of the business of any Loan Party;

 

(f)                                    Liens
in favor of the Administrative Agent under the Loan Documents;

 

(g)                                 the EDA Lien, but only to the extent securing
the Company’s obligations under the EDA Loan Guarantee and the EDA Standby L/C
Reimbursement Agreement in a combined amount not exceeding $2,000,000;

 

(h)                                 the Earnout Sellers Lien to the extent fully
subject to the Earnout Subordination Agreement; and

 

(i)                                     Liens on deposit accounts granted or arising
in the ordinary course of business in favor of depositary banks maintaining
such deposit accounts solely to secure customary account fees and charges
payable in respect of such deposit accounts and overdrafts;

 

(j)                                     Liens
in favor of custom brokers for taxes, assessments and governmental charges the
payment of which is not required under Section 10.4 payable in
connection with the importation of Inventory in the ordinary course of business
of the Company or any other Loan Party;

 

(k)                                  leases
or subleases granted to other Persons (as lessee thereof) not materially
interfering with the conduct of the business of the Company or any other Loan
Party;

 

(l)                                     precautionary
UCC financing statement filings regarding operating leases;

 

(m)                               Liens
arising out of the existence of judgment or awards not giving rise to an Event
of Default; provided that the Loan Parties shall promptly seek the stay of, or
otherwise satisfy any such Lien not being contested in good faith;

 

(n)                                 inchoate
statutory and common law landlords’ liens under leases to which the Company or
any other Loan Party is a party;

 

(o)                                 the replacement, extension or renewal of any
Lien permitted by clauses (c) or (d) above upon or in the same
property subject thereto arising out of the extension, renewal or replacement
of the Debt secured thereby (without increase in the amount thereof or decrease
in the weighted average life to maturity thereof); and

 

(p)                                 any other Liens in an aggregate amount not
exceeding $100,000 at any time.

 

77

 

11.3                           Restricted
Payments.  Except as permitted
pursuant to the following sentence, not, and not permit any other Loan Party or
Subsidiary to (a) make any distribution to any holders of its Capital
Securities, (b) purchase or redeem any of its Capital Securities, (c) pay any
management fees or similar fees to any of its direct or indirect equityholders
or any Affiliate thereof, (d) pay, redeem, prepay, defease, purchase,
repurchase or make any other payment on or in respect of any Restricted Debt,
or (e) set aside funds for any of the foregoing.  Notwithstanding the foregoing:

 

(i)                                     any
Subsidiary may pay dividends or make other distributions in respect of its
Capital Securities to the Company or to its parent company (including, without
limitation, to enable the recipient to pay taxes);

 

(ii)                                  (1)
so long as no Event of Default or Unmatured Event of Default exists or would
result therefrom, the Loan Parties may make regularly scheduled payments of
interest (including any interest payable to the Earnout Sellers in connection
with the Earnout Consideration) in respect of Subordinated Debt (other than
Subordinated Debt owing to any Affiliate) to the extent permitted under the
subordination provisions thereof, and (2) the Loan Parties shall be permitted
to accrue all non-cash interest (i.e., PIK interest) on its Subordinated Debt
and non-cash dividends on its Capital Securities consisting of preferred stock;

 

(iii)                               so long as both before
and after giving effect to the payments described in this clause (iii), (x)
Excess Availability will equal or exceed $15,000,000 and (y) no violation of
the financial covenants set forth in Sections 11.13.1, 11.13.2,
or 11.13.3 would then exist or would, on a pro forma basis, result
therefrom, the Company may, upon no less than 10 days’ prior written notice to
the Administrative Agent, accompanied by a certificate of the Chief Financial
Officer delivered to the Administrative Agent setting forth the calculations of
pro forma Excess Revolving Loan Availability and the pro forma calculations of
such financial covenants (after giving effect to such payments) in detail
reasonably acceptable to the Administrative Agent: (1) declare (no more
frequently than quarterly) and pay out of legally available funds, regular cash
dividends payable on the Company’s common stock and (2) pay when due (or at any
time following the due date thereof when all of the foregoing conditions shall
have been satisfied), the Earnout Consideration (or any portion thereof that
may be paid at such time in accordance with this clause (iii));

 

(iv)                              any
Loan Party or Subsidiary may declare and pay dividends or make other
distributions in respect of its common stock payable solely in its common
stock;

 

(v)                                 so
long as no Event of Default or Unmatured Event of Default exists or would
result therefrom and at the time thereof and after giving effect to such
payments, Excess Revolving Loan Availability will equal or exceed $15,000,000,
the Company may, upon no less than 10 days’ prior written notice to

 

78

 

the Administrative
Agent, accompanied by a certificate of the Chief Financial Officer delivered to
the Administrative Agent setting forth the calculations of pro forma
Excess Revolving Loan Availability and the pro forma calculations of financial
covenants set forth in Sections 11.13.1, 11.13.2, or 11.13.3
in detail reasonably acceptable to the Administrative Agent (in each case,
after giving effect to such payments): (1) repurchase or redeem Capital
Securities of such Loan Party held by employees, officers and directors in the
ordinary course of business and consistent with past practice, (2) make
repurchases or redemptions of Capital Securities from employees, officers and
directors that die, retire or otherwise terminate their employment, and (3)
repurchase its Capital Securities; and

 

(vi)                              the
Company may pay the Sassy Earnout Consideration when due and payable in an
amount not to exceed $1,000,000.

 

11.4                           Mergers,
Consolidations, Sales and Other Transactions Outside the Ordinary Course of
Business.  Not, and not permit any
other Loan Party or any First-Tier Foreign Subsidiary to:

 

(a)                                  sell,
transfer, convey or lease any of its assets or Capital Securities (including
the sale of Capital Securities of any First-Tier Foreign Subsidiary) except for
(i) sales of Inventory in the ordinary course of business, (ii) sales of
obsolete and unusable Equipment in the ordinary course of business, (iii)
subject to Section 6.2.2(a), so long as no Event of Default then
exists, the disposition of other property having a fair market value not to
exceed $500,000 in the aggregate in any Fiscal Year for a cash purchase price
payable at closing of not less than the fair market value thereof (unless the
Administrative Agent consents otherwise) and (iv) in the case of its Capital
Securities, as permitted pursuant Section 11.9 or clause (f)
of this Section;

 

(b)                                 sell
or assign with or without recourse any receivables (other than receivables of
any Foreign Subsidiaries);

 

(c)                                  prepay
any Debt (other than the Obligations and, in the case of the Canadian Borrower,
the Canadian Borrower’s obligations under the Canadian Loan Documents);

 

(d)                                 enter
into any transaction whereby such Loan Party leases any property previously
owned and sold by any other Loan Party or any Subsidiary;

 

(e)                                  except
as expressly otherwise permitted hereunder enter into any other transaction
outside the ordinary course of such Loan Party’s business; or

 

(f)                                    be
a party to any merger or consolidation or, except as otherwise permitted
pursuant to this Section, Section 11.10(a), or Section 11.10(f),
purchase or otherwise acquire the
assets or the Capital Securities of any class of any other Person; except for
(1) (A) the merger or consolidation of any Borrower (other than the Company)
into any other Borrower or the sale, assignment or conveyances of any, all or
substantially all of the assets of one Borrower (other than the Company) to another
Borrower, (B) the merger or consolidation of any Loan Party (other than a
Borrower) into any other Loan Party (other than a Borrower) or the sale,

 

79

 

assignment or conveyances of
any, all or substantially all of the assets of one Loan Party (other than a
Borrower) to another Loan Party (other than a Borrower), (C) the merger or
consolidation of any Domestic Wholly-Owned Subsidiary (other than a Loan Party)
into any Loan Party (other than a Borrower) so long as the Loan Party is the
survivor thereof, or the sale, assignment or conveyance of any, all or
substantially all of the assets of any Domestic Wholly-Owned Subsidiary (other
than a Loan Party) to a Loan Party (other than a Borrower), and (D) the merger
or consolidation of any Domestic Wholly-Owned Subsidiary (other than a Loan
Party) into any other Domestic Wholly-Owned Subsidiary (other than a Loan
Party) or the sale, assignment or conveyances of any, all or substantially all
of the assets of one Domestic Wholly-Owned Subsidiary (other than a Loan Party)
by or to any other Domestic Wholly-Owned Subsidiary (other than a Loan Party)
or (2) any Acquisition by the Company
or any other Loan Party entered into and consummated after September 30,
2005 in respect of which the requirement of Section 10.10 have then
been satisfied, where:

 

(i)                                     the
business, divisions or operating units acquired are for use, or the Person
acquired is engaged or reasonably related or complementary thereto, in the
businesses engaged in by the Loan Parties on the Closing Date;

 

(ii)                                  immediately before and after giving effect to
such Acquisition, no Event of Default or Unmatured Event of Default on an
actual or pro forma basis shall exist or would result therefrom;

 

(iii)                               the aggregate consideration to be paid by the
Loan Parties (including any Debt assumed or issued in connection therewith, the
amount thereof to be calculated in accordance with GAAP, and the fair market
value of any non-cash consideration) in connection with (1) such Acquisition
(or any series of related Acquisitions) is less than $15,000,000 in any given
transaction (or series of related transactions) or $25,000,000 in any given
Fiscal Year and (2) all
Acquisitions after the Closing Date is less than $75,000,000 in the aggregate;

 

(iv)                              immediately after giving effect to such
Acquisition, the Company and its Subsidiaries are in pro forma compliance with
all the financial ratios and restrictions set forth in Section 11.13;
provided however that immediately after giving effect to such Acquisition,
Excess Revolving Loan Availability shall not be less than $15,000,000;

 

(v)                                 in the case of the Acquisition of any Person,
the governing body of such Person has approved such Acquisition;

 

(vi)                              reasonably prior to such Acquisition, the
Administrative Agent shall have received complete executed or conformed copies
of each material document, instrument and agreement to be executed in
connection with such Acquisition together with all lien search reports and lien
release letters and other documents as the Administrative Agent may reasonably
require to evidence the

 

80

 

termination of Liens (other than the Permitted Liens) on the assets or
business to be acquired;

 

(vii)                           reasonably prior to such Acquisition, the
Administrative Agent shall have received an acquisition summary with respect to
the Person and/or business or division to be acquired, such summary to include
a reasonably detailed description thereof (including financial information) and
operating results (including financial statements for the most recent 12 month
period for which they are available and as otherwise available), the terms and
conditions, including economic terms, of the proposed Acquisition, and the
Company’ calculation of pro
forma compliance with the financial ratios and restrictions set forth in Section 11.13
relating thereto including, without limitation, the Borrowers’ calculation of
EBITDA;

 

(viii)                        the Administrative Agent shall have approved
the Borrowers’ computation of pro forma compliance with the financial ratios
and restrictions set forth in Section 11.13 including, without
limitation, the Borrowers’ calculation of pro forma EBITDA and the Borrowers’
calculation of Excess Revolving Loan Availability as set forth in clause
(iv) above;

 

(ix)                                consents have been obtained in favor of the
Administrative Agent and the Lenders to the granting of a security interest
and/or the collateral assignment of rights and indemnities under the related
acquisition documents and opinions of counsel for the Loan Parties
and/or relevant Subsidiaries and (if
delivered to the Loan Party or any such Subsidiary) the selling party allowing
reliance thereon by the Administrative Agent and the Lenders have been
delivered and the applicable Loan Party shall have executed an agreement
providing for the granting of a security interest in, and the collateral
assignment to the Administrative Agent of, such Loan Parties’ rights and
indemnities under the related acquisition documents;

 

(x)                                   if such Acquisition is of one hundred percent
of the Capital Securities of a Person (and in respect of which the provisions
of Section 10.10 will be complied with), or is made through a
Domestic Wholly-Owned Subsidiary formed in compliance with 11.15, the provisions
of Section 10.10 have been satisfied with respect to all such
Persons and its Subsidiaries or such newly-formed Subsidiaries concurrently
with or prior to such Acquisition;

 

(xi)                                if the assets acquired in such Acquisition
are intended to be included in the Borrowing Base, the Administrative Agent
must provide its prior written approval, upon its review of such assets
including, without limitation, its review of such field examinations, audits,
appraisals and other due diligence as the Administrative Agent shall reasonably
require; it being acknowledged and agreed that (i) the Administrative Agent may
require that the acquired assets be held in a separate Domestic Wholly-Owned
Subsidiary which shall be deemed a Guarantor and (ii) such additional assets,
if any, included in the Borrowing Base

 

81

 

may be subject to different advance rates or may require the imposition
of additional reserves with respect thereto;

 

(xii)                             no Interim Advance shall then be outstanding
or would be required on a pro forma basis after giving effect to such
Acquisition; and

 

(xiii)                          if the Acquisition is structured as a merger,
the Company or the Loan Party thereto is the surviving entity.

 

(any such Acquisition described in this clause (2),
being a “Permitted Acquisition”).

 

11.5                           Modification
of Organizational Documents.  Not
permit the charter, by-laws or other organizational documents of any Loan Party
or Subsidiary to be amended or modified in any way which could reasonably be expected
to materially adversely affect the interests of the Lenders.  Not change, or allow any other Loan Party to
change, its state of formation or its organizational form unless it gives the
Administrative Agent at least 30 days (or such lesser amount of time as
consented to by the Administrative Agent) prior written notice thereof and
takes actions reasonably requested by Agent to maintain the perfection or
priority of any Lien or security interest granted hereunder.

 

11.6                           Transactions
with Affiliates.  Not, and not permit
any other Loan Party to, enter into, or cause, suffer or permit to exist any
transaction, arrangement or contract with any of its other Affiliates
(including any Subsidiary or Joint Venture) which is on terms, which are less
favorable than are obtainable from any Person which is not one of its
Affiliates, other than (i) customary and reasonable employment
arrangements with employees (including without limitation, incentive
compensation arrangements) and benefit programs and entered into in the
ordinary course of business and pursuant to the reasonable requirements of such
Loan Party’s business and, in the case of any senior officers or directors of
any Loan Party, approved by the Board of Directors and permissible under law,
(ii) customary indemnification agreements and insurance arrangements entered
into for the benefit of any Loan Party’s directors or officers entered into in
the ordinary course of business consistent with past practices and pursuant to
the reasonable requirements of such Loan Party’s business, (iii) as permitted
pursuant to clauses (a), (g), (j) and (k) of Section 11.10,
(iv) transactions with officers or directors of the Company or its Subsidiaries
providing for the payment of customary and reasonable fees, and indemnification
and reimbursement of expenses, upon customary and reasonable terms, and to the
extent not otherwise prohibited hereunder, transactions between Loan Parties.

 

11.7                           Unconditional
Purchase Obligations.  Not, and not
permit any other Loan Party to, enter into, guaranty or be a party to any
material contract for the purchase of materials, supplies or other property or
services if such contract requires that payment be made by it regardless of
whether delivery is ever made of such materials, supplies or other property or
services.

 

11.8                           Inconsistent
Agreements.  Not, and not permit any
other Loan Party or, Domestic Wholly-Owned Subsidiary to, enter into any
agreement containing any provision which would (a) be violated or breached by
any borrowing by the Borrowers hereunder or by the performance

 

82

 

by any Loan Party or Subsidiary of any of its Obligations hereunder or
under any other Loan Document, (b) prohibit any Loan Party from granting to the
Administrative Agent and the Lenders, a Lien on any of its assets (other than
distribution agreements or license agreements, provided that with respect to
any such distribution agreements or license agreement that prohibit any Loan
Party from granting to the Administrative Agent Liens on the right to receive
payments and other proceeds from the sale of products licensed or distributed
under such agreements, the Borrowers shall use their commercially reasonable
efforts (it being agreed that this shall not include the payment of any monies)
to obtain the consent of the counterparties thereto to permit the Liens of the
Administrative Agent under the Loan Documents and the Borrowers further agree
to, and to cause the other Loan Parties to, disclose and schedule such agreements
in accordance with the terms of the Guaranty and Security Agreement) or (c)
create or permit to exist or become effective any encumbrance or restriction on
the ability of any Subsidiary to (i) pay dividends or make other distributions
to any Loan Party or any other Subsidiary, or pay any Debt owed to any Loan
Party or any other Subsidiary, (ii) make loans or advances to any Loan Party or
(iii) transfer any of its assets or properties to any Loan Party, other than
(A) customary restrictions and conditions contained in agreements relating to
the sale of all or a substantial part of the assets of any Subsidiary pending
such sale, provided that such restrictions and conditions apply only to
the Subsidiary to be sold and such sale is permitted hereunder, (B) restrictions
or conditions imposed by any agreement relating to purchase money Debt, Capital
Leases and other secured Debt permitted by this Agreement if such restrictions
or conditions apply only to the property or assets securing such Debt, (C)
customary provisions in leases and other contracts restricting the assignment
or other transfer thereof, and (D) customary provisions in organizational
documents of any Foreign Subsidiary that restrict the transfer of Capital
Securities of such Subsidiaries, or (E) any applicable law, rule or regulation
(including, without limitation, applicable currency control laws and applicable
state corporate statutes restricting the payment of dividends in certain
circumstances).

 

11.9                           Business
Activities; Issuance of Equity.  Not,
and not permit any other Loan Party or Subsidiary, to engage in any line of
business other than the businesses of the Borrowers engaged in on the date
hereof and businesses reasonably related, incidental or complementary thereto.  Not, and not permit any other Loan Party or
Subsidiary to, issue any Capital Securities other than, so long as no Unmatured
Event of Default or Event of Default would occur or result therefrom (x) in
accordance with Section 11.10 and (y) the issuance by the Company
of its common stock (or options to purchase its common stock) (i) for fair
value or (ii) to any employee or director of the Company or any Subsidiary with
respect to compensation or benefits, whether or not pursuant to a formal option
program, benefit plan, compensation plan or otherwise, in accordance with past
practices.

 

11.10                     Investments.  Not, and not permit any other Loan Party or
Subsidiary to, make or permit to exist any Investment in any other Person,
except the following; it being agreed that to be permitted hereunder, any such
Investment, if evidenced by Capital Securities of the Person being invested in,
the provisions of Section 10.10 must be complied with and, if
evidenced by Debt, the provision of Section 11.1(c) relating to
evidencing and pledging as Collateral of such Debt from a Loan Party and, where
appropriate, subordination thereof to the Obligations must be complied with:

 

83

 

(a)                                  (i)
contributions by the Loan Parties to the capital of any other Loan Party, so
long as the recipient of any such capital contribution has guaranteed the
Obligations and such guaranty is secured by a pledge of all of its Capital
Securities and substantially all of its real and personal property, in each
case in accordance with Section 10.10 and (ii) contributions by
First Tier Foreign Subsidiaries and Second Tier Foreign Subsidiaries in other
First Tier Foreign Subsidiaries and Second Tier Foreign Subsidiaries;

 

(b)                                 Investments
constituting Debt permitted by Section 11.1;

 

(c)                                  Contingent
Liabilities constituting Debt permitted by Section 11.1 or Liens
permitted by Section 11.2;

 

(d)                                 Cash
Equivalent Investments and in the case of Foreign Subsidiaries, Investments
made locally of a type comparable to those described in the definition of Cash
Equivalent Investments;

 

(e)                                  bank
deposits in the ordinary course of business, provided that the Loan
Parties and their Domestic Wholly-Owned Subsidiaries shall at no time have
deposits or investments of more than $2,000,000, in aggregate, maintained in
any accounts which are not subject to an Account Control Agreement among the
Administrative Agent, such financial institutions at which such accounts are
maintained and the applicable Loan Party which is in form and substance
reasonably acceptable to the Administrative Agent;

 

(f)                                    Investments
in securities of Account Debtors received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such
account debtors;

 

(g)                                 loans
or advances to employees, officers or directors of the Loan Parties or any
Subsidiary incurred in the ordinary course of business (including for travel,
entertainment and relocation expenses), in an aggregate amount not to exceed
$200,000 at any one time outstanding;

 

(h)                                 subject
to the limitations in Section 11.4, Investments constituting
Permitted Acquisitions;

 

(i)                                     Investments
listed on Schedule 11.10 existing as of the Closing Date;

 

(j)                                     loans
and advances permitted pursuant to Section 11.1(c);

 

(k)                                  Investments
in accordance with past business practices in life insurance plans of certain
employees, officers, and directors of the Company relating to their deferred
compensation which insurance plans name the Company as the beneficiary
thereunder (it being agreed that, (1) the Company and the Borrowers have
granted a Lien to the Administrative Agent in such Investments and the proceeds
of such policies, and (2) absent an Event of Default under Section 13.1.4,
or the attempted enforcement of any claim by any other creditor of the Loan Parties
or their respective Subsidiaries against such assets, the Administrative Agent
shall not assert its interest in any such proceeds of such policies);

 

84

 

(l)                                     subject
to the limitations in Section 11.6, customary security deposits
paid to landlords of real property leased by the Loan Parties in the ordinary
course of business and in accordance with the lease to which such Loan Party is
a party; and

 

(m)                               other
Investments in an aggregate amount not to exceed $100,000 at any time;

 

provided
that (x) any Investment which when made complies with the requirements of the
definition of the term “Cash Equivalent Investment” may continue to be
held notwithstanding that such Investment if made thereafter would not comply
with such requirements; (y) no Investment otherwise permitted by clause (b)
or (c) shall be permitted to be made if, immediately before or after
giving effect thereto, any Event of Default or Unmatured Event of Default
exists or would result therefrom.

 

11.11                     Restriction
of Amendments to Certain Documents. 
Not amend or otherwise modify, or waive any rights under the Related
Agreements, the EDA Documents, the Sassy Purchase Agreement, and any other
agreement, document or instrument evidencing any other Subordinated Debt, if,
in any case, such amendment, modification or waiver which would be or would
reasonably be likely to be adverse to the interests of the Administrative Agent
and the Lenders.

