Document:

exv10w38

 

EXHIBIT 10.38

EXECUTION COPY

LIMITED LIABILITY COMPANY AGREEMENT

FOR

LG FILM FINANCE I, LLC

A DELAWARE LIMITED LIABILITY COMPANY

THE MEMBERSHIP INTERESTS REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS.
SUCH MEMBERSHIP INTERESTS MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS QUALIFIED OR REGISTERED UNDER APPLICABLE STATE AND FEDERAL
SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO FILMCO, SUCH QUALIFICATION AND
REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE MEMBERSHIP INTERESTS REPRESENTED BY THIS
AGREEMENT IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS, AND CONDITIONS WHICH ARE SET FORTH
HEREIN.

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	ARTICLE I DEFINITIONS	 	 	1	 
	 
	 	 	 	 	 	 
	1.1
	 	Defined Terms	 	 	1	 
	 
	 	 	 	 	 	 
	ARTICLE II ORGANIZATIONAL MATTERS	 	 	7	 
	 
	 	 	 	 	 	 
	2.1
	 	Formation	 	 	7	 
	 
	 	 	 	 	 	 
	2.2
	 	Name	 	 	8	 
	 
	 	 	 	 	 	 
	2.3
	 	Term	 	 	8	 
	 
	 	 	 	 	 	 
	2.4
	 	Principal Office; Registered Agent	 	 	8	 
	 
	 	 	 	 	 	 
	2.5
	 	Purpose of FilmCo	 	 	8	 
	 
	 	 	 	 	 	 
	ARTICLE III CAPITAL CONTRIBUTIONS	 	 	8	 
	 
	 	 	 	 	 	 
	3.1
	 	Mandatory Capital Contributions	 	 	8	 
	 
	 	 	 	 	 	 
	3.2
	 	Determination of Capital Contribution Amount	 	 	9	 
	 
	 	 	 	 	 	 
	3.3
	 	Capital Calls	 	 	10	 
	 
	 	 	 	 	 	 
	3.4
	 	Intentionally Omitted	 	 	10	 
	 
	 	 	 	 	 	 
	3.5
	 	Excess Cap Pictures; Super Excess Cap Pictures	 	 	10	 
	 
	 	 	 	 	 	 
	3.6
	 	Excludable Pictures	 	 	14	 
	 
	 	 	 	 	 	 
	3.7
	 	Failure to Make Mandatory Capital Contributions.	 	 	14	 
	 
	 	 	 	 	 	 
	3.8
	 	Capital Accounts	 	 	16	 
	 
	 	 	 	 	 	 
	3.9
	 	No Interest	 	 	17	 
	 
	 	 	 	 	 	 
	3.10
	 	Withdrawals	 	 	17	 
	 
	 	 	 	 	 	 
	ARTICLE IV MEMBERS	 	 	18	 
	 
	 	 	 	 	 	 
	4.1
	 	Limited Liability	 	 	18	 
	 
	 	 	 	 	 	 
	4.2
	 	Admission of Additional Members	 	 	18	 
	 
	 	 	 	 	 	 
	4.3
	 	Meetings of Members	 	 	18	 

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Table of Contents
(Continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	4.4
	 	Voting by Members	 	 	19	 
	 
	 	 	 	 	 	 
	4.5
	 	Members Are Not Agents	 	 	19	 
	 
	 	 	 	 	 	 
	4.6
	 	No Withdrawal	 	 	19	 
	 
	 	 	 	 	 	 
	4.7
	 	Consent of Members	 	 	19	 
	 
	 	 	 	 	 	 
	ARTICLE V MANAGEMENT AND CONTROL OF FILMCO	 	 	20	 
	 
	 	 	 	 	 	 
	5.1
	 	Board of Directors	 	 	20	 
	 
	 	 	 	 	 	 
	5.2
	 	Agency Authority of Directors	 	 	20	 
	 
	 	 	 	 	 	 
	5.3
	 	Directors	 	 	20	 
	 
	 	 	 	 	 	 
	5.4
	 	Day-to-Day Management of FilmCo by Manager	 	 	22	 
	 
	 	 	 	 	 	 
	5.5
	 	Approval by Unanimous Vote of the Board of Directors	 	 	22	 
	 
	 	 	 	 	 	 
	5.6
	 	Rights of FundCo	 	 	24	 
	 
	 	 	 	 	 	 
	5.7
	 	Rights of LGE	 	 	25	 
	 
	 	 	 	 	 	 
	5.8
	 	Officers	 	 	25	 
	 
	 	 	 	 	 	 
	5.9
	 	Devotion of Time	 	 	26	 
	 
	 	 	 	 	 	 
	5.10
	 	Competing Activities	 	 	26	 
	 
	 	 	 	 	 	 
	5.11
	 	Confidentiality	 	 	26	 
	 
	 	 	 	 	 	 
	5.12
	 	Equitable Relief	 	 	27	 
	 
	 	 	 	 	 	 
	5.13
	 	Remuneration for Management or Other Services	 	 	27	 
	 
	 	 	 	 	 	 
	5.14
	 	Reimbursement of Expenses	 	 	27	 
	 
	 	 	 	 	 	 
	5.15
	 	Agreement of Members	 	 	27	 
	 
	 	 	 	 	 	 
	ARTICLE VI ALLOCATIONS OF NET PROFITS AND NET LOSSES AND DISTRIBUTIONS	 	 	27	 
	 
	 	 	 	 	 	 
	6.1
	 	Allocations of Net Profits	 	 	27	 
	 
	 	 	 	 	 	 
	6.2
	 	Allocations of Net Losses	 	 	27	 

ii

 

Table of Contents
(Continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	6.3
	 	Special Allocations	 	 	28	 
	 
	 	 	 	 	 	 
	6.4
	 	Curative Allocations	 	 	29	 
	 
	 	 	 	 	 	 
	6.5
	 	Code Section 704(c) Allocations	 	 	29	 
	 
	 	 	 	 	 	 
	6.6
	 	Allocations in Respect of a Transferred Membership Interest	 	 	30	 
	 
	 	 	 	 	 	 
	6.7
	 	Obligations of Members to Report Consistently	 	 	30	 
	 
	 	 	 	 	 	 
	6.8
	 	Gross Receipts; Adjusted Receipts	 	 	30	 
	 
	 	 	 	 	 	 
	6.9
	 	Distributions by FilmCo to Members	 	 	30	 
	 
	 	 	 	 	 	 
	6.10
	 	Form of Distributions	 	 	32	 
	 
	 	 	 	 	 	 
	6.11
	 	Return of Distributions	 	 	32	 
	 
	 	 	 	 	 	 
	6.12
	 	Limitation on Distributions	 	 	32	 
	 
	 	 	 	 	 	 
	6.13
	 	Withholding	 	 	32	 
	 
	 	 	 	 	 	 
	6.14
	 	Payments	 	 	32	 
	 
	 	 	 	 	 	 
	ARTICLE VII TRANSFER OF INTERESTS	 	 	33	 
	 
	 	 	 	 	 	 
	7.1
	 	Conditions to Transfer	 	 	33	 
	 
	 	 	 	 	 	 
	7.2
	 	Repurchase Option; Sequel Repurchase Commitment	 	 	34	 
	 
	 	 	 	 	 	 
	7.3
	 	Invalid Transfers	 	 	37	 
	 
	 	 	 	 	 	 
	7.4
	 	Effective Date of Permitted Transfers	 	 	37	 
	 
	 	 	 	 	 	 
	7.5
	 	Effect of Permitted Transfers	 	 	37	 
	 
	 	 	 	 	 	 
	7.6
	 	Substitution of Members	 	 	37	 
	 
	 	 	 	 	 	 
	7.7
	 	Elections Under the Code	 	 	37	 
	 
	 	 	 	 	 	 
	ARTICLE VIII BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS	 	 	38	 
	 
	 	 	 	 	 	 
	8.1
	 	Books and Records	 	 	38	 
	 
	 	 	 	 	 	 
	8.2
	 	Delivery to Members and Inspection	 	 	38	 

iii

 

Table of Contents
(Continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	8.3
	 	Financial Statements	 	 	38	 
	 
	 	 	 	 	 	 
	8.4
	 	Tax Returns	 	 	39	 
	 
	 	 	 	 	 	 
	8.5
	 	Other Filings	 	 	39	 
	 
	 	 	 	 	 	 
	8.6
	 	Bank Accounts	 	 	39	 
	 
	 	 	 	 	 	 
	8.7
	 	Accounting Decisions and Reliance on Others	 	 	41	 
	 
	 	 	 	 	 	 
	8.8
	 	Tax Matters	 	 	41	 
	 
	 	 	 	 	 	 
	ARTICLE IX DISSOLUTION AND WINDING UP	 	 	42	 
	 
	 	 	 	 	 	 
	9.1
	 	Dissolution	 	 	42	 
	 
	 	 	 	 	 	 
	9.2
	 	Winding Up	 	 	42	 
	 
	 	 	 	 	 	 
	9.3
	 	Distributions in Kind	 	 	42	 
	 
	 	 	 	 	 	 
	9.4
	 	Determination of Fair Market Value	 	 	42	 
	 
	 	 	 	 	 	 
	9.5
	 	Order of Distributions Upon Liquidation	 	 	43	 
	 
	 	 	 	 	 	 
	9.6
	 	Limitations on Payments Made in Dissolution	 	 	43	 
	 
	 	 	 	 	 	 
	9.7
	 	Certificate of Cancellation	 	 	43	 
	 
	 	 	 	 	 	 
	9.8
	 	Termination	 	 	43	 
	 
	 	 	 	 	 	 
	9.9
	 	No Action for Dissolution	 	 	43	 
	 
	 	 	 	 	 	 
	ARTICLE X COVENANTS	 	 	43	 
	 
	 	 	 	 	 	 
	10.1
	 	Covenants of FilmCo	 	 	43	 
	 
	 	 	 	 	 	 
	10.2
	 	Covenants of FundCo	 	 	44	 
	 
	 	 	 	 	 	 
	ARTICLE XI EXCULPATION AND INDEMNIFICATION	 	 	45	 
	 
	 	 	 	 	 	 
	ARTICLE XII SPECIAL PURPOSE ENTITY	 	 	46	 
	 
	 	 	 	 	 	 
	ARTICLE XIII MISCELLANEOUS	 	 	49	 
	 
	 	 	 	 	 	 
	13.1
	 	Complete Agreement	 	 	49	 

iv

 

Table of Contents
(Continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	13.2
	 	Binding Effect	 	 	49	 
	 
	 	 	 	 	 	 
	13.3
	 	Parties in Interest	 	 	49	 
	 
	 	 	 	 	 	 
	13.4
	 	Pronouns; Statutory References	 	 	49	 
	 
	 	 	 	 	 	 
	13.5
	 	Headings	 	 	49	 
	 
	 	 	 	 	 	 
	13.6
	 	References to this Agreement	 	 	49	 
	 
	 	 	 	 	 	 
	13.7
	 	Arbitration; Governing Law; Submission to Jurisdiction	 	 	49	 
	 
	 	 	 	 	 	 
	13.8
	 	Severability	 	 	49	 
	 
	 	 	 	 	 	 
	13.9
	 	Additional Documents and Acts	 	 	50	 
	 
	 	 	 	 	 	 
	13.10
	 	Notices	 	 	50	 
	 
	 	 	 	 	 	 
	13.11
	 	Amendments	 	 	51	 
	 
	 	 	 	 	 	 
	13.12
	 	No Interest in FilmCo Property; Waiver of Action for Partition	 	 	51	 
	 
	 	 	 	 	 	 
	13.13
	 	Consequential Damages Waiver	 	 	51	 
	 
	 	 	 	 	 	 
	13.14
	 	Multiple Counterparts; Facsimile; TIFF; PDF	 	 	51	 
	 
	 	 	 	 	 	 
	13.15
	 	Remedies Cumulative	 	 	51	 
	 
	 	 	 	 	 	 
	13.16
	 	Investment Representation	 	 	51	 

v

 

TABLE OF EXHIBITS

	 	 	 
	Exhibit No.	 	 Description
	 
	SCHEDULE A
	 	Master Glossary
	 
	 	 
	SCHEDULE B
	 	Dispute Resolution Provisions
	 
	 	 
	SCHEDULE 5.3.1
	 	Initial Directors
	 
	 	 
	SCHEDULE 5.5.17
	 	Approved Auditors
	 
	 	 
	SCHEDULE 7.2.4
	 	Potential Evaluators
	 
	 	 
	EXHIBIT A
	 	Member/Address; Commitment Amount; Percentage Interests
	 
	 	 
	EXHIBIT B
	 	Form of Capital Call Notice
	 
	 	 
	EXHIBIT C
	 	Form of Confidentiality Agreement

vi

 

LIMITED LIABILITY COMPANY AGREEMENT

FOR

LG FILM FINANCE I, LLC

A DELAWARE LIMITED LIABILITY COMPANY

A DELAWARE LIMITED LIABILITY COMPANY

     This Limited Liability Company Agreement (as amended and/or restated from time to time, this
“Agreement”) for LG FILM FINANCE I, LLC, a Delaware limited liability company
(“FilmCo”), is made and entered into effective as of May 25, 2007, by and between Lions
Gate Entertainment Inc., a Delaware corporation (“LGE”), and Pride Pictures LLC, a Delaware
limited liability company (“FundCo”), with reference to the following facts:

     A. FilmCo was formed upon the filing of the Certificate with the Delaware Secretary of State
on April 17, 2007.

     B. The Members desire to execute this Agreement, which shall establish their rights and
responsibilities and govern their relationships.

     NOW, THEREFORE, in consideration of the mutual promises made herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Members,
intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

     1.1 Defined Terms. When used in this Agreement, unless the context otherwise
requires, the following terms shall have the meanings set forth below (all terms used in this
Agreement that are not defined in this Section 1.1 shall have the meanings set forth in
Schedule A to this Agreement):

          “Act” means the Delaware Limited Liability Company Act, 6 Del. C. § 18-101,
et seq, as the same may be amended from time to time.

          “Adjusted Capital Account Deficit” means, with respect to any Member, the deficit
balance, if any, in such Member’s Capital Account with respect to a particular Funded Picture as of
the end of the relevant Fiscal Year, after giving effect to the following adjustments:

          (a) Credit to such Capital Account (without duplication) any amounts that such Member is
obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and

1

 

          (b) Debit to such Capital Account (without duplication) the items described in Regulations
Sections 1.704-1 (b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).

     The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the
provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.

          “Administrative Expenses” means all expenses of FilmCo on a continuing basis,
including payments to the Collateral Agent under the Collateral Agent Agreement; legal fees and
expenses, if any; and accountant fees and expenses, including the cost of performing an annual
audit of the Records pursuant to the Master Picture Purchase Agreement.

          “Agreement” has the meaning set forth in the preamble hereto.

          “Allocable Share” means, with respect to Adjusted Receipts, the following:

          (a) with respect to a 50/50 Funded Picture, fifty percent (50%) to LGE and fifty percent (50%)
to FundCo;

          (b) with respect to a Member and a Non 50/50 Funded Picture, the quotient, expressed as a
percentage, obtained by dividing (i) the aggregate amount of all Capital Contributions made by such
Member with respect to such Non 50/50 Funded Picture by (ii) the aggregate amount of all Capital
Contributions made by all Members with respect to such Non 50/50 Funded Picture;

          “Board of Directors” means the board of directors of FilmCo.

          “Call Notice” has the meaning set forth in Section 3.3 hereof.

          “Capital Account” means, with respect to a Member, each capital account that FilmCo
establishes and maintains for such Member pursuant to Section 3.8.

          “Capital Call” has the meaning set forth in Section 3.3 hereof.

          “Capital Contribution” means, with respect to a Member, a contribution in cash or
property to the capital of FilmCo (and if required by the context of this Agreement, “Capital
Contribution” shall also refer to the total amount of cash and the fair market value of property so
contributed).

          “Certificate” means the Certificate of Formation of FilmCo originally filed with the
Delaware Secretary of State, as amended and/or restated from time to time.

          “Closing Date” means May 25, 2007.

          “Code” means the Internal Revenue Code of 1986, as amended from time to time, the
provisions of succeeding Law, and to the extent applicable, the Regulations.

          “DC Reserve Deposit Amount” has the meaning set forth in Section 8.6.6.

2

 

          “P&R Reserve Triggering Event” has the meaning set forth in Section 6.5 of
the Distribution Agreement.

          “Director” means a member of the Board of Directors.

          “Distributor Security Agreement” has the meaning set forth in the Distribution
Agreement.

          “Dissolution Event” has the meaning set forth in Section 9.1.

          “Dollars” and “$” each means the lawful currency of the United States.

          “Evaluator” has the meaning set forth in Section 7.2.4 hereof.

          “FilmCo Minimum Gain” has the meaning ascribed to the term “Partnership Minimum Gain”
in Regulations Sections 1.704-2(b)(2) and 1.704-2(d).

          “FilmCo Distribution Costs Reserve Account” means the account (account number
737302570) in the name of FilmCo maintained at JPMorgan Chase Bank, N.A, (ABA #071000013)
established pursuant to Section 8.6.6 hereof.

          “FilmCo Distribution Costs Reserve Bank” has the meaning set forth in Section
 8.6.6 hereof.

          “FilmCo Funding Account” means the account (account number 737302513) in the name of
FilmCo maintained at JPMorgan Chase Bank, N.A, (ABA #071000013) established pursuant to Section
8.6.4 hereof.

          “FilmCo Funding Account Bank” has the meaning set forth in Section 8.6.4
hereof.

          “FilmCo P&R Account” means the account (account number 737302554) in the name of
FilmCo maintained at JPMorgan Chase Bank, N.A, (ABA #071000013) established pursuant to Section
8.6.5 hereof.

          “FilmCo P&R Account Bank” has the meaning set forth in Section 8.6.5 hereof.

          “FilmCo Reserve Account” means the account (account number 737302539) in the name of
FilmCo maintained at JPMorgan Chase Bank, N.A, (ABA #071000013) established pursuant to Section
8.6.4 hereof.

          “FilmCo Reserve Account Bank” has the meaning set forth in Section 8.6.4
hereof.

          “FilmCo Security Agreement” means that certain Security Agreement entered into
simultaneously herewith by and among FilmCo, LGE and FundCo, as from time to time amended,
supplemented or otherwise modified pursuant to the terms thereof.

3

 

          “FilmCo Separate Account” means the account (account number 737302497) in the name of
FilmCo maintained at JPMorgan Chase Bank, N.A. (ABA #071000013) established pursuant to
Section 8.6.2 hereof.

          “FilmCo Separate Account Bank” has the meaning set forth in Section 8.6.2
hereof.

          “Fiscal Year” means FilmCo’s fiscal year, which shall be the calendar year, or any
portion of such period for which FilmCo is required to allocate Net Profits, Net Losses or other
items of FilmCo income, gain, loss or deduction pursuant hereto.

          “FundCo Available Investment Amount” has the meaning for such term set forth in the
Master Picture Purchase Agreement.

          “Independent Director” means a natural Person who is a member of the Board of
Directors and who is not at the time of initial appointment as a director hereunder or at any time
while serving as a director, member or manager of FilmCo, and has not been at any time during the
five (5) years preceding such initial appointment:

          (c) a stockholder, director (with the exception of serving as an Independent Director of
FilmCo), officer, trustee, employee, partner, member, attorney or counsel of FilmCo, any Member of
FilmCo, any Lions Gate Company or of any Affiliate of any of the foregoing;

          (d) a creditor, customer, supplier, or other Person who derives more than five percent (5%) of
its revenues from, or acquires more than $100,000 in services or supplies from, its activities with
any Member, FilmCo, any Lions Gate Company or of any Affiliate of any of the foregoing;

          (e) a Person controlling or under common control with any Person excluded from serving as
Independent Director under clause (c) or (d) above; or

          (f) a member of the immediate family by blood or marriage of any Person excluded from serving
as Independent Director under clause (c) or (d) above.

          For purposes hereof “control” means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

          A natural person who satisfies the foregoing definition, other than clause (d), shall not be
disqualified from serving as an Independent Director of FilmCo if such individual is an Independent
Director provided by a nationally recognized company that provides professional independent
directors (a “Professional Independent Director”) and other corporate services in the
ordinary course of its business. A natural person who otherwise satisfies the foregoing
definition, other than clause (c), by reason of being the independent director of a “special
purpose entity” affiliated with FilmCo shall not be disqualified from serving as an Independent
Director of FilmCo if such individual is either (i) a Professional Independent Director or (ii) the
fees that such individual earns from serving as independent director of Affiliates of FilmCo in any
given year constitute in the aggregate less than five percent (5%) of such individual’s annual

4

 

income for that year. Notwithstanding the immediately preceding sentence, an Independent
Director may not simultaneously serve as Independent Director of FilmCo and independent director of
a special purpose entity that either (1) owns a direct or indirect equity interest in FilmCo or a
direct or indirect interest in any co-borrower with FilmCo, or (2) is owned, in whole or in part,
by FilmCo. For purposes of this paragraph, a “special purpose entity” is an entity, whose
organizational documents contain restrictions on its activities and impose requirements intended to
preserve such entity’s separateness that are substantially similar to the “special purpose”
provisions of this limited liability company agreement.

          “Initial Members” means LGE and FundCo.

          “LGE Default” means the failure of LGE to make a Capital Contribution as and when
required to do so under this Agreement (which Capital Contribution may be evidenced by book-entry
transfers as described in Section 3.1 hereof), which failure is not cured within fifteen
(15) days of the original due date of such Capital Contribution.

          “LIBOR Determination Date” means, with respect to any period, the second Business Day
immediately preceding the first day of such period.

          “Make Up Capital Amount” has the meaning set forth in Section 3.2.3 hereof.

          “Manager” means LGE.

          “Manager Obligations” has the meaning set forth in Section 5.4 hereof.

          “Member” means each Person who (a) is an Initial Member, has been admitted to FilmCo
as a Member in accordance with the Certificate or this Agreement, or is an assignee who has become
a Member in accordance with ARTICLE VII, and (b) has not retired, resigned, withdrawn, been
expelled or removed, or, if other than an individual, dissolved.

          “Member Nonrecourse Debt” has the meaning ascribed to the term “Partner Nonrecourse
Debt” in Regulations Section 1.704-2(b)(4).

          “Member Nonrecourse Debt Minimum Gain” means an amount, with respect to each Member
Nonrecourse Debt, equal to FilmCo Minimum Gain that would result if such Member Nonrecourse Debt
were treated as a Nonrecourse Liability, determined in accordance with Regulations Section
1.704-2(i)(3).

          “Member Nonrecourse Deductions” has the same meaning as the term “Partner Nonrecourse
Deductions” in Regulations Sections 1.704-2(i)(1) and 1.704-2(i)(2).

          “Membership Interest” means a Member’s entire interest in FilmCo, including the
Member’s right to share in income, gains, losses, deductions, credits, or similar items of, and to
receive distributions from, FilmCo pursuant to this Agreement and the Act, the right to vote or
participate in the management of FilmCo to the extent herein provided or as specifically required
by the Act, and the right to receive information concerning the business and affairs of FilmCo.

5

 

          “Net Profits” and “Net Losses” means, for each Fiscal Year, an amount equal to
FilmCo’s taxable income or loss for such Fiscal Year, determined in accordance with Code Section
703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with
the following adjustments:

          (g) Any income of FilmCo that is exempt from federal income tax and not otherwise taken into
account in computing Net Profits or Net Losses pursuant to this definition shall be added to such
taxable income or loss;

          (h) Any expenditures of FilmCo described in Code Section 705(a)(2)(B) or treated as Code
Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not
otherwise taken into account in computing Net Profits or Net Losses pursuant to this definition,
shall be subtracted from such taxable income or loss;

          (i) In the event the book value of any FilmCo asset is adjusted as a result of the application
of Regulations Section 1.704-1(b)(2)(iv)(e) or Regulations Section 1.704-1(b)(2)(iv)(f), the amount
of such adjustment shall be taken into account as gain or loss from the disposition of such asset
for purposes of computing Net Profits or Net Losses;

          (j) Gain or loss resulting from any disposition of property with respect to which gain or loss
is recognized for federal income tax purposes shall be computed by reference to the book value of
the property disposed of, notwithstanding that the adjusted tax basis of such property differs from
its book value;

          (k) In lieu of the depreciation, amortization, and other cost recovery deductions taken into
account in computing such taxable income or loss, there shall be taken into account book
depreciation, amortization, and other cost recovery deductions for such Fiscal Year, computed in
accordance with Regulations Section 1.704-1(b)(2)(iv)(g); and

          (l) Notwithstanding any other provision of this definition, any items that are specially
allocated pursuant to Section 6.3 or Section 6.4 hereof shall not be taken into
account in computing Net Profits or Net Losses (the amounts of the items of FilmCo income, gain,
loss, or deduction available to be specially allocated pursuant to Section 6.3 and
Section 6.4 hereof shall be determined by applying rules analogous to those set forth in
clauses (g) through (k) above).

     The foregoing definition of Net Profits and Net Losses is intended to comply with the
provisions of Regulations Section 1.704-1(b) and shall be interpreted consistently therewith. In
the event the Board of Directors determine that it is prudent to modify the manner in which Net
Profits and Net Losses are computed in order to comply with such Regulations, the Board of
Directors may make such modification.

          “Nonrecourse Deductions” has the meaning set forth in Regulations Sections
1.704-2(b)(1) and 1.704-2(c).

          “Nonrecourse Liability” has the meaning set forth in Regulations Section
1.704-2(b)(3).

6

 

          “Original Agreement” has the meaning set forth in the recitals to this Agreement.

          “P&R Reserve Deposit Amount” has the meaning set forth in Section 8.6.5.

          “P&R Reserve Triggering Event” has the meaning set forth in Section 6.4 of
the Distribution Agreement.

          “Percentage Interest” means the percentage interest of a Member set forth opposite the
name of such Member in Exhibit A attached hereto.

          “Permitted FilmCo Transferee” means any Affiliate of a Member other than a
Disqualified Transferee (as defined in the FundCo Operating Agreement).

          “Regulations” means the regulations currently in force from time to time as final or
temporary that have been issued by the U.S. Department of the Treasury pursuant to its authority
under the Code. If a word or phrase is defined in this Agreement by cross-referencing the
Regulations, then to the extent the context of this Agreement and the Regulations require, the term
“Member” shall be substituted in the Regulations for the term “partner”, the term “FilmCo” shall be
substituted in the Regulations for the term “partnership”, and other similar conforming changes
shall be deemed to have been made for purposes of applying the Regulations.

          “Repurchase Extension Period” has the meaning set forth in Section 7.2.3
hereof.

          “Required Capital Contributions” has the meaning set forth in Section 3.1.

          “Sequel Repurchase Commitment” has the meaning set forth Section 7.2.2

          “Settlement Report” shall have the meaning set forth in the Distribution Agreement.

          “Specified Agent” shall have the meaning set forth in Section 11.1 hereof.

          “Subsequent Cap Notice” has the meaning set forth in Section 3.5.1(b) hereof.

          “Subsequent Excess Cap Notice” has the meaning set forth in Section 3.5.2(b)
hereof.

          “Successor Manager” has the meaning set forth in Section 5.4 hereof.

          “Suspension Period” has the meaning for such term set forth in the Master Picture
Purchase Agreement.

ARTICLE II

ORGANIZATIONAL MATTERS

     2.1 Formation. Pursuant to the Act, FilmCo was formed as a Delaware limited liability company under the
laws of the State of Delaware on April 17, 2007. The rights and liabilities of the Members shall
be determined pursuant to the Act and this Agreement. To the

7

 

extent that the rights or obligations
of any Member are different by reason of any provision of this Agreement than they would be in the
absence of such provision, this Agreement shall, to the extent permitted by the Act, control.

     2.2 Name. The name of FilmCo shall be “LG Film Finance I, LLC.” The business and
affairs of FilmCo may be conducted under that name or, upon compliance with applicable Laws, any
other name that the Board of Directors, pursuant to ARTICLE V, may deem appropriate or advisable.

     2.3 Term. The term of FilmCo commenced on the date of the filing of the Certificate
with the Delaware Secretary of State and shall continue until FilmCo is dissolved in accordance
with the provisions of this Agreement.

     2.4 Principal Office; Registered Agent. The principal office of FilmCo shall be as
determined by the Board of Directors. FilmCo shall continuously maintain a registered agent and
office in the State of Delaware as required by the Act. The registered agent shall be as stated in
the Certificate or as otherwise determined by the Board of Directors.

     2.5 Purpose of FilmCo. The nature of the business or purposes to be conducted or
promoted by FilmCo is to engage in only the following activities:

          2.5.1 to acquire solely and exclusively from LGF pursuant to the Master Picture Purchase
Agreement, own and exploit Covered Pictures;

          2.5.2 to enter into and perform its obligations under the Master Picture Purchase Agreement;

          2.5.3 to enter into and perform its obligations under the Distribution Agreement;

          2.5.4 to enter into and perform its obligations under the Intercreditor Agreement;

          2.5.5 to enter into and perform its obligations under certain documents and agreements that
may be related or incidental to and necessary, convenient or advisable for the accomplishment of
the above-mentioned purposes; and

          2.5.6 to engage in any lawful act or activity and exercise any powers permitted to be
exercised by limited liability companies organized under the laws of the State of Delaware that are
related or incidental to and necessary, convenient or advisable for the accomplishment of the
above-mentioned purposes.

ARTICLE III

CAPITAL CONTRIBUTIONS

     3.1 Mandatory Capital Contributions. Subject to the terms and conditions of this
Agreement, each Member, severally and not jointly, agrees to make Capital Contributions from

8

 

time
to time which shall be used exclusively for (a) FilmCo’s Administrative Expenses, (b) the purchase
by FilmCo from LGF of twenty-three (23) Covered Pictures during the Investment Period and under
certain circumstances, up to three (3) Covered Pictures that are Sequels during the Sequel
Investment Period, pursuant to the Master Picture Purchase Agreement, and (c) True-Up Payments
required to be made by FilmCo under the Distribution Agreement. Notwithstanding the foregoing, in
no event shall FundCo be required to make any Capital Contribution if doing so would cause the
FundCo Aggregate Investment Amount to exceed the Maximum Investment Amount; provided,
however, that the Manager may, at its option, require FundCo to make Capital Contributions
with respect to a particular Covered Picture such that the FundCo Aggregate Investment Amount
equals the Maximum Investment Amount, even if such Capital Contributions are less than the amount
that would, absent reaching the Maximum Investment Amount, be required pursuant to Section
3.2. No Member shall be required to make any Capital Contribution other than the Capital
Contributions required pursuant to this Section 3.1 and Section 3.3 (the
“Required Capital Contributions”). The parties acknowledge and agree that any Capital
Contributions required to be made by LGE pursuant to the terms of this Agreement may be evidenced
by book entry account transfers, (a) from LGE to FilmCo in respect of a required Capital
Contribution, and (b) from FilmCo to LGF in respect of FilmCo’s obligations to LGF under the Master
Picture Purchase Agreement and the Distribution Agreement.

     3.2 Determination of Capital Contribution Amount. Subject to the further provisions
to this Agreement, the Required Capital Contributions of each Member with respect to each Covered
Picture acquired by FilmCo pursuant to the Master Picture Purchase Agreement shall be equal to
fifty percent (50%) of the Purchase Price for such Covered Picture payable during the Contribution
Period. Notwithstanding the foregoing, the Members’ Capital Contributions shall be adjusted in the
following circumstances:

          3.2.1 If a Funded Picture not originally identified as an Excess Cap Picture on the Initial
Investment Date for such Funded Picture becomes an Excess Cap Picture after such Initial Investment
Date, and FundCo elects (or is deemed to have elected) pursuant to Section 3.5.1(b) not to
fund additional Covered Picture Costs for such Funded Picture in excess of the Cap Amount, FundCo’s
aggregate Capital Contributions in respect of such Excess Cap Picture shall not exceed the Cap
Amount, and LGE shall be solely responsible for, and shall make, all
additional Capital Contributions in respect of such Excess Cap Picture in excess of the Cap
Amount; in such event, such Excess Cap Picture shall be a Non 50/50 Funded Picture.

          3.2.2 If a Funded Picture not originally identified as a Super Excess Cap Picture on the
Initial Investment Date for such Funded Picture becomes a Super Excess Cap Picture after such
Initial Investment Date, and if FundCo elects (or is deemed to have elected) pursuant to
Section 3.5.2(b) not to fund additional Covered Picture Costs for such Funded Picture in
excess of the Excess Cap Amount, FundCo’s aggregate Capital Contributions in respect of such Super
Excess Cap Picture shall not exceed the Excess Cap Amount, and LGE shall be solely responsible for,
and shall make, all additional Capital Contributions in respect of such Super Excess Cap Picture in
excess of the Excess Cap Amount; in such event, such Super Excess Cap Picture shall be a Non 50/50
Funded Picture.

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          3.2.3 In the event that the Aggregate FundCo Committed Amount is less than Two Hundred Four
Million Dollars ($204,000,000) on the Closing Date, an amount (the “Make Up Capital
Amount”) equal to the lesser of (i) the difference between Two Hundred Four Million Dollars
($204,000,000) and the Aggregate FundCo Committed Amount, and (ii) Four Million Dollars
($4,000,000) shall be reimbursed by LGE to FundCo by being contributed as Capital Contributions by
LGE on FundCo’s behalf, at the times and in the amounts set forth in this Section 3.2.3.
All Capital Contributions made by LGE on FundCo’s behalf under this Section 3.2.3 shall be
credited to FundCo’s Capital Accounts. Until it has made Capital Contributions under this
Section 3.2.3 in an amount equal to the Make Up Capital Amount, on each Capital Call in
respect of the Initial Purchase Price for a Covered Picture, LGE shall contribute twenty percent
(20%) (or such lesser amount as, together with all other Capital Contributions made by LGE pursuant
to this Section 3.2.3 equals the Make Up Capital Amount) of the Capital Contribution
required to be made by FundCo in respect of such Covered Picture. LGE and FundCo agree and
acknowledge that as of the Closing Date the Aggregate FundCo Committed Amount is equal to Two
Hundred Four Million Dollars ($204,000,000).

     3.3 Capital Calls. The Manager may from time to time make a capital call on behalf of
FilmCo (each, a “Capital Call”) by delivering to each Member a notice in the form attached
as Exhibit B (a “Call Notice”) (i) stating (A) the amount of capital required by
FilmCo, (B) each Funded Picture for which the Member’s Capital Contribution will be used (as
Purchase Price or True-Up Payment), including the specific amount (on a Funded Picture by Funded
Picture basis) to be so allotted, (C) the date and time by which such Capital Contribution is
required to be made, which date shall not be less than ten (10) Business Days after the date on
which the Call Notice is delivered; (D) the wire transfer instructions in accordance with which the
Capital Contribution is required to be made (it being acknowledged and agreed that the Manager may
direct some or all of a Capital Contribution to the Distributor to pay amounts due to the
Distributor from FilmCo (including True-Up Payments)); (ii) representing and warranting that the
capital called pursuant to such Call Notice is to be used by FilmCo in accordance with Section
3.1 hereof, (iii) if any portion of such Capital Contributions are to be used for the Initial
Purchase Price of a Covered Picture, attaching the applicable Notice Materials, and (iv) if any
portion of such Capital Contributions are to be used to make True-Up Payments, attaching the
applicable True-Up Statement. All Call Notices to the Initial Members shall be in equal amounts,
except as
otherwise required under Section 3.2 hereof. FilmCo shall use all reasonable efforts
to deliver not more than one (1) Call Notice per calendar month.

     3.4 Intentionally Omitted.

     3.5 Excess Cap Pictures; Super Excess Cap Pictures.

          3.5.1 Excess Cap Pictures.

               (a) FundCo shall have the sole right to direct FilmCo to exercise (or not exercise) the Excess
Cap Picture Option. FundCo shall have no obligation or right to make Capital Contributions with
respect to an Excess Cap Picture, other than with respect to the first ***** Excess Cap Pictures
required to be purchased by FilmCo under the Master Picture Purchase Agreement which, for greater
certainty, shall not be subject to the Cap Amount and for which the Required Capital Contribution
of each Member shall be equal to fifty percent (50%) of

10

 

the Purchase Price for such Excess Cap
Pictures. If FundCo directs FilmCo to exercise the Excess Cap Picture Option, the Members shall be
obligated and have the right to make Capital Contributions with respect to each Excess Cap Picture.
FundCo shall notify FilmCo in writing whether FundCo elects to cause FilmCo to exercise the Excess
Cap Picture Option under the Master Picture Purchase Agreement within five (5) Business Days after
the later of receipt of Notice Materials with respect to the ***** Excess Cap Picture and the
screening (if requested) of such ***** Excess Cap Picture pursuant to Section 2.5 of
the Master Picture Purchase Agreement. If FundCo elects to cause FilmCo not to exercise the Excess
Cap Picture Option or FundCo fails timely to cause FilmCo to exercise the Excess Cap Picture Option
under the Master Picture Purchase Agreement, FilmCo shall have no right to acquire and FundCo shall
have no right to make Capital Contributions with respect to such ***** Excess Cap Picture or
any subsequent Excess Cap Pictures; in such event, LGE (and its Affiliates) shall have the right to
continue to produce, acquire, own, finance and/or fund such Excess Cap Pictures and exploit all
Rights thereto outside of FilmCo.

               (b) If a
Funded Picture not originally identified as an Excess Cap Picture on the Initial
Investment Date for such Funded Picture becomes an Excess Cap Picture after its Initial Investment
Date (including by virtue of the After Acquired Costs for any After Acquired Rights with respect to
such Funded Picture), LGE shall provide written notice to FundCo and FilmCo of such event (a
“Subsequent Cap Notice”), which notice shall include the amount of anticipated additional
Covered Picture Costs or After Acquired Costs, as applicable, for such Funded Picture in excess of
the Cap Amount; provided that LGE’s obligation to deliver a Subsequent Cap Notice to FundCo and
FilmCo under this Agreement shall be deemed satisfied if LGF delivers a courtesy notice pursuant to
Section 1.7.1(ii) of the Master Picture Purchase Agreement that contains all of the
information required to be conveyed in a Subsequent Cap Notice.
Within five (5) Business Days of
FundCo’s receipt of a Subsequent Cap Notice from LGE or LGF, FundCo shall provide written notice to
LGE whether FundCo elects to fund its
fifty percent (50%) share of all additional Covered Picture Costs or After Acquired Costs, as
applicable, for such Funded Picture in excess of the Cap Amount; provided that if FilmCo has not
yet acquired, or been deemed to have acquired, ***** Excess Cap Pictures pursuant to the terms
of the Master Picture Purchase Agreement, FundCo shall be required to fund such additional Covered
Picture Costs or After Acquired Costs, as applicable, pursuant to the terms of the Master Picture
Purchase Agreement. If (a) FundCo is required to fund additional Covered Picture Costs or After
Acquired Costs, as applicable, for such Funded Picture in excess of the Cap Amount, such Funded
Picture shall (i) be a 50/50 Funded Picture that FilmCo has acquired, or been deemed to have
acquired pursuant to the terms of the Master Picture Purchase Agreement and (ii) be counted against
the obligation of FilmCo under the Master Picture Purchase Agreement to acquire the Rights to the
first ***** Excess Cap Pictures (if FilmCo has not yet acquired, or been deemed to have
acquired, ***** Excess Cap Pictures pursuant to the terms of the Master Picture Purchase
Agreement); (b) if such Funded Picture is the ***** Excess Cap Picture that FilmCo has
acquired, or been deemed to have acquired pursuant to the terms of the Master Picture Purchase
Agreement, FundCo shall be deemed to have elected to cause FilmCo to exercise (and FilmCo shall be
deemed to have exercised) the Excess Cap Picture Option. If FundCo fails to give LGE the foregoing
notice with respect to the Funded Picture that is the ***** Excess Cap Picture, FundCo shall
be deemed to have elected not to fund additional Covered Picture Costs or After Acquired Costs, as
applicable, for such Funded Picture in excess of the Cap Amount, such Funded Picture shall be a Non
50/50 Funded Picture,

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FundCo’s aggregate Capital Contributions in respect of such Funded Picture
shall not exceed the Cap Amount, FundCo shall be deemed to have elected not to exercise the Excess
Cap Picture Option, and LGE shall be solely responsible for and shall make all additional Capital
Contributions in respect of such Funded Picture in excess of the Cap Amount.

