Document:

Exhibit 4.10

 

Execution
Version

 

 

CREDIT
AGREEMENT

 

dated as of March 14, 2006

 

among

 

KIDS LINE,
LLC

 

and

 

SASSY, INC.,

as the Borrowers,

 

AND
TOGETHER WITH CERTAIN SUBSIDIARIES 

OF THE FOREGOING BORROWERS,

as the Loan Parties

 

THOSE
FINANCIAL INSTITUTIONS PARTY HERETO,
as the Lenders,

 

LASALLE
BANK NATIONAL ASSOCIATION,

as the Administrative Agent and the Arranger,

 

SOVEREIGN
BANK,

as Syndication Agent,

 

and

 

BANK OF
AMERICA, N.A.,

as Documentation Agent

 

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 1

  	
  DEFINITIONS

  	
  1

  
	
  1.1

  	
  Definitions

  	
  1

  
	
  1.2

  	
  Other Interpretive
  Provisions

  	
  28

  
	
   

  	
   

  	
   

  
	
  SECTION 2

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

  	
  29

  
	
  2.1

  	
  Commitments

  	
  29

  
	
  2.2

  	
  Loan Procedures

  	
  30

  
	
  2.3

  	
  Letter of Credit
  Procedures

  	
  33

  
	
  2.4

  	
  Commitments Several

  	
  35

  
	
  2.5

  	
  Certain Conditions

  	
  35

  
	
  2.6

  	
  Loan Party
  Representative

  	
  35

  
	
   

  	
   

  	
   

  
	
  SECTION 3

  	
  EVIDENCING OF LOANS

  	
  36

  
	
  3.1

  	
  Notes

  	
  36

  
	
  3.2

  	
  Recordkeeping

  	
  36

  
	
   

  	
   

  	
   

  
	
  SECTION 4

  	
  INTEREST

  	
  37

  
	
  4.1

  	
  Interest Rates

  	
  37

  
	
  4.2

  	
  Interest Payment Dates

  	
  37

  
	
  4.3

  	
  Setting and Notice of
  LIBOR Rates

  	
  37

  
	
  4.4

  	
  Computation of Interest

  	
  37

  
	
   

  	
   

  	
   

  
	
  SECTION 5

  	
  FEES

  	
  37

  
	
  5.1

  	
  Non-Use Fee

  	
  37

  
	
  5.2

  	
  Letter of Credit Fees.

  	
  38

  
	
  5.3

  	
  Administrative Agent’s
  Fees

  	
  38

  
	
  5.4

  	
  Termination Fee

  	
  38

  
	
   

  	
   

  	
   

  
	
  SECTION 6

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

  	
  38

  
	
  6.1

  	
  Reduction and
  Termination of the Revolving Commitment

  	
  38

  
	
  6.2

  	
  Prepayments

  	
  39

  
	
  6.3

  	
  Manner of Prepayments

  	
  40

  
	
  6.4

  	
  Repayments

  	
  41

  

 

i

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 7

  	
  MAKING AND PRORATION OF
  PAYMENTS; SETOFF; TAXES

  	
  41

  
	
  7.1

  	
  Making of Payments

  	
  41

  
	
  7.2

  	
  Application of Certain
  Payments

  	
  42

  
	
  7.3

  	
  Due Date Extension

  	
  43

  
	
  7.4

  	
  Setoff

  	
  43

  
	
  7.5

  	
  Proration of Payments

  	
  43

  
	
  7.6

  	
  Taxes

  	
  43

  
	
   

  	
   

  	
   

  
	
  SECTION 8

  	
  INCREASED COSTS; SPECIAL
  PROVISIONS FOR LIBOR LOANS

  	
  45

  
	
  8.1

  	
  Increased Costs

  	
  45

  
	
  8.2

  	
  Basis for Determining
  Interest Rate Inadequate or Unfair

  	
  46

  
	
  8.3

  	
  Changes in Law
  Rendering LIBOR Loans Unlawful

  	
  47

  
	
  8.4

  	
  Funding Losses

  	
  47

  
	
  8.5

  	
  Right of Lenders to
  Fund through Other Offices

  	
  47

  
	
  8.6

  	
  Discretion of Lenders
  as to Manner of Funding

  	
  47

  
	
  8.7

  	
  Mitigation of
  Circumstances; Replacement of Lenders

  	
  48

  
	
  8.8

  	
  Conclusiveness of
  Statements; Survival of Provisions

  	
  48

  
	
   

  	
   

  	
   

  
	
  SECTION 9

  	
  REPRESENTATIONS AND WARRANTIES

  	
  49

  
	
  9.1

  	
  Organization

  	
  49

  
	
  9.2

  	
  Authorization; No Conflict

  	
  49

  
	
  9.3

  	
  Validity and Binding
  Nature

  	
  49

  
	
  9.4

  	
  Financial Condition

  	
  49

  
	
  9.5

  	
  No Material Adverse
  Change

  	
  50

  
	
  9.6

  	
  Litigation and
  Contingent Liabilities

  	
  50

  
	
  9.7

  	
  Ownership of
  Properties; Liens

  	
  50

  
	
  9.8

  	
  Equity Ownership;
  Subsidiaries

  	
  50

  
	
  9.9

  	
  Pension Plans

  	
  50

  
	
  9.10

  	
  Investment Company Act

  	
  51

  
	
  9.11

  	
  Public Utility Holding
  Company Act

  	
  52

  
	
  9.12

  	
  Regulation U

  	
  52

  

 

ii

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  9.13

  	
  Taxes

  	
  52

  
	
  9.14

  	
  Solvency, etc

  	
  52

  
	
  9.15

  	
  Environmental Matters

  	
  53

  
	
  9.16

  	
  Insurance

  	
  53

  
	
  9.17

  	
  Real Property

  	
  54

  
	
  9.18

  	
  Information

  	
  54

  
	
  9.19

  	
  Intellectual Property

  	
  54

  
	
  9.20

  	
  Burdensome Obligations

  	
  55

  
	
  9.21

  	
  Labor Matters

  	
  55

  
	
  9.22

  	
  No Default

  	
  55

  
	
  9.23

  	
  Related Agreements, etc

  	
  55

  
	
  9.24

  	
  Subordinated Debt

  	
  55

  
	
  9.25

  	
  Eligible Accounts and
  Eligible Inventory

  	
  55

  
	
  9.26

  	
  Other Debt

  	
  55

  
	
   

  	
   

  	
   

  
	
  SECTION 10

  	
  AFFIRMATIVE COVENANTS

  	
  55

  
	
  10.1

  	
  Reports, Certificates
  and Other Information

  	
  56

  
	
  10.2

  	
  Books, Records and
  Inspections

  	
  60

  
	
  10.3

  	
  Maintenance of
  Property; Insurance

  	
  61

  
	
  10.4

  	
  Compliance with Laws;
  Payment of Taxes and Liabilities

  	
  62

  
	
  10.5

  	
  Maintenance of
  Existence, etc

  	
  62

  
	
  10.6

  	
  Reserved

  	
  62

  
	
  10.7

  	
  Use of Proceeds

  	
  62

  
	
  10.8

  	
  Employee Benefit Plans

  	
  63

  
	
  10.9

  	
  Environmental Matters

  	
  63

  
	
  10.10

  	
  New Subsidiaries

  	
  64

  
	
  10.11

  	
  Deposit Accounts

  	
  65

  
	
  10.12

  	
  Independent Directors

  	
  66

  
	
   

  	
   

  	
   

  
	
  SECTION 11

  	
  NEGATIVE COVENANTS

  	
  66

  
	
  11.1

  	
  Debt

  	
  66

  
	
  11.2

  	
  Liens

  	
  67

  

 

iii

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  11.3

  	
  Restricted Payments

  	
  69

  
	
  11.4

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

  	
  71

  
	
  11.5

  	
  Modification of
  Organizational Documents

  	
  74

  
	
  11.6

  	
  Transactions with
  Affiliates

  	
  74

  
	
  11.7

  	
  Unconditional Purchase
  Obligations

  	
  74

  
	
  11.8

  	
  Inconsistent Agreements

  	
  75

  
	
  11.9

  	
  Business Activities

  	
  75

  
	
  11.10

  	
  Investments

  	
  75

  
	
  11.11

  	
  Restriction of
  Amendments to Certain Documents

  	
  77

  
	
  11.12

  	
  Fiscal Year

  	
  77

  
	
  11.13

  	
  Financial Covenants

  	
  77

  
	
  11.14

  	
  Cancellation of Debt

  	
  78

  
	
  11.15

  	
  Creation of
  Subsidiaries

  	
  78

  
	
  11.16

  	
  Commingling of Funds

  	
  78

  
	
   

  	
   

  	
   

  
	
  SECTION 12

  	
  EFFECTIVENESS; CONDITIONS OF
  LENDING, ETC

  	
  78

  
	
  12.1

  	
  Initial Credit
  Extension

  	
  78

  
	
  12.2

  	
  Conditions

  	
  81

  
	
   

  	
   

  	
   

  
	
  SECTION 13

  	
  EVENTS OF DEFAULT AND THEIR
  EFFECT

  	
  82

  
	
  13.1

  	
  Events of Default

  	
  82

  
	
  13.2

  	
  Effect of Event of
  Default

  	
  84

  
	
   

  	
   

  	
   

  
	
  SECTION 14

  	
  THE ADMINISTRATIVE AGENT

  	
  85

  
	
  14.1

  	
  Appointment and
  Authorization

  	
  85

  
	
  14.2

  	
  Issuing Lender

  	
  85

  
	
  14.3

  	
  Delegation of Duties

  	
  85

  
	
  14.4

  	
  Exculpation of
  Administrative Agent

  	
  85

  
	
  14.5

  	
  Reliance by
  Administrative Agent

  	
  86

  
	
  14.6

  	
  Notice of Default

  	
  86

  
	
  14.7

  	
  Credit Decision

  	
  86

  
	
  14.8

  	
  Indemnification

  	
  87

  

 

iv

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  14.9

  	
  Administrative Agent in
  Individual Capacity

  	
  87

  
	
  14.10

  	
  Successor
  Administrative Agent

  	
  88

  
	
  14.11

  	
  Collateral Matters

  	
  88

  
	
  14.12

  	
  Administrative Agent May File
  Proofs of Claim

  	
  89

  
	
  14.13

  	
  Other Agents; Arrangers
  and Managers

  	
  89

  
	
   

  	
   

  	
   

  
	
  SECTION 15

  	
  GENERAL

  	
  90

  
	
  15.1

  	
  Waiver; Amendments

  	
  90

  
	
  15.2

  	
  Confirmations

  	
  90

  
	
  15.3

  	
  Notices

  	
  90

  
	
  15.4

  	
  Computations

  	
  91

  
	
  15.5

  	
  Costs, Expenses and
  Taxes

  	
  91

  
	
  15.6

  	
  Assignments;
  Participations

  	
  92

  
	
  15.7

  	
  Register

  	
  93

  
	
  15.8

  	
  GOVERNING LAW

  	
  94

  
	
  15.9

  	
  Confidentiality

  	
  94

  
	
  15.10

  	
  Severability

  	
  94

  
	
  15.11

  	
  Nature of Remedies

  	
  95

  
	
  15.12

  	
  Entire Agreement

  	
  95

  
	
  15.13

  	
  Counterparts

  	
  95

  
	
  15.14

  	
  Successors and Assigns

  	
  95

  
	
  15.15

  	
  Captions

  	
  95

  
	
  15.16

  	
  Patriot Act Notice

  	
  95

  
	
  15.17

  	
  Indemnification by the
  Loan Parties

  	
  95

  
	
  15.18

  	
  Nonliability of Lenders

  	
  96

  
	
  15.19

  	
  FORUM SELECTION AND
  CONSENT TO JURISDICTION

  	
  97

  
	
  15.20

  	
  WAIVER OF JURY TRIAL

  	
  97

  
	
  15.21

  	
  Other Waivers

  	
  97

  
	
  15.22

  	
  Joint and Several
  Liability

  	
  98

  
	