 

11.12                     Fiscal
Year.  Not change its current
determination of its Fiscal Year.

 

11.13                     Financial
Covenants.

 

11.13.1          Fixed
Charge Coverage Ratio.  For any
Fiscal Quarter, not permit the Fixed Charge Coverage Ratio (calculated as of
the last day of such Fiscal Quarter) to be less than the applicable ratio set
forth below:

 

	
  Fiscal Quarter

  	
   

  	
  Fixed Charge Coverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Each Fiscal Quarter ending on (and including) September 30,
  2005 through (and including) June 30, 2006

  	
   

  	
  1.15:1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Each Fiscal Quarter ending thereafter

  	
   

  	
  1.25:1.00

  	
   

  

 

11.13.2          Total
Debt to EBITDA Ratio.  Not permit the
Total Debt to EBITDA Ratio as of the last day of any Fiscal Quarter ending on
or after September 30, 2005 to exceed 3.50:1:00.

 

11.13.3          Excess
Availability.  Not permit Excess
Revolving Loan Availability to be less than $2,500,000 at any time on or after
the Closing Date.

 

11.14                     Cancellation
of Debt.  Not, and not permit any
other Loan Party to, cancel any claim or Debt owing to it, other than (i) in
connection with trade discounts or allowances granted in the ordinary course of
its business consistent with past practices, and (ii) so long as no Event

 

85

 

of Default or Unmatured Event of Default is then
outstanding (A) the cancellation of Debts or claims (other than with respect to
a promissory note in original principal amount of $1,000,000 issued by the
purchasers of substantially all of the assets of Bright of America, Inc. in
favor of the Company, the “Bright of America Note”) not to exceed
$500,000 in any Fiscal Year, and (B) the cancellation of Debts or claims with
respect to the Bright of America Note not to exceed $1,000,000 in the
aggregate, in each case of clauses (1) and (2) above, in connection with the
resolution of good faith disputes relating thereto.

 

11.15                     Creation
of Subsidiaries.  Not, and not permit
any other Loan Party or Subsidiary to, create any Subsidiary or enter into any
joint venture, other than so long as no Event of Default or Unmatured Event of
Default then exist or would result therefrom, (i) Subsidiaries in respect of
which the provisions of Sections 10.10 shall have been satisfied or (ii)
which are Second-Tier Foreign Subsidiaries.

 

11.16                     Inactive
Subsidiaries.  Not permit any
Inactive Subsidiary to own any properties or assets in excess of $50,000, in each
case; incur any Debt or other material liabilities (other than immaterial
contingent obligations not to exceed $50,000 with respect to each such Inactive
Subsidiary); have any Investments; or conduct any operations or business.

 

SECTION 12                             EFFECTIVENESS; CONDITIONS
OF LENDING, ETC.

 

The obligation of each Lender to make its Loans and of
the Issuing Bank to issue Letters of Credit is subject to the following
conditions precedent:

 

12.1                           Initial
Credit Extension.  The obligation of
the Lenders to make the initial Loans and the obligation of the Issuing Bank to
issue its initial Letter of Credit (whichever first occurs) is, in addition to
the conditions precedent specified in Section 12.2, subject to the
conditions precedent that (a) all Debt to be Repaid has been (or concurrently
with the initial borrowing will be) paid in full in cash, and that all
agreements and instruments governing the Debt to be Repaid and that all Liens
securing such Debt to be Repaid have been (or concurrently with the initial
borrowing will be) terminated and (b) the Administrative Agent shall have
received all of the following,
each duly executed and dated the Closing Date (or such earlier date as shall be
satisfactory to the Administrative Agent), in form and substance reasonably satisfactory
to the Administrative Agent (and the date on which all such conditions
precedent have been satisfied or waived in writing by the Administrative Agent
and the Lenders is called the “Closing Date”):

 

12.1.1                List
of Closing Documents.  All instruments,
documents, certificates and agreements, set forth on the List of Closing
Documents attached hereto as Schedule 12.1.1.

 

12.1.2                Consents,
etc.  Evidence, reasonably
satisfactory to the Administrative Agent, that the Loan Parties have received
all governmental and third party approvals necessary for the continuing
operations of the Loan Parties and such approvals shall be on terms reasonably
satisfactory to the Administrative Agent and shall be in full force and effect,
except for such approvals the failure to obtain which, individually or in the
aggregate, would not have or could not reasonably be expected to have a
Material Adverse Effect.

 

86

 

12.1.3                Payment
of Fees.  Receipt by the
Administrative Agent of payment by the Loan Parties of all accrued and unpaid
fees and expenses to the extent then due and payable to the Administrative
Agent and/or the Lenders on the Closing Date (including, without limitation,
pursuant to the Agent Fee Letter), together with all Attorney Costs of the
Administrative Agent to the extent invoiced prior to the Closing Date, plus
such additional amounts of Attorney Costs as shall constitute the
Administrative Agent’s reasonable estimate of Attorney Costs incurred or to be
incurred by the Administrative Agent through the closing proceedings (provided,
that such estimate shall not thereafter preclude final settling of accounts
between the Borrowers and the Administrative Agent).

 

12.1.4                Excess
Availability.  Excess Revolving Loan
Availability plus unrestricted cash shall not be less than $20,000,000 on the
Closing Date.  For the purposes of this Section 12.1.4,
“unrestricted cash” shall mean cash of the Borrowers (w) which is not pledged
to, or subject to the Lien or security interest of, any Person (other than the
Earnout Sellers Lien, to the extent such Lien continues to be subject to the
Earnout Subordination Agreement), (x) the use of which by the Borrowers is not
restricted or such amounts are not required to be paid to any other Person
pursuant to any agreement, instrument, or document, or any law, order, writ or
decree, (y) which is not a deposit or prepayment for goods or services to be
provided and (z) such cash is in a deposit account or securities account
subject to an account control agreement in favor of the Administrative Agent
and in form and substance reasonably satisfactory to the Administrative Agent.

 

12.1.5                Independent
Collateral Field Audit Examination Documents.  A collateral field examination shall have
been conducted by an independent third party appraiser acceptable to the
Administrative Agent, and the written results of such examination shall be
satisfactory to the Administrative Agent, in its sole and absolute
discretion.  To the extent that the
Administrative Agent requested any appraisals of any of the assets of the Loan
Parties, such appraisals shall have been conducted by independent third party
appraisers acceptable to the Administrative Agent, provide that they may be
relied upon by the Administrative Agent and the Lenders (subject, if
applicable, to reasonable confidentiality restrictions) and the written results
of such appraisals shall be satisfactory to the Administrative Agent, in its
sole and absolute discretion.

 

12.1.6                Material
Adverse Effect.  Since December 31,
2004, no event shall have occurred which has had or could reasonably be
expected to have a Material Adverse Effect on the Loan Parties, taken as a
whole; it being agreed, however, that the results of operations of the Company
and its Subsidiaries for the quarter ended March 31, 2005, as reported on
its Form 10-Q filed with the SEC on or about May 10, 2005 shall not, in and of
themselves, be deemed a Material Adverse Effect.

 

12.1.7                Due
Diligence.  The Administrative Agent
shall have completed its legal and business due diligence with respect to each
Loan Party and the results thereof shall be acceptable to the Administrative
Agent, in its reasonable discretion.

 

12.1.8                Litigation.  The Administrative Agent shall have received
evidence, satisfactory to the Administrative Agent, that no litigation
(including derivative actions), arbitration proceeding or governmental
investigation or proceeding is pending or, to the knowledge of any

 

87

 

Loan Party, threatened challenging the validity, permissibility or
legality of the transactions contemplated by the Loan Documents.

 

12.1.9                Projections.  The Administrative Agent shall have received
projected income statements, balance sheets and statements of cash flow of the
Company and its Subsidiaries after giving effect to the making of the initial
Loans and the issuance of the initial Letters of Credit on a monthly basis for
Fiscal Year 2005 and on an annual basis for Fiscal Year 2006.

 

12.1.10          Financial
Statements.  (i) Audited consolidated
financial statements (including balance sheets, statements of earnings and cash
flows) of the Company and its Subsidiaries for the 2002, 2003 and 2004 Fiscal
Years and (ii) unaudited interim consolidated financial statements (including
balance sheets, statements of earnings and cash flows) of the Company and its
Subsidiaries for each fiscal month and quarter ended after the latest period
for which financial statements have been delivered in accordance with the
immediately preceding clause (i).

 

12.1.11          Filings,
Registrations and Recordings.  The
Administrative Agent shall have received each document (including Uniform
Commercial Code financing statements) required by the Collateral Documents or
under law or reasonably requested by the Administrative Agent to be filed,
registered or recorded in order to create in favor of the Administrative Agent,
for the benefit of the Lenders, a perfected Lien on the collateral described
therein, prior to any other Liens (other than prior Liens permitted pursuant to
Section 11.2), in proper form for filing, registration or
recording, including without limitation, UCC financing statements, mortgages,
deeds of trust, account control agreements, title policies.

 

12.1.12          Insurance.  The Administrative Agent shall be reasonably
satisfied with the insurance program to be maintained by the Loan Parties and
shall have received, if requested by the Administrative Agent, copies of
Borrowers’ and the other Loan Parties’ insurance policies.

 

12.1.13          Other.  Such other documents, instruments or
agreements as the Administrative Agent or any Lender may reasonably request.

 

12.2                           Conditions.  The obligation (a) of each Lender to make
each Loan and (b) of the Issuing Bank to issue each Letter of Credit is subject
to the following further conditions precedent that:

 

12.2.1                Compliance
with Warranties, No Default, etc. 
Both before and after giving effect to the making, continuation or
conversion any Loan or the issuance of any Letter of Credit, the following
statements shall be true and correct:

 

(a)                                  the
representations and warranties of each Loan Party set forth in this Agreement
and the other Loan Documents shall be true and correct in all material respects
with the same effect as if then made (or, if such representations and
warranties are qualified by materiality or Material Adverse Effect, in all
respects) except to the extent stated to relate to a specific earlier date, in
which case such representations and warranties shall be true and correct in all
material respects as of such earlier date (or, if such representations and
warranties are qualified by materiality or Material Adverse Effect, in all
respects)); and

 

88

 

(b)                                 no
Event of Default or Unmatured Event of Default shall have then occurred and be
continuing.

 

12.2.2                Confirmatory
Certificate.  If requested by the
Administrative Agent or any Lender, the Administrative Agent shall have
received (in sufficient counterparts to provide one to each Lender) a
certificate dated the date of such requested Loan or Letter of Credit and
signed by a duly authorized representative of each of the Loan Parties as to
the matters set out in Section 12.2.1 (it being understood that
each request by the Borrowers for the making of a Loan or the issuance of a
Letter of Credit shall be deemed to constitute a representation and warranty by
the Loan Parties that the conditions precedent set forth in Section 12.2.1
will be satisfied at the time of the making of such Loan or the issuance of such
Letter of Credit).

 

SECTION 13                             EVENTS OF DEFAULT AND
THEIR EFFECT.

 

13.1                           Events
of Default.  Each of the following
shall constitute an Event of Default under this Agreement:

 

13.1.1                Non-Payment
of the Loans, etc.  Default in the
payment when due of the principal of any Loan; or default, and continuance
thereof for five days, in the payment when due of any interest, fee,
reimbursement obligation with respect to any Letter of Credit or other amount
payable by any Loan Party hereunder or under any other Loan Document.

 

13.1.2                Non-Payment
of Other Debt.  Any default shall
occur under the terms applicable to any Debt of any Loan Party in an aggregate
amount exceeding $1,000,000 and such default shall (a) consist of the failure
to pay such Debt when due, whether by acceleration or otherwise, and including
any such failure as a result of any prohibition under Section 11.3,
or (b) accelerate the maturity of such Debt or permit the holder or holders
thereof, or any trustee or agent for such holder or holders, to cause such Debt
to become due and payable (or require any Loan Party to purchase or redeem such
Debt or post cash collateral in respect thereof) prior to its expressed
maturity.

 

13.1.3                Reserved.

 

13.1.4                Bankruptcy,
Insolvency, etc.  Any Loan Party
becomes insolvent or generally fails to pay, or admits in writing its inability
or refusal to pay, debts as they become due; or any Loan Party applies for,
consents to, or acquiesces in the appointment of a trustee, receiver or other
custodian for such Loan Party or any property thereof, or makes a general
assignment for the benefit of creditors; or, in the absence of such
application, consent or acquiescence, a trustee, receiver or other custodian is
appointed for any Loan Party or for a substantial part of the property of any
thereof and is not discharged within 60 days; or any bankruptcy,
reorganization, debt arrangement, or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is
commenced in respect of any Loan Party, and if such case or proceeding is not
commenced by such Loan Party, it is consented to or acquiesced in by such Loan
Party, or remains for 60 days undismissed; or any Loan Party takes any action
to authorize, or in furtherance of, any of the foregoing.

 

89

 

13.1.5                Non-Compliance
with Loan Documents.  (a) Failure by
any Loan Party to comply with or to perform any covenant set forth in 10.1.5(a),
10.1.5(d), 10.3.2, 10.3.3, 10.5,  10.11 or Section 11
of this Agreement or Section 5.2 of the Guaranty and Collateral
Agreement; provided that the mere failure to deliver insurance certificates or
proof of insurance (as distinguished from the failure to maintain any such
insurance in effect) as required pursuant to Section 10.3.2 or 10.3.3
will not cause an Event of Default to immediately occur pursuant to this clause
(a), (b) failure by any Loan Party to comply with or to perform any
covenant set forth in Sections 10.1.1, 10.1.2, 10.1.3,
10.1.5 (other than clauses (a) or (d) thereof), 10.1.6,
10.1.8 or to deliver insurance certificates or proof of insurance (as
distinguished from the failure to maintain any such insurance in effect) as
required pursuant to Section 10.3.2 or 10.3.3, and
continuance of such failure described in this clause (b) for 20 days, or
(c) failure by any Loan Party to comply with or to perform any other provision
of this Agreement or any other Loan Document (and not constituting an Event of
Default under any other provision of this Section 13) and
continuance of such failure described in this clause (c) for 30 days.

 

13.1.6                Representations;
Warranties.  Any representation or
warranty made by any Loan Party herein or any other Loan Document is breached
or is false or misleading in any material respect when made or deemed to have
been made, or any schedule, certificate, financial statement, report, notice or
other writing furnished by any Loan Party to the Administrative Agent or any
Lender in connection herewith is false or misleading in any material respect on
the date as of which the facts therein set forth are stated or certified.

 

13.1.7                Pension
Plans.  (a) A Termination Event
occurs which has or could reasonably be expected to result in liability to any
of the Loan Parties or any other member of the Controlled Group in excess of
$1,000,000 in the aggregate; (b) there arises or exists an Unfunded Liability
which would or could reasonably be expected to have a Material Adverse Effect
or (c) there shall occur any withdrawal or partial withdrawal from a
Multiemployer Pension Plan which would or could reasonably be expected to
result in a liability to any Loan Party or other member of the Controlled Group
in excess of $1,000,000 in the aggregate.

 

13.1.8                Judgments.  Final judgments which (i) in the case of
monetary judgments, exceed $5,000,000, in aggregate, for all such judgments, in
excess of any applicable insurance with respect to which the insurer has not
denied liability or coverage and (ii) in the case of non-monetary judgments,
would have or could reasonably be expected to have a Material Adverse Effect,
shall be rendered against any Loan Party and, in each of the cases of clause
(i) and (ii) above, shall not have been paid, discharged or vacated
or had execution thereof stayed pending appeal within 30 days after entry or
filing of such judgments.

 

13.1.9                Loss
of Collateral.  Any loss, theft,
damage or destruction of any material portion of the Collateral to the extent
not fully covered (subject to such deductibles and self-insurance retentions as
the Administrative Agent shall have permitted) by insurance or if and to the
extent the insurance company has denied or asserted a denial of coverage
therefor.

 

13.1.10          Levy,
Seizure or Attachment.  The making by
any Person of a levy, seizure or attachment upon any material portion of the
Collateral, except to the extent that such proceedings are being diligently
contested in good faith by appropriate proceedings and the enforcement

 

90

 

thereof is stayed (and the terms of such stay do not adversely affect
in any material respect the Administrative Agent’s Liens or other rights on
such Collateral or its ability to accept and retain payment hereunder).

 

13.1.11          Invalidity
of Collateral Documents, etc.  Any
Collateral Document shall cease to be in full force and effect (other than in
accordance with its terms) or any Loan Party (or any Person by, through or on
behalf of any Loan Party) shall contest in any manner the validity, binding
nature or enforceability of any Collateral Document or the Liens purported to
be granted therein or any court or any governmental authority shall issue a
judgment, order, decree or ruling to the effect that any of the obligations of
any party to any Collateral Document are illegal, invalid or unenforceable.

 

13.1.12          Invalidity
of Subordination Provisions, etc. 
Any provision of the Intercreditor Agreement or any
subordination provision in any document or instrument governing Subordinated
Debt, or any subordination provision in any guaranty by any Loan Party of any
Subordinated Debt shall, in any such case, cease to be in full force and
effect; or any Loan Party, any subordinating party or any governmental
authority having jurisdiction over any of them or over the Administrative Agent
and/or the Lenders shall contest in any judicial or administrative proceeding
the validity, binding nature or enforceability of any such provision or
agreement.

 

13.1.13          Change
of Control.  A Change of Control
shall occur.

 

13.1.14          Reserved

 

13.1.15          EDA
Standby L/C.  Any drawing is made
under the EDA Standby L/C.

 

13.2                           Effect
of Event of Default.  If any Event of
Default described in Section 13.1.4 shall occur in respect of any
Loan Party, the Commitments shall immediately terminate and the Loans and all
other Obligations hereunder shall become immediately due and payable and the
Loan Parties shall become immediately obligated to Cash Collateralize all
Letters of Credit, all without presentment, demand, protest or notice of any
kind; and, if any other Event of Default shall occur and be continuing, the
Administrative Agent may (and, upon the written request of the Required
Facility A Lenders, in the case of the Revolving Commitment and Term
Loan A Commitment, or subject to the Intercreditor Agreement, the Required
Facility B Lenders, in the case of the Term Loan B Commitment, shall)
declare the respective Commitments to be terminated in whole or in part and/or
declare all or any part of the Loans and all other Obligations hereunder to be
due and payable and/or demand that the Loan Parties immediately Cash
Collateralize all or any Letters of Credit, whereupon the Commitments shall
immediately terminate (or be reduced, as applicable) and/or the Loans and other
Obligations hereunder shall become immediately due and payable (in whole or in
part, as applicable) and/or the Loan Parties shall immediately become obligated
to Cash Collateralize the Letters of Credit (all or any, as applicable), all
without presentment, demand, protest or notice of any kind.  The Administrative Agent shall promptly
advise the Loan Party Representative of any such declaration, but failure to do
so shall not impair the effect of such declaration.  Any cash collateral delivered hereunder shall
be held by the Administrative Agent (without liability for interest thereon)
and applied to the Obligations arising in connection with any drawing under a
Letter of Credit.  After the

 

91

 

expiration or termination of all Letters of Credit,
such cash collateral shall be applied by the Administrative Agent to any
remaining Obligations hereunder and any excess shall be delivered to the Loan
Party Representative, on behalf of the Loan Parties, or as a court of competent
jurisdiction may elect.

 

SECTION 14                             THE ADMINISTRATIVE AGENT.

 

14.1                           Appointment
and Authorization.  Each Lender
hereby irrevocably (subject to Section 14.10) appoints, designates
and authorizes the Administrative Agent to take such action on its behalf under
the provisions of this Agreement and each other Loan Document and to exercise
such powers and perform such duties as are expressly delegated to it by the
terms of this Agreement or any other Loan Document, together with such powers
as are reasonably incidental thereto. 
Notwithstanding any provision to the contrary contained elsewhere in
this Agreement or in any other Loan Document, the Administrative Agent shall
not have any duty or responsibility except those expressly set forth herein,
nor shall the Administrative Agent have or be deemed to have any fiduciary
relationship with any Lender or participant, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the Administrative
Agent.  Without limiting the generality
of the foregoing sentence, the use of the term “agent” herein and in other Loan
Documents with reference to the Administrative Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law.  Instead,
such term is used merely as a matter of market custom, and is intended to
create or reflect only an administrative relationship between independent
contracting parties.

 

14.2                           Issuing
Bank.  The Issuing Bank shall act on
behalf of the Facility A Lenders (according to their Pro Rata Shares
relating to the Revolving Loans) with respect to any Letters of Credit issued
by it and the documents associated therewith. 
The Issuing Bank shall have all of the benefits and immunities (a)
provided to the Administrative Agent in this Section 14 with
respect to any acts taken or omissions suffered by the Issuing Bank in
connection with Letters of Credit issued by it or proposed to be issued by it and
the applications and agreements for letters of credit pertaining to such
Letters of Credit as fully as if the term “Administrative Agent”, as used in
this Section 14, included the Issuing Bank with respect to such
acts or omissions and (b) as additionally provided in this Agreement with
respect to the Issuing Bank.

 

14.3                           Delegation
of Duties.  The Administrative Agent
may execute any of its duties under this Agreement or any other Loan Document
by or through agents, employees or attorneys in fact and shall be entitled to
advice of counsel and other consultants or experts concerning all matters
pertaining to such duties.  The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agent or attorney in fact that it selects in the absence of gross
negligence or willful misconduct.

 

14.4                           Exculpation
of Administrative Agent.  None of the
Administrative Agent nor any of its directors, officers, employees or agents
shall (a) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except to the extent resulting from its own
gross negligence or willful misconduct in connection with its duties expressly
set forth herein as

 

92

 

determined by a final, nonappealable judgment by a
court of competent jurisdiction), or (b) be responsible in any manner to any
Lender or participant for any recital, statement, representation or warranty
made by any Loan Party or Affiliate of any Loan Party or any officer thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document (or the creation, perfection or priority of any Lien or security
interest therein), or for any failure of any Loan Party or any other party to
any Loan Document to perform its Obligations hereunder or thereunder.  The Administrative Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Loan Party or its Affiliates.

