Document:

Exhibit 4.12

 

Execution Copy

 

 

CREDIT
AGREEMENT

 

dated as of March 14, 2006

 

among

 

RUSS
BERRIE AND COMPANY, INC.,

as the Loan Party Representative

 

and

 

RUSS
BERRIE U.S. GIFT, INC.,

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

RUSS BERRIE AND COMPANY PROPERTIES, INC.,

RUSSPLUS, INC., AND

RUSS BERRIE AND COMPANY INVESTMENTS, INC.

as the Borrowers,

 

THOSE
FINANCIAL INSTITUTIONS PARTY HERETO,

as Lenders,

 

LASALLE
BUSINESS CREDIT, LLC,

as Administrative Agent  and Arranger,

 

and

 

LASALLE
BANK NATIONAL ASSOCIATION,

as Issuing Bank

 

 

 

TABLE OF
CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 1.

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  1.2

  	
  Other Interpretive Provisions

  	
  29

  
	
   

  	
   

  
	
  SECTION 2.

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

  	
  30

  
	
   

  	
   

  
	
  2.1

  	
  Commitments

  	
  30

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1.1

  	
  Revolving Loan Commitment

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1.2

  	
  [Intentionally Omitted]

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1.3

  	
  L/C Commitment

  	
  31

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Loan Procedures

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2.1

  	
  Various Types of Revolving Loans

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2.2

  	
  Borrowing Procedures

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2.3

  	
  Conversion and Continuation Procedures

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2.4

  	
  Borrowing Representations and Warranties

  	
  34

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Letter of Credit Procedures

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3.1

  	
  L/C Applications

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3.2

  	
  Participations in Letters of Credit

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3.3

  	
  Reimbursement Obligations

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3.4

  	
  Funding by the Lenders to Issuing Bank

  	
  36

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  Commitments Several

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  2.5

  	
  Certain Conditions

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  2.6

  	
  Loan Party Representative

  	
   

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  2.7

  	
  Increase in Commitments

  	
   

  	
  37

  
	
   

  	
   

  
	
  SECTION 3.

  	
  EVIDENCING OF REVOLVING LOANS

  	
   

  	
  38

  
	
   

  	
   

  
	
  3.1

  	
  Notes

  	
  38

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Recordkeeping

  	
  38

  
	
   

  	
   

  
	
  SECTION 4.

  	
  INTEREST

  	
   

  	
  38

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Interest Rates

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  4.2

  	
  Interest Payment Dates

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  4.3

  	
  Setting and Notice of LIBOR Rates

  	
   

  	
  39

  
										

 

i

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  4.4

  	
  Computation of Interest

  	
   

  	
  39

  
	
   

  	
   

  	
   

  
	
  SECTION 5.

  	
  FEES

  	
   

  	
  39

  
	
   

  	
   

  
	
  5.1

  	
  Non-Use Fee

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  5.2

  	
  Letter of Credit Fees

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  5.3

  	
  Administrative Agent’s Fees

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  5.4

  	
  Termination Fee

  	
   

  	
  40

  
	
   

  	
   

  	
   

  
	
  SECTION 6.

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

  	
  40

  
	
   

  	
   

  
	
  6.1

  	
  Reduction or Termination of the Revolving
  Commitment

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1.1

  	
  Voluntary Reduction or Termination of the
  Revolving Commitment

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1.2

  	
  [Intentionally Omitted]

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1.3

  	
  All Reductions of the Revolving Commitment

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  6.2

  	
  Prepayments

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2.1

  	
  Voluntary Prepayments

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2.2

  	
  Mandatory Prepayments

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  6.3

  	
  Manner of Prepayments

  	
  42

  
	
   

  	
   

  	
   

  
	
  6.4

  	
  Repayments

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4.1

  	
  All Obligations

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4.2

  	
  Revolving Loans

  	
  42

  
	
   

  	
   

  
	
  SECTION 7.

  	
  MAKING AND
  PRORATION OF PAYMENTS; SETOFF; TAXES

  	
  42

  
	
   

  	
   

  
	
  7.1

  	
  Making of Payments

  	
   

  	
  42

  
	
   

  	
   

  	
   

  
	
   

  	
  7.1.1

  	
  Manner of Payment; Application of Payment

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1.2

  	
  Payment Authorization

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1.3

  	
  Settlement

  	
  43

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  Application of Certain Payments

  	
   

  	
  44

  
	
   

  	
   

  	
   

  
	
  7.3

  	
  Due Date Extension

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  7.4

  	
  Setoff

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  7.5

  	
  Proration of Payments

  	
   

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  7.6

  	
  Taxes

  	
   

  	
  45

  
										

 

ii

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  SECTION 8.

  	
  INCREASED
  COSTS; SPECIAL PROVISIONS FOR LIBOR LOANS

  	
  46

  
	
   

  	
   

  
	
  8.1

  	
  Increased Costs

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  8.2

  	
  Basis for Determining Interest Rate
  Inadequate or Unfair

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
  8.3

  	
  Changes in Law Rendering LIBOR Loans
  Unlawful

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
  8.4

  	
  Funding Losses

  	
   

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
  8.5

  	
  Right of Lenders to Fund through Other
  Offices

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
  8.6

  	
  Discretion of Lenders as to Manner of
  Funding

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
  8.7

  	
  Mitigation of Circumstances; Replacement of
  Lenders

  	
   

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
  8.8

  	
  Conclusiveness of Statements; Survival of
  Provisions

  	
   

  	
  50

  
	
   

  	
   

  
	
  SECTION 9.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  	
  50

  
	
   

  	
   

  
	
  9.1

  	
  Organization

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  9.2

  	
  Authorization; No Conflict

  	
   

  	
  50

  
	
   

  	
   

  	
   

  	
   

  
	
  9.3

  	
  Validity and Binding Nature

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  9.4

  	
  Financial Condition

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  9.5

  	
  No Material Adverse Change

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  9.6

  	
  Litigation and Contingent Liabilities

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  9.7

  	
  Ownership of Properties; Liens

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  9.8

  	
  Equity Ownership; Subsidiaries

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  9.9

  	
  Pension Plans

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
  9.10

  	
  Investment Company Act

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  9.11

  	
  Public Utility Holding Company Act

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  9.12

  	
  Regulation U

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  9.13

  	
  Taxes

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  
	
  9.14

  	
  Solvency, etc

  	
   

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
  9.15

  	
  Environmental Matters

  	
   

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
  9.16

  	
  Insurance

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  
	
  9.17

  	
  Real Property

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  
	
  9.18

  	
  Information

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  
	
  9.19

  	
  Intellectual Property

  	
   

  	
  56

  
							

 

iii

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  9.20

  	
  Burdensome Obligations

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  9.21

  	
  Labor Matters

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  9.22

  	
  No Default

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  9.23

  	
  Related Agreements, etc

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  
	
  9.24

  	
  [Intentionally Omitted]

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  9.25

  	
  Eligible Accounts and Eligible Inventory

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  9.26

  	
  Other Debt

  	
   

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
  9.27

  	
  Inactive Subsidiaries

  	
   

  	
  57

  
	
   

  	
   

  
	
  SECTION 10.

  	
  AFFIRMATIVE COVENANTS

  	
   

  	
  57

  
	
   

  	
   

  
	
  10.1

  	
  Reports, Certificates and Other Information

  	
   

  	
  57

  
	
   

  	
   

  	
   

  
	
   

  	
  10.1.1

  	
  Annual Report

  	
  57

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1.2

  	
  Interim Reports

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1.3

  	
  Compliance Certificates

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1.4

  	
  Reports to the SEC and to Shareholders

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1.5

  	
  Notice of Default, Litigation and ERISA
  Matters

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1.6

  	
  Borrowing Base Certificates

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1.7

  	
  Management Reports

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1.8

  	
  Projections

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1.9

  	
  Material Notices

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1.10

  	
  Asset Dispositions

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1.11

  	
  Other Information

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  10.2

  	
  Books, Records and Inspections

  	
  61

  
	
   

  	
   

  	
   

  	
   

  
	
  10.3

  	
  Maintenance of Property; Insurance

  	
  63

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3.1

  	
  Obligation to Maintain Properties

  	
  62

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3.2

  	
  Property Insurance

  	
  62

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3.3

  	
  Liability Insurance

  	
  63

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3.4

  	
  Forced Place Coverage

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
  10.4

  	
  Compliance with Laws; Payment of Taxes and
  Liabilities

  	
  64

  
	
   

  	
   

  	
   

  
	
  10.5

  	
  Maintenance of Existence, etc

  	
  65

  
	
   

  	
   

  	
   

  
	
  10.6

  	
  [Intentionally Omitted]

  	
  65

  
								

 

iv

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  10.7

  	
  Use of Proceeds

  	
  65

  
	
   

  	
   

  	
   

  
	
  10.8

  	
  Employee Benefit Plans

  	
  65

  
	
   

  	
   

  	
   

  
	
  10.9

  	
  Environmental Matters

  	
  65

  
	
   

  	
   

  	
   

  
	
  10.10

  	
  New Subsidiaries

  	
  66

  
	
   

  	
   

  	
   

  
	
  10.11

  	
  Deposit Accounts

  	
  67

  
	
   

  	
   

  	
   

  
	
  10.12

  	
  [Intentionally Omitted]

  	
  68

  
	
   

  	
   

  	
   

  
	
  10.13

  	
  Appraisal of Inventory

  	
  69

  
	
   

  	
   

  	
   

  
	
  10.14

  	
  Post-Closing Spin-Off Consents

  	
  69

  
	
   

  	
   

  
	
  SECTION 11.

  	
  NEGATIVE COVENANTS

  	
   

  	
  69

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Debt

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  
	
  11.2

  	
  Liens

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  
	
  11.3

  	
  Restricted Payments

  	
   

  	
  72

  
	
   

  	
   

  	
   

  	
   

  
	
  11.4

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

  	
  73

  
	
   

  	
   

  	
   

  	
   

  
	
  11.5

  	
  Modification of Organizational Documents

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  
	
  11.6

  	
  Transactions with Affiliates

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  
	
  11.7

  	
  Unconditional Purchase Obligations

  	
   

  	
  74

  
	
   

  	
   

  	
   

  	
   

  
	
  11.8

  	
  Inconsistent Agreements

  	
   

  	
  75

  
	
   

  	
   

  	
   

  	
   

  
	
  11.9

  	
  Business Activities; Issuance of Equity

  	
   

  	
  75

  
	
   

  	
   

  	
   

  	
   

  
	
  11.10

  	
  Investments

  	
   

  	
  75

  
	
   

  	
   

  	
   

  	
   

  
	
  11.11

  	
  Restriction of Amendments to Certain Documents

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  
	
  11.12

  	
  Fiscal Year

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  
	
  11.13

  	
  Financial Covenants

  	
   

  	
  77

  
	
   

  	
   

  	
   

  
	
   

  	
  11.13.1

  	
  Excess Revolving Loan Availability

  	
  77

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.13.2

  	
  Minimum EBITDA

  	
  77

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.13.3

  	
  Capital Expenditures

  	
  78

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.13.4

  	
  Fixed Charge Coverage Ratio

  	
  78

  
	
   

  	
   

  	
   

  
	
  11.14

  	
  Cancellation of Debt

  	
   

  	
  78

  
	
   

  	
   

  	
   

  	
   

  
	
  11.15

  	
  Creation of Subsidiaries

  	
   

  	
  78

  
	
   

  	
   

  	
   

  	
   

  
	
  11.16

  	
  Inactive Subsidiaries

  	
   

  	
  78

  
						

 

v

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  11.17

  	
  Commingling of Funds

  	
   

  	
  79

  
	
   

  	
   

  
	
  SECTION 12.

  	
  EFFECTIVENESS; CONDITIONS OF LENDING, ETC

  	
   

  	
  79

  
	
   

  	
   

  
	
  12.1

  	
  Initial Credit Extension

  	
   

  	
  79

  
	
   

  	
   

  	
   

  
	
   

  	
  12.1.1

  	
  List of Closing Documents

  	
  79

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.2

  	
  Consents, etc

  	
  79

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.3

  	
  Payment of Fees

  	
  79

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.4

  	
  Excess Revolving Loan Availability

  	
  80

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.5

  	
  Independent Collateral Field Audit Examination
  Documents

  	
  80

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.6

  	
  Material Adverse Effect

  	
  80

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.7

  	
  Due Diligence

  	
  80

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.8

  	
  Litigation

  	
  80

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.9

  	
  Projections

  	
  80

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.10

  	
  Financial Statements

  	
  80

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.11

  	
  Filings, Registrations and Recordings

  	
  81

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.12

  	
  Insurance

  	
  81

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.13

  	
  EDA Documents

  	
  81

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.14

  	
  Capitalization and Structure

  	
  81

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.15

  	
  Related Transactions

  	
  81

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.16

  	
  Debt

  	
  81

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.17

  	
  Sources and Uses of Funds

  	
  81

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1.18

  	
  Other

  	
  81

  
	
   

  	
   

  	
   

  
	
  12.2

  	
  Conditions to Loans and Increase in
  Commitments

  	
   

  	
  81

  
	
   

  	
   

  	
   

  
	
   

  	
  12.2.1

  	
  Compliance with Warranties, No Default, etc

  	
  82

  
	
   

  	
   

  	
   

  
	
  12.3

  	
  Confirmatory Certificate

  	
   

  	
  82

  
	
   

  	
   

  
	
  SECTION 13.

  	
  EVENTS OF DEFAULT AND THEIR EFFECT

  	
   

  	
  82

  
	
   

  	
   

  
	
  13.1

  	
  Events of Default

  	
   

  	
  82

  
	
   

  	
   

  	
   

  
	
   

  	
  13.1.1

  	
  Non-Payment of the Revolving Loans, etc

  	
  82

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1.2

  	
  Non-Payment of Other Debt

  	
  82

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1.3

  	
  Pledge Agreement Default

  	
  83

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1.4

  	
  Bankruptcy, Insolvency, etc

  	
  83

  
						

 

vi

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1.5

  	
  Non-Compliance with Loan Documents

  	
  83

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1.6

  	
  Representations; Warranties

  	
  83

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1.7

  	
  Pension Plans

  	
  83

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1.8

  	
  Judgments

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1.9

  	
  Loss of Collateral

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1.10

  	
  Levy, Seizure or Attachment

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1.11

  	
  Invalidity of Collateral Documents, etc

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1.12

  	
  Invalidity of Subordination Provisions, etc

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1.13

  	
  Change of Control

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1.14

  	
  EDA Matters

  	
  84

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1.15

  	
  Triggering Event

  	
  85

  
	
   

  	
   

  	
   

  
	
  13.2

  	
  Effect of Event of Default

  	
   

  	
  85

  
	
   

  	
   

  
	
  SECTION 14.

  	
  THE ADMINISTRATIVE AGENT

  	
   

  	
  86

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  Appointment and Authorization

  	
   

  	
  86

  
	
   

  	
   

  	
   

  	
   

  
	
  14.2

  	
  Issuing Bank

  	
   

  	
  86

  
	
   

  	
   

  	
   

  	
   

  
	
  14.3

  	
  Delegation of Duties

  	
   

  	
  86

  
	
   

  	
   

  	
   

  	
   

  
	
  14.4

  	
  Exculpation of Administrative Agent

  	
   

  	
  86

  
	
   

  	
   

  	
   

  	
   

  
	
  14.5

  	
  Reliance by Administrative Agent

  	
   

  	
  87

  
	
   

  	
   

  	
   

  	
   

  
	
  14.6

  	
  Notice of Default

  	
   

  	
  87

  
	
   

  	
   

  	
   

  	
   

  
	
  14.7

  	
  Credit Decision

  	
   

  	
  87

  
	
   

  	
   

  	
   

  	
   

  
	
  14.8

  	
  Indemnification

  	
   

  	
  88

  
	
   

  	
   

  	
   

  	
   

  
	
  14.9

  	
  Administrative Agent in Individual Capacity

  	
   

  	
  88

  
	
   

  	
   

  	
   

  	
   

  
	
  14.10

  	
  Successor Administrative Agent

  	
   

  	
  89

  
	
   

  	
   

  	
   

  	
   

  
	
  14.11

  	
  Collateral Matters

  	
   

  	
  89

  
	
   

  	
   

  	
   

  	
   

  
	
  14.12

  	
  Administrative Agent May File Proofs
  of Claim

  	
   

  	
  90

  
	
   

  	
   

  	
   

  	
   

  
	
  14.13

  	
  Other Agents; Arrangers and Managers

  	
   

  	
  90

  
	
   

  	
   

  	
   

  
	
  SECTION 15.

  	
  GENERAL

  	
   

  	
  91

  
	
   

  	
   

  	
   

  
	
  15.1

  	
  Waiver; Amendments

  	
   

  	
  91

  
	
   

  	
   

  	
   

  	
   

  
	
  15.2

  	
  Confirmations

  	
   

  	
  91

  
	
   

  	
   

  	
   

  	
   

  
	
  15.3

  	
  Notices

  	
   

  	
  91

  
							

 

vii

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  15.4

  	
  Computations

  	
   

  	
  92

  
	
   

  	
   

  	
   

  	
   

  
	
  15.5

  	
  Costs, Expenses and Taxes

  	
   

  	
  92

  
	
   

  	
   

  	
   

  	
   

  
	
  15.6

  	
  Assignments; Participations

  	
   

  	
  93

  
	
   

  	
   

  
	
   

  	
  15.6.1

  	
  Assignments

  	
  93

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.6.2

  	
  Participations

  	
  94

  
	
   

  	
   

  	
   

  
	
  15.7

  	
  Register

  	
   

  	
  94

  
	
   

  	
   

  	
   

  	
   

  
	
  15.8

  	
  GOVERNING LAW

  	
   

  	
  95

  
	
   

  	
   

  	
   

  	
   

  
	
  15.9

  	
  Confidentiality

  	
   

  	
  95

  
	
   

  	
   

  	
   

  	
   

  
	
  15.10

  	
  Severability

  	
   

  	
  95

  
	
   

  	
   

  	
   

  	
   

  
	
  15.11

  	
  Nature of Remedies

  	
   

  	
  96

  
	
   

  	
   

  	
   

  	
   

  
	
  15.12

  	
  Entire Agreement

  	
   

  	
  96

  
	
   

  	
   

  	
   

  	
   

  
	
  15.13

  	
  Counterparts

  	
   

  	
  96

  
	
   

  	
   

  	
   

  	
   

  
	
  15.14

  	
  Successors and Assigns

  	
   

  	
  96

  
	
   

  	
   

  	
   

  	
   

  
	
  15.15

  	
  Captions

  	
   

  	
  96

  
	
   

  	
   

  	
   

  	
   

  
	
  15.16

  	
  Patriot Act Notice

  	
   

  	
  96

  
	
   

  	
   

  	
   

  	
   

  
	
  15.17

  	
  Indemnification by the Loan Parties

  	
   

  	
  96

  
	
   

  	
   

  	
   

  	
   

  
	
  15.18

  	
  Nonliability of Lenders

  	
   

  	
  97

  
	
   

  	
   

  	
   

  	
   

  
	
  15.19

  	
  FORUM SELECTION AND CONSENT TO JURISDICTION

  	
   

  	
  98

  
	
   

  	
   

  	
   

  	
   

  
	
  15.20

  	
  WAIVER OF JURY TRIAL

  	
   

  	
  98

  
	
   

  	
   

  	
   

  	
   

  
	
  15.21

  	
  Other Waivers

  	
   

  	
  98

  
	
   

  	
   

  	
   

  	
   

  
	
  15.22

  	
  Joint and Several Liability

  	
   

  	
  99

  
	
   

  	
   

  	
   

  
	
   

  	
  15.22.1

  	
  Nature of Obligations

  	
  99

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.22.2

  	
  No Fraudulent Conveyances

  	
  99

  
	
   

  	
   

  	
   

  	
   

  
	
  15.23

  	
  Revival and Reinstatement of Obligations

  	
  99

  
						

 

viii

 

	
  ANNEXES

  
	
   

  	
   

  	
   

  
	
  ANNEX A

  	
   

  	
  Lenders and Pro Rata Shares

  
	
  ANNEX B

  	
   

  	
  Addresses for Notices

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 9.6

  	
   

  	
  Litigation and Contingent Liabilities

  
	
  SCHEDULE 9.8

  	
   

  	
  Subsidiaries

  
	
  SCHEDULE 9.9

  	
   

  	
  Pension Plans

  
	
  SCHEDULE 9.15

  	
   

  	
  Environmental Matters

  
	
  SCHEDULE 9.16

  	
   

  	
  Insurance

  
	
  SCHEDULE 9.17

  	
   

  	
  Real Property

  
	
  SCHEDULE 9.19

  	
   

  	
  Intellectual Property

  
	
  SCHEDULE 9.21

  	
   

  	
  Labor Matters

  
	
  SCHEDULE 9.23

  	
   

  	
  Outstanding Consents

  
	
  SCHEDULE 9.26

  	
   

  	
  Other Debt

  
	
  SCHEDULE 10.11

  	
   

  	
  Specified Exempted Bank Accounts

  
	
  SCHEDULE 11.2

  	
   

  	
  Existing Liens

  
	
  SCHEDULE 11.10

  	
   

  	
  Investments

  
	
  SCHEDULE 12.1

  	
   

  	
  Debt to be Repaid

  
	
  SCHEDULE 12.1.1

  	
   

  	
  List of Closing Documents

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
   

  	
  Form of Note (Section 3.1)

  
	
  EXHIBIT B

  	
   

  	
  Form of Compliance Certificate (Section 10.1.3)

  
	
  EXHIBIT C

  	
   

  	
  Form of Borrowing Base Certificate (Section 1.1)

  
	
  EXHIBIT D

  	
   

  	
  Form of Assignment Agreement (Section 15.6.1)

  
	
  EXHIBIT E

  	
   

  	
  Form of Notice of Borrowing (Section 2.2.2)

  
	
  EXHIBIT F

  	
   

  	
  Form of Notice of
  Conversion/Continuation (Section 2.2.3)

  
	
  EXHIBIT G

  	
   

  	
  Form of Intercompany Note

  
	
  EXHIBIT H

  	
   

  	
  Form of Joinder Agreement

  

 

ix

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT dated as of March 14, 2006 (this “Agreement”)
is entered into by and among Russ Berrie and Company, Inc. (the “Company”),
Russ Berrie U.S. Gift, Inc., a Delaware corporation (“Russ
Gift”), Russ Berrie & Co. (West), Inc. (“Russ West”),
Russ Berrie and Company Properties, Inc. (“Russ Properties”),
Russplus, Inc. (“Russplus”), and Russ Berrie and Company Investments, Inc.
(“Russ Investments”) (Russ Gift, Russ West, Russ Properties, Russplus,
and Russ Investments are sometimes referred to herein collectively as the “Borrowers”
and individually as a “Borrower”), the financial institutions that are
or may from time to time become parties hereto as “Lenders” (and each
being a “Lender”), LASALLE BANK NATIONAL ASSOCIATION, in its capacity as “Issuing
Bank” hereunder, LASALLE BUSINESS CREDIT, LLC (in its individual capacity, “LaSalle”),
as administrative agent (in such capacity, the “Administrative Agent”)
for the Lenders.

 

The Lenders have agreed to make available to the Borrowers a revolving
credit facility (which includes letters of credit) and the Issuing Bank has
agreed to issue letters of credit for the Borrowers, upon the terms and
conditions set forth herein.

 

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

 

SECTION 1.   DEFINITIONS.

 

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

 

Account Debtor is defined in the UCC.

 

Account or Accounts is defined in the UCC.

 

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

 

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

 

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

 

 

Affected Loan - see Section 8.3.

 

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

 

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

 

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

 

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

 

Agreement - see the Preamble.

 

Applicable Margin means, subject to the
provisions of Section 10.1.3, for any day, the rate per annum set
forth below, it being understood that the “Applicable Margin” for (i) Revolving
Loans which are designated as LIBOR Loans (the “LIBOR Margin”) shall be
the percentage set forth under the column “LIBOR Margin,” (ii) Revolving
Loans which are designated as Base Rate Loans (the “Base Rate Margin”)
shall be the percentage set forth under the column “Revolving Loan Base Rate
Margin,” (iii) the Non-Use Fee Rate shall be the percentage set forth
under the column “Non-Use Fee Rate,” and (iv) the L/C Fee Rate
shall be the percentage set forth under the column “L/C Fee Rate”:

 

	
  LIBOR

  Margin

  	
   

  	
  Base

  Rate

  Margin

  	
   

  	
  Non-Use

  Fee

  Rate

  	
   

  	
  L/C

  Fee

  Rate

  	
   

  
	
  2.75

  	
  %

  	
  1.25

  	
  %

  	
  0.50

  	
  %

  	
  2.75

  	
  %

  

 

Asset Disposition means the sale, lease
(including any sale/leaseback), assignment or other transfer for value by any
Loan Party to any Person (other than a Loan Party) of any asset or right of
such Loan Party (including, the loss, destruction or damage of any thereof or
any actual

 

2

 

condemnation, confiscation, requisition,
seizure or taking thereof) (each, a “Disposition”), other than the sale,
lease or other dispositions of Inventory in the ordinary course of business or
any Disposition of Equipment sold in the ordinary course of the Loan Parties’
business and not having an aggregate book value of more than $200,000 in any
Fiscal Year.

 

Assignment Agreement - see Section 15.6.1.