  15.23

  	
  Revival and
  Reinstatement of Obligations

  	
  98

  

 

v

 

	
   

  	
   

  	
   

  
	
   

  	
  ANNEXES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ANNEX A

  	
  Lenders and Pro Rata Shares

  	
   

  
	
  ANNEX B

  	
  Addresses for Notices

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SCHEDULES

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  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

  	
   

  
	
  SCHEDULE 12.1.18

  	
  Independent Director Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A-1

  	
  Form of Revolving Loan Note (Section 3.1)

  	
   

  
	
  EXHIBIT A-2

  	
  Form of Term Loan Note (Section 3.1)

  	
   

  
	
  EXHIBIT B

  	
  Form of Compliance Certificate (Section 1.1)

  	
   

  
	
  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 10.10)

  	
   

  
	
  EXHIBIT H

  	
  Form of Intercompany Note (Section 11.1)

  	
   

  

 

vi

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT
dated as of March 14, 2006 (this “Agreement”) is entered into by
and among KIDS LINE, LLC, a Delaware limited liability company (“Kids Line”),
SASSY, INC., an Illinois corporation (“Sassy”), 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”
(Kids Line, Sassy and such Domestic Wholly-Owned Subsidiaries are sometimes
referred to herein collectively as the “Borrowers” and individually as a
“Borrower”), those Domestic Subsidiaries that are or, in accordance with
Section 10.10 of this Agreement, may hereafter become parties
hereto as Guarantors (such Domestic Subsidiaries are sometimes referred to
herein collectively as the “Guarantors” and individually as a “Guarantor”),
the financial institutions that are or may from time to time become
parties hereto (together with their respective successors and assigns, the “Lenders”),
LASALLE BANK NATIONAL ASSOCIATION (in its individual capacity, “LaSalle”),
as administrative agent (in such capacity, the “Administrative Agent”)
for the Lenders, SOVEREIGN BANK, as syndication agent (in such capacity, the “Syndication
Agent”), and BANK OF AMERICA, N.A., as documentation agent (in such
capacity, the “Documentation Agent”).

 

The Lenders have agreed
to make available to the Borrowers a certain term loan facility and a revolving
credit facility (which includes letters of credit) 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 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.

 

Account Debtor
is defined in the UCC.

 

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 any Borrower or a Domestic
Wholly-Owned Subsidiary of a Borrower 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(d).

 

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 Lender 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 Lender 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 the Fee letter dated as of the date hereof among the Borrowers and the
Administrative Agent.

 

Agreement
- see the Preamble.

 

Applicable Margin
means, 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) LIBOR
Loans shall be the percentage set forth under the column “LIBOR Margin”, (ii) Base
Rate Loans shall be the percentage set forth under the column “Base Rate Margin”,
(iii) the Non-Use Fee Rate shall be the percentage set forth under the
column “Non-Use Fee Rate” and (iv) the L/C Fee shall be the percentage set
forth under the column “L/C Fee Rate”:

 

2

 

	
  Level

  	
   

  	
  Total Debt

  to EBITDA Ratio

  	
   

  	
  LIBOR

  Margin

  	
   

  	
  Base Rate

  Margin

  	
   

  	
  Non-Use

  Fee Rate

  	
   

  	
  L/C Fee

  Rate

  	
   

  
	
  I

  	
   

  	
  Greater than 2.50:1

  	
   

  	
  2.50

  	
  %

  	
  1.00

  	
  %

  	
  0.50

  	
  %

  	
  2.50

  	
  %

  
	
  II

  	
   

  	
  Greater than 2.00:1 but less than or equal
  to 2.50:1

  	
   

  	
  2.25

  	
  %

  	
  0.75

  	
  %

  	
  0.50

  	
  %

  	
  2.25

  	
  %

  
	
  III

  	
   

  	
  Greater than 1.50:1 but less or equal to
  2.00:1

  	
   

  	
  2.00

  	
  %

  	
  0.50

  	
  %

  	
  0.50

  	
  %

  	
  2.00

  	
  %

  
	
  IV

  	
   

  	
  Less than or equal to 1.50:1

  	
   

  	
  1.75

  	
  %

  	
  0.25

  	
  %

  	
  0.50

  	
  %

  	
  1.75

  	
  %

  

 

The LIBOR Margin, the
Base Rate Margin, the Non-Use Fee Rate and the L/C Fee Rate shall be determined
and adjusted, to the extent applicable, on the first (1st) Business Day after
the Loan Party Representative provides the Administrative Agent the annual and
quarterly financial statements and other information pursuant to Sections
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 Loan Party
Representative 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 LIBOR Margin, the Base Rate 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 (1st) 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 Margin to be in effect on the Closing Date and
thereafter, until delivery of the financial statements and Compliance
Certificate required to be delivered with respect to the Borrowers and their
Subsidiaries for both Fiscal Year 2005 and the Fiscal Quarter ending March 31,
2006, shall be based on Level II.

 

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 (a) the Disposition of any asset which is to be replaced, and
is in fact replaced, within 180 days with another asset performing the same or
a similar function, (b) the sale or lease of inventory in the ordinary
course of business and (c) other Dispositions in any Fiscal Year the Net
Cash Proceeds of which do not in the aggregate exceed $250,000.

 

Assignee
- see Section 15.6.1.

 

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.

 

3

 

Bank Product Agreements
means those certain cash management service agreements entered into from time
to time between any Loan Party and LaSalle, any 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, any Lender or its 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, any Lender or any of their
respective Affiliates as a result of the Administrative Agent or LaSalle any
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.

 

Bank Products
means any service or facility extended to any Loan Party by LaSalle, any 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 the United States Bankruptcy Code, Title 11 of United States Code (11
U.S.C. § 101, et seq.), together with the rules promulgated
thereunder, in each case, as amended.

 

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, with respect to the Company, 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 the Preamble.

 

Borrowing Base
means an amount equal to:

 

(A)                              means
an amount equal to the total of (a) up to 85% of the unpaid amount of all
Eligible Accounts plus (b) the least of (1) 50% of the
Revolving Commitments of all Lenders as in effect from time to time, (2) up
to 55% of the value of all Eligible Inventory valued at the lower of cost or
market and (3) up to 80% 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
Rent Reserve, if any, in effect at such time; and minus

 

4

 

(C)                                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

 

(D)                               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.

 

BSA -
see Section 10.4.

 

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.

 

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;
provided, that for purposes of this Agreement, including the calculation of
Excess Cash Flow, the Fixed Charge Coverage Ratio or compliance with Section 11.13.4,
the reinvestment of sale or insurance proceeds arising from a sale (permitted
hereunder) or casualty loss of a capital asset in replacement capital assets
having the same or substantially similar use as the affected capital asset
shall not be included as a Capital Expenditure hereunder to the extent of such
reinvestment.

 

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.

 

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

 

5

 

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 or any Lender 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 in which 90% or more of the assets invested
satisfy 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
common stock of the Company ceases to be listed and traded on a national stock
exchange;

 

(d)                                 the
Company ceases to own and control, directly, 100% of the shares of the Capital
Securities of the Borrowers, unless otherwise permitted hereunder,

 

(e)                                  any
Borrower ceases to own and control, directly or indirectly, 100% of the shares
of the Capital Securities of any Loan Party which is its Subsidiary, unless
otherwise permitted hereunder, or

 

(f)                                    (i) the
Company consolidates with or merges with or into another entity (other than a
Loan Party that is a Domestic Wholly-Owned Subsidiary) 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 that is a
Domestic Wholly-Owned Subsidiary).

 

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.

 

6

 

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

 

Company
means Russ Berrie and Company, Inc., a New Jersey corporation.

 

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 Borrowers and their consolidated Subsidiaries, on a
consolidated basis, for any period, the net income (or loss) of the Borrowers
and their 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.

 

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

 

7

 

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 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.

 

Contractual Redemption
- see the definition of “Excess Cash Flow.”

 

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 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

 

8

 

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 Subordinated 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(i).

 

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
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 a Borrower.

 

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 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 (as amended as
of the Closing Date to, among other things, release the Company therefrom),
that certain Subordinated Security Agreement, dated as of December 15,
2004 (as amended as of the Closing Date), executed by the Company and certain
of its subsidiaries party thereto in favor of the Earnout Sellers Agent for the
benefit of the Earnout Sellers as security for the such Person’s obligations
with respect to payment (or guaranty of payment) of the Earnout Consideration,
that certain Subordinated Mortgage by and from Sassy 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).

 

9

 

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 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 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 Borrowers and their 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, (vii) if expensed, reasonable costs, expenses
and fees incurred in connection with the negotiation, execution and delivery of
the Loan Documents and the financings contemplated thereby, (viii) if
expensed, the reasonable fees and expenses paid to any Independent Director and
incremental auditor’s fees and expenses relating to the preparation of separate
audited financial statements of the Borrowers (distinct from those of the
Company) as required pursuant to Section 10.1.1(a) 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, 11.13.2 and 11.13.3 and the Applicable
Margin, EBITDA for Fiscal Quarters ended on June 30, 2005, September 30,
2005 and December 31, 2005 shall be deemed to be $8,792,000, $9,316,000
and $9,165,000, respectively.

 

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;

 

10

 

(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;
provided that, if subject to any such other assignment, claim or Lien (other
than the Earnout Sellers 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;

 

(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

 

11

 

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 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 $5,000,000 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 not 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 25% 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 that (i) with respect to Toys ‘R’
Us and Babies ‘R’ Us, collectively, if the aggregate amount of all Accounts
owed by the such entities (including those owned by its Affiliated Account
Debtors) thereon exceeds, collectively, 55% of the aggregate amount of all
Eligible Accounts at such time, or (ii) with respect to 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 Investor Services, Inc., if the aggregate amount of all Accounts
owed by such entity (including those owned by its Affiliated Account Debtors)
thereon exceeds, collectively, 35% of the aggregate amount of all Eligible
Accounts at such time, then, in any such case, all Accounts owed by the
applicable

 

12

 

Account Debtor(s)
and its Affiliated Account Debtors in excess of the amounts determined above
shall be deemed ineligible;

 

(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
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; (iv) any
Affiliate of a Person of the type set forth in clause (i), (ii) or (iii),
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.

 

13

 

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;
provided that, if subject to any such other assignment, claim or lien (other
than the Earnout Sellers’ 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 $3,000,000 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 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

 

14

 

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 Cash Flow
means, for any period, (a) EBITDA for such period, minus (b) the sum,
without duplication, of (i) scheduled repayments of principal of the Term
Loan made during such period, plus (ii) voluntary prepayments of the Term
Loan pursuant to Section 6.2.1 during such period (including any
other fees or expenses resulting from such prepayment paid during such period
in connection with such prepayment), plus (iii) cash payments made in such
period with respect to unfinanced Capital Expenditures, plus (iv) all
cash payments made or cash dividends or distributions to the Company by the
Borrowers to make restricted payments pursuant to, and to the extent permitted
by, Sections 11.3(iii), 11.3(v), 11.3(vii) (to the
extent that any such redemption or repurchase as described in such clause is
required pursuant to a contractual requirement to make such redemption or
repurchase which is either in effect as of the Closing Date or which is entered
into thereafter in accordance with the ordinary course of the Company’s
business, a “Contractual Redemption”) and 11.3(viii), plus
(v) cash Interest Expense of the Loan Parties during such period, plus
(vi) other scheduled payments of principal on Debt permitted under Section 11.1
made during such period (but only to the extent such payment was

 

15

 

permitted pursuant
to the terms hereof), plus (or minus) (vii) any increases in
working capital (or decreases in working capital) during such period, plus
(viii) the reasonable fees and expenses paid to the Independent Directors
during such period, plus (ix) fees required to be paid by the
Borrowers to the Administrative Agent, the Lenders or the Issuing Lender
pursuant to the Loan Documents during such period, plus (x) fees and
expenses relating to the initial effectuation of the Spin-Off and allocable to
the Borrowers during such period, plus (xi) incremental auditor’s fees
and expenses relating to the preparation of separate audited financial
statements of the Borrowers (distinct from those of the Company) as required
pursuant to Section 10.1.1(a).

