Document:

Exhibit
10.1

 

 

CREDIT AGREEMENT

 

DATED AS OF
FEBRUARY 19, 2004

 

by and among

 

PLAYTEX PRODUCTS,
INC.,

 

as Borrower

 

and

 

THE OTHER PERSONS
PARTY HERETO THAT ARE

DESIGNATED AS CREDIT PARTIES

 

and

 

GENERAL ELECTRIC
CAPITAL CORPORATION

as Agent, L/C
Issuer and a Lender

 

and

 

 THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO

as Lenders

 

and

 

GECC CAPITAL
MARKETS GROUP, INC.

as Lead Arranger

 

 

 

TABLE OF CONTENTS

 

	
  SECTION 1.
  AMOUNTS AND TERMS OF LOANS

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Loans.

  	
   

  
	
  1.2

  	
  Interest and
  Applicable Margins.

  	
   

  
	
  1.3

  	
  Fees.

  	
   

  
	
  1.4

  	
  Payments.

  	
   

  
	
  1.5

  	
  Prepayments.

  	
   

  
	
  1.6

  	
  Maturity.

  	
   

  
	
  1.7

  	
  Eligible
  Accounts.

  	
   

  
	
  1.8

  	
  Eligible
  Inventory.

  	
   

  
	
  1.9

  	
  [Intentionally
  Omitted]

  	
   

  
	
  1.10

  	
  Loan Accounts.

  	
   

  
	
  1.11

  	
  Yield Protection; Illegality.

  	
   

  
	
  1.12

  	
  Taxes.

  	
   

  
	
  1.13

  	
  Common
  Enterprise.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2.
  AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Compliance
  With Laws and Contractual Obligations.

  	
   

  
	
  2.2

  	
  Insurance;
  Damage to or Destruction of Collateral.

  	
   

  
	
  2.3

  	
  Inspection; Lender Meeting.

  	
   

  
	
  2.4

  	
  Organizational Existence.

  	
   

  
	
  2.5

  	
  Environmental
  Matters.

  	
   

  
	
  2.6

  	
  Landlords’
  Agreements, Mortgagee Agreements, Bailee and Processor Letters and Real
  Estate Purchases

  	
   

  
	
  2.7

  	
  Conduct
  of Business.

  	
   

  
	
  2.8

  	
  Merger of Securitization
  Vehicle.

  	
   

  
	
  2.9

  	
  Further
  Assurances.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.
  NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Indebtedness.

  	
   

  
	
  3.2

  	
  Liens and Related Matters.

  	
   

  
	
  3.3

  	
  Investments.

  	
   

  
	
  3.4

  	
  Contingent
  Obligations.

  	
   

  
	
  3.5

  	
  Restricted
  Payments.

  	
   

  
	
  3.6

  	
  Restriction on
  Fundamental Changes.

  	
   

  
	
  3.7

  	
  Disposal of
  Assets or Subsidiary Stock.

  	
   

  
	
  3.8

  	
  Transactions with
  Affiliates.

  	
   

  
	
  3.9

  	
  Conduct of Business.

  	
   

  
	
  3.10

  	
  Changes Relating to
  Indebtedness.

  	
   

  
	
  3.11

  	
  Fiscal Year.

  	
   

  
	
  3.12

  	
  Press
  Release; Public Offering Materials.

  	
   

  
	
  3.13

  	
  Subsidiaries.

  	
   

  

 

i

 

	
  3.14

  	
  Bank Accounts.

  	
   

  
	
  3.15

  	
  Hazardous
  Materials.

  	
   

  
	
  3.16

  	
  ERISA.

  	
   

  
	
  3.17

  	
  Sale-Leasebacks.

  	
   

  
	
  3.18

  	
  Prepayments of Other
  Indebtedness.

  	
   

  
	
  3.19

  	
  Changes to Material
  Contracts.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.
  FINANCIAL COVENANTS/REPORTING

  	
   

  
	
   

  	
   

  
	
  4.1

  	
  [Intentionally Omitted]

  	
   

  
	
  4.2

  	
  Financial
  Statements and Other Reports.

  	
   

  
	
  4.3

  	
  Accounting
  Terms; Utilization of GAAP for Purposes of Calculations Under Agreement.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  
	
  5.1

  	
  Disclosure.

  	
   

  
	
  5.2

  	
  No Material Adverse Effect.

  	
   

  
	
  5.3

  	
  No Conflict.

  	
   

  
	
  5.4

  	
  Organization,
  Powers, Capitalization and Good Standing.

  	
   

  
	
  5.5

  	
  Financial
  Statements and Projections.

  	
   

  
	
  5.6

  	
  Intellectual
  Property.

  	
   

  
	
  5.7

  	
  Investigations, Audits,
  Etc.

  	
   

  
	
  5.8

  	
  Employee
  Matters.

  	
   

  
	
  5.9

  	
  Solvency.

  	
   

  
	
  5.10

  	
  Litigation; Adverse Facts.

  	
   

  
	
  5.11

  	
  Use of Proceeds;
  Margin Regulations.

  	
   

  
	
  5.12

  	
  Ownership of Real
  Property; Liens.

  	
   

  
	
  5.13

  	
  Environmental
  Matters.

  	
   

  
	
  5.14

  	
  ERISA.

  	
   

  
	
  5.15

  	
  Brokers.

  	
   

  
	
  5.16

  	
  Deposit and
  Disbursement Accounts.

  	
   

  
	
  5.17

  	
  Agreements and Other
  Documents.

  	
   

  
	
  5.18

  	
  Insurance.

  	
   

  
	
  5.19

  	
  Senior
  Secured Note Documents and Senior Subordinated Note Documents.

  	
   

  
	
  5.20

  	
  Compliance.

  	
   

  
	
  5.21

  	
  Smile-Tote.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6. DEFAULT, RIGHTS AND
  REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Event of Default.

  	
   

  
	
  6.2

  	
  Suspension or
  Termination of Commitments.

  	
   

  
	
  6.3

  	
  Acceleration and other
  Remedies.

  	
   

  
	
  6.4

  	
  Performance
  by Agent.

  	
   

  
	
  6.5

  	
  Application
  of Proceeds.

  	
   

  

 

ii

 

	
  SECTION 7. CONDITIONS TO LOANS

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Conditions to Initial
  Loans.

  	
   

  
	
  7.2

  	
  Conditions
  to All Loans.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8. ASSIGNMENT AND
  PARTICIPATION

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Assignment and
  Participations.

  	
   

  
	
  8.2

  	
  Agent.

  	
   

  
	
  8.3

  	
  Set Off and Sharing of
  Payments.

  	
   

  
	
  8.4

  	
  Disbursement
  of Funds.

  	
   

  
	
  8.5

  	
  Disbursements of
  Advances; Payment.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9. MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Indemnities.

  	
   

  
	
  9.2

  	
  Amendments
  and Waivers.

  	
   

  
	
  9.3

  	
  Notices.

  	
   

  
	
  9.4

  	
  Failure
  or Indulgence Not Waiver; Remedies Cumulative.

  	
   

  
	
  9.5

  	
  Marshaling; Payments Set
  Aside.

  	
   

  
	
  9.6

  	
  Severability.

  	
   

  
	
  9.7

  	
  Lenders’
  Obligations Several; Independent Nature of Lenders’ Rights.

  	
   

  
	
  9.8

  	
  Headings.

  	
   

  
	
  9.9

  	
  Applicable Law.

  	
   

  
	
  9.10

  	
  Successors
  and Assigns.

  	
   

  
	
  9.11

  	
  No
  Fiduciary Relationship; Limited Liability.

  	
   

  
	
  9.12

  	
  Construction.

  	
   

  
	
  9.13

  	
  Confidentiality.

  	
   

  
	
  9.14

  	
  CONSENT
  TO JURISDICTION.

  	
   

  
	
  9.15

  	
  WAIVER
  OF JURY TRIAL.

  	
   

  
	
  9.16

  	
  Survival
  of Warranties and Certain Agreements.

  	
   

  
	
  9.17

  	
  Entire Agreement.

  	
   

  
	
  9.18

  	
  Counterparts;
  Effectiveness.

  	
   

  
	
  9.19

  	
  Replacement
  of Lenders.

  	
   

  
	
  9.20

  	
  Delivery
  of Termination Statements and Mortgage Releases.

  	
   

  

 

iii

 

INDEX OF APPENDICES

Annexes

 

	
  Annex A

  	
  -

  	
  Definitions

  	
   

  

 

iv

 

CREDIT AGREEMENT

 

This CREDIT AGREEMENT is
dated as of February 19, 2004 and entered into by and among PLAYTEX
PRODUCTS, INC., a Delaware corporation (“Borrower”), the other persons
designated as “Credit Parties” on the signature pages hereof,
the financial institutions who are or hereafter become parties to this
Agreement as Lenders, and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware
corporation  (in its individual capacity “GE Capital”), as the
initial L/C Issuer and as Agent.

 

R E C I T A L S:

 

WHEREAS, Borrower desires
that Lenders extend a term
credit  facility  and a revolving credit
facility to Borrower to fund the repayment of certain indebtedness of Borrower
under its existing credit facility and receivables purchase facility to provide
working capital financing for Borrower and its Subsidiaries  and to provide funds for other general
corporate purposes of Borrower and its Subsidiaries; and

 

WHEREAS, Borrower desires
to secure all of its Obligations (as hereinafter defined) under the Loan
Documents (as hereinafter defined) by granting to Agent, for the benefit of
Agent and Lenders, a security interest in and lien upon substantially all of
its personal and material owned real property; and

 

WHEREAS, each of the
Guarantors is willing to guaranty all of the Obligations of Borrower and to
grant to Agent, for the benefit of Agent and Lenders, a security interest in
and lien upon substantially all of its personal and material owned real
property to secure the Obligations; and

 

WHEREAS, all capitalized
terms herein shall have the meanings ascribed thereto in Annex A hereto
which is incorporated herein by reference.

 

NOW, THEREFORE, in
consideration of the premises and the agreements, provisions and covenants
herein contained, Borrower, the other Credit Parties, Lenders and Agent agree
as follows:

 

 

SECTION 1.

AMOUNTS AND TERMS OF LOANS

 

1.1                                 Loans. 
Subject to the terms and conditions of this Agreement and
in reliance upon the representations and warranties of Borrower and the other
Credit Parties contained herein:

 

(a)                                  Revolving Loans.

 

(i)                                     Each Revolving Lender agrees,
severally and not jointly, to make available to Borrower from time to time
until the Commitment Termination Date its Pro Rata Share of advances (each a “Revolving
Credit Advance”) of Revolving Loans requested by Borrower hereunder.  The Pro Rata Share of the Revolving Loan of
any Revolving Lender (including, without duplication, Swing Line Loans) shall
not at any time exceed its separate Revolving Loan Commitment.  Revolving Credit Advances may be repaid and
reborrowed; provided, that the
amount of any Revolving Credit Advance to be made at any time shall not exceed
Borrowing Availability at such time. 
Borrowing Availability may be further reduced by Reserves imposed by
Agent in accordance with this Agreement. 
All Revolving Loans shall be repaid in full on the Commitment
Termination Date.  Borrower shall
execute and deliver to each Revolving Lender a note to evidence the Revolving
Loan Commitment of that Revolving Lender. 
Each note shall be in the principal amount of the Revolving Loan
Commitment of the applicable Revolving Lender, dated the Closing Date and
substantially in the form of Exhibit 1.1(a)(i) (each a “Revolving
Note” and, collectively, the “Revolving Notes”).  Other than pursuant to Section 1.1(a)(ii),
if at any time the Borrowing Availability is less than $0 (Revolving Loans that
result in such Borrowing Availability deficiency are herein referred to
collectively as “Overadvances”), Lenders shall not be obligated to make
Revolving Credit Advances, no additional Letters of Credit shall be issued and,
except as provided in Section 1.1(a)(ii) below, Revolving Loans
must be repaid immediately and Letters of Credit cash collateralized in an
amount sufficient to eliminate any Overadvances.  All Overadvances shall constitute Index Rate Loans and shall bear
interest at the Default Rate.  Revolving
Loans which are Index Rate Loans may be requested in any amount with one (1)
Business Day prior written notice required for funding requests equal to or
greater than $10,000,000.  For funding
requests for such Loans less than $10,000,000, written notice must be provided
by 1:00 p.m. (New York time) on the Business Day on which the Loan is to be
made.  All LIBOR Loans require three (3)
Business Days prior written notice. Written notices for funding requests shall
be in the form attached as Exhibit 1.1(a)(ii) (“Notice of Revolving
Credit Advance”).

 

(ii)                                  If Borrower requests that Revolving
Lenders make, or permit to remain outstanding any Overadvances, Agent may, in
its sole discretion, elect to make, or permit to remain outstanding such
Overadvances; provided, however, that Agent may not cause
Revolving Lenders to make, or permit to remain outstanding, (a) aggregate
Revolving Loans (including, without duplication, Swing Line Loans) in excess of
the Maximum Amount or (b) Overadvances in an aggregate amount in excess of
5% of the Revolving Loan Commitment.  If
an Overadvance is made, or permitted to remain outstanding, pursuant to the
preceding sentence, then all Revolving Lenders shall be bound to make, or
permit to remain outstanding such Overadvance based upon their Pro Rata Shares
of the Revolving Loan Commitment in

 

2

 

accordance with the terms of this
Agreement.  If an Overadvance remains
outstanding for more than ninety (90) days during any one hundred eighty (180)
day period, Revolving Loans must be repaid immediately in an amount sufficient
to eliminate all of such Overadvances. 
Furthermore, holders of a majority of the Revolving Loan Commitment may
prospectively revoke Agent’s ability to make or permit Overadvances by written
notice to Agent.  Any Overadvance may be
made as a Swing Line Advance.

 

(b)                                 Term Loan. 
Each Term Lender agrees, severally and not jointly, to lend to Borrower
in one draw, on the Closing Date, its Pro Rata Share of the aggregate amount of
$7,500,000 (the “Term Loan”). 
Borrower shall repay the then outstanding principal balance of the Term
Loan on February, 19, 2009. 
Notwithstanding the foregoing, the outstanding principal balance of the
Term Loan shall be due and payable in full on the Commitment Termination Date.  Amounts borrowed under this Section 1.1(b)
and repaid may not be reborrowed.

 

The Term Loan shall be
evidenced by promissory notes substantially in the form of Exhibit 1.1(b)
(each a “Term Note” and, collectively, the “Term Notes”), and
Borrower shall execute and deliver each Term Note to the applicable Term
Lender.  Each Term Note shall represent
the obligation of Borrower  to pay
the amount of the applicable Term Lender’s Term Loan Commitment, together with
interest thereon.

 

(c)                                  Swing Line Facility.

 

(i)                                     Agent shall notify the Swing Line
Lender upon Agent’s receipt of any Notice of Revolving Credit Advance.  Subject to the terms and conditions hereof,
the Swing Line Lender (1) may, if the applicable Notice of Revolving Credit
Advance request is for an Index Rate Loan, in its discretion, make available
from time to time until the Commitment Termination Date advances in accordance
with any such notice and (2) shall upon Agent’s receipt of a notice of Swing
Line Advance in the form attached as Exhibit 1.1(c)(i) (“Notice of
Swing Line Advance”) by Borrower, make available from time to time until
the Commitment Termination Date advances in accordance with any such notice
(each advance pursuant to this Section 1.1(c) a “Swing Line
Advance”).  The provisions of this Section 1.1(c)
shall not relieve Revolving Lenders of their obligations to make Revolving
Credit Advances under Section 1.1(a); provided, that if the Swing Line Lender makes a Swing Line
Advance pursuant to any notice described in clause (1) above, such Swing
Line Advance shall be in lieu of any Revolving Credit Advance that otherwise
may be made by Revolving Lenders pursuant to such notice.  Except as provided in Section 1.1(a)(ii)
above, the aggregate amount of Swing Line Advances outstanding shall not exceed
at any time the lesser of (A) the Swing Line Commitment and (B) Borrowing
Availability (“Swing Line Availability”).  Until the Commitment Termination Date, Borrower may from time to
time borrow, repay and reborrow under this Section 1.1(c).  Each Swing Line Advance shall be made
pursuant to a Notice of Revolving Credit Advance delivered by Borrower to Agent
in accordance with Section 1.1(a) or pursuant to a Notice of Swing
Line Advance provided by 1:00p.m. (New York time) on the Business Day on which
the Swing Line Loan is to be made. 
Unless the Swing Line Lender has received at least one (1) Business
Day’s prior written notice from Requisite Revolving Lenders instructing it not
to make a Swing Line Advance due to the failure of any condition to borrowing
contained in Section 7.2 to be satisfied, the Swing Line Lender
shall, notwithstanding the failure of any condition precedent set forth in

 

3

 

Section 7.2, be entitled (but not required) to
fund that Swing Line Advance, and to have each Revolving Lender make Revolving
Credit Advances in accordance with Section 1.1(c)(iii) or purchase
participating interests in accordance with Section 1.1(c)(iv).  Notwithstanding any other provision of this
Agreement or the other Loan Documents, the Swing Line Loan shall constitute an
Index Rate Loan.  The entire unpaid
balance of the Swing Line Loan and all other non-contingent Obligations shall
be immediately due and payable in full in immediately available funds on the
Commitment Termination Date if not sooner paid in full.

 

(ii)                                  Borrower shall execute and deliver
to the Swing Line Lender a promissory note to evidence the Swing Line
Commitment.  Such note shall be in the
principal amount of the Swing Line Commitment of the Swing Line Lender, dated
the Closing Date and substantially in the form of Exhibit 1.1(c)(ii)
(the “Swing Line Note”).  The
Swing Line Note shall represent the obligation of Borrower to pay the amount of
the Swing Line Commitment or, if less, the aggregate unpaid principal amount of
all Swing Line Advances made to Borrower together with interest thereon as
prescribed in Section 1.2.

 

(iii)                               The Swing Line Lender, at any time
and from time to time in its sole and absolute discretion but no less
frequently than once weekly,  shall  on behalf of Borrower (and
Borrower hereby irrevocably authorizes the Swing Line Lender to so act on its
behalf), and Borrower may, at any time and from time to time in its sole and
absolute discretion, request each Revolving Lender (including the Swing Line
Lender) to make a Revolving Credit Advance to Borrower (which shall be an Index
Rate Loan) in an amount equal to that Revolving Lender’s Pro Rata Share of the
principal amount of the Swing Line Loan (the “Refunded Swing Line Loan”)
outstanding on the date such notice is given. 
Unless any of the events described in Sections 6.1(f) and 6.1(g)
has occurred (in which event the procedures of Section 1.1(c)(iv)
shall apply) and regardless of whether the conditions precedent set forth in
this Agreement to the making of a Revolving Credit Advance are then satisfied,
each Revolving Lender shall disburse directly to Agent, its Pro Rata Share of a
Revolving Credit Advance on behalf of the Swing Line Lender, prior to 3:00 p.m.
(New York time), in immediately available funds on the Business Day next
succeeding the date that notice is given. 
The proceeds of those Revolving Credit Advances shall be immediately
paid to the Swing Line Lender and applied to repay the Refunded Swing Line
Loan.

 

(iv)                              If, prior to refunding a Swing Line
Loan with a Revolving Credit Advance pursuant to Section 1.1(c)(iii),
one of the events described in Sections 6.1(f) or 6.1(g) has occurred,
then, subject to the provisions of Section 1.1(c)(v) below, each
Revolving Lender shall, on the date such Revolving Credit Advance was to have
been made for the benefit of Borrower, purchase from the Swing Line Lender an
undivided participation interest in the Swing Line Loan in an amount equal to
its Pro Rata Share (determined with respect to Revolving Loans) of such Swing
Line Loan.  Upon request, each Revolving
Lender shall promptly transfer to the Swing Line Lender, in immediately
available funds, the amount of its participation interest.

 

(v)                                 Each Revolving Lender’s obligation
to make Revolving Credit Advances in accordance with Section 1.1(c)(iii)
and to purchase participation interests in accordance with Section 1.1(c)(iv)
shall be absolute and unconditional and shall not be affected

 

4

 

by any circumstance, including
(A) any setoff, counterclaim, recoupment, defense or other right that such
Revolving Lender may have against the Swing Line Lender, Borrower or any other
Person for any reason whatsoever; (B) the occurrence or continuance of any
Default or Event of Default; (C) any inability of Borrower to satisfy the
conditions precedent to borrowing set forth in this Agreement at any time or
(D) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.  Swing
Line Lender shall be entitled to recover, on demand, from each Revolving Lender
the amounts required pursuant to Sections 1.1.(c)(iii) or 1.1(c)(iv), as
the case may be.  If any Revolving
Lender does not make available such amounts to Agent or the Swing Line Lender,
as applicable, the Swing Line Lender shall be entitled to recover, on demand,
such amount on demand from such Revolving Lender, together with interest
thereon for each day from the date of non-payment until such amount is paid in
full at the Federal Funds Rate for the first two Business Days and at the Index
Rate thereafter.

 

(d)                                 Letters of Credit. 
The Revolving Loan Commitment may, in addition to advances under the
Revolving Loan, be utilized, upon the request of Borrower, for the issuance of
Letters of Credit.  Immediately upon the
issuance by an L/C Issuer of a Letter of Credit, and without further action on
the part of Agent or any of the Lenders, each Revolving Lender shall be deemed
to have purchased from such L/C Issuer a participation in such Letter of Credit
(or in its obligation under a risk participation agreement with respect
thereto) equal to such Revolving Lender’s Pro Rata Share of the aggregate
amount available to be drawn under such Letter of Credit.

 

(i)                                     Maximum Amount. 
The aggregate amount of Letter of Credit Obligations with respect to all
Letters of Credit outstanding at any time shall not exceed $15,000,000 (“L/C
Sublimit”).

 

(ii)                                  Reimbursement. 
Borrower shall be irrevocably and unconditionally obligated forthwith
without presentment, demand, protest or other formalities of any kind, to
reimburse any L/C Issuer on demand in immediately available funds for any
amounts paid by such L/C Issuer with respect to a Letter of Credit, including
all reimbursement payments, Fees, Charges, costs and expenses paid by such L/C
Issuer.  Borrower hereby authorizes and
directs Agent, at Agent’s option, to debit Borrower’s account (by increasing
the outstanding principal balance of the Revolving Credit Advances) in the
amount of any payment made by an L/C Issuer with respect to any Letter of
Credit.  All amounts paid by an L/C
Issuer with respect to any Letter of Credit that are not immediately repaid by
Borrower with the proceeds of a Revolving Credit Advance or otherwise shall
bear interest at the interest rate applicable to Revolving Loans which are
Index Rate Loans plus, at the election of Agent or Requisite Revolving Lenders,
an additional two percent (2.00%) per annum. 
Each Revolving Lender agrees to fund its Pro Rata Share of any Revolving
Loan made pursuant to this Section 1.1(d)(ii).  In the event Agent elects not to debit
Borrower’s account and Borrower fails to reimburse the L/C Issuer in full on
the date of any payment in respect of a Letter of Credit, Agent shall promptly
notify each Revolving Lender of the amount of such unreimbursed payment and the
accrued interest thereon and each Revolving Lender, on the next Business Day
prior to 3:00 p.m. (New York time), shall deliver to Agent an amount equal to
its Pro Rata Share thereof in same day funds.  Each Revolving Lender hereby absolutely and unconditionally
agrees to pay to the L/C Issuer upon demand by the L/C Issuer such Revolving
Lender’s Pro Rata Share of each

 

5

 

payment made by the L/C Issuer in
respect of a Letter of Credit and not immediately reimbursed by Borrower or
satisfied through a debit of Borrower’s account (by increasing the outstanding
principal balance of the Revolving Credit Advances).  Each Revolving Lender acknowledges and agrees that its
obligations pursuant to this subsection in respect of Letters of Credit
are absolute and unconditional and shall not be affected by any circumstance
whatsoever, including setoff, counterclaim, the occurrence and continuance of a
Default or an Event of Default or any failure by Borrower to satisfy any of the
conditions set forth in Section 7.2.  If any Revolving Lender fails to make available to the L/C Issuer
the amount of such Revolving Lender’s Pro Rata Share of any payments made by
the L/C Issuer in respect of a Letter of Credit as provided in this Section 1.1(d)(ii),
the L/C Issuer shall be entitled to recover such amount on demand from such
Revolving Lender together with interest at the Index Rate.

 

(iii)                               Request for Letters of Credit. 
Borrower shall give Agent at least three (3) Business Days prior written
notice specifying the date a Letter of Credit is requested to be issued, the
amount and the name and address of the beneficiary and a description of the
transactions proposed to be supported thereby. 
If Agent informs Borrower that the L/C Issuer cannot issue the requested
Letter of Credit directly, Borrower may request that L/C Issuer arrange for the
issuance of the requested Letter of Credit under a risk participation agreement
with another financial institution reasonably acceptable to Agent, L/C Issuer
and Borrower.  The issuance of any Letter
of Credit under this Agreement shall be subject to the conditions that the
Letter of Credit is in a form and contains such terms and conditions as are
reasonably satisfactory to the L/C Issuer and, in the case of standby letters
of credit, Agent.  The initial notice
requesting the issuance of a Letter of Credit shall be accompanied by the form
of the Letter of Credit and the Master Standby Agreement and an application for
a letter of credit, if any, then required by the L/C Issuer completed in a
manner reasonably satisfactory to such L/C Issuer.  If any provision of any application or reimbursement agreement is
inconsistent with the terms of this Agreement, then the provisions of this
Agreement, to the extent of such inconsistency, shall control.

 

(iv)                              Expiration Dates of Letters of
Credit.  The expiration date of each Letter of Credit
shall be on a date which is not later than the earlier of (a) one year
from its date of issuance or (b) the thirtieth (30th) day prior
to the date set forth in clause (a) of the definition of the term
Commitment Termination Date. Notwithstanding the foregoing, a Letter of Credit
may provide for automatic extensions of its expiration date for one (1) or more
successive one (1) year periods provided that the L/C Issuer has the right to
terminate such Letter of Credit on each such annual expiration date and no
renewal term may extend the term of the Letter of Credit to a date that is
later than the thirtieth (30th) day prior to the date set forth in clause (a)
of the definition of the term Commitment Termination Date.  The L/C Issuer may elect not to renew any
such Letter of Credit and, upon direction by Agent or Requisite Revolving
Lenders, shall not renew any such Letter of Credit at any time during the
continuance of an Event of Default, provided that, in the case of a direction
by Agent or Requisite Revolving Lenders, the L/C Issuer receives such
directions prior to the date notice of non-renewal is required to be given by
the L/C Issuer and the L/C Issuer has had a reasonable period of time to act on
such notice.

 

(v)                                 Obligations Absolute. 
The obligation of Borrower to reimburse the L/C Issuer, Agent and
Lenders for payments made in respect of Letters of Credit issued by

 

6

 

the L/C Issuer shall be unconditional
and irrevocable and shall be paid under all circumstances strictly in
accordance with the terms of this Agreement, including the following
circumstances: (a) any lack of validity or enforceability of any Letter of
Credit; (b) any amendment or waiver of or any consent or departure from
all or any of the provisions of any Letter of Credit or any Loan Document;
(c) the existence of any claim, set-off, defense or other right which
Borrower, any of its Subsidiaries or Affiliates or any other Person may at any
time have against any beneficiary of any Letter of Credit, Agent, any L/C
Issuer, any Lender or any other Person, whether in connection with this
Agreement, any other Loan Document or any other related or unrelated agreements
or transactions; (d) any draft or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
or (e)  any other act or omission to act or delay of any kind of any L/C
Issuer, Agent, any Lender or any other Person or any other event or
circumstance whatsoever that might, but for the provisions of this Section 1.1(d)(v),
constitute a legal or equitable discharge of Borrower’s obligations hereunder.

 

(vi)                              Obligations of L/C Issuers. 
Each L/C Issuer (other than GE Capital) hereby agrees that it will not
issue a Letter of Credit hereunder until it has provided Agent with written
notice specifying the amount and intended issuance date of such Letter of
Credit and Agent has returned a written acknowledgment of such notice to L/C
Issuer.  Each L/C Issuer (other than GE
Capital) further agrees to provide to Agent: 
(a) a copy of each Letter of Credit issued by such L/C Issuer
promptly after its issuance; (b) a weekly report summarizing available
amounts under Letters of Credit issued by such L/C Issuer, the dates and
amounts of any draws under such Letters of Credit, the effective date of any
increase or decrease in the face amount of any Letters of Credit during such
week and the amount of any unreimbursed draws under such Letters of Credit; and
(c) such additional information reasonably requested by Agent from time to
time with respect to the Letters of Credit issued by such L/C Issuer.  Without limiting the generality of the
foregoing, it is expressly understood and agreed by Borrower that the absolute
and unconditional obligation of Borrower to Agent and Lenders hereunder to
reimburse payments made under a Letter of Credit will not be excused by the
gross negligence or willful misconduct of the L/C Issuer.  However, the foregoing shall not be
construed to excuse an L/C Issuer from liability to Borrower to the extent of
any direct damages (as opposed to consequential damages, with Borrower hereby
waiving all claims for any consequential damages to the extent permitted by
applicable law) suffered by Borrower that are subject to indemnification under
the Master Standby Agreement.

 

(e)                                  Funding Authorization. 
The proceeds of all Loans made pursuant to this Agreement subsequent to
the Closing Date are to be funded by Agent by wire transfer to the account
designated by Borrower below (the “Disbursement Account”):

 

7

 

	
  Bank:

  	
   

  	
  Wells Fargo Bank

  
	
   

  	
   

  	
  Corporate Banking
  Services

  
	
  ABA No.:

  	
   

  	
  121000248

  
	
  Bank Address:

  	
   

  	
  420 Montgomery St.

  
	
   

  	
   

  	
  San Francisco, Ca.
  97109

  
	
   

  	
   

  	
  420 Montgomery St.

  
	
   

  	
   

  	
  San Francisco, CA 97109

  
	
  Account No.:

  	
   

  	
  4091216036

  
	
  Reference:

  	
   

  	
  Playtex Products, Inc.

  

 

Borrower shall provide
Agent with written notice of any change in the foregoing instructions at least
three (3) Business Days before the desired effective date of such change.

 

1.2                                 Interest and Applicable Margins.

 

(a)                                  Borrower shall pay interest to
Agent, for the ratable benefit of Lenders, in accordance with the various Loans
being made by each Lender, in arrears on each applicable Interest Payment Date,
at the following rates:  (i) with
respect to the Revolving Credit Advances which are designated as Index Rate
Loans, the Index Rate plus the Applicable Revolver Index Margin per annum or,
with respect to Revolving Credit Advances which are designated as LIBOR Loans,
the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum;
(ii) with respect to such portion of the Term Loan  designated as an Index Rate
Loan, the Index Rate plus the Applicable Term Loan Index Margin per annum or,
with respect to such portion of the Term Loan designated as a LIBOR Loan, the
applicable LIBOR Rate plus the Applicable Term Loan LIBOR Margin per annum; and
(iii) with respect to the Swing Line Loan, the Index Rate plus the
Applicable Revolver Index Margin per annum.

 

The Applicable Margins
are as follows:

 

	
  Applicable
  Revolver Index Margin

  	
   

  	
  1.25

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable
  Revolver LIBOR Margin

  	
   

  	
  2.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable
  Term Loan Index Margin

  	
   

  	
  2.75

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable
  Term Loan LIBOR Margin

  	
   

  	
  4.00

  	
  %

  

 

(b)                                 If any payment on any Loan becomes
due and payable on a day other than a Business Day, the maturity thereof will
be extended to the next succeeding Business Day (except as set forth in the
definition of LIBOR Period) and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.

 

(c)                                  All computations of Fees calculated
on a per annum basis shall be made by Agent on the basis of a 360-day year, in
each case for the actual number of days occurring in the period for which such
Fees are payable.  All computation of
interest calculated on a per annum basis shall be made by Agent on the basis of
a 360-day year with respect to LIBOR Loans

 

8

 

and on the basis of a 365/366-day
year with respect to Index Rate Loans, in each case for the actual number of
days occurring for which such interest is payable.  The Index Rate is a floating rate determined for each day.  Each determination by Agent of an interest
rate and Fees hereunder shall be final, binding and conclusive on Borrower,
absent manifest error.

 

(d)                                 So long as an Event of Default has
occurred and is continuing under Section 6.1(a), (f) or (g) and
without notice of any kind, or so long as any other Event of Default has
occurred and is continuing and at the election of Agent (or upon the written
request of Requisite Lenders) confirmed by written notice from Agent to
Borrower, the interest rates applicable to the Loans and the Letter of Credit
Fee shall be increased by two percentage points (2%) per annum above the rates
of interest or the rate of such Fee otherwise applicable hereunder (“Default
Rate”).  Interest and Letter of
Credit Fees at the Default Rate shall accrue from the initial date of such
Event of Default until that Event of Default is cured or waived and shall be
payable upon demand, but in any event, shall be payable on the next regularly
scheduled Interest Payment Date set forth herein for such Obligation.

 

(e)                                  Borrower shall have the option to
(i) request that any Revolving Credit Advance be made as a LIBOR Loan,
(ii) convert at any time all or any part of outstanding Loans (other than
the Swing Line Loan) from Index Rate Loans to LIBOR Loans, (iii) convert
any LIBOR Loan to an Index Rate Loan, subject to payment of the LIBOR Breakage
Cost in accordance with Section 1.3(d) if such conversion is made
prior to the expiration of the LIBOR Period applicable thereto, or
(iv) continue all or any portion of any Loan (other than the Swing Line
Loan) as a LIBOR Loan upon the expiration of the applicable LIBOR Period and
the succeeding LIBOR Period of that continued Loan shall commence on the first day
after the last day of the LIBOR Period of the Loan to be continued.  Any Loan or group of Loans having the same
proposed LIBOR Period to be made or continued as, or converted into, a LIBOR
Loan must be in a minimum amount of $5,000,000
and integral multiples of $500,000 in excess of such amount.  Any such election must be made by  1:00 p.m. (New York time) on
the 3rd Business Day prior to (1) the date of any proposed Revolving
Credit Advance which is to bear interest at the LIBOR Rate, (2) the end of
each LIBOR Period with respect to any LIBOR Loans to be continued as such, or
(3) the date on which Borrower wishes to convert any Index Rate Loan to a
LIBOR Loan for a LIBOR Period designated by Borrower in such election.  If no election is received with respect to a
LIBOR Loan by 1:00 p.m. (New York time)
on the 3rd Business Day prior to the end of the LIBOR Period with respect
thereto, that LIBOR Loan shall be converted to an Index Rate Loan at the end of
its LIBOR Period.  Borrower must make
such election by notice to Agent in writing, by fax or overnight courier.  In the case of any conversion or
continuation, such election must be made pursuant to a written notice (a “Notice
of Conversion/Continuation”) in the form of Exhibit 1.2(e).  No Loan shall be made, converted into or
continued as a LIBOR Loan, if an Event of Default has occurred and is
continuing and Agent or Requisite Lenders have determined not to make or
continue any Loan as a LIBOR Loan as a result thereof.  Until April 19, 2004, no Loan may be
made as or converted into a LIBOR Loan with a LIBOR Period of greater than one
month.

 

(f)                                    Notwithstanding anything to the
contrary set forth in this Section 1.2, if a court of competent
jurisdiction determines in a final order that the rate of interest payable
hereunder exceeds the highest rate of interest permissible under law (the “Maximum
Lawful

 

9

 

Rate”), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate; provided,
however, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest that would have been received had
the interest rate payable hereunder been (but for the operation of this
paragraph) the interest rate payable since the Closing Date as otherwise
provided in this Agreement.  Thereafter,
interest hereunder shall be paid at the rate(s) of interest and in the manner
provided in Sections 1.2(a) through (e), unless and until the rate of
interest again exceeds the Maximum Lawful Rate, and at that time this paragraph
shall again apply.  In no event shall
the total interest received by any Lender pursuant to the terms hereof exceed
the amount that such Lender could lawfully have received had the interest due
hereunder been calculated for the full term hereof at the Maximum Lawful
Rate.  If the Maximum Lawful Rate is
calculated pursuant to this paragraph, such interest shall be calculated at a
daily rate equal to the Maximum Lawful Rate divided by the number of days in
the year in which such calculation is made. 
If, notwithstanding the provisions of this Section 1.2(f), a
court of competent jurisdiction shall determine by a final, non-appealable
order that a Lender has received interest hereunder in excess of the Maximum
Lawful Rate, Agent shall, to the extent permitted by applicable law, promptly
apply such excess as specified in Section 6.5 and thereafter shall
refund any excess to Borrower or as such court of competent jurisdiction may
otherwise order.

 

1.3                                 Fees.

 

(a)                                  Fee Letter.  Borrower shall pay to GE Capital, individually, the Fees specified
in that certain fee letter dated as of  January 30, 2004  between
Borrower and GE Capital (the “GE Capital Fee Letter”), at the times
specified for payment therein.

 

(b)                                 Unused Line Fee. 
As additional compensation for the Revolving Lenders, Borrower shall pay
to Agent, for the ratable benefit of such Lenders, in arrears, on the first
Business Day of each Fiscal Quarter prior to the Commitment Termination Date
and on the Commitment Termination Date, a fee for Borrower’s non-use of
available funds in respect of Revolving Loan Commitments in an amount equal to
the product of:

 

(i)                                     (x) one-half of one percent (0.50%)
per annum, if the average for the period of the daily closing balances of the
Revolving Loan (including, without duplication, Swing Line Loans) outstanding
during the period for which such Fee is due is less than 50% of the Maximum
Amount, or

 

(y)                                 three eighths of one percent
(0.375%) per annum, if the average for the period of the daily closing balances
of the Revolving Loan (including, without duplication, Swing Line Loans)
outstanding during the period for which such Fee is due is greater than or
equal to 50% of the Maximum Amount,

 

(in each case, calculated on the
basis of a 360 day year for actual days elapsed) multiplied by
(ii) the difference of the Maximum Amount minus the average for the
period of the daily closing

 

10

 

balances of the Revolving Loan
(including, without duplication, Swing Line Loans) outstanding during the
period for which such Fee is due.