               (c) Upon exercise
of FundCo’s sole right to cause FilmCo to exercise the Excess Cap Picture
Option (or in the event the Excess Cap Picture Option is exercised pursuant to Section
3.5.1(b)), the Cap Amount as a criterion of a Covered Picture shall no longer be applicable
with respect to Excess Cap Pictures to be acquired by FilmCo after the exercise of the Excess Cap
Picture Option.

               (d) FundCo’s failure (within the periods specified in this Agreement) to provide an
affirmative notice to FilmCo after it has received the Notice Materials or a Subsequent Cap Notice,
if any, for the ***** Excess Cap Picture sold to, or proposed to be sold to, FilmCo shall be
deemed FundCo’s decision to cause FilmCo not to exercise the Excess Cap Picture Option.

               (e) If a Covered Picture was originally identified as the ***** Excess Cap Picture and
FilmCo did not exercise the Excess Cap Picture Option, but thereafter the Cap Computation Amount
for such Covered Picture (if paid) measured on the date that is ninety (90) days after the Initial
Theatrical Release Date for such Covered Picture would have been less than the product of (x) 2.0
and (y) the Cap Amount, such Covered Picture shall be required to be purchased by FilmCo from LGF
and sold by LGF to FilmCo pursuant to the terms of the Master Picture Purchase Agreement, and the
Excess Cap Picture Option shall be reinstated.

          3.5.2 Super Excess Cap Pictures.

               (a) FundCo shall have the sole right to direct FilmCo to exercise (or not exercise) each Super
Excess Cap Picture Option. FundCo shall have no obligation or right to make Capital Contributions
with respect to a Super Excess Cap Picture unless FundCo has directed FilmCo to exercise (and
FilmCo has exercised) the Super Excess Cap Picture Option with respect to such Super Excess Cap
Picture, in which event the Members shall be obligated to make Capital Contributions with respect
to such Super Excess Cap Picture and such Super Excess Cap Picture shall be a 50/50 Funded Picture.
FundCo shall notify FilmCo in writing whether FundCo elects to cause FilmCo to exercise a Super
Excess Cap Picture Option with respect to a Super Excess Cap Picture within five (5) Business Days
after the later of receipt of Notice Materials with respect to such Super Excess Cap Picture and
the screening (if requested) of such Super Excess Cap Picture pursuant to Section 2.5 of
the Master Picture Purchase Agreement. If FundCo declines to direct FilmCo to exercise the Super
Excess Cap Picture Option with respect to a Super Excess Cap Picture or fails to give LGE the
foregoing notice, FundCo shall have no rights in or to such Super Excess Cap Picture or the
proceeds thereof and no right or obligation to make Capital Contributions with respect to such
Super Excess Cap Picture, and LGE shall also have no obligation or right to make Capital
Contributions with respect to such Super Excess Cap Picture; in such event, LGE (and its
Affiliates) shall have the right to continue to produce, acquire, own, finance and or fund such
Super Excess Cap Picture and exploit all Rights thereto outside of FilmCo.

12

 

               (b) If a Funded Picture not originally identified as a Super Excess Cap Picture on the Initial
Investment Date for such Funded Picture becomes a Super Excess Cap Picture after its Initial
Investment Date (including by virtue of the After Acquired Costs for any After Acquired Rights with
respect to such Funded Picture), LGE shall provide written notice to FundCo and FilmCo of such
event (a “Subsequent Excess Cap Notice”), which notice shall include the amount of
anticipated additional Covered Picture Costs or After Acquired Costs, as applicable, for such
Funded Picture in excess of the Excess Cap Amount; provided that LGE’s obligation to deliver a
Subsequent Excess Cap Notice to FundCo and FilmCo under this Agreement shall be deemed satisfied if
LGF delivers a courtesy notice pursuant to Section 1.7.2(iii) of the Master Picture
Purchase Agreement that contains all of the information required to be conveyed in a Subsequent
Excess Cap Notice. Within five (5) Business Days of FundCo’s receipt of a Subsequent Excess Cap
Notice from LGE or LGF, FundCo shall provide written notice to LGE with respect to whether FundCo
elects to fund additional Covered Picture Costs or After Acquired Costs, as applicable, for such
Funded Picture in excess of the Excess Cap Amount. If FundCo notifies LGE that it elects to fund
additional Covered Picture Costs or After Acquired Costs, as applicable, for such Funded Picture in
excess of the Excess Cap Amount, such Funded Picture shall (i) be a 50/50 Funded Picture, and (ii)
FundCo shall be deemed to have elected to cause FilmCo to exercise (and FundCo shall be deemed to
have exercised) the Super Excess Cap Picture Option under the Master Picture Purchase Agreement
with respect to such Super Excess Cap Picture. If FundCo fails to give LGE the foregoing notice,
FundCo shall be deemed to have elected not to fund additional Covered Picture Costs or After
Acquired Costs, as applicable, for such Funded Picture in excess of the Excess Cap Amount, such
Funded Picture shall be a Non 50/50 Funded Picture,
FundCo’s aggregate Capital Contributions in
respect of such Super Excess Cap Picture shall not exceed the Excess Cap Amount, and LGE shall be
solely responsible for, and shall make all additional Capital Contributions in respect of,
such Super Excess Cap Picture in excess of the Excess Cap Amount.

               (c) FundCo’s failure to provide an affirmative notice to FilmCo within five
(5) Business Days
after (x) the later of FundCo’s receipt of Notice Materials with respect to a Super Excess Cap
Picture and the screening (if requested) of such Super Excess Cap Picture pursuant to Section
2.5 of the Master Picture Purchase Agreement or (y) FundCo’s receipt of a Subsequent Excess Cap
Notice, shall be deemed FundCo’s decision to cause FilmCo not to exercise the Super Excess Cap
Picture Option for such Super Excess Cap Picture.

               (d) If a Covered Picture was originally identified as a Super Excess Cap Picture and FilmCo
did not exercise the Super Excess Cap Picture Option with respect to such Covered Picture, but
thereafter the Cap Computation Amount for such Covered Picture (if paid) measured on the date that
is ninety (90) days after the Initial Theatrical Release Date for such Covered Picture would have
been less than seventy-five million dollars ($75,000,000) but more than fifty million dollars
($50,000,000), (i) such Covered Picture shall be treated as an Excess Cap Picture for purposes of
FilmCo’s obligations under the Master Picture Purchase Agreement, (ii) if FilmCo has not previously
acquired, or been deemed to have acquired, ***** Excess Cap Pictures pursuant to the terms of
the Master Pictures Purchase Agreement, then (A) FilmCo shall be obligated to acquire such Covered
Picture, and (B) such Covered Picture shall count against FilmCo’s obligation under the Master
Picture Purchase Agreement to acquire the Rights to the first ***** Excess Cap Pictures from
LGE, and (iii) if such Covered Picture would be the ***** Excess Cap Picture acquired by
FilmCo or deemed to have been

13

 

acquired by FilmCo pursuant to the terms of the Master Picture
Purchase Agreement, such Covered Picture shall be subject to the Excess Cap Picture Option.

               (e) If a Covered Picture was originally identified as a Super Excess Cap Picture and FundCo
elected not to make a Capital Contribution with respect to such Covered Picture, but thereafter the
Cap Computation Amount for such Covered Picture (if paid) measured on the date that is ninety (90)
days after the Initial Theatrical Release Date for such Covered Picture would have been less than
fifty million dollars ($50,000,000), such Covered Picture shall be required to be purchased by
FilmCo from LGF and sold by LGF to FilmCo pursuant to the terms of the Master Picture Purchase
Agreement.

     3.6 Excludable Pictures. FundCo shall have the sole right to direct FilmCo to
exercise (or not exercise) the Excludable Picture Purchase Option. FundCo shall have no obligation
or right to make Capital Contributions with respect to an Excludable Picture, unless FundCo has
directed FilmCo to exercise (and FilmCo has exercised) the Excludable Picture Purchase Option with
respect to such Excludable Picture, in which event the Members shall be obligated to make Capital
Contributions with respect to such Excludable Picture. FundCo shall notify FilmCo whether FundCo
elects to cause FilmCo to exercise the Excludable Picture Purchase Option with respect to an
Excludable Picture within three (3) Business Days of the receipt of Notice Materials with respect
to such Excludable Picture. FundCo’s failure to provide an affirmative notice to FilmCo that
FundCo directs FilmCo to exercise the Excludable Picture Purchase Option with respect to an
Excludable Picture shall be deemed FundCo’s decision not to cause FilmCo to exercise such
option. For the avoidance of doubt, notwithstanding anything to the contrary contained in
this Agreement, (x) if FundCo elects to cause FilmCo to exercise the Excludable Picture Option with
respect to an Excludable Picture and such Excludable Picture is an Excess Cap Picture, such Funded
Picture shall be counted against the obligation of FilmCo under the Master Picture Purchase
Agreement to acquire the Rights with respect to the first ***** Excess Cap Pictures (if FilmCo
has not yet acquired, or been deemed to have acquired, ***** Excess Cap Pictures pursuant to the
terms of the Master Picture Purchase Agreement); and (y) if an Excludable Picture would be the
***** Excess Cap Picture to be acquired by FilmCo under the Master Picture
Purchase Agreement, under no circumstances shall an election by FundCo to cause to FilmCo to
exercise (or not exercise) the Excludable Picture Option with respect to such Excludable Picture
trigger a deemed exercise of (or failure to exercise) the Excess Cap Picture Option, or otherwise
impact the rights of FundCo or FilmCo with respect to the Excess Cap Picture Option in any manner.

     3.7 Failure to Make Mandatory Capital Contributions.

          3.7.1 FundCo Default. In the event of a FundCo Default, FilmCo may, upon written
notice to FundCo and without waiving any other rights or remedies available to it under this
Agreement or at Law or in equity:

               (a) at the request of LGE, apply any sums in the FilmCo Separate Account, up to the amount of
the Capital Contribution that remains unpaid by FundCo, that would, absent this clause (a) be
distributed to FundCo pursuant to Section 6.9.1, against FundCo’s obligation to make such
Capital Contribution (amounts so applied shall be deemed to

14

 

have been distributed to FundCo by
FilmCo and subsequently contributed to FilmCo by FundCo as a Capital Contribution);

               (b) at the request of LGE, make all payments and distributions that would otherwise be due to
FundCo to LGE until LGE has received an amount equal to the sum of (x) the FundCo Capital
Contribution shortfall together with interest at LIBOR plus two hundred (200) basis points from the
date on which the Capital Contribution was required to be made to the date paid and (y) amounts due
to LGE in respect of its Capital Accounts and not paid as a result of the FundCo Default;

               (c) at the request of LGE, terminate the Master Picture Purchase Agreement and cease to
acquire Covered Pictures thereunder.

In addition, in the event of a FundCo Default, LGE may, without waiving any other rights or
remedies available to it under this Agreement or at Law or in equity, exercise its Repurchase
Option and/or its Sequel Repurchase Commitment pursuant to Section 7.2 hereof.

     Upon any termination of the Master Picture Purchase Agreement, the Members shall not be
obligated or permitted to make Capital Contributions pursuant to Section 3.1 with respect
to Covered Pictures not purchased by FilmCo prior to such termination; provided,
however, that the obligations and rights of the Members with respect to Covered Pictures
purchased by FilmCo
prior to such termination shall continue in the manner set forth in the Master Picture
Purchase Agreement.

          3.7.2 LGE Default. In the event of a LGE Default, FilmCo may, upon written notice to
LGE and without waiving any other rights or remedies available to it under this Agreement or at Law
or in equity:

               (a) at the request of FundCo, apply any sums in the FilmCo Separate Account, up to the amount
of the Capital Contribution that remains unpaid by LGE, that would, absent this clause (a) be
distributed to LGE pursuant to Section 6.9.1, against LGE’s obligation to make such Capital
Contribution (amounts so applied shall be deemed to have been distributed to LGE by FilmCo and
subsequently contributed to FilmCo by LGE as a Capital Contribution);

               (b) at the request of FundCo, make all payments and distributions that would otherwise be due
to LGE to FundCo until FundCo has received an amount equal to the sum of (x) the LGE Capital
Contribution shortfall together with interest at LIBOR plus two hundred (200) basis points from the
date on which the Capital Contribution was required to be made to the date paid and (y) amounts due
to FundCo in respect of its Capital Accounts and not paid as a result of the LGE Default;

               (c) at the request of FundCo, terminate the Master Picture Purchase Agreement and cease to
acquire Covered Pictures thereunder.

     Upon any termination of the Master Picture Purchase Agreement pursuant to this Section
3.7.2, the Members shall not be obligated or permitted to make Capital Contributions pursuant
to Section 3.1 with respect to Covered Pictures not purchased by FilmCo prior to such
termination;

15

 

provided, however, that the obligations and rights of the Members with
respect to Covered Pictures purchased by FilmCo prior to such termination shall continue.

     Notwithstanding anything to the contrary contained in this Agreement, to the extent that a LGE
Default has occurred and is continuing, FundCo shall not be obligated to make any Capital
Contribution that would otherwise be required pursuant to the provisions of this Agreement unless
and until such LGE Default has been cured.

          3.7.3 Permitted FundCo Non-Contribution.(a) In the event of a Permitted FundCo
Non-Contribution that arises under the circumstances described in clause (a) of the definition
provided for such term in the Master Glossary, and which continues for a period of at least one
hundred eighty (180) consecutive days, FilmCo may, upon written notice to FundCo at the request of
LGE, terminate the Master Picture Purchase Agreement and cease to acquire Covered Pictures
thereunder; such remedy is the sole remedy for a Permitted FundCo Non-Contribution. Upon any such
termination of the Master Picture Purchase Agreement, the Members shall not be obligated or
permitted to make Capital Contributions pursuant to Section 3.1 with respect to Covered
Pictures not purchased by FilmCo prior to such termination; provided, however, that
the obligations and
rights of the Members with respect to Covered Pictures purchased by FilmCo prior to such
termination shall continue.

               (b) (i)      During any Suspension Period, the Manager shall, as
required, continue to make Capital
Calls and deliver related Call Notices to the Members with respect to Funded Pictures that were
acquired by FilmCo in advance of the commencement of the applicable Suspension Period. LGE shall
continue to make its Required Capital Contributions with respect to all Capital Calls that are made
by the Manager during the Suspension Period, and the Manager shall adjust the Capital Accounts of
LGE accordingly.

                    (ii) FundCo shall notify FilmCo within two (2) Business Days
after the requirements for
termination of the applicable Suspension Period (as enumerated in Section 1.6.2 of the
Master Picture Purchase Agreement) have been satisfied. Upon receipt of the foregoing notice, the
Manager shall, on behalf of FilmCo, deliver to FundCo a Capital Call for the aggregate FundCo
Available Investment Amount. Upon receipt of such amount from FundCo, the Manager shall, on behalf
of FilmCo, apply such amount in accordance with the formula provided in Section 1.6.2(ii)
of the Master Picture Purchase Agreement, and the respective Capital Accounts of LGE and FundCo
shall be adjusted accordingly.

          3.7.4 [Intentionally Omitted].

     3.8 Capital Accounts. FilmCo shall establish an individual Capital Account for each
Member with respect to each Funded Picture that is purchased by FilmCo pursuant to the Master
Picture Purchase Agreement and credit to such individual Capital Accounts all amounts actually
contributed (or deemed contributed) by each Member in respect of such Funded Picture (including
pursuant to Section 3.1, Section 3.2.3, Section 3.3, and Section
6.9.4). FilmCo shall determine and maintain each Capital Account in accordance with
Regulations Section 1.704-1(b)(2)(iv) and, in pursuance thereof, the following provisions shall
apply:

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          3.8.1 Each Member’s Capital Account with respect to a Funded Picture shall be credited with
the amount of (i) such Member’s Capital Contributions for such Funded Picture, (ii) such Member’s
allocated share of Net Profits and any items in the nature of income or gain that are specially
allocated pursuant to Section 6.3 or Section 6.4 hereof, and (iii) the amount of
any FilmCo liabilities assumed by such Member or which are secured by any property distributed to
such Member with respect to such Funded Picture;

          3.8.2 To each Member’s Capital Account with respect to a particular Funded Picture there shall
be debited (i) the amount of cash and the fair market value of any property distributed to such
Member pursuant to any provision of this Agreement, (ii) such Member’s allocated share of Net
Losses and any items in the nature of expenses or losses that are specially allocated pursuant to
Section 6.3 or Section 6.4 hereof, and (iii) the amount of any liabilities of such
Member assumed by FilmCo or which are secured by any property contributed by such Member to FilmCo,
each with respect to the particular Funded Picture to which the Capital Account relates;

          3.8.3 In the event all or a portion of a Membership Interest in FilmCo is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the Capital Accounts
of the transferor to the extent they relate to the transferred Membership Interest; and

          3.8.4 In determining the amount of any liability for purposes of Section 3.8.1 and
Section 3.8.2 hereof, there shall be taken into account Code Section 752(c) and any other
applicable provisions of the Code and Regulations.

     The foregoing provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and
shall be interpreted and applied in a manner consistent with such Regulations. In the event the
Board of Directors determines that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto, are computed in order to comply with such Regulations,
the Board of Directors may make such modification.

     3.9 No Interest. No Member shall be entitled to receive any interest on such Member’s
Capital Contributions.

     3.10 Withdrawals.

          3.10.1 No Withdrawals. No Member shall have the right to withdraw such Member’s
Capital Contributions or to demand and receive property of FilmCo or any distribution in return for
such Member’s Capital Contributions, except as may be expressly provided in this Agreement or
required by law.

17

 

ARTICLE IV

MEMBERS

     4.1 Limited Liability. Except as required under the Act or as expressly set forth in
this Agreement, no Member shall be personally liable for any debt, obligation or liability of
FilmCo, whether that debt, obligation or liability arises in contract, tort or otherwise.

     4.2 Admission of Additional Members. No additional Members shall be admitted unless
approved unanimously by the Members. No additional Member shall become a Member until such
additional Member has (i) complied with the terms and conditions of ARTICLE VII hereof,
(ii) made any required Capital Contribution and (iii) become a party to this Agreement. Substitute
Members may be admitted only in accordance with ARTICLE VII.

     4.3 Meetings of Members.

          4.3.1 No annual or regular meetings of the Members as such shall be required; if convened,
however, meetings of the Members may be held at such date, time and place as the Board of
Directors, Member or Members who properly noticed such meeting, as the case may be, may fix from
time to time. At any meeting of the Members, the Manager shall preside at the meeting and shall
appoint another person to act as secretary of the meeting. The secretary of the meeting shall
prepare written minutes of the meeting, which shall be maintained in the books and records of
FilmCo.

          4.3.2 A meeting of the Members may be called at any time by the Members, any Member, or the
Board of Directors for the purpose of addressing any matter on which the vote, consent, or approval
of the Members is required or permitted under this Agreement.

          4.3.3 Notice of any meeting of the Members shall be sent or otherwise given by the Manager to
the Members in accordance with this Agreement not less than ten (10) nor more than sixty (60) days
before the date of the meeting. The notice shall specify the place, date and hour of the meeting
and the general nature of the business to be transacted. Except as the Members may otherwise
agree, no business other than that described in the notice may be transacted at the meeting.

          4.3.4 Attendance of a Member at a meeting in person, by proxy, telephonically or other means
by which the Members may hear each other shall constitute a waiver of notice of that meeting,
except when the Member objects, at the beginning of the meeting, to the transaction of any business
because the meeting is not duly called or convened, and except that attendance at a meeting is not
a waiver by such Member of any right to object to the consideration of matters not included in the
notice of the meeting if that objection is expressly made by such Member at the meeting. Neither
the business to be transacted nor the purpose of any meeting of the Members need be specified in
any written waiver of notice. The Members may participate in any meeting of the Members by means
of conference telephone or similar means as long as all Members can hear one another. A Member so
participating shall be deemed to be present in person at the meeting.

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          4.3.5 Any action that can be taken at a meeting of the Members may be taken without a meeting
if a consent in writing setting forth the action so taken is signed and delivered to FilmCo by
Members representing not less than the minimum amount of Percentage Interests necessary under this
Agreement to approve the action and otherwise in accordance with the requirements of the Act. The
Manager shall notify Members of all actions taken by such written consents, and all such written
consents shall be maintained in the books and records of FilmCo.

     4.4 Voting by Members.

          4.4.1 The Members, acting solely in their capacities as Members, shall have the right to vote
on, consent to or otherwise approve only those matters as to which this
Agreement specifically requires such approval. Except as otherwise specifically provided in
this Agreement, the vote, consent, or approval of all the Members shall be required as to all
matters as to which the vote, consent or approval of the Members is required or permitted under
this Agreement.

     4.5 Members Are Not Agents. No Member acting solely in the capacity of a Member is an
agent of FilmCo, nor can any Member acting solely in the capacity of a Member bind FilmCo or
execute any instrument on behalf of FilmCo.

     4.6 No Withdrawal. Except as provided in ARTICLE VII and ARTICLE IX
hereof, no Member may withdraw, retire, or resign from FilmCo without the prior consent of all
other Members.

     4.7 Consent of Members.

          4.7.1 Each of the Members consents to the pledge and assignment of FundCo’s interest in this
Agreement and the other Pledged Collateral (as defined in the each of the Credit and Security
Agreement and the Secured Subordinated Note Purchase Agreement) pursuant to the terms of the Credit
and Security Agreement and the Secured Subordinated Note Purchase Agreement.

          4.7.2 Subject to the terms of this Agreement, FilmCo shall deposit all amounts payable by
FilmCo to FundCo directly into the Operating Account established by FundCo pursuant to the terms of
the Credit and Security Agreement and the Secured Subordinated Note Purchase Agreement.

          4.7.3 Each of the Members agrees that the Collateral Agent, being the Collateral Agent as
defined in the Credit and Security Agreement or the Collateral Agent as defined in the Secured
Subordinated Note Purchase Agreement, as applicable, shall upon the occurrence and continuance of
an Event of Default have the full power and authority to exercise all of the rights and remedies of
FundCo to the extent expressly provided in this Agreement and in accordance with the terms and
subject to the provisions of Section 5.04, Section 7.06 and Section 7.09(d) of each of the Credit
and Security Agreement and the Secured Subordinated Note Purchase Agreement, including, without
limitation, the right to accept the Buy-Out Option, to receive any notices addressed to FundCo
under this Agreement, to make any amendments thereto or to agree to any consent or waiver in
respect thereof.

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ARTICLE V

MANAGEMENT AND CONTROL OF FILMCO

     5.1 Board of Directors. Subject to the provisions of the Certificate and this Agreement, except as delegated to the
Manager under Section 5.4, the Members hereby agree that the business, property and affairs
of FilmCo shall be managed under the direction of the Board of Directors, the members of which
shall constitute the “managers” of FilmCo for purposes of the Act.

     5.2 Agency Authority of Directors.

          5.2.1 Except if the Board of Directors has appointed officers pursuant to Section 5.8,
the Independent Director of the Board of Directors shall have the signing authority of an officer
under Section 5.8 herein. If the Board of Directors has appointed officers pursuant to
Section 5.8, the Directors shall have no authority to endorse checks, drafts and other
evidences of indebtedness made payable to the order of FilmCo or to sign checks, drafts and other
instruments obligating FilmCo to pay money, or sign agreements or other documents.

          5.2.2 Subject to the provisions of the Certificate and this Agreement, the Board of Directors
may, by majority vote of all Directors then in office, delegate to any officers of FilmCo or
delegate to the Manager any power vested in the Board of Directors. The Board of Directors has
delegated the management of the day-to-day operations of FilmCo (including the making of Capital
Calls and the delivering of Call Notices) to the Manager, and such delegation shall not be modified
or terminated without the unanimous vote of the Directors.

     5.3 Directors.

          5.3.1 Number, Term and Qualification. The number of Directors who shall constitute
the whole Board of Directors shall be three (3). One (1) Director shall be designated by LGE, one
(1) Director shall be designated by FundCo and one (1) Director shall be designated jointly by LGE
and FundCo as set forth in Section 5.3.5. The Director designated jointly by LGE and
FundCo must be an Independent Director. The Directors initially designated by LGE and FundCo are
listed on Exhibit 5.3.1 hereto. Each Director shall hold office for a term commencing on
the date of designation (or in the case of initial Directors, commencing on the date hereof) and
expiring upon the earlier of (i) the date on which such Director is removed pursuant to the
provisions of this Agreement or (ii) the date on which such Director resigns pursuant to the
provisions of this Agreement. A Director shall be an individual but need not be a Member.

          5.3.2 Independent Directors. At least one-third (1/3) of the Board of Directors (but
not less than one (1) of the members of the Board of Directors) shall be an Independent Director;
provided, however, that if at any time the office of the Independent Director shall
be vacant for any reason, subject to Section 5.5, Section 5.6, Section 5.7
and this Section 5.3.2, any action taken by the Board of Directors in accordance with this
Agreement (other than actions taken with respect to matters described in Section 5.5,
Section 5.6, Section 5.7 and this Section 5.3.2) shall nonetheless be
valid. If an Independent Director resigns, dies or

20

 

becomes incapacitated, or such position
otherwise becomes vacant, no action requiring the unanimous vote of the Board of Directors shall be
taken until a successor Independent Director is elected and qualified and approves of such action.
In the event of the death, incapacity or resignation of an Independent Director or a vacancy for
any reason, a successor Independent Director shall be appointed by the Members as soon as
practicable.

          5.3.3 Resignation. Any Director may resign at any time by giving written notice to
the other Directors and the Members without prejudice to the rights, if any, of FilmCo under any
contract to which the Director is a party. The resignation of any Director shall take effect upon
receipt of that notice or at such later time as shall be specified in the notice, and, unless
otherwise specified in the notice, the acceptance of the resignation shall not be necessary to make
it effective.

          5.3.4 Removal. Any Director may be removed at any time, with or without cause, by the
Member(s) entitled to designate such Director, or in the case of the Independent Director, by the
unanimous vote of the Members. Any such removal shall be without prejudice to the rights, if any,
of the Director and FilmCo under any employment contract between such parties.

          5.3.5 Vacancies. Any vacancy occurring for any reason in the office of Director may
be filled by the Member(s) who designated such Director; provided that if the Members are unable to
agree with respect to the identity of any successor to the Independent Director within thirty (30)
days of the commencement of a vacancy in such office, such successor shall be selected by the
departing Independent Director.

          5.3.6 Board of Directors. Each Director, in his or her capacity as a Director, shall
have no authority to act alone, but the Directors shall only act as members of the Board of
Directors as provided in this Agreement.

               (a) Meetings. No regular meetings of the Board of Directors are required;
provided, however, that the Board of Directors will meet at least once annually or
act pursuant to written consent to the extent required under the Act. Meetings of the Board of
Directors may be called by any Director. All meetings shall be held upon ten (10) days’ notice by
mail or forty-eight (48) hours’ notice delivered personally, by telephone or by facsimile. A
notice need not specify the purpose of any meeting. Notice of a meeting need not be given to any
Director who signs a waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or who attends the meeting without
protesting, prior to its commencement, the lack of notice to such Director. All such waivers,
consents and approvals shall be filed with FilmCo records or made a part of the minutes of the
meeting. A majority of the Directors present, whether or not a quorum is present, may adjourn any
meeting to another time and place. If the meeting is adjourned for more than twenty-four
(24) hours, notice of any adjournment shall be given prior to the time of the adjourned
meeting to the Directors who are not present at the time of the adjournment. Meetings of the
Directors may be held at any place within or without the State of Delaware that has been designated
in the notice of the meeting or at such place as may be approved by the Directors. Directors may
participate in a meeting through the use of conference telephone or similar communications
equipment, so long as all Directors participating in such meeting can hear one another.

21

 

Participation in a meeting in such manner constitutes a presence in person at such meeting for all
purposes under this Agreement.

               (b) Action by a Majority of the Directors. Except as otherwise provided herein, a
majority of the authorized number of Directors constitutes a quorum of the Directors for the
transaction of business, and except as otherwise required pursuant to Section 5.5 hereof,
every act or decision done or made with the approval of at least a majority of the authorized
number of Directors, whether present at a meeting duly held or by written consent, is the act of
the Directors. Any action required or permitted to be taken by the Board of Directors may be taken
by the Directors without a meeting, if such action is approved in writing by a majority of the
Directors except as otherwise required pursuant to Section 5.5 hereof. Such action by
written consent shall have the same force and effect as a determination of the Directors at a
meeting duly held.

               (c) Committees. The Board of Directors may create committees, having such powers and
performing such duties as may be assigned to them by the Board of Directors, to assist the Board of
Directors and the officers of FilmCo in the governance of areas of importance to FilmCo.

     5.4 Day-to-Day Management of FilmCo by Manager. Subject to the provisions of the
Certificate and this Agreement, the management of the day-to-day operations of FilmCo (including
the making of capital calls and the delivering of Call Notices) is hereby delegated by the Members
and the Board of Directors to the Manager. The Manager shall be authorized to make expenditures
and Capital Calls on behalf of FilmCo in accordance with this Agreement. The Manager shall provide
to all Members the financial statements required pursuant to Section 8.3 hereof. No Member
other than the Manager (except to the extent otherwise set forth in this Agreement) shall have any
right or authority to take any action on behalf of FilmCo or to bind or commit FilmCo with respect
to third parties or otherwise. Except as otherwise expressly provided in this Agreement, each
Member hereby (i) specifically delegates to the Manager its rights and powers to manage and control
the day-to-day business and affairs of FilmCo in accordance with the provisions in Section 18-407
of the Act, and (ii) revokes its right to bind FilmCo, as contemplated by the provisions of Section
18-402 of the Act. LGE shall not be permitted to resign or assign its duties as Manager hereunder
unless (x) LGE appoints a successor Manager (the “Successor Manager”) that (A) is a Lions
Gate Company and (B) LGE reasonably believes is competent to perform all payment and performance
obligations of the Manager under this Agreement (collectively, the “Manager Obligations”),
and (y) LGE provides to FilmCo an unconditional guarantee, in a form reasonably acceptable to
FundCo, of all Manager Obligations to be performed by the Successor Manager. Notwithstanding
anything to the contrary contained in this Agreement, any costs or expenses incurred in connection
with the appointment of a Successor Manager or the performance by a
Successor Manager of any Manager Obligations shall be solely and exclusively borne by LGE. In
the event that any Successor Manager resigns as Manager of FilmCo, LGE shall be obligated to
appoint a subsequent Successor Manager, subject to the conditions contained in clauses (x) and (y)
above, and the immediately preceding sentence.

     5.5 Approval by Unanimous Vote of the Board of Directors. Notwithstanding any
provision of this Agreement to the contrary (other than Section 5.6 or Section
5.7), neither the

22

 

Members, the Manager, the Board of Directors, nor any of the officers of
FilmCo shall, without the affirmative vote of one hundred percent (100%) of the Board of Directors
(including the affirmative vote of the Independent Director), do any of the following:

          5.5.1 cause or allow FilmCo to commence, settle or compromise any Action or potential Action,
other than Actions or potential Actions not exceeding $150,000 in disputed liability;

          5.5.2 cause or allow FilmCo to take any action outside the ordinary course of business;

          5.5.3 cause or allow FilmCo to engage in any business or activity other than as set forth in
Section 2.5;

          5.5.4 cause or allow FilmCo to take any action, or fail to take any action, set forth in
ARTICLE X or ARTICLE XII;

          5.5.5 cause or allow FilmCo to sell, license or transfer any of its assets other than pursuant
to the Transaction Documents;

          5.5.6 directly or indirectly cause or allow FilmCo to redeem, retire, purchase or acquire any
Membership Interest or any equity interest of any other Person;

          5.5.7 cause or allow FilmCo to authorize, issue, sell or reclassify any Membership Interest or
any other security, or issue or sell any bonds, debentures, options, warrants, rights or other
obligations convertible into or exchangeable for, or having rights to purchase or acquire any
Membership Interest or any other equity securities;

          5.5.8 cause or allow FilmCo to enter into any contract or arrangement with any Person, other
than the Transaction Documents and except with the auditors and legal counsel appointed in
accordance with this Section 5.5;

          5.5.9 cause or allow FilmCo to incur any Indebtedness;

          5.5.10 cause or allow FilmCo to grant any Encumbrance on any of its assets;

          5.5.11 cause or allow FilmCo to establish or adopt any employee benefit plan;

          5.5.12 cause or allow FilmCo to dissolve, liquidate, in whole or in part, consolidate or merge
with or into any other entity or convey or transfer its properties and assets, substantially as an
entirety to any entity;

          5.5.13 amend this Agreement;

          5.5.14 cause or allow FilmCo to commence a voluntary bankruptcy case or institute proceedings
to be adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against it or file a petition seeking, or consent to any, reorganization, liquidation
or relief under any applicable federal or state Law relating to

23

 

bankruptcy, insolvency,
reorganization or dissolution, or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of FilmCo or a substantial part of its property,
or make an assignment for the benefit of creditors, or admit in writing its inability to pay its
debts as they become due, or take corporate action in furtherance of any such action or take any
similar action with respect to any securitization trust established by it;

          5.5.15 cause or allow FilmCo to enter into any agreement, document or instrument with or for
the benefit of, or to assume or guarantee any obligations of any Lions Gate Company (other than any
document FilmCo is expressly required to deliver under the Master Picture Purchase Agreement or the
Distribution Agreement);

          5.5.16 cause or allow FilmCo to appoint new auditors for FilmCo; or

          5.5.17 cause or allow FilmCo to appoint new outside legal counsel for FilmCo.

          The initial auditors of FilmCo shall be chosen by the Manager from any of the firms listed on
Schedule 5.5.17 attached hereto and the initial outside legal counsel of FilmCo shall be
Liner Yankelevitz Sunshine & Regenstreif LLP.

     5.6 Rights of FundCo. Notwithstanding any provision of this Agreement to the contrary
(including Section 5.5), FundCo shall have the sole and exclusive right to cause FilmCo to:

          5.6.1 exercise any of FilmCo’s rights or remedies under any agreement between FilmCo and any
Lions Gate Company, including the grant of any consent or waiver under any such agreement (other
than such consents or waivers within LGE’s authority as Manager in respect of day-to-day
operations);

          5.6.2 approve the entry by FilmCo into any agreement, document or instrument with or for the
benefit of, or to assume or guarantee any obligations of any Lions Gate Company (other than any
document FilmCo is expressly required to deliver under the Master Picture Purchase Agreement or the
Distribution Agreement);

          5.6.3 direct FilmCo to exercise its audit rights under the Master Picture Purchase Agreement
or the Distribution Agreement, and supervise the auditor’s performance of any audit;

          5.6.4 exercise any of FilmCo’s rights or remedies under this Agreement in the event of a
default of LGE as a Member under this Agreement, such as its failure to make a Capital Contribution
when required;

          5.6.5 exercise the Excludable Picture Purchase Option, Excess Cap Picture Option or the Super
Excess Cap Picture Option pursuant to the Master Picture Purchase Agreement and this Agreement.

24

 

     5.7 Rights of LGE. Notwithstanding any provision of this Agreement to the contrary
(including Section 5.5), LGE shall have the sole and exclusive right to:

          5.7.1 exercise any of FilmCo’s rights or remedies under any agreement between FilmCo and
FundCo;

          5.7.2 exercise any of FilmCo’s rights or remedies under this Agreement in the event of a
default of FundCo as a Member under this Agreement, such as failure to make a Capital Contribution
when required.

     5.8 Officers.

          5.8.1 Appointment of Officers. The Board of Directors may in its discretion appoint
officers of FilmCo at any time and from time to time, which officers shall include a President,
Chief Financial Officer and Secretary (the “Executive Officers”), and may include one or
more vice presidents, treasurers, assistant treasurers and assistant secretaries as may be
appointed by the Members. Any two (2) or more offices may be held by the same person. The initial
officers of FilmCo shall be as follows:

	 	 	 
	Name	 	Title
	Wayne Levin

	 	President
	James Keegan

	 	Chief Financial Officer
	B. James Gladstone

	 	Secretary

          5.8.2 Removal, Resignation, and Filling of Vacancy of Officers. Any officer may be
removed, either with or without cause, by the Board of Directors or the Manager. Any officer may
resign at any time by giving written notice to the Board of Directors and the Manager. Any
resignation shall take effect at the date of the receipt of that notice or at any later time
specified in that notice; and, unless otherwise specified in that notice, the acceptance of the
resignation shall not be necessary to make it effective. Any resignation or removal is without
prejudice to the rights, if any, of the parties under any contract to which the officer is a party.
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled, if at all, by the Board of Directors or
the Manager.

          5.8.3 Authority and Duties. Except as otherwise provided herein or required by the
Act or other applicable Law, the Manager hereby delegates to the Executive Officers, and the
Executive Officers shall have, the authority to act on behalf of FilmCo in connection with its
day-to-day affairs, including its performance under the Master Picture Purchase Agreement and the
Distribution Agreement. No matter described in Sections 5.3, 5.4,
5.5 or 5.6 or which would cause FilmCo to violate ARTICLE XI is within the
authority granted to the Executive Officers herein.

          5.8.4 Signing Authority of Officers. Subject to any restrictions imposed by the Board
of Directors or the Members, any Executive Officer or the Manager, acting alone, is authorized to
endorse checks, drafts and other evidences of Indebtedness made payable to the order of FilmCo, but
only for the purpose of deposit into FilmCo’s accounts. All checks, drafts and other instruments
obligating FilmCo to pay money may be signed by the Treasurer, Assistant

25

 

Treasurer or any officer
authorized to do so by the Members. Any officer so authorized by the Members may sign contracts
and obligations on behalf of FilmCo.

     5.9 Devotion of Time. Except as required by any individual contract and
notwithstanding any provision to the contrary in this Agreement, no Director or officer is
obligated to devote all of such Person’s time or business efforts to the affairs of FilmCo, but
shall devote such time, effort and skill as such Person deems appropriate for the operation of
FilmCo.