 

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.

 

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.

 

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 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 Borrowers and their consolidated Subsidiaries,
which period shall be the 12-month period 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”)
refer 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 any
period ending thereon for the Borrowers and their consolidated Subsidiaries on
a consolidated basis, the ratio of (a) the total for such period of EBITDA
(calculated, where applicable, using

 

16

 

the EBITDA values
set forth in the definition thereof) minus the sum of (i) all unfinanced
Capital Expenditures of such Persons incurred during such period, and (ii) all
cash dividends or distributions paid during such period (including all cash
dividends or distributions to the Company by the Borrowers during such period
for the sole purpose of permitting the Company to pay income taxes as permitted
pursuant to Section 11.3(iii)) to (b) the sum for such
period for the Borrowers and their consolidated Subsidiaries on a consolidated
basis of all scheduled interest and principal payments of Debt (other than the
Earnout Consideration), including the principal component of any Capital Lease
(in each case, whether or not in fact paid during such period), paid (or which
should have been paid) in cash.

 

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
- see the Preamble. A Guarantor is 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.

 

17

 

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.

 

Indemnified Liabilities
- see Section 15.17.

 

Independent Director
- means, any person who (i) is not a stockholder (whether direct, indirect
or beneficial), customer or supplier of the Company, any Loan Party or any of the
foregoing’s Affiliates; (ii) other than in their capacity as an
Independent Director, is not a director, officer, employee, Affiliate or
associate (as such term is defined in Rule 14a-1(a) promulgated under
the Exchange Act) of the Company, any Loan Party or any of the foregoing’s
Affiliates; (iii) is not a trustee, conservator or receiver for the
Company, any Loan Party or any of the foregoing’s Affiliates and (iv) is
not a person related to any person referred to in clauses (i), (ii) or
(iii); and (v) has at least three years of prior experience as an
independent director for a corporation or other business entity whose charter
documents require an independent director’s consent to certain actions,
including, without limitation, the institution of bankruptcy or insolvency
proceedings against it; provided that a person may be an
Independent Director of more than one Borrower.

 

Interest Expense
means for any period the consolidated interest expense of the Borrowers and
their 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 Termination Date, in the case of any Interest
Period relating to any Revolving Loan or the Term Loan; and

 

18

 

(d)                                 there
may be no more than six (6) Interest Periods outstanding at any time.

 

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, 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 Lender
means LaSalle, 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
- see the Preamble.

 

Kids Line Purchase
Agreement means that certain Membership Interest Purchase
Agreement, dated as of December 15, 2004, among Kids Line, the Company and
the various seller parties thereto, as the same has been modified by that
certain letter agreement dated on or about the date hereof among the Company,
the Borrowers, the Earnout Sellers (through their authorized representatives)
and the Earnout Sellers Agent.

 

LaSalle
- see the Preamble.

 

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 Lender
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 -
see the Preamble. In addition (a) Lender shall include the Issuing
Lender and the Administrative Agent to the extent it makes any loans or
advances any financial accommodations under this Agreement or any other Loan
Document and (b) for the purpose of identifying a Person 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 Person
entitled to indemnification and exculpation as a Lender or a Lender party under
this Agreement or any other Loan Document, the term Lender and Lender Party
shall include Affiliates of a Lender providing a Bank Product pursuant to this
Agreement or any other Loan Document and the transactions contemplated hereby
or thereby.

 

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.

 

19

 

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.

 

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.

 

Loan Documents
means this Agreement, the Notes, the Letters of Credit, the Master Letter of
Credit Agreement, the L/C Applications, the Agent Fee Letter, the Collateral
Documents, 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.

 

Loan Party
means, collectively, each other Borrower and each Guarantor, and Loan
Parties means all such Persons, collectively.

 

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 and, the Term Loan and Loan means any
of the foregoing.

 

20

 

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 Lender 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) $35,000,000, as such
amount may be decreased from time to time in accordance with Sections
6.1.1 or 6.1.2 (the “Revolving Commitment Limit”) and (y) the
sum of the Revolving Commitments of all 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, investment banking and other professional and transactional 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 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

 

21

 

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, when used in respect of the Borrowing Base as it
relates to the 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 on or about May, 2005 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 in
accordance with the terms hereof.

 

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 and, the Term Loan 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 Lender, any Lender Party or any other party
to or beneficiary of this Agreement or any 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,

 

22

 

LaSalle 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 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); (vii) any fiduciary of any of the Persons referred to
in clause (iii) (iv), (v) or (vi); or (viii) (1) any
institutional Person or entity described in Rule 13d-1(b)(1)(ii) under
the Exchange Act, (2) any “qualified institutional buyer” as defined in Rule 144(a)(1) promulgated
under the Securities Act of 1933, as amended (the “Act”), (3) any
institutional Person or entity described in clauses (1), (2), (3), (7) or,
to the extent comprised of institutional Persons or entities described in
clauses (1), (2), (3) and/or (7), clause (8) of the definition of “accredited
investor” as defined in Rule 501(a) promulgated under the Act, or (4) any
similar institutional equity investor.

 

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.

 

23

 

Pledge Agreement
means the 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.

 

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

 

(c)                                  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 at such time by (B) the aggregate principal amount of
all Loans owing to all Lenders at such time.

 

Regulation D
means Regulation D of the FRB.

 

Regulation U
means Regulation U of the FRB.

 

24

 

Related Agreements
means, collectively, that certain Assignment and Assumption Agreement and Bill
of Sale, that certain Omnibus Amendment of Intellectual Property and the
related individual assignments of specified intellectual property, in each
case, dated on or prior to the date hereof between the Company and Russ Berrie
U.S. Gift, Inc., the incorporation documents for Russ Berrie U.S. Gift, Inc.,
together with any other instruments, documents and agreements 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.

 

Related Transactions
means the Spin-Off and the other transactions contemplated by the Related
Agreements.

 

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 Lenders
means, at any time, those Lenders whose Pro Rata Shares (as determined in
accordance with clause (c) of the definition thereof) exceed 50.1%.

 

Restricted Debt
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 agreements 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.

 

Revolving Commitment
means with respect to each Lender, such Lender’s Revolving Commitment set forth
on Annex A hereto or in the most recent Assignment Agreement relating
hereto to which such Lender is a party, and Revolving Commitments means
the sum of all such Commitments of all such Lenders, in each case, as the same may be
reduced from time to time pursuant to Sections 6.1.1 and 6.1.2.

 

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, the lesser of (i) the
Maximum Revolving Commitment in effect at such time and (ii) the Borrowing
Base at such time.

 

Revolving Loan Notes
– see Section 3.1.

 

25

 

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.

 

Russ Berrie B Entities
means, collectively, Russ Berrie U.S. Gift, Inc., a Delaware corporation
and wholly-owned Subsidiary of the Company, Russ Berrie & Co. (West), Inc.,
a California corporation, Russ Berrie and Company Properties, Inc., a New
Jersey corporation, Russplus, Inc., a New Jersey corporation, and Russ
Berrie and Company Investments, Inc., a New Jersey corporation.

 

Sassy -
see the Preamble.

 

Scheduled Termination
Date means March 14, 2011.

 

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 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 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 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.

 

Spin-Off
means the transfer to Russ Berrie U.S. Gift, Inc. of substantially all of
the assets and operations of the Company in accordance with the Related
Agreements.

 

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.

 

26

 

Subordinated Debt
means (a) the obligations under the Kids Line Purchase Agreement  and the Earnout Security Documents with
respect to payment of the Earnout Consideration, and (b) any Debt of any
Loan Party or any Subsidiary 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.

 

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 a Borrower.

 

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 Date
means the earliest to occur of (i) the Scheduled Termination Date, (ii) the
termination of the Revolving Commitment (either automatically or at the
Required 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.

 

Termination Fee
- see Section 5.4.

 

Term Loan
- see Section 2.1.2.

 

Term Loan Commitment
means, with respect to each Lender, that amount set forth opposite such 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 Lenders, $60,000,000. The
Term Loan Commitment of each Lender shall be deemed satisfied upon the making
of the Term Loan to the Borrowers on the Closing Date in the amount of such
Lender’s Term Loan Commitment.

 

Term Loan 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

 

27

 

Earnout
Consideration) of the Borrowers and their 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).

 

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 a
Borrower.

 

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 

 

28

 

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.

 

(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. In the event of any inconsistency
between the terms of the Master Letter of Credit Agreement and the terms of
this Agreement, the terms of this Agreement shall control for the purposes of
calculating compliance with any condition or covenant, and the occurrence of
any Event of Default or Unmatured Event of Default, under the terms of this
Agreement. Notwithstanding anything to the contrary contained in this
Agreement, the occurrence of a default, Unmatured Event of Default or Event of
Default under, and as defined in the Master Letter of Credit Agreement shall
not result in a default, Unmatured Event of Default or Event of Default under
this Agreement if the event that created such default, Unmatured Event of
Default or Event of Default would not, if the Master Letter of Credit Agreement
was not a Loan Document, have independently created a default, Unmatured Event
of Default or Event of Default under this Agreement.

 

(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 and the other parties hereto and thereto and are the products of
all parties. Accordingly, they shall not be construed against the
Administrative Agent or the Lenders merely because of the Administrative Agent’s
or the Lenders’ 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
Lenders, in the case of Sections 2.1.1, 2.1.2 and 2.1.3,
severally and for itself alone, agrees to make loans to, and to issue or
participate in letters of credit for the account of, the Borrowers as follows:

 

2.1.1                        Revolving
Loan Commitment.

 

(a)                                  Revolving
Loans. Subject to the terms and conditions of this Agreement, each Lender with
a Revolving Commitment agrees to make loans on a revolving basis (“Revolving
Loans”) from time to time until the Termination Date in such 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.

 

(b)                                 Reserved.

 

(c)                                  Defaulting
Lender. If and to the extent that a Lender does not settle with the
Administrative Agent as required under this Agreement (a “Defaulting Lender”),
the Borrowers

 

29

 

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 Commitment. Subject to the terms and conditions of this Agreement,
each Lender with a Term Loan Commitment agrees to make a loan to the Borrowers
(each such loan, a “Term Loan”) on the Closing Date in such Lender’s Pro
Rata Share of the Term Loan Commitment. The Commitments of the Lenders to make
the Term Loan shall be satisfied fully upon the making of the Term Loan on the
Closing Date. Amounts repaid with respect to any Term Loan 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 Lender 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 Lender (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 Lender 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 $5,000,000, 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.

 

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 six (6) 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 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

 

30

 

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 the
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 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 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 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 Lender’s Pro Rata Share of such proposed advance.

 

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:

 

31

 

(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

 

(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’

 

32

 

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, and (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.

 

2.3                                 Letter
of Credit Procedures.

 

2.3.1                        L/C
Applications. The Borrowers shall execute and deliver to the Issuing Lender
the Master Letter of Credit Agreement on the Closing Date. The Loan Party
Representative shall give notice to the Administrative Agent and the Issuing
Lender 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 Lender 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 Lender, together with
such other documentation as the Administrative Agent or the Issuing Lender 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 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 Lender consent thereto) and whether 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 Lender shall be the sole
responsibility of the Issuing Lender and the Issuing Lender shall be solely
entitled to the benefits of such Cash Collateral. The Issuing Lender 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 Lender shall be deemed to have sold and transferred to each
Lender (which term shall not, for purposes of this Section 2.3.2,
include the Issuing Lender) with a Revolving Commitment, and each such Lender
shall be deemed irrevocably and unconditionally to have purchased and received
from the Issuing Lender, without recourse or warranty, an undivided interest
and participation, to the extent of such Lender’s Pro Rata Share, in such
Letter of Credit and the Borrowers’ reimbursement obligations with respect
thereto. If the Borrowers do not pay any reimbursement obligation when due
under any Letter of Credit, the Borrowers shall be deemed to have immediately
requested that the 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 Lenders of such deemed request and,

 

33

 

without the necessity of compliance with the
requirements of Section 2.2.2, Section 12.2 or
otherwise such 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 Lender for the account of the Borrowers in
satisfaction of such reimbursement obligations. For the purposes of this
Agreement, the unparticipated portion of each Letter of Credit shall be deemed
to be the Issuing Lender’s “participation” therein. The Issuing Lender hereby
agrees, upon request of the Administrative Agent, to deliver to the
Administrative Agent or Lender a list of all outstanding Letters of Credit
issued by the Issuing Lender, together with such information related thereto as
the Administrative Agent or any 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 Lender for each payment or disbursement made by
the Issuing Lender 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. 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 Lender 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 Base Rate Margin from time to time in effect plus,
beginning on the third Business Day after receipt of notice from the Issuing
Lender of such payment or disbursement, 2%. The Issuing Lender 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 Lender to so notify the Loan Party
Representative or the Administrative Agent shall not affect the rights of the
Issuing Lender or the 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 Lender, 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 Lender 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 any Lender in
its capacity as the Issuing Lender) 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.