 

(c)                                  Letter of Credit Fee. 
Borrower agrees to pay to Agent for the benefit of Revolving Lenders, as
compensation to such Revolving Lenders for Letter of Credit Obligations incurred
hereunder, (i) without duplication of fees and other amounts payable to
the applicable L/C Issuer, all costs and expenses incurred by Agent or any
Lender on account of such Letter of Credit Obligations, and (ii) for each
Fiscal Quarter during which any Letter of Credit Obligation shall remain
outstanding, a fee (the “Letter of Credit Fee”) in an amount equal to
the Applicable Revolver LIBOR Margin multiplied by the maximum amount available
from time to time to be drawn under the applicable Letter of Credit.  Such fee shall be paid to Agent for the
benefit of the Revolving Lenders in arrears, on the first Business Day of each
Fiscal Quarter and on the Commitment Termination Date.  In addition, Borrower shall pay to any L/C
Issuer, on demand, such reasonable, customary and documented fees, charges and
expenses of such L/C Issuer in respect of the issuance, negotiation,
acceptance, amendment, transfer and payment of such Letter of Credit or
otherwise payable pursuant to the application and related documentation under
which such Letter of Credit is issued.

 

(d)                                 LIBOR Breakage Cost. 
Upon (i) any default by Borrower in making any borrowing of,
conversion into or continuation of any LIBOR Loan following Borrower’s delivery
to Agent of any LIBOR Loan request in respect thereof or (ii) any payment
of a LIBOR Loan on any day that is not the last day of the LIBOR Period
applicable thereto (regardless of the source of such prepayment and whether
voluntary, by acceleration or otherwise), Borrower shall pay Agent, for the
benefit of all Lenders that funded or were prepared to fund any such LIBOR
Loan, the LIBOR Breakage Cost.

 

(e)                                  Expenses and Attorneys’ Fees. 
Borrower agrees to promptly pay all reasonable and documented
out-of-pocket fees, charges, costs and expenses (including reasonable
attorneys’ fees and expenses of either outside counsel or internal legal staff,
but not both; it being understood and agreed that the documentation of
counsel’s fees and expenses may omit information that such counsel reasonably
deems privileged) incurred by Agent in connection with any matters arising out
of the Loan Documents, in connection with the examination, review, due
diligence investigation, documentation, negotiation and closing of the
transactions contemplated herein and in connection with the continued
administration of the Loan Documents including any amendments, modifications,
consents and waivers.  Without limiting
the foregoing, Borrower agrees to promptly pay all reasonable and documented
out-of-pocket costs and expenses (including reasonable fees and expenses) of
external auditors or, in the case of internal auditors, a per diem charge at
the rate of $750 per person per day for each such auditor in the field and
office plus all reasonable and documented out-of-pocket costs and expenses
(including, without limitation, air fare, lodging and meals) incurred in
connection with or relating to audits to be conducted pursuant to Section 4.2(e)(i).  Borrower agrees to promptly pay all
reasonable and documented out-of-pocket fees, charges, costs and expenses
(including fees, charges, costs and expenses of either outside counsel or
internal legal staff, but not both; it being understood and agreed that the
documentation of counsel’s fees and expenses may omit information that such counsel
reasonably deems privileged), auditors (whether internal (at a per diem charge
at the rate of $750 per person per day for each such auditor) or external),
appraisers,

 

11

 

consultants and advisors) incurred by
Agent in connection with any Event of Default, work-out or action to enforce
any Loan Document or to collect any payments due from Borrower or any other
Credit Party.  In addition, in
connection with any work-out or action to enforce any Loan Document or to
collect any payments due from Borrower or any other Credit Party, Borrower
agrees to promptly pay all reasonable and documented out-of-pocket fees,
charges, costs and expenses incurred by Lenders for one (1) counsel acting for
all Lenders other than Agent.  All fees,
charges, costs and expenses for which Borrower is responsible under this Section 1.3(e)
shall be deemed part of the Obligations when incurred, payable upon demand or
in accordance with the final sentence of Section 1.4 and secured by
the Collateral.

 

1.4                                 Payments.  All payments by Borrower of the Obligations
shall be without deduction, defense, setoff or counterclaim and shall be made
in same day funds and delivered to Agent, for the benefit of Agent and Lenders,
as applicable, by wire transfer to the following account or such other place as
Agent may from time to time designate in writing.

 

ABA No. 021-001-033

Account Number 502-328-54

Deutsche Bank Trust
Company Americas

New York, New York

ACCOUNT NAME: GECC/CAF
DEPOSITORY

Reference:  GE Capital re Playtex

 

Borrower shall receive
credit on the day of receipt for funds received by Agent by 2:00 p.m. (New York
time).  In the absence of timely
receipt, such funds shall be deemed to have been paid on the next Business Day.  Whenever any payment to be made hereunder
shall be stated to be due on a day that is not a Business Day, the payment may
be made on the next succeeding Business Day and such extension of time shall be
included in the computation of the amount of interest and Fees due hereunder.

 

Borrower hereby
authorizes Lenders to make Revolving Credit Advances or Swing Line Advances, on
the basis of their Pro Rata Shares, for the payment of (i) Letter of
Credit reimbursement obligations and any amounts required to be deposited with respect
to outstanding Letter of Credit Obligations pursuant to Sections 1.5(f) or
6.3(d), and (ii) after the occurrence and during the continuance of an
Event of Default, interest, Fees and expenses (it being agreed that Agent will
send a notice to Borrower promptly after any such Revolving Credit Advance or
Swing Line Advance is made).

 

1.5                                 Prepayments.

 

(a)                                  Voluntary Prepayments of Loans. 
At any time, Borrower may prepay the Loans, in whole or in part, without
premium or penalty but subject to the payment of  LIBOR Breakage Costs, if
applicable.

 

(b)                                 Prepayments from Asset Dispositions. 
Immediately upon receipt of any Net Proceeds which, when added to all
other Net Proceeds received after the Closing Date, exceed $7,500,000, Borrower
shall prepay the Loans in an amount equal to the amount of such

 

12

 

Net
Proceeds.  Notwithstanding the
foregoing, Borrower or any Subsidiary may reinvest the Net Proceeds of an Asset
Disposition, within three hundred and sixty (360) days, in replacement assets
(other than Intellectual Property) of a kind then used or usable in the
business of Borrower or the applicable Guarantor.  If Borrower or the applicable Guarantor does not intend to so
reinvest such Net Proceeds or if the period set forth in the immediately
preceding sentence expires without Borrower or the applicable Guarantor having
reinvested such Net Proceeds, Borrower shall, to the extent otherwise required
by the first sentence of this Section 1.5(b), prepay the Loans in
an amount equal to such Net Proceeds. 
The payments shall be applied in accordance with Section 1.5(d).

 

(c)                                  [Intentionally Omitted]

 

(d)                                 Application of Proceeds. 
With respect to any prepayments described in Section 1.5(b),
such prepayments shall be applied as
follows:  first,  in payment of the Term Loan until the Term
Loan shall have been prepaid in full; second, to reduce the outstanding
principal balance of the Swing Line Loan outstanding until the same has been
repaid in full (but not as a permanent reduction of the Swing Line Commitment);
and  third, to the Revolving
Credit Advances outstanding until the same has been repaid in full but not as a permanent reduction of
the Revolving Loan Commitment.  Considering each type of Loan being prepaid
separately, any such prepayment shall be applied first to Index Rate Loans of
the type required to be prepaid before application to LIBOR Loans of the type
required to be prepaid, in each case in a manner which minimizes any resulting
LIBOR Breakage Cost.

 

(e)                                  Application of Prepayments from
Insurance Proceeds.  Prepayments from insurance proceeds and
condemnation proceeds in accordance with Section 2.2 shall be
applied as follows:  insurance proceeds
from casualties or losses to cash or Inventory shall be applied first,
to the Swing Line Loans and, second, to the Revolving Credit Advances;
insurance from casualties or losses to, or condemnations proceeds with respect
to, Equipment, Fixtures and Real Estate shall be applied first, to the
Term Loan, second, to the Swing Line Loans and, third, to the
Revolving Credit Advances.  Neither the
Revolving Loan Commitment nor the Swing Line Loan Commitment shall be
permanently reduced by the amount of any such prepayments.

 

(f)                                    Letter of Credit Obligations. 
In the event any Letters of Credit are outstanding at the time that the
Revolving Loan Commitment is terminated, Borrower shall (1) deposit with
Agent for the benefit of all Revolving Lenders cash or deliver duly issued
letter(s) of credit satisfactory to Agent in support of all outstanding Letters
of Credit in an amount equal to 105% of the aggregate outstanding Letter of
Credit Obligations to be available to Agent to reimburse payments of drafts
drawn under such Letters of Credit and pay any Fees and expenses related thereto
and (2) prepay the fee payable under Section 1.3(c) with
respect to such Letters of Credit for the full remaining terms of such Letters
of Credit.  Upon termination of any such
Letter of Credit, the unearned portion of such prepaid fee attributable to such
Letter of Credit shall be refunded to Borrower.

 

1.6                                 Maturity.  All of the Obligations shall become due and
payable as otherwise set forth herein, but in any event all of the remaining
Obligations shall become due and payable upon termination of this
Agreement.  Until all Obligations have
been fully paid and satisfied

 

13

 

(other than contingent indemnification obligations to
the extent no unsatisfied claim has been asserted), the Revolving Loan Commitment
has been terminated and all Letters of Credit have been terminated or otherwise
secured to the reasonable satisfaction of Agent in accordance with Section 1.5(f).  Agent shall be entitled to retain the
security interests in the Collateral granted under the Collateral Documents and
the ability to exercise all rights and remedies available to them under the
Loan Documents and applicable laws. 
Notwithstanding anything contained in this Agreement to the contrary, upon
any termination of the Revolving Loan Commitment, all of the Obligations shall
be due and payable.

 

1.7                                 Eligible
Accounts. 
All of the Accounts owned by the Credit Parties and
reflected in the most recent Borrowing Base Certificate delivered by Borrower
to Agent shall be “Eligible Accounts” for purposes of this Agreement,
except any Account to which any of the exclusionary criteria set forth below
applies.  In addition to Reserves
established on the Closing Date, following
notice by Agent to Borrower given reasonably in advance, Agent shall have
the right to establish or modify
Reserves against Eligible Accounts from time to time in its good faith credit
judgment based on its analysis of facts or events to reflect changes in the
collectability of Accounts arising or discovered by Agent after the Closing
Date.  Eligible Accounts shall not
include any Account of any Credit Party:

 

(a)                                  that does not arise from the sale of
goods or the performance of services by such Credit Party in the ordinary
course of its business;

 

(b)                                 (i) upon which such Credit
Party’s right to receive payment is not absolute or is contingent upon the
fulfillment of any condition whatsoever or (ii) as to which such Credit
Party is not able to bring suit or otherwise enforce its remedies against the
Account Debtor through judicial process, or (iii) if the Account
represents a progress billing consisting of an invoice for goods sold or used
or services rendered pursuant to a contract under which the Account Debtor’s
obligation to pay that invoice is subject to such Credit Party’s completion of
further performance under such contract or is subject to the equitable lien of
a surety bond issuer;

 

(c)                                  to the
extent of any defense, counterclaim, setoff or dispute that is asserted
as to such Account;

 

(d)                                 that is not a true and correct statement
of bona fide indebtedness incurred in the amount of the Account for merchandise
sold to or services rendered;

 

(e)                                  with respect to which an invoice has
not been sent to the applicable Account Debtor;

 

(f)                                    that (i) is not owned by such
Credit Party or (ii) is subject to any right, claim, security interest or other
interest of any other Person, other than Liens in favor of Agent, on behalf of
itself and Lenders, and other than Permitted Encumbrances described in clause
(a) and clause (l) of the definition of the term “Permitted
Encumbrances”;

 

(g)                                 that arises from a sale to any
director, officer, other employee or Affiliate of any Credit Party, or to any
entity that has any common officer with any Credit Party;

 

14

 

(h)                                 that is the obligation of an Account
Debtor that is the United States government or a political subdivision thereof,
or any state, county or municipality or
department, agency or instrumentality thereof which, when added to the other
obligations of Account Debtors that are the United States government or a
political subdivision thereof, or any state, county or municipality or
department, agency or instrumentality thereof, exceeds $5,000,000 in the
aggregate unless Agent, in its sole discretion, has agreed to the contrary in
writing and such Credit Party, if necessary or desirable, has complied with
respect to such obligation with the Federal Assignment of Claims Act of 1940, or any applicable state, county or municipal
law restricting the assignment thereof with respect to such obligation;

 

(i)                                     that is the obligation of an Account
Debtor located in a foreign country other than Canada unless payment thereof is
assured by a letter of credit assigned and delivered to Agent, reasonably
satisfactory to Agent as to form, amount and issuer;

 

(j)                                     to the extent such Credit Party or
any Subsidiary of Borrower that is not a Credit Party is liable for goods sold
or services rendered by the applicable Account Debtor to such Credit Party or
such Subsidiary but only to the extent of the potential offset;

 

(k)                                  that arises with respect to goods
that are delivered on a bill-and-hold, cash-on-delivery basis or placed on
consignment, guaranteed sale or other terms by reason of which the payment by
the Account Debtor is or may be conditional;

 

(l)                                     if any of the following applies to
such Account:

 

(i)                                     the Account is not paid within the
earlier of: 60 days following its due date set forth in its original invoice
or, unless the Account is a Dating Account, 90 days following its original
invoice date;

 

(ii)                                  the Account Debtor obligated upon
such Account suspends business, makes a general assignment for the benefit of
creditors or fails to pay its debts generally as they come due; or

 

(iii)                               a petition is filed by or against
any Account Debtor obligated upon such Account under any bankruptcy law or any
other federal, state or foreign (including any provincial) receivership,
insolvency relief or other law or laws for the relief of debtors;

 

(m)                               that is the obligation of an Account
Debtor if 50% or more of the Dollar amount of all Accounts owing by that
Account Debtor are ineligible under the other criteria set forth in this Section 1.7;

 

(n)                                 as to which Agent’s Lien thereon, on
behalf of itself and Lenders, is not a first priority perfected Lien;

 

(o)                                 as to which any of the
representations or warranties in the Loan Documents are untrue;

 

15

 

(p)                                 to the extent such Account is
evidenced by a judgment, Instrument or Chattel Paper, unless, in the case of
Instrument or Chattel Paper, such Instrument and Chattel Paper, as the case may
be, has been delivered to Agent as collateral security for the Obligations and
Agent has obtained a first priority perfected Lien on such Instruments and
Chattel Paper;

 

(q)                                 to the extent that such Account,
together with all other Accounts owing by such Account Debtor and its
Affiliates (determined, solely for the purposes of this clause (q), as if the
“10%” set forth in clause (a) of the definition of “Affiliate” were
“51%” and without giving effect to clause (c) or clause (d) of
such definition), as of any date of determination exceed 10% of all Eligible Accounts of all
Credit Parties, other than (x) solely with respect to an Account owing by
Wal-Mart, in which case such Account shall be ineligible to the extent that
such Account, together with all other Accounts owing by Wal-Mart and its
Affiliates (determined, solely for the purposes of this clause (q), as if the
“10%” set forth in clause (a) of the definition of “Affiliate” were “51%” and
without giving effect to clause (c) or clause (d) of such
definition), as of any date of determination exceed 30% of all Eligible Accounts of all Credit Parties and
(y) solely with respect to an Account owing by an Investment Grade Account Debtor, in which case such
Account shall be ineligible to the extent that such Account, together with all
other Accounts owing by such Investment Grade Account Debtor and its Affiliates
(determined, solely for the purposes of this clause (q), as if the “10%” set
forth in clause (a) of the definition of “Affiliate” were “51%” and without
giving effect to clause (c) or clause (d) of such definition), as
of any date of determination exceed 20%
of all Eligible Accounts of all Credit Parties;

 

(r)                                    that is payable in any currency
other than Dollars; or

 

(s)                                  that is a Chargeback Account.

 

1.8                                 Eligible
Inventory.  All of the Inventory owned by the Credit
Parties and reflected in the most recent Borrowing Base Certificate delivered
by Borrower to Agent shall be “Eligible Inventory” for purposes of this
Agreement, except any Inventory to which any of the exclusionary criteria set
forth below applies.  In addition to
Reserves established on the Closing Date, following notice by Agent to Borrower given reasonably in advance,
Agent shall have the right to establish or
modify Reserves against Eligible Inventory from time to time in its good faith
credit judgment based on its analysis of facts or events to reflect changes in
the salability of Inventory arising or discovered by Agent after the Closing
Date.  Eligible Inventory shall not
include any Inventory of any Credit Party that:

 

(a)                                  is not owned by such Credit Party
free and clear of all Liens and rights of any other Person (including the
rights of a purchaser that has made progress payments and the rights of a
surety that has issued a bond to assure such Credit Party’s performance with
respect to that Inventory), except the Liens in favor of Agent, on behalf of
itself and Lenders, and except the Permitted Encumbrances described in clause
(a), clause (e) and clause (l) of the definition of the term
“Permitted Encumbrances”;

 

(b)                                 (i) is not located on premises
owned, leased or rented by such Credit Party and set forth in Schedule 5.12
(as Schedule 5.12 may be updated from time to time in writing by

 

16

 

listing additional locations or
deleting existing locations delivered by Borrower to Agent on or prior to each
such change of locations), (ii) is stored at a leased location, unless
listed on Schedule 5.12 or Agent has received prior written notice
thereof from Borrower and unless (x) a reasonably satisfactory landlord
waiver has been delivered to Agent or no statutory or contractual landlord lien
exists with respect to such Inventory, or (y) Reserves satisfactory to
Agent have been established with respect thereto, (iii) is stored with a
bailee or warehouseman unless a reasonably satisfactory bailee letter has been
received by Agent and Reserves reasonably satisfactory to Agent have been
established with respect thereto, (iv) is located at an owned location
subject to a mortgage in favor of a lender other than Agent or the Senior
Secured Notes Trustee, unless a reasonably satisfactory mortgagee waiver has been
delivered to Agent, (v) is located at any site if the aggregate book value of
Inventory at any such location is less than $50,000, or (vi) is located on
the premises of, or is in the possession of, a processor;

 

(c)                                  is placed on consignment or is in
transit;

 

(d)                                 is covered by a negotiable document
of title, unless such document has been delivered to Agent with all necessary
endorsements, free and clear of all Liens except those in favor of Agent and
Lenders and the Senior Secured Notes Trustee;

 

(e)                                  is excess, obsolete, unsaleable,
shopworn, seconds, damaged or unfit for sale;

 

(f)                                    consists of display items or packing
or shipping materials, manufacturing supplies or replacement parts;

 

(g)                                 consists of goods which have been
returned by the buyer;

 

(h)                                 is not of a type held for sale in
the ordinary course of such Credit Party’s business;

 

(i)                                     is not subject to a first priority
lien in favor of Agent on behalf of itself and Lenders;

 

(j)                                     breaches any of the representations
or warranties pertaining to Inventory set forth in the Loan Documents;

 

(k)                                  consists of Hazardous Materials or
goods that can be transported or sold only with licenses that are not readily
available;

 

(l)                                     is not covered by casualty insurance
required to be maintained under Section 2.2 of this Agreement or
otherwise reasonably acceptable to Agent; or

 

(m)                               with respect to which Agent does not
have the right, in Agent’s reasonable determination, to freely transfer
Inventory or complete the production of Inventory without the need for any
license, sublicense or consent which has not been obtained.

 

17

 

1.9                                 [Intentionally Omitted]

 

1.10                           Loan
Accounts.  Agent shall maintain a loan account (the “Loan
Account”) on its books to record: 
all Advances and the Term Loans, all payments made by Borrower, and all
other debits and credits as provided in this Agreement with respect to the
Loans or any other Obligations.  All
entries in the Loan Account shall be made in accordance with Agent’s customary
accounting practices as in effect from time to time.  The balance in the Loan Account, as recorded on Agent’s most
recent printout or other written statement, shall, absent manifest error, be
presumptive evidence of the amounts due and owing to Agent and Lenders by
Borrower; provided, that any
failure to so record or any error in so recording shall not limit or otherwise
affect Borrower’s duty to pay the Obligations. 
Agent shall render to Borrower a monthly accounting of transactions with
respect to the Loans setting forth the balance of the Loan Account for the
immediately preceding month.  Unless
Borrower notifies Agent in writing of any objection to any such accounting
(specifically describing the basis for such objection), within one hundred
eighty (180) days after the date thereof, each and every such accounting shall,
absent manifest error, be deemed final, binding and conclusive on Borrower in
all respects as to all matters reflected therein.  Only those items expressly objected to in such notice shall be
deemed to be disputed by Borrower. 
Notwithstanding any provision herein contained to the contrary, any
Lender may elect (which election may be revoked) to dispense with the issuance
of Notes to that Lender and may rely on the Loan Account as evidence of the amount
of Obligations from time to time owing to it.

 

1.11                           Yield
Protection; Illegality.

 

(a)                                  Capital Adequacy and Other
Adjustments.  In the event that any Lender shall have
determined that the adoption after the date hereof of any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or
compliance by any Lender or any corporation controlling such Lender with any
request or directive regarding capital adequacy, reserve requirements or
similar requirements (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) from any central bank or
governmental agency or body having jurisdiction does or shall have the effect
of increasing the amount of capital, reserves or other funds required to be
maintained by such Lender or any corporation controlling such Lender and
thereby reducing the rate of return on such Lender’s or such corporation’s
capital as a consequence of its obligations hereunder, then Borrower shall from
time to time within fifteen (15) days after notice and demand from such Lender
(together with the certificate referred to in the next sentence and with a copy
to Agent) pay to Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction.  A certificate in reasonable detail as to the
amount of such cost and showing the basis of the computation of such cost submitted
by such Lender to Borrower and Agent shall, absent manifest error, be final,
conclusive and binding for all purposes.

 

(b)                                 Increased LIBOR Funding Costs;
Illegality.  Notwithstanding anything to the contrary
contained herein, if the introduction of or any change in any law, rule,
regulation, treaty or directive (or any change in the interpretation thereof)
shall make it unlawful, or any central bank or other Governmental Authority
shall assert that it is unlawful, for any Lender to

 

18

 

agree to make or to make or to
continue to fund or maintain any LIBOR Loan, then, unless that Lender is able
to make or to continue to fund or to maintain such LIBOR Loan at another branch
or office of that Lender without, in that Lender’s good-faith opinion, adversely
affecting it or its Loans or the income obtained therefrom, on notice thereof
and demand therefor by such Lender to Borrower through Agent, (i) the
obligation of such Lender to agree to make or to continue to fund or maintain
LIBOR Loans shall terminate until such time as such condition no longer exists
in such Lender’s good-faith opinion (it being understood and agreed that
Borrower shall not be required to pay any LIBOR Breakage Costs with respect to
any Loans of such Lender terminated or converted in such circumstances) and
(ii) Borrower shall forthwith prepay in full all outstanding LIBOR Loans
owing to such Lender, together with interest accrued thereon, unless Borrower, within ten (10) Business
Days after the delivery of such notice and demand, converts all LIBOR Loans
into Index Rate Loans. If, after the date hereof, the introduction of, change
in or interpretation of any law, rule, regulation, treaty or directive would
impose or increase reserve requirements (other than as taken into account in
the definition of LIBOR) or otherwise increase the cost (other than any taxes
described in Section 1.12) to any Lender of making or maintaining a
LIBOR Loan, then Borrower shall from time to time within fifteen (15) days
after notice and demand from Agent to Borrower (together with the certificate
referred to in the next sentence) pay to Agent, for the account of all such
affected Lenders, additional amounts sufficient to compensate such Lenders for
such increased cost.  A certificate in
reasonable detail as to the amount of such cost and showing the basis of the
computation of such cost submitted by Agent on behalf of all such affected
Lenders to Borrower shall, absent manifest error, be final, conclusive and
binding for all purposes.

 

1.12                           Taxes.

 

(a)                                  No Deductions. 
Except as otherwise required by law, any and all payments or
reimbursements made hereunder or under any of the other Loan Documents shall be
made free and clear of and without deduction for any and all Charges, taxes,
levies, imposts, deductions or withholdings, and all liabilities with respect
thereto of any nature whatsoever imposed by any taxing authority, excluding (A)
net income taxes, franchise taxes (imposed in lieu of net income taxes) and
branch profits taxes, in each case imposed on Agent or any Lender as a result
of a present or former connection between Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such connection
arising from Agent’s or such Lender’s having executed, delivered or performed
its obligations or received a payment under, or enforced, this Agreement or any
other Loan Document ); (B) any taxes that are attributable to such Lender’s
failure to comply with the requirements of Section 1.12(c), unless
such failure is attributable to a change in law (or interpretation thereof)
that becomes effective after the date such Lender becomes a party to this
Agreement; or (C) any taxes, including withholding taxes imposed on amounts
payable to a Lender that becomes a party to this Agreement at the time such
Lender becomes a party, except to the extent that such Lender’s assignor was
entitled, at the time of assignment, to receive additional amounts from the Borrower
with respect to any Charges, taxes, levies, imposts, deductions or withholdings
(other than those excluded pursuant to clause (A) or clause  (B)
above).  If Borrower or any other Credit
Party shall be required by law to deduct any Charges, taxes, levies, imposts,
deductions or withholdings (other than those excluded pursuant to clause (A),
clause (B) or clause  (C) above) from or in respect of any
sum payable hereunder or

 

19

 

under any other Loan Document to any
Lender or Agent, then the sum payable hereunder or under any other Loan
Document shall be increased as may be necessary so that, after making all
required deductions, such Lender or Agent receives an amount equal to the sum
it would have received had no such deductions been made.

 

(b)                                 Changes in Tax Laws. 
In the event that, subsequent to the Closing Date, (1) any changes
in any existing law, regulation, treaty or directive or in the interpretation
or application thereof or (2) any new law, regulation, treaty or directive
enacted or any interpretation or application thereof:

 

(i)                                     does or shall subject Agent or any
Lender to any tax of any kind whatsoever with respect to this Agreement, the
other Loan Documents or any Loans made or Letters of Credit issued hereunder,
or change the basis of taxation of payments to Agent or such Lender of
principal, fees, interest or any other amount payable hereunder (except for
Charges, taxes, levies, imposts, deductions or withholdings excluded pursuant
to clause (A), clause (B) or clause (C) in subsection 1.12(a),
net income taxes, or franchise taxes imposed in lieu of net income taxes,
imposed generally by federal, state or local taxing authorities with respect to
principal, fees, interest or any other amount payable hereunder or changes in
the rate of tax on the overall net income of Agent or such Lender); or

 

(ii)                                  does or shall impose on Agent or any
Lender any other condition or increased cost in connection with the
transactions contemplated hereby or participations herein;

 

and the result of any of
the foregoing is to increase the cost to Agent or any such Lender of issuing
any Letter of Credit or making or continuing any Loan hereunder, as the case
may be, or to reduce any amount receivable hereunder, then, in any such case,
Borrower shall promptly pay to Agent or such Lender, upon its demand, any
additional amounts necessary to compensate Agent or such Lender, on an
after-tax basis, for such additional cost or reduced amount receivable, as
determined by Agent or such Lender with respect to this Agreement or the other
Loan Documents.  If Agent or such Lender
becomes entitled to claim any additional amounts pursuant to this Section 1.12(b),
it shall promptly notify Borrower of the event by reason of which Agent or such
Lender has become so entitled.  A
certificate as to any additional amounts payable pursuant to the foregoing
sentence submitted by Agent or such Lender to Borrower (with a copy to Agent)
shall, absent manifest error, be final, conclusive and binding for all
purposes.

 

(c)                                  Foreign Lenders. 
Each Lender that is not a citizen or resident of the United States, not
a corporation, partnership or other entity created or organized in or under the
laws of the United States (or any jurisdiction thereof), any estate that is
subject to federal income taxation regardless of the source of its income or
any trust that is not a “United States person” under
Section 7701(a)(30)(E) of the Internal Revenue Code of 1986, as amended (a
“Foreign Lender”) shall provide to Borrower and Agent two properly
completed and executed IRS Form W-8BEN or Form W-8ECI or, in the case of a
Foreign Lender claiming exemption from U.S. federal withholding tax under
Section 871(h) or 881(c) of the Internal Revenue Code of 1986, as amended,
with respect to payments of “portfolio interest” a statement substantially in
the form attached as Exhibit 1.12 and a Form W-8BEN, or other applicable
form, certificate or document

 

20

 

prescribed by the IRS of the United
States certifying as to such Foreign Lender’s entitlement to complete exemption
from, or a reduced rate of, U.S. federal withholding tax with respect to
payments to be made to such Foreign Lender under this Agreement and under the
Notes (a “Certificate of Exemption”). 
Prior to becoming a Lender under this Agreement and within fifteen (15)
days after a reasonable written request of Borrower or Agent from time to time
thereafter, each Foreign Lender that becomes a Lender under this Agreement
shall provide a Certificate of Exemption to Borrower and Agent.  In addition, each Foreign Lender shall
deliver such forms promptly upon the obsolescence, expiration, or invalidity of
any form previously delivered by such Foreign Lender.  If a Foreign Lender is entitled to an exemption with respect to
payments to be made to such Foreign Lender under this Agreement and does not
provide a Certificate of Exemption to Borrower and Agent as provided herein,
Borrower shall withhold taxes from payments to such Foreign Lender at the
applicable statutory rates and Borrower shall not be required to pay any
additional amounts as a result of such withholding, provided, that all such withholding shall cease upon
delivery by such Foreign Lender of a Certificate of Exemption to Borrower and
Agent.

 

(d)                                 Change in Lending Office. 
Each Lender agrees that, upon the occurrence of any event giving rise to
the operation of Section 1.12 with respect to such Lender in a
manner that requires Borrower to pay additional amounts to or for the account
of such Lender, such Lender will, if reasonably requested by Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such designation is made on terms that, in
the sole judgment of such Lender, cause such Lender and its lending office(s)
to suffer no economic, legal or regulatory disadvantage, and provided, further,
that nothing in this Section 1.12(d) shall affect or postpone any
of the obligations of Borrower or the rights of any Lender pursuant to Sections
1.12(a), (b) or (c).

 

1.13                           Common
Enterprise.  Borrower is the direct or indirect and
beneficial owner and holder of all of the issued and outstanding Stock in each
Guarantor.  Borrower and Guarantors make
up a related organization of various entities constituting a single economic
and business enterprise so that Borrower and Guarantors share a substantial
identity of interests such that any benefit received by any one of them
benefits the others.  Borrower and
certain of the Guarantors render services to or for the benefit of Borrower
and/or the other Guarantors, as the case may be, purchase or sell and supply
goods to or from or for the benefit of the others, make loans, advances and
provide other financial accommodations to or for the benefit of Borrower and
Guarantors (including inter alia,
the payment by Borrower and Guarantors of creditors of the Borrower or Guarantors
and guarantees by Borrower and Guarantors of indebtedness of Borrower and
Guarantors and provide administrative, marketing, payroll and management
services to or for the benefit of Borrower and Guarantors).  Borrower and Guarantors have centralized accounting,
have substantially common officers and directors and are in certain
circumstances, identified to creditors as a single economic and business
enterprise.  Borrower and Guarantors
agree that the foregoing shall continue to be true in all material respects
until the Termination Date.

 

21

 

SECTION 2.

AFFIRMATIVE COVENANTS

 

Each Credit Party
executing this Agreement jointly and severally agrees as to all Credit Parties
that from and after the date hereof and until the Termination Date:

 

2.1                                 Compliance With Laws and Contractual Obligations.  Each Credit Party will (a) comply with
and shall cause each of its Subsidiaries to comply with (i) the
requirements of all applicable laws, rules, regulations and orders of any
Governmental Authority (including, without limitation, laws, rules, regulations
and orders relating to taxes, employer and employee contributions, securities,
employee retirement and welfare benefits, environmental protection matters and
employee health and safety) as now in effect and which may be imposed in the
future in all jurisdictions in which any Credit Party or any of its
Subsidiaries is now doing business or may hereafter be doing business and
(ii) the obligations, covenants and conditions contained in all
Contractual Obligations of such Credit Party or any of its Subsidiaries other
than those laws, rules, regulations, orders and provisions of such Contractual
Obligations the noncompliance with which could not be reasonably expected to have,
either individually or in the aggregate, a Material Adverse Effect, and
(b) maintain or obtain and shall cause each of its Subsidiaries to
maintain or obtain all licenses, qualifications and permits now held or
hereafter required to be held by such Credit Party or any of its Subsidiaries,
for which the loss, suspension, revocation or failure to obtain or renew, could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.  This Section 2.1
shall not preclude any Credit Party or its Subsidiaries from contesting any
taxes or other payments, if they are being diligently contested in good faith
in a manner which stays enforcement thereof and if appropriate expense
provisions have been recorded in conformity with GAAP, subject to Section 3.2.

 

2.2                                 Insurance; Damage to or Destruction of Collateral.

 

(a)                                  The Credit Parties shall, at their
sole cost and expense, maintain the policies of insurance described on Schedule 5.18
as in effect on the date hereof or otherwise in form and amounts reasonably
acceptable to Agent and with the insurers that have a Financial Strength Rating
of “A” or better and a Long-Term Debt Rating of “a” or better as rated by A.M.
Best Company or any similar or successor rating organization.  Such policies of insurance (or the loss
payable and additional insured endorsements delivered to Agent) shall contain
provisions pursuant to which the insurer agrees to provide 30 days prior
written notice to Agent in the event of any non-renewal, cancellation or
amendment of any such insurance policy. 
If any Credit Party at any time or times hereafter shall fail to obtain
or maintain any of the policies of insurance required above or to pay all
premiums relating thereto, Agent may at any time or times thereafter upon
notice to Borrower obtain and maintain such policies of insurance and pay such
premiums and take any other action with respect thereto that Agent deems
advisable.  Agent shall have no
obligation to obtain insurance for any Credit Party or pay any premiums
therefor.  By doing so, Agent shall not
be deemed to have waived any Default or Event of Default arising from any
Credit Party’s failure to maintain such insurance or pay any premiums therefor.  All sums so disbursed, including reasonable
attorneys’ fees, court costs and other charges related

 

22

 

thereto, shall be payable on demand
by Borrower to Agent and shall be additional Obligations hereunder secured by
the Collateral.

 

(b)                                 Each Credit Party shall deliver to
Agent, in form and substance reasonably satisfactory to Agent, endorsements to
(i) all “All Risk” and business interruption insurance naming Agent, on behalf
of itself and Lenders, as loss payee, and (ii) all general liability and other
liability policies naming Agent, on behalf of itself and Lenders, as additional
insured.  Each Credit Party irrevocably
makes, constitutes and appoints Agent (and all officers, employees or agents
designated by Agent), so long as any Default or Event of Default has occurred
and is continuing, as each Credit Party’s true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting claims under
such “All Risk” policies of insurance, endorsing the name of each Credit Party
on any check or other item of payment for the proceeds of such “All Risk”
policies of insurance and for making all determinations and decisions with
respect to such “All Risk” policies of insurance.  Agent shall have no duty to exercise any rights or powers granted
to it pursuant to the foregoing power-of-attorney.  Credit Parties shall promptly notify Agent of any loss, damage,
or destruction to the Collateral in the amount of $1,000,000 or more, whether or not covered by insurance.  To the extent any insurance proceeds or
condemnation proceeds received after the Closing Date do not exceed $7,500,000
for any occurrence or are business interruption insurance proceeds, Borrower
may receive and retain such insurance proceeds or condemnation proceeds.  To the extent any insurance proceeds (other
than business interruption insurance proceeds) or condemnation proceeds exceed
$7,500,000 for any occurrence, Borrower may use such insurance proceeds or
condemnation proceeds, or any part thereof, to replace, repair, restore or rebuild
the Collateral in a diligent and expeditious manner with materials and
workmanship of substantially the same quality as existed before the loss,
damage or destruction if Borrower completes such replacement, restoration,
repair or rebuilding within 360
days of such casualty.  If Borrower does
not complete such replacement, restoration, repair or rebuilding within 360 days of such casualty, after
deducting from any insurance or condemnation proceeds the expenses, if any,
incurred by Agent in the collection or handling thereof, Agent may apply such
insurance or condemnation proceeds to the Obligations in accordance with Section 1.5(e)
(and to the extent such proceeds have not been paid to the Agent, the Borrower
shall make a payment to the Agent in the amount to be so applied).  All insurance or condemnation proceeds that
are to be made available to Borrower or to another Credit Party to replace,
repair, restore or rebuild the Collateral may be applied by Borrower, at its
option, to reduce the outstanding principal balance of the Revolving Loan
(which application shall not result in a permanent reduction of the Revolving
Loan Commitment).  To the extent not
used to replace, repair, restore or rebuild the Collateral, such insurance
proceeds shall be applied in accordance with Section 1.5(e).

