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Section 1: 8-K (8-K)

8-K - 2019 HNB Credit Facility Agreement





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________



FORM 8-K

________________________________

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 13, 2019

________________________________

 

ROCKY BRANDS, INC.

(Exact name of registrant as specified in its charter)





 

 

 

 

Ohio

 

001-34382

 

31-1364046

(State or other jurisdiction
of incorporation)

 

(Commission
File Number)

 

(IRS Employer
Identification No.)



39 East Canal Street, Nelsonville, Ohio 45764

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code: (740) 753-1951

 

Not Applicable

(Former name or former address, if changed since last report.)

________________________________

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):





 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).



Emerging growth company 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 




 

Item 1.01 Entry into a Material Definitive Agreement.



On February 13, 2019, Rocky Brands, Inc. (the “Company”) entered into a Revolving Credit, Guaranty, and Security Agreement (the “Credit Agreement”) among the Company and certain of its subsidiaries (together with the Company, the “Borrowers”), the lenders party thereto, and The Huntington National Bank as administrative agent for the lenders (the “Agent”) for certain extensions of revolving credit.  All capitalized terms not otherwise defined herein are as defined in the Credit Agreement.



The Credit Agreement provides for a new senior secured asset-based revolving credit facility up to a principal amount of $75 million, which includes a sublimit for the issuance of letters of credit up to $7.5 million (the “Credit Facility”).  The Credit Facility may be increased up to an additional $25 million at the Borrowers’ request and the Lenders’ option, subject to customary conditions.  Proceeds of any loans under the Credit Facility may be used to repay existing indebtedness, for working capital and for general corporate purposes, including capital expenditures, dividends in respect of the Company’s stock, and to make permitted acquisitions.



The Borrowers have granted to the Agent (for the benefit of the Lenders and other secured parties), as collateral security for the obligations under the Credit Facility, security interests and pledges in, and liens on, all inventory, accounts receivable, certain deposit accounts and investment property, and certain other personal property assets of the Company and certain of its subsidiaries, subject to certain Excluded Property.



The applicable margins for interest rates on borrowings under the Credit Agreement are based upon Quarterly Liquidity.  Eurodollar Rate Loans bear interest at a rate per annum equal to the sum of an applicable margin, plus the Eurodollar Rate, and Domestic Rate Loans bear interest at a rate per annum equal to the sum of an applicable margin plus the highest of (i) the overnight bank funding rate plus 0.50%, (ii) the Agent’s prime commercial rate in effect, and (iii) the Eurodollar Rate for a period of one month plus 1.0%.  Interest for borrowings under the Credit Agreement is payable monthly and at the end of each applicable interest period.  A facility fee is payable monthly in arrears on the daily average unused portion of the Credit Facility. 



The Credit Agreement matures on February 13, 2024 and requires compliance with conditions precedent that must be satisfied prior to any borrowing as well as ongoing compliance with certain representations and warranties, affirmative and negative covenants, in many cases subject to a material adverse effect. The Credit Agreement also contains various information and reporting requirements and provides for various customary fees to be paid by the Company.  In addition, the Credit Agreement contains customary events of default. An event of default may cause the applicable interest rate and fees to increase by 2.0% until such event of default has been cured, waived, or amended.



On February 13, 2019, upon execution of the Credit Agreement, the Company refinanced the amounts under, and terminated the Amended and Restated Revolving Credit, Term Loan, Guaranty, and Security Agreement, dated December 19, 2014, as amended from time to time (the “Former Credit Agreement”), among the Company, certain of the Company’s subsidiaries, the financial institutions listed therein as lenders, and PNC Bank, National Association as agent for the lenders. The Former Credit Agreement provided for a revolving credit facility of $75 million and a $5 million term loan facility, which credit facility was secured by a first priority perfected security interest in substantially all of the personal property of the borrowers under the Former Credit Agreement, subject to specified exceptions.



The foregoing is intended only to be a summary of the Credit Facility and Credit Agreement and is qualified in its entirety by reference to the full text of the Credit Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference.



Item 1.02 Termination of a Material Definitive Agreement.



The information set forth under Item 1.01 is hereby incorporated by reference into this Item 1.02.



Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.



The information set forth under Item 1.01 is hereby incorporated by reference into this Item 2.03.


 

Item 9.01 Financial Statements and Exhibits.



(d) Exhibits.





 

 



 

 

   Exhibit No.

 

Description

Exhibit 10.1

 

Revolving Credit, Guaranty, and Security Agreement, dated February 13, 2019, among Rocky Brands, Inc., Lehigh Outfitters, LLC, Lifestyle Footwear, Inc., Rocky Brands US, LLC, Rocky Brands International, LLC, and Rocky Outdoor Gear Store, LLC, as borrowers, the financial institutions party thereto as lenders, and The Huntington National Bank, as agent for the lenders.



 

 




 



SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.





 

Date: February 19, 2019





 



Rocky Brands, Inc.



 



/s/ Thomas D. Robertson



Thomas D. Robertson



Executive Vice President, Chief Financial Officer, and Treasurer






(Back To Top)

Section 2: EX-10 (EX-10)

Exhibit 10.1 2019 HNB Credit Facility

Exhibit 10.1





















REVOLVING CREDIT, GUARANTY, AND SECURITY AGREEMENT





THE HUNTINGTON NATIONAL BANK

(AS LENDER AND AS AGENT)



AND



ROCKY BRANDS, INC.,

LEHIGH OUTFITTERS, LLC,

LIFESTYLE FOOTWEAR, INC.,

ROCKY BRANDS US, LLC,

ROCKY BRANDS INTERNATIONAL, LLC,

ROCKY OUTDOOR GEAR STORE, LLC



(AS BORROWERS)



Dated as of February 13, 2019

 


 

TABLE OF CONTENTS

DEFINITIONS1

Accounting Terms1

General Terms1

Uniform Commercial Code Terms36

Certain Matters of Construction36

ADVANCES, PAYMENTS37

Revolving Advances37

Procedure for Revolving Advances Borrowing38

Disbursement of Advance Proceeds40

Reserved41

Maximum Advances41

Repayment of Advances41

Repayment of Excess Advances41

Statement of Account41

Letters of Credit42

Issuance of Letters of Credit42

Requirements For Issuance of Letters of Credit43

Disbursements, Reimbursement43

Repayment of Participation Advances44

Documentation45

Determination to Honor Drawing Request45

Nature of Participation and Reimbursement Obligations45

Indemnity47

Liability for Acts and Omissions47

Cash Collateral48

Additional Payments49

Manner of Borrowing and Payment49

Mandatory Prepayments50

Use of Proceeds50

Defaulting Lender51

Increase of the Maximum Revolving Advance Amount52

Reduction of the Maximum Revolving Advance Amount53

INTEREST AND FEES53

Interest53

Letter of Credit Fees54

Facility Fee54

Other Fees and Charges55

Computation of Interest and Fees56

Maximum Charges56

Increased Costs56

Basis For Determining Interest Rate Inadequate or Unfair57

Capital Adequacy.57

Taxes58

COLLATERAL:  GENERAL TERMS60

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Security Interest in the Collateral60

Perfection of Security Interest61

Disposition of Property61

Preservation of Collateral62

Ownership of Collateral62

Defense of Agent’s and Lenders’ Interests63

Books and Records63

Reserved64

Compliance with Laws64

Inspection of Premises64

Insurance64

Failure to Pay Insurance65

Payment of Taxes65

Payment of Leasehold Obligations66

Receivables66

Inventory71

Maintenance of Equipment71

Exculpation of Liability71

Environmental Matters71

Financing Statements73

REPRESENTATIONS AND WARRANTIES73

Authority73

Formation, Qualification, Equity Interests, Subsidiaries74

Survival of Representations and Warranties74

Tax Returns74

Financial Statements75

Entity Names75

O.S.H.A. and Environmental Compliance75

Solvency; No Litigation, Violation, Indebtedness or Default76

Patents, Trademarks, Copyrights and Licenses77

Licenses and Permits; Firearms77

Default of Indebtedness77

No Default78

No Burdensome Restrictions78

No Labor Disputes78

Margin Regulations78

Investment Company Act78

Disclosure78

No Claims78

Conflicting Agreements78

Application of Certain Laws and Regulations79

Business and Property of Borrowers79

Anti-Corruption Laws and Sanctions79

Anti-Terrorism Laws79

AFFIRMATIVE COVENANTS79

Payment of Fees79

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Conduct of Business and Maintenance of Existence and Assets80

Reserved80

Government Receivables80

Fixed Charge Coverage Ratio80

Execution of Supplemental Instruments80

Payment of Indebtedness80

Standards of Financial Statements81

Keepwell81

NEGATIVE COVENANTS81

Merger, Consolidation, Acquisition and Sale of Assets81

Creation of Liens82

Guarantees82

Investments82

Loans82

Reserved82

Dividends82

Indebtedness83

Nature of Business83

Transactions with Affiliates83

Firearms Regulatory Licenses83

Subsidiaries84

Fiscal Year and Accounting Changes84

Pledge of Credit84

Amendment of Articles of Incorporation, By-Laws, Certificate of Formation, Operating Agreement; Change of Name84

Compliance with ERISA84

Prepayment of Indebtedness84

Membership/Partnership Interests85

Anti-Terrorism Laws85

EJ Asia Limited85

CONDITIONS PRECEDENT85

Conditions to Initial Advances85

Conditions to Each Advance88

INFORMATION AS TO BORROWERS89

Disclosure of Material Matters89

Schedules89

Environmental Reports90

Litigation90

Material Occurrences90

Government Receivables90

Annual Financial Statements91

Reserved91

Monthly Financial Statements91

Other Reports91

Additional Information91

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Projected Operating Budget92

Variances From Operating Budget92

Notice of Suits, Adverse Events92

ERISA Notices and Requests92

Additional Documents93

Cash Reporting; Liquidity Calculation93

Intellectual Property Updates93

EVENTS OF DEFAULT93

Nonpayment93

Breach of Representation93

Financial Information94

Judicial Actions94

Noncompliance94

Judgments94

Bankruptcy94

Inability to Pay95

Reserved95

Lien Priority95

Cross Default95

Breach of Guaranty95

Change of Control95

Invalidity95

Licenses95

Seizures96

96

96

LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT96

Rights and Remedies96

Agent’s Discretion98

Setoff98

 Appointment of Receiver98

Rights and Remedies not Exclusive99

Allocation of Payments After Event of Default99

WAIVERS AND JUDICIAL PROCEEDINGS100

Waiver of Notice100

Delay100

Jury Waiver100

EFFECTIVE DATE AND TERMINATION101

Term101

Termination101

REGARDING AGENT102

Appointment102

Nature of Duties102

Lack of Reliance on Agent and Resignation103

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Certain Rights of Agent103

Reliance104

Notice of Default104

Indemnification104

Agent in its Individual Capacity104

Delivery of Documents104

Borrowers’ Undertaking to Agent105

No Reliance on Agent’s Customer Identification Program105

Other Agreements105

Delegation105

BORROWING AGENCY105

Borrowing Agency Provisions105

Waiver of Subrogation106

Cross Guaranty106

Subordination107

No Disposition107

MISCELLANEOUS107

Governing Law107

Amendments and Waivers108

Successors and Assigns; Participations; New Lenders110

Application of Payments112

Indemnity113

Notice113

Survival115

Severability115

Expenses115

Injunctive Relief115

Consequential Damages116

Captions116

Counterparts; Electronic Signatures116

Construction116

Confidentiality; Sharing Information116

Publicity117

Certifications From Banks and Participants; US PATRIOT Act117

Language117

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LIST OF EXHIBITS AND SCHEDULES



Exhibits



Exhibit 1.2Borrowing Base Certificate

Exhibit 4.15(j) US Assignment



Schedules



Schedule 1.2(a) Permitted Encumbrances

Schedule 4.5 Property, Equipment, Books & Records, and Inventory Locations

Schedule 4.11Insurance

Schedule 4.15(c)Chief Executive Offices

Schedule 4.15(h)Deposit and Investment Accounts

Schedule 4.15(j)Government Contracts

Schedule 5.1Consents

Schedule 5.2(a) States of Qualification and Good Standing

Schedule 5.2(b) Equity Interests; Subsidiaries

Schedule 5.4Federal Tax Identification Number

Schedule 5.6 Prior Names

Schedule 5.7OSHA and Environmental Compliance

Schedule 5.8(d) ERISA Plans

Schedule 5.9 Intellectual Property, Source Code Escrow Agreements

Schedule 5.10 Licenses and Permits

Schedule 5.12Material Contracts

Schedule 5.14 Labor Disputes

Schedule 7.3 Guarantees

Schedule 7.8 Existing Indebtedness

 

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REVOLVING CREDIT, GUARANTY, AND SECURITY AGREEMENT



This Revolving Credit,  Guaranty, and Security Agreement dated as of February 13, 2019 among Rocky Brands, Inc., an Ohio corporation (“Parent”), Lehigh Outfitters, LLC, a Delaware limited liability company (“Lehigh”),  Lifestyle Footwear, Inc., a Delaware corporation (“Lifestyle”), Rocky Brands US, LLC, a Delaware limited liability company (“Rocky Brands”),  Rocky Brands International, LLC, an Ohio limited liability company (“Rocky International”),  Rocky Outdoor Gear Store, LLC an Ohio limited liability company (“Rocky Outdoor”) (Parent,  Lehigh,  Lifestyle,  Rocky Brands,  Rocky International,  and Rocky Outdoor, collectively, the “Borrowers” and individually a “Borrower”), the Lenders listed on the signature pages hereto or which hereafter become a party hereto as lenders (collectively, the “Lenders” and individually a “Lender”) and The Huntington National Bank (“HNB”), as agent for Lenders (HNB, in such capacity, the “Agent”).



IN CONSIDERATION of the mutual covenants and undertakings herein contained, Borrowers,  Lenders and Agent hereby agree as follows:

I DEFINITIONS.

1.1. Accounting Terms.  As used in this Agreement, the Other Documents or any certificate, report or other document made or delivered pursuant to this Agreement, accounting terms not defined in Section 1.2 or elsewhere in this Agreement and accounting terms partly defined in Section 1.2 to the extent not defined, shall have the respective meanings given to them under GAAP;  provided, however, whenever such accounting terms are used for the purposes of determining compliance with financial covenants in this Agreement, such accounting terms shall be defined in accordance with GAAP as applied in preparation of the audited financial statements of Borrowers for the fiscal year ended December 31, 2017.    

1.2. General Terms.  For purposes of this Agreement the following terms shall have the following meanings:

Access Agreement Locations” shall mean the premises leased by a Borrower in Puerto Rico and listed on Schedule 4.5.  

Account Control Notice” shall have the meaning set forth in Section 4.15(h)(i).

Advance Rates” shall have the meaning set forth in Section 2.1(a)(y)(iii).

Advances” shall mean and include the Revolving Advances and Letters of Credit.  

Affiliate” of any Person shall mean (a) any Person which, directly or indirectly, is in control of, is controlled by, or is under common control with such Person, or (b) any Person who is a director, managing member, general partner or officer (i) of such Person,  (ii) of any Subsidiary of such Person or (iii) of any Person described in clause (a) above.  For purposes of this definition, control of a Person shall mean the power, direct or indirect, (x) to vote 20% or more of the Equity Interests having ordinary voting power for the election of directors of such Person or other Persons performing similar functions for any such Person, or (y) to direct or cause the direction of the

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management and policies of such Person whether by ownership of Equity Interests, contract or otherwise.

Agent” shall have the meaning set forth in the preamble to this Agreement and shall include its successors and assigns.

 “Agreement” shall mean this Revolving Credit,  Guaranty, and Security Agreement, as the same may be amended, restated, supplemented or otherwise modified from time to time.

