Document:

Exhibit 10.1
 

 

LICENSE AGREEMENT

 

THIS LICENSE AGREEMENT (the “Agreement”), dated as of the 27th day of April, 2009, is entered into by and between XCELLINK INTERNATIONAL LIMITED, a British Virgin Island Corporation operating out of Hong Kong (“Licensor”) and XCELLINK INTERNATIONAL INC., a Nevada corporation (“Licensee”).

 

WHEREAS:

A.  Licensor has been engaged in research during the course of which it has invented, developed and/or acquired certain technologies resulting in patented processes related to the automated data interchange of financial transactions between customers and merchants over local, wired or wireless electronic link using an information device - most commonly a mobile phone (the “Patented Technologies”) which Patented Technologies are wholly owned by the Licensor;

B.  Licensor wants to enter into this Agreement with the objective of furthering the development, use and exploitation of its Patented Technologies, while securitizing the Patented Technologies by way of providing the License (as defined herein) to the Licensor which is a publicly traded corporation and Licensee wants to acquire license to the Patented Technologies; and

C.  The Licensee wants Licensor to license its Patented Technologies to the Licensee on the terms and conditions set out in this agreement.  

THE PARTIES AGREE AS FOLLOWS:

	
            1.0
 	
            PROPERTY RIGHTS IN AND TO THE TECHNOLOGY:
 

1.1                   The Licensee acknowledges and agrees that Licensor owns all right, title and interest in and to the Technology.

1.2                   The Licensor must, at the request of Licensee, enter into such further agreements and sign all documents as may be required to ensure the full transfer of ownership of the Patented Technologies via a share exchange agreement (the “Share Exchange Agreement”) through which Licensor agrees with Licensee to exchange 100% of the issued and outstanding shares of Licensor for shares in the share capital of Licensee.

	
            2.0
 	
            GRANT OF LICENSE:
 

2.1                   In consideration of the one time royalty payment of 20,000,000 shares in the capital of Licensee, to be provided by Licensor majority shareholder, Mark Fingarson (“Fingarson”) and transferred from stock registered to Fingarson in efforts to increase shareholder value, Licensor grants to the Licensee an exclusive and irrevocable global license in perpetuity to use and sublicense the Patented Technologies and any improvements and to manufacture, distribute, and sell the any related products (the “Products”) on the terms and conditions set out in this Agreement.

 

2.2                   The license granted under this agreement is granted to the Licensee and not to any Affiliated Companies.

2.3                   Notwithstanding Article 3.1, the parties acknowledge and agree that Licensor may use the Patented Technologies and any improvements without charge in any manner only as such use may be required for the further development of the Patented Technologies and not for commercial use.

	
            3.0
 	
            PATENTS:
 

3.1                   The Licensee may identify any process, use or products arising out of the Technology and any improvements that may be patentable and Licensor will, on the request of the Licensee, take reasonable steps to apply for a patent in the name of Licensor provided that the Licensee pays all costs of applying for, registering and maintaining the patent in the jurisdictions in which the Licensee designates that a patent is required.  All current patents issued for the Patented Technologies are set out on Schedule “A” hereto.

3.2                   On the issuance of a patent obtained, the Licensee becomes the licensee of the patent on the terms and conditions set out in this agreement.

	
            4.0
 	
            APPOINTMENT OF DIRECTOR
 

4.1       As a term of this Agreement, Michael Malbourne, CEO and director of the Licensor, shall also be appointed to the board of directors of Licensee.

	
            5.0
 	
            GENERAL:
 

5.1                   The Licensee must permit any duly authorized representative of Licensor, during normal business hours and at Licensor's sole risk and expense, to enter any premises of the Licensee for the purpose of inspecting the Products and the manner of their manufacture and generally of ascertaining whether or not this agreement has been, is being, or will be complied with by the Licensee.

5.2                   Subject to the limitations set out in this Agreement, this Agreement operates for the benefit of and is binding on the parties and their respective successors and permitted assigns.

5.3                   No condoning, excusing or overlooking by any party of any default, breach or non-observance by any other party at any time or times in respect of any terms or conditions of this agreement operates as a waiver of that party's rights under this agreement.  A waiver of any provision of, or right under, this agreement must be in writing signed by the party entitled to the benefit of that provision or right, and is effective only to the extent set out in any written waiver.  

5.4                   No exercise of a specific right or remedy by any party precludes it from or prejudices it in exercising another right or pursuing another remedy or maintaining an action to which it may otherwise be entitled either at law or in equity.

5.5                   Marginal headings as used in this agreement are for the convenience of reference only and do not form a part of this agreement and are not be used in the interpretation of this agreement.

 

5.6                   The terms and conditions contained in this agreement which, under this agreement, require performance by the parties after the expiry or termination of this agreement, remain in force despite this agreement’s expiry or termination for any reason.

5.7                   Part or all of any Article, part, section, clause, paragraph or subparagraph of this agreement that is indefinite, invalid, illegal or otherwise voidable or unenforceable may be severed from this agreement and the balance of this agreement continues in full force and effect.

5.8                   This Agreement sets out the entire understanding between the parties and no changes to this agreement are binding unless signed in writing by the parties to this agreement.

	
            5.9
 	
            Time is of the essence of this Agreement.
 

5.10                In this Agreement, unless the contrary intention appears, the singular includes the plural and vice versa and words importing a gender include other genders.  

 

THE PARTIES INTENDING TO BE LEGALLY BOUND have executed this Agreement as of the date first above written.

 

	
            XCELLINK INTERNATIONAL INC.  
 	
            XCELLINK INTERNATIONAL LIMITED
 

 

	
            By: /s/ Mark Fingarson
 	
            By. /s/ Michael Malbourne
 

 

	
            Name:Mark Fingarson
 	
            Name: Michael Malbourne
 

	
            Title: President/Director
 	
            Title: CEO/Director
 

 

 

/s/ Mark Fingarson

Mark Fingarson

 

SCHEDULE "A"

 

DESCRIPTION OF "TECHNOLOGY"

 

 

	
            Licensor File #
 	
            Inventor(s)
 	
            Description
 	
            Patent #
 
	
            India

 
 	
            John Warwick Adcock and Rodney Alfred John Reynolds
 	
            Automatic Electronic Funds Transfer System and Method
 	
            207687
 
	
            Malaysia

 
 	
            John Warwick Adcock and Rodney Alfred John Reynolds
 	
            Automatic Electronic Funds Transfer System and Method
 	
            MY-123132-A
 
	
            United States

 
 	
            John Warwick Adcock and Rodney Alfred John Reynolds
 	
            Automatic Electronic Funds Transfer System and Method
 	
            US 7,024,385 B1
 
	
            Canada

 
 	
            John Warwick Adcock and Rodney Alfred John Reynolds
 	
            Automatic Electronic Funds Transfer System and Method
 	
            2,264,048
 
	
            Philippines

 
 	
            John Warwick Adcock and Rodney Alfred John Reynolds
 	
            Automatic Electronic Funds Transfer System and Method
 	
            1-1997- 57704
 
	
            China

 
 	
            John Warwick Adcock and Rodney Alfred John Reynolds
 	
            Automatic Electronic Funds Transfer System and Method
 	
            ZL 97197543.4
 
	
            ARIPO

 
 	
            John Warwick Adcock and Rodney Alfred John Reynolds
 	
            Automatic Electronic Funds Transfer System and Method
 	
            AP 1088
 
	
            Singapore

 
 	
            John Warwick Adcock and Rodney Alfred John Reynolds
 	
            Automatic Electronic Funds Transfer System and Method
 	
            T-NO. 64100 [WO 98/09260]
 
	
            Australia

 
 	
            John Warwick Adcock and Rodney Alfred John Reynolds
 	
            Automatic Electronic Funds Transfer System and Method
 	
            731121
 
	
            Vietnam

 
 	
            John Warwick Adcock and Rodney Alfred John Reynolds
 	
            Automatic Electronic Funds Transfer System and Method
 	
            1831
 
	
            New Zealand

 
 	
            John Warwick Adcock and Rodney Alfred John Reynolds
 	
            Automatic Electronic Funds Transfer System and Method
 	
            334917
 
	
            Taiwan

 
 	