 

2.3                                 Inspection;
Lender Meeting.  Each Credit Party shall permit any
authorized representatives of Agent to visit, audit and inspect any of the
properties of such Credit Party, including its financial and accounting
records, and to make copies and take extracts therefrom, and to discuss its
affairs, finances and business with its officers, at reasonable times during
normal business hours, which visits, audits and inspections, unless an Event of
Default has occurred and is continuing, shall be made upon reasonable prior
notice to such Credit Party and which shall not be conducted more than twice
during any twelve consecutive month period. 
Representatives of each Lender will be permitted to accompany
representatives of Agent during

 

23

 

each visit, inspection and discussion referred to in
the immediately preceding sentence. 
Without in any way limiting the foregoing, each Credit Party will
participate and will cause key management personnel of each Credit Party to
participate in a meeting with Agent and Lenders at least once during each year,
which meeting shall be held at such time and such place as may be reasonably
requested by Agent and approved by the Borrower, which approval shall not be
unreasonably withheld, conditioned or delayed by Borrower.

 

2.4                                 Organizational
Existence.  Except as otherwise permitted by Section 3.6,
each Credit Party will and will cause its Subsidiaries to at all times preserve
and keep in full force and effect its organizational existence and all rights
and franchises material to its business.

 

2.5                                 Environmental
Matters.  Each Credit Party shall and shall cause each
Person within its control to: (a) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect; (b) to the extent Real Estate
owned by one or more Credit Parties constitutes an asset included in the
Borrowing Base (it being understood and agreed that whether to include any such
Real Estate in the Borrowing Base, and the terms and conditions thereof, shall
be determined by Agent and Lenders in their sole discretion), implement any and
all investigation, remediation, removal and response actions that are
appropriate or necessary to maintain the value and marketability assuming
continued use as an industrial facility of such Real Estate and, in the case of
all Real Estate owned by Credit Parties (whether or not included in the
Borrowing Base), implement any and all investigation, remediation, removal and
response actions that are appropriate or necessary to comply in all material
respects with Environmental Laws and Environmental Permits pertaining to the
presence, generation, treatment, storage, use, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of its Real Estate; (c) notify Agent promptly after such Credit Party
or any Person within its control becomes aware of any violation of
Environmental Laws or Environmental Permits or any Release on, at, in, under,
above, to, from or about any Real Estate that is reasonably likely to result in
Environmental Liabilities to a Credit Party or its Subsidiaries in excess of
$500,000; and (d) promptly forward to Agent a copy of any material,
non-privileged order, notice, request for information or any communication or
report received by such Credit Party or any Person within its control in connection
with any such violation or Release or any other matter relating to any
Environmental Laws or Environmental Permits that could reasonably be expected
to result in Environmental Liabilities in excess of $500,000, in each case
whether or not the Environmental Protection Agency or any Governmental
Authority has taken or threatened any action in connection with any such
violation, Release or other matter.  If
Agent at any time has a reasonable basis to believe that there may be a
violation of any Environmental Laws or Environmental Permits by any Credit
Party or any Person under its control or any Environmental Liability arising
thereunder, or a Release of Hazardous Materials on, at, in, under, above, to,
from or about any of its Real Estate, that, in each case, could reasonably be
expected to have a Material Adverse Effect, then each Credit Party and its
Subsidiaries shall, upon Agent’s written request (i) cause the performance
of such environmental audits including subsurface sampling of soil and groundwater,
and preparation of such environmental reports, at Borrower’s expense, as Agent
may from time to time reasonably request, which shall be conducted by reputable
environmental consulting firms reasonably acceptable to Agent and shall be in
form and substance reasonably

 

24

 

acceptable to Agent, and (ii) if the Credit Party
fails to cause the performance of such environmental audit, permit Agent or its
representatives to have access to all Real Estate for the purpose of conducting
such environmental audits and testing as Agent deems appropriate in its
reasonable judgment, including subsurface sampling of soil and
groundwater.  Borrower shall reimburse
Agent for the costs of such audits and tests and the same will constitute a
part of the Obligations secured hereunder.

 

2.6                                 Landlords’ Agreements, Mortgagee Agreements, Bailee and Processor Letters
and Real Estate Purchases 
Each Credit Party shall use commercially reasonable efforts to obtain a
landlord’s agreement, mortgagee agreement or bailee or processor letter, as
applicable, from the lessor of each leased property, mortgagee of owned
property, bailee or processor with respect to any warehouse, processor or
converter facility or other location where Collateral (in each case where
Collateral with a fair market value of greater than $50,000 is located) is
stored or located, which agreement or letter shall contain a waiver or
subordination of all Liens or claims that the landlord, mortgagee, bailee or
processor may assert against the Collateral at that location, and shall
otherwise be reasonably satisfactory in form and substance to Agent.  With respect to such locations or warehouse
space leased or owned as of the Closing Date and thereafter, if Agent has not
received a landlord or mortgagee agreement or bailee or processor letter as of
the Closing Date (or, if later, as of the date such location is acquired or
leased), the Eligible Inventory, Eligible Processor Inventory, Eligible
Returned Inventory or Eligible Remnant Inventory at that location shall, in
Agent’s discretion, be subject to such Reserves as may be established by Agent
in its reasonable credit judgment. 
After the Closing Date, no real property or warehouse space shall be
leased by any Credit Party or its Subsidiary, no Inventory shall be shipped to
a processor or converter under arrangements established after the Closing Date
and no Eligible Equipment shall be transferred to a location different from
those indicated in Attachment A to Schedule 1 to Exhibit 4.2(d)
unless and until (i) such other locations are described in writing to the
Agent in advance of lease, shipment or transfer, (ii) a satisfactory
landlord agreement or bailee letter, as appropriate, shall first have been
obtained with respect to such location, and (iii) in the case of Eligible
Equipment, such Eligible Equipment is segregated or otherwise separately
identifiable from goods of other Persons, if any, stored on the premises
(unless, in each case, the fair market value of such Eligible Equipment and
other Collateral at such location is less than $50,000).  Each Credit Party shall and shall cause its
Subsidiaries to timely and fully pay and perform their obligations in all
material respects under all leases and other agreements with respect to each
leased location or public warehouse where any Collateral with a fair market
value in excess of $50,000 is or may be located.

 

2.7                                 Conduct of Business.  Each Credit Party shall at all times maintain, preserve and
protect all of its material assets and properties used or useful in the conduct
of its business, and keep the same in good repair, working order and condition
in all material respects (taking into consideration ordinary wear and tear) and
from time to time make, or cause to be made, all necessary or appropriate
repairs, replacements and improvements thereto consistent with industry
practices; and transact business only in such corporate and trade names as are
set forth in Schedule 2.7 unless such Credit Party has given Agent
15 days prior written notice of any additional or changed corporate or trade
name.

 

25

 

2.8                                 Merger of Securitization Vehicle.  Borrower shall cause Playtex A/R LLC, a Delaware limited
liability company, to merge into Borrower, with Borrower as a surviving entity,
on the Closing Date and shall deliver evidence thereof to Agent.  

 

2.9                                 Further
Assurances.

 

(a)                                  Each Credit Party shall, from time
to time, execute such guaranties, financing statements, documents, security agreements
and reports as Agent or Requisite Lenders at any time may reasonably request to
evidence, perfect or otherwise implement the guaranties and security for
repayment of the Obligations contemplated by the Loan Documents.

 

(b)                                 In the event that, after the Closing
Date, any Credit Party acquires an ownership interest in fee simple in any real
property which has a fair market value in excess of $1,000,000 or which is
adjacent or contiguous to any real property subject to Mortgage, such Credit
Party shall deliver to Agent a fully executed mortgage or deed of trust over
such real property in form and substance reasonably satisfactory to Agent,
together with such title insurance policies, surveys, evidence of insurance,
legal opinions, environmental assessments and other documents and certificates
as shall be reasonably required by Agent.

 

(c)                                  Each Credit Party shall
(i) cause each Person, upon its becoming a Domestic Subsidiary of such
Credit Party (provided, that this
shall not be construed to constitute consent by any of the Lenders to any
transaction referred to above which is not expressly permitted by the terms of
this Agreement), promptly to guaranty the Obligations and to grant to Agent,
for the benefit of Agent and Lenders, a security interest in the real, personal
and mixed property of such Person to secure the Obligations and
(ii) pledge, or cause to be pledged, to Agent, for the benefit of Agent
and Lenders, all of the Stock of any additional Subsidiary of any Credit Party
to secure the Obligations; provided,
that with respect to any Person that becomes a Foreign Subsidiary of a Credit
Party hereunder, not more than 65% of the voting Stock in such Foreign
Subsidiary will be required to be pledged to secure the Obligations.  The documentation for such guaranty,
security and pledge shall be substantially similar to the Loan Documents
executed concurrently herewith with such modifications as are reasonably
requested by Agent and as are acceptable to Borrower, which acceptance shall
not be unreasonably denied, conditioned or delayed by Borrower, and shall be
accompanied by such opinions, certificates and other documents and instruments
as reasonably requested by Agent.

 

SECTION 3.

NEGATIVE COVENANTS

 

Each Credit Party
executing this Agreement jointly and severally agrees as to all Credit Parties
that from and after the date hereof until the Termination Date:

 

3.1                                 Indebtedness.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries directly or indirectly to create, incur,
assume, or otherwise become or remain directly or indirectly liable with
respect to any Indebtedness (other than pursuant to a Contingent Obligation
permitted under Section 3.4) except:

 

26

 

(a)                                  the Obligations;

 

(b)                                 Indebtedness consisting of
intercompany loans and advances made by Borrower to any Guarantor or by a
Guarantor to Borrower;

 

(c)                                  Indebtedness outstanding on the
Closing Date described in Schedule 3.1 and refinancings thereof or
amendments or modifications thereto that do not have the effect of
(i) increasing the principal amount thereof (other than with respect to
refinancing costs and premiums) or changing the amortization thereof (other
than to extend the same), (ii) increasing the interest rate on such Indebtedness
being refinanced, amended or modified; (iii) changing the dates upon which
payments of principal are due on such Indebtedness being refinanced, amended or
modified (other than to extend the due date thereof); (iv) changing any
event of default or add or make more restrictive any covenant with respect to
such Indebtedness being refinanced, amended or modified; (v) changing the
redemption or prepayment provisions of the Indebtedness being refinanced,
amended or modified; (vi) changing the subordination provisions of the
Indebtedness being refinanced, amended or modified (or the subordination terms
of any guaranty thereof); (vii) granting Liens on additional collateral or
securing all or any part of the Indebtedness being refinanced, amended or modified
that is unsecured or (viii) increasing the portion of interest
payable in cash with respect to any Indebtedness being refinanced, amended or
modified for which interest is payable by the issuance of payment-in-kind notes
or is permitted to accrue;

 

(d)                                 Indebtedness of Borrower evidenced
by the Senior Secured Notes in a principal amount not to exceed $460,000,000 in
the aggregate at any time outstanding;

 

(e)                                  unsecured Subordinated Debt of
Borrower evidenced by the Senior Subordinated Notes in a principal amount not
to exceed $350,000,000 in the aggregate at any time outstanding;

 

(f)                                    Indebtedness of Credit Parties in a
principal amount not to exceed $10,000,000 in the aggregate at any time
outstanding secured by purchase money Liens or incurred with respect to Capital
Leases;

 

(g)                                 other unsecured Subordinated Debt of
Credit Parties incurred after the Closing Date in a principal amount not to
exceed $10,000,000 in the aggregate at any time outstanding;

 

(h)                                 Indebtedness incurred by Playtex
Canada owing to GE Capital or an Affiliate of GE Capital in a principal amount
not to exceed $25,000,000 in the aggregate at any time outstanding, provided, that no Credit Party shall have
any direct or indirect obligation or liability for or with respect to any such
Indebtedness (other than (1) guaranty thereof by Borrower as long as
recourse thereof is limited to the Stock in Playtex Canada owned by Borrower
and (2) a pledge of Stock in Playtex Canada to secure such Indebtedness
and related obligations; and

 

(i)                                     other unsecured Indebtedness of
Credit Parties incurred after the Closing Date in a principal amount not to
exceed $10,000,000 in the aggregate at any time outstanding.

 

27

 

3.2                                 Liens
and Related Matters.

 

(a)                                  No Liens. 
The Credit Parties shall not and shall not cause or permit their
Subsidiaries to directly or indirectly create, incur, assume or permit to exist
any Lien on or with respect to any property or asset of such Credit Party or
any such Subsidiary, whether now owned or hereafter acquired, or any income or
profits therefrom, except Permitted Encumbrances (including, without
limitation, those Liens constituting Permitted Encumbrances existing on the
date hereof and renewals and extensions thereof, as set forth on Schedule 3.2).

 

(b)                                 No Negative Pledges. 
The Credit Parties shall not and shall not cause or permit their
Subsidiaries to directly or indirectly enter into or assume any agreement
(other than the Loan Documents and other than as provided in (x) the Senior
Subordinated Note Documents and Senior Secured Note Documents, each as in
effect on the Closing Date and (y) any purchase money mortgages evidencing
purchase money Liens or Capital Leases permitted hereunder (in which case, any
prohibition or limitation shall only be effective against the assets financed
thereby)) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.

 

(c)                                  No Restrictions on Subsidiary
Distributions to Borrower.  Except as
provided herein and in the Senior Subordinated Note Documents and Senior
Secured Note Documents, each as in effect on the Closing Date and other than
pursuant to documentation relating to Indebtedness permitted pursuant to Section 3.1(h)
hereof and only encumbering or restricting Playtex Canada, the Credit Parties
shall not and shall not cause or permit their Subsidiaries to directly or
indirectly create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any such
Subsidiary to: (1) pay dividends or make any other distribution on any of
such Subsidiary’s Stock owned by Borrower or any other Subsidiary; (2) pay
any Indebtedness owed to Borrower or any other Subsidiary; (3) make loans
or advances to Borrower or any other Subsidiary; or (4) transfer any of
its property or assets to Borrower or any other Subsidiary.

 

3.3                                 Investments.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly make or own any
Investment in any Person except:

 

(a)                                  Borrower and its Subsidiaries may
make and own Investments in Cash Equivalents;

 

(b)                                 Borrower may make intercompany loans
to one or more Guarantors;

 

(c)                                  Guarantors may make intercompany
loans to Borrower;

 

(d)                                 Borrower and its Subsidiaries may
make loans and advances to employees for moving, entertainment, travel and
other similar expenses in the ordinary course of business not to exceed
$1,000,000 in the aggregate at any time outstanding;

 

(e)                                  each Credit Party may make
Investments in its Domestic Subsidiaries;

 

(f)                                    extensions of trade credit in the
ordinary course of business;

 

28

 

(g)                                 Investments in existence on the date
hereof (and not otherwise included in any subsection of this Section 3.3)
listed on Schedule 3.3 and extensions, renewals, or restatements
thereof that are on terms and conditions no less favorable to Agent or any
Lender and on terms and conditions not materially less favorable to any Credit
Party, in each case as determined by Agent in its reasonable discretion, than
the terms and conditions of the Investment being extended, renewed or restated;

 

(h)                                 Investments in Foreign Subsidiaries
in an aggregate amount not to exceed $1,000,000 at any one time outstanding;

 

(i)                                     if in the reasonable judgment of the
Borrower or any of its Subsidiaries, any customer is deemed to be in a
reorganization or unable to make a timely cash payment on Indebtedness of such
customer owing to it, each of the Borrower and its Subsidiaries may invest in
securities issued by such customer or any affiliate thereof in lieu of cash
payments; provided, that the
Borrower or such Subsidiary, as the case may be, has paid no new consideration
(other than the forgiveness of Indebtedness or other obligations) therefor; and

 

(j)                                     other Investments in an aggregate
amount not to exceed $5,000,000.

 

3.4                                 Contingent
Obligations.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly create or become
or be liable with respect to any Contingent Obligation except:

 

(a)                                  Letter of Credit Obligations;

 

(b)                                 those resulting from endorsement of
negotiable instruments for collection in the ordinary course of business;

 

(c)                                  those existing on the Closing Date
and described in Schedule 3.4;

 

(d)                                 those arising under indemnity
agreements to title insurers to cause such title insurers to issue to Agent
mortgagee title insurance policies;

 

(e)                                  those incurred in the ordinary
course of business with respect to surety and appeal bonds, performance and
return-of-money bonds and other similar obligations not exceeding at any time
outstanding $1,000,000 in aggregate liability;

 

(f)                                    those incurred with respect to
Indebtedness permitted by Section 3.1 (other than Section 3.1(h)),
provided,  that any such Contingent Obligation is
subordinated to the Obligations to the same extent as the Indebtedness to which
it relates is subordinated to the Obligations,and provided, further,that if any Person guarantees payment or performance of any or all
of the obligations under any or all of the Senior Secured Note Documents or
Senior Subordinated Note Documents and such Person is not a guarantor or direct
obligor with respect to the Obligations, the Credit Parties shall cause such
Person to guarantee payment of the Obligations and grant to Agent a Lien on
such Person’s assets in a manner consistent with the terms of the Loan
Documents;

 

29

 

(g)                                 Contingent Obligations of Borrower
to extent described in clause (1) in the parenthetical in Section 3.1(h);

 

(h)                                 Contingent Obligations of the
Borrower in respect of obligations of one or more Domestic Subsidiaries of the
Borrower; and

 

(i)                                     other Contingent Obligations not
permitted by clauses (a) through (g) above as long as such other
Contingent Obligations, in the aggregate at any time outstanding, do not exceed
$1,000,000.

 

3.5                                 Restricted
Payments.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly declare, order,
pay, make or set apart any sum for any Restricted Payment, except that:

 

(a)                                  Subsidiaries of Borrower may make
Restricted Payments to Borrower or any Domestic Subsidiary;

 

(b)                                 Borrower may make regularly
scheduled cash interest payments pursuant to the terms of the Senior
Subordinated Note Documents as in effect on the Closing Date;

 

(c)                                  Borrower may reimburse reasonable
out-of-pocket expenses payable to Stockholders of the Borrower;  provided,that no Default or Event of Default exists at the time of any such
Restricted Payment or would occur as a result thereof; and

 

(d)                                 Borrower
may repurchase Stock owned by employees of Borrower or its Affiliates whose
employment with Borrower or its Affiliates has been terminated, provided,that such payments shall not exceed $500,000 in any Fiscal Year or
$2,500,000 during the term of this Agreement and provided, further,
that no Event of Default exists at the time of such Restricted Payment or would
occur as a result thereof.

 

3.6                                 Restriction on Fundamental Changes.  The Credit Parties shall not and shall not cause or permit their
Subsidiaries to directly or indirectly: 
(a) amend, modify or waive any term or provision of its organizational
documents, including its articles of incorporation, certificates of
designations pertaining to preferred stock, by-laws, partnership agreement or
operating agreement unless required by law or unless doing so would not have a
Material Adverse Effect; (b) consummate any transaction of merger or consolidation
except, upon not less than five (5) Business Days prior written notice to
Agent, any wholly-owned Subsidiary of Borrower may be merged with or into
Borrower (provided,  that Borrower is the surviving entity) or  any
other wholly-owned Subsidiary of Borrower; (c) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution); or (d) acquire
by purchase or otherwise all or any substantial part of the business or assets
of any other Person.

 

3.7                                 Disposal of Assets or Subsidiary Stock.  The Credit Parties shall not and shall not cause or permit their
Subsidiaries to directly or indirectly convey, sell, lease (as lessor),
sublease (as sublessor), transfer or otherwise dispose of, or grant any Person
an option to acquire, in one transaction or a series of related transactions,
any of its property, business or assets, whether now owned or hereafter
acquired, except for (a) sales of inventory in the ordinary course of
business

 

30

 

and dispositions of worn out or obsolete equipment,
fixtures or real estate not used or useful in the business, (b) Asset
Dispositions by Borrower and its Subsidiaries (excluding sales of Accounts and
Stock of any of Subsidiaries) if all of the following conditions are met:  (i)  the aggregate market value of
assets sold or otherwise disposed of in any Fiscal Year does not exceed
$25,000,000; (ii) the consideration received is at least equal to the fair
market value of such assets; (iii) at least 75% of the consideration
received is cash; (iv) the Net Proceeds of such Asset Disposition are
applied as required by Section 1.5(b); and (v) no Default or
Event of Default then exists or would result from such Asset Disposition, (c)
sales, leases, transfers or other dispositions of assets by any Subsidiary to
Borrower or any other Credit Party, (d) sales, leases, transfers or other
dispositions constituting Investments permitted by Section 3.3, and
(e) sales, leases, transfers or other dispositions of Investments
permitted by Section 3.3.

 

3.8                                 Transactions with Affiliates.  The Credit Parties shall not and shall not cause or permit their
Subsidiaries to directly or indirectly enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any management, consulting, investment banking, advisory or
other similar services) with any Affiliate or with any director, officer or
employee of any Credit Party, except (a) as set forth on Schedule 3.8,
(b) transactions pursuant to the reasonable requirements of the business
of any such Credit Party or any of its Subsidiaries and upon fair and
reasonable terms which are no less favorable to any such Credit Party or any of
its Subsidiaries than would be obtained in a comparable arm’s length
transaction with a Person that is not an Affiliate, (c) payment of
reasonable compensation (including employee benefit arrangements) to officers
and employees for services actually rendered to any such Credit Party or any of
its Subsidiaries, (d) payment of director’s fees, (e) any employee benefit
plan available to employees of Borrower generally and (f) transactions among
Credit Parties otherwise permitted by this Agreement.

 

3.9                                 Conduct of Business.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly engage in any
business other than businesses of the type described on Schedule 3.9
or any other business reasonably related thereto or extensions thereof, except
for Subsidiaries established, created or acquired with the proceeds of an
Investment to the extent such Investment is permitted under and in accordance
with Section 3.3.

 

3.10                           Changes Relating to Indebtedness.  The Credit Parties shall not and shall not cause or permit their
Subsidiaries to directly or indirectly change or amend the terms of any of its
Indebtedness permitted by Sections 3.1(c), (d) and (f)  if
the effect of such amendment is to: (a) increase the interest rate on such
Indebtedness; (b) change the dates upon which payments of principal or
interest are due on or principal amount of such Indebtedness; (c) change
any event of default or add or make more restrictive any covenant with respect
to such Indebtedness; (d) change the redemption or prepayment provisions of
such Indebtedness; (e) change the subordination provisions thereof (or the
subordination terms of any guaranty thereof); (f) change or amend any
other term if such change or amendment would materially increase the
obligations of the obligor or confer additional material rights on the holder
of such Indebtedness in a manner adverse to any Credit Party or Lenders; or (g)
increase the portion of interest payable in cash with respect to any
Indebtedness for which interest is payable by the issuance of payment-in-kind notes
or is permitted to accrue.

 

31

 

3.11                           Fiscal
Year.  No Credit Party shall change its Fiscal Year
or permit any of its Subsidiaries to change their respective fiscal years.

 

3.12                           Press Release; Public Offering Materials.  Each Credit Party executing this Agreement
agrees that neither it nor its Affiliates will in the future issue any public
disclosure, other than any prospectus, proxy statement or other materials filed
with any Governmental Authority, using the name of GE Capital or its affiliates
without at least two (2) Business Days’ prior notice to GE Capital and without
the prior written consent of GE Capital unless (and only to the extent that)
such Credit Party or Affiliate is required to do so under law and then, in any
event, such Credit Party or Affiliate will consult with GE Capital before
issuing such public disclosure.  Each
Credit Party consents to the publication by Agent or any Lender of a tombstone
or similar advertising material relating to the financing transactions
contemplated by this Agreement.  Agent
or such Lender shall provide a draft of any such tombstone or similar
advertising material to each Credit Party for review and comment prior to the
publication thereof.  Agent reserves the
right to provide to industry trade organizations information necessary and
customary for inclusion in league table measurements.

 

3.13                           Subsidiaries.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to directly or indirectly establish, create
or acquire any new Subsidiary, except for Subsidiaries established, created or
acquired with the proceeds of any Investment to the extent such Investment is
permitted under and in accordance with Section 3.3.

 

3.14                           Bank
Accounts.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to establish any new bank accounts without
prior written notice to Agent and unless Agent and the bank at which the
account is to be opened enter into a tri-party agreement regarding such bank
account pursuant to which such bank acknowledges the security interest of Agent
in such bank account, agrees to comply with instructions originated by Agent
directing disposition of the funds in the bank account without further consent
from such Credit Party or Subsidiary, agrees to subordinate and limit any
security interest the bank may have in the bank account on terms reasonably
satisfactory to Agent and agrees, from and after the receipt of a notice from
Agent (which may be given by Agent at any time at which an Event of Default has
occurred and is continuing), to forward immediately all amounts in each account
to the collection account of Agent set forth in Section 1.4 and to
commence the process of daily sweeps from such bank account into such collection
account.  No Credit Party shall, or
shall cause or permit any Subsidiary thereof to, accumulate or maintain cash in
any disbursement account or payroll accounts as of any date of determination in
excess of checks and debits outstanding against such accounts as of that date
and amounts necessary to meet minimum balance requirements.  With respect to the bank account maintained
with Banco Popular de Puerto Rico, in San Juan Puerto Rico, the account number
of which is set forth opposite its name on Schedule 3.14, Credit
Parties shall cause Banco Popular de Puerto Rico to forward any amount on
deposit in that account to the bank account maintained with Wells Fargo Bank,
the account number of which is set forth opposite its name on Schedule 3.14
(the “Concentration Account”) not less frequently than once each month
(and in any event Credit Parties shall cause Banco Popular de Puerto Rico to
immediately forward to the Concentration Account all amounts on deposit in that
account if the balance of such account equals or exceeds $250,000).  With respect to the bank account maintained
with Fleet Bank CT, the account number of which is set forth opposite its name
on 

 

32

 

Schedule 3.14,
Credit Parties shall not permit the balance on deposit in that account to
exceed $25,000 at any time (net of debits and checks written but not yet
cleared against the balance on deposit in that account).  With respect to the bank account maintained
with U.S. Bank National Association, the account number of which is set forth
opposite its name on Schedule 3.14, Credit Parties shall not permit
the balance on deposit in that account to exceed $150,000 at any time (net of
debits and checks written but not yet cleared against the balance on deposit in
that account).

 

3.15                           Hazardous
Materials.  The Credit Parties shall not and shall not
cause or permit their Subsidiaries to cause or permit a Release of any
Hazardous Material on, at, in, under, above, to, from or about any of the Real
Estate where such Release would (a) violate in any respect, or form the
basis for any Environmental Liabilities by the Credit Parties or any of their
Subsidiaries under, any Environmental Laws or Environmental Permits or
(b) otherwise adversely impact the value or marketability of any of the
Real Estate or any of the Collateral, in each case other than such violations,
Environmental Liabilities or adverse impacts of value or marketability that
could not reasonably be expected to have a Material Adverse Effect.

 

3.16                           ERISA.  The Credit Parties shall not and shall not
cause or permit any ERISA Affiliate to, cause or permit to occur an ERISA Event
to the extent such ERISA Event could reasonably be expected to have a Material
Adverse Effect.

 

3.17                           Sale-Leasebacks.  The
Credit Parties shall not and shall not cause or permit any of their
Subsidiaries to engage in any sale-leaseback, synthetic lease or similar
transaction involving any of its assets.

 

3.18                           Prepayments of Other Indebtedness.  No
Credit Parties shall, directly or indirectly, voluntarily purchase, redeem,
defease or prepay any principal of, premium, if any, interest or other amount
payable in respect of any Indebtedness (including, without limitation,
Indebtedness under or pursuant to one or more Senior Secured Note Documents or
Indebtedness under or pursuant to one or more Senior Subordinated Note
Documents), other than (i) the Obligations and (ii) intercompany Indebtedness
reflecting amounts owing to Borrower or any Guarantor.

 

3.19                           Changes
to Material Contracts.  The Credit Parties shall not and shall not
cause or permit any of their Subsidiaries to change or amend the terms of any
of the following material contracts: (i) Amended Trademark License
Agreement dated November 19, 1991 by and between Playtex Marketing
Corporation, a Delaware corporation, as licensor, and Playtex Apparel, Inc., a
Delaware corporation, and Playtex Family Products Corporation, a Delaware
corporation, as licensees (relating to “Playtex” and “Living” marks in United
States and Canada); (ii) Trademark License Agreement (U.S.), dated 1995
and executed February 24, 1995, by and between Reckitt & Colman, Inc.,
a Delaware corporation, as licensor, and Borrower, as licensee (relating to
“Woolite” mark in United States); (iii) Trademark License Agreement
(Canada), dated 1999 by and between Reckitt & Colman Canada, Inc., a Canada
corporation, as licensor, and Borrower (relating to “Woolite” mark in Canada);
and (iv) License Agreement dated as of March 31, 1999 between Melrose
Products Limited, a company registered under the laws of Guernsey, as licensor,
and Borrower, as licensee (relating to patents with respect to the design

 

33

 

and flexible tubing in manufacturing) (it being agreed
that extensions of the terms of, or delivery of notices as contemplated by, any
of the foregoing agreements shall not be prohibited by this Section 3.19).

 

SECTION 4.

FINANCIAL COVENANTS/REPORTING

 

Borrower covenants and
agrees that from and after the date hereof until the Termination Date, Borrower
shall perform and comply with, and shall cause each of the other Credit Parties
to perform and comply with, all covenants in this Section 4
applicable to such Person.

 

4.1                                 [Intentionally
Omitted]

 

4.2                                 Financial Statements and Other Reports.  Borrower will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance
with sound business practices to permit preparation of Financial Statements in
conformity with GAAP (it being understood that the quarterly Financial
Statements are not required to have footnote disclosures).  Borrower will deliver each of the Financial
Statements and other reports described below to Agent (and each Lender in the
case of the Financial Statements and other reports described in Sections
4.2(a), (b), (d), (f), (g), (h), and (k)).

 

(a)                                  Quarterly Financials. 
As soon as available and in any event within forty-five (45) days after
the end of each quarter (excluding the last quarter of each Fiscal Year of
Borrower), Borrower will deliver (1) the consolidated balance sheets of
Borrower  and
its Subsidiaries, as at the end of such quarter, and the related consolidated
statements of income, stockholders’ equity and cash flow for such quarter and
for the period from the beginning of the then current Fiscal Year of Borrower
to the end of such quarter and (2) a report setting forth in comparative
form the corresponding figures for the corresponding periods of the previous
Fiscal Year.

 

(b)                                 Year-End Financials. 
As soon as available and in any event within ninety (90) days after the
end of each Fiscal Year of Borrower, Borrower will deliver (1) the
consolidated and consolidating balance sheets of Borrower and its Subsidiaries,
as at the end of such year, and the related consolidated and consolidating  statements
of income and the related consolidated statements of stockholders’ equity and
cash flow for such Fiscal Year and (2)  a report with respect to the
consolidated Financial Statements from a firm of Certified Public Accountants
selected by Borrower and reasonably acceptable to Agent, which report shall be
prepared in accordance with Statement of Auditing Standards No. 58 (the “Statement”)
“Reports on Audited Financial Statements” and such report shall be without a
“going concern” or like qualification or exception, or qualification arising
out of the scope of the audit.

 

(c)                                  Accountants’ Reports. 
Promptly upon receipt thereof, Borrower will deliver copies of all
significant reports submitted by Borrower’s firm of certified public
accountants in connection with each annual, interim or special audit or review
of any type of the Financial Statements or related internal control systems of
Borrower or its Subsidiaries  made by

 

34

 

such accountants, including any
comment letter submitted by such accountants to management in connection with
their services.

 

(d)                                 Additional Deliveries.

 

(i)                                     To Agent, upon its request, and in
any event no less frequently than noon (New York time) on, five (5) Business
Days after the end of each Fiscal Month (together with a copy of any of the
following reports requested by Agent in writing after the Closing Date),
Borrower will deliver each of the following reports, each of which shall be
prepared by Borrower as of the last day of the immediately preceding Fiscal
Month or the date 2 days prior to the date of any such request:

 

(A)                              a Borrowing Base Certificate with
respect to Credit Parties, accompanied by such supporting detail and documentation
as shall be requested by Agent in its reasonable discretion (in substantially
the same form as Exhibit 4.2(d) (a “Borrowing Base Certificate”)
as of the last day of such period (it being understood and agreed that, at its
option, Borrower may deliver the Borrowing Base Certificate and such supporting
detail and documentation more frequently than on a monthly basis, but not more
frequently than on a weekly basis);

 

(B)                                with respect to Credit Parties, a
summary of Inventory by location and type with a supporting perpetual Inventory
report and a slow-moving Inventory report, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion; and

 

(C)                                with respect to Credit Parties, a
monthly trial balance showing Accounts outstanding aged from invoice date as
follows:  1 to 30 days, 31 to 60 days,
61 to 90 days and 91 days or more, accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion.

 

(ii)                                  To Agent, if requested by Agent in
connection with or following the delivery of a Borrowing Base Certificate,
collateral reports with respect to Credit Parties,  including all additions and
reductions (cash and non-cash) with respect to Accounts of Credit Parties,  in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion each of which shall be prepared by the Borrower as of the
last day of the immediately preceding week or the date 2 days prior to the date
of any request;

 

(iii)                               To Agent, no later than the tenth
(10th) Business Day after the end of each Fiscal Month and at the
time of the delivery of each quarterly Financial Statements pursuant to this Section 4.2,
as the case may be:

 

(A)                              (x) no later than the tenth (10th)
Business Day after the end of each Fiscal Month, a reconciliation of the most
recent Borrowing Base, general ledger and month-end Inventory reports of Credit
Parties to Credit Parties’ general ledger and (y) together with each
delivery of the quarterly Financial Statements, a reconciliation of the most
recent Borrowing Base, general ledger and month-end Inventory reports of

 

35

 

Credit
Parties to such quarterly Financial Statements, in each case accompanied by
such supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;

 

(B)                                (x) no later than the tenth (10th)
Business Day after the end of each Fiscal Month, a reconciliation of the
perpetual inventory by location to Credit Parties’ most recent Borrowing Base
Certificate and general ledger and (y) together with each delivery of the
quarterly Financial Statements, a reconciliation of the perpetual inventory by
location to such quarterly Financial Statements, in each case accompanied by
such supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;

 

(C)                                (x) no later than the tenth (10th)
Business Day after the end of each Fiscal Month, an aging of accounts payable
and a reconciliation of that accounts payable aging to Credit Parties’ general
ledger and (y) together with each delivery of the quarterly Financial
Statements, an aging of accounts payable and a reconciliation of that accounts
payable aging to such quarterly Financial Statements, in each case accompanied
by such supporting detail and documentation as shall be requested by Agent in
its reasonable discretion;

 

(D)                               (x) no later than the tenth (10th)
Business Day after the end of each Fiscal Month, a reconciliation of the
outstanding Loans as set forth in the monthly Loan Account statement provided
by Agent to Credit Parties’ general ledger and (y) together with each
delivery of the quarterly Financial Statements, a reconciliation of the
outstanding Loans as set forth in the monthly Loan Account statement provided
by Agent to such quarterly Financial Statements, in each case accompanied by
such supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;

 

(E)                                 no later than the tenth (10th)
Business Day after the end of each Fiscal Month, supporting detail and
documentation satisfactory to Agent in its reasonable discretion relating to
(i) the current and historical performance of Eligible Remnant Inventory and
(ii) credit memos issued with respect to the Credit Memo Chargeback Accounts;

 

(F)                                 together with each delivery of the
quarterly Financial Statements, a summary of the outstanding balance of all
intercompany loans owing by Borrower and owing by each Guarantor as of the last
day of the applicable Fiscal Quarter;

 

(G)                                together with each delivery of the
quarterly Financial Statements, a summary of the license royalty payments owing
by each Credit Party as of the last day of the applicable Fiscal Quarter with
respect to material contracts listed in clauses (i), (ii), (iii) and (iv)
of Section 3.19, and a certificate that, to the Borrower’s
knowledge, no default exists with respect to each such contract; and

 

36

 

(H)                               together with each delivery of the
quarterly Financial Statements, a listing of each transaction with an Affiliate
permitted pursuant to Section 3.8 hereto which involves payments or
assets of greater than $1,000,000;

 

(iv)                              on the Closing Date and together
with each delivery of the annual Financial Statements, and more frequently at
any time there is a material increase in any rent or any storage, processing,
freight or shipping charge, with respect to each leased, warehouse, processor
or converter facility or other location where Collateral is stored or located
(in each case where Collateral with a fair market value of greater than $50,000
is stored or located) (w) a schedule of rents showing the
monthly rent due or other monthly charges due, (x) a schedule of
accrued and unpaid storage and/or processing charges for the storage and/or
processing of goods, (y) a schedule of accrued and unpaid charges of
freight carrier or shipping company charges for the transportation of goods and
(z) a certificate that, to the Borrower’s knowledge, no default exists
with respect to each applicable agreement with such landlord, processor, bailee
or freight carrier or shipping company;

 

(v)                                 To Agent, at the time of delivery of
each of the annual Financial Statements delivered pursuant to this Section 4.2,
(i) a listing of government contracts of each Credit Party subject to the
Federal Assignment of Claims Act of 1940; and (ii) a list of any
applications for the registration of any Patent, Trademark or Copyright filed
by any Credit Party with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency in the prior
Fiscal Year.

 

(e)                                  Field Audits; Appraisals;
Inspections.