Alternate Base Rate” shall mean for any day a fluctuating rate of interest per annum equal to the highest of (a) the Federal Funds Rate plus 0.50%, (b) the Prime Commercial Rate in effect for such day, and (c) the Eurodollar Rate for a period of one (1) month plus 1.00%, subject to the interest rate floors set forth therein; provided that if the Alternate Base Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement. 

Anti-Corruption Laws” shall mean all laws, rules, and regulations of any jurisdiction applicable to Borrowers or any of their respective Subsidiaries from time to time concerning or relating to bribery or corruption.

Anti-Terrorism Law(s)”  shall mean those laws and sanctions relating to terrorism or money laundering, including Executive Order No. 13224, the Patriot Act, the Bank Secrecy Act (Public Law 91-508), the Trading with the Enemy Act (50 U.S.C. App. Section 1 et. seq.), the International Emergency Economic Powers Act (50 U.S.C. Section 1701 et. seq.), and the sanction regulations promulgated pursuant thereto by the Office of Foreign Assets Control, as well as laws relating to prevention and detection of money laundering in 18 U.S.C. Sections 1956 and 1957 (as any of the foregoing may from time to time be amended, renewed, extended or replaced).

 “Applicable Law” shall mean all laws, rules and regulations applicable to the Person, conduct, transaction, covenant, Other Document or contract in question, including all applicable common law and equitable principles; all provisions of all applicable state, territorial, federal and foreign constitutions, statutes, rules, regulations, treaties, directives and orders of any Governmental Body, and all orders, judgments and decrees of all courts and arbitrators.

 Applicable Rate” for Revolving Advances and the Facility Fee shall mean, commencing as of the Closing Date, the percentages per annum set forth in Tier 1 of the pricing table below.  Thereafter, effective as of the fifth (5th) Business Day after receipt by Agent of a Liquidity Calculation for the fiscal quarter ending March 31, 2019, and thereafter upon receipt of a Liquidity Calculation for each subsequent fiscal quarter (each day of such delivery, an “Adjustment Date”), the Applicable Rate shall be adjusted prospectively, if necessary, to the applicable percentages per annum set forth in the pricing table below corresponding to the Quarterly Liquidity of Borrowers during the fiscal quarter ending immediately prior to the applicable Adjustment Date: 







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Tier

Quarterly Liquidity

Applicable Rates for Eurodollar Rate Revolving Advances

Applicable Rates for Domestic Rate Revolving Advances

 

Applicable Rates for Facility Fee

1

> $25,000,000

1.00  %

- 0.50  %

0.10 %

2

< $25,000,000 but > $17,500,000

1.25  %

- 0.50  %

0.10 %

3

< $17,500,000 but > $10,000,000

1.50  %

-  0.25  %

0.10 %

4

< $10,000,000

1.75  %

0.00  %

0.10 %

If the Borrowers shall fail to deliver a Liquidity Calculation for any fiscal quarter on or before the fifth (5th)  Business Day of the following fiscal quarter, each Applicable Rate shall be conclusively presumed to equal the highest Applicable Rate specified in the pricing table set forth above until the date of delivery of such Liquidity Calculation, at which time the rate will be adjusted prospectively based upon the Quarterly Liquidity reflected in such Liquidity Calculation.

No downward adjustment of any Applicable Rate shall occur if, at the time such downward adjustment would otherwise be made, there shall exist any Event of Default,  provided that such downward adjustment shall be made on the first (1st) day of the month after the date on which the applicable Event of Default shall have been waived by Agent in writing. During any period which an Event of Default exists, the Applicable Rate(s) shall adjust to the highest Applicable Rate(s) set forth above upon direction of the Agent or the Required Lenders.

If the Agent determines that (a) the Liquidity Calculation as of any applicable date was inaccurate or otherwise is not consistent with Agent’s calculation of Quarterly Liquidity, which calculation of Agent shall control in the event of any inconsistency, and (b) Agent’s determination of the Quarterly Liquidity would have resulted in different pricing for any period, then (y) if Agent’s determination of the Quarterly Liquidity would have resulted in higher pricing for such period, the Borrowers shall automatically and retroactively be obligated to pay to the Agent, promptly upon demand by the Agent, an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period; and (z) if Agent’s determination of the Quarterly Liquidity would have resulted in lower pricing for such period, Borrowers shall be entitled to a credit against interest or fees accruing after the date of determination; provided, that, if Agent’s determination of the Quarterly Liquidity would have resulted in higher pricing for one or more periods and lower pricing for one or more other periods, then the amount payable by the Borrowers pursuant to clause (y) above shall be based upon the excess, if any, of the amount of interest and fees that should have been paid for all applicable periods over the amounts of interest and fees actually paid for such periods. 





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Authority” shall have the meaning set forth in Section 4.19(d).

Average Availability” shall mean, as of the date of determination, the sum of Undrawn Availability, plus Qualified Cash for each day of the sixty (60) day period ending on such date, divided by sixty (60).    

 “Bank Products Obligations” shall have the meaning set forth in the definition of Obligations.

Bankruptcy Code” shall mean title 11 of the United States Code as in effect from time to time.

BATFE shall have the meaning specified therefor in the definition of Firearms Regulatory Authority.

Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of ERISA) for which any Borrower or any ERISA Affiliate of any Borrower has been an “employer” (as defined in Section 3(5) of ERISA) within the past six (6) years.

Blocked Accounts” shall have the meaning set forth in Section 4.15(h)(i).

Blocked Account Agreement” shall have the meaning set forth in Section 4.15(h)(i).

Blocked Account Bank” shall have the meaning set forth in Section 4.15(h)(i).  

Blocked Person”  shall mean any of the following: (a) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224; (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224; (c) a Person with which Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order No. 13224; (e) a Person that is named as a “specially designated national” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list; or (f) a Person who is affiliated or associated with a Person listed above.

Board of Directors” shall mean the board of directors (or comparable managers) of Parent or any committee thereof duly authorized to act on behalf of the board of directors (or comparable managers).

Beneficial Ownership Regulation” shall mean 31 C.F.R. § 1010.230.

Borrower” or “Borrowers” shall have the meaning set forth in the preamble to this Agreement and shall extend to all permitted successors and assigns of such Persons, and any Person that shall join this Agreement as a Borrower hereunder.

Borrowers’ Account” shall have the meaning set forth in Section 2.8.

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Borrowing Agent” shall mean Parent.

Borrowing Base Certificate” shall mean a certificate in substantially the form of Exhibit 1.2 duly executed by the Chief Executive Officer, Chief Financial Officer or Controller of the Borrowing Agent and delivered to the Agent, appropriately completed, by which such officer shall certify to Agent the Formula Amount and calculation thereof as of the date of such certificate.

Business Day” shall mean any day other than a Saturday, a Sunday, or other day on which Agent and each Lender is authorized or required to be closed; and if the applicable Business Day relates to any Loan accruing interest based on the Eurodollar Rate, such day must also be a day for trading by and between banks in US dollar deposits in the London interbank market.

Capital Expenditures” shall mean expenditures made or liabilities incurred for the acquisition of any fixed assets or improvements, replacements, substitutions or additions thereto which have a useful life of more than one year, including the total principal portion of Capitalized Lease Obligations, which, in accordance with GAAP, would be classified as capital expenditures.

Capitalized Lease Obligation” shall mean any Indebtedness of any Borrower represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP;  provided that any obligations of the Parent and its subsidiaries, either existing on the Closing Date or created prior to any recharacterization described below (a) that were not included on the consolidated balance sheet of the Parent or such Subsidiary as capital lease obligations and (b) that are subsequently recharacterized as capital lease obligations or indebtedness due to a change in accounting treatment or otherwise, shall for all purposes under this Agreement (including, without limitation, the calculation of net income and EBITDA) not be treated as capital leases, Capitalized Lease Obligations or Indebtedness.

Cash Dominion Period” shall mean any period commencing upon the occurrence of a Triggering Event and ending upon the occurrence of a related Satisfaction Event.  

Cash Equivalents” shall mean (a) marketable direct obligations issued or unconditionally guaranteed by the government of the United States or issued by any agency thereof and backed by the full faith and credit of the United States, as the case may be, in each case maturing within 1 year from the date of acquisition thereof, (b) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within 1 year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor’s Rating Group (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”), (c) commercial paper maturing no more than 270 days from the date of creation thereof 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,  (d) certificates of deposit or bankers’ acceptances maturing within 1 year from the date of acquisition thereof issued by any bank organized under the laws of the United States or any state thereof, having at the date of acquisition thereof combined capital and surplus of not less than $250,000,000, (e) demand deposit accounts maintained with any bank organized under the laws of the United States or any state thereof so long as the amount maintained with any individual bank is less than or equal to the maximum amount insured by the Federal Deposit Insurance Corporation and (f) Investments in money market funds substantially all of whose assets are invested in the types of assets described in clauses (a) through (e) above.

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CCR” shall have the meaning set forth in Section 4.15(j)(iv).

CEA” shall mean the Commodity Exchange Act (7 U.S.C.§1 et seq.), as amended from time to time, and any successor statute.

CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.

CFTC” shall mean the Commodity Futures Trading Commission.

Change in Law” shall mean the occurrence, after the Closing Date, of any of the following: (a) the adoption or taking effect of any Applicable Law;  (b) any change in any Applicable Law or in the administration, implementation, interpretation or application thereof by any Governmental Body; or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Body;  provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, regulations, guidelines, interpretations or directives thereunder or issued in connection therewith (whether or not having the force of Applicable Law) and (y) all requests, rules, regulations, guidelines, interpretations or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities (whether or not having the force of law), in each case pursuant to Basel III, shall in each case be deemed to be a Change in Law regardless of the date enacted, adopted, issued, promulgated or implemented.

 “Change of Control” shall mean (a) other than between or among Borrowers, any merger or consolidation of or with any Borrower or sale of all or substantially all of the property or assets of any Borrower, or (b) that any Person, together with its Affiliates, acquires Equity Interests in Parent in one or more transactions such that they collectively own or control, directly or indirectly, greater than or equal to 50% of the Equity Interests of Parent, or (c) that Parent ceases to own, directly or indirectly, and control 100% of the outstanding Equity Interests of (i) each of the other Borrowers and (ii) each of its Subsidiaries,  provided that, with respect to any Foreign Subsidiary, a Change of Control shall not occur so long as Parent owns the greater of either 95% of the outstanding Equity Interests of such Foreign Subsidiary, or the largest percentage of such Equity Interests which may be owned by Parent under the laws of the jurisdiction in which such Foreign Subsidiary is organized.

 “Charges” shall mean all taxes, charges, fees, imposts, levies or other assessments, including all net income, gross income, gross receipts, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation and property taxes, custom duties, fees, assessments, Liens,  claims and charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts, imposed by any taxing or other authority, domestic or foreign (including the Pension Benefit Guaranty Corporation or any environmental agency or superfund), upon the Collateral, or any Borrower, Guarantor, or any of their respective Subsidiaries.

Claims” shall have the meaning set forth in Section 16.21.

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Closing Date” shall mean the date of this Agreement.

 “Code” shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.

Collateral” shall mean and include, as to any Borrower or Guarantor:

(a) all Receivables other than Excluded Receivables;

(b) all Equipment;

(c) all General Intangibles;

(d) all Inventory;

(e) all Investment Property;

(f) [reserved];

(g) all Subsidiary Stock;

(h) [reserved];

(i) all of each Borrower’s and Guarantor’s right, title and interest in and to, whether now owned or hereafter acquired and wherever located, (i) its respective goods and other property including, but not limited to, all merchandise returned or rejected by Customers, relating to or securing any of the Receivables;  (ii) all of each Borrower’s and Guarantor’s rights as a consignor, a consignee, an unpaid vendor, mechanic, artisan, or other lienor, including stoppage in transit, setoff, detinue, replevin, reclamation and repurchase; (iii) all additional amounts due to any Borrower or Guarantor from any Customer relating to the Receivables;  (iv) other property, including warranty claims, relating to any goods securing the Obligations; (v) all of each Borrower’s and Guarantor’s contract rights, rights of payment which have been earned under a contract right, instruments (including promissory notes), documents, documents of title, chattel paper (including electronic chattel paper), warehouse receipts, deposit accounts, accounts, letters of credit and money; (vi) all commercial tort claims in excess of $100,000 (whether now existing or hereafter arising); (vii) if and when obtained by any Borrower or Guarantor, all real and personal property of third parties in which either has been granted a lien or security interest as security for the payment or enforcement of Receivables;  (viii) all letter of credit rights (whether or not the respective letter of credit is evidenced by a writing); (ix) all supporting obligations; and (x) any other goods or personal property now owned or hereafter acquired in which any Borrower or Guarantor has expressly granted a security interest or may in the future grant a security interest to Agent hereunder, or in any amendment or supplement hereto or thereto, or under any other agreement between Agent and any Borrower or Guarantor;

(j) all of each Borrower’s and Guarantor’s ledger sheets, ledger cards, files, correspondence, records, books of account, business papers, computers, computer software (owned by any Borrower or Guarantor or in which it has an interest other than as licensee),

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computer programs, tapes, disks and documents relating to (a),  (b),  (c),  (d),  (e),  (g), or (i) of this Paragraph; and

(k) all proceeds and products of (a),  (b),  (c),  (d),  (e),  (g), (i) and (j) in whatever form, including, but not limited to:  cash, deposit accounts (whether or not comprised solely of proceeds), certificates of deposit, insurance proceeds (including hazard, flood and credit insurance), negotiable instruments and other instruments for the payment of money, chattel paper, security agreements, documents, eminent domain proceeds, condemnation proceeds and tort claim proceeds.

Notwithstanding anything contained in this Agreement or any Other Document to the contrary, the term Collateral” shall not include the following (collectively, the “Excluded Property”):

(i)any Borrower’s or Guarantor’s rights or interests in or under any license, contract or agreement to the extent, but only to the extent that such a grant would, under the terms of such license, contract or agreement, constitute or result in (A)  the abandonment, invalidation or unenforceability of any material right, title or interest of such Borrower or Guarantor therein, or (B)  a breach, termination, or a default under such license, contract or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any other Applicable Law (including any bankruptcy or insolvency laws) or principles of equity), provided that  (x) immediately upon either (A) an Event of Default pursuant to Section 10.7 or (B) the ineffectiveness, lapse or termination of any such term, the Collateral shall include, and such Borrower or Guarantor shall be deemed to have granted a security interest as of the Closing Date in, all such rights and interests as if such term had never been in effect, and (y) to the extent that any such lease, license, contract or agreement would otherwise constitute Collateral (but for the provisions of this paragraph), all receivables from each Borrower’s or Guarantor’s performance under such license, contract or agreement and all proceeds resulting from the sale or disposition by each Borrower or Guarantor of any rights of each Borrower or Guarantor under such license, contract or agreement shall constitute Collateral,

(ii)Investment Property constituting Equity Interests of any Foreign Subsidiary of any Borrower or Guarantor;  provided that the Agent shall have a Lien upon 65% of the Equity Interests of each such Foreign Subsidiary,  

(iii)Equipment owned by Lifestyle Footwear, Inc. and located in Puerto Rico;

(iv)any Real Property; 

(v)depository accounts and investment accounts maintained solely for one or more of the following: payroll, medical expenses and payments, pension and deferred compensation benefits, withholding taxes, social security taxes, sales taxes, or other similar accounts otherwise held exclusively for the benefit of third parties, other than the Borrowers and Guarantors;

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(vi) until such time as the Borrowers have so requested and the Agent has agreed to include Intellectual Property in the Formula Amount, Intellectual Property of each Borrower and Guarantor; and

(vii)any property, other than Eligible In-Transit Finished Goods Inventory,  that is located outside the United States of America or Puerto Rico.