 

14.5                           Reliance
by Administrative Agent.  The
Administrative Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, communication, signature, resolution,
representation, notice, consent, certificate, electronic mail message,
affidavit, letter, telegram, facsimile, telex or telephone message, statement
or other document or conversation believed by it to be genuine and correct and
to have been signed, sent or made by the proper Person or Persons, and upon
advice and statements of legal counsel (including counsel to the Loan Parties),
independent accountants and other experts selected by the Administrative
Agent.  The Administrative Agent shall be
fully justified in failing or refusing to take any action under this Agreement
or any other Loan Document unless it shall first receive such advice or
concurrence of the Required Lenders, the Required Facility A Lenders, or
the Required Facility B Lenders, as applicable, as it deems appropriate
and, if it so requests, confirmation from the Lenders (or any of them) of their
obligation to indemnify the Administrative Agent against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action.  The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the Required Lenders, the Required Facility A
Lenders, or the Required Facility B Lenders, as applicable, and such request
and any action taken or failure to act pursuant thereto shall be binding upon
each Lender.  For purposes of determining
compliance with the conditions specified in Section 12, each Lender
that has signed this Agreement shall be deemed to have consented to, approved
or accepted or to be satisfied with, each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to a
Lender unless the Administrative Agent shall have received written notice from
such Lender prior to the proposed Closing Date specifying its objection
thereto.

 

14.6                           Notice
of Default.  The Administrative Agent
shall not be deemed to have knowledge or notice of the occurrence of any Event
of Default or Unmatured Event of Default except with respect to defaults in the
payment of principal, interest and fees required to be paid to the
Administrative Agent for the account of the Lenders, unless the Administrative
Agent shall have received written notice from a Lender or the Loan Party Representative
referring to this Agreement, describing such Event of Default or Unmatured
Event of Default and stating that such notice is a “notice of default”.  The Administrative Agent will notify the
Lenders of its

 

93

 

receipt of any such notice.  The Administrative Agent shall take such
action with respect to such Event of Default or Unmatured Event of Default as
may be requested by the Required Lenders in accordance with Section 13.2;
provided that unless and until the Administrative Agent has received any
such request, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Event of
Default or Unmatured Event of Default as it shall deem advisable or in the best
interest of the Lenders.

 

14.7                           Credit
Decision.  Each Lender acknowledges
that the Administrative Agent has not made any representation or warranty to
it, and that no act by the Administrative Agent hereafter taken, including any
consent and acceptance of any assignment or review of the affairs of the Loan
Parties, shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender as to any matter, including whether the
Administrative Agent has disclosed material information in its possession.  Each Lender represents to the Administrative
Agent that it has, independently and without reliance upon the Administrative
Agent and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Loan Parties, and made its own decision to enter into this Agreement and to
extend credit to the Company and the other Borrowers hereunder.  Each Lender also represents that it will,
independently and without reliance upon the Administrative Agent and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to
make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Loan Parties. 
Except for notices, reports and other documents expressly herein
required to be furnished to the Lenders by the Administrative Agent, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial or other condition or creditworthiness of the
Loan Parties which may come into the possession of the Administrative Agent.

 

14.8                           Indemnification.  Whether or not the transactions contemplated
hereby are consummated, each Lender shall indemnify upon demand the
Administrative Agent and its directors, officers, employees and agents (to the
extent not reimbursed by or on behalf of the Loan Parties and without limiting
the obligation of the Loan Parties to do so), according to its applicable Pro
Rata Share, from and against any and all Indemnified Liabilities (as
hereinafter defined); provided that no Lender shall be liable for any payment
to any such Person of any portion of the Indemnified Liabilities to the extent
such Indemnified Liabilities resulted from the applicable Person’s own gross
negligence or willful misconduct.  No
action taken in accordance with the directions of the Required Lenders, the
Required Facility A Lenders or the Required Facility B Lenders, as
applicable, shall be deemed to constitute gross negligence or willful
misconduct for purposes of this Section. 
Without limitation of the foregoing, each Lender shall reimburse the
Administrative Agent upon demand for its ratable share of any costs or out of
pocket expenses (including Attorney Costs and Taxes) incurred by the
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any

 

94

 

document contemplated by or referred to herein, to the
extent that the Administrative Agent is not reimbursed for such expenses by or
on behalf of the Loan Parties.  The
undertaking in this Section shall survive repayment of the Loans,
cancellation of the Notes, expiration or termination of the Letters of Credit,
any foreclosure under, or modification, release or discharge of, any or all of
the Collateral Documents, termination of this Agreement and the resignation or
replacement of the Administrative Agent.

 

14.9                           Administrative
Agent in Individual Capacity. 
LaSalle and its Affiliates may make loans to, issue letters of credit
for the account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with the Loan Parties and Affiliates as though
LaSalle were not the Administrative Agent hereunder and without notice to or
consent of any Lender.  Each Lender
acknowledges that, pursuant to such activities, LaSalle or its Affiliates may
receive information regarding the Loan Parties or their Affiliates (including
information that may be subject to confidentiality obligations in favor of such
Loan Party or such Affiliate) and acknowledge that the Administrative Agent
shall be under no obligation to provide such information to them.  With respect to their Loans (if any), LaSalle
and its Affiliates shall have the same rights and powers under this Agreement
as any other Lender and may exercise the same as though LaSalle were not the
Administrative Agent, and the terms “Lender” and “Lenders” include LaSalle and
its Affiliates, to the extent applicable, in their individual capacities.

 

14.10                     Successor
Administrative Agent.  The
Administrative Agent may resign as Administrative Agent upon 30 days’ notice to
the Lenders and the Loan Party Representative. 
If the Administrative Agent resigns under this Agreement, the Required
Lenders shall, with (so long as no Event of Default exists) the consent of the
Loan Party Representative (which shall not be unreasonably withheld or
delayed), appoint from among the Lenders a successor agent for the
Lenders.  If no successor agent is
appointed prior to the effective date of the resignation of the Administrative
Agent, the Administrative Agent may appoint, after consulting with the Lenders
and the Loan Party Representative, a successor agent from among the
Lenders.  Upon the acceptance of its
appointment as successor agent hereunder, such successor agent shall succeed to
all the rights, powers and duties of the retiring Administrative Agent and the
term “Administrative Agent” shall mean such successor agent, and the retiring
Administrative Agent’s appointment, powers and duties as Administrative Agent
shall be terminated. After any retiring Administrative Agent’s resignation
hereunder as Administrative Agent, the provisions of this Section 14
and Sections 15.5 and 15.17 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Administrative Agent
under this Agreement.  If no successor
agent has accepted appointment as Administrative Agent by the date which is 30
days following a retiring Administrative Agent’s notice of resignation, the
retiring Administrative Agent’s resignation shall nevertheless thereupon become
effective and the Lenders shall perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Required Lenders appoint a
successor agent as provided for above.

 

14.11                     Collateral
Matters.  The Lenders irrevocably
authorize the Administrative Agent, at its option and in its discretion, (a) to
release any Lien granted to or held by the Administrative Agent under any
Collateral Document (i) upon termination of the Commitments and payment in full
of all Loans and all other obligations of the Loan Parties hereunder and the
expiration or

 

95

 

termination of all Letters of Credit; (ii)
constituting property sold or to be sold or disposed of as part of or in connection
with any disposition permitted hereunder; (iii) subject to Section 15.1,
if approved, authorized or ratified in writing by the Required Lenders; or (iv)
as otherwise authorized in the Intercreditor Agreement or (b) to subordinate
its interest in any Collateral to any holder of a Lien on such Collateral which
is permitted by Section 11.2(d)(i) or (d)(iii)  (it being understood that the Administrative
Agent may conclusively rely on a certificate from the Loan Party
Representative, on behalf of the Loan Parties, in determining whether the Debt
secured by any such Lien is permitted by Section 11.1(b)).  Upon request by the Administrative Agent at
any time, the Lenders will confirm in writing the Administrative Agent’s
authority to release, or subordinate its interest in, particular types or items
of Collateral pursuant to this Section 14.11.  Each Lender hereby authorizes the
Administrative Agent to give blockage notices in connection with any
Subordinated Debt at the direction of the Required Lenders, and agrees that it
will not act unilaterally to deliver such notices.

 

14.12                     Administrative
Agent May File Proofs of Claim.  In
case of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to any Loan Party, the Administrative Agent (irrespective
of whether the principal of any Loan shall then be due and payable as herein
expressed or by declaration or otherwise and irrespective of whether the Administrative
Agent shall have made any demand on the Loan Party Representative, on behalf of
the Loan Parties) shall be entitled and empowered, by intervention in such
proceeding or otherwise:

 

(a)                                  to
file and prove one or more claims for the whole amount of the principal and
interest owing and unpaid in respect of the Loans, and all other Obligations
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and
their respective agents and counsel and all other amounts due the Lenders and
the Administrative Agent under Sections 5, 15.5 and 15.17)
allowed in such judicial proceedings; and

 

(b)                                 to
collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same;

 

and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make
such payments to the Administrative Agent and, in the event that the
Administrative Agent shall consent to the making of such payments directly to
the Lenders, to pay to the Administrative Agent any amount due for the
reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Sections 5, 15.5 and 15.17.

 

Nothing contained herein
shall be deemed to authorize the Administrative Agent to authorize or consent
to or accept or adopt on behalf of any Lender any plan of reorganization,
arrangement, adjustment or composition affecting the Obligations or the rights
of any Lender or

 

96

 

to authorize the
Administrative Agent to vote in respect of the claim of any Lender in any such
proceeding.

 

14.13                     Other
Agents; Arrangers and Managers.  None
of the Lenders or other Persons identified on the facing page or signature
pages of this Agreement as a “syndication agent,” “documentation agent,” “co-agent,”
“book manager,” “lead manager,” “arranger,” “lead arranger” or “co-arranger”,
if any, shall have any right, power, obligation, liability, responsibility or
duty under this Agreement other than, in the case of such Lenders, those
applicable to all Lenders as such. 
Without limiting the foregoing, none of the Lenders or other Persons so
identified shall have or be deemed to have any fiduciary relationship with any
Lender.  Each Lender acknowledges that it
has not relied, and will not rely, on any of the Lenders or other Persons so
identified in deciding to enter into this Agreement or in taking or not taking
action hereunder.

 

SECTION 15                             GENERAL.

 

15.1                           Waiver;
Amendments.  Except as set forth in clauses
(a) through (g) below, no amendment, modification or waiver of, or
consent with respect to, any provision of this Agreement or the other Loan
Documents shall in any event be effective unless the same shall be in writing
and acknowledged by the Administrative Agent, the Required Lenders, the Issuing
Bank and the Borrowers, and then any such amendment, modification, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.

 

(a) Without the consent of each Lender (including the
Issuing Bank) directly affected thereby, no amendment, modification, waiver or
consent shall (i) extend or increase the Commitment of any Lender, (ii) extend
the date scheduled for payment of any principal (excluding mandatory
prepayments) of or interest on the Loans or any fees payable hereunder or waive
an Event of Default for non-payment thereof, (iii) reduce the principal amount
of any Loan, the rate of interest thereon or any fees payable hereunder (except
for periodic changes in the Applicable Margins hereunder or resulting from the
imposition of the Default Rate), or (iv) reduce such Lender’s Pro Rata
Share (other than in connection with any permitted increase to the Revolving
Commitment Limit pursuant to Section 6.1.2).

 

(b) Without the consent of all Lenders, no amendment,
modification, waiver or consent shall (i) release any Loan Party from its
obligations hereunder, under any other Loan Document or under any guaranty of
the Obligations or release all or any substantial portion of the Collateral,
(ii) change the definition of Required Lenders, (iii) amend the provisions of
this Section 15.1; (iv) increase the advance rates used in calculating
the Borrowing Base or (v) amend the definition of Pro Rata Share.

 

(c) Without the consent of the Required
Facility B Lenders no amendment, modification, waiver or consent shall (i)
amend any provision of this
Agreement if the effect is to increase the interest rate or rates per annum or
fees payable with respect to the Facility A Loans if the aggregate effect of
such increases or changes is to increase the interest rates in excess of two
hundred (200) basis points over the interest rates otherwise set forth in this
Agreement (it being understood and agreed, however, that changes to interest
rates and fees resulting from fluctuations of the Base Rate, LIBOR Rate and
other reference rates that may float and/or

 

97

 

resulting from the application of the Default Rate and
changes to fees and charges by the Administrative Agent are not subject to the
limitations of this clause (c)(i)), (ii) amend Sections 10.1.5 (other than Section 10.1.5(a)
or (d)), 10.2 (except with respect to fees and charges by the
Administrative Agent), 11.1,  11.3 through 11.12, 11.14,
11.15, 11.16, 13.1.1, 13.1.4 and 13.1.5(a)
(other than with respect to Section 10.1.5(a) or (d)); it
being agreed and understood that this clause (ii) shall apply to amendments
only and not to any waivers or consents under such Sections, (iii) amend or waive or consent to a departure from
the terms of Sections 10.1.5(a), 10.1.5(d), 10.7, 13.1.2,
13.1.6, 13.1.9, 13.1.10, and 13.1.13. or (iv)
except in connection with the financing, refinancing, sale or other disposition
of any asset of any Loan Party permitted under this Agreement or any other Loan
Document, release or subordinate (or amend the Collateral Documents where the
effect of such amendment is to release or subordinate) any liens in favor of
the Administrative Agent on any of the Collateral or waive or consent to a
departure from the provisions of Section 11.2 if (1) the liens and
security interests under the Collateral Documents securing the Obligations
would be subordinated to the lien that is the subject of such waiver or consent
and (2) the lien that is the subject of such waiver and consent is of a type
not included in the definition of Permitted Liens (as such definition exists on
the Closing Date).

 

(d) Without the consent of all Facility B
Lenders, no amendment, modification, waiver or consent shall amend the
definition of Required Facility B Lenders

 

(d) Without the consent of all Facility A Lenders,
amend the definition of Required Facility A Lenders.

 

(f) No amendment, modification or waiver of, or
consent with respect to, any provision of this Agreement or the other Loan
Documents affecting either the Administrative Agent (including each and every
provision of Section 14 hereof) or the Issuing Bank, in each case,
in such Person’s capacity as such, shall be effective without the consent of
the Administrative Agent and/or the Issuing Bank, as applicable.

 

(g) Notwithstanding any of the foregoing to the
contrary, for purposes of voting or consenting to matters with respect to this
Agreement and the other Loan Documents, a Defaulting Lender shall not be
considered a Lender and such Defaulting Lender’s Pro Rata Share of the
Obligations shall each be deemed to be $0 until such Defaulting Lender makes
the payments required in this Agreement.

 

(h) Notwithstanding anything contained herein to the
contrary, with respect to, and in the event of, any amendment, waiver or
modification of or to this Agreement or any other Loan Document which would
otherwise be approved hereunder but for the refusal of one or more requisite
Facility B Lender to grant its approval thereto (a “Rejecting Facility B
Lender”), such refusal shall give rise to the following rights with respect
to each such Rejecting Facility B Lender (and each such Rejecting Facility B
Lender hereby agrees to cooperate with and to execute and deliver, at the
Borrowers’ expense, any reasonably necessary instruments, agreements and
documents and take any and all such actions as may be reasonably required in
connection with the enforcement of any such rights), (i) each Facility A Lender
shall have the right to purchase, for cash at the closing of such purchase, its
ratable share (as among all Facility A Lenders willing to make such purchase)
of all (but not less than all) of any such Rejecting

 

98

 

Facility B Lender’s outstanding Term Loan B and
related Obligations owing to it hereunder in the manner set forth in Section 8.7(b)
and (ii) if no Facility A Lender elects to exercise the purchase option
described in the immediately preceding clause (i), then the Loan Party
Representative and/or the Administrative Agent shall have the right to
designate an alternative Lender (which shall meet the requirements of an
Eligible Assignee) acceptable to the Administrative Agent and the Issuing Bank
(such acceptance not to be unreasonably withheld or delayed) and, so long as no
Event of Default has occurred and is then continuing, the Loan Party
Representative, to serve as a Replacement Lender to purchase all (but not less
than all), for cash at the closing of such purchase, of the Loans and all such
related Obligations of such Rejecting Facility B Lender in the manner set forth
in Section 8.7(b): it being agreed in either of the cases of
clauses (i) and (ii) above, that no prepayment fee under Section 6.2.1(b)
shall be due or payable in connection with any such purchase of any Facility B
Lender’s Facility B Obligations as set forth above.

 

15.2                           Confirmations.  The Loan Party Representative and each holder
of a Note agree from time to time, upon written request received by it from the
other, to confirm to the other in writing (with a copy of each such
confirmation to the Administrative Agent) the aggregate unpaid principal amount
of the Loans then outstanding under such Note.

 

15.3                           Notices.  Except as otherwise provided in Sections
2.2.2 and 2.2.3, all notices hereunder shall be in writing
(including facsimile transmission) and shall be sent to the applicable party at
its address shown on Annex B or at such other address as such party may,
by written notice received by the other parties, have designated as its address
for such purpose.  Notices sent by
facsimile transmission shall be deemed to have been given when sent; notices
sent by mail shall be deemed to have been given three Business Days after the
date when sent by registered or certified mail, postage prepaid; and notices
sent by hand delivery or overnight courier service shall be deemed to have been
given when received.  For purposes of Sections 2.2.2
and 2.2.3, the Administrative Agent shall be entitled to rely on
telephonic instructions from any person that the Administrative Agent in good
faith believes is an authorized officer or employee of the Loan Party Representative,
and the Loan Party Representative shall hold the Administrative Agent and each
other Lender harmless from any loss, cost or expense resulting from any such
reliance.  The Administrative Agent
agrees to use commercially reasonable efforts give the Loan Party
Representative prompt notice of any amendment or modification to the Earnout
Subordination Agreement, the Intercreditor Agreement or the Canadian
Intercreditor Agreement; provided that any failure to do so will not result in
any liability of the Administrative Agent or any Lender to any Loan Party, or
relieve any Loan Party of any of its obligations hereunder to any such Person.

 

15.4                           Computations.  Where the character or amount of any asset or
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall, to the
extent applicable and except as otherwise specified in this Agreement, be made in
accordance with GAAP, consistently applied; provided that if the Loan
Party Representative notifies the Administrative Agent that the Loan Parties
wish to amend any covenant in Section 11.13 (or any related
definition) to eliminate or to take into account the effect of any change in
GAAP on the operation of such covenant (or if the Administrative Agent

 

99

 

notifies the Loan Party Representative that the
Required Lenders wish to amend Section 11.13 (or any related
definition) for such purpose), then the Loan Parties’ compliance with such
covenant shall be determined on the basis of GAAP in effect immediately before
the relevant change in GAAP became effective, until either such notice is
withdrawn or such covenant (or related definition) is amended in a manner
satisfactory to the Loan Parties and the Required Lenders.

 

15.5                           Costs,
Expenses and Taxes.  Without
duplication of any other provision of this Agreement, the Borrowers each hereby
jointly and severally agrees to pay on demand all reasonable out-of-pocket
costs and expenses of the Administrative Agent (including Attorney Costs, all
field examination and appraisal costs and any Taxes in connection with the
preparation, execution, syndication, delivery and administration (including
perfection and protection of any Collateral and the costs of Intralinks (or
other similar service), if applicable) of this Agreement, the other Loan
Documents (including any amendment, supplement or waiver to any Loan Document),
whether or not the transactions contemplated hereby or thereby shall be
consummated, and all reasonable out-of-pocket costs and expenses (including
Attorney Costs (including the fees and disbursements) of not more than one
counsel for the Administrative Agent and the Facility A Lenders), and one
counsel for the Facility B Lenders, together in each case, with any local
counsel reasonably required to realize or exercise their rights in and upon
Collateral in various locations, all field examination and appraisal costs and
any Taxes incurred by the Administrative Agent and each Lender after an Event
of Default in connection with the collection of the Obligations or the
enforcement of this Agreement, the other Loan Documents or any such other
documents or during any workout, restructuring or negotiations in respect
thereof.  In addition, each of the Loan
Parties hereby jointly and severally agrees to pay, and to save the
Administrative Agent and the Lenders harmless from all liability for, any fees
of the Loan Parties’ auditors in connection with any reasonable exercise by the
Administrative Agent and the Lenders of their rights pursuant to Section 10.2.  All Obligations provided for in this Section 15.5
shall survive repayment of the Loans, cancellation of the Notes, expiration or
termination of the Letters of Credit and termination of this Agreement.

 

15.6                           Assignments;
Participations.

 

15.6.1                Assignments

 

(a)                                  Any
Lender may at any time assign to one or more Eligible Assignees all or any
portion of such Lender’s Loans and Commitments, with the prior written consent
of the Administrative Agent, the Issuing Bank (for an assignment of the
Revolving Loans and the Revolving Commitment) and, so long as no Event of
Default exists, the Loan Party Representative (which consents shall not be
unreasonably withheld or delayed and shall not be required for an assignment by
a Lender to a Lender or an Affiliate of a Lender).  Except as the Administrative Agent may
otherwise agree in connection with the completion of a successful syndication,
any such assignment shall be in a minimum aggregate amount equal to $5,000,000
(or $1,000,000, in the case of assignments of Term Loan B) or, if less, the
remaining Commitment and Loans held by the assigning Lender.  The Loan Parties and the Loan Party
Representative shall be entitled to continue to deal solely and directly with
such Lender in connection with the interests so assigned to an Eligible
Assignee until the Administrative Agent

 

100

 

shall have received and accepted an effective
assignment agreement in substantially the form of Exhibit D hereto (an “Assignment
Agreement”) executed, delivered and fully completed by the applicable
parties thereto and a processing fee of $3500. 
No assignment may be made to any Person if at the time of such
assignment the Loan Parties would be obligated to pay any greater amount under Section 7.6
or 8 to the Eligible Assignee than the Loan Parties are then obligated
to pay to the assigning Lender under such Sections (and if any assignment is
made in violation of the foregoing, the Loan Parties will not be required to
pay such greater amounts).  In addition,
no Eligible Assignee shall be entitled to the benefits of Section 7.6
unless such Eligible Assignee has complied and will comply with the
requirements of Section 7.6 as though it were a Lender.  In connection with any such assignment, the
assignee shall acknowledge and agree to be bound by the terms of the
Intercreditor Agreement as if originally a party thereto. Any attempted
assignment not made in accordance with this Section 15.6.1 shall be
treated as the sale of a participation under Section 15.6.2.  The Loan Parties shall be deemed to have
granted its consent to any assignment requiring its consent hereunder unless
the Loan Parties have expressly objected to such assignment within five
Business Days after notice thereof.  Upon
becoming party to this Agreement, each Lender shall be deemed to have become a
party to and bound by the Intercreditor Agreement to the same extent as if such
Person were an original signatory thereto (in such capacity as such Person is
becoming a party hereto).