 

(i)                                     Any of Agent’s officers, employees
or agents shall have the right, at any time or times, in the name of Agent, any
designee of Agent, or any Credit Party (after, unless an Event of Default has
occurred and is continuing, providing Borrower with a reasonable opportunity to
consult with Agent regarding such verification process) to verify the validity,
amount or any other matter relating to Accounts or Inventory by mail,
telephone, consultations, electronic communication, personal inspection or
otherwise and to conduct field audits of the financial affairs and Collateral
of the Credit Parties, which field audits, absent the occurrence and
continuation of an Event of Default, Agent shall conduct no more frequently
than twice each Fiscal Year and, following the occurrence and during the
continuation of an Event of Default, more frequently if Agent requests.  Credit Parties shall cooperate fully with
Agent and its agents in an effort to facilitate and promptly conclude any such
verification process and field audits, all of which shall be at the expense of
Credit Parties.

 

(ii)                                  At Credit Parties’ expense, at any
time while and so long as an Event of Default shall have occurred and be
continuing, and in the absence of an Event of Default not more than once during
any twelve (12) month period commencing with the Closing Date, Agent may
obtain appraisal reports of Inventory in form and substance and from appraisers
reasonably satisfactory to Agent. 
Credit Parties shall cooperate fully with such appraisers, Agent and its
agents in an effort to facilitate and promptly conclude any such appraisal.

 

37

 

(iii)                               At Credit Parties’ expense, at any
time while and so long as an Event of Default shall have occurred and be
continuing, and in the absence of an Event of Default not more than once during
any twelve (12) month period commencing with the Closing Date, Agent may
obtain appraisal reports of Eligible Equipment in form and substance and from
appraisers reasonably satisfactory to Agent. 
Credit Parties shall cooperate fully with such appraisers, Agent and its
agents in an effort to facilitate and promptly conclude any such appraisal.

 

(iv)                              At Credit Parties’ expense, at any
time while and so long as an Event of Default shall have occurred and be
continuing, and in the absence of an Event of Default not more than once during
any twelve (12) month period commencing with the Closing Date, Agent may
obtain appraisal reports in form and substance and from appraisers satisfactory
to Agent stating the then current fair market value of all or any portion of
the Real Estate owned by Credit Parties, provided,
that, in the absence of an Event of Default, such appraisals will not be
required hereunder as long as Real Estate owned by one or more Credit Parties
does not constitute an asset included in the Borrowing Base (it being
understood and agreed that whether to include any such Real Estate in the
Borrowing Base, and the terms and conditions thereof, shall be determined by
Agent and Lenders in their sole discretion). 
Credit Parties shall cooperate fully with such appraisers, Agent and its
agents in an effort to facilitate and promptly conclude any such appraisal.

 

(v)                                 Notwithstanding the foregoing to the
contrary, from time to time, if Agent reasonably determines that obtaining appraisals
is necessary in order for Agent or such Lender to comply with applicable laws
or regulations, Agent will, at Credit Parties’ expense, obtain appraisal
reports in form and substance and from appraisers reasonably satisfactory to
Agent stating the then current fair market values of all or any portion of the
Real Estate owned by Credit Parties.

 

(f)                                    Projections. 
As soon as available and in any event no later than forty-five (45) days
after each of Borrower’s Fiscal Years, Borrower will deliver Projections of
Borrower and its Subsidiaries for the forthcoming three (3) fiscal years, year
by year, and for the forthcoming fiscal year, quarter by quarter.

 

(g)                                 SEC Filings and Press Releases. 
Promptly upon their becoming available, Borrower will deliver copies of
(1) all Financial Statements, reports, notices and proxy statements sent
or made available by Borrower or any of its Subsidiaries to their Stockholders,
(2) all regular and periodic reports and all registration statements and
prospectuses, if any, filed by Borrower or any of its Subsidiaries with any
securities exchange or with the Securities and Exchange Commission, any
Governmental Authority or any private regulatory authority, and (3) all
press releases and other statements made available by Borrower or any of its
Subsidiaries to the public concerning developments in the business of any such
Person.

 

(h)                                 Events of Default, Etc. 
Promptly upon any Responsible Officer of any Credit Party obtaining
knowledge of any of the following events or conditions, Borrower shall deliver
copies of all notices given or received by Borrower or any of its Subsidiaries
with respect to any such event or condition and a certificate of Borrower’s
Responsible Officer specifying the

 

38

 

nature and period of existence of
such event or condition and what action Borrower or any of its Subsidiaries has
taken, is taking and proposes to take with respect thereto:  (1) any condition or event that constitutes
an Event of Default or Default; (2) any notice that any Person has given
to Borrower or any of its Subsidiaries or any other action taken with respect
to a claimed default or event or condition of the type referred to in Section 6.1(b);
(3) any event or condition that could reasonably be expected to result in
any Material Adverse Effect; (4) any default or event of default under or
with respect to any or all of the Senior Secured Note Documents; (5) any
default or event of default under or with respect to any or all of the Senior
Subordinated Note Documents; or (6) any default or event of default with
respect to any Indebtedness of Borrower or any of its Subsidiaries having a
principal amount in excess of $3,000,000.

 

(i)                                     Litigation. 
Promptly upon Responsible Officer or general counsel of any Credit Party
obtaining knowledge of (1) the institution of any action, charge, claim,
demand, suit, proceeding, petition, governmental investigation, tax audit or
arbitration now pending or, to the best knowledge of such Credit Party after due
inquiry, threatened against or affecting any Credit Party or any of its
Subsidiaries or any property of any Credit Party or any of its Subsidiaries (“Litigation”)
not previously disclosed by Borrower to Agent or (2) any material
development in any action, suit, proceeding, governmental investigation or
arbitration at any time pending against or affecting any Credit Party or any
property of any Credit Party which, in the case of clause (1) or clause
(2) above, could reasonably be expected to have a Material Adverse Effect,
Borrower will promptly give notice thereof to Agent and provide such other
information as may be reasonably available to them to enable Agent and its
counsel to evaluate such matter.

 

(j)                                     Notice of Corporate and other
Changes.  Borrower shall provide prompt written notice
of (1)  any change after the Closing Date in the authorized and issued
Stock of any Credit Party or any Subsidiary of any Credit Party or any
amendment to their articles or certificate of incorporation, by-laws, partnership
agreement or other organizational documents, (2) any Subsidiary created or
acquired by any Credit Party or any of its Subsidiaries after the Closing Date,
such notice, in each case, to identify the applicable jurisdictions, capital
structures or Subsidiaries, as applicable, and (3) any other event that
occurs after the Closing Date which would cause any of the representations and
warranties in Section 5 of this Agreement or in any other Loan
Document to be untrue or misleading in any material respect.  The foregoing notice requirement shall not
be construed to constitute consent by any of the Lenders to any transaction
referred to above which is not expressly permitted by the terms of this
Agreement.

 

(k)                                  Compliance Certificate. 
Together with each delivery of year-end Financial Statements of Borrower
and its Subsidiaries pursuant to Sections 4.2(b), Credit Parties
will deliver a fully and properly completed Compliance Certificate (in
substantially the same form as Exhibit 4.2(k) (the “Compliance,
Certificate”) signed by each Credit Party’s chief executive officer, chief
financial officer, president, treasurer or controller.

 

(l)                                     Customer Concentration. 
Borrower shall provide prompt written notice if the Accounts of any
customer (other than Wal-Mart and Investment
Grade Account Debtors) exceed in the aggregate an amount equal to ten percent of the aggregate of all
Accounts of the Credit Parties at any time.

 

39

 

(m)                               Other Information. 
With reasonable promptness, Borrower will deliver such other information
and data with respect to any Credit Party or any Subsidiary of any Credit Party
as from time to time may be reasonably requested by Agent.

 

(n)                                 Taxes.  Borrower shall provide prompt written notice
of (i) the execution or filing with the IRS or any other Governmental Authority
of any agreement or other document extending, or having the effect of
extending, the period for assessment or collection of any Charges by any Credit
Party or any of its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect and (ii) any written agreement by any Credit Party or
any of its Subsidiaries or request directed to any Credit Party or any of its
Subsidiaries to make any adjustment under IRC Section 481(a), by reason of
a change in accounting method or otherwise, which could reasonably be expected
to have a Material Adverse Effect.

 

4.3                                 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
Agreement.  For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to such terms in conformity with GAAP. 
Financial statements and other information furnished to Agent pursuant
to Section 4.2 or any other section (unless specifically
indicated otherwise) shall be prepared in accordance with GAAP as in effect at
the time of such preparation; provided,
that no Accounting Change shall affect financial covenants, standards or terms
in this Agreement; provided, further, that Borrower shall prepare
footnotes to the Financial Statements required to be delivered hereunder that
show the differences between the Financial Statements delivered (which reflect
such Accounting Changes) and the basis for calculating financial covenant
compliance (without reflecting such Accounting Changes). All such adjustments
described in clause (c) of the definition of the term Accounting Changes
resulting from expenditures made subsequent to the Closing Date (including
capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made.

 

SECTION 5.

REPRESENTATIONS AND WARRANTIES

 

To induce Agent and
Lenders to enter into the Loan Documents, to make Loans and to issue or cause
to be issued Letters of Credit, Credit Parties, jointly and severally,
represent, warrant and covenant to Agent and each Lender that the following
statements are and, after giving effect to the Related Transactions, will
remain true, correct and complete until the Termination Date with respect to
all Credit Parties:

 

5.1                                 Disclosure.  No representation or warranty of any Credit
Party contained in this Agreement, the Financial Statements referred to in Section 5.5,
the other Related Transactions Documents or any other document, certificate or
written statement furnished to Agent or any Lender by or on behalf of any such
Person for use in connection with the Loan Documents or the Related
Transactions Documents contains any untrue statement of a material fact or
omitted, omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances in which the same were made. 
On the Closing Date, after giving effect to the consummation of the
Related Transactions, no default or event of default under or with respect to
any of the Related Transactions Documents, any

 

40

 

Senior Secured Note Documents or any Senior
Subordinated Note Documents has occurred and is continuing

 

5.2                                 No
Material Adverse Effect.  Since December 31, 2002 there have been
no events or changes in facts or circumstances affecting any Credit Party or
any of its Subsidiaries which individually or in the aggregate have had or
could reasonably be expected to have a Material Adverse Effect and that have
not been disclosed herein or in the attached Disclosure Schedules.

 

5.3                                 No
Conflict.  The consummation of the Related Transactions
does not and will not violate or conflict with any laws, rules, regulations or
orders of any Governmental Authority or violate, conflict with, result in a
breach of, or constitute a default (with due notice or lapse of time or both)
under any Contractual Obligation or organizational documents of any Credit Party
or any of its Subsidiaries except if such violations, conflicts, breaches or
defaults could not reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect.

 

5.4                                 Organization, Powers, Capitalization and Good Standing.

 

(a)                                  Organization and Powers. 
Each of the Credit Parties and each of their Subsidiaries is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and qualified to do business in all states where
such qualification is required except where failure to be so qualified could
not reasonably be expected to have a Material Adverse Effect.  As of the Closing Date, the jurisdiction of
organization and all jurisdictions in which each Credit Party is qualified to
do business are set forth on Schedule 5.4(a).  Each of the Credit Parties and each of their
Subsidiaries has all requisite organizational power and authority to own and
operate its properties, to carry on its business as now conducted and proposed
to be conducted, to enter into each Loan Document to which it is a party and to
incur the Obligations, grant liens and security interests in the Collateral and
carry out the transactions contemplated by the Loan Documents.

 

(b)                                 Capitalization. 
As of the Closing Date: 
(i) the authorized Stock of each of the Credit Parties and each of
their Subsidiaries is as set forth on Schedule 5.4(b);
(ii) all issued and outstanding Stock of each of the Credit Parties and
each of their Subsidiaries is duly authorized and validly issued, fully paid,
nonassessable, free and clear of all Liens other than those in favor of Agent
for the benefit of Agent and Lenders, and other than Permitted Encumbrances
described in clause (a) and clause (l) of the definition of the
term “Permitted Encumbrances”, and such Stock was issued in compliance with all
applicable state, federal and foreign laws concerning the issuance of
securities; (iii) the identity of the holders of the Stock of each of the
Credit Parties (other than Borrower) and each of their Subsidiaries and the
percentage of their fully-diluted ownership of the Stock of each of the Credit
Parties (other than Borrower) and each of their Subsidiaries is set forth on Schedule 5.4(b);
and (iv) no Stock of any Credit Party or any of their Subsidiaries, other
than those described above, are issued and outstanding.  Except as provided in Schedule 5.4(b),  as of the Closing Date, there are no
preemptive or other outstanding rights, options, warrants, conversion rights or
similar agreements or understandings for the purchase or acquisition from any
Credit Party or any of their Subsidiaries of any Stock of any such entity.

 

41

 

(c)                                  Binding Obligation. 
This Agreement is, and the other Related Transactions Documents when
executed and delivered will be, the legally valid and binding obligations of
the applicable parties thereto, each enforceable against each of such parties,
as applicable, in accordance with their respective terms.

 

5.5                                 Financial Statements and Projections.  All Financial Statements concerning Credit Parties and their
Subsidiaries which have been or will hereafter be furnished to Agent pursuant
to this Agreement, including those listed below, have been or will be prepared
in accordance with GAAP consistently applied (except as disclosed therein) and
do or will present fairly the financial condition of the entities covered
thereby as at the dates thereof and the results of their operations for the
periods then ended, subject to, in the case of unaudited Financial Statements,
the absence of footnotes and normal year-end adjustments.

 

(a)                                  The
consolidated balance sheets at December 28, 2002 and the related statement
of income of Borrower  and its Subsidiaries, for the Fiscal Year
then ended, audited by KPMG LLP.

 

(b)                                 The
consolidated balance sheet at December 27, 2003 and the related statement
of income of Borrower and its Subsidiaries for the twelve (12) months then
ended.

 

The Projections delivered
on or prior to the Closing Date and the updated Projections delivered pursuant
to Section 4.2(h) represent and will represent as of the date
thereof the good faith reasonable estimate of Credit Parties and their senior
management based upon reasonable assumptions at the time made concerning the
course of their business (it being understood that the Projections may not be
realized).

 

5.6                                 Intellectual
Property.  Each of the Credit Parties and its
Subsidiaries owns, is licensed to use or otherwise has the right to use, all
Intellectual Property used in or necessary for the conduct of its business as
currently conducted that is material to the condition (financial or other),
business or operations of such Credit Party and its Subsidiaries and all
Copyrights, Patents and Trademarks existing in the United States, as of the
Closing Date, are identified on Schedule 5.6 and fully protected
and/or duly and properly registered, filed or issued in the appropriate office
and jurisdictions for such registrations, filings or issuances.  As of the Closing Date, except as disclosed
in Schedule 5.6, the use of such Intellectual Property by the
Credit Parties and their Subsidiaries and the conduct of their businesses does
not and has not been alleged by any Person to infringe on the rights of any
Person.

 

5.7                                 Investigations,
Audits, Etc.  As of the Closing Date, except as set forth
on Schedule 5.7, no Credit Party or any of their Subsidiaries is
the subject of any review or audit by the IRS or any governmental investigation
concerning the violation or possible violation of any law.

 

5.8                                 Employee
Matters.  As of the Closing Date, except as set forth
on Schedule 5.8, (a) no Credit Party or Subsidiary of a Credit
Party nor any of their respective employees is subject to any collective
bargaining agreement, (b) no petition for certification or union election

 

42

 

is pending with respect to the employees of any Credit
Party or any of their Subsidiaries and no union or collective bargaining unit
has sought such certification or recognition with respect to the employees of
any Credit Party or any of their Subsidiaries, (c) there are no strikes,
slowdowns, work stoppages or controversies pending or, to the best knowledge of
any Credit Party after due inquiry, threatened between any Credit Party or any
of their Subsidiaries and its respective employees, other than employee
grievances arising in the ordinary course of business which could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect and (d) hours worked by and payment made to
employees of each Credit Party and each of their Subsidiaries comply with the
Fair Labor Standards Act to the extent applicable, and each other material
federal, state, local or foreign law applicable to such matters.  As of the Closing Date, except as set forth
on Schedule 5.8, neither Borrower nor any of its Subsidiaries is
party to an employment contract.

 

5.9                                 Solvency.  Each of the Credit Parties and its
Subsidiaries is Solvent.

 

5.10                           Litigation;
Adverse Facts.  As of the Closing Date, except as set forth
on Schedule 5.10, there are no judgments outstanding against any
Credit Party or any of its Subsidiaries or affecting any property of any Credit
Party or any of its Subsidiaries, nor is there any Litigation pending, or to
the best knowledge of any Credit Party threatened, against any Credit Party or
any of its Subsidiaries which could reasonably be expected to result in any
Material Adverse Effect.

 

5.11                           Use of Proceeds; Margin Regulations.

 

(a)                                  No part of the proceeds of any Loan
will be used for “buying” or “carrying” “margin stock” within the respective
meanings of such terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect or for
any other purpose that violates the provisions of the regulations of the Board
of Governors of the Federal Reserve System. 
If requested by Agent, each Credit Party will furnish to Agent and each
Lender a statement to the foregoing effect in conformity with the requirements
of FR Form G-3 or FR Form 0-1, as applicable, referred to in Regulation U.

 

(b)                                 Borrower shall utilize the proceeds
of the Loans solely for the Refinancing (and to pay any related transaction
expenses), and for the financing of Borrower’s and its Subsidiaries’ ordinary
working capital and general corporate needs. 
Schedule 5.11 contains a description of Borrower’s sources
and uses of funds as of the Closing Date, including Loans and Letter of Credit
Obligations to be made or incurred on that date, and a funds flow memorandum
detailing how funds from each source are to be transferred for particular uses.

 

5.12                           Ownership of Real Property; Liens.  As of the Closing Date, the real estate (“Real Estate”)
listed in Schedule 5.12 constitutes all of the real property owned,
leased, subleased, or used by any Credit Party or any of its Subsidiaries.  As of the Closing Date, each of the Credit
Parties and each of its Subsidiaries owns good and marketable fee simple title
to all of its material owned Real Estate, and valid and marketable leasehold
interests in all of its leased Real Estate, all as described on Schedule 5.12,
and copies of all such leases or a summary of terms thereof as in effect on the
Closing Date reasonably satisfactory to Agent have been delivered to

 

43

 

Agent.  Schedule 5.12
further describes any Real Estate with respect to which any Credit Party or any
of its Subsidiaries is a lessor, sublessor or assignor as of the Closing
Date.  Each of the Credit Parties and
each of its Subsidiaries also has good and marketable title to, or valid
leasehold interests in, all of its material personal property and assets.  As of the Closing Date, none of the material
properties and assets of any Credit Party or any of its Subsidiaries are
subject to any Liens other than Permitted Encumbrances, and there are no facts,
circumstances or conditions known to Borrower that may result in any Liens
(including Liens arising under Environmental Laws) other than Permitted
Encumbrances against the properties or assets of any Credit Party or any of its
Subsidiaries.  As of the Closing Date,
each of the Credit Parties and each of its Subsidiaries has received all deeds,
assignments, waivers, consents, nondisturbance and attornment or similar
agreements, bills of sale and other documents, and has duly effected all
recordings, filings and other actions necessary to establish, protect and
perfect such Credit Party’s or Subsidiary’s right, title and interest in and to
all such material owned Real Estate and other material properties and
assets.  Schedule 5.12 also
describes any purchase options, rights of first refusal or other similar
contractual rights pertaining to any Real Estate as of the Closing Date.  As of the Closing Date, no portion of any
Credit Party’s or any of its Subsidiaries’ Real Estate has suffered any
material damage by fire or other casualty loss that has not heretofore been
repaired and restored in all material respects to its original condition or
otherwise remedied.  As of the Closing
Date, all material permits required to have been issued or appropriate to
enable the Real Estate to be lawfully occupied and used for all of the purposes
for which it is currently occupied and used have been lawfully issued and are
in full force and effect.

 

5.13                           Environmental
Matters.

 

(a)                                  Except as set forth in Schedule 5.13,
as of the Closing Date: (i) the Real Estate is free of contamination from
any Hazardous Material except for such contamination that could not reasonably
be expected to adversely impact the value or marketability assuming continued
use as an industrial facility of such Real Estate and that could not reasonably
be expected to result in Environmental Liabilities of the Credit Parties or
their Subsidiaries in excess of $500,000 in the aggregate; (ii) no Credit
Party and no Subsidiary of a Credit Party has caused or suffered to occur any
Release of Hazardous Materials on, at, in, under, above, to, from or about any
of their Real Estate except for such releases that could not reasonably be
expected to result in Environmental Liabilities of the Credit Parties or their
Subsidiaries in excess of $500,000 in the aggregate; (iii) the Credit
Parties and their Subsidiaries are and have been in compliance with all Environmental
Laws, except for such noncompliance that could not reasonably be expected to
result in Environmental Liabilities of the Credit Parties or their Subsidiaries
in excess of $500,000 in the aggregate; (iv) the Credit Parties and their
Subsidiaries have obtained, and are in compliance with, all Environmental
Permits required by Environmental Laws for the operations of their respective
businesses as presently conducted or as proposed to be conducted, except where
the failure to so obtain or comply with such Environmental Permits could not
reasonably be expected to result in Environmental Liabilities of the Credit
Parties or their Subsidiaries in excess of $500,000 in the aggregate, and all
such Environmental Permits are valid, uncontested and in good standing;
(v) no Credit Party and no Subsidiary of a Credit Party is involved in
operations or knows of any facts, circumstances or conditions, including any
Releases of Hazardous Materials, that are likely to result in any Environmental
Liabilities of such Credit Party or Subsidiary which could reasonably be
expected to be in excess of $500,000

 

44

 

in the aggregate, and no Credit Party
or Subsidiary of a Credit Party has permitted any current or former tenant or
occupant of the Real Estate to engage in any such operations; (vi) there
is no Litigation arising under or related to any Environmental Laws,
Environmental Permits or Hazardous Material that seeks damages, penalties,
fines, costs or expenses in excess of $500,000 in the aggregate or injunctive
relief against, or that alleges criminal misconduct by any Credit Party or any
Subsidiary of a Credit Party; (vii) no notice has been received by any
Credit Party or any Subsidiary of a Credit Party identifying any of them as a
“potentially responsible party” or requesting information under CERCLA or
analogous state statutes, and to the knowledge of the Credit Parties, there are
no facts, circumstances or conditions that may result in any of the Credit
Parties or their Subsidiaries being identified as a “potentially responsible
party” under CERCLA or analogous state statutes, except, in either case, as
could not reasonably be expected to result in Environmental Liabilities of the
Credit Parties or their Subsidiaries in excess of $500,000 in the aggregate;
and (viii) the Credit Parties have provided to Agent copies of all
material environmental reports, reviews and audits and all written information
pertaining to actual or potential Environmental Liabilities, in each case
relating to any of the Credit Parties or their Subsidiaries and in their
possession or under their control.

 

(b)                                 Each Credit Party hereby
acknowledges and agrees that Agent (i) is not now, and has not ever been,
in control of any of the Real Estate or affairs of such Credit Party or its
Subsidiaries , and (ii) does not have the capacity through the provisions
of the Loan Documents or otherwise to influence any Credit Party’s or its
Subsidiaries’ conduct with respect to the ownership, operation or management of
any of their Real Estate or compliance with Environmental Laws or Environmental
Permits.

 

5.14                           ERISA.

 

(a)                                  As of the Closing Date, Schedule 5.14
lists all Plans and separately identifies all Pension Plans, including Title IV
Plans, Multiemployer Plans, ESOPs and Welfare Plans, including all Retiree
Welfare Plans, as applicable.  To the
extent applicable, copies of all such listed Plans, together with a copy of the
latest form IRS/DOL 5500-series for each such Plan have been delivered to
Agent.  Except with respect to
Multiemployer Plans, each Qualified Plan has been determined by the IRS to
qualify under Section 401 of the IRC, the trusts created thereunder have
been determined to be exempt from tax under the provisions of Section 501
of the IRC, and to the knowledge of the Credit Parties, nothing has occurred
that would cause the loss of such qualification or tax-exempt status.  Each Plan is in material compliance with the
applicable provisions of ERISA and the IRC, including the timely filing of all
reports required under the IRC or ERISA, including the statement required by 29
CFR Section 2520.104-23.  Neither
any Credit Party nor ERISA Affiliate has failed to make any material
contribution or pay any amount due as required by either Section 412 of the
IRC or Section 302 of ERISA or the terms of any such Plan.  Neither any Credit Party nor ERISA Affiliate
has engaged in a “prohibited transaction,” as defined in Section 406 of
ERISA and Section 4975 of the IRC, in connection with any Plan, that would
subject any Credit Party to a material tax on prohibited transactions imposed
by Section 502(i) of ERISA or Section 4975 of the IRC.

 

(b)                                 As of the Closing Date, except as
set forth in Schedule 5.14: (i) no Title IV Plan has any
Unfunded Pension Liability; (ii) no ERISA Event or event described in
Section 4062(e)

 

45

 

of ERISA with respect to any Title IV
Plan has occurred or, to any Responsible Officer’s knowledge is reasonably
expected to occur; (iii) there are no pending, or to the knowledge of
Borrower, threatened claims (other than claims for benefits in the normal
course), sanctions, actions or lawsuits, asserted or instituted against any
Plan or any Person as fiduciary or sponsor of any Plan; (iv) no Credit
Party or ERISA Affiliate has incurred or, to any Responsible Officer’s
knowledge reasonably expects to incur any liability as a result of a complete
or partial withdrawal from a Multiemployer Plan; (v) within the last five
years no Title IV Plan of any Credit Party or ERISA Affiliate has been
terminated, whether or not in a “standard termination” as that term is used in
Section 404(b)(1) of ERISA, nor has any Title IV Plan of any Credit Party
or ERISA Affiliate (determined at any time within the past five years) with
Unfunded Pension Liabilities been transferred outside of the “controlled group”
(within the meaning of Section 4001(a)(14) of ERISA) of any Credit Party
or ERISA Affiliate; (vi) Stock of all Credit Parties and their ERISA
Affiliates makes up, in the aggregate, no more than 10% of fair market value of
the assets of any Plan measured on the basis of fair market value as of the
latest valuation date of any Plan; and (vii) no liability under any Title
IV Plan has been satisfied with the purchase of a contract from an insurance
company that is not rated AAA by S&P or an equivalent rating by another
nationally recognized rating agency.

 

5.15                           Brokers.  No broker or finder acting on behalf of any
Credit Party or Affiliate thereof brought about the obtaining, making or
closing of the Loans, and no Credit Party or Affiliate thereof has any
obligation to any Person in respect of any finder’s or brokerage fees in
connection therewith.

 

5.16                           Deposit and Disbursement Accounts.  Schedule 5.16 lists all banks and other financial
institutions at which any Credit Party maintains deposit or other accounts as
of the Closing Date, including any Disbursement Accounts, and such
Schedule correctly identifies the name, address and telephone number of
each depository, the name in which the account is held, a description of the
purpose of the account, and the complete account number therefor.

 

5.17                           Agreements and Other Documents.  As of the Closing Date, each Credit Party has provided to Agent
or its counsel, on behalf of Lenders, accurate and complete copies (or
summaries) of all of the following agreements or documents to which it is
subject and each of which is listed in Schedule 5.17:  supply agreements and purchase agreements
involving transactions in excess of $1,000,000
per annum; leases of Equipment having a remaining term of one year or longer
and requiring aggregate rental and other payments in excess of $500,000  per annum; licenses and
permits held by the Credit Parties, the absence of which could reasonably be expected
to have a Material Adverse Effect; instruments and documents evidencing any
Indebtedness or Guaranteed Indebtedness of such Credit Party and any Lien
granted by such Credit Party with respect thereto; and instruments and
agreements evidencing the issuance of any equity securities, warrants, rights
or options to purchase equity securities of such Credit Party.

 

5.18                           Insurance. 
Schedule 5.18 lists all insurance policies of any nature
maintained, as of the Closing Date, for current occurrences by each Credit
Party, as well as a summary of the key business terms of each such policy such
as deductibles, coverage limits and term of policy.

 

46

 

5.19                           Senior Secured Note Documents and Senior Subordinated
Note Documents.

 

(a)                                  All aspects of the transactions
contemplated by the Senior Secured Note Documents have been effected in all
material respects in accordance with the terms of the Senior Secured Note
Documents and applicable law.

 

(b)                                 The execution and delivery of the
Related Transactions Documents by any Credit Party and the incurrence of
Indebtedness by any Credit Party pursuant to Related Transactions Documents,
including any future advances hereunder, will not violate or result in a
default under any of the Senior Subordinated Note Documents.

 

(c)                                  The Obligations constitute Senior
Indebtedness (as defined in the Senior Subordinated Note Indenture) under the
terms of the Senior Subordinated Note Documents.

 

(d)                                 Liens on the Collateral other than
the Senior Secured Note Primary Collateral granted to the Senior Secured Notes
Trustee pursuant to the Senior Secured Note Documents are second in priority to
the Liens on the Collateral other than the Senior Secured Note Primary
Collateral granted to the Agent, on behalf of itself and Lenders, pursuant to
the Collateral Documents.

 

(e)                                  Agent and Lenders are intended third
party beneficiaries of the provisions of Article 10 (“Intercreditor
Provisions Relating to Credit Agreement”) of the Senior Secured Note Indenture,
with the right and ability to enforce such provisions for their own benefit.

 

5.20                           Compliance. 
Each Credit Party represents and warrants that it is in compliance and
each of its Subsidiaries is in compliance with the requirements of all
applicable laws, rules, regulations and orders of any Governmental Authority
and the obligations, covenants and conditions contained in all Contractual
Obligations other than instances of noncompliance with those laws, rules,
regulations, orders and provisions of such Contractual Obligations which could
not be reasonably expected to have, either individually or in the aggregate, a
Material Adverse Effect.

 

5.21                           Smile-Tote.  The fair
market value of the assets of Smile-Tote, Inc. is less than $650,000 and
Smile-Tote, Inc.’s net income for the most recently completed twelve month
period is less than $30,000.

 

SECTION 6.

DEFAULT, RIGHTS AND REMEDIES

 

6.1                                 Event
of Default.  “Event of Default” shall mean the
occurrence or existence of any one or more of the following:

 

(a)                                  Payment. 
(1) Failure to pay any payment of principal of any Loan when due,
or to repay Revolving Loans to reduce their balance to the maximum amount of
Revolving Loans then permitted to be outstanding or to reimburse any L/C Issuer
for any payment made by such L/C Issuer under or in respect of any Letter of
Credit when due or (2) failure to pay, within

 

47

 

five (5) days after the due date, any
interest on any Loan or any other amount due under this Agreement or any of the
other Loan Documents; or

 

(b)                                 Default in Other Agreements. 
(1) Any Credit Party fails to pay when due or within any applicable
grace period any principal or interest on Indebtedness (other than the Loans)
or any Contingent Obligations or (2) breach or default of any Credit
Party, or the occurrence of any condition or event, with respect to any
Indebtedness (other than the Loans) or any Contingent Obligations, if the effect
of such breach, default or occurrence is to cause or to permit the holder or
holders then to cause, Indebtedness and/or Contingent Obligations having an
aggregate principal amount in excess of $5,000,000 to become or be declared due
prior to their stated maturity; or

 

(c)                                  Breach of Certain Provisions; Breach
of Warranty.  Failure of any Credit Party to perform or
comply with any term or condition contained in (i) Section 2.3 and
the continuation of such failure for five days or (ii) that portion of Section 2.2
relating to the Credit Parties’ obligation to maintain insurance, Section 2.8,
Section 3 or Section 4; or

 

(d)                                 Borrowing Base Certificate; Breach
of Warranty.  Any information contained in any Borrowing
Base Certificate is untrue or incorrect in any respect (other than
(i) inadvertent, immaterial errors not exceeding $1,000,000  in
the aggregate in any Borrowing Base Certificate or (ii) errors occurring
as long as, had such errors not been made, Borrowing Availability would exceed
$0), or any representation or warranty herein or in any Loan Document or in any
written statement, report, financial statement or certificate (other than a
Borrowing Base Certificate) made or delivered to Agent or any Lender by any
Credit Party is untrue or incorrect in any material respect (without
duplication of materiality qualifiers contained therein) as of the date when
made or deemed made; or

 

(e)                                  Other Defaults Under Loan Documents. Any Credit Party defaults in the
performance of or compliance with any term contained in this Agreement or the
other Loan Documents (other than occurrences described in other provisions of
this Section 6.1 for which a different grace or cure period is
specified, or for which no cure period is specified and which constitute
immediate Events of Default) and such default is not remedied or waived within
thirty (30) days after the earlier of (1) receipt by Borrower of notice
from Agent or Requisite Lenders of such default or (2) actual knowledge of
any Responsible Officer of such default; or

 

(f)                                    Involuntary Bankruptcy; Appointment
of Receiver, Etc.  (1) A court enters a decree or order
for relief with respect to any Credit Party in an involuntary case under the
Bankruptcy Code, which decree or order is not stayed or other similar relief is
not granted under any applicable federal or state law; or (2) the
continuance of any of the following events for sixty (60) days unless
dismissed, bonded or discharged: 
(a) an involuntary case is commenced against  any Credit Party, under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or (b) a decree or order of a court for the appointment of a
receiver, liquidator, sequestrator, trustee, custodian or other officer having
similar powers over  any Credit Party, or over all or a substantial
part of its property, is entered; or (c) a receiver, trustee or other
custodian is appointed without the consent of a Credit Party, for all or a
substantial part of the property of  the Credit Party; or

 

48

 

(g)                                 Voluntary Bankruptcy; Appointment of
Receiver, Etc.  (1) any Credit Party commences a
voluntary case under the Bankruptcy Code, or consents to the entry of an order
for relief in an involuntary case or to the conversion of an involuntary case
to a voluntary case under any such law or consents to the appointment of or
taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; or (2) any Credit Party makes any
assignment for the benefit of creditors; or (3) the Board of Directors of
any Credit Party adopts any resolution or otherwise authorizes action to
approve any of the actions referred to in this Section 6.1(g); or

 

(h)                                 Judgment and Attachments. 
Any money judgment, writ or warrant of attachment, or similar process
(other than those described elsewhere in this Section 6.1)
involving an amount in the aggregate at any time in excess of $5,000,000 (in
either case to the extent not adequately covered by insurance in Agent’s sole
discretion as to which the insurance company has acknowledged coverage) is
entered or filed against one or more of the Credit Parties or any of their
respective assets and remains undischarged, unvacated, unbonded or unstayed for
a period of thirty (30) days or in any event later than five (5) Business Days
prior to the date of any proposed sale thereunder; or

 

(i)                                     Dissolution. 
Any order, judgment or decree is entered against any Credit Party
decreeing the dissolution or split up of such Credit Party and such order
remains undischarged or unstayed for a period in excess of fifteen (15) days;
or

 

(j)                                     Solvency. 
Any Credit Party ceases to be Solvent, fails to pay its debts as they
become due or admits in writing its present or prospective inability to pay its
debts as they become due; or

 

(k)                                  Invalidity of Loan Documents. 
Any of the Loan Documents for any reason, other than a partial or full
release in accordance with the terms thereof, ceases to be in full force and
effect or is declared to be null and void, or any Credit Party denies that it
has any further liability under any Loan Documents to which it is party, or
gives notice to such effect; or

 

(l)                                     Change of Control. 
A Change of Control occurs; or

 

(m)                               Subordinated Indebtedness. 
The failure of any Credit Party or any creditor of Borrower or any of
its Subsidiaries to comply with the terms of any subordination or intercreditor
agreement or any subordination provisions of any note or other document running
to the benefit of Agent or Lenders, or if any such document or provisions cease
to be in full force and effect or become null and void or any party denies
further liability under any such document or provides notice to that effect.

 

6.2                                 Suspension or Termination of Commitments.  Upon the occurrence of any Event of Default,
Agent may, and at the request of Requisite Revolving Lenders Agent shall,
without notice or demand, immediately suspend or terminate all or any portion
of Lenders’ obligations to make additional Loans or issue or cause to be issued
Letters of Credit under the Revolving Loan Commitment; provided, that, in the case of an Event of
Default, if the subject condition or event

 

49

 

is waived by Requisite Revolving Lenders or cured
within any applicable grace or cure period, the Revolving Loan Commitment shall
be reinstated.

 

6.3                                 Acceleration
and other Remedies.  Upon the occurrence of any Event of Default
described in Sections 6.1(f) or 6.1(g), the Commitments shall be
immediately terminated and all of the Obligations, including the Revolving
Loans, shall automatically become immediately due and payable, without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other requirements of any kind, all of which are hereby
expressly waived by Borrower, and the Commitments shall thereupon
terminate.  Upon the occurrence and
during the continuance of any other Event of Default, Agent may, and at the
request of the Requisite Lenders, Agent shall, by written notice to Borrower
(a) reduce the aggregate amount of the Commitments from time to time, (b)
declare all or any portion of the Loans and all or any portion of the other
Obligations to be, and the same shall forthwith become, immediately due and
payable together with accrued interest thereon, (c) terminate all or any
portion of the obligations of Agent, L/C Issuers and Lenders to make Revolving
Credit Advances and issue Letters of Credit, (d) demand that Borrower
immediately deliver cash to Agent for the benefit of L/C Issuers (and Borrower
shall then immediately so deliver) in an amount equal to 105% of the aggregate
outstanding Letter of Credit Obligations and (e) exercise any other
remedies which may be available under the Loan Documents or applicable law.  Borrower hereby grants to Agent, for the
benefit of L/C Issuers and each Lender with a participation in any Letters of
Credit then outstanding, a security interest in such cash collateral to secure
all of the Letter of Credit Obligations. 
Any such cash collateral shall be made available by Agent to L/C Issuers
to reimburse L/C Issuers for payments of drafts drawn under such Letters of
Credit and any Fees, Charges and expenses of L/C Issuers with respect to such
Letters of Credit and the unused portion thereof, after all such Letters of
Credit shall have expired or been fully drawn upon, shall be applied to repay
any other Obligations.  After all such
Letters of Credit shall have expired or been fully drawn upon and all
Obligations shall have been satisfied and paid in full, the balance, if any, of
such cash collateral shall be returned to Borrower.  Borrower shall from time to time execute and deliver to Agent
such further documents and instruments as Agent may request with respect to
such cash collateral.