 “Collateral Access Agreement” shall mean an agreement in form and substance satisfactory to the Agent in its Permitted Discretion which is executed in favor of Agent by (a) a  Person who owns or occupies premises at which any Collateral may be located from time to time and by which such Person shall waive or subordinate lien rights and authorize Agent from time to time to enter upon the premises to access, inspect or remove the Collateral from such premises or to use such premises to store or dispose of such Collateral, or (b) a  Person who has possession, custody or control of Collateral and by which such Person shall waive lien rights and agree to grant Agent access to the Collateral upon request and to follow the instructions of Agent with respect to the disposition of such Collateral.

Collection Accounts” shall have the meaning set forth in Section 4.15(h)(i).

Commitment Percentage” of any Lender shall mean the percentage set forth below such Lender’s name on the signature page hereof as same may be adjusted upon any assignment by a Lender pursuant to Section 16.3(c) or (d).

Commitment Transfer Supplement” shall mean a commitment transfer supplement document properly completed and in form and substance satisfactory to Agent in its Permitted Discretion by which the Purchasing Lender purchases and assumes a portion of the obligation of Lenders to make Advances under this Agreement.

 “Compliance Certificate” shall mean a compliance certificate to be signed by the Chief Financial Officer or Controller of Borrowing Agent, which shall state that, based on an examination sufficient to permit such officer to make an informed statement, no Default or Event of Default exists, or if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by Borrowers with respect to such default and, such certificate shall have appended thereto a calculation of the Fixed Charge Coverage Ratio for the periods required by Sections 7.7, if applicable, 9.7 and 9.9.

Consents” shall mean all filings and all licenses, permits, consents, approvals, authorizations, qualifications and orders of Governmental Bodies and other third parties, domestic or foreign, necessary to carry on any Borrower’s business or necessary (including to avoid a conflict or breach under any agreement, instrument, other document, license, permit or other authorization) for the execution, delivery or performance of this Agreement, the Other Documents,  including any Consents required under all applicable federal, state or other Applicable Law.

Consigned Inventory” shall mean Inventory of any Borrower that is in the possession of another Person on a consignment, sale or return, or other basis that does not constitute a final sale and acceptance of such Inventory.

Contract Rate” shall have the meaning set forth in Section 3.1(b).

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 “Controlled Group” shall mean, at any time, each Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control and all other entities which, together with any Borrower, are treated as a single employer under Section 414 of the Code.

Customer” shall mean and include the account debtor with respect to any Receivable and/or the prospective purchaser of goods, services or both with respect to any contract or contract right, and/or any party who enters into or proposes to enter into any contract or other arrangement with any Borrower, pursuant to which such Borrower is to deliver any personal property or perform any services.

Customs” shall have the meaning set forth in Section 2.11(b).

"Deemed Credit Request" shall have the meaning set forth in Section 2.2(b).

 “Default” shall mean an event, circumstance, default, or condition which, with the giving of notice or passage of time or both, would constitute an Event of Default.

Default Rate” shall have the meaning set forth in Section 3.1(c).

Defaulting Lender” shall have the meaning set forth in Section 2.24(a).

Designated Lender” shall have the meaning set forth in Section 16.2(c).

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

Domestic Rate Loan” shall mean any Advance that bears interest based upon the Alternate Base Rate.

"Domestic Subsidiary" shall mean any direct or indirect Subsidiary of a Person that is organized under the laws of any state of the United States or the District of Columbia (other than an indirect Subsidiary of a Person which is a direct or indirect Subsidiary of another Subsidiary which is not organized under such laws)

Drawing Date” shall have the meaning set forth in Section 2.12(b).

Earnings Before Interest and Taxes” shall mean for any period, for Parent and its Subsidiaries on a consolidated basis, the sum of (i) net income (or loss) for such period (excluding extraordinary gains and losses), plus (ii) all interest expense for such period, plus (iii) all charges against income for such period for federal, state and local taxes.

EBITDA”  shall mean for any period the sum of (i) Earnings Before Interest and Taxes for such period, plus (ii) depreciation expenses for such period, plus (iii) amortization expenses for such period, plus (iv) one-time charges for severance and termination related charges and expenses in an amount not to exceed $1,000,000 for such period; plus (v) any fees or expenses incurred or paid by either the Borrower or any of its Subsidiaries or Affiliates in connection with the Borrowers’ entry into this Agreement and the Other Documents, (including, any fees or expenses incurred or paid by any Borrower or any Subsidiaries),  appraisals or due diligence with respect to

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the Agreement and the Other Documents or any deliverables to be provided or actions to be taken on a post-closing basis for such period.

Effective Date” means the date indicated in a document or agreement to be the date on which such document or agreement becomes effective, or, if there is no such indication, the date of execution of such document or agreement.

Eligible Contract Participant” shall mean an “eligible contract participant” as defined in the CEA and regulations thereunder.

 “Eligible Finished Goods Inventory” shall mean and include finished goods Inventory, with respect to each Borrower, valued at the lower of cost or market, determined on a first-in-first-out basis, which is not, in Agent’s Permitted Discretion, obsolete, slow moving or unmerchantable and which Agent, in its Permitted Discretion, shall not deem ineligible Inventory, based on such considerations as Agent may from time to time deem appropriate.  In addition, Inventory shall not be Eligible Finished Goods Inventory if it (a) is not subject to a perfected, first priority security interest in favor of Agent and no other Lien (other than Permitted Encumbrances), (b)  does not conform to all standards imposed by any Governmental Body which has regulatory authority over such goods or the use or sale thereof, (c)  constitutes Consigned Inventory,  (d)  is the subject of an Intellectual Property Claim;  (e)  commencing on the date that is thirty (30) days (or such later date as Agent shall determine in its sole discretion) after the Closing Date, is subject to a License Agreement or other agreement that in any material respect limits, conditions or restricts any Borrower’s or Agent’s right to sell or otherwise dispose of such Inventory, unless Agent is a party to a Licensor/Agent Agreement with the Licensor under such License Agreement;  (f)  is situated at a location not listed on Schedule 4.5 as of the Closing Date or is situated at an Access Agreement Location and no Collateral Access Agreement is in effect in favor of Agent unless a rent reserve has been established by Agent with respect thereto, (g)  unless it is Eligible In-Transit Finished Goods Inventory, it is located outside the continental United States or Puerto Rico, or at a location that is not listed on Schedule 4.5, provided that, finished goods Inventory located in Puerto Rico may only constitute Eligible Finished Goods Inventory to the extent that the total amount of Eligible Raw Materials Inventory located in Puerto Rico and Eligible Finished Goods Inventory located in Puerto Rico included in the Formula Amount (after application of the Finished Goods Inventory Advance Rate) would not exceed $2,000,000 at any time.  Eligible Finished Goods Inventory shall not include Inventory being acquired pursuant to a trade Letter of Credit (other than any trade Letter of Credit issued hereunder) to the extent such trade Letter of Credit remains outstanding.

Eligible Government Receivable” shall have the meaning provided in the definition of “Eligible Receivables”.

Eligible Intellectual Property” shall mean, at any time, Intellectual Property of Borrowers that Agent determines in its Permitted Discretion is eligible as the basis for the extension of Advances after the Parent has requested in writing Intellectual Property to be included in the Formula Amount.  Without limiting Agent’s discretion provided herein, Eligible Intellectual Property shall not include any Intellectual Property (a) which is not subject to a first priority perfected Lien in favor of Agent or is subject to any Lien other than a Permitted Encumbrance;  (b) with respect to which any covenant, representation, or warranty contained in this Agreement has

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been breached or is not true in any material respect (or, with respect to any covenant, representation or warranty which is subject to any materiality qualifier, has been breached or is not true in any respect); (c) in which any Person other than a Borrower shall have any direct or indirect ownership, interest or title to such Intellectual Property; or (d) which the Agent otherwise determines in its Permitted Discretion is unacceptable. 

Eligible In-Transit Finished Goods Inventory” shall include Inventory:  (a) which title has passed to a Borrower, (b) which is insured to the full value thereof with Agent as lender loss payee under the applicable insurance policy and evidence of such insurance has been provided to Agent,  (c) which is in-transit with a carrier to a facility listed on Schedule 4.5, (d) which would otherwise be Eligible Finished Goods Inventory except for its location, (e) for which Agent or the customs broker or other representative shall have in its possession a true and correct copy of the bill of lading and other shipping documents for such inventory,  (f) which (i) if the applicable bill of lading is non-negotiable and the Inventory is in transit within the United States, a duly executed Collateral Access Agreement from the applicable customs broker for such Inventory, or all related unpaid freight charges and customs duties related to the shipment thereof shall be reserved for, or (ii) if the applicable bill of lading is negotiable, confirmation that the bill is issued in the name of a Borrower and consigned to the order of the Agent or an agent thereof, and an acceptable agreement has been executed with a Borrower’s customs broker, in which the customs broker or other representative agrees that it is holding possession of the negotiable bill as agent for the Agent and will grant the Agent access to the Inventory,  (g)  for which the carrier is not an Affiliate of the applicable vendor or supplier of the Inventory, and (h)  the customs broker is not an Affiliate of a Borrower; provided however that, in each case, all related unpaid freight charges and customs duties related to such shipment shall be reserved for unless a lien waiver among the applicable Borrower, the applicable customs broker, freight carrier, shipping company or shipping agent, as the case may be, and Agent has been executed and delivered to the Agent, in each case in form and substance satisfactory to the Agent in its Permitted Discretion.

Eligible Inventory” shall mean collectively Eligible Finished Goods Inventory,  Eligible Raw Material Inventory, and Eligible In-Transit Finished Goods Inventory.

Eligible Raw Materials Inventory” shall mean and include raw materials Inventory with respect to each Borrower, valued at the lower of cost or market value, determined on a first-in-first-out basis, which is not, in Agent’s Permitted Discretion, obsolete, slow moving or unmerchantable and which Agent, in its Permitted Discretion, shall not deem ineligible Inventory, based on such considerations as Agent may from time to time deem appropriate including whether the Inventory is subject to a perfected, first priority security interest in favor of Agent and no other Lien (other than a Permitted Encumbrance).  In addition, Inventory shall not be Eligible Raw Materials Inventory if it (a) does not conform to all standards imposed by any Governmental Body which has regulatory authority over such goods or the use or sale thereof, (b) constitutes Consigned Inventory,  (c) is the subject of an Intellectual Property Claim;  (d) commencing on the date that is thirty (30) days (or such later date as Agent shall determine in its sole discretion) after the Closing Date, is subject to a License Agreement or other agreement that in any material respect limits, conditions or restricts any Borrower’s or Agent’s right to sell or otherwise dispose of such Inventory, unless Agent is a party to a Licensor/Agent Agreement with the Licensor under such License Agreement;  (e) is situated at a location not listed on Schedule 4.5 as of the Closing Date, or is situated at an Access Agreement Location and no Collateral Access Agreement is in effect in

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favor of Agent unless a rent reserve has been established by Agent with respect thereto, (f) is located outside the continental United States or Puerto Rico, or at a location that is not listed on Schedule 4.5, provided that, raw material Inventory located in Puerto Rico may only constitute Eligible Raw Material Inventory to the extent that the total amount of Eligible Raw Materials Inventory located in Puerto Rico and Eligible Finished Goods Inventory located in Puerto Rico included in the Formula Amount (after application of the Raw Materials Inventory Advance Rate) would not exceed $2,000,000 at any time.  Eligible Raw Materials Inventory shall not include Inventory being acquired pursuant to a trade Letter of Credit to the extent such trade Letter of Credit remains outstanding.

Eligible Receivables” shall mean and include with respect to each Borrower, each Receivable of such Borrower arising in the Ordinary Course of Business and which Agent, in its Permitted Discretion, shall deem to be an Eligible Receivable, based on such considerations as Agent may from time to time deem appropriate.  A Receivable shall not be deemed eligible unless such Receivable is subject to Agent’s first priority perfected security interest and no other Lien (other than Permitted Encumbrances), and is evidenced by an invoice or other documentary evidence reasonably satisfactory to Agent.  In addition, no Receivable shall be an Eligible Receivable if:

(a) it arises out of a sale made by any Borrower to an Affiliate of any Borrower or to a Person controlled by an Affiliate of any Borrower;

(b) for Receivables with payment terms of thirty (30) days or less, it is due or unpaid more than the sooner of sixty (60) days after the original due date or ninety (90) days after the original invoice date;

(c) for Receivables with payment terms of greater than thirty (30) days but not in excess of sixty (60) days, it is due or unpaid more than the sooner of sixty (60) days after the original due date or one hundred twenty (120) days after the original invoice date;

(d) for Receivables with payment terms of greater than sixty (60) days, it is due or unpaid more than the sooner of thirty (30) days after the original due date or one hundred eighty (180) days after the original invoice date; provided that, the aggregate amount of Receivables between one hundred fifty (150) and one hundred eighty (180) days past the original invoice date that are uninsured or are insured by credit insurance that is not satisfactory to Agent in its Permitted Discretion shall not exceed five percent (5%) of the amount of Eligible Receivables; 

(e) fifty percent (50%) or more of the Receivables from such Customer are not deemed Eligible Receivables hereunder;

(f) any covenant, representation or warranty contained in this Agreement with respect to such Receivable has been breached in any material respect;

(g) the Customer shall (i) apply for, suffer, or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or call a meeting of its creditors, (ii) admit in writing its inability, or be generally unable, to pay its debts as they become due or cease operations of its present business, (iii) make a general assignment for the benefit of creditors, (iv) commence a voluntary

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case under any state or federal or foreign bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition seeking to take advantage of any other law providing for the relief or reorganization of debtors, (vii) acquiesce to, or fail to have dismissed, any petition which is filed against it in any involuntary case under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the foregoing;

(h) the sale is to a Customer outside the continental United States of America or Canada, unless the sale is on letter of credit, guaranty or acceptance terms, in each case acceptable to Agent in its Permitted Discretion;

(i) the sale to the Customer is on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval, consignment or any other repurchase or return basis or is evidenced by chattel paper;

(j) Agent believes, in its Permitted Discretion, that collection of such Receivable is insecure or that such Receivable may not be paid by reason of the Customer’s financial inability to pay;

(k) the Customer is the United States, any state, territory, or any department, agency or instrumentality of any of them, provided that such a Receivable may be an Eligible Receivable if (a) such Receivable would otherwise qualify as an Eligible Receivable,  (b) such Receivable has payment terms of thirty (30) days or less, and (c) the applicable Borrower complies with Section 4.15(j) with respect to such Receivable (each an “Eligible Government Receivable”);

(l) the Receivable is an Eligible Government Receivable and would cause the total amount of Eligible Government Receivables in the Formula Amount (after application of the Receivables Advance Rate) to exceed 5.00% of the Maximum Revolving Advance Amount at any time, but only to the extent of such excess;

(m) the Customer is the government of Canada, any province, territory, or any department, agency or instrumentality of any of them;

(n) the goods giving rise to such Receivable have not been delivered to and accepted by the Customer or the services giving rise to such Receivable have not been performed by the applicable Borrower and accepted by the Customer or the Receivable otherwise does not represent a final sale;

(o) the Receivable would cause the total amount of Eligible Receivables due from a specific Customer to constitute more than ten percent (10%) of all Eligible Receivables of Borrowers, but only to the extent of such excess;

(p) the Receivable is subject to any offset, deduction, defense, dispute, or counterclaim, the Customer is also a creditor or supplier of a Borrower or the Receivable is contingent in any respect or for any reason, but only to the extent of any such offset, deduction, defense, or other dispute;

(q) the applicable Borrower has made any agreement with any Customer for any deduction therefrom, except for discounts or allowances made in the Ordinary Course of

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Business for prompt payment, all of which discounts or allowances are reflected in the calculation of the face value of each respective invoice related thereto;

(r) any return, rejection or repossession of the merchandise has occurred or the rendition of services has been disputed;

(s) such Receivable is not payable to a Borrower;

(t) such Receivable is not otherwise satisfactory to Agent as determined by Agent in its Permitted Discretion;  or

(u) such Receivable is an Excluded Receivable.