     5.10 Competing Activities. Except as provided by any individual contract between such
Person and FilmCo: (i) any Member, Manager, Director or officer may engage or invest in, or be
employed by, independently or with others, any business activity of any type or description,
including, without limitation, those that might be the same as or similar to FilmCo’s business and
that might be in direct or indirect competition with FilmCo; (ii) neither FilmCo nor any Member
shall have any right in or to such other ventures or activities or to the income or proceeds
derived therefrom; (iii) no Member, Manager, Director or officer shall be obligated to present any
investment opportunity or prospective economic advantage to FilmCo, even if the opportunity is of
the character that, if presented to FilmCo, could be taken by FilmCo; and (iv) any Member, Manager,
Director or officer shall have the right to hold any investment opportunity or prospective economic
advantage for such Member’s, Manager’s, Director’s or officer’s own account or to recommend such
opportunity to Persons other than FilmCo. Each Member acknowledges that the other Members,
Manager, Directors and the officers might own, manage or be employed by, other businesses,
including businesses that may compete with FilmCo for the time of the Member, Manager, Director or
officer. Each Member hereby waives any and all rights and claims that it may otherwise have
against the other Members, Manager, the Directors and the officers as a result of any such
permitted activities.

     5.11 Confidentiality.

          5.11.1 Each Member shall, and shall cause each of its Representatives to, hold in strict
confidence all Confidential Information of FilmCo acquired by such Member in its capacity as
Member, and no Member shall disclose any Confidential Information to any of its Representatives
except to the extent such Member reasonably determines is necessary or desirable in connection with
its ownership and control of its Membership Interest, and provided that FundCo may provide all
Confidential Information of FilmCo acquired by it to its members, the Lenders and the Subordinated
Note Holders who have signed confidentiality agreements in the form attached as Exhibit C
hereto. “Confidential Information” includes, but is not limited to, all matters of a
business nature such as trade secrets, financial information (including but not limited to all
financial information related to the Ultimates of the Funded Pictures), finances, costs and
profits, production, distribution, marketing and advertising plans and strategies, personnel
information, records, and/or other confidential or proprietary information relating to the business
and enterprise of FilmCo or LGE.

          5.11.2 Notwithstanding the foregoing, a Member may disclose Confidential Information if such
information becomes publicly known without fault of such Member, or where such Member is obligated
to disclose such information by operation of law; provided, however, that if such
Member receives a subpoena or other legal process, or otherwise receives a legally-binding request
(whether voluntary or involuntary) from a third party, the response to

26

 

which reasonably could
result in the disclosure of Confidential Information, such Member shall provide notice thereof to
FilmCo within two (2) Business Days of the Member’s receipt of such subpoena, legal process or
request. The obligations of the Members under this Section 5.11 with respect to the
Confidential Information will survive expiration or termination of this Agreement.

     5.12 Equitable Relief. The Members hereby acknowledge that the provisions of
Section 5.11 are reasonable and necessary to protect the legitimate interests of FilmCo and
that any violation of such provisions would result in irreparable injury to FilmCo. In the event
of a violation of the provisions of Section 5.11, the Members further agree that FilmCo
shall, in addition to all other remedies available to it, be entitled to equitable relief by way of
injunction and any other legal or equitable remedies, and that the Manager may exercise these
rights on behalf of FilmCo.

     5.13 Remuneration for Management or Other Services. Other than the Independent
Director’s fees, the Directors, the Manager and officers of FilmCo shall not be entitled to
remuneration for providing management or other services to FilmCo.

     5.14 Reimbursement of Expenses. FilmCo shall reimburse the Independent Director for
the actual out-of-pocket costs of attending meetings of FilmCo. The Independent Director, the
Manager and the officers shall not
be reimbursed by FilmCo for any indirect or overhead expenses, including, without limitation,
rent and general office expenses.

     5.15 Agreement of Members. To the extent the Members hold any security interest in
any assets of FilmCo, no Member shall exercise any rights of a secured creditor thereunder without
the consent of the other Members, such consent not to be unreasonably withheld.

ARTICLE VI

ALLOCATIONS OF NET PROFITS AND NET LOSSES

AND DISTRIBUTIONS

     6.1 Allocations of Net Profits. After giving effect to the special allocations set
forth in Section 6.3 and Section 6.4 herein, Net Profits with respect to each
Funded Picture for any Fiscal Year shall be allocated to the Members in the following order of
priority:

          6.1.1 Chargeback to the Extent of Net Losses. First, Net Profits with respect to each
Funded Picture shall be allocated to each Member to the extent of and in the reverse order of the
aggregate amount of Net Losses with respect to such Funded Picture previously allocated to such
Member pursuant to Section 6.2.2, with respect to which Net Profits have not been
previously allocated pursuant to this subsection.

          6.1.2 Other Net Profits. Second, except as provided in Section 6.1.1, Net
Profits with respect to each Funded Picture shall be allocated in accordance with each Member’s
Allocable Share of such Funded Picture.

     6.2 Allocations of Net Losses. After giving effect to the special allocations set
forth in Section 6.3 and Section 6.4 herein, Net Losses with respect to each Funded
Picture for any Fiscal Year shall be allocated to the Members as follows:

27

 

          6.2.1 Chargeback to the Extent of Net Profits. First, except as provided in
Section 6.2.3, Net Losses with respect to each Funded Picture shall be allocated to each
Member to the extent of the aggregate amount of Net Profits with respect to such Funded Picture
previously allocated to such Member pursuant to Section 6.1.2, with respect to which Net
Losses have not been previously allocated pursuant to this subsection.

          6.2.2 Other Net Losses. Second, except as provided in Section 6.2.1 and Section 6.2.3, Net Losses
shall be allocated in accordance with the Members’ Adjusted Capital Accounts with respect to each
Funded Picture. For purposes of this Section 6.2, “Adjusted Capital Account” means, with
respect to a Capital Account of any Member, the Member’s Capital Account as adjusted by the items
described in clauses (a) or (b) of the definition of “Adjusted Capital Account
Deficit.”

          6.2.3 Adjusted Capital Account Deficit. An allocation of Net Losses under Section
6.2.1 or Section 6.2.2 hereof shall not be made to the extent it would create or
increase an Adjusted Capital Account Deficit for a Member or Members at the end of any Fiscal Year.
Any Net Losses not allocated because of the preceding sentence shall be allocated to the other
Member or Members in proportion to such Member’s or Members’ respective Adjusted Capital Accounts;
provided, however, that to the extent such allocation would create or increase an
Adjusted Capital Account Deficit for another Member or Members at the end of any Fiscal Year, such
allocation shall be made to the remaining Member or Members in proportion to the respective
Adjusted Capital Accounts of such Member or Members.

     6.3 Special Allocations.

          6.3.1 Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any Fiscal
Year shall be specially allocated to the Member who bears the economic risk of loss with respect to
the Member Nonrecourse Debt or other liability to which such Member Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i).

          6.3.2 Nonrecourse Deductions Referable to Liabilities Owed to Non-Members. Any
Nonrecourse Deductions for any Fiscal Year and any other deductions or losses for any Fiscal Year
referable to a liability owed by FilmCo to a Person other than a Member to the extent that no
Member bears the economic risk of loss shall be specially allocated to the Members in accordance
with their Percentage Interests.

          6.3.3 Member Minimum Gain Chargeback. Except as otherwise provided in Regulation
Section 1.704-2(i)(4), notwithstanding any other provision of this ARTICLE VI, if there is
a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt
during any Fiscal Year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt (which share shall be determined in accordance with
Regulations Section 1.704-2(i)(5)) shall be specially allocated items of FilmCo income and gain for
such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to that portion of
such Member’s share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable to
such Member Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(4). Allocations pursuant to the

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previous sentence shall be made in
proportion to the amounts required to be allocated to each Member pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations Section 1.704-2(i)(4) and
1.704-2(j)(2). This Section 6.3.3 is intended to comply with the minimum gain chargeback
requirement contained in Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.

          6.3.4 Minimum Gain Chargeback. Except as otherwise provided in Regulations Section
1.704-2(f), notwithstanding any other provision of this ARTICLE VI, if there is a net
decrease in FilmCo Minimum Gain during any Fiscal Year, each Member shall be specially allocated
items of FilmCo income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years)
in an amount equal to the portion of such Member’s share of the net decrease in FilmCo Minimum Gain
which share of such net decrease shall be determined in accordance with Regulations Section
1.704-2(g)(2). Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Member pursuant thereto. The items to be so
allocated shall be determined in accordance with Regulations Section 1.704-2(f)(6) and
1.704-2(j)(2). This Section 6.3.4 is intended to comply with the minimum gain chargeback
requirement contained in Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith.

          6.3.5 Qualified Income Offset. In the event any Member unexpectedly receives any
adjustments, allocations, or distributions described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5), or (6), or any other event creates an Adjusted Capital Account
Deficit, items of FilmCo income and gain shall be specially allocated to each such Member in an
amount and manner sufficient to eliminate the Adjusted Capital Account Deficit of such Member as
quickly as possible, provided that an allocation pursuant to this Section 6.3.5 shall be
made only if and to the extent that such Member would have an Adjusted Capital Account Deficit
after all other allocations provided for in this ARTICLE VI have been tentatively made as
if this Section 6.3.5 were not in the Agreement.

     6.4 Curative Allocations. The allocations set forth in Section 6.3 hereof
(the “Regulatory Allocations”) are intended to comply with certain requirements of the
Regulations. It is the intent of the Members that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory Allocations or with special allocations of
other items of FilmCo income, gain, loss, or deduction pursuant to this Section 6.4.
Therefore, notwithstanding any other provision of this ARTICLE VI (other than the
Regulatory Allocations), the Board of Directors shall make such offsetting special allocations of
FilmCo income, gain, loss, or deduction in whatever manner they determine appropriate so that,
after such offsetting allocations are made, a Member’s Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Member would have had if the Regulatory
Allocations were not part of this Agreement and all FilmCo items were allocated pursuant to
Section 6.1.1, Section 6.1.2, Section 6.2.1 and Section 6.2.2. In
exercising their discretion under this Section 6.4, the Board of Directors shall take into
account any future Regulatory Allocations under Section 6.3.3 and Section 6.3.4
that, although not yet
made, are likely to offset other Regulatory Allocations previously made under Section
6.3.1 and Section 6.3.2.

     6.5 Code Section 704(c) Allocations. The allocations specified in this Agreement
shall govern the allocation of items to the Members for Code Section 704(b) book purposes, and

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the
allocation of items to the Members for tax purposes shall be in accordance with such book
allocations, except that solely for tax purposes and notwithstanding any other provision of this
ARTICLE VI: (i) Code Section 704(c) shall apply to the allocation of items of income, gain,
deduction, and loss related to contributed property having an adjusted federal income tax basis at
the time of contribution that differs from its fair market value; and (ii) Regulations Section
1.704-1(b)(2)(iv)(f)(4) shall apply to the items of income, gain, deduction, and loss related to
property the book value of which is adjusted pursuant to Regulations Section 1.704-1(b)(2)(iv)(f).

     6.6 Allocations in Respect of a Transferred Membership Interest. If any Membership
Interest is transferred, or is increased or decreased by reason of the admission of a new Member or
otherwise, during any Fiscal Year of FilmCo, each item of income, gain, loss, deduction, or credit
of FilmCo for such Fiscal Year shall be allocated among the Members, as determined by the Board of
Directors in accordance with any method permitted by Code Section 706(d) and the Regulations
promulgated thereunder in order to take into account the Members’ varying interests in FilmCo
during such Fiscal Year.

     6.7 Obligations of Members to Report Consistently. The Members are aware of the
income tax consequences of the allocations made by this ARTICLE VI and hereby agree to be
bound by the provisions of this ARTICLE VI in reporting their shares of FilmCo income and
loss for income tax purposes.

     6.8 Gross Receipts; Adjusted Receipts. Gross Receipts in respect of Funded Pictures
purchased by FilmCo pursuant to the Master Picture Purchase Agreement shall be collected by the
Distributor and deposited in the LGF Master Collection Account in accordance with Section
6.3.1 of the Distribution Agreement. The Distributor shall, on a weekly basis, pay over the
FundCo Share of Gross Receipts into the FilmCo Separate Account in accordance with Section 6.3.1 of
the Distribution Agreement. The Distributor shall pay over Adjusted Receipts into the FilmCo
Separate Account in accordance with clause Fourth of the Distributor Waterfall set forth in
Section 6.3.2 of the Distribution Agreement.

     6.9 Distributions by FilmCo to Members.

          6.9.1 In General. Prior to the occurrence of any Dissolution Event, and subject to applicable Law and any
limitations contained elsewhere in this Agreement, FilmCo shall, and the Manager shall have the
right and authority to direct the FilmCo Separate Account Bank to, apply all Adjusted Receipts in
the FilmCo Separate Account (including any investment earnings received with respect to such
Adjusted Receipts) that have not been previously distributed as set forth below.

          6.9.2 Distributions from FilmCo Separate Account. The Manager shall have the
obligation, right and authority to direct the FilmCo Separate Account Bank to apply and distribute
all Adjusted Receipts in the FilmCo Separate Account (including any investment earnings received
with respect to such Adjusted Receipts) in respect of Funded Pictures in the following order of
priority:

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               6.9.2.1. First, for the payment of Administrative Expenses, as and when due and
payable;

               6.9.2.2. Second, on each Settlement Date (immediately following receipt of
Adjusted Receipts from the Distributor), to the FilmCo Reserve Account, an amount
sufficient to bring the available balance of the FilmCo Reserve Account to $250,000;
and

               6.9.2.3. Third, on each Settlement Date (immediately following receipt of
Adjusted Receipts from the Distributor and the payment of any interest owed to the
Distributor pursuant to and in accordance with Section 6.3.1 of the
Distribution Agreement), to each Member, on a Funded Picture-by-Funded Picture
basis, such Member’s Allocable Share of such Adjusted Receipts.

          6.9.3 Transfers from the FilmCo Reserve Account. If prior to any payment date for
Administrative Expenses, the Manager determines that the amount of available funds in the FilmCo
Separate Account will be insufficient on such payment date to pay in full the Administrative
Expenses then due and payable, the Manager shall have the right and authority to direct the FilmCo
Reserve Account Bank to transfer from the FilmCo Reserve Account to the FilmCo Separate Account an
amount equal to the insufficiency and allocate such payment toward the obligations described in
Section 6.9.2.1.

          6.9.4 Distributions In Respect of Retransferred Pictures. All proceeds received by
FilmCo from LGF with respect to a Retransferred Picture that is repurchased by LGF pursuant to
Section 1.11 of the Master Picture Purchase Agreement shall be distributed to each Member in
accordance with its Allocable Share with respect to such Retransferred Picture, and the Capital
Account of each Member with respect to such Retransferred Picture shall be terminated upon such
distribution.

          6.9.5 FundCo Default. Notwithstanding Section 6.9.2, upon the occurrence and
during the continuance of a FundCo Default (including any applicable cure period), FilmCo’s
obligation to make any
distributions to FundCo hereunder shall be suspended. Without limitation of the foregoing
and in addition to the provisions of Section 3.7, upon the occurrence and during the
continuance of a FundCo Default, FilmCo may, at the request of LGE, deduct from FundCo’s portion of
Adjusted Receipts up to the amount of any Capital Contributions that remain uncontributed by FundCo
(with all amounts so deducted deemed to have been distributed to FundCo by FilmCo and subsequently
contributed to FilmCo by FundCo as a Capital Contribution).

          6.9.6 LGE Default. Notwithstanding Section 6.9.2, upon the occurrence and
during the continuance of a LGE Default (including any applicable cure period), FilmCo’s obligation
to make any distributions to LGE hereunder shall be suspended. Without limitation of the foregoing
and in addition to the provisions of Section 3.7, upon the occurrence and during the
continuance of a LGE Default, FilmCo may, at the request of FundCo, deduct from LGE’s portion of
Adjusted Receipts up to the amount of any Capital Contributions that remain uncontributed by LGE
(with all amounts so deducted deemed to have been distributed to LGE by FilmCo and subsequently
contributed to FilmCo by LGE as a Capital Contribution).

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          6.9.7 Advances or Drawings. Distributions of money and property shall be treated as
advances or drawings of money or property against a Member’s distributive share of income and as
current distributions made on the last day of FilmCo’s taxable year with respect to such Member.

          6.9.8 Distributees; Liability for Distributions. All distributions made pursuant to
this Section 6.9 shall be made only to the Persons who, according to the books and records
of FilmCo, hold the Membership Interests in respect of which such distributions are made on the
actual date of distribution. To the fullest extent permitted by applicable Law, none of FilmCo,
the Board of Directors nor any Member or officer shall incur any liability for making distributions
in accordance with this Section 6.9.

     6.10 Form of Distributions. A Member, regardless of the nature of the Member’s
Capital Contributions, has no right to demand and receive any distribution from FilmCo in any form
other than money. No Member may be compelled to accept from FilmCo a distribution of any asset in
kind in lieu of a proportionate distribution of money being made to other Members.

     6.11 Return of Distributions. Except for distributions made in violation of the Act
or this Agreement, or as otherwise required by law, no Member shall be obligated to return any
distribution to FilmCo or pay the amount of any distribution for the account of FilmCo or to any
creditor of FilmCo.

     6.12 Limitation on Distributions. Notwithstanding any provision to the contrary in this Agreement, FilmCo shall not make a
distribution to any Member on account of such Member’s interest in FilmCo if such distribution
would violate Section 18-607 of the Act or other applicable Law.

     6.13 Withholding. Any tax required to be withheld with respect to any Member under
Section 1446 of the Code or other provisions of the Code, or under the Law of any state or other
jurisdiction, shall be treated for all purposes of this Agreement (i) as a distribution of cash to
be charged against future distributions to which such Member would otherwise have been entitled, or
(ii) if determined by the Board of Directors, as a demand loan to such Member.

     6.14 Payments. All payments by one party to another party hereunder shall be made in
immediately available funds on the payment dates specified in this Agreement. Each such payment
shall be made to the account of such party set forth below (or to such other account as such party
may notify the other party of in writing) no later than 4:00 p.m. (New York City time) on the day
when due. Funds credited to such account after such time shall be deemed to be received on the
following Business Day.

To FilmCo:

JPMorgan Chase Bank, N.A.

Bank ABA #: 071000013

Credit: LG Film Finance I, LLC Separate Account

Account #: 737302497

Reference: [Name of Funded Picture]

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To LGE:

Account Name: Lions Gate Entertainment Inc.

Account Bank: JPMorgan Chase Bank, N.A.

Bank ABA #: 021000021

Credit: Lions Gate Entertainment Inc.

Account #: 323-514405

Reference: [Name of Funded Picture]

To FundCo:

Account Name: Pride Pictures LLC — Operating Account

Account Bank: JPMorgan Chase Bank, N.A.

Bank ABA #: 021000021

Credit: Pride Pictures LLC

Account #: 737302596

Reference: [Name of Funded Picture]

ARTICLE VII

TRANSFER OF INTERESTS

     7.1 Conditions to Transfer. No Member shall be entitled to Transfer all or any part
of such Member’s Membership Interest unless all of the following conditions have been met: (a)
FilmCo shall have received written notice of the proposed Transfer, setting forth the circumstances
and details thereof; (b) the Transfer shall be of all (and not less than all) of such Member’s
Membership Interest and shall be to a Permitted FilmCo Transferee or to another Member; (c) the
Member shall remain liable for all Capital Contributions to be made by it hereunder, (d) FilmCo
shall (at its option) have received an attorney’s written opinion, in form and substance reasonably
satisfactory to FilmCo, specifying the nature and circumstances of the proposed Transfer, and based
on such facts stating that the proposed Transfer will not be in violation of any of the
registration provisions of the Securities Act of 1933, as amended, or any applicable state
securities laws; (e) if to a Permitted FilmCo Transferee, FilmCo shall have received from the
Permitted FilmCo Transferee its written agreement to be bound by all of the terms and conditions of
this Agreement; (f) the Transfer will not result in the loss of any license or regulatory approval
or exemption that has been obtained by FilmCo and is materially useful in the conduct of its
business as then being conducted or proposed to be conducted; (g) FilmCo is reimbursed upon request
for its reasonable expenses in connection with the Transfer; and (h) the Transfer complies with all
other applicable requirements of this Agreement. In addition to the foregoing, LGE agrees that it
will not (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any of its Membership Interest or any
securities convertible into or exercisable or exchangeable for any of its Membership Interest or
(2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of its Membership Interest,

33

 

whether any such transaction
described in clauses (1) or (2) above is to be settled by delivery of the Membership Interest or
such other securities, in cash or otherwise. Notwithstanding anything to the contrary contained
in this Agreement, FundCo may pledge its Membership Interest in FilmCo to the Collateral Agent (as
defined in the Senior Debt Agreement) for the benefit of the Secured Parties under the Senior Debt
Agreement, and LGE may pledge its Membership Interest in FilmCo to the lenders under the LGE Credit
Agreement or under another corporate financing arrangement which restructures, refinances, amends,
replaces or supplements the LGE Credit Agreement (whether or not such arrangement is made with the
same lenders or agents that are parties to the LGE Credit Agreement).

     7.2 Repurchase Option; Sequel Repurchase Commitment.

          7.2.1 Repurchase Option. LGE will have the option (the “Repurchase Option”),
exercisable in its sole discretion at any time following the earlier of (i) the second (2nd)
anniversary of the Initial Theatrical
Release Date of the last Funded Picture acquired by FilmCo during the Investment Period and
(ii) the date on which a FundCo Default has occurred, to purchase from FundCo all of FundCo’s
existing Membership Interest in FilmCo for the aggregate Fair Market Value of all of FundCo’s
interests in FilmCo as of the Option Repurchase Date; provided that, in the case of clause (i)
above if there is a Sequel Investment Period, LGE shall instead acquire upon exercise of the
Repurchase Option, at Fair Market Value, from FundCo, its Capital Accounts for the Funded Pictures
owned by FilmCo as of such date and acquired during the Investment Period, including all of
FundCo’s right to receive distributions in respect thereof. On or after the date (if any) on which
LGE exercises the Repurchase Option, any termination by FilmCo of the Distribution Agreement shall
not apply to Funded Pictures the Capital Accounts with respect to which have been repurchased by
LGE from FundCo. If LGE fails to elect to exercise the Repurchase Option within two (2) years of
the date on which it first becomes exercisable, the Distribution Fee shall be reduced to 12.5% for
each Accounting Period commencing on or after the eighth (8th) anniversary of the Closing Date, as
provided in the Distribution Agreement.

          7.2.2 Sequel Repurchase Commitment. If there is a Sequel Investment Period, and
provided that LGE has previously exercised the Repurchase Option, LGE must purchase, on the date
(such date, the “Sequel Repurchase Date”) that is ninety (90) days after the earlier to
occur of: (i) the second (2nd) anniversary of the Initial Theatrical Release Date of the last
Funded Picture acquired by FilmCo during the Sequel Investment Period and (ii) the date on which it
is determined that there has been a FundCo Default, from FundCo all of FundCo’s existing Membership
Interest in FilmCo for the aggregate Fair Market Value of all of FundCo’s remaining Capital
Accounts in FilmCo as of the Sequel Repurchase Date (the “Sequel Repurchase Commitment”).

     Notwithstanding the foregoing, FundCo and the FundCo Senior Lenders or the Subordinated Note
Holders, as applicable shall be permitted to delay LGE’s exercise of the Repurchase Option in
accordance with Section 7.2.3 below. If LGE does not exercise the Repurchase Option, there
shall be no Sequel Repurchase Commitment.

          7.2.3 Exercise of Repurchase Option. In the event LGE elects to exercise the
Repurchase Option or is required to exercise the Sequel Repurchase Commitment, as the case

34

 

may be,
LGE shall give FundCo written notice thereof (with respect to Repurchase Option, the
“Repurchase Notice” and with respect to the Sequel Repurchase Commitment, the “Sequel
Repurchase Notice”). At any time during the thirty (30) days following the date on which the
Repurchase Price is finally determined pursuant to Section 7.2.4, FundCo may, so long as
such Repurchase Notice does not relate to a FundCo Default, elect (the “Repurchase Extension
Election”) to delay the date of LGE’s repurchase pursuant to the Repurchase Option for a period
not to exceed twelve (12) months from and after the date it receives the Repurchase Notice with
respect to the Repurchase Option (the “Repurchase Extension Period”); provided,
however, that if (i) at the time the Repurchase Extension Election is exercised by FundCo
it is projected that after the end of the Repurchase Extension Period any obligations will remain
outstanding under the Senior Debt Agreement or any Subordinated Notes will continue to be
outstanding and (ii) after giving effect to the payment of the entire Repurchase Price against such
outstanding obligations under the Senior
Debt Agreement and the outstanding Subordinated Notes, there would remain unrecouped principal
and accrued interest (without application of any default interest rate) under the Senior Debt
Agreement or the Subordinated Notes, then the FundCo Senior Lenders (or, in the event the Senior
Debt Agreement is no longer outstanding or the FundCo Senior Lenders fail to exercise such
extension, a majority of the Subordinated Note Holders) shall have the one-time right (the
“Additional Extension Election”) exercisable no later than ten (10) Business Days after the
exercise by FundCo of the Repurchase Extension Election to delay the Option Repurchase Date (solely
with respect to the Repurchase Option but not the Sequel Repurchase Commitment) for a period ending
no later than the earlier of (x) the repayment in full of all obligations under the Senior Debt
Agreement and the Secured Subordinated Note Purchase Agreement, respectively, and (y) three (3)
years from and after the originally proposed Option Repurchase Date. Notwithstanding the
foregoing, none of FundCo, the Lenders or the Subordinated Note Holders shall have any right to
delay the Option Repurchase Date if the Repurchase Option is triggered by a FundCo Default. The
“Option Repurchase Date” (x) means, with respect to the Repurchase Option, the later to
occur of (i) the date that is ninety (90) days after the Repurchase Notice and (ii) if the Lenders
or the Subordinated Note Holders have a right to delay the Option Repurchase Date, the date to
which the FundCo Senior Lenders or the Subordinated Note Holders, as applicable, have delayed such
repurchase pursuant to this Agreement and (y) with respect to the Sequel Repurchase Commitment, the
date that is ninety (90) days after the Sequel Repurchase Notice.

          7.2.4 Payment of Repurchase Price.

               (a) If LGE elects to exercise the Repurchase Option or is deemed to have exercised the Sequel
Repurchase Commitment, as applicable, LGE shall include with the Repurchase Notice and the Sequel
Repurchase Notice, respectively, a proposed Repurchase Price or a proposed Sequel Repurchase Price,
as applicable, not later than forty-five (45) days prior to the proposed Option Repurchase Date or
Sequel Repurchase Date, as applicable (the “Proposed Repurchase Price”). The
“Repurchase Price” means (i) in the case of the Repurchase Option where there is no Sequel
Investment Period, the aggregate Fair Market Value of FundCo’s Capital Accounts at FilmCo related
to the Funded Pictures purchased during the Investment Period, calculated as of the Option
Repurchase Date, (ii) in the case of the Repurchase Option where there is a Sequel Investment
Period, the aggregate Fair Market Value of FundCo’s Capital Accounts in respect of all Funded
Pictures owned by FilmCo as of the Option Repurchase Date, and (iii) in the event of the Sequel
Repurchase Commitment, the aggregate Fair Market Value of

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FundCo’s Capital Accounts in respect of
all Funded Pictures owned by FilmCo as of the Sequel Repurchase Date. The Repurchase Price and
Sequel Repurchase Price, as applicable, shall be payable in full, in cash, on the Option Repurchase
Date.

               (b) In the event that FundCo disagrees with the Proposed Repurchase Price, it shall have the
right, at any time within the thirty (30) days after it receives the Proposed Repurchase Price, to
request a second opinion on the calculation of the Proposed Repurchase Price. If FundCo so
requests a second opinion, FundCo and LGE shall mutually agree on a third party firm from among
those listed on Schedule 7.2.4 or as otherwise agreed (the selected firm, the
“Evaluator”) to determine whether the Proposed Repurchase Price is equal to
Fair Market Value. LGE shall provide all of its calculations related to the Proposed
Repurchase Price, and such additional underlying documentation as may be requested, to the
Evaluator. In the event the Evaluator determines that the Fair Market Value of the assets to be
acquired pursuant to the Repurchase Option or Sequel Repurchase Commitment, as applicable, is lower
than the Proposed Repurchase Price, the Evaluator’s determination will govern, and FundCo shall be
solely responsible for all costs incurred with respect to the Evaluator’s engagement. If the
Evaluator’s determination is within two and one-half percent (2.5%) of the Proposed Repurchase
Price, the two amounts shall be averaged and the average shall be the “Repurchase Price”, and
FundCo shall be solely responsible for all costs incurred with respect to the Evaluator’s
engagement. If the Evaluator’s determination is more than two and one-half percent (2.5%) higher
than the Proposed Repurchase Price, LGE shall be solely responsible for all costs incurred with
respect to the Evaluator’s engagement, and either (i) LGE and FundCo shall agree on the Repurchase
Price or Sequel Repurchase Price, as applicable, or (ii) not later than thirty (30) days after such
Evaluator’s determination, the two calculations (the calculation of the Evaluator and the Proposed
Repurchase Price) shall be submitted to a third-party firm (other than the Evaluator) mutually
selected by FundCo and LGE from among those listed on Schedule 7.2.4 (the “Second
Evaluator”), which shall select either the Evaluator’s or LGE’s Proposed Repurchase Price,
without changes, addition or adjustment of any kind in any amount, as closer to the definition of
Fair Market Value, and in that event the amount as selected by the Second Evaluator shall be the
Repurchase Price or Sequel Repurchase Price, as applicable. If the Second Evaluator selects the
amount determined by the Evaluator, LGE shall be solely responsible for all costs incurred with
respect to the Second Evaluator’s engagement. If the Second Evaluator selects LGE’s Proposed
Repurchase Price, FundCo shall be solely responsible for all costs incurred with respect to the
Second Evaluator’s engagement.

               (c) If, after exercising the Repurchase Option, LGE (i) fails to pay the Repurchase Price
in
full, in cash, on the Option Repurchase Date, or (ii) fails to pay the Sequel Repurchase Price in
full, in cash, on the Sequel Repurchase Date, notwithstanding anything to the contrary herein, (A)
FundCo shall continue to receive all amounts owed to it by FilmCo unless and until the applicable
Repurchase Price or Sequel Repurchase Price is paid for in full by LGE, and (B) FundCo shall be
entitled to charge interest on any unpaid portion of the applicable Repurchase Price or Sequel
Repurchase Price at LIBOR plus four hundred (400) basis points from the Option Repurchase Date or
Sequel Repurchase Date, as applicable, until paid, in each case without prejudice to its other
rights and remedies hereunder.

               (d) FundCo shall, upon receipt of the Repurchase Price or Sequel Repurchase Price (as
applicable, and as finally determined pursuant to clause (b) above), take all

36

 

reasonable steps
necessary to validly effect the transfers contemplated by the Repurchase Option or the Sequel
Repurchase Commitment, as applicable, including, without limitation, execution of any documents
reasonably necessary to effect such transfers; provided, however, that in the event that within
five (5) Business Days after LGE’s written request, FundCo fails to execute and deliver such
documents, FundCo hereby appoints LGE as its attorney in fact (which appointment is coupled with an
interest and irrevocable) for the sole purpose of executing and delivering all such documents on
FundCo’s behalf, copies of which shall be provided to FundCo within ten (10) Business Days of
execution.

     7.3 Invalid Transfers. Transfers in violation of Section 7.1 or in violation of any other provision of
this ARTICLE VII or this Agreement shall be null and void ab initio and of no effect
whatsoever.

     7.4 Effective Date of Permitted Transfers. Any permitted Transfer of all of a
Membership Interest shall be effective no earlier than the date following the date upon which the
requirements of this Agreement have been met.

     7.5 Effect of Permitted Transfers. After the effective date of any Transfer of a
Membership Interest in accordance with this Agreement, the Membership Interest so Transferred shall
continue to be subject to the terms, provisions, and conditions of this Agreement and any further
Transfers shall be required to comply with all of the terms, provisions, and conditions of this
Agreement. Any transferee of all or any portion of a Membership Interest shall take subject to the
restrictions on transfer imposed by this Agreement.

     7.6 Substitution of Members. Notwithstanding any provision to the contrary in this
Agreement, a transferee of a Membership Interest shall not have the right to become a substitute
Member until each of the following is true: (a) the requirements of Section 7.1 are
satisfied; (b) such Person executes an instrument satisfactory to FilmCo accepting and adopting the
terms, provisions and conditions of this Agreement, including, without limitation, Section
13.16 herein, with respect to the acquired Membership Interest; and (c) such Person pays any
reasonable expenses in connection with such Person’s admission as a new Member. The admission of a
substitute Member shall not result in the release of the Member who assigned the Membership
Interest from any liability that such Member may have to FilmCo, and notwithstanding any provision
of this Agreement to the contrary, each Initial Member shall remain liable for all Capital
Contributions to be made by it hereunder.

     7.7 Elections Under the Code. In the event of a Transfer of a Membership Interest in
accordance with this Agreement, FilmCo, at the request of the party acquiring such transferred
Membership Interest, shall elect, pursuant to Section 754 of the Code and any like provision of
applicable state law, to adjust the basis of FilmCo property; each Member agrees to provide FilmCo
with all information necessary to give effect to such election.

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ARTICLE VIII

BOOKS AND RECORDS; ACCOUNTING; TAX MATTERS

     8.1 Books and Records.

          8.1.1 The Manager shall cause the books and records of FilmCo to be kept, and the financial
position and the results of its operations to be recorded, in accordance with GAAP;
provided, however, that FilmCo may, to the extent appropriate under applicable tax
and accounting principles, maintain separate and corresponding records for book and tax purposes.
The books and records of FilmCo shall reflect all FilmCo transactions and shall be appropriate and
adequate for FilmCo’s business.

          8.1.2 Notice Materials; Transaction Documents. FilmCo shall deliver to each Member a
copy of all notices, demands, or claims, received by it from LGE, the Distributor or any of their
respective Affiliates, including all Notice Materials and Transfer Documents delivered to FilmCo by
LGE pursuant to the Master Picture Purchase Agreement, within one (1) Business Day of FilmCo’s
receipt thereof. FilmCo shall have no obligation to verify the contents or the accuracy of any
documents provided by it to the Members under this Section 8.1.2.

     8.2 Delivery to Members and Inspection.

          8.2.1 Upon reasonable notice, FilmCo shall afford each Member and its Representatives
reasonable access, during normal business hours, to its books and records, including the
information required to be maintained by FilmCo under Section 8.1.1. The requesting Member
shall reimburse FilmCo for any out-of-pocket costs incurred in complying with a Member’s request
for copies of books or records of FilmCo.

          8.2.2 Any request, inspection, or copying of information by a Member under this Section
8.2 may be made by that Person or that Person’s Representative.

     8.3 Financial Statements.

          8.3.1 General. The Manager shall provide any Member with such unaudited financial
statements of FilmCo as such Member may from time to time reasonably request, provided that such
financial statements may not be requested more than quarterly. Notwithstanding the foregoing, the
Manager shall be required to timely provide to FundCo all financial statements that FundCo is
required to deliver to the Lenders and the Subordinated Note Holders pursuant to (x) the Senior
Debt Agreement and the Secured Subordinated Note Purchase Agreement, each as amended from time to
time, and (y) any financing arrangements designed to replace the foregoing, respectively.

          8.3.2 Annual Report. The Manager shall cause annual financial statements to be sent
to each Member not later than one hundred twenty (120) days after the close of the Fiscal Year.
The report shall
contain a balance sheet as of the end of the Fiscal Year and an income statement and statement
of changes in financial position for the Fiscal Year.

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     8.4 Tax Returns. The Manager shall cause to be prepared at least annually information
necessary for the preparation of the Members’ federal and state income tax and information returns.
The Manager shall send or cause to be sent to each Member within ninety (90) days after the end of
each taxable year, or as soon as practicable thereafter, such information as is necessary to
complete such Member’s federal and state income tax or information returns, and a copy of FilmCo’s
federal, state, and local income tax or information returns for that year. The Manager shall cause
the income tax and information returns for FilmCo to be timely filed with the appropriate
authorities.

     8.5 Other Filings. The Manager also shall cause to be prepared and timely filed, with
appropriate federal and state regulatory and administrative bodies, amendments to, or restatements
of, the Certificate and all reports required to be filed by FilmCo with those entities under the
Act or other then current applicable Laws.

     8.6 Bank Accounts.

          8.6.1 Generally. The Manager shall maintain the funds of FilmCo in one or more
separate bank accounts in the name of FilmCo, and shall not permit the funds of FilmCo to be
commingled in any fashion with the funds of any other Person.

          8.6.2 FilmCo Separate Account. On or prior to the Closing Date, FilmCo shall
establish and shall thereafter maintain with JPMorgan Chase Bank, N.A. (in such capacity, the
“FilmCo Separate Account Bank”) the FilmCo Separate Account. Funds on deposit in the
FilmCo Separate Account shall be invested in Permitted Investments, as directed in writing by the
Manager to the FilmCo Separate Account Bank (which may be a standing direction), that will mature
or otherwise be available for withdrawal without penalty on the following Settlement Date, with all
realized interest and other investment earnings (net of losses and investment expenses) to remain a
part of the FilmCo Separate Account as the property of FilmCo, subject to distribution pursuant to
the terms of this Agreement.

          8.6.3 FilmCo Funding Account. On or prior to the Closing Date, FilmCo shall establish
and shall thereafter maintain with JPMorgan Chase Bank, N.A. (the “FilmCo Funding Account
Bank”) the FilmCo Funding Account. The FilmCo Funding Account shall be funded exclusively by
all Capital Contributions
made to FilmCo by FundCo. Funds on deposit in the FilmCo Funding Account shall be invested in
Permitted Investments, as directed in writing by the Manager to the FilmCo Funding Account Bank
(which may be a standing direction), with all realized interest and other investment earnings (net
of losses and investment expenses) to remain a part of the FilmCo Funding Account as the property
of FilmCo, subject to application and distribution pursuant to the terms of this Agreement.

          8.6.4 FilmCo Reserve Account. On or prior to the Closing Date, FilmCo shall establish
and shall thereafter maintain with JPMorgan Chase Bank, N.A. (in such capacity, the “FilmCo
Reserve Account Bank”) the FilmCo Reserve Account. Funds on deposit in the FilmCo Reserve
Account shall be invested in the items listed in clauses (a), (b) and (g) of the definition of
Permitted Investments in the Master Glossary, as directed in writing by the Manager to the FilmCo
Reserve Account Bank (which may be a standing direction), with all realized interest and other
investment earnings (net of losses and investment expenses) to remain

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a part of the FilmCo Reserve
Account as the property of FilmCo, subject to distribution pursuant to the terms of this Agreement.