 

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

 

Back-Stop L/C means a Letter of Credit
previously requested by the Borrowers in the original face amount of
$7,388,356.16 to be issued on or after the Closing Date by the Issuing Bank for
the benefit of The Bank of New York in lieu of posting cash collateral for the
obligations of the Company under the EDA Standby L/C Reimbursement Agreement.

 

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

 

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

 

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

 

Bankruptcy Code means the United States
Bankruptcy Code, Title 11 of United States Code (11 U.S.C. § 101, et
seq.), together with the rules promulgated thereunder, in each case, as
amended.

 

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

 

Base Rate Margin - see definition of
Applicable Margin.

 

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

 

3

 

Berrie Commitment means, the letter agreement
of March 13, 2006 from Angelica Berrie to the Board of Directors of the
Company regarding her agreement to fund the full amount to effect the EDA Bond
Redemption in accordance with the provisions of the EDA Indenture, by no later
than March 20, 2006.

 

BNY/Administrative Agent Commitment means that
certain letter agreement dated as of the Closing Date among the Administrative
Agent, The Bank of New York, the Company and the Borrowers regarding the
issuance of the Back-Stop L/C and the entry into the EDA Participation
Agreement.

 

Board of Directors means, with respect to any
Person, the board of directors of such Person or any committee thereof duly
authorized to act on behalf of such board of directors.

 

Borrower and Borrowers  - see Preamble.

 

Borrowing Base means an amount equal to:

 

(A)                              the
total of (a) up to 85% of the unpaid amount of all Eligible Accounts, plus
(b) the lesser of (x) up to 65% of the value of all Eligible Inventory
valued at the lower of cost or market, (y) up to 85% of the value of all
Eligible Inventory valued at the Net Orderly Liquidation Value thereof as
determined by the Administrative Agent from time to time in its commercially
reasonable credit judgment after consultation with the Loan Party
Representative, and (z) Fifteen Million Dollars ($15,000,000); minus

 

(B)                                the
EDA Reserve, if any, as in effect at such time; minus

 

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

 

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

 

(E)                                 such
other reserves (without duplication) as the Administrative Agent elects, in its
commercially reasonable credit judgment after consultation with the Loan Party
Representative, to establish from time to time.

 

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

 

Bright of America Note - see Section 11.14.

 

BSA - see Section 10.4.

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Capital Expenditures means with respect to any
Person all expenditures which, in accordance with GAAP, would be required to be
capitalized and shown on the consolidated balance sheet of such Person,
including expenditures in respect of Capital Leases; provided, that for
the purposes of this Agreement, including the calculation of the Fixed Charge
Coverage Ratio, the reinvestment of sale or insurance proceeds arising from a
sale (permitted hereunder) or casualty loss of a capital asset in replacement
capital assets having the same or substantially similar use as the affected
capital asset shall not be included as a Capital Expenditure hereunder to the
extent of such reinvestment.

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

(c)                                  the
common stock of the Company ceases to be listed and traded on a national stock
exchange;

 

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

 

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

 

6

 

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

 

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

 

Closing Date - see Section 12.1.

 

Code means the Internal Revenue Code of 1986.

 

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

 

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

 

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

 

Commitment means, as to any Lender, such
Lender’s commitment to make Revolving Loans and/or to issue or participate in
Letters of Credit, in each case, under this Agreement and “Commitments”
means the sum of all such Commitments of all Lenders, in each case, as the same
may, from time to time, be increased or supplemented pursuant to Section 2.7
or reduced pursuant to Section 6.1.1. The initial amount of each
Lender’s Commitment to make Revolving Loans is set forth on Annex A.

 

Company - see Preamble.

 

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

 

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

 

Consolidated Net Income means, with respect to
the Borrowers and their consolidated Subsidiaries, on a consolidated basis, for
any period, the net income (or loss) of the Borrowers

 

7

 

and their consolidated Subsidiaries for such
period, in each case, determined in accordance with GAAP, but excluding any
extraordinary after-tax gains and losses, any non-recurring gains or losses, or
any non-cash gains or losses from Asset Dispositions, any
non-cash restructuring charges, any tax refunds, net operating losses or other net tax benefits and any after-tax gains and losses
from discontinued operations.

 

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

 

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

 

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

 

8

 

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

 

Debt to be Repaid means Debt listed on Schedule 12.1.

 

Defaulting Lender – see Section 2.1.1(c).

 

Designated Proceeds - see Section 6.2.2.

 

Disposition – see the definition of “Asset
Disposition.”

 

Disproportionate Advance – see Section 2.2.2(i).

 

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

 

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

 

Earnout Consideration means the “Earnout
Consideration” as defined in the Kids Line Purchase Agreement as in effect on
the date hereof (without giving effect to any amendment or other modification
thereof after the Closing Date, except to the extent expressly permitted

 

9

 

hereunder). As used herein, the term “Earnout
Consideration” shall also include any payments in respect of any guaranty of
the Earnout Consideration.

 

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

 

Earnout Sellers means, collectively, the “Deferred
Payout Sellers” as defined in the Kids Line Purchase Agreement as in effect on
the date hereof (without giving effect to any amendment or other modification
thereof after the Closing Date, except to the extent expressly permitted
hereunder).

 

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

 

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

 

EBITDA means, for any period, with respect to
the Borrowers and their consolidated Subsidiaries on a consolidated basis,
Consolidated Net Income for such period plus (minus), to the extent deducted
(added) in determining such Consolidated Net Income, (i) Interest Expense,
(ii) income tax expense, (iii) depreciation, (iv) amortization, (v) other
non-cash charges (gains), (vi) if expensed, reasonable costs, expenses and
fees incurred in connection with the negotiation, execution and delivery of the
Loan Documents, the Canadian Loan Documents, and the financings contemplated
thereby and by the Spin-Off and (vii) non-cash transaction losses (gains)
due solely to fluctuations in currency values, in each case, during such
period.

 

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

 

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

 

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

 

10

 

EDA Bond Redemption means the redemption or
repayment in full, in cash (unfinanced by the Company or any of its
Subsidiaries), and cancellation, of all EDA Bonds (including the payment of all
accrued interest and fees) in accordance with the terms of the EDA Bond
Indenture, the satisfaction and termination, in full and in cash, of all
obligations of the Company under the EDA Standby L/C Reimbursement Agreement
and the EDA Guaranty, and the termination and release of all Liens securing the
EDA Bonds, the EDA Guaranty, the EDA Loan Agreement and the EDA Standby L/C
Reimbursement Agreement.

 

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

 

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

 

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

 

EDA Documents means, collectively, the EDA
Loan Guarantee, the EDA Standby L/C Reimbursement Agreement, the EDA Standby
L/C, the EDA Bond Indenture, the EDA Loan Agreement, the EDA Financing
Statements, the EDA Standby L/C Reimbursement Agreement Modification Letter,
the Berrie Commitment, the Back-Stop L/C, and the BNY/Administrative Agent
Commitment.

 

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

 

EDA Loan Agreement means that certain Loan
Agreement dated as of December 1, 1983 (as amended from time to time
through the Closing Date) between EDA and EDA Borrower.

 

EDA Lien means the security interest granted
by the Company in favor of the EDA Bond Trustee and the EDA Standby L/C Issuer
on accounts receivable and inventory of the Company (and to the extent
applicable, Russ Gift, as assignee thereof) to secure its obligations under the
EDA Loan Guarantee and the EDA Standby L/C Reimbursement Agreement.

 

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

 

11

 

EDA Participation Agreement means a
participation agreement to be entered into among the Administrative Agent, the
Lenders and the EDA Standby L/C Issuer pursuant to the BNY/Administrative Agent
Commitment, pursuant to which, among other things, the Agent and the Lenders
would be granted a one hundred percent (100%) participation interest in the EDA
Standby L/C Issuer’s interest under the EDA Standby L/C Reimbursement Agreement
and all collateral documents relating thereto upon a draw on the Back-Stop L/C.

 

EDA Release Date means the date upon which the
EDA Bond Redemption shall have occurred.

 

EDA Reserve means, (1) prior to the EDA
Release Date, an amount (but not less than zero) equal to the
maximum aggregate amount of the Company’s obligations (including contingent
obligations) under the EDA Loan Guaranty and the EDA Standby L/C Reimbursement
Agreement (or such lesser portion thereof above which (and for so long as) the
EDA Standby L/C Issuer has agreed not to require Liens, cash collateral or
other collateral therefor, including the Back-Stop L/C), less the amount of (x)
the drawn and undrawn amount of the Back-Stop L/C and (y) any unfinanced cash
collateral provided by the Company to (and which is then on deposit with) the
EDA Standby L/C Issuer solely for applications to such obligations (it being
agreed that funds on deposit with the EDA Bond Trustee (or any remarketing
agent for the EDA Bonds) to fund the EDA Bond Redemption shall not be deemed to
be cash collateral for purposes hereof) and (2) from and after the EDA
Release Date, zero; provided that notwithstanding clause (1) above, until
such time as the Back-Stop L/C is issued (or the Issuing Bank’s commitment to
issue such Letter of Credit has terminated prior to such issuance), clause (1) shall
be deemed to be an amount equal to $7,388,356.16.

 

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

 

EDA Standby L/C means that certain Letter of
Credit dated March 25, 1994, as amended as of the Closing Date issued by
the EDA Standby L/C Issuer for the account of the Company in a maximum amount
available to be drawn thereunder of $7,388,356.16 or any other letter of credit
issued for the account of the Company upon or following the expiration of the
aforementioned Letter of Credit to secure the payment of the EDA Bonds in an
amount not to exceed $7,388,356.16 and having substantially the same terms as
the aforementioned Letter of Credit (other than the maturity date thereof) (in
each case, without giving effect to any amendment or other modification thereof
after the Closing Date, except to the extent expressly permitted hereunder).

 

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

 

12

 

EDA Standby L/C Reimbursement Agreement Modification Letter
means that certain letter agreement dated on or prior to the Closing Date from
the EDA Standby L/C Issuer to the Company and the Borrowers regarding limitations
on the EDA Standby L/C Issuer’s ability to require additional cash collateral
for the Company’s reimbursement obligations under the EDA Standby L/C
Reimbursement Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

(j)                                     if
such Borrower maintains a credit limit for an Account Debtor, the aggregate
dollar amount of Accounts due from such Account Debtor and its Affiliated
Account Debtors, including such Account, does not exceed such credit limit;
provided that only such portion of such Account that exceeds such credit limit
shall be deemed ineligible pursuant to this clause (j);

 

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

 

(l)                                     such
Account is evidenced by an invoice delivered to the related Account Debtor and
is not more than (i) 60 days past the due date thereof or (ii) 90
days past the original invoice date thereof, in each case according to the
original terms of sale; provided that up to $5,000,000 of Accounts evidenced by
invoices not more than (x) 60 days past the due date thereof or (y)
180 days past the original invoice date thereof but which otherwise meet all
other eligibility criteria hereunder shall not be deemed ineligible pursuant to
this clause (l);

 

(m)                               it
is not owing by an Account Debtor in respect of which 35% or more of the
aggregate dollar amount of all Accounts owing by such Account Debtor and its
Affiliated Account Debtors are ineligible pursuant to clause (l) immediately
above;

 

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

 

14

 

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

 

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

 

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

 

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

 

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

 

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

 

Eligible Assignee means (i) commercial
banks organized under the laws of the United States, or any State thereof, and
having combined capital and surplus of at least $500,000,000; (ii) commercial
banks organized under the laws of any other country that is a member of the

 

15

 

OECD or has concluded special lending
arrangements with the International Monetary Fund associated with its General
Arrangements to borrow, or a political subdivision of any such country, and
having combined capital and surplus of at least $500,000,000, so long as any
such bank is acting through a branch or agency located in the United States; (iii) finance
companies, insurance companies or other financial institutions or funds
(whether corporations, partnerships, trusts or other entities) that are
regularly engaged in the United States in making, purchasing or otherwise
investing in commercial loans in the ordinary course of its business and having
combined capital and surplus of at least $500,000,000 or with respect to any
funds with total assets under its management in excess of $250,000,000; and (iv) any
other Person other than an Affiliate of a Loan Party approved by the
Administrative Agent and the Loan Party Representative, such approval not to be
unreasonably withheld or delayed.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(g)                                 it
is not “in transit” to such Borrower or held by such Borrower on consignment; provided
that up to $3,000,000 of Inventory which is “in transit” (the “In-Transit
Inventory”)

 

16

 

shall be deemed eligible hereunder so long as
such In-Transit Inventory (i) otherwise meets all other criteria for
eligibility hereunder, (ii) the In-Transit Inventory is subject to bills
of lading, air bills or other similar documentation (collectively, the “Shipping
Documents”) which are adequate as determined by the Administrative Agent in
its commercially reasonable credit judgment; (iii) the In-Transit
Inventory is fully-insured under an insurance policy naming the Administrative
Agent as loss payee, (iv) the applicable Borrower has title to such an
In-Transit Inventory, (v) such In-Transit Inventory shall be listed as
such on the report required pursuant to Section 10.1.6 for the
months in which such In-Transit Inventory is in transit, and (vi) the
Borrowers have, if and to the extent requested by the Administrative Agent at
any time during the continuation of an Unmatured Event of Default or Event of
Default, delivered such Shipping Documents to the Administrative Agent,
appropriately endorsed, together with a power of attorney to allow the
Administrative Agent to list itself as “consignee” thereunder;

 

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

 

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

 

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

 

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

 

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

 

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

 

ERISA means the Employee Retirement Income
Security Act of 1974.

 

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

 

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

 

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

 

17

 

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

 

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

 

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

 

Fiscal Quarter means a fiscal quarter of a
Fiscal Year.

 

Fiscal Year means the fiscal year of the
Borrowers and their consolidated Subsidiaries, which period shall be the
12-month period ending on December 31st of each calendar year. References
to a Fiscal Year with a number corresponding to any calendar year (e.g., “Fiscal
Year 2006”) refers to the Fiscal Year ending on December 31st of such
calendar year.

 

Fixed Charge Coverage Ratio means, as of the
last day of any Fiscal Quarter for the Computation Period ending on such date
for the Borrowers and their consolidated Subsidiaries on a consolidated basis,
the ratio of (a) the total for such period of EBITDA for the Computation
Period ending on such date (calculated, where applicable, using the EBITDA
values set forth in the definition thereof) minus the sum of (i) income
taxes paid (or which should have been paid) in cash by such Persons during such
Computation Period, (ii) all unfinanced Capital Expenditures of such
Persons incurred during such Computation Period, and (iii) all cash
dividends or distributions paid during such Computation Period to (b) the
sum for such Computation Period for the Borrowers and their consolidated
Subsidiaries on a consolidated basis of all scheduled interest and principal
payments of Debt, including the principal component of any Capital Lease (in
each case, whether or not in fact paid during such period).

 

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

 

18

 

Fraudulent Conveyance – see Section 15.22.2.

 

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

 

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

 

Group - see Section 2.2.1.

 

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

 

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

 

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

 

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

 

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

 

Inactive Subsidiary means any domestically
organized Subsidiary of the Company or a Loan Party designated as an “Inactive
Subsidiary” in writing by the Loan Party Representative to the Administrative
Agent and which satisfies all requirements of an “Inactive Subsidiary” set
forth in Section 11.16, and shall include as of the Closing Date,
(and thereafter for so long as such Persons shall continue to meet such
requirements) RBCACQ, Inc., a California corporation,

 

19

 

Fluf N’ Stuf, a Pennsylvania corporation,
RBTACQ, Inc., an Ohio corporation, P/F Done, Inc., a Pennsylvania
corporation and BOA Done, Inc., a West Virginia corporation, and Inactive
Subsidiaries means all such subsidiaries.

 

Indemnified Liabilities - see Section 15.17.

 

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

 

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

 

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

 

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

 

(c)                                  the
Loan Party Representative may not select any Interest Period which would
extend beyond the Scheduled Termination Date; and

 

(d)                                 there
may be no more than five (5) Interest Periods outstanding at any
time.

 

Interim Advance - see Section 2.1.1(b).

 

Inventory is defined in the Guaranty and
Collateral Agreement.

 

Investment means, with respect to any Person,
any investment in another Person, whether by acquisition of any debt or Capital
Security, by making any loan or advance, by assuming, becoming obligated with
respect to a liability, Debt or Contingent Liability in respect of obligations
of such other Person (other than travel, relocation and similar advances to
employees in the ordinary course of business).

 

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

 

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

 

Kids Line Credit Agreement means that certain
Credit Agreement dated as of the date hereof by and among Kids Line and Sassy,
each as borrowers, and LaSalle Bank National Association, as the administrative
agent, and the other lenders designated therein.

 

20

 

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

 

LaSalle - see the Preamble.

 

LaSalle Bank – means LaSalle Bank National
Association.

 

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

 

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

 

Lender and Lenders - see Preamble. In
addition, (i) the term “Lender” shall include the Administrative Agent to
the extent it makes any loans or advances any financial accommodations
hereunder or under any other Loan Documents, (ii) for the purpose of
identifying the Persons entitled to share in the Collateral and the proceeds
thereof under, and in accordance with the provisions of this Agreement and the
Collateral Documents and the Persons entitled to indemnification and
exculpation as a Lender or a Lender Party hereunder or under any of the other
Loan Documents, the term “Lender” and “Lender Party” shall include the Issuing
Bank, and (iii) the term Lender shall include any Affiliate of a Lender
providing a Bank Product pursuant to this Agreement or any other Loan Document
and the transactions contemplated hereby or thereby.

 

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

 

Letter of Credit - see Section 2.1.3
and such definition shall include the Back-Stop L/C.

 

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

 

LIBOR Margin - see the definition of
Applicable Margin.

 

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

 

LIBOR Rate means a rate of interest equal to (a) the
per annum rate of interest at which United States dollar deposits in an amount
comparable to the amount of the relevant LIBOR Loan and for a period equal to
the relevant Interest Period are offered in the London Interbank Eurodollar
market at 11:00 A.M. (London time) two (2) Business Days prior to the
commencement of such Interest Period (or three (3) Business Days prior to
the commencement of such Interest Period if banks in London, England were not
open and dealing in offshore United States dollars on such second preceding
Business Day), as displayed in the Bloomberg

 

21

 

Financial Markets
system (or other authoritative source selected by the Administrative Agent in
its sole discretion) or, if the Bloomberg Financial
Markets system or another authoritative source is not available, as
the LIBOR Rate is otherwise determined by the Administrative Agent in its sole
and absolute discretion, divided by (b) a number determined by subtracting
from 1.00 the then stated maximum reserve percentage for determining reserves
to be maintained by member banks of the Federal Reserve System for Eurocurrency
funding or liabilities as defined in Regulation D (or any successor
category of liabilities under Regulation D), such rate to remain fixed for such
Interest Period. The Administrative Agent’s determination of the LIBOR Rate
shall be conclusive, absent manifest error.

 

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

 

Loan Documents means this Agreement, the
Notes, the Letters of Credit, the Master Letter of Credit Agreement, the L/C
Applications, the Agent Fee Letter, the Collateral Documents, the
BNY/Administrative Agent Commitment, the subordination agreements, if any,
relating to any Subordinated Debt and all other documents, instruments and
agreements delivered in connection with the foregoing, in each case, as the
same may be amended, restated, supplemented or otherwise modified from
time to time. In no event shall the Guaranty by Russ Gift of the Canadian
Borrower’s obligations under the Canadian Loan Documents be deemed to be a Loan
Document.

 

Loan Party means, collectively, the Borrowers
and each Guarantor, and Loan Parties means all such Persons, collectively.
For the avoidance of doubt, the Company shall not be a Loan Party under this
Agreement for any purpose.

 

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

 

Mandatory Prepayment Event - see Section 6.2.2(a).

 

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

 

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

 

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

 

22

 

Collateral Documents against any material
portion of the Collateral or upon the legality, validity, binding effect or
enforceability against any Loan Party of any Loan Document, or the rights and
remedies, taken as a whole, of the Administrative Agent or the Lenders under
any Loan Document.

 

Maximum Revolving Commitment means, the lesser
of (x) $25,000,000, as such amount may be decreased from time to time in
accordance with Section 6.1.1 (the “Revolving Commitment Limit”)
and (y) the sum of the Commitments of all Lenders as in effect at such time.

 

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

 

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

 

Net Cash Proceeds means:

 

(a)                                  with
respect to any Asset Disposition relating to any property of any Loan Party,
the aggregate cash proceeds (including cash proceeds received pursuant to
policies of insurance or by way of deferred payment of principal pursuant to a
note, installment receivable or otherwise, but only as and when received)
received by any Loan Party pursuant to such Asset Disposition, net of (i) the
direct reasonable costs, expenses and fees relating to such Asset Disposition
(including reasonable and customary sales commissions and reasonable legal,
accounting and investment banking and other professional and transactional
fees), (ii) taxes paid or reasonably estimated by such Loan Party to be
payable as a result thereof (after taking into account any available tax credits
or deductions and any tax sharing arrangements), (iii) amounts required to
be applied to the repayment of any Debt secured by a Permitted Lien having
priority over the Liens of the Administrative Agent under the Loan Documents on
the asset subject to such transaction (other than the Loans); and (iv) amounts
reserved in accordance with GAAP for any indemnification obligations associated
with such sale so long as such reserves are required to be maintained; it being
agreed that the amount of such reserves shall be deemed Net Cash Proceeds of
such transaction received by such Loan Party upon (and in the amount of) the
release or reduction of any such reserve.

 

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

 

(c)                                  with
respect to any issuance of Debt, the aggregate cash proceeds received by any
Loan Party pursuant to such issuance, net of the direct reasonable and
customary costs, expenses

 

23

 

and fees (including legal, accounting and
other professional fees, costs and expenses) relating to such issuance
(including reasonable and customary up-front, underwriters’ and placement
fees).

 

Net Orderly Liquidation Value means, when used
in respect of the Borrowing Base as it relates to the Borrowers’ Eligible
Inventory (and without limiting the Administrative Agent’s ability to assign
any lower value thereto or apply reserves in accordance with the definition of
Borrowing Base), the orderly liquidation value thereof, net of costs, fees and
expenses arising in connection with such orderly liquidation thereof,
determined in accordance with the methodologies and conclusions set forth in
the appraisal of such Inventory prepared for the Administrative Agent by Hilco
Appraisal Services, LLC on or about May 25, 2005 or, if elected by the
Administrative Agent, any subsequent field audit or appraisal of such assets
conducted for the Administrative Agent in accordance with the terms hereof.

 

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

 

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

 

Notes - see Section 3.1.

 

Notice of Borrowing - see Section 2.2.2.

 

Notice of Conversion/Continuation - see Section 2.2.3.

 

Obligations means all obligations, liabilities
and indebtedness (monetary or otherwise, including post-petition and default
interest, allowed or not) of any Loan Party under this Agreement and any other
Loan Document owing to any Lender, the Administrative Agent, the Issuing Bank,
any Lender Party or any other party to or beneficiary of this Agreement or any
other Loan Document (and any successor or assign of any of the foregoing),
including, without limitation, for principal, interest (including post-petition
interest, allowed or not), fees, costs, expenses, indemnification, Attorney
Costs, any reimbursement obligations of each Loan Party in respect of Letters
of Credit and surety bonds, all Specified Hedging Obligations permitted
hereunder and incurred in connection herewith which are owed to the
Administrative Agent, LaSalle Bank or any Lender and each of their respective
Affiliates, and all Bank Products Obligations permitted hereunder and incurred
in connection herewith which are owed to the Administrative Agent, LaSalle Bank
or any Lender and each of their respective Affiliates, in each case, howsoever
created, arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due; provided, that (i) obligations
of any Loan Party under any Specified Hedging Agreement shall be secured and
guaranteed pursuant to the provisions of this Agreement and the Loan Documents
only to the extent that, and for so long as, the other Obligations are so
secured and guaranteed and (ii) any release of Collateral or guarantors
effected in the manner permitted by this Agreement shall not require the
consent of any counterparty on any Specified Hedging Agreement or the holder of
any Specified Hedging Obligations. In no event shall the obligations of Russ
Gift under the Canadian Guaranty made in favor of the Canadian Lenders and
Canadian Agent be deemed to be Obligations hereunder.

 

OFAC - see Section 10.4.

 

24

 

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

 

Participant - see Section 15.6.2.

 

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

 

Permitted Holder means (i) Angelica
Berrie; (ii) any lineal descendant of Russell Berrie; (iii) the
Estate of Russell Berrie; (iv) The Russell Berrie 2002A Trust; (v) The
Russell Berrie Foundation, a New Jersey Nonprofit Corporation; (vi) any
trust created pursuant to the terms of the instruments governing or creating
any of the Persons referred to in clause (iii), (iv), or (v); (vii) any
fiduciary of any of the Persons referred to in clause (iii) (iv), (v) or
(vi); or (viii) (1) any institutional Person or entity described in Rule 13d-1(b)(1)(ii) under
the Exchange Act, (2) any “qualified institutional buyer” as defined in Rule 144(a)(1) promulgated
under the Securities Act, (3) any institutional Person or entity described
in clauses (1), (2), (3), (7) or, to the extent comprised of institutional
Persons or entities described in clauses (1), (2), (3) and/or (7), clause (8) of
the definition of “accredited investor” as defined in Rule 501(a) promulgated
under the Securities Act, or (4) any similar institutional equity
investor.