 

(b)                                 From
and after the date on which the conditions described above have been met, (i)
such Eligible Assignee shall be deemed automatically to have become a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to such Eligible Assignee pursuant to such Assignment Agreement, shall
have the rights and obligations of a Lender hereunder and (ii) the assigning
Lender, to the extent that rights and obligations hereunder have been assigned
by it pursuant to such Assignment Agreement, shall be released from its rights
(other than its indemnification rights) and obligations hereunder.  Upon the request of the Eligible Assignee
(and, as applicable, the assigning Lender) pursuant to an effective Assignment
Agreement, the Borrowers shall execute and deliver to the Administrative Agent
for delivery to the Assignee (and, as applicable, the assigning Lender) Note(s)
in the applicable principal amounts of the Assignee’s Pro Rata Share of the
Revolving Commitment, Term Loan A Commitment or Term Loan B
Commitment, as applicable (and, as applicable, Notes in the principal amount of
the Pro Rata Share of the Revolving Commitment, Term Loan A Commitment or
Term Loan B Commitment, as applicable, retained by the assigning
Lender).  Each such Note shall be dated
the effective date of such assignment. 
Upon receipt by the assigning Lender of such Note(s), the assigning Lender
shall return to the Loan Party Representative, on behalf of the Borrowers, any
prior Note(s) held by it.

 

(c)                                  Any
Lender 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
Lender, including any pledge or assignment to secure obligations to a Federal
Reserve Bank, and this Section 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 Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.

 

15.6.2                Participations.  Any Lender may at any time sell to one or
more Persons participating interests in its Loans, Commitments or other
interests hereunder (any such Person, a

 

101

 

“Participant”).  In the
event of a sale by a Lender of a participating interest to a Participant,
(a) such Lender’s obligations hereunder shall remain unchanged for all
purposes, (b) the Loan Parties, the Loan Party Representative and the
Administrative Agent shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations hereunder and
(c) all amounts payable by the Loan Parties shall be determined as if such
Lender had not sold such participation and shall be paid directly to such
Lender.  No Participant shall have any
direct or indirect voting rights hereunder except with respect to any event
described in Section 15.1 expressly requiring the unanimous vote of
all Lenders or, as applicable, all affected Lenders.  Each Lender agrees to incorporate the
requirements of the preceding sentence into each participation agreement which
such Lender enters into with any Participant. 
The Loan Parties each hereby agrees that if amounts outstanding under
this Agreement are due and payable (as a result of acceleration or otherwise),
each Participant, subject to the Intercreditor Agreement, shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement and with respect to any Letter of Credit to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under this Agreement; provided that such right of set-off
shall be further subject to the obligation of each Participant to share with
the Lenders, and the Lenders agree to share with each Participant, as provided
in Section 7.5.  The Loan
Parties also each hereby agrees that each Participant shall be entitled to the
benefits (and subject to the requirements) of Section 7.6 or 8
as if it were a Lender (provided that on the date of the participation
no Participant shall be entitled to any greater compensation pursuant to Section 7.6
or 8 than would have been paid to the participating Lender on such date
if no participation had been sold and provided that such Participant shall not
be entitled to the benefits of Section 7.6 unless such Participant
has complied and will comply with Section 7.6(d) as if it were
Lender).

 

15.7                           Register.  The Administrative Agent shall maintain a
copy of each Assignment Agreement delivered and accepted by it and register
(the “Register”) for the recordation of names and addresses of the
Lenders and the Commitment of each Lender from time to time and whether such
Lender is the original Lender or the Assignee. 
No assignment shall be effective unless and until the Assignment
Agreement is accepted and registered in the Register. All records of transfer
of a Lender’s interest in the Register shall be conclusive, absent manifest
error, as to the ownership of the interests in the Loans. The Administrative
Agent shall not incur any liability of any kind with respect to any Lender with
respect to the maintenance of the Register.

 

15.8                           GOVERNING LAW.  THIS AGREEMENT AND EACH NOTE SHALL BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES.

 

15.9                           Confidentiality.  As required by federal law and the
Administrative Agent’s policies and practices, the Administrative Agent may
need to obtain, verify, and record certain customer identification information
and documentation in connection with opening or maintaining accounts, or
establishing or continuing to provide services. 
The Administrative Agent and each Lender agree to use commercially
reasonable efforts (equivalent to the efforts the Administrative Agent or such
Lender applies to maintain the confidentiality of its own

 

102

 

confidential information) to maintain as confidential
all non-public information provided to them by any Loan Party (and which at the
time is not, and does not thereafter become, publicly available), except that
the Administrative Agent and each Lender may disclose such information (a) to
Persons employed or engaged by the Administrative Agent or such Lender in
evaluating, approving, structuring or administering the Loans and the
Commitments; (b) to any assignee or participant or potential assignee or
participant that has agreed in writing to comply with
the covenant contained in this Section 15.9 (and any such assignee
or participant or potential assignee or participant may disclose such
information to Persons employed or engaged by them as described in clause
(a) above); (c) as required or requested by any federal or state regulatory
authority or examiner, or any insurance industry association, or as reasonably
believed by the Administrative Agent or such Lender to be compelled by any
court decree, subpoena or legal or administrative order or process; (d) as, on
the advice of the Administrative Agent’s or such Lender’s counsel, is required
by law; (e) in connection with the exercise of any right or remedy under the
Loan Documents or in connection with any litigation to which the Administrative
Agent or such Lender is a party; (f) to any nationally recognized rating agency
that requires access to information about a Lender’s investment portfolio in
connection with ratings issued with respect to such Lender; (g) to any
Affiliate of the Administrative Agent, the Issuing Bank or any other Lender who
may provide Bank Products to the Loan Parties; or (h) that ceases to be
confidential through no fault of the Administrative Agent or any Lender.  Notwithstanding the foregoing, the Loan
Parties consent to the publication by the Administrative Agent or any Lender
(including in its capacity as “Syndications Agent” or “Documentation Agent”) of
a tombstone or similar advertising material relating to the financing
transactions contemplated by this Agreement; provided that such tombstone or
announcement has been approved by the Loan Party Representative, which approval
shall not be unreasonably withheld or delayed, and the Administrative Agent,
the Syndications Agent and the Documentation Agent each reserves the right to
provide to industry trade organizations information necessary and customary for
inclusion in league table measurements.

 

15.10                     Severability.  Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.  All obligations of the Loan Parties and
rights of the Administrative Agent and the Lenders expressed herein or in any
other Loan Document shall be in addition to and not in limitation of those
provided by applicable law.

 

15.11                     Nature
of Remedies.  All Obligations of the
Loan Parties and rights of the Administrative Agent and the Lenders expressed
herein or in any other Loan Document shall be in addition to and not in
limitation of those provided by applicable law. 
No failure to exercise and no delay in exercising, on the part of the
Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power
or privilege.

 

15.12                     Entire
Agreement.  This Agreement, together
with the other Loan Documents, embodies the entire agreement and understanding
among the parties hereto and supersedes all

 

103

 

prior or contemporaneous agreements and understandings
of such Persons, verbal or written, relating to the subject matter hereof and
thereof (except as relates to the fees described in Section 5.3)
and any prior arrangements made with respect to the payment by the Loan Parties
of (or any indemnification for) any fees, costs or expenses payable to or
incurred (or to be incurred) by or on behalf of the Administrative Agent, the
Issuing Bank or the Lenders.

 

15.13                     Counterparts.  This Agreement may be executed in any number
of counterparts and by the different parties hereto on separate counterparts
and each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement.  Receipt of an executed signature page to this
Agreement by facsimile or other electronic transmission shall constitute
effective delivery thereof.  Electronic
records of executed Loan Documents maintained by the Administrative Agent, the
Lenders and the Issuing Bank shall deemed to be originals.

 

15.14                     Successors
and Assigns.  This Agreement shall be
binding upon the Loan Parties, the Lenders, the Issuing Bank and the
Administrative Agent and their respective successors and assigns, and shall
inure to the benefit of the Loan Parties, the Lenders, the Issuing Bank and the
Administrative Agent and the successors and assigns of the Lenders, the Issuing
Bank and the Administrative Agent.  No
other Person shall be a direct or indirect legal beneficiary of, or have any
direct or indirect cause of action or claim in connection with, this Agreement
or any of the other Loan Documents.  No
Loan Party may assign or transfer any of its rights or Obligations under this
Agreement without the prior written consent of the Administrative Agent, the
Issuing Bank and each Lender.

 

15.15                     Captions.  Section captions used in this Agreement
are for convenience only and shall not affect the construction of this
Agreement.

 

15.16                     Patriot
Act Notice.  As required by federal
law and LaSalle’s policies and practices, LaSalle may need to collect certain
customer identification information and documentation in connection with
opening or maintaining accounts or establishing or continuing to provide
services.

 

15.17                     Indemnification
by the Loan Parties.  In
consideration of the execution and delivery of this Agreement by the
Administrative Agent, the Issuing Bank and the Lenders and the agreement to
extend the Commitments provided hereunder and other financial accommodations, each
Loan Party hereby agrees to jointly and severally indemnify and hold the
Administrative Agent, each Lender, the Issuing Bank and each of the officers,
directors, employees, affiliates and agents of the Administrative Agent, the
Issuing Bank and each Lender (each a “Lender Party”) free and harmless
from and against any and all actions, causes of action, suits, losses,
liabilities, damages and expenses, including Attorney Costs (collectively, the “Indemnified
Liabilities”), incurred by the Lender Parties or any of them as a result
of, or arising out of, or relating to (a) any tender offer, merger, purchase of
capital securities, purchase of assets or other similar transaction financed or
proposed to be financed in whole or in part, directly or indirectly, with the
proceeds of any of the Loans, (b) the past, present or future presence, use,
handling, release or threat of release, emission, discharge, transportation,
storage, treatment or disposal of any Hazardous Substance at or affecting any
property owned or leased

 

104

 

by any Loan Party, (c) any violation of any
Environmental Laws with respect to conditions at any property owned or leased
by any Loan Party or the operations conducted thereon, (d) the investigation,
cleanup or remediation of offsite locations at which any Loan Party or their
respective predecessors are alleged to have directly or indirectly disposed of
Hazardous Substances or (e) the execution, delivery, performance or enforcement
of this Agreement or any other Loan Document by any of the Lender Parties,
except for any such Indemnified Liabilities arising on account of any of the
Lender Parties’ gross negligence or willful misconduct.  If and to the extent that the foregoing
undertaking may be unenforceable for any reason, each Loan Party hereby agrees
to make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.  All obligations provided for in this Section 15.17
shall survive repayment of the Loans, cancellation of the Notes, expiration or
termination of the Letters of Credit, any foreclosure under, or any
modification, release or discharge of, any or all of the Collateral Documents
and termination of this Agreement.

 

15.18                     Nonliability
of Lenders.  The relationship between
the Loan Parties on the one hand and the Lenders, the Issuing Bank and the
Administrative Agent on the other hand shall be solely that of borrower and
lender, respectively.  Neither the Administrative
Agent, the Issuing Bank nor any Lender has any fiduciary relationship with or
duty to any Loan Party arising out of or in connection with this Agreement or
any of the other Loan Documents, and the relationship between the Loan Parties
, on the one hand, and the Administrative Agent, the Issuing Bank and the
Lenders, on the other hand, in connection herewith or therewith is solely that
of debtor and creditor, respectively. 
Neither the Administrative Agent, the Issuing Bank nor any Lender
undertakes any responsibility to any Loan Party to review or inform any Loan
Party of any matter in connection with any phase of any Loan Party’s business
or operations.  Each Loan Party agrees,
on behalf of itself and each other Loan Party, that neither the Administrative
Agent, the Issuing Bank nor any Lender shall have liability to any Loan Party
(whether sounding in tort, contract or otherwise) for losses suffered by any
Loan Party in connection with, arising out of, or in any way related to the
transactions contemplated and the relationship established by the Loan
Documents, or any act, omission or event occurring in connection therewith,
unless resulting from the gross negligence or willful misconduct of the party
from which recovery is sought.  NO LENDER PARTY SHALL BE LIABLE FOR ANY DAMAGES
ARISING FROM THE USE BY OTHERS OF ANY INFORMATION OR OTHER MATERIALS OBTAINED
THROUGH INTRALINKS OR OTHER SIMILAR INFORMATION TRANSMISSION SYSTEMS IN
CONNECTION WITH THIS AGREEMENT, NOR SHALL ANY LENDER PARTY HAVE ANY LIABILITY
WITH RESPECT TO, AND EACH LOAN PARTY ON BEHALF OF ITSELF AND EACH OTHER LOAN
PARTY, HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE FOR ANY SPECIAL, INDIRECT
OR CONSEQUENTIAL DAMAGES RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
OR ARISING OUT OF ITS ACTIVITIES IN CONNECTION HEREWITH OR THEREWITH (WHETHER
BEFORE OR AFTER THE CLOSING DATE). 
Each Loan Party acknowledges that it has been advised by counsel in the
negotiation, execution and delivery of this Agreement and the other Loan
Documents to which it is a party.  No
joint venture is created hereby or by the other Loan Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Lenders or
among the Loan Parties and the Lenders.

 

105

 

15.19                     FORUM SELECTION AND CONSENT TO JURISDICTION.  ANY LITIGATION BASED HEREON, OR ARISING OUT
OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW
YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK; PROVIDED THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE
TO PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION.  EACH
LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE.  EACH LOAN PARTY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK.  EACH LOAN PARTY HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  With respect to any action by the
Administrative Agent to enforce the rights and remedies of the Lender Parties
hereunder or under the other Loan Documents, each Lender Party hereby consents
to the jurisdiction of the court in which such action is maintained.

 

15.20                     WAIVER OF JURY TRIAL.  EACH OF THE LOAN PARTIES, THE ADMINISTRATIVE
AGENT, THE ISSUING BANK AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT AND ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP
EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

15.21                     Other
Waivers.  The Administrative Agent’s,
the Issuing Bank’s and/or the Lenders’ failure, at any time or times hereafter,
to require strict performance by the Loan Parties of any provision of this
Agreement or any of the other Loan Documents shall not waive, affect or
diminish any right of the Administrative Agent, the Issuing Bank or any Lender
thereafter to demand strict compliance and performance therewith.  Any suspension or waiver by the
Administrative Agent, the Issuing Bank or any Lender of an Event of Default
under this Agreement or any default under any of the other Loan Documents shall
not suspend, waive or affect any other Event of Default under this Agreement or
any other default under any of the other Loan Documents, whether the same is
prior or subsequent thereto and whether of the same or of a different kind or
character.  No delay on the part of the
Administrative Agent, the Issuing Bank or any Lender in the exercise of any
right or remedy under this Agreement or any other

 

106

 

Loan Documents shall preclude other or further
exercise thereof or the exercise of any right or remedy.  None of the undertakings, agreements,
warranties, covenants and representations of any Loan Party contained in this
Agreement or any of the other Loan Documents and no Event of Default under this
Agreement or default under any of the other Loan Documents shall be deemed to
have been suspended or waived by the Administrative Agent, the Issuing Bank
and/or the Lenders unless such suspension or waiver is in writing, signed by a
duly authorized officer of the Administrative Agent, the Required Lenders or
all of the Lenders and/or the Issuing Bank, as required herein, and directed to
such Loan Party specifying such suspension or waiver.

 

15.22                     Joint
and Several Liability.

 

15.22.1          Nature
of Obligations.  Notwithstanding
anything to the contrary contained herein, all Obligations of each Loan Party
hereunder and under the other Loan Documents shall be joint and several
obligations of the Loan Parties.

 

15.22.2          No
Fraudulent Conveyances. 
Notwithstanding any provisions of this Agreement to the contrary, it is
intended that the joint and several nature of the Obligations of the Loan
Parties and the liens and security interests granted by the Loan Parties to
secure the Obligations, not constitute a “Fraudulent Conveyance” (as defined
below).  Consequently, the Administrative
Agent, the Lenders and the Loan Parties agree that if the Obligations of a Loan
Party, or any liens or security interests granted by such Loan Party securing
the Obligations would, but for the application of this sentence, constitute a
Fraudulent Conveyance, the Obligations of such Loan Party and the liens and
security interests securing such Obligations shall be valid and enforceable
only to the maximum extent that would not cause such Obligations or such lien
or security interest to constitute a Fraudulent Conveyance, and the Obligations
of such Loan Party and this Agreement shall automatically be deemed to have
been amended accordingly.  For purposes
hereof, “Fraudulent Conveyance” means a fraudulent conveyance under the
Bankruptcy Code or a fraudulent conveyance or fraudulent transfer under the
applicable provisions of any fraudulent conveyance or fraudulent transfer law
or similar law of any state, nation or other governmental unit, as in effect
from time to time.

 

15.23                     Revival
and Reinstatement of Obligations.  If
the incurrence or payment of the Obligations by any Loan Party or the transfer
to the Administrative Agent, the Issuing Bank or any Lender of any property
should for any reason subsequently be declared to be void or voidable under any
state or federal law relating to creditors’ rights, including provisions of the
Bankruptcy Code relating to Fraudulent Conveyances, preferences, or other
voidable or recoverable payments of money or transfers of property
(collectively, a “Voidable Transfer”), and if the Administrative Agent,
the Issuing Bank or any Lender is required to repay or restore, in whole or in
part, any such Voidable Transfer, or elects to do so upon the reasonable advice
of its counsel, then, as to any such Voidable Transfer, or the amount thereof that
the Administrative Agent, the Issuing Bank or any Lender is required or elects
to repay or restore, and as to all reasonable costs, expenses, and Attorneys
Costs of the Administrative Agent, the Issuing Bank and/or the Lenders, the
Obligations shall automatically shall be revived, reinstated, and restored and
shall exist as though such Voidable Transfer had never been made, and if the
Facility A Termination Date or the Facility B. Termination Date, as applicable,
had previously occurred, it shall be rescinded and this Agreement, the other
Loan Documents and all Liens granted

 

107

 

hereunder and thereunder shall be immediately
reinstated until full and final payment of the Obligations, in cash, shall have
been received by the Administrative Agent.

 

15.24                     Intercreditor
Agreement.  This Agreement is subject
to the provisions of the Intercreditor Agreement.

 

108

 

The parties hereto have
caused this Agreement to be duly executed and delivered by their duly
authorized officers as of the date first set forth above.

 

	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  RUSS
  BERRIE AND COMPANY, INC., a New

  Jersey corporation, as a Borrower and as the Loan Party Representative

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name:

  	
  John D. Wille

  
	
   

  	
  Title:

  	
  Vice President
  and

  
	
   

  	
   

  	
  Chief Financial
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KIDS
  LINE, LLC, a Delaware limited liability

  company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name:

  	
  John D. Wille

  
	
   

  	
  Title:

  	
  Vice President,
  Assistant Secretary,

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SASSY,
  INC., an Illinois corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name:

  	
  John D. Wille

  
	
   

  	
  Title:

  	
  Vice President,
  Assistant Secretary,

  
	
   

  	
   

  	
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RUSS
  BERRIE & CO. (WEST), INC., a 

  California corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name:

  	
  John D. Wille

  
	
   

  	
  Title:

  	
  Assistant
  Secretary, Treasurer

  
					

 

Signature Page to Credit
Agreement

 

 

	
   

  	
  RUSS
  BERRIE AND COMPANY

  PROPERTIES, INC., a New Jersey corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name:

  	
  John D. Wille

  
	
   

  	
  Title:

  	
  Assistant
  Secretary, Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RUSSPLUS,
  INC., a New Jersey corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name:

  	
  John D. Wille

  
	
   

  	
  Title:

  	
  Assistant
  Secretary, Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RUSS
  BERRIE AND COMPANY

  INVESTMENTS, INC., a New Jersey corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name:

  	
  John D. Wille

  
	
   

  	
  Title:

  	
  Assistant
  Secretary, Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BOA
  DONE, INC., a West Virginia corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name:

  	
  John D. Wille

  
	
   

  	
  Title:

  	
  Vice President,
  Assistant Secretary,

  Treasurer

  
					

 

 

	
   

  	
  LASALLE
  BUSINESS CREDIT, as

  Administrative Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C. John
  Mosofi

  	
   

  
	
   

  	
  Name:

  	
  C. John Mostofi

  
	
   

  	
  Title:

  	
  Senior Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LASALLE
  BANK NATIONAL ASSOCIATION,

  as Issuing Bank

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C. John
  Mostofi

  	
   

  
	
   

  	
  Name:

  	
  C. John Mostofi

  
	
   

  	
  Title:

  	
  Senior Vice PresidentExhibit No. 4.6

 

EXECUTION COPY

 

 

 

GUARANTY AND
COLLATERAL AGREEMENT

 

dated as of June 28,
2005

 

among

 

RUSS BERRIE AND
COMPANY, INC.,

 

and

 

THE OTHER PARTIES HERETO

as Grantors,

and

 

LASALLE BUSINESS CREDIT, LLC,

as the
Administrative Agent

 

 

 

 

 

GUARANTY AND COLLATERAL AGREEMENT

 

This Guaranty and Collateral Agreement dated as of June 28, 2005
(this “Agreement”) is entered into among RUSS BERRIE
AND COMPANY, INC. (the “Company” and, together with certain
of its subsidiaries that are parties hereto in accordance with the Credit
Agreement (as hereinafter defined), the “Borrowers”, together with any other
person that becomes a party hereto as provided herein being, collectively, the “Grantors”),
in favor of LASALLE BUSINESS CREDIT, LLC, as
the “Administrative Agent” for the “Issuing Bank,” and the Facility A Lenders
(as defined in the Credit Agreement referred to below), the Facility B Lenders
(as defined in the Credit Agreement).