            John Warwick Adcock and Rodney Alfred John Reynolds
 	
            Automatic Electronic Funds Transfer System and Method
 	
            105305
 
	
            South Africa

 
 	
            John Warwick Adcock and Rodney Alfred John Reynolds
 	
            Automatic Electronic Funds Transfer System and Method
 	
            97/7747
 
	
            International PCT

 
 	
            John Warwick Adcock and Rodney Alfred John Reynolds
 	
            Automatic Electronic Funds Transfer System and Method
 	
            PO 2011exhibit10.htm

    

      
        
           

        

        
           

          
            

          

        

        
           

          
            PLAN
VERSION

            

            

          

        

      

      Debtor-in-Possession Senior Secured Facilities

       

      Summary
of Principal Terms and Conditions

       

      THIS
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS IS FOR USE IN THE

       

      COMPANY'S
SOLICITATION OF ACCEPTANCES OF A PREPACKAGED PLAN OF

       

      REORGANIZATION
AND DOES NOT CONSTITUTE A COMMITMENT TO LEND OR

       

      TO
SYNDICATE A FINANCING OR AN AGREEMENT TO PREPARE, NEGOTIATE,

       

      EXECUTE
OR DELIVER SUCH A COMMITMENT.

       

      
        	
                Borrower:

              	
                Source
      Interlink Companies, Inc., as a debtor and debtor-in-possession (“Borrower”) in a case (the “Case”) filed under Chapter 11 of the United
      States Bankruptcy Code (the “Bankruptcy
      Code”) in the United States Bankruptcy Court for the District of
      Delaware (the “Bankruptcy
      Court”).

              
	
                Joint
      Lead Arrangers and Joint Bookrunners:

              	
                 

                DIP
      Revolving Facility: Citigroup Global Markets Inc. (“CGMI”) and J.P. Morgan Securities Inc.
      (“JPMSI”).

                DIP
      Term Facility: CGMI and JPMSI

              
	
                Syndication
      Agent:

              	
                DIP
      Revolving Facility: Wells Fargo Foothill, LLC

                DIP
      Term Facility: JPMorgan Chase Bank, N.A.

              
	
                Administrative
      Agent:

              	
                Citicorp
      North America, Inc. (in its capacity as Administrative Agent, the “Administrative Agent”).

              
	
                Collateral
      Agent:

              	
                DIP
      Revolving Facility: Citicorp North America, Inc. and Wells Fargo Foothill,
      LLC (or its designated affiliate or subsidiary)

                DIP
      Term Facility: Citicorp North America, Inc.

              
	
                DIP
      Lenders:

              	
                (A)DIP
      Term Facility

              
	 
      	
                A
      syndicate of financial institutions consisting of lenders under the
      Borrower's prepetition Term Loan Agreement, dated as of August 1, 2007 (as
      amended, the “Prepetition Term Loan”)
      (the “DIP Term
    Lenders”).

              
	 
      	
                For
      each dollar of DIP Term Loans (as defined below) committed to be made by
      each DIP Term Lender, such DIP Term Lender shall have the right, in
      accordance with the terms and subject to the conditions of the Senior
      Secured Credit Facilities Summary of Principal Terms and Conditions
      attached here to as Annex II (the
      “Exit Term Sheet”), to have a dollar
      of its Prepetition Term Loan converted to Term B Loans (as defined in the
      Exit Term Sheet) under an amended and restated Prepetition Term Loan
      agreement.

              
	 
      	
                (B)DIP
      Revolving Facility

              
	 
      	
                A
      syndicate of financial institutions consisting of lenders under the
      Borrower's prepetition Revolving Credit Agreement, dated as of August 1,
      2007 (as amended, the “Prepetition Revolving
      Facility” and, collectively with the Prepetition Term Loan, the
      “Prepetition Facilities”) (the “DIP Revolving Lenders” and, collectively
      with the DIP Term Lenders, the “DIP
      Lenders”), providing revolving commitments equivalent to their
      respective commitments under the Prepetition Revolving
      Facility.

              
	
                Debtor-in-Possession
      Senior Secured Facilities:

              	
                (A)A
      super-priority senior secured multiple-draw term loan facility in an
      aggregate principal amount of $85,000,000 (the “DIP Term Facility”).

              
	 
      	
                (B)A
      super-priority senior secured revolving credit facility in an aggregate
      principal amount of $300,000,000, subject to the Borrowing Base (as
      defined below) (the “DIP Revolving
      Facility” and, together with the DIP Term Facility, the “DIP Facilities”).

              
	 
      	
                The
      DIP Term Facility will be documented pursuant to a credit agreement
      separate from that governing the DIP Revolving
Facility.

              
	
                Closing
      Date:

              	
                Not
      later than three (3) Business Days after entry of the Interim Order (as
      defined below), but in any event, not later than April 30, 2009 (the
      “Closing Date”).

              
	
                Purpose
      and Availability:

              	
                (A)DIP
      Term Facility

              
	 
      	
                The
      DIP Term Facility (the loans thereunder, the “DIP Term Loans”) will be available to be
      drawn in up to three drawings consistent with the Cash Flow Forecast (as
      defined below), with drawings permitted on the Closing Date and on a
      weekly basis thereafter; provided
      that the full remaining commitment may be drawn on the third draw without
      regard to the Cash Flow Forecast; provided further that if a plan of reorganization is
      consummated in accordance with the Exit Term Sheet, any remaining
      commitments to make DIP Term Loans will be available to be funded in an
      additional draw in connection therewith.  Amounts borrowed under
      the DIP Term Facility that are repaid or prepaid may not be
      reborrowed.

              
	 
      	
                The
      proceeds of loans under the DIP Term Facility will be used by Borrower (i)
      to pay fees and expenses associated with the DIP Facilities, (ii) to
      provide working capital from time to time for the Borrower and its
      subsidiaries and for other general corporate purposes during the pendency
      of the Chapter 11 Cases (as defined below), and (iii) in connection with
      the consummation of a plan of reorganization in accordance with the Exit
      Term Sheet.

              
	 
      	
                (B)Revolving
      Facility

              
	 
      	
                The
      amount from time to time available under the DIP Revolving Facility
      (including in respect of Letters of Credit) shall not exceed the lesser of
      (A) sum (the “Borrowing Base”) of
      (i) the lower of (x) 85% of the net orderly liquidation value of, and
      (y) 65% of the cost of, all eligible inventory of Borrower and its
      subsidiaries and (ii) 85% of eligible accounts receivable of Borrower
      and its subsidiaries, with reserves and eligibility criteria in respect of
      the Borrowing Base as determined by the Collateral Agents in their
      reasonable discretion and (B) the then available
      commitments.  The eligibility reserve under the Prepetition
      Revolving Facility (which is $20,000,000 as of April 22, 2009, and is
      scheduled to $25,000,000 on April 29, 2009) will be released and replaced
      with a minimum excess availability covenant as set forth under “Financial
      Covenants” below.  The Collateral Agents shall be entitled to
      maintain a reserve in an amount equal to the Carve-Out.

              
	 
      	
                The
      proceeds of loans under the DIP Revolving Facility (the loans thereunder,
      the “DIP Revolving Loans” and,
      together with the DIP Term Loans, the “DIP
      Loans”) will be used by Borrower (i) to refinance the Prepetition
      Revolving Facility in full, (ii) to pay fees and expenses associated with
      the DIP Facilities, and (iii) to provide working capital from time to time
      for the Borrower and its subsidiaries and for other general corporate
      purposes during the pendency of the Chapter 11 Cases.  Loans
      under the DIP Revolving Facility are available at any time before the
      final maturity of the DIP Revolving Facility, in agreed minimum principal
      amounts.

              
	 
      	
                $50,000,000
      of the DIP Revolving Facility (subject to the Borrowing Base) is available
      for the issuance of letters of credit (the “Letters of Credit”) by Citibank, N.A. or
      one or more Lenders to be agreed upon (any Lender in such capacity, an
      “Issuing Lender”).  No
      Letter of Credit shall have an expiration date after one year after the
      date of issuance, provided that any
      Letter of Credit with a one-year tenor may provide for the renewal thereof
      for additional one-year periods.  Letters of credit outstanding
      under the Prepetition Revolving Facility on the Closing Date shall be
      deemed to be Letters of Credit under the DIP Revolving
      Facility.