 

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

 

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

 

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

 

Pre-Settlement Determination Date – see Section 7.1.3.

 

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

 

25

 

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

 

Regulation D means Regulation D of the FRB.

 

Regulation U means Regulation U of the FRB.

 

Related Agreements means, collectively, that
certain Assignment and Assumption Agreement and Bill of Sale, that certain
Omnibus Amendment of Intellectual Property and the related individual
assignments of specified intellectual property, in each case, dated on or prior
to the date hereof between the Company and Russ Gift, the incorporation
documents for Russ Gift, together with any other instruments, documents and
agreements entered into in connection therewith, in each case, as the same may be
amended, restated, supplemented or otherwise modified in accordance with Section 11.11.

 

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

 

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

 

Replacement Lender - see Section 8.7(b).

 

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

 

Required Lenders means, at any time, those
Lenders whose Pro Rata Shares exceed 50.1%; provided that
if there are two or fewer Lenders, then the term “Required Lenders” shall mean
all of the Lenders.

 

Restricted Debt means (a) the obligations
of the Company and any other Loan Party with respect to the EDA Standby L/C
Reimbursement Agreement and the EDA Loan Guarantee and (b) any other
Subordinated Debt.

 

26

 

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

 

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

 

Revolving Loan and Revolving Loans -
see Section 2.1.1(a).

 

Revolving Loan Availability means the
difference between (a) (i) before an increase in Commitments pursuant
to Section 2.7, the Borrowing Base or (ii) at all times after
an increase in Commitments pursuant to Section 2.7, the lesser of
(x) the Maximum Revolving Commitment in effect at such time and (y) the
Borrowing Base at such time, minus (b) the sum of the aggregate
principal amount of all “Loans,” all “Specified Hedging Obligations” and the “Stated
Amount” of all “Letters of Credit” outstanding or requested but not yet funded
under (and, in each case, as such terms are defined in) the Canadian Loan
Agreement.

 

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

 

Sassy means Sassy, Inc., an Illinois
corporation.

 

Scheduled Termination Date means March 14,
2011.

 

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

 

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

 

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

 

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

 

Settlement Date – see Section 7.1.3.

 

Specified Hedging Agreement means any Hedging
Agreement (a) entered into by (i) a Borrower and (ii) any Lender
(as determined as of the date such Hedging Agreement is entered into) or any
affiliate thereof, as counterparty and (b)(i) the covered transactions
thereunder are the Revolving Loans or Obligations hereunder or (ii) that
has otherwise been designated by the Administrative Agent, such Lender or such
affiliate, as the case may be, and the Loan Party Representative, on
behalf of such Borrower, by notice to the Administrative Agent, as a Specified
Hedging Agreement. The designation of any Hedging Agreement as a Specified
Hedging Agreement shall not create in favor of the Administrative Agent, any
Lender or affiliate

 

27

 

thereof that is a party thereto any rights in
connection with the management or release of any Collateral or of the
obligations of any guarantor under this Agreement or the Loan Documents.

 

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

 

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

 

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

 

Subordinated Debt means any Debt of the
Borrowers and their consolidated Subsidiaries on a consolidated basis that is
unsecured and is expressly subordinated to the prior payment in full, in cash,
of the Obligations pursuant to an agreement in form and substance
reasonably satisfactory to the Administrative Agent.

 

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

 

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

 

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

 

Termination Fee - see Section 5.4.

 

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

 

28

 

condition that might constitute grounds under
Section 4042 of ERISA for the termination of, or appointment of a trustee
to administer, such Pension Plan.

 

Triggering Event means any invalidation,
rescission or avoidance of (a) the transfer of the assets and operations
of the Company to Russ Gift pursuant to the Related Agreements and/or (b) the
liens and security interests granted by Russ Gift on such assets to secure the
Obligations, in either case, under or pursuant to any state or federal law
relating to bankruptcy, insolvency or 
creditors’ rights, generally, including provisions of the Bankruptcy
Code relating to fraudulent conveyances, preferences or other voidable or
recoverable payments of money or transfers of property.

 

type - see Section 2.2.1.

 

UCC is defined in the Guaranty and Collateral
Agreement.

 

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

 

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

 

Voidable Transfer – see Section 15.23.

 

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

 

1.2                                 Other
Interpretive Provisions.

 

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

 

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

 

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

 

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

 

29

 

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

 

(f)                                    This
Agreement and the other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and each shall be
performed in accordance with its terms. In the event of any inconsistency
between the terms of the Master Letter of Credit Agreement and the terms of
this Agreement, the terms of this Agreement shall control for the purposes of
calculating compliance with any condition or covenant, and the occurrence of
any Event of Default or Unmatured Event of Default, under the terms of this
Agreement. Notwithstanding anything to the contrary contained in this
Agreement, the occurrence of a default, Unmatured Event of Default or Event of
Default under, and as defined in the Master Letter of Credit Agreement shall
not result in a default, Unmatured Event of Default or Event of Default under
this Agreement if the event that created such default, Unmatured Event of
Default or Event of Default would not, if the Master Letter of Credit Agreement
was not a Loan Document, have independently created a default, Unmatured Event
of Default or Event of Default under this Agreement.

 

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

 

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

 

2.1                                 Commitments.
On and subject to the terms and conditions of this Agreement, each of the
Lenders, severally and for itself alone, agrees to make Revolving Loans to, and
to issue or participate in Letters of Credit for the account of, the Borrowers
as follows:

 

2.1.1                        Revolving
Loan Commitment.

 

(a)                                  Revolving
Loans. Subject to the terms and conditions of this Agreement, each Lender
agrees to make loans on a revolving basis (each, a “Revolving Loan”, and
collectively, the “Revolving Loans”) from time to time until the
Termination Date in such Lender’s Pro Rata Share of such aggregate amounts as
the Loan Party Representative may request from the Administrative Agent in
accordance with Section 2.2.2; provided that, except as and
to the extent set forth in clause (b) below, the Revolving
Outstandings will not at any time exceed Revolving Loan Availability or result
in the violation of Section 11.13.1.

 

30

 

(b)                                 Interim
Advances. If at any time the Revolving Outstandings exceeds the Borrowing
Base or Section 11.13.1 is violated, and without limiting the other
rights and remedies of the Administrative Agent and the Lenders hereunder and
under the other Loan Documents, the Borrowers shall immediately, and without
the necessity of demand by the Administrative Agent, make the mandatory
prepayment required pursuant to Section 6.2.2(b) to the
Administrative Agent; provided, that the Administrative Agent may, at its
option and in its sole discretion, permit such excess (the “Interim Advance”)
to remain outstanding and continue to advance Revolving Loans to the Borrowers
on behalf of the Lenders without the consent of any Lender for a period of up
to thirty (30) calendar days, so long as (i) the amount of the Interim
Advances does not exceed at any time One Million dollars ($1,000,000), (ii) the
Revolving Outstandings do not exceed the Commitments, and (iii) in the
case of any subsequent Interim Advances, the Administrative Agent has not been
notified by the Required Lenders to cease making such Revolving Loans. If the
Interim Advance is not repaid (or otherwise eliminated) in full within thirty
(30) days of the initial occurrence of the Interim Advance, no future advances may be
made to the Borrowers without the consent of all Lenders until the Interim
Advance is repaid in full.

 

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

 

2.1.2                        [Intentionally
Omitted].

 

2.1.3                        L/C
Commitment. Subject to Section 2.3.1 and the other terms and
conditions of this Agreement, the Issuing Bank agrees to issue letters of
credit, in each case containing such terms and conditions as are permitted by
this Agreement and are reasonably satisfactory to the Issuing Bank (each, a “Letter
of Credit”), at the request of the Loan Party Representative and for the
account of the Borrowers from time to time before the Termination Date and, as
more fully set forth in Section 2.3.2, each Lender (which shall not
include the Issuing Bank) agrees to purchase a participation in each such
Letter of Credit; provided that (a) the aggregate Stated Amount of
all Letters of Credit (after giving effect to the Stated Amount of any Letter
of Credit so requested) shall not at any time exceed Eight Million Dollars
($8,000,000) and (b) the Revolving Outstandings (after giving effect to
the Stated Amount of any Letter of Credit so requested) shall not at any time
exceed Revolving Loan Availability or result in a violation of Section 11.13.1.
Without limiting any of the foregoing (and without duplication of the EDA
Reserve), the Back-Stop L/C shall be deemed to have been requested by the
Borrowers on the Closing Date, regardless of when issued.

 

31

 

2.2                                 Loan
Procedures.

 

2.2.1                        Various
Types of Revolving Loans. Each Revolving Loan shall be divided into
tranches which are, either a Base Rate Loan or a LIBOR Loan (each a “type”
of Loan), as the Loan Party Representative shall specify in the related notice
of borrowing or conversion pursuant to Section 2.2.2 or 2.2.3.
LIBOR Loans having the same Interest Period which expire on the same day are
sometimes called a “Group” or collectively “Groups”. Base Rate
Loans and LIBOR Loans may be outstanding at the same time, provided
that not more than five (5) different Groups of LIBOR Loans, in
aggregate, shall be outstanding at any one time. All borrowings, conversions
and repayments of Revolving Loans shall be effected so that each Lender will
have a ratable share (according to its Pro Rata Share) of all types and Groups
of Revolving Loans.

 

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

 

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

 

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

 

32

 

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

 

2.2.3                        Conversion
and Continuation Procedures.

 

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

 

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

 

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

 

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

 

(b)                                 The
Loan Party Representative shall give written notice (each such written notice,
a “Notice of Conversion/Continuation”) substantially in the form of
Exhibit F or telephonic notice (followed immediately by a Notice of
Conversion/Continuation) to the Administrative Agent of each proposed
conversion or continuation not later than (i) in the case of conversion
into Base Rate Loans, 11:00 A.M., Chicago time, on the proposed date of
such conversion and (ii) in the case of conversion into or continuation of
LIBOR Loans, 11:00 A.M., Chicago time, at least three (3) Business
Days prior to the proposed date of such conversion or continuation, specifying
in each case:

 

(i)                                     the proposed date
of conversion or continuation;

 

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

 

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

 

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

 

33

 

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

 

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

 

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

 

2.2.4                        Borrowing
Representations and Warranties. Each and every request (or deemed request)
by the Borrowers (through the Loan Party Representative) for, and acceptance by
the Borrowers of, a Revolving Loan or Letter of Credit shall, in each case,
constitute the Borrowers’ representation and warranty that (and the
Administrative Agents’ and the Lenders’ obligation to make any such Revolving
Loan or issue or participate in any Letter of Credit shall be subject to the
conditions precedent that), both on the date of such request for such Revolving
Loan and/or Letter of Credit and on the date any such Revolving Loan is made or
Letter of Credit is issued, (i) no Unmatured Event of Default or Event of
Default has occurred and is continuing, (ii) the Borrowers’
representations and warranties set forth in this Agreement, as supplemented
from time to time, are true and correct in all material respects (or, if such
representations and warranties are qualified by materiality or Material Adverse
Effect, in all respects) except to the extent any such representation and
warranty expressly speaks to an earlier date, and (iii) after giving
effect to such Revolving Loan and/or Letter of Credit, no violation of Section 11.13.1
would then exist or result therefrom.

 

2.3                                 Letter
of Credit Procedures.

 

2.3.1                        L/C
Applications. The Borrowers shall execute and deliver to the Issuing Bank
the Master Letter of Credit Agreement on the Closing Date. The Loan Party
Representative shall give notice to the Administrative Agent and the Issuing
Bank of the requested issuance of each Letter of Credit on a Business Day which
is at least three (3) Business Days (or such lesser number of days as the
Administrative Agent and the Issuing Bank shall agree in any particular
instance in their sole discretion) prior to the proposed date of issuance of
such Letter of Credit. Each such notice shall be accompanied by an L/C
Application, duly executed by the Loan Party Representative and in all respects
satisfactory to the Administrative Agent and the Issuing Bank, together with
such other documentation as the Administrative Agent or the Issuing Bank may reasonably
request in support thereof, it being understood that each L/C Application shall
specify, among other things, the date on which the proposed Letter of Credit is
to be issued, the expiration date of such Letter of Credit (which shall not be
later than thirty (30) days prior to the Scheduled Termination Date (unless
such Letter of Credit is Cash Collateralized) and shall in no event exceed more
than one (1) year from the date of issuance, provided such Letter of
Credit may provide for annual renewals subject to Issuing Bank consent
thereto) and whether such Letter of Credit is to be transferable in whole or in
part. Any Letter of Credit outstanding after the Scheduled Termination Date
which is Cash Collateralized for the benefit of the Issuing Bank shall be the
sole responsibility of the Issuing Bank and the Issuing

 

34

 

Bank shall be solely entitled to the benefits of such Cash Collateral. The
Issuing Bank shall promptly advise the Administrative Agent of the issuance of
each Letter of Credit and of any amendment thereto, extension thereof or event
or circumstance changing the amount available for drawing thereunder. In the
event of any inconsistency between the terms of the Master Letter of Credit
Agreement, any L/C Application and the terms of this Agreement, the terms of
this Agreement shall control.

 

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

 

2.3.3                        Reimbursement
Obligations.

 

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

 

(b)                                 The
Borrowers’ reimbursement obligations hereunder shall be irrevocable and
unconditional under all circumstances, including (a) any lack of validity
or enforceability of any

 

35

 

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

 

2.3.4                        Funding
by the Lenders to Issuing Bank. If the Issuing Bank makes any payment or
disbursement under any Letter of Credit and (a) (i) a Revolving Loan may not
be made in accordance with Section 2.3.2 and (ii) the Loan
Parties have not reimbursed the Issuing Bank in full for such payment or disbursement
by 11:00 A.M., Chicago time on the date of such payment or disbursement or
(b) any reimbursement that was received by the Issuing Bank from a Loan
Party or any other Person on behalf of the Loan Parties is or must be returned
or rescinded upon or during any bankruptcy or reorganization of any Loan Party,
such other Person or otherwise, each Lender with a Commitment shall be
obligated to pay to the Administrative Agent for the account of the Issuing
Bank, in full or partial payment of the purchase price of its participation in
such Letter of Credit, its Pro Rata Share (aggregating to 100% as among all
such Lenders (exclusive of the Issuing Bank)) of such payment or disbursement
(but no such payment shall diminish the obligations of the Borrowers under Section 2.3.3),
and, upon notice from the Issuing Bank, the Administrative Agent shall promptly
notify each Lender thereof. Each Lender irrevocably and unconditionally agrees
to so pay to the Administrative Agent in immediately available funds for the
Issuing Bank’s account the amount of such Lender’s Pro Rata Share of such
payment or disbursement. If and to the extent any Lender shall not have made
such amount available to the Administrative Agent by 2:00 P.M., Chicago
time, on the Business Day on which such Lender receives notice from the
Administrative Agent of such payment or disbursement (it being understood that
any such notice received after noon, Chicago time, on any Business Day shall be
deemed to have been received on the next following Business Day), such Lender
agrees to pay interest on such amount to the Administrative Agent for the
Issuing Bank’s account forthwith on demand, for each day from the date such
amount was to have been delivered to the Administrative Agent to the date such
amount is paid, at a rate per annum equal to (a) for the first three (3) days
after demand, the Federal Funds Rate from time to time in effect and (b) thereafter,
the Base Rate from time to time in effect. Any Lender’s failure to make
available to the Administrative Agent its Pro Rata Share of any such payment or
disbursement shall not relieve the Borrowers or any other Lender of its
obligation hereunder to make available to the Administrative Agent, the
Borrowers’ or such other Lender’s Pro Rata Share of such payment, but no Lender
shall be responsible for the failure of any other Lender to make available

 

36

 

to the Administrative Agent such other Lender’s Pro Rata Share of any
such payment or disbursement.

 

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

 

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

 

2.6                                 Loan
Party Representative. Each Loan Party hereby designates the Company as its
representative and agent on its behalf (in such capacity, the “Loan Party
Representative”) to act as specified herein. Each Loan Party hereby
authorizes the Loan Party Representative to take such actions on its behalf
under the terms of this Agreement and the other Loan Documents and to exercise
such powers and perform such duties hereunder and thereunder as are
specified in such agreements or are reasonably incidental thereto, including
issuing Notices of Borrowing and Notices of Conversion/Continuation, acceptance
of amounts borrowed hereunder, giving instructions with respect to the
disbursement of the proceeds of the Revolving Loans, selecting interest rate
options, requesting Letters of Credit, giving and receiving all other notices
and consents hereunder or under any of the other Loan Documents and taking all
other actions (including in respect of compliance with covenants), in each
case, on behalf of the Borrowers and the Loan Parties under the Loan Documents.
The Loan Party Representative hereby accepts such appointment. The
Administrative Agent and the Lenders shall be entitled to rely on all notices,
requests, consents, certifications and/or authorizations or other similar acts
delivered or taken by the Loan Party Representative for or on behalf of any
Borrower pursuant hereto or the other Loan Documents without inquiry and as if
such notices, requests, consents, certifications and/or authorizations or other
similar acts were delivered by such Borrower. Each warranty, covenant,
agreement and undertaking made on its behalf by the Loan Party Representative
shall be deemed for all purposes to have been made by all Borrowers and Loan
Parties (or any of the them, as applicable) and shall be binding upon and
enforceable against such Borrower or Loan Party to the same extent as it if the
same had been made directly by such Borrower or Loan Party. The Company shall
not be permitted to resign as the Loan Party Representative and the Borrowers
shall not be permitted to remove the Company as Loan Party Representative
without the consent of the Administrative Agent; provided that if the Company
notifies the Administrative Agent in writing that it (or any successor Loan
Party Representative) shall no longer be able to act as Loan Party
Representative in accordance with the terms hereof, the Administrative Agent
and the Borrowers shall appoint a successor to act as Loan Party
Representative, which successor shall be a Borrower designated by the Administrative
Agent therefor (and the Borrowers hereby agree that such Person thereafter
shall be vested with all rights, powers, privileges and authority of the Loan
Party Representative hereunder).

 

2.7                                 Increase
in Commitments. Upon the request of the Loan Party Representative made at
any time (a) prior to the Termination Date and (b) indicating that
any existing Lender

 

37

 

has agreed to increase its Commitment or that any other Eligible
Assignee approved by the Loan Party Representative, the Administrative Agent
and the Issuing Bank, has become a party hereto as a Lender and has agreed to
accept an additional Commitment (in each case, pursuant to documentation in form and
substance reasonably satisfactory to the Administrative Agent), then, provided
that no Unmatured Event of Default or Event of Default then exists and is
continuing and without the consent of any other Lender, upon payment of any
applicable fees in the Agent Fee Letter relating to such increase, the
aggregate Commitments shall be increased by the amount of the additional or
supplemental Commitment(s) of such Lender(s). Upon the increase in the
aggregate Commitments, the respective Pro Rata Shares of each Lender in respect
of the Commitments shall be adjusted automatically to reflect the increase in
the aggregate Commitments and such Lender’s new or supplemental Commitment.

 

SECTION 3.   EVIDENCING OF REVOLVING LOANS.

 

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

 

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

 

SECTION 4.   INTEREST.

 

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

 

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

 

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

 

provided that any time an Event of Default
exists, at the Required Lenders’ election, the interest rate applicable to each
such Revolving Loan shall be increased by two percent (2%); and provided,
further, that any such increase may thereafter be rescinded by the
Required Lenders

 

38

 

notwithstanding Section 15.1. Notwithstanding the
foregoing, upon the occurrence of an Event of Default under Section 13.1.1
or 13.1.4, such increase shall occur automatically.

 

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

 

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

 

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

 

SECTION 5.   FEES.

 

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

 

5.2                                 Letter
of Credit Fees.

 

(a)                                  The
Borrowers hereby jointly and severally agree to pay to the Administrative
Agent, for the account of each Lender, a letter of credit fee for each Letter
of Credit equal to the L/C Fee Rate in effect from time to time of such Lender’s
Pro Rata Share (as adjusted from time to time) of the undrawn amount of such
Letter of Credit (computed for the actual number of days elapsed on the basis
of a year of three hundred sixty (360) days); provided that, upon the
election of the Required Lenders (or automatically upon the occurrence of an
Event of Default under Section 13.1.1 or 13.1.4), the rate
applicable to each Letter of Credit shall be increased by two

 

39

 

percent (2%) at any time that an Event of
Default exists. Such letter of credit fee shall be payable in arrears on the
last day of each calendar month and on the Termination Date (or such later date
on which such Letter of Credit expires or is terminated) for the period from
the date of the issuance of each Letter of Credit (or the last day on which the
letter of credit fee was paid with respect thereto) to the date such payment is
due or, if earlier, the date on which such Letter of Credit expired or was
terminated.

 

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

 

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

 

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

 

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

 

6.1                                                         Reduction
or Termination of the Revolving Commitment.

 

6.1.1                        Voluntary
Reduction or Termination of the Revolving Commitment. The Loan Party
Representative may from time to time on at least three (3) Business
Days’ prior written notice received by the Administrative Agent (which shall
promptly advise each Lender thereof) permanently reduce the Revolving
Commitment Limit to an amount not less than the Revolving Outstandings plus
the required Excess Revolving Loan Availability pursuant to Section 11.13.1.
Any such reduction shall be in an amount not less than $1,000,000 or a higher
integral multiple of $1,000,000 and such reduction shall be applied Pro Rata as
a reduction to each Lender’s Commitment such that the sum of such Commitments
equal the Revolving Commitment Limit. Concurrently with any reduction of the
Revolving Commitment Limit to zero, the Termination Date shall be deemed to
have occurred, and the Borrowers shall be required to repay all Obligations and
shall terminate or Cash Collateralize in full all outstanding Letters of Credit.
Any such termination of the Revolving Commitment Limit occurring on or prior to
the first year anniversary of the Closing Date shall be accompanied by the
Termination Fee required pursuant to Section 5.4.

 

6.1.2                        [Intentionally
Omitted].

 

40

 

6.1.3                        All
Reductions of the Revolving Commitment. All reductions of the Commitments
shall reduce the Revolving Commitment Limit and shall reduce the Commitments
ratably among the Lenders according to their respective Pro Rata Shares.

 

6.2                                 Prepayments.

 

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

 

6.2.2                        Mandatory
Prepayments.

 

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

 

(i)                                     Subject to Section 10.3.2,
concurrently with the receipt by any Loan Party of any Net Cash Proceeds from
any Asset Disposition (or financing or refinancing of any Obligations with Debt
permitted under Section 11.1(b)), in an amount equal to 100% of
such Net Cash Proceeds therefrom, which amounts shall be applied (1) first,
to the Revolving Outstandings until paid in full (including the Cash
Collateralization of all outstanding Letters of Credit), (2) second,
against all Bank Products Obligations due and owing to any  Lender or its Affiliates, pro-rata, until
paid in full, (3) third, to all other Obligations due and owing to each
Lender and the Administrative Agent, pro-rata, until paid in full, (4) fourth,
to the payment of any Specified Hedging Obligations due and owing to any
Lenders, pro-rata, until paid in full, and (5) fifth, any amounts
remaining thereafter, shall be delivered to the Loan Party Representative for
remittance to the Borrowers; and

 

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

 

Nothing in this Section 6.2.2(a) shall be deemed to
authorize any Asset Disposition or the sale or issuance of any Capital
Securities or Debt not otherwise permitted hereunder.

 

(b)                                 In
addition to the payments required pursuant to clause (a) immediately
above, the outstanding principal balance of the Revolving Loans shall be repaid
daily from available funds in the Agent Account as determined in accordance
with Section 7.1.1 and Section 10.11 hereof. In
addition, subject to Section 2.1.1(b) and without limiting any
of the other rights and remedies of the Administrative Agent and the Lenders in
respect thereof, if on any day the Revolving

 

41

 

Outstandings exceeds the Revolving Loan
Availability on such day or a violation of Section 11.13.1 then
exists, the Borrowers shall immediately prepay the Revolving Loans and/or Cash
Collateralize the outstanding Letters of Credit, or do a combination of the
foregoing, in an amount sufficient to eliminate such excess or violation.

 

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

 

6.3                                 Manner
of Prepayments. Any partial prepayment of a Group of LIBOR Loans shall be
subject to the proviso to Section 2.2.3(a). Any prepayment of a
LIBOR Loan on a day other than the last day of an Interest Period therefor
shall include interest on the principal amount being repaid and shall be
subject to Section 8.4. Except as otherwise provided by this
Agreement, all principal payments in respect of the Revolving Loans shall be
applied first, to repay outstanding Base Rate Loans, if any, and then to repay
outstanding LIBOR Rate Loans in direct order of Interest Period maturities.

 

6.4                                 Repayments.

 

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

 

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

 

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

 

7.1                                 Making
of Payments.

 

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

 

42

 

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

 

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

 

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

 

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

 

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

 

(c)                                  Within
one (1) Business Day of receipt thereof by the Administrative Agent,
payments to be applied to the Letter of Credit Fee for each Letter of Credit as
provided in

 

43

 

Section 5.2
shall be paid to each Lender in proportion to its Pro Rata Share of the undrawn
amount of such Letter of Credit.

 

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

 

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

 

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

 

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

 

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

 

44

 

cause such purchasing Lender to share the excess payment or other
recovery ratably with each of them; provided that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing Lender,
the purchase shall be rescinded and the purchase price restored to the extent
of such recovery.