 

The Lenders (as defined in the Credit Agreement) and the Issuing Bank
have severally agreed to extend credit to the Borrowers pursuant to the Credit
Agreement.  The Borrowers are affiliated
with each other Grantor.  The Borrowers
and the other Grantors are engaged in interrelated businesses, and each Grantor
will derive substantial direct and indirect benefit from extensions of credit
under the Credit Agreement.  It is a
condition precedent to each Lender’s and Issuing Bank’s obligation to extend
credit under the Credit Agreement that the Grantors shall have executed and
delivered this Agreement to the Administrative Agent for the benefit of all the
Lenders and the Issuing Bank.

 

In consideration of the premises and to induce the Administrative
Agent, the Lenders and the Issuing Bank to enter into the Credit Agreement and
to induce the Lenders and the Issuing Bank to extend credit thereunder, each
Grantor hereby agrees with the Administrative Agent, for the benefit of the
Lenders and the Issuing Bank, as follows:

 

SECTION 1  DEFINITIONS.

 

1.1                                 Unless
otherwise defined herein, terms defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement, and the
following terms are used herein as defined in the UCC: Accounts, Account
Debtor, Certificated Security, Commercial Tort Claims, Deposit Accounts,
Documents, Electronic Chattel Paper, Equipment, Goods, Instruments, Inventory,
Leases, Letter-of-Credit Rights, Money, Payment Intangibles, Supporting
Obligations, Tangible Chattel Paper. In addition, for the purposes of this
Agreement, the term “Lender” and “Lender Party” shall include the Issuing Bank.

 

1.2                                 When
used herein the following terms shall have the following meanings:

 

Assigned Agreements
means (i) the Related Agreements, together with all security agreements, and
all liens, security interest and other encumbrances granted thereunder, and
(ii) any agreement executed from time to time in favor of the Borrowers
(or any of them) by their customers securing the purchase price of goods
purchased by such customers from the Borrowers (or any of them), and (iii) each material document, instrument and
agreement to be executed in connection with each Permitted Acquisition.

 

Agreement has the meaning set forth in the
preamble hereto.

 

Borrower Obligations means all Obligations of the Borrowers.

 

Signature Page to Guaranty and Collateral Agreement

 

 

Chattel Paper means all “chattel paper” as such term
is defined in Section 9-102(a)(11) of the UCC
and, in any event, including with respect to any Grantor, all Electronic
Chattel Paper and Tangible Chattel Paper.

 

Collateral means (a)
all of the personal property now owned or at any time hereafter acquired by any
Grantor or in which any Grantor now has or at any time in the future may
acquire any right, title or interest, including all of each Grantor’s Accounts,
Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Equipment,
Fixtures, General Intangibles, Goods, Instruments, Intellectual Property,
Inventory, Investment Property, Leases, Letter-of-Credit Rights, Money,
Supporting Obligations, and Identified Claims, (b) all of the real property
mortgaged by any Grantor to the Administrative Agent, (c) all books and records
pertaining to any of the foregoing and to each Grantor’s business, (d) any
other property of any Grantor now or hereafter in the possession, custody or
control of the Administrative Agent, the Issuing Bank, or any Lender or any
participant with any Lender in the Loans, for any purpose (whether for
safekeeping, deposit, collection, custody, pledge, transmission or otherwise),
(e) all additions and accessions to, substitutions for, and replacements,
products and Proceeds of any of the foregoing, including without limitation,
proceeds of all insurance policies insuring the foregoing property, and (f) all
collateral security and guaranties given by any Person with respect to any of
the foregoing.  Where the context
requires, terms relating to the Collateral or any part thereof, when used in
relation to a Grantor, shall refer to such Grantor’s Collateral or the relevant
part thereof. Notwithstanding the foregoing, in no event shall any equity
interest of any Second-Tier Foreign Subsidiary or more than 65% of the total
outstanding equity interests of any First-Tier Foreign Subsidiary of any
Grantor be deemed at any time to be “Collateral” hereunder.  Anything contained in this Agreement to the
contrary notwithstanding, the term “Collateral” shall not include any rights or
interests in any real property lease or any contract, permit, license, charter
or other agreement covering personal property that are now or hereafter held by
any Grantor in the event that as a result of an assignment thereof or grant of
a security interest therein, such Grantor’s rights in or with respect to such real
property lease, contract, permit, license, charter, or other agreement would be
forfeited or such Grantor would be deemed to have breached or defaulted under
such real property lease, contract, permit, license, charter or other agreement
pursuant to restrictions contained in such real property lease, contract,
permit, license, charter, or other agreement (but only to the extent such
prohibition is enforceable at law) (such real estate leases, contracts,
permits, licenses, charters and other agreements being the “Restricted
Agreements”); provided that the security interest granted herein and
the term “Collateral” shall include the right to receive payments and other
Proceeds with respect to such Restricted Agreements (except for the Restricted
Agreements set forth on Schedule 1.1A attached hereto as the same
may be updated monthly to reflect any additions or changes thereto) and the
Goods produced under such Restricted Agreements (except for the Restricted
Agreements set forth on Schedule 1.1B attached hereto as the same
may be updated monthly to reflect any additions or changes thereto); provided
further that the applicable Grantor shall, after the Agent’s request, have
used its reasonable efforts to provide notice to Administrative Agent of such
restrictions contained in any Restricted Agreement to an assignment thereof or
a grant of a security interest therein.  In
addition, the term “Collateral” shall not include Equipment which is subject to
a Permitted Lien described in Section 11.2(d) of the Credit Agreement,
which pursuant to the terms of any lease or financing agreement with respect
thereto prohibits the granting of a security interest in such Equipment (so
long as such restriction is limited to the particular Equipment financed or
leased).

 

2

 

Contract Rights means all of the Grantors’ rights and
remedies with respect to the Assigned Agreements.

 

Copyrights means all copyrights arising under the
laws of the United States, any other country or any political subdivision
thereof, whether registered or unregistered and whether published or
unpublished, including those listed on Schedule 5 all registrations
and recordings thereof, and all applications in connection therewith, including
all registrations, recordings and applications in the United States Copyright
Office, and the right to obtain all renewals of any of the foregoing.

 

Copyright Licenses means all written agreements naming any
Grantor as licensor or licensee, including those listed on Schedule 5,
granting any right under any Copyright, including the grant of rights to
manufacture, distribute, exploit and sell materials derived from any Copyright.

 

Credit Agreement
means the Credit Agreement of even date herewith among the Borrowers, the
Lenders, the Issuing Bank, the Administrative Agent, the financial institutions
that are or may from time to time become parties hereto as Facility A Lenders
(together with their respective successors and assigns, each being a “Facility
A Lender” and collectively, the “Facility A Lenders”), and the
financial institutions that are or may from time to time become parties hereto
as Facility B Lenders (together with their respective successors and assigns,
each being a “Facility B Lender” and collectively, the “Facility B
Lenders”), as amended, supplemented, restated or otherwise modified from
time to time.

 

Fixtures means all of the following, whether now owned or hereafter
acquired by a Grantor: plant fixtures; business fixtures and other fixtures,
wherever located; and all additions and accessories thereto and replacements
therefor.

 

General Intangibles means all “general intangibles” as such
term is defined in Section 9-102(a)(42) of the UCC and, in any event,
including with respect to any Grantor, all Payment Intangibles, all contracts
and Contract Rights (including all Assigned Agreements and Seller
Undertakings), agreements, instruments and indentures in any form, and portions
thereof, to which such Grantor is a party or under which such Grantor has any
right, title or interest or to which such Grantor or any property of such
Grantor is subject, as the same from time to time may be amended, supplemented
or otherwise modified, including, without limitation, (a) all rights of such
Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (b) all rights of such Grantor to damages arising
thereunder and (c) all rights of such Grantor to perform and to exercise all
remedies thereunder; provided, that the foregoing limitation shall not
affect, limit, restrict or impair the grant by such Grantor of a security
interest pursuant to this Agreement in any Receivable or any money or other
amounts due or to become due under any such Payment Intangible, contract,
agreement, instrument or indenture.

 

Guarantor Obligations means, collectively, with respect to
each Guarantor, all Obligations of such Guarantor.

 

Guarantors means the collective reference to each Grantor other than
the Borrowers, if any.

 

3

 

Identified Claims means the Commercial Tort Claims described
on Schedule 7 as such schedule shall be supplemented from time
to time.

 

Intellectual Property means the collective reference to all
rights, priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including the Copyrights, the Copyright Licenses, the Patents, the Patent
Licenses, the Trademarks and the Trademark Licenses, and all rights to sue at
law or in equity for any infringement or other impairment thereof, including
the right to receive all proceeds and damages therefrom.

 

Intercompany Note means any promissory note evidencing
loans made by any Grantor to any other Grantor.

 

Investment Property means the collective reference to (a)
all “investment property” as such term is defined in Section 9-102(a)(49)
of the UCC (other than the equity interest of any Foreign Subsidiary excluded
from the definition of Pledged Equity), (b) all “financial assets” as such term
is defined in Section 8-102(a)(9) of the UCC, and (c) whether or not
constituting “investment property” as so defined, all Pledged Notes and all
Pledged Equity.

 

Issuers means the collective reference to each issuer of any
Investment Property.

 

Paid in Full means (a) the payment in full in cash
and performance of all Secured Obligations (other than unasserted contingent
and indemnification obligations), (b) the termination of all Commitments and
(c) either (i) the cancellation and return to the Administrative Agent of all
Letters of Credit or (ii) the cash collateralization of all Letters of Credit
in accordance with the Credit Agreement.

 

Patents means (a) all letters patent of the
United States, any other country or any political subdivision thereof, all
reissues and extensions thereof and all goodwill associated therewith,
including any of the foregoing referred to in Schedule 5, (b) all
applications for letters patent of the United States or any other country and
all divisions, continuations and continuations-in-part thereof, including any
of the foregoing referred to in Schedule 5, and (c) all rights to
obtain any reissues or extensions of the foregoing.

 

Patent Licenses means all agreements, whether written or
oral, providing for the grant by or to any Grantor of any right to manufacture,
use or sell any invention covered in whole or in part by a Patent, including
any of the foregoing referred to in Schedule 5.

 

Pledged Equity means the equity interests listed on Schedule 1,
together with any other equity interests, certificates, options or rights of
any nature whatsoever in respect of the equity interests of any Person that may
be issued or granted to, or held by, any Grantor while this Agreement is in
effect; provided that in no event shall more than 65% of the total
outstanding equity interests of any First-Tier Foreign Subsidiary be required
to be directly or indirectly pledged hereunder; provided, further that
in no event shall any of the equity interests of Russ Australia Pty Limited or
of any Second-Tier Foreign Subsidiary be required to be directly or indirectly
pledged hereunder.

 

4

 

Pledged Notes means all promissory notes listed on Schedule 1,
all Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than (a) promissory
notes issued in connection with extensions of trade credit by any Grantor in
the ordinary course of business and (b) any individual promissory note which is
less than $250,000 in principal amount, up to an aggregate of $500,000 for all
such promissory notes excluded under this clause (b)).

 

Proceeds means all “proceeds” as such term is
defined in Section 9-102(a)(64) of the UCC and, in any event, shall
include all dividends or other income from the Investment Property, collections
thereon or distributions or payments with respect thereto.

 

Receivable means any right to payment for goods
sold or leased or for services rendered, whether or not such right is evidenced
by an Instrument or Chattel Paper and whether or not it has been earned by
performance (including any Accounts).

 

Restricted Agreements has the meaning set forth in the
definition of “Collateral.”

 

Secured Obligations means, collectively, the Borrower
Obligations and Guarantor Obligations.

 

Securities Act means the Securities Act of 1933, as
amended.

 

Seller Undertakings means, collectively, all
representations, warranties, covenants and agreements in favor of any Grantor,
and all indemnifications for the benefit of any Grantor relating thereto,
pursuant to the Assigned Agreements.

 

Trademarks means (a) all trademarks, trade names,
corporate names, the Grantors’ names, business names, fictitious business
names, trade styles, service marks, logos and other source or business
identifiers, and all goodwill associated therewith, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
applications in connection therewith, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, or
otherwise, and all common-law rights related thereto, including any of the
foregoing referred to in Schedule 5, and (b) the right to obtain
all renewals thereof.

 

Trademark Licenses means, collectively, each agreement,
whether written or oral, providing for the grant by or to any Grantor of any
right to use any Trademark, including any of the foregoing referred to in Schedule 5.

 

UCC means the Uniform Commercial Code as in effect
on the date hereof and from time to time in the State of New York, provided
that if by reason of mandatory provisions of law, the perfection or the effect
of perfection or non-perfection of the security interests in any Collateral or
the availability of any remedy hereunder is governed by the Uniform Commercial
Code as in effect on or after the date hereof in any other jurisdiction, “UCC”
means the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such perfection or effect of
perfection or non-perfection or availability of such remedy.

 

5

 

SECTION 2  GUARANTY.

 

2.1                                 Guaranty.  (a) Each of the Guarantors hereby, jointly
and severally, unconditionally and irrevocably, as a primary obligor and not
only a surety, guaranties to the Administrative Agent, for the benefit of the
Lenders, the Issuing Bank and their respective successors, indorsees,
transferees and assigns, the prompt and complete payment and performance by the
Borrowers when due (whether at the stated maturity, by acceleration or
otherwise) of the Borrower Obligations.

 

(b)                                 Anything
herein or in any other Loan Document to the contrary notwithstanding, the
maximum liability of each Guarantor hereunder and under the other Loan
Documents shall in no event exceed the amount which can be guarantied by such
Guarantor under applicable federal and state laws relating to the insolvency of
debtors (after giving effect to the right of contribution established in Section 2.2).

 

(c)                                  Each
Guarantor agrees that the Secured Obligations may at any time and from time to
time exceed the amount of the liability of such Guarantor hereunder without
impairing the guaranty contained in this Section 2 or affecting the
rights and remedies of the Administrative Agent or any Lender hereunder.

 

(d)                                 The
guaranty contained in this Section 2 shall remain in full force and
effect until all of the Secured Obligations shall have been Paid
in Full.

 

(e)                                  No
payment made by the Borrowers, any of the Guarantors, any other guarantor or
any other Person or received or collected by the Administrative Agent or any
Lender from the Borrowers, any of the Guarantors, any other guarantor or any
other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of
or in payment of the Secured Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of any Guarantor hereunder which shall,
notwithstanding any such payment (other than any payment made by such Guarantor
in respect of the Secured Obligations or any payment received or collected from
such Guarantor in respect of the Secured Obligations), remain liable for the
Secured Obligations up to the maximum liability of such Guarantor hereunder
until the Secured Obligations are Paid in Full.

 

2.2                                 Right
of Contribution.  Each Guarantor
hereby agrees that to the extent that a Guarantor shall have paid more than its
proportionate share of any payment made hereunder, such Guarantor shall be
entitled to seek and receive contribution from and against any other Guarantor
hereunder which has not paid its proportionate share of such payment.  Each Guarantor’s right of contribution shall
be subject to the terms and conditions of Section 2.3.  The provisions of this Section 2.2
shall in no respect limit the obligations and liabilities of any Guarantor to
the Administrative Agent and the Lenders, and each Guarantor shall remain
liable to the Administrative Agent and the Lenders for the full amount
guarantied by such Guarantor hereunder.

 

2.3                                 No
Subrogation.  Notwithstanding any
payment made by any Guarantor hereunder or any set-off or application of funds
of any Guarantor by the Administrative Agent or any Lender, no Guarantor shall
be entitled to be subrogated to any of the rights of the

 

6

 

Administrative Agent or any Lender against the
Borrowers or any other Guarantor or any collateral security or guaranty or
right of offset held by the Administrative Agent or any Lender for the payment
of the Secured Obligations, nor shall any Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrowers or any other Guarantor in
respect of payments made by such Guarantor hereunder, until all of the Secured
Obligations are Paid in Full.  If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when all of the Secured Obligations shall not have been Paid in Full,
such amount shall be held by such Guarantor in trust for the Administrative
Agent and the Lenders, segregated from other funds of such Guarantor, and
shall, forthwith upon receipt by such Guarantor, be turned over to the
Administrative Agent in the exact form received by such Guarantor (duly
indorsed by such Guarantor to the Administrative Agent, if required), to be
applied against the Secured Obligations, whether matured or unmatured, in such
order as the Administrative Agent may determine.

 

2.4                                 Amendments,
etc. with respect to the Secured Obligations.  Each Guarantor shall remain obligated
hereunder notwithstanding that, without 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 Secured Obligations made by the Administrative Agent
or any Lender may be rescinded by the Administrative Agent or such Lender and
any of the Secured Obligations continued, and the Secured Obligations, or the
liability of any other Person upon or for any part thereof, or any collateral
security or guaranty therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended,
modified, accelerated, compromised, waived, surrendered or released by the
Administrative Agent or any Lender, and the Credit Agreement and the other Loan
Documents and any other documents executed and delivered in connection
therewith may be amended, modified, supplemented or terminated, in whole or in
part, as the Administrative Agent (or the Required Lenders or all the Lenders,
as the case may be) and, to the extent required thereunder, the other parties
thereto may deem advisable from time to time. 
Neither the Administrative Agent nor any Lender shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by
it as security for the Secured Obligations or for the guaranty contained in
this Section 2 or any property subject thereto.

 

The Administrative Agent
or any Lender may, from time to time, at its sole discretion and without notice
to any Guarantor (or any of them), take any or all of the following
actions:  (a) retain or obtain a security
interest in any property to secure any of the Secured Obligations or any
obligation hereunder, (b) retain or obtain the primary or secondary obligation
of any obligor or obligors, in addition to the undersigned, with respect to any
of the Secured Obligations, (c) extend or renew any of the Secured Obligations
for one or more periods (whether or not longer than the original period), alter
or exchange any of the Secured Obligations, or release or compromise any
obligation of any of the undersigned hereunder or any obligation of any nature
of any other obligor with respect to any of the Secured Obligations, (d)
release any guaranty or right of offset or its security interest in, or
surrender, release or permit any substitution or exchange for, all or any part
of any property securing any of the Secured Obligations or any obligation
hereunder, or extend or renew for one or more periods (whether or not longer
than the original period) or release, compromise, alter or exchange any
obligations of any nature of any obligor with respect to any such property, and
(e) resort to the undersigned (or any of them) for payment of any of the
Secured Obligations when due, whether or not the

 

7

 

Administrative Agent or such Lender shall have
resorted to any property securing any of the Secured Obligations or any obligation
hereunder or shall have proceeded against any other of the undersigned or any
other obligor primarily or secondarily obligated with respect to any of the
Secured Obligations.

 

2.5                                 Waivers.  Each Guarantor waives any and all notice of
the creation, renewal, extension or accrual of any of the Secured Obligations
and notice of or proof of reliance by the Administrative Agent or any Lender
upon the guaranty contained in this Section 2 or acceptance of the
guaranty contained in this Section 2; the Secured Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guaranty contained in this Section 2, and all dealings between the
Borrowers and any of the Guarantors, on the one hand, and the Administrative
Agent and the Lenders, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon the guaranty
contained in this Section 2. 
Each Guarantor waives (a) diligence, presentment, protest, demand for
payment and notice of default, dishonor or nonpayment and all other notices
whatsoever to or upon the Borrowers or any of the Guarantors with respect to
the Secured Obligations, (b) notice of the existence or creation or non-payment
of all or any of the Secured Obligations and (c) all diligence in collection or
protection of or realization upon any Secured Obligations or any security for
or guaranty of any Secured Obligations.

 

2.6                                 Payments.  Each Guarantor hereby guaranties that
payments by such Guarantor hereunder will be paid to the Administrative Agent
without set-off or counterclaim in Dollars at the office of the Administrative
Agent specified in the Credit Agreement.

 

SECTION 3  GRANT OF
SECURITY INTEREST.

 

3.1                                 Grant.  Each Grantor hereby collaterally assigns and
transfers to the Administrative Agent, and hereby grants to the Administrative
Agent, for the benefit of itself, the Lenders, and the Issuing Bank, a
continuing security interest in all of its Collateral, as collateral security
for the prompt and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of the Borrower Obligations or
the Guarantor Obligations, as the case may be.

 

3.2                                 Collateral
Assignment of Rights under the Assigned Agreements.  Each Grantor hereby irrevocably authorizes
and empowers the Administrative Agent or its agents, in their sole discretion,
to assert, either directly or on behalf of any Grantor, at any time that an
Event of Default has occurred and is continuing, any claims any Grantor may
from time to time have against the sellers or any of their affiliates with
respect to any and all of the Contract Rights to the extent permitted by the
applicable Assigned Agreement or with respect to any and all payments or other
obligations due from the sellers or any of their affiliates to the Company or
any other Borrower under or pursuant to the Assigned Agreements (“Payments”),
and to receive and collect any damages, awards and other monies resulting
therefrom and to apply the same on account of the Secured Obligations.  After the occurrence of any Event of Default,
the Administrative Agent may provide notice to the sellers or any of their
affiliates under any Assigned Agreement that all Payments shall be made to or
at the direction of the Administrative Agent for so long as such Event of
Default shall be continuing.  Following
the delivery of any

 

8

 

such
notice, the Administrative Agent shall promptly notify the sellers under the
Assigned Agreement upon the termination or waiver of any such Event of
Default.  Each Grantor hereby irrevocably
makes, constitutes and appoints the Administrative Agent (and all officers,
employees, or agents designated by the Administrative Agent) as such Grantor’s
true and lawful attorney (and agent-in-fact) for the purpose of enabling the
Administrative Agent or its agents to, during the occurrence and continuance of
an Event of Default, assert and collect such claims and to apply such monies in
the manner set forth hereinabove.