 

34

 

2.3.4                        Funding
by the Lenders to Issuing Lender. If the Issuing Lender makes any payment
or disbursement under any Letter of Credit and (a) the Borrowers have not
reimbursed the Issuing Lender in full for such payment or disbursement by 11:00 A.M.,
Chicago time on the date of such payment or disbursement, (b) a Revolving
Loan may not be made in accordance with Section 2.3.2 or (c) any
reimbursement received by the Issuing Lender from the Borrowers is or must be
returned or rescinded upon or during any bankruptcy or reorganization of any
Loan Party, such other Person or otherwise, each other Lender with a Revolving
Commitment shall be obligated to pay to the Administrative Agent for the
account of the Issuing Lender, in full or partial payment of the purchase price
of its participation in such Letter of Credit, its Pro Rata Share 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
Lender, the Administrative Agent shall promptly notify each Lender thereof. Each
Lender irrevocably and unconditionally agrees to so pay to the Administrative
Agent in immediately available funds for the Issuing Lender’s account the
amount of such Lender’s Pro Rata Share of such payment or disbursement. If and
to the extent any 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 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 Lender agrees to pay interest on such amount
to the Administrative Agent for the Issuing Lender’s account forthwith on
demand, for each day from the date such amount was to 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 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 Lender shall be responsible for the failure of
any other Lender to make available to the Administrative Agent such other
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 Lender 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

 

35

 

and Notices of Conversion/Continuation, acceptance of
amounts borrowed hereunder, giving instructions with respect to the
disbursement of the proceeds of the Loans, selecting interest rate options,
requesting Letters of Credit, giving and receiving all other notices and
consents hereunder or under any of the other Loan Documents and taking all
other actions (including in respect of compliance with covenants), 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 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”) and in the form set
forth as Exhibit A-2, in the case of the Notes evidencing the Term
Loan (the “Term Loan 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 or Term Loan 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.

 

36

 

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 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
LIBOR Margin from time to time in effect;

 

provided
that any time an Event of Default exists, at the Required Lenders’
election, 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 Required Lenders, in the case of the Revolving Loans and
Term Loan, notwithstanding Section 15.1. Notwithstanding the
foregoing, upon the occurrence of an Event of Default under Sections 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 Lender with a Revolving
Commitment, a non-use fee, for the period from the Closing Date to the
Termination Date, at the Non-Use Fee Rate in

 

37

 

effect from time to time of such 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 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 Lender with a Revolving Commitment, 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 Lender’s Pro Rata Share (as adjusted from time to time) of
the undrawn amount of such Letter of Credit (computed for the actual number of
days elapsed on the basis of a year of 360 days); provided that, upon the
election of the Required  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
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 Lender, for its own account, (i) such
fees and expenses as the Issuing Lender 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 Borrowers and the Issuing Lender.

 

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 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 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. 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.

 

38

 

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

 

6.1                                 Reduction
and Termination 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. 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 Termination Date shall be deemed to
have occurred, and the Borrowers shall be required to repay all Obligations and
shall terminate or Cash Collateralize in full all outstanding Letters of Credit.
Any such termination of the Revolving Commitment Limit occurring on or 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                        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 Lenders with a Revolving Commitment
according to their respective Pro Rata Shares (as defined under clause (a) thereof).

 

6.2                                 Prepayments.

 

6.2.1                        Voluntary
Prepayments. The Borrowers may from time to time prepay the Loans 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).
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 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, with respect to
prepayments of the Term Loan, shall be accompanied by payment of all accrued
but unpaid interest on the amount Term Loan being prepaid and any breakfunding
costs, if any, pursuant to Section 8.4. Revolving Loans may be
prepaid at any time and from time to time and, subject to the terms hereof,
reborrowed.

 

6.2.2                        Mandatory
Prepayments.

 

(a)                                  The
Borrowers shall make a prepayment of the Term Loans 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 (such applicable amounts being
referred to as “Designated Proceeds”):

 

(i)                                     Concurrently
with the receipt by any Loan Party of any Net Cash Proceeds from any Asset
Disposition, in an amount equal to 100% of such Net Cash Proceeds.

 

(ii)                                  Concurrently
with the receipt by any Loan Party of any Net Cash Proceeds from any issuance
of Capital Securities of any Loan Party (excluding any

 

39

 

issuance of
Capital Securities by any Loan Party to any Loan Party), in an amount equal to
100% of such Net Cash Proceeds.

 

(iii)                               Concurrently
with the receipt by any Loan Party of any Net Cash Proceeds from any issuance
of any Debt of any Loan Party (excluding Debt permitted by clauses (a) -
(l) of Section 11.1), in an amount equal to 100% of such Net Cash
Proceeds.

 

(iv)                              Within
120 days after the end of each Fiscal Year (commencing with Fiscal Year 2007),
in an amount equal to 50% of Excess Cash Flow for such Fiscal Year; provided
that no prepayment shall be required with respect to any Fiscal Year in the
event that the Total Debt to EBITDA Ratio determined for such Fiscal Year is
equal to or less than 2.00:1.00.

 

(v)                                 Concurrently
with the receipt by any Loan Party of any contribution by the Company funded
from the Net Cash Proceeds of any issuance of Capital Securities by such Loan
Party to the Company, in an amount equal to 100% of such contribution.

 

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.

 

(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.

 

(c)                                  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, 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.

 

(d)                                 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 pro rata among the Term Loans according to principal amounts
thereof and, as to each Term Loan, pro rata to all remaining installments of
principal. Term Loans that are prepaid may not be reborrowed.

 

40

 

6.4                                 Repayments.

 

6.4.1                        All
Obligations. NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, (I)
ALL OBLIGATIONS (OTHER THAN UNASSERTED CONTINGENT AND INDEMNIFICATION
OBLIGATIONS AND SPECIFIED HEDGING OBLIGATIONS NOT OTHERWISE DUE OR REQUIRED TO
BE PAID) SHALL BE AND BECOME IMMEDIATELY DUE AND PAYABLE AND (II) ALL LETTERS
OF CREDIT SHALL IMMEDIATELY BE REQUIRED TO BE TERMINATED OR CASH COLLATERALIZED
UPON THE OCCURRENCE OF THE TERMINATION DATE FOR ANY REASON WHATSOEVER.

 

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

 

6.4.3                        Term
Loan. The principal amount of the Term Loan shall be repaid in installments
as follows:  (a) $750,000, on the
last day of each calendar month for the period commencing March 31, 2006
through and including February, 2008, (b) $1,000,000, on the last day of
each calendar month for the period commencing March 31, 2008 through and
including February, 2009, (c) $1,250,000, on the last day of each calendar
month for the period commencing March 31, 2009 through and including
February, 2011 and (d) the aggregate amount of the unpaid principal
balance of the Term Loan on the Scheduled Termination Date. Unless sooner paid
in full, the outstanding principal balance of the Term Loan shall be paid in
full on the Scheduled 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. 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

 

41

 

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 Lender in proportion to its Pro Rata Share of the daily
average of the unused amount of the Revolving Commitment; and

 

(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 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, (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 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

 

42

 

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 Sections 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 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.

 

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

 

43

 

with respect to
the additional payments required under this Section 7.6(b)), the
amount paid to the Lenders 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 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 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 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 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 interest 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, to the
extent permitted under applicable law, 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 interest payments to be made hereunder or any Loan.

 

44

 

(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 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),

 

45

 

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 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
any Person controlling such Lender 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 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 such controlling
Person could have achieved but for such change, adoption, phase-in or
compliance (taking into consideration such Lender’s or such controlling Person’s
policies with respect to capital adequacy) by an amount deemed by such Lender
or such controlling Person to be material, then from time to time, 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 to such Lender such
additional amount as will compensate such Lender 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 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  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, in the case of the Revolving
Loans and Term Loan, automatically convert to a Base Rate Loan.

 

46

 

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) in the case of the 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, automatically convert to a Base Rate Loan. Each Base Rate Loan made by 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.

 

47

 

8.7                                 Mitigation
of Circumstances; Replacement of Lenders.

 

(a)                                  Each
Lender 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 sole judgment, imposes any
expense upon or is otherwise disadvantageous to such Lender) 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 has given notice of any such event described
in clause (i) or (ii) above and thereafter such event ceases to
exist, such Lender 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 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
Lender 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 pursuant to Section 7.6, 8.1, 8.2, 8.3
or 8.4 shall be conclusive absent demonstrable error. Lenders 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.

 

48

 

SECTION 9                    REPRESENTATIONS AND WARRANTIES.

 

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

 

9.1                                 Organization.
The Company and 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 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. The Company and 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 the Company 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 the Company and
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 the Company
or any Loan Party or (iii) any material agreement, indenture, instrument
or other material document, or any judgment, order or decree, which is binding
upon the Company, 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 the Company or 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, the unaudited
consolidating financial statements of the Borrowers and their Subsidiaries for
Fiscal Years 2002, 2003 and 2004, and the unaudited consolidating financial
statements of the Borrowers and their 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 to the absence of footnotes and to normal year-end adjustments, solely
with respect to unaudited financial statements) and present fairly in all
material respects the consolidated financial condition of the Borrowers and
their Subsidiaries or the Company and its Subsidiaries, as applicable, as at
such dates and the results of their operations for the periods then ended.

 

49

 

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 consolidated results of operations of
the Company and its Subsidiaries for the quarters ended March 31, 2005, June 30,
2005 and September 30, 2005, as reported on the 10-Q’s of the Company
filed with the SEC on or about May 10, 2005, August 9, 2005 and November 9,
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 such Loan Party’s knowledge, threatened against, the Company, any other
Loan Party or any of the foregoing’s Subsidiaries which has had, or could
reasonably be expected to have, a Material Adverse Effect. Other than any
liability incident to such litigation 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. The Company owns good title to the Capital
Securities of the Borrowers, free and clear of all Liens (other than Liens
permitted pursuant to Section 11.2(h)), charges and claims other
than Liens in favor of the Administrative Agent pursuant to the Pledge
Agreement.

 

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 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 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

 

50

 

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 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, Subsidiary of a Loan Party or, to the best
knowledge of such Loan Party, the Company, 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.

 

51

 

9.11                           Public
Utility Holding Company Act. No Loan Party, Subsidiary of a Loan Party or,
to the best knowledge of such Loan Party, the Company, 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.
The Company, each Loan Party and each Subsidiary of each of the foregoing 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 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 the Company, any Loan Party or any of the foregoing’s
Subsidiaries. The Company has, for all periods, and commencing with the
financial statements of the Borrowers for the Fiscal Quarter ending March 31,
2006 and continuing thereafter, the Loan Parties and each Subsidiary of each of
the foregoing have, in each case, 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. Neither
the Company nor any Loan Party or any of the foregoing’s Subsidiaries 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. (a)  On the Closing Date, both immediately before and after
giving effect to the Spin-Off and the other Related Transactions contemplated
hereby and by the other Loan Documents and the Related Agreements, the fair
value of the assets of the Company and its Subsidiaries on a consolidated
basis, at a fair valuation on a going concern basis, will exceed the debts and
liabilities, as determined in accordance with GAAP, of the Company and its
Subsidiaries on a consolidated basis; the present fair saleable value of the
assets of the Company and its Subsidiaries on a consolidated basis, determined
on a going concern basis, will be greater than the amount that will be required
to pay the probable liability of the Company and its 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 Company and its 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 Company and its
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.