 

7.6                                 Taxes.

 

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

 

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

 

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

 

(d)                                 (i)                                     Each
Lender that is not a United States person within the meaning of Code Section 7701(a)(30)
(a “Non-U.S. Participant”) shall deliver to the Loan Party
Representative and the Administrative Agent on or prior to the Closing Date (or
in the case of a change in the funding office or a Lender that is an Assignee,
on the date of such change in funding office or assignment to such Lender) two (2) accurate
and complete original signed copies of Internal Revenue Service (“IRS”) Form W-8BEN,
W-8ECI, or W-8IMY (or any successor or other applicable form prescribed by
the IRS) certifying to such Lender’s entitlement to a complete exemption from
United States withholding tax on payments to be made hereunder or any

 

45

 

Revolving Loan. If a Lender that is a
Non-U.S. Participant is claiming a complete exemption from withholding on
interest pursuant to Code Sections 871(h) or 881(c), such Lender shall
deliver (along with two (2) accurate and complete original signed copies
of IRS Form W-8BEN) a certificate in form and substance reasonably
acceptable to Administrative Agent (any such certificate, a “Withholding
Certificate”). In addition, each Lender that is a Non-U.S. Participant
agrees that, from time to time after the Closing Date (or in the case of a
Lender that is an Assignee, after the date of the assignment to such Lender),
when a lapse in time (or change in circumstances or in any applicable law, rule or
regulation by any governmental authority, or compliance by any Lender with any
request or directive (whether or not having force of law) of any such authority
occurs) renders the prior certificates hereunder obsolete or inaccurate in any
material respect, such Lender shall promptly deliver to the Loan Party
Representative and the Administrative Agent two (2) new and accurate and
complete original signed copies of an IRS Form W-8BEN, W-8ECI, or W-8IMY
(or any successor or other applicable forms prescribed by the IRS) and, if
applicable, a new Withholding Certificate, to confirm or establish the
entitlement of such Lender or the Administrative Agent to an exemption from, or
reduction in, United States withholding tax on payments to be made hereunder or
any Revolving Loan but only to the extent permitted at the time by applicable
law.

 

(ii)                                  Each Lender that is
not a Non-U.S. Participant (other than any such Lender which is taxed as a
corporation for U.S. Federal income tax purposes) shall provide two (2) properly
completed and duly executed copies of IRS Form W-9 (or any successor or
other applicable form) to the Loan Party Representative and the Administrative
Agent certifying that such Lender is exempt from United States backup
withholding tax. Thereafter, from time to time, to the extent that a form provided
pursuant to this Section 7.6(d)(ii) is rendered obsolete or
inaccurate in any material respects as result of change in circumstances with
respect to the status of a Lender, such Lender shall promptly deliver to the
Loan Party Representative and the Administrative Agent revised forms necessary
to confirm or establish the entitlement to such Lender’s or Administrative
Agent’s exemption from United States backup withholding tax.

 

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

 

(e)                                  Each
Lender agrees to indemnify the Administrative Agent and hold the Administrative
Agent harmless for the full amount of any and all present or future Taxes and
related liabilities (including penalties, interest, additions to tax and
expenses, and any Taxes imposed by any jurisdiction on amounts payable to the
Administrative Agent under this Section 7.6) which are imposed on
or with respect to principal, interest or fees payable to such Lender hereunder
and which are not paid by the Borrower pursuant to this Section 7.6,
whether or not such Taxes or related liabilities were correctly or legally
asserted. This indemnification shall be made within thirty (30) days from
the date the Administrative Agent makes written demand therefor.

 

46

 

SECTION 8.                                INCREASED COSTS; SPECIAL PROVISIONS FOR LIBOR
LOANS.

 

8.1           Increased Costs.

 

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

 

(b)           If
any Lender or the Issuing Bank shall reasonably determine that any change in,
or the adoption or phase-in of, any applicable law, rule or regulation
regarding capital adequacy, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
the compliance by any Lender or the Issuing Bank, or any Person controlling
such Lender or the Issuing Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Lender’s, the Issuing Bank’s or such controlling Person’s
capital as a consequence of such Person’s obligations hereunder or under any
Letter of Credit to a level below that which such Lender, or the Issuing Bank
or such controlling Person could have achieved but for such change, adoption,
phase-in or compliance (taking into consideration such Lender’s, or the Issuing
Bank’s or such controlling Person’s policies with respect to capital adequacy)
by an amount deemed by such Lender, or the Issuing Bank or such controlling
Person to be material, then from time to time, upon demand by such Lender or
the Issuing Bank (which demand shall be accompanied by a statement setting
forth the basis for such demand and a calculation of the amount thereof in
reasonable detail, a copy of which shall be furnished to the Administrative
Agent), the Borrowers hereby jointly and severally agree to pay to such Lender
or the Issuing Bank, as applicable, such additional amount as will compensate
such Lender, or the Issuing Bank, or such controlling Person for such reduction
so long as such

 

47

 

amounts have accrued on or after the day which is one hundred eighty
(180) days prior to the date on which such Lender or the Issuing Bank, as
applicable, first made demand therefor.

 

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

 

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

 

(b)           the
Required Lenders advise the Administrative Agent that the LIBOR Rate as
determined by the Administrative Agent will not adequately and fairly reflect
the cost to such Lenders of maintaining or funding LIBOR Loans for the relevant
Interest Period (taking into account any amount to which such Lenders may be
entitled under Section 8.1) or that the making or funding of LIBOR Loans
has become impracticable as a result of an event occurring after the date of
this Agreement which in the opinion of such Lenders materially affects such
Revolving Loans; then the Administrative Agent shall promptly notify the
other parties thereof and, so long as such circumstances shall continue, (i) no
Lender shall be under any obligation to make or convert any Base Rate Loans
into LIBOR Loans and (ii) on the last day of the current Interest Period for
each LIBOR Loan, such Revolving Loan shall, unless then repaid in full,
automatically convert to a Base Rate Loan.

 

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

 

8.4           Funding Losses. The Borrowers hereby jointly and
severally agrees that upon written demand by any Lender (which demand shall be
accompanied by a statement setting forth in reasonable detail the basis for the
amount being claimed, a copy of which shall be furnished to the Administrative
Agent), each Borrower will indemnify such Lender against any net loss or
expense which such Lender may sustain or incur (including any net loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Lender to

 

48

 

fund or
maintain any LIBOR Loan), as reasonably determined by such Lender, as a result
of (a) any payment, prepayment or conversion of any LIBOR Loan of such
Lender on a date other than the last day of an Interest Period for such
Revolving Loan (including any conversion pursuant to Section 8.3)
or (b) any failure of any Borrower to borrow, convert or continue any
Revolving Loan on a date specified therefor in a notice of borrowing,
conversion or continuation pursuant to this Agreement. For this purpose, all
such notices to the Administrative Agent pursuant to this Agreement shall be
deemed irrevocable.

 

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

 

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

 

8.7           Mitigation of Circumstances; Replacement of Lenders.

 

(a)           Each
Lender or the Issuing Bank, as applicable, shall promptly notify the Loan Party
Representative and the Administrative Agent of any event of which it has
knowledge which will or is likely to result in, and will use reasonable
commercial efforts available to it (other than the taking of any such action
which, in such Lender’s or the Issuing Bank’s sole judgment, imposes any
expense upon or is otherwise disadvantageous to such Lender or the Issuing
Bank, as applicable) to mitigate or avoid, (i) any obligation by the Borrowers
to pay any amount pursuant to Section 7.6 or 8.1 or (ii) the
occurrence of any circumstances described in Section 8.2 or 8.3
(and, if any Lender or the Issuing Bank has given notice of any such event
described in clause (i) or (ii) above and thereafter such event
ceases to exist, such Lender or the Issuing Bank, as applicable, shall promptly
so notify the Loan Party Representative and the Administrative Agent); provided
that the failure by any Lender to provide prospective notice of any such
possible event shall not reduce or diminish such Lender’s remedies or the Loan
Parties’ obligations hereunder. Without limiting the foregoing, each Lender or
the Issuing Bank, as applicable, will designate a different funding office if
such designation will avoid (or reduce the cost to the Borrowers of) any event
described in clause (i) or (ii) above and such designation
will not, in such Lender’s sole judgment, impose aggregate expenses in excess
of $1,000 on such Lender or be otherwise disadvantageous to such Lender.

 

(b)           If
any Borrower becomes obligated to pay additional amounts to any Lender pursuant
to Section 7.6 or 8.1, any Lender gives notice of the
occurrence of any circumstances

 

49

 

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

 

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

 

SECTION 9.   REPRESENTATIONS
AND WARRANTIES.

 

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

 

9.1           Organization. The Company and each other Loan Party
is validly existing and in good standing under the laws of its jurisdiction of
organization and each is duly qualified to do business in each jurisdiction
where, because of the nature of its activities or properties, such
qualification is required, except for such jurisdictions where the failure to
so qualify would not have or could not reasonably be expected to have a Material
Adverse Effect.

 

9.2           Authorization; No Conflict. The Company and each
other Loan Party is duly authorized to execute and deliver each Loan Document
to which it is a party, each Borrower is duly authorized to borrow monies
hereunder and the Company and each other Loan Party is duly authorized to
perform its obligations under each Loan Document to which it is a party. The
execution, delivery and performance by the Company and each other Loan Party of
each Loan Document to which it is a party, and the borrowings by each Borrower
hereunder, do not and will not (a) require any consent or approval of any
governmental agency or authority (other than any consent or approval which has
been obtained and is in full force and effect, except such as

 

50

 

would not have
and reasonably could not be expected to have a Material Adverse Effect),
(b) conflict with (i) any provision of law, (ii) the charter, by-laws
or other organizational documents of the Company or any other Loan Party or
(iii) any material agreement, indenture, instrument or other material document,
or any judgment, order or decree, which is binding upon the Company, any other
Loan Party or any of their respective properties or (c) require, or result in,
the creation or imposition of any Lien on any asset of the Company or any other
Loan Party (other than Permitted Liens and Liens in favor of the Administrative
Agent created pursuant to the Collateral Documents).

 

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

 

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

 

9.5           No Material Adverse Change. Since December 31,
2004, no event or circumstance exists and/or has occurred that has had or could
reasonably be expected to have, either alone or in conjunction with any other
circumstances, events or occurrences, a Material Adverse Effect; it being
agreed, however, that the consolidated results of operations of the Company and
its Subsidiaries for the quarters ended March 31, 2005, June 30, 2005 and
September 30, 2005, as reported on the 10-Qs of the Company filed with the SEC
on or about May 10, 2005, August 9, 2005 and November 9, 2005 shall not, in and
of themselves, be deemed a Material Adverse Effect.

 

9.6           Litigation and Contingent Liabilities. No
litigation (including derivative actions), arbitration proceeding or
governmental investigation or proceeding is pending or, to the such Loan Party’s
knowledge, threatened against any Loan Party or any Subsidiary of the Company
or any Loan Party which has had or could reasonably be expected to have, a
Material Adverse Effect. Other than any liability incident to such litigation
or proceedings, no Loan Party has any material Contingent Liabilities not
listed on Schedule 9.6 or permitted by Section 11.1.

 

9.7           Ownership of Properties; Liens. Each Loan Party
owns good and, in the case of real property, marketable title to all of its
properties and assets, real and personal, tangible and intangible, of any
nature whatsoever (including patents, trademarks, trade names, service marks
and copyrights) material to its business free and clear of all Liens, charges
and claims (including infringement claims with respect to patents, trademarks,
service marks, copyrights and the like) other than Permitted Liens. The Company
owns good title to the Capital Securities of the

 

51

 

Borrowers,
free and clear of all Liens, charges and claims other than Liens in favor of
the Administrative Agent pursuant to the Pledge Agreement and Liens permitted
under Section 11.2(h).

 

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

 

9.9           Pension Plans.

 

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

 

(b)           All
contributions (if any) have been made to any Multiemployer Pension Plan that
are required to be made by the Loan Parties or any other member of the
Controlled Group under the terms of the plan or of any collective bargaining
agreement or by applicable law; no Loan Party nor any other member of the
Controlled Group has withdrawn or partially withdrawn from any Multiemployer
Pension Plan, incurred any material withdrawal liability with respect to any
such plan or received notice of any claim or demand for withdrawal liability or
partial withdrawal liability from any such plan, and no condition has occurred
which, if continued,

 

52

 

could result in a withdrawal or partial withdrawal from any such plan;
and no Loan Party nor any other member of the Controlled Group has received any
notice that any Multiemployer Pension Plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of any excise tax, that any such plan is or has been funded at a
rate less than that required under Section 412 of the Code, that any such plan
is or may be terminated, or that any such plan is or may become insolvent.

 

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

 

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

 

9.10         Investment Company Act. No Loan Party or any of their
Subsidiaries or, to the best knowledge of the Loan Parties, the Company is an “investment
company” or a company “controlled” by an “investment company” or a “subsidiary”
of an “investment company,” within the meaning of the Investment Company Act of
1940.

 

9.11         Public Utility Holding Company Act. No Loan Party or
any of their Subsidiaries or, to the best knowledge of the Loan Parties, the
Company, is a “holding company”, or a “subsidiary company” of a “holding
company,” or an “affiliate” of a “holding company” or of a “subsidiary company”
of a “holding company,” within the meaning of the Public Utility Holding
Company Act of 1935.

 

9.12         Regulation U. No Loan Party nor any of their
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
Margin Stock.

 

9.13         Taxes. The Company, each other Loan Party and each
Subsidiary of each of the foregoing has timely filed all federal and state
income and all other material tax returns and reports required by law to have
been filed by it and has paid all taxes and governmental charges due and
payable with respect to such return, except any such taxes or charges which are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on
its books and in respect of which no Lien has been filed against the assets of
the Company, any other Loan Party or any Subsidiary of the foregoing. The
Company has, for all periods, and commencing with the financial statements of
the Borrowers for the Fiscal Quarter ending March 31, 2006 and continuing
thereafter, the other Loan Parties and each Subsidiary of each of the foregoing
have, in each case, made adequate reserves on their books and records in
accordance with GAAP for all federal and state income and all other material
taxes that have accrued but which are not yet due and payable. Neither the
Company nor any other Loan Party or any Subsidiary of the foregoing has
participated in any

 

53

 

transaction
that relates to a year of the taxpayer (which is still open under the
applicable statute of limitations) which is a “reportable transaction” within
the meaning of Treasury Regulation Section 1.6011-4(b)(2) (irrespective of the
date when the transaction was entered into).

 

9.14         Solvency, etc. (a) 
On the Closing Date, both immediately before and after giving effect to
the Spin-Off and the other Related Transactions contemplated hereby and by the
other Loan Documents and the Related Agreements, the fair value of the assets
of the Company and its Subsidiaries on a consolidated basis, at a fair
valuation on a going concern basis, will exceed the debts and liabilities, as
determined in accordance with GAAP, of the Company and its Subsidiaries on a
consolidated basis; the present fair saleable value of the assets of the
Company and its Subsidiaries on a consolidated basis on a going concern basis
will be greater than the amount that will be required to pay the probable
liability of the Company and its Subsidiaries on a consolidated basis on their
debts and other liabilities, as determined in accordance with GAAP, as such
debts and other liabilities become absolute and matured; the Company and its
Subsidiaries on a consolidated basis will be able to pay their debts and
liabilities, as determined in accordance with GAAP, as such debts and
liabilities become absolute and matured; and the Company and its Subsidiaries
on a consolidated basis will not have unreasonably small capital with which to
conduct the businesses in which they are engaged as such businesses are now
conducted and are proposed to be conducted after the date hereof.

 

(b)           On
the Closing Date, both immediately before and after giving effect to the
Spin-Off and the other Related Transactions contemplated hereby and by the
other Loan Documents and the Related Agreements, and thereafter immediately
prior to and after giving effect to the issuance of each Letter of Credit and
each borrowing hereunder and the use of the proceeds thereof, the fair value of
the assets of the Loan Parties and their Subsidiaries on a consolidated basis,
at a fair valuation on a going concern basis, will exceed the debts and
liabilities, as determined in accordance with GAAP, of the Loan Parties and
their Subsidiaries on a consolidated basis; the present fair saleable value of
the assets of the Loan Parties and their Subsidiaries on a consolidated basis
on a going concern basis will be greater than the amount that will be required
to pay the probable liability of the Loan Parties and their Subsidiaries on a
consolidated basis on their debts and other liabilities, as determined in
accordance with GAAP, as such debts and other liabilities become absolute and
matured; the Loan Parties and their Subsidiaries on a consolidated basis will
be able to pay their debts and liabilities, as determined in accordance with
GAAP, as such debts and liabilities become absolute and matured; and the Loan
Parties and their Subsidiaries on a consolidated basis will not have
unreasonably small capital with which to conduct the businesses in which they
are engaged as such businesses are now conducted and are proposed to be conducted
after the date hereof.

 

9.15         Environmental Matters. The on-going operations of
each Loan Party and each Subsidiary comply in all respects with all
Environmental Laws, except such non-compliance which has not had, and could not
(if enforced in accordance with applicable law) reasonably be expected to
result in, either individually or in the aggregate, a Material Adverse Effect. Each
Loan Party and each of their Subsidiaries has obtained, and maintained in good
standing, all licenses, permits, authorizations, registrations and other
approvals required under any Environmental Law for their respective ordinary
course operations, and for their reasonably anticipated future operations, and
each Loan Party and each of their Subsidiaries is in compliance with all terms
and conditions thereof, except where the failure to do so has not had

 

54

 

and could not
reasonably be expected to result in a material liability to any Loan Party or
Subsidiary and has not had, and could not reasonably be expected to result in,
either individually or in the aggregate, a Material Adverse Effect. Except as
set forth on Schedule 9.15, no Loan Party nor any of their Subsidiaries
nor any of their properties or operations is subject to, or reasonably
anticipates the issuance of, any written order from or agreement with any
Federal, state or local governmental authority, nor subject to any judicial or
docketed administrative or other proceeding, respecting any Environmental Law,
Environmental Claim or Hazardous Substance any of which has had, or could
reasonably be expected to result in, individually or in the aggregate, a
Material Adverse Effect. There are no Hazardous Substances or other conditions
or circumstances existing with respect to any property, arising from operations
prior to the Closing Date, or relating to any waste disposal, of any Loan Party
or of their Subsidiaries that has had, or could reasonably be expected to
result in, either individually or in the aggregate, a Material Adverse Effect. No
Loan Party nor any of their Subsidiaries has any underground storage tanks that
are not properly registered or permitted under applicable Environmental Laws or
that at any time have released, leaked, disposed of or otherwise discharged
Hazardous Substances any of which has had, or could reasonably be expected to
result in, individually or in the aggregate, a Material Adverse Effect.

 

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

 

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

 

9.18         Information. None of the representations or
warranties made by the Company or any Loan Party in the Loan Documents as of the
date such representations and warranties are made or deemed made, and none of
the statements contained in each exhibit, report, statement or certificate
furnished by or on behalf of any Loan Party in connection with the Loan
Documents (including the offering and disclosure materials, if any, delivered
by the Company or such Loan Party to the Administrative Agent prior to the
Closing Date), contains any untrue statement of a material fact or omits any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they are made, not
misleading as of the time when made or delivered. It being recognized by the
Administrative Agent and the Lenders that any projections and forecasts provided
by the Borrowers, any other Loan Party or the Company (relating to the
Borrowers or the Loan Parties) are subject to uncertainties and contingencies,
are based on good faith estimates and assumptions believed by the Borrowers and

 

55

 

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

 

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

 

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

 

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

 

9.22         No Default. No Event of Default or Unmatured Event of
Default exists or would result from the execution, delivery or performance
hereof or of the other Loan

 

56

 

Documents,
including as a result of the Related Transactions and/or the incurrence by any
Loan Party or any of their Subsidiaries of any Debt hereunder or under any
other Loan Document.

 

9.23         Related Agreements, etc. The Loan Party
Representative has heretofore furnished the Administrative Agent a true and
correct copy of each of the Related Agreements and the Restricted Agreements, in
each case, as in effect as of the date of this Agreement. The Company and Russ
Gift have received all governmental and third party consents and approvals
necessary for the Spin-Off (including to effect the transfers of rights related
to real property, related to Intellectual Property, and otherwise under any
licensing or distribution agreements) and the continuing activities of the
Company and the Loan Parties, and such consents and approvals are in full force
and effect, except for the consents and approvals listed on Schedule 9.23
the failure to obtain any of which, individually or in the aggregate, (x) with
respect to each of the Company’s current real property leases of premises
located at 2520 Route 130, South Brunswick, New Jersey 08512 and 111 Bauer
Drive, Oakland, New Jersey 07436, which are being assigned to Russ Gift
pursuant to the Related Agreements, will not result in any material liability
or restrict any of the Loan Parties’ ability to do business in any material
respect, (y) other than in the case of governmental approvals or consents (or
the consents set forth in clause (x) immediately above), would not and could
not reasonably be expected to result in any material liability or restrict any
of the Loan Parties’ ability to do business in any material respect and (z) in
the case of governmental approvals or consents, would not and could not
reasonably be expected to result in any material liability, would not and could
not reasonably be expected to render the validity of the transfers of any material
portion of such assets by the Company to Russ Gift as contemplated by the
Related Agreements invalid, and would not adversely effect the creation and
validity of the Liens granted by Russ Gift to the Administrative Agent under
the Collateral Documents.

 

9.24         [Intentionally Omitted].

 

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

 

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

 

9.27         Inactive Subsidiaries. None of the Inactive
Subsidiaries owns any material properties or assets, has any Investments, Debt
or other material liabilities or conducts any operations or businesses;
provided, that BOA Done, Inc. currently holds and may continue to hold the
Bright of America Note. As of the Closing Date, the only Inactive Subsidiaries
of the Company and the Loan Parties are Fluf N’ Stuf, Inc., P/F Done, Inc.,
RBTACQ, Inc., BOA Done, Inc. and RBCACQ, Inc.

 

SECTION 10. AFFIRMATIVE
COVENANTS.

 

Until the
expiration or termination of the Commitments and thereafter until all
Obligations (other than unasserted contingent indemnification obligations)
hereunder and under

 

57

 

the other Loan Documents are paid in full in cash and all Letters of
Credit have been terminated (or Cash Collateralized), each of the Loan Parties
agrees that, unless at any time the Required Lenders shall otherwise expressly
consent in writing, it will:

 

10.1         Reports, Certificates and Other Information. Deliver
to the Administrative Agent (whereupon, in the cases of Sections 10.1.1,
10.1.2, 10.1.3, 10.1.5(a), 10.1.6, 10.1.8
and 10.1.9, the Administrative Agent shall deliver copies thereof to the
Lenders):

 

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

 

10.1.2      Interim Reports. (a) 
Promptly when available and in any event within 45 days after the end of
each of the first three Fiscal Quarters of each Fiscal Year (or such earlier or
later date as Form 10-Qs are required to be filed with the SEC taking into
account any extension granted by the SEC, provided the Company gives the
Administrative Agent prompt written notice of such extension), unaudited
consolidated financial statements of the Company and its Subsidiaries for such
Fiscal Quarter, including therein consolidated balance sheets and statements of
earnings and cash flows as of the end of such Fiscal Quarter and for the period
beginning with the first day of such Fiscal Year and ending on the last day of
such Fiscal Quarter, in each case, prepared in accordance with GAAP,
consistently applied and certified by the Chief Financial Officer as fairly
presenting in all material respects the financial condition of the Company and
its Subsidiaries as at the date thereof, together with (i) a comparison with
the corresponding period of the previous Fiscal Year and a comparison with the
budget for such period of the current Fiscal Year and (ii) a consolidating
balance sheet of the Company, the Borrowers and their Subsidiaries as of the
end of such Fiscal Quarter and consolidating statement

 

58

 

of earnings
and cash flows for the Company, the Borrowers and their Subsidiaries for such
Fiscal Quarter, in each case, prepared in accordance with GAAP (other than with
respect to the absence of footnotes and normal year end audit adjustments)
certified by the Chief Financial Officer as fairly presenting in all material
respects the financial condition of such entities as at the date and for the
period covered; provided that to the extent that the Company’s quarterly
report on Form 10-Q shall satisfy the requirement of this Section 10.1.2(a),
the Administrative Agent will accept such Form 10-Q in lieu of such item; and

 

(b)           promptly
when available and in any event within 30 days after the end of each fiscal
month of the Company (other than the end of a fiscal month which is also a
Fiscal Quarter or Fiscal Year end), unaudited consolidated financial statements
of the Company and its Subsidiaries for such fiscal month, including therein
consolidated balance sheets and statements of earnings and cash flows as of the
end of such fiscal month and for the period beginning with the first day of
such Fiscal Year and ending on the last day of such fiscal month, in each case,
prepared in accordance with GAAP, consistently applied and certified by the
Chief Financial Officer as fairly presenting in all material respects the
financial condition of the Company and its Subsidiaries as at the date thereof,
together with (i) a comparison with the corresponding period of the previous
Fiscal Year and a comparison with the budget for such period of the current
Fiscal Year and (ii) a consolidating balance sheet of the Company, the
Borrowers and their Subsidiaries as of the end of such month and consolidating
statement of earnings and cash flows for the Company, the Borrowers and their
Subsidiaries for such month, in each case, prepared in accordance with GAAP
(other than with respect to the absence of footnotes and normal year-end audit
adjustments) certified by the Chief Financial Officer as fairly presenting in
all material respects the financial condition of such entities as at the date
and for the period covered.