 

SECTION 4  REPRESENTATIONS
AND WARRANTIES.

 

To induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the
Borrowers thereunder, each Grantor jointly and severally hereby represents and
warrants to the Administrative Agent and each Lender that:

 

4.1                                 Title;
No Other Liens.  Except for Permitted
Liens, the Grantors own each item of the Collateral free and clear of any and
all Liens.  No financing statement or
other public notice with respect to all or any part of the Collateral is on
file or of record in any public office, except filings evidencing Permitted
Liens and filings for which termination statements have been delivered to the
Administrative Agent.

 

4.2                                 Perfected
First Priority Liens.  The security
interests granted pursuant to this Agreement (a) upon completion of the filings
and other actions specified on Schedule 2 (which, in the case of
all filings and other documents referred to on Schedule 2, have
been delivered to the Administrative Agent in completed and duly executed form)
and payment of all necessary filing fees will constitute valid perfected
security interests in all of the Collateral in favor of the Administrative
Agent, for the benefit of the Lenders and the Issuing Bank, as collateral
security for each Grantor’s Obligations, enforceable in accordance with the
terms hereof (subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors’ rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing) against all creditors of each Grantor and any Persons
purporting to purchase any Collateral from each Grantor and (b) are prior to
all other Liens on the Collateral in existence on the date hereof except for
Permitted Liens for which priority is accorded under applicable law.  Subject to the payment of all necessary
filing fees, the filings and other actions specified on Schedule 2
constitute all of the filings and other actions necessary to perfect all
security interests granted hereunder. 
Anything contained in this Agreement to the contrary notwithstanding, in
no event shall any Grantor be required to file, register or record any type of
pledge or other agreement or filing in a jurisdiction outside the United States
with respect to any Pledged Equity (other than filings, registrations or
recordations in connection with the Limited Pledge Agreement).

 

4.3                                 Grantor
Information.  On the date hereof, Schedule 3
sets forth (a) each Grantor’s jurisdiction of organization, (b) the location of
each Grantor’s chief executive office, (c) each Grantor’s exact legal name as
it appears on its organizational documents and (d) each Grantor’s
organizational identification number (to the extent a Grantor is organized in a
jurisdiction which assigns such numbers) and federal employer identification
number.

 

9

 

4.4                                 Collateral
Locations.  On the date hereof, Schedule 4
sets forth (a) each place of business of each Grantor (including its chief
executive office), (b) all locations where all Inventory and the Equipment
owned by each Grantor is kept, except with respect to locations at which
Inventory and Equipment with a fair market value of less than $10,000 in the
aggregate for each location (up to an aggregate of $500,000 for all locations)
and excluding Inventory with respect to “bill and hold” or consignment
arrangements with fair market value of less than $10,000 in the aggregate for
each location (up to an aggregate of $500,000 for all locations) which may be
located at other locations and (c) whether each such Collateral location and
place of business (including each Grantor’s chief executive office) is owned or
leased (and if leased, specifies the complete name and notice address of each
lessor).  No Collateral is located
outside the United States (excluding In-Transit Inventory) or in the possession
of any lessor, bailee, warehouseman or consignee, except as indicated on Schedule 4
or except for Collateral with a fair market value of less than $10,000 in the
aggregate for each location and $500,000 in the aggregate for all locations of
the Grantors.

 

4.5                                 Certain
Property.  None of the Collateral
constitutes, or is the Proceeds of, (a) Farm Products, (b) Health Care
Insurance Receivables or (c) vessels, aircraft or any other property subject to
any certificate of title or other registration statute of the United States,
any State or other jurisdiction, except for vehicles owned by the Grantors and
used by employees of the Grantors in the ordinary course of business with an
aggregate fair market value of less than $200,000 (in the aggregate for all
Grantors).

 

4.6                                 Investment
Property.  (a) The Pledged Equity
pledged by each Grantor hereunder constitute all the issued and outstanding
equity interests of each Issuer owned by such Grantor and, in the case of any
First-Tier Foreign Subsidiary, 65% of all issued and outstanding equity
interests of such First-Tier Foreign Subsidiary.

 

(b)                                 All
of the Pledged Equity has been duly and validly issued and is fully paid and
nonassessable.

 

(c)                                  Each
of the Intercompany Notes and, to the applicable Grantor’s knowledge, each of
the other Pledged Notes in favor of such Grantor constitutes the legal, valid
and binding obligation of the obligor with respect thereto, enforceable in
accordance with its terms (subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing).

 

(d)                                 Subject
to quarterly updates to reflect any additions or changes thereto, Schedule 1
lists all Investment Property owned by each Grantor having a fair market value
or remaining principal balance, as applicable, in excess of $250,000.  Each Grantor is the record and beneficial
owner of, and has good and marketable title to, the Investment Property pledged
by it hereunder, free of any and all Liens or options in favor of, or claims
of, any other Person, except Permitted Liens.

 

10

 

4.7                                 Receivables.  (a) No amount in excess of $250,000 payable
to all such Grantors under or in connection with any Receivable is evidenced by
any Instrument or Chattel Paper which has not been delivered to the
Administrative Agent.

 

(b)                                 The
amounts represented by such Grantor to the Lenders from time to time as owing
to such Grantor in respect of the Receivables (to the extent such
representations are required by any of the Loan Documents) will at all such
times be accurate in all material respects; provided however that such amounts
included in any Borrowing Base Certificate shall be accurate in all respects on
the date represented in such Borrowing Base Certificate.

 

4.8                                 Intellectual
Property.  (a)  Subject to quarterly updates to reflect any
additions or changes thereto, Schedule 5 lists all material registered
or applied for Intellectual Property owned by such Grantor in its own name on
the date hereof.

 

(b)                                 On
the date hereof, all material Intellectual Property owned or licensed by any
Guarantor is valid, subsisting, unexpired and enforceable and has not been
abandoned.

 

(c)                                  Subject
to quarterly updates to reflect any additions or changes thereto, except as set
forth in Schedule 5, none of the material Intellectual Property is
the subject of any licensing or franchise agreement pursuant to which such
Grantor is the licensor or franchisor.

 

(d)                                 Each
Grantor owns and possesses or has a license or other right to use all
Intellectual Property as is necessary for the conduct of the businesses of such
Grantor, without any infringement upon rights of others which could reasonably
be expected to have a Material Adverse Effect.

 

4.9                                 Depositary
and Other Accounts.  All depositary
and other accounts maintained by each Grantor are described on Schedule 6
hereto (subject to quarterly updates to reflect any additions or changes
thereto), which description includes for each such account the name of the
Grantor maintaining such account, the name, address, telephone and fax numbers
of the financial institution at which such account is maintained, the account
number of such account.

 

4.10                           Eligible
Accounts. Each Account which the Grantors shall request the Administrative
Agent to classify as an Eligible Account shall, as of the time when such
request is made or deemed made, meet all requirements of and constitute an “Eligible
Account” for purposes of the Credit Agreement at such time.

 

SECTION 5  COVENANTS.

 

Each Grantor covenants
and agrees with the Administrative Agent and the Lenders that, from and after
the date of this Agreement until the Secured Obligations shall have been Paid in Full:

 

5.1                                 Delivery
of Instruments, Certificated Securities and Chattel Paper.  If any amount payable under or in connection
with any of the Collateral in excess of $500,000 (in the aggregate for all
Grantors) shall be or become evidenced by any
Instrument, Certificated

 

11

 

Security or Chattel Paper, such Instrument,
Certificated Security or Chattel Paper shall be delivered to the Administrative
Agent within 5 Business Days of the applicable Grantor’s receipt thereof,
duly indorsed in a manner reasonably satisfactory to the Administrative Agent,
to be held as Collateral pursuant to this Agreement.  Notwithstanding the foregoing, in the event
that an Event of Default shall have occurred and be continuing, upon the
written request of the Administrative Agent, any Instrument, Certificated
Security or Chattel Paper not theretofore delivered to the Administrative Agent
and at such time being held by any Grantor shall be promptly delivered to the
Administrative Agent, duly indorsed in a manner reasonably satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this Agreement.

 

5.2                                 Maintenance
of Perfected Security Interest; Further Documentation. (a) Except with
respect to actions affirmatively taken by the Administrative Agent with respect
to its Liens or any failure by the Administrative Agent to continue any such
Lien prior to the lapse therof due to the passage of time, such Grantor shall
maintain such security interest as a perfected security interest having at
least the priority described in Section 4.2 and shall defend such
security interest against the claims and demands of all Persons whomsoever.

 

(b)                                 Such
Grantor will furnish to the Administrative Agent and the Lenders from time to
time statements and schedules further identifying and describing the assets and
property of such Grantor and such other reports in connection therewith as the
Administrative Agent may reasonably request, all in reasonable detail.

 

(c)                                  At
any time and from time to time, upon the written request of the Administrative
Agent, and at the sole expense of such Grantor, such Grantor will promptly and
duly execute and deliver, and have recorded, such further instruments and
documents and take such further actions as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted, including, but
not limited to, (i) filing any financing or continuation statements under the
UCC (or other similar laws) in effect in any jurisdiction with respect to the
security interests created hereby and, (ii) subject to Section 4.6(a)
hereof in the case of Investment Property and any other relevant Collateral,
taking any actions reasonably necessary to enable the Administrative Agent to
obtain “control” (within the meaning of the applicable UCC) with respect
thereto, including obtaining Account Control Agreements.

 

(d)                                 Such
Grantor shall not permit any of the Collateral with a fair market value in
excess of $500,000, in aggregate for all Grantors to become a Fixture to any
real property unless such real property is subject to a mortgage by such
Grantor in favor of Administrative Agent.

 

5.3                                 Changes
in Locations, Name, etc.  Such
Grantor shall not, except upon 20 days’ prior written notice to the
Administrative Agent and delivery to the Administrative Agent of (a) all
additional financing statements and other documents reasonably requested by the
Administrative Agent as to the validity, perfection and priority of the
security interests provided for herein and (b) if applicable, a written
supplement to Schedule 4 showing any additional location at which
Inventory or Equipment shall be kept (other than locations at which Inventory
or Equipment shall be kept with a fair market value not to exceed $10,000 in
the aggregate for each location and $500,000 in aggregate for all locations for
all Grantors):

 

12

 

(i)                                     permit
any of the Inventory or Equipment (other than In-Transit Inventory or Inventory
related to any “bill and hold” or consignment arrangement, with a fair market
value not to exceed $10,000 in the aggregate for each location and $500,000 in
aggregate for all locations for all Grantors) to be kept at a location other
than those listed on Schedule 4;

 

(ii)                                  change
its jurisdiction of organization or the location of its chief executive office
from that specified on Schedule 3 or in any subsequent notice
delivered pursuant to this Section 5.3; or

 

(iii)                               change
its name, identity or corporate structure.

 

5.4                                 Notices.  Such Grantor will advise the Administrative
Agent promptly, in reasonable detail, of:

 

(a)                                  any
Lien (other than Permitted Liens) on any of the Collateral which would
adversely affect the ability of the Administrative Agent to exercise any of its
remedies hereunder; and

 

(b)                                 the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the Liens created hereby.

 

5.5                                 Investment
Property.  (a) If such Grantor shall
become entitled to receive or shall receive any certificate, option or rights
in respect of the equity interests (other than the equity interests not
required to be pledged hereunder)  of any
Issuer of Pledged Equity, whether in addition to, in substitution of, as a
conversion of, or in exchange for, any of the Pledged Equity, or otherwise in
respect thereof, such Grantor shall accept the same as the agent of the
Administrative Agent and the Lenders, hold the same in trust for the
Administrative Agent and the Lenders and, if certificated, deliver the same
forthwith to the Administrative Agent in the exact form received, duly indorsed
by such Grantor to the Administrative Agent, if required, together with an
undated instrument of transfer covering such certificate duly executed in blank
by such Grantor, to be held by the Administrative Agent, subject to the terms
hereof, as additional Collateral for the Secured Obligations (and if
uncertificated, shall promptly notify the Administrative Agent of its receipt
thereof and take such actions as the Administrative Agent shall reasonably
request to note the Administrative Agent’s Lien on such interest, right or
option and to enable the Administrative Agent to exercise its rights with
respect thereto (including the transfer thereof) upon the occurrence and during
the continuance of an Event of Default without any action on the part of the
Grantor).  Upon the occurrence and during
the continuance of an Event of Default, (i) any sums paid upon or in respect of
the Investment Property upon the liquidation or dissolution of any Issuer shall
be paid over to the Administrative Agent to be held by it hereunder as additional
Collateral for the Secured Obligations, and (ii) in case any distribution of
capital shall be made on or in respect of the Investment Property or any
property shall be distributed upon or with respect to the Investment Property
pursuant to the recapitalization or reclassification of the capital of any
Issuer or pursuant to the reorganization thereof, the property so distributed
shall, unless otherwise subject to a perfected Lien in favor of the
Administrative Agent, be delivered to the Administrative Agent to be held by it
hereunder as

 

13

 

additional
Collateral for the Secured Obligations. 
Upon the occurrence and during the continuance of an Event of Default,
if any sums of money or property so paid or distributed in respect of the
Investment Property shall be received by such Grantor, such Grantor shall,
until such money or property is paid or delivered to the Administrative Agent,
hold such money or property in trust for the Lenders, segregated from other
funds of such Grantor, as additional Collateral for the Secured Obligations.

 

(b)                                 Without
the prior written consent of the Administrative Agent, such Grantor will not
(i) vote to enable, or take any other action to permit, any Issuer of Pledged
Equity to issue any equity interests of any nature or to issue any other
securities or interests convertible into or granting the right to purchase or
exchange for any equity interests of any nature of any Issuer of Pledged
Equity, except, in each case, as permitted by the Credit Agreement, (ii) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any option with
respect to, the Investment Property or Proceeds thereof (except pursuant to a
transaction expressly permitted by the Credit Agreement) other than, with
respect to Investment Property not constituting Pledged Equity or Pledged
Notes, any such action which is not prohibited by the Credit Agreement, (iii)
create, incur or permit to exist any Lien or option in favor of, or any claim
of any Person other than such Grantor with respect to, any of the Investment
Property or Proceeds thereof, or any interest therein, except for Permitted
Liens, or (iv) enter into any agreement or undertaking restricting the right or
ability of such Grantor or the Administrative Agent to sell, assign or transfer
any of the Investment Property or Proceeds thereof, except, with respect to
such Investment Property, shareholders’ agreements entered into by such Grantor
with respect to Persons in which such Grantor maintains an ownership interest
of 50% or less.

 

(c)                                  In
the case of each Grantor which is an Issuer, such Issuer agrees that (i) it
will be bound by the terms of this Agreement relating to the Investment
Property issued by it and will comply with such terms insofar as such terms are
applicable to it, (ii) it will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5.5(a)
with respect to the Investment Property issued by it and (iii) the terms of Sections 6.3(c)
and 6.7 shall apply to such Grantor with respect to all actions that may
be required of it pursuant to Section 6.3(c) or 6.7 regarding
the Investment Property issued by it.

 

5.6                                 Receivables.  (a) Other than in the ordinary course of
business consistent with its past practice and in amounts which are not
material to such Grantor and as permitted by Section 11.14 of the Credit
Agreement, such Grantor will not (i) grant any extension of the time of payment
of any Receivable, (ii) compromise or settle any Receivable for less than the
full amount thereof, (iii) release, wholly or partially, any Person liable for
the payment of any Receivable, (iv) allow any credit or discount whatsoever on
any Receivable or (v) amend, supplement or modify any Receivable in any manner
that could reasonably be expected to materially and adversely affect the value
thereof; provided, however, that no Grantor shall take any such action at
any time that an Event of Default then exists or would result therefrom; provided
further that no Grantor shall take any action described in clause (v) above at
any time that an Event of Default or an Unmatured Event of Default then exists
or would result therefrom.

 

(b)                                 Such
Grantor will deliver to the Administrative Agent a copy of each material
demand, notice or document received by it that questions or calls into doubt
the validity

 

14

 

or
enforceability of more than 5% of the
aggregate amount of the then outstanding Receivables for all Grantors.

 

5.7                                 Intellectual
Property.  (a) Unless such Grantor,
in its commercially reasonable business judgment determines that doing otherwise
would be in its best commercial interest, such Grantor (either itself or
through licensees) will (i) continue to use each Trademark material to its
business in order to maintain such Trademark in full force free from any claim
of abandonment for non-use, (ii) maintain as in the past the quality of
products and services offered under such Trademark, (iii) use such Trademark
with the appropriate notice of registration and all other notices and legends
required by applicable law, (iv) not adopt or use any mark which is confusingly
similar or a colorable imitation of such Trademark unless the Administrative
Agent, for the benefit of the Lenders and the Issuing Bank, shall obtain a
perfected security interest in such mark pursuant to this Agreement, and (v)
not (and not knowingly permit any licensee or sublicensee thereof to) do any
act or knowingly omit to do any act whereby such Trademark may become
invalidated or impaired in any way.

 

(b)                                 Unless
such Grantor, in its commercially reasonable business judgment determines doing
so would be in its best commercial interest, such Grantor (either itself or
through licensees) will not do any act, or omit to do any act, whereby any
Patent material to its business may become forfeited, abandoned or dedicated to
the public.

 

(c)                                  Unless
such Grantor, in its commercially reasonable business judgment determines that
doing otherwise would be in its best commercial interest, such Grantor (either
itself or through licensees) (i) will employ each Copyright material to its
business and (ii) will not (and will not knowingly permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby any
material portion of such Copyrights may become invalidated or otherwise
impaired.  Such Grantor will not (either
itself or through licensees) do any act whereby any material portion of such
Copyrights may fall into the public domain.

 

(d)                                 Such
Grantor (either itself or through licensees) will not do any act that knowingly
uses any Intellectual Property material to its business to infringe the
intellectual property rights of any other Person.

 

(e)                                  Such
Grantor will notify the Administrative Agent and the Lenders promptly if it
knows, or has reason to know, that any application or registration relating to
any material Intellectual Property may become forfeited, abandoned or dedicated
to the public, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark Office, the United States Copyright
Office or any court or tribunal in any country) regarding, such Grantor’s
ownership of, or the validity of, any material Intellectual Property or such
Grantor’s right to register the same or to own and maintain the same.

 

(f)                                    Whenever
such Grantor, either by itself or through any agent, employee, licensee or
designee, shall file an application for the registration of any Intellectual
Property with the United States Patent and Trademark Office, the United States
Copyright Office or any similar office or agency in any other country or any
political subdivision thereof, such Grantor shall report such filing to the
Administrative Agent by the later of 30 days thereafter or concurrently

 

15

 

with
the next delivery of financial statements of the Borrowers pursuant to Section 10.1
of the Credit Agreement.  Upon the
request of the Administrative Agent, such Grantor shall execute and deliver,
and have recorded, any and all agreements, instruments, documents, and papers
as the Administrative Agent may reasonably request to evidence the
Administrative Agent’s and the Lenders’ security interest in any Copyright,
Patent or Trademark and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby.

 

(g)                                 Unless
such Grantor, in its commercially reasonable business judgment determines doing
so would be in its best commercial interest, such Grantor will take all
reasonable and necessary steps to maintain and pursue each application (and to
obtain the relevant registration) and to maintain each registration of all
material Intellectual Property owned by it.

 

(h)                                 In
the event that any material Intellectual Property is infringed upon or
misappropriated or diluted by a third party, such Grantor shall (i) take such
actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such Grantor in
its commercially reasonable business judgment determines that such Intellectual
Property is of material economic value, promptly notify the Administrative
Agent after it learns thereof and, to the extent, in its commercially reasonable
business judgment, such Grantor determines it appropriate under the circumstances,
sue for infringement, misappropriation or dilution, to seek injunctive relief
where appropriate and to recover any and all damages for such infringement,
misappropriation or dilution.

 

5.8                                 Seller
Undertakings.

 

(a)                                  Each Grantor shall keep the Administrative
Agent informed of all circumstances bearing upon any potential claim under or
with respect to the Assigned Agreements and the Seller Undertakings that could
have a materially adverse effect on Administrative Agent and such Grantor shall
not, without the prior written consent of the Administrative Agent,
(i) waive any of its rights or remedies under any Assigned Agreement with
respect to any of the Seller Undertakings in excess of $25,000,
(ii) settle, compromise or offset any amount payable by the sellers to
such Grantor under any Assigned Agreement in excess of $25,000 or
(iii) amend or otherwise modify any Assigned Agreement in any manner which
is materially adverse to the interests of the Administrative Agent or the
Lenders.

 

(b)                                 Each Grantor shall perform and observe
all the material terms and conditions of each Assigned Agreement to be
performed by it, maintain each Assigned Agreement in full force and effect
(except such Assigned Agreement which, by its terms, has expired or
terminated), enforce the material provisions of each Assigned Agreement in
accordance with its terms as it deems appropriate in its reasonable business
judgment and, after the occurrence and during the continuance of an Event of
Default, take all such action to such end as may from time to time be
reasonably requested by the Administrative Agent.

 

(c)                                  Anything herein to the contrary
notwithstanding, (i) each applicable Grantor shall remain liable under
each Assigned Agreement to the extent set forth therein to perform all of its
material duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (ii) the exercise by the Administrative
Agent of any of its

 

16

 

rights hereunder
shall not release any Grantor from any of its duties or obligations under any
Assigned Agreement and (iii) neither the Administrative Agent nor any
other Lender shall have any obligation or liability under any Assigned
Agreement by reason of this Agreement, nor shall the Administrative Agent or
any other Lender be obligated to perform any of the obligations or duties of
any Grantor thereunder or to take any action to collect or enforce any claim
for payment assigned hereunder.