              
	 
      	
                Drawings
      under any Letter of Credit shall be reimbursed by Borrower (whether with
      its own funds or with the proceeds of revolving loans) within one business
      day.  To the extent that Borrower does not so reimburse the
      applicable Issuing Lender within one business day, the Lenders under the
      DIP Revolving Facility shall be irrevocably and unconditionally obligated
      to reimburse the applicable Issuing Lender on a pro rata basis.

              
	 
      	
                Availability
      of the DIP Facilities for vendor payments on account of prepetition claims
      shall be limited to ordinary course payments to vendors who have agreed in
      writing (which may be by confirmatory email) to provide commercial and
      credit terms no worse for the Borrower and its subsidiaries than in
      accordance with such vendor's ordinary course past practices with the
      Borrower and its subsidiaries; provided that, to the extent that such
      written acknowledgment is not practical, in lieu of such writing, payments
      may be made on account of prepetition claims to vendors who have been
      advised that the payments have been made pursuant to a court order on the
      basis that such vendors will maintain such commercial and credit
      terms.

              
	
                Final
      Maturity Date:

              	
                The
      date which is the earliest of (i) the two-month anniversary of the Closing
      Date (the “Scheduled Maturity Date”),
      (ii) 30 days after the entry of the Interim Order if the Final Order
      (defined below) has not been entered by the Bankruptcy Court on or before
      such date, (iii) the date of substantial consummation (as defined in
      Section 1101 of the Bankruptcy Code) of a plan of reorganization that is
      confirmed pursuant to an order entered by the Bankruptcy Court and (iv)
      such earlier date on which all DIP Loans shall become due and payable in
      accordance with the terms of the Operative Documents.

              
	
                Amortization
      / Payment at Maturity:

              	
                No
      amortization prior to Final Maturity Date.  Amounts outstanding
      under the DIP Facilities shall become due and payable on the Final
      Maturity Date; provided that if a
      plan of reorganization is consummated in accordance with the Exit Term
      Sheet, (i) any remaining commitments to make DIP Term Loans will be
      available to be funded in connection therewith, and the DIP Term Loans
      (including any amounts so funded) shall be converted on a
      dollar-for-dollar basis on the effective date of such plan of
      reorganization into Term A Loans (as defined in the Exit Term Sheet) under
      an amended and restated Prepetition Term Loan agreement in accordance with
      the terms set forth in the Exit Term Sheet in satisfaction of the
      corresponding obligations under the DIP Term Facility and (ii) the DIP
      Revolving Loans and commitments shall be converted on a dollar-for-dollar
      basis on the effective date of such plan of reorganization into Revolving
      Loans (as defined in the Exit Term Sheet) and commitments in accordance
      with the terms set forth in the Exit Term Sheet in satisfaction of the
      corresponding obligations under the DIP Revolving
  Facility.

              
	
                Interest
      Rates and Fees:

              	
                As
      set forth on Annex I
      hereto.

              
	
                Guarantors:

              	
                Borrower’s
      direct and indirect domestic subsidiaries existing on the Closing Date or
      thereafter created or acquired, except as otherwise provided in the credit
      documents, each as a debtor and debtor-in-possession in a case
      (collectively with the Case of the Borrower, the “Chapter 11 Cases”) filed under Chapter 11
      of the Bankruptcy Code in the Bankruptcy Court, shall unconditionally
      guarantee, on a joint and several basis, all obligations of Borrower under
      the DIP Facilities and under each cash management agreement entered into
      with a DIP Lender or an affiliate of a DIP Lender.  Each
      guarantor of the DIP Facilities is herein referred to as a “Guarantor” and its guarantee is referred to
      herein as a “Guarantee”; Borrower and
      the Guarantors are herein referred to as the “Credit Parties.”

              
	
                Adequate
      Protection:

              	
                The
      lenders under the Prepetition Facilities shall agree that their adequate
      protection, as that term is used in section 361 of the Bankruptcy Code
      (“Adequate Protection”) on account of
      Borrower's use of cash collateral, collateral diminution, obtaining
      priming lien financing, the imposition of the automatic stay, the Term
      Loan Primed Liens, Revolving Loan Primed Liens or any other reason shall
      be as set forth in the Interim Order or the Final Order, as applicable,
      and shall be of the type and in amounts acceptable to the DIP
      Lenders.

              
	
                Cash
      Collateral:

              	
                The
      lenders under the Prepetition Facilities shall authorize and consent to
      Borrower's use of cash collateral for, among other things, working capital
      and general corporate purposes (provided that such lenders shall receive
      Adequate Protection as provided herein), all in accordance with and
      subject to the Interim Order or the Final Order, as applicable, in each
      case on terms acceptable to the DIP Lenders.

              
	
                Collateral:

              	
                The
      DIP Term Facility and the Guarantees in respect thereof shall at all
      times:

                (i)
      pursuant to section 364(c)(1) of the Bankruptcy Code, be entitled to
      superpriority administrative claim status in the Chapter 11
      Cases;

                (ii)
      pursuant to section 364(c)(2) of the Bankruptcy Code, be secured by
      perfected first priority liens on all property of the Borrowers or the
      Guarantors of the kind that would come within the definition of Fixed
      Asset Collateral (as defined in the Intercreditor Agreement) if such
      property were subject to liens securing the Prepetition Revolving Facility
      or the Prepetition Term Loan and second priority liens on all property of
      the Borrower and the Guarantors of the kind that would come within the
      definition of Current Asset Collateral (as defined in the Intercreditor
      Agreement) if such property were subject to liens securing the Prepetition
      Revolving Facility or the Prepetition Term Loan, in each case, that is not
      subject to valid, perfected and non-avoidable liens in existence on the
      Petition Date (defined below) in favor of any party, including, without
      limitation, stock in subsidiaries, foreign and domestic, except that with
      respect to non-U.S. subsidiaries such lien and pledge shall be limited to
      65% of the capital stock of “first-tier” non-U.S.
      subsidiaries;

                (iii)
      pursuant to section 364(c)(3) of the Bankruptcy Code, be secured by
      perfected junior liens on all property of the Borrower and Guarantors now
      owned or hereafter acquired that are subject to valid, perfected and
      non-avoidable liens in existence on the Petition Date or to valid liens in
      existence on the Petition Date as permitted by Section 546(b) of the
      Bankruptcy Code, below (other than as provided with respect to priming
      liens in clause (iv), below);

                (iv)
      pursuant to Section 364(d)(1) of the Bankruptcy Code, be secured by a
      perfected first priority, senior priming lien on all the property of the
      Borrower and Guarantors now owned or hereafter acquired of any kind,
      senior to (a) the liens that secure the obligations of the Borrower and
      Guarantors, under the Prepetition Term Loans, (b) any liens to which such
      liens are senior (including Prepetition Vendor Liens (as defined below)),
      all of which existing liens (together with the liens referred to in clause
      (a) above, the “Term Loan Primed
      Liens”) shall be primed by and made subject and subordinate to the
      perfected first priority senior liens to be granted to the Administrative
      Agent, which senior priming liens in favor of the Administrative Agent
      shall also prime any liens after the commencement of the Chapter 11 Cases
      to provide adequate protection in respect of any Term Loan Primed Liens
      but shall not prime liens, if any, to which the Term Loan Primed Liens are
      subject at the time of the commencement of the Chapter 11 Cases; provided, that in no event shall the Term
      Loan Primed Liens include liens (including replacement liens) on Current
      Asset Collateral securing the Prepetition Revolving Facility or the DIP
      Revolving Facility; and

                (v)
      such liens and security interests shall not be subject or subordinate to
      any liens or security interests that are avoided and preserved for the
      benefit of any of the Borrower or the Guarantors under section 551 of the
      Bankruptcy Code or any liens arising after the Petition Date including,
      without limitation, any liens or security interests granted in favor of
      any federal, state, municipal or other governmental unit, commission,
      board or court for any liability of any of the Borrower or the Guarantors
      other than with respect to any liens or security interest arising after
      the Petition Date and permitted under the DIP Term Facility to be senior
      to the liens granted thereunder.