 

10.1.3      Compliance Certificates. Contemporaneously with the
furnishing of a copy of each annual audit report pursuant to Section 10.1.1
and each set of quarterly statements pursuant to Section 10.1.2(a), a
duly completed compliance certificate in the form of Exhibit B, with
appropriate insertions, dated the date of such annual report or such quarterly
statements and signed by a Senior Officer of the Company, containing (i) if
required pursuant to the terms hereof, a computation of each of the financial
ratios and restrictions set forth in Section 11.13 and to the effect
that such officer has not become aware of any Event of Default or Unmatured Event
of Default that has occurred and is continuing or, if there is any such event,
describing it and the steps, if any, taken or being taken to cure it and (ii) a
written statement of each Borrower’s management setting forth a discussion of
the financial condition of the Borrowers and their Subsidiaries and any
material changes in their financial condition and/or results of operations; provided
that to the extent that the Company’s annual report on Form 10-K or its
quarterly report on Form 10-Q shall satisfy the requirement of this Section
10.1.3(ii), the Administrative Agent will accept such Form 10-K or Form
10-Q in lieu of such item.

 

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

 

59

 

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

 

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

 

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

 

(c)           the
institution of any steps by any member of the Controlled Group or any other
Person to terminate any Pension Plan, or the failure of any member of the
Controlled Group to make a required contribution to any Pension Plan (if such
failure is sufficient to give rise to a Lien under Section 302(f) of ERISA) or
to any Multiemployer Pension Plan, or the taking of any action with respect to
a Pension Plan which could result in the requirement that the any Loan Party or
any other member of the Controlled Group furnish a bond or other security to
the PBGC or such Pension Plan, or the occurrence of any event with respect to
any Pension Plan or Multiemployer Pension Plan which could result in the
incurrence by any member of the Controlled Group of any material liability,
fine or penalty (including any claim or demand for withdrawal liability or
partial withdrawal from any Multiemployer Pension Plan), or any material
increase in the contingent liability of any Loan Party or any other member of
the Controlled Group with respect to any post-retirement welfare benefit plan
or other employee benefit plan of any Loan Party or any other member of the
Controlled Group which would have or could reasonably be expected to have a
Material Adverse Effect, or any notice that any Multiemployer Pension Plan is
in reorganization, that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of an excise tax, that any such
plan is or has been funded at a rate less than that required under Section 412
of the Code, that any such plan is or may be terminated, or that any such plan
is or may become insolvent;

 

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

 

(e)           any
cancellation, material change or any material increase (or any increase as a
result of the deterioration of the risk profile of any Loan Party or any of
their Subsidiaries) in the deductible in any insurance policy or coverage
maintained by any Loan Party or any of their Subsidiaries.

 

10.1.6      Borrowing Base Certificates. (a) By Wednesday of each
calendar week for the immediately preceding 
calendar week, a Borrowing Base Certificate executed by a Senior Officer
of the Loan Party Representative on behalf of the Borrowers (provided that (i)
the Loan Party Representative may deliver a Borrowing Base Certificate more
frequently if it chooses and (ii) after the occurrence and during the
continuance of an Event of Default, the

 

60

 

Administrative
Agent may require the Loan Party Representative to deliver Borrowing Base
Certificates more frequently upon its request. Upon the request by the
Administrative Agent, the Loan Parties (at their sole expense) shall provide
the Administrative Agent with full access to copies of the Borrowers’ sales
journals, cash receipts journals and credit memo journals for the relevant
period and shall provide the Administrative Agent with such other additional
information concerning Accounts and Inventory as may be reasonably requested by
the Administrative Agent from time to time. Each Borrowing Base Certificate
shall reflect the actual, aggregate Account balance and book Inventory balance
as of such date.

 

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

 

10.1.8      Projections. As soon as practicable, and in any event
not later than 45 days after the commencement of each Fiscal Year (commencing
with Fiscal Year 2007), financial projections for the Borrowers and their
Subsidiaries for such Fiscal Year (including monthly operating and cash flow
budgets) prepared in a manner consistent with the projections delivered by the
Borrowers to the Administrative Agent prior to the Closing Date or otherwise in
a manner reasonably satisfactory to the Administrative Agent, accompanied by a
certificate of the Chief Financial Officer on behalf of the Borrowers and their
Subsidiaries to the effect that (a) such projections were prepared by the
Borrowers and their Subsidiaries in good faith, (b) the Borrowers and their
Subsidiaries had a reasonable basis for the assumptions contained in such
projections and (c) such projections have been prepared in accordance with such
assumptions (it being recognized that any projections provided hereunder by the
Borrowers or any other Loan Party are subject to uncertainties and
contingencies, are based on good faith estimates and assumptions believed by
the Borrowers to be reasonable as of the date of the applicable projections and
upon the best information then reasonably available to the Borrowers and the
Loan Parties and that actual results during the period or periods covered by
any such projections may differ materially from projected results; provided
however that if, during the period or periods covered by any such
projections, management of the Borrowers or any other Loan Party determines
that the projections no longer accurately reflect in any material respect the
projected financial results for such period or periods, as the case may be, the
Chief Financial Officer shall, as soon as practicable, provide to the
Administrative Agent revised projections for such period or periods.

 

10.1.9      Material Notices. Promptly following receipt, copies of
any notices of default, termination or acceleration or any other material
notices (including, in the case of the EDA Bonds, any notice of default under
the Berrie Commitment, any termination, cancellation or rescission of the EDA
Bond Redemption or any release of the monies deposited by Angelica Berrie with
the EDA Bond Trustee in accordance with the Berrie Commitment to effect such
EDA Bond Redemption) received from any holder or trustee of, under or with
respect to any Subordinated Debt, the EDA Documents, the Related Agreements,
the Restricted Debt Agreements or any other material agreement.

 

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

 

61

 

10.1.11    Other Information. Promptly from time to time, such other
information concerning the Loan Parties (or any of them), any of their
Subsidiaries or, to the extent obtainable by the Loan Parties, the Company and
its Subsidiaries (other than the Loan Parties and their Subsidiaries) as any
Lender or the Administrative Agent may reasonably request.

 

10.2         Books, Records and Inspections. Keep, and cause the
Company and each other Loan Party and their Subsidiaries to keep, their books
and records in accordance with sound business practices sufficient to allow the
preparation of financial statements in accordance with GAAP; permit, and cause
the Company, each Loan Party and their Subsidiaries to permit, the
Administrative Agent, any Lender or any representative thereof to inspect the
properties and operations of the Company, the Loan Parties and their
Subsidiaries during regular business hours and with reasonable prior notice (or
any time without notice if an Event of Default exists); and permit, and cause
the Company, each Loan Party and their Subsidiaries to permit, during regular
business hours and with reasonable prior notice (or at any time without notice
if an Event of Default exists) provided that any Lender’s inspection must be
coordinated with an inspection by the Administrative Agent or one of its
representatives, the Administrative Agent or any representative thereof to
visit any or all of its offices, to discuss its financial matters with its
officers and its independent auditors (and the Loan Parties each hereby
authorizes such independent auditors to discuss such financial matters with any
Lender or the Administrative Agent or any representative thereof), and to
examine (and, at the expense of the Loan Parties) photocopy extracts from any
of its books or other records; and permit, and cause the Company and each Loan
Party to permit, during regular business hours and with reasonable prior notice
(or at any time without notice if an Event of Default exists), the
Administrative Agent and its representatives to inspect the Collateral and
other tangible assets of the Loan Parties, to perform appraisals of the
Collateral and real property of the Loan Parties, and to inspect, audit, check
and make copies of and extracts from the books, records, computer data, computer
programs, journals, orders, receipts, correspondence and other data relating to
Inventory, Accounts and any other Collateral. The Loan Parties shall be jointly
and severally liable for all reasonable expenses of the Administrative Agent
incurred in connection with such inspections or audits, including the
reasonable fees and expenses of its representatives and/or agents (it being
agreed that any Lender may accompany the Administrative Agent at its own
expense); provided, however, that other than with respect to
audits, inspections and appraisals conducted at any time that an Event of
Default exists, the Loan Parties shall not be required to reimburse the
Administrative Agent for more than two (2) inspections and/or audits and
more than two (2) appraisals in any Fiscal Year (including the audit and/or
inspection conducted for the completion of this Agreement); it being
acknowledged that a single inspection, audit and/or appraisal may entail visits
to the multiple locations of books, records and assets of the Loan Parties; and
it being further agreed that the costs for each inspection/audit shall not
exceed $25,000, in aggregate, and the costs for each appraisal shall not exceed
$15,000, in aggregate, in each case, plus reasonable out of pocket expenses and
disbursements (and, in each case, inclusive of any such amounts expended in
connection with audits or appraisals of the Canadian Borrower pursuant to the
Canadian Loan Agreement and the other Canadian Loan Documents).

 

62

 

10.3         Maintenance of Property; Insurance.

 

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

 

10.3.2      Property Insurance. Keep, and cause each other Loan
Party and their Subsidiaries to keep, the Collateral and all other property
insured for the full insurable value thereof against loss or damage by fire,
theft, explosion, sprinklers, collision and such other risks as are customarily
insured against by Persons engaged in businesses similar to that of the Loan
Parties, with such companies, in such amounts, with such deductibles, and under
policies in such form, as shall be reasonably satisfactory to the
Administrative Agent. Copies of all such policies of insurance covering the
property and operations of the Loan Parties have been and shall promptly
hereafter be delivered to the Administrative Agent, together with evidence of
payment of all premiums therefor, and shall contain an endorsement, in form and
substance reasonably acceptable to the Administrative Agent, showing loss under
such insurance policies (other than losses with respect to properties subject
to prior Permitted Liens of the type described in Section 11.2(d)
in favor of Persons other than the Administrative Agent or the Lenders) payable
to the Administrative Agent, for the benefit of the Administrative Agent and
the Lenders. Such endorsement, or an independent instrument furnished to the
Administrative Agent, shall provide that the insurance company shall give the
Administrative Agent at least thirty (30) days’ prior written notice before any
such policy of insurance is altered or canceled (or ten (10) days’ prior written
notice in the event of cancellation for non-payment of premiums) and that no
act, whether willful or negligent, or default of any Loan Party or any other
Person shall affect the right of the Administrative Agent to recover under such
policy of insurance in case of loss or damage. In addition, the Loan Parties
shall cause to be executed and delivered to the Administrative Agent an
assignment of proceeds of its business interruption insurance policies. Each
Loan Party hereby directs all insurers under all policies of property insurance
to pay all proceeds payable thereunder directly to the Administrative Agent;
provided that, so long as no Event of Default or Unmatured Event of Default
then exists or thereafter occurs, if the Loan Party Representative notifies the
Administrative Agent within 20 days after a casualty event with respect to
equipment or real property of any Loan Party that results in Net Cash Proceeds
of less than $1,000,000, that it intends to repair, rebuild or replace any such
damaged or destroyed equipment or real property with other property of
comparable quality, value and use within 180 days after any such casualty
event, then the Administrative Agent shall hold such proceeds received by it in
a non-interest bearing account at LaSalle Bank and, subject to its receipt of
plans, specifications and budgets reasonably acceptable to it, will agree to
disburse such proceeds as needed to effect such repair,  reconstruction or replacement; it being
agreed that (i) funds paid to and held by the Administrative Agent as aforesaid
shall not be deemed to reduce the outstanding Obligations; and (ii) if such
repairs, reconstruction or replacement have not been substantially completed
within such 180 day period (or such earlier time as the Administrative Agent
reasonably determines that such repair, reconstruction or replacement is no
longer being diligently pursued), the Administrative Agent shall have the right
to apply all such funds being held by it to the Obligations as provided herein.
Each Loan Party irrevocably makes, constitutes and appoints the Administrative
Agent (and all officers, employees or agents designated by the Administrative
Agent) as such Loan Party’s true and lawful attorney (and agent-in-fact) for
the

 

63

 

purpose of,
following the occurrence and during the continuance of an Event of Default,
making, settling and adjusting claims under such policies of property and/or
business interruption insurance, endorsing the name of such Loan Party on any
check, draft, instrument or other item of payment for the proceeds of such
policies of insurance and making all determinations and decisions with respect
to such policies of insurance.

 

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

 

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

 

10.4         Compliance with Laws; Payment of Taxes and Liabilities.
(a) Comply, and cause the Company and each Loan Party and their Subsidiaries to
comply, in all material respects with all applicable laws, rules, regulations,
decrees, orders, judgments, licenses, except where the failure to comply would
not or could not reasonably be expected to have a Material Adverse

 

64

 

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

 

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

 

10.6         [Intentionally Omitted].

 

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

 

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

 

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

 

(c)           Not,
and not permit any other member of the Controlled Group to (i) seek a waiver of
the minimum funding standards of ERISA, (ii) terminate or withdraw from any

 

65

 

Pension Plan or Multiemployer Pension Plan or (iii) take any other action
with respect to any Pension Plan that would, or could reasonably be expected
to, entitle the PBGC to terminate, impose liability in respect of, or cause a
trustee to be appointed to administer, any Pension Plan, unless the actions or
events described in clauses (i), (ii) and (iii) above individually or in the
aggregate would not or could not reasonably be expected to have a Material
Adverse Effect.

 

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

 

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

 

10.10       New Subsidiaries. If, after the Closing Date, any Loan
Party creates, either directly or indirectly, any Subsidiary in accordance with
Section 11.4 or 11.15, it will upon such creation thereof:

 

(a)           if
such Subsidiary is a Domestic Subsidiary (x) cause such Subsidiary to become
either a Borrower or a Guarantor; provided, that such Subsidiary may
become a Borrower hereunder only if such Subsidiary is a Wholly-Owned
Subsidiary and the Administrative Agent has provided its prior written approval
of such Subsidiary becoming a Borrower (upon its review of such Subsidiary
including, without limitation, its review of such field examinations, audits, appraisals
and other due diligence as the Administrative Agent shall reasonably require)
and, if such Subsidiary is not a Wholly-Owned Subsidiary or in the event such
approval is not provided

 

66

 

for a Wholly-Owned Subsidiary to become a Borrower, such Subsidiary
shall become a Guarantor, and (y) cause such Subsidiary to execute and deliver
to the Administrative Agent (1) a Joinder Agreement in the form of Exhibit G
hereto, in its capacity as a Borrower or a Guarantor, as applicable, and (2)
any further documents, instruments or agreements as the Administrative Agent
may reasonably require in order to grant the Administrative Agent a perfected
first priority security interest (subject only to Permitted Liens) in
substantially all of the assets of such Subsidiary; or

 

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

 

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

 

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

 

10.11       Deposit Accounts. (a) 
Unless the Administrative Agent otherwise consents in writing and as
described in clause (b) below, in order to facilitate the Administrative Agent’s
and the Lenders’ maintenance and monitoring of their security interests in the
Collateral, maintain all of their lock-boxes, collection accounts, deposit
accounts, securities accounts, operating accounts, checking accounts,
disbursement accounts and other accounts (other than payroll accounts and
accounts maintained by the Borrowers for the sole benefit of its employees as
listed on Schedule 10.11 attached hereto) (collectively, the “Subject
Accounts”) with LaSalle Bank. 

 

67

 

With respect
to any Subject Accounts maintained with LaSalle Bank, although no compensating
balance will be required, the Borrowers and Loan Parties shall keep monthly
balances in order to merit earnings credits which will cover LaSalle Bank’s
service charges for Bank Products. With respect to any such Subject Accounts
with LaSalle Bank, each Loan Party shall enter into Bank Product Agreements
relating thereto. The Borrowers and the Loan Parties shall be responsible for
nominal charges assessed thereon.

 

(b)           With
respect to any Subject Accounts maintained by the Borrowers (or by the Company
for and on behalf of the Borrowers (which the Borrowers represent are currently
limited to account number 610-045-1067 maintained with The Bank of New York and
the JPMorgan Account referred to below)) at financial institutions other than
LaSalle Bank on the Closing Date, the Borrowers agree to, and to cause the
Company to agree to, cooperate with the Administrative Agent to transition such
accounts and cash management services to LaSalle Bank and, as soon as
reasonably practicable after the Closing Date, to notify all Account Debtors to
remit all payments on Accounts to a collection account maintained at LaSalle
Bank and, within one hundred twenty (120) days after the Closing Date,
close any such other Subject Accounts maintained at financial institutions
other than LaSalle Bank. With respect to the Borrowers’ (or, to the extent
maintained by or on behalf of the Borrowers (or any of them), the Company’s)
existing Subject Accounts (other than that certain disbursement account no.
00302177 maintained by the Company with JPMorgan Chase Bank the balance of
which is hereby represented to at no time exceed $150,000, the “JPMorgan
Account”), the Borrowers shall, or shall cause the Company (with respect to
any such account maintained by or on behalf of the Borrowers (or any of them))
to, deliver, on or prior to the Closing Date, Account Control Agreements
executed by the applicable Borrowers or the Company, the applicable financial
institution and the Administrative Agent relating to each such Subject Account.
No Borrower shall open any new Subject Accounts other than with LaSalle Bank. No
Borrower shall, nor shall it permit the Company to, make any further deposits
to the JPMorgan Account. The Borrowers shall deliver to the Administrative
Agent a revised schedule showing any changes to its or (solely with respect to
any such accounts maintained by the Company for or on behalf of the Borrowers
(or any of them)) the Company’s Subject Accounts within five (5) Business Days
of any changes to the Subject Accounts. Each Borrower hereby authorizes, and
shall cause the Company (solely with respect to any such accounts maintained by
the Company for or on behalf of the Borrowers (or any of them)) to authorize,
the financial institutions at which such Borrower or the Company, as
applicable, maintains a Subject Account to provide the Administrative Agent
with a copy of such financial institution’s regular statements and such other
more frequent statements or advices as the Administrative Agent may reasonably
request, in each case, covering the remittances, deposits, and withdrawals from
and balances of such account, and each Borrower hereby consents, and will cause
the Company (solely with respect to any such accounts maintained by the Company
for or on behalf of the Borrowers (or any of them)) to consent, to such
information being provided to the Administrative Agent. Each Borrower shall,
and shall cause the Company (solely with respect to any such accounts
maintained by the Company for or on behalf of the Borrowers (or any of them))
to, cause each financial institution at which such Borrower or the Company, as
applicable, maintains a Subject Account (other than the JPMorgan Account) to
enter into an Account Control Agreement in order to give the Administrative
Agent “control” thereof (as defined in the UCC) for perfection purposes. Notwithstanding
anything contained herein or in any other Loan Document to the contrary, with
respect to any Subject Account to which Accounts are remitted, collected or
deposited, the financial institutions at

 

68

 

which any such accounts are maintained shall, on a daily basis, remit
all amounts on deposit in or remittance to such accounts to accounts designated
by the Administrative Agent for application to the Obligations in accordance
with the terms hereof.

 

10.12       [Intentionally Omitted].

 

10.13       Appraisal of Inventory. Within thirty (30) days after
the Closing Date, the Borrowers shall deliver to the Administrative Agent an
appraisal of the Borrowers’ Inventory and the orderly liquidation value
thereof, net of costs, fees and expenses arising in connection with such
orderly liquidation thereof, prepared for the Administrative Agent by Hilco
Appraisal Services, LLC (or other auditor or appraiser reasonably acceptable to
the Administrative Agent).

 

10.14       Post-Closing Spin-Off Consents. The Borrowers shall use
commercially reasonable efforts to obtain within 120 days after the Closing
Date, all governmental and third party consents and approvals related to the
Spin-Off that were not obtained on or before the Closing Date, including each
consent listed on Schedule 9.23, and shall deliver to the Administrative
Agent evidence reasonably satisfactory to the Administrative Agent, of such
approvals and consents obtained.

 

SECTION 11.  NEGATIVE
COVENANTS.

 

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

 

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

 

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

 

(b)           Debt
secured by Liens permitted by Section 11.2(d); provided that the
aggregate amount of all such Debt at any time outstanding shall not exceed
$500,000;

 

(c)           (i)
unsecured Debt owing by any Borrower to any other Loan Party,
(ii) unsecured Debt owing by any Guarantor (that is a Wholly-Owned Subsidiary)
to any other Loan Party, and (iii) unsecured Debt owing by any Loan Party to a
First-Tier Foreign Subsidiary of any Loan Party; provided that in each
of the cases of clause (i) and (ii) any such Debt shall be evidenced by a
demand note in the form of Exhibit H attached hereto and pledged
and delivered to the Administrative Agent pursuant to the Collateral Documents
as additional collateral security for the Obligations; provided, further
that in each of the cases of clause (i), (ii) and (iii) any such Debt shall be
subordinated to the Obligations of the Loan Parties hereunder in a manner
reasonably satisfactory to the Administrative Agent (it being agreed that the
subordination provisions set forth in the demand note referred to above shall
be deemed to be reasonably satisfactory to the Administrative Agent);

 

69

 

(d)           unsecured
Subordinated Debt  (other than Debt
described in clause (c) above) in an amount at any time outstanding not to
exceed $2,000,000;

 

(e)           unsecured
Hedging Obligations for bona fide hedging purposes and not for speculation;

 

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

 

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

 

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

 

(i)            [Intentionally
Omitted];

 

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

 

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

 

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

 

(m)          unsecured
guaranties by any Loan Party of the obligations of any Borrower under any
license and/or distribution agreement entered into by such Borrower in the
ordinary course of its business.

 

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

 

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

 

(b)           Liens
arising in the ordinary course of business (such as (i) Liens of carriers,
warehousemen, mechanics and materialmen and other similar Liens imposed by law
and (ii) Liens in the form of deposits or pledges incurred in connection with
worker’s compensation, unemployment compensation and other types of social
security (excluding Liens arising under

 

70

 

ERISA) or in connection with surety bonds, bids, performance bonds and
similar obligations) for sums not overdue or being contested in good faith by
appropriate proceedings and not involving any advances or borrowed money or the
deferred purchase price of property or services and, in each case, for which it
maintains adequate reserves;

 

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

 

(d)           subject
to the dollar limitation set forth in Section 11.1(b), (i) Liens
(including Liens having priority over the Liens pursuant to the Loan Documents)
arising in connection with Capital Leases (and attaching only to the property
being leased), (ii) Liens (including Liens having priority over the Liens
pursuant to the Loan Documents) that constitute purchase money security
interests on any capital asset securing Debt incurred for the purpose of
financing all or any part of the cost of acquiring such capital asset, provided
that any such Lien attaches solely to the capital asset so acquired and secures
no more than the purchase price (or portion) thereof financed thereby;

 

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

 

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

 

(g)           the
EDA Lien, but only to the extent of the EDA Reserve;

 

(h)           [Intentionally
Omitted];

 

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

 

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

 

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

 

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

 

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

 

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

 

71

 

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

 

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

 

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

 

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

 

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

 

(iii)          the Borrowers may
pay dividends or make other distributions to the Company for the sole purpose
of permitting the Company to (and upon receipt by the Company of such funds the
Company shall promptly use such funds for such purpose) pay income tax
liabilities allocable to the Borrowers’ and their Subsidiaries’ operations, to
the extent any such taxes are due and owing by the Company and its Subsidiaries
on a consolidated basis with the Loan Parties;

 

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

 

(v)           so long as both
before and immediately after giving effect to the payments described in this
clause (v), (x) no Event of Default or Unmatured Event of Default exists or
would result therefrom and (y) no violation of the financial covenants set
forth in Section 11.13 would then exist or would, on a pro forma basis,
result therefrom (compliance with such conditions to be demonstrated by a
certificate of the Chief Financial Officer to be delivered to the
Administrative Agent by the 10th Business Day of the month following
the month in which any such dividend or distribution is made, in each case,
certifying that no Event of Default or Unmatured Event of Default then exists
or would result from the proposed distribution and setting forth the

 

72

 

calculations
of pro forma Excess Revolving Loan Availability and the pro forma calculations
of such financial covenants (after giving effect to such payments) in detail
reasonably acceptable to the Administrative Agent), the Borrowers may pay
dividends or make other distributions to the Company, out of legally available
funds, for the sole purpose of permitting the Company to (and upon receipt by
the Company of such funds the Company shall promptly use such funds for such
purpose) pay corporate overhead expenses incurred in the ordinary course of
business in an amount not to exceed (x) $4,500,000 in each of Fiscal Years 2006
and 2007 and (y) $5,000,000 in any Fiscal Year thereafter (it being agreed that
this provision shall not be deemed to limit the ability of any Loan Party to
reimburse the Company or any Subsidiary thereof for the payment by the Company
or such Subsidiary of business expenses incurred by the Company or such
Subsidiary for and on behalf of the Loan Parties, which business expenses (1)
are of a type typically incurred by the Loan Party on its own behalf in the
ordinary course of its business operations and (2) when reimbursed by the Loan
Parties are included as expenses on the books and records of the Loan Parties);

 

(vi)          [Intentionally
Omitted]; and

 

(vii)         so long as the
Earnout Consideration has been paid in full, and both before and immediately
after giving effect to the payments described in this clause (vii), (w) no
Event of Default or Unmatured Event of Default exists or would result
therefrom, (x) Excess Revolving Loan Availability will equal or exceed
$8,000,000, (y) the Fixed Charge Coverage Ratio equals or exceeds 1.25:1.00 and
(z) no violation of the financial covenants set forth in Sections 11.13
would then exist or would, on a pro forma basis result therefrom, upon no less
than 10 days prior written notice to the Administrative Agent, accompanied by a
certificate of the Chief Financial Officer delivered to the Administrative
Agent setting forth the calculations of pro forma Excess Revolving Loan
Availability and the pro forma calculations of such financial covenants (after
giving effect to such payments), in detail reasonably acceptable to the
Administrative Agent, the Borrowers may pay dividends or make other
distributions to the Company, out of legally available funds, for the sole
purpose of permitting the Company to (and upon receipt by the Company of such
funds the Company shall promptly use such funds for such purpose), pay a
regular quarterly dividend payment payable out of legally available funds on
the outstanding common stock of the Company.