 

(b)                                 On
the Closing Date, both immediately before and after giving effect to the Spin-Off
and the other Related Transactions contemplated hereby and by the other Loan
Documents and the Related Agreements, 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

 

52

 

proceeds thereof,
the fair value of the assets of the Loan Parties and their Subsidiaries on a
consolidated basis, at a fair valuation on a going concern basis, 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, determined on a going concern 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.

 

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, 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

 

53

 

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 the Company or 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 the Company or
any Loan Party in connection with the Loan Documents (including the offering
and disclosure materials, if any, delivered by the Company or 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 Borrowers, any other
Loan Party or the Company (relating to the Borrowers or the Loan Parties) are
subject to uncertainties and contingencies, are based on good faith estimates
and assumptions believed by the Borrowers and the other Loan Parties or 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
Borrowers and the other Loan Parties or the Company 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 Borrowers, any other Loan Party or the Company
(relating to the Borrowers or the Loan Parties) 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 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

 

54

 

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 or bound by 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, except
such violations which would not have, and which could not reasonably be
expected to have, a Material Adverse Effect.

 

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 Related Transactions and/or the
incurrence by the Company, 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
and the Restricted Debt Agreements, 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 acknowledge that the Administrative Agent and
each Lender are entering into this Agreement and are extending the Commitments
and making the 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.

 

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

 

55

 

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
(whereupon, in the cases of Sections 10.1.1, 10.1.2, 10.1.3,
10.1.5(a), 10.1.6, 10.1.8 and 10.1.9, the
Administrative Agent shall deliver copies thereof to the Lenders):

 

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 of the Company
are required to be filed by with the SEC taking into account any extension
granted by the SEC, provided the Loan Party Representative gives the
Administrative Agent prompt written notice of such extension), (1) with respect
to Fiscal Year 2005, (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) 
consolidating balance sheets 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 accurately presenting in
all material respects the financial condition and results of such entities as
at the date and (2) commencing with Fiscal Year 2006: (a) a copy of
the annual audit report of the Borrowers and their Subsidiaries for such Fiscal
Year, including therein consolidated balance sheets and statements of earnings
and cash flows of the Borrowers and their 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 Borrowers 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) 
consolidating balance sheets of the Borrowers and their Subsidiaries as of the
end of such Fiscal Year and consolidating statements of earnings and cash flows
for the Borrowers and their 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 accurately
presenting in all material respects the financial condition and results of such
entities as

 

56

 

at the date and for the period covered; provided that
with respect to the foregoing relating to Fiscal Year ended 2005, to the extent
the Company’s annual report on Form 10-K shall satisfy the requirements of
this Section 10.1.1(a), 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 of the Company are required
to be filed by the SEC taking into account any extension granted by the SEC,
provided the Loan Party Representative gives the Administrative Agent prompt
written notice of such extension), unaudited consolidated financial statements
of the Borrowers and their 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 Borrowers and their
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 Borrowers and their Subsidiaries as of the
end of such Fiscal Quarter and consolidating statement of earnings and cash
flows for the Borrowers and their 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 Borrowers (other than the end of a fiscal month which is also a
Fiscal Quarter or Fiscal Year end), unaudited consolidated financial statements
of the Borrowers and their 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 Borrowers and their 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 Borrowers and their Subsidiaries as of the end of such month and
consolidating statement of earnings and cash flows for the Borrowers and their
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 with respect to the foregoing
relating to any Fiscal Quarter ending prior to the Closing Date, to the extent
the Company’s quarterly report on Form 10-Q for such quarter shall satisfy
the requirements of this Section 10.1.1(b), 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,

 

57

 

with appropriate insertions, dated the date of such
annual report or such quarterly statements and signed by a Senior Officer of
the Loan Party Representative, 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 Borrowers’ management setting forth a discussion of the
financial condition of the Borrowers and their Subsidiaries and any material
changes in their financial condition and/or results of operations.

 

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 the Company, any Loan Party, any Subsidiary
of any of the foregoing 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 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;

 

58

 

(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;

 

(e)                                  any
Asset Disposition; or

 

(f)                                    any
cancellation, any material change or any increase (which increase is as a
result of deterioration in the risk profile of any Loan Party or Subsidiary) in
the deductible in any insurance policy or coverage maintained by any Loan Party
or Subsidiary.

 

10.1.6                  Borrowing
Base Certificates. 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, and (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). 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 any Loan Party by its independent auditors
in connection with each annual or interim audit made by such auditors of the
books of the Borrowers and their 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 2007), financial
projections for the Borrowers and their Subsidiaries for such Fiscal Year
(including monthly operating and cash flow budgets) prepared in a manner
consistent with the projections delivered by the Borrowers 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 Borrowers and their
Subsidiaries to the effect that (a) such projections were prepared by the
Borrowers and their Subsidiaries in good faith, (b) the Borrowers and
their 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, the Borrowers or any other Loan Party are subject to
uncertainties and contingencies, are based on good faith estimates and
assumptions believed by the Company, the Borrowers or such Loan Party to be
reasonable as of the date of the applicable projections and upon the best
information then reasonably available to the Company, the Borrowers and the
other 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,

 

59

 

management of the Borrowers 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 Kids
Line Purchase Agreement, the Earnout Subordination Agreement, the Earnout
Security Documents, the other Restricted Debt Agreements, the Related
Agreements or any other material agreement.

 

10.1.10            Other Information.
Promptly from time to time, such other information concerning the Loan Parties
(or any of them), any Subsidiary or, to the extent obtainable by the Loan
Parties, the Company and its Subsidiaries (other than the Loan Parties and
their Subsidiaries) 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); provided that any Lender’s inspection
must be coordinated with an inspection by the Administrative Agent or one of
its representatives; 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 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

 

60

 

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.

 

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 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                  Obligation to
Maintain Insurance. Maintain, and cause each other Loan Party and
Subsidiary to maintain, with responsible insurance companies, such insurance
coverage as may be required by any law or governmental regulation or court
decree or order applicable to it and such other insurance, to such extent and
against such hazards and liabilities, as is customarily maintained by companies
similarly situated, but which shall insure against all risks and liabilities of
the type identified on Schedule 9.16; and, upon request of the
Administrative Agent or any Lender, furnish to the Administrative Agent a
certificate setting forth in reasonable detail the nature and extent of all
insurance maintained by the Loan Parties and Subsidiaries. The Loan Party
Representative shall cause each issuer of an insurance policy to provide the
Administrative Agent with an endorsement (i) showing the Administrative
Agent as loss payee with respect to each policy of property or casualty
insurance and naming the Administrative Agent as an additional insured with
respect to each policy of liability insurance, (ii) providing that 30 days’
notice will be given to the Administrative Agent prior to any cancellation of
(or 10 days’ notice in the event of non-payment of premiums), material
reduction or change in coverage provided by or other material modification to
such policy and (iii) reasonably acceptable in all other respects to the
Administrative Agent. The Loan Parties shall execute and deliver to the
Administrative Agent a collateral assignment, in form and substance
reasonably satisfactory to the Administrative Agent, of the proceeds of each
business interruption insurance policy maintained by the Loan Parties.

 

10.3.3                  Forced Place
Coverage. UNLESS THE LOAN PARTIES 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 LOAN
PARTIES 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

 

61

 

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 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 the
Company and 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 the Company and each
other Loan Party and Subsidiary to ensure, that no person who owns a
controlling interest in or otherwise controls the Company, 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 the
Company and 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 the Company, 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 the Company, 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).

 

10.6                           Reserved.

 

10.7                           Use
of Proceeds. In the case of Revolving Loans and the Term 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 no event shall any of the

 

62

 

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.

 

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.

 

63

 

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, it will upon such creation or acquisition thereof:

 

(a)                                  if
such Subsidiary is a Domestic Subsidiary (x) cause such Subsidiary to become
either a Borrower or a Guarantor; provided, that such Subsidiary may become
a Borrower hereunder only if such Subsidiary is a Wholly-Owned Subsidiary and
the Administrative Agent has provided its prior written approval of such
Subsidiary becoming a Borrower (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 Subsidiary is not a Wholly-Owned Subsidiary or in the event such
approval is not provided for a Wholly-Owned Subsidiary, such Subsidiary shall
become a Guarantor, and (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 organized in the United States of America or 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 First-Tier Foreign 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
and the Lenders.

 

64

 

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. With regard to all 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 Loan Parties for the sole benefit of their employees
as listed on Schedule 10.11 attached hereto) (collectively, the “Subject
Accounts”), each Loan Party hereby authorizes the financial institutions at
which any such Subject Accounts are maintained 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 Administrative Agent may reasonably
request, in each case, covering the remittances, deposits, and withdrawals from
and balances of such account, and each Loan Party hereby consents to such
information being provided to the Administrative Agent. Each Loan Party shall
cause each financial institution at which such Loan Party maintains a Subject
Account (other than LaSalle) to enter into an Account Control Agreement in
order to give the Administrative Agent “control” thereof (as defined in the
UCC) for perfection purposes; provided that (i) with respect to any such
account existing on the Closing Date, a fully-executed Account Control
Agreement must be delivered to the Administrative Agent on or prior to the
Closing Date, (ii) with respect to any Subject Account opened after the
Closing Date, such Loan Party must provide the Administrative Agent with 10
days’ prior written notice of its intention to open such account and must
deliver to the Administrative Agent a fully-executed Account Control Agreement
with respect to such account, and (iii) it is hereby acknowledged and
agreed that the Borrowers may maintain and operate Subject Accounts (other
than any such Subject Account to which Accounts are deposited or remitted) not
having at any time deposits in excess of $1,000,000, in aggregate among all
such Subject Accounts, in respect of which no Account Control Agreements are in
effect. Notwithstanding anything contained herein or in any other Loan Document
to the contrary, the Loan Parties hereby acknowledge and agree that, with
respect to any Subject Accounts, upon the occurrence and 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 on deposit in any such accounts and (B) to
remit or apply all amounts on deposit in or remittances to such accounts in
accordance with the direction of 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 unless and until 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 (2) six 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 continuing, the
Administrative Agent shall promptly notify all financial institutions to which
it has 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 such
accounts until a new Notice of Control is given by the Administrative Agent (a “Notice
of Rescission”). The Administrative Agent shall copy the Loan Party
Representative on any Notice of Control and Notice of Rescission given to a
financial

 

65

 

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                     Independent
Directors. Each Borrower agrees that, at all times, at least one of its
directors will be an Independent Director who will serve such Borrower in
accordance with the terms of such Borrower’s Articles of Incorporation, and no
Borrower shall take, authorize, consent or acquiesce to or permit any of its
Subsidiaries to take, authorize, consent or acquiesce to, any of the following
without the affirmative vote of such Independent Director: (i) the
commencement by or against or the consent or acquiescence to, any proceeding of
a type described in Section 13.1.4 involving any Borrower or (ii) the
amendment of any provision of this Section 10.12 or such Borrower’s Bylaws
or Operating Agreement, as applicable, altering any provision effecting the
rights, duties or responsibilities of any Independent Director.