                The
      DIP Revolving Facility, the Guarantees in respect thereof and the
      obligations of Borrower under each cash management agreement entered into
      with a DIP Revolving Lender, any affiliate of a DIP Revolving Lender, a
      DIP Term Lender or any affiliate of a DIP Term Lender shall at all
      times:

                (i)
      pursuant to section 364(c)(1) of the Bankruptcy Code, be entitled to
      superpriority administrative claim status in the Chapter 11
      Cases;

                (ii)
      pursuant to section 364(c)(2) of the Bankruptcy Code, be secured by
      perfected first priority liens on all property of the Borrowers or the
      Guarantors of the kind that would come within the definition Current Asset
      Collateral if such property were subject to liens securing the Prepetition
      Revolving Facility or the Prepetition Term Loan and second priority liens
      on all property of the Borrower and the Guarantors of the kind that would
      come within the definition Fixed Asset Collateral if such property were
      subject to liens securing the Prepetition Revolving Facility or the
      Prepetition Term Loan, in each case, that is not subject to valid,
      perfected and non-avoidable liens in existence on the Petition Date
      (defined below) in favor of any party, including, without limitation,
      stock in subsidiaries, foreign and domestic, except that with respect to
      non-U.S. subsidiaries such lien and pledge shall be limited to 65% of the
      capital stock of “first-tier” non-U.S. subsidiaries;

                (iii)
      pursuant to section 364(c)(3) of the Bankruptcy Code, be secured by
      perfected junior liens on all property of the Borrower and Guarantors now
      owned or hereafter acquired that is subject to valid, perfected and
      non-avoidable liens in existence on the Petition Date or to valid liens in
      existence on the Petition Date as permitted by Section 546(b) of the
      Bankruptcy Code, below (other than as provided with respect to priming
      liens in clause (iv), below);

                (iv)
      pursuant to Section 364(d)(1) of the Bankruptcy Code, be secured by a
      perfected first priority, senior priming lien on all the property of the
      Borrower and Guarantors now owned or hereafter acquired of any kind,
      senior to (a) the liens that secure the obligations of the Borrower and
      Guarantors, under the Prepetition Revolving Facility, (b) any liens to
      which such liens are senior (including the Prepetition Vendor Liens), all
      of which existing liens (together with the liens referred to in clause (a)
      above, the “Revolving Loan Primed
      Liens”) shall be primed by and made subject and subordinate to the
      perfected first priority senior liens to be granted to the Collateral
      Agent and Administrative Agent, which senior priming liens in favor of the
      Administrative Agent and Collateral Agent shall also prime any liens after
      the commencement of the Chapter 11 Cases to provide adequate protection in
      respect of any Revolving Loan Primed Liens but shall not prime liens, if
      any, to which the Revolving Loan Primed Liens are subject at the time of
      the commencement of the Chapter 11 Cases; provided, that in no event shall the
      Revolving Loan Primed Liens include liens (including replacement liens) on
      Fixed Asset Collateral securing the Prepetition Term Loan or the DIP Term
      Facility; and

                (v)
      such liens and security interests shall not be subject or subordinate to
      any liens or security interests that are avoided and preserved for the
      benefit of any of the Borrower or the Guarantors under section 551 of the
      Bankruptcy Code or any liens arising after the Petition Date including,
      without limitation, any liens or security interests granted in favor of
      any federal, state, municipal or other governmental unit, commission,
      board or court for any liability of any of the Borrower or the Guarantors
      other than with respect to any liens or security interest arising after
      the Petition Date and permitted under the DIP Revolving Facility to be
      senior to the liens granted thereunder.

                Upon
      entry of the Final Order, the collateral shall include all proceeds of any
      avoidance actions under chapter 5 of the Bankruptcy Code and any proceeds
      thereof.

                Notwithstanding
      the foregoing, the claims and liens set forth above would be subject and
      subordinate to the following “Carve
      Out”, which shall mean the following amounts:  (i) all
      fees required to be paid to the Clerk of the Bankruptcy Court and
      statutory fees payable to the U.S. Trustee pursuant to 28 U.S.C. §
      1930(a)(6); and (ii) in the event of an occurrence and during the
      continuance of an Event of Default, the “Case Professionals Carve Out”, comprising
      the sum of (a) all allowed unpaid fees, expenses and disbursements
      (regardless of when such fees, expenses, and disbursements become allowed
      by order of the Court) for any professionals retained by the Debtors
      pursuant to section 327 of the Bankruptcy Code (the “Case Professionals”) incurred subsequent to
      receipt of notice delivered by the DIP Term Loan Agent to counsel for the
      Debtors following the occurrence of an Event of Default expressly stating
      that the Carve Out has been invoked (a “Carve Out Trigger Notice”) in an aggregate
      amount not in excess of $2,000,000 (the “Carve Out Cap”), plus (b) all unpaid
      professional fees, expenses, and disbursements of such Case Professionals
      incurred prior to receipt of the Carve Out Trigger Notice to the extent
      previously or subsequently allowed pursuant to an order of the Court
      (collectively, “Allowed Professional
      Fees”) under sections 328, 330 and/or 331 of the Bankruptcy Code,
      but in the case of clause (b), solely to the extent such fees, expenses
      and disbursements were incurred in accordance with the Cash Flow Forecast
      (as such fees, expenses and disbursements provided for in the Cash Flow
      Forecast may be increased by prior notice from the Borrower or its counsel
      to the Administrative Agent).  The liens of the DIP Facilities
      shall prime the liens of vendors (the “Prepetition Vendor Liens”) to the Credit
      Parties in assets of the Credit Parties.

              
	
                Cash
      Management:

              	
                In
      addition, with respect to the DIP Revolving Facility, the Credit Parties
      will be required to maintain with the Administrative Agent or a bank
      affiliate of the Administrative Agent main cash concentration accounts,
      and with the Administrative Agent or a bank affiliate of the
      Administrative Agent or other banks reasonably acceptable to the
      Administrative Agent (it being agreed that Wachovia Bank, National
      Association and Wells Fargo Bank, N.A. (and their respective successors)
      are each an acceptable bank to the Administrative Agent) blocked accounts
      (with specified exceptions for certain accounts) into which all proceeds
      of collateral are paid (and with respect to which (with specified
      exceptions for certain accounts), if requested by the Administrative
      Agent, account control agreements in form and substance acceptable to the
      Administrative Agent have been executed).  All amounts on
      deposit in any blocked account shall be transferred to the main
      concentration account at the end of each business day and all amounts on
      deposit in the main concentration account shall be applied on a daily
      basis by the Administrative Agent to reduce amounts outstanding under the
      DIP Revolving Facility.

              
	
                Intercreditor
      Agreement:

              	
                The
      DIP Revolving Facility and the DIP Term Facility shall be subject to such
      intercreditor arrangements as may be necessary to reflect the lien
      priority, relative rights and other creditors’ rights issues in respect of
      each other, the Prepetition Facilities.  The parties to the
      Borrower's existing Intercreditor Agreement with respect to the
      Prepetition Facilities (the “Intercreditor
      Agreement”) shall acknowledge that the obligations under the DIP
      Term Facility shall be treated as “Term Loan Obligations” for purposes of
      the Intercreditor Agreement, entitled to all of the benefits of such
      agreement.

                 

              
	
                Operative
      Documents:

              	
                Credit
      agreements, security agreements, guarantees, intercreditor agreements and
      other agreements to be mutually agreed executed, delivered and/or filed or
      recorded at any time in connection with the DIP Facilities (the “Operative Documents”).

              
	
                Optional
      Prepayments and

                Reductions
      in Commitments:

              	
                 

                Loans
      may be prepaid and commitments may be reduced by Borrower, in minimum
      agreed amounts, at Borrower’s option at any time, without penalty, premium
      or fees (subject to breakage costs).