Eligibility Date shall mean, with respect to each Borrower and Guarantor and each Swap, the date on which this Agreement or any Other Document becomes effective with respect to such Swap (for the avoidance of doubt, the Eligibility Date shall be the Effective Date of such Swap if this Agreement or any Other Document is then in effect with respect to such Borrower or Guarantor, and otherwise it shall be the Effective Date of this Agreement and/or such Other Document(s) to which such Borrower or Guarantor is a party).

Environmental Complaint” shall have the meaning set forth in Section 4.19(d).

Environmental Laws” shall mean all federal, state and local environmental, land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of Hazardous Substances and the rules, regulations, policies, guidelines, interpretations, decisions, orders and directives of federal, state and local governmental agencies and authorities with respect thereto.

Equipment” shall mean and include as to each Borrower all of such Borrower’s goods (other than Inventory) whether now owned or hereafter acquired and wherever located including all equipment, machinery, apparatus, motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all replacements and substitutions therefor or accessions thereto.

Equity Interests” of any Person shall mean any and all shares, rights to purchase, options, warrants, general, limited or limited liability partnership interests, member interests, participation or other equivalents of or interest in (regardless of how designated) equity of such Person, whether voting or nonvoting, including common stock, preferred stock, convertible securities or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).

ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and the rules and regulations promulgated thereunder.

Eurodollar Rate” shall mean the rate obtained by dividing: (a) the actual or estimated per annum rate, or the arithmetic mean of the per annum rates, of interest for deposits in U.S. Dollars in the London interbank market for the related Interest Period, as determined by Agent in its discretion based upon reference to information which appears on page LIBOR01, captioned ICE

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Benchmark Administration Interest Settlement Rates, of the Reuters America Network, a service of Reuters America Inc. (or such other page that may replace that page on that service for the purpose of displaying London interbank offered rates; or, if such service ceases to be available or ceases to be used by Agent, such other reasonably comparable money rate service as Agent may select) or upon information obtained from any other reasonable procedure, as of two Business Days prior to the first day of a Interest Period; by (b) an amount equal to one minus the stated maximum  rate (expressed as a decimal), if any, of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) that is specified on the first day of each Interest Period by the Board of Governors of the Federal Reserve System (or any successor agency thereto) for determining the maximum reserve requirement with respect to eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of such Board) maintained by a member bank of such System, or any other regulations of any governmental authority having jurisdiction with respect thereto as conclusively determined by Agent.  Subject to any maximum or minimum interest rate limitation specified herein or by applicable law, any variable rate of interest on the obligation evidenced hereby shall change automatically, without notice to the Borrowing Agent, on the first day of each Interest Period.  The interest rate change will not occur more often than each month.  If the Eurodollar Rate becomes unavailable, Agent may designate, in consultation with the Borrowing Agent, a substitute index after notifying the Borrowing Agent; provided that the final determination shall be made solely by Agent in its Permitted Discretion.  If the Eurodollar Rate is determined to be less than zero, such index shall be deemed to be zero for the purposes of this Agreement.    Agent shall give prompt notice to the Borrowing Agent of the Eurodollar Rate as determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.

Eurodollar Rate Loan” shall mean an Advance at any time that bears interest based on the Eurodollar Rate.

Event of Default” shall have the meaning set forth in Article X.

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

Excluded Hedge Liability or Liabilities shall mean, with respect to each Borrower and Guarantor, each of its Swap Obligations if, and only to the extent that, all or any portion of this Agreement or any Other Document that relates to such Swap Obligation is or becomes illegal under the CEA, or any rule, regulation or order of the CFTC, solely by virtue of such Borrower’s and/or Guarantor’s failure to qualify as an Eligible Contract Participant on the Eligibility Date for the applicable Swap.  Notwithstanding anything to the contrary contained in the foregoing or in any other provision of this Agreement or any Other Document, the foregoing is subject to the following provisos: (a) if a Swap Obligation arises under a master agreement governing more than one Swap, this definition shall apply only to the portion of such Swap Obligation that is attributable to Swaps for which such guaranty or security interest is or becomes illegal under the CEA, or any rule, regulations or order of the CFTC, solely as a result of the failure by such Borrower or Guarantor for any reason to qualify as an Eligible Contract Participant on the Eligibility Date for such Swap;  (b) if a guarantee of a Swap Obligation would cause such obligation to be an Excluded Hedge Liability but the grant of a security interest would not cause such obligation to be an Excluded Hedge Liability, such Swap Obligation shall constitute an Excluded Hedge Liability for purposes of the guaranty but not for purposes of the grant of the security interest; and (c) if there

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is more than one Borrower or Guarantor executing this Agreement or the Other Documents and a Swap Obligation would be an Excluded Hedge Liability with respect to one or more of such Persons, but not all of them, the definition of Excluded Hedge Liability or Liabilities with respect to each such Person shall only be deemed applicable to (i) the particular Swap Obligations that constitute Excluded Hedge Liabilities with respect to such Person, and (ii) the particular Person with respect to which such Swap Obligations constitute Excluded Hedge Liabilities.

Excluded Property” shall have the meaning set forth in the definition of Collateral.

Excluded Receivables” shall mean any Receivable owing by a Customer that is a Sanctioned Person or that arises out of a transaction or activity that would violate any Anti-Terrorism Laws.  

Excluded Taxes” shall mean, with respect to the Agent, any Lender,  Participant,  Issuer or any other recipient of any payment to be made by or on account of any Obligations, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender,  Participant, or Issuer, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which a Borrower is located, (c) in the case of a Foreign Lender, any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new lending office), acquires an interest in any Advance or commitment for an Advance, or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.10(e), except to the extent that such Foreign Lender or Participant (or its assignor or seller of a participation, if any) was entitled, at the time of designation of a new lending office (or assignment or sale of a participation), to receive additional amounts from a Borrower with respect to such withholding tax pursuant to Section 3.10(a),  (d) any Taxes imposed on any “withholding payment” payable to such recipient as a result of the failure of such recipient to satisfy the requirements set forth in the FATCA after December 31, 2012; and (e) Other Connection Taxes

Facility Fee” shall have the meaning set forth in Section 3.3.

FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof.    

Federal Firearms License” shall mean licenses issued pursuant to the Gun Control Act of 1968 and regulations issued thereunder. 

Federal Funds Rate”  shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the nearest one hundredth of one percent (1/100 of 1%) equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided,  however, that: (a) if the day for

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which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such a rate on such transactions on the immediately preceding Business Day as so published on the next succeeding Business Day and (b) if such rate is not so published for any Business Day, the Federal Funds Rate for such Business Day shall be the average of quotations for such day on such transactions received by HNB from three federal funds brokers of recognized standing selected by Agent.

Federal Assignment of Claims Act” shall mean the Assignment of Claims Act of 1940, as amended, 31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq., as the same now exists or may from time to time hereafter be amended, modified, recodified, or supplemented, together with all rules, regulations, and interpretations thereunder or related thereto.

 “Finished Goods Inventory Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(ii).

Firearms Regulatory Authority means the Bureau of Alcohol, Tobacco, Firearms and Explosives (the "BATFE"), and any other federal, state or local government or any agency or instrumentality thereof that exercises executive, legislative, regulatory or administrative authority over the businesses conducted by Borrowers relating to the sale, purchase or handling of firearms and ammunition.

Firearms Regulatory Laws means all Laws pursuant to which any Firearms Regulatory Authority possesses regulatory, licensing, permit or other administrative authority over the businesses conducted by Borrowers, including but not limited to, The Gun Control Act of 1968, administered by the BATFE.

Firearms Regulatory Licenses shall have the meaning set forth in Section 5.10.

Fixed Charge Coverage Ratio” shall mean and include for any fiscal period, for Parent and its Subsidiaries on a consolidated basis, the ratio of (a) EBITDA,  plus non-cash charges against net income other than write-downs of Eligible Accounts and Eligible Inventory,  minus Unfinanced Capital Expenditures made, minus expenses for income or franchise taxes included as an expense in the determination of net income (other than any provision for deferred taxes), minus payment of deferred taxes relating to income and franchise taxes accrued in any prior period, to (b) Senior Debt Payments made, plus dividends or redemptions paid by Parent,  plus aggregate payments made on account of pension-related obligations to the extent not deducted as an expense in the determination of EBITDA during such fiscal period, all for the same fiscal period.

Foreign Lender” shall mean any Lender that is organized under the laws of a jurisdiction other than that in which a Borrower is resident for tax purposes.  For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. 

Foreign Subsidiary” of any Person, shall mean any Subsidiary of such Person that is not a Domestic Subsidiary.  

Formula Amount” shall have the meaning set forth in Section 2.1(a)(y).

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GAAP” shall mean generally accepted accounting principles in the United States of America in effect from time to time.

 “General Intangibles” shall mean and include as to each Borrower all of such Borrower’s general intangibles or intangibles, whether now owned or hereafter acquired,  including all payment intangibles, all choses in action, causes of action, corporate or other business records, equipment formulations, manufacturing procedures, quality control procedures, goodwill, design rights, software, computer information, source codes, codes, records and updates, registrations, licenses, franchises, customer lists, tax refunds, tax refund claims, computer programs, all claims under guaranties, security interests or other security held by or granted to such Borrower to secure payment of any of the Receivables by a Customer (other than to the extent covered by Receivables) all rights of indemnification and all other intangible property of every kind and nature (other than Receivables, trademark applications, trade names and trademarks).  Notwithstanding anything herein to the contrary, the term “General Intangibles” shall not include any Excluded Property.

Governmental Acts” shall have the meaning set forth in Section 2.17.

Governmental Body” shall mean any nation or government, any state, or other political subdivision thereof or any entity, authority, agency, division or department exercising the legislative, judicial, regulatory or administrative functions of or pertaining to a government.

Guarantor” shall mean any Person who may hereafter guarantee payment or performance of the whole or any part of the Obligations and “Guarantors” means collectively all such Persons.   As of the Closing Date, there are no Guarantors.

Guarantor Security Agreement” shall mean any Security Agreement executed by any Guarantor in favor of Agent securing the Guaranty of such Guarantor,  in form and substance satisfactory to Agent and such Guarantor. 

Guaranty” shall mean any guaranty of the obligations of Borrowers executed by a Guarantor in favor of Agent for its benefit and for the ratable benefit of Lenders,  in form and substance satisfactory to Agent and such Guarantor.

Hazardous Discharge” shall have the meaning set forth in Section 4.19(d).

Hazardous Substance” shall mean, without limitation, any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or related materials as defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et  seq.), RCRA, or any other applicable Environmental Law and in the regulations adopted pursuant thereto.

Hazardous Wastes” shall mean all waste materials subject to regulation under CERCLA,  RCRA or applicable state law, and any other applicable Federal and state laws now in force or hereafter enacted relating to hazardous waste disposal.

Hedge Agreement” shall mean any and all transactions, agreements, or documents now existing or hereafter entered into by any Borrower that provides for an interest rate, credit,

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commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency swap, cross currency rate swap, currency option, or any combination of, or option with respect to, these or similar transactions, for the purpose of hedging Borrowers’ exposure to fluctuations in interest or exchange rates, loan, credit exchange, security or currency valuations or commodity prices.

Hedge Liabilities” shall have the meaning provided in the definition of “Lender-Provided Hedge”.

In-Transit Inventory Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(iv).

 “Indebtedness” of a Person at a particular date shall mean all obligations of such Person which in accordance with GAAP would be classified upon a balance sheet as liabilities (except capital stock and surplus earned or otherwise, customer deposits, trade payables and other accrued expenses and liabilities incurred in the Ordinary Course of Business (not constituting Indebtedness for borrowed money)) and in any event, without limitation by reason of enumeration, shall include all indebtedness, debt and other similar monetary obligations of such Person whether direct or guaranteed, and all premiums, if any, due at the required prepayment dates of such indebtedness, and  all indebtedness secured by a Lien on assets owned by such Person, whether or not such indebtedness actually shall have been created, assumed or incurred by such Person.  Any indebtedness of such Person resulting from the acquisition by such Person of any assets subject to any Lien shall be deemed, for the purposes hereof, to be the equivalent of the creation, assumption and incurring of the indebtedness secured thereby, whether or not actually so created, assumed or incurred.

Indemnified Taxes” shall mean Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any of the Obligations.

Ineligible Security” shall mean any security which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.

Insolvency Proceeding” shall mean any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other national, state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, or proceedings seeking reorganization, arrangement, liquidation, or other similar relief.

Intellectual Property” shall mean all present and future property constituting under any Applicable Law a patent, patent application, copyright, copyright application, trademark, trademark application, service mark, trade name, mask work, trade secret or license or other right to use any of the foregoing.

Intellectual Property Claim” shall mean the assertion by any Person of a claim that the ownership, use, marketing, sale or distribution of any Inventory or Intellectual Property violates any ownership of or right to use any Intellectual Property of such Person which results in a cease and desist order with respect to such Inventory or Intellectual Property or the practical equivalent of such an order.

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Intercompany Obligations” shall have the meaning set forth in Section 15.4.

Interest Period” shall mean means one (1), two (2), three (3) or six (6) month(s), provided that: if any Interest Period would otherwise expire on a day which is not a Business Day, the Interest Period shall be extended to the next succeeding Business Day (provided, however, that if such next succeeding Business Day occurs in the following calendar month, then the Interest Period shall expire on the immediately preceding Business Day).

 “Inventory” shall mean and include as to each Borrower all of such Borrower’s now owned or hereafter acquired goods, merchandise and other personal property, wherever located, to be furnished under any consignment arrangement, contract of service or held for sale or lease, all raw materials, work in process, finished goods and materials and supplies of any kind, nature or description which are or might be used or consumed in such Borrower’s business or used in selling or furnishing such goods, merchandise and other personal property, and all documents of title or other documents representing them.

 “Investment Property” shall mean and include as to each Borrower, all of such Borrower’s now owned or hereafter acquired securities (whether certificated or uncertificated), securities entitlements, securities accounts, commodities contracts and commodities accounts.

Issuer” shall mean any Person who issues a Letter of Credit and/or accepts a draft pursuant to the terms hereof.

Lender” and “Lenders” shall have the meaning ascribed to such term in the preamble to this Agreement and shall include each Person which becomes a transferee, successor or assign of any Lender.

Lender-Provided Hedge” shall mean a Hedge Agreement with any Lender and with respect to which the Agent confirms meets the following requirements:  (a)  it is documented on a standard International Swap Dealer Association Agreement or other form agreement acceptable to Agent,  (b)  it provides for the method of calculating the reimbursable amount of the provider's credit exposure in a reasonable and customary manner, and (c)  it is entered into for hedging (rather than speculative) purposes.  The liabilities of any Borrower to the provider of any Lender-Provided Hedge (the “Hedge Liabilities”) shall be “Obligations”  hereunder, guaranteed obligations under each Guaranty and secured obligations hereunder, and otherwise treated as Obligations for purposes of each of the Other Documents.  The Liens securing the Hedge Liabilities shall be pari passu with the Liens securing all other Obligations under this Agreement and the Other Documents.

Letter of Credit Fees” shall have the meaning set forth in Section 3.2. 

Letter of Credit Borrowing” shall have the meaning set forth in Section 2.12(d).  

Letter of Credit Sublimit” shall mean ten percent (10%) of Maximum Revolving Advance Amount.  

Letters of Credit” shall have the meaning set forth in Section 2.9. 