 

6.4                                 Performance
by Agent.  If any Credit Party shall fail to perform
any covenant, duty or agreement contained in any of the Loan Documents, Agent
may, upon the occurrence and during the continuance of an Event of Default,
perform or attempt to perform such covenant, duty or agreement on behalf of
such Credit Party after the expiration of any cure or grace periods set forth
herein.  In such event, such Credit
Party shall, at the request of Agent, promptly pay any amount reasonably
expended by Agent in such performance or attempted performance to Agent,
together with interest thereon at the highest rate of interest in effect upon
the occurrence of an Event of Default as specified in Section 1.2(d)
from the date of such expenditure until paid. 
Notwithstanding the foregoing, it is expressly agreed that Agent shall
not have any liability or responsibility for the performance of any obligation
of any Credit Party under this Agreement or any other Loan Document.

 

6.5                                 Application
of Proceeds.  Notwithstanding anything to the contrary
contained in this Agreement, upon the occurrence and during the continuance of
an Event of Default, (a) Borrower irrevocably waives the right to direct
the application of any and all payments at any

 

50

 

time or times thereafter received by Agent from or on
behalf of Borrower, and Agent shall have the continuing and exclusive right to
apply and to reapply any and all payments received at any time or times after
the occurrence and during the continuance of an Event of Default against the
Obligations in such manner as Agent may deem advisable notwithstanding any
previous application by Agent and (b) in the absence of a specific
determination by Agent with respect thereto, the proceeds of any sale of, or
other realization upon, all or any part of the Collateral shall be
applied:  first, to all Fees,
costs and expenses incurred by or owing to Agent and any Lender with respect to
this Agreement, the other Loan Documents or the Collateral; second, to
accrued and unpaid interest on the Obligations (including any interest which
but for the provisions of the Bankruptcy Code, would have accrued on such
amounts); third, to the principal amount of the Obligations outstanding;
and fourth to any other obligations of Borrower owing to Agent or any
Lender under the Loan Documents.  Any
balance remaining shall be delivered to Borrower or to whomever may be lawfully
entitled to receive such balance or as a court of competent jurisdiction may
direct.

 

SECTION 7.

CONDITIONS TO LOANS

 

The obligations of
Lenders and L/C Issuers to make Loans and to issue or cause to be issued
Letters of Credit are subject to satisfaction of all of the applicable
conditions set forth below.

 

7.1                                 Conditions
to Initial Loans.  The obligations of Lenders and L/C Issuers
to make the initial Loans and to issue or cause to be issued Letters of Credit
on the Closing Date are, in addition to the conditions precedent specified in Section 7.2,
subject to the completion of all of the following conditions in a manner,
unless specifically set forth otherwise, reasonably satisfactory to Agent in
its sole discretion:

 

(a)                                  Closing Checklist. 
The Credit Parties shall have delivered all documents and shall have
satisfied all other conditions precedent listed on the Closing Checklist attached
hereto as Annex C and all actions set forth thereon shall have been
taken, all in form and substance, or in a manner, reasonably satisfactory to
Agent and Lenders.

 

(b)                                 Payment of Fees. 
Borrower shall have paid the Fees required to be paid on the Closing
Date in the respective amounts specified in Section 1.3 (including
the Fees specified in the GE Capital Fee Letter), and shall have reimbursed
Agent for all reasonable and documented out-of-pocket fees, costs and expenses
of closing presented as of the Closing Date.

 

(c)                                  Consummation
of the Related Transactions.  The Agent shall have received fully executed copies of
final and complete copies of each of the other Related Transactions Documents,
each of which shall be in full force and effect in form and substance
reasonably satisfactory to Agent.  The Related Transactions shall, on the
Closing Date, be consummated in accordance with the terms of the Related
Transactions Documents simultaneously with the making of the initial Loans and
the issuance of the Letters of Credit to be issued on the Closing Date.

 

51

 

(d)                                 Note Issuance Proceeds. 
Borrower shall have received not less than $460,000,000 of gross
proceeds from the issuance and sale of the Senior Secured Notes and the Agent
shall have received evidence thereof reasonably satisfactory to the Agent.

 

(e)                                  Initial Draw. 
After giving effect to the payment of, or the creation of a Reserve for,
all fees and expenses related to the Related Transactions, no more than
$80,000,000 in Revolving Loans (including, without duplication, all Letter of
Credit Obligations incurred) will be drawn as of the Closing Date.

 

(f)                                    Legal Due Diligence. 
The Agent shall have completed its legal due diligence.

 

7.2                                 Conditions
to All Loans.  Except as otherwise expressly provided
herein, no Lender or L/C Issuer shall be obligated to fund any Advance or incur
any Letter of Credit Obligation, if, as of the date thereof (the “Funding
Date”):

 

(a)                                  any representation or warranty by
any Credit Party contained herein or in any other Loan Document is untrue or
incorrect in any material respect (without duplication of any materiality
qualifier contained therein) as of such date, except to the extent that such
representation or warranty expressly relates to an earlier date, and Agent or
Requisite Revolving Lenders have determined not to make such Advance or incur
such Letter of Credit Obligation as a result of the fact that such warranty or
representation is untrue or incorrect in any material respect;

 

(b)                                 any Default or Event of Default has
occurred and is continuing or would result after giving effect to any Advance
(or the incurrence of any Letter of Credit Obligation), and Agent or Requisite
Revolving Lenders shall have determined not to make any Advance or incur any
Letter of Credit Obligation as a result of that Default or Event of Default; or

 

(c)                                  (i) any Advance (or the incurrence
of any Letter of Credit Obligations) would exceed Borrowing Availability
(except as provided in Section 1.1(a)(ii)) or (ii) the
outstanding amount of the Revolving Loan would exceed the Borrowing Base less
the Availability Block and less the outstanding amount of the Swing Line
Loan.

 

The request and
acceptance by Borrower of the proceeds of any Advance, the incurrence of any
Letter of Credit Obligations or the conversion or continuation of any Loan
into, or as, a LIBOR Loan shall be deemed to constitute, as of the date
thereof, (i) a representation and warranty by Borrower that the conditions
in this Section 7.2  have
been satisfied and (ii) a reaffirmation by Borrower of the granting and
continuance of Agent’s Liens, on behalf of itself and Lenders, pursuant to the
Collateral Documents.

 

52

 

SECTION 8.

ASSIGNMENT AND PARTICIPATION

 

8.1                                 Assignment
and Participations.

 

(a)                                  Subject to the terms of this Section 8.1,
any Lender may make an assignment to a Qualified Assignee of, or sale of
participations in, at any time or times, the Loan Documents, Loans, Letter of
Credit Obligations and any Commitment or any portion thereof or interest
therein, including any Lender’s rights, title, interests, remedies, powers or
duties thereunder.  Any assignment by a
Lender shall:  (i) require the
consent of Agent (which consent shall not be unreasonably withheld, conditioned
or delayed with respect to a Qualified Assignee) and the execution of an
assignment agreement (an “Assignment Agreement” substantially in the
form attached hereto as Exhibit 8.1 and otherwise in form and substance
reasonably satisfactory to, and acknowledged by, Agent); (ii) be conditioned on
such assignee Lender representing to the assigning Lender and Agent that it is
purchasing the applicable Loans to be assigned to it for its own account, for
investment purposes and not with a view to the distribution thereof; (iii)
after giving effect to any such partial assignment, the assignee Lender shall
have Commitments in an amount at least equal to $5,000,000  and the assigning Lender shall have
retained Commitments in an amount at least equal to $5,000,000; (iv) require a payment to Agent of an assignment fee
of $3,500 and (v) so long as no Event of Default has occurred and is
continuing, require the consent of Borrower, which shall not be unreasonably
withheld, conditioned or delayed and shall be deemed granted if not objected to
within three (3) Business Days following notice thereof to Borrower; provided that no such consent shall be
required for an assignment to a Qualified Assignee.  Notwithstanding the above, Agent may in its sole and absolute
discretion permit any assignment by a Lender to a Person or Persons that are
not Qualified Assignees; provided,
that so long as no Event of Default has occurred and is continuing, such
assignment shall also require Borrower’s consent, which consent shall not be
unreasonably withheld, conditioned or delayed. 
In the case of an assignment by a Lender under this Section 8.1,
the assignee shall have, to the extent of such assignment, the same rights,
benefits and obligations as all other Lenders hereunder.  Each Qualified Assignee or other assignee
shall comply with Section 1.12(d), as a Lender.  The assigning Lender shall be relieved of
its obligations hereunder with respect to its Commitments or assigned portion
thereof from and after the date of such assignment.  Borrower hereby acknowledges and agrees that any assignment shall
give rise to a direct obligation of Borrower to the assignee and that the
assignee shall be considered to be a “Lender.” 
In all instances, each Lender’s liability to make Loans hereunder shall
be several and not joint and shall be limited to such Lender’s Pro Rata Share
of the applicable Commitment.  In the
event Agent or any Lender assigns or otherwise transfers all or any part of the
Obligations, Agent or any such Lender shall so notify Borrower and Borrower
shall, upon the request of Agent or such Lender, execute new Notes in exchange
for the Notes, if any, being assigned. 
Notwithstanding the foregoing provisions of this Section 8.1(a),
(a) any Lender may at any time pledge the Obligations held by it and such
Lender’s rights under this Agreement and the other Loan Documents to a Federal
Reserve Bank, (b) any Lender that is an investment fund may assign the
Obligations held by it and such Lender’s rights under this Agreement and the
other Loan Documents to another investment fund managed by the same investment
advisor or pledge such Obligations and rights to trustee for the benefit of its
investors and (c) any Lender may assign the Obligations to an Affiliate of such
Lender or to a Person that is a Lender prior to the date of such assignment.

 

(b)                                 Any participation by a Lender of all
or any part of its Commitments shall be made with the understanding that all
amounts payable by Borrower hereunder shall be determined as if that Lender had
not sold such participation, and that the holder of any such

 

53

 

participation shall not be entitled
to require such Lender to take or omit to take any action hereunder except actions
directly affecting (i) any reduction in the principal amount of, or interest
rate or Fees payable with respect to, any Loan in which such holder
participates, (ii) any extension of the scheduled amortization of the principal
amount of any Loan in which such holder participates or the final maturity date
thereof, and (iii) any release of all or substantially all of the Collateral
(other than in accordance with the terms of this Agreement, the Collateral
Documents or the other Loan Documents). 
Solely for purposes of Sections 1.11, 1.12, 8.3 and 9.1, Borrower
acknowledges and agrees that a participation shall give rise to a direct
obligation of Borrower to the participant and the participant shall be
considered to be a “Lender,” provided,
that no participant (including a participant that is already a Lender hereunder
at the time of the sale of the participation) shall be entitled to receive any
greater amount pursuant to Section 1.12 with respect to such
participation than that to which the Lender would have been entitled to receive
with respect to such participation if the Lender had not sold such
participation.  Each participant shall
comply with Section 1.12(c) as a Lender.  Except as set forth in the preceding sentence neither Borrower
nor any other Credit Party shall have any obligation or duty to any
participant.  Neither Agent nor any
Lender (other than the Lender selling a participation) shall have any duty to
any participant and may continue to deal solely with the Lender selling a
participation as if no such sale had occurred.

 

(c)                                  Except as expressly provided in this
Section 8.1, no Lender shall, as between Borrower and that Lender,
or Agent and that Lender, be relieved of any of its obligations hereunder as a
result of any sale, assignment, transfer or negotiation of, or granting of
participation in, all or any part of the Loans, the Notes or other Obligations
owed to such Lender.

 

(d)                                 For a period of ninety (90) days
following the Closing Date, each Credit Party shall assist each Lender
permitted to sell assignments or participations under this Section 8.1
as required to enable the assigning or selling Lender to effect any such
assignment or participation, including the execution and delivery of any and
all agreements, notes and other documents and instruments as shall be requested
and the prompt preparation of informational materials for, and the
participation of management in meetings with, potential assignees or
participants, all on a timetable established by Agent in its sole discretion.  For a period of ninety (90) days following
the Closing Date, each Credit Party executing this Agreement shall certify the
correctness, completeness and accuracy of all descriptions of the Credit
Parties and their respective affairs contained in any selling materials
provided by it and all other information provided by it and included in such
materials, except that any Projections delivered by Borrower shall only be
certified by Borrower as having been prepared by Borrower in compliance with
the representations contained in Section 5.5.  In addition, following the 90-day period
referenced above, upon the request of any Lender, each Credit Party shall use
reasonable efforts to assist the Lenders in effectuating assignments or
participations permitted hereunder. Agent shall maintain a “register” for
recording the name, address, commitment and Loans owing to each Lender.  The entries in such register shall be
presumptive evidence of the amounts due and owing to each Lender in the absence
of manifest error.  Borrower, Agent and
each Lender may treat each Person whose name is recorded in such register
pursuant to the terms hereof as a Lender for all purposes of this
Agreement.  Any assignment of any Loan,
whether or not evidenced by a Note, shall be effective only upon appropriate
entries with respect thereto being made in such register.  Any assignment or transfer of all or part of
a Loan evidenced by a Note shall be registered on

 

54

 

such register only upon surrender for
registration of assignment or transfer of the Note evidencing such Loan,
accompanied by a duly executed Assignment Agreement; thereupon one or more new
Notes in the same aggregate principal amount shall be issued to the designated
Assignee, and the old Notes shall be returned by the Administrative Agent to
the Borrower marked “canceled.”  The
register described herein shall be available for inspection by Borrower and any
Lender, at any reasonable time upon reasonable prior notice.

 

(e)                                  A Lender may furnish any information
concerning Credit Parties in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants);
provided that such Lender shall obtain from assignees or participants confidentiality
covenants substantially equivalent to those contained in Section 9.13.

 

(f)                                    So long as no Event of Default has
occurred and is continuing, no Lender shall assign or sell participations in
any portion of its Loans or Commitments to a potential Lender or participant,
if, as of the date of the proposed assignment or sale, the assignee Lender or
participant would be subject to capital adequacy or similar requirements under Section 1.11(a),
increased costs or an inability to fund LIBOR Loans under Section 1.11(b),
or withholding taxes in accordance with Section 1.12.

 

8.2                                 Agent.

 

(a)                                  Appointment. 
Each Lender hereby designates and appoints GE Capital as its Agent under
this Agreement and the other Loan Documents, and each Lender hereby irrevocably
authorizes Agent to execute and deliver the Collateral Documents and to take
such action or to refrain from taking such action on its behalf under the
provisions of this Agreement and the other Loan Documents and to exercise such
powers as are set forth herein or therein, together with such other powers as
are reasonably incidental thereto. 
Agent is authorized and empowered to amend, modify, or waive any
provisions of this Agreement or the other Loan Documents on behalf of Lenders
subject to the requirement that certain of Lenders’ consent be obtained in
certain instances as provided in this Section 8.2 and Section 9.2.  The provisions of this Section 8.2
are solely for the benefit of Agent and Lenders and neither Borrower nor any
other Credit Party shall have any rights as a third party beneficiary of any of
the provisions hereof.  In performing
its functions and duties under this Agreement, Agent shall act solely as agent
of Lenders and does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for Borrower or
any other Credit Party.  Agent may
perform any of its duties hereunder, or under the Loan Documents, by or through
its agents or employees.

 

(b)                                 Agent, as
holder of Liens securing Obligations, for the benefit of itself and each
present and future Lender, and each Lender hereby agree to be, and are, bound
by the provisions of Article 10 (“Intercreditor Provisions Relating
to Credit Agreement”) of the Senior Secured Note Indenture and agree that such
agreement is intended for the benefit
of, and is enforceable as a third-party beneficiary by, the Senior
Secured Notes Trustee, as holder of Liens securing Note Obligations (as defined
in the Senior Secured Note Indenture) for the benefit of each present and future holder of Note
Obligations.  Each Lender hereby
irrevocably authorizes Agent to execute and deliver to the Senior Secured Notes
Trustee a written confirmation of the

 

55

 

agreements set forth in the preceding
sentence and a written agreement to observe and perform each and all of the
obligations of Agent under the provisions of Article 10 (“Intercreditor
Provisions Relating to Credit Agreement”) of the Senior Secured Note Indenture
and to take such action or to refrain from taking such action on its behalf
under the provisions of Article 10 (“Intercreditor Provisions Relating to
Credit Agreement”) of the Senior Secured Note Indenture and to exercise such
powers as are set forth herein or therein, together with such other powers as
are reasonably incidental thereto.

 

(c)                                  Nature of Duties. 
The duties of Agent shall be mechanical and administrative in
nature.  Agent shall not have by reason
of this Agreement a fiduciary relationship in respect of any Lender.   Nothing in this Agreement or any of the
Loan Documents, express or implied, is intended to or shall be construed to
impose upon Agent any obligations in respect of this Agreement or any of the
Loan Documents except as expressly set forth herein or therein.  Each Lender shall make its own independent
investigation of the financial condition and affairs of each Credit Party in
connection with the extension of credit hereunder and shall make its own
appraisal of the creditworthiness of each Credit Party, and Agent shall have no
duty or responsibility, either initially or on a continuing basis, to provide
any Lender with any credit or other information with respect thereto (other
than as expressly required herein).  If
Agent seeks the consent or approval of any Lenders to the taking or refraining
from taking any action hereunder, then Agent shall send notice thereof to each
Lender.  Agent shall promptly notify
each Lender any time that the Requisite Lenders or Requisite Revolving Lenders
have instructed Agent to act or refrain from acting pursuant hereto.

 

(d)                                 Rights, Exculpation, Etc. 
Neither Agent nor any of its officers, directors, employees or agents
shall be liable to any Lender for any action taken or omitted by them hereunder
or under any of the Loan Documents, or in connection herewith or therewith,
except that Agent shall be liable to the extent of its own gross negligence or
willful misconduct as determined by a final non-appealable order by a court of
competent jurisdiction.  Agent shall not
be liable for any apportionment or distribution of payments made by it in good
faith and if any such apportionment or distribution is subsequently determined
to have been made in error the sole recourse of any Lender to whom payment was
due but not made, shall be to recover from other Lenders any payment in excess
of the amount to which they are determined to be entitled (and such other
Lenders hereby agree to return to such Lender any such erroneous payments
received by them).  In no event shall
Agent be liable for punitive, special, consequential, incidental, exemplary or
other similar damages.  In performing
its functions and duties hereunder, Agent shall exercise the same care which it
would in dealing with loans for its own account, but neither Agent nor any of
its agents or representatives shall be responsible to any Lender for any
recitals, statements, representations or warranties herein or for the
execution, effectiveness, genuineness, validity, enforceability,
collectibility, or sufficiency of this Agreement or any of the Loan Documents
or the transactions contemplated thereby, or for the financial condition of any
Credit Party.  Agent shall not be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this Agreement or any of the Loan
Documents or the financial condition of any Credit Party, or the existence or
possible existence of any Default or Event of Default.  Agent may at any time request instructions
from Requisite Lenders or Requisite Revolving Lenders or all affected Lenders
with respect to any actions or approvals which by the terms of this Agreement
or of any

 

56

 

of the Loan Documents Agent is
permitted or required to take or to grant. 
If such instructions are promptly requested, Agent shall be absolutely
entitled to refrain from taking any action or to withhold any approval and
shall not be under any liability whatsoever to any Person for refraining from
any action or withholding any approval under any of the Loan Documents until it
shall have received such instructions from the Requisite Lenders, Requisite
Revolving Lenders or such other portion of the Lenders as shall be prescribed
by this Agreement.  Without limiting the
foregoing, no Lender shall have any right of action whatsoever against Agent as
a result of Agent acting or refraining from acting under this Agreement or any
of the other Loan Documents in accordance with the instructions of Requisite
Lenders, Requisite Revolving Lenders or all affected Lenders, as applicable;
and, notwithstanding the instructions of Requisite Lenders, Requisite Revolving
Lenders or all affected Lenders, as applicable, Agent shall have no obligation
to take any action if it believes, in good faith, that such action is deemed to
be illegal by Agent or exposes Agent to any liability for which it has not
received satisfactory indemnification in accordance with Section 8.2(f).

 

(e)                                  Reliance. 
Agent shall be entitled to rely, and shall be fully protected in
relying, upon any written or oral notices, statements, certificates, orders or
other documents or any telephone message or other communication (including any
writing, telex, fax or telegram) believed by it in good faith to be genuine and
correct and to have been signed, sent or made by the proper Person, and with
respect to all matters pertaining to this Agreement or any of the Loan
Documents and its duties hereunder or thereunder.  Agent shall be entitled to rely upon the advice of legal counsel,
independent accountants, and other experts selected by Agent in its sole
discretion.

 

(f)                                    Indemnification. 
Lenders will reimburse and indemnify Agent for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including, without limitation, attorneys’ fees and expenses),
advances or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against Agent in any way relating to or arising
out of this Agreement or any of the Loan Documents or any action taken or
omitted by Agent under this Agreement or any of the Loan Documents, in
proportion to each Lender’s Pro Rata Share, but only to the extent that any of
the foregoing is not reimbursed by Borrower; provided, however,
that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, advances or disbursements to the extent resulting from Agent’s gross
negligence or willful misconduct as determined by a final non-appealable order
by a court of competent jurisdiction. 
If any indemnity furnished to Agent for any purpose shall, in the
opinion of Agent, be insufficient or become impaired, Agent may call for
additional indemnity and cease, or not commence, to do the acts indemnified
against even if so directed by the Requisite Lenders, Requisite Revolving
Lenders or such other portion of the Lenders as shall be prescribed by this
Agreement until such additional indemnity is furnished.  The obligations of Lenders under this Section 8.2(f)
shall survive the payment in full of the Obligations and the termination of
this Agreement.

 

(g)                                 GE Capital Individually. 
With respect to its Commitments hereunder, GE Capital shall have and may
exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender.  The

 

57

 

terms “Lenders”, “Requisite Lenders”,
“Requisite Revolving Lenders” or any similar terms shall, unless the context
clearly otherwise indicates, include GE Capital in its individual capacity as a
Lender or one of the Requisite Lenders or Requisite Revolving Lenders.  GE Capital, either directly or through
strategic affiliations, may lend money to, acquire equity or other ownership
interests in, provide advisory services to and generally engage in any kind of
banking, trust or other business with any Credit Party as if it were not acting
as Agent pursuant hereto and without any duty to account therefor to
Lenders.  GE Capital, either directly or
through strategic affiliations, may accept fees and other consideration from
any Credit Party for services in connection with this Agreement or otherwise
without having to account for the same to Lenders.

 

(h)                                 Successor Agent.

 

(i)                                     Resignation. 
Agent may resign from the performance of all its agency functions and
duties hereunder at any time by giving at least thirty (30) Business Days’
prior written notice to Borrower and Lenders. 
Such resignation shall take effect upon the acceptance by a successor
Agent of appointment pursuant to clause (ii) below or as otherwise provided in
clause (ii) below.

 

(ii)                                  Appointment of Successor. 
Upon any such notice of resignation pursuant to clause (i) above,
Requisite Lenders shall appoint a successor Agent which, unless an Event of
Default has occurred and is continuing, shall be reasonably acceptable to
Borrower.  If a successor Agent shall
not have been so appointed within the thirty (30) Business Day period referred
to in clause (i) above, the retiring Agent, upon notice to Borrower, shall then
appoint a successor Agent who shall serve as Agent until such time, if any, as
Requisite Lenders appoint a successor Agent as provided above.

 

(iii)                               Successor Agent. 
Upon the acceptance of any appointment as Agent under the Loan Documents
by a successor Agent, such successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under the Loan Documents. 
After any retiring Agent’s resignation as Agent, the provisions of this Section 8.2
shall continue to inure to its benefit as to any actions taken or omitted to be
taken by it in its capacity as Agent.

 

(i)                                     Collateral Matters.

 

(i)                                     Release of Collateral. 
Lenders hereby irrevocably authorize Agent, at its option and in its
discretion, to release any Lien granted to or held by Agent upon any Collateral
(x) upon termination of the Commitments and payment and satisfaction of
all Obligations (other than contingent indemnification obligations to the
extent no claims giving rise thereto have been asserted) or
(y) constituting property being sold or disposed of if Borrower certifies
to Agent that the sale or disposition is made in compliance with the provisions
of this Agreement (and Agent may rely in good faith conclusively on any such
certificate, without further inquiry).

 

58

 

(ii)                                  Confirmation of Authority; Execution
of Releases.  Without in any manner limiting Agent’s
authority to act without any specific or further authorization or consent by
Lenders (as set forth in Section 8.2(i)(i)), each Lender agrees to
confirm in writing, upon request by Agent or Borrower, the authority to release
any Collateral conferred upon Agent under clauses (x) and (y) of Section 8.2(i)(i).  Upon receipt by Agent of any required
confirmation from the Requisite Lenders of its authority to release any
particular item or types of Collateral, and upon at least five (5) Business
Days’ prior written request by Borrower, Agent shall (and is hereby irrevocably
authorized by Lenders to) execute such documents as may be necessary to
evidence the release of the Liens granted to Agent upon such Collateral; provided, however, that (x) Agent shall not
be required to execute any such document on terms which, in Agent’s opinion,
would expose Agent to liability or create any obligation or entail any
consequence other than the release of such Liens without recourse or warranty,
and (y) such release shall not in any manner discharge, affect or impair
the Obligations or any Liens upon (or obligations of any Credit Party, in
respect of), all interests retained by any Credit Party, including the proceeds
of any sale, all of which shall continue to constitute part of the Collateral.

 

(iii)                               Absence of Duty. 
Agent shall have no obligation whatsoever to any Lender or any other
Person to assure that the property covered by the Collateral Documents exists
or is owned by Borrower or any other Credit Party or is cared for, protected or
insured or has been encumbered or that the Liens granted to Agent have been
properly or sufficiently or lawfully created, perfected, protected or enforced
or are entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent in this Section 8.2(i) or in any of the Loan
Documents, it being understood and agreed that in respect of the property
covered by the Collateral Documents or any act, omission or event related
thereto, Agent may act in any manner it may deem reasonably appropriate, in its
discretion, given Agent’s own interest in property covered by the Collateral
Documents as one of the Lenders and that Agent shall have no duty or liability
whatsoever to any of the other Lenders, provided,
that Agent shall exercise the same care which it would in dealing with loans
for its own account.

 

(j)                                     Agency for Perfection. 
Agent and each Lender hereby appoint each other Lender as agent for the
purpose of perfecting Agent’s security interest in assets which, in accordance
with the Code in any applicable jurisdiction, can be perfected by possession or
control.  Should any Lender (other than
Agent) obtain possession or control of any such assets, such Lender shall
notify Agent thereof, and, promptly upon Agent’s request therefor, shall
deliver such assets to Agent or in accordance with Agent’s instructions or
transfer control to Agent in accordance with Agent’s instructions.  Each Lender agrees that it will not have any
right individually to enforce or seek to enforce any Collateral Document or to
realize upon any collateral security for the Loans unless instructed to do so
by Agent in writing, it being understood and agreed that such rights and
remedies may be exercised only by Agent.

 

(k)                                  Notice of Default. 
Agent shall not be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default except with respect to defaults in the
payment of principal, interest and Fees required to be paid to Agent for the
account of Lenders, unless Agent shall have received written notice from a
Lender or Borrower referring to this

 

59

 

Agreement, describing such Default or
Event of Default and stating that such notice is a “notice of default”.  Agent will use reasonable efforts to notify
each Lender of its receipt of any such notice, unless such notice is with
respect to defaults in the payment of principal, interest and fees, in which
case Agent will notify each Lender of its receipt of such notice.  Agent shall take such action with respect to
such Default or Event of Default as may be requested by Requisite Lenders in
accordance with Section 6. 
Unless and until Agent has received any such request, Agent may (but
shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable or in the best interests of Lenders.

 

(l)                                     Lender Actions Against Collateral.

 

Each Lender agrees that
it will not take any action, nor institute any actions or proceedings, with
respect to the Loans, against Borrower or any other Credit Party hereunder or
under the other Loan Documents or against any of the Real Estate encumbered by
Mortgages without the consent of the Requisite Lenders.  With respect to any action by Agent to
enforce the rights and remedies of Agent and the Lenders under this Agreement
and the other Loan Documents, each Lender hereby consents to the jurisdiction
of the court in which such action is maintained, and agrees to deliver its
Notes to Agent to the extent necessary to enforce the rights and remedies of
Agent for the benefit of the Lenders under the Mortgages in accordance with the
provisions hereof.

 

8.3                                 Set
Off and Sharing of Payments.  In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
during the continuance of any Event of Default, each Lender is hereby
authorized by Borrower at any time or from time to time, with reasonably prompt
subsequent notice to Borrower (any prior or contemporaneous notice being hereby
expressly waived) to set off and to appropriate and to apply any and all
(A) balances held by such Lender at any of its offices for the account of
Borrower (regardless of whether such balances are then due to Borrower), and
(B) other property at any time held or owing by such Lender to or for the
credit or for the account of Borrower, against and on account of any of the
Obligations; except that no Lender shall exercise any such right without the
prior written consent of Agent.  Any
Lender exercising a right to set off shall purchase for cash (and the other
Lenders shall sell) interests in each of such other Lender’s Pro Rata Share of
the Obligations as would be necessary to cause all Lenders to share the amount
so set off with each other Lender in accordance with their respective Pro Rata
Shares.  Borrower agrees, to the fullest
extent permitted by law, that any Lender may exercise its right to set off with
respect to amounts in excess of its Pro Rata Share of the Obligations and upon
doing so shall deliver such amount so set off to the Agent for the benefit of
all Lenders in accordance with their Pro Rata Shares.

 

8.4                                 Disbursement
of Funds.  Agent may, on behalf of Lenders, disburse
funds to Borrower for Loans requested. 
Each Lender shall reimburse Agent on demand for all funds disbursed on
its behalf by Agent, or if Agent so requests, each Lender will remit to Agent
its Pro Rata Share of any Loan before Agent disburses same to Borrower.  If Agent elects to require that each Lender
make funds available to Agent prior to a disbursement by Agent to Borrower,
Agent shall advise each Lender by telephone or fax of the amount of such
Lender’s Pro Rata Share of the Loan requested by Borrower no later than 1:00
p.m. (New York time) on the Funding Date applicable thereto, and each such
Lender shall pay Agent such Lender’s Pro Rata Share of such

 

60

 

requested Loan, in same day funds, by wire transfer to
Agent’s account on such Funding Date. 
If any Lender fails to pay the amount of its Pro Rata Share within one
(1) Business Day after Agent’s demand, Agent shall promptly notify Borrower,
and Borrower shall immediately repay such amount to Agent.  Any repayment required pursuant to this Section 8.4
shall be without premium or penalty. 
Nothing in this Section 8.4 or elsewhere in this Agreement
or the other Loan Documents, including the provisions of Section 8.5,
shall be deemed to require Agent to advance funds on behalf of any Lender or to
relieve any Lender from its obligation to fulfill its commitments hereunder or
to prejudice any rights that Agent or Borrower may have against any Lender as a
result of any default by such Lender hereunder.

 

8.5                                 Disbursements of Advances; Payment.

 

(a)                                  Advances; Payments.

 

(i)                                     Revolving Lenders shall refund or
participate in the Swing Line Loan in accordance with clauses (iii) and (iv) of
Section 1.1(c).  If the
Swing Line Lender declines to make a Swing Line Loan or if Swing Line
Availability is zero, Agent shall notify Revolving Lenders, promptly after
receipt of a Notice of Revolving Credit Advance and in any event prior to 1:00
p.m. (New York time)  on the date such Notice of a Revolving
Credit Advance is received, by fax, telephone or other similar form of
transmission.  Each Revolving Lender
shall make the amount of such Lender’s Pro Rata Share of such Revolving Credit
Advance available to Agent in same day funds by wire transfer to Agent’s
account as set forth in Section 1.1(e) not later than 3:00 p.m.
(New York time)  on the requested Funding Date in the case of an Index Rate
Loans and not later than 11:00 a.m. (New York time)  on the requested Funding
Date in the case of a LIBOR Loan.  After
receipt of such wire transfers (or, in the Agent’s sole discretion, before
receipt of such wire transfers), subject to the terms hereof, Agent shall make
the requested Revolving Credit Advance to Borrower.  All payments by each Revolving Lender shall be made without
setoff, counterclaim or deduction of any kind.

 

(ii)                                  At least once each calendar week or
more frequently at Agent’s election (each, a “Settlement Date”), Agent
shall advise each Lender by telephone or fax of the amount of such Lender’s Pro
Rata Share of principal, interest and Fees paid for the benefit of Lenders with
respect to each applicable Loan. 
Provided that each Lender has funded all payments and Advances required
to be made by it and purchased all participations required to be purchased by
it under this Agreement and the other Loan Documents as of such Settlement
Date, Agent shall pay to each Lender such Lender’s Pro Rata Share of principal,
interest and Fees paid by Borrower since the previous Settlement Date for the
benefit of such Lender on the Loans held by it. Such payments shall be made by
wire transfer to such Lender’s account (as specified by such Lender in Annex
E or the applicable Assignment Agreement) not later than 2:00 p.m. (New
York time)on the next Business Day following each Settlement Date. To the extent
that any Lender (a “Non-Funding Lender”) has failed to fund all such
payments and Advances or failed to fund the purchase of all such
participations, Agent shall be entitled to set off the funding shortfall
against that Non-Funding Lender’s Pro Rata Share of all payments received
from Borrower.

 

(b)                                 Availability of Lender’s Pro Rata
Share.  Agent may assume that each Revolving Lender
will make its Pro Rata Share of each Revolving Credit Advance available to

 

61

 

Agent on each Funding Date.  If such Pro Rata Share is not, in fact, paid
to Agent by such Revolving Lender when due, Agent will be entitled to recover
such amount on demand from such Revolving Lender without setoff, counterclaim
or deduction of any kind.  If any
Revolving Lender fails to pay the amount of its Pro Rata Share forthwith upon
Agent’s demand, Agent shall promptly notify Borrower and Borrower shall
immediately repay such amount to Agent. 
Nothing in this Section 8.5(b) or elsewhere in this
Agreement or the other Loan Documents shall be deemed to require Agent to
advance funds on behalf of any Revolving Lender or to relieve any Revolving
Lender from its obligation to fulfill its Commitments hereunder or to prejudice
any rights that Borrower may have against any Revolving Lender as a result of
any default by such Revolving Lender hereunder.  To the extent that Agent advances funds to Borrower on behalf of
any Revolving Lender and is not reimbursed therefor on the same Business Day as
such Advance is made, Agent shall be entitled to retain for its account all
interest accrued on such Advance until reimbursed by the applicable Revolving
Lender.

 

(c)                                  Return of Payments.

 

(i)                                     If Agent pays an amount to a Lender
under this Agreement in the belief or expectation that a related payment has
been or will be received by Agent from Borrower and such related payment is not
received by Agent, then Agent will be entitled to recover such amount from such
Lender on demand without setoff, counterclaim or deduction of any kind.

 

(ii)                                  If Agent determines at any time that
any amount received by Agent under this Agreement must be returned to Borrower
or paid to any other Person pursuant to any insolvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement or any other Loan
Document, Agent will not be required to distribute any portion thereof to any
Lender.  In addition, each Lender will
repay to Agent on demand any portion of such amount that Agent has distributed
to such Lender, together with interest at such rate, if any, as Agent is
required to pay to Borrower or such other Person, without setoff, counterclaim
or deduction of any kind.

 

(d)                                 Non-Funding Lenders. 
The failure of any Non-Funding Lender to make any Revolving Credit
Advance or any payment required by it hereunder, or to purchase any
participation in any Swing Line Loan to be made or purchased by it on the date
specified therefor shall not relieve any other Lender (each such other
Revolving Lender, an “Other Lender”) of its obligations to make such
Advance or purchase such participation on such date, but neither any Other
Lender nor Agent shall be responsible for the failure of any Non-Funding Lender
to make an Advance, purchase a participation or make any other payment required
hereunder.  Notwithstanding anything set
forth herein to the contrary, a Non-Funding Lender shall not have any voting or
consent rights under or with respect to any Loan Document or constitute a
“Lender” or a “Revolving Lender” (or be included in the calculation of
“Requisite Lenders” or “Requisite Revolving Lenders” hereunder) for any voting
or consent rights under or with respect to any Loan Document.

 

(e)                                  Dissemination of Information. 
Agent shall use reasonable efforts to provide Lenders with any notice of
Default or Event of Default received by Agent from, or delivered by Agent to,
any Credit Party, with notice of any Event of Default of which Agent has

 

62

 

actually become aware and with notice
of any action taken by Agent following any Event of Default; provided, that
Agent shall not be liable to any Lender for any failure to do so.

 

(f)                                    Actions in Concert. 
Anything in this Agreement to the contrary notwithstanding, each Lender
hereby agrees with each other Lender that no Lender shall take any action to
protect or enforce its rights arising out of this Agreement or the Notes
(including exercising any rights of setoff) without first obtaining the prior
written consent of Agent or Requisite Lenders, it being the intent of Lenders
that any such action to protect or enforce rights under this Agreement and the
Notes shall be taken in concert and at the direction or with the consent of
Agent or Requisite Lenders.  Agent is
authorized to issue all notices to be issued by or on behalf of the Lenders
with respect to any Subordinated Debt.