              
	
                Mandatory
      Prepayments:

              	
                Loans
      under the DIP Facilities shall be prepaid in an amount equal to 100% of
      the net cash proceeds of all non-ordinary-course asset sales or other
      dispositions of property by Borrower and its subsidiaries (including
      insurance and condemnation proceeds in excess of an agreed amount),
      subject to specified exceptions (with net cash proceeds of Fixed Asset
      Collateral to be applied first to obligations under the DIP Term Facility,
      and net cash proceeds of Current Asset Collateral to be applied first to
      obligations under the DIP Revolving Facility).

              
	 
      	
                In
      addition, loans under the DIP Revolving Facility shall be repaid (and any
      excess amounts shall be applied to cash collateralize outstanding Letters
      of Credit) to the extent that such loans and Letters of Credit exceed the
      lesser of the then current Borrowing Base or effective commitments
      thereunder.

              
	
                Representations
      and Warranties:

              	
                The
      Operative Documents will contain representations and warranties
      customarily found in the Administrative Agent’s loan agreements for
      similar financings and other representations and warranties deemed by the
      Administrative Agent appropriate to the specific transaction, subject to,
      where appropriate, materiality thresholds to be agreed (which will be
      applicable to the Borrower, the Guarantors and their respective
      subsidiaries), including, without limitation with respect
    to:

              
	 
      	
                1.Corporate
      status and authority.

              
	 
      	
                2.Execution,
      delivery, and performance of Operative Documents do not violate law or
      other agreements.

              
	 
      	
                3.No
      government or regulatory approvals required, other than approvals in
      effect.

              
	 
      	
                4.Due
      authorization, execution and delivery of Operative Documents; legality,
      validity, binding effect and enforceability of the Operative
      Documents.

              
	 
      	
                5.Ownership
      of Borrower and its subsidiaries.

              
	 
      	
                6.Accuracy
      of financial statements and other information.

              
	 
      	
                7.No
      material adverse change in (i) the business, assets, operations,
      properties, financial condition or results of operations of Borrower and
      its subsidiaries, taken as a whole (other than events leading up to and
      resulting from the anticipated filing of the Chapter 11 Cases), (ii) the
      legality, validity, binding effect or enforceability of the credit
      documents against Borrower or the Guarantors or (iii) the rights and
      remedies available to the Administrative Agent, any other agent, the DIP
      Lenders or any other secured party under any Operative Document (any of
      the foregoing a “Material Adverse
      Change”).

              
	 
      	
                8.No
      action, suit, investigation, litigation or proceeding pending or
      threatened in any court or before any arbitrator or governmental authority
      that could reasonably be expected to result in a Material Adverse
      Change.

              
	 
      	
                9.Payment
      of taxes.

              
	 
      	
                10.Accurate
      and complete disclosure.

              
	 
      	
                11.Compliance
      with margin regulations.

              
	 
      	
                12.No
      default under agreements if such default could reasonably be expected to
      result in a Material Adverse Change.

              
	 
      	
                13.Inapplicability
      of the Investment Company Act.

              
	 
      	
                14.Use
      of proceeds.

              
	 
      	
                15.Insurance.

              
	 
      	
                16.Labor
      matters.

              
	 
      	
                17.Compliance
      with laws and regulations, including ERISA, and all applicable
      environmental laws and regulations.

              
	 
      	
                18.Ownership
      of properties and necessary rights to intellectual
    property.

              
	 
      	
                19.Validity,
      priority and perfection of security interests in
    collateral.

              
	 
      	
                20.Status
      of DIP Facilities as senior debt entitled to superpriority administrative
      claim status in the Chapter 11 Cases.

              
	
                Conditions
      Precedent to the Closing Date:

              	
                The
      Operative Documents will contain conditions to the closing of the DIP
      Facilities customarily found in the Administrative Agent’s loan agreements
      for similar financings and other conditions deemed by the Administrative
      Agent to be appropriate to the specific transaction and in any event
      including without limitation:

              
	 
      	
                1.All
      documentation relating to the DIP Facilities shall be in form and
      substance consistent with this term sheet and otherwise satisfactory to
      the Borrower and its counsel and the Administrative Agent and its counsel
      (including any applicable intercreditor agreements or amendments thereto
      and appropriate fee reimbursement letters), and the primary documentation
      for each DIP Facility also shall be in form and substance satisfactory to
      each DIP Lender thereunder.

              
	 
      	
                2.All
      fees and out-of-pocket expenses (including reasonable fees and expenses of
      counsel) required to be paid to the Administrative Agent, each other
      agent, and the DIP Lenders on or before the Closing Date shall have been
      paid.

              
	 
      	
                3.The
      DIP Lenders shall have received, and the Required DIP Revolving Lenders
      and the Required DIP Term Lenders be satisfied with, (i) audited financial
      statements (or, if audited financial statements are not available, current
      draft financial statements) of the Borrower and its subsidiaries for the
      fiscal period ending January 31, 2009, (ii) interim unaudited monthly
      financial statements of the Borrower and its subsidiaries through the
      fiscal months ending February and (if available) March, 2009, (iv) the
      Borrower’s business plan which shall include a financial forecast on a
      monthly basis for the fiscal year ending January 31, 2010, and on an
      annual basis through the year of the last scheduled maturity of any of the
      Senior Secured Facilities (as defined in the Exit Term Sheet), and shall
      detail projected borrowing base capacity and availability for such periods
      prepared by the Borrower’s management, and (v) the initial Cash Flow
      Forecast.

              
	 
      	
                4.The
      Administrative Agent shall be satisfied that (i) the Borrower’s, the
      Guarantors’, and their respective subsidiaries’ existing debts and liens
      do not exceed an amount agreed upon prior to the Closing Date, and (ii)
      there shall not occur as a result of, and after giving effect to, the
      consummation of the funding of the DIP Facilities, a default (or any event
      which with the giving of notice or lapse of time or both would be a
      default) under any of the Borrower’s, the Guarantors’ or their respective
      subsidiaries’ debt instruments and other agreements that could reasonably
      be expected to result in a Material Adverse Change.

              
	 
      	
                5.The
      Administrative Agent shall have received satisfactory opinions of
      independent counsel to the Borrower and the Guarantors, addressing such
      customary matters as the Administrative Agent shall reasonably request,
      including, without limitation, the enforceability of all Operative
      Documents, no conflicts with applicable laws and regulations, and entry of
      the Interim Order.

              
	 
      	
                6.The
      absence of a material adverse change, or any event or occurrence which
      could reasonably be expected to result in a material adverse change, in
      (i) the business, condition (financial or otherwise), operations,
      performance, properties, contingent liabilities, material agreements or
      prospects of the Borrower, the Guarantors and their respective
      subsidiaries, taken as a whole, since January 31, 2008 (other than events
      leading up to and resulting from the anticipated filing of the Chapter 11
      Cases), (ii) the ability of the Borrower or the Guarantors to perform
      their respective obligations under the Operative Documents or (iii) the
      ability of the Administrative Agent and the DIP Lenders to enforce the
      Operative Documents.

              
	 
      	
                7.There
      shall exist no action, suit, investigation, litigation or proceeding
      pending or threatened in any court or before any arbitrator or
      governmental instrumentality (other than the Chapter 11 Cases) that (i)
      could reasonably be expected to result in a Material Adverse Change or
      (ii) restrains, prevents or imposes or can reasonably be expected to
      impose materially adverse conditions upon the DIP Facilities or the
      transactions contemplated thereby.

              
	 
      	
                8.All
      necessary governmental and third party consents and approvals necessary in
      connection with the DIP Facilities and the transactions contemplated
      thereby shall have been obtained (without the imposition of any conditions
      that are not reasonably acceptable to the DIP Lenders) and shall remain in
      effect, and all applicable governmental filings have been made and all
      applicable waiting periods shall have expired without in either case any
      action being taken by any competent authority; and no law or regulation
      shall be applicable in the judgment of the DIP Lenders that restrains,
      prevents or imposes materially adverse conditions upon the DIP Facilities
      or the transactions contemplated thereby.

              
	 
      	
                9.The
      DIP Lenders shall have a valid and perfected lien on and security interest
      in the collateral referred to above under “Collateral” having the priority
      described in such section; searches necessary or desirable in connection
      with such liens and security interests that have been requested by the
      Administrative Agent shall have been duly made.