          8.6.5 FilmCo P&R Reserve Account. On or prior to the Closing Date, FilmCo shall establish
and shall thereafter maintain with JPMorgan Chase Bank, N.A. (in such capacity, the “FilmCo P&R
Account Bank”) the FilmCo P&R Reserve Account. On each Settlement Date, if a P&R Reserve
Triggering Event shall have occurred on such Settlement Date, FilmCo shall, upon receipt from the
Distributor of the Adjusted Receipts due to FilmCo (if any) in respect of the Accounting Period
that ends on such Settlement Date, deposit into the FilmCo P&R Reserve Account an amount equal to
the smallest of (a) all accrued but unpaid Third Party Participations and Residuals reflected on
the Cumulative Aggregate Ultimates Statement delivered to FilmCo by the Distributor on such
Settlement Date, (b) the absolute value of the negative amount of cumulative aggregate Estimated
Net Receipts reflected on such Cumulative Aggregate Ultimates Statement and (c) the difference
between (i) the aggregate amount of Adjusted Receipts paid by the Distributor to FilmCo on such
Settlement Date and (ii) the DC Reserve Deposit Amount (if any) deposited by FilmCo into the FilmCo
Distribution Costs Reserve Account on such Settlement Date pursuant to Section 8.6.6 below,
provided that clause (c) shall not apply on any Settlement Date that occurs during the quarter that
immediately precedes the Commitment Expiry Date (such smallest amount, the “P&R Reserve Deposit
Amount”). On each Settlement Date, (x) FilmCo shall, to the extent that amounts on deposit in
the FilmCo P&R Reserve Account exceed the amount equal to the negative amount of cumulative
aggregate Estimated Net Receipts reflected on the applicable Cumulative Aggregate Ultimates
Statement, transfer such excess amounts into the FilmCo Separate Account; and (y) if the cumulative
aggregate Estimated Net Receipts shown on the applicable Cumulative Aggregate Ultimates Statement
is a positive number, transfer all funds on deposit in the FilmCo P&R Reserve Account into the
FilmCo Separate Account. Funds on deposit in the FilmCo P&R Reserve Account shall be invested in
Permitted Investments, as directed in writing by the Manager to the FilmCo P&R Account Bank (which
may be a standing direction), with all realized interest and other investment earnings (net of
losses and investment expenses) to remain a part of the FilmCo P&R Reserve Account as the property
of FilmCo, subject to distribution pursuant to the terms of this Agreement. The Manager shall be
permitted to use amounts available from time to time in the FilmCo P&R Reserve Account solely and
exclusively to satisfy FilmCo’s obligations to pay for Third Party Participations and Residuals not
otherwise paid or recouped pursuant to the terms of the Master Picture Purchase Agreement and the
Distribution Agreement, and FilmCo will grant a first ranking security interest in such account to
the Distributor solely and exclusively to secure FilmCo’s obligations to pay for Third Party
Participations and Residuals not otherwise paid or recouped pursuant to the terms of the Master
Picture Purchase Agreement and the Distribution Agreement in the event that (x) FilmCo has such
obligations and fails to satisfy them and (y) Distributor has actually paid such amounts. Any
amounts drawn by the Manager pursuant to the preceding sentence with respect to a particular Funded
Picture shall be deemed to increase the Purchase Price of such Funded Picture by an equal amount
and to have been paid by the Members pro rata with their respective Capital Accounts established
with respect to such Funded Picture.

          8.6.6 Distribution Costs Reserve Account. On and after the Commitment Expiry Date, FilmCo
shall establish and shall thereafter maintain with JPMorgan Chase Bank, N.A. (in such capacity, the
“FilmCo DC Reserve Account Bank”) the FilmCo Distribution Costs

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Reserve Account. On each
Settlement Date that occurs on or after the Commitment Expiry Date, if a DC Reserve Triggering
Event shall have occurred on such Settlement Date, FilmCo shall, upon receipt from the Distributor
of the Adjusted Receipts due to FilmCo (if any) in respect of the Accounting Period that ends on
such Settlement Date, deposit into the FilmCo Distribution Costs Reserve Account an amount equal to
the smallest of (a) all accrued but unpaid Distribution Costs (excluding Third Party Participations
and Residuals) reflected on the Cumulative Aggregate Ultimates Statement delivered to FilmCo by the
Distributor on such Settlement Date, (b) the absolute value of the negative amount of cumulative
aggregate Estimated Net Receipts reflected on such Cumulative Aggregate Ultimates Statement and (c)
the difference between (i) the aggregate amount of Adjusted Receipts paid by the Distributor to
FilmCo on such Settlement Date and (ii) the P&R Reserve Deposit Amount (if any) deposited by FilmCo
into the FilmCo P&R Reserve Account on such Settlement Date pursuant to Section 8.6.5 above
(such smallest amount, the “DC Reserve Deposit Amount”). On each Settlement Date, (x)
FilmCo shall, to the extent that amounts on deposit in the FilmCo Distribution Costs Reserve
Account exceed the amount equal to the negative amount of cumulative aggregate Estimated Net
Receipts reflected on the applicable Cumulative Aggregate Ultimates Statement, transfer such excess
amounts into the FilmCo Separate Account; and (y) if the cumulative aggregate Estimated Net
Receipts shown on the applicable Cumulative Aggregate Ultimates Statement is a positive number,
transfer all funds on deposit in the FilmCo Distribution Costs Reserve Account into the FilmCo
Separate Account. Funds on deposit in the FilmCo Distribution Costs Reserve Account shall be
invested in Permitted Investments, as directed in writing by the Manager to the FilmCo DC Reserve
Account Bank (which may be a standing direction), with all realized interest and other investment
earnings (net of losses and investment expenses) to remain a part of the FilmCo Distribution Costs
Reserve Account as the property of FilmCo, subject to distribution pursuant to the terms of this
Agreement. The Manager shall be permitted to use amounts available from time to time in the FilmCo
Distribution Costs Reserve Account solely and exclusively to satisfy FilmCo’s obligations to pay
for Distribution Costs (without duplication of costs paid for out of amounts available under the
FilmCo P&R Reserve Account) not otherwise paid or recouped pursuant to the terms of the Master
Picture Purchase Agreement and the Distribution Agreement. Any amounts drawn by the Manager
pursuant to the preceding sentence with respect to a particular Funded Picture shall be deemed to
increase the Purchase Price of such Funded Picture by an equal amount and to have
been paid by the Members pro rata with their respective Capital Accounts established with respect
to such Funded Picture.

     8.7 Accounting Decisions and Reliance on Others. All decisions as to accounting
matters, except as otherwise specifically set forth herein, shall be made by the Manager. The
Manager may rely upon the advice of FilmCo’s accountants as to whether such decisions are in
accordance with accounting methods followed for federal income tax purposes or financial accounting
purposes (as applicable).

     8.8 Tax Matters.

          8.8.1 Taxation as Partnership. FilmCo shall be treated as a partnership for tax
purposes. FilmCo shall avail itself of any election or procedure under the Code or the Regulations
and under state and local tax law, including any “check-the-box” election, for purposes of having
an entity classified as a partnership for tax purposes, and the Members shall

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cooperate with FilmCo
in connection therewith and hereby authorize FilmCo to take whatever actions and execute whatever
documents are necessary or appropriate to effectuate the foregoing.

          8.8.2 Elections; Tax Matters Partner. Subject to the provisions of this Agreement,
the Manager shall from time to time cause FilmCo to make such tax elections as it deems to be
necessary or appropriate. Pursuant to Section 4.4, the Members shall designate a “tax
matters partner” (within the meaning of Code Section 6231(a)(7)) to represent FilmCo in connection
with all examinations of FilmCo’s affairs by tax authorities, including without limitation
resulting judicial and administrative proceedings, and shall expend FilmCo funds for professional
services and costs associated therewith. The initial tax matters partner shall be LGE.

ARTICLE IX

DISSOLUTION AND WINDING UP

     9.1 Dissolution. FilmCo shall be dissolved, its assets shall be disposed of, and its
affairs shall be wound up the first to occur of the following (each, a “Dissolution
Event”):

               (a) The unanimous approval of the Members; or

               (b) At any point that there are no Members unless the business of FilmCo is continued without
dissolution under the Act.

     9.2 Winding Up. Upon the occurrence of a Dissolution Event, FilmCo shall continue solely for the purpose of
winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of
its creditors. The Members shall be responsible for overseeing the winding up and liquidation of
FilmCo, shall take full account of the assets and liabilities of FilmCo, shall either cause its
assets to be sold to any Person or distributed to a Member, and if sold, as promptly as is
consistent with obtaining the fair market value thereof, shall cause the proceeds therefrom, to the
extent sufficient therefor, to be applied and distributed as provided in Section 9.5
herein. The Person(s) winding up the affairs of FilmCo shall give written notice of the
commencement of winding up by mail to all known creditors and claimants whose addresses appear on
the records of FilmCo. All actions and decisions required to be taken or made by such Person(s)
under this Agreement shall be taken or made only with the consent of all such Person(s).

     9.3 Distributions in Kind. Any non-cash asset distributed to one or more Members
shall first be valued at its fair market value to determine the gain or loss that would have been
included in the amounts allocated pursuant to ARTICLE VI if such asset were sold for such
value. Such gain or loss shall then be allocated pursuant to ARTICLE VI, and the Members’
Capital Accounts shall be adjusted to reflect such allocations. The amount distributed and charged
to the Capital Accounts of each Member receiving an interest in such distributed asset shall be the
fair market value of such interest (net of any liability secured by such asset that such Member
assumes or takes subject to).

     9.4 Determination of Fair Market Value. For purposes of Section 9.2 and
Section 9.3, the fair market value of each asset of FilmCo shall be determined by the
Members or, if any

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Member requests, by an independent, third-party appraiser experienced in the
valuation of businesses such as FilmCo’s business, selected in good faith by the Members. Any
determination of fair market value for purposes of Section 9.2 and Section 9.3
shall be made in good faith based on an estimate of what the applicable asset could be sold for in
an arm’s-length sale. FilmCo shall bear the costs of any related third-party appraisal.

     9.5 Order of Distributions Upon Liquidation. After determining that all the known
debts and liabilities of FilmCo, including, without limitation, debts and liabilities to Members
who are creditors of FilmCo, have been paid or adequately provided for, the proceeds received by
FilmCo in connection with the liquidation and winding up of FilmCo shall be applied in the
following order of priority:

          9.5.1 To the payment of expenses incurred in dissolution, termination and winding up;

          9.5.2 To the payment of creditors of FilmCo, except secured creditors whose obligations will
be assumed or otherwise transferred on a liquidation of FilmCo property and assets;

          9.5.3 To the Members in accordance with the distribution provisions of Section 6.9
hereof.

     9.6 Limitations on Payments Made in Dissolution. Each Member shall be entitled to
look solely to the assets of FilmCo for the return of such Member’s positive Capital Account
balances. Notwithstanding that the assets of FilmCo remaining after payment of or due provision
for all debts, liabilities, and obligations of FilmCo may be insufficient to return the Capital
Contributions or share of Net Profits reflected in such Member’s positive Capital Account balances,
a Member shall have no recourse against FilmCo, the Manager or any other Member.

     9.7 Certificate of Cancellation. Upon completion of the winding up of the affairs of
FilmCo, the Person(s) winding up the affairs of FilmCo shall cause to be filed in the office of,
and on a form prescribed by, the Delaware Secretary of State, a certificate of cancellation.

     9.8 Termination. FilmCo shall terminate when all of the assets of FilmCo have been
distributed in the manner provided for in this ARTICLE IX, and the certificate of
cancellation is filed in accordance with Section 9.7.

     9.9 No Action for Dissolution. Except as expressly permitted in this Agreement, a
Member shall not take any voluntary action that directly causes a dissolution of FilmCo.

ARTICLE X

COVENANTS

     10.1 Covenants of FilmCo. For so long as FundCo is a member of FilmCo, the Manager of
FilmCo shall, at all times, unless consented to in writing by FundCo, cause FilmCo to:

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          10.1.1 Acquisition of Covered Pictures. Comply with its obligations under the Master
Picture Purchase Agreement, including, without limitation, its obligation to acquire Covered
Pictures from LGE pursuant thereto.

          10.1.2 Settlement Reports. Remit to the Members within one (1) Business Day of
receipt thereof, each Settlement Report received by FilmCo. In addition, on each Settlement Date
the Distributor shall submit to FilmCo pursuant to the Master Picture Purchase Agreement, and
FilmCo shall remit copies to the
Members within one (1) Business Day of receipt thereof, each True-Up Statement for the
applicable Accounting Period.

          10.1.3 Ultimates Statements. With respect to each Funded Picture, FilmCo shall cause
the Distributor to provide the Members with Ultimates Statements related to such Funded Picture,
together with Cumulative Aggregate Ultimates Statements, in accordance with Section 6.4 and
Section 6.5 of the Master Distribution Agreement.

          10.1.4 Accounting Records and Audit Rights. FilmCo shall exercise its audit rights
under Section 7.7 of the Distribution Agreement.

     10.2 Covenants of FundCo. For so long as FundCo is a member of FilmCo, FundCo shall,
at all times, unless consented to in writing by LGE:

          10.2.1 Notices of Default Under Transaction Documents; Opportunity to Cure Defaults.
Within two (2) Business Days of the occurrence of a default by FundCo under the Senior Debt
Agreement or the Secured Subordinated Note Purchase Agreement, provide written notice of such
default to LGE. FundCo shall provide LGE with a reasonable opportunity to (x) cure any
administrative or technical defaults by FundCo that arise under the Senior Debt Agreement or the
Secured Subordinated Note Purchase Agreement, respectively, and (y) satisfy any administrative or
technical conditions to funding under the Senior Debt Agreement or the Secured Subordinated Note
Purchase Agreement, respectively. LGE shall be entitled to recoup from FundCo out of pocket
amounts reasonably expended by LGE or any of its Affiliates in curing any such defaults or
satisfying any such conditions.

          10.2.2 Amendments to Transaction Documents. In advance of executing any amendment to
or terminating any of the Transaction Documents to which FundCo is a party, if such amendment or
termination would decrease or terminate the express third party beneficiary right of LGE under such
Transaction Document, procure the written consent of LGE to such amendment, provided that such
consent of LGE shall not be unreasonably withheld. FundCo agrees that it shall not execute any
amendment to any of the Transaction Documents to which it is party if such amendment would reduce
amounts available to FundCo or otherwise adversely affect the availability of financing at FundCo
to satisfy its funding obligations under this Agreement.

          10.2.3 Contravention of FundCo Operating Agreement. Refrain from taking any actions
in contravention of Section 2.5 of the FundCo Operating Agreement.

          10.2.4 Direction to Lenders by FundCo. From and after the Full Junior Capital Funding,
irrevocably direct the Lenders to fund any borrowings by FundCo under the Senior

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Debt Agreement
(for the purpose of funding Capital Contributions to FilmCo) directly into the FilmCo Funding
Account.

          10.2.5 Copies of Reports. Provide FilmCo copies of each of the reports that FundCo
provides to the Lenders under Sections 5.03(b) and 5.03(c) of the Senior Debt Agreement no later
than five (5) Business Days after it provides such reports to the Lenders.

ARTICLE XI

EXCULPATION AND INDEMNIFICATION

     11.1. Neither the Members, the Directors, the Manager or their respective Affiliates nor any
Person who at any time shall serve, or shall have served, as an officer, director, manager,
employee or other agent of the Members or any such Affiliate and who, in such capacity, shall
engage, or shall have engaged, in activities on behalf of FilmCo (a “Specified Agent”)
shall be liable, in damages or otherwise, to FilmCo or the Members for, and FilmCo shall not take
any action against the Members, the Directors, the Manager or their respective Affiliates or any
Specified Agent, in respect of any loss which arises out of any acts or omissions performed or
omitted by it pursuant to the authority granted by this Agreement, or otherwise performed on behalf
of FilmCo, if the Members, the Directors, the Manager or such Affiliate or such Specified Agent, as
applicable, in good faith, determined that such course of conduct was in the best interests of
FilmCo. The Members shall look solely to the assets of FilmCo for return of their investment, and
if the property of FilmCo remaining after the discharge of the debts and liabilities of FilmCo is
insufficient to return such investment, the Members shall have no recourse against FilmCo, the
Manager or the Directors except as expressly provided herein.

     11.2. FilmCo shall, to the fullest extent permitted under the Act or other applicable Law,
indemnify any Person who was or is a party or is threatened to be or made a party to any Action by
reason of the fact that such Person is a Member, Director, Manager or a Specified Agent of FilmCo,
against losses, damages, expenses (including attorneys’ fees), judgments and amounts paid in
settlement actually and reasonably incurred by or in connection with such claim, action, suit or
proceeding; provided, however, that FilmCo shall not indemnify: (i) any such Person
in respect of any claim, issue or matter as to which such Person has been adjudged to be liable as
a result of bad faith, willful misconduct, gross negligence or fraud; or (ii) any Member in respect
of any Action brought by another Member, or (iii) any Lions Gate Company in any Action by FilmCo
related to or arising out of any agreement to which both FilmCo and a Lions Gate Company is a party
except as may be expressly provided in any Transaction Document, or (iv) FundCo or any of its
Affiliates in any Action by FilmCo related to or arising out of any agreement to which both FilmCo
and FundCo is a party. Any act or omission by the Members, the Directors, the Manager, their
respective Affiliates or any Specified Agent, if done in reliance upon the opinion of independent
legal counsel or public accountants selected with reasonable care by the Members, the Directors,
the Manager, their respective Affiliates or such Specified
Agent, as applicable, shall not constitute bad faith, willful misconduct, gross negligence or
fraud on the part of such Persons.

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     11.3. The termination of any claim or Action, by judgment, order or settlement shall not, of
itself, create a presumption that any act or failure to act by the Members, the Directors, the
Manager, their respective Affiliates or any Specified Agent constituted bad faith, willful
misconduct, gross negligence or fraud under this Agreement.

     11.4. Any such indemnification under this ARTICLE XI shall be recoverable only out of
the assets of FilmCo and not from the Members or the Manager. No debt shall be incurred by FilmCo,
the Members or the Manager in order to provide a source of funds for any indemnity, and neither the
Members nor the Manager shall not have any liability (or any liability to make any additional
Capital Contribution) on account thereof.

     11.5. To the extent that, at Law or in equity, a Specified Agent, Member, the Manager,
Director or Affiliate of any of the foregoing has duties (including fiduciary duties) and
liabilities relating thereto to FilmCo or to any other Specified Agent, Member, Director or their
respective Affiliates, then such Specified Agent, Member, the Manager, Director or their respective
Affiliates acting under this Agreement shall not be liable to FilmCo or to any other Specified
Agent, Member, the Manager, Director or their respective Affiliates for its good faith reliance on
the provisions of this Agreement or any approval or authorization granted by FilmCo or any other
Specified Agent, Member, the Manager, Director or their respective Affiliates. The provisions of
this Agreement, to the extent that they restrict the duties and liabilities of a Specified Agent,
Member, the Manager, Director or their respective Affiliates otherwise existing at Law or in
equity, are agreed by the Member and FilmCo to replace such other duties and liabilities of such
Specified Agent, Member, Director, the Manager or their respective Affiliates.

ARTICLE XII

SPECIAL PURPOSE ENTITY

     This ARTICLE XII is being adopted in order to comply with certain provisions required
in order to qualify FilmCo as a “special purpose entity.” FilmCo shall:

     12.1. not commingle any of its money or other assets with any money or assets of any other
Person, provided, however, that, money in any LG Entity account, including, but not
limited to, the Collection Accounts (as defined in the Distribution Agreement) or the LGF Master
Collection Account is not property of FilmCo;

     12.2. maintain correct and complete limited liability company records and books of account and
minutes of the meetings and the other proceedings of FilmCo;

     12.3. have its own principal executive and administrative office through which its business is
conducted (which, however, may be within the premises of and leased from LGE or any Affiliate of
LGE) as reasonably determined by FilmCo based on its operations, and which will be conspicuously
identified as the office of FilmCo so that it can be easily located by outsiders;

     12.4. allocate in a reasonably proportionate manner any overhead for shared office space with
an Affiliate, including payment for shared office space and the services performed by

46

 

any employee
of an Affiliate; provided, any such allocation must be approved by the Board of Directors pursuant
to Section 5.5 of this Agreement;

     12.5. maintain books and records separate from any other Person provided that the foregoing
limitation shall not be interpreted as preventing FilmCo from keeping such books and records in the
same office, file cabinets or hard drives as the books and records of any other Affiliate,
including any Member;

     12.6. conduct its own business and affairs in its own name, act solely in its own name and
through its own authorized officers and agents. No Affiliates of FilmCo will be appointed as
agents of FilmCo provided that the foregoing limitation shall not be interpreted as preventing LGE
from serving as Manager, or any officer or employee of any Affiliate, including any Member, from
serving as an officer or providing other services to FilmCo, so long as such services are provided
on an “arm’s length” basis;

     12.7. maintain separate financial statements that comply with GAAP showing its assets and
liabilities separate and apart from those of any other Person, and not have its assets listed on
any financial statement of any other Person; provided, however, that FilmCo’s
assets may be included in a consolidated financial statement of its Affiliates provided that (a)
appropriate notation shall be made on such consolidated financial statements to indicate the
separateness of FilmCo from such Affiliates and to indicate that FilmCo’s assets and credit are not
available to satisfy the debts and other obligations of such Affiliate or any other Person and (b)
such assets shall also be listed on FilmCo’s own separate balance sheet;

     12.8. pay its own liabilities only out of its own funds and not pay the liabilities of any
other Person out of its funds other than for value, provided that the foregoing limitation shall
not be interpreted as preventing FilmCo from entering into cost-sharing arrangements with
Affiliates, including any Member, which allocate such costs in a reasonably proportionate manner;

     12.9. other than Capital Contributions and distributions, not enter into any transaction with
any of its Affiliates, including any Member, except on commercially reasonable terms similar to
those of an “arm’s length” transaction;

     12.10. observe all Delaware limited liability company formalities required under the Act;

     12.11. not guarantee or become obligated for the debts of any other Person, including any
Affiliate, or hold out its credit or assets as being available to satisfy the obligations of others
and not allow any Affiliate to guarantee or become obligated for the debts of FilmCo other than as
contemplated by the Transaction Documents;

     12.12. use stationery, invoices, checks and telephone numbers through which all business
correspondence and communications are conducted separate from that of any other Person as
reasonably determined by FilmCo;

     12.13. not pledge its assets for the benefit of any Person or other entity except as
contemplated by the Transaction Documents to which it is a party;

47

 

     12.14. at all times hold itself out to the public as a legal entity separate from any Members
and any other Person;

     12.15. not engage, directly or indirectly, in any business or purposes other than the actions
required or permitted to be performed under Section 2.5, Section 5.3, and
Section 5.4;

     12.16. not engage in any merger, consolidation or combination transaction with any Person;

     12.17. maintain its bank accounts in its own name except as contemplated by the Transaction
Documents;

     12.18. in the event that FilmCo is included within a consolidated tax return of any Person,
the existence of FilmCo and the ownership of the assets of FilmCo shall be disclosed in a footnote
or otherwise noted therein;

     12.19. not acquire the obligations or securities of any Affiliate;

     12.20. maintain adequate capital in light of its contemplated business purpose, transactions
and liabilities in its reasonable judgment; provided, however, the foregoing shall
not require the Members, Manager, Directors or any Affiliate of FilmCo to take any action to assure
such maintenance, whether by providing capital or facilitating the obtaining of capital;

     12.21. cause the Members, Manager, Directors, agents and other representatives of FilmCo to
act at all times with respect to FilmCo consistently and in furtherance of the foregoing and in
accordance with their obligations under the Act;

     12.22. not create, incur or suffer to exist any Indebtedness other than pursuant to and as
contemplated by the Transaction Documents to which it is a party;

     12.23. not form, or cause to be formed, any direct subsidiaries;

     12.24. make decisions with respect to the business and daily operations of FilmCo
independently in its reasonable judgment, and not, in its reasonable judgment, allow such decisions
to be dictated by any Affiliate of FilmCo.

     12.25. correct any known misunderstanding regarding its separate identity and not identify
itself as being a division of any other Person and not permit any Person to identify FilmCo as
being a division of such Person, provided that the foregoing limitation will not limit FilmCo’s
ability to identify itself as a limited liability company and disregarded entity for tax purposes;

     12.26. not be bound by the business decisions of its Members unless such business decisions
have been approved in accordance with the governance procedures set forth herein; and

     12.27. not take any action inconsistent with Section 5.3 or Section 5.4.

48

 

     Failure of FilmCo, the Members, the Board of Directors or the Manager on behalf of FilmCo, to
comply with any of the foregoing covenants or any other covenants contained in this Agreement shall
not affect the status of FilmCo as a separate legal entity or the liability of the Members, the
Manager or the Directors.

ARTICLE XIII

MISCELLANEOUS

     13.1 Complete Agreement. This Agreement (including any schedules or exhibits attached
hereto) and the Certificate constitute the complete and exclusive statement of agreement among the
Members with respect to the subject matter herein and therein and replace and supersede all prior
written and oral agreements or statements by and among the Members or any of them, including the
Original Agreement. No representation, statement, condition or warranty not contained in this
Agreement or the Certificate shall be binding on the Members or have any force or effect
whatsoever.

     13.2 Binding Effect. Subject to the provisions of this Agreement relating to
transferability, this Agreement shall be binding upon and inure to the benefit of the Members, and
their respective successors and permitted assigns.

     13.3 Parties in Interest. Except as expressly provided in the Act, nothing in this
Agreement shall confer any rights or remedies under or by reason of this Agreement on any Persons
other than the Members and their respective successors and assigns nor shall anything in this
Agreement relieve or discharge the obligation or liability of any third Person to any party to this
Agreement, nor shall any provision give any third Person any right of subrogation or action over or
against any party to this Agreement.

     13.4 Pronouns; Statutory References. All pronouns and all variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the context in which
they are used may require. Any reference to the Code, the Regulations, the Act, or other statutes
or laws shall include all amendments, modifications or replacements of the specific sections and
provisions concerned.

     13.5 Headings. All headings herein are inserted only for convenience and ease of
reference and shall not be considered in the construction or interpretation of any provision of
this Agreement.

     13.6 References to this Agreement. Numbered or lettered articles, sections and
subsections herein contained refer to articles, sections and subsections of this Agreement unless
otherwise expressly stated.

     13.7 Arbitration; Governing Law; Submission to Jurisdiction. Set forth on
Schedule B are the procedures agreed by the parties for resolution of all Proceedings under
this Agreement, the breach thereof and/or the scope of the provisions of this Section 13.7.

     13.8 Severability. If any provision of this Agreement or the application of such
provision to any Person or circumstance shall be held invalid, the remainder of this Agreement or

49

 

the application of such provision to Persons or circumstances other than those to which it is held
invalid shall not be affected thereby.

     13.9 Additional Documents and Acts. Each Member agrees to execute and deliver, from
time to time, such additional documents and instruments and to perform such additional acts as may
be necessary or appropriate to effectuate, carry out, and perform all of the terms, provisions, and
conditions of this Agreement and the transactions contemplated hereby.

     13.10 Notices. All notices, demands, consents, approvals, requests and other
communications required or permitted hereby shall be in writing and shall be deemed to have been
duly and sufficiently given only if (a) personally delivered with proof of delivery thereof (any
notice or communication so delivered being deemed to have been received at the time so delivered),
or (b) sent by Federal Express (or other similar overnight courier) (any notice or communication so
delivered being deemed to have been received only when delivered), (c) sent by telecopier or
facsimile (any notice or communication so delivered being deemed to have been received if a copy is
also delivered by one of the other means of delivery and shall be deemed to have been received (i)
on the Business Day so sent, if so sent prior to 4:00 p.m. (based upon the recipient’s time) of the
Business Day so sent, and (ii) on the Business Day following the day so sent, if so sent on a
non-Business Day or on or after 4:00 p.m. (based upon the recipient’s time) of the Business Day so
sent (unless actually received by the addressee on the day so sent)), or (d) sent by United States
registered or certified mail, postage prepaid, at a post office regularly maintained by the United
States Postal Service (any notice or communication so sent being deemed to have been received only
when delivered), in any such case addressed to the respective parties as follows:

	 	 	 
	If to a Member:
	 	 
	 
	to the address set forth on Exhibit A
	attached hereto.
	 	 
	 
	 	 
	If to FilmCo:
	 	with a copy to:
	 
	 	 
	LG Film Finance I LLC
	 	Liner Yankelevitz Sunshine & Regenstreif LLP
	c/o Lions Gate Entertainment Inc.
	 	1100 Glendon Avenue, 14th Floor
	2700 Colorado Avenue, Suite 200
	 	Los Angeles, California  90024
	Santa Monica, California 90404
	 	Attn:  Joshua B. Grode, Esq.
	Attn: General Counsel
	 	Telephone: 310-500-3500
	Telephone: (310) 449-9200
	 	Facsimile: (310) 500-3501
	Facsimile: (310) 255-3840
	 	 
	 
	 	 
	If to FundCo:
	 	with a copy to:
	 
	 	 
	Pride Pictures LLC
	 	 
	c/o Global Securitization Services, LLC
	 	 
	445 Broad Hollow Road, Suite 239
	 	 
	Melville, New York 11747
	 	Attn:
	Attention: Bernard J. Angelo
	 	Telephone:

50

 

	 	 	 
	Telephone: (631) 587-4700
	 	Facsimile:
	Facsimile: (212) 302-8767
	 	 

or to such other address or party as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address or addresses shall only be effective
upon receipt.

     13.11 Amendments. Any amendment to this Agreement shall be adopted and be effective
as an amendment hereto only if approved in writing by all Members.

     13.12 No Interest in FilmCo Property; Waiver of Action for Partition. No Member has
any interest in specific property of FilmCo. Without limiting the foregoing, each Member
irrevocably waives during the duration of FilmCo any right that such Member may have to maintain
any action for partition with respect to the property of FilmCo.

     13.13 Consequential Damages Waiver. In no event shall any Member, Director or the
Manager (or any of their respective Affiliates) be liable to the other Members, Directors or the
Manager for (and each Member, Director and the Manager hereby expressly waive any rights to seek
damages against the other Members, Directors or the Manager or any of their respective Affiliates
for) any special,
consequential, incidental, indirect, punitive, or exemplary damages resulting in any way from
the performance of this Agreement.

     13.14 Multiple Counterparts; Facsimile; TIFF; PDF. This Agreement (and all exhibits,
certificates, appendices, schedules and amendments) may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed to be an original and all of which
taken together shall constitute one and the same instrument, respectively. Executed copies of the
signature pages of this Agreement sent by facsimile or transmitted electronically in either Tagged
Image Format Files (“TIFF”) or Portable Document Format (“PDF”) shall be treated as
originals, fully binding and with full legal force and effect, and the parties waive any rights
they may have to object to such treatment. Any party delivering an executed counterpart of this
Agreement by facsimile, TIFF or PDF shall also deliver a manually executed counterpart of this
Agreement, but the failure to deliver a manually executed counterpart shall not affect the
validity, enforceability, and binding effect of this Agreement.

     13.15 Remedies Cumulative. The remedies under this Agreement are cumulative and shall
not exclude any other remedies to which any Person may be lawfully entitled.

     13.16 Investment Representation. Each Member hereby represents to, and agrees with,
the other Members and FilmCo that such Member is acquiring the Membership Interest for investment
purposes for such Member’s own account only and not with a view to or for sale in connection with
any distribution of all or any part of the Membership Interest. No other Person will have any
direct or indirect beneficial interest in or right to the Membership Interest.

[Remainder of page intentionally left blank]

51

 

     IN WITNESS WHEREOF, the Members have executed this Limited Liability Company Agreement,
effective as of the date first written above.

	 	 	 	 	 	 	 
	 	 	LIONS GATE ENTERTAINMENT INC.,

a Delaware corporation	 	  
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Wayne Levin	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Wayne Levin	 	 
	 

	 	Title:	 	General Counsel	 	 
	 
	 	 	 	 	 	 
	 	 	PRIDE PICTURES LLC,

a Delaware limited liability company	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Global Securitization Services, LLC,

its Manager	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ John M. DeMilt	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	John M. DeMilt	 	 
	 

	 	Title:	 	Vice President	 	 

S-1EX-101

 

Exhibit 10.1

This Note Purchase Agreement is subject to the provisions of that certain Intercreditor Agreement
(as may be amended, modified, supplemented, extended, renewed, restated or replaced from time to
time, the “Intercreditor Agreement”) dated as of May 25, 2007 among, Laminar Direct Capital L.P.,
GMAC Commercial Finance LLC, Rocky Brands, Inc. and certain subsidiaries of Rocky Brands, Inc., and
each party to this Note Purchase Agreement, by its acceptance hereof, shall be bound by the
provisions of the Intercreditor Agreement.

 

NOTE PURCHASE AGREEMENT

by and among

ROCKY BRANDS, INC.

AND THE OTHER LOAN PARTIES IDENTIFIED ON

THE SIGNATURE PAGES HERETO,

LAMINAR DIRECT CAPITAL L.P.,

AS COLLATERAL AGENT,

and

THE PURCHASERS IDENTIFIED ON

ANNEX A HERETO

May 25, 2007

 

$40,000,000 Second Priority Senior Secured Notes Due May 25, 2012

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE 1 DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	1.1 Certain Definitions
	 	 	1	 
	1.2 Accounting Principles
	 	 	16	 
	1.3 Other Definitional Provisions; Construction
	 	 	16	 
	 
	 	 	 	 
	ARTICLE 2 ISSUE AND SALE OF THE SENIOR TERM NOTES
	 	 	17	 
	 
	 	 	 	 
	2.1 Senior Term Notes
	 	 	17	 
	2.2 Sale and Purchase
	 	 	17	 
	2.3 The Closing
	 	 	17	 
	 
	 	 	 	 
	ARTICLE 3 REPAYMENT OF SENIOR TERM NOTES
	 	 	17	 
	 
	 	 	 	 
	3.1 Interest Rates and Interest Payments
	 	 	17	 
	3.2 Repayment of Senior Term Notes
	 	 	18	 
	3.3 Optional Prepayment of Senior Term Notes
	 	 	18	 
	3.4 Notice of Optional Prepayment
	 	 	18	 
	3.5 Mandatory Prepayment
	 	 	18	 
	3.6 Equity Payment
	 	 	19	 
	3.7 Home Office Payment
	 	 	20	 
	3.8 Maximum Lawful Rate
	 	 	20	 
	3.9 Taxes
	 	 	21	 
	3.10 Capital Adequacy
	 	 	21	 
	3.11 Certain Waivers
	 	 	22	 
	 
	 	 	 	 
	ARTICLE 4 CONDITIONS
	 	 	22	 
	 
	 	 	 	 
	4.1 Conditions to the Purchase of the Senior Term Notes
	 	 	22	 
	4.2 Waiver
	 	 	24	 
	 
	 	 	 	 
	ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES
	 	 	25	 
	 
	 	 	 	 
	5.1 Representations and Warranties of the Loan Parties
	 	 	25	 
	5.2 Absolute Reliance on the Representations and Warranties
	 	 	33	 
	 
	 	 	 	 
	ARTICLE 6 TRANSFER OF SENIOR TERM NOTES
	 	 	33	 
	 
	 	 	 	 
	6.1 Restricted Securities
	 	 	33	 
	6.2 Legends; Purchasers’ Representations
	 	 	34	 
	6.3 Transfer of Senior Term Notes
	 	 	34	 
	6.4 Replacement of Lost Senior Term Notes
	 	 	35	 
	6.5 No Other Representations Affected
	 	 	35	 
	 
	 	 	 	 
	ARTICLE 7 COVENANTS
	 	 	35	 
	 
	 	 	 	 

 

 

	 	 	 	 	 
	 	 	Page
	7.1 Affirmative Covenants
	 	 	35	 
	7.2 Negative Covenants
	 	 	39	 
	7.3 Financial Covenant
	 	 	46	 
	 
	 	 	 	 
	ARTICLE 8 EVENTS OF DEFAULT
	 	 	47	 
	 
	 	 	 	 
	8.1 Events of Default
	 	 	47	 
	8.2 Consequences of Event of Default
	 	 	49	 
	 
	 	 	 	 
	ARTICLE 9 AGENT
	 	 	49	 
	 
	 	 	 	 
	9.1 Authorization and Action
	 	 	49	 
	9.2 Delegation of Duties
	 	 	50	 
	9.3 Exculpatory Provisions
	 	 	50	 
	9.4 Reliance
	 	 	50	 
	9.5 Non-Reliance on Agent and Other Purchasers
	 	 	50	 
	9.6 No Liability of Purchasers
	 	 	51	 
	9.7 Agent in its Individual Capacity
	 	 	51	 
	9.8 Successor Agent
	 	 	51	 
	9.9 Consent of Purchasers.
	 	 	51	 
	9.10 This Article Not Applicable to the Loan Parties
	 	 	51	 
	 
	 	 	 	 
	ARTICLE 10 MISCELLANEOUS
	 	 	52	 
	 
	 	 	 	 
	10.1 Successors and Assigns
	 	 	52	 
	10.2 Modifications and Amendments
	 	 	52	 
	10.3 No Implied Waivers; Cumulative Remedies; Writing Required
	 	 	52	 
	10.4 Reimbursement of Expenses
	 	 	52	 
	10.5 Holidays
	 	 	53	 
	10.6 Notices
	 	 	53	 
	10.7 Survival
	 	 	54	 
	10.8 Governing Law
	 	 	54	 
	10.9 Jurisdiction, Consent to Service of Process.
	 	 	54	 
	10.10 Jury Trial Waiver
	 	 	55	 
	10.11 Severability
	 	 	55	 
	10.12 Headings
	 	 	55	 
	10.13 Indemnity
	 	 	55	 
	10.14 Environmental Indemnity
	 	 	56	 
	10.15 Counterparts
	 	 	56	 
	10.16 Integration
	 	 	57	 
	10.17 Intercreditor
	 	 	57	 
	10.18 Confidentiality
	 	 	57	 
	 
	 	 	 	 
	SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT
	 	 	59	 
	 
	 	 	 	 
	ANNEX A INFORMATION RELATING TO THE PURCHASERS
	 	 	3	 
	 
	 	 	 	 
	ANNEX B ALLOCATION OF SENIOR TERM NOTES AMONG PURCHASERS
	 	 	5	 

ii

 

NOTE PURCHASE AGREEMENT

$40,000,000 Aggregate Principal Amount of

Second Priority Senior Secured Notes Due May 25, 2012

          THIS NOTE PURCHASE AGREEMENT (this “Agreement”), dated as of May 25, 2007, is by and among
ROCKY BRANDS, INC., an Ohio corporation (“Parent”) and the other parties identified on the
signature pages hereto as “Loan Parties” (each a “Loan Party” and, together with Parent, the “Loan
Parties”), the note purchasers that are now and hereafter at any time parties hereto and are listed
in Annex A (or any amendment or supplement thereto) attached hereto (each, together with
its successors and permitted assigns, a “Purchaser” and collectively, the “Purchasers”), and
Laminar Direct Capital L.P., a Delaware limited partnership, as collateral agent for the Purchasers
(in such capacity “Agent”). Capitalized terms used and not defined elsewhere in this Agreement are
defined in Article 1 hereof.