 

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 Loan Party, (ii) unsecured Debt
owing by any Loan Party (other than a Borrower) which is a Wholly-Owned
Subsidiary to any other Loan Party (other than a Borrower), (iii) unsecured
Debt owing by any Loan Party (other than a Borrower or a Wholly-Owned
Subsidiary) to any other Loan Party, in an aggregate amount at any time
outstanding not to exceed $3,000,000 among all Loan Parties, and (iv) unsecured
Debt owing by any Loan Party to a First-Tier Foreign Subsidiary of any Loan
Party, in an aggregate amount at any time outstanding not to exceed $3,000,000
among all Loan Parties; provided that in each of the cases of (i), (ii) and
(iii) above, 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; provided, further that in each of the cases of clause (i),
(ii) and (iii) any such Debt shall be subordinated to the Obligations
of the Loan Parties hereunder in a manner reasonably satisfactory to the
Administrative Agent (it being agreed that the subordination provisions set
forth in the demand note referred to above shall be deemed to be reasonably
satisfactory to the Administrative Agent);

 

(d)                                 unsecured
Subordinated Debt (other than Debt described in clause (c) above) in an
amount at any time outstanding not to exceed $7,500,000;

 

66

 

(e)                                  unsecured
Hedging Obligations 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);

 

(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 $2,500,000 at any time outstanding of Acquired Debt assumed in Permitted
Acquisitions which, if secured, the Liens thereunder would be of a type
permitted pursuant to Section 11.2(d);

 

(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; and

 

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

 

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;

 

67

 

(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) and Section 11.1(i),
(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 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)                                 reserved;

 

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

 

(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 Borrowers 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 any Borrower 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 any Borrower or
any other Loan Party is a party;

 

68

 

(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 or priority thereof or the security or collateral therefor 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.

 

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 Subordinated Debt, or (e) set aside funds for any of the
foregoing. Notwithstanding the foregoing:

 

(i)                                     any
Wholly-Owned Subsidiary may pay dividends or make other distributions in
respect of its Capital Securities to the Borrowers 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)                               the
Borrowers may pay dividends or make other distributions, out of legally
available funds, to the Company for the sole purpose of permitting the Company
to (and upon receipt by the Company of such funds the Company shall promptly
use such funds to) pay income tax liabilities allocable to the Borrowers’ and
their Subsidiaries’ operations, to the extent any such taxes are due and owing
by the Company and its Subsidiaries on a consolidated basis; it being agreed
however that from and after the payment of the Earnout Consideration in full,
the proportion (as between the Borrowers and their Subsidiaries on the one
hand, and the Russ Berrie B Entities, on the other hand) of the tax liability
of the Company that the Borrowers shall be permitted to fund pursuant to this
clause (iii) may be increased to the extent and in the amount of
taxes which would previously have been owed by the Company based solely on the
operations of the Borrowers’ and their Subsidiaries’, but were offset from and
after the Closing Date by losses, credits or deductions relating to the Russ
Berrie B Entities’ operations;

 

(iv)                              any
Loan Party (other than a domestic Subsidiary which is not a Wholly-Owned
Subsidiary) or a Wholly-Owned Subsidiary may pay dividends or make other
distributions in respect of its common stock payable solely in its common
stock;

 

69

 

(v)                                 so
long as both before and immediately after giving effect to the payments
described in this clause (v), Excess Revolving Loan Availability will equal or
exceed $3,000,000 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, 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, the Borrowers may,
or may pay dividends or make other distributions to the Company, out of
legally available funds, for the sole purpose of permitting the Company to (and
upon receipt by the Company of such funds the Company shall promptly use such
funds to), pay the Earnout Consideration (or any portion thereof that may be
paid at such time in accordance with this clause (v)) as and when due and
payable in accordance with the terms of the Kids Line Purchase Agreement;

 

(vi)                              so
long as (x) the Earnout Consideration has been paid in full, and (y) both
before and immediately after giving effect to the payments described in this
clause (vi), (1) no Event of Default or Unmatured Event of Default exists
or would result therefrom, (2) Excess Revolving Loan Availability will
equal or exceed $4,000,000 and (3) 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, 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, the Borrowers may pay dividends or make other
distributions to the Company, out of legally available funds, for the sole
purpose of permitting the Company to (and upon receipt by the Company of such
funds the Company shall promptly use such funds to) pay a regular quarterly
dividend payment payable out of legally available funds on the outstanding
common stock of the Company;

 

(vii)                           so long
as (x) the Earnout Consideration has been paid in full and (y) both before and
immediately after giving effect to the payments described in this clause (vii),
(1) no Event of Default or Unmatured Event of Default exists or would
result therefrom and (2) Excess Revolving Loan Availability will equal or
exceed $5,000,000 and (z) 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, 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, the Borrowers may pay
dividends or make other distributions, out of legally available funds, to the
Company for the sole purpose of permitting the Company to (and upon receipt by
the Company of such funds the Company shall promptly use such funds to): (A) repurchase
or redeem Capital Securities of the Company held by employees, officers and
directors in the ordinary

 

70

 

course of business
and consistent with past practice and (B) make repurchases or redemptions
of Capital Securities from employees, officers and directors that die, retire
or otherwise terminate their employment; provided, that notwithstanding
the prior repayment of the Earnout Consideration (but subject to the other
conditions set forth in this clause (vii)), the Borrowers may pay such
dividends and other distributions to finance, and the Company may use
those proceeds to make, Contractual Redemptions as and when required to be made
in accordance with the agreements relating thereto, in an amount not to exceed
$500,000, in aggregate, per Fiscal Year; and

 

(viii)                        so long as
both before and after giving effect to the payments described in this clause
(viii), (x) no Event of Default exists or would result therefrom and (y) Excess
Revolving Loan Availability will equal or exceed $4,000,000 (compliance with
such conditions to be demonstrated by a certificate of the Chief Financial
Officer to be delivered to the Administrative Agent by the 10th
Business Day of the month following the month in which any such dividend or
distributions is made, in each case, setting forth the calculations of pro
forma Excess Revolving Loan Availability (after giving effect to such payments)
in detail reasonably acceptable to the Administrative Agent), the Borrowers may pay
dividends or make other distributions, out of legally available funds, to the
Company for the sole purpose of permitting the Company to pay corporate
overhead expenses incurred in the ordinary course of business; provided, that
the aggregate amount of dividends or distributions received by the Company from
the Borrowers for the payment of such corporate overhead expenses shall not
exceed $2,000,000 in any Fiscal Year (it being agreed that this provision shall
not be deemed to limit the ability of any Loan Party to reimburse the Company
or any Subsidiary thereof for the payment by the Company or such Subsidiary of
business expenses incurred by the Company or such Subsidiary for and on behalf
of the Loan Parties, which business expenses (1) are of a type typically incurred
by the Loan Party on its own behalf in the ordinary course of its business
operations and (2) when reimbursed by the Loan Parties are included as
expenses on the books and records of the Loan Parties).

 

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

 

(a)                                  sell,
transfer, convey or lease any of its assets or Capital Securities 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) sales or
other dispositions of assets (other than Inventory (other than as covered in
clause (i) above), Capital Securities of Subsidiaries and Accounts and/or
receivables of any Loan Party) for at least fair market value (as determined by
the board of directors of such Loan Party) so long as the net book value of all
assets sold or otherwise disposed of in any Fiscal Year does not exceed
$1,000,000, and (iv) in the case of its Capital Securities, as permitted
pursuant to clause (d) of this Section;

 

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

 

(c)                                  prepay
any Debt (other than the Obligations);

 

71

 

(d)                                 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 into any other Borrower or the sale, assignment or conveyances of
any, all or substantially all of the assets of one Borrower to another Borrower,
and (B) the merger or consolidation of any Loan Party (other than a
Borrower) which is a Wholly-Owned Subsidiary into any other Loan Party (other
than a Borrower) which is a Wholly-Owned Subsidiary or the sale, 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 or a Loan
Party which is not a Wholly-Owned Subsidiary), or (2) any Acquisition by a
Borrower or any other Loan Party (other than a Loan Party which is not a Wholly-Owned
Subsidiary) entered into and consummated after June 30, 2006 in respect of
which the requirements 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 $10,000,000 in any given transaction (or series of
related transactions) or $15,000,000 in any given Fiscal Year and (2) all
Acquisitions after the Closing Date is less than $40,000,000 in the aggregate;

 

(iv)                              immediately
after giving effect to such Acquisition, the Borrowers and their 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 $5,000,000;

 

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

 

72

 

(vii)                           reasonably
prior to such Acquisition, the Administrative Agent shall have received (A) 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 Borrowers’ 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, (B) due diligence materials with respect to the business, legal,
tax and environmental aspects of the Person and/or business or division to be
acquired and the Administrative Agent shall be satisfied with results of its
due diligence and (C) unless the Administrative Agent otherwise consents,
in the case of the Acquisition of any Person and/or business or division,
evidence that the EBITDA of such Person and/or business or division for the
most recent 12 month period for which financial statements are available, as
adjusted by such add-backs with respect to cash expenses not related to
operations which are acceptable to the Administrative Agent or which are
permitted under Article 11 of Regulation S-X promulgated under the
Securities Act of 1933, as amended, is not less than zero;

 

(viii)                        the
Administrative Agent shall have approved (which approval shall not unreasonably
be withheld) 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)                                   unless
the Administrative Agent otherwise consents, if such Acquisition is structured
as an acquisition of Capital Securities, such Acquisition is of more than fifty
percent of the Capital Securities of such 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 Section 11.15,
and 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
such Acquisition is structured as an asset acquisition, (A) and if such
assets 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

 

73

 

diligence as the
Administrative Agent shall reasonably require; it being acknowledged and agreed
that (1) 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 (2) such additional assets, if any, included in the
Borrowing Base may be subject to different advance rates or may require
the imposition of additional reserves with respect thereto and (B) such
Loan Party shall not assume any obligations or liabilities of the seller other
than Acquired Debt to the extent permitted pursuant to Section 11.1(i);
and

 

(xii)                             if
the Acquisition is structured as a merger, a Loan Party is the surviving
entity; provided that no Borrower may enter into a merger unless the
Administrative Agent has provided its prior written consent to such merger. (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 of
the Loan Parties) 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) and (j) of Section 11.10, (iv) transactions
with officers or directors of a Borrower or its Subsidiaries providing for the
payment of customary and reasonable fees, and indemnification and reimbursement
of expenses, upon customary and reasonable terms, (v) entering into
perpetual, royalty-free, irrevocable licenses of intellectual property with
other Loan Parties and their Subsidiaries and (vi) to the extent permitted
hereunder, transactions among Loan Parties, among Loan Parties and their
Subsidiaries and/or other Subsidiaries of the Company.

 

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

 

74

 

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 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 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 Subsidiary, or pay any Debt owed
to any Loan Party or any 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,
(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. Not, and not permit any other Loan Party, 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.

 

11.10                     Investments.
Not, and not permit any other Loan Party 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:

 

(a)                                  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

 

75

 

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; provided that the aggregate
amount of all contributions to a Loan Party which is not a Wholly-Owned
Subsidiary shall not exceed $10,000,000 at any time outstanding;

 

(b)                                 Investments
constituting Debt permitted by Section 11.1(c);

 

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

 

(d)                                 Cash
Equivalent Investments;

 

(e)                                  bank
deposits in the ordinary course of business, provided that the Loan Parties
shall at no time have deposits or investments of more than $1,000,000, in
aggregate, on deposit in Subject Accounts which are not subject to Account
Control Agreements;

 

(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)                                  loans
by a Loan Party to any First-Tier Foreign Subsidiary in an aggregate amount not
to exceed $1,000,000 at any time outstanding;

 

(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.