              
	 
      	
                10.The
      Administrative Agent shall have received endorsements naming the
      Administrative Agent, on behalf of the DIP Lenders, as an additional
      insured and loss payee under all insurance policies to be maintained with
      respect to the properties of the Borrower, the Guarantors and their
      respective subsidiaries forming part of the DIP Lenders’
      collateral.

              
	 
      	
                11.The
      filing of voluntary petitions for relief under chapter 11 of title 11 the
      Bankruptcy Code by the Borrower and each Guarantor (the date of such
      filing, the “Petition Date”) shall
      have occurred.

              
	 
      	
                12.Not
      later than three (3) business days after the Petition Date, entry of an
      order of the Bankruptcy Court (the “Interim
      Order”) acceptable in all respects to the Required DIP Revolving
      Lenders and the Required DIP Term Lenders on an application or motion by
      the Borrower and Guarantors, that motion to be satisfactory in form and
      substance to the Required DIP Revolving Lenders and the Required DIP Term
      Lenders, which Interim Order shall have been entered on such notice to
      such parties as may be satisfactory to the Required DIP Revolving Lenders
      and the Required DIP Term Lenders, approving the transactions contemplated
      herein and granting the superiority claim status and liens referred to
      above, and which Interim Order, among other things, shall (i) approve the
      DIP Facilities and authorize extensions of credit under the DIP
      Facilities, (ii) approve the payment by the Borrower and Guarantors of all
      the fees provided for herein, (iii) lift the automatic stay to permit the
      Borrower and Guarantors to perform their obligations, and the
      Administrative Agent and the Lenders to exercise their remedies, with
      respect to the DIP Facilities, (iv) provide for the automatic termination
      of the automatic stay (but solely with respect to the DIP Facilities)
      after three (3) business days notice of an Event of Default, with a full
      waiver by the Borrower and Guarantors of all rights to contest such
      termination except with respect to the existence of an Event of Default;
      (v) not have been reversed, modified, amended or stayed, and (vi) have
      such other findings, orders and relief typical for financings of the type
      contemplated herein.

              
	 
      	
                13.All
      first-day and related orders entered by the Bankruptcy Court in the
      Chapter 11 Cases shall be in form and substance reasonably satisfactory to
      the Required DIP Revolving Lenders and the Required DIP Term
      Lenders.

              
	 
      	
                14.The
      DIP Lenders shall be satisfied in their sole discretion with the status of
      the vendor relationships of the Borrower and its subsidiaries and matters
      related thereto.

              
	 
      	
                15.The
      aggregate commitments of all DIP Lenders in respect of the DIP Facilities
      shall be no less than the maximum aggregate amount of the respective DIP
      Facilities, and the aggregate commitments of all Senior Lenders in respect
      of the Senior Secured Facilities (each as defined in the Exit Term Sheet),
      as applicable, shall be no less than the maximum aggregate amount of the
      respective Senior Secured Facilities.

              
	 
      	
                16.The
      Borrower shall have received the requisite votes needed to confirm the
      Debtor's Prepackaged Joint Plan of Reorganization Pursuant to Chapter 11
      of the Bankruptcy Code.

              
	 
      	
                17.As
      a condition to the effectiveness of the DIP Term Facility, all
      documentation relating to the DIP Revolving Facility shall have been
      completed in form and substance satisfactory to the Required DIP Revolving
      Lenders and the Required DIP Term Lenders.  All conditions
      precedent to the DIP Revolving Facility shall have been met (or waived
      with the consent of the Required DIP Revolving Lenders) and the DIP
      Revolving Facility shall be in full force and effect.  As a
      condition to the effectiveness of the DIP Revolving Facility, all
      documentation relating to the DIP Term Facility shall have been completed
      in form and substance satisfactory to the Required DIP Term
      Lenders.  All conditions precedent to the DIP Term Facility
      shall have been met (or waived with the consent the Required DIP Term
      Lenders) and the DIP Term Facility shall be in full force and
      effect.

              
	 
      	
                18.The
      accuracy of all representations and warranties.

              
	 
      	
                Each
      of the conditions precedent may be waived (i) in case of conditions that
      do not specify any person, by the Required DIP Revolving Lenders and/or
      the Required DIP Term Lenders, as applicable, (ii) in the case of
      conditions that specify the DIP Lenders, all DIP Revolving Lenders and/or
      DIP Term Lenders, as applicable, (iii) in the case of conditions that
      specify any other person, such person, and (iv) in the case of any waiver
      of any immaterial condition that does not adversely affect the DIP
      Lenders, the Administrative Agent.

              
	
                Conditions
      Precedent to Each Borrowing:

              	
                (1)
      The absence (both before and after the making of any extension of credit)
      of any continuing default or Event of Default, (2) the accuracy of
      all representations and warranties in all material respects, (3) delivery
      of borrowing notice, (4) the making of such loan shall not violate any
      requirement of law and shall not be enjoined, temporarily, preliminarily
      or permanently, (5) unless otherwise waived by the DIP Lenders, no appeal
      or petition for review, rehearing or certiorari with respect to the Final
      Order (or, prior to entry of the Final Order, the Interim Order) shall be
      pending, and (6) the Final Order (or, prior to entry of the Final Order,
      the Interim Order) shall otherwise be in full force and
      effect.

              
	
                Reporting
      Covenants:

              	
                To
      include, without limitation, the following, to be applicable to Borrower
      and each of its subsidiaries:

                1.Delivery
      of independently audited annual consolidated financial statements and
      unaudited quarterly and monthly consolidated financial statements,
      together with a comparison to the Borrower's prior corresponding financial
      statements and annual financial plan and, with respect to quarterly and
      annual financial statements, a detailed explanation of significant
      variances.

                2.Weekly
      borrowing base certificates and other collateral reporting as
      agreed.

                3.A
      rolling 13-week cash forecast of receipts and disbursements in form and
      substance satisfactory to the Administrative Agent, delivered weekly,
      including all information provided in the cash flow forecast delivered by
      the Borrower pursuant to the Prepetition Facilities, together with a
      variance report and a detailed explanation of significant variances (the
      “Cash Flow Forecast”).

                4.Delivery
      to all DIP Lenders of copies of any and all inspection reports, appraisals
      and field exams performed under the DIP Facilities (which delivery shall
      be consented to by the Administrative Agent or the Collateral Agents, as
      applicable).

                5.Other
      reporting requirements and notices, including notices of default and
      litigation.

              
	
                Affirmative
      Covenants:

              	
                The
      Operative Documents will contain affirmative covenants customarily found
      in the Administrative Agent’s loan agreements for similar financings and
      other affirmative covenants deemed by the Administrative Agent appropriate
      to the specific transaction, subject to, where appropriate, materiality
      thresholds, carve-outs, and exceptions to be mutually agreed (which will
      be applicable to the Borrower, the Guarantors and their respective
      subsidiaries), including, without limitation, the
    following:

              
	 
      	
                1.Preservation
      of corporate existence.

              
	 
      	
                2.Material
      compliance with laws (including ERISA and applicable environmental
      laws).

              
	 
      	
                3.Payment
      of taxes.

              
	 
      	
                4.Payment
      and/or performance of obligations.

              
	 
      	
                5.Maintenance
      of insurance.

              
	 
      	
                6.Access
      to books and records and visitation and access rights, and quarterly
      lender update calls with management, and once per year a lender meeting
      and a presentation regarding the annual budget.

              
	 
      	
                7.Maintenance
      of books and records.

              
	 
      	
                8.Maintenance
      of properties.

              
	 
      	
                9.Environmental
      matters.

              
	 
      	
                10.Provision
      of additional collateral, guarantees and mortgages (including duly making
      all filings, recordations and searches necessary or desirable in
      connection with such liens and security interests that have been requested
      by the Administrative Agent or the Collateral Agents, account control
      agreements in accordance with “Cash Management” above promptly upon
      request by the Administrative Agent or the Collateral Agents, and due
      payment of all filing and recording fees and taxes to the extent
      applicable).