 

SECTION 9.

MISCELLANEOUS

 

9.1                                 Indemnities. 
Borrower agrees to indemnify, pay, and hold Agent, each Lender, each L/C
Issuer and their respective officers, directors, employees, agents, and
attorneys (the “Indemnitees”) harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs and expenses (including all reasonable fees and expenses
of counsel to such Indemnitees) of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Indemnitee as a result of such
Indemnitees being a party to this Agreement or the transactions consummated
pursuant to this Agreement or otherwise relating to any of the Related
Transactions; provided, that Borrower shall have no obligation to an
Indemnitee hereunder with respect to liabilities to the extent resulting from
the gross negligence or willful misconduct of that Indemnitee as determined by
a court of competent jurisdiction.  If
and to the extent that the foregoing undertaking may be unenforceable for any
reason, Borrower agrees to make the maximum contribution to the payment and
satisfaction thereof which is permissible under applicable law.

 

9.2                                 Amendments
and Waivers.

 

(a)                                  Except for actions expressly
permitted to be taken by Agent, no amendment, modification, termination or
waiver of any provision of this Agreement or any other Loan Document, or any
consent to any departure by any Credit Party therefrom, shall in any event be
effective unless the same shall be in writing and signed by Borrower, and by
Requisite Lenders, Requisite Revolving Lenders, or all affected Lenders, as
applicable.  Except as set forth in
clauses (b) and (c) below, all such amendments, modifications, terminations or
waivers requiring the consent of any Lenders shall require the written consent
of Requisite Lenders.

 

(b)                                 No amendment, modification,
termination or waiver of or consent with respect to any provision of this
Agreement that increases the percentage advance rates set forth in the
definition of the Borrowing Base or that makes less restrictive the
nondiscretionary criteria for exclusion from Eligible Accounts, Eligible
Inventory, Eligible In-Transit Inventory, Eligible Processor Inventory,
Eligible Returned Inventory and Eligible Remnant Inventory set forth in Exhibit
4.2(d), shall be effective unless the same shall be in writing and signed
by Agent, Requisite Revolving Lenders and Borrower.  No amendment, modification, termination or

 

63

 

waiver of or consent with respect to
any provision of this Agreement that waives compliance with the conditions
precedent set forth in Section 7.2 to the making of any Loan or the
incurrence of any Letter of Credit Obligations shall be effective unless the
same shall be in writing and signed by Agent, Requisite Revolving Lenders and
Borrower.  Notwithstanding anything
contained in this Agreement to the contrary, no waiver or consent with respect
to any Default or any Event of Default shall be effective for purposes of the
conditions precedent to the making of Loans or the incurrence of Letter of
Credit Obligations set forth in Section 7.2 unless the same shall
be in writing and signed by Agent, Requisite Revolving Lenders and Borrower.

 

(c)                                  No amendment, modification,
termination or waiver shall, unless in writing and signed by Agent and each
Lender directly affected thereby: 
(i) increase the principal amount of any Lender’s Commitment (which
action shall be deemed to directly affect only the applicable Lenders);
(ii) reduce the principal of, rate of interest on or Fees payable with
respect to any Loan or Letter of Credit Obligations of any affected Lender;
(iii) extend the final maturity date of the principal amount of any Loan
of any affected Lender; (iv) waive, forgive, defer, extend or postpone any
payment of interest or Fees as to any affected Lender (which action shall be
deemed only to affect those Lenders to whom such payments are made);
(v) except as otherwise permitted by the Loan Documents, release any
Guaranty or, except as otherwise permitted in Section 3.7, release
Collateral with a book value exceeding 5% of the book value of all assets in
the aggregate in any one (1) year (which action shall be deemed to directly
affect all Lenders); (vi) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Loans that shall be required for
Lenders or any of them to take any action hereunder; and (vii) amend or
waive this Section 9.2 or the definitions of the terms “Requisite
Lenders” or “Requisite Revolving Lenders” insofar as such definitions affect
the substance of this Section 9.2. 
Furthermore, no amendment, modification, termination or waiver affecting
the rights or duties of Agent or L/C Issuers under this Agreement or any other
Loan Document shall be effective unless in writing and signed by Agent or L/C
Issuers, as the case may be, in addition to Lenders required hereinabove to
take such action.  Each amendment,
modification, termination or waiver shall be effective only in the specific
instance and for the specific purpose for which it was given.  No amendment, modification, termination or
waiver shall be required for Agent to take additional Collateral pursuant to
any Loan Document.  No amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the holder of that Note.  No notice to or demand on any Credit Party
in any case shall entitle such Credit Party or any other Credit Party to any
other or further notice or demand in similar or other circumstances.  Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 9.2
shall be binding upon each holder of the Notes at the time outstanding and each
future holder of the Notes.

 

9.3                                 Notices.  Any notice or other communication required
shall be in writing addressed to the respective party as set forth below and
may be personally served, telecopied, sent by overnight courier service or U.S.
mail and shall be deemed to have been given: 
(a) if delivered in person, when delivered; (b) if delivered
by fax, on the date of transmission if transmitted on a Business Day before
4:00 p.m. (New York Time);  (c) if delivered by overnight courier, one
(1) Business Day after delivery to the courier properly addressed; or
(d) if delivered by U.S. mail, four (4) Business Days after deposit with
postage prepaid and properly addressed.

 

64

 

Notices shall be
addressed as follows:

 

	
  If to Borrower:

  	
   

  	
  PLAYTEX PRODUCTS, INC.

  
	
   

  	
   

  	
  300 Nyala Farms Road

  
	
   

  	
   

  	
  Westport, Connecticut
  06880

  
	
   

  	
   

  	
  ATTN:  Glenn Forbes

  
	
   

  	
   

  	
  Fax:  (203) 341-4260

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  HAAS WHEAT & PARTNERS,
  L.P.

  
	
   

  	
   

  	
  300 Crescent Court,
  Suite 1700

  
	
   

  	
   

  	
  Dallas, Texas 75201

  
	
   

  	
   

  	
  ATTN:  Todd Robichaux

  
	
   

  	
   

  	
  Fax:  (214) 871-8316

  
	
   

  	
   

  	
   

  
	
  If to Agent or GE
  Capital:

  	
   

  	
  GENERAL ELECTRIC
  CORPORATION

  
	
   

  	
   

  	
  500 W. Monroe Street

  
	
   

  	
   

  	
  Chicago, Illinois 60661

  
	
   

  	
   

  	
  ATTN: Playtex Account Officer

  
	
   

  	
   

  	
  Fax:  (312) 441-6158

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  GENERAL ELECTRIC
  CAPITAL CORPORATION

  
	
   

  	
   

  	
  GE Global Sponsor
  Finance

  
	
   

  	
   

  	
  201 Merritt 7

  
	
   

  	
   

  	
  6th Floor

  
	
   

  	
   

  	
  Norwalk, CT 06856-5201

  
	
   

  	
   

  	
  ATTN:  Corporate Counsel

  
	
   

  	
   

  	
  Commercial
  Finance – GE Global Sponsor Finance

  
	
   

  	
   

  	
  Fax:  (203) 956-4216

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GENERAL ELECTRIC
  CAPITAL

  
	
   

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
  500 West Monroe Street

  
	
   

  	
   

  	
  Chicago, Illinois 60661

  
	
   

  	
   

  	
  ATTN:  Corporate Counsel

  
	
   

  	
   

  	
  Commercial
  Finance – GE Global Sponsor Finance

  
	
   

  	
   

  	
  Fax:  (312) 441-6876

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LATHAM & WATKINS

  
	
   

  	
   

  	
  5800 Sears Tower

  

 

65

 

	
   

  	
   

  	
  Chicago, Illinois  60606

  
	
   

  	
   

  	
  ATTN:  Jeffrey G. Moran

  
	
   

  	
   

  	
  Fax:  (312) 993-9767

  
	
   

  	
   

  	
   

  
	
  If to a Lender:

  	
   

  	
  To the address set
  forth on the signature page hereto or in the applicable Assignment Agreement

  

 

9.4                                 Failure or Indulgence Not Waiver; Remedies Cumulative.  No failure or delay on the part of Agent or
any Lender to exercise, nor any partial exercise of, any power, right or
privilege hereunder or under any other Loan Documents shall impair such power,
right, or privilege or be construed to be a waiver of any Default or Event of
Default.  All rights and remedies
existing hereunder or under any other Loan Document are cumulative to and not
exclusive of any rights or remedies otherwise available.

 

9.5                                 Marshaling;
Payments Set Aside. 
Neither Agent nor any Lender shall be under any obligation to marshal
any assets in payment of any or all of the Obligations.  To the extent that Borrower makes payment(s)
or Agent enforces its Liens or Agent or any Lender exercises its right of
set-off, and such payment(s) or the proceeds of such enforcement or set-off is
subsequently invalidated, declared to be fraudulent or preferential, set aside,
or required to be repaid by anyone, then to the extent of such recovery, the
Obligations or part thereof originally intended to be satisfied, and all Liens,
rights and remedies therefor, shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or set-off had
not occurred.

 

9.6                                 Severability. 
The invalidity, illegality, or unenforceability in any jurisdiction of
any provision under the Loan Documents shall not affect or impair the remaining
provisions in the Loan Documents.

 

9.7                                 Lenders’ Obligations Several; Independent Nature of
Lenders’ Rights. 
The obligation of each Lender hereunder is several and not joint and no
Lender shall be responsible for the obligation or commitment of any other
Lender hereunder.  In the event that any
Lender at any time should fail to make a Loan as herein provided, the Lenders,
or any of them, at their sole option, may make the Loan that was to have been
made by the Lender so failing to make such Loan.  Nothing contained in any Loan Document and no action taken by
Agent or any Lender pursuant hereto or thereto shall be deemed to constitute
Lenders to be a partnership, an association, a joint venture or any other kind
of entity.  The amounts payable at any
time hereunder to each Lender shall be a separate and independent debt.

 

9.8                                 Headings. 
Section and subsection headings are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purposes or be given substantive effect.

 

9.9                                 Applicable
Law.  THIS AGREEMENT AND EACH OF THE OTHER LOAN
DOCUMENTS WHICH DOES NOT EXPRESSLY SET FORTH APPLICABLE LAW SHALL BE GOVERNED
BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE

 

66

 

WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.

 

9.10                           Successors
and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns except that Borrower may not assign its rights or obligations hereunder
without the written consent of all Lenders.

 

9.11                           No Fiduciary Relationship; Limited Liability.  No provision in the Loan Documents and no
course of dealing between the parties shall be deemed to create any fiduciary
duty owing to any Credit Party by Agent or any Lender.  Credit Parties agree that neither Agent nor
any Lender shall have liability to any Credit Party (whether sounding in tort,
contract or otherwise) for losses suffered by Credit Parties 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 and to the extent that it is
determined that such losses resulted from the gross negligence or willful
misconduct of the party from which recovery is sought as determined by a final
non-appealable order by a court of competent jurisdiction.  Neither Agent nor any Lender shall have any
liability with respect to, and each Credit Party hereby waives, releases and
agrees not to sue for, any special, indirect or consequential damages suffered
by such Credit Party in connection with, arising out of, or in any way related
to the Loan Documents or the transactions contemplated thereby.

 

9.12                           Construction.  Agent, each Lender, Borrower and each other
Credit Party acknowledge that each of them has had the benefit of legal counsel
of its own choice and has been afforded an opportunity to review the Loan
Documents with its legal counsel and that the Loan Documents shall be construed
as if jointly drafted by Agent, each Lender, Borrower and each other Credit
Party.

 

9.13                           Confidentiality. 
Agent and each Lender agree to exercise their best efforts to keep
confidential any non-public information delivered pursuant to the Loan
Documents and not to disclose such information to Persons other than to
potential assignees or participants or to Persons employed by or engaged by
Agent a Lender or a Lender’s assignees or participants including attorneys,
auditors, professional consultants, rating agencies, insurance industry
associations and portfolio management services who agree to maintain the
confidentiality of such information in accordance with this Section 9.13.  The confidentiality provisions contained in
this Section 9.13 shall not apply to disclosures (i) required
to be made by Agent or any Lender to any regulatory or governmental agency or
pursuant to legal process or (ii) consisting of general portfolio
information that does not identify Borrower. 
The obligations of Agent and Lenders under this Section 9.13
shall supersede and replace the obligations of Agent and Lenders under any
confidentiality agreement in respect of this financing executed and delivered
by Agent or any Lender prior to the date hereof.

 

9.14                           CONSENT
TO JURISDICTION.  BORROWER, CREDIT PARTIES, AGENT AND LENDERS
HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN
NEW YORK COUNTY, STATE OF NEW YORK AND IRREVOCABLY AGREE THAT, SUBJECT TO
AGENT’S OR BORROWER’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO

 

67

 

THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS  SHALL
BE LITIGATED IN SUCH COURTS.  BORROWER,
CREDIT PARTIES, AGENT AND LENDERS EXPRESSLY SUBMIT AND CONSENT TO THE
JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OF FORUM NON
CONVENIENS.  BORROWER, CREDIT PARTIES,
AGENT AND LENDERS HEREBY WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS AND
AGREE THAT ALL SUCH SERVICE OF PROCESS  MAY BE MADE UPON BORROWER, CREDIT PARTIES,
AGENT AND LENDERS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
ADDRESSED TO SUCH PARTY, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE  SO
MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.  IN ANY
LITIGATION, TRIAL, ARBITRATION OR OTHER DISPUTE RESOLUTION PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, ALL DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS OF BORROWER, CREDIT PARTIES, AGENT AND LENDERS OR ANY OF THEIR AFFILIATES SHALL BE DEEMED TO BE
EMPLOYEES OR MANAGING AGENTS OF BORROWER OR SUCH CREDIT PARTIES OR SUCH AGENT
OR LENDERS FOR PURPOSES OF ALL APPLICABLE LAW OR COURT RULES REGARDING THE
PRODUCTION OF WITNESSES BY NOTICE FOR TESTIMONY (WHETHER IN A DEPOSITION, AT
TRIAL OR OTHERWISE).  BORROWER, CREDIT
PARTIES, AGENT AND LENDERS AGREE
THAT THE OTHER PARTY’S COUNSEL IN ANY SUCH DISPUTE RESOLUTION PROCEEDING MAY
EXAMINE ANY OF THESE INDIVIDUALS AS IF UNDER CROSS-EXAMINATION AND THAT ANY
DISCOVERY DEPOSITION OF ANY OF THEM MAY BE USED IN THAT PROCEEDING AS IF IT
WERE AN EVIDENCE DEPOSITION.  BORROWER, CREDIT
PARTIES, AGENT AND LENDERS IN ANY EVENT
WILL USE ALL COMMERCIALLY REASONABLE EFFORTS TO PRODUCE IN ANY SUCH DISPUTE
RESOLUTION PROCEEDING, AT THE TIME AND IN THE MANNER REQUESTED BY ANY OTHER
PARTY, ALL PERSONS, DOCUMENTS (WHETHER IN TANGIBLE, ELECTRONIC OR OTHER FORM)
OR OTHER THINGS UNDER THEIR CONTROL AND RELATING TO THE DISPUTE; PROVIDED, THAT
IN NO EVENT SHALL COMPLIANCE WITH THIS SENTENCE BE REQUIRED IF SUCH COMPLIANCE
COULD REASONABLY BE EXPECTED TO RESULT IN ANY WAIVER OF ANY ATTORNEY-CLIENT
PRIVILEGE, WORK PRODUCT PRIVILEGE OR ANY OTHER PRIVILEGE WHICH MAY BE AVAILABLE
UNDER APPLICABLE LAW.

 

9.15                           WAIVER
OF JURY TRIAL.  BORROWER, CREDIT PARTIES, AGENT AND EACH
LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.  BORROWER, CREDIT PARTIES,
AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN
ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.  BORROWER, CREDIT PARTIES, AGENT AND EACH
LENDER WARRANT AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING
THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS.

 

68

 

9.16                           Survival of Warranties and Certain Agreements.  All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement, the making of the Loans, issuances of Letters of Credit and the execution
and delivery of the Notes. 
Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Borrower set forth in Sections 1.3(e),
1.11, 1.12, and 9.1 shall survive the repayment of the Obligations and the
termination of this Agreement.

 

9.17                           Entire
Agreement.  This Agreement, the Notes and the other Loan
Documents embody the entire agreement among the parties hereto and supersede
all prior commitments, agreements, representations, and understandings, whether
oral or written, relating to the subject matter hereof, and may not be
contradicted or varied by evidence of prior, contemporaneous, or subsequent
oral agreements or discussions of the parties hereto.  All Exhibits, Schedules and Annexes referred to herein are incorporated
in this Agreement by reference and constitute a part of this Agreement.

 

9.18                           Counterparts;
Effectiveness.  This Agreement and any amendments, waivers,
consents or supplements may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one in the same instrument.  This Agreement shall become effective upon
the execution of a counterpart hereof by each of the parties hereto.

 

9.19                           Replacement
of Lenders.

 

(a)                                  Within fifteen (15) days after
receipt by Borrower of written notice and demand from any Lender for payment
pursuant to Section 1.11 or 1.12 or, as provided in this Section 9.19(c),
in the case of certain refusals by any Lender to consent to certain proposed
amendments, modifications, terminations or waivers with respect to this
Agreement that have been approved by Requisite Lenders, Requisite Revolving
Lenders or all affected Lenders, as applicable (any such Lender demanding such
payment or refusing to so consent being referred to herein as an “Affected
Lender”), Borrower may, at its option, notify Agent and such Affected
Lender of its intention to do one of the following:

 

(i)                                     Borrower may obtain, at Borrower’s
expense, a replacement Lender (“Replacement Lender”) for such Affected
Lender, which Replacement Lender shall be reasonably satisfactory to
Agent.  In the event Borrower obtains a
Replacement Lender that will purchase all outstanding Obligations owed to such
Affected Lender and assume its Commitments hereunder within ninety (90) days
following notice of Borrower’s intention to do so, the Affected Lender shall
sell and assign all of its rights and delegate all of its obligations under
this Agreement to such Replacement Lender in accordance with the provisions of Section 8.1,
provided that Borrower has reimbursed such Affected Lender for any
administrative fee payable pursuant to Section 8.1 and, in any case
where such replacement occurs as the result of a demand for payment pursuant to
Section 1.11 or 1.12, paid all amounts required to be paid to such
Affected Lender pursuant to Section 1.11 or 1.12 through the date
of such sale and assignment; or

 

69

 

(ii)                                  Borrower may, with Agent’s consent,
prepay in full all outstanding Obligations owed to such Affected Lender and
terminate such Affected Lender’s Pro Rata Share of the Revolving Loan
Commitment and Pro Rata Share of the Term Loan Commitment, in which case the
Revolving Loan Commitment and Term Loan Commitment will be reduced by the
amount of such Pro Rata Share.  Borrower
shall, within ninety (90) days following notice of its intention to do so,
prepay in full all outstanding Obligations owed to such Affected Lender
(including, in any case where such prepayment occurs as the result of a demand
for payment for increased costs, such Affected Lender’s increased costs for
which it is entitled to reimbursement under this Agreement through the date of
such prepayment), and terminate such Affected Lender’s obligations under the
Revolving Loan Commitment and Term Loan Commitment.

 

(b)                                 In the case of a Non-Funding Lender
pursuant to Section 8.5(a), at Borrower’s request, Agent, any
Qualified Assignee or any Person acceptable to Agent shall have the right with
Agent’s consent (not to be unreasonably withheld, conditioned or delayed) to
purchase (but the Agent shall have no obligation to make any such purchase and
may or may not make any such purchase in its sole discretion) from any
Non-Funding Lender, and each Non-Funding Lender agrees that it shall, at
Agent’s request, sell and assign to Agent or such Person, all of the Loans and
Commitments of that Non-Funding Lender for an amount equal to the principal
balance of all Loans held by such Non-Funding Lender and all accrued interest
and Fees with respect thereto through the date of sale, such purchase and sale
to be consummated pursuant to an executed Assignment Agreement.

 

(c)                                  If, in connection with any proposed
amendment, modification, waiver or termination pursuant to Section 9.2
(a “Proposed Change”) requiring the consent of all affected Lenders, the
consent of Requisite Lenders is obtained, but the consent of other Lenders
whose consent is required is not obtained (any such Lender whose consent is not
obtained as described in this clause being referred to as a “Non-Consenting
Lender”), then, so long as Agent is not a Non-Consenting Lender, at
Borrower’s request, Agent, any Qualified Assignee or any Person reasonably
acceptable to Agent, shall have the right with Agent’s consent (not to be
unreasonably withheld, conditioned or delayed) to purchase (but the Agent shall
have no obligation to make any such purchase and may or may not make any such
purchase in its sole discretion) from such Non-Consenting Lenders, and such
Non-Consenting Lenders agree that they shall, upon Agent’s request, sell and
assign to Agent or such Person, all of the Loans and Commitments of such
Non-Consenting Lenders for an amount equal to the principal balance of all
Loans held by the Non-Consenting Lenders and all accrued interest and Fees with
respect thereto through the date of sale, such purchase and sale to be
consummated pursuant to an executed Assignment Agreement.

 

70

 

9.20                           Delivery of Termination Statements and Mortgage
Releases.  Upon payment in full in cash and performance
of all of the Obligations (other than indemnification Obligations), termination
of the Commitments and a release of all claims against Agent and Lenders, and
so long as no suits, actions proceedings, or claims are pending or threatened
against any Indemnitee asserting any damages, losses or liabilities that are
indemnified liabilities hereunder, Agent shall deliver to Borrower termination
statements, mortgage releases and other documents necessary or appropriate to
evidence the termination of the Liens securing payment of the Obligations.

 

[Signature Pages Follow]

 

71

 

Witness the due execution
hereof by the respective duly authorized officers of the undersigned as of the
date first written above.

 

	
   

  	
  PLAYTEX PRODUCTS, INC., a Delaware

  corporation, as Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn A. Forbes

  	
   

  
	
   

  	
  Name:

  	
  Glenn A. Forbes

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  and Chief Financial Office

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PLAYTEX
  SALES & SERVICES, INC., a

  Delaware corporation, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn A. Forbes

  	
   

  
	
   

  	
  Name:

  	
  Glenn A. Forbes

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PLAYTEX
  MANUFACTURING, INC., a

  Delaware corporation, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn A. Forbes

  	
   

  
	
   

  	
  Name:

  	
  Glenn A. Forbes

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PLAYTEX
  INVESTMENT CORP., a

  Delaware corporation, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn A. Forbes

  	
   

  
	
   

  	
  Name:

  	
  Glenn A. Forbes

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PLAYTEX
  INTERNATIONAL CORP., a

  Delaware corporation, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn A. Forbes

  	
   

  
	
   

  	
  Name:

  	
  Glenn A. Forbes

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  	
   

  
						

 

Signature
Page to Credit Agreement

S-1

 

	
   

  	
  TH
  MARKETING CORP., a Delaware

  corporation, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn A. Forbes

  	
   

  
	
   

  	
  Name:

  	
  Glenn A. Forbes

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SMILE-TOTE,
  INC., a California

  corporation, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn A. Forbes

  	
   

  
	
   

  	
  Name:

  	
  Glenn A. Forbes

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SUN
  PHARMACEUTICALS CORP., a

  Delaware corporation, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn A. Forbes

  	
   

  
	
   

  	
  Name:

  	
  Glenn A. Forbes

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PERSONAL
  CARE GROUP, INC., a

  Delaware corporation, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn A. Forbes

  	
   

  
	
   

  	
  Name:

  	
  Glenn A. Forbes

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PERSONAL
  CARE HOLDINGS, INC., a

  Delaware corporation, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn A. Forbes

  	
   

  
	
   

  	
  Name:

  	
  Glenn A. Forbes

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  	
   

  
	
   

  	
   

  
	
   

  	
  CAREWELL
  INDUSTRIES, INC., a New

  York corporation, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn A. Forbes

  	
   

  
	
   

  	
  Name:

  	
  Glenn A. Forbes

  	
   

  
	
   

  	
  Title:

  	
  Executive Vice
  President

  	
   

  
						

 

Signature
Page to Credit Agreement

S-2

 

	
   

  	
  GENERAL
  ELECTRIC CAPITAL

  CORPORATION,

  
	
   

  	
  as Agent, an L/C Issuer and a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph V. Walker

  	
   

  
	
   

  	
   

  	
  Its Duly Authorized
  Signatory

  

 

Signature
Page to Credit Agreement

S-3

 

ANNEX
A

to

CREDIT AGREEMENT

 

DEFINITIONS

 

Capitalized terms used in
the Loan Documents shall have (unless otherwise provided elsewhere in the Loan
Documents) the following respective meanings and all references to Sections,
Exhibits, Schedules or Annexes in the following definitions shall refer to
Sections, Exhibits, Schedules or Annexes of or to the Agreement:

 

“Account Debtor”
means any Person who may become obligated to any Credit Party under, with
respect to, or on account of, an Account, Chattel Paper or General Intangibles
(including a payment intangible).

 

“Accounting Changes”
means:  (a) changes in accounting
principles required by GAAP and implemented by Borrower; (b) changes in
accounting principles recommended by Borrower’s certified public accountants
and implemented by Borrower; and (c) changes in carrying value of
Borrower’s or any of its Subsidiaries’ assets, liabilities or equity accounts
resulting from (i) the application of purchase accounting principles
(A.P.B. 16 and/or 17 and EITF 88-16 and FASB 109) to the Related
Transactions or (ii) as the result of any other adjustments that, in each
case, were applicable to, but not included in, the Pro Forma.

 

“Accounts” means
all “accounts,” as such term is defined in the Code, now owned or hereafter
acquired by any Credit Party, including (a) all accounts receivable, other
receivables, book debts and other forms of obligations (other than forms of
obligations evidenced by Chattel Paper or Instruments), (including any such
obligations that may be characterized as an account or contract right under the
Code), (b) all of each Credit Party’s rights in, to and under all purchase
orders or receipts for goods or services, (c) all of each Credit Party’s
rights to any goods represented by any of the foregoing (including unpaid
sellers’ rights of rescission, replevin, reclamation and stoppage in transit
and rights to returned, reclaimed or repossessed goods), (d) all rights to
payment due to any Credit Party for property sold, leased, licensed, assigned
or otherwise disposed of, for a policy of insurance issued or to be issued, for
a secondary obligation incurred or to be incurred, for energy provided or to be
provided, for the use or hire of a vessel under a charter or other contract,
arising out of the use of a credit card or charge card, or for services
rendered or to be rendered by such Credit Party or in connection with any other
transaction (whether or not yet earned by performance on the part of such
Credit Party), (e) all healthcare insurance receivables, and (f) all
collateral security of any kind, now or hereafter in existence, given by any
Account Debtor or other Person with respect to any of the foregoing.

 

“Advances” means
any Revolving Credit Advance or Swing Line Advance, as the context may require.

 

“Affected Lender”
has the meaning ascribed to it in Section 9.19(a).

 

A-1

 

“Affiliate” means,
with respect to any Person, (a) each Person that, directly or indirectly,
owns or controls, whether beneficially, or as a trustee, guardian or other
fiduciary, 10% or more of the
Stock having ordinary voting power in the election of directors of such Person,
(b) each Person that controls, is controlled by or is under common control
with such Person, (c) each of such Person’s officers, directors, joint
venturers and partners and (d) in the case of Borrower, the immediate
family members, spouses and lineal descendants of individuals who are
Affiliates of Borrower.  For the
purposes of this definition, “control” of a Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of
voting securities, by contract or otherwise; provided,
however, that the term “Affiliate”
shall specifically exclude Agent and each Lender.

 

“Agent” means GE
Capital in its capacity as Agent for Lenders or its successor appointed
pursuant to Section 8.2.

 

“Agreement” means
this Credit Agreement (including all schedules, subschedules, annexes and
exhibits hereto), as the same may be amended, supplemented, restated or
otherwise modified from time to time.

 

“Applicable Margins”
means collectively the Applicable Revolver Index Margin, the Applicable Term
Loan Index Margin, the Applicable Revolver LIBOR Margin and the Applicable Term
Loan LIBOR Margin.

 

“Applicable Revolver
Index Margin” means the per annum interest rate margin from time to time in
effect and payable in addition to the Index Rate applicable to the Revolving
Loan, as determined by reference to Section 1.2(a).

 

“Applicable Revolver
LIBOR Margin” means the per annum interest rate from time to time in effect
and payable in addition to the LIBOR Rate applicable to the Revolving Loan, as
determined by reference to Section 1.2(a).

 

“Applicable Term Loan
Index Margin” means the per annum interest rate from time to time in effect
and payable in addition to the Index Rate applicable to the Term Loan, as
determined by reference to Section 1.2(a).

 

“Applicable Term Loan
LIBOR Margin” means the per annum interest rate from time to time in effect
and payable in addition to the LIBOR Rate applicable to the Term Loan, as
determined by reference to Section 1.2(a).

 

“Asset Disposition”
means the disposition whether by sale, lease, transfer or other voluntary
disposition of any of the following: 
(a) any of the Stock or other equity or ownership interest of any
of Borrower’s Subsidiaries or (b) any or all of the assets of Borrower or
any of its Subsidiaries other than sales of Inventory in the ordinary course of
business.

 

“Assignment Agreement”
has the meaning ascribed to it in Section 8.1(a).

 

“Availability Block”
means $15,000,000.

 

A-2

 

“Bankruptcy Code”
means the provisions of Title 11 of the United States Code, 11 U.S.C.
§§ 101 et seq. or other applicable bankruptcy, insolvency or similar laws.

 

“Borrower” has the
meanings ascribed to it in the preamble to the Agreement.

 

“Borrowing
Availability” means as of any date of determination the lesser of
(i) the Maximum Amount less the Availability Block and
(ii) the Borrowing Base less the Availability Block, in each case, less
the sum of (a) the Revolving Loan then outstanding (including, without
duplication, the outstanding balance of Letter of Credit Obligations and the
Swing Line Loan then outstanding),  (b) the Swing Line Loan then
outstanding and (c) Reserves required by Agent in its reasonable credit
judgment in accordance with this Agreement.

 

“Borrowing Base”
means, as of any date of determination by Agent, from time to time, an amount
equal to the sum at such time of:

 

(a)                                  85%  of the book value of
Eligible Accounts at such time; and

 

(b)                                 65% of the book value of Eligible
Inventory valued at the lower of cost (determined on a first-in, first-out
basis) or market; and

 

(c)                                  the lesser of (i) $5,000,000 or
(ii) 50% of the book value of Eligible In-Transit Inventory valued at the
lower of cost (determined on a first-in, first-out basis) or market; and

 

(d)                                 the lesser of (i) $5,000,000 or
(ii) 50% of the book value of Eligible Returned Inventory valued at the
lower of cost (determined on a first-in, first-out basis) or market; and

 

(e)                                  the lesser of (i) $9,000,000 or
(ii) 50% of the book value of Eligible Processor Inventory valued at the
lower of cost (determined on a first-in, first-out basis) or market; and

 

(f)                                    the lesser of (i) $7,000,000 or
(ii) the lesser of (A) 35% of the book value of Eligible Remnant
Inventory valued at the lower of cost (determined on a first-in, first-out
basis) or market and

 

(g)                                 (a) at all times on or prior to
February 18, 2005, $10,000,000, (b) at all times on or after
February 19, 2005 through and including February 18, 2006, $8,000,000
and (c) at all times on or after February 19, 2006, $6,000,000;

 

in each case, less
any Reserves established by Agent at such time in accordance with this
Agreement.

 

“Borrowing
Base Certificate” has the meaning ascribed to it in Section 4.2(d).

 

A-3

 

“Business Day”
means any day that is not a Saturday, a Sunday or a day on which banks are
required or permitted to be closed in the State of New York and in reference to
LIBOR Loans shall mean any such day that is also a LIBOR Business Day.

 

“Capital Lease”
means, with respect to any Person, any lease of any property (whether real,
personal or mixed) by such Person as lessee that, in accordance with GAAP,
would be required to be classified and accounted for as a capital lease on a
balance sheet of such Person.

 

“Capital Lease
Obligation” means, with respect to any Capital Lease of any Person, the
amount of the obligation of the lessee thereunder that, in accordance with
GAAP, would appear on a balance sheet of such lessee in respect of such Capital
Lease.

 

“Cash Equivalents”
means:  (i) marketable securities
(A) issued or directly and unconditionally guaranteed as to interest and
principal by the United States government or (B) issued by any agency of
the United States government the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one (1)
year after acquisition thereof; (ii) marketable direct obligations issued
by any state of the United States of America or any political subdivision of
any such state or any public instrumentality thereof, in each case maturing
within one year after acquisition thereof and having, at the time of
acquisition, a rating of at least A-1 from S&P or at least P-1 from Moody’s;
(iii) commercial paper maturing no more than one year from the date of
acquisition and, at the time of acquisition, having a rating of at least A-1
from S&P or at least P-1 from Moody’s; (iv) certificates of deposit or
bankers’ acceptances issued or accepted by any Lender or by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia that is at least (A) ”adequately capitalized”
(as defined in the regulations of its primary Federal banking regulator) and
(B) has Tier 1 capital (as defined in such regulations) of not less than
$250,000,000, in each case maturing within one year after issuance or
acceptance thereof; and (v) shares of any money market mutual or similar
funds that (A) has substantially all of its assets invested continuously
in the types of investments referred to in clauses (i) through (iv) above,
(B) has net assets of not less than $500,000,000 and (C) has the
highest rating obtainable from either S&P or Moody’s.

 

“Certificate
of Exemption” has the meaning ascribed to it in Section 1.12(c).

 

“Change of Control”
means any event, transaction or occurrence as a result of which (a)  any
Person or “group” (within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended), other than the Permitted Holders
or a Permitted Group, (x) shall have acquired beneficial ownership of Stock in
Borrower representing 50% or more of the outstanding Stock having ordinary
voting power in the election of directors of the Borrower, or (y) shall have
acquired beneficial ownership of Stock of the Borrower representing a
percentage that is greater than the percentage of the beneficial ownership of
Stock in Borrower held by the Permitted Holders in the aggregate; (b) a “Change
in Control” (as defined in the Senior Subordinated Note Documents) shall have
occurred; or (c) a “Change of Control” (as defined in the Senior Secured
Note Documents) shall have occurred.

 

A-4

 

“Chargeback Account”
means any Account that represents the unpaid portion of a previously issued
invoice which is not paid in full due to adjustments and offsets arising in the
normal course of business and which is carried as an open Account until
verification and issuance of a credit honoring the adjustment is issued and the
amount of such credit is offset against such Account or until such Account is
paid in full by the applicable Account Debtor.

 

“Charges” means
all federal, state, county, city, municipal, local, foreign or other
governmental taxes (including premiums and other amounts owed to the PBGC at
the time due and payable), levies, assessments, charges, liens, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Credit Party,
(d) any Credit Party’s ownership or use of any properties or other assets,
or (e) any other aspect of any Credit Party’s business.

 

“Chattel Paper”
means any “chattel paper,” as such term is defined in the Code, including
electronic chattel paper, now owned or hereafter acquired by any Credit Party,
wherever located.

 

“Closing Checklist”
means the schedule, including all appendices, exhibits or schedules thereto,
listing certain documents and information to be delivered in connection with
the Agreement, the other Loan Documents and the transactions contemplated
thereunder, substantially in the form attached hereto as Annex C.

 

“Closing Date”
means February 19, 2004.

 

“Code” means the
Uniform Commercial Code as the same may, from time to time, be enacted and in
effect in the State of New York;
provided, that to the extent that
the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern; provided,
further, that in the event that, by reason of mandatory provisions
of law, any or all of the attachment, perfection or priority of, or remedies with
respect to, Agent’s or any Lender’s Lien on any Collateral is governed by the
Uniform Commercial Code as enacted and in effect in a jurisdiction other than
the State of New York, the term “Code” shall mean the Uniform Commercial
Code as enacted and in effect in such other jurisdiction solely for purposes of
the provisions thereof relating to such attachment, perfection, priority or
remedies and for purposes of definitions related to such provisions.

 

“Collateral” means
the property covered by the Security Agreement, the Mortgages and the other
Collateral Documents and any other property, real or personal, tangible or
intangible, of the Borrower or any other Credit Party, now existing or
hereafter acquired, that may at any time be or become subject to a security
interest or Lien in favor of Agent, on behalf of itself and Lenders, to secure
the Obligations or any portion thereof.

 

“Collateral Documents”
means the Security Agreement, the Pledge Agreement, the Guaranties, the
Mortgages, the Patent Security Agreements, the Trademark Security Agreements,
the Copyright Security Agreements and all similar agreements entered into

 

A-5

 

guaranteeing payment of,
or granting a Lien upon property as security for payment of, the Obligations or
any portion thereof.

 

“Commitment
Termination Date” means the earliest of (a) February 19, 2009
(b) the date of termination of Lenders’ obligations to make Advances and
to incur Letter of Credit Obligations or permit existing Loans to remain
outstanding pursuant to Section 6.3, and (c) the date of (i)
indefeasible prepayment in full in cash by Borrower of the Loans, (ii) the
cancellation and return (or stand-by guarantee) of all Letters of Credit or the
cash collateralization of all Letter of Credit Obligations pursuant to Section 1.5(f),
and (iii) the permanent reduction of the Commitments to zero dollars ($0).