 

76

 

11.11                     Restriction
of Amendments to Certain Documents. Not amend or otherwise modify, or waive
any rights under the Related Agreements, the Restricted Debt Agreements 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 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 of the following Fiscal Quarters set forth below to be less than the
corresponding applicable ratios set forth below:

 

	
  Fiscal Quarter Ending

  	
   

  	
  Total Debt to EBITDA Ratio

  
	
   

  	
   

  	
   

  
	
  March 31,
  2006

  	
   

  	
  2.60 : 1.00

  
	
   

  	
   

  	
   

  
	
  June 30,
  2006

  	
   

  	
  2.50 : 1.00

  
	
   

  	
   

  	
   

  
	
  September 30,
  2006

  	
   

  	
  2.25 : 1.00

  
	
   

  	
   

  	
   

  
	
  December 31,
  2006

  	
   

  	
  2.25 : 1.00

  
	
   

  	
   

  	
   

  
	
  March 31,
  2007

  	
   

  	
  2.20 : 1.00

  
	
   

  	
   

  	
   

  
	
  Each Fiscal
  Quarter ending on (and including) June 30, 2007 and September 30,
  2007

  	
   

  	
  1.75 : 1.00

  
	
   

  	
   

  	
   

  
	
  Each Fiscal
  Quarter ending thereafter

  	
   

  	
  2.25 : 1.00

  

 

11.13.3            EBITDA. Not
Permit EBITDA for any Computation Period to be less than the corresponding
amount set forth below for such Computation Period:

 

	
  Fiscal Quarter Ending

  	
   

  	
  EBITDA

  
	
   

  	
   

  	
   

  	
   

  
	
  Each Fiscal
  Quarter ending on (and including) March 31, 2006 through (and including)
  December 31, 2006

  	
   

  	
  $

  	
  33,000,000

  
	
   

  	
   

  	
   

  	
   

  
	
  Each Fiscal
  Quarter ending on (and including) March 31, 2007 through (and including)
  December 31, 2007

  	
   

  	
  $

  	
  34,000,000

  
	
   

  	
   

  	
   

  	
   

  
	
  Each Fiscal
  Quarter ending thereafter

  	
   

  	
  $

  	
  35,000,000

  

 

77

 

11.13.4            Capital
Expenditures. Not permit the aggregate amount of all Capital Expenditures
made by the Loan Parties in any Fiscal Year to exceed $1,500,000 (the “Capital
Expenditure Limitation”). If the Loan Parties do not utilize the entire
amount of the Capital Expenditure Limitation permitted in any Fiscal Year, the
Loan Parties may carry forward, to the immediately succeeding Fiscal Year
only, up to one hundred percent (100%) of such unutilized amount. All Capital
Expenditures in any Fiscal Year shall first be applied to reduce the applicable
Capital Expenditure Limitation for such Fiscal Year and then to reduce the
carry-forward from the previous Fiscal Year, if any.

 

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 of Default or Unmatured Event of
Default is then outstanding the cancellation of Debts or claims not to exceed
$500,000 in any Fiscal Year, in the aggregate, 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 Domestic
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, Subsidiaries in respect of which the provisions of Sections
10.10 shall have been satisfied.

 

11.16                     Commingling
of Funds. Not, and not permit the Company or any other Loan Party to,
commingle any of such Person’s cash or cash equivalents with the cash or cash
equivalents of any of the Russ Berrie B Entities.

 

SECTION 12              EFFECTIVENESS; CONDITIONS OF LENDING, ETC.

 

The obligation of each
Lender to make its Loans and of the Issuing Lender 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 Lender 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 or determined the satisfaction of all
of the following, which, in the case of any delivery, shall be 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”):

 

78

 

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.

 

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
Revolving Loan Availability. Excess Revolving Loan Availability shall not
be less than $8,500,000 on the Closing Date.

 

12.1.5                  Maximum Total
Debt to EBITDA Ratio. The Total Debt to EBITDA Ratio for the Computation
Period ending December 31, 2005 for the Borrowers and their Subsidiaries
shall not be greater than 2.30:1.00.

 

12.1.6                  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.

 

12.1.7                  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
consolidated results of operations of the Company and its Subsidiaries for the
quarters ended March 31, 2005, June 30, 2005 and September 30,
2005, as reported on the 10-Q’s of the Company filed with the SEC on or about May 10,
2005, August 9, 2005 and November 9, 2005 shall not, in and of
themselves, be deemed a Material Adverse Effect.

 

79

 

12.1.8                  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.

 

12.1.9                  Capitalization
and Structure. The capitalization and structure of the Borrowers and their
Subsidiaries after giving effect to the transaction contemplated hereunder
shall be reasonably satisfactory to the Administrative Agent.

 

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

 

12.1.11            Projections. The
Administrative Agent shall have received consolidating projected income
statements, balance sheets and statements of cash flow of the Borrowers and
their Subsidiaries on a consolidating basis 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 2006 and on an annual basis for Fiscal Year 2007, 2008,
2009, 2010 and 2011.

 

12.1.12            Financial
Statements. The Administrative Agent shall have received (i) consolidated
and consolidating financial statements (including balance sheets, statements of
earnings and cash flows) of the Borrowers and their Subsidiaries for the 2002,
2003 and 2004 Fiscal Years and (ii) unaudited interim consolidated and
consolidating financial statements (including balance sheets, statements of
earnings and cash flows) of the Borrowers and their 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).

 

12.1.13            Filings, Registrations
and Recordings. The Administrative Agent shall have received (i) the
results of recent tax, judgment and UCC lien searches in each relevant
jurisdiction with respect to each Loan Party and (ii) 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.

 

12.1.14            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.

 

12.1.15            Related
Transactions. The Administrative Agent shall have received evidence,
reasonably satisfactory to the Administrative Agent, that the Company has
completed the Related Transactions in accordance with applicable law and on
terms consistent with the

 

80

 

Related Agreements (with no material provisions waived
without the written consent of the Administrative Agent).

 

12.1.16            LaSalle Debt. The
Administrative Agent shall have received evidence, reasonably satisfactory to
the Administrative Agent, that the Russ Berrie B Entities have closed, or
concurrently with the initial credit extension hereunder will close, a credit
facility of up to $25,000,000 with LaSalle Business Credit, LLC.

 

12.1.17            Sources and Uses of
Funds. The sources and uses of cash for the transactions contemplated under
this Agreement shall be consistent in all material respects with the sources
and uses of cash previously described by the Borrowers to the Administrative
Agent.

 

12.1.18            Amendments to
Articles of Incorporation. The Administrative Agent shall have received
filed copies of the amendments to each of the Borrower’s Articles of
Incorporation in form and substance reasonably satisfactory to the
Administrative Agent incorporating the provisions therein that are set forth in
Schedule 12.1.18, and each Borrower shall have duly appointed
separate Independent Directors who shall be qualified and acting in such capacity
as of the Closing Date.

 

12.1.19            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 Lender 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

 

(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

 

81

 

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 among all of
the Loan Parties 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 to 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                  Pledge
Agreement. Any “Event of Default” occurs and is continuing under (and as
defined in) the Pledge Agreement.

 

13.1.4                  Bankruptcy,
Insolvency, etc. The Company or 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 the Company or any Loan Party applies for,
consents to, or acquiesces in the appointment of a trustee, receiver or other
custodian for the Company or 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 the Company or 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 the Company or any Loan Party, and if such case or
proceeding is not commenced by the Company or such Loan Party, it is consented
to or acquiesced in by the Company or such Loan Party, or remains for 60 days
undismissed; or the Company or any Loan Party takes any action to authorize, or
in furtherance of, any of the foregoing.

 

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 Sections 10.1.5(a), 10.1.5(d),
10.3.2, 10.3.3, 10.5, 10.11, or 10.12 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 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

 

82

 

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,
and continuance of such failure described in this clause (b) for 20
days, or (c) failure by the Company or 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 the Company or 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
the Company or any Loan Party to the Administrative Agent or any Lender in
connection herewith or in any other Loan Document 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 or (ii) in the case of non-monetary judgments, would have or
could reasonably be expected to have a Material Adverse Effect, shall in either
case be rendered against the Company and/or 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 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).

 

83

 

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 the Company or 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 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.

 

13.2                           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 (other than any outstanding
Specified Hedging Obligations which would not pursuant to their terms be,
become or be declared to be then due and payable) 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 Lenders 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 (other than any outstanding
Specified Hedging Obligations which would not pursuant to their terms be,
become or be declared to be then due and payable) 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 (other
than any outstanding Specified Hedging Obligations which would not pursuant to
their terms be, become or be declared to be then due and payable) 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 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.

 

84

 

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
Lender. The Issuing Lender shall act on behalf of the 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 Lender 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 Lender 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 Lender with respect to such acts or omissions and (b) as
additionally provided in this Agreement with respect to the Issuing Lender.

 

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
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,

 

85

 

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, 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, 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 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

 

86

 

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 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 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
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

 

87

 

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 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; or (iii) subject to Section 15.1, if approved,
authorized or ratified in writing by the Required Lenders; 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

 

88

 

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 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.

 

89

 

SECTION 15              GENERAL.

 

15.1                           Waiver;
Amendments. Except as set forth in clauses (a) through (d) 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 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. In addition to
the foregoing required consents:

 

(a)                                  Without
the consent of each Lender (including the Issuing Lender) 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.

 

(b)                                 Without
the consent of all Lenders, no amendment, modification, waiver or consent shall
(i) except as specifically provided in clause (c) below, 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) amend the definition of Required Lenders, (iii) amend
the provisions of this Section 15.1 or (iv) amend the
definition of Pro Rata Share.

 

(c)                                  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 Lender, in each case, in such Person’s capacity as such,
shall be effective without the consent of the Administrative Agent and/or the
Issuing Lender, as applicable.

 

(d)                                 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.

 

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.

 

90

 

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 and each Loan Party 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; 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 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
(subject to the limitations set forth in Section 10.2), 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 Lenders) 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

 

91

 

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 (any such
Eligible Assignee, an “Assignee”) all or any portion of such Lender’s Loans and
Commitments, with the prior written consent of the Administrative Agent, the
Issuing Lender (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); provided, that in the event a Lender assigns less than
all of its Loans and Commitments at any time, such assignment must be pro-rata
with respect to all of such Lender’s Loans and Commitments. Any such assignment
shall be in a minimum aggregate amount equal to $5,000,000 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 Assignee until the Administrative Agent 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 $3,500. 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 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 Assignee shall be entitled to the benefits of
Section 7.6 unless such Assignee has complied and will comply with
the requirements of Section 7.6 as though it were a Lender. 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 receiving written notice
thereof.

 

(b)                                 From
and after the date on which the conditions described above have been met, (i) such
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
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
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

 

92

 

or Term Loan Commitment,
as applicable (and, as applicable, Notes in the principal amount of the Pro
Rata Share of the Revolving Commitment or Term Loan 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 “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, 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.

 

93

 

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 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 Lender 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 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 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.

 

94

 

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 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 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 and the Lenders shall deemed to be
originals.

 

15.14                     Successors
and Assigns. This Agreement shall be binding upon the Loan Parties, the
Lenders and the Administrative Agent and their respective successors and
assigns, and shall inure to the benefit of the Loan Parties, the 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 Loan
Party may assign or transfer any of its rights or Obligations under this
Agreement without the prior written consent of the Administrative Agent 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 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 and each of the officers, directors,
employees, affiliates and agents of the Administrative Agent and each Lender
(each a “Lender Party”) free and harmless from and against any and all

 

95

 

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 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 and the Administrative Agent on the other hand shall be solely that
of borrower and lender, respectively. Neither the Administrative Agent 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 and the Lenders, on the other hand, in connection herewith
or therewith is solely that of debtor and creditor, respectively. Neither the
Administrative Agent 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 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

 

96

 

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.

 

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
LENDER 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 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 or any Lender
thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by the Administrative Agent or any Lender of an Event of
Default under this Agreement or any default under any of the other Loan
Documents shall not

 

97

 

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 or any Lender in the exercise of any right or remedy under
this Agreement or any other 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 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 and/or all of the Lenders, as required herein (with respect to
all Lenders, only to the extent expressly required by Section 15.1),
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 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 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 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 and/or the Lenders, the Obligations shall
automatically shall be revived, reinstated, and

 

98

 

restored and shall exist as though such Voidable
Transfer had never been made, and if the Termination Date had previously
occurred, it shall be rescinded and this Agreement, the other Loan Documents
and all Liens granted 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.