              
	 
      	
                11.Inspections,
      appraisals and field exams with respect to Current Asset Collateral (to
      include at least semi-annual inventory appraisals and quarterly field
      examinations (for field examinations, each field examination will cover
      the Alliance Entertainment business, and at least two field exams per year
      will cover each of the Company's other business segments), and otherwise
      at such times as agreed); provided that, not more than one field exam
      shall be at the Borrower’s expense between the Closing Date and the
      Scheduled Maturity Date (unless the Scheduled Maturity Date has been
      extended) so long as no Event of Default is continuing.

              
	 
      	
                12.Not
      later than thirty (30) days after the Petition Date, the Bankruptcy Court
      shall have entered a final order (in form and substance acceptable to the
      Administrative Agent) on an application or motion by the Borrower and
      Guarantors, that motion to be in form and substance to the Administrative
      Agent, approving the financing transactions contemplated herein and
      granting the superpriority claim status and liens referred to above, and
      which Final Order, among other things, shall (i) approve the DIP
      Facilities and authorize extensions of credit under the DIP Facilities,
      (ii) approve the payment by the Borrower and Guarantors of all the fees
      provided for herein, (iii) lift the automatic stay to permit the Borrower
      and Guarantors to perform their obligations, and the Administrative Agent
      and the Lenders to exercise their remedies, with respect to the DIP
      Facilities, (iv) provide for the automatic termination of the automatic
      stay (but solely with respect to the DIP Facilities) after three (3)
      business days notice of an Event of Default, with a full waiver by the
      Borrower and Guarantors of all rights to contest such termination except
      with respect to the existence of an Event of Default, (v) not have been
      reversed, modified, amended or stayed, and (vi) have such other findings,
      orders and relief typical for financings of the type contemplated
      herein.  The Final Order shall have been entered on such notice
      to such parties as may be reasonably satisfactory to the DIP Lenders and
      as required by the Bankruptcy Code, the Federal Rules of Bankruptcy
      Procedure, orders of the Bankruptcy Court, and any applicable local
      bankruptcy rules.

              
	
                Negative
      Covenants:

              	
                The
      Operative Documents will contain negative covenants customarily found in
      the Administrative Agent’s loan agreements for similar financings and
      other negative covenants deemed by the Administrative Agent appropriate to
      the specific transaction, subject to, where appropriate, materiality
      thresholds, carve-outs, and exceptions to be mutually agreed (which will
      be applicable to the Borrower, the Guarantors and their respective
      subsidiaries), including, without limitation, the
    following:

              
	 
      	
                1.Limitations
      on liens.

              
	 
      	
                2.Limitations
      on debt (including debt incurred by direct or indirect subsidiaries and
      obligations in respect of foreign currency exchange and other hedging
      arrangements).

              
	 
      	
                3.Limitations
      on dividends, redemptions and repurchases with respect to capital
      stock.

              
	 
      	
                4.Limitations
      on voluntary or optional prepayments, redemptions and repurchases of debt
      (other than loans under the DIP Revolving Facility).

              
	 
      	
                5.Limitations
      on loans and investments.

              
	 
      	
                6.Limitations
      on mergers, consolidations, acquisitions, asset dispositions and
      sale/leaseback transactions.

              
	 
      	
                7.Limitations
      on transactions with affiliates.

              
	 
      	
                8.Limitations
      on changes in business conducted by Borrower and its
      subsidiaries.

              
	 
      	
                9.Limitations
      on amendment of debt and organizational documents.

              
	 
      	
                10.Limitations
      on restrictions on distributions from subsidiaries.

              
	 
      	
                11.Prohibitions
      on the issuance and sale of capital stock or other equity interests of
      Borrower and its subsidiaries.

              
	
                Financial
      Covenants:

              	
                The
      DIP Facilities will have the following financial
  covenants:

              
	 
      	
                1.The
      difference of (i) excess availability minus (ii) the amount of accounts
      payable that are greater than 60 days past due, shall be at least
      $15,000,000 at all times; provided
      that such difference shall be permitted to be as low as $0 from time to
      time during each of two periods selected by the Borrower of 14 consecutive
      calendar days each; provided, however, that the first day of any such
      14-day period shall be no less than 30 days after the first day of the
      prior such period.

              
	 
      	
                2.Actual
      average cash receipts for any period of three weeks shall not be less than
      85% of average cash receipts for such period projected in the initial Cash
      Flow Forecast, and actual average cash disbursements (calculated without
      giving effect to debt service, professional fees and other restructuring
      expenses) for any period of three weeks shall not be more than 115% of
      average cash disbursements for such period projected in the initial Cash
      Flow Forecast, in each case tested on a rolling weekly
    basis.

              
	
                Events
      of Default:

              	
                The
      Operative Documents will contain events of default customarily found in
      the Administrative Agent’s loan agreements for similar financings and
      other events of default deemed by the Administrative Agent appropriate to
      the specific transaction (which will be applicable to the Borrower, the
      Guarantors and their respective subsidiaries), including, without
      limitation, the following, with, where appropriate, grace periods and
      exceptions to be mutually agreed upon:

              
	 
      	
                1.Failure
      to pay principal, interest or any other amount when due (subject to a
      grace period of five business days in the case of interest and other
      amounts).

              
	 
      	
                2.Representations
      or warranties materially incorrect when given.

              
	 
      	
                3.Failure
      to comply with covenants (with notice and cure periods as
      applicable).

              
	 
      	
                4.Cross-default
      and cross-acceleration to debt aggregating an amount to be mutually agreed
      upon.

              
	 
      	
                5.Unsatisfied
      judgment or order in excess of an amount to be mutually agreed upon
      individually or in the aggregate.

              
	 
      	
                6.The
      occurrence of certain ERISA events that result in liabilities in excess of
      an amount to be mutually agreed upon.

              
	 
      	
                7.Change
      of control or ownership (to be defined).

              
	 
      	
                8.Actual
      invalidity, or any assertion by any Credit Party or any affiliate of a
      Credit Party of invalidity, of any collateral or Guarantee or other
      Operative Document.

              
	 
      	
                9.Entry
      of an order granting relief from the automatic stay with respect to any
      claim in excess of specified amounts to be mutually agreed
      upon.

              
	 
      	
                10.Entry
      of or application for order appointing a trustee under Section 1104 of the
      Bankruptcy Code or examiner with enlarged powers under Section 1106(b) of
      the Bankruptcy Code.

              
	 
      	
                11.Entry
      of an order converting any of the Chapter 11 Cases into a chapter 7
      case.

              
	 
      	
                12.Submission
      of, or entry of an order confirming, a plan of reorganization that does
      not (i) provide for termination of the DIP Facilities and payment in full
      in cash of all obligations under the Operative Documents on or before the
      effective date of such plan, except pursuant to (A) a conversion of the
      DIP Term Facility to a Term A Facility (as defined in the Exit Term Sheet)
      substantially in accordance with the Exit Term Sheet, with such changes as
      may be agreed to by the DIP Term Lenders, or (B) a conversion of the DIP
      Revolving Facility to a Revolving Facility (as defined in the Exit Term
      Sheet) substantially in accordance with the Exit Term Sheet, with such
      changes as may be agreed to by the DIP Revolving Lenders, in each case
      pursuant to a Plan of Reorganization (as defined in the Exit Term Sheet)
      in form and substance acceptable to the Required DIP Term Lenders and the
      Required DIP Revolving Lenders and otherwise in compliance with the
      requirements of the Exit Term Sheet, or (ii) provide for the continuation
      of the liens and security interests of the Administrative Agent and
      continued priority thereof until such plan effective
  date.

              
	 
      	
                13.Entry
      of an order dismissing any of the Chapter 11 Cases that does not provide
      for termination of the DIP Facilities and payment in full in cash of all
      obligations under the Operative Documents.

              
	 
      	
                14.Entry
      of an order to (i) revoke, reverse, stay, modify, supplement or amend the
      Interim Order or the Final Order, (ii) permit any administrative expense
      or claim to have administrative priority as to any of the Borrower or
      Guarantors equal or superior to the priority of the Administrative Agent
      and the Lenders in respect of the DIP Facilities, or (iii) grant or permit
      the grant of the liens on the collateral other than as permitted by the
      Operative Documents.