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License Agreement” shall mean any agreement between any Borrower and a Licensor pursuant to which such Borrower is authorized to use any Intellectual Property of such Licensor in connection with the manufacturing, marketing, sale or other distribution of any Inventory of such Borrower.

Licensor” shall mean any Person from whom any Borrower obtains the right to use (whether on an exclusive or non-exclusive basis) any Intellectual Property in connection with such Borrower’s manufacture, marketing, sale or other distribution of any Inventory or otherwise in connection with such Borrower’s business operations.

Licensor/Agent Agreement” shall mean an agreement between Agent and a Licensor,  in form and content satisfactory to Agent and such Licensor, by which Agent is given the right, vis-a-vis such Licensor, to enforce Agent’s Liens with respect to and to dispose of any Borrower’s Inventory with the benefit of any Intellectual Property applicable thereto, irrespective of such Borrower’s default under any License Agreement with such Licensor.

Lien” shall mean any mortgage, deed of trust, pledge, hypothecation, hypothec, assignment, security interest,  lien (whether statutory or otherwise), Charge, claim or encumbrance, or preference, priority or other security agreement or preferential arrangement held or asserted in respect of any asset of any kind or nature whatsoever including any conditional sale or other title retention agreement, any lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction.

Liquidity Calculation” shall mean a calculation by Borrowing Agent of the Quarterly Liquidity of Borrowers using Agent’s on-line Collateral monitoring system and including both a schedule of the amount of Qualified Cash as of the end of each Business Day during the applicable fiscal quarter and the amount owing to Borrowers’ trade creditors which are 60 days or more past due as of the end of such quarter, executed by the Chief Executive Officer, Chief Financial Officer or Controller of the Borrowing Agent and delivered to the Agent, appropriately completed, by which such officer shall certify to Agent the Quarterly Liquidity and calculation thereof as of the date of such certificate. 

 “Material Adverse Effect” shall mean a material adverse effect on (a) the condition (financial or otherwise), results of operations, assets, business, or properties of the Borrowers, and their respective Subsidiaries taken as a whole, (b) the ability of the Borrowers taken as a whole to duly and punctually pay or perform the Obligations in accordance with the terms thereof, (c) the value of the Collateral, taken as a whole, or Agent’s Liens on the Collateral or the priority of such Liens or (d) the practical realization of the benefits of Agent’s and each Lender’s rights and remedies under this Agreement, or under any Other Document in any material respect.

Material Contract” shall mean, with respect to any Person, each contract or agreement to which such Person or any of its Subsidiaries is a party, the loss, termination or modification of which could reasonably be expected to result in a Material Adverse Effect

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Maximum Face Amount” shall mean, with respect to any outstanding Letter of Credit, the face amount of such Letter of Credit including all automatic increases provided for in such Letter of Credit, whether or not any such automatic increase has become effective.

Maximum Revolving Advance Amount” shall mean $75,000,000, as adjusted in accordance with Section 2.25 or 2.26.

Maximum Undrawn Amount” shall mean with respect to any outstanding Letter of Credit, the amount of such Letter of Credit that is or may become available to be drawn, including all automatic increases provided for in such Letter of Credit, whether or not any such automatic increase has become effective.

Modified Commitment Transfer Supplement” shall have the meaning set forth in Section 16.3(d).

 “Multiemployer Plan” shall mean a “multiemployer plan” as defined in Sections 3(37) and 4001(a)(3) of ERISA.

Multiple Employer Plan” shall mean a Plan which has two or more contributing sponsors (including any Borrower or any member of the Controlled Group) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.

Non-Qualifying Party” shall mean any Borrower or any Guarantor that on the Eligibility Date fails for any reason to qualify as an Eligible Contract Participant.  

Note(s)” shall mean the Revolving Credit Note.

Obligations” shall mean and include:  (a) any and all Indebtedness, loans, advances, debts, liabilities, guaranties, obligations, covenants and duties owing by any Borrower or Guarantor to Lenders or Agent or to any other direct or indirect subsidiary or affiliate of Agent or any Lender under this Agreement and the Other Documents,  including any Lender-Provided Hedge, of any kind or nature, present or future (including any interest or other amounts accruing thereon after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to any Borrower or Guarantor, whether or not a claim for post-filing or post-petition interest or other amounts is allowed in such proceeding), plus (b) any and all Indebtedness, liabilities, debts or advances arising out of overdrafts or deposit or other accounts or electronic funds transfers (whether through automated clearing houses or otherwise) or out of the Agent’s or any Lenders non-receipt of or inability to collect funds or otherwise not being made whole in connection with depository transfer check or other similar arrangements (such Indebtedness, liabilities, debts or advances described in this clause (b), the “Bank Products Obligations”), and, in the case of both clauses (a) and (b), whether direct or indirect (including those acquired by assignment or participation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, liquidated or unliquidated, regardless of how such indebtedness or liabilities arise or by what agreement or instrument they may be evidenced and all costs and expenses of Agent and any Lender incurred in the documentation, negotiation, modification, enforcement, collection or otherwise in connection with any of the foregoing, including but not limited to reasonable attorneys’ fees and expenses and all obligations of any Borrower or Guarantor to Agent or Lenders to perform acts or refrain from taking any action. 

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Notwithstanding anything to the contrary contained in the foregoing, the Obligations shall not include any Excluded Hedge Liabilities.

Ordinary Course of Business” shall mean with respect to any Borrower, the ordinary course of such Borrower’s business as conducted on the Closing Date.

Other Connection Taxes” means, with respect to the Agent, any Lender, Participant, Issuer or any other recipient, Taxes imposed as a result of a present or former connection between such recipient and the jurisdiction imposing such Tax (other than connections arising from such recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Other Document, or sold or assigned an interest in any Advance, this Agreement or Other Document)

Other Documents” shall mean any Note, any Guaranty,  any Guarantor Security Agreement, any Lender-Provided Hedge and any and all other agreements, instruments and documents, including guaranties, pledges, powers of attorney, consents,  interest or currency swap agreements or other similar agreements and all other writings heretofore, now or hereafter executed by any Borrower or any Guarantor and/or delivered to Agent or any Lender in respect of the transactions contemplated by this Agreement.

Other Taxes” shall mean all present or future stamp or documentary Taxes or any other excise or property Taxes,  charges or similar levies arising from any payment made hereunder or under any Other Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any Other Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

Out-of-Formula Loans” shall have the meaning set forth in Section 16.2(d).

Parent” is defined in the preamble.

Parent and its Subsidiaries on a consolidated basis” shall mean the consolidation in accordance with GAAP of the accounts or other items of Parent and its respective Subsidiaries.

Participant” shall have the meaning set forth in Section 16.3(b).

Participation Advance” shall have the meaning set forth in Section 2.12(d).

Participation Commitment” shall mean each Lender’s obligation to buy a participation of the Letters of Credit issued hereunder.

Payment Condition(s)” shall have the meaning set forth in Section 7.7.

Payment Office” shall mean initially The Huntington National Bank, 7 Easton Oval, EA4W57, Columbus, Ohio, 43219; thereafter, such other office of Agent, if any, which it may designate by notice to Borrowing Agent and to each Lender to be the Payment Office.

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PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor.

Pension Benefit Plan” shall mean at any time any employee pension benefit plan (including a  Multiple Employer Plan, but not a Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained by any member of the Controlled Group for employees of any member of the Controlled Group; or (ii) has at any time within the preceding five years been maintained by any entity which was at such time a member of the Controlled Group for employees of any entity which was at such time a member of the Controlled Group.

Permitted Acquisition” shall mean any acquisition made by any Borrower or Subsidiary of a Borrower, provided, that:

(a) immediately before and after the consummation of such acquisition, no Default or Event of Default shall have occurred and be continuing;

(b) Borrowing Agent shall have furnished to Agent at least ten (10) Business Days (or such shorter period as permitted by Agent in its reasonable discretion) prior to the consummation of such acquisition:

(i) written notice of such proposed acquisition;

(ii) a  term sheet and/or commitment letter, executed if available, setting forth in reasonable detail the terms and conditions of such acquisition and, at the request of Agent, such other information and documents that Agent may reasonably request;

(iii) pro forma consolidated financial statements for the twelve (12) month period immediately following the expected date of the consummation of such acquisition, presented in accordance with GAAP, taking into consideration such acquisition and funding of all loans in connection therewith;

(iv) a certificate of Borrowing Agent’s Chief Financial Officer demonstrating, on a pro forma basis, (x) compliance with the Fixed Charge Coverage Ratio for one (1) year following the consummation of such acquisition, and (y) Undrawn Availability plus Qualified Cash is greater than the least of: (A) 13.33% of the Formula Amount,  or (B) 13.33% of the Maximum Revolving Advance Amount,  and (C) $10,000,000, immediately prior to and after giving effect to such acquisition and the Revolving Advances to be funded in connection therewith.  The calculation of Undrawn Availability for purposes of clause (y) herein shall exclude any and all of the acquired (or to be acquired) assets of any Person unless Agent has first completed field exams and appraisals (to the extent deemed necessary by the Agent in its sole discretion) relating to such assets with results satisfactory to the Agent in its Permitted Discretion and such assets are otherwise Eligible Inventory or Eligible Receivables;

(v) copies of all financial information presented to the Board of Directors in connection with such acquisition;

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(c) all property to be so acquired in connection with such acquisition shall be free and clear of any and all Liens, except for Permitted Encumbrances (and if any such property is subject to any Lien not permitted by this clause (c), then concurrently with such acquisition such Lien shall be released);

(d) the Subsidiary to be acquired or formed as a result of such acquisition shall be, in the reasonable judgment of the Borrowers, engaged in the same line of business or a business ancillary, complementary or reasonably related thereto of the Borrowers and such Subsidiary will be a direct wholly-owned Subsidiary of a Borrower, provided that such Subsidiary may be an indirect wholly-owned Subsidiary of a Borrower if the Agent consents in writing, provided further that any such business would not subject the Agent or any Lender to regulatory or third-party approvals in connection with the exercise of its rights and remedies under this Agreement or any Other Documents other than approvals applicable to the exercise of such rights and remedies with respect to Borrowers prior to such acquisition;

(e) such acquisition shall be effected in such a manner so that the acquired Equity Interests or assets (if an asset acquisition) are owned by a Borrower and, if effected by merger or consolidation involving a Borrower, the continuing or surviving Person shall be a Borrower;

(f) such acquisition shall have been approved by the board of directors or other governing body of the Person whose Equity Interests or assets are proposed to be acquired to the extent required by the governing documents of the Person whose Equity Interests or assets are proposed to be acquired or by Applicable Law;

(g) Agent shall be satisfied that all acts necessary to perfect Agent’s Liens in the assets constituting Collateral acquired by any Borrower, Guarantor or Domestic Subsidiary have been taken; provided that, in the case of an acquisition of assets constituting Equity Interests,  Agent’s Liens shall be perfected with respect to the Equity Interests in and the assets of the acquired Person (other than in the case of a Foreign Subsidiary, where Agent shall have a perfected Lien upon 65% of the Equity Interests of such Foreign Subsidiary only);

(h) all or substantially all of the business and assets of the entity being acquired are located in the United States, Puerto Rico or other country acceptable to Agent;

(i) the Purchase Price for such acquisition shall not individually or in the aggregate with all other acquisitions during any calendar year exceed $40,000,000, provided, that in connection with any Permitted Acquisitions, such amounts shall be increased on a dollar for dollar basis by the amount of Purchase Price paid from the actual proceeds of the issuance of Equity Interests by any Borrower; and

(j) nothing contained in this definition of Permitted Acquisition shall permit a Borrower to make any acquisition prohibited by any other provision of this Agreement.

Permitted Advances” shall mean (a) Accounts owing to Borrowers, customer deposits, prepaid expenses and accrued expenses created or acquired in the Ordinary Course of Business and payable on customary trade terms of a Borrower, (b) advances to sales representatives of Borrowers in the Ordinary Course of Business and consistent with past practices not to exceed

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$100,000 per sales representative and $1,000,000 in the aggregate with respect to all sales representatives in each case for Parent and its Subsidiaries on a Consolidated Basis, and (c) any loans or advances that are included in the definition of “Permitted Investments.”

Permitted Discretion” shall mean a determination made in the exercise of reasonable (from the perspective of a secured asset based lender) judgment. 

Permitted Dispositions” shall have the meaning set forth in Section 4.3.

Permitted Encumbrances” shall mean:

(a) Liens in favor of Agent for the benefit of Agent and Lenders;  

(b)  Liens for taxes, assessments or other governmental charges not delinquent or being Properly Contested;  

(c)  Liens disclosed in the financial statements referred to in Section 5.5, the existence of which Agent has consented to in writing;

(d)  deposits or pledges to secure obligations under worker’s compensation, social security or similar laws, or under unemployment insurance;

(e)  deposits or pledges to secure bids, tenders, contracts (other than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the Ordinary Course of Business;  

(f)  Liens arising by virtue of the rendition, entry or issuance against any Borrower or any Subsidiary, or any property of any Borrower or any Subsidiary, of any judgment, writ, order, or decree for so long as each such Lien (i) is in existence for less than 20 consecutive days after it first arises or is being Properly Contested and (ii) is at all times junior in priority to any Liens in favor of Agent;  

(g) mechanics’, workers’, materialmen’s, warehouse, statutory landlord or other like Liens arising in the Ordinary Course of Business with respect to obligations which are not due or which are being Properly Contested;  

(h)  Liens placed upon fixed assets hereafter acquired to secure a portion of the purchase price thereof, provided that (i) any such Lien shall not encumber any other property of any Borrower and (ii) the aggregate amount of Indebtedness secured by such Liens incurred as a result of such purchases shall not exceed the amount provided for in Section 7.8(b);  

(j)  Liens disclosed on Schedule 1.2(a);  provided that such Liens shall secure only those obligations which they secure on the Closing Date (and extensions, renewals and refinancings of such obligations permitted by Section 7.8) and shall not subsequently apply to any other property or assets of any Borrower;

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(k)Liens arising in the ordinary course of business in favor of customs brokers, custom and forwarding agents and similar Persons in respect of imported goods and merchandise in the custody of such Persons;    

(l)Liens securing Indebtedness for financing insurance premiums which attach solely to the applicable insurance policies and proceeds thereof;

(m)Liens of any licensor or licensee on Intellectual Property arising in connection with license agreements entered into in the Ordinary Course of Business;

(n)any Lien; UCC-1 financing statement, interest or title of a lessor under any operating lease entered into in the Ordinary Course of Business, or any interest or title of any lessee under any leases or subleases of real property, with respect solely to the leased property and not to any Collateral;

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

(p)Liens consisting of UCC-1 financing statements or similar notices filed by a Person of a type listed in Section 9-505 of the UCC solely in such capacity;

(q) Liens arising in connection with a judgment or attachment that would not constitute an Event of Default under this Agreement;  

(r) Liens or rights of setoff against credit balances of the Borrowers with credit card issuers or credit card processors to secure obligations to any such credit card issuer or credit card processor incurred in the ordinary course of business as a result of fees and chargebacks; and

(s)Extensions, renewals and replacements of Liens referred to in clauses (a) through (q) above; provided, however, that any such extension, renewal or replacement Lien shall be limited to the property or assets covered by the Lien extended, renewed or replaced and that the obligations secured by any such extension, renewal or replacement Lien shall be in an amount not greater than the amount of the obligations secured by the Lien extended, renewed or replaced.

Permitted Guarantees” shall mean (a) warranties made in the Ordinary Course of Business,  (b) any guaranty by a Borrower of any liabilities of any other Borrower or a Subsidiary of a Borrower to any lessor or licensor,  (c) indemnities in agreements evidencing Indebtedness permitted hereunder,  (d) any indemnities by any Borrower of any liability of its directors, officers and employees in their capacities as such as permitted by Applicable Law,  (e) any guaranty of any Indebtedness permitted under this Agreement,  and (f) indemnities in respect of statutory

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obligations, bonding agreements, brokerage and deposit agreements, engagement letters, commitment letters, and agreements for, acquisitions, divestures and other like agreements.