 

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

 

(a)           sell,
transfer, convey or lease any of its assets or Capital Securities (including the
sale of Capital Securities of any First-Tier Foreign Subsidiary of a Loan
Party) except for (i) sales of Inventory in the ordinary course of
business, (ii) sales of obsolete and unusable Equipment and other assets in the
ordinary course of business, (iii) subject to Section 6.2.2(a), so long
as no Event of Default then exists, the disposition of other property having a
fair market value not to exceed $200,000 in the aggregate in any Fiscal Year
for a cash purchase price payable at closing of not less than the fair market
value thereof (unless the Administrative Agent consents otherwise), (iv) in the
case of its Capital Securities, as permitted pursuant Section 11.9

 

73

 

or clause (f) of this
Section, and (v) subject to Section 6.2.2(a), sale/leaseback
transactions not to exceed $1,000,000 in any Fiscal Year;

 

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

 

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

 

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

 

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

 

(f)                                    be
a party to any merger or consolidation or, except as otherwise permitted
pursuant to this Section, Section 11.10(a), or Section 11.10(f),
purchase or otherwise acquire the assets or the Capital Securities of any class of
any other Person; except for (i) the merger or consolidation of any
Borrower into any other Borrower or the sale, assignment or conveyances of any,
all or substantially all of the assets of one Borrower to another Borrower or (ii) the
merger or consolidation of any Guarantor into any other Guarantor which is a
Wholly-Owned Subsidiary, provided that the Wholly-Owned Subsidiary is the
surviving entity of such merger or consolidation, or the sale, assignment or
conveyances of any, all or substantially all of the assets of one Guarantor to
another Guarantor which is a Wholly-Owned Subsidiary, provided that the
Wholly-Owned Subsidiary is the surviving entity of such sale, assignment or
conveyances.

 

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

 

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

 

74

 

Borrower or its Subsidiaries providing for the payment of customary and
reasonable fees, and indemnification and reimbursement of expenses, upon
customary and reasonable terms, and (v) to the extent not otherwise
prohibited hereunder, transactions between Loan Parties and their respective
Wholly-Owned Subsidiaries.

 

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

 

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

 

11.9                           Business
Activities; Issuance of Equity. Not, and not permit any other Loan Party or
Subsidiary thereof, to engage in any line of business other than the businesses
of the Borrowers engaged in on the date hereof and businesses reasonably
related, incidental or

 

75

 

complementary thereto. Not, and not permit any other Loan Party or
their Subsidiaries to, issue any Capital Securities.

 

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

 

(a)                                  contributions
by First Tier Foreign Subsidiaries of such Loan Party and Second Tier Foreign
Subsidiaries of such Loan Party in other First Tier Foreign Subsidiaries of
such Loan Party and Second Tier Foreign Subsidiaries;

 

(b)                                 Investments
constituting Debt permitted by Section 11.1;

 

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

 

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

 

(e)                                  bank
deposits in the ordinary course of business, provided that the Loan
Parties and their Domestic Wholly-Owned Subsidiaries shall at no time have
deposits or investments of more than $500,000 in the aggregate maintained in
any accounts which are not subject to an Account Control Agreement among the
Administrative Agent, such financial institutions at which such accounts are
maintained and the applicable Loan Party which is in form and substance
reasonably acceptable to the Administrative Agent;

 

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

 

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

 

(h)                                 [Intentionally
Omitted];

 

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

 

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

 

(k)                                  Investments
in accordance with past business practices in life insurance plans of certain
employees, officers, and directors of the Borrowers relating to their deferred

 

76

 

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

 

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

 

(m)                               other
Investments in an aggregate amount not to exceed $50,000 at any time;

 

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

 

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

 

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

 

11.13                     Financial
Covenants.

 

11.13.1            Excess Revolving
Loan Availability; Maximum Revolving Outstandings. Not permit (a) Excess
Revolving Loan Availability at any time to be less than Five Million Dollars
($5,000,000) or (b) without limiting Sections 13.1 and 13.2
hereof, at any time after December 31, 2007 in respect of which the Fixed
Charge Coverage Ratio for the Computation Period ending as of the Fiscal
Quarter end most recently preceding such date was less than 1.00 to 1.00,
Revolving Outstandings plus the sum of the aggregate principal amount of all “Loans,”
all “Specified Hedging Obligations” and the “Stated Amount” of all “Letters of
Credit” outstanding under (and, in each case, as such terms are defined in) the
Canadian Loan Agreement, to exceed $10,000,000.

 

11.13.2            Minimum EBITDA.
Not permit EBITDA, measured: (a) for each of the following Fiscal
Quarters, for the one Fiscal Quarter period ending on each of the following
dates, to be less than the amount set forth below: 

 

77

 

	
  Period ending:

  	
   

  	
  Minimum Quarterly EBITDA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2006

  	
   

  	
  $

  	
  (7,800,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  June 30,
  2006

  	
   

  	
  $

  	
  (7,700,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30,
  2006

  	
   

  	
  $

  	
  3,200,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2006

  	
   

  	
  $

  	
  0

  	
   

  

 

and (b) for any Fiscal Quarter, as of the end of the following
periods ending at the end of such Fiscal Quarter, to be less than the
applicable amount set forth below:

 

	
  Period ending:

  	
   

  	
  Minimum EBITDA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Two Fiscal
  Quarter period ending June 30, 2006

  	
   

  	
  $

  	
  (15,500,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  Three Fiscal
  Quarter period ending

  September 30, 2006

  	
   

  	
  $

  	
  (12,300,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  Computation
  Periods ending as of the last day of each of the following Fiscal
  Quarters:   December 31, 2006

  	
   

  	
  $

  	
  (12,300,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2007

  	
   

  	
  $

  	
  (7,800,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  June 30,
  2007

  	
   

  	
  $

  	
  (4,800,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  September 30,
  2007

  	
   

  	
  $

  	
  (3,000,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2007

  	
   

  	
  $

  	
  1,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2008 and each Fiscal Quarter ending thereafter

  	
   

  	
  $

  	
  4,000,000

  	
   

  

 

11.13.3            Capital
Expenditures. Not permit Capital Expenditures of the Borrowers and their
Subsidiaries, on a consolidated basis, in any Fiscal Year, to exceed $3,000,000.
If the Loan Parties do not utilize the entire amount of the Capital Expenditure
Limitation permitted in any Fiscal Year, the Loan Parties may carry
forward, to the immediately succeeding Fiscal Year only, up to one hundred
percent (100%) of such unutilized amount. All Capital Expenditures in any Fiscal
Year shall first be applied to reduce the applicable Capital Expenditure
Limitation for such Fiscal Year and then to reduce the carry-forward from the
previous Fiscal Year, if any.

 

11.13.4            Fixed Charge
Coverage Ratio. Beginning with Computation Period relating to the Fiscal
Quarter ending on March 31, 2008 and thereafter for each Computation
Period relating to each Fiscal Quarter ending thereafter, not permit the Fixed
Charge Coverage Ratio (calculated as of the last day of each Fiscal Quarter) to
be less than 1.00:1.00.

 

78

 

11.14                     Cancellation
of Debt. Not, and not permit any other Loan Party to, cancel any claim or
Debt owing to it, other than (i) in connection with trade discounts or
allowances granted in the ordinary course of its business consistent with past
practices, and (ii) so long as no Event of Default or Unmatured Event of
Default is then outstanding, the cancellation of Debts or claims not to exceed
$500,000 in any Fiscal Year in connection with the resolution of good faith
disputes relating thereto.

 

11.15                     Creation
of Subsidiaries. Not, and not permit any other Loan Party or Domestic
Subsidiary to, create any Subsidiary or enter into any joint venture other
than, so long as no Event of Default or Unmatured Event of Default then exists
or would result therefrom, Subsidiaries in respect of which the provisions of Section 10.10
shall have been satisfied.

 

11.16                     Inactive
Subsidiaries. Not permit any Inactive Subsidiary to own any properties or
assets in excess of Fifty Thousand Dollars ($50,000), in each case; incur any
Debt or other material liabilities (other than immaterial contingent
obligations not to exceed Fifty Thousand Dollars ($50,000) with respect to each
such Inactive Subsidiary); have any Investments; or conduct any operations or
business; provided, that notwithstanding any of the foregoing, it is
acknowledged and agreed that BOA Done, Inc. currently holds and may continue
to hold the Bright of America Note.

 

11.17                     Commingling
of Funds. Not, and not permit the Company or any other Loan Party to,
commingle any of such Person’s cash or cash equivalents with the cash or cash
equivalents of any of Kids Line or Sassy or any Subsidiary thereof.

 

SECTION 12.                          EFFECTIVENESS; CONDITIONS OF LENDING, ETC.

 

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

 

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

 

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

 

12.1.2                  Consents, etc.
Evidence, reasonably satisfactory to the Administrative Agent, that the Company
and the Loan Parties have received all governmental and third party approvals
necessary for the Spin-Off and the continuing activities of the Company and the
Loan

 

79

 

Parties and such approvals shall be on terms reasonably satisfactory to
the Administrative Agent and shall be in full force and effect, except for such
approvals, the failure to obtain which, individually or in the aggregate, would
not have or could not reasonably be expected to have, a Material Adverse
Effect.

 

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

 

12.1.4                  Excess
Revolving Loan Availability. Excess Revolving Loan Availability shall not
be less than Ten Million Dollars ($10,000,000) on the Closing Date.

 

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

 

12.1.6                  Material
Adverse Effect. Since December 31, 2004, no event shall have occurred
which has had or could reasonably be expected to have a Material Adverse
Effect; it being agreed, however, that the consolidated results of operations
of the Company and its Subsidiaries for the quarters ended March 31, 2005,
June 30, 2005 and September 30, 2005, as reported on the 10-Qs of the
Company filed with the SEC on or about May 10, 2005, August 9, 2005
and November 9, 2005 shall not, in and of themselves, be deemed a Material
Adverse Effect.

 

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

 

12.1.8                  Litigation.
The Administrative Agent shall have received evidence, satisfactory to the
Administrative Agent, that no litigation (including derivative actions),
arbitration proceeding or governmental investigation or proceeding is pending
or, to the knowledge of any Loan Party, threatened challenging the validity,
permissibility or legality of the transactions contemplated by the Loan
Documents.

 

80

 

12.1.9                  Projections.
The Administrative Agent shall have received consolidating projected income
statements, balance sheets and statements of cash flow of the Borrowers and
their Subsidiaries on a consolidated basis after giving effect to the making of
the initial Revolving Loans and the issuance of the initial Letters of Credit
on a quarterly basis for Fiscal Year 2006 and on an annual basis for Fiscal
Year 2007, 2008, 2009, 2010 and 2011.

 

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

 

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

 

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

 

12.1.13            EDA Documents. The
Administrative Agent shall have received fully-executed copies of each of the
following: (i) the EDA Standby L/C Reimbursement Agreement Modification
Letter from The Bank of New York, (ii) the Berrie Commitment and (iii) the
BNY/Administrative Agent Commitment, in each case, in form and substance
reasonably satisfactory to the Administrative Agent. Furthermore, there shall
have been no draw on the EDA Standby L/C (other than for scheduled installments
of interest in accordance with the terms of the EDA Standby L/C Reimbursement
Agreement, which installments shall have been reimbursed by the Company within
the required time periods set forth therefor in such agreement).

 

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

 

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

 

81

 

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

 

12.1.16            Debt. The
Administrative Agent shall have received evidence, reasonably satisfactory to
the Administrative Agent, that Kids Line and Sassy, each a wholly-owned
Subsidiary of Parent, has closed, or concurrently with the initial credit
extension hereunder will close, a credit facility of up to $95,000,000 with
LaSalle Bank National Association.

 

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

 

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

 

12.2                           Conditions
to Loans and Increase in Commitments. The obligation (a) of each
Lender to make each Revolving Loan, (b) of each Lender to increase its
Commitment pursuant to Section 2.7, and (c) of the Issuing
Bank to issue each Letter of Credit is subject to the following further
conditions precedent that:

 

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

 

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

 

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

 

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

 

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SECTION 13.  EVENTS OF DEFAULT AND THEIR EFFECT.

 

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

 

13.1.1                  Non-Payment
of the Revolving Loans, etc. Default in the payment when due of the
principal of any Revolving Loan; or default, and continuance thereof for five (5) days,
in the payment when due of any interest, fee, reimbursement obligation with
respect to any Letter of Credit or other amount payable by any Loan Party
hereunder or under any other Loan Document.

 

13.1.2                  Non-Payment
of Other Debt. Any default shall occur under the terms applicable to any
Debt of any Loan Party in an aggregate amount exceeding $500,000 and such
default shall (a) consist of the failure to pay such Debt when due,
whether by acceleration or otherwise, and including any such failure as a
result of any prohibition under Section 11.3, or (b) accelerate
the maturity of such Debt or permit the holder or holders thereof, or any
trustee or agent for such holder or holders, to cause such Debt to become due
and payable (or require any Loan Party to purchase or redeem such Debt or post
cash collateral in respect thereof) prior to its expressed maturity.

 

13.1.3                  Pledge
Agreement Default. An “Event of Default” occurs and is continuing under (and
as defined in) the Pledge Agreement.

 

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

 

13.1.5                  Non-Compliance
with Loan Documents. (a) Failure by any Loan Party to comply with or
to perform any covenant set forth in Sections 10.1.5(a), 10.1.5(d),
10.3.2, 10.3.3, 10.5,  10.11, 10.12 or 11
of this Agreement or Section 5.2 of the Guaranty and Collateral
Agreement; provided that the mere failure to deliver insurance certificates or
proof of insurance (as distinguished from the failure to maintain any such
insurance in effect) as required pursuant to Sections 10.3.2 or 10.3.3
will not cause an Event of Default to immediately occur pursuant to this clause
(a), (b) failure by any Loan Party to comply with or to perform any
covenant set forth in Sections 10.1.1, 10.1.2, 10.1.3,
10.1.5 (other than clauses (a) or (d) thereof), 10.1.6,
10.1.8, 10.1.13 or to deliver insurance certificates or proof of
insurance (as distinguished

 

83

 

from the failure to maintain any such insurance in effect) as required
pursuant to Sections 10.3.2 or 10.3.3, and continuance of
such failure described in this clause (b) for twenty (20) days, or (c) failure
by the Company or any Loan Party to comply with or to perform any other
provision of this Agreement or any other Loan Document (and not constituting an
Event of Default under any other provision of this Section 13) and
continuance of such failure described in this clause (c) for thirty
(30) days.

 

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

 

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

 

13.1.8                  Judgments.
Final judgments which (i) in the case of monetary judgments, exceed
$2,500,000, in aggregate, for all such judgments, in excess of any applicable
insurance with respect to which the insurer has not denied liability or
coverage and (ii) in the case of non-monetary judgments, would have or
could reasonably be expected to have a Material Adverse Effect, shall be
rendered against the Company or any other Loan Party and, in each of the cases
of clause (i) and (ii) above, shall not have been paid,
discharged or vacated or had execution thereof stayed pending appeal within
thirty (30) days after entry or filing of such judgments.

 

13.1.9                  Loss of
Collateral. Any loss, theft, damage or destruction of any Collateral in
excess of $750,000 to the extent not fully covered (subject to such deductibles
and self-insurance retentions as the Administrative Agent shall have permitted)
by insurance or if and to the extent the insurance company has denied or
asserted a denial of coverage therefor.

 

13.1.10            Levy, Seizure or
Attachment. The making by any Person of a levy, seizure or attachment upon
any Collateral in excess of $750,000, except to the extent that such
proceedings are being diligently contested in good faith by appropriate
proceedings and the enforcement thereof is stayed (and the terms of such stay
do not adversely affect in any material respect the Administrative Agent’s
Liens or other rights on such Collateral or its ability to accept and retain
payment hereunder).

 

13.1.11            Invalidity of
Collateral Documents, etc. Any Collateral Document shall cease to be in
full force and effect (other than in accordance with its terms) or any Loan
Party (or any Person by, through or on behalf of the Company or any other Loan
Party) shall

 

84

 

contest in any manner the validity, binding nature or enforceability of
any Collateral Document or the Liens purported to be granted therein or any
court or any governmental authority shall issue a judgment, order, decree or
ruling to the effect that any of the obligations of any party to any Collateral
Document are illegal, invalid or unenforceable.

 

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

 

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

 

13.1.14            EDA Matters. (i) 
Any drawing is made under the EDA Standby L/C, other than any such drawing,
made in accordance with the terms and procedures set forth in the EDA Standby
L/C solely in the amount of and for the payment of regularly scheduled monthly
payments of interest due and owing under the EDA Bonds, which drawing is
reimbursed within the time set forth therefor pursuant to the EDA Bond
Indenture; (ii) any drawing is made on the Back-Stop L/C or the Standby
L/C Issuer demands additional collateral (in excess of that currently pledged
as of the Closing Date) for the obligations under the EDA Standby L/C
Reimbursement Agreement, (iii) at any time prior to the EDA Release Date,
Angelica Berrie shall become the subject of a proceeding of the type described
in Section 13.1.4; (iv) at any time prior to the EDA Release
Date, Angelica Berrie shall contest in any judicial or administrative
proceeding the validity, binding nature or enforceability of the Berrie
Commitment, (v) Angelica Berrie fails to comply with any material term of
the Berrie Commitment, (vi) unless the EDA Release Date shall have
previously occurred, Angelica Berrie shall fail to deposit in escrow with the
EDA Bond Trustee the full amount of available monies required to effect the EDA
Bond Redemption and pay all associated fees, in each case, in accordance with
the terms of the EDA Bond Indenture on or prior to March 20, 2006, (vii) any
funds are removed or withdrawn from such escrow prior to the EDA Release Date, (viii) unless
the EDA Release Date shall have previously occurred, Angelica Berrie shall fail
to initiate the EDA Bond Redemption (including the giving of any notices
thereof required pursuant to the EDA Bond Indenture) by the date required to
complete the EDA Bond Redemption by May 5, 2006 (notwithstanding that, in
the event an acceptable bankruptcy preference opinion can not be delivered to
the EDA Bond Trustee by such date, the completion of the EDA Bond Redemption may be
deferred until August 5, 2006), (ix) the EDA Bond Redemption, once
commenced in accordance with the foregoing, shall be terminated, rescinded or
cancelled prior to the EDA Release Date, or (x) the EDA Release Date shall not
have occurred prior to August 15, 2006.

 

13.1.15            Triggering Event.
A Triggering Event shall occur.

 

13.2                           Effect
of Event of Default. If any Event of Default described in Section 13.1.4
shall occur in respect of any Loan Party, the Commitments shall immediately
terminate and the Revolving Loans and all other Obligations hereunder shall
become immediately due and payable and the Loan Parties shall become
immediately obligated to Cash Collateralize all

 

85

 

Letters of Credit, all without presentment, demand, protest or notice
of any kind; and, if any other Event of Default shall occur and be continuing,
the Administrative Agent may (and, upon the written request of the
Required Lenders, shall) declare the Commitments to be terminated in whole or
in part and/or declare all or any part of the Revolving Loans and all
other Obligations hereunder to be due and payable and/or demand that the Loan
Parties immediately Cash Collateralize all or any Letters of Credit, whereupon
the Commitments shall immediately terminate (or be reduced, as applicable)
and/or the Revolving Loans and other Obligations hereunder shall become
immediately due and payable (in whole or in part, as applicable) and/or the
Loan Parties shall immediately become obligated to Cash Collateralize the
Letters of Credit (all or any, as applicable), all without presentment, demand,
protest or notice of any kind. The Administrative Agent shall promptly advise
the Loan Party Representative of any such declaration, but failure to do so
shall not impair the effect of such declaration. Any cash collateral delivered
hereunder shall be held by the Administrative Agent (without liability for
interest thereon) and applied to the Obligations arising in connection with any
drawing under a Letter of Credit. After the expiration or termination of all Letters
of Credit, such cash collateral shall be applied by the Administrative Agent to
any remaining Obligations hereunder and any excess shall be delivered to the
Loan Party Representative, on behalf of the Loan Parties, or as a court of
competent jurisdiction may elect.

 

SECTION 14.  THE ADMINISTRATIVE AGENT.

 

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

 

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

 

86

 

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

 

14.4                           Exculpation
of Administrative Agent. None of the Administrative Agent nor any of its
directors, officers, employees or agents shall (a) be liable for any
action taken or omitted to be taken by any of them under or in connection with
this Agreement or any other Loan Document or the transactions contemplated
hereby (except to the extent resulting from its own gross negligence or willful
misconduct in connection with its duties expressly set forth herein as
determined by a final, nonappealable judgment by a court of competent
jurisdiction), or (b) be responsible in any manner to any Lender or
participant for any recital, statement, representation or warranty made by any
Loan Party or Affiliate of any Loan Party or any officer thereof, contained in
this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document (or the creation,
perfection or priority of any Lien or security interest therein), or for any
failure of any Loan Party or any other party to any Loan Document to perform its
Obligations hereunder or thereunder. The Administrative Agent shall not be
under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Loan Party or its Affiliates.

 

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

 

87

 

received written notice from such Lender prior to the proposed Closing
Date specifying its objection thereto.

 

14.6                           Notice
of Default. The Administrative Agent shall not be deemed to have knowledge
or notice of the occurrence of any Event of Default or Unmatured Event of
Default except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Administrative Agent for the account of the
Lenders, unless the Administrative Agent shall have received written notice
from a Lender or the Loan Party Representative referring to this Agreement,
describing such Event of Default or Unmatured Event of Default and stating that
such notice is a “notice of default”. The Administrative Agent will notify the
Lenders of its receipt of any such notice. The Administrative Agent shall take
such action with respect to such Event of Default or Unmatured Event of Default
as may be requested by the Required Lenders in accordance with Section 13.2;
provided that unless and until the Administrative Agent has received any
such request, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Event of Default or Unmatured Event of Default as it shall deem advisable or in
the best interest of the Lenders.

 

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

 

14.8                           Indemnification.
Whether or not the transactions contemplated hereby are consummated, each
Lender shall indemnify upon demand the Administrative Agent and its directors,
officers, employees and agents (to the extent not reimbursed by or on behalf of
the Loan Parties and without limiting the obligation of the Loan Parties to do
so), according to its applicable Pro Rata Share, from and against any and all
Indemnified Liabilities (as hereinafter defined); provided that no Lender shall
be liable for any payment to any such Person of any portion of the Indemnified
Liabilities to the extent such Indemnified Liabilities resulted from the 

 

88

 

applicable Person’s own gross negligence or willful misconduct. No
action taken in accordance with the directions of the Required Lenders shall be
deemed to constitute gross negligence or willful misconduct for purposes of
this Section. Without limitation of the foregoing, each Lender shall reimburse
the Administrative Agent upon demand for its ratable share of any costs or out
of pocket expenses (including Attorney Costs and Taxes) incurred by the
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that the
Administrative Agent is not reimbursed for such expenses by or on behalf of the
Loan Parties. The undertaking in this Section shall survive repayment of
the Revolving Loans, cancellation of the Notes, expiration or termination of
the Letters of Credit, any foreclosure under, or modification, release or
discharge of, any or all of the Collateral Documents, termination of this
Agreement and the resignation or replacement of the Administrative Agent.

 

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

 

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

 

89

 

the Lenders shall perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Required Lenders appoint a
successor agent as provided for above.

 

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

 

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

 

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

 

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

 

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

 

90

 

and its agents and counsel, and any other amounts due the
Administrative Agent under Sections 5, 15.5 and 15.17.

 

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

 

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

 

SECTION 15. GENERAL.

 

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

 

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

 

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

 

91

 

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

 

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

 

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

 

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

 

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

 

92

 

covenant (or related definition) is amended in a manner satisfactory to
the Loan Parties and the Required Lenders.

 

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

 

15.6                           Assignments;
Participations.

 

15.6.1                  Assignments.

 

(a)                                  Any
Lender may at any time assign to one or more Eligible Assignees all or any
portion of such Lender’s Revolving Loans and Commitments, with the prior
written consent of the Administrative Agent, the Issuing Bank (for an
assignment of the Revolving Loans and the Commitment) and, so long as no Event
of Default exists, the Loan Party Representative (which consents shall not be
unreasonably withheld, delayed or conditioned and shall not be required for an
assignment by a Lender to a Lender or an Affiliate of a Lender). Any such
assignment shall be in a minimum aggregate amount equal to $3,000,000 or, if
less, the remaining Commitment and Revolving Loans held by the assigning Lender.
The Loan Parties and the Loan Party Representative shall be entitled to
continue to deal solely and directly with such Lender in connection with the
interests so assigned to an Eligible Assignee until the Administrative Agent
shall have received and accepted an effective assignment agreement in
substantially the form of Exhibit D hereto (an “Assignment
Agreement”) executed, delivered and fully completed by the applicable
parties thereto and a processing fee of $3500. No assignment may be made
to any Person if at the time of such assignment the Loan Parties would be
obligated to pay any greater amount under Section 7.6 or 8
to the Eligible Assignee than the Loan Parties are then obligated to pay to the
assigning Lender under such Sections (and if any assignment is made in
violation of the foregoing, the Loan Parties will not be required to pay such
greater amounts). In addition, no Eligible Assignee shall be entitled to the
benefits of Section 7.6 unless such Eligible Assignee

 

93

 

has complied and will comply with the
requirements of Section 7.6 as though it were a Lender. Any
attempted assignment not made in accordance with this Section 15.6.1
shall be treated as the sale of a participation under Section 15.6.2.
The Loan Parties shall be deemed to have granted its consent to any assignment
requiring its consent hereunder unless the Loan Parties have expressly objected
to such assignment in writing within five (5) Business Days after
their receipt of written notice thereof.