 

“Commitments”
means (a) as to any Lender, the aggregate of such Lender’s Revolving Loan
Commitment and Term Loan Commitment as set forth on Annex B to the
Agreement or in the most recent Assignment Agreement executed by such Lender
and (b) as to all Lenders, the aggregate of all Lenders’ Revolving Loan
Commitments and Term Loan Commitments, which aggregate commitment shall be One
Hundred Fifty Million Dollars ($150,000,000) on the Closing Date, as such
Commitments may be reduced, amortized or adjusted from time to time in
accordance with the Agreement.

 

“Compliance
Certificate” has the meaning ascribed to it in Section 4.2(k).

 

“Contingent Obligation”
means, as applied to any Person, any direct or indirect liability of that
Person:  (i) with respect to
Guaranteed Indebtedness and with respect to any Indebtedness, lease, dividend
or other obligation of another Person if the purpose or intent of the Person
incurring such liability, or the effect thereof, is to provide assurance to the
obligee of such liability that such liability will be paid or discharged, or
that any agreements relating thereto will be complied with, or that the holders
of such liability will be protected (in whole or in part) against loss with
respect thereto; (ii) with respect to any letter of credit issued for the
account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings; (iii) under any foreign exchange contract,
currency swap agreement, interest rate swap agreement or other similar
agreement or arrangement designed to alter the risks of that Person arising
from fluctuations in currency values or interest rates, (iv) any agreement,
contract or transaction involving commodity options or future contracts,
(v) to make take-or-pay or similar payments if required regardless of
nonperformance by any other party or parties to an agreement, or
(vi) pursuant to any agreement to purchase, repurchase or otherwise
acquire any obligation or any property constituting security therefor, to
provide funds for the payment or discharge of such obligation or to maintain
the solvency, financial condition or any balance sheet item or level of income
of another.  The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if not a fixed and determined amount, the
maximum amount so guaranteed.

 

“Contractual
Obligations” means, as applied to any Person, any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument
to which that Person is a party or by which it or any of its material
properties is bound or to which it or any of its material properties is subject
including the Related Transactions Documents.

 

A-6

 

“Copyright License”
means any and all rights now owned or hereafter acquired by any Credit Party
under any written agreement granting any right to use any Copyright or
Copyright registration.

 

“Copyright Security
Agreements” means the Copyright Security Agreements made in favor of Agent,
on behalf of itself and Lenders, by each applicable Credit Party.

 

“Copyrights” means
all of the following now owned or hereafter adopted or acquired by any Credit
Party: (a) all United States copyrights (whether registered or
unregistered), all registrations and recordings thereof, and all applications
in connection therewith, including all registrations, recordings and
applications in the United States Copyright Office or in any similar office or
agency of the United States, any state or territory thereof, or any other
country or any political subdivision thereof; and (b) all reissues,
extensions or renewals thereof.

 

“Credit Parties”
means Borrower and each Guarantor.

 

“Dating Account”
means an Account arising from the sale of “Sun Care” products with payment
terms consistent with practices thereof as in effect on the Closing Date.

 

“Default” means
any event that, with the passage of time or notice or both, would, unless cured
or waived, become an Event of Default.

 

“Default Rate” has
the meaning ascribed to it in Section 1.2(d).

 

“Disbursement Account”
has the meaning ascribed to it in Section 1.1(e).

 

“Disclosure Schedules”
means the Schedules prepared by Borrower and denominated as Schedules 2.7
through 5.18 in the index to the Agreement.

 

“Documents” means
any “document,” as such term is defined in the Code, including electronic
documents, now owned or hereafter acquired by any Credit Party, wherever
located.

 

“Dollars”
or “$” means lawful currency of the United States of America.

 

“Domestic” means,
as to any Person, a Person which is created or organized under the laws of the
United States of America, any of its states or the District of Columbia.

 

“Eligible Accounts”
has the meaning ascribed to it in Section 1.7 of the Agreement (as
calculated in accordance with Schedule 1 to Exhibit 4.2(d)).

 

“Eligible Equipment”
means Equipment owned by the Credit Parties located as of the Closing Date at
any of the locations listed on Attachment A to Schedule 1 to
Exhibit 4.2(d)).

 

“Eligible In-Transit
Inventory” means all Inventory consisting of raw materials and finished
goods owned by Credit Parties and not covered by Letters of Credit, and which
raw

 

A-7

 

materials and finished
goods Inventory is in transit between domestic locations of Credit Parties and
which raw materials and finished goods Inventory (a) is owned by a Credit
Party, (b) is fully insured, (c) is subject to a first priority security
interest in and Lien upon such goods in favor of Agent (except for any
possessor lien upon such goods in the possession of a freight carrier or
shipping company securing only the freight charges for the transportation of
such goods to Borrower), (d) is evidenced or deliverable pursuant to documents,
notices, instruments, statements and bills of lading that have been delivered
to Agent or an agent acting on its behalf, and (e) would constitute and be
deemed to be “Eligible Inventory” in accordance with Section 1.8 of
the Agreement if the criteria excluding Inventory from eligibility set forth in
clauses (a), (c) and (i) thereof did not apply.

 

“Eligible Inventory”
has the meaning ascribed to it in Section 1.8 of the Agreement (as
calculated in accordance with Schedule 1 to Exhibit 4.2(d)).

 

“Eligible Processor
Inventory” means all Inventory consisting of raw materials, work-in-process
and finished goods owned by the Credit Parties which is located at a
third-party contractor or processor and which (a) is owned by a Credit
Party, (b) is fully insured, (c) is subject to a first priority
security interest in and Lien upon such goods in favor of Agent, (d) is subject
to a duly executed processor letter from such third-party contractor or
processor that is delivered to Agent, which letter shall contain a waiver or
subordination of all Liens or claims that the processor may assert against the
Collateral at that location and which letter shall otherwise be reasonably
satisfactory in form and substance to Agent and (e) would constitute and
be deemed to be “Eligible Inventory” in accordance with Section 1.8
of the Agreement if the criteria excluding Inventory from eligibility set forth
in clause (a),  clause (b)
and clause (i) thereof did not apply.

 

“Eligible Remnant
Inventory” means all Inventory consisting of finished goods owned by Credit
Parties which is saleable quality, finished goods Inventory designated for sale
to remnant or close-out Account Debtors through previously established channels
and which (a) is owned by a Credit Party, (b) is fully insured,
(c) is subject to a first priority security interest in and Lien upon such
goods in favor of Agent and (d) would constitute and be deemed to be
“Eligible Inventory” in accordance with Section 1.8 of the
Agreement if the criteria excluding Inventory from eligibility set forth in clause
(e) (but only to the extent excluded by reason of clause (e)
applying to Inventory being excess, shopworn, seconds or damaged), clause
(g) and clause (h) thereof did not apply.

 

“Eligible Returned
Inventory” means all Inventory consisting of finished goods owned by Credit
Parties and which is “Sun Care” finished goods Inventory that has been returned
during the seasonal returns process (consistent with the ordinary course of
business operations) and has been scanned and designated as of acceptable,
saleable quality and is located at the Borrower’s third-party reclamation
center and which (a) is owned by a Credit Party, (b) is fully
insured, (c) is subject to a first priority security interest in and Lien
upon such goods in favor of Agent and (d) would constitute and be deemed
to be “Eligible Inventory” in accordance with Section 1.8 of the
Agreement if the criteria excluding Inventory from eligibility set forth in clause
(g) and clause (h) thereof did not apply.

 

A-8

 

“Environmental Laws”
means all applicable federal, state, local and foreign laws, statutes, ordinances,
codes, rules, standards and regulations, now or hereafter in effect, and any
applicable judicial or administrative interpretation thereof, including any
applicable judicial or administrative order, consent decree, order or judgment,
imposing liability or standards of conduct for or relating to the regulation
and protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation).  Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.
§§ 9601 et seq.) (“CERCLA”); the Hazardous Materials
Transportation Authorization Act of 1994 (49 U.S.C. §§ 5101 et seq.);
the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§ 136 et
seq.); the Solid Waste Disposal Act (42 U.S.C. §§ 6901 et seq.);
the Toxic Substance Control Act (15 U.S.C. §§ 2601 et seq.); the
Clean Air Act (42 U.S.C. §§ 7401 et seq.); the Federal Water
Pollution Control Act (33 U.S.C. §§ 1251 et seq.); the Occupational
Safety and Health Act (29 U.S.C. §§ 651 et seq.); and the Safe
Drinking Water Act (42 U.S.C. §§ 300(f) et seq.), and any and all
regulations promulgated thereunder, and all analogous state, local and foreign
counterparts or equivalents and any transfer of ownership notification or
approval statutes.

 

“Environmental
Liabilities” means, with respect to any Person, all liabilities,
obligations, responsibilities, response, remedial and removal costs,
investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand
by any Person, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute or common law arising under or
related to any Environmental Laws, Environmental Permits, or in connection with
any Release or threatened Release or presence of a Hazardous Material whether
on, at, in, under, from or about or in the vicinity of any real or personal
property.

 

“Environmental Permits”
means all permits, licenses, authorizations, certificates, approvals or
registrations required by any Governmental Authority under any Environmental
Laws.

 

“Equipment” means
all “equipment,” as such term is defined in the Code, now owned or hereafter
acquired by any Credit Party, wherever located and, in any event, including all
such Credit Party’s machinery and equipment, including processing equipment,
conveyors, machine tools, data processing and computer equipment, including
embedded software and peripheral equipment and all engineering, processing and
manufacturing equipment, office machinery, furniture, materials handling
equipment, tools, attachments, accessories, automotive equipment, trailers,
trucks, forklifts, molds, dies, stamps, motor vehicles, rolling stock and other
equipment of every kind and nature, trade fixtures and fixtures not forming a part
of real property, together with all additions and accessions thereto,
replacements therefor, all parts therefor, all substitutes for any of the
foregoing, fuel therefor, and all manuals, drawings, instructions, warranties
and rights with respect thereto, and all products and proceeds thereof and
condemnation awards and insurance proceeds with respect thereto.

 

A-9

 

“ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and any regulations promulgated thereunder.

 

“ERISA Affiliate”
means, with respect to any Credit Party, any trade or business (whether or not
incorporated) that, together with such Credit Party, are treated as a single
employer within the meaning of Sections 414(b), (c), (m) or (o) of the IRC.

 

“ERISA Event”
means, with respect to any Credit Party or any ERISA Affiliate, (a) any
event described in Section 4043(c) of ERISA with respect to a Title IV
Plan; (b) the withdrawal of any Credit Party or ERISA Affiliate from a
Title IV Plan subject to Section 4063 of ERISA during a plan year in which
it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(c) the complete or partial withdrawal of any Credit Party or any ERISA Affiliate
from any Multiemployer Plan; (d) the filing of a notice of intent to
terminate a Title IV Plan or the treatment of a plan amendment as a termination
under Section 4041 of ERISA; (e) the institution of proceedings to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the
failure by any Credit Party or ERISA Affiliate to make when due (taking into
account available extensions) required contributions to a Multiemployer Plan or
Title IV Plan unless such failure is cured within 30 days of the date such contributions
are otherwise due; (g) any other event or condition that might reasonably
be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Title IV
Plan or Multiemployer Plan or for the imposition of liability under
Section 4069 or 4212(c) of ERISA; (h) the termination of a
Multiemployer Plan under Section 4041A of ERISA or the reorganization or
insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA; or
(i) the loss of a Qualified Plan’s qualification or tax exempt status; or
(j) the termination of a Plan described in Section 4064 of ERISA.

 

“ESOP” means a
Plan that is intended to satisfy the requirements of Section 4975(e)(7) of
the IRC.

 

“Event of Default”
has the meaning ascribed to it in Section 6.1.

 

“Fair Labor Standards
Act” means the Fair Labor Standards Act, 29 U.S.C. §201 et seq.

 

“Federal Funds Rate”
means, for any day, a floating rate equal to the weighted average of the rates
on overnight federal funds transactions among members of the Federal Reserve
System, as determined by Agent in its sole discretion, which determination
shall be final, binding and conclusive (absent manifest error).

 

“Federal Reserve Board”
means the Board of Governors of the Federal Reserve System.

 

“Fees” means any
and all fees payable to Agent or any Lender pursuant to the Agreement or any of
the other Loan Documents.

 

A-10

 

“Financial Statements”
means the consolidated and consolidating income statements, statements of cash
flows and balance sheets of Borrower and its Subsidiaries delivered in
accordance with Sections 4.2(a) and (b).

 

“Fiscal Month”
means any of the monthly accounting periods of Borrower.

 

“Fiscal Quarter”
means any of the quarterly accounting periods of Borrower as reported in the
Borrower’s Quarterly Report on Form 10-Q.

 

“Fiscal Year”
means any of the annual accounting periods of Borrower as reported in the
Borrower’s Annual Report on Form 10-K.

 

“Fixtures” means
all “fixtures” as such term is defined in the Code, now owned or hereafter
acquired by any Credit Party.

 

“Foreign” means,
as to any Person, a Person which is not created or organized under the laws of
the United States of America, or any of its states or the District of Columbia.

 

“Foreign Lender”
has the meaning ascribed to it in Section 1.12(c).

 

“Funding Date” has
the meaning ascribed to it in Section 7.2.

 

“GAAP” means
generally accepted accounting principles in the United States of America,
consistently applied.

 

“GE Capital” has
the meaning ascribed to it in the Preamble.

 

“GE Capital Fee Letter”
has the meaning ascribed to it in Section 1.3(a).

 

“General Intangibles”
means “general intangibles,” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, including all right, title and interest
that such Credit Party may now or hereafter have in or under any Contractual
Obligation, all payment intangibles, customer lists, Licenses, Copyrights,
Trademarks, Patents, rights in Intellectual Property, interests in
partnerships, joint ventures and other business associations, licenses,
permits, copyrights, trade secrets, proprietary or confidential information,
inventions (whether or not patented or patentable), technical information,
procedures, designs, knowledge, know-how, Software, data bases, data, skill,
expertise, experience, processes, models, drawings, materials and records,
goodwill (including the goodwill associated with any Trademark or Trademark
License), all rights and claims in or under insurance policies (including
insurance for fire, damage, loss and casualty, whether covering personal
property, real property, tangible rights or intangible rights, all liability,
life, key man and business interruption insurance, and all unearned premiums),
uncertificated securities, chooses in action, deposit, checking and other bank
accounts, rights to receive tax refunds and other payments, rights to receive
dividends, distributions, cash, Instruments and other property in respect of or
in exchange for pledged Stock and Investment Property, rights of
indemnification, all books and records, correspondence, credit files, invoices
and other papers, including all tapes, cards, computer runs and other papers
and

 

A-11

 

documents in the
possession or under the control of such Credit Party or any computer bureau or
service company from time to time acting for such Credit Party.

 

“Goods” means any
“goods,” as such term is defined in the Code, now owned or hereafter acquired
by any Credit Party, wherever located, including embedded software to the
extent included in “goods” as defined in the Code, manufactured homes, standing
timber that is cut and removed for sale and unborn young of animals.

 

“Governmental
Authority” means any nation or government, any state or other political
subdivision thereof, and any agency, department or other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

 

“Guaranteed
Indebtedness” means, as to any Person, any obligation of such Person
guaranteeing, providing comfort or otherwise supporting any Indebtedness,
lease, dividend, or other obligation (“primary obligation”) of any other
Person (the “primary obligor”) in any manner, including any obligation
or arrangement of such Person to (a) purchase or repurchase any such
primary obligation, (b) advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency or any balance sheet condition of the primary obligor,
(c) purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation, (d) protect the
beneficiary of such arrangement from loss (other than product warranties given
in the ordinary course of business) or (e) indemnify the owner of such
primary obligation against loss in respect thereof.  The amount of any Guaranteed Indebtedness at any time shall be
deemed to be an amount equal to the lesser at such time of (x) the stated
or determinable amount of the primary obligation in respect of which such
Guaranteed Indebtedness is incurred and (y) the maximum amount for which
such Person may be liable pursuant to the terms of the instrument embodying
such Guaranteed Indebtedness, or, if not stated or determinable, the maximum
reasonably anticipated liability (assuming full performance) in respect
thereof.

 

“Guaranties”
means, collectively, each Subsidiary Guaranty and any other guaranty executed
by any Guarantor in favor of Agent and Lenders in respect of the Obligations.

 

“Guarantors” means
each direct or indirect Domestic Subsidiary of Borrower existing on the Closing
Date and each other Domestic Subsidiary, if any, that executes a guaranty or
other similar agreement in favor of Agent, for itself and the ratable benefit of
Lenders, in connection with the transactions contemplated by the Agreement and
the other Loan Documents.

 

“Hazardous Material”
means any substance, material or waste that is regulated by, or forms the basis
of liability now or hereafter under, any Environmental Laws, including any
material or substance that is (a) defined as a “solid waste,” “hazardous
waste,” “hazardous material,” “hazardous substance,” “extremely hazardous
waste,”  “restricted hazardous waste,”
“pollutant,” “contaminant,” “hazardous constituent,” “special waste,” “toxic
substance” or other

 

A-12

 

similar term or phrase
under any Environmental Laws, or (b) petroleum or any fraction or
by-product thereof, asbestos, polychlorinated biphenyls (PCB’s), or any
radioactive substance.

 

“Indebtedness”
means, with respect to any Person, without duplication (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property payment for which is deferred six (6) months or more, but
excluding obligations to trade creditors incurred in the ordinary course of
business that are unsecured and not overdue by more than six (6) months unless
being contested in good faith, (b) all reimbursement and other obligations
with respect to letters of credit, bankers’ acceptances and surety bonds,
whether or not matured, (c) all obligations evidenced by notes, bonds,
debentures or similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all Capital Lease Obligations
and the present value (discounted at the Index Rate as in effect on the Closing
Date) of future rental payments under all synthetic leases, (f) all
obligations of such Person under commodity purchase or option agreements or
other commodity price hedging arrangements, in each case whether contingent or
matured, (g) all net obligations of such Person under any foreign exchange
contract, currency swap agreement, interest rate swap, cap or collar agreement
or other similar agreement or arrangement designed to alter the risks of that
Person arising from fluctuations in currency values or interest rates, in each
case whether contingent or matured, (h) all Indebtedness referred to above
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property or
other assets (including accounts and contract rights) owned by such Person,
even though such Person has not assumed or become liable for the payment of
such Indebtedness, (i) “earnouts” and similar payment obligations, and
(j) the Obligations.

 

“Indemnitees” has
the meaning ascribed to it in Section 9.1.

 

“Index Rate”
means, for any day, a floating rate equal to the higher of (i) the rate
publicly quoted from time to time by The Wall Street Journal
as the “base rate on corporate loans posted by at least 75% of the nation’s 30
largest banks” (or, if The Wall Street Journal ceases quoting
a base rate of the type described, the highest per annum rate of interest
published by the Federal Reserve Board in Federal Reserve statistical release
H.15 (519) entitled “Selected Interest Rates” as the Bank prime loan rate
or its equivalent), and (ii) the Federal Funds Rate plus 50 basis points
per annum.  Each change in any interest
rate provided for in the Agreement based upon the Index Rate shall take effect
at the time of such change in the Index Rate.

 

“Index Rate Loan”
means a Loan or portion thereof bearing interest by reference to the Index
Rate.

 

“Instruments”
means all “instruments,” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, wherever located, and, in any event,
including all certificated securities, all certificates of deposit, and all
promissory notes and other evidences of indebtedness, other than instruments
that constitute, or are a part of a group of writings that constitute, Chattel
Paper.

 

A-13

 

“Intellectual Property”
means any and all Licenses, Patents, Copyrights, Trademarks, and the goodwill
associated with such Trademarks.

 

“Intercompany Notes”
has the meaning ascribed to it in Section 3.1.

 

“Interest Payment Date”
means (a) as to any Index Rate Loan, the first Business Day of each Fiscal
Quarter to occur while such Loan is outstanding, and (b) as to any LIBOR
Loan, the last day of the applicable LIBOR Period; provided, that in the case of any LIBOR Period greater than
three months in duration, interest shall be payable at three month intervals
and on the last day of such LIBOR Period; and  provided, further,  that,
in addition to the foregoing, each of (x) the date upon which all of the
Commitments have been terminated and the Loans have been paid in full and
(y) the Commitment Termination Date shall be deemed to be an “Interest
Payment Date” with respect to any interest that has then accrued under the
Agreement.

 

“Inventory” means
any “inventory,” as such term is defined in the Code, now owned or hereafter
acquired by any Credit Party, wherever located, including inventory,
merchandise, goods and other personal property that are held by or on behalf of
any Credit Party for sale or lease or are furnished or are to be furnished
under a contract of service, or that constitute raw materials, work in process,
finished goods, returned goods, supplies or materials of any kind, nature or
description used or consumed or to be used or consumed in such Credit Party’s
business or in the processing, production, packaging, promotion, delivery or
shipping of the same, including all supplies and embedded software.

 

“Investment” means
(i) any direct or indirect purchase or other acquisition by Borrower or
any other Credit Party of any Stock of, or other ownership interest in, any
other Person, and (ii) any direct or indirect loan, advance or capital
contribution by Borrower or any other Credit Party to any other Person,
including all indebtedness and accounts receivable from that other Person that
are not current assets or did not arise from sales to that other Person in the
ordinary course of business.

 

“Investment
Grade Account Debtor” means an Account Debtor whose unsecured long
term debt is rated “BBB-” or better by S&P and “Baa3” or better by Moody’s.

 

“Investment Property”
means all “investment property,” as such term is defined in the Code, now owned
or hereafter acquired by any Credit Party, wherever located, including:
(i) all securities, whether certificated or uncertificated, including
stocks, bonds, interests in limited liability companies, partnership interests,
treasuries, certificates of deposit, and mutual fund shares; (ii) all
securities entitlements of any Credit Party, 
including the rights of such Credit Party to any securities account and
the financial assets held by a securities intermediary in such securities
account and any free credit balance or other money owing by any securities
intermediary with respect to that account; (iii) all securities accounts
of any Credit Party; (iv) all commodity contracts of any Credit Party; and
(v) all commodity accounts held by any Credit Party.

 

“IRC” means the
Internal Revenue Code of 1986, as amended, and all regulations promulgated
thereunder.

 

A-14

 

“IRS”
means the Internal Revenue Service.

 

“L/C Issuer” means
GE Capital or a Subsidiary thereof or a bank or other legally authorized Person
selected by or acceptable to Agent in its sole discretion, in such Person’s
capacity as an issuer of Letters of Credit hereunder.

 

“L/C Sublimit” has
the meaning ascribed to it in Section 1.1(d).

 

“Lenders” means GE
Capital, the other Lenders named on the signature pages of the Agreement, and,
if any such Lender shall decide to assign all or any portion of the
Obligations, such term shall include any assignee of such Lender.

 

“Letters of Credit”
means standby letters of credit issued for the account of Borrower or any other
Credit Party by L/C Issuers, and bankers’ acceptances issued by Borrower, for
which Agent and Lenders have incurred Letter of Credit Obligations.

 

“Letter of Credit Fee”
has the meaning ascribed to it in Section 1.3(c).

 

“Letter of Credit
Obligations” means all outstanding obligations incurred by Agent and
Lenders at the request of Borrower, whether direct or indirect, contingent or
otherwise, due or not due, in connection with the issuance of Letters of Credit
by L/C Issuers or the purchase of a participation as set forth in Section 1.1(d)
with respect to any Letter of Credit. 
The amount of such Letter of Credit Obligations shall equal the maximum
amount that may be payable by Agent and Lenders thereupon or pursuant thereto.

 

LIBOR Breakage Cost”
means an amount equal to the amount of any losses, expenses, liabilities (other
than any loss of margin over funding costs or anticipated profit) that any
Lender may sustain as a result of (i) any default by Borrower in making any
borrowing of, conversion into or continuation of any LIBOR Loan following
Borrower’s delivery to Agent of any LIBOR Loan request in respect thereof or
(ii) any payment of a LIBOR Loan on any day that is not the last day of
the LIBOR Period applicable thereto (regardless of the source of such
prepayment and whether voluntary, by acceleration or otherwise).   In any such event, such loss shall equal
the excess, if any, of such Lender’s cost of obtaining funds for such LIBOR
Loan for the period from such event until the end of such Interest Period over
the amount of interest likely to be realized in redeploying the funds released
or not utilized as a result of such event for such period.  For purposes of calculating amounts payable
to a Lender under Section 1.3(d), each Lender shall be deemed to
have actually funded its relevant LIBOR Loan through the purchase of a deposit
bearing interest at LIBOR in an amount equal to the amount of that LIBOR Loan
and having a maturity and repricing characteristics comparable to the relevant
LIBOR Period; provided, however,
that each Lender may fund each of its LIBOR Loans in any manner it sees fit,
and the foregoing assumption shall be utilized only for the calculation of
amounts payable under Section 1.3(d).

 

“LIBOR Business Day”
means a Business Day on which banks in the City of London are generally open
for interbank or foreign exchange transactions.

 

A-15

 

“LIBOR Loans”
means a Loan or any portion thereof bearing interest by reference to the LIBOR
Rate.

 

“LIBOR Period”
means, with respect to any LIBOR Loan, each period commencing on a LIBOR
Business Day selected by Borrower pursuant to the Agreement and ending one,
two, three or six months thereafter (and, in addition, if Agent determines in
its discretion that such period is available, nine or twelve months
thereafter), as selected by Borrower’s irrevocable notice to Agent as set forth
in Section 1.2(e); provided,  that the foregoing provision relating to
LIBOR Periods is subject to the following:

 

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

 

(b)                                 any
LIBOR Period that would otherwise extend beyond the date set forth in clause
(a) of the definition of “Commitment Termination Date” shall end two (2) LIBOR
Business Days prior to such date;

 

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

 

(d)                                 Borrower
shall select LIBOR Periods so as not to require a payment or prepayment of any
LIBOR Loan during a LIBOR Period for such Loan; and

 

(e)                                  Borrower
shall select LIBOR Periods so that there shall be no more than 5 separate LIBOR Loans in existence at
any one time.

 

“LIBOR Rate” means
for each LIBOR Period, a rate of interest determined by Agent equal to:

 

(a)                                  the
offered rate for deposits in United States Dollars for the applicable LIBOR
Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time),
on the second full LIBOR Business Day next preceding the first day of such
LIBOR Period (unless such date is not a Business Day, in which event the next
succeeding Business Day will be used); divided by

 

(b)                                 a
number equal to 1.0 minus the aggregate (but without duplication) of the
rates (expressed as a decimal fraction) of reserve requirements in effect on
the day that is two (2) LIBOR Business Days prior to the beginning of such
LIBOR Period (including basic, supplemental, marginal and emergency reserves
under any regulations of the Federal Reserve Board or other Governmental
Authority having jurisdiction with respect thereto, as now and from time to
time in effect) for Eurocurrency funding (currently

 

A-16

 

referred to as
“Eurocurrency Liabilities” in Regulation D of the Federal Reserve Board that
are required to be maintained by a member bank of the Federal Reserve System.

 

If such interest rates
shall cease to be available from Telerate News Service, the LIBOR Rate shall be
determined from such financial reporting service or other information as shall
be available to Agent.

 

“License” means
any Copyright License, Patent License, Trademark License or other license of
rights or interests now held or hereafter acquired by any Credit Party.

 

“Lien” means any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, easement or encumbrance,
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever (including any lease or title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of, or agreement to give, any financing
statement perfecting a security interest under the Code or comparable law of
any jurisdiction).

 

“Litigation” has
the meaning ascribed to it in Section 4.2(i).

 

“Loan Account” has
the meaning ascribed to it in Section 1.10.

 

“Loan Documents”
means the Agreement, the Notes, the Collateral Documents, the GE Capital Fee
Letter and all other agreements, instruments, documents and certificates
identified in the Closing Checklist executed and delivered to, or in favor of,
Agent or any Lenders and including all other pledges, powers of attorney,
consents, assignments, contracts, notices, and all other written matter whether
heretofore, now or hereafter executed by or on behalf of any Credit Party, or
any employee of any Credit Party, and delivered to Agent or any Lender in
connection with the Agreement or the transactions contemplated thereby.  Any reference in the Agreement or any other
Loan Document to a Loan Document shall include all appendices, exhibits or
schedules thereto, and all amendments, restatements, supplements or other
modifications thereto, and shall refer to the Agreement or such Loan Document
as the same may be in effect at any and all times such reference becomes
operative.

 

“Loans”
means the Revolving Loan, the Swing Line Loan and the Term Loan(s).

 

“Master Standby
Agreement” means that certain Master Agreement for Standby Letters of
Credit Terms and Conditions dated as of the date hereof among General Electric
Capital Corporation, as L/C Issuer, and Borrower.

 

“Material Adverse
Effect” means a material adverse effect on (a) the business, assets,
operations, prospects or financial or other condition of the Credit Parties,
taken as a whole (b) Borrower’s ability to pay any of the Loans or any of
the other Obligations in accordance with the terms of the Agreement,
(c) the Collateral or Agent’s Liens, on behalf of itself and Lenders, on
the Collateral or the priority of such Liens, or (d) Agent’s or any
Lender’s rights and remedies under the Agreement and the other Loan Documents.

 

A-17

 

“Maximum Amount”
means, as of any date of determination, an amount equal to the Revolving Loan
Commitment of all Lenders as of that date.

 

“Maximum Lawful Rate”
has the meaning ascribed to it in Section 1.2(f).

 

“Moody’s” means
Moody’s Investor’s Services, Inc or any successor.

 

“Mortgages” means
each of the mortgages, deeds of trust, leasehold mortgages, leasehold deeds of
trust, collateral assignments of leases or other real estate security documents
delivered by any Domestic Credit Party to Agent on behalf of itself and Lenders
with respect to the Real Estate.

 

“Multiemployer Plan”
means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA,
and to which any Credit Party or ERISA Affiliate is making, is obligated to
make or has made or been obligated to make, contributions on behalf of
participants who are or were employed by any of them.

 

“Net Proceeds” means
cash proceeds received by Borrower or any other Credit Party from any Asset
Disposition (including payments under notes or other debt securities received
in connection with any Asset Disposition), net of (a) the costs of such
Asset Disposition (including taxes attributable to such sale, lease or
transfer) and (b) amounts applied to repayment of Indebtedness (other than
(i) the Obligations and (ii) to the extent such proceeds do not
constitute the identifiable cash proceeds of the Senior Secured Note Primary
Collateral, Indebtedness under or in with respect to one or more Senior Secured
Note Documents) secured by a Lien on the asset or property disposed.

 

“Non-Consenting Lender”
has the meaning ascribed to it in Section 9.19(c).

 

“Non-Funding Lender”
has the meaning ascribed to it in Section 8.5(a).

 

“Notes” means,
collectively, the Revolving Notes, the Swing Line Note and the Term Notes.

 

“Notice of
Conversion/Continuation” has the meaning ascribed to it in Section 1.2(e).

 

“Notice of Revolving
Credit Advance” has the meaning ascribed to it in Section 1.1(a).

 

“Notice of Swing Line
Advance” has the meaning ascribed to it in Section 1.1(c).

 

“Obligations”
means all loans, advances, debts, liabilities and obligations, for the
performance of covenants, tasks or duties or for payment of monetary amounts
(whether or not such performance is then required or contingent, or such
amounts are liquidated or determinable), including obligations pursuant to
Letter of Credit Obligations, owing by any Credit Party to Agent or any Lender,
and all covenants and duties regarding such amounts, of any kind or nature,
present or future, whether or not evidenced by any note, agreement or other

 

A-18

 

instrument, arising under
the Agreement or any of the other Loan Documents.  This term includes all principal, interest (including all
interest that accrues after the commencement of any case or proceeding by or
against any Credit Party in bankruptcy, whether or not allowed in such case or
proceeding), Fees, Charges, expenses, attorneys’ fees and any other sum
chargeable to any Credit Party under the Agreement or any of the other Loan
Documents.

 

“Other Lender” has
the meaning ascribed to it in Section 8.5(d).

 

“Overadvance”
has the meaning ascribed to it in Section 1.1(a).

 

“Patent License”
means rights under any written agreement now owned or hereafter acquired by any
Credit Party granting any right with respect to any invention on which a Patent
is in existence.

 

“Patent Security Agreements”
means the Patent Security Agreements made in favor of Agent, on behalf of
itself and Lenders, by each applicable Credit Party.

 

“Patents” means
all of the following in which any Credit Party now holds or hereafter acquires
any interest: (a) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or of any other country, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State or any other country, and (b) all reissues, continuations,
continuations-in-part or extensions thereof.

 

“PBGC”
means the Pension Benefit Guaranty Corporation.

 

“Pension Plan”
means a Plan that is subject to Title IV of ERISA.

 

“Permitted
Encumbrances” means the following encumbrances: (a) Liens for taxes or
assessments or other governmental Charges not yet due and payable;
(b) pledges or deposits of money securing statutory obligations under
workmen’s compensation, unemployment insurance, social security or public
liability laws or similar legislation (excluding Liens under ERISA);
(c) pledges or deposits of money securing bids, tenders, contracts (other
than contracts for the payment of money) or leases to which any Credit Party is
a party as lessee made in the ordinary course of business; (d) inchoate
and unperfected workers’, mechanics’ or similar liens arising in the ordinary
course of business, so long as such Liens attach only to Equipment, Fixtures
and/or Real Estate; (e) carriers’, warehousemen’s, suppliers’, landlords’
or other similar possessory liens arising in the ordinary course of business so
long as such Liens attach only to Inventory; (f) deposits securing, or in
lieu of, surety, appeal or customs bonds in proceedings to which any Credit
Party is a party; (g) any attachment or judgment lien not constituting an
Event of Default under Section 6.1; (h) zoning restrictions,
easements, licenses, or other restrictions on the use of any Real Estate or
other minor irregularities in title (including leasehold title) thereto, so
long as the same do not materially impair the use, value, or marketability of
such Real Estate; (i) presently existing or hereafter created Liens in
favor of Agent, on behalf of Lenders; (j) Liens existing on the date hereof and
renewal, and extensions thereof which Liens are set forth on Schedule 3.2;
(k) Liens securing Indebtedness permitted by Section 3.1(f), provided,that the Liens attach only to the assets financed by such
Indebtedness; (l) Liens securing the Senior

 

A-19

 

Secured Notes granted in
favor of the Senior Secured Notes Trustee pursuant to the Senior Secured Note
Documents on Collateral (other than the Senior Secured Note Primary Collateral)
as long as such Liens are, pursuant to the provisions of Article 10
(“Intercreditor Provisions Relating to Credit Agreement”) of the Senior Secured
Note Indenture, subordinated to
the Liens securing the Obligations granted in favor of Agent, on behalf of
itself and Lenders, pursuant to the Loan Documents; (m) Liens securing the
Senior Secured Notes granted in favor of the Senior Secured Notes Trustee
pursuant to the Senior Secured Note Documents on the Senior Secured Note
Primary Collateral); (n) Liens on the assets of Playtex Canada granted by
Playtex Canada solely to secure Indebtedness of Playtex Canada to the extent
such Indebtedness is permitted under Section 3.1(h); (o) Liens
arising out of judgments or awards not resulting in an Event of Default and in
respect of which the applicable Credit Party or Credit Parties are in good
faith prosecuting an appeal or proceedings for review in respect of which there
shall be secured a subsisting stay of execution pending such appeal or
proceedings; and (p) Liens arising under licensing agreements entered into
by the Borrower or any Subsidiary in the ordinary course of business for the
use of Intellectual Property or other intangible assets of the Borrower or such
Subsidiary and settlements, permissions, consents to use, and other similar
agreements concerning Intellectual Property or judgments adjudicating rights in
Intellectual Property.

 

“Permitted Group”
means any group of investors that is deemed to be a “Person” as that term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended; provided that such group
is controlled by the Permitted Holders.

 

“Permitted Holders”
means (i) HWH Capital Partners, L.P., HWH Valentine Partners, L.P., HWH
Surplus Valentine Partners, L.P. or Haas Wheat & Partners Incorporated
and any of their respective Affiliates; (ii) any officer or other member
of management employed by Borrower or any Subsidiary as of the date of this
Agreement; (iii) Robert B. Haas and Douglas D. Wheat; (iv) family
members or relatives of the persons described in clauses (i), (ii)
and (iii) of this definition; (v) any trusts created for the
benefit of the persons described in clauses (i), (ii), (iii) and (iv) of
this definition; (vi) in the event of the death or incompetence of an
individual described in clauses (i), (ii), (iii), (iv) or (v) of this
definition, such person’s estate, executor, administrator, committee or other
personal representatives or beneficiaries; and (vii) upon a distribution
by a partnership described in clause (i) of this definition of all or any of
the stock of Borrower, the limited partners of such partnership.

 

“Person” means any
individual, sole proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company, institution,
public benefit corporation, other entity or government (whether federal, state,
county, city, municipal, local, foreign, or otherwise, including any
instrumentality, division, agency, body or department thereof).

 

“Personal Care Group”
means Personal Care Group, Inc., a Delaware corporation.

 

“Personal Care
Holdings” means Personal Care Holdings, Inc., a Delaware corporation.

 

A-20

 

“Plan” means, at
any time, an “employee benefit plan,” as defined in Section 3(3) of ERISA,
that any Credit Party or ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any Credit Party.

 

“Playtex Australia”
means Personal Care Group PTY LTD, an entity organized under the laws of
Australia.

 

“Playtex Barbados”
means Playtex Foreign Sales Corporation, an entity organized under the laws of
Barbados.

 

“Playtex Bermuda”
means Playtex Enterprise Risk Management Ltd., an entity organized under the
laws of Bermuda.