Permitted Investments” shall mean any of the following:

(a)obligations or securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof;

(b)United States dollar-denominated time deposits, certificates of deposit and bankers acceptances of any bank whose short-term debt rating from S&P, is at least A-1 or the equivalent or whose short-term debt rating from Moody’s is at least P-1 or the equivalent with maturities of not more than six months from the date of acquisition;

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

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

(e)Investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (a) through (d) above;

(f)Deposit Accounts maintained in accordance with the Blocked Account Agreements;

(g)Investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the Ordinary Course of Business;

(h) deposits made in the Ordinary Course of Business consistent with past practices to secure the performance of leases or in connection with bidding on government contracts;

(i)loans to employees in an aggregate amount not in excess of $100,000 at any one time per such employee (not to exceed in the aggregate at any time outstanding the sum of $1,000,000 with respect to all employees of the Borrowers), for the purpose of funding such employees’ purchase of Equity Interests of the Parent, in each case for Parent and its Subsidiaries on a Consolidated Basis;

(j)Investments or intercompany loans and advances of (i) Parent or a Subsidiary in or to any other Subsidiary (subject to a maximum amount of such loans and advances (which, for clarification, do not include trade payables incurred in the Ordinary Course of Business) by Parent and any other Borrower to any and all such Subsidiaries of $10,000,000 in the aggregate at any one time outstanding (provided that upon request by Agent, each such loan and advance shall be evidenced by a promissory note in form and substance satisfactory to Agent which

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is pledged by the payee as additional security for the Obligations)), or (ii) any Subsidiary in or to the Parent;  

 (k)additional Investments not otherwise permitted in this Section not to exceed $1,000,000 in the aggregate at any one time outstanding for Parent and its Subsidiaries on a Consolidated Basis;

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

(m)Investments constituting Permitted Acquisitions;

(n)Investments in Hedge Agreements, derivative agreements, materials future contracts or other arrangements in connection with Indebtedness, in all cases not for speculative purposes, not to exceed in the aggregate a notional amount of $35,000,000 at any time outstanding for Parent and its Subsidiaries on a Consolidated Basis;  

(o)Deposit Accounts with financial institutions available for withdrawal on demand, subject to the provisions of Section 4.15(h);  

(p)the transfer of Inventory in the Ordinary Course of Business to Rocky Brands Canada, Inc. to fulfill bona fide third-party purchase orders prior to shipment thereof; and

(q)Investments in Permitted Securities Accounts; provided that, during a Cash Dominion Period, (i) Borrower shall, as soon as is reasonably practical, but, in any event, no later than the maturity of such investment, liquidate all existing investments maintained in all Permitted Securities Accounts and forward all proceeds to Agent to be applied to the Revolving Loan and (ii) shall not make any further investments in such accounts.

Permitted Securities Accounts” shall mean money market, CDs, CDARs, treasuries, GNMA mortgage-backed securities, corporate bonds, and any other accounts acceptable to Agent in its Permitted Discretion.

Person” shall mean any individual, sole proprietorship, partnership, limited partnership, corporation, business trust, joint stock company, trust, unincorporated organization, association, limited or unlimited liability company, limited liability partnership, institution, public benefit corporation, joint venture, entity or Governmental Body (whether federal, state, county, city, municipal or otherwise, including any instrumentality, division, agency, body or department thereof).

Prime Commercial Rate”  shall mean, for any day, the rate established by Agent from time to time based on its consideration of economic, money market, business and competitive factors, and it is not necessarily Agent’s most favored rate.  Subject to any maximum or minimum interest rate limitation specified herein or by applicable law, any variable rate of interest on the obligation evidenced hereby shall change automatically without notice to the undersigned immediately with

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each change in the Prime Commercial Rate.  The interest rate change will not occur more often than each Business Day.  If the Prime Commercial Rate becomes unavailable, after notifying Borrowing Agent and in consultation with therewith, Agent may designate a substitute index; provided that the final determination shall be made solely by Agent in its Permitted Discretion.  

Prior Related Event” shall have the meaning set forth in Section 16.21.

Properly Contested” shall mean, in the case of any Indebtedness or Lien, as applicable, of any Person (including any taxes) that is not paid as and when due or payable by reason of such Person’s bona fide dispute concerning its liability to pay same or concerning the amount thereof, (a) such Indebtedness or Lien, as applicable, is being properly contested in good faith by appropriate proceedings promptly instituted and diligently conducted; (b) such Person has established appropriate reserves as shall be required in conformity with GAAP;  (c) the non-payment of such Indebtedness will not have a Material Adverse Effect and will not result in the forfeiture of any assets of such Person that will have a Material Adverse Effect;  (d) no Lien is imposed upon any of such Person’s assets with respect to such Indebtedness unless such Lien is at all times junior and subordinate in priority to the Liens in favor of the Agent (except only with respect to Charges that have priority as a matter of Applicable Law) and enforcement of such Lien is stayed during the period prior to the final resolution or disposition of such dispute; (e) if such Indebtedness or Lien, as applicable, results from, or is determined by the entry, rendition or issuance against a Person or any of its assets of a judgment, writ, order or decree, enforcement of such judgment, writ, order or decree is stayed pending a timely appeal or other judicial review; and (f) if such contest is abandoned, settled or determined adversely (in whole or in part) to such Person, such Person forthwith pays such Indebtedness and all penalties, interest and other amounts due in connection therewith.

Purchase Price” shall mean, with respect to any acquisition, the sum of, without duplication, (a) the aggregate consideration, whether cash, property (including the face amount of any promissory note or any other debt instrument issued in connection with such acquisition) or securities (including the fair market value of any Equity Interests of any Borrower issued in connection therewith), paid or delivered by a Borrower, plus (b) the aggregate amount of Indebtedness of the acquired business, plus (c) all transaction costs and contingent obligations incurred by a Borrower.

Purchasing CLO” shall have the meaning set forth in Section 16.3(d).

Purchasing Lender” shall have the meaning set forth in Section 16.3(c).

Qualified Cash” shall mean, as of any date of determination, the amount of unrestricted cash and Cash Equivalents of Borrowers that is in deposit accounts maintained by HNB at a branch office of HNB located within the United States or over which the Agent has determined it has exclusive springing control regardless of whether a Triggering Event has occurred.

Qualified ECP Loan Party” shall mean each Borrower or Guarantor that on the Eligibility Date is (a) a corporation, partnership, proprietorship, organization, trust, or other entity other than a “commodity pool” as defined in Section 1a(10) of the CEA and CFTC regulations thereunder that has total assets exceeding $10,000,000 or (b) an Eligible Contract Participant that can cause

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another person to qualify as an Eligible Contract Participant on the Eligibility Date under Section 1a(18)(A)(v)(II) of the CEA by entering into or otherwise providing a “letter of credit or keepwell, support, or other agreement” for purposes of Section 1a(18)(A)(v)(II) of the CEA.

Quarterly Liquidity” shall mean, for any fiscal quarter, an amount equal to (a) the daily average (as of the end of each Business Day) during such fiscal quarter of the sum of: (i) the lesser of (A) the Formula Amount minus the outstanding amount of the Revolving Advances, or (B) the Maximum Revolving Advance Amount minus the Maximum Undrawn Amount of all Letters of Credit minus the outstanding amount of the Revolving Advances,  plus (ii) Qualified Cash,  minus (b) all amounts owing to Borrowers’ trade creditors which are 60 days or more past due as of the end of such fiscal quarter.

 “Raw Material Inventory Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(iii).

RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., as same may be amended from time to time.

Real Property” shall mean all of each Borrower’s right, title and interest in and to the real estate identified on Schedule 4.5 hereto and related improvements, or which is hereafter owned or leased by any Borrower.

Receivables” shall mean and include, as to each Borrower, all of such Borrower’s accounts, contract rights, instruments (including those evidencing indebtedness owed to such Borrower by its Affiliates), documents, chattel paper (including electronic chattel paper), general intangibles relating to accounts, drafts and acceptances, credit card receivables and all other forms of obligations owing to such Borrower arising out of or in connection with the sale or lease of Inventory or the rendition of services, all supporting obligations, guarantees and other security therefor, whether secured or unsecured, now existing or hereafter created, and whether or not specifically sold or assigned to Agent hereunder.

Receivables Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(i).

Register” shall have the meaning set forth in Section 16.3(e).

Reimbursement Obligation” shall have the meaning set forth in Section 2.12(b).

Release” shall have the meaning set forth in Section 5.7(c)(i).

Reportable Event” shall mean a reportable event described in Section 4043(c) of ERISA or the regulations promulgated thereunder.

Required Lenders” shall mean Lenders holding greater than fifty percent (50%) of the Advances and, if no Advances are outstanding, shall mean Lenders holding greater than fifty percent (50%) of the Commitment Percentages;  provided, however, if there are fewer than three (3) Lenders, Required Lenders shall mean both Lenders.

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Reserve Percentage” shall mean as of any day the maximum percentage in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including supplemental, marginal and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as “Eurocurrency Liabilities”).

Revolving Advance(s)” shall mean Advances made other than Letters of Credit.

Revolving Credit Note” shall have the meaning set forth in Section 2.1(a).

Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the sum of the Alternate Base Rate plus the Applicable Rate for Revolving Advances with respect to Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus the Applicable Rate for Revolving Advances with respect to Eurodollar Rate Loans.

Sanctioned Country” means, at any time, a country or territory which is itself the subject or target of any Sanctions (at the time of this Agreement, Cuba, Iran, North Korea, Sudan and Syria).

Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b).

Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State. 

Satisfaction Event” shall mean the first (1st) date after a Triggering Event on which both of the following conditions are satisfied: (a) the sum of Undrawn Availability plus Qualified Cash is greater than the least of: (i) 20.00% of the Formula Amount, (ii) 20.00% of the Maximum Revolving Advance Amount, and (iii) $15,000,000, for a period of forty-five (45) or more consecutive calendar days after such Triggering Event, and (b)  no Default or Event of Default is continuing.  

SEC” shall mean the Securities and Exchange Commission or any successor thereto.

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

Senior Debt Payments” shall mean and include all cash actually expended by any Borrower to make (a) interest payments on any Advances hereunder,  plus (b) net payments on account of all Hedging Agreements,  plus (c) payments for all fees, commissions and charges paid to Agent,  Issuer, or any Lender set forth herein and with respect to any Advances,  plus (d) payments on Capitalized Lease Obligations,  plus (e) payments with respect to any other Indebtedness for borrowed money (other than the Revolving Advances and Letters of Credit) but excluding the satisfaction of any Indebtedness to the extent simultaneously refinanced with the

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proceeds of any Indebtedness permitted to be incurred hereunder other than the proceeds Revolving Advances.

Senior Obligations” shall have the meaning set forth in Section 15.4.

Settlement Date” shall mean the Closing Date and thereafter Wednesday or Thursday of each week or more frequently if Agent deems appropriate unless such day is not a Business Day in which case it shall be the next succeeding Business Day.

Solvent” shall mean as to any Person (a)  the ability to pay its debts as they mature, (b)  having capital sufficient to carry on its business and all businesses in which it is about to engage, and (c) (i)  as of the Closing Date, the fair present saleable value of its assets, calculated on a going concern basis, is in excess of the amount of its liabilities, and (ii)  subsequent to the Closing Date, the fair saleable value of its assets (calculated on a going concern basis) will be in excess of the amount of its liabilities; provided, however, that (1)  the determination of whether a Person is Solvent shall take into account all such Person's properties and liabilities regardless of whether, or the amount at which, any such property or liability is included on a balance sheet of such Person prepared in accordance with GAAP,  including properties such as contingent contribution or subrogation rights, business prospects, distribution channels and goodwill; (2)  the determination of the sum of a Person's properties at a fair valuation or the present fair saleable value of a Person's properties shall be made on a going concern basis; (3)  in computing the amount of contingent or unrealized assets or contingent or unliquidated liabilities at any time, such assets and liabilities will be computed at the amounts which, in light of all the facts and circumstances existing at such time, represent the amount that reasonably can be expected to become realized assets or matured liabilities, as the case may be; and (4)  in computing the amount that would be required to pay a Person's probable liability on its existing debts as they become absolute and matured, reasonable valuation techniques, including a present value analysis, shall be applied using such rates over such periods as are appropriate under the circumstances.

Subsidiary” of any Person shall mean a corporation or other entity of whose Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the directors of such corporation, or other Persons performing similar functions for such entity, are owned, directly or indirectly, by such Person; provided, however, the term “Subsidiary” shall not include EJ Asia Limited.

Subsidiary Stock” shall mean all of the issued and outstanding Equity Interests of any Subsidiary owned by any Borrower (not to exceed 65% of the Equity Interests of any Foreign Subsidiary).

Swap” shall mean any “swap” as defined in Section 1a(47) of the CEA and regulations thereunder other than (a) a  swap entered into on, or subject to the rules of, a board of trade designated as a contract market under Section 5 of the CEA, or (b) a commodity option entered into pursuant to CFTC Regulation 32.3(a).

Swap Obligation” means any obligation to pay or perform under any agreement, contract or transaction that constitutes a Swap which is also a Lender-Provided Hedge.

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Taxes” shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Body,  including any interest, additions to tax or penalties applicable thereto.

Term” shall have the meaning set forth in Section 13.1.

Termination Event” shall mean (a)  a  Reportable Event with respect to any Pension Benefit Plan or Multiemployer Plan;  (b)  the withdrawal of any Borrower or any member of the Controlled Group from a Pension Benefit Plan or Multiemployer Plan during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA;  (c)  the providing of notice of intent to terminate a Pension Benefit Plan in a distress termination described in Section 4041(c) of ERISA;  (d)  the institution by the PBGC of proceedings to terminate a Pension Benefit Plan or Multiemployer Plan;  (e)  any event or condition (i)  which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Benefit Plan or Multiemployer Plan, or (ii)  that may result in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA(f)  the partial or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of any Borrower or any member of the Controlled Group from a Multiemployer Plan;  or (g)  providing any security to any Pension Benefit Plan under Section 436(f) of the Code by Borrower or any member of the Controlled Group. 

 “Toxic Substance” shall mean and include any material present on the Real Property which has been shown to have significant adverse effect on human health or which is subject to regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq., applicable state law, or any other applicable Federal or state laws now in force or hereafter enacted relating to toxic substances.  “Toxic Substance” includes but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.

 “Transferee” shall have the meaning set forth in Section 16.3(d).

Triggering Event” shall mean either: (a) the occurrence of an Event of Default, or (b) the first (1st) date after the Closing Date (or the most recent Satisfaction Event if a Triggering Event has previously occurred) on which the sum of Undrawn Availability plus Qualified Cash is less than the least of: (i)  13.33% of the Formula Amount,  (ii)  13.33% of the Maximum Revolving Advance Amount, or (iii) $10,000,000, for a period of ten (10) or more consecutive days, or (c) any single date on which the sum of Undrawn Availability plus Qualified Cash is less than the least of: (i)  10.00% of the Formula Amount,  (ii)  10.00% of the Maximum Revolving Advance Amount, or (iii) $7,500,000.

Undrawn Availability” at a particular date shall mean an amount equal to (a) the lesser of (i) the Formula Amount, or (ii) the Maximum Revolving Advance Amount,  minus the Maximum Undrawn Amount of all Letters of Credit,  minus (b) the sum of (i) the outstanding amount of Revolving Advances, plus (ii) amounts due and owing to any Borrower’s trade creditors which are outstanding sixty (60) days or more past the due date thereof.