 

5.9                                 Collection
of Accounts.  Administrative Agent
may, at any time after the occurrence and during the continuance of an Event of
Default, whether before or after notification to any Account Debtor and whether
before or after the maturity of any of the Secured Obligations,
(i) enforce collection of any of each Grantor’s Accounts or other amounts
owed to a Grantor by suit or otherwise; (ii) exercise all of such Grantor’s
rights and remedies with respect to proceedings brought to collect any Accounts
or other amounts owed to such Grantor; (iii) surrender, release or
exchange all or any part of any Accounts or other amounts owed to such Grantor,
or compromise or extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder; (iv) sell or assign any
Account of such Grantor or other amount owed to such Grantor upon such terms,
for such amount and at such time or times as Administrative Agent deems
advisable; (v) prepare, file and sign such Grantor’s name on any proof of
claim in bankruptcy or other similar document against any Account Debtor or
other Person obligated to such Grantor; and (vi) do all other acts and
things which are necessary, in Administrative Agent’s commercially reasonable
discretion, to fulfill such Grantor’s obligations under this Agreement and the
Credit Agreements and to allow Administrative Agent to collect the Accounts or
other amounts owed to such Grantor.  In
addition to any other provision hereof, Administrative Agent may at any time,
after the occurrence and during the continuance of an Event of Default, at
Grantors’ expense, notify any parties obligated on any of the Accounts to make
payment directly to Administrative Agent of any amounts due or to become due
thereunder.

 

5.10                           Other
Matters.

 

(a)                                  Grantors
shall each use commercially reasonable efforts to cause to be delivered to the
Administrative Agent a Collateral Access Agreement with respect to
(a) each bailee with which such Grantor keeps Inventory or other assets as
of the Closing Date with a fair market value in excess of $450,000 and (b) each
landlord which leases real property (and the accompanying facilities) to any of
the Grantors at which such Grantor keeps Inventory or other assets with a fair
market value in excess of $250,000.  Such
requirement may be waived at the option of the Administrative Agent or may, in
the discretion of the Administrative Agent after consultation with the Loan
Party Representative, be substituted with a requirement to maintain a Rent
Reserve as set forth in the Credit Agreement.

 

(b)                                 Each
Grantor authorizes the Administrative Agent to, at any time and from time to
time, file financing statements, continuation statements, and amendments
thereto that describe the Collateral as set forth herein or describe the
collateral covered thereby as “all assets” of each Grantor, or words of similar
effect, and which contain any other information required pursuant to the UCC
for the sufficiency of filing office acceptance of any financing statement,
continuation statement, or amendment, and each Grantor agrees to furnish any
such information to the Administrative Agent promptly upon request.  Any such financing statement, continuation

 

17

 

statement,
or amendment may be signed and/or filed by the Administrative Agent on behalf
of any Grantor and may be filed at any time in any jurisdiction.

 

(c)                                  Each
Grantor shall, at any time and from time and to time, take such steps as the
Administrative Agent may reasonably request for the Administrative Agent
(i) to obtain an acknowledgement, in form and substance reasonably
satisfactory to the Administrative Agent, of any bailee having possession of
any of the Collateral having a value in excess of $250,000, stating that the
bailee holds such Collateral for the Administrative Agent, (ii) to obtain “control”
of any letter-of-credit rights, or electronic chattel paper having a value in
excess of $250,000 (as such terms are defined by the UCC with corresponding
provisions thereof defining what constitutes “control” for such items of
Collateral), with any agreements establishing control to be in form and
substance reasonably satisfactory to the Administrative Agent, and
(iii) otherwise to insure the continued perfection and priority of the
Administrative Agent’s security interest in any of the Collateral and of the
preservation of its rights therein.  If
any Grantor shall at any time, acquire a “commercial tort claim” (as such term
is defined in the UCC) in excess of $200,000, such Grantor shall promptly
notify the Administrative Agent thereof in writing and supplement Schedule 7,
therein providing a reasonable description and summary thereof, and upon
delivery thereof to the Administrative Agent, such Grantor shall be deemed to
thereby grant to the Administrative Agent (and such Grantor hereby grants to
the Administrative Agent) a security interest and lien in and to such
commercial tort claim and all proceeds thereof, all upon the terms of and
governed by this Agreement.

 

(d)                                 Without
limiting the generality of the foregoing, if any Grantor at any time holds or
acquires an interest in any electronic chattel paper or any “transferable
record”, as that term is defined in Section 201 of the federal Electronic
Signatures in Global and National Commerce Act, or in §16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction having a
value greater than $250,000, such Grantor shall promptly notify the
Administrative Agent thereof and, at the request of the Administrative Agent,
shall take such action as the Administrative Agent may reasonably request to
vest in the Administrative Agent “control” under Section 9-105 of the UCC
of such electronic chattel paper or control under Section 201 of the
federal Electronic Signatures in Global and National Commerce Act or, as the
case may be, §16 of the Uniform Electronic Transactions Act, as so in effect in
such jurisdiction, of such transferable record.

 

(e)                                  Each
Grantor shall permit during regular business hours and with reasonable prior notice
(or at any time without notice if an Event of Default has occurred and is
continuing) Administrative Agent and Lenders to examine any of the Collateral
and wherever the Collateral may be located. Each Grantor shall, at the request
of Administrative Agent, indicate on its records concerning the Collateral a
notation, in form reasonably satisfactory to Administrative Agent, of the
security interest of Administrative Agent hereunder.

 

(f)                                    Each
Grantor shall (x) use its commercially reasonable efforts to obtain the consent
to the assignment thereof or the granting of a security interest by such
Grantor to the Administrative Agent of the applicable parties to any Restricted
Agreement entered into after the date of this Agreement which contains a
restriction or prohibition on the assignment of, or grant of a security
interest in the right to receive payments and other Proceeds with respect to,
or the Goods produced under, such Restricted Agreement (provided however that
such Grantor’s

 

18

 

commercially reasonable efforts shall not include the
requirement that such Grantor pay any fees to any other party of a Restricted
Agreement to obtain a consent to the assignment thereof or a grant of a
security interest therein), and (y) shall provide the Administrative Agent with
monthly updates to Schedules 1.1A and 1.1B to reflect any
additions to or changes in such schedules.

 

SECTION 6  REMEDIAL
PROVISIONS.

 

6.1                                 Certain
Matters Relating to Receivables.  (a)
At any time and from time to time after the occurrence and during the
continuance of an Event of Default, the Administrative Agent (through its
officers, employees or agents) shall have the right to make test verifications
of the Receivables in any manner and through any medium that it reasonably
considers advisable, and each Grantor shall furnish all such assistance and
information as the Administrative Agent may reasonably require in connection
with such test verifications.  At any
time and from time to time after the occurrence and during the continuance of
an Event of Default, upon the Administrative Agent’s request and at the expense
of the relevant Grantor, such Grantor shall cause independent public
accountants or others reasonably satisfactory to the Administrative Agent to
furnish to the Administrative Agent reports showing reconciliations, agings and
test verifications of, and trial balances for, the Receivables.

 

(b)                                 The
Administrative Agent hereby authorizes each Grantor to collect such Grantor’s
Receivables, and the Administrative Agent may curtail or terminate such
authority at any time after the occurrence and during the continuance of an
Event of Default.  If required by the
Administrative Agent at any time after the occurrence and during the
continuance of an Event of Default, any payments of Receivables, when collected
by any Grantor, (i) shall be forthwith (and, in any event, within 1 Business
Day) deposited by such Grantor in the exact form received, duly indorsed by
such Grantor to the Administrative Agent if required, in a collateral account
maintained under the sole dominion and control of the Administrative Agent,
subject to withdrawal by the Administrative Agent for the account of the
Lenders only as provided in Section 6.5, and (ii) until so turned
over, shall be held by such Grantor in trust for the Administrative Agent and
the Lenders, segregated from other funds of such Grantor.  If required by the Administrative Agent at
any time after the occurrence and during the continuance of an Event of
Default, each such deposit of Proceeds of Receivables shall be accompanied by a
report identifying in reasonable detail the nature and source of the payments
included in the deposit.

 

(c)                                  At
any time and from time to time after the occurrence and during the continuance
of an Event of Default, at the Administrative Agent’s request, each Grantor
shall deliver to the Administrative Agent all original and other documents
evidencing, and relating to, the agreements and transactions which gave rise to
the Receivables, including all original orders, invoices and shipping receipts
in such Grantor’s possession.

 

(d)                                 Each Grantor hereby irrevocably
authorizes and empowers the Administrative Agent, in the Administrative Agent’s
sole discretion, at any time that after the occurrence and during the
continuance of an Event of Default, to assert, either directly or on behalf of
such Grantor, any claim such Grantor may from time to time have against the
sellers under or with respect to the Assigned Agreements and to receive and
collect any and all damages, awards and other monies resulting therefrom and to
apply the same to the Secured

 

19

 

Obligations. 
Each Grantor hereby irrevocably makes, constitutes and appoints the
Administrative Agent as its true and lawful attorney in fact for the purpose of
enabling the Administrative Agent to, after the occurrence and during the
continuance of an Event of Default, assert and collect such claims and to apply
such monies in the manner set forth above, which appointment, being coupled
with an interest, is irrevocable.

 

6.2                                 Communications
with Obligors; Grantors Remain Liable. 
(a) The Administrative Agent in its own name or in the name of others
may at any time after the occurrence and during the continuance of an Event of
Default communicate with obligors under the Receivables to verify with them to
the Administrative Agent’s satisfaction the existence, amount and terms of any
Receivables.

 

(b)                                 Anything
herein to the contrary notwithstanding, each Grantor shall remain liable in
respect of each of the Receivables to observe and perform all the conditions
and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise thereto.  Neither the Administrative Agent nor any
Lender shall have any obligation or liability under any Receivable (or any
agreement giving rise thereto) by reason of or arising out of this Agreement or
the receipt by the Administrative Agent or any Lender of any payment relating
thereto, nor shall the Administrative Agent or any Lender be obligated in any
manner to perform any of the obligations of any Grantor under or pursuant to
any Receivable (or any agreement giving rise thereto), to make any payment, to
make any inquiry as to the nature or the sufficiency of any payment received by
it or as to the sufficiency of any performance by any party thereunder, to
present or file any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.

 

(c)                                  For
the purpose of enabling the Administrative Agent to exercise rights and
remedies under this Agreement, each Grantor hereby grants to the Administrative
Agent, for the benefit of the Administrative Agent and the Lenders, an
irrevocable, nonexclusive license (exercisable without payment of royalty or
other compensation to such Grantor) to, following an Event of Default, use,
license or sublicense for such purpose any Intellectual Property now owned or
hereafter acquired by such Grantor, and wherever the same may be located, and
including in such license access to all media in which any of the licensed
items may be recorded or stored and, to the extent permitted by terms of the
applicable underlying agreement, all computer software and programs used for
the compilation or printout thereof.

 

6.3                                 Investment
Property.  (a) Unless an Event of
Default shall have occurred and be continuing and the Administrative Agent
shall have given written notice to the relevant Grantor of the Administrative
Agent’s intent to exercise its corresponding rights pursuant to Section 6.3(b),
each Grantor shall be permitted to receive all cash dividends and distributions
paid in respect of the Pledged Equity and all payments made in respect of the
Pledged Notes, to the extent permitted in the Credit Agreement, and to exercise
all voting and other rights with respect to the Investment Property; provided,
that no vote shall be cast or other right exercised or action taken which would
or would reasonably be likely to impair the Collateral or which would be
inconsistent with or result in any violation of any provision of the Credit
Agreement, this Agreement or any other Loan Document.

 

20

 

(b)                                 If
an Event of Default shall occur and be continuing and the Administrative Agent
shall give written notice of its intent to exercise such rights to the relevant
Grantor or Grantors, (i) the Administrative Agent shall have the right to
receive any and all cash dividends and distributions, payments or other
Proceeds paid in respect of the Investment Property and make application
thereof to the Secured Obligations in accordance with Section 6.5 hereof,
and (ii) any or all of the Investment Property shall be registered in the name
of the Administrative Agent or its nominee, and the Administrative Agent or its
nominee may thereafter exercise (x) all voting and other rights pertaining to
such Investment Property at any meeting of holders of the equity interests of the
relevant Issuer or Issuers or otherwise and (y) any and all rights of
conversion, exchange and subscription and any other rights, privileges or
options pertaining to such Investment Property as if it were the absolute owner
thereof (including the right to exchange at its discretion any and all of the
Investment Property upon the merger, consolidation, reorganization,
recapitalization or other fundamental change in the corporate or other
structure of any Issuer, or upon the exercise by any Grantor or the Administrative
Agent of any right, privilege or option pertaining to such Investment Property,
and in connection therewith, the right to deposit and deliver any and all of
the Investment Property with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as the
Administrative Agent may determine), all without liability except for the
Administrative Agent’s gross negligence or willful misconduct and except to
account for property actually received by it, but the Administrative Agent
shall have no duty to any Grantor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing.

 

(c)                                  Each
Grantor hereby authorizes and instructs each Issuer under the control of such
Grantor of any Investment Property pledged by such Grantor hereunder to (i)
comply with any instruction received by it from the Administrative Agent in
writing that (x) states that an Event of Default has occurred and is continuing
and (y) is otherwise in accordance with the terms of this Agreement, without
any other or further instructions from such Grantor, and each Grantor agrees
that each Issuer shall be fully protected in so complying and (ii) unless
otherwise expressly permitted by this Agreement or other Loan Documents, pay
any dividends, distributions or other payments with respect to the Investment
Property directly to the Administrative Agent.

 

6.4                                 Proceeds
to be Turned Over to Administrative Agent.  In addition to the rights of the
Administrative Agent and the Lenders specified in Section 6.1 with
respect to payments of Receivables, if an Event of Default shall occur and be
continuing and subject to Section 11.10(k) of the Credit Agreement, all
Proceeds received by any Grantor consisting of cash, checks and other cash
equivalent items shall be held by such Grantor in trust for the Administrative
Agent and the Lenders, segregated from other funds of such Grantor, and shall,
forthwith upon receipt by such Grantor, be turned over to the Administrative
Agent in the exact form received by such Grantor (duly indorsed by such Grantor
to the Administrative Agent, if required). 
All such Proceeds received by the Administrative Agent under this Section 6.4
shall be held by the Administrative Agent in a collateral account maintained
under its sole dominion and control.  All
such Proceeds, while held by the Administrative Agent in any collateral account
(or by such Grantor in trust for the Administrative Agent and the Lenders)
established pursuant hereto, shall continue to be held as collateral security
for the Secured Obligations and shall not constitute payment thereof until
applied as provided in Section 6.5.

 

21

 

6.5                                 Application
of Proceeds.  At such intervals as
may be elected by the Administrative Agent upon its receipt of any payments or
Net Cash Proceeds in respect of the Secured Obligations, the Administrator
Agent may or, if an Event of Default shall have occurred and be continuing, upon
its receipt of any payments or Net Cash Proceeds in respect of the Secured
Obligations, the Administrative Agent shall apply all or any part of Net Cash
Proceeds from the sale of, or other realization upon, all or any part of the
Collateral in payment of the Secured Obligations as set forth below (subject to
the terms of the Credit Agreement and Intercreditor Agreement).  Any part of such funds which the
Administrative Agent elects not so to apply and deems not required as
collateral security for the Secured Obligations shall be paid over from time to
time by the Administrative Agent to the applicable Grantor or to whomsoever may
be lawfully entitled to receive the same. 
Any balance of such Net Cash Proceeds remaining after the Secured
Obligations shall have been Paid in Full shall be paid over to the applicable
Grantor or to whomsoever may be lawfully entitled to receive the same.  In the absence of a specific determination by
the Administrative Agent, and at all times during the continuation of an Event
of Default, the Net Cash Proceeds from the sale of, or other realization upon,
all or any part of the Collateral in payment of the Secured Obligations shall
be applied in the following order:

 

FIRST, TO THE PAYMENT OF ALL FEES, REASONABLE
COSTS, REASONABLE EXPENSES AND INDEMNITIES OF THE ADMINISTRATIVE AGENT (IN ITS
CAPACITY AS SUCH), INCLUDING ATTORNEY COSTS, AND ANY OTHER SECURED
OBLIGATIONS THEN DUE AND PAYABLE TO THE ADMINISTRATIVE AGENT IN RESPECT OF SUMS
ADVANCED BY THE ADMINISTRATIVE AGENT TO PRESERVE THE COLLATERAL OR TO PRESERVE
ITS SECURITY INTEREST IN THE COLLATERAL, UNTIL PAID IN FULL;

 

SECOND, TO THE PAYMENT OF ALL FEES,
REASONABLE COSTS, REASONABLE EXPENSES AND INDEMNITIES OF THE FACILITY A
LENDERS, PRO-RATA, UNTIL PAID IN FULL;

 

THIRD, TO THE PAYMENT OF ALL OF THE SECURED
OBLIGATIONS CONSISTING OF ACCRUED AND UNPAID INTEREST THEN DUE AND PAYABLE TO
ANY FACILITY A LENDER, PRO-RATA, UNTIL PAID IN FULL;

 

FOURTH, TO THE PAYMENT OF ALL SECURED
OBLIGATIONS CONSISTING OF PRINCIPAL THEN DUE AND PAYABLE TO ANY FACILITY A
LENDER, PRO-RATA, UNTIL PAID IN FULL;

 

FIFTH, TO THE PAYMENT OF THE ADMINISTRATIVE
AGENT AN AMOUNT EQUAL TO ALL SECURED OBLIGATIONS IN RESPECT OF ALL OUTSTANDING
LETTERS OF CREDIT, IF ANY, TO BE HELD AS CASH COLLATERAL IN RESPECT OF SUCH OBLIGATIONS;

 

SIXTH, TO THE PAYMENT OF ALL BANK PRODUCTS
OBLIGATIONS AND SPECIFIED HEDGING OBLIGATIONS THEN DUE AND PAYABLE TO ANY
FACILITY A LENDER OR ITS AFFILIATES, PRO-RATA, UNTIL PAID IN FULL;

 

22

 

SEVENTH, TO THE PAYMENT OF ALL FEES,
REASONABLE COSTS, REASONABLE EXPENSES AND INDEMNITIES OF THE FACILITY B
LENDERS, PRO-RATA, UNTIL PAID IN FULL;

 

EIGHTH, TO THE PAYMENT OF ALL OF THE SECURED
OBLIGATIONS CONSISTING OF ACCRUED AND UNPAID INTEREST THEN DUE AND PAYABLE TO
ANY FACILITY B LENDER, PRO-RATA, UNTIL PAID IN FULL;

 

NINTH, TO THE PAYMENT OF ALL SECURED
OBLIGATIONS CONSISTING OF PRINCIPAL THEN DUE AND PAYABLE TO ANY FACILITY B
LENDER, PRO-RATA UNTIL PAID IN FULL;

 

TENTH, TO THE PAYMENT OF ALL OTHER SECURED
OBLIGATIONS THEN DUE AND PAYABLE TO EACH LENDER, PRO-RATA, UNTIL PAID IN FULL;
AND

 

ELEVENTH, TO THE PAYMENT
OF ANY REMAINING PROCEEDS, IF ANY, TO THE GRANTORS OR TO WHOMEVER
MAY BE LAWFULLY ENTITLED TO RECEIVE SUCH AMOUNTS.

 

6.6                                 Code
and Other Remedies.  Subject to Section 11.10(k)
of the Credit Agreement, if an Event of Default shall occur and be continuing,
the Administrative Agent, on behalf of the Lenders, may exercise, in addition
to all other rights and remedies granted to them in this Agreement and in any
other instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under the UCC or any
other applicable law.  Without limiting
the generality of the foregoing, the Administrative Agent, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon any
Grantor or any other Person (all and each of which demands, defenses, advertisements
and notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate, realize upon and take possession of the Collateral, or
any part thereof (in addition to Collateral of which it already has
possession), wherever it may be found, and for that purpose may pursue the same
wherever it may be found, and may enter onto any of Grantor’s premises where
any of the Collateral may be, and search for, take possession of, remove, keep
and store any of the Collateral until the same shall be sold or otherwise
disposed of, and Administrative Agent shall have the right to store the same at
any of Grantor’s premises without cost to Administrative Agent or any Lender in
each case, subject to the terms of the applicable lease agreement and
Collateral Access Agreements with respect to premises leased by Grantor.  The Administrative Agent may forthwith sell,
lease, assign, give options to purchase, or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, at any exchange, broker’s
board or office of the Administrative Agent or any Lender or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery with assumption of any
credit risk.  The Administrative Agent or
any Lender shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in any Grantor, which right or equity is hereby waived and
released.  Each Grantor further agrees,
at the Administrative

 

23

 

Agent’s request and at each Grantor’s expense, to
assemble the Collateral and make it available to the Administrative Agent at
places which the Administrative Agent shall reasonably select, whether at such
Grantor’s premises or elsewhere.  The
Administrative Agent shall apply the net proceeds of any action taken by it
pursuant to this Section 6.6, after deducting all reasonable costs
and expenses of every kind incurred in connection therewith or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Administrative Agent and the Lenders hereunder,
including Attorney Costs to the payment in whole or in part of the Secured
Obligations, in such order as the Administrative Agent may elect, and only
after such application and after the payment by the Administrative Agent of any
other amount required by any provision of law, need the Administrative Agent
account for the surplus, if any, to any Grantor.  To the extent permitted by applicable law,
each Grantor waives all claims, damages and demands it may acquire against the
Administrative Agent or any Lender arising out of the exercise by them of any
rights hereunder, except claims, damages and demands related to Administrative
Agent or any Lender’s gross negligence, willful misconduct or bad faith.  If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition.