 

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

 

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

 

15.6.2                  Participations.
Any Lender may at any time sell to one or more Persons participating
interests in its Revolving Loans, Commitments or other interests hereunder (any
such Person, a “Participant”). In the event of a sale by a Lender of a
participating interest to a Participant, (a) such Lender’s obligations
hereunder shall remain unchanged for all purposes, (b) the Loan Parties,
the Loan Party Representative and the Administrative Agent shall continue to
deal solely and directly with such Lender in connection with such Lender’s
rights and obligations hereunder and (c) all amounts payable by the Loan
Parties shall be determined as if such Lender had not sold such participation
and shall be paid directly to such Lender. No Participant shall have any direct
or indirect voting rights hereunder except with respect to any event described
in Section 15.1 expressly requiring the unanimous vote of all
Lenders or, as applicable, all affected Lenders. Each Lender agrees to
incorporate the requirements of the preceding sentence into each participation
agreement which such Lender enters into with any Participant. The Loan Parties
each hereby agrees that if amounts outstanding under this Agreement are due and
payable (as a result of acceleration or otherwise), each Participant shall be
deemed to have the right of set-off in respect of its participating interest in
amounts owing under this Agreement and with respect to any Letter of Credit to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement; provided 

 

94

 

that such right of set-off shall be further subject to the obligation
of each Participant to share with the Lenders, and the Lenders agree to share
with each Participant, as provided in Section 7.5. The Loan Parties
also each hereby agrees that each Participant shall be entitled to the benefits
(and subject to the requirements) of Section 7.6 or 8 as if
it were a Lender (provided that on the date of the participation no
Participant shall be entitled to any greater compensation pursuant to Section 7.6
or 8 than would have been paid to the participating Lender on such date
if no participation had been sold and provided that such Participant shall not
be entitled to the benefits of Section 7.6 unless such Participant
has complied and will comply with Section 7.6(d) as if it were
Lender).

 

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

 

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

 

15.9                           Confidentiality.
As required by federal law and the Administrative Agent’s policies and
practices, the Administrative Agent may need to obtain, verify, and record
certain customer identification information and documentation in connection
with opening or maintaining accounts, or establishing or continuing to provide
services. The Administrative Agent and each Lender agree to use commercially
reasonable efforts (equivalent to the efforts the Administrative Agent or such
Lender applies to maintain the confidentiality of its own confidential
information) to maintain as confidential all non-public information provided to
them by any Loan Party (and which at the time is not, and does not thereafter
become, publicly available), except that the Administrative Agent and each
Lender may disclose such information (a) to Persons employed or
engaged by the Administrative Agent or such Lender in evaluating, approving,
structuring or administering the Revolving Loans and the Commitments; (b) to
any assignee or participant or potential assignee or participant that has
agreed in writing to comply with the covenant
contained in this Section 15.9 (and any such assignee or
participant or potential assignee or participant may disclose such
information to Persons employed or engaged by them as described in clause (a) above);
(c) as required or requested by any federal or state regulatory authority
or examiner, or any insurance industry association, or as reasonably believed
by the Administrative Agent or such Lender to be compelled by any court decree,
subpoena or legal or administrative order or process; (d) as, on the
advice of the Administrative Agent’s or such Lender’s counsel, is required by
law; (e) in connection with the exercise of any right or remedy under the
Loan Documents or in connection with any litigation to which the Administrative
Agent or such Lender is a party; (f) to any nationally recognized rating
agency

 

95

 

that requires access to information about a Lender’s investment
portfolio in connection with ratings issued with respect to such Lender; (g) to
any Affiliate of the Administrative Agent, the Issuing Bank or any other Lender
who may provide Bank Products to the Loan Parties; or (h) that ceases
to be confidential through no fault of the Administrative Agent or any Lender. Notwithstanding
the foregoing, the Loan Parties consent to the publication by the
Administrative Agent or any Lender of a tombstone or similar advertising
material relating to the financing transactions contemplated by this Agreement;
provided that such tombstone or announcement has been approved by the Loan
Party Representative, which approval shall not be unreasonably withheld, delayed
or conditioned, and the Administrative Agent reserves the right to provide to
industry trade organizations information necessary and customary for inclusion
in league table measurements.

 

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

 

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

 

15.12                     Entire
Agreement. This Agreement, together with the other Loan Documents, embodies
the entire agreement and understanding among the parties hereto and supersedes
all prior or contemporaneous agreements and understandings of such Persons,
verbal or written, relating to the subject matter hereof and thereof (except as
relates to the fees described in Section 5.3) and any prior
arrangements made with respect to the payment by the Loan Parties of (or any
indemnification for) any fees, costs or expenses payable to or incurred (or to
be incurred) by or on behalf of the Administrative Agent, the Issuing Bank or
the Lenders.

 

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

 

15.14                     Successors
and Assigns. This Agreement shall be binding upon the Loan Parties, the
Lenders, the Issuing Bank and the Administrative Agent and their respective
successors and assigns, and shall inure to the benefit of the Loan Parties, the
Lenders, the Issuing

 

96

 

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

 

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

 

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

 

15.17                     Indemnification
by the Loan Parties. In consideration of the execution and delivery of this
Agreement by the Administrative Agent, the Issuing Bank and the Lenders and the
agreement to extend the Commitments provided hereunder and other financial
accommodations, each Loan Party hereby agrees to jointly and severally
indemnify and hold the Administrative Agent, each Lender, the Issuing Bank and
each of the officers, directors, employees, affiliates and agents of the
Administrative Agent, the Issuing Bank and each Lender (each a “Lender Party”)
free and harmless from and against any and all actions, causes of action,
suits, losses, liabilities, damages and expenses, including Attorney Costs
(collectively, the “Indemnified Liabilities”), incurred by the Lender
Parties or any of them as a result of, or arising out of, or relating to (a) any
tender offer, merger, purchase of capital securities, purchase of assets or
other similar transaction financed or proposed to be financed in whole or in
part, directly or indirectly, with the proceeds of any of the Revolving Loans, (b) the
past, present or future presence, use, handling, release or threat of release,
emission, discharge, transportation, storage, treatment or disposal of any
Hazardous Substance at or affecting any property owned or leased by any Loan
Party, (c) any violation of any Environmental Laws with respect to
conditions at any property owned or leased by any Loan Party or the operations
conducted thereon, (d) the investigation, cleanup or remediation of
offsite locations at which any Loan Party or their respective predecessors are
alleged to have directly or indirectly disposed of Hazardous Substances or (e) the
execution, delivery, performance or enforcement of this Agreement or any other
Loan Document by any of the Lender Parties, except for any such Indemnified
Liabilities arising on account of any of the Lender Parties’ gross negligence
or willful misconduct. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, each Loan Party hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. All obligations provided
for in this Section 15.17 shall survive repayment of the Revolving
Loans, cancellation of the Notes, expiration or termination of the Letters of
Credit, any foreclosure under, or any modification, release or discharge of,
any or all of the Collateral Documents and termination of this Agreement.

 

15.18                     Nonliability
of Lenders. The relationship between the Loan Parties on the one hand and
the Lenders, the Issuing Bank and the Administrative Agent on the other hand
shall be solely that of borrower and lender, respectively. Neither the
Administrative Agent, the Issuing

 

97

 

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

 

15.19                     FORUM
SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE
STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK; PROVIDED THAT NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION. EACH LOAN PARTY HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE.
EACH LOAN PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF NEW YORK. EACH LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO

 

98

 

ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. With respect to any action by the Administrative Agent to
enforce the rights and remedies of the Lender Parties hereunder or under the
other Loan Documents, each Lender Party hereby consents to the jurisdiction of
the court in which such action is maintained.

 

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

 

15.21                     Other
Waivers. The Administrative Agent’s, the Issuing Bank’s and/or the Lenders’
failure, at any time or times hereafter, to require strict performance by the
Loan Parties of any provision of this Agreement or any of the other Loan
Documents shall not waive, affect or diminish any right of the Administrative
Agent, the Issuing Bank or any Lender thereafter to demand strict compliance
and performance therewith. Any suspension or waiver by the Administrative
Agent, the Issuing Bank or any Lender of an Event of Default under this
Agreement or any default under any of the other Loan Documents shall not
suspend, waive or affect any other Event of Default under this Agreement or any
other default under any of the other Loan Documents, whether the same is prior
or subsequent thereto and whether of the same or of a different kind or
character. No delay on the part of the Administrative Agent, the Issuing
Bank or any Lender in the exercise of any right or remedy under this Agreement
or any other Loan Documents shall preclude other or further exercise thereof or
the exercise of any right or remedy. None of the undertakings, agreements,
warranties, covenants and representations of any Loan Party contained in this
Agreement or any of the other Loan Documents and no Event of Default under this
Agreement or default under any of the other Loan Documents shall be deemed to
have been suspended or waived by the Administrative Agent, the Issuing Bank
and/or the Lenders unless such suspension or waiver is in writing, signed by a
duly authorized officer of the Administrative Agent, the Required Lenders or
all of the Lenders and/or the Issuing Bank, as required herein, and directed to
such Loan Party specifying such suspension or waiver.

 

15.22                     Joint and
Several Liability.

 

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

 

15.22.2            No Fraudulent
Conveyances. Notwithstanding any provisions of this Agreement to the
contrary, it is intended that the joint and several nature of the Obligations
of the Loan Parties and the liens and security interests granted by the Loan
Parties to secure the Obligations, not constitute a “Fraudulent Conveyance” (as
defined below). Consequently, the

 

99

 

Administrative Agent, the Lenders and the Loan Parties agree that if
the Obligations of a Loan Party, or any liens or security interests granted by such
Loan Party securing the Obligations would, but for the application of this
sentence, constitute a Fraudulent Conveyance, the Obligations of such Loan
Party and the liens and security interests securing such Obligations shall be
valid and enforceable only to the maximum extent that would not cause such
Obligations or such lien or security interest to constitute a Fraudulent
Conveyance, and the Obligations of such Loan Party and this Agreement shall
automatically be deemed to have been amended accordingly. For purposes hereof, “Fraudulent
Conveyance” means a fraudulent conveyance under the Bankruptcy Code or a
fraudulent conveyance or fraudulent transfer under the applicable provisions of
any fraudulent conveyance or fraudulent transfer law or similar law of any
state, nation or other governmental unit, as in effect from time to time.

 

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

 

100

 

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

 

	
   

  	
   

  	
  BORROWERS:  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RUSS
  BERRIE U.S. GIFT, INC., a Delaware 

  corporation  

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John
  Wille  

  
	
   

  	
   

  	
  Name:

  	
  John Wille

  
	
   

  	
   

  	
  Title:

  	
  Vice  President and Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

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

  California corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John
  Wille

  
	
   

  	
   

  	
  Name:

  	
  John Wille 

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President, Treasurer, Asst. Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RUSS
  BERRIE AND COMPANY 

  PROPERTIES, INC., a New Jersey corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John
  Wille 

  
	
   

  	
   

  	
  Name:

  	
  John Wille 

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President, Treasurer, Asst. Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RUSSPLUS, INC.,
  a New Jersey corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John
  Wille 

  
	
   

  	
   

  	
  Name:

  	
  John Wille

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President, Treasurer, Asst. Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RUSS
  BERRIE AND COMPANY 

  INVESTMENTS, INC., a New Jersey 

  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John
  Wille

  
	
   

  	
   

  	
  Name:

  	
  John Wille

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President, Treasurer, Asst. Secretary

  
						

 

S-1

 

	
  The
  undersigned hereby accepts its appointment 

  as the Loan Party Representative pursuant to 

  Section 2.6 of this Agreement and agrees to 

  exercise its powers and perform its duties in its 

  capacity as the Loan Party Representative in 

  accordance with the terms and provisions of this 

  Agreement and the other Loan Documents

  	
   

  
	
   

  	
   

  
	
  RUSS
  BERRIE AND COMPANY, INC., a 

  New Jersey corporation 

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John
  Wille 

  	
   

  
	
  Name:

  	
  John Wille 

  	
   

  
	
  Title:

  	
  Vice
  President and Chief Financial Officer

  	
   

  
					

 

S-2

 

	
   

  	
   

  	
  LASALLE
  BUSINESS CREDIT, LLC,
  as 

  Administrative Agent and as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Steven
  E. Friedlander

  
	
   

  	
   

  	
  Name: 

  	
  Steven E.
  Friedlander

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LASALLE
  BANK NATIONAL 

  ASSOCIATION, as Issuing Bank

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Steven
  E. Friedlander

  
	
   

  	
   

  	
  Name:

  	
  Steven E.
  Friedlander

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice
  President

  
						

 

S-3Exhibit 4.13

 

Execution
Version

 

 

 

GUARANTY AND COLLATERAL
AGREEMENT

 

dated as of March 14, 2006

 

among

 

RUSS BERRIE U.S. GIFT, INC.,

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

RUSS BERRIE AND COMPANY PROPERTIES, INC.,

RUSSPLUS, INC.,

and

RUSS BERRIE AND COMPANY INVESTMENTS, INC.

 

 

 

and

 

LASALLE BUSINESS CREDIT, LLC,

as Administrative Agent and Arranger

 

 

 

 

GUARANTY
AND COLLATERAL AGREEMENT

 

This Guaranty and
Collateral Agreement dated as of March 14, 2006 (this “Agreement”)
is entered into among Russ Berrie U.S. Gift, Inc. (“Russ Gift”),
Russ Berrie & Co. (West), Inc. (“Russ West”), Russ Berrie
and Company Properties, Inc. (“Russ Properties”), Russplus, Inc.
(“Russplus”) and Russ Berrie and Company Investments, Inc. (“Russ
Investments”) (Russ Gift, Russ West, Russ Properties, Russplus and Russ
Investments are referred to herein collectively as, the “Borrowers”, and
together with any other person that becomes a party hereto as provided herein
being, collectively, the “Grantors”), in favor of LASALLE BUSINESS CREDIT, LLC,
as the “Administrative Agent” for the “Issuing Bank” and the Lenders (as
defined in the Credit Agreement).

 

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

 

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

 

SECTION 1               DEFINITIONS.

 

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

 

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

 

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

 

Agreement
has the meaning set forth in the preamble hereto.

 

 

Borrower Obligations
means all Obligations of the Borrowers.

 

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

 

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

 

2

 

agreement with
respect thereto prohibits the granting of a security interest in such Equipment
(so long as such restriction is limited to the particular Equipment financed or
leased thereunder).

 

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

 

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

 

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

 

Credit Agreement
means the Credit Agreement of even date herewith among the Borrowers, the other
Subsidiaries from time to time party thereto, the Lenders, the Issuing Bank,
and the Administrative Agent, as amended, supplemented, restated or otherwise
modified from time to time.

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

Line Australia Pty
Ltd. or of any Second-Tier Foreign Subsidiary be required to be directly or
indirectly pledged hereunder.

 

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

 

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

 

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

 

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

 

Secured Obligations
means, collectively, the Borrower Obligations and Guarantor Obligations, and
shall not include any obligation of any Person under the Canadian Guaranty or
the Canadian Loan Documents.

 

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

 

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

 

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

 

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

 

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

 

5

 

Commercial Code as
in effect in such other jurisdiction for purposes of the provisions hereof
relating to such perfection or effect of perfection or non-perfection or
availability of such remedy.

 

SECTION 2               GUARANTY.

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

2.3                         No
Subrogation. Notwithstanding any payment made by any Guarantor hereunder or
any set-off or application of funds of any Guarantor by the Administrative
Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of
the rights of the Administrative Agent or any Lender against the Borrowers or
any other Guarantor or any collateral security or guaranty or right of offset
held by the Administrative Agent or any Lender for the payment of the Secured
Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from the Borrowers or any other Guarantor in
respect of payments made by such Guarantor hereunder, until all of the Secured
Obligations are Paid in Full. If any amount shall be paid to any Guarantor on
account of such subrogation rights at any time when all of the Secured
Obligations shall not have been Paid in Full, such amount shall be held by such
Guarantor in trust for the Administrative Agent and the Lenders, segregated
from other funds of such Guarantor, and shall, forthwith upon receipt by such
Guarantor, be turned over to the Administrative Agent in the exact form received
by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent,
if required), to be applied against the Secured Obligations, whether matured or
unmatured, in such order as the Administrative Agent may determine.

 

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

 

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

 

7

 

not longer than
the original period) or release, compromise, alter or exchange any obligations
of any nature of any obligor with respect to any such property, and (e) resort
to the undersigned (or any of them) for payment of any of the Secured Obligations
when due, whether or not the Administrative Agent or such Lender shall have
resorted to any property securing any of the Secured Obligations or any
obligation hereunder or shall have proceeded against any other of the
undersigned or any other obligor primarily or secondarily obligated with
respect to any of the Secured Obligations.

 

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

 

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

 

SECTION 3               GRANT OF
SECURITY INTEREST.

 

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

 

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

 

8

 

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

 

SECTION 4               REPRESENTATIONS
AND WARRANTIES.

 

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

 

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

 

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

 

4.3                         Grantor
Information. On the date hereof, Schedule 3 sets forth (a) each
Grantor’s jurisdiction of organization, (b) the location of each Grantor’s
chief executive office, (c) each Grantor’s exact legal name as it appears
on its organizational documents and (d) each

 

9

 

Grantor’s organizational identification number (to the
extent a Grantor is organized in a jurisdiction which assigns such numbers) and
federal employer identification number.

 

4.4                         Collateral
Locations. On the date hereof, Schedule 4 sets forth (a) each
place of business of each Grantor (including its chief executive office), (b) all
locations where all Inventory and the Equipment owned by each Grantor is kept,
except with respect to locations at which Inventory and Equipment with a fair
market value of less than $10,000 in the aggregate for each location (up to an
aggregate of $300,000 for all locations) and excluding Inventory with respect
to “bill and hold” or consignment arrangements with fair market value of less
than $10,000 in the aggregate for each location (up to an aggregate of $300,000
for all locations) which may be located at other locations and (c) whether
each such Collateral location and place of business (including each Grantor’s
chief executive office) is owned or leased (and if leased, specifies the
complete name and notice address of each lessor). No Collateral is located
outside the United States (excluding In-Transit Inventory) or in the possession
of any lessor, bailee, warehouseman or consignee, except as indicated on Schedule 4
or except for Collateral with a fair market value of less than $10,000 in the
aggregate for each location and $300,000 in the aggregate for all locations of
the Grantors.

 

4.5        Certain Property. None of the
Collateral constitutes, or is the Proceeds of, (a) Farm Products, (b) Health
Care Insurance Receivables or (c) vessels, aircraft or any other property
subject to any certificate of title or other registration statute of the United
States, any State or other jurisdiction, except for vehicles owned by the
Grantors and used by employees of the Grantors in the ordinary course of
business with an aggregate fair market value of less than $100,000 (in the
aggregate for all Grantors).

 

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

 

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

 

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

 

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

 

10

 

4.7                         Receivables.
(a)  No amount in excess of $200,000 payable to all such Grantors under or
in connection with any Receivable is evidenced by any Instrument or Chattel
Paper which has not been delivered to the Administrative Agent.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION 5               COVENANTS.

 

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

 

5.1        Delivery of Instruments, Certificated
Securities and Chattel Paper. If any amount payable under or in connection
with any of the Collateral in excess of $250,000 (in the aggregate for all
Grantors) shall be or become evidenced by any Instrument, Certificated Security
or Chattel Paper, such Instrument, Certificated Security or Chattel Paper shall
be

 

11

 

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

 

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

 

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

 

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

 

(d)        Such Grantor shall not permit any of the
Collateral with a fair market value in excess of $250,000, in aggregate for all
Grantors to become a Fixture to any real property unless such real property is
subject to a mortgage by such Grantor in favor of Administrative Agent.

 

(e)         If, notwithstanding anything in Section 10.11
of the Credit Agreement, any Grantor receives any payments in respect of any
Receivables, such payments (i) shall be forthwith (and, in any event,
within three (3) Business Days) deposited by such Grantor in the exact form received,
duly indorsed by such Grantor to the Administrative Agent if required, in a
collateral account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Lenders as provided in Section 6.5, and (ii) until
so turned over, shall be held by such Grantor in trust for the Administrative
Agent and the Lenders, segregated from other funds of such Grantor.

 

12

 

5.3                         Changes
in Locations, Name, etc. Such Grantor shall not, except upon twenty (20)
days’ prior written notice to the Administrative Agent and delivery to the
Administrative Agent of (a) all additional financing statements and other
documents reasonably requested by the Administrative Agent as to the validity,
perfection and priority of the security interests provided for herein and (b) if
applicable, a written supplement to Schedule 4 showing any
additional location at which Inventory or Equipment shall be kept (other than
locations at which Inventory or Equipment shall be kept with a fair market
value not to exceed $10,000 in the aggregate for each location and $300,000 in
aggregate for all locations for all Grantors):

 

(i)                              permit
any of the Inventory or Equipment (other than In-Transit Inventory or Inventory
related to any “bill and hold” or consignment arrangement, with a fair market
value not to exceed $10,000 in the aggregate for each location and $300,000 in
the aggregate for all locations for all Grantors) to be kept at a location
other than those listed on Schedule 4;

 

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

 

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

 

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

 

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

 

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

 

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

 

13

 

any action on the part of the Grantor). Upon the
occurrence and during the continuance of an Event of Default, (i) any sums
paid upon or in respect of the Investment Property upon the liquidation or
dissolution of any Issuer shall be paid over to the Administrative Agent to be
held by it hereunder as additional Collateral for the Secured Obligations, and (ii) in
case any distribution of capital shall be made on or in respect of the
Investment Property or any property shall be distributed upon or with respect
to the Investment Property pursuant to the recapitalization or reclassification
of the capital of any Issuer or pursuant to the reorganization thereof, the
property so distributed shall, unless otherwise subject to a perfected Lien in
favor of the Administrative Agent, be delivered to the Administrative Agent to
be held by it hereunder as additional Collateral for the Secured Obligations. Upon
the occurrence and during the continuance of an Event of Default, if any sums
of money or property so paid or distributed in respect of the Investment
Property shall be received by such Grantor, such Grantor shall, until such
money or property is paid or delivered to the Administrative Agent, hold such
money or property in trust for the Lenders, segregated from other funds of such
Grantor, as additional Collateral for the Secured Obligations.

 

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

 

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

 

5.6                         Receivables.
(a) Other than in the ordinary course of business consistent with the past
practices of the Grantors and/or the Company and in amounts which are not
material to such Grantor and as permitted by Section 11.14 of the Credit
Agreement, such Grantor will not (i) grant any extension of the time of
payment of any Receivable, (ii) compromise or settle any Receivable for
less than the full amount thereof, (iii) release, wholly or partially, any
Person liable for the payment of any Receivable, (iv) allow any credit or
discount

 

14

 

whatsoever on any Receivable or (v) amend,
supplement or modify any Receivable in any manner that could reasonably be
expected to materially and adversely affect the value thereof; provided,
however, that no Grantor shall take any such action at any time that an Event
of Default then exists or would result therefrom; provided further that
no Grantor shall take any action described in clause (v) above at any time
that an Event of Default or an Unmatured Event of Default then exists or would
result therefrom.

 

(b)                         Such
Grantor will deliver to the Administrative Agent a copy of each material
demand, notice or document received by it that questions or calls into doubt
the validity or enforceability of more than 5% of the aggregate amount of the
then outstanding Receivables for all Grantors.

 

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

 

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

 

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

 

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

 

(e)         Such Grantor will notify the
Administrative Agent and the Lenders promptly if it knows, or has reason to
know, that any application or registration relating to any material
Intellectual Property may become forfeited, abandoned or dedicated to the
public, or of any adverse determination or development (including the
institution of, or any such determination or development in, any proceeding in
the United States Patent and Trademark

 

15

 

Office, the United States Copyright Office or any
court or tribunal in any country) regarding, such Grantor’s ownership of, or
the validity of, any material Intellectual Property or such Grantor’s right to
register the same or to own and maintain the same.

 

(f)                            Whenever
such Grantor, either by itself or through any agent, employee, licensee or
designee, shall file an application for the registration of any Intellectual
Property with the United States Patent and Trademark Office, the United States
Copyright Office or any similar office or agency in any other country or any
political subdivision thereof, such Grantor shall report such filing to the
Administrative Agent by the later of 30 days thereafter or concurrently with
the next delivery of financial statements of the Borrowers pursuant to Section 10.1
of the Credit Agreement. Upon the request of the Administrative Agent, such Grantor
shall execute and deliver, and have recorded, any and all agreements,
instruments, documents, and papers as the Administrative Agent may reasonably
request to evidence the Administrative Agent’s and the Lenders’ security
interest in any Copyright, Patent or Trademark and the goodwill and general
intangibles of such Grantor relating thereto or represented thereby.