Unfinanced Capital Expenditures” shall mean all Capital Expenditures of Borrower other than those made utilizing financing provided by the applicable seller or third party lenders.  For the avoidance of doubt, a Capital Expenditure made by a Borrower utilizing a Revolving Advance

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shall be deemed an Unfinanced Capital Expenditure unless such Revolving Advance is repaid during the same fiscal quarter that such Capital Expenditure is made with financing permitted hereunder and provided by the applicable seller or third-party lenders.

Uniform Commercial Code” shall have the meaning set forth in Section 1.3.

US Assignment” shall have the meaning set forth in Section 4.15(j).

USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

Week” shall mean the time period commencing with the opening of business on a Wednesday and ending on the end of business the following Tuesday.

Withholding Agent” means Borrowers and Agent.

1.3. Uniform Commercial Code Terms.  All terms used herein and defined in the Uniform Commercial Code as adopted in the State of Ohio from time to time (the “Uniform Commercial Code”) shall have the meaning given therein unless otherwise defined herein.  Without limiting the foregoing, unless otherwise defined herein, the terms “accounts”, “chattel paper”, “commercial tort claims”, “instruments”, “general intangibles”, “goods”, “payment intangibles”, “proceeds”, “supporting obligations”, “securities”, “investment property”, “documents”, “deposit accounts”, “software”, “letter of credit rights”, “inventory”, “equipment” and “fixtures”, as and when used in the description of Collateral shall have the meanings given to such terms in Articles 8 or 9 of the Uniform Commercial Code.  To the extent the definition of any category or type of collateral is expanded by any amendment, modification or revision to the Uniform Commercial Code, such expanded definition will apply automatically as of the date of such amendment, modification or revision. 

1.4. Certain Matters of Construction.  The terms “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision.  All references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement.  Any pronoun used shall be deemed to cover all genders.  Wherever appropriate in the context, terms used herein in the singular also include the plural and vice versa.  All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations.  Unless otherwise provided, all references to any instruments or agreements to which Agent is a party, including references to any of the Other Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof.  All references herein to the time of day shall mean the time in Ohio.  Unless otherwise provided, all financial calculations shall be performed with Inventory valued on a first-in, first-out basis.  Whenever the words “including” or “include” shall be used, such words shall be understood to mean “including, without limitation” or “include, without limitation”.  A Default or Event of Default shall be deemed to exist and be continuing at all times during the period commencing on the date that such Default or Event of Default occurs to the date on which such Default or Event of Default is waived in writing pursuant to this Agreement or is cured within any period of cure

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expressly provided for in this Agreement.  Any Lien referred to in this Agreement or any of the Other Documents as having been created in favor of Agent, any agreement entered into by Agent pursuant to this Agreement or any of the Other Documents, any payment made by or to or funds received by Agent pursuant to or as contemplated by this Agreement or any of the Other Documents, or any act taken or omitted to be taken by Agent, shall, unless otherwise expressly provided, be created, entered into, made or received, or taken or omitted, for the benefit or account of Agent and Lenders. Wherever the phrase “to the best of Borrowers’ knowledge” or words of similar import relating to the knowledge or the awareness of any Borrower are used in this Agreement or Other Documents, such phrase shall mean and refer to the actual knowledge of a senior officer of any Borrower.  All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or otherwise within the limitations of, another covenant shall not avoid the occurrence of a default if such action is taken or condition exists.  In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of a breach of a representation or warranty hereunder. 

II ADVANCES, PAYMENTS.

2.1. Revolving Advances.

(a) Amount of Revolving Advances.  Subject to the terms and conditions set forth in this Agreement including Section 2.1(b), each Lender, severally and not jointly, will make Revolving Advances to Borrowers in aggregate amounts outstanding at any time equal to such Lender’s Commitment Percentage of the lesser of (x) the Maximum Revolving Advance Amount less the Maximum Undrawn Amount of all Letters of Credit or (y) an amount equal to the sum of the following (the “Formula Amount”):

(i) up to 85%, or 90% if such Eligible Receivables are subject to credit insurance acceptable to Agent in its Permitted Discretion, (“Receivables Advance Rate”) of Eligible Receivables, plus

(ii) up to the lesser of (A) 75% of the value of Eligible Finished Goods Inventory (“Finished Goods Inventory Advance Rate”), or (B) 85% of the appraised net orderly liquidation value of Eligible Finished Goods Inventory (as evidenced by an Inventory appraisal satisfactory to Agent in its Permitted Discretion), plus

(iii) up to the lesser of (A) 75% of the value of the Eligible Raw Material Inventory (“Raw Material Inventory Advance Rate”), or (B) 85% of the appraised net orderly liquidation value of Eligible Raw Materials Inventory (as evidenced by an Inventory appraisal satisfactory to Agent in its Permitted Discretion), plus

(iv) up to the least of (A) 75% of the value of the Eligible In-Transit Finished Goods Inventory (“In-Transit Inventory Advance Rate” and together with the Finished Goods Inventory Advance Rate, Raw Material Inventory Advance Rate and the Receivables Advance Rate, collectively, the “Advance Rates”), (B) 85% of the appraised net orderly liquidation

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value of Eligible In-Transit Finished Goods Inventory (as evidenced by an Inventory appraisal satisfactory to Agent in its Permitted Discretion), or (C)$8,000,000, plus 

(v) if an appraisal (requested and paid for by Borrowers in their sole discretion and satisfactory to Agent) is ordered and performed, up to the lesser of (A) 50% of the appraised net orderly liquidation value of Eligible Intellectual Property and (B) $15,000,000; minus 

(vi) the Maximum Undrawn Amount of all Letters of Credit,  minus

(vii) such reserves as Agent may deem proper and necessary from time to time in its Permitted Discretion.

Notwithstanding the foregoing, the amount of the sum of Section 2.1(a)(y)(ii) plus Section 2.1(a)(y)(iii) plus Section 2.1(a)(y)(iv) shall not exceed sixty percent (60%) of the Formula Amount.  The Revolving Advances shall be evidenced by one or more secured promissory notes (collectively, the “Revolving Credit Note”).

(b) Discretionary Rights.  The Advance Rates may be increased or decreased by Agent at any time and from time to time in the exercise of its Permitted Discretion.  Each Borrower consents to any such increases or decreases and acknowledges that decreasing the Advance Rates or increasing or imposing reserves may limit or restrict Advances requested by Borrowing AgentAgent shall give Borrowing Agent five (5) days prior written notice of its intention to decrease the Advance Rates.  The rights of Agent under this subsection are subject to the provisions of Section 16.2(b).

2.2. Procedure for Revolving Advances Borrowing. 

(a) Domestic Rate Loan Requests.  Borrowing Agent on behalf of any Borrower may notify Agent prior to 12:00 Noon on a Business Day of a Borrower’s request to incur, on that day, a Revolving Advance comprised of a Domestic Rate Loan hereunder.  

(b) Deemed Credit Requests.  The Borrowers shall be deemed to have made a request for a Revolving Advance (a "Deemed Credit Request"), which Deemed Credit Request shall be irrevocable upon any interest, principal, fee or other Obligation of the Borrowers hereunder becoming due, for a Revolving Advance comprised of a Domestic Rate Loan in an amount necessary to pay such interest, principal, fee or other Obligation.  Each Lender agrees that its obligation to make or participate in Revolving Advances pursuant to a Deemed Credit Request is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence of any Default or Event of Default or the failure of any condition precedent.

(c) Eurodollar Rate Loan Requests. In the event any Borrower desires to obtain a Eurodollar Rate Loan,  Borrowing Agent shall give Agent written notice by no later than 12:00 Noon on the day which is three (3) Business Days prior to the date such Eurodollar Rate Loan is to be borrowed, specifying (i) the date of the proposed borrowing (which shall be a Business Day), (ii) the type of borrowing and the amount on the date of such Advance to be borrowed, which amount shall be in an aggregate principal amount that is not less than $1,000,000 and integral multiples of $500,000 in excess thereof, and (iii) the duration of the first Interest Period therefor. 

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No Eurodollar Rate Loan shall be made available to any Borrower during the continuance of a Default or an Event of Default.  After giving effect to each requested Eurodollar Rate Loan,  including those which are converted from a Domestic Rate Loan under Section 2.2(d), there shall not be outstanding more than eight (8) Eurodollar Rate Loans, in the aggregate.  Each Interest Period of a Eurodollar Rate Loan shall commence on the date such Eurodollar Rate Loan is made and shall end on such date as Borrowing Agent may elect as set forth in subsection (c)(iii) above provided that the exact length of each Interest Period shall be determined in accordance with the practice of the interbank market for offshore Dollar deposits and no Interest Period shall end after the last day of the TermBorrowing Agent shall elect the initial Interest Period applicable to a Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to Section 2.2(c) or by its notice of conversion given to Agent pursuant to Section 2.2(d), as the case may be.  Borrowing Agent shall elect the duration of each succeeding Interest Period by giving irrevocable written notice to Agent of such duration not later than 12:00 Noon on the day which is three (3) Business Days prior to the last day of the then current Interest Period applicable to such Eurodollar Rate Loan.  If Agent does not receive timely notice of the Interest Period elected by Borrowing Agent,  Borrowing Agent shall be deemed to have elected to convert to a Domestic Rate Loan subject to Section 2.2(d) herein below.    

(d) Rate Conversions and Continuations.  Provided that no Event of Default shall have occurred and be continuing, Borrowing Agent may, on the last Business Day of the then current Interest Period applicable to any outstanding Eurodollar Rate Loan, or on any Business Day with respect to Domestic Rate Loans, convert or continue any such loan into a loan of another type in the same aggregate principal amount provided that any conversion or continuation of a Eurodollar Rate Loan shall be made only on the last Business Day of the then current Interest Period applicable to such Eurodollar Rate Loan.  If Borrowing Agent desires to convert or continue a loan, Borrowing Agent shall give Agent written notice by no later than 12:00 Noon (i) on the day which is three (3) Business Days’ prior to the date on which such conversion or continuation is to occur with respect to a conversion from a Domestic Rate Loan to a Eurodollar Rate Loan or a continuation of a Eurodollar Rate Loan as a Eurodollar Rate Loan, or (ii) on the day which is one (1) Business Day prior to the date on which such conversion is to occur with respect to a conversion from a Eurodollar Rate Loan to a Domestic Rate Loan, specifying, in each case, the date of such conversion or continuation, the loans to be converted or continued and if the conversion is from a Domestic Rate Loan to any other type of loan, the duration of the first Interest Period therefor. 

(e) Eurodollar Rate Loan Prepayments.  At its option and upon written notice given prior to 12:00 Noon at least three (3) Business Days’ prior to the date of such prepayment, any Borrower may prepay the Eurodollar Rate Loans in whole at any time or in part from time to time with accrued interest on the principal being prepaid to the date of such repayment.  Such Borrower shall specify the date of prepayment of Advances which are Eurodollar Rate Loans and the amount of such prepayment.  In the event that any prepayment of a Eurodollar Rate Loan is required or permitted on a date other than the last Business Day of the then current Interest Period with respect thereto, such Borrower shall indemnify Agent and Lenders therefor in accordance with Section 2.2(f).

(f) Indemnity.  Each Borrower shall indemnify Agent and Lenders and hold Agent and Lenders harmless from and against any and all losses or expenses that Agent and

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Lenders may sustain or incur as a consequence of any prepayment, conversion of or any default by any Borrower in the payment of the principal of or interest on any Eurodollar Rate Loan or failure by any Borrower to complete a borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan after notice thereof has been given, including, but not limited to, any interest payable by Agent or Lenders to lenders of funds obtained by it in order to make or maintain its Eurodollar Rate Loans hereunder.  A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Agent or any Lender to Borrowing Agent shall be conclusive absent manifest error.

(g) Illegality of Eurodollar Rate Loans.  Notwithstanding any other provision hereof, if any Applicable Law or any Change in Law, shall make it unlawful for any Lender (for purposes of this subsection (g), the term Lender” shall include any Lender and the office or branch where any Lender or any corporation or bank controlling such Lender makes or maintains any Eurodollar Rate Loans) to make or maintain its Eurodollar Rate Loans, the obligation of Lenders to make Eurodollar Rate Loans hereunder shall forthwith be cancelled and Borrowers shall, if any affected Eurodollar Rate Loans are then outstanding, promptly upon request from Agent, either pay all such affected Eurodollar Rate Loans or convert such affected Eurodollar Rate Loans into loans of another type.  If any such payment or conversion of any Eurodollar Rate Loan is made on a day that is not the last day of the Interest Period applicable to such Eurodollar Rate Loan, Borrowers shall pay Agent, upon Agent’s request, such amount or amounts as may be necessary to compensate Lenders for any loss or expense sustained or incurred by Lenders in respect of such Eurodollar Rate Loan as a result of such payment or conversion, including (but not limited to) any interest or other amounts payable by Lenders to lenders of funds obtained by Lenders in order to make or maintain such Eurodollar Rate Loan.  A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by Lenders to Borrowing Agent shall be conclusive absent manifest error.

2.3. Disbursement of Advance Proceeds.  All Advances shall be disbursed from whichever office or other place Agent may designate from time to time and, together with any and all other Obligations of Borrowers to Agent or Lenders, shall be charged to Borrowers’ Account on Agent’s books.  During the Term, Borrowers may use the Revolving Advances by borrowing, prepaying and reborrowing, all in accordance with the terms and conditions hereof.  The proceeds of each Revolving Advance requested by Borrowing Agent on behalf of any Borrower shall, with respect to requested Revolving Advances to the extent Lenders make such Revolving Advances, be made available to the applicable Borrower on the day so requested by way of credit to such Borrower’s operating account at HNB, or such other bank as Borrowing Agent may designate following notification to Agent, in immediately available federal funds or other immediately available funds or, with respect to Deemed Credit Requests, be disbursed to Agent to be applied to the outstanding Obligations giving rise to such deemed request.

2.4. Reserved.  

2.5. Maximum Advances.  The aggregate balance of Revolving Advances outstanding at any time shall not exceed the lesser of (a) the Maximum Revolving Advance Amount less the Maximum Undrawn Amount of all Letters of Credit or (b) the Formula Amount.

2.6. Repayment of Advances.

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(a) The Revolving Advances shall be due and payable in full on the last day of the Term subject to earlier prepayment as herein provided.

(b) Each Borrower recognizes that the amounts evidenced by checks, notes, drafts or any other items of payment relating to and/or proceeds of Collateral may not be collectible by Agent on the date received.  In calculating availability, Borrowers agree that any such item of payment will be deemed to have been received by Agent and will be provisionally credited to the Borrowers’ Account by Agent on the Business Day immediately following the day on which Agent has actual possession of such item of payment for deposit.  In consideration of Agent’s agreement for provisional crediting of items of payment, Borrowers agree that, in calculating interest and other charges on the Obligations, all Customer payments will be treated as having been credited to the Borrowers’ Account on the second Business Day immediately following the Business Day on which such payments are deemed to have been received by Agent pursuant to this paragraph.    Agent is not, however, required to credit Borrowers’ Account for the amount of any item of payment which is unsatisfactory to Agent and Agent may charge Borrowers’ Account for the amount of any item of payment which is returned to Agent unpaid. 

(c) All payments of principal, interest and other amounts payable hereunder, or under any of the Other Documents shall be made to Agent at the Payment Office not later than 1:00 p.m. on the due date therefor in lawful money of the United States of America in federal funds or other funds immediately available to AgentAgent shall have the right to effectuate payment on any and all Obligations due and owing hereunder by a Deemed Credit Request as provided in Section 2.2(b).

(d) Borrowers shall pay principal, interest, and all other amounts payable hereunder, or under any Other Document, without any deduction whatsoever, including, but not limited to, any deduction for any withholding, setoff or counterclaim.