RECITALS

          A. The Loan Parties have proposed selling Second Priority Senior Secured Notes to the
Purchasers designated on Annex A in the aggregate amount of $40,000,000 for the purpose of
(i) refinancing certain existing outstanding indebtedness of the Loan Parties (A) to the Lenders
under the GMAC Credit Agreement (as defined herein), including a Term Loan A in the original
principal amount of $18,000,000 (“Term Loan A”) and a Term Loan C in the original principal amount
of $15,000,000 (“Term Loan C”) and (B) under a certain Note Purchase Agreement in the original
aggregate principal amount in favor of American Capital Financial Services, Inc. and the purchasers
thereunder (collectively, the “Refinancing”), (ii) paying transaction costs associated with the
Refinancing and (iii) providing for general business purposes of the Loan Parties.

          B. The Loan Parties have also proposed to enter into an amended and restated revolving credit
facility with the Lenders (as defined herein) in the aggregate amount of $100,000,000.

          NOW, THEREFORE, the parties hereto, in consideration of the promises and their mutual
covenants and agreements herein set forth and intending to be legally bound hereby, covenant and
agree as follows:

ARTICLE 1

DEFINITIONS

          1.1 Certain Definitions. In addition to other words and terms defined elsewhere in this
Agreement, the following words and terms shall have the meanings set forth below:

          “Affiliate” shall mean, with respect to any Person, any other Person that is directly or
indirectly controlling, controlled by or under common control with such Person or
entity or any of its Subsidiaries, and

 

 

the term “control” (including the terms “controlled by”
and “under common control with”) means having, directly or indirectly, the power to direct or cause
the direction of the management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise. Without limiting the foregoing, the ownership of ten percent
(10%) or more of the voting securities of a Person shall be deemed to constitute control and
notwithstanding anything to the contrary herein, neither the Purchasers nor any of their respective
Affiliates shall be deemed to be Affiliates of the Loan Parties by virtue of the transactions
contemplated in this Agreement.

          “Agent” shall have the meaning assigned to such term in the preamble hereto and shall include
any successor agent provided for hereunder.

          “Agreement” shall mean this Note Purchase Agreement, as the same may be amended, restated,
supplemented or otherwise modified from time to time.

          “Business” shall mean the principal business of the Loan Parties as set forth in Section
5.1(b) herein and as such shall continue to be conducted following the purchase and sale of the
Senior Term Notes.

          “Business Day” shall mean any day other than a Saturday, Sunday or other day on which banking
institutions in New York are authorized or required by law to close.

          “By-laws” shall mean, with respect to any Person, the by-laws, partnership agreement,
operating agreement, limited liability company agreement or analogous instrument governing the
operations of the Loan Parties, as applicable, including all amendments and supplements thereto.

          “Capital Expenditures” shall mean, for any period of determination, with respect to any
Person, the sum of expenditures for, or contracts for expenditures with respect to, any fixed
assets or improvements, or for replacements, substitutions or additions thereto, that in accordance
with GAAP either would be required to be capitalized on the balance sheet of such Person, or would
be classified and accounted for as capital expenditures on a statement of cash flows of such
Person.

          “Capitalization Schedule” shall have the meaning assigned to such term in Section 5.1(d).

          “Capitalized Leases” shall mean, with respect to any Person, any lease of any property
(whether real, personal or mixed) that in conformity with GAAP, would be required to be classified
and accounted for as a capital lease on a balance sheet of such Person.

          “Cash Interest Expense” shall mean, without duplication, for any period, for Parent on a
Consolidated Basis: interest expense deducted in the determination of net income (excluding (a) the
amortization of fees and costs with respect to the Parent’s acquisition of certain equity interests
and the financing thereof on or about January 6, 2005, which have been capitalized as transaction
costs in accordance with the provisions of Section 1.3; (b) any non-cash charges and/or
amortization of other capitalized fees and costs subsequent to January 6, 2005, and (c) interest
paid in kind).

2

 

          “CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. § 9604, et seq.), as amended, and rules, regulations, and standards promulgated
thereunder.

          “Change of Control” shall mean the occurrence of any of the following:

          (a) any person or group of persons (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended) shall obtain ownership or control in one or more series of
transactions of more than 50% of the common stock or 50% of the voting power of the Parent entitled
to vote in the election of members of the board of directors of the Parent;

          (b) a merger, consolidation, reorganization, recapitalization or share exchange (whether or
not Parent is the surviving and continuing corporation) in which the stockholders of Parent
immediately prior to such transaction own, as a result of such transaction, less than fifty percent
(50%) of the securities entitled to vote for the election of directors of the resulting corporation
or less than fifty percent (50%) of the capital stock of the resulting corporation; or

          (c) a sale, transfer or other disposition of all or substantially all of the assets of Parent
and its Subsidiaries, on a consolidated basis.

          “Charges” shall mean all taxes, charges, fees, imposts, levies or other assessments,
including, without limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp, occupation and
property taxes, custom duties, fees, assessments, liens, claims and charges of any kind whatsoever,
together with any interest and any penalties, additions to tax or additional amounts, imposed by
any taxing or other authority, domestic or foreign (including, without limitation, the PBGC or any
environmental agency or superfund), upon the Collateral, the Loan Parties or any of their
Affiliates.

          “Charter Documents” shall mean, with respect to any Person, the articles of incorporation,
certificate of incorporation, certificate of limited partnership, certificate of limited liability
company, charter or analogous organic instrument filed with the appropriate Governmental
Authorities of such Person, as applicable, including all amendments and supplements thereto.

          “Closing” shall have the meaning assigned in Section 2.3 hereof.

          “Closing Date” shall have the meaning assigned to such term in Section 2.3 hereof.

          “Code” shall mean the Internal Revenue Code of 1986, as amended.

          “Collateral” shall have the meaning assigned to such term in the Security Agreement.

          “Common Stock” shall mean the common stock, without par value, of Parent.

3

 

          “Condition” shall mean any condition that results in or otherwise relates to any Environmental
Liabilities.

          “Controlled Group” shall mean the “controlled group of corporations” as that term is defined
in Section 1563 of the Code, of which the Loan Parties are a party from time to time.

          “Copyright Licenses” means any agreement, whether written or oral, providing for the grant by
or to the Loan Parties or any of their Subsidiaries of any right under any Copyright, including the
grant of any right to use, copy, publicly perform, display, create derivative works, manufacture,
distribute, exploit or sell materials derived from any Copyright.

          “Copyrights” means (a) all right, title and interest in or relating to copyrights, whether now
owned or hereafter acquired or existing, arising under the laws of the United States or any other
country or any political subdivision thereof, whether registered or unregistered and whether
published or unpublished, all registrations and recordings thereof and all applications in
connection therewith, including all registrations, recordings and applications in the United States
Copyright Office or in any counterparts thereof, and (b) the right to obtain all renewals,
continuations, reversions and extensions thereof.

          “Covered Taxes” shall have the meaning assigned to such term in Section 3.9 hereof.

          “Default” shall mean any event or condition that, but for the giving of notice or the lapse of
time, or both, would constitute an Event of Default.

          “Deposit Account Control Agreements” shall have the meaning assigned to such term in Section
4.1(c).

          “Domestic Subsidiary” shall mean, with respect to any Person, a Subsidiary of such Person,
which Subsidiary is incorporated or otherwise organized under the laws of a State of the United
States of America.

          “EBITDA” means, for any period, without duplication, the total of the following for Parent on
a Consolidated Basis, each calculated for such period: (a) net income determined in accordance with
GAAP; plus, to the extent included in the calculation of net income, (b) the sum of (i) income and
franchise taxes paid or accrued; (ii) interest expense, net of interest income, paid or accrued;
(iii) amortization and depreciation, (iv) Non-Recurring Charges and (v) any non-cash intellectual
property impairment charges, non-cash stock compensation expense charges and other non-cash charges
(excluding accruals for cash expenses made in the ordinary course of business); less, to the extent
included in the calculation of net income, (c) the sum of (i) the income of any Person (other than
wholly-owned Subsidiaries of Parent) in which Parent or a wholly-owned Subsidiary of Parent has an
ownership interest, except to the extent such income is received by Parent or such wholly-owned
Subsidiary in a cash distribution during such period; (ii) gains or losses from sales or other
dispositions of assets (other than inventory in the normal course of business) and (iii)
extraordinary gains.

4

 

          “Environmental Laws” shall mean any Laws that address, are related to or are otherwise
concerned with environmental, health or safety issues, including any Laws relating to any
emissions, releases or discharges of Pollutants into ambient air, surface water, ground water or
land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, handling, clean-up or control of Pollutants or any exposure or impact on
worker health and safety.

          “Environmental Liabilities” shall mean any obligations or liabilities (including any claims,
suits or other assertions of obligations or liabilities) that are:

          (a) related to environmental, health or safety issues (including on-site or off-site
contamination by Pollutants of surface or subsurface soil or water, and occupational safety and
health); and

          (b) based upon or related to (i) any provision of past, present or future United States or
foreign Environmental Law (including CERCLA and RCRA) or common law, or (ii) any judgment, order,
writ, decree, permit or injunction imposed by any court, administrative agency, tribunal or
otherwise.

          The term “Environmental Liabilities” includes: (i) fines, penalties, judgments, awards,
settlements, losses, damages (including foreseeable and unforeseeable consequential damages),
costs, fees (including attorneys’ and consultants’ fees), expenses and disbursements; (ii) defense
and other responses to any administrative or judicial action (including claims, notice letters,
complaints, and other assertions of liability); and (iii) financial responsibility for (1) cleanup
costs and injunctive relief, including any Removal, Remedial or other Response actions, and natural
resource damages, and (2) any other compliance or remedial measures.

          “Environmental Schedule” shall have the meaning assigned to such term in Section 5.1(l)
hereof.

          “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may from
time to time be amended, and the rules and regulations of any governmental agency or authority, as
from time to time in effect, promulgated thereunder.

          “Equity Equivalent” shall have the meaning assigned to such term in Section 3.6 hereof.

          “Equity Prepayment” shall have the meaning assigned to such term in Section 3.6 hereof.

          “Equity Prepayment Premium” shall have the meaning assigned to such term in Section 3.6
hereof.

          “ERISA Affiliate” shall mean any Loan Party and any Person who is a member of a group which is
under common control with any Loan Party, who together with any Loan Party is treated as a single
employer within the meaning of Section 414 of the Internal Revenue Code.

5

 

          “Event of Default” shall mean any of the events of default described in Section 8.1 hereof.

          “Financial Statements” shall have the meaning assigned to such term in Section 5.1(c) hereof.

          “Financing Statements” shall have the meaning assigned to such term in Section 4.1(c) hereof.

          “Fiscal Year” or “fiscal year” shall mean each twelve (12) month period ending on December 31
of each year.

          “Fixed Charge Coverage Ratio” shall mean, for any period of four (4) consecutive calendar
quarters, the ratio of EBITDA of Parent on a Consolidated Basis less Capital Expenditures on a
consolidated basis during such period to the Fixed Charges during such period.

          “Fixed Charges” shall mean, for any period, and each calculated for such period (without
duplication) of Parent on a Consolidated Basis, the sum of (a) Cash Interest Expense of the Loan
Parties; (b) scheduled payments of principal with respect to all Indebtedness (other than (i) the
Revolving Financing and (ii) payments made with respect to Term Loan A and Term Loan C); (c) any
provision for income or franchise taxes included in the determination of net income, excluding any
provision for deferred taxes; and (d) payment of deferred taxes, income and franchise taxes accrued
in any prior period.

          “Foreign Subsidiary” means, with respect to any Person, a Subsidiary of such Person, which
Subsidiary is not incorporated or otherwise organized under the laws of a state of the United
States of America.

          “GAAP” shall have the meaning assigned to such term in Section 1.2 hereof.

          “GMAC” shall mean GMAC Commercial Finance, LLC, a Delaware limited liability company.

          “GMAC Agent” shall mean the administrative agent as defined in the GMAC Credit Agreement.

          “GMAC Credit Agreement” shall mean that certain Amended and Restated Loan and Security
Agreement by and among the Loan Parties and GMAC, dated as of May 25, 2007, as such may be amended
or modified from time to time as permitted hereunder; and any loan and security agreement, credit
agreement or other financing agreement evidencing any refinancing of the Indebtedness evidenced by
such GMAC Credit Agreement; provided that (i) the principal amount of such refinanced
Indebtedness does not exceed the amount permitted by the definition of “Revolving Financing”, (ii)
such Indebtedness does not extend beyond December 31, 2013, (iii) the terms and conditions of the
agreements, documents and instruments related to such refinancing, taken as a whole, are not, in
the reasonable judgment of Agent or the Required Purchasers, materially more onerous to the Agent
and the Required Purchases or the Loan Parties than those set forth in the GMAC Credit Agreement,
as in effect on the date of such

6

 

refinancing and (iv) such Indebtedness, including the documentation therefore, otherwise
constitutes Senior Indebtedness under the Intercreditor Agreement and the agent or lender
thereunder has executed a joinder or supplement to the Intercreditor Agreement or a new
intercreditor agreement on substantially the same terms as the Intercreditor Agreement.

          “GMAC Credit Documents” shall mean the GMAC Credit Agreement and all ancillary documents and
materials entered into in connection with the GMAC Credit Agreement.

          “GMAC Financing” shall mean, collectively, the Indebtedness and other obligations under or
relating to the Revolving Financing.

          “Governmental Authorities” shall mean any federal, state or municipal court or other
governmental department, commission, board, bureau, agency or instrumentality, governmental or
quasi-governmental, domestic or foreign.

          “Guaranty” shall mean any guaranty of the payment or performance of any Indebtedness or other
obligation and any other arrangement whereby credit is extended to one obligor on the basis of any
promise of another Person, whether that promise is expressed in terms of an obligation to pay the
Indebtedness of such obligor, or to purchase an obligation owed by such obligor, or to purchase
goods and services from such obligor pursuant to a take-or-pay contract, or to maintain the
capital, working capital, solvency or general financial condition of such obligor, whether or not
any such arrangement is reflected on the balance sheet of such other Person, firm or corporation,
or referred to in a footnote thereto, but shall not include endorsements of items for collection in
the ordinary course of business. For the purpose of all computations made under this Agreement,
the amount of a Guaranty in respect of any obligation shall be deemed to be equal to the maximum
aggregate amount of such obligation or, if the Guaranty is limited to less than the full amount of
such obligation, the maximum aggregate potential liability under the terms of the Guaranty.

          “Indebtedness” shall mean, for any Person at the time of any determination, without
duplication, all obligations, contingent or otherwise, of such Person that, in accordance with
GAAP, should be classified upon the balance sheet of such Person as indebtedness, but in any event
including: (i) all obligations for borrowed money, (ii) all obligations arising from installment
purchases of property or representing the deferred purchase price of property or services in
respect of which such Person is liable, contingently or otherwise, as obligor or otherwise (other
than trade payables and other current liabilities incurred in the ordinary course of business on
terms customary in the trade), (iii) all obligations evidenced by notes, bonds, debentures,
acceptances or instruments, or arising out of letters of credit or bankers’ acceptances issued for
such Person’s account, (iv) all obligations, whether or not assumed, secured by any Lien or payable
out of the proceeds or production from any property or assets now or hereafter owned or acquired by
such Person, (v) all obligations for which such Person is obligated pursuant to a Guaranty which
are classified under GAAP as indebtedness, (vi) the capitalized portion of lease obligations under
Capitalized Leases, (vii) all obligations for which such Person is obligated pursuant to any
Interest Rate Protection Agreements or derivative agreements or arrangements, (viii) all factoring
arrangements and (ix) all obligations of such Person upon which interest charges are customarily
paid or accrued.

7

 

          “Intellectual Property Agreements” shall have the meaning assigned to such term in Section
4.1(c) hereof.

          “Intellectual Property Schedule” shall have the meaning assigned to such term in Section
5.1(r) hereof.

          “Intercreditor Agreement” shall have the meaning assigned to such term in Section 10.17
hereof.

          “Interest Rate Protection Agreement” shall mean any interest rate swap, interest rate cap,
interest rate collar or other interest rate hedging agreement or arrangement.

          “Investment” as applied to any Person shall mean the amount paid or agreed to be paid or
loaned, advanced or contributed to other Persons, and in any event shall include, without
limitation, (i) any direct or indirect purchase or other acquisition of any notes, obligations,
instruments, stock, securities or ownership interest (including partnership interests and joint
venture interests) and (ii) any capital contribution to any other Person.

          “Laws” shall mean all U.S. and foreign federal, state or local statutes, laws, rules,
regulations, ordinances, codes, policies, rules of common law, and the like, now or hereafter in
effect, including any judicial or administrative interpretations thereof, and any judicial or
administrative orders, consents, decrees or judgments.

          “Lenders” shall collectively mean the lenders party to the GMAC Credit Agreement.

          “Liabilities” shall have the meaning given that term in accordance with GAAP and shall
include, without limitation, Indebtedness.

          “Lien” shall mean any security interest, lien, pledge, bailment, mortgage, hypothecation, deed
of trust, conditional sales and title retention agreement (including any lease in the nature
thereof), charge, encumbrance or other similar arrangement or interest in real or personal
property, now owned or hereafter acquired, whether such interest is based on common law, statute or
contract.

          “Litigation Schedule” shall have meaning assigned to such term in Section 5.1(j) hereof.

          “Loan Party” and “Loan Parties” shall have the meanings assigned to such terms in the preamble
hereto.

          “Management” shall mean generation, production, handling, distribution, processing, use,
storage, treatment, operation, transportation, recycling, reuse and/or disposal, as those terms are
defined in CERCLA, RCRA and other Environmental Laws (including as those terms are further defined,
construed, or otherwise used in rules, regulations, standards, guidelines and publications issued
pursuant to, or otherwise in implementation of, such Environmental Laws).

8

 

          “Material Adverse Change” shall mean any change that has a Material Adverse Effect.

          “Material Adverse Effect” shall mean (a) a material adverse effect on the business,
properties, assets, liabilities or condition (financial or otherwise) of the Loan Parties, taken
together as a whole, (b) a material impairment of the ability of the Loan Parties, taken as a
whole, to perform their material obligations under the Transaction Documents to which they are
parties, taken as a whole, or (c) a material adverse effect upon the legality, validity, binding
effect or enforceability against the Loan Parties of the Transaction Documents to which they are
parties, taken as a whole.

          “Material Contracts” shall have the meaning assigned to such term in Section 5.1(w) hereof.

          “Maturity Date” shall have the meaning assigned to such term in Section 3.2 hereof.

          “Moody’s” shall have the meaning assigned to such term in Section 7.2(h) hereof.

          “Multiemployer Plan” shall mean a multiemployer plan (within the meaning of Section 3(37) of
ERISA) that is maintained for the benefit of the employees of the Loan Parties or any member of the
Controlled Group.

          “Non-Recurring Charges” shall mean the sum of the aggregate amount of fees, expenses,
financing costs and other expenses incurred in connection with (i) the Parent’s acquisition of
certain equity interests and the financing thereof on or about January 6, 2005, to the extent paid
substantially contemporaneously with, on or about such acquisition and (ii) the Transactions, to
the extent paid substantially contemporaneously with, on or about the Closing Date.

          “Offering Memorandum” shall mean that certain Second Priority Senior Secured Notes $40,000,000
Confidential Private Placement Offering Memorandum dated April, 2007, prepared in conjunction with
Piper Jaffray & Co.

          “Organization Schedule” shall have the meaning assigned to such term in Section 5.1(a) hereof.

          “Other Taxes” shall have the meaning assigned to such term in Section 3.9 hereof.

          “Parent” shall have the meaning assigned to such term in the preamble hereof.

          “Parent on a Consolidated Basis” shall mean the consolidation, in accordance with GAAP, of the
financial accounts of Parent and its Subsidiaries.

          “Parent SEC Reports” shall have the meaning assigned to such term in Section 5.1(y) hereof.

9

 

          “Patent License” means all agreements, whether written or oral, providing for the grant by or
to the Loan Parties or any of their Subsidiaries of any right to any Patent, including the grant of
any right to manufacture, have manufactured, use, import, lease, sell or offer for sale any
invention covered in whole or in part by a Patent.

          “Patents” means (a) all right, title and interest in or relating to letters patent of the
United States, any other country or any political subdivision thereof and all reissues,
reexaminations, and extensions thereof, (b) all applications for letters patent of the United
States or any other country or any political subdivisions thereof and all divisionals,
continuations and continuations-in-part thereof and (c) all rights to obtain any reissues,
reexaminations or extensions of the foregoing.

          “Patriot Act” shall have the meaning assigned to such term in Section 5.1(x) hereof.

          “PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A
of Title IV of ERISA, or any other governmental agency, department or instrumentality succeeding to
the functions thereof.

          “PCBs” shall have the mean assigned to such term within the definition of the term “Pollutant”
below.

          “Permitted Acquisition” means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement by which the Parent or any Subsidiary thereof
(a) acquires any ongoing business or all or a substantially all of the operations or assets of any
Person, any division thereof or operating unit thereof, whether through purchase of assets, merger
or otherwise or (b) directly or indirectly acquires (in one transaction or in a series of
transactions) all or substantially all (in number of votes) of the equity interests of a Person
which have ordinary voting power for the election of directors or constitute a majority (by
percentage of voting power) of the outstanding equity interests of another Person (any of the
foregoing an “Acquisition”); provided that:

(i) such Acquisition is made at a time when, after giving effect to such Acquisition and the
related financing thereof, no Default or Event of Default exists;

(ii) after giving effect to such Acquisition, no Default or Event of Default exists or would
occur based on a 12 month pro forma good faith prospective calculation of the covenant set
forth in Section 7.3(A) (excluding any Acquisition as a Capital Expenditure), giving effect
to the EBITDA of the acquired operations or Person and any higher levels of Indebtedness
associated with the acquired operations or Person;

(iii) the acquired Person or post-merger Person (other than any Foreign Subsidiary), if such
Acquisition is of equity interests, guarantees all obligations under this Agreement and
grants to Agent, for the benefit of Agent and Purchasers, a first Lien upon all of the
tangible and intangible personal property of such acquired Person, whether then owned or
thereafter acquired or arising, subject only to Liens permitted by this Agreement;

10

 

(iv) if the Acquisition is of equity interests, such Loan Party acquiring such equity
interests grants to Agent, for the benefit of Agent and Purchasers, a Lien upon all such
equity interests (or not less than 65% of such equity interests if a Foreign Subsidiary)
pursuant to a pledge agreement or joinder in form and substance satisfactory to Agent;

(v) any acquired assets become subject to Liens in favor of Agent, for the benefit of Agent
and Purchasers, pursuant to such agreements, instruments and documents as shall be
satisfactory in form and substance to Agent, and are free and clear of all other Liens
except as permitted under this Agreement;

(vi) Parent delivers written notice to Agent of its or such Subsidiary’s intention to make
such Acquisition no less than 15 Business Days prior to the proposed closing date for such
Acquisition, together with a certificate that sets forth (A) information regarding
liabilities and obligations with respect to tax, ERISA and environmental matters, if any, to
be incurred by such Person (including, without limitation, the acquired Person in the event
of an Acquisition of equity interests) as a result of such Acquisition, any indemnities
afforded under the terms of such Acquisition and the scope and results of any tax, ERISA or
environmental review undertaken by the Parent or such Subsidiary in connection therewith and
(B) any available financial statements of (1) such acquired Person if such Acquisition of
equity interests, and (2) operating unit or division if such Acquisition is of assets;

(vii) on the date of the closing of the Permitted Acquisition, all representations and
warranties under the Transaction Documents shall be true and correct in all material
respects as though made on and as of such date, except to the extent that any such
representation or warranty expressly relates to an earlier date;

(viii) such Acquisition is of or with a Person assembling and selling specialty footwear,
apparel and accessories or an industry related thereto;

(ix) such Acquisition shall have been approved by the board of directors of such Person (or
similar governing body if such Person is not a corporation) that is the subject of such
Acquisition, and such Person shall not have announced that it will oppose such Acquisition
or shall not have commenced any action which alleges that such Acquisition will violate any
applicable law;

(x) the consideration for the Permitted Acquisition shall have been paid only (A) in cash,
(B) in deferred installment payments, provided that any indebtedness incurred in
connection therewith is permitted pursuant to Section 7.2(a) or equity interests of the
Parent or such Subsidiary making such Acquisition, and the purchase price for any such
Acquisition, including (1) the original stated purchase price therefor, plus (2) the
reasonably estimated transaction costs associated with such Acquisition, plus (3)
the amount of Indebtedness for borrowed money assumed (directly or indirectly) as a result
thereof, plus (4) all amounts payable of any nature whatsoever, including cost of
goods sold, to the seller or any Affiliate of such seller following such Acquisition, shall
not

11

 

exceed the amount set forth in Section 7.2(d) (excluding any portion of any of the foregoing
payable in common equity of the Parent or any Subsidiary thereof); and

(xi) on the funding date for any borrowing of any Loans for the purpose of consummating a
Permitted Acquisition, Agent shall have received a certificate from an officer of Parent (A)
certifying that (1) such Acquisition meets the requirements of the definition of Permitted
Acquisition and (2) the liabilities assumed with respect to such Permitted Acquisition do
not or are not reasonably likely to have a Material Adverse Effect, and (B) attaching
calculations of financial covenant set forth in Section 7.3, copies of the
definitive purchase agreement or most recent draft of the same, and copies of all material,
business and financial information relating to the business purchased in the Permitted
Acquisition, all as Agent may reasonably request.

          “Permitted Encumbrances Schedule” shall have the meaning assigned to such term in
Section 7.2(b) hereof.

          “Permitted Indebtedness Schedule” shall have the meaning assigned to such term in Section
7.2(a) hereof.

          “Permitted Investment” shall have the meaning assigned to such term in Section 7.2(h) hereof.

          “Permitted Liens” shall have the meaning assigned to such term in Section 7.2(b) hereof.

          “Permitted Sale/Leaseback” means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement by which the Parent or any Subsidiary thereof
(a) sells any of its real property and equipment which is subject to, as of the Closing Date, a
Lien in favor of General Electric Capital Business Asset Funding Corporation and, substantially
simultaneously therewith, (b) leases such real property (or a portion thereof) from the purchaser
thereof or an Affiliate of such purchaser, or otherwise enters into a contractual relationship
pursuant to which such purchaser (or an Affiliate thereof) provides logistic services for one or
more of the Loan Parties at such property; provided that:

(i) such sale/leaseback is made at a time when, after giving effect thereto, no Default or
Event of Default exists;

(ii) the entire balance of the mortgage secured by such real property is paid in full from
the sale proceeds thereof;

(iii) any Net Cash Proceeds (as defined in the GMAC Credit Agreement) thereof are remitted
to GMAC Agent in accordance with the GMAC Credit Agreement; and

(iv) any non-cash proceeds thereof consisting of any notes or other evidence of Indebtedness
are delivered to the GMAC Agent as additional Collateral, together with such Transaction
Documents as Agent may reasonable request in connection therewith.

12

 

          “Person” shall mean any individual, partnership, limited partnership, corporation, limited
liability company, association, joint stock company, trust, joint venture, unincorporated
organization or governmental entity or department, agency or political subdivision thereof.

          “Plan” shall mean any employee benefit plan (within the meaning of Section 3(3) of ERISA),
other than a Multiemployer Plan, established or maintained by the Loan Parties or any member of the
Controlled Group.

          “Pledge Agreement” shall have the meaning assigned to such term in Section 4.1(c) hereof.

          “Pollutant” shall include any “hazardous substance” and any “pollutant or contaminant” as
those terms are defined in CERCLA; any “hazardous waste” as that term is defined in RCRA; and any
“hazardous material” as that term is defined in the Hazardous Materials Transportation Act (49
U.S.C. § 1801 et seq.), as amended (including as those terms are further defined, construed, or
otherwise used in rules, regulations, or standards promulgated pursuant to, or otherwise in
implementation of, said Environmental Laws); and including without limitation any petroleum product
or byproduct, solvent, flammable or explosive material, radioactive material, asbestos,
polychlorinated biphenyls (“PCBs”), dioxins, dibenzofurans, heavy metals, and radon gas; and
including any other substance or material that is reasonably determined to present a threat, hazard
or risk to human health or the environment.

          “Prepayment Fee” shall mean a non-refundable fee payable pro rata to the Purchasers equal to
the principal amount of any Senior Term Note prepaid pursuant to Section 3.3 or 3.5, multiplied by
(i) five percent (5%), if such prepayment occurs during the period beginning with the first
anniversary of the Closing Date and ending with the day immediately preceding the second
anniversary of the Closing Date, (ii) three percent (3%), if such prepayment occurs during the
period beginning with the second anniversary of the Closing Date and ending with the day
immediately preceding the third anniversary of the Closing Date, (iii) one and one-half percent
(1.5%) if such prepayment occurs during the period beginning with the third anniversary of the
Closing Date and ending with the day immediately preceding the fourth anniversary of the Closing
Date, and (iv) zero percent (0%) if such prepayment occurs at any time thereafter.

          “Pro Forma Balance Sheet” shall have the meaning assigned to such term in Section 5.1(c)(iii).

          “Properties and Facilities” shall have the meaning assigned to such term in Section 5.1(q)
hereof.

          “Properties Schedule” shall have the meaning assigned to such term in Section 5.1(q) hereof.

          “Proprietary Rights” shall mean, collectively, whether now owned or hereafter acquired or
existing, (a) all right, title and interest of the Loan Parties or any of their Subsidiaries in or
relating to intellectual property or industrial property, whether arising under United States,
multinational or foreign laws or otherwise, including Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trademarks, Trademark Licenses, trade secrets, Internet domain names and

13

 

domain name registrations, software and contract rights relating to software, websites,
advertising rights, rights in designs, including registrations thereof, and rights in data, and (b)
all right to income, royalties, proceeds and damages now or hereafter due and/or payable under and
with respect thereto, including all rights to sue and recover at law or in equity for any past,
present and future infringement, misappropriation, dilution, violation or other impairment thereof.

          “Purchaser” and “Purchasers” shall have the meanings assigned to such terms in the preamble
hereto and in Section 6.2 hereof.

          “RCRA” shall mean the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), as
amended, and all rules, regulations, standards, guidelines, and publications issued thereunder.

          “Refinancing” shall have the meaning assigned to such term in the recitals hereto.

          “Removal,” “Remedial” and “Response” actions shall include the types of
activities “covered”
by CERCLA, RCRA, and other comparable Environmental Laws, and whether the activities are those that
might be taken by a government entity or those that a government entity or any other person might
seek to require of waste generators, handlers, distributors, processors, users, storers, treaters,
owners, operators, transporters, recyclers, reusers, disposers, or other persons under “removal,”
“remedial,” or other “response” actions.

          “Reportable Event” shall mean any of the events that are reportable under Section 4043 of
ERISA and the regulations promulgated thereunder, other than an occurrence for which the thirty
(30) day notice contained in 29 C.F.R. § 2615.3(a) is waived.

          “Required Purchasers” shall mean, at any time, the Purchasers holding a pro rata percentage of
the outstanding principal amount of the Senior Term Notes aggregating at least 50.1% at such time.

          “Revolving Financing” shall mean a secured revolving line of credit facility pursuant to the
GMAC Credit Agreement in an aggregate principal amount not to exceed $100,000,000,
provided, however, that the outstanding principal amount of Revolving Financing may
be increased to $110,000,000, so long as the advance rates and standards for determining the
eligible receivables and eligible inventory for inclusion in the borrowing base under the GMAC
Credit Agreement in effect on the Closing Date support such increase and are satisfied.

          “S&P” shall have the meaning assigned to such term in Section 7.2(h) hereof.

          “Sarbanes Oxley” shall mean the United States Sarbanes-Oxley Act of 2002.

          “SEC” shall mean the Securities and Exchange Commission and any governmental body or agency
succeeding to the functions thereof.

          “Securities Act” shall mean the Securities Act of 1933, as amended.

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

          “Securitization” shall have the meaning assigned to such term in Section 10.18 hereof.

          “Security Agreement” shall have the meaning assigned to such term in Section 4.1(c) hereof.

          “Security Documents” shall mean the Security Agreement, the Pledge Agreement, the Financing
Statements, and all other documents, instruments and other materials necessary to create or perfect
the security interests created pursuant to the Security Agreement.

          “Senior Term Notes” shall have the meaning assigned to such term in Section 2.1 hereof.

          “Subsidiary” of any corporation shall mean any other corporation or limited liability company
of which the outstanding capital stock possessing a majority of voting power in the election of
directors (otherwise than as the result of a default) is owned or controlled by such corporation
directly or indirectly through Subsidiaries.

          “Subsidiary Schedule” shall have the meaning assigned to such term in Section 5.1(e) hereof.

          “Taxes” shall have the meaning assigned to such term in Section 3.9 hereof.

          “Term Loan A” shall have the meaning assigned to such term in the recitals hereto.

          “Term Loan C” shall have the meaning assigned to such term in the recitals hereto.

          “Third Party Proprietary Rights” means any right, title or interest of any Person other than
the Loan Parties or any of their Subsidiaries under patent, copyright, trademark or trade secret
law or any other statutory provision or common law doctrine relating to intellectual property or
proprietary rights.

          “Trademark License” means any agreement, whether written or oral, providing for the grant by
or to the Loan Parties or any of their Subsidiaries of any right under any Trademark.

          “Trademarks” means (a) all trademarks, trade names, corporate names, company names, business
names, fictitious business names, trade styles, trade dress, service marks, logos and other source
or business identifiers, and, in each case, all goodwill associated therewith, whether now owned or
hereafter acquired or existing, all registrations and recordings thereof and all applications in
connection therewith, in each case whether in the United States Patent and Trademark Office or in
any similar office or agency of any state thereof or any other country or

15

 

any political subdivision thereof, or otherwise, and all common-law rights related thereto,
and (b) the right to obtain all renewals and extensions thereof.

          “Transaction Documents” shall mean this Agreement, the Senior Term Notes and the Security
Documents and all other agreements, instruments and documents delivered in connection therewith as
any or all of the foregoing may be supplemented or amended from time to time.

          “Transactions” shall mean the incurrence of debt and the issuance of securities in connection
therewith, as contemplated by this Agreement, the Senior Term Notes, the consummation of the
Refinancing, and all other agreements contemplated hereby and thereby.

          “UCC” shall mean the New York Uniform Commercial Code.

          “UST” shall mean an underground storage tank, including as that term is defined, construed and
otherwise used in RCRA and in rules, regulations, standards, guidelines and publications issued
pursuant to RCRA and comparable state and local laws.

          1.2 Accounting Principles. The character or amount of any asset, liability, capital account
or reserve and of any item of income or expense to be determined, and any consolidation or other
accounting computation to be made, and the construction of any definition containing a financial
term, pursuant to this Agreement shall be determined or made in accordance with generally accepted
accounting principles in the United States of America consistently applied (“GAAP”), unless such
principles are inconsistent with the express requirements of this Agreement. In the event any
“Accounting Changes” (as defined below) shall occur and such changes affect financial covenants,
standards or terms in this Agreement, then Loan Parties and Required Purchasers agree to enter into
negotiations in order to amend such provisions of this Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating the financial condition
of the Loan Parties shall be the same after such Accounting Changes as if such Accounting Changes
had not been made, and until such time as such an amendment shall have been executed and delivered
by Loan Parties and Requisite Lenders, (A) all financial covenants, standards and terms in this
Agreement shall be calculated and/or construed as if such Accounting Changes had not been made, and
(B) the Loan Parties shall prepare footnotes to each compliance certificate and the financial
statements required to be delivered hereunder that show the differences between the financial
statements delivered (which reflect such Accounting Changes) and the basis for calculating
financial covenant compliance (without reflecting such Accounting Changes). “Accounting Changes”
means: (a) changes in accounting principles required by GAAP and implemented by Loan Parties and
(b) changes in accounting principles recommended by Loan Parties’ accountants.

          1.3 Other Definitional Provisions; Construction. Whenever the context so requires, neuter
gender includes the masculine and feminine, the singular number includes the plural and vice versa.
The word “including” when used herein shall mean “including without limitation” unless the context
states otherwise. The words “hereof,” “herein” and “hereunder” and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this
Agreement, and references to any section, article, annex, schedule, exhibit or like references are
references to this Agreement unless

16

 

otherwise specified. A Default or Event of Default shall
“continue” or be “continuing” until such Default or Event of Default has been cured or waived by
Agent and the Required Purchasers or the Purchasers, as applicable, pursuant to Section 10.2.
References in this Agreement to any Persons shall include such Persons, successors and permitted
assigns. Other terms contained in this Agreement (which are not otherwise specifically defined
herein) shall have the meanings provided to such terms in Article 9 of the UCC on the date hereof
to the extent the same are used or defined therein.

ARTICLE 2

ISSUE AND SALE OF THE SENIOR TERM NOTES

          2.1 Senior Term Notes. On the Closing Date, the Loan Parties duly authorized the issuance to
the Purchasers designated on Annex A of $40,000,000 aggregate principal amount of the Loan
Parties’ Second Priority Senior Secured Notes due May 25, 2012 (together with any promissory notes
issued in substitution therefor pursuant to Sections 6.3 and 6.4, the “Senior Term Notes”)
substantially in the form of the promissory notes made by the Loan Parties in favor of the
Purchasers thereof in the form attached hereto as Exhibit A.

          2.2 Sale and Purchase. Subject to the terms and conditions and in reliance upon the
representations, warranties and agreements set forth herein, the Loan Parties shall sell to the
Purchasers, and the Purchasers shall purchase from the Loan Parties, in amounts designated in Annex
B, the Senior Term Notes in the aggregate principal amount set forth in Section 2.1 hereof.

          2.3 The Closing. Delivery of and payment for the Senior Term Notes (the “Closing”) shall be
made at on May 25, 2007, or at such other date as may be mutually agreeable to the Loan Parties and
the Purchasers. The date and time of the Closing as finally determined pursuant to this Section
2.3 are referred to herein as the “Closing Date.” Delivery of the Senior Term Notes shall be made
to the Purchasers against payment of the purchase price therefor, less any amounts payable pursuant
to Section 4.1(g) hereof, by wire transfer of immediately available funds in the manner agreed to
by the Loan Parties and the Purchasers. The Senior Term Notes shall be issued in such name or
names and in such permitted denomination or denominations, numbers and amounts as set forth in
Annex A or as the Purchasers may request in writing not less than two (2) Business Days
before the Closing Date.

ARTICLE 3

REPAYMENT OF SENIOR TERM NOTES

          3.1 Interest Rates and Interest Payments.

          (a) Senior Term Notes. The Loan Parties, jointly and severally, covenant and agree to make
payments to the Purchasers holding Senior Term Notes, of accrued interest on the Senior Term Notes
semi-annually in arrears on the first Business Day of each June and December, commencing on
December 1, 2007, through the date of repayment in full of the Senior Term Notes. The Senior Term
Notes shall bear interest on the outstanding principal thereof at a rate equal to the fixed rate of
eleven and one-half percent (11.50%).