 

“Playtex Canada”
means Playtex Limited, an entity organized under the laws of Ontario, Canada.

 

“Playtex International”
means Playtex International Corp., a Delaware corporation.

 

“Pledge Agreement”
means the Pledge Agreement, of even date herewith executed by Borrower, TH
Marketing, Personal Care Group, Personal Care Holdings, and Playtex
International in favor of Agent, on behalf of itself and Lenders, pledging 65%
Stock of Playtex Barbados, 65% of Stock of Playtex Australia, 65% of Stock of
Playtex Canada, 65%  of the Stock
of Playtex Bermuda and all of the Stock of all other Subsidiaries and all
Intercompany Notes owing to or held by such Credit Parties as pledgors and any
other pledge agreement entered into after the Closing Date by any Credit Party.

 

“Pro Forma” means
the unaudited consolidated and consolidating balance sheets of Borrower and its
Subsidiaries prepared in accordance with GAAP as of the Closing Date after
giving effect to the Related Transactions. 
The Pro Forma is annexed hereto as Annex D.

 

“Pro Rata Share”
means with respect to all matters relating to any Lender (a) with respect
to the Revolving Loan, the percentage obtained by dividing (i) the
Revolving Loan Commitment of that Lender by (ii) the aggregate Revolving
Loan Commitments of all Lenders, (b) with respect to the Term Loan, the
percentage obtained by dividing (i) the Term Loan Commitment of that
Lender by (ii) the aggregate Term Loan Commitments of all Lenders,
(c) with respect to all Loans, the percentage obtained by dividing
(i) the aggregate Commitments of that Lender by (ii) the aggregate
Commitments of all Lenders, and (d) with respect to all Loans on and after
the Commitment Termination Date, the percentage obtained by dividing
(i) the aggregate outstanding principal balance of the Loans held by that
Lender, by (ii) the outstanding principal balance of the Loans held by all
Lenders, as such percentages may be adjusted by assignments pursuant to Section 8.1.

 

“Projections”
means Borrower’s forecasted consolidated: 
(a) balance sheets; (b) profit and loss statements; and
(c) cash flow statements; consistent with the historical Financial
Statements of Borrower, together with appropriate supporting details and a
statement of underlying assumptions.

 

A-21

 

“Proposed Change”
has the meaning ascribed to it in Section 9.19(c).

 

“Qualified Assignee”
means (a) any Lender, any Affiliate of any Lender and, with respect to any
Lender that is an investment fund that invests in commercial loans, any other
investment fund that invests in commercial loans and that is managed or advised
by the same investment advisor as such Lender or by an Affiliate of such
investment advisor, and (b) any commercial bank, savings and loan association
or savings bank or any other entity which is an “accredited investor” (as
defined in Regulation D under the Securities Act of 1933) which extends credit
or buys loans as one of its businesses, including insurance companies, mutual
funds, lease financing companies and commercial finance companies, in each
case, which has a rating of “BBB” or higher from S&P and a rating of “Baa2”
or higher from Moody’s at the date that it becomes a Lender and which, through
its applicable lending office, is capable of lending to Borrower without the
imposition of any withholding or similar taxes; provided that no Person
determined by Agent to be acting in the capacity of a vulture fund or
distressed debt purchaser shall be a Qualified Assignee and no Person or
Affiliate of such Person (other than a Person that is already a Lender) holding
Subordinated Debt or Stock issued by any Credit Party shall be a Qualified
Assignee.

 

“Qualified Plan”
means a Pension Plan that is intended to be tax-qualified under
Section 401(a) of the IRC.

 

“Real Estate” has
the meaning ascribed to it in Section 5.12.

 

“Refinancing”
means the repayment in full of all obligations (other than contingent
obligations and reimbursement obligations with respect to letters of credit)
owing under, pursuant to or in respect of (i) that certain Credit Agreement
dated as of May 22, 2001 among the Borrower, the Lenders (as defined therein)
and Credit Suisse First Boston, acting through its Cayman Islands Branch, as
administrative agent and (ii) that certain Receivables Purchase Agreement dated
as of May 22, 2001 among Playtex A/R LLC, Alpine Securitization Corp., Credit
Suisse First Boston, New York Branch and the Borrower.

 

“Refunded Swing Line
Loan” has the meaning ascribed to it in Section 1.1(c)(iii).

 

“Related Transactions”
means the initial borrowing under the Revolving Loan and the Term Loan on the
Closing Date, the Refinancing, the issuance of the Senior Secured Notes, the payment
of all Fees, costs and expenses associated with all of the foregoing and the
execution and delivery of all of the Related Transactions Documents.

 

“Related Transactions
Documents” means the Loan Documents, the Senior Secured Note Documents, and
all other agreements or instruments executed in connection with the Related
Transactions.

 

“Release” means
any release, threatened release, spill, emission, leaking, pumping, pouring,
emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal,
dumping, leaching or migration of Hazardous Material in the indoor or outdoor
environment, including the movement of Hazardous Material through or in the
air, soil, surface water, ground water or property.

 

A-22

 

“Replacement Lender”
has the meaning ascribed to it in Section 9.19(a).

 

“Requisite Lenders”
means Lenders having (a) more than 50% of the Commitments of all Lenders,
or (b) if the Commitments have been terminated, more than 50% of the
aggregate outstanding amount of the Loans.

 

“Requisite Revolving
Lenders” means Lenders having (a) more than 50% of the Revolving Loan
Commitments of all Lenders, or (b) if the Revolving Loan Commitments have
been terminated, more than 50% of the aggregate outstanding amount of the
Revolving Loan (with the Swing Line Loan being attributed to the Lender making
such Loan).

 

“Reserves” means,
with respect to the Borrowing Base (a) reserves established by Agent from
time to time against Eligible Accounts, Eligible Inventory, Eligible In-Transit
Inventory, Eligible Processor Inventory, Eligible Returned Inventory, Eligible
Remnant Inventory and Eligible Equipment pursuant to Exhibit 4.2(d) and
(b) such other reserves against Eligible Accounts, Eligible Inventory,
Eligible In-Transit Inventory, Eligible Processor Inventory, Eligible Returned
Inventory, Eligible Remnant Inventory, Eligible Equipment or Borrowing
Availability that Agent may, in its good faith credit judgment based upon its
analysis of facts and events, establish from time to time.  Without limiting the generality of the
foregoing, Reserves established to ensure the payment of accrued Interest
Expenses or Indebtedness and with respect to dilution on product returns, seasonal
returns, rent reserve, third-party distribution center and licensors shall be
deemed to be a reasonable exercise of Agent’s credit judgment.

 

“Responsible Officer”
means the chief executive officer, the president, the corporate counsel, the
chief financial officer, the treasurer or the controller of a Credit Party, or
any other officer or manager having substantially the same authority and
responsibility.

 

“Restricted Payment”
means, with respect to any Credit Party (a) the declaration or payment of
any dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of Stock (other
than those payable in additional Stock of such Credit Party); (b) any
payment on account of the purchase, redemption, defeasance, sinking fund or other
retirement of such Credit Party’s Stock or any other payment or distribution
made in respect thereof, either directly or indirectly (other than those
payable in additional Stock of such Credit Party); (c) any payment or
prepayment of principal of, premium, if any, or interest, fees or other charges
on or with respect to, and any redemption, purchase, retirement, defeasance,
sinking fund or similar payment and any claim for rescission with respect to,
any Subordinated Debt; (d) any payment made to redeem, purchase,
repurchase or retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire Stock of such Credit Party now or hereafter
outstanding; (e) any payment of a claim for the rescission of the purchase
or sale of, or for material damages arising from the purchase or sale of, any
shares of such Credit Party’s Stock or of a claim for reimbursement,
indemnification or contribution arising out of or related to any such claim for
damages or rescission; (f) any payment, loan, contribution, or other
transfer of funds or other property to any Stockholder of such Credit Party
other than payment of compensation in the ordinary course of business to
Stockholders who are employees of such Credit Party; and (g) any payment
of management fees (or other fees of a

 

A-23

 

similar nature) or
out-of-pocket expenses in connection therewith by such Credit Party to any of
its Affiliates.

 

“Retiree Welfare Plan”
means, at any time, a Welfare Plan that provides for continuing coverage or
benefits for any participant or any beneficiary of a participant after such
participant’s termination of employment, other than continuation coverage
provided pursuant to Section 4980B of the IRC and at the sole expense of
the participant or the beneficiary of the participant.

 

“Revolving Credit
Advance” has the meaning ascribed to it in Section 1.1(a).

 

“Revolving Lenders”
means those Lenders having a Revolving Loan Commitment.

 

“Revolving Loan(s)”
means, at any time, the sum of (i) the aggregate amount of Revolving Credit
Advances outstanding to Borrower (including Swing Line Advances) plus
(ii) the aggregate Letter of Credit Obligations incurred on behalf of
Borrower.  Unless the context otherwise
requires, references to the outstanding principal balance of the Revolving Loan
shall include the outstanding balance of Letter of Credit Obligations.

 

“Revolving Loan
Commitment” means (a) as to any Lender, the commitment of such Lender
to make its Pro Rata Share of Revolving Credit Advances or incur its Pro Rata
Share of Letter of Credit Obligations (including, in the case of the Swing Line
Lender, its commitment to make Swing Line Advances as a portion of its
Revolving Loan Commitment) as set forth on Annex B or in the most recent
Assignment Agreement, if any, executed by such Lender and (b) as to all
Lenders, the aggregate commitment of all Lenders to make the Revolving Credit
Advances (including, in the case of the Swing Line Lender, Swing Line Advances)
or incur Letter of Credit Obligations, which aggregate commitment shall be One
Hundred Forty Two Million Five Hundred Thousand Dollars ($142,500,000) on the
Closing Date, as such amount may be adjusted, if at all, from time to time in
accordance with the Agreement.

 

“Revolving Notes”
has the meaning ascribed to it in Section 1.1(a).

 

“S&P” means
Standard & Poor’s Ratings Services, a division of the McGraw-Hill
Companies, Inc.

 

“Security Agreement”
means the Security Agreement of even date herewith entered into by and among
Agent, on behalf of itself and Lenders, and each Credit Party that is a
signatory thereto.

 

“Senior Secured Note
Indenture” means that certain Indenture, dated as of the Closing Date,
between Borrower, as issuer, and Wells Fargo Corporate Trust Services, as
trustee (the “Senior Secured Notes Trustee”), governing the terms and
issuance of the Senior Secured Notes as amended, modified or otherwise
supplemented from time to time in accordance with the terms of this Agreement.

 

A-24

 

“Senior Secured Note
Documents” means the Senior Subordinated Note Indenture, the Senior
Subordinated Notes and any other instrument, document or agreement delivered
pursuant thereto or in connection therewith.

 

“Senior Secured Note
Primary Collateral” means the Asset Sales Proceeds Account (as defined in
the Senior Secured Note Indenture) and all registered and unregistered United
States and foreign Patents, Trademarks, Copyrights, applications therefor and
Licenses with respect thereto and tradenames, trade secrets, servicemarks and
know-how, manufacturing processes and formulas that may at any time be or
become subject to a security interest or Lien in favor of the Senior Secured
Note Trustee to secure the obligations or any portion thereof under the Senior
Secured Note Documents.

 

“Senior Secured Notes”
means those certain 8% Senior
Secured Notes due 2011 issued by Borrower  in
an aggregate original principal amount of $460,000,000 pursuant to the Senior
Secured Note Indenture.

 

“Senior Secured Notes
Trustee” has the meaning ascribed to it in the definition of the term
“Senior Secured Note Indenture.”

 

“Senior Subordinated
Note Indenture” means that certain Indenture dated as of May 22, 2001
between Borrower, as issuer, and The Bank of New York, as trustee, governing
the terms and issuance of the Senior Subordinated Notes as amended, modified or
otherwise supplemented from time to time in accordance with the terms of this
Agreement.

 

“Senior Subordinated
Notes” means those certain unsecured 9.375%  Senior Subordinated Notes due 2011 issued by Borrower  in an aggregate original principal amount
of $350,000,000 pursuant to the Senior Subordinated Note Indenture.

 

“Senior Subordinated
Note Documents” means the Senior Subordinated Note Indenture, the Senior
Subordinated Notes and any other instrument, document or agreement delivered
pursuant thereto or in connection therewith.

 

“Settlement
Date” has the meaning ascribed to it in Section 8.5(a)(ii).

 

“Software” means
all “software” as such term is defined in the Code, now owned or hereafter
acquired by any Credit Party, other than software embedded in any category of
Goods, including all computer programs and all supporting information provided
in connection with a transaction related to any program.

 

“Solvent” means,
with respect to any Person on a particular date, that on such date (a) the
fair value of the property of such Person is greater than the total amount of
liabilities, including subordinated and contingent liabilities, of such Person;
(b) the present fair saleable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of
such Person on its debts and liabilities, including subordinated and contingent
liabilities as they become absolute and matured; (c) such Person does not
intend to, and does not believe that it will, incur debts or liabilities beyond
such Person’s ability to pay as such debts and liabilities mature; and
(d) such Person is not engaged in a business or transaction,

 

A-25

 

and is not about to
engage in a business or transaction, for which such Person’s property would
constitute an unreasonably small capital. 
The amount of contingent liabilities (such as litigation, guaranties and
pension plan liabilities) at any time shall be computed as the amount that, in
light of all the facts and circumstances existing at the time, represents the
amount that can reasonably be expected to become an actual or matured liability.

 

“Statement” has
the meaning ascribed to it in Section 4.2(b).

 

“Stock” means all
shares, options, warrants, general or limited partnership interests, membership
interests or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity
whether voting or nonvoting, including common stock, preferred stock or any
other “equity security” (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934).

 

“Stockholder”
means, with respect to any Person, each holder of Stock of such Person.

 

“Subordinated Debt”
means the Indebtedness of Borrower  evidenced
by the Senior Subordinated Notes and  any other  Indebtedness of any Credit
Party subordinated to the Obligations to the same extent as the Senior
Subordinated Notes or otherwise in a manner and form satisfactory to Agent and
Requisite Lenders in their sole discretion, as to right and time of payment and
as to any other rights and remedies thereunder.

 

“Subsidiary”
means, with respect to any Person, (a) any corporation of which an
aggregate of more than 50% of the outstanding Stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of more than 50% of such Stock whether by proxy, agreement,
operation of law or otherwise, and (b) any partnership or limited
liability company in which such Person and/or one or more Subsidiaries of such
Person shall have an interest (whether in the form of voting or participation
in profits or capital contribution) of more than 50% or of which any such
Person is a general partner or may exercise the powers of a general
partner.  Unless the context otherwise
requires, each reference to a Subsidiary shall be a reference to a Subsidiary
of the Borrower.

 

“Subsidiary Guaranty”
means the Subsidiary Guaranty of even date herewith executed by one or more
Domestic Subsidiaries of Borrower in favor of Agent, on behalf of itself and
Lenders.

 

“Swing
Line Advance” has the meaning ascribed to it in Section 1.1(c).

 

“Swing Line
Availability” has the meaning ascribed to it in Section 1.1(c).

 

A-26

 

“Swing Line Commitment”
means the commitment of the Swing Line Lender to make Swing Line Advances as
set forth on Annex B to the Agreement, which commitment constitutes a
subfacility of the Revolving Loan Commitment of the Swing Line Lender.

 

“Swing
Line Lender” means GE Capital.

 

“Swing Line Loan”
means at any time, the aggregate amount of Swing Line Advances outstanding to
Borrower.

 

“Swing Line Note” has
the meaning ascribed to it in Section 1.1(c).

 

“Termination Date”
means the date on which (a) the Loans have been indefeasibly repaid in
cash in full, (b) all other Obligations under the Agreement and the other
Loan Documents (other than contingent obligations) have been completely
discharged, (c) all Letter of Credit Obligations have been cash
collateralized in the amount set forth in Section 1.5(g), cancelled
or backed by standby letters of credit acceptable to Agent and
(d) Borrower shall not have any further right to borrow any monies under
the Agreement.

 

“Term
Lenders” means those Lenders having Term Loan Commitments.

 

“Term
Loan” has the meaning ascribed to it in Section 1.1(b).

 

“Term
Note” has the meaning ascribed to it in Section 1.1(b).

 

“Term Loan Commitment”
means (a) as to any Lender, the commitment of such Lender to make its Pro
Rata Share of the Term Loan (as set forth on Annex B) in the maximum
aggregate amount set forth in Section 1.1(b) or in the most recent
Assignment Agreement, if any, executed by such Lender and (b) as to all
Lenders, the aggregate commitment of all Lenders to make the Term Loan.  The Term Loan Commitment with respect to
each Term Loan shall reduce automatically by the amount prepaid or repaid in
respect of such Term Loan (but solely by the amount of such prepayment or
repayment allocable to a Lender, for purposes of clause (a) of this
definition).

 

“TH Marketing”
means TH Marketing Corp., a Delaware corporation.

 

“Title IV Plan”
means a Pension Plan (other than a Multiemployer Plan), that is subject to
Title IV of ERISA, and that any Credit Party or ERISA Affiliate maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any of them.

 

“Trademark License”
means rights under any written agreement now owned or hereafter acquired by any
Credit Party granting any right to use any Trademark.

 

“Trademark Security
Agreements” means the Trademark Security Agreements made in favor of Agent,
on behalf of itself and Lenders, by each applicable Credit Party.

 

A-27

 

“Trademarks” means
all of the following now owned or hereafter adopted or acquired by any Credit
Party: (a) all United States trademarks, trade names, corporate names,
business names, trade styles, service marks, logos, internet domain names,
other source or business identifiers, prints and labels on which any of the
foregoing have appeared or appear, designs and general intangibles of like
nature (whether registered or unregistered), all registrations and recordings
thereof, and all applications in connection therewith, including registrations,
recordings and applications in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof;
(b) all reissues, extensions or renewals thereof; and (c) all
goodwill associated with or symbolized by any of the foregoing.

 

“Unfunded Pension
Liability” means, at any time, the aggregate amount, if any, of the sum of
(a) the amount by which the present value of all accrued benefits under
each Title IV Plan exceeds the fair market value of all assets of such Title IV
Plan allocable to such benefits in accordance with Title IV of ERISA, all
determined as of the most recent valuation date for each such Title IV Plan
using the actuarial assumptions for funding purposes in effect under such Title
IV Plan, and (b) for a period of 5 years following a transaction which
might reasonably be expected to be covered by Section 4069 of ERISA, the
liabilities (whether or not accrued) that could be avoided by any Credit Party
or any ERISA Affiliate as a result of such transaction.

 

“Welfare Plan”
means a Plan described in Section 3(1) of ERISA.

 

Rules of construction
with respect to accounting terms used in the Agreement or the other Loan
Documents shall be as set forth or referred to in this Annex A.  All other undefined terms contained in any
of the Loan Documents shall, unless the context indicates otherwise, have the
meanings provided for by the Code to the extent the same are used or defined
therein; in the event that any term is defined differently in different
Articles or Divisions of the Code, the definition contained in Article or
Division 9 shall control.  Unless
otherwise specified, references in the Agreement or any of the Appendices to a
Section, subsection or clause refer to such Section, subsection or
clause as contained in the Agreement. 
The words “herein,” “hereof” and “hereunder” and other words of similar
import refer to the Agreement as a whole, including all Annexes, Exhibits and
Schedules, as the same may from time to time be amended, restated, modified or
supplemented, and not to any particular section, subsection or clause
contained in the Agreement or any such Annex, Exhibit or Schedule.

 

Wherever from the context
it appears appropriate, each term stated in either the singular or plural shall
include the singular and the plural, and pronouns stated in the masculine,
feminine or neuter gender shall include the masculine, feminine and neuter
genders.  The words “including”,
“includes” and “include” shall be deemed to be followed by the words “without
limitation”; the word “or” is not exclusive; references to Persons include
their respective successors and assigns (to the extent and only to the extent
permitted by the Loan Documents) or, in the case of governmental Persons,
Persons succeeding to the relevant functions of such Persons; and all
references to statutes and related regulations shall include any amendments of
the same and any successor statutes and regulations.  Whenever any provision in any Loan Document refers to the
knowledge (or an analogous phrase) of any Credit Party, such words are intended
to signify that such Credit Party has actual knowledge or awareness of a
particular fact

 

A-28

 

or circumstance or that
such Credit Party, if it had exercised reasonable diligence, would have known
or been aware of such fact or circumstance.

 

A-29Exhibit 10.A

 

ECOLAB INC.

MANAGEMENT PERFORMANCE INCENTIVE PLAN 

(as amended and restated on February 28, 2004) 

 

1.     Purpose
of Plan. 

 

The purpose of the Ecolab Inc. Management
Performance Incentive Plan, as amended (the "Plan") is to advance the
interests of Ecolab Inc. (the "Company") and its stockholders by
enabling the Company and its Subsidiaries to attract and retain key executives
of outstanding ability, by focusing such key executives on pre-established,
objective performance goals and by providing such key executives with
opportunities to earn financial rewards based on the achievement of such
performance goals. The Plan is intended to constitute a qualified
performance-based compensation plan under Section 162(m)(4)(C) of the
Internal Revenue Code of 1986, as amended (the "Code") and shall be
administered and interpreted so as to ensure such compliance. 

 

2.     Definitions.

 

For the purposes of the Plan, the following terms
will have the meanings set forth below, unless the context clearly otherwise
requires: 

 

2.1    "Award" means a right granted to a Participant
pursuant to Section 5 of the Plan to receive a cash payment from the
Company (or a Subsidiary) based upon the extent to which the Participant's
Performance Goal(s) are achieved during the relevant Performance Period and
subject to the Committee's discretion pursuant to Section 3.1. 

 

2.2    "Board" means the Board of Directors of the Company.

 

2.3    "Code" is defined in Section 1 of the Plan. 

 

2.4    "Committee" is defined in Section 3 of the Plan. 

 

2.5    "Company" is defined in Section 1 of the Plan. 

 

2.6    "Covered
Employee" means
an individual who with respect to a Performance Period is a "covered
employee" within the meaning of Section 162(m)(3) of the Code. 

 

2.7    "Disability" means the disability of the Participant such
as would entitle the Participant to receive disability income benefits pursuant
to the long-term disability plan of the Company or Subsidiary then covering the
Participant or, if no such plan exists or is applicable to the Participant, a
determination by the Committee that the Participant is permanently and totally
disabled within the meaning of Section 22(e)(3) of the Code. 

 

2.8    "Executive
Officer" means
an executive officer of the Company within the meaning of Rule 3b-7 under
the Securities Exchange Act of 1934, as amended. 

 

2.9    "GAAP" means generally accepted accounting
principles set forth in the opinions, statements and pronouncements of the
Financial Accounting Standards Board, United States (or predecessors or
successors thereto or agencies with similar functions), or in such other
statements by such other entity as may be in general use by significant
segments of the accounting profession, which are applicable to the
circumstances as of the date of determination and in any event applied in a
manner consistent with the application thereof used in the preparation of the
Company's financial statements. 

 

2.10    "Participant" means an Executive Officer of the Company to
whom an Award is granted by the Committee under the Plan. 

 

2.11    "Performance
Goal" means a
performance objective established by the Committee for a particular Participant
for a Performance Period pursuant to Section 5 of the Plan for the purpose
of determining the extent to which an Award has been earned for such
Performance Period. Each Performance Goal will consist of (a) "Performance Criteria," as
defined in Section 5.2 of the Plan, which are one or more objectively
determinable measures related to individual, business unit or Company
performance, and (b) a "Performance
Target," which is the level at which the relevant 

 

 

1

 

Performance Criteria must be achieved for purposes
of determining whether a cash payment is to be made under an Award, which may
be stated as a threshold level below which no payment will be made, a maximum
level at or above which full payment will be made and intermediate targets
which will result in payment between such threshold and maximum level. 

 

2.12    "Performance
Period" means a
Plan Year or, for an Executive Officer who is first hired as an Executive
Officer after the first day of the Plan Year and who becomes a Participant
during the Plan Year, such portion of the Plan Year as determined by the Committee.

 

2.13    "Plan" is defined in Section 1 of the Plan. 

 

2.14    "Plan
Year" means the
fiscal year of the Company. 

 

2.15    "Retirement" means termination of employment at an age
and length of service such that the Participant would be eligible to an
immediate commencement of benefit payments under the final average compensation
formula of the Company's defined benefit pension plan available generally to
its employees, whether or not such individual actually elects to commence such
payments (provided that, (i) if the Participant is not covered by the
Company's defined benefit pension plan, or (ii) if the Participant is
covered under the cash balance formula of such plan, then the Participant will
be deemed to be covered by the final average compensation formula of such plan
for purposes of this Plan). 

 

2.16    "Subsidiary" means any entity that is directly or
indirectly controlled by the Company, as determined by the Committee. 

 

3.     Plan
Administration. 

 

3.1    The
Committee.    The
Plan will be administered by a committee appointed by the Board consisting
solely of two or more directors, each of whom is an "outside
director" within the meaning of Section 162(m)(4)(C)(i) of the
Code (the "Committee"). In accordance with and subject to the provisions
of the Plan, the Committee will have full authority and discretion with respect
to Awards made under the Plan, including without limitation the following:
(a) selecting the Executive Officers to be Participants;
(b) establishing the terms of each Award; (c) determining the time or
times when Awards will be granted; and (d) establishing the restrictions
and other conditions to which the payment of Awards may be subject. The
Committee will have no authority under the Plan to amend or modify, in any
manner, the terms of any outstanding Award; provided, however, that
(x) the Committee shall have the authority provided for in
Section 3.2 of the Plan; and (y) the Committee shall have the
authority to reduce or eliminate the compensation or other economic benefit due
pursuant to an Award upon the attainment of one or more Performance Goals
included in such Award. Each determination, interpretation or other action made
or taken by the Committee pursuant to the provisions of the Plan will be
conclusive and binding for all purposes and on all persons, and no member of
the Committee will be liable for any action or determination made in good faith
with respect to the Plan or any Award granted under the Plan. 

 

3.2    Adjustments.    In the event of
(a) any merger, reorganization, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of
shares, rights, offering, extraordinary dividend (including a spin-off) or
other similar change affecting the Company's shares, (b) any purchase,
acquisition, sale or disposition of a significant amount of assets other than
in the ordinary course of business, or of a significant business, (c) any
change resulting from the accounting effects of discontinued operations,
extraordinary income or loss, changes in accounting as determined under GAAP,
or restatement of earnings or (d) any charge or credit resulting from an
item which is classified as "non-recurring,"
"restructuring," or similar unusual item on the Company's audited
annual Statement of Income which, in the case of (a) — (d), results in a change
in the components of the calculations of any of the Performance Criteria, as
established by the Committee, in each case with respect to the Company or any
other entity whose performance is relevant to the achievement of any
Performance Goal included in an Award, the Committee (or, if the Company is not
the surviving 

 

2

 

corporation in any such transaction, a committee of
the board of directors of the surviving corporation consisting solely of two or
more "outside directors" within the meaning of
Section 162(m)(4)(C)(i) of the Code) shall, without the consent of
any affected Participant, amend or modify the terms of any outstanding Award
that includes any Performance Goal based in whole or in part on the financial
performance of the Company (or any Subsidiary or division thereof) or such
other entity so as equitably to reflect such event or events, such that the
criteria for evaluating such financial performance of the Company or such other
entity (and the achievement of the corresponding Performance Goal) will be
substantially the same (as determined by the Committee or the committee of the
board of directors of the surviving corporation) following such event as prior
to such event; provided, however, that the Committee shall not take any action
pursuant to this Section which would constitute an impermissible exercise of
discretion pursuant to Section 162(m) of the Code. 

 

4.     Participation.

 

The Participants for any Performance Period shall be
those Executive Officers who are granted Awards by the Committee under the Plan
for such Performance Period. 

 

5.     Grant
of Awards. 

 

5.1    Nature
of Awards.    An
Award granted under the Plan shall provide for a cash payment to be made solely
on account of the attainment of one or more pre-established, objective
Performance Goals included in such Award, subject to the Committee's authority
pursuant to Sections 3 and 10 of the Plan. 

 

5.2    Performance
Criteria.    Performance
Criteria which the Committee may include in Awards made under the Plan include
the following measurements, or changes in such measurements between different
Plan Years (or combination thereof) as applied to the Company as a consolidated
entity or, except as to Diluted Earnings Per Share, a business division or
business or staff unit thereof: 

 

(a)                                  "Diluted Earnings
Per Share" ("EPS") means net income (loss) per common share, diluted, as
reported in the Company's audited year-end Consolidated Statement of Income
("Statement of Income") for the Plan Year; 

 

(b)                                 "Operating
Income"
means "operating income" as reported or included in the Company's
Statement of Income; 

 

(c)                                  "Net
Sales" means "net sales" as reported or included in
the Company's Statement of Income; 

 

(d)                                 "Days
Sales Outstanding" ("DSO") means the 12 point average
of month-end DSO numbers, and month-end DSO numbers shall mean monthly
performance for days sales invested in trade accounts receivable, determined by
using the "exhaustion method"; 

 

(e)                                  "Capital
Expenditures"
means "capital expenditures" reported or included in the Company's
year-end audited Consolidated Statement of Cash Flows for the Plan year; 

 

(f)                                    "Inventory Days On
Hand"
("DOH") means, by category of inventory, the average of the
12 month-end DOH numbers, and the month-end DOH numbers shall mean, by
category of inventory, (i) inventory on hand at standard cost, divided by
(ii) cost of goods at standard cost based on either forecasted requirements
or historical shipments; 

 

(g)                                 "Controllable
Expenses"
means expenses under the control of the Participant; 

 

(h)                                 "Return on
Beginning Equity" means net income (loss) as reported or included in the Company's
Statement of Income divided by beginning of the year "shareholders
equity" as reported or included in the Company's year-end audited
financial statements for the Plan Year; and 

 

3

(i)                                     "Return on Net
Assets"
means (i) Operating Income, less income taxes at the applicable effective
rate, divided by (ii) total assets less cash and cash equivalents,
investments in securities and non-interest bearing liabilities as reported or
included in the Company's year-end audited financial statements for the Plan
year, including footnotes. 

 

5.3    Establishment
of Performance Goals.    Not
later than 90 days after the commencement of the Plan Year (or such
earlier date as may be required pursuant to Section 162(m) of the Code)
the Committee shall determine in writing for each Participant: 

 

(a)                                  the Performance Goal(s) for the
Participant, including in each case one or more of the Performance Criteria set
forth in Section 5.2 of the Plan and the Performance Target for each
Performance Criteria; 

 

(b)                                 if more than one Performance Goal is
specified for a Participant, the relative weight assigned to each Performance
Goal; and 

 

(c)                                  the cash award expressed as a percentage
of the base salary for the Participant for the Performance Period, provided
that the Committee shall also place a maximum dollar amount on such cash award
which may not exceed $3 million. 

 

For an Executive Officer who is first hired as an
Executive Officer and who becomes a Participant after the first day of the Plan
Year, the Performance Goals shall be established by the Committee as set forth
in this Section within the time period permitted by Section 162(m) of the
Code. 

 

6.     Payment
of Awards. 

 

As soon as practicable after the Committee has
received the appropriate financial and other data after the end of a Plan Year,
the Committee will for each Participant certify in writing the extent to which
the applicable Performance Goals for such Participant have been met and the
corresponding amount of the Award earned by such Participant. Payment of each
Award in a cash lump sum, less applicable withholding taxes pursuant to
Section 8 of the Plan, shall be made as soon as practicable thereafter.
Notwithstanding anything in the Plan to the contrary, no payment made pursuant
to any Award in respect of any Performance Period shall exceed $3 million.
If the Committee determines in good faith that there is a reasonable likelihood
that any compensation paid or payable to a Participant by the Company or a
Subsidiary pursuant to the Plan for a Plan Year would not be deductible by the
Company or the Subsidiary solely by reason of the limitation under
Section 162(m) of the Code, the Committee may defer all or a portion of
the amounts otherwise payable pursuant to the Plan to the extent deemed
necessary by the Committee to ensure that the entire amount of any distribution
to such Participant is deductible. If so determined by the Committee, such
deferred amounts, when paid to the Participant, may be accompanied by interest
at a reasonable rate (as determined by the Committee). 

 

7.     Effect
of Termination of Employment. 

 

7.1    Termination
Due to Death, Disability or Retirement.    In the event a
Participant's employment with the Company and all Subsidiaries is terminated by
reason of death, Disability or Retirement during a Performance Period, the
Participant (or the Participant's estate) (subject to the Committee's
discretion as allowed by clause (y) of Section 3.1 of the Plan) shall
be paid (pursuant to Section 6 of the Plan after the completion of the
Plan Year) a percentage of the amount earned according to the terms of the
Award equal to the portion of the Performance Period through the Participant's
death, Disability or Retirement, as the case may be, as determined by the
Committee. 

 

7.2    Termination
for Reasons Other than Death, Disability or Retirement.    In the event a
Participant's employment is terminated with the Company and all Subsidiaries
prior to the end of the Performance Period for any reason other than death,
Disability or Retirement, or a Participant is in the employ of a Subsidiary and
the Subsidiary ceases to be a Subsidiary of the Company (unless the Participant
continues in the employ of the Company or another Subsidiary), the
Participant's Award for 

 

4

 

such Performance Period shall be immediately
forfeited and the Participant shall have no right to any payment thereafter;
provided, however, that under such circumstances the Committee may pay the
Participant an amount not to exceed a percentage of the amount earned according
to the terms of the Award equal to the portion of the Performance Period
through the Participant's termination. 

 

8.     Payment
of Withholding Taxes. 

 

The Company is entitled to withhold and deduct from
the payment made pursuant to an Award or from future wages of the Participant
(or from other amounts that may be due and owing to the Participant from the
Company or a Subsidiary), or make other arrangements for the collection of, all
legally required amounts necessary to satisfy any and all federal, state and
local withholding and employment-related tax requirements attributable to any
payment made pursuant to an Award. 

 

9.     Rights
of Eligible Executive Officers and Participants; Transferability. 

 

9.1    Employment.    Nothing in the Plan
will interfere with or limit in any way the right of the Company or any
Subsidiary to terminate the employment or otherwise modify the terms and
conditions of the employment of any Executive Officer or Participant at any
time, nor confer upon any Executive Officer or Participant any right to
continue in the employ of the Company or any Subsidiary. 

 

9.2    Restrictions
on Transfer.    Except
pursuant to testamentary will or the laws of descent and as otherwise expressly
permitted by the Plan, no right or interest of any Participant in an Award will
be assignable or transferable, or subjected to any lien, during the lifetime of
the Participant, either voluntarily or involuntarily, directly or indirectly,
by operation of law or otherwise. 

 

9.3    Non-Exclusivity
of the Plan.    Nothing
contained in the Plan is intended to modify or rescind any previously approved
compensation plans or programs of the Company or any Subsidiary or create any
limitations on the power or authority of the Board or any committee thereof to
adopt such additional or other compensation arrangements as the Board or
committee may deem necessary or appropriate. 

 

10.   Plan
Amendment, Modification and Termination. 

 

The Board may suspend or terminate the Plan or any
portion thereof at any time, and may amend the Plan from time to time in such
respects as the Board may deem advisable in order that Awards under the Plan
will conform to any change in applicable laws or regulations or in any other
respect the Board may deem to be in the best interests of the Company;
provided, however, that no amendments to the Plan will be effective without the
approval of the stockholders of the Company if stockholder approval of the
amendment is then required for the Plan to continue to be a qualified performance-based
compensation plan pursuant to Section 162(m) of the Code. Any termination,
suspension or amendment of the Plan may adversely affect any outstanding Award
without the consent of the affected Participant. 

 

11.   Unfunded,
Unsecured Obligation. 

 

A Participant's only interest under the Plan shall
be the right to receive a cash payment under an Award pursuant to the terms of
the Award and the Plan (subject to the authority of the Committee pursuant to
Sections 3 and 10 of the Plan). No portion of the amount payable to
Participants upon the achievement of any Performance Goal therein shall be held
by the Company or any Subsidiary in trust or escrow or any other form of asset
segregation. To the extent that a participant acquires a right to receive such
a cash payment under the Plan, such right shall be no greater than the right of
any unsecured, general creditor of the Company. 

 

12.   Effective Date
and Duration of the Plan. 

 

The Plan (formerly titled the "1999
Ecolab Inc. Management Performance Incentive Plan") was originally
approved by the Board on February 19, 1999 and by the Company's
stockholders on 

 

5

 

May 14, 1999. The Plan was further
amended and restated by the Board on February 28, 2004, subject to
stockholder approval as required by Section 162(m) of the Code. No
benefits will be granted or amounts will be paid pursuant to the further
amended Plan unless and until such stockholder approval is obtained. If
approved, the further amended Plan shall be effective for the Plan Year
beginning on January 1, 2004 and will remain in effect through and
including the Plan Year ending December 31, 2008. The Plan may be
terminated at any time by the Board. Any payments pursuant to Awards
outstanding upon termination of the Plan may continue to be made in accordance
with the terms of the Awards, subject to the authority of the Committee
pursuant to Sections 3 and 10 of the Plan. 

 

13.   Miscellaneous.

 

13.1    Governing
Law.    Except
to the extent in connection with other matters of corporate governance and
authority (all of which shall be governed by the laws of the Company's
jurisdiction of incorporation), the validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations and actions
relating to the Plan will be governed by and construed exclusively in
accordance with the internal, substantive laws of the State of Minnesota,
without regard to the conflict of law rules of the State of Minnesota or any
other jurisdiction. 

 

13.2    Successors.    The Plan will be
binding upon and inure to the benefit of the successors of the Company and the
Participants. 

 

6

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