 

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

 

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

 

5.8        Seller Undertakings.

 

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

 

(b)        Each Grantor shall perform and
observe all the material terms and conditions of each Assigned Agreement to be
performed by it, maintain each Assigned

 

16

 

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

 

(c)                          Anything
herein to the contrary notwithstanding, (i) each applicable Grantor shall
remain liable under each Assigned Agreement to the extent set forth therein to
perform all of its material duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (ii) the exercise by
the Administrative Agent of any of its rights hereunder shall not release any
Grantor from any of its duties or obligations under any Assigned Agreement and (iii) neither
the Administrative Agent nor any other Lender shall have any obligation or
liability under any Assigned Agreement by reason of this Agreement, nor shall
the Administrative Agent or any other Lender be obligated to perform any
of the obligations or duties of any Grantor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.

 

5.9        Collection of Accounts. Without
in any way limiting Section 10.11 of the Credit Agreement or any
provisions of any Account Control Agreement, the Administrative Agent may, at
any time after the occurrence and during the continuance of an Event of
Default, whether before or after notification to any Account Debtor and whether
before or after the maturity of any of the Secured Obligations, (i) enforce
collection of any of each Grantor’s Accounts or other amounts owed to a Grantor
by suit or otherwise; (ii) exercise all of such Grantor’s rights and
remedies with respect to proceedings brought to collect any Accounts or other
amounts owed to such Grantor; (iii) surrender, release or exchange all or
any part of any Accounts or other amounts owed to such Grantor, or
compromise or extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder; (iv) sell or assign any
Account of such Grantor or other amount owed to such Grantor upon such terms,
for such amount and at such time or times as the Administrative Agent deems
advisable; (v) prepare, file and sign such Grantor’s name on any proof of
claim in bankruptcy or other similar document against any Account Debtor or
other Person obligated to such Grantor; and (vi) do all other acts and
things which are necessary or reasonably advisable, in the Administrative Agent’s
commercially reasonable discretion, to fulfill such Grantor’s obligations under
this Agreement and the Credit Agreements and to allow Administrative Agent to
collect the Accounts or other amounts owed to such Grantor. In addition to any
other provision hereof, Administrative Agent may at any time, after the
occurrence and during the continuance of an Event of Default, at Grantors’
expense, notify any parties obligated on any of the Accounts to make payment
directly to Administrative Agent of any amounts due or to become due
thereunder.

 

5.10      Other Matters.

 

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

 

17

 

option of the Administrative Agent or may, in the
discretion of the Administrative Agent after consultation with the Loan Party
Representative, be substituted with a requirement to maintain a Rent Reserve as
set forth in the Credit Agreement.

 

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

 

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

 

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

 

(e)         Subject to Section 10.2 of the
Credit Agreement, each Grantor shall permit during regular business hours and
with reasonable prior notice (or at any time without notice if

 

18

 

an Event of Default has occurred and is continuing)
the Administrative Agent and the Lenders to examine any of the Collateral and
wherever the Collateral may be located. Each Grantor shall, at the request
of the Administrative Agent, indicate on its records concerning the Collateral
a notation, in form reasonably satisfactory to the Administrative Agent,
of the security interest of the Administrative Agent hereunder.

 

(f)                            Each Grantor
shall (x) use its commercially reasonable efforts to obtain the consent to the
assignment thereof or the granting of a security interest by such Grantor to
the Administrative Agent of the applicable parties to any Restricted Agreement
entered into after the date of this Agreement which contains a restriction or
prohibition on the assignment of, or grant of a security interest in the right
to receive payments and other Proceeds with respect to, or the Goods produced
under, such Restricted Agreement (provided however that such Grantor’s
commercially reasonable efforts shall not include the requirement that such
Grantor pay any fees to any other party of a Restricted Agreement to obtain a
consent to the assignment thereof or a grant of a security interest therein),
and (y) shall provide the Administrative Agent with monthly updates to Schedules
1.1A and 1.1B to reflect any additions to or changes in such
schedules.

 

SECTION 6               REMEDIAL
PROVISIONS.

 

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

 

(b)                         [Intentionally Omitted]

 

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

 

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

 

19

 

Administrative Agent to, after the occurrence and
during the continuance of an Event of Default, assert and collect such claims
and to apply such monies in the manner set forth above, which appointment,
being coupled with an interest, is irrevocable.

 

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

 

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

 

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

 

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

 

(b)        If an Event of Default shall occur and
be continuing and the Administrative Agent shall give written notice of its
intent to exercise such rights to the relevant

 

20

 

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

 

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

 

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

 

21

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

22

 

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

 

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

 

6.6                         Code
and Other Remedies.  Subject to Section 11.10(k) of the Credit
Agreement, if an Event of Default shall occur and be continuing, the
Administrative Agent, on behalf of the Lenders, may exercise, in addition
to all other rights and remedies granted to them in this Agreement and in any
other instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under the UCC or any
other applicable law. Without limiting the generality of the foregoing, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person (all
and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive,
appropriate, realize upon and take possession of the Collateral, or any part thereof
(in addition to Collateral of which it already has possession), wherever it may be
found, and for that purpose may pursue the same wherever it may be
found, and may enter onto any of Grantor’s premises where any of the
Collateral may be, and search for, take possession of, remove, keep and
store any of the Collateral until the same shall be sold or otherwise disposed
of, and Administrative Agent shall have the right to store the same at any of
Grantor’s premises without cost to Administrative Agent or any Lender in each
case, subject to the terms of the applicable lease agreement and Collateral
Access Agreements with respect to premises leased by Grantor. The
Administrative Agent may forthwith sell, lease, assign, give options to
purchase, or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker’s board or office of the
Administrative Agent or any Lender or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery with assumption of any credit risk. The
Administrative Agent or any Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold,
free of any right or equity of redemption in any Grantor, which right or equity
is hereby waived and released. Each Grantor further agrees, at the
Administrative Agent’s request and at each Grantor’s expense, to assemble the
Collateral and make it available to the Administrative Agent at places which
the Administrative Agent shall reasonably select, whether at such Grantor’s
premises or elsewhere. The Administrative Agent shall apply the net proceeds of
any action taken by it pursuant to this Section 6.6, after
deducting all reasonable costs and expenses of every kind incurred in
connection therewith or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Administrative Agent and the Lenders hereunder, including Attorney Costs, as
provided in Section 6.5. To the extent permitted by applicable law,
each Grantor waives all claims, damages and demands it may acquire against
the Administrative Agent or any Lender arising out of the exercise by them of
any rights hereunder, except claims, damages and demands related to
Administrative Agent or any Lender’s gross negligence, willful misconduct or
bad faith. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice

 

23

 

shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition.

 

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

 

(b)                         Each
Grantor recognizes that the Administrative Agent may be unable to effect a
public sale of any or all the Pledged Equity, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws or
otherwise, and may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers which will be obliged to agree,
among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Each
Grantor acknowledges and agrees that any such private sale may result in
prices and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Equity for the period of time necessary to permit the Issuer thereof to
register such securities or other interests for public sale under the
Securities Act, or under applicable state securities laws, even if such Issuer
would agree to do so.

 

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

 

24

 

covenants except for a
defense that no Event of Default has occurred under the Credit Agreement.

 

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

 

SECTION 7             THE ADMINISTRATIVE
AGENT.

 

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

 

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

 

(ii)                          in the
case of any Intellectual Property, execute and deliver, and have recorded, any
and all agreements, instruments, documents and papers as the Administrative
Agent may reasonably request to evidence the Administrative Agent’s
security interest in such Intellectual Property and the goodwill and general
intangibles of such Grantor relating thereto or represented thereby;

 

(iii)                       discharge
Liens levied or placed on or threatened against the Collateral (other than
Permitted Liens), and effect any repairs or insurance called for by the terms
of this Agreement and pay all or any part of the premiums therefor and the
costs thereof;

 

(iv)                      execute, in
connection with any sale provided for in Section 6.6 or 6.7,
any indorsements, assignments or other instruments of conveyance or transfer
with respect to the Collateral; and

 

(v)                         (1) direct
any party liable for any payment under any of the Collateral to make payment of
any and all moneys due or to become due thereunder directly to the
Administrative Agent or as the Administrative Agent shall direct; (2) ask
or demand for, collect, and receive payment of and receipt for, any and all
moneys, claims and other

 

25

 

amounts due or to become due at any time in respect of
or arising out of any Collateral; (3) sign and indorse any invoices,
freight or express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications, notices and other documents
in connection with any of the Collateral; (4) commence and prosecute any
suits, actions or proceedings at law or in equity in any court of competent jurisdiction
to collect the Collateral or any portion thereof and to enforce any other right
in respect of any Collateral; (5) defend any suit, action or proceeding
brought against such Grantor with respect to any Collateral; (6) settle,
compromise or adjust any such suit, action or proceeding and, in connection
therewith, give such discharges or releases as the Administrative Agent may deem
reasonably appropriate; (7) assign any Copyright, Patent or Trademark, in
each case, that is subject to the Lien of the Administrative Agent granted
pursuant to any Loan Document, throughout the world for such term or terms, on
such conditions, and in such manner, as the Administrative Agent shall in its
reasonable discretion determine; (8) vote any right or interest with
respect to any Investment Property; (9) order good standing certificates
and conduct lien searches in respect of such jurisdictions or offices as the
Administrative Agent may deem reasonably appropriate; and (10) generally
sell, transfer, pledge and make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the Administrative
Agent were the absolute owner thereof for all purposes, and do, at the
Administrative Agent’s option and such Grantor’s expense, at any time, or from
time to time, all acts and things which the Administrative Agent deems
reasonably necessary to protect, preserve or realize upon the Collateral and
the Administrative Agent’s security interests therein and to effect the intent
of this Agreement, all as fully and effectively as such Grantor might do.

 

Anything in this Section 7.1(a) or
any other Loan Document to the contrary notwithstanding, the Administrative
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this Section 7.1(a) unless an Event of Default
shall have occurred and be continuing.

 

(b)                         If any
Grantor fails to perform or comply with any of its agreements contained
herein, the Administrative Agent, at its option, but without any obligation so
to do, may, after written notice to such Grantor, perform or comply, or
otherwise cause performance or compliance, with such agreement.

 

(c)                          Each
Grantor hereby ratifies all that such attorneys in fact shall lawfully do or
cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the Secured Obligations are Paid in
Full.

 

7.2                         Duty
of Administrative Agent. The Administrative Agent’s sole duty with respect
to the custody, safekeeping and physical preservation of the Collateral in its
possession shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent or any Lender nor any of their respective officers,
directors, employees or agents shall be liable for any failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of any Grantor or any

 

26

 

other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof.
The powers conferred on the Administrative Agent and the Lenders hereunder are
solely to protect the Administrative Agent’s and the Lenders’ interests in the
Collateral and shall not impose any duty upon the Administrative Agent or any
Lender to exercise any such powers. The Administrative Agent and the Lenders
shall be accountable only for amounts that they actually receive as a result of
the exercise of such powers, and neither the Administrative Agent, nor any
Lender nor any of their respective officers, directors, employees or agents
shall be responsible to any Grantor for any act (except for the Administrative
Agent’s or any Lender’s gross negligence or willful misconduct in so acting) or
failure to act hereunder.

 

7.3                         Authority
of Administrative Agent. Each Grantor acknowledges that the rights and
responsibilities of the Administrative Agent under this Agreement with respect
to any action taken by the Administrative Agent or the exercise or non-exercise
by the Administrative Agent of any option, voting right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Agreement shall, as between the Administrative Agent and the Lenders, be
governed by the Credit Agreement and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Grantors, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and no Grantor shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.

 

SECTION 8             MISCELLANEOUS.

 

8.1                         Amendments
in Writing.    None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified
except in accordance with Section 15.1 of the Credit Agreement.

 

8.2                         Notices.   All
notices, requests and demands to or upon the Administrative Agent or any
Grantor hereunder shall be addressed to the Administrative Agent or Loan Party
Representative, respectively, and effected in the manner provided for in Section 15.3
of the Credit Agreement and each Grantor hereby appoints the Loan Party
Representative as its agent to give and receive notices hereunder and the
Administrative Agent shall be fully protected and held harmless by the Grantors
hereunder for relying on any such notice reasonably believed by it to have been
delivered by the Loan Party Representative.

 

8.3                         Indemnification
by Grantors.   THE GRANTORS, JOINTLY AND SEVERALLY, HEREBY
AGREE TO INDEMNIFY AND HOLD EACH LENDER PARTY AND ISSUING BANK FREE AND
HARMLESS FROM AND AGAINST ANY AND ALL INDEMNIFIED LIABILITIES, INCURRED BY THE
LENDER PARTIES, ISSUING BANK OR ANY OF THEM AS A RESULT OF, OR ARISING OUT OF,
OR RELATING TO (A) ANY TENDER OFFER, MERGER, PURCHASE OF EQUITY INTERESTS,
PURCHASE OF ASSETS (INCLUDING THE RELATED TRANSACTIONS) OR OTHER SIMILAR
TRANSACTION FINANCED OR PROPOSED TO BE FINANCED IN WHOLE OR IN PART, DIRECTLY
OR INDIRECTLY, WITH THE PROCEEDS OF ANY OF THE LOANS, (B) THE PAST,
PRESENT OR FUTURE PRESENCE, USE, HANDLING, RELEASE OR THREAT OF RELEASE,
EMISSION, DISCHARGE, TRANSPORTATION, STORAGE, TREATMENT OR DISPOSAL OF ANY
HAZARDOUS SUBSTANCE AT OR AFFECTING ANY PROPERTY

 

27

 

OWNED OR LEASED BY ANY
GRANTOR, (C) ANY VIOLATION OF ANY ENVIRONMENTAL LAWS WITH RESPECT TO
CONDITIONS AT ANY PROPERTY OWNED OR LEASED BY ANY GRANTOR OR THE OPERATIONS
CONDUCTED THEREON, (D) THE INVESTIGATION, CLEANUP OR REMEDIATION OF
OFFSITE LOCATIONS AT WHICH ANY GRANTOR OR ITS RESPECTIVE PREDECESSORS ARE
ALLEGED TO HAVE DIRECTLY OR INDIRECTLY DISPOSED OF HAZARDOUS SUBSTANCES OR (E) THE
EXECUTION, DELIVERY, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT BY ANY OF THE LENDER PARTIES OR ISSUING BANK, EXCEPT FOR ANY SUCH
INDEMNIFIED LIABILITIES ARISING ON ACCOUNT OF THE APPLICABLE LENDER PARTY’S OR
ISSUING BANK’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IF AND TO THE EXTENT
THAT THE FOREGOING UNDERTAKING MAY BE UNENFORCEABLE FOR ANY REASON, EACH
GRANTOR HEREBY AGREES TO MAKE THE MAXIMUM CONTRIBUTION TO THE PAYMENT AND
SATISFACTION OF EACH OF THE INDEMNIFIED LIABILITIES WHICH IS PERMISSIBLE UNDER
APPLICABLE LAW. ALL OBLIGATIONS PROVIDED FOR IN THIS SECTION 8.3
SHALL SURVIVE REPAYMENT OF ALL (AND SHALL BE) SECURED OBLIGATIONS (AND
TERMINATION OF ALL COMMITMENTS UNDER THE CREDIT AGREEMENT), ANY FORECLOSURE
UNDER, OR ANY MODIFICATION, RELEASE OR DISCHARGE OF, ANY OR ALL OF THE
COLLATERAL DOCUMENTS AND TERMINATION OF THIS AGREEMENT.

 

8.4                         Enforcement
Expenses. (a)  Each Grantor agrees, on a joint and several basis, to
pay or reimburse within three (3) Business Days of demand each Lender and
the Administrative Agent for all reasonable out-of-pocket costs and expenses
(subject to the limitations on the number of counsel set forth in Section 15.5
of the Credit Agreement, including, without duplication of any provision of
this Agreement, Attorney Costs) incurred in collecting against any Guarantor
under the guaranty contained in Section 2 or otherwise enforcing or
preserving any rights under this Agreement and the other Loan Documents.

 

(b)                         Each
Grantor agrees to pay, and to save the Administrative Agent and the Lenders
harmless from, any and all liabilities with respect to, or resulting from any
delay caused by any Grantor in paying, any and all stamp, excise, sales or
other taxes which may be payable or determined to be payable with respect
to any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.

 

(c)                          The
agreements in this Section 8.4 shall survive repayment of all (and
shall be) Secured Obligations (and termination of all commitments under the
Credit Agreement), any foreclosure under, or any modification, release or
discharge of, any or all of the Collateral Documents and termination of this
Agreement.

 

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

 

8.6                         Nature
of Remedies.  All Secured Obligations of each Grantor and rights
of the Administrative Agent and the Lenders expressed herein or in any other
Loan Document shall be in addition to and not in limitation of those provided
by applicable law. No failure to

 

28

 

exercise and no delay in
exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.

 

8.7                         Counterparts.    This
Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts and each such counterpart shall
be deemed to be an original, but all such counterparts shall together
constitute but one and the same Agreement. Receipt by telecopy of any executed
signature page to this Agreement or any other Loan Document shall
constitute effective delivery of such signature page.

 

8.8                         Severability.    The
illegality or unenforceability of any provision of this Agreement or any
instrument or agreement required hereunder shall not in any way affect or
impair the legality or enforceability of the remaining provisions of this
Agreement or any instrument or agreement required hereunder.

 

8.9                         Entire
Agreement.    This Agreement, together with the other
Loan Documents, embodies the entire agreement and understanding among the parties
hereto and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof and any prior arrangements made with respect to the
payment by any Grantor of (or any indemnification for) any fees, costs or
expenses payable to or incurred (or to be incurred) by or on behalf of the
Administrative Agent or the Lenders.

 

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

 

8.11                   Governing
Law.    THIS AGREEMENT SHALL BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES.

 

8.12                   Forum
Selection; Consent to Jurisdiction.    ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW
YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK; PROVIDED THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
PRECLUDE THE ADMINISTRATIVE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION IN WHICH COLLATERAL IS LOCATED.

 

29

 

EACH GRANTOR HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE.
EACH GRANTOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF NEW YORK. EACH GRANTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.

 

8.13                   Waiver of
Jury Trial.   EACH GRANTOR, THE ADMINISTRATIVE AGENT AND
EACH LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT AND ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

8.14                   Set-off.   Each
Grantor agrees that the Administrative Agent and each Lender have all rights of
set-off and bankers’ lien provided by applicable law, and in addition thereto,
each Grantor agrees that at any time any Event of Default occurs and is
continuing, the Administrative Agent and each Lender may apply to the
payment of any Secured Obligations, whether or not then due, any and all
balances, credits, deposits, accounts or moneys of such Grantor then or
thereafter with the Administrative Agent or such Lender.

 

8.15                   Acknowledgements.  Each
Grantor hereby acknowledges that:

 

(a)                          it has
been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Loan Documents to which it is a party;

 

(b)                         neither
the Administrative Agent nor any Lender has any fiduciary relationship with or
duty to any Grantor arising out of or in connection with this Agreement or any
of the other Loan Documents, and the relationship between the Grantors, on the
one hand, and the Administrative Agent and the Lenders, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and

 

(c)                          no joint
venture is created hereby or by the other Loan Documents or otherwise exists by
virtue of the transactions contemplated hereby among the Lenders or among the
Grantors and the Lenders.

 

8.16                   Additional
Grantors.  Each Loan Party that is required to become a party to
this Agreement pursuant to Section 10.10 of the Credit Agreement shall
become a Grantor for all purposes of this Agreement upon execution and delivery
by such Loan Party of a joinder agreement in the form of Exhibit G to
the Credit Agreement.

 

30

 

8.17                   Releases.
(a)  At such time as the Secured Obligations have been Paid in Full, the
Collateral shall be automatically released from the Liens created hereby, and
this Agreement and all obligations (other than those expressly stated to
survive such termination) of the Administrative Agent and each Grantor
hereunder shall terminate, all without delivery of any instrument or
performance of any act by any party, and all rights to the Collateral shall
revert to the Grantors. At the request and sole expense of any Grantor
concurrently with any such termination, the Administrative Agent shall deliver
to the Grantors any Collateral held by the Administrative Agent hereunder, and
execute and deliver to the Grantors such documents as the Grantors shall
reasonably request to evidence such termination.

 

(b)                         If any of
the Collateral shall be sold, transferred or otherwise disposed of by any
Grantor in a transaction permitted by the Credit Agreement, then the
Administrative Agent, at the request and sole expense of such Grantor, shall
execute and deliver to such Grantor all releases or other documents reasonably
necessary or desirable for the release of the Liens created hereby on such
Collateral. At the request and sole expense of the Borrowers, a Guarantor shall
be released from its obligations hereunder in the event that all the equity
interests of such Guarantor shall be sold, transferred or otherwise disposed of
in a transaction permitted by the Credit Agreement; provided that the
Borrowers shall have delivered to the Administrative Agent, with reasonable
notice prior to the date of the proposed release, a written request for release
identifying the relevant Guarantor and the terms of the sale or other
disposition in reasonable detail, including the price thereof and any expenses
in connection therewith, together with a certification by the Borrowers stating
that such transaction is in compliance with the Credit Agreement and the other
Loan Documents.

 

8.18                   Obligations
and Liens Absolute and Unconditional. Each Grantor understands and agrees
that the obligations of each Grantor under this Agreement shall be construed as
a continuing, absolute and unconditional without regard to (a) the
validity or enforceability of any Loan Document, any of the Secured Obligations
or any other collateral security therefor or guaranty or right of offset with
respect thereto at any time or from time to time held by the Administrative
Agent or any Lender, (b) any defense, set-off or counterclaim (other than
a defense of payment or performance) which may at any time be available to
or be asserted by any Grantor or any other Person against the Administrative
Agent or any Lender, or (c) any other circumstance whatsoever (with or
without notice to or knowledge of any Grantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of any Grantor for the
Secured Obligations, in bankruptcy or in any other instance. When making any
demand hereunder or otherwise pursuing its rights and remedies hereunder
against any Grantor, the Administrative Agent or any Lender may, but shall be
under no obligation to, make a similar demand on or otherwise pursue such
rights and remedies as it may have against any other Grantor or any other
Person or against any collateral security or guaranty for the Secured
Obligations or any right of offset with respect thereto, and any failure by the
Administrative Agent or any Lender to make any such demand, to pursue such
other rights or remedies or to collect any payments from any other Grantor or
any other Person or to realize upon any such collateral security or guaranty or
to exercise any such right of offset, or any release of any other Grantor or
any other Person or any such collateral security, guaranty or right of offset,
shall not relieve any Grantor of any obligation or liability hereunder, and
shall not impair or affect the rights and remedies, whether express, implied or
available as a matter of law, of the

 

31

 

Administrative Agent or
any Lender against any Grantor. For the purposes hereof “demand” shall include
the commencement and continuance of any legal proceedings.

 

8.19                   Reinstatement.  This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Grantor or any Issuer for liquidation or reorganization, should Grantor or any
Issuer become insolvent or make an assignment for the benefit of creditors or
should a receiver or trustee be appointed for all or any significant part of
Grantor’s or and Issuer’s assets, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of
the Secured Obligations, or any part thereof, is, pursuant to applicable
law, rescinded or reduced in amount, or must otherwise be restored or returned
by any obligee of the Secured Obligations, whether as a “voidable preference”, “fraudulent
conveyance”, or otherwise, all as though such payment or performance had not
been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Secured Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.

 

[signature pages follow]

 

32

 

Each of the
undersigned has caused this Guaranty and Collateral Agreement to be duly
executed and delivered as of the date first above written.

 

	
   

  	
  RUSS BERRIE U.S. GIFT, INC.,
  a Delaware

  
	
   

  	
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Wille

  	
   

  
	
   

  	
  Name: John Wille

  
	
   

  	
  Title: Vice President and Chief Financial
  Officer

  
	
   

  	
   

  
	
   

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

  
	
   

  	
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Wille

  	
   

  
	
   

  	
  Name: John Wille

  
	
   

  	
  Title: Vice President, Treasurer and
  Assistant Secretary

  
	
   

  	
   

  
	
   

  	
  RUSS BERRIE AND COMPANY PROPERTIES,

  
	
   

  	
  INC., a New Jersey
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Wille

  	
   

  
	
   

  	
  Name: John Wille

  
	
   

  	
  Title: Vice President, Treasurer and
  Assistant Secretary

  
	
   

  	
   

  
	
   

  	
  RUSSPLUS, INC.,
  a New Jersey corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Wille

  	
   

  
	
   

  	
  Name: John Wille

  
	
   

  	
  Title: Vice President, Treasurer and
  Assistant Secretary

  
	
   

  	
   

  
	
   

  	
  RUSS BERRIE AND COMPANY INVESTMENTS,

  
	
   

  	
  INC., a New Jersey
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Wille

  	
   

  
	
   

  	
  Name: John Wille

  
	
   

  	
  Title: Vice President, Treasurer and
  Assistant Secretary

  
					

 

 

	
   

  	
  LASALLE BUSINESS CREDIT, LLC,
  as the

  
	
   

  	
  Administrative Agent and a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ C. John Mostofi

  	
   

  
	
   

  	
  Name: C. John Mostofi

  
	
   

  	
  Title: Senior Vice President

  

 

33

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