17

 

          (b) Computation of Interest. Interest on the Senior Term Notes shall be computed on the basis
of a year with three hundred sixty (360) days and twelve 30-day months.

          3.2 Repayment of Senior Term Notes. The Loan Parties, jointly and severally, covenant and
agree to repay any and all unpaid principal on the Senior Term Notes, together with all accrued and
unpaid interest, fees and other amounts due in connection with the Senior Term Notes upon maturity
of the Senior Term Notes on May 25, 2012 (the “Maturity Date”).

          3.3 Optional Prepayment of Senior Term Notes. At any time on or after the first anniversary
of the Closing Date, subject to the terms of this Section 3.3, and in connection with any Equity
Prepayment pursuant to Section 3.9 (regardless of when such event occurs), the Loan Parties may
prepay to the Purchasers the outstanding principal amount of the Senior Term Notes in whole or in
part in multiples of $500,000, or such lesser amount as is then outstanding, plus accrued interest,
if any, to the date set for prepayment on the principal amount to be repaid. At the time of each
such prepayment made at any time prior to the fourth anniversary of the Closing Date, the Loan
Parties shall pay to the Purchasers the applicable Prepayment Fee or Equity Prepayment Premium.
All such prepayments shall be so applied after application of such prepayment to any accrued
interest payable, if any, in connection therewith and any applicable Prepayment Fee or Equity
Prepayment Premium.

          3.4 Notice of Optional Prepayment. If the Loan Parties shall elect to prepay any Senior Term
Notes pursuant to Section 3.3 hereof, the Loan Parties shall give notice of such prepayment to the
Agent and the Purchasers not less than thirty (30) days or more than ninety (90) days prior to the
date fixed for prepayment, specifying (i) the date on which such prepayment is to be made, (ii) the
principal amount of such Senior Term Notes to be prepaid on such date and (iii) the applicable
Prepayment Fee or Equity Prepayment Premium, if any, and accrued interest applicable to such
prepayment. Such notice shall be accompanied by a certificate of the Chief Executive Officer, the
Chief Financial Officer, or the Chief Operating Officer of Parent that such prepayment is being
made in compliance with Section 3.3. Notice of prepayment having been so given, the aggregate
principal amount of the Senior Term Notes specified in such notice, together with accrued interest
thereon and the premium, if any, shall become due and payable on the prepayment date set forth in
such notice.

          3.5 Mandatory Prepayment: Change of Control; Event of Default.

     (a) Upon the occurrence of a Change of Control, each Purchaser shall have the right to require
the Loan Parties to repurchase all or any part of such Purchaser’s Senior Term Notes pursuant to
the offer described below (the “Change of Control Offer”) at an offer price (the
“Change of Control Payment”) in cash equal to the outstanding principal amount of the
applicable Senior Term Notes, together with all accrued and unpaid interest, fees, expenses and a
premium for the ratable benefit of the Purchasers equal to five percent (5%) of the aggregate
outstanding principal amounts of the Senior Term Notes being prepaid, in each case as of the date
of purchase (the “Change of Control Payment Date”). The Loan Parties will make the Change
of Control Offer by delivering a written notice of such offer to the Purchasers at least five (5)
Business Days prior to the occurrence of a Change of Control, specifying the Change of Control
Payment Date (which such date shall not be more than five (5) Business Days following

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such Change
of Control). A Purchaser may accept such Change of Control Offer by delivering a written notice of
acceptance to the Loan Parties within five (5) Business Days after receipt of the Change of Control
Offer specifying the amount of the Senior Term Notes to be redeemed.

     (b) By 2:00 p.m. (noon) Central Time on the Change of Control Payment Date, the Loan Parties
shall (1) accept for payment all Senior Term Notes or portions thereof properly tendered pursuant
to the Change of Control Offer, and (2) pay via wire transfer in immediately available funds an
amount equal to the Change of Control Payment in respect of all Senior Term Notes or portions
thereof so tendered. All payments under this Section 3.5 shall be applied first to all costs,
expenses, indemnities and other amounts payable hereunder and under the applicable Senior Term
Notes, then to payment of default interest, if any, then to payment of premium, if any, then to
payment of accrued interest and thereafter to payment of principal. The Loan Parties shall send to
each Purchaser that has tendered its Senior Term Notes the applicable Change of Control Payment for
such Senior Term Notes, and the Loan Parties shall promptly execute and mail to each Purchaser a
new Senior Term Note equal in principal amount to any unpurchased portion of the Senior Term Notes
surrendered, if any.

     (c) In addition, the Senior Term Notes shall be prepaid in full, together with all accrued and
unpaid interest, fees, any applicable Prepayment Fee, for the ratable benefit of the Purchasers,
and expenses upon such Senior Term Notes becoming due as a consequence of an Event of Default
(other than due to a Change of Control) pursuant to Section 8.2. If the Senior Term Notes shall
become due prior to the first anniversary of the Closing Date as a result of an Event of Default,
the applicable Prepayment Fee shall be deemed to be 5.0% of the aggregate principal amount of the
Senior Term Notes prepaid.

          3.6 Equity Payment. In the event the Parent or any Subsidiary shall at any time or from time
to time issue any equity securities to any Person other than the Parent or any Subsidiary thereof,
notwithstanding any provision of this Agreement, but subject to the terms of this Section 3.6, the
Loan Parties may prepay to the Purchasers, on a ratable basis, from the net cash proceeds of any
such equity issuance, up to 35% of the aggregate outstanding principal amount of the Senior
Term Notes then outstanding (an “Equity Prepayment”) in whole or in part in multiples of
$500,000, or such lesser amount as is then outstanding, plus accrued interest, if any, to the date
set for prepayment on the principal amount to be repaid. If any such prepayment or redemption is
made at any time prior to the first anniversary of the Closing Date, the Loan Parties shall pay to
the Purchasers a prepayment premium (an “Equity Prepayment Premium”) (expressed as a percentage of
principal amount) equal to 11.50% of the aggregate principal amount of the Senior Term Notes
prepaid or redeemed with each Equity Prepayment. If any such prepayment or redemption is made at
any time on or after the first anniversary of the Closing Date, the Loan Parties shall pay to the
Purchasers any applicable Prepayment Fee on the Senior Term Notes prepaid or redeemed with each
Equity Prepayment to the extent applicable. In the event of any such prepayment from the net cash
proceeds of an equity issuance, at the election of the Parent, and provided no Default or Event of
Default then exists, such Equity Prepayment Premium or Prepayment Fee may be paid, subject to the
terms of this Section 3.6, either in cash or in equity securities of the Parent. If the Parent
elects to pay such Equity Prepayment Premium or Prepayment Fee in equity securities rather than
cash, such securities shall be paid in registered, marketable, publicly traded equity securities of
the Parent in an

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amount equal to the Equity Equivalent (as defined below). If the Parent elects to
prepay any Senior Term Notes pursuant to this Section 3.6 hereof, the Parent shall give notice of
such prepayment to Agent and the Purchasers not less than forty-five (45) days or more than one
hundred and five (105) days prior to the date fixed for such Equity Prepayment, specifying (i) the
date on which such prepayment is to be made, (ii) the principal amount of such Senior Term Notes to
be prepaid on such date, (iii) such Equity Prepayment Premium or Prepayment Fee, if any, and
accrued interest applicable to such prepayment and (iv) whether such Equity Prepayment Premium or
Prepayment Fee will be paid in cash or equity securities. Such notice shall be accompanied by a
certificate of the Chief Executive Officer, the Chief Financial Officer, or the Chief Operating
Officer of Parent that such prepayment is being made in compliance with this Section 3.6. Notice
of prepayment having been so given, the aggregate principal amount of the Senior Term Notes
specified in such notice, together with accrued interest thereon and the premium, if any, shall
become due and payable on the prepayment date set forth in such notice. “Equity Equivalent” shall
be determined by dividing (i) the cash value of the applicable Equity Prepayment Premium or
Prepayment Fee by (ii) the per share average closing price of Parent’s equity securities as
reported on the exchange on which such equity securities are then listed for the seven trading days
prior to a date that is three trading days prior to the date fixed for prepayment or redemption.

          3.7 Home Office Payment. The Loan Parties will pay all sums becoming due on any Senior Term
Note for principal, prepayment penalty, if any, and interest to the respective Purchasers by the
method and at the address specified for such purpose in Annex A, or by such other method or
at such other address as the Purchasers shall have from time to time specified to the Loan Parties
in writing for such purpose, without the presentation or surrender of such Senior Term Note or the
making of any notation thereon, except that upon written request of the Loan Parties made
concurrently with or reasonably promptly after payment or prepayment in full of any Senior Term
Note, each holder of a Senior Term Note shall surrender such Senior Term Note for cancellation,
reasonably promptly after such request, to the Loan Parties at their principal executive office.
Notwithstanding anything to the contrary contained herein, all payments of principal and interest
due from the Loan Parties hereunder shall be made to the Purchasers on an equal and ratable
basis.

          3.8 Maximum Lawful Rate. This Agreement, the Senior Term Notes and the other Transaction
Documents are hereby limited by this Section 3.8. In no event, whether by reason of acceleration
of the maturity of the amounts due hereunder or otherwise, shall interest and fees contracted for,
charged, received, paid or agreed to be paid to the Purchasers exceed the maximum amount
permissible under applicable Law. If, from any circumstance whatsoever, interest and fees would
otherwise be payable to Agent or the Purchasers in excess of the maximum amount permissible under
applicable Law, the interest and fees shall be reduced to the maximum amount permitted under such
Law. If from any circumstance, Agent or the Purchasers shall have received anything of value
deemed interest by applicable Law in excess of the maximum lawful amount, an amount equal to any
excess of interest shall be applied to the reduction of the principal amount of the Senior Term
Notes, in such manner as may be determined by the Purchasers, and not to the payment of fees or
interest, or if such excess interest exceeds the unpaid balance of the principal amount of the
Senior Term Notes, such excess shall be refunded to the Loan Parties.

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          3.9 Taxes. Any and all payments by the Loan Parties hereunder or under the Senior Term Notes or
other Transaction Documents that are made to or for the benefit of the Purchasers shall be made
free and clear of and without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings and penalties, interests and all other liabilities with respect
thereto (collectively, “Taxes”), excluding taxes imposed on Agent’s or the Purchasers’ net income
or capital and franchise taxes imposed on any of them by the jurisdiction under the laws of which
any of them is organized or any political subdivision thereof (all such non-excluded Taxes being
hereinafter referred to as “Covered Taxes”). If any of the Loan Parties shall be required by Law
to deduct any Covered Taxes from or in respect of any sum payable hereunder or under any Senior
Term Notes or other Transaction Documents to the Purchasers the sum payable shall be increased as
may be necessary so that after making all required deductions of Covered Taxes (including
deductions of Covered Taxes applicable to additional sums payable under this paragraph), each
Purchaser receives an amount equal to the sum it would have received had no such deductions been
made. The Loan Parties shall make such deductions and the Loan Parties shall pay the full amount
so deducted to the relevant taxation authority or other authority in accordance with applicable
law. In addition, the Loan Parties agree to pay any present or future stamp, documentary, excise,
privilege, intangible or similar levies that arise at any time or from time to time from any
payment made under any and all Transaction Documents or from the execution or delivery by the Loan
Parties or from the filing or recording or maintenance of, or otherwise with respect to the
exercise by Agent or the Purchasers of their respective rights under any and all Transaction
Documents (collectively, “Other Taxes”). The Loan Parties will indemnify Agent and the Purchasers
for the full amount of Covered Taxes imposed on or with respect to amounts payable hereunder and
Other Taxes, and any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto. Payment of this indemnification shall be made within thirty (30) days from
the date Agent or the Purchasers provide the Loan Parties with a certificate certifying and setting
forth in reasonable detail the
calculation thereof as to the amount and type of such Taxes. Any such certificates submitted by
Agent or the Purchasers in good faith to the Loan Parties shall, absent manifest error, be final,
conclusive and binding on all parties. The obligations of the Loan Parties under this Section 3.9
shall survive the payment of the Senior Term Notes and the termination of this Agreement. Within
thirty (30) days after the Loan Parties having received a receipt for payment of Covered Taxes
and/or Other Taxes, the Loan Parties shall furnish to the Purchasers the original or certified copy
of a receipt evidencing payment thereof.

          3.10 Capital Adequacy. If, after the date hereof, either the introduction of or any change of
the interpretation of any Law or the compliance by the Purchasers with any guideline or request
from any Governmental Authority (whether or not having the force of Law) has or would have the
effect of reducing the rate of return on the capital or assets of the Purchasers as a consequence
of, as determined by Agent or the Purchasers in their reasonable discretion, the existence of any
Purchaser’s obligations under this Agreement or any other Transaction Documents, then, upon demand
by the Purchasers, the Loan Parties immediately shall pay to the Purchasers, from the time as
specified by Purchasers, additional amounts sufficient to compensate the Purchaser in light of such
circumstances. The obligations of the Loan Parties under this Section 3.10 shall survive the
payments of the Senior Term Notes and the termination of this Agreement.

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          3.11 Certain Waivers. The Loan Parties unconditionally waive (i) any rights to presentment,
demand, protest or (except as expressly required hereby) notice of any kind, and (ii) any rights of
rescission, setoff, counterclaim or defense to payment under the Senior Term Notes or otherwise
that the Loan Parties may have or claim against any Purchaser, Agent or any prior Purchaser or
Agent.

ARTICLE 4

CONDITIONS

          4.1 Conditions to the Purchase of the Senior Term Notes. The obligation of the Purchasers to
purchase and pay for the Senior Term Notes is subject to the satisfaction, prior to or at the
Closing, of the following conditions:

          (a) Representations and Warranties True. The representations and warranties contained in
Article 5 hereof shall be true and correct at and as of the Closing Date as though then made,
except to the extent of changes caused by the transactions expressly contemplated herein.

          (b) Material Adverse Change. There shall have been no Material Adverse Change in the
business, financial condition, assets, Business or prospects of Parent on a Consolidated Basis
(prior to the effective date of the Transactions), or the capital markets since December 31, 2006.

          (c) Security Agreement; Etc. The Loan Parties and Agent, for the benefit of the Purchasers,
shall have entered into (i) a security agreement or security agreements with Agent, in form and
substance as set forth in Exhibit B attached hereto (as the same may be amended, modified
or supplemented from time to time in accordance with the terms thereof, the “Security Agreement”),
(ii) security agreements for all Patents, Patent Licenses, Trademarks, Trademark Licenses and
registered Copyrights of the Loan Parties in form and substance reasonably acceptable to Agent for
filing with the United States Patent and Trademark Office and the United States Copyright Office in
the form set forth in Exhibit C attached hereto (such security agreements set forth under
the foregoing (ii), as the same may be amended, modified or supplemented from time to time in
accordance with the terms thereof, the “Intellectual Property Agreements”), (iii) a stock pledge
and security agreement in form and substance as set forth in Exhibit D attached hereto (as
the same may be amended, modified or supplemented from time to time in accordance with the terms
thereof, the “Pledge Agreement”) and (iv) if reasonably requested by GMAC Agent and Agent, the Loan
Parties and their depository banks shall have entered into deposit account control agreements in
form and substance satisfactory to Agent (“Deposit Account Control Agreements”). The Loan Parties
shall have executed and delivered to Agent, for the benefit of the Purchasers, an authorization to
file such financing statements and other instruments (collectively, “Financing Statements”), and
shall have delivered to Agent such certificates, instruments and documents, as Agent shall
reasonably require in order to perfect and maintain the continued perfection of the security
interests created by the agreements described herein. Agent shall have received reports of filings
with appropriate government agencies showing that there are no Liens on the assets of the Loan
Parties other than Permitted Liens.

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          (d) Intercreditor Agreement. Agent, GMAC Agent and Loan Parties shall have executed the
Intercreditor Agreement on terms reasonably satisfactory to Agent and the Purchasers.

          (e) Charter and Bylaws. Each Loan Party shall have made such amendments to its articles of
incorporation, certificate of incorporation, By-laws, membership agreement and such other documents
as the Purchasers shall reasonably request.

          (f) Closing Documents. The Loan Parties will have delivered or caused to be delivered to
Agent all of the following documents in form and substance satisfactory to Agent:

          (i) a Senior Term Note for each Purchaser pursuant to Section 2.1 and Annex A
hereof in the respective aggregate original principal amounts as set forth herein, duly
completed and executed by the Loan Parties;

          (ii) certificates of good standing dated not more than thirty (30) days prior to the
Closing Date for the Loan Parties, issued by their respective jurisdiction of organization
and each jurisdiction where a Loan Party is qualified to operate as a foreign
corporation, or its equivalent, except where the failure to so qualify is not
reasonably likely to have a Material Adverse Effect;

          (iii) a copy of the Charter Documents of each of the Loan Parties, certified by the
appropriate governmental official of the jurisdiction of its organization as of a date not
more than thirty (30) days prior to the Closing Date;

          (iv) a copy of the By-laws or members agreement of the Loan Parties, certified as of
the Closing Date by the secretary, assistant secretary, manager or general partner, as
applicable, of the Loan Parties;

          (v) a certificate of the secretary or assistant secretary, manager or general partner
of the Loan Parties, certifying as to the names and true signatures of the officers or other
authorized person of the Loan Parties authorized to sign this Agreement and the other
documents to be delivered by the Loan Parties hereunder;

          (vi) copies of the resolutions duly adopted by the board of directors, general
partners, board of managers or other governing body of the Loan Parties, authorizing the
execution, delivery and performance by the Loan Parties of this Agreement and each of the
other agreements, instruments and documents contemplated hereby to which each of the Loan
Parties is a party to, and the consummation of all of the other Transactions, certified as
of the Closing Date by the secretary, assistant secretary, manager or general partner of the
Loan Parties;

          (vii) a certificate dated as of the Closing Date from an officer, general partner or
manager of each of the Loan Parties stating that the conditions specified in this Section
4.1 have been fully satisfied or waived by Agent and the Purchasers;

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          (viii) certificates of insurance evidencing the existence of all insurance required to
be maintained by the Loan Parties pursuant to Section 7.1(c), and Agent and the Purchasers
shall be satisfied with the type and extent of such coverage;

          (ix) an opinion of Porter, Wright, Morris & Arthur LLP, counsel to Parent, in form and
substance satisfactory to Agent and the Purchasers;

          (x) copies of all material leases and contracts to which each of the Loan Parties is a
party; and

          (xi) such other documents relating to the Transactions contemplated by this Agreement
as Agent, any Purchaser or their respective counsel may reasonably request.

          (g) Purchaser’s Fees and Expenses.

          (i) Other Fees and Expenses. On the Closing Date, the Loan Parties shall have paid the
fees and expenses of Agent and the Purchasers, payable by the Loan Parties pursuant to
Section 10.4 hereof (and the Loan Parties hereby authorize each
Purchaser to deduct all such applicable amounts from the aggregate proceeds of the sale
of the Senior Term Notes by the Loan Parties).

          (h) Legal Investment. On the Closing Date, the Purchasers’ purchases of the Senior Term Notes
shall not be prohibited by any applicable law, rule or regulation of any Governmental Authority
(including, without limitation, Regulations T, U or X of the Board of Governors of the Federal
Reserve System) as a result of the promulgation or enactment thereof or any changes therein, or
change in the interpretation thereof by any Governmental Authority, subsequent to the date of this
Agreement.

          (i) Proceedings. All proceedings taken or required to be taken in connection with the
transactions contemplated hereby to be consummated at or prior to the Closing and all documents
incident thereto will be satisfactory in form and substance to Agent, each Purchaser and their
respective counsel.

          (j) Charter and Bylaw Amendments. The Loan Parties shall have entered into such amendments to
their respective articles of incorporation or certificates of incorporation and Bylaws as the
Purchasers shall reasonably request.

          (k) Consummation of GMAC Financing and Refinancing. The GMAC Financing shall have been
consummated in form and substance satisfactory to the Purchasers in the Purchasers’ sole discretion
and the Purchasers shall have been provided copies of all agreements, instruments and documents in
connection therewith. The Refinancing shall have occurred and the Agent shall have received payoff
and lien release letters and/or other evidence thereof satisfactory to the Agent.

          4.2 Waiver. Any condition specified in this Article 4 may be waived by Agent and the
Purchasers; provided that no such waiver will be effective unless it is set forth in a
writing executed by Agent and the Purchasers.

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ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES

          5.1 Representations and Warranties of the Loan Parties. As a material inducement to Agent and
the Purchasers to enter into this Agreement and for the Purchasers to purchase the Senior Term
Notes, Parent for itself and each Loan Party and each Loan Party as to itself, hereby represent and
warrant to Agent and the Purchasers as follows:

          (a) Organization and Power. Each of the Loan Parties is a legal entity of the type designated
on Schedule 5.1(a). Each of the Loan Parties is duly organized, validly existing and in
good standing under the laws of its state of formation. Each of the Loan Parties has all requisite
corporate or other organizational power and authority and all material licenses, permits, approvals
and authorizations necessary to own and operate its properties, to carry on its businesses as now
conducted and presently proposed to be conducted and to carry out the Transactions, and is
qualified to do business in the jurisdictions listed on the “Organizational Schedule” attached
hereto as Schedule 5.1(a), which includes every jurisdiction where the failure to so
qualify is reasonably likely to have a Material Adverse Effect. Each of the Loan Parties has its
principal place of business as set forth on the Organizational Schedule. The copies of the Charter
Documents and By-laws of each of the Loan Parties that have been furnished to Agent reflect all
amendments made thereto at any time prior to the date of this Agreement and are correct and
complete.

          (b) Principal Business. The Loan Parties are primarily engaged in the business of assembling
and selling specialty footwear and related apparel and accessories (the “Business”).

          (c) Financial Statements.

          (i) Financial Statements; Historical Statements. Parent has delivered to Agent copies
of its audited consolidated year-end financial statements for and as of the end of its
fiscal year ended December 31, 2006, and unaudited balance sheet, income statements and cash
flow statements for the three (3) month period ended March 31 , 2007 (together, the
“Financial Statements”). The Financial Statements were compiled from the books and records
maintained by Parent’s management are correct and complete and fairly represent the
consolidated financial condition of Parent as of their dates and the results of operations
for the fiscal periods then ended and have been prepared in accordance with GAAP
consistently applied (with such interim financial statements being subject to the absence of
footnotes required by GAAP and subject to normal year-end adjustments).

          (ii) Offering Memorandum. The projected financial information contained in the
Offering Memorandum has been prepared in good faith based upon assumptions believed to be
reasonable at the time of the preparation thereof.

          (iii) Pro Forma Balance Sheet. The unaudited pro forma balance sheet of Parent on a
Consolidated Basis as of the Closing Date, a copy of which has heretofore been delivered to
Agent, gives pro forma effect to the consummation of the

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Refinancing, the initial extensions
of credit made under this Agreement, and the payment of transaction fees and expenses
related to the foregoing, all as if such events had occurred on such date (the “Pro Forma
Balance Sheet”). The Pro Forma Balance Sheet has been prepared in a manner consistent with
customary accounting practices and the financial statements described in Section 5.1(c)(i)
(subject to the absence of footnotes
required by GAAP and subject to normal year-end adjustments) and, subject to stated
assumptions made in good faith and having a reasonable basis set forth therein, presents
fairly the financial condition of the Loan Parties on an unaudited pro forma basis as of the
date set forth therein after giving effect to the consummation of the transactions described
above.

          (iv) Accuracy of Financial Statements. As of the dates of such Financial Statements,
Parent on a Consolidated Basis did not have any liabilities, contingent or otherwise, or
forward or long-term commitments that are not disclosed in the Financial Statements or in
the notes thereto, and except as disclosed therein, as of such dates, there are no
unrealized or anticipated losses from any commitments of the Loan Parties that are
reasonably likely to have a Material Adverse Effect.

          (d) Capitalization and Related Matters. As of the Closing Date and immediately thereafter,
the authorized capital stock of Parent is as set forth on the “Capitalization Schedule” attached
hereto as Schedule 5.1(d). As of the Closing Date, the authorized capital stock or other
equity interests of each of the Subsidiaries of Parent and the number and ownership of all
outstanding capital stock or equity interests of each of the Loan Parties (other than Parent) is
set forth on Schedule 5.1(d). Except as set forth on the Schedule 5.1(d), as of
the Closing Date, none of the Loan Parties will have outstanding any stock or securities
convertible into or exchangeable for any shares of its capital stock and none will have outstanding
any rights or options to subscribe for or to purchase its capital stock or other equity interests
or any stock or securities convertible into or exchangeable for its capital stock or other equity
interests. As of the Closing Date, none of the Loan Parties will be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital
stock or other equity interests. As of the Closing Date, all of the outstanding shares and capital
stock or other equity interests of the Loan Parties will be validly issued, fully paid and
nonassessable. None of the Loan Parties have violated any applicable federal or state securities
laws in any material respect in connection with the offer, sale or issuance of any of its capital
stock or other equity interests, and the offer, sale and issuance of the Senior Term Notes
hereunder do not require registration under the Securities Act or any applicable state securities
laws.

          (e) Subsidiaries. Except as set forth on the “Subsidiary Schedule”, attached hereto as
Schedule 5.1(e), the Loan Parties do not own, or hold any rights to acquire, any shares of
stock or any other security or interest in any other Person.

          (f) Authorization; No Breach. The execution, delivery and performance of this Agreement, the
other Transaction Documents to which each of the Loan Parties is a party, and the consummation of
the Transactions and the Refinancing have been duly authorized by the Loan Parties. The execution
and delivery by the Loan Parties of the Transaction Documents and the consummation of the
Transactions and the Refinancing does not and will not (i) conflict with

26

 

or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii)
except as created pursuant to the Security Documents and the GMAC Credit Documents, result in the
creation of any Lien upon the Loan Parties’ capital stock or assets pursuant to, (iv) give any
third party the right to accelerate any material obligation under, (v) result in a violation of, or
(vi) require any authorization, consent, approval, exemption or other action by or notice to any
Governmental Authority pursuant to, the Charter Documents of the Loan Parties, or any law, statute,
rule or regulation to which the Loan Parties are subject, or any material agreement or instrument,
order, judgment or decree to which any of the Loan Parties is a party or to which it or each of its
respective assets are subject.

          (g) Governmental Approvals. Except as specifically provided by the Transaction Documents, no
registration with or consent or approval of, or other action by, any Governmental Authority is or
will be required in connection with the consummation of the Transactions by the Loan Parties. No
registration with or consent or approval of, or other action by, any Governmental Authority was
required in connection with the consummation of the Refinancing.

          (h) Enforceability. This Agreement constitutes, and each of the other Transaction Documents
when duly executed and delivered by each of the Loan Parties who is a party thereto will
constitute, legal, valid and binding obligations of the Loan Parties enforceable in accordance with
their respective terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or other laws affecting the enforcement of creditors’ rights generally and
by general principles of equity.

          (i) No Material Adverse Change. Since December 31, 2006, there has been no Material Adverse
Change, with respect to Parent and its Subsidiaries taken as a whole, prior to giving effect to the
Transactions; provided, that the consummation of the Transactions shall not, in and of itself, be
deemed to be a Material Adverse Change.

          (j) Litigation. Except as described in the “Litigation Schedule” attached hereto as
Schedule 5.1(j), as of the Closing Date, there are no actions, suits or proceedings at law
or in equity or by or before any arbitrator or any Governmental Authority now pending or, to the
knowledge of the Loan Parties’ management after reasonable inquiry, threatened against or filed by
or affecting the Loan Parties or their respective directors or officers or the businesses, assets
or rights of any of the Loan Parties, which are reasonably likely to have a Material Adverse
Effect.

          (k) Compliance with Laws. The Loan Parties are not in violation of any applicable Law which violation or violations
are reasonably likely to have a Material Adverse Effect. The Loan Parties are not in, and the
consummation of the Transactions will not cause any, default concerning any judgment, order, writ,
injunction or decree of any Governmental Authority. As of and after the Closing Date, there is no
investigation, enforcement action or regulatory action pending or, to the knowledge of the Loan
Parties, threatened against or affecting any of the Loan Parties by any Governmental Authority,
except as set forth on the Litigation Schedule, which is reasonably likely to have a Material
Adverse Effect. Except as set forth in the Litigation Schedule, as of and after the Closing Date,
there is no remedial or other

27

 

corrective action that any of the Loan Parties is required to take to
remain in compliance with any judgment, order, writ, injunction or decree of any Governmental
Authority or to maintain any material permits, approvals or licenses granted by any Governmental
Authority in full force and effect which is reasonably likely to have a Material Adverse Effect.
To the knowledge of Parent, during the past ten (10) years, none of the executive officers,
directors or management of Parent or any of its Subsidiaries have been arrested or convicted of any
material crime nor have any of them been bankrupt or an officer or director of a bankrupt
corporation or other entity.

          (l) Environmental Protection. Except as specified in “Environmental Schedule” attached hereto
as Schedule 5.1(l) and after giving effect to the Transactions, except for materials,
conditions, operations and noncompliance which are not reasonably likely to have a Material Adverse
Effect: (i) the business of the Loan Parties and each of their Subsidiaries, the methods and means
employed by the Loan Parties (and their Subsidiaries) in the operation thereof (including all
operations and conditions at or in the properties of the Loan Parties or any of their
Subsidiaries), the assets owned, leased, managed, used, controlled, held or operated by the Loan
Parties and/or their Subsidiaries comply in all material respects with all applicable Environmental
Laws; (ii) with respect to the Properties and Facilities, and except as disclosed in the
Environmental Schedule, the Loan Parties have obtained, possess, and are in compliance in all
material respects with all permits, licenses, reviews, certifications, approvals, registrations,
consents, and any other authorizations under any Environmental Laws; (iii) the Loan Parties have
not received (x) any claim or notice of violation, lien, complaint, suit, order or other claim or
notice to the effect that the Loan Parties are or may be liable to any Person as a result of (A)
the environmental condition of any of their Properties and Facilities or any other property, or (B)
the release or threatened release of any Pollutant, or (y) any letter or request for information
under Section 104 of the CERCLA, or comparable state laws, and to Loan Parties’ knowledge, none of
the operations of the Loan Parties is the subject of any investigation by a Governmental Authority
evaluating whether any remedial action is needed to respond to a release or threatened release of
any Pollutant at the Properties and Facilities or at any other location, including any location to
which the Loan Parties have transported, or arranged for the transportation of, any Pollutants with
respect to the Properties and Facilities; (iv) except as disclosed in the Environmental Schedule,
neither the Loan Parties, nor, to the knowledge of the Loan Parties, any prior owner or operator
has incurred in the past, or is now subject to, any Environmental Liabilities; (v) except as
disclosed in the Environmental Schedule, to the knowledge of the Loan Parties, there are no Liens,
covenants, deed restrictions, notice or registration requirements, or other limitations applicable
to the Properties and Facilities, based upon any Environmental Laws or other legal obligations;
(vi) to the knowledge of the Loan Parties, there are no USTs located in, at, on, or
under the Properties and Facilities or other than the USTs identified in the Environmental
Schedule as USTs; and, to the knowledge of the Loan Parties, each of those USTs is in compliance
with all Environmental Laws and other legal obligations; and (vii) except as disclosed in the
Environmental Schedule, to the knowledge of the Loan Parties, there are no PCBs, lead paint,
asbestos (of any type or form), or materials, articles or products containing PCBs, lead paint or
asbestos, located in, at, on, under, a part of, or otherwise related to the Properties and
Facilities, and, to the knowledge of the Loan Parties, all of the PCBs, lead paint, asbestos, and
materials, articles and products containing PCBs, lead paint or asbestos identified in the
Environmental Schedule are in compliance with all Environmental Laws and other legal obligations.

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          (m) Legal Investments; Use of Proceeds. The Loan Parties will use the proceeds from the sale
of the Senior Term Notes to effect the Refinancing. The Loan Parties are not engaged in the
business of extending credit for the purpose of purchasing or carrying any “margin stock”
or “margin security” (within the meaning of Regulations T, U or X issued by the Board of
Governors of the Federal Reserve System), and no proceeds of the sale of the Senior Term Notes will
be used to purchase or carry any margin stock or margin security or to extend credit to others for
the purpose of purchasing or carrying any margin stock or margin security.

          (n) Taxes. The Loan Parties have filed or caused to be filed all federal, state and local tax
returns that are required to be filed by it and their Subsidiaries, and have paid or caused to be
paid all taxes shown to be due and payable on such returns or on any assessments received by it,
including payroll taxes, other than such Charges (i) which are being contested in good faith by
such Person, as the case may be, by appropriate proceedings diligently instituted and conducted and
without the risk of the imposition of a Lien with respect to a material portion of the Collateral
and (ii) with respect to which a reserve or other appropriate provision, if any, as is required in
conformity with GAAP shall have been made. Parent has no knowledge of any proposed tax assessment
against Parent or any of its Subsidiaries that is reasonably likely to have a Material Adverse
Effect.

          (o) Labor and Employment. Except where noncompliance is not reasonably likely to have a
Material Adverse Effect, each Loan Party, ERISA Affiliate and each Plan is in compliance in all
material respects with those provisions of ERISA, the Code, the Age Discrimination in Employment
Act, and the regulations and published interpretations thereunder that are applicable to the Loan
Party, ERISA Affiliate or any such Plan. As of the date hereof, no Reportable Event has occurred
with respect to any Plan maintained by any Loan Party or ERISA Affiliate as to which said Loan
Party or ERISA Affiliate is or was required to file a report with the PBGC. No Plan has any amount
of unfunded benefit liabilities (within the meaning of Section 4001(a)(18) of ERISA) or any
accumulated funding deficiency (within the meaning of Section 302(a)(2) of ERISA), whether or not
waived, and none of the Loan Parties, nor any ERISA Affiliate or member of the Controlled Group has
incurred or expects to incur any withdrawal liability under Subtitle E of
Title IV of ERISA to a Multiemployer Plan. Except where noncompliance is not reasonably
likely to have a Material Adverse Effect, the Loan Parties and ERISA Affiliates are in compliance
in all material respects with all labor and employment laws, rules, regulations and requirements of
all applicable domestic and foreign jurisdictions. There are no pending or threatened labor
disputes, work stoppages or strikes as of the Closing Date that are reasonably likely to have a
Material Adverse Effect.

          (p) Investment Company Act. None of the Loan Parties are an “investment company” or
“controlled” by an investment company within the meaning of the Investment Company Act of 1940, as
amended.

          (q) Properties; Security Interests. The Loan Parties have good and, solely as to real estate,
marketable title to, or valid leasehold interests in, or valid licenses to use, all of the material
assets and properties used or useful by the Loan Parties in the Business (collectively, the
“Properties and Facilities”), subject to no Liens except for Permitted Liens. All of the
Properties and Facilities are in good repair, working order and condition and all such assets and
properties are owned by the Loan Parties free and clear of all Liens except for Permitted Liens.

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The Properties and Facilities constitute all of the material assets, properties and rights of the
Loan Parties of any type used in or necessary for the conduct of the Business. The Security
Agreement creates and grants to Agent a valid and perfected security interest in all the collateral
thereunder, subject only to Permitted Liens. All real estate owned or leased by the Loan Parties
listed on the “Properties Schedule,” attached hereto as Schedule 5.1(q).

          (r) Intellectual Property; Licenses. The Loan Parties and each of their Subsidiaries owns or
licenses, pursuant to a valid and enforceable written license agreement, all Proprietary Rights
necessary and sufficient to conduct the Business and all other businesses conducted by the Loan
Parties and their Subsidiaries as heretofore conducted and as proposed to be conducted. The
“Intellectual Property Schedule” attached hereto as Schedule 5.1(r) sets forth a true and
complete list of all registered Proprietary Rights and material unregistered Trademarks owned by
the Loan Parties and their Subsidiaries and applications therefor filed by the Loan Parties and
their Subsidiaries, which list includes the owner, the title and description, the registration or
application number, and the registration or application date of each such Proprietary Right and the
jurisdiction in which each such Proprietary Right is registered, subject to an application for
registration or otherwise arises. No event has occurred that permits, or after notice or lapse of
time or both would permit, the revocation or termination of any of the foregoing, which taken in
isolation or when considered with all other such revocations or terminations is reasonably likely
to have a Material Adverse Effect. The entity identified as of the owner of each such Proprietary
Right required to be set forth on the Intellectual Property Schedule is the sole and exclusive
owner (unless otherwise indicated) of such Proprietary Right. All Proprietary Rights required to
be identified on the Intellectual Property Schedule are valid, subsisting and enforceable, except
where the lack of validity or enforceability is not reasonably likely to have a Material Adverse
Effect. None of the Proprietary Rights owned, licensed or otherwise used by the Loan Parties
infringes, misappropriates, dilutes, violates or otherwise impairs any Third Party Proprietary
Rights or other rights of any other Person. The conduct of the Business and all other businesses
conducted by the Loan Parties and their Subsidiaries as heretofore conducted and as proposed to be
conducted, and the products and services sold by the Loan Parties and their Subsidiaries in
connection therewith, does not infringe, misappropriate, dilute, violate or otherwise impair any
Third Party Proprietary Rights or other rights of any other Person, except where any such
infringement, misappropriation or use is not reasonably likely to have a Material Adverse Effect.
No other Person is infringing, misappropriating, diluting, violating or making any other unlawful
or unauthorized use of any Proprietary Right, except where any such infringement, misappropriation
or use is not reasonably likely to have a Material Adverse Effect. The Loan Parties do not have
notice or knowledge of any facts or any past, present or threatened occurrence that could preclude
or impair the Loan Parties’ or any of their Subsidiaries’ ability to retain or obtain any
authorization necessary for the operation of the Business and all other businesses conducted by the
Loan Parties and their Subsidiaries as heretofore conducted and as proposed to be conducted.

          (s) Solvency. After giving effect to the Transactions, (i) the fair value of the assets of
the Loan Parties, at a fair valuation, will exceed their debts and liabilities, subordinated,
contingent or otherwise, (ii) the present fair saleable value of the property of the Loan Parties
will be greater than the amount that will be required to pay the probable liability of their debts
and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities
become absolute and matured, (iii) the Loan Parties will be able to pay their debts and
liabilities,

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subordinated, contingent or otherwise, as such debts and liabilities become absolute
and matured, and (iv) the Loan Parties will not have unreasonably small capital with which to
conduct the business in which they are engaged as such business is now conducted and is proposed to
be conducted following the Closing Date. The determination of whether a Person is Solvent shall
take into account all such Person’s properties and liabilities regardless of whether, or the amount
at which, any such property or liability is included on a balance sheet of such Person prepared in
accordance with GAAP, including properties such as contingent contribution or subrogation rights,
business prospects, distribution channels and goodwill. The determination of the sum of a Person’s
properties at a fair valuation or the present fair saleable value of a Person’s properties shall be
made on a going concern basis, unless at the time of such determination the liquidation of the
business in which such properties are used or useful is in process or is reasonably anticipated.
In computing the amount of contingent or unrealized properties or contingent or unliquidated
liabilities at any time, such properties and liabilities will be computed at the amounts which, in
light of all the facts and circumstances existing at such time, represent the amount that
reasonably can be expected to become realized properties or matured liabilities, as the case may
be. In computing the amount that would be required to pay a Person’s probable liability on its
existing debts as they become absolute and matured, reasonable valuation techniques, including a
present value analysis, shall be applied using such rates over such periods as are appropriate
under the circumstances, and it is understood that, in appropriate circumstances, the present value
of contingent liabilities or obligations under Guaranties may be zero.