 

99

 

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:

  
	
   

  	
   

  
	
   

  	
  KIDS LINE, LLC, a
  Delaware limited liability

  
	
   

  	
  company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Wille

  	
   

  
	
   

  	
  Name:

  	
  John Wille

  	
   

  
	
   

  	
  Title:

  	
  Vice President, Treasurer, Asst. Secretary

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  SASSY, INC.,
  an Illinois corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Wille

  	
   

  
	
   

  	
  Name:

  	
  John Wille

  	
   

  
	
   

  	
  Title:

  	
  Vice President, Treasurer, Asst. Secretary

  	
   

  
	
   

  	
   

  
	
  The undersigned hereby accepts its appointment as
  the Loan Party Representative pursuant to Section 2.6 of this Agreement
  and agrees to exercise its powers and perform its duties in its capacity
  as the Loan Party Representative in accordance with the terms and provisions
  of this Agreement and the other Loan Documents

  	
   

  
	
   

  	
   

  
	
  RUSS BERRIE AND COMPANY, INC.,
  a

  	
   

  
	
  New Jersey corporation

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John Wille

  	
   

  	
   

  
	
  Name:

  	
  John Wille

  	
   

  	
   

  
	
  Title:

  	
  Vice President and Chief Financial Officer

  	
   

  	
   

  
												

 

 

Signature Page to Credit
Agreement

 

 

	
  ADMINISTRATIVE AGENT:

  	
  LASALLE BANK NATIONAL

  
	
   

  	
  ASSOCIATION, as Administrative
  Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven E. Friedlander

  	
   

  
	
   

  	
  Name:

  	
  Steven E. Friedlander

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  LENDERS/ISSUING LENDER

  	
  LASALLE BANK NATIONAL

  
	
   

  	
  ASSOCIATION, as a Lender and
  as Issuing

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven E. Friedlander

  	
   

  
	
   

  	
  Name:

  	
  Steven E. Friedlander

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SOVEREIGN BANK, as a Lender
  and as

  Syndication Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christine Gerula

  	
   

  
	
   

  	
  Name:

  	
  Christine Gerula

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, NATIONAL

  
	
   

  	
  ASSOCIATION, as a Lender and
  as

  
	
   

  	
  Documentation Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kathleen M. Auth

  	
   

  
	
   

  	
  Name:

  	
  Kathleen M. Auth

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC CAPITAL

  
	
   

  	
  CORPORATION, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Karl Kieffer

  	
   

  
	
   

  	
  Name:

  	
  Karl Kieffer

  	
   

  
	
   

  	
  Title:

  	
  Duly Authorized Signatory

  	
   

  
								

 

 

Signature Page to Credit
Agreement

 

 

	
   

  	
  WACHOVIA BANK, NATIONAL

  
	
   

  	
  ASSOCIATION, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert C. Babelf

  	
   

  
	
   

  	
  Name:

  	
  Robert C. Babelf

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK, as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen Contos

  	
   

  
	
   

  	
  Name:

  	
  Stephen Contos

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
							

 

 

Signature Page to Credit
Agreement

 

 

ANNEX A

 

LENDERS AND PRO RATA SHARES

 

	
  Lender

  	
   

  	
  Revolving

  Commitment

  	
   

  	
  Pro Rata Share

  	
   

  	
  Term Loan

  Commitment

  	
   

  	
  Pro Rata Share

  	
   

  
	
  LaSalle Bank
  National Association

  	
   

  	
  $

  	
  5,882,503

  	
   

  	
  16.807151421

  	
  %

  	
  $

  	
  11,469,095

  	
   

  	
  19.11515863

  	
  %

  
	
  Sovereign
  Bank

  	
   

  	
  $

  	
  8,675,799

  	
   

  	
  24.787997391

  	
  %

  	
  $

  	
  8,675,799

  	
   

  	
  14.45966514

  	
  %

  
	
  Bank of
  America, National Association

  	
   

  	
  $

  	
  5,882,503

  	
   

  	
  16.807151421

  	
  %

  	
  $

  	
  11,469,095

  	
   

  	
  19.11515863

  	
  %

  
	
  General
  Electric Capital Corporation

  	
   

  	
  $

  	
  5,882,503

  	
   

  	
  16.807151421

  	
  %

  	
  $

  	
  11,469,095

  	
   

  	
  19.11515863

  	
  %

  
	
  Wachovia Bank,
  National Association

  	
   

  	
  $

  	
  5,882,503

  	
   

  	
  16.807151421

  	
  %

  	
  $

  	
  11,469,095

  	
   

  	
  19.11515863

  	
  %

  
	
  The Bank of
  New York

  	
   

  	
  $

  	
  2,794,189

  	
   

  	
  7.983396925

  	
  %

  	
  $

  	
  5,447,820

  	
   

  	
  9.07970035

  	
  %

  
	
  TOTALS

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  60,000,000

  	
   

  	
  100

  	
  %

  

 

 

Signature Page to Credit
Agreement

 

 

ANNEX B

 

ADDRESSES FOR NOTICES

 

If to the Loan Party
Representative,

any Borrower or any Loan Party:

c/o  RUSS BERRIE AND COMPANY, INC.

111 Bauer Drive

Oakland, New Jersey  07436

Attention:  Chief Financial Officer

Telephone:  (201) 405-7340

Facsimile:  (201) 405-7333

 

If to the Administrative Agent or
the Issuing Lender:

 

Notices of Borrowing ,
Conversion, Continuation and Letter of Credit Issuance

 

LaSalle Bank National
Association

135 South LaSalle Street

Chicago, Illinois  60603

Attention:  Mr. Steven Friedlander

Telephone:  (312) 992-2487

Facsimile:  (312) 904-6450

 

All Other Notices

 

LaSalle Bank National
Association

135 South LaSalle Street

Chicago, Illinois  60603

Attention:  Mr. C. John Mostofi

Telephone:  (312) 904-8141

Facsimile:  (312) 904-6450

 

Sovereign Bank

3 Huntington Quad.

Suite 103 South

Melville, New York  11747

Attention:  Ms. Christine Gerula

Telephone:  (631) 351-0728

Facsimile:  (631) 531-0685

 

Bank of America, National
Association

750 Walnut Avenue

Cransford, New
Jersey  07016

Attention:  Ms. Kathleen Auth

Telephone:  (908) 709-3185

Facsimile:  (908) 709-5476

 

 

Signature Page to Credit
Agreement

 

 

General Electric Capital
Corporation

Corporate Financial
Services

201 Merritt 7, P.O. Box
5201

Norwalk, Connecticut  06856-5201

Attention:  Ms. Hittie Chao Lee

Telephone:  (203) -956-4053

Facsimile:  (203) 956-4006

 

Wachovia Bank, National
Association

Commercial Credit
Products Management

NJ3161

190 River Road

Summit, New Jersey  07901

Attention:  Mr. James Petronchack

Telephone:  (908) 598-3047

Facsimile:  (908) 598-3800

 

The Bank of New York

385 Rifle Camp Road

West Paterson, New
Jersey  07424-0403

Attention:  Mr. Stephen Contos

Telephone:  (973) 357-7759

Facsimile:  (973) 357-7745

 

 

Signature Page to Credit
AgreementExhibit 4.11

 

Execution Version

 

 

 

GUARANTY AND COLLATERAL AGREEMENT

 

dated
as of March 14, 2006

 

among

 

KIDS LINE, LLC,

 

and

 

SASSY, INC.

 

and

 

THE
OTHER PARTIES HERETO

as Grantors,

 

and

 

LASALLE
BANK NATIONAL ASSOCIATION,

as the Administrative Agent

 

 

 

GUARANTY AND COLLATERAL AGREEMENT

 

This Guaranty and
Collateral Agreement dated as of March 14, 2006 (this “Agreement”)
is entered into among KIDS LINE, LLC,
a Delaware limited liability company (“Kids Line”), SASSY, INC.,
an Illinois corporation (“Sassy”), and those Domestic Wholly-Owned
Subsidiaries that are or, in accordance with Section 10.10 of the Credit
Agreement, may hereafter become parties thereto as “Borrowers” (Kids Line,
Sassy and such Domestic Wholly-Owned Subsidiaries are sometimes referred to
therein collectively as the “Borrowers”, together with any other person
that becomes a party hereto as provided herein being, collectively, the “Grantors”),
in favor of LASALLE BANK NATIONAL ASSOCIATION,
as the “Administrative Agent” for itself and the Lenders (as defined in the
Credit Agreement referred to below).

 

The Administrative Agent and Lenders have
severally agreed to extend credit and provide other financial accommodations 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 the Administrative Agent’s and each Lender’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 itself and all the Lenders.

 

In consideration of the premises and to
induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Administrative Agent and the Lenders to extend
credit and provide other financial accommodations thereunder, each Grantor
hereby agrees with the Administrative Agent, for the benefit of itself and the
Lenders, 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.

 

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, (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.

 

 

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, 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 Kids Line Australia Pty Ltd., 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 Administrative Agent’s request,
have used its reasonable efforts to provide notice to the 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 and for so long as 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 thereunder).

 

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 other
Subsidiaries from time to time party thereto, the Lenders, and the
Administrative Agent, 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.

 

Grantor
means the collective reference to the Borrowers and each other Person that
becomes a party to this Agreement in accordance with Section 8.16.

 

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 Kids Line Australia Pty Ltd.
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 itself and of the Lenders, 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
and the Lenders, 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 any Grantor 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 such notice, the

 

8

 

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
itself and the Lenders  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 $200,000 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 $200,000
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 $200,000 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 as to each
Grantor. 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 $200,000 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 $250,000
(in the aggregate for all Grantors) shall be or
become evidenced by any Instrument, Certificated Security or Chattel Paper,
such Instrument, Certificated Security or Chattel Paper shall be

 

11

 

delivered to the Administrative Agent within five (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 thereof 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 necessary or reasonably advisable 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 $250,000, 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 twenty (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 $300,000 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 $300,000 in
the 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 the
past practices of the Grantors and/or the Company 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 itself and
the Lenders, 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 the Administrative Agent and the Lenders 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

 

16

 

Agreement had not been executed, (ii) the
exercise by the Administrative Agent of any of its 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 the 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 or reasonably advisable, in the
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

 

17

 

to the Administrative Agent promptly upon request. Any
such financing statement, continuation 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 $250,000, 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)                                  Subject
to Section 10.2 of the Credit Agreement, 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) the
Administrative Agent and the Lenders to examine any of the Collateral and
wherever the Collateral may be located. Each Grantor shall, at the request
of the Administrative Agent, indicate on its records concerning the Collateral
a notation, in form reasonably satisfactory to the Administrative Agent,
of the security interest of the 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

 

18

 

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 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 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 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 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 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

 

19

 

damages, awards and other monies resulting therefrom
and to apply the same to the Secured 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, during the continuance of 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, 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 Administrative 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). 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 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 THE LENDERS, PRO-RATA, UNTIL PAID IN
FULL;

 

FOURTH,
TO THE PAYMENT OF ALL SECURED OBLIGATIONS CONSISTING OF PRINCIPAL THEN DUE AND
PAYABLE TO THE LENDERS, 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 LENDER OR ITS AFFILIATES, PRO-RATA,
UNTIL PAID IN FULL;

 

22

 

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

 

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

 

6.6                                 Code
and Other Remedies. 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 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, as provided in Section 6.5.
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

 

23

 

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 reasonably
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
commercially reasonable 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 reasonably 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 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

 

24

 

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 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 (other than Permitted Liens),
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

 

25

 

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, in
each case, that is subject to the Lien of the Administrative Agent granted
pursuant to any Loan Document, 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, 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

 

26

 

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 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  FREE AND
HARMLESS FROM AND AGAINST ANY AND ALL 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 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 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

 

27

 

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, EXCEPT FOR ANY SUCH INDEMNIFIED LIABILITIES ARISING ON ACCOUNT OF THE
APPLICABLE LENDER PARTY’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 (3) Business 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 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

 

28

 

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.

 

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

 

29

 

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;

 

(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.

 

30

 

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 (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

 

31

 

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.

 

	
   

  	
  KIDS LINE, LLC, a
  Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Wille 

  	
   

  
	
   

  	
  Name: John Wille 

  
	
   

  	
  Title: Vice President, Treasurer and
  Assistant Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SASSY, INC.,
  an Illinois corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Wille 

  	
   

  
	
   

  	
  Name: John Wille

  
	
   

  	
  Title: Vice President, Treasurer and
  Assistant Secretary

  

 

 

	
   

  	
  LASALLE NATIONAL BANK ASSOCIATION,
  as

  Administrative Agent and Issuing Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven E. Friedlander

  	
   

  
	
   

  	
  Name: 
  Steven E. Friedlander

  
	
   

  	
  Title: 
  Senior Vice President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}]]