              
	 
      	
                15.Failure
      by the Bankruptcy Court to enter a Final Order within 30 days of the
      Petition Date.

              
	 
      	
                16.There
      shall be filed by any Credit Party any motion to sell all or a substantial
      part of the Collateral on terms that are not acceptable to the Required
      DIP Term Lenders or the Required DIP Revolving Lenders, as
      applicable.

              
	 
      	
                17.Any
      Credit Party shall file any action, suit or other proceeding or contested
      matter challenging the validity, perfection or priority of any Liens
      securing the Prepetition Facilities, or the validity or enforceability of
      any of the Credit Documents (as defined therein), or asserting any
      avoidance claim against, or seeking to recover any monetary damages from,
      any agent or lender under any of the Prepetition Facilities or DIP
      Facilities.

              
	 
      	
                18.Without
      Required DIP Revolving Lenders or Required DIP Term Lenders consent, as
      applicable, any Credit Party shall discontinue or suspend all or any
      material part of its business operations or commence an orderly wind-down
      or liquidation of any material part of the Collateral.

              
	 
      	
                19.Publishers
      representing a material portion of the supply for the Magazine
      Distribution business cease distributing through the Borrower for a two
      week period and such cessation causes a Material Adverse
      Effect.

              
	 
      	
                The
      Administrative Agent shall not exercise rights of setoff or other remedies
      against the collateral on account of an Event of Default until the
      Remedies Notice Period (as defined in the Interim Order) has
      expired.

              
	
                Voting:

              	
                Amendments,
      modifications, terminations and waivers of the Operative Documents for the
      DIP Term Facility or the terms thereof will require the approval of DIP
      Term Lenders holding more than 50% of the aggregate amount of the loans
      and commitments under the DIP Term Facility (but in any event at least
      three unaffiliated DIP Term Lenders) (the “Required DIP Term Lenders”), except that in
      certain circumstances the consent of a greater percentage of the aggregate
      amount of the loans and commitments of the DIP Term Lenders may be
      required.

                Amendments,
      modifications, terminations and waivers of the Operative Documents for the
      DIP Revolving Facility or any provisions thereof will require the approval
      of DIP Revolving Lenders holding more than 50% of the aggregate amount of
      the loans and commitments under the DIP Revolving Facility (the “Required DIP Revolving Lenders”), except
      that in certain circumstances the consent of a greater percentage of the
      aggregate amount of the loans and commitments of the DIP Revolving Lenders
      may be required (including consent of Lenders holding more than 75% of the
      aggregate amount of loans and commitments under the DIP Revolving Facility
      to reduce, amend, waive or terminate the financial covenants or to amend
      certain provisions relating to protective advances).

              
	
                Assignment
      and Participation:

              	
                The
      DIP Lenders will have the right to assign loans and commitments to their
      affiliates, other DIP Lenders (and affiliates of such other DIP Lenders)
      and to any Federal Reserve Bank without restriction, and to other
      financial institutions with the consent, not to be unreasonably withheld,
      of the Administrative Agent and, with respect to the DIP Revolving
      Facility, each issuing bank.  Minimum aggregate assignment level
      (which shall not be applicable to assignments to affiliates of the
      assigning DIP Lenders and other DIP Lenders and their affiliates) of
      $1,000,000 and increments of $1,000,000 in excess thereof.  The
      parties to the assignment (other than Borrower) shall pay to the
      Administrative Agent an administrative fee of $3,500.

              
	 
      	
                Each
      DIP Lender has the right to sell participations in its rights and
      obligations under the loan documents, subject to customary restrictions on
      the participants’ voting rights.

              
	
                Yield
      Protection, Taxes

                and
      Other Deductions:

              	
                 

                The
      loan documents will contain yield protection provisions, customary for
      facilities of this nature, protecting the DIP Lenders in the event of
      unavailability of funding, funding losses, reserve and capital adequacy
      requirements.

              
	 
      	
                All
      payments to be free and clear of any present or future taxes, withholdings
      or other deductions whatsoever (other than income taxes).  The
      DIP Lenders will use reasonable efforts to minimize to the extent possible
      any applicable taxes and Borrower will indemnify the DIP Lenders and the
      Administrative Agent for such taxes paid by the DIP Lenders or the
      Administrative Agent.

              
	
                Expenses:

              	
                Customary
      provisions regarding expense reimbursement by Borrower.

              
	
                Governing
      Law:

              	
                New
      York.

              
	
                Exclusive
      Jurisdiction:

              	
                Bankruptcy
      Court (and, to the extent jurisdiction is not exercised by the Bankruptcy
      Court, a court of the State of New York sitting in New York County or a
      federal court sitting in New York County).

              
	
                Counsel
      to Administrative Agent:

              	
                Skadden,
      Arps, Slate, Meagher & Flom
LLP.

              

      

      
        
          
             

          

           

        

        
           

          
            

          

        

        
           

        

      

      

      ANNEX
I

       

      

       

      Debtor-in-Possession
Senior Secured Credit Facilities

       

      Interest
Rates and Fees

       

      
        	
                Interest
      Rates:

              	
                Borrower
      will be entitled to make borrowings under the DIP Revolving Facility based
      on ABR plus 5.00% or LIBOR plus 6.00%.

                Borrower
      will be entitled to make borrowings under the DIP Term Facility based on
      ABR plus 11.00% or LIBOR plus 12.00%.

              
	 
      	
                Borrower
      may elect interest periods of 1 month for LIBOR
  borrowings.

              
	 
      	
                Calculation
      of interest shall be on the basis of actual days elapsed in a year of 360
      days (or 365 or 366 days, as the case may be, in the case of ABR loans,
      except where ABR is determined pursuant to clause (ii) of the
      definition thereof).

              
	 
      	
                Interest
      will be payable in arrears (a) for loans accruing interest at a rate based
      on LIBOR, at the end of each interest period and on the applicable
      maturity date, (b) for loans accruing interest based on the ABR, monthly
      in arrears and on the applicable maturity date.

              
	 
      	
                LIBOR
      will at all times include statutory reserves, and interest rates will be
      subject to a 3.00% LIBOR floor and a 4.00% ABR
      floor.  Definitions related to determination of LIBOR and ABR
      will be updated to the Administrative Agent's current
  form.

              
	
                Default
      Rate:

              	
                Upon
      the occurrence and during the continuance of an Event of Default, the
      loans, interest, fees, and all other amounts outstanding under the DIP
      Term Facility or the DIP Revolving Facility, as applicable, shall bear
      interest at the applicable interest rate plus 2% per annum payable upon
    demand.

              
	
                Commitment
      Fees:

              	
                A
      per annum commitment fee on
      the undrawn portion of the commitments in respect of the DIP Revolving
      Facility shall accrue from the date of execution and delivery of the
      Operative Documents at a rate per
      annum equal to 0.75%,
      payable monthly in arrears.

                A
      per annum commitment fee on
      the undrawn portion of the commitments in respect of the DIP Term Facility
      shall accrue from the date of execution and delivery of the Operative
      Documents at a rate per annum equal to 1.50%,
      payable monthly in arrears.

              
	 
      	
                Borrower
      shall pay a fee on all outstanding Letters of Credit at a per annum rate equal to the Applicable Margin
      then in effect with respect to LIBOR Loans under the DIP Revolving
      Facility on the face amount of each such Letter of Credit less the fronting fee described in the next
      paragraph.  Such fee shall be shared ratably among the Lenders
      participating in the DIP Revolving Facility and shall be payable quarterly
      in arrears.

              
	 
      	
                A
      fronting fee equal to 0.25% per annum on the face amount of each Letter of
      Credit shall be payable quarterly in arrears to the Issuing Lender for its
      own account.  In addition, customary administrative, issuance,
      amendment, payment and negotiation charges shall be payable to the Issuing
      Lender for its own account.

              
	
                Up-Front
      Fees:

              	
                DIP
      Revolving Facility: An up-front fee of 1.00% of the DIP Revolving Facility
      shall be earned and payable on the Closing Date.

                DIP
      Term Facility: An up-front fee of 3.00% of the DIP Term Facility shall be
      earned and payable on the Closing
Date.

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