          (t) Complete Disclosure. All factual information furnished by or on behalf of the Loan Parties to Agent and the
Purchasers for purposes of or in connection with this Transaction Document and the transactions
contemplated hereby and in the Refinancing is, and all other such factual information hereafter
furnished by or on behalf of the Loan Parties will be, true and accurate in all material respects
on the date as of which such information is furnished and not incomplete by omitting to state any
fact necessary to make such information not materially misleading at such time in light of the
circumstances under which such information was provided.

          (u) Side Agreements. Except as set forth in Schedule 5.1(u), none of the Loan Parties
nor any Affiliate of the Loan Parties nor any director, officer or employee of the Loan Parties or
any of their Affiliates, respectively, has entered into, as of the date hereof, any side agreement,
either oral or written, with any individual or business, pursuant to which the director, officer,
employee, Loan Party or Affiliate agreed to do anything beyond the requirements of the formal,
written contracts executed by the Loan Parties and disclosed to the Purchasers and Agent herein.

          (v) Broker’s or Finder’s Commissions. No broker’s or finder’s or placement fee or commission
will be payable to any broker or agent engaged by the Loan Parties or any of their officers,
directors or agents with respect to the issuance and sale of the Senior Term Notes or the
transactions contemplated by this Agreement, including without limitation the Transactions, except
for fees payable to Piper Jaffray & Co., the Purchasers and Agent, if any. The Loan Parties agree
to indemnify Agent and the Purchasers and to hold them harmless from and against any claim, demand
or liability for broker’s or finder’s or placement fees or similar commissions, whether or not
payable by the Loan Parties, alleged to have been incurred in

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connection with such transactions,
other than any broker’s or finder’s fees payable to Persons engaged by Agent or the Purchasers
without the knowledge of the Loan Parties.

          (w) Material Contracts. Schedule 5.1(w) lists, as of the Closing Date, each material
contract to which the Loan Parties are a party, by which any of them or their respective properties
is bound or to which any of them is subject (collectively, “Material Contracts”), and also
indicates the parties, subject matter and term thereof. As of the Closing Date, (i) each Material
Contract is in full force and effect and is enforceable by the Loan Party that is a party thereto
in accordance with its terms, and (ii) none of the Loan Parties (nor, to the knowledge of the Loan
Parties , any other party thereto) is in breach of or default under any Material Contract in any
material respect or has given notice of termination or cancellation of any Material Contract.

          (x) Foreign Assets Control Regulations, Etc. None of the Loan Parties are an “enemy” or an
“ally of the enemy” within the meaning of Section 2 of the Trading with the Enemy Act of the United
States of America (50 U.S.C. App. §§ 1 et seq.), as amended. None of the Loan Parties are in
violation of (a) the Trading with the Enemy Act, as amended, (b) any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or
any enabling legislation or executive order relating thereto or (c) the USA Patriot Act, Title III
of Pub. L. 107-56, signed into law October 26, 2001 (the “Patriot Act”). No Loan Party (i) is a
blocked person described in section 1 of the Anti-Terrorism Order or (ii) to the best of its
knowledge, engages in any dealings or transactions, or is otherwise associated, with any such
blocked person.

          (y) Parent SEC Reports.

          (i) Parent has filed all required material forms, reports, schedules, statements and
other documents (including exhibits and other information incorporated therein) with the SEC
since December 31, 2002 (collectively, the “Parent SEC Reports”). As of their respective
dates, or, if amended, as of the date of the last such amendment, each Parent SEC Report,
(a) complied in all material respects with the applicable requirements of the Securities
Act, the Securities Exchange Act, and the rules and regulations thereunder applicable to
such Parent SEC Reports and (b) did not, and in the case of such forms, reports, schedules,
statements and other documents filed after the date hereof will not as of the time they are
filed, contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. Each of the consolidated
financial statements included in or incorporated by reference into the Parent SEC Reports
(including the related notes and schedules) were, and in the case of such consolidated
financial statements filed after the date hereof will be, prepared materially in accordance
with the published rules and regulations of the SEC, and fairly presents (as to such
previously filed items) in all material respects the consolidated financial position of
Parent and its Subsidiaries as of its date, and each of the consolidated statements of
operations, stockholders’ equity and cash flows included in or incorporated by reference
into the Parent SEC Reports (including any related notes and schedules) fairly presents (as
to such previously filed items) in all material respects the financial position, results of
operations and cash flows,

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as the case may be, of Parent and its Subsidiaries for the
periods set forth therein, in each case in accordance with GAAP consistently applied during
the periods involved, except as may be noted therein (and subject, in the case of unaudited
statements, to normal year-end audit adjustments and the absence of footnotes).

          (ii) As of the Closing Date, (x) there is no investigation by the SEC pending or
threatened with respect to any Parent SEC Report, (y) none of the Parent SEC Reports are the
subject of open, unresolved comments from the SEC, and (z) to the knowledge of Parent, there
is no material unresolved violation of the Securities Exchange Act or the published rules
and regulations of the SEC asserted by the SEC with respect to the Parent SEC Reports.

          (z) Current Business Practices. None of the Loan Parties, nor, to the knowledge of the Loan
Parties, any of their respective directors, officers, agents, employees or representatives in their
capacities as such has
knowingly (or unknowingly, in the case where such conduct is reasonably likely to have had a
Material Adverse Effect): (i) used any funds for unlawful contributions, unlawful gifts, unlawful
entertainment or other unlawful expenses relating to political activity; (ii) directly or
indirectly paid or delivered any fee, commission or other sum of money or item of property, however
characterized, to any finder, agent or other party acting on behalf of or under the auspices of a
governmental official or Governmental Authority, in the United States of America or any other
country, which is in any manner related to the Business that was illegal under federal, state or
local laws of the United States of America or any other country having jurisdiction; (iii) made any
payment to any customer or subcontractor of the Business or to any officer, director, partner,
employee or agent of any such customer or subcontractor, for the unlawful influence of any such
customer or subcontractor or any such officer, director, partner, employee or agent; (iv) engaged
in any other unlawful reciprocal practice, or made any other unlawful payment or given any other
unlawful consideration to any such customer or subcontractor or any such officer, director,
partner, employee or agent, in respect of the Business; or (v) except as set forth on Schedule
5.1(z), violated any federal, state or local campaign finance, election or similar Laws.

          5.2 Absolute Reliance on the Representations and Warranties. All representations and
warranties contained in this Agreement and any financial statements, instruments, certificates,
schedules or other documents delivered in connection herewith, shall survive the execution and
delivery of this Agreement, regardless of any investigation made by Agent or the Purchasers or on
Agent’s or the Purchasers’ behalf.

ARTICLE 6

TRANSFER OF SENIOR TERM NOTES

          6.1 Restricted Securities. The Purchasers acknowledge that the Senior Term Notes have not
been registered under the Securities Act and may be resold only if registered pursuant to the
provisions of the Securities Act or if an exemption from registration is available, and that the
Loan Parties are not required to register any of the Senior Term Notes under the Securities Act.

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          6.2 Legends; Purchasers’ Representations. Each of the Purchasers hereby represents and
warrants to the Loan Parties that it is an “accredited investor” within the meaning of Rule 501(a)
under the Securities Act and is acquiring the Senior Term Notes for investment for its own account,
with no present intention of dividing its participation with others (except for a potential
transfer or transfers of the Senior Term Notes to an Affiliate or Affiliates of the Purchasers) or
reselling or otherwise distributing the same. Each Purchaser understands that the acquisition of
the Senior Term Notes has not been registered under the Securities Act or registered or qualified
under any state securities law in reliance on specific exemptions therefrom, which exemptions may
depend upon, among other things, the bona fide nature of such Purchaser’s representations as
expressed herein. Each Purchaser will not, directly or indirectly, offer, sell, pledge, transfer
or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a
pledge of) the Senior Term Notes, except in compliance with the Securities Act and any applicable
state securities laws, and
the rules and regulations promulgated thereunder. The Loan Parties may place an appropriate
legend on the Senior Term Notes owned by the Purchasers concerning the restrictions set forth in
this Article 6. Upon the assignment or transfer by the Purchasers or any of its successors or
assignees of all or any part of the Senior Term Notes, the term “Purchaser” as used herein shall
thereafter mean, to the extent thereof, the then holder or holders of such Senior Term Notes, or
portion thereof

          6.3 Transfer of Senior Term Notes. Subject to Section 6.2, a holder of a Senior Term Note may
transfer such Senior Term Note to a new holder, or may exchange such Senior Term Note for Senior
Term Notes of different denominations (but in no event of denominations of less than $1,000,000 in
original principal amount), by surrendering such Senior Term Note to the Loan Parties duly endorsed
for transfer or accompanied by a duly executed instrument of transfer naming the new holder (or the
current holder if submitted for exchange only), together with written instructions for the issuance
of one or more new Senior Term Notes specifying the respective principal amounts of each new Senior
Term Note and the name of each new holder and each address therefor. The Loan Parties shall
simultaneously deliver to such holder or its designee such new Senior Term Notes, shall mark the
surrendered Senior Term Notes as canceled and shall provide notice of such transfer to Agent. In
lieu of the foregoing procedures, a holder may assign a Senior Term Note (in whole but not in part)
to a new holder by allonge or other assignment document and by sending written notice to the Loan
Parties and Agent of such assignment specifying the new holder’s name and address; in such case,
the Loan Parties shall promptly acknowledge such assignment in writing to both the old and new
holder.

          Notwithstanding anything in the Transaction Documents to the contrary, (a) in the absence of
an Event of Default, if after giving effect to any transfer hereunder there are 10 (10) or more
unaffiliated holders of Senior Term Notes (i.e., a holder of a Senior Term Note and its Affiliates
who hold Senior Term Notes (and who receive notices and payments at a common address) shall count
as a single holder for purposes of this clause), an agent shall be appointed by such holders of the
Senior Term Notes to handle payments, notices and other administrative matters related to the
Senior Term Notes on terms reasonably acceptable to all such holders, (b) a Purchaser may pledge,
or grant a security interest in, all or any portion of its Senior Term Notes and other rights and
interests under the Transaction Documents to a bank or other funding source in support of
borrowings made by such Purchaser from such Person and (c) any Purchaser which is a fund may
pledge, or grant a security interest in, all or any portion of its Senior Term Notes

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and other
rights and interests under the Transaction Documents to its trustee in support of its obligations
to its trustee.

          6.4 Replacement of Lost Senior Term Notes. Upon receipt of evidence reasonably satisfactory
to the Loan Parties of the mutilation, destruction, loss or theft of any Senior Term Notes and the
ownership thereof, the Loan Parties shall, upon the written request of the holder of such Senior
Term Notes, execute and deliver in replacement thereof new Senior Term Notes in the same form, in
the same original tenor and dated the same date as the Senior Term Notes so mutilated, destroyed,
lost or stolen; and such Senior Term Notes so mutilated, destroyed, lost or stolen shall then be
deemed no longer outstanding hereunder. If the Senior Term Notes being replaced have been mutilated, they
shall be surrendered to the Loan Parties; and if such replaced Senior Term Notes have been
destroyed, lost or stolen, such holder shall furnish the Loan Parties with an indemnity in writing
to save it harmless in respect of such replaced Senior Term Notes.

          6.5 No Other Representations Affected. Nothing contained in this Article 6 shall limit the
full force or effect of any representation, agreement or warranty made herein or in connection
herewith to the Purchasers.

ARTICLE 7

COVENANTS

          7.1 Affirmative Covenants. The Loan Parties, jointly and severally, covenant that, so long as
all or any of the Senior Term Notes shall remain outstanding, the Loan Parties shall and shall
cause each of their Subsidiaries to:

          (a) Existence. Do or cause to be done all things necessary to preserve, renew and keep in
full force and effect their legal existence and the legal existence of their Subsidiaries.

          (b) Businesses and Properties; Compliance with Laws. At all times (i) do or cause to be done
all things necessary to preserve, renew and keep in full force and effect the rights, licenses,
registrations, permits, certifications, approvals, consents, franchises, and Proprietary Rights
that are material to the conduct of their businesses; (ii) comply in all material respects with all
Laws and regulations applicable to the operation of such business, including but not limited to,
all Environmental Laws, whether now in effect or hereafter enacted and with all other applicable
Laws and regulations; (iii) comply in all material respects with Sarbanes Oxley and all regulations
promulgated thereunder; (iv) take all action that may be required to obtain, preserve, renew and
extend all rights, Proprietary Rights, franchises, registrations, certifications, approvals,
consents, licenses, permits and any other authorizations that may be material to the operation of
such business; (v) maintain, preserve and protect all property material to the conduct of such
business; and (vi) except for obsolete or worn out equipment, keep their property in good repair,
working order and condition and from time to time make, or cause to be made, all needful and proper
repairs, renewals, additions, improvements and replacements thereto necessary in order that the
business carried on in connection therewith may be properly conducted at all times.

          (c) Insurance. Maintain insurance required by the Transaction Documents and any and all
contracts entered into by the Loan Parties, including but not limited to: (i)

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coverage on their
insurable properties (including all inventory, equipment and real property) against the perils of
fire, theft, hazard and burglary; (ii) public liability; (iii) workers’ compensation; (iv) business
interruption; (v) product liability; and (vi) such other risks as are customary with companies
similarly situated and in the same or similar business as that of the Loan Parties under policies
issued by financially sound and reputable insurers in such amounts as are customary with companies
similarly situated and in the same or similar business. Each of the Loan Parties shall pay or
shall cause to be paid all insurance premiums payable by it or its Subsidiaries and, upon Agent’s
request, shall deliver copies of the policy or policies of such insurance (or certificates of
insurance with copies of such policies) to Agent. All insurance policies of the Loan Parties shall
contain endorsements, in form and substance reasonably satisfactory to Agent, providing that the
insurance shall not be cancelable except upon thirty (30) days’ prior written notice to Agent.
Agent, on behalf of the Purchasers, shall be shown as a loss payee and an additional named insured
party under all such insurance policies, in each case pursuant to appropriate endorsements
reasonably satisfactory to Agent.

          (d) Obligations and Taxes. Pay and discharge promptly when due all taxes, assessments and
governmental charges or levies imposed upon them or upon their income or profits or in respect of
their properties before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise, which, if unpaid, might give rise to Liens
or charges upon such properties or any part thereof; provided, however, that the
Loan Parties shall not be required to pay and discharge or to cause to be paid and discharged any
such tax, assessment, charge, levy or claim so long as (i) the validity or amount thereof shall be
contested in good faith by appropriate proceedings and (ii) the Loan Parties shall have set aside
on their books adequate reserves with respect thereto.

          (e) Financial Statements; Reports. Furnish to each Purchaser:

          (i) Annual Statements. Within ninety (90) days after the end of each fiscal year, a
balance sheet and statements of operations, stockholders’ equity and cash flows of Parent on
a Consolidated Basis showing the financial condition as of the close of such year and the
results of operations during such year, all of the foregoing financial statements to be
audited by a firm of independent certified public accountants of recognized national
standing acceptable to Agent and accompanied by an opinion of such accountants without
material exceptions or qualifications. Additionally, such financial statements shall be
accompanied by a certificate of such accountants (which shall not contain any qualification
exception or scope limitation not acceptable to Agent) stating that in the course of its
regular audit of the Business, which audit was conducted in accordance with GAAP, no Default
or Event of Default relating to financial and accounting matters has come to their
attention, or if any Default or Event of Default exists, a statement as to the nature
thereof.

          (ii) Monthly Statements. Within (A) ninety (90) calendar days after the end of each
December, (B) sixty (60) calendar days after the end of each January, (C) forty-five
calendar days after the end of each March, June and September and (D) thirty (30) calendar
days after the end of each other calendar month, financial statements
(including a balance sheet and income statements) showing the financial condition and
results of operations of Parent on a Consolidated Basis as of the end of each such month

36

 

and for the then elapsed portion of the current fiscal year, together with comparisons to the
corresponding periods in the preceding year and the budget for such periods, accompanied by
a certificate of an officer that such financial statements have been prepared in accordance
with GAAP, consistently applied, subject to year end audit adjustments and setting forth in
comparative form the respective financial statements for the corresponding date and period
in the previous fiscal year.

          (iii) Certificate of Compliance. Each financial statement furnished to the Purchasers
pursuant to subsections (i) and (ii) of this Section 7.1(e) shall be accompanied by a
written certificate signed by the chief financial officer of Parent to the effect that no
Default or Event of Default has occurred during the period covered by such statements or, if
any such Default or Event of Default has occurred during such period, setting forth a
description of such Default or Event of Default and specifying the action, if any, taken by
the Loan Parties to remedy the same, and a compliance certificate in the form of Exhibit
E showing the Loan Parties’ compliance with the covenants set forth in Section 7.3.

          (iv) Projections. As soon as available, but in no event later than December 31 of each
year, a projection of the balance sheet, and income statement of Parent on a Consolidated
Basis, respectively, for the following fiscal year; and within ten (10) days after any
material update or amendment of any such plan or forecast, a copy of such update or
amendment, including a description of and reasons for such update or amendment. Each such
projection, update or amendment shall be accompanied by a written certificate signed by the
chief financial officer of Parent to the effect that it has been prepared on the basis of
historical financial statements and records, together with the assumptions set forth in such
projection and that it reflects expectations, after reasonable analysis, of Parent’s
management as to the matters set forth therein.

          (v) Additional Information. Promptly, from time to time, such other information
regarding the compliance by the Loan Parties with the terms of this Agreement and the other
Transaction Documents or the affairs, operations or condition (financial or otherwise) of
the Loan Parties as Agent or Required Purchasers may reasonably request and that is capable
of being obtained, produced or generated by the Loan Parties or of which the Loan Parties
have knowledge.

          (f) Litigation and Other Notices. Give Agent and the Purchasers prompt written notice of the
following:

          (i) Orders; Injunctions. The issuance by any court or governmental agency or authority
of any injunction, order, decision or other restraint prohibiting, or having the effect of
prohibiting, the making of any loan or the initiation of any litigation or similar
proceeding seeking any such injunction, order or other restraint.

          (ii) Litigation. The notice, filing or commencement of any action, suit or proceeding
against any of the Loan Parties whether at law or in equity or by or before any court or any
Federal, state, municipal or other governmental agency or authority and

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that, if adversely
determined against any of the Loan Parties (or their Subsidiaries), could result in
uninsured liability in excess of $1,000,000 in the aggregate.

          (iii) Environmental Matters. (A) Any release or threatened release of any Pollutant
required to be reported to any Federal, state or local governmental or regulatory agency
under any applicable Environmental Laws, (B) any Removal, Remedial or Response action taken
by any of the Loan Parties or any other person in response to any Pollutant in, at, on or
under, a part of or about the Loan Parties’ properties or any other property, (C) any
violation by the Loan Parties of any Environmental Law, in each case, that could result in a
Material Adverse Effect, or (D) any notice, claim or other information that the Loan Parties
might be subject to an Environmental Liability that could result in uninsured liability in
excess of $1,000,000.

          (iv) Default. Any Default or Event of Default, specifying the nature and extent
thereof and the action (if any) that is proposed to be taken with respect thereto.

          (v) Material Adverse Effect. Any development in the business or affairs of the Loan
Parties that is reasonably likely to have a Material Adverse Effect.

          (g) ERISA. Comply in all material respects with the applicable provisions of ERISA and the
provisions of the Code relating thereto and furnish to Agent and the Purchasers (i) as soon as
possible, and in any event within thirty (30) days after the Loan Parties knew or had reason to
know thereof, notice of (A) the establishment by the Loan Parties or ERISA Affiliate of any Plan,
(B) the commencement by a Loan Party or ERISA Affiliate of contributions to a Multiemployer Plan,
(C) any failure by any of the Loan Parties or any of their ERISA Affiliates to make contributions
required by Section 302 of ERISA (whether or not such requirement is waived pursuant to Section 303
of ERISA), or (D) the occurrence of any Reportable Event with respect to any Plan or Multiemployer
Plan for which the reporting requirement is not waived, together with a statement of an officer
setting forth details as to such Reportable Event and the action that the Loan Parties propose to
take with respect thereto, together with a copy of the notice of such Reportable Event given to the
PBGC if any such notice was provided by the Loan Parties, and (ii) promptly after receipt thereof,
a copy of any notice a Loan Party or ERISA Affiliate may receive from the PBGC relating to the
intention of the PBGC to terminate any Plan or Multiemployer Plan, or to appoint a trustee to
administer any Plan or Multiemployer Plan, and (iii) promptly after receipt thereof, a copy of any
notice of withdrawal liability from any Multiemployer Plan.

          (h) Maintaining Records; Access to Premises and Inspections. Maintain financial records in
accordance with generally accepted practices and, upon reasonable notice, at all reasonable times
and as often as Agent or any Purchaser may reasonably request (and at any time after the occurrence
and during the continuation of a Default
or Event of Default), subject to the same confidentiality provisions for Agent and Purchaser
contained in this Agreement, permit any authorized representative designated by Agent or the
Required Purchasers to visit and inspect the properties and financial records of the Loan Parties
and to make extracts from such financial records, all at the Loan Parties’ reasonable expense, and
permit any authorized representative designated by Agent or any Purchasers to discuss the affairs,
finances and condition of the Loan Parties with the chief financial officer of each of the Loan
Parties and such

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other officers as the Loan Parties shall deem appropriate, and the Loan Parties’
independent public accountants.

          (i) Patriot Act Compliance. The Loan Parties shall provide such information and take such
actions as are reasonably required by Agent or any Purchaser in order to assist Agent and the
Purchasers with compliance with the Patriot Act.

          (j) Research Reports. Promptly after the sending, delivery or dissemination thereof, the Loan
Parties, if permitted by the preparer thereof, shall send to Agent and the Purchasers copies of
research reports, investment memorandum or other similar materials that shall have been prepared
for or on behalf of Parent by an investment banking firm, financial institution or other financial
advisory firm.

          (k) Non-Loan Party Guaranty. Any Foreign Subsidiary of Parent, that, after the Closing Date,
becomes a Loan Party or Guarantor under the GMAC Credit Agreement, shall enter into a Guaranty, in
a form reasonably satisfactory to Agent, in favor of Agent and the Purchasers securing the payment
of and guaranteeing all Indebtedness and other obligations incurred by the Loan Parties pursuant to
this Agreement or any other Transaction Document.

          (l) Deposit Account Control Agreements, Landlord Waivers. Within 45 days after the Closing
Date (or such later date as the Agent may agree to), the Loan Parties shall use commercially
reasonable efforts to enter into and deliver to Agent such Deposit Account Control Agreements and
Landlord Waivers (as defined in the GMAC Credit Agreement) that are reasonably satisfactory to
Agent with respect to (x) in the case of Deposit Account Control Agreements, any deposit accounts
that were subject to deposit account control agreements solely in favor of GMAC Agent as part of
the GMAC Financing and (y) in the case of Landlord Waivers, the Kane distribution center. Without
limiting the foregoing, if all of the indebtedness under the GMAC Credit Agreement is satisfied and
any obligations to lend thereunder are terminated, the Loan Parties shall promptly use commercially
reasonable efforts to enter into and deliver to Agent such Deposit Account Control Agreements and
all Landlord Waivers that were in favor of GMAC Agent.

          7.2 Negative Covenants. The Loan Parties, jointly and severally, covenant that, so long as all or any part of the
Senior Term Notes shall remain outstanding:

          (a) Indebtedness. The Loan Parties shall not create, incur, assume guarantee or be or remain
liable for, contingently or otherwise, or suffer to exist any Indebtedness, except:

          (i) Indebtedness under this Agreement;

          (ii) Indebtedness incurred in the ordinary course of business with respect to customer
deposits, trade payables and other unsecured current liabilities not the result of borrowing
and not evidenced by any note or other evidence of indebtedness;

          (iii) Indebtedness under the GMAC Financing, in an amount not to exceed the applicable
cap on principal amount set forth in the definition of Revolving Financing;

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          (iv) Purchase money Indebtedness of any Loan Party and Indebtedness consisting of
Capitalized Leases, in the aggregate, not to exceed $2,500,000 at any time outstanding;

          (v) Intercompany Indebtedness between the Loan Parties, including between Parent and
its Subsidiaries (which, for the sake of clarification, does not include trade payables
incurred in the ordinary course of business); provided, that the aggregate
outstanding amount of the intercompany indebtedness owing at any time by Subsidiaries that
are not Loan Parties to Loan Parties shall not exceed $10,000,000;

          (vi) Indebtedness to shareholders of Parent from share repurchases and redemptions
under the Stockholders Agreement not to exceed $500,000 in the aggregate in any Fiscal Year;

          (vii) Other Indebtedness of Loan Parties in the aggregate at any time outstanding of
$1,000,000; provided that such Indebtedness is unsecured and/or subordinated to the
Indebtedness under this Agreement on terms reasonably satisfactory to Agent;

          (viii) Indebtedness of any Loan Party listed on the “Permitted Indebtedness Schedule”
attached hereto as Schedule 7.2(a);

          (ix) Indebtedness incurred in connection with the financing of Loan Parties’ insurance
premiums;

          (x) Indebtedness incurred in connection with Interest Rate Protection Agreements, in
all cases not for speculative purposes, not to exceed in the aggregate a maximum potential
liability for the termination of such any and all such agreements, of $7,500,000 at any time
outstanding;

          (xi) Indebtedness incurred in connection with the purchase, financing or refinancing of
real property, not to exceed the sum of $5,000,000 in the aggregate at any time outstanding;

          (xii) obligations under any lease which is accounted for by the lessee as an operating
lease and under which the lessee is intended to be the “owner” of the leased property for
Federal income tax purposes; and

          (xiii) Indebtedness incurred in connection with a Permitted Sale/Leaseback.

          (b) Negative Pledge; Liens. The Loan Parties shall not create, incur, assume or suffer to
exist any Lien of any kind on any of their properties or assets of any kind, except the following
(collectively, “Permitted Liens”):

          (i) Liens created in connection with the Security Documents;

40

 

          (ii) Liens created in connection with the GMAC Financing which are subject to the terms
of the Intercreditor Agreement;

          (iii) Liens for or priority claims imposed by law that are incidental to the conduct of
business or the ownership of properties and assets (including mechanic’s, warehousemen’s,
attorneys’ and statutory landlords’ Liens) and deposits and pledges incurred in the ordinary
course of business and not in connection with the borrowing of money; provided,
however, that in each case, the obligation secured is not overdue, or, if overdue,
is being contested in good faith and adequate reserves have been set up by the Loan Parties
as the case may be; and provided, further, that the Lien and security interest provided in
the Security Documents or any portion thereof created or intended to be created thereby is
not, in the opinion of Agent, unreasonably jeopardized thereby;

          (iv) Liens securing the payments of Charges incurred in the ordinary course of business
that either (A) are not delinquent, or (B) are being contested in good faith by appropriate
legal or administrative proceedings and as to which adequate reserves have been set aside on
their books, and so long as during the period of any such contest, the Loan Parties shall
suffer no loss of any privilege of doing business or any other right, power or privilege
necessary or material to the operation of the Business; provided, however,
that a stay of enforcement of any such Lien is in effect and the priority status of the Lien
of Agent under the Security Documents shall not be affected thereby;

          (v) Liens securing Capitalized Leases, purchase money Indebtedness permitted under
Section 7.2(a) and Indebtedness incurred in connection with a Permitted Sale/Leaseback, in
each case which attach solely to the assets being leased or purchased;

          (vi) Liens securing Indebtedness permitted under Section 7.2(a) which attach solely to
applicable insurance policies and proceeds thereof;

          (vii) Liens securing Indebtedness permitted under Section 7.2(a) which attach solely to
the relevant real property and improvements;

          (viii) Liens listed on the “Permitted Encumbrances Schedule” attached hereto as
Schedule 7.2(b); and

          (ix) Extensions, renewals and replacements of Liens referred to in clauses (i), (ii),
(v), (vi), (vii), (viii) of this Section 7.2(b); provided, however, that any
such extension, renewal or replacement Lien shall be limited to the property or assets
covered by the Lien extended, renewed or replaced and that the obligations secured by any
such extension, renewal or replacement Lien shall be in an amount not greater than the
amount of the obligations secured by the Lien extended, renewed or replaced at the time of
such extension, renewal or replacement;

          (x) Liens of any licensor or licensee in connection with license agreements entered
into in the ordinary course of business, which such Liens do not constitute security
interests in any assets of any Loan Party;

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          (xi) any Lien or encumbrance, UCC financing statement, interest or title of a lessor
under any operating lease entered into in the ordinary course of business, or any interest
or title of any lessee under any leases or subleases of real property, with respect solely
to the leased property and not to any other Collateral;

          (xii) with respect solely to real property, defects and irregularities in title, survey
exceptions, encumbrances, licenses, covenants, restrictions, easements or reservations of
others for rights-of-way, roads, pipelines, railroad crossings, services, utilities or other
similar purposes; outstanding mineral rights or reservations (including rights with respect
to the removal of material resources) which do not materially diminish the value of the
surface estate, assuming usage of such surface estate similar to that being carried on by
any Person as of the effective date, and Liens arising with respect to zoning restrictions,
licenses, covenants, building restrictions and other similar charges or encumbrances on the
use of real property of such Person which do not materially interfere with the ordinary
conduct of such Person’s business;

          (xiii) Liens on any interest in life insurance on any officer, director or employee;

          (xiv) Liens incurred or pledges and deposits made in the ordinary course of business in
connection with worker’s compensation, unemployment insurance, pensions or other types of
social security benefits, or to secure the performance of statutory obligations or to secure
the performance of bids, tenders, sales and contracts (other than for the repayment of
borrowed money) and Liens incurred to secure any surety bonds, appeal bonds, supersedeas
bonds or other instruments serving a similar purpose in connection with the appeal of any
judgment or defense of any claim relating to a prejudgment Lien;

          (xv) Liens consisting of financing statements or similar notices filed by a Person of a
type listed in Section 9-505 of the UCC solely in such capacity; and

          (xvi) Liens consisting of judgments or attachments that would not constitute an Event
of Default under Section 8.1(j).

          (c) Contingent Liabilities. The Loan Parties shall not become liable for any Guaranties,
except for (i) the endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, (ii) Guaranties by a Loan Party with respect to
Indebtedness of any Loan Party permitted under Section 7.2(a), (iii) Guaranties of a Loan Party
with respect to a maximum potential liability of $1,000,000 at any time outstanding, (iv)
Guaranties, obligations, warranties and indemnities, not with respect to senior or funded
Indebtedness of any Person, which have been or are undertaken or made in the ordinary course of
business, in connection with the Transactions or in connection with the issuance of securities of
Parent, and (v) Guaranties of any Loan Party on behalf of such Loan Party’s Subsidiary which is
not a Loan Party not to exceed in the aggregate at any time outstanding, guaranteed Indebtedness in
the sum of $1,000,000.

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          (d) Mergers, Asset Sales, etc. Except for a merger or consolidation of any Subsidiary or Loan
Party into another Loan Party, Loan Parties shall not alter the corporate, capital or legal
structure of the Loan Parties, or merge into or consolidate or combine with any other Person, or
liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution) or purchase, lease
or otherwise acquire (in one transaction or a series of related transactions) all or any
substantial part of the property or assets of any Person, other than in connection with Permitted
Acquisitions the consideration for which does not exceed the aggregate sum of (i) $5,000,000 for
all such Permitted Acquisitions prior to January 10, 2010 and (ii) $7,500,000 for all such
Permitted Acquisitions during the term of this Agreement. The Loan Parties shall not sell,
transfer or otherwise dispose of any of their assets, including without limitation the collateral
under the respective Security Documents, other than (i) sales, leases, assignments, transfers,
conveyances or other dispositions of Inventory in the ordinary course of business; (ii) the sale of
Parent’s former office and warehouse properties in Nelsonville, Ohio, and sales, assignments,
transfers, conveyances or other dispositions (other than leases or subleases of leases) of
properties outside of the ordinary course of business not to exceed in the aggregate more than
$250,000 in any Fiscal Year (exclusive of any sales or other dispositions of Parent’s former
warehouse property); (iii) in addition to dispositions permitted under clauses (i) and
(ii) above, the disposition of equipment of any Loan Party if such equipment is obsolete or
no longer useful in the ordinary course of such Loan Party’s business; (iv) licenses of
intellectual property in the ordinary course of business; (v) the sale or transfer of property of
any Loan Party to any other Loan Party; (vi) subleases of leases or leases of property which, at
the time of such sublease or lease, is not then currently being utilized in the Business; and (vii)
any Permitted Sale/Leaseback.

          (e) Affiliate Transactions. Other than by and between, or among, Parent, the Loan Parties and
their respective Subsidiaries, in each case in a manner that is not materially economically
detrimental to any Loan Party, the Loan Parties shall not make any loan or advance to any director,
officer or
employee of any of the Loan Parties or to any Affiliate or enter into or be a party to any
transaction or arrangement with any Affiliate of the Loan Parties, including, without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any service by or for,
any Affiliate, except pursuant to the reasonable requirements of the Loan Parties’ business and
upon fair and reasonable terms no less favorable to the Loan Parties than would be obtained in a
comparable arm’s-length transaction with a Person other than an Affiliate.

          (f) Dividends and Stock Purchases. The Loan Parties shall not, directly or indirectly,
declare or pay any dividends or make any distribution of any kind on their outstanding capital
stock or any other payment of any kind to any of their stockholders or its Affiliates (including
any redemption, purchase or acquisition of, whether in cash or in property, securities or a
combination thereof, any partnership interests or capital accounts or warrants, options or any of
their other securities), or set aside any sum for any such purpose other than (i) for such
dividends, distributions or payments paid solely to other Loan Parties and (ii) for any other
purpose up to $500,000 in the aggregate in any Fiscal Year.

          (g) Advances, Investments and Loans. The Loan Parties shall not purchase, or hold
beneficially any stock, other securities or evidences of Indebtedness of, or make or permit to
exist any loan or advance to, or make any Investment or acquire any interest

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whatsoever in, any
other Person (including, but not limited to, the formation or acquisition of any Subsidiaries),
except prior to the occurrence and continuance of Default or Event of Default, and subject to the
substantially contemporaneous delivery to GMAC Agent and/or Agent of such agreements, documents or
instruments reasonably requested by such Agent to obtain a perfected security interest in any such
Investment that constitutes Collateral, any of the following (each, a “Permitted Investment”):

          (i) securities issued or directly and fully guaranteed or insured by the United States
of America or any agency or instrumentality thereof having maturities of not more than six
(6) months from the date of acquisition;

          (ii) United States dollar-denominated time deposits, certificates of deposit and
bankers acceptances of any bank whose short-term debt rating from Standard & Poor’s Ratings
Group, a division of The McGraw-Hill Companies, Inc. (“S&P”), is at least A-1 or the
equivalent or whose short-term debt rating from Moody’s Investors Service, Inc. (“Moody’s”)
is at least P-1 or the equivalent with maturities of not more than six months from the date
of acquisition;

          (iii) commercial paper with a rating of at least A-1 or the equivalent by S&P or at
least P-1 or the equivalent by Moody’s maturing within six months after the date of
acquisition;

          (iv) marketable direct obligations issued by any state of the United States of America
or any political subdivision of any such state or any public instrumentality thereof
maturing within six months from the date of acquisition thereof
and, at the time of acquisition, having one of the two highest ratings obtainable from
either S&P or Moody’s;

          (v) Investments in money market funds substantially all the assets of which are
comprised of securities of the types described in clauses (i) through (iv) above;

          (vi) deposit accounts maintained in accordance with the GMAC Credit Documents;

          (vii) Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in the ordinary
course of business;

          (viii) receivables owing to the Loan Parties, prepaid expenses and accrued expenses
created or acquired in the ordinary course of Business and payable on customary trade terms
of the Loan Parties;

          (ix) deposits made in the ordinary course of Business consistent with past practices to
secure the performance of leases or in connection with bidding on government contracts;

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          (x) loans to employees in an aggregate amount not in excess of $100,000 at any one (1)
time per such employee (not to exceed in the aggregate at any time outstanding the sum of
$1,000,000 with respect to all employees of the Loan Parties), for the purpose of assisting
such employees in the purchase of Common Stock;

          (xi) Investments or intercompany loans and advances of (A) Parent or a Subsidiary in or
to any other Subsidiary (subject to a maximum amount of such loans and advances (which, for
the sake of clarification, does not include trade payables incurred in the ordinary course
of business) by Parent and any other Loan Party to any and all such Subsidiaries of
$10,000,000 in the aggregate at any one (1) time outstanding and provided that each such
loan and advance is evidenced by a promissory note in form and substance satisfactory to
Agent which is pledged by the payee as additional security for the obligations), (B) any
Subsidiary in or to Parent or (C) any Foreign Subsidiary of Parent, that, after the Closing
Date, becomes a Loan Party or Guarantor under the GMAC Credit Agreement and enters into a
Guaranty pursuant to this Agreement, in or to any Loan Party;

          (xii) advances to sales representatives of Parent or any of its Subsidiaries in the
ordinary course of their business and consistent with past practices;

          (xiii) additional Investments not otherwise permitted in this Section not to exceed
$1,000,000 in the aggregate at any one (1) time outstanding;

          (xiv) Investments in certificates of deposit and bank deposits with financial
institutions located in Puerto Rico and the Dominican Republic, solely to the
extent necessary to maintain preferred tax treatment or country of origin status in
such locations, not to exceed $5,000,000, in the aggregate at any time outstanding;

          (xv) Investments made pursuant to Permitted Acquisitions;

          (xvi) Investments in Interest Rate Protection Agreements, derivative agreements,
materials future contracts or other arrangements in connection with Indebtedness, in all
cases not for speculative purposes, not to exceed in the aggregate a notional amount of
$60,000,000 at any time outstanding; and

          (xvii) Deposit Accounts with financial institutions available for withdrawal on demand,
subject to the provisions of the GMAC Credit Documents.

          (h) Use of Proceeds. The Loan Parties shall not use any proceeds from the sale of the Senior
Term Notes hereunder, directly or indirectly, for the purposes of purchasing or carrying any
“margin securities” within the meaning of Regulations T, U or X promulgated by the Board of
Governors of the Federal Reserve Board or for the purpose of arranging for the extension of credit
secured, directly or indirectly, in whole or in part by collateral that includes any “margin
securities.”

          (i) Modifications of Revolving Loan Documents. The Loan Parties shall not amend, replace,
refinance, refund, restructure, supplement, extend or otherwise modify the

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GMAC Credit Agreement in
effect on the Closing Date or any other GMAC Credit Documents in effect on the Closing Date in
contravention of the terms set forth in the Intercreditor Agreement.

          (j) Amendment of Charter Documents. The Loan Parties shall not amend, terminate, modify or
waive or agree to the amendment, modification or waiver of any material term or provision of their
Charter Documents, or By-laws, other than any amendment, modification or other change to any
Charter Document or By-laws that does not adversely affect the rights and privileges of Parent or
any Loan Party under this Agreement and the Security Documents, or the interests of Agent or the
Purchasers under the Security Documents or in the collateral thereunder.