 

6.7                                 Registration
Rights.  (a) If the Administrative
Agent shall determine to exercise its right to sell any or all of the Pledged
Equity in any Domestic Wholly-Owned Subsidiary (as defined in the Credit
Agreement) pursuant to Section 6.6, and if in the opinion of the
Administrative Agent it is necessary or advisable to have the Pledged Equity in
any Subsidiary, or that portion thereof to be sold, registered under the
provisions of the Securities Act, the relevant Grantor will cause the Issuer
thereof to (i) execute and deliver, and cause the directors and officers of
such Issuer to execute and deliver, all such instruments and documents, and do
or cause to be done all such other acts as may be, in the reasonable opinion of
the Administrative Agent or its counsel, necessary or advisable to register the
Pledged Equity, or that portion thereof to be sold, under the provisions of the
Securities Act, (ii) use its best efforts to cause the registration statement
relating thereto to become effective and to remain effective for a period of
one year from the date of the first public offering of the Pledged Equity, or
that portion thereof to be sold, and (iii) make all amendments thereto and/or
to the related prospectus which, in the reasonable opinion of the
Administrative Agent or its counsel, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto.  Each Grantor agrees to cause such Issuer to
comply with the provisions of the securities or “Blue Sky” laws of any and all
jurisdictions which the Administrative Agent shall designate and to make
available to its security holders, as soon as practicable, an earnings
statement (which need not be audited) which will satisfy the provisions of Section 11(a)
of the Securities Act.

 

(b)                                 Each
Grantor recognizes that the Administrative Agent may be unable to effect a
public sale of any or all the Pledged Equity, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof.  Each Grantor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable than if
such sale were a public sale and, notwithstanding such circumstances, agrees
that any such

 

24

 

private
sale shall be deemed to have been made in a commercially reasonable
manner.  The Administrative Agent shall
be under no obligation to delay a sale of any of the Pledged Equity for the
period of time necessary to permit the Issuer thereof to register such
securities or other interests for public sale under the Securities Act, or
under applicable state securities laws, even if such Issuer would agree to do
so.

 

(c)                                  Each
Grantor agrees to use commercially reasonable efforts to do or cause to be done
all such other acts as may be reasonably necessary to make such sale or sales
of all or any portion of the Pledged Equity pursuant to this Section 6.7
valid and binding and in compliance with applicable law.  Each Grantor further agrees that a breach of
any of the covenants contained in this Section 6.7 will cause
irreparable injury to the Administrative Agent and the Lenders, that the
Administrative Agent and the Lenders have no adequate remedy at law in respect
of such breach and, as a consequence, that each and every covenant contained in
this Section 6.7 shall be specifically enforceable against such
Grantor, and such Grantor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a
defense that no Event of Default has occurred under the Credit Agreement.

 

6.8                                 Waiver;
Deficiency.  Each Grantor waives and
agrees not to assert any rights or privileges which it may acquire under Section 9-626
of the UCC.  Each Grantor shall remain
liable for any deficiency if the proceeds of any sale or other disposition of
the Collateral are insufficient to pay the Secured Obligations in full and the
reasonable fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.

 

SECTION 7  THE
ADMINISTRATIVE AGENT.

 

7.1                                 Administrative
Agent’s Appointment as Attorney-in-Fact, etc.  (a) Each Grantor hereby irrevocably
constitutes and appoints the Administrative Agent and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of such Grantor and in the name of such Grantor or in its own name, for
the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be reasonably necessary or desirable to accomplish the purposes of this
Agreement, and, without limiting the generality of the foregoing, each Grantor
hereby gives the Administrative Agent the power and right, on behalf of and at
the expense of such Grantor, without notice to or assent by such Grantor, to do
any or all of the following:

 

(i)                                     in
the name of such Grantor or its own name, or otherwise, take possession of and
indorse and collect any checks, drafts, notes, acceptances or other instruments
for the payment of moneys due under any Receivable or with respect to any other
Collateral and file any claim or take any other action or proceeding in any
court of law or equity or otherwise deemed reasonably appropriate by the
Administrative Agent for the purpose of collecting any and all such moneys due
under any Receivable or with respect to any other Collateral whenever payable;

 

(ii)                                  in
the case of any Intellectual Property, execute and deliver, and have recorded,
any and all agreements, instruments, documents and papers as the

 

25

 

Administrative Agent may reasonably request to evidence the
Administrative Agent’s security interest in such Intellectual Property and the
goodwill and general intangibles of such Grantor relating thereto or
represented thereby;

 

(iii)                               discharge
Liens levied or placed on or threatened against the Collateral, and effect any
repairs or insurance called for by the terms of this Agreement and pay all or
any part of the premiums therefor and the costs thereof;

 

(iv)                              execute,
in connection with any sale provided for in Section 6.6 or 6.7, any
indorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral; and

 

(v)                                 (1)
direct any party liable for any payment under any of the Collateral to make
payment of any and all moneys due or to become due thereunder directly to the
Administrative Agent or as the Administrative Agent shall direct; (2) ask or
demand for, collect, and receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in respect of
or arising out of any Collateral; (3) sign and indorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications, notices and other documents in connection
with any of the Collateral; (4) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any portion thereof and to enforce any other right in
respect of any Collateral; (5) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (6) settle, compromise or
adjust any such suit, action or proceeding and, in connection therewith, give
such discharges or releases as the Administrative Agent may deem reasonably
appropriate; (7) assign any Copyright, Patent or Trademark, throughout the
world for such term or terms, on such conditions, and in such manner, as the
Administrative Agent shall in its reasonable discretion determine; (8) vote any
right or interest with respect to any Investment Property; (9) order good
standing certificates and conduct lien searches in respect of such
jurisdictions or offices as the Administrative Agent may deem reasonably
appropriate; and (10) generally sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though the Administrative Agent were the absolute owner thereof
for all purposes, and do, at the Administrative Agent’s option and such Grantor’s
expense, at any time, or from time to time, all acts and things which the
Administrative Agent deems reasonably necessary to protect, preserve or realize
upon the Collateral and the Administrative Agent’s security interests therein
and to effect the intent of this Agreement, all as fully and effectively as
such Grantor might do.

 

Anything in this Section 7.1(a)
or any other Loan Document to the contrary notwithstanding, the Administrative
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this Section 7.1(a) unless an Event of Default
shall have occurred and be continuing.

 

(b)                                 If
any Grantor fails to perform or comply with any of its agreements contained
herein, the Administrative Agent, at its option, but without any obligation so
to do,

 

26

 

may,
after written notice to such Grantor, perform or comply, or otherwise cause
performance or compliance, with such agreement.

 

(c)                                  Each
Grantor hereby ratifies all that such attorneys in fact shall lawfully do or
cause to be done by virtue hereof.  All
powers, authorizations and agencies contained in this Agreement are coupled
with an interest and are irrevocable until this Agreement is terminated and the
Secured Obligations are Paid in Full.

 

7.2                                 Duty
of Administrative Agent.  The
Administrative Agent’s sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession shall be to deal with
it in the same manner as the Administrative Agent deals with similar property
for its own account.  Neither the
Administrative Agent or any Lender nor any of their respective officers,
directors, employees or agents shall be liable for any failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.  The powers conferred on the Administrative
Agent and the Lenders hereunder are solely to protect the Administrative Agent’s
and the Lenders’ interests in the Collateral and shall not impose any duty upon
the Administrative Agent or any Lender to exercise any such powers.  The Administrative Agent and the Lenders
shall be accountable only for amounts that they actually receive as a result of
the exercise of such powers, and neither the Administrative Agent, nor any
Lender nor any of their respective officers, directors, employees or agents
shall be responsible to any Grantor for any act (except for the Administrative
Agent’s or any Lender’s gross negligence or willful misconduct in so acting) or
failure to act hereunder.

 

7.3                                 Authority
of Administrative Agent.  Each
Grantor acknowledges that the rights and responsibilities of the Administrative
Agent under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as between the
Administrative Agent and the Lenders, be governed by the Credit Agreement and
by such other agreements with respect thereto as may exist from time to time
among them, but, as between the Administrative Agent and the Grantors, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Lenders with full and valid authority so to act or refrain from acting, and
no Grantor shall be under any obligation, or entitlement, to make any inquiry
respecting such authority.

 

SECTION 8  MISCELLANEOUS.

 

8.1                                 Amendments
in Writing.  None of the terms or
provisions of this Agreement may be waived, amended, supplemented or otherwise
modified except in accordance with Section 15.1 of the Credit
Agreement.

 

8.2                                 Notices.  All notices, requests and demands to or upon
the Administrative Agent or any Grantor hereunder shall be addressed to the
Administrative Agent or Loan Party Representative, respectively, and effected
in the manner provided for in Section 15.3 of the Credit Agreement and
each Grantor hereby appoints the Loan Party Representative as its agent to give
and receive notices hereunder and the Administrative Agent shall be fully
protected and

 

27

 

held
harmless by the Grantors hereunder for relying on any such notice reasonably
believed by it to have been delivered by the Loan Party Representative.

 

8.3                                 Indemnification
by Grantors.  THE GRANTORS, JOINTLY
AND SEVERALLY, HEREBY AGREE TO INDEMNIFY AND HOLD EACH LENDER PARTY AND ISSUING
BANK FREE AND HARMLESS FROM AND AGAINST ANY AND ALL INDEMNIFIED LIABILITIES,
INCURRED BY THE LENDER PARTIES, ISSUING BANK OR ANY OF THEM AS A RESULT OF, OR
ARISING OUT OF, OR RELATING TO (A) ANY TENDER OFFER, MERGER, PURCHASE OF EQUITY
INTERESTS, PURCHASE OF ASSETS (INCLUDING THE RELATED TRANSACTIONS) OR OTHER
SIMILAR TRANSACTION FINANCED OR PROPOSED TO BE FINANCED IN WHOLE OR IN PART,
DIRECTLY OR INDIRECTLY, WITH THE PROCEEDS OF ANY OF THE LOANS, (B) THE USE,
HANDLING, RELEASE, EMISSION, DISCHARGE, TRANSPORTATION, STORAGE, TREATMENT OR
DISPOSAL OF ANY HAZARDOUS SUBSTANCE AT ANY PROPERTY OWNED OR LEASED BY ANY
GRANTOR, (C) ANY VIOLATION OF ANY ENVIRONMENTAL LAWS WITH RESPECT TO CONDITIONS
AT ANY PROPERTY OWNED OR LEASED BY ANY GRANTOR OR THE OPERATIONS CONDUCTED
THEREON, (D) THE INVESTIGATION, CLEANUP OR REMEDIATION OF OFFSITE LOCATIONS AT
WHICH ANY GRANTOR OR ITS RESPECTIVE PREDECESSORS ARE ALLEGED TO HAVE DIRECTLY
OR INDIRECTLY DISPOSED OF HAZARDOUS SUBSTANCES OR (E) THE EXECUTION,
DELIVERY, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT BY ANY OF THE LENDER PARTIES OR ISSUING BANK, EXCEPT FOR ANY SUCH
INDEMNIFIED LIABILITIES ARISING ON ACCOUNT OF THE APPLICABLE LENDER PARTY’S OR
ISSUING BANK’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.  IF AND TO THE EXTENT THAT THE FOREGOING UNDERTAKING
MAY BE UNENFORCEABLE FOR ANY REASON, EACH GRANTOR HEREBY AGREES TO MAKE THE
MAXIMUM CONTRIBUTION TO THE PAYMENT AND SATISFACTION OF EACH OF THE INDEMNIFIED
LIABILITIES WHICH IS PERMISSIBLE UNDER APPLICABLE LAW.  ALL OBLIGATIONS PROVIDED FOR IN THIS SECTION 8.3
SHALL SURVIVE REPAYMENT OF ALL (AND SHALL BE) SECURED OBLIGATIONS (AND
TERMINATION OF ALL COMMITMENTS UNDER THE CREDIT AGREEMENT), ANY FORECLOSURE
UNDER, OR ANY MODIFICATION, RELEASE OR DISCHARGE OF, ANY OR ALL OF THE
COLLATERAL DOCUMENTS AND TERMINATION OF THIS AGREEMENT.

 

8.4                                 Enforcement
Expenses.  (a) Each Grantor agrees,
on a joint and several basis, to pay or reimburse within three days of demand
each Lender and the Administrative Agent for all reasonable out-of-pocket costs
and expenses (subject to the limitations on the number of counsel set forth in Section 15.5
of the Credit Agreement, including, without duplication of any provision of
this Agreement, Attorney Costs) incurred in collecting against any Guarantor
under the guaranty contained in Section 2 or otherwise enforcing or
preserving any rights under this Agreement and the other Loan Documents.

 

(b)                                 Each
Grantor agrees to pay, and to save the Administrative Agent and the Lenders
harmless from, any and all liabilities with respect to, or resulting from any
delay caused by any Grantor in paying, any and all stamp, excise, sales or
other taxes which may be payable

 

28

 

or
determined to be payable with respect to any of the Collateral or in connection
with any of the transactions contemplated by this Agreement.

 

(c)                                  The
agreements in this Section 8.4 shall survive repayment of all (and
shall be) Secured Obligations (and termination of all commitments under the
Credit Agreement), any foreclosure under, or any modification, release or
discharge of, any or all of the Collateral Documents and termination of this
Agreement.

 

8.5                                 Captions.  Section captions used in this Agreement
are for convenience only and shall not affect the construction of this
Agreement.

 

8.6                                 Nature
of Remedies.  All Secured Obligations
of each Grantor and rights of the Administrative Agent and the Lenders
expressed herein or in any other Loan Document shall be in addition to and not
in limitation of those provided by applicable law.  No failure to exercise and no delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
remedy, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.

 

8.7                                 Counterparts.  This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same
Agreement.  Receipt by telecopy of any
executed signature page to this Agreement or any other Loan Document shall
constitute effective delivery of such signature page.

 

8.8                                 Severability.  The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.

 

8.9                                 Entire
Agreement.  This Agreement, together
with the other Loan Documents, embodies the entire agreement and understanding
among the parties hereto and supersedes all prior or contemporaneous agreements
and understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof and any prior arrangements made with respect to the
payment by any Grantor of (or any indemnification for) any fees, costs or
expenses payable to or incurred (or to be incurred) by or on behalf of the
Administrative Agent or the Lenders.

 

8.10                           Successors;
Assigns.  This Agreement shall
be binding upon Grantors, the Lenders and the Administrative Agent and
their respective successors and assigns, and shall inure to the benefit of
Grantors, Lenders and the Administrative Agent and the successors and assigns
of the Lenders and the Administrative Agent. 
No other Person shall be a direct or indirect legal beneficiary of, or
have any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents. 
No Grantor may assign or transfer any of its rights or Obligations under
this Agreement without the prior written consent of the Administrative Agent.

 

29

 

8.11                           Governing
Law.  THIS AGREEMENT SHALL BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

 

8.12                           Forum
Selection; Consent to Jurisdiction. 
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION
WITH THIS AGREEMENT SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS
OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK; PROVIDED THAT NOTHING IN THIS AGREEMENT
SHALL BE DEEMED OR OPERATE TO PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING
SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION IN WHICH COLLATERAL
IS LOCATED.  EACH GRANTOR HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH
ABOVE.  EACH GRANTOR FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK.  EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.

 

8.13                           Waiver
of Jury Trial.  EACH GRANTOR, THE
ADMINISTRATIVE AGENT AND EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

8.14                           Set-off.  Each Grantor agrees that the Administrative
Agent and each Lender have all rights of set-off and bankers’ lien provided by
applicable law, and in addition thereto, each Grantor agrees that at any time
any Event of Default occurs and is continuing, the Administrative Agent and
each Lender may apply to the payment of any Secured Obligations, whether or not
then due, any and all balances, credits, deposits, accounts or moneys of such
Grantor then or thereafter with the Administrative Agent or such Lender.

 

8.15                           Acknowledgements.  Each Grantor hereby acknowledges that:

 

(a)                                  it has been advised by counsel in the negotiation, execution
and delivery of this Agreement and the other Loan Documents to which it is a
party;

 

30

 

(b)                                 neither
the Administrative Agent nor any Lender has any fiduciary relationship with or
duty to any Grantor arising out of or in connection with this Agreement or any
of the other Loan Documents, and the relationship between the Grantors, on the
one hand, and the Administrative Agent and the Lenders, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and

 

(c)                                  no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Lenders or among the Grantors and the Lenders.

 

8.16                           Additional
Grantors.  Each Loan Party that is
required to become a party to this Agreement pursuant to Section 10.10
of the Credit Agreement shall become a Grantor for all purposes of this
Agreement upon execution and delivery by such Loan Party of a joinder agreement
in the form of Exhibit G to the Credit Agreement.

 

8.17                           Releases.  (a) At such time as the Secured Obligations
have been Paid in Full, the Collateral shall be automatically released from the
Liens created hereby, and this Agreement and all obligations (other than those
expressly stated to survive such termination) of the Administrative Agent and
each Grantor hereunder shall terminate, all without delivery of any instrument
or performance of any act by any party, and all rights to the Collateral shall
revert to the Grantors.  At the request
and sole expense of any Grantor concurrently with any such termination, the
Administrative Agent shall deliver to the Grantors any Collateral held by the
Administrative Agent hereunder, and execute and deliver to the Grantors such
documents as the Grantors shall reasonably request to evidence such
termination.

 

(b)                                 If
any of the Collateral shall be sold, transferred or otherwise disposed of by
any Grantor in a transaction permitted by the Credit Agreement, then the
Administrative Agent, at the request and sole expense of such Grantor, shall
execute and deliver to such Grantor all releases or other documents reasonably
necessary or desirable for the release of the Liens created hereby on such
Collateral.  At the request and sole
expense of the Borrowers, a Guarantor shall be released from its obligations hereunder
in the event that all the equity interests of such Guarantor shall be sold,
transferred or otherwise disposed of in a transaction permitted by the Credit
Agreement; provided that the Borrowers shall have delivered to the
Administrative Agent, with reasonable notice prior to the date of the proposed
release, a written request for release identifying the relevant Guarantor and
the terms of the sale or other disposition in reasonable detail, including the
price thereof and any expenses in connection therewith, together with a
certification by the Borrowers stating that such transaction is in compliance
with the Credit Agreement and the other Loan Documents.

 

8.18                           Obligations
and Liens Absolute and Unconditional. 
Each Grantor understands and agrees that the obligations of each Grantor
under this Agreement shall be construed as a continuing, absolute and
unconditional without regard to (a) the validity or enforceability of any Loan
Document, any of the Secured Obligations or any other collateral security
therefor or guaranty or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent or any Lender, (b) any
defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by any Grantor
or any other Person against the Administrative Agent or any Lender, or

 

31

 

(c) any other circumstance
whatsoever (with or without notice to or knowledge of any Grantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of any Grantor for the Secured Obligations, in bankruptcy or in any
other instance.  When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against any
Grantor, the Administrative Agent or any Lender may, but shall be under no
obligation to, make a similar demand on or otherwise pursue such rights and
remedies as it may have against any other Grantor or any other Person or
against any collateral security or guaranty for the Secured Obligations or any
right of offset with respect thereto, and any failure by the Administrative
Agent or any Lender to make any such demand, to pursue such other rights or
remedies or to collect any payments from any other Grantor or any other Person
or to realize upon any such collateral security or guaranty or to exercise any
such right of offset, or any release of any other Grantor or any other Person
or any such collateral security, guaranty or right of offset, shall not relieve
any Grantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Administrative Agent or any Lender against any
Grantor.  For the purposes hereof “demand”
shall include the commencement and continuance of any legal proceedings.

 

8.19                           Reinstatement.  This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Grantor or any Issuer for liquidation or reorganization, should Grantor or any
Issuer become insolvent or make an assignment for the benefit of creditors or
should a receiver or trustee be appointed for all or any significant part of
Grantor’s or and Issuer’s assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Secured Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by
any obligee of the Secured Obligations, whether as a “voidable preference”, “fraudulent
conveyance”, or otherwise, all as though such payment or performance had not
been made.  In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.

 

[signature pages follow]

 

32

 

Each of the undersigned
has caused this Guaranty and Collateral Agreement to be duly executed and
delivered as of the date first above written.

 

	
   

  	
  RUSS
  BERRIE AND COMPANY, INC., a New Jersey

  corporation, as a Borrower and as the Loan Party

  Representative

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name: John
  D.Wille

  
	
   

  	
  Title: Vice
  President and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KIDS
  LINE, LLC, a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name: John
  D.Wille

  
	
   

  	
  Title: Vice
  President, Treasurer and Assistant Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SASSY,
  INC., an Illinois corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name: John
  D.Wille

  
	
   

  	
  Title: Vice
  President, Treasurer and Assistant Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RUSS
  BERRIE & CO. (WEST), INC., a California

  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name: John D.Wille

  
	
   

  	
  Title: Treasurer
  and Assistant Secretary

  

 

Signature Page to Guaranty and Collateral Agreement

 

 

	
   

  	
  RUSS
  BERRIE AND COMPANY PROPERTIES,

  INC., a New Jersey corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name: John
  D.Wille

  
	
   

  	
  Title: Treasurer
  and Assistant Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RUSSPLUS,
  INC., a New Jersey corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name: John
  D.Wille

  
	
   

  	
  Title: Treasurer
  and Assistant Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RUSS
  BERRIE AND COMPANY INVESTMENTS,

  INC., a New Jersey corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name: John
  D.Wille

  
	
   

  	
  Title: Treasurer
  and Assistant Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BOA
  DONE, INC., a West Virginia corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John D.
  Wille

  	
   

  
	
   

  	
  Name: John
  D.Wille

  
	
   

  	
  Title: Vice
  President, Treasurer and Assistant Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LASALLE
  BUSINESS CREDIT, LLC, as

  Administrative Agent and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C. John
  Mostofi

  	
   

  
	
   

  	
  Name: C. John
  Mostofi

  
	
   

  	
  Title: Senior
  Vice President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00087-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00087-of-00352.parquet"}]]