          (k) Subsidiaries. The Loan Parties shall not establish nor acquire any new Subsidiary except
(i) Foreign Subsidiaries, with the prior written consent of Agent not to be unreasonably withheld;
provided, that at least sixty-five percent (65%) of all of the outstanding equity
securities of such Foreign Subsidiaries are pledged to the Agent for the benefit of the Purchasers
pursuant to a pledge agreement on terms reasonably satisfactory to Agent or (ii) Domestic
Subsidiaries, in connection with any acquisition permitted by this Agreement and/or where such
Subsidiary becomes a Loan Party or obligated pursuant to a Guaranty and grants Agent a priority
perfected security interest in substantially all of its assets, subject only to Permitted Liens.

          (l) Business. The Loan Parties shall not engage, directly or indirectly, in any business
other than the Business and any business reasonably incidental thereto.

          (m) Fiscal Year; Accounting. The Loan Parties shall not change their Fiscal Year from ending
on December 31, or method of accounting (other than immaterial changes in methods), except as
required by GAAP.

          (n) Establishment of New or Changed Business Locations. The Loan Parties shall not relocate
their principal executive offices or other facilities or establish new business locations or store
any inventory or other assets at a location not identified to Agent on or before the date hereof,
without providing not less than thirty (30) days advance written notice to Agent.

          (o) Changed or Additional Business Names. The Loan Parties shall not change their corporate
names, establish new or additional trade names or change their state of organization without
providing not less than thirty (30) days advance written notice to Agent.

          (p) Limitations on Affiliate Ownership of Obligations. No Loan Party nor any Affiliate
thereof shall, directly or indirectly, purchase, participate, be assigned or in any way
beneficially own any of the Indebtedness arising under any of the Loan Documents or the Revolving
Loan Documents.

          7.3 Financial Covenant. Parent covenants and agrees that, so long as all or any part of the
Senior Term Notes remain outstanding, it shall maintain on a consolidated basis the following:

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          (a) Fixed Charge Coverage. A minimum Fixed Charge Coverage Ratio as of the end of each period
set forth below of not less than the respective ratio set forth below:

	 	 	 
	 	 	Fixed Charge
	Period
	 	Coverage Ratio
	Four Quarters ending June 30, 2007,
	 	1.20 to 1.00
	Four Quarters ending September 30, 2007,
	 	1.10 to 1.00
	Four Quarters ending December 31, 2007, and
	 	1.05 to 1.00
	Each four Quarter period ending thereafter
	 	1.00 to 1.00

ARTICLE 8

EVENTS OF DEFAULT

          8.1 Events of Default. An “Event of Default” shall mean the occurrence of one or more of the
following described events:

          (a) any Loan Party shall default in the payment of (i) interest on any Senior Term Note when
due, (ii) principal of any Senior Term Note when due, whether at maturity, upon notice of
prepayment in accordance with Sections 3.3, 3.4, or 3.9 upon any scheduled payment date, a
mandatory prepayment date in accordance with Section 3.5 or by acceleration or otherwise, or (iii)
any other amount due under any Transaction Document within 30 Business Days after the same is due;

          (b) an event of default shall occur under the GMAC Credit Agreement (i) in respect of any
payment due thereunder, (ii) in respect of any other provision thereof and more than 90 days have
elapsed since the date of any such event of default without such event of default being cured or
waived, or (iii) that has resulted in the acceleration of the Indebtedness thereunder;

          (c) with respect to Indebtedness other than the GMAC Financing, there shall occur a default
under any agreement under which any Indebtedness having an individual principal amount of
$1,000,000 or more or having an aggregate principal amount of $2,000,000 or more is created, which
default permits the holder(s) of such Indebtedness to accelerate the maturity of such Indebtedness;

          (d) any representation or warranty herein made by any of the Loan Parties, or any certificate
or financial statement furnished pursuant to the provisions hereof, shall prove to have been false
or misleading in any material respect as of the time made or furnished or deemed made or furnished;

          (e) any Loan Party shall default in the performance of any covenant, condition or provision
set forth in Section 7.2 or 7.3;

          (f) a default or event of default shall occur under any other Transaction Document, beyond any
applicable notice or cure periods;

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          (g) any Loan Party shall breach any other covenant, condition or provision of this Agreement,
any Senior Term Note or any other Transaction Document not otherwise addressed in this Section 8.1,
and such breach shall not be remedied to Agent’s or Required Purchasers’ satisfaction for a period
of fifteen (15) days of the written notice from the Agent of such default;

          (h) a proceeding shall have been instituted in a court having jurisdiction in the premises
seeking a decree or order for relief in respect of any Loan Party having assets in excess of
$1,000,000 in an involuntary case under any applicable bankruptcy, insolvency or other similar Law
now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of any such Loan Party or for any
substantial part of its property, or for the winding-up or liquidation of their affairs, and such
proceeding shall remain undismissed or unstayed and in effect for a period of sixty (60) days;

          (i) any Loan Party shall commence a voluntary case under any applicable bankruptcy, insolvency
or other similar Law now or hereafter in effect, shall consent to the entry of an order for relief
in an involuntary case under any such Law, or any Loan Party having assets in excess of $1,000,000
shall consent to the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of any Loan Party or for any
substantial part of their property, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay their debts as they become due, or shall take any action
in furtherance of any of the foregoing;

          (j) either of the following events shall occur: (i) a Reportable Event, the occurrence of
which would have a Material Adverse Effect that could cause the imposition of a Lien under Section
4068 of ERISA, shall have occurred with respect to any Plan or Plans; or (ii) the aggregate amount
of the then “current liability” (as defined in Section 412(l)(7) of the Code) of all accrued
benefits under such Plan or Plans exceeds the then current value of the assets allocable to such
benefits by more than $1,000,000 at such time;

          (k) a final judgment that exceeds $500,000 or, together with other undischarged final
judgments against any Loan Party, exceeds an aggregate of $1,000,000 (excluding judgments to the
extent the applicable Loan Party is fully insured or the deductible or retention limit does not
(when aggregated with other undischarged judgments) exceed $1,000,000 and with respect to which the
insurer has assumed responsibility in writing), shall have been entered against the Loan Party if,
within thirty (30) days after the entry thereof, such judgment, or any other judgment which,
together with such judgment exceeds $1,000,000 in the aggregate, shall not have been discharged or
execution thereof stayed pending appeal or if, within thirty (30) days after the expiration of any
such stay, any such judgment shall not have been discharged; or

          (l) any material Transaction Document shall at any time after the Closing Date cease for any
reason to be in full force and effect or shall cease to create perfected security interests in
favor of Agent in the collateral subject or purported to be subject thereto, subject to no other
Liens other than Permitted Liens, or such collateral shall have been transferred to any Person
other than as permitted under this Agreement without the prior written consent of the holders of a
majority in principal amount of the outstanding Senior Term Notes.

48

 

          8.2 Consequences of Event of Default.

          (a) Bankruptcy. If an Event of Default specified in paragraphs (h) or (i) of Section 8.1
hereof shall occur, the unpaid balance of the Senior Term Notes, all interest accrued thereon and
all other liabilities of the Loan Parties hereunder and thereunder shall be immediately due and
payable, together with any applicable prepayment premium, without presentment, demand,
protest or (except as expressly required hereby) notice of any kind, all of which are hereby
expressly waived.

          (b) Other Defaults. If any other Event of Default shall occur, Required Purchasers may at
their option, by written notice to the Loan Parties, declare the entire unpaid balance of the
Senior Term Notes, all interest accrued thereon and all other liabilities of the Loan Parties
hereunder and thereunder to be forthwith due and payable, together with any applicable prepayment
premium, and the same shall thereupon become immediately due and payable, without presentment,
demand, protest or (except as expressly required hereby) notice of any kind, all of which are
hereby expressly waived; provided, that if a Default specified in clause (ii) of paragraph (a) of
Section 8.1 hereof shall occur, any holder of a Senior Term Note as to which such Event of Default
has occurred may declare the entire unpaid balance of such Senior Term Note (but only such Senior
Term Note) and other amounts due hereunder and thereunder with respect to such Senior Term Note
immediately due and payable and same shall thereupon become immediately due and payable, without
presentment, demand, protest or (except as expressly provided hereby) notice of any kind, all of
which are expressly waived.

          (c) Default Interest. Following the occurrence and during the continuance of any Event of
Default, the holders of the Senior Term Notes shall be entitled to receive, to the extent permitted
by applicable Law, interest on the outstanding principal of, and premium and overdue interest, if
any, on, the Senior Term Notes at a rate per annum equal to 13.5%.

          (d) Security. Payments of principal of, and premium, if any, and interest on, the Senior Term
Notes and all other obligations of the Loan Parties under this Agreement or the Senior Term Notes
are secured pursuant to the terms of the Security Documents.

ARTICLE 9

AGENT

          9.1 Authorization and Action. Each Purchaser and each subsequent holder of any Senior Term
Note, by its acceptance thereof, hereby designates and appoints Laminar Direct Capital L.P. as
collateral agent and Agent hereunder and authorizes Laminar Direct Capital L.P. to take such
actions as agent on its behalf and to exercise such powers as are delegated to Agent by the terms
of this Agreement and the other Transaction Documents, together with such powers as are reasonably
incidental thereto. Agent shall not have any duties or responsibilities, except those expressly
set forth herein, or any fiduciary relationship with any Purchaser, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities on the part of Agent shall be read
into this Agreement or otherwise exist for Agent. In performing its functions and duties
hereunder, Agent shall act solely as agent for the Purchasers and does not assume, nor shall be
deemed to have assumed, any obligation or relationship of trust or agency with or for the Loan
Parties or any of their respective successors or assigns.

49

 

Agent shall not be required to take any action that exposes
Agent to personal liability or that is contrary to this Agreement or applicable Laws. The
appointment and authority of Agent hereunder shall terminate at the indefeasible payment in full of
the Senior Term Notes and related obligations.

          9.2 Delegation of Duties. Agent may execute any of its duties under this Agreement by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care.

          9.3 Exculpatory Provisions. Neither Agent nor any of its directors, officers, agents or
employees shall be (i) liable for any action lawfully taken or omitted to be taken by it or them
under or in connection with this Agreement (except for its, their or such Person’s own gross
negligence or willful misconduct or, in the case of Agent, the breach of its obligations expressly
set forth in this Agreement, unless such action was taken or omitted to be taken by Agent at the
direction of the Required Purchasers), or (ii) responsible in any manner to any of the Purchasers
for any recitals, statements, representations or warranties made by the Loan Parties contained in
this Agreement or in any certificate, report, statement or other document referred to or provided
for in, or received under or in connection with, this Agreement or the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other document
furnished in connection herewith, or for any failure of the Loan Parties to perform their
respective obligations hereunder, or for the satisfaction of any condition specified in Article 4.
Agent shall not be under any obligation to any Purchaser to ascertain or to inquire as to the
observance or performance of any of the agreements or covenants contained in, or conditions of,
this Agreement or any other Transaction Document, or to inspect the properties, books or records of
the Loan Parties.

          9.4 Reliance. Agent shall in all cases be entitled to rely, and shall be fully protected in
relying, upon any 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, without limitation, counsel to Parent and to the other Loan Parties),
independent accountants and other experts selected by Agent. Agent shall in all cases be fully
justified in failing or refusing to take any action under this Agreement or any other document
furnished in connection herewith unless it shall first receive such advice or concurrence of the
Required Purchasers or all of the Purchasers, as applicable, as it deems appropriate or it shall
first be indemnified to its satisfaction by the Purchasers; provided, that, unless and until Agent
shall have received such advice, Agent may take or refrain from taking any action, as Agent shall
deem advisable and in the best interests of the Purchasers. Agent shall in all cases be fully
protected in acting, or in refraining from acting, in accordance with a request of the Required
Purchasers or all of the Purchasers, as applicable, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all Purchasers.

          9.5 Non-Reliance on Agent and Other Purchasers. Each Purchaser expressly acknowledges that
neither Agent, nor any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it and that no act by Agent or hereafter
taken, including, without limitation, any review of the affairs of the Loan Parties, shall be
deemed to constitute any representation or warranty by Agent. Each Purchaser

50

 

represents and
warrants to Agent that it has and will, independently and without reliance upon Agent or any other
Purchaser and based on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property, prospects, financial and
other conditions and creditworthiness of the Loan Parties and made its own decision to enter into
this Agreement.

          9.6 No Liability of Purchasers. The Purchasers shall have no liability to any Loan Party or
any other entity as a result of any actions or failures to act by Agent, hereunder or otherwise.

          9.7 Agent in its Individual Capacity. Agent and each of its Affiliates may make loans to,
purchase securities from, provide services to, accept deposits from and generally engage in any
kind of business with the Loan Parties or any Affiliate of the Loan Parties as though Agent were
not Agent hereunder.

          9.8 Successor Agent. Agent may, upon forty-five (45) days’ notice to the Loan Parties and the
Purchasers, and Agent will, upon the direction of the Required Purchasers (other than Agent, in its
individual capacity), resign as Agent. If Agent shall resign, then during such forty-five (45) day
period the Required Purchasers shall appoint a successor Agent and, if the Required Purchasers
direct Agent to resign, such direction shall include an appointment of a successor Agent. If for
any reason no successor Agent is appointed by the Required Purchasers during such forty-five (45)
day period, then effective upon the expiration of such forty-five (45) day period, the Purchasers
shall perform all of the duties of Agent hereunder and the Loan Parties shall make all payments in
respect of the Senior Term Notes directly to the applicable Purchasers and for all purposes shall
deal directly with the Purchasers. After any retiring Agent’s resignation hereunder as Agent, the
provisions of Article 9 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Agent under this Agreement.

          9.9 Consent of Purchasers.

          After an acceleration of the Indebtedness, Agent may, after consultation (to the extent
reasonably practicable under the circumstances) with all Purchasers and, upon written instruction
from the Required Purchasers shall, exercise or refrain from exercising any and all rights,
remedies, privileges and options under this Agreement or the other Transaction Documents and
available at law or in equity to protect the rights of Agent and the Purchasers and collect the
Indebtedness under the Senior Term Notes, including, without limitation, instituting and pursuing
all legal actions brought against any Loan Party or to collect the Indebtedness under the Senior
Term Notes, or defending any and all actions brought by any Loan Party or
other Person; or incurring expenses or otherwise making expenditures to protect the
collateral, the Senior Term Notes or Agent’s or any Purchaser’s rights or remedies.

          9.10 This Article Not Applicable to the Loan Parties. Except for this Section 9.10, this
Article 9 is included in this Agreement solely for the purpose of determining certain rights as
between Agent and the Purchasers and does not create, nor shall it give rise to, any rights in or
obligations on the part of the Loan Parties and all rights and obligations of the Loan Parties
(other than as specifically set forth herein) under this Agreement shall be determined by reference
to the provisions of this Agreement other than this Article 9.

51

 

ARTICLE 10

MISCELLANEOUS

          10.1 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that (i) the Loan Parties
may not assign or transfer its rights hereunder or any interest herein or delegate their duties
hereunder and (ii) the Purchasers shall have the right to assign their rights hereunder and under
the Senior Term Notes in accordance with Article 6.

          10.2 Modifications and Amendments. The provisions of this Agreement may be modified, waived
or amended, but only by a written instrument signed by each of the Loan Parties and the Required
Purchasers; provided that (a) without the prior written consent of all Purchasers then holding
Senior Term Notes none of the following modifications may be made: (i) extend any payment date
under the Senior Term Notes; (ii) reduce any interest rate applicable to any of the Senior Term
Notes or any fee payable to the Purchasers hereunder; (iii) waive any Event of Default under
Section 8.1(a); (iv) compromise or settle all or a portion of the Indebtedness under the Senior
Term Notes; (v) release any obligor from the Indebtedness under the Senior Term Notes except in
connection with full payment and satisfaction of all Indebtedness under the Senior Term Notes; (vi)
amend the definition of Required Purchasers, or (vii) amend this Section 10.2 and (b) unless also
signed by the Agent, no amendment, waiver or consent shall affect the rights or duties of the Agent
under this Agreement or any other Transaction Document.

          10.3 No Implied Waivers; Cumulative Remedies; Writing Required. No delay or failure in
exercising any right, power or remedy hereunder shall affect or operate as a waiver thereof; nor
shall any single or partial exercise thereof or any abandonment or discontinuance of steps to
enforce such a right, power or remedy preclude any further exercise thereof or of any other right,
power or remedy. The rights and remedies hereunder are cumulative and not exclusive of any rights
or remedies that Agent or the Purchasers or any holder of Senior Term Notes would otherwise have.
Any waiver, permit, consent or approval of any kind or character of any breach or default under
this Agreement or any such waiver of any
provision or condition of this Agreement must be in writing, satisfy the conditions set forth
in Section 9.11 and shall be effective only to the extent in such writing specifically set forth.

          10.4 Reimbursement of Expenses. The Loan Parties agree to pay or reimburse Agent and the
Purchasers upon demand for all reasonable fees and expenses incurred or payable by Agent or the
Purchasers (including, without limitation, reasonable fees and expenses of special counsel for
Agent or any Purchaser and charges for services performed for the Purchasers by Agents’ internal
auditing staff), from time to time (i) up to a mutually agreed amount, arising in connection with
the negotiation, preparation and execution of this Agreement, the Senior Term Notes, the other
Transaction Documents and all other instruments and documents to be delivered hereunder or
thereunder or arising in connection with the transactions contemplated hereunder or thereunder
(whether such fees and expenses are invoiced at or after the Closing), (ii) relating to the
administration of this Agreement and the Transaction Documents, including any amendments, waivers
or consents pursuant to the provisions hereof or thereof, and (iii) arising in connection with the
enforcement of this Agreement or any Security Document, or collection of any Senior Term Note.

52

 

          10.5 Holidays. Whenever any payment or action to be made or taken hereunder or under the
Senior Term Notes shall be stated to be due on a day that is not a Business Day, such payment or
action shall be made or taken on the next following Business Day, and such extension of time shall
be included in computing interest or fees, if any, in connection with such payment or action.

          10.6 Notices. All notices and other communications given to or made upon any party hereto in
connection with this Agreement shall, except as otherwise expressly herein provided, be in writing
(including telecopy, but in such case, a confirming copy will be sent by another permitted means)
and mailed via certified mail, telecopied or delivered by guaranteed overnight parcel express
service or courier to the respective parties, as follows:

	 	 	 
	to the Loan Parties:

	 	Rocky Brands, Inc.
	 

	 	39 East Canal Street
	 

	 	Nelsonville, Ohio 45764
	 

	 	Attn: James E. McDonald
	 

	 	          Chief Financial Officer
	 

	 	Telecopier: 740-753-4024
	 
	 	 
	with a copy to:

	 	Porter, Wright, Morris & Arthur LLP
	 

	 	41 South High Street
	 

	 	Columbus, Ohio 43215
	 

	 	Attn: Timothy E. Grady, Esq.
	 

	 	Telecopier: (614) 227-2100
	 
	 	 
	to Agent:
	 	 
	 

	 	Laminar Direct Capital L.P.
	 

	 	3 Bethesda Metro Center
	 

	 	Suite 1450
	 

	 	Bethesda, MD 20814
	 

	 	Attn: Dean D’Angelo
	 

	 	Telecopier: (301) 634-3051
	 
	 	 
	with a copy to:

	 	D. E. Shaw & Co., L.P.
	 

	 	120 West 45th Street, 39th Floor
	 

	 	New York, New York 10036
	 

	 	Attn: Hilda Blair.
	 

	 	Telecopier: (212) 478-0100
	 
	 	 
	with a copy to:

	 	Moore & Van Allen PLLC
	 

	 	100 North Tryon Street, 47th Floor
	 

	 	Charlotte, NC 28202
	 

	 	Attn: C. Wayne McKinzie, Esq.
	 

	 	Telecopier: (704) 378-2061
	 
	 	 
	to the Purchasers:

	 	As set forth on Annex A

53

 

or in accordance with any subsequent written direction from the recipient party to the sending
party. All such notices and other communications shall, except as otherwise expressly herein
provided, be effective upon delivery if delivered by courier or overnight parcel express service;
in the case of certified mail, three (3) Business Days after the date sent; or in the case of
telecopy, when received.

          10.7 Survival. All representations, warranties, covenants and agreements of the Loan Parties
contained herein or made in writing in connection herewith shall survive the execution and delivery
of this Agreement and the purchase of the Senior Term Notes and shall continue in full force and
effect so long as any Senior Term Note is outstanding and until payment in full of all of the Loan
Parties’ obligations hereunder or thereunder. All obligations relating to indemnification
hereunder shall survive any termination of this Agreement and shall continue for the length of any
applicable statute of limitations.

          10.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

          10.9 Jurisdiction, Consent to Service of Process.

          (a) EACH OF THE LOAN PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND
ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT OF THE
UNITED STATES OF AMERICA SITTING IN THE STATE OF NEW YORK, AND ANY APPELLATE COURT FROM ANY
THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE SENIOR TERM
NOTES OR ANY OTHER TRANSACTION DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL
COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT AGENT AND THE
PURCHASERS MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE
SENIOR TERM NOTES OR ANY OTHER TRANSACTION DOCUMENT AGAINST THE LOAN PARTIES OR THEIR PROPERTIES IN
THE COURTS OF ANY JURISDICTION.

          (b) EACH OF THE LOAN PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT THEY MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE SENIOR

54

 

TERM NOTES OR ANY OTHER TRANSACTION DOCUMENT IN ANY OHIO STATE OR FEDERAL COURT. EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

          (c) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER
PROVIDED FOR NOTICES IN SECTION 10.6 HEREOF. NOTHING IN THIS AGREEMENT SHALL AFFECT THE RIGHT OF
ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

          10.10 Jury Trial Waiver. EACH OF THE LOAN PARTIES HEREBY IRREVOCABLY WAIVES ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING (I) TO ENFORCE OR DEFEND
ANY RIGHTS UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR (II) ARISING FROM ANY DISPUTE OR
CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS AGREEMENT AND AGREE THAT ANY SUCH ACTION OR
COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

          10.11 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 is held to be prohibited by or invalid under applicable Law in any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or invalidity, without
invalidating any other provision of this Agreement.

          10.12 Headings. Article, section and subsection headings in this Agreement are included for
convenience of reference only and shall not constitute a part of this Agreement for any other
purpose.

          10.13 Indemnity. The Loan Parties, jointly and severally, hereby agree to indemnify, defend
and hold harmless Agent and the Purchasers and their officers, directors, employees, agents and
representatives, and their respective successors and assigns in connection with any losses, claims,
damages, liabilities and expenses, including reasonable attorneys’ fees, to which Agent or any
Purchaser may become subject (other than as a result of the gross negligence or willful misconduct
of any such Person), insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or by reason of any investigation, litigation or other proceedings related to
or resulting from any act of, or omission by, the Loan Parties or their Affiliates or any officer,
director, employee, agent or representative of the Loan Parties or their Affiliates with respect to
the Transactions, the Senior Term Notes, Charter Documents, the By-laws or any agreements entered
into in connection with any such agreements, instruments or documents and to reimburse Agent and
the Purchasers and each such Person and Affiliate, upon demand, for any legal or other expenses
incurred in connection with investigating or defending any such loss, claim, damage, liability,
expense or action. To the extent that the foregoing undertakings may be unenforceable for any
reason, the Loan Parties agree to make the maximum contribution to the payment and satisfaction of
indemnified liabilities set forth in this Section 10.13 that is permissible under applicable Law.

55

 

          10.14 Environmental Indemnity. The Loan Parties, and their successors and assigns, hereby
release and discharge, and agree to defend, indemnify and hold harmless, Agent, the Purchasers and
their Affiliates (including their partners, subsidiaries, customers, guests, and invitees, and the
successors and assigns of all of the foregoing, and their respective officers, employees and
agents) from and against any and all Environmental Liabilities, (other than as a result of the
gross negligence or willful misconduct of any such Person), whenever and by whomever asserted, to
the extent that such Environmental Liabilities are based upon, or otherwise relate to: (i) any
Condition at any
time in, at, on, under, a part of, involving or otherwise related to the Properties and
Facilities (including any of the properties, materials, articles, products, or other things
included in or otherwise a part of the Properties and Facilities); (ii) any action or failure to
act of any Person, including any prior owner or operator of the Properties and Facilities
(including any of the properties, materials, articles, products, or other things included in or
otherwise a part of the Properties and Facilities), involving or otherwise related to the
Properties and Facilities or operations of the Loan Parties; (iii) the Management of any Pollutant,
material, article or product (including Management of any material, article or product containing a
Pollutant) in any physical state and at any time, involving or otherwise related to the Properties
and Facilities or any property covered by clause (iv) (including Management either from the
Properties and Facilities or from any property covered by clause (iv), and Management to, at,
involving or otherwise related to the Properties and Facilities or any property covered by clause
(iv)); (iv) Conditions, and actions or failures to act, in, at, on, under, a part of, involving or
otherwise related to any property other than the Properties and Facilities, which property was, at
or prior to the Closing Date, (I) acquired, held, sold, owned, operated, leased, managed, or
divested by, or otherwise associated with, (A) the Loan Parties or any of their Subsidiaries, (B)
any of the Loan Parties’ Affiliates, or (C) any predecessor or successor organization of those
identified in (A) or (B); or (II) engaged in any tolling, contract manufacturing or processing, or
other similar activities for, with, or on behalf of the Loan Parties; (v) any violation of or
noncompliance with or the assertion of any Lien under the Environmental Laws, (vi) the presence of
any toxic or hazardous substances, wastes or contaminants on, at or from the past and present
properties and facilities, including, without limitation, human exposure thereto; (vii) any spill,
release, discharge or emission affecting the past and present properties and facilities, whether or
not the same originates or emanates from such properties and facilities or any contiguous real
estate, including, without limitation, any loss of value of such properties and facilities as a
result thereof; or (viii) a misrepresentation in any representation or warranty or breach of or
failure to perform any covenant in respect of Environmental Law made by the Loan Parties in this
Agreement. This indemnity and agreement to defend and hold harmless shall survive any termination
or satisfaction of the Senior Term Notes or the sale, assignment or foreclosure thereof or the
sale, transfer or conveyance of all or part of the past and present Properties and Facilities or
any other circumstances that might otherwise constitute a legal or equitable release or discharge,
in whole or in part, of the Loan Parties under the Senior Term Notes.

          10.15 Counterparts. This Agreement may be executed in any number of counterparts and by
either party hereto on separate counterparts, each of which, when so executed and delivered, shall
be an original, but all such counterparts shall together constitute one and the same instrument.

56

 

          10.16 Integration. This Agreement and the other Transaction Documents set forth the entire
understanding of the parties hereto with respect to all matters contemplated hereby and supersede
all previous agreements and understandings among them concerning such matters. No statements or
agreements, oral or written, made prior to or at the signing hereof, shall vary, waive or modify
the written terms hereof.

          10.17 Intercreditor. The obligations evidenced hereby are subject to that certain
Intercreditor Agreement (as amended or otherwise modified from time to time in accordance with its
terms, or as replaced with the prior written agreement of the Loan Parties, Agent, the Required
Purchasers, and the agent then appointed under the GMAC Credit Agreement, the “Intercreditor
Agreement”), with respect to the indebtedness and, other liabilities owed by the Loan Parties
under and pursuant to the GMAC Credit Agreement and each related GMAC Credit Document, and the
Purchasers and Agent, by their acceptance hereof, acknowledge and agree to be bound by the
provisions of the Intercreditor Agreement.

          10.18 Confidentiality. Agent and each Purchaser agree to exercise their best efforts to keep
confidential any non-public information delivered pursuant to the Transaction Documents and
identified as such by any Loan Party and not to disclose such information to Persons other than to:
(a) to any actual or prospective transferee (who agrees to treat such information as confidential)
of a Senior Term Note, (b) to its employees, directors, agents, attorneys, accountants and other
professional advisors or those of any of its affiliates, (c) upon the request or demand of any
Governmental Authority, (d) in response to any order of any court or other Governmental Authority
or as may otherwise be required pursuant to any applicable Law or rules of any stock exchanges, (e)
that has been publicly disclosed, (f) to the National Association of Insurance Commissioners or any
similar organization or any nationally recognized rating agency that requires access to information
about a Purchaser’s investment portfolio in connection with ratings issued with respect to such
Purchaser, (g) in connection with the exercise of any remedy hereunder or under any other
Transaction Document, (h) to an investor or prospective investor in a Securitization that agrees
that its access to information regarding the Loan Parties and the Senior Term Notes and Transaction
Documents is solely for purposes of evaluating an investment in such Securitization and who agrees
to treat such information as confidential, (i) to a trustee, collateral manager, servicer, backup
servicer, noteholder or secured party in a Securitization in connection with the administration,
servicing and reporting on the assets serving as collateral for a Securitization, (j) to a
nationally recognized rating agency that requires access to information regarding the Loan Parties
and the Senior Term Notes and Transaction Documents in connection with ratings issued with respect
to a Securitization and (k) to a Purchaser’s lender or other financing source (who agrees to treat
such information as confidential) that requires access to information regarding the Loan Parties
and the Senior Term Notes and Transaction Documents in connection with providing financing to such
Purchaser. The obligations of Agent and Purchasers under this Section 10.18 shall supersede and
replace the obligations of Agent and Purchasers under any confidentiality agreement in respect of
this financing executed and delivered by Agent or any Purchaser prior to the date hereof. In no
event shall Agent or any Purchaser be obligated or required to return any materials furnished by
Loan Parties; provided, however, each potential assignee or participant shall be
required to agree that if it does not become an assignee (or participant) it shall return all
materials furnished to it by Loan Parties in connection herewith.

57

 

          For purposes of this Section 10.18, “Securitization” means a public or private offering by a
Purchaser or any of its direct or indirect Affiliates or their respective successors and
assigns, of securities which represent an interest in, or which are collateralized, in whole or in
part, by the loans evidenced by the Senior Term Notes.

* * *

58

 

SIGNATURE PAGE TO

NOTE PURCHASE AGREEMENT

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

	 	 	 	 	 	 	 
	 	 	LOAN PARTIES:	 	 
	 
	 	 	 	 	 	 
	 	 	ROCKY BRANDS, INC.,

LIFESTYLE FOOTWEAR, INC.,

ROCKY BRANDS WHOLESALE LLC, and

ROCKY BRANDS RETAIL LLC
	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ James E. McDonald	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: James E. McDonald	 	 
	 

	 	 	 	Title: Executive Vice President, Chief Financial
Officer and Treasurer of each of the foregoing Loan
Parties	 	 
	 
	 	 	 	 	 	 
	 	 	PURCHASER:	 	 
	 
	 	 	 	 	 	 
	 	 	LAMINAR DIRECT CAPITAL L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert Ladd	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Robert Ladd	 	 
	 

	 	 	 	Title: Authorized Signatory	 	 
	 
	 	 	 	 	 	 
	 	 	PURCHASER:	 	 
	 
	 	 	 	 	 	 
	 	 	WHITEBOX HEDGED HIGH YIELD PARTNERS, LP	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Jonathan Wood	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Jonathan Wood	 	 
	 

	 	 	 	Title: Director — CFO	 	 
	 
	 	 	 	 	 	 
	 	 	PURCHASER:	 	 
	 
	 	 	 	 	 	 
	 	 	GPC LIX, L.L.C.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Jonathan Wood	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Jonathan Wood	 	 
	 

	 	 	 	Title: Director — CFO	 	 

59

 

SIGNATURE PAGE TO

NOTE PURCHASE AGREEMENT

	 	 	 	 	 	 	 
	 	 	AGENT:	 	 
	 
	 	 	 	 	 	 
	 	 	LAMINAR DIRECT CAPITAL L.P., as Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert Ladd	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Robert Ladd	 	 
	 

	 	 	 	Title: Authorized Signatory	 	 

 

 

ANNEX

	 	 	 
	Annex A

	 	Information Relating to the Purchasers
	Annex B

	 	Allocation of Senior Term Notes among the Purchasers

SCHEDULES

	 	 	 
	“Organizational Schedule”

	 	Section 5.1(a)
	“Capitalization Schedule”

	 	Section 5.1(d)
	“Subsidiary Schedule”

	 	Section 5.1(e)
	“Litigation Schedule”

	 	Section 5.1(j)
	“Environmental Schedule”

	 	Section 5.1(l)
	“Properties Schedule”

	 	Section 5.1(q)
	“Intellectual Property Schedule”

	 	Section 5.1(r)
	“Side Agreements Schedule”

	 	Section 5.1(u)
	“Material Contracts Schedule”

	 	Section 5.1(w)
	“Current Business Practices Schedule”

	 	Section 5.1(z)
	“Permitted Indebtedness Schedule”

	 	Section 7.2(a)
	“Permitted Encumbrances Schedule”

	 	Section 7.2(b)

EXHIBITS

	 	 	 
	EXHIBIT A

	 	Form of Senior Term Note
	EXHIBIT B

	 	Form of Security Agreement
	EXHIBIT C

	 	Form of Intellectual Property Agreements
	EXHIBIT D

	 	Form of Pledge Assignment
	EXHIBIT E

	 	Form of Compliance Certificate

2

 

ANNEX A

INFORMATION RELATING TO THE PURCHASERS

Name and Address

of Initial Purchaser

LAMINAR DIRECT CAPITAL L.P.

(1) All payments:

If by wire:

Bank: HSBC Bank

ABA#: 021001088

Credit: Laminar Direct Capital L.P.

Account #: 639-722598

Ref: Rocky Brands, Inc.

If by mail:

Laminar Direct Capital L.P.

10000 Memorial Drive, Suite 500

Houston, Texas 77024

Attention: Debbie Blank

Facsimile: (703) 292-5454

If by overnight parcel service

(e.g., FedEx, UPS, etc):

Laminar Direct Capital L.P.

10000 Memorial Drive, Suite 500

Houston, Texas 77024

Attention: Debbie Blank

Facsimile: (703) 292-5454

with sufficient information

to identify the source and

application of such funds.

 

** All checks should be made payable to “Laminar Direct Capital L.P.”

3

 

	(2)	 	All notices of payments and
written confirmations of
such wire transfers:

Laminar Direct Capital L.P.

10000 Memorial Drive, Suite 500

Houston, Texas 77024

Attention: Debbie Blank

Facsimile: (703) 292-5454

	(3)	 	All other communications:

Laminar Direct Capital L.P.

3 Bethesda Metro Center

Suite 1450

Bethesda, MD 20

Attn: Dean D’Angelo

Facsimile: (301) 634-3051

     with a copy to:

D. E. Shaw & Co., L.P.

120 West 45th Street, 39th Floor

New York, New York 10036

Attn: Hilda Blair.

Facsimile: (212) 478-0100

     with a copy to:

Moore & Van Allen PLLC

100 North Tryon Street, 47th Floor

Charlotte, NC 28202

Attn: C. Wayne McKinzie, Esq.:

Facsimile: (704) 378-2061

4

 

Whitebox Hedged High Yield Partners, LP

3033 Excelsior Boulevard

Suite 300

Minneapolis, MN 55416

(1) All payments:

     If by wire:

Bank: Wells Fargo Bank N.A.

ABA#: 121000248

Account Name: Whitebox Hedged High Yield Partners, LP

Account #: 3369948900

Reference Rocky Brands

     If by mail:

Whitebox Advisors, LLC

3033 Excelsior Boulevard

Suite 300

Minneapolis, MN 55416

Attn: Barb Reller

Telephone: 612-253-6014

Facsimile: 612-253-6114

If by overnight parcel service

(e.g., FedEx, UPS, etc):

Whitebox Advisors, LLC

3033 Excelsior Boulevard

Suite 300

Minneapolis, MN 55416

Attn: Barb Reller

Telephone: 612-253-6014

Facsimile: 612-253-6114

with sufficient information

to identify the source and

application of such funds.

 

** All checks should be made payable to “Whitebox Hedged High Yield Partners, LP”

 

 

	(2)	 	All notices of payments and
written confirmations of
such wire transfers:

Whitebox Advisors, LLC

3033 Excelsior Boulevard

Suite 300

Minneapolis, MN 55416

Attn: Barb Reller

Telephone: 612-253-6014

Facsimile: 612-253-6114

	(3)	 	All other communications:

Whitebox Advisors, LLC

3033 Excelsior Boulevard

Suite 300

Minneapolis, MN 55416

Attn: Nick Swenson

Facsimile: (612) 253-6100

with a copy to:

Faegre & Benson, LLP

2200 Wells Fargo Center

90 South Seventh Street

Minneapolis, MN 55402

Attn: Daniel J. Amen, Esq.

Facsimile: (612) 766-1600

2

 

GPC LIX, L.L.C.

3033 Excelsior Boulevard

Suite 300

Minneapolis, MN 55416

	(1)	 	All payments:
	 
	 	 	If by wire:

Bank: Bank of America, NA

ABA#: 026009593

Account Name: Bank of America Securities LLC

Account #: 001233932118

FFC: GPC LIX, L.L.C.

FFC A/C#: 118-02069

Reference: Rocky Brands

If by mail:

GPC LIX, L.L.C.

C/O Whitebox Advisors, LLC

3033 Excelsior Boulevard

Suite 300

Minneapolis, MN 55416

Attn: Barb Reller

Telephone: 612-253-6014

Facsimile: 612-253-6114

If by overnight parcel service

(e.g., FedEx, UPS, etc):

GPC LIX, L.L.C.

C/O Whitebox Advisors, LLC

3033 Excelsior Boulevard

Suite 300

Minneapolis, MN 55416

Attn: Barb Reller

Telephone: 612-253-6014

Facsimile: 612-253-6114

with sufficient information

to identify the source and

application of such funds.

 

** All check should be made payable to “GPC LIX, L.L.C.”

3

 

	(2)	 	All notices of payments and
written confirmations of
such wire transfers:

Whitebox Advisors, LLC

3033 Excelsior Boulevard

Suite 300

Minneapolis, MN 55416

Attn: Barb Reller

Telephone: 612-253-6014

Facsimile: 612-253-6114

	(3)	 	All other communications:

Whitebox Advisors, LLC

3033 Excelsior Boulevard

Suite 300

Minneapolis, MN 55416

Attn: Nick Swenson

Facsimile: (612) 253-6100

with a copy to:

Faegre & Benson, LLP

2200 Wells Fargo Center

90 South Seventh Street

Minneapolis, MN 55402

Attn: Daniel J. Amen, Esq.

Facsimile: (612) 766-1600

4

 

ANNEX B

ALLOCATION OF SENIOR TERM NOTES AMONG PURCHASERS

	 	 	 	 	 	 	 	 	 
	Senior Term Notes	 	Allocation	 	Percentage
	Purchaser: Laminar Direct Capital L.P.
	 	$	20,000,000	 	 	 	50.00	%
	Purchaser: Whitebox Hedged High Yield Partners, LP
	 	$	17,500,000	 	 	 	43.75	%
	Purchaser: GPC LIX, L.L.C.
	 	$	2,500,000	 	 	 	6.25	%

5

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