2.7. Repayment of Excess Advances.  The aggregate balance of Advances outstanding at any time in excess of the maximum amount of Advances permitted hereunder shall be immediately due and payable without the necessity of any demand, at the Payment Office, whether or not a Default or Event of Default has occurred.

2.8. Statement of AccountAgent shall maintain, in accordance with its customary procedures, a loan account (“Borrowers’ Account”) in the name of Borrowers in which shall be recorded the date and amount of each Advance made by Agent and the date and amount of each payment in respect thereof; provided, however, the failure by Agent to record the date and amount of any Advance shall not adversely affect Agent or any Lender.  Each calendar month, Agent shall send to Borrowing Agent a statement showing the accounting for the Advances made, payments made or credited in respect thereof, and other transactions between Agent and Borrowers during such month.  The monthly statements shall be deemed correct and binding upon Borrowers in the absence of manifest error and shall constitute an account stated between Lenders and Borrowers unless Agent receives a written statement of Borrowers’ specific exceptions thereto within thirty (30) days after such statement is received by Borrowing Agent.  The records of Agent with respect to the loan account shall be conclusive evidence absent manifest error of the amounts of Advances and other charges thereto and of payments applicable thereto.

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2.9. Letters of Credit.  Subject to the terms and conditions hereof,  Agent shall issue or cause the issuance of standby and/or trade letters of credit (“Letters of Credit”) for the account of any Borrower; provided, however, that Agent will not be required to issue or cause to be issued any Letters of Credit to the extent that the issuance thereof would then cause the sum of (a) the Revolving Advances plus (b) the Maximum Undrawn Amount of all Letters of Credit to exceed the lesser of (i) the Maximum Revolving Advance Amount or (ii) the Formula Amount.  The Maximum Undrawn Amount of all Letters of Credit shall not exceed in the aggregate at any time the Letter of Credit Sublimit.  All disbursements or payments related to Letters of Credit shall be deemed to be Domestic Rate Loans consisting of Revolving Advances and shall bear interest at the Revolving Interest Rate for Domestic Rate Loans; Letters of Credit that have not been drawn upon shall not bear interest.    

2.10. Issuance of Letters of Credit.

(a) Borrowing Agent, on behalf of Borrowers, may request Agent to issue or cause the issuance of a Letter of Credit by delivering to Agent at the Payment Office, prior to 12:00 Noon at least five (5)  Business Days’ prior to the proposed date of issuance, Agent’s form of Letter of Credit Application (the “Letter of Credit Application”) completed to the satisfaction of Agent; and, such other certificates, documents and other papers and information as Agent may reasonably request.  Borrowing Agent, on behalf of Borrowers, also has the right to give instructions and make agreements with respect to any application, any applicable letter of credit and security agreement, any applicable letter of credit reimbursement agreement and/or any other applicable agreement, any letter of credit and the disposition of documents, disposition of any unutilized funds, and to agree with Agent upon any amendment, extension or renewal of any Letter of Credit.

(b) Each Letter of Credit shall, among other things, (i) provide for the payment of sight drafts, other written demands for payment, or acceptances of usance drafts when presented for honor thereunder in accordance with the terms thereof and when accompanied by the documents described therein and (ii) have an expiry date not later than the earlier of one (1) year from such Letter of Credit’s date of issuance or five (5) Business Days prior to the last day of the Term.  Each standby Letter of Credit shall be subject either to the Uniform Customs and Practice for Documentary Credits as  most recently published by the International Chamber of Commerce at the time a Letter of Credit is issued (the “UCP”) or the International Standby Practices (ISP98 International Chamber of Commerce Publication Number 590), and any subsequent revision thereof at the time a standby Letter of Credit is issued, as determined by Agent in its Permitted Discretion, and each trade Letter of Credit shall be subject to the UCP. 

(c) Agent shall use its reasonable efforts to notify Lenders of the request by Borrowing Agent for a Letter of Credit hereunder.

2.11. Requirements For Issuance of Letters of Credit.    

(a) Borrowing Agent shall authorize and direct any Issuer to name the applicable Borrower as the “Applicant” or “Account Party” of each Letter of Credit.  If Agent is not the Issuer of any Letter of Credit,  Borrowing Agent shall authorize and direct the Issuer to deliver to Agent all instruments, documents, and other writings and property received by the Issuer

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pursuant to the Letter of Credit and to accept and rely upon Agent’s instructions and agreements with respect to all matters arising in connection with the Letter of Credit, the application therefor or any acceptance therefor. 

(b) In connection with all Letters of Credit issued or caused to be issued by Agent under this Agreement, each Borrower hereby appoints Agent, or its designee, as its attorney, with full power and authority if an Event of Default shall have occurred and be continuing, (i) to sign and/or endorse such Borrower’s name upon any warehouse or other receipts, letter of credit applications and acceptances, (ii) to sign such Borrower’s name on bills of lading; (iii) to clear Inventory through the United States of America Customs Department (“Customs”) in the name of such Borrower or Agent or Agent’s designee, and to sign and deliver to Customs officials powers of attorney in the name of such Borrower for such purpose; and (iv) to complete in such Borrower’s name or Agent’s, or in the name of Agent’s designee, any order, sale or transaction, obtain the necessary documents in connection therewith, and collect the proceeds thereof.  Neither Agent nor its attorneys will be liable for any acts or omissions nor for any error of judgment or mistakes of fact or law, except for Agent’s or its attorney’s willful misconduct.  This power, being coupled with an interest, is irrevocable as long as any Letters of Credit remain outstanding.

2.12. Disbursements, Reimbursement.

(a) Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from Agent a participation in such Letter of Credit and each drawing thereunder in an amount equal to such Lender’s Commitment Percentage of the Maximum Face Amount of such Letter of Credit and the amount of such drawing, respectively. 

(b) In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, Agent will promptly notify Borrowing Agent.  Provided that Borrowing Agent shall have received such notice, the Borrowers shall reimburse (such obligation to reimburse Agent shall sometimes be referred to as a “Reimbursement Obligation”) Agent prior to 12:00 Noon on each date that an amount is paid by Agent under any Letter of Credit (each such date, a “Drawing Date”) in an amount equal to the amount so paid by Agent.  In the event Borrowers fail to reimburse Agent for the full amount of any drawing under any Letter of Credit by 12:00 Noon, on the Drawing Date,  Agent will promptly notify each Lender thereof, and Borrowers shall be deemed to have requested that a Revolving Advance maintained as a Domestic Rate Loan be made by the Lenders to be disbursed on the Drawing Date under such Letter of Credit, subject to the amount of the unutilized portion of the lesser of Maximum Revolving Advance Amount or the Formula Amount and subject to Section 8.2.  Any notice given by Agent pursuant to this Section 2.12(b) may be oral if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

(c) Each Lender shall upon any notice pursuant to Section 2.12(b) make available to Agent an amount in immediately available funds equal to its Commitment Percentage of the amount of the drawing, whereupon the participating Lenders shall (subject to Section 2.12(d)) each be deemed to have made a Revolving Advance maintained as a Domestic Rate Loan to Borrowers in that amount.  If any Lender so notified fails to make available to Agent the amount

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of such Lender’s Commitment Percentage of such amount by no later than 2:00 p.m. on the Drawing Date, then interest shall accrue on such Lender’s obligation to make such payment, from the Drawing Date to the date on which such Lender makes such payment (i) at a rate per annum equal to the Federal Funds Rate during the first three days following the Drawing Date and (ii) at a rate per annum equal to the rate applicable to Revolving Advances maintained as a Domestic Rate Loans on and after the fourth day following the Drawing DateAgent will promptly give notice of the occurrence of the Drawing Date, but failure of Agent to give any such notice on the Drawing Date or in sufficient time to enable any Lender to effect such payment on such date shall not relieve such Lender from its obligation under this Section 2.12(c),  provided that such Lender shall not be obligated to pay interest as provided in Section 2.12(c) (i) and (ii) until and commencing from the date of receipt of notice from Agent of a drawing.

(d) With respect to any unreimbursed drawing that is not converted into a Revolving Advance maintained as a Domestic Rate Loan to Borrowers in whole or in part as contemplated by Section 2.12(b), because of Borrowers’ failure to satisfy the conditions set forth in Section 8.2 (other than any notice requirements) or for any other reason, Borrowers shall be deemed to have incurred from Agent a borrowing (each a “Letter of Credit Borrowing”) in the amount of such drawing. Such Letter of Credit Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the rate per annum applicable to a Revolving Advance maintained as a Domestic Rate Loan.  Each Lender’s payment to Agent pursuant to Section 2.12(c) shall be deemed to be a payment in respect of its participation in such Letter of Credit Borrowing and shall constitute a “Participation Advance” from such Lender in satisfaction of its Participation Commitment under this Section 2.12.

(e) Each Lender’s Participation Commitment shall continue until the last to occur of any of the following events:  (i) Agent ceases to be obligated to issue or cause to be issued Letters of Credit hereunder;  (ii) no Letter of Credit issued or created hereunder remains outstanding and uncancelled and (iii) all Persons (other than the Borrowers) have been fully reimbursed for all payments made under or relating to Letters of Credit

2.13. Repayment of Participation Advances. 

(a) Upon (and only upon) receipt by Agent for its account of immediately available funds from Borrowers (i) in reimbursement of any payment made by the Agent under the Letter of Credit with respect to which any Lender has made a Participation Advance to Agent, or (ii) in payment of interest on such a payment made by Agent under such a Letter of Credit,  Agent will pay to each Lender, in the same funds as those received by Agent, the amount of such Lender’s Commitment Percentage of such funds, except Agent shall retain the amount of the Commitment Percentage of such funds of any Lender that did not make a Participation Advance in respect of such payment by Agent.

(b) If Agent is required at any time to return to any Borrower, or to a trustee, receiver, liquidator, custodian, or any official in any Insolvency Proceeding, any portion of the payments made by Borrowers to Agent pursuant to Section 2.13(a) in reimbursement of a payment made under the Letter of Credit or interest or fee thereon, each Lender shall, on demand of Agent, forthwith return to Agent the amount of its Commitment Percentage of any amounts so returned by Agent plus interest at the Federal Funds Rate.

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2.14. Documentation.  Each Borrower agrees to be bound by the terms of the Letter of Credit Application and by Agent’s interpretations of any Letter of Credit issued on behalf of such Borrower and by Agent’s written regulations and customary practices relating to letters of credit, though Agent’s interpretations may be different from such Borrower’s own.  In the event of a conflict between the Letter of Credit Application and this Agreement, this Agreement shall govern.  Except in the case of gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment),  Agent shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following the Borrowing Agent’s or any Borrower’s instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto.

2.15. Determination to Honor Drawing Request.  In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, Agent shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit and that any other drawing condition appearing on the face of such Letter of Credit has been satisfied in the manner so set forth.

2.16. Nature of Participation and Reimbursement Obligations.  Each Lender’s obligation in accordance with this Agreement to make the Revolving Advances or Participation Advances as a result of a drawing under a Letter of Credit, and the obligations of Borrowers to reimburse Agent upon a draw under a Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.16 under all circumstances, including the following circumstances:

(i) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Agent, any Borrower or any other Person for any reason whatsoever;

(ii) the failure of any Borrower or any other Person to comply, in connection with a Letter of Credit Borrowing, with the conditions set forth in this Agreement for the making of a Revolving Advance, it being acknowledged that such conditions are not required for the making of a Letter of Credit Borrowing and the obligation of the Lenders to make Participation Advances under Section 2.12;

(iii) any lack of validity or enforceability of any Letter of Credit;

(iv) any claim of breach of warranty that might be made by Borrower or any Lender against the beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment, counterclaim, cross-claim, defense or other right which any Borrower or any Lender may have at any time against a beneficiary, any successor beneficiary or any transferee of any Letter of Credit or the proceeds thereof (or any Persons for whom any such transferee may be acting), Agent or any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between any Borrower or any Subsidiaries of such Borrower and the beneficiary for which any Letter of Credit was procured);

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(v) the lack of power or authority of any signer of (or any defect in or forgery of any signature or endorsement on) or the form of or lack of validity, sufficiency, accuracy, enforceability or genuineness of any draft, demand, instrument, certificate or other document presented under or in connection with any Letter of Credit, or any fraud or alleged fraud in connection with any Letter of Credit, or the transport of any property or provisions of services relating to a Letter of Credit, in each case even if Agent or any of Agent’s Affiliates has been notified thereof;

(vi) payment by Agent under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit;

(vii) the solvency of, or any acts or omissions by, any beneficiary of any Letter of Credit, or any other Person having a role in any transaction or obligation relating to a Letter of Credit, or the existence, nature, quality, quantity, condition, value or other characteristic of any property or services relating to a Letter of Credit;

(viii) any failure by the Agent or any of Agent’s Affiliates to issue any Letter of Credit in the form requested by Borrowing Agent, unless the Agent has received written notice from Borrowing Agent of such failure within three (3) Business Days after the Agent shall have furnished Borrowing Agent a copy of such Letter of Credit and such error is material and no drawing has been made thereon prior to receipt of such notice;

(ix) any Material Adverse Effect;

(x) any breach of this Agreement or any Other Document by any party thereto;

(xi) the occurrence or continuance of an Insolvency Proceeding with respect to any Borrower, Guarantor, or any of their respective Subsidiaries;

(xii) the fact that a Default or Event of Default shall have occurred and be continuing;

(xiii) the fact that the Term shall have expired or this Agreement or the Obligations hereunder shall have been terminated; and

(xiv) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

2.17. Indemnity.  In addition to amounts payable as provided in Section 16.5, each Borrower hereby agrees to protect, indemnify, pay and save harmless Agent from and against any and all claims, demands, liabilities, damages, taxes, penalties, interest, judgments, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which the Agent may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit, other than as a result of (a) the gross negligence or willful misconduct of the Agent as determined by a final and non-appealable judgment of a court of competent jurisdiction or (b) the wrongful dishonor by the Agent of a proper

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demand for payment made under any Letter of Credit, except if such dishonor resulted from any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Body (all such acts or omissions herein called “Governmental Acts”).

2.18. Liability for Acts and Omissions.  As between Borrowers and Agent and Lenders, each Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit.  In furtherance and not in limitation of the respective foregoing, Agent shall not be responsible for: (a)  the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged (even if Agent shall have been notified thereof); (b)  the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (c)  the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of any Borrower against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among any Borrower and any beneficiary of any Letter of Credit or any such transferee;  (d)  errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, facsimile, telex or otherwise, whether or not they be in cipher; (e)  errors in interpretation of technical terms; (f)  any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (g)  the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (h)  any consequences arising from causes beyond the control of Agent,  including any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of Agent’s rights or powers hereunder. Nothing in the preceding sentence shall relieve Agent from liability for Agent’s gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment) in connection with actions or omissions described in such clauses (a) through (h) of such sentence.  In no event shall Agent be liable to any Borrower for any indirect, consequential, incidental, punitive, exemplary or special damages or expenses (including without limitation attorneys’ fees), or for any damages resulting from any change in the value of any property relating to a Letter of Credit.

Without limiting the generality of the foregoing, Agent (i) may rely on any oral or other communication believed in good faith by Agent or  such Affiliate to have been authorized or given by or on behalf of the applicant for a Letter of Credit,  (ii) may honor any presentation if the documents presented appear on their face substantially to comply with the terms and conditions of the relevant Letter of Credit;  (iii) may honor a previously dishonored presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the same extent as if such presentation had initially been honored, together with any interest paid by Agent;  (iv) may honor any drawing that is payable upon presentation of a statement advising negotiation or payment, upon receipt of such statement (even if such statement indicates that a draft or other document is being delivered separately), and shall not be liable for any failure of any such draft or other document to arrive, or to conform in any way with the relevant Letter of Credit;  (v) may pay any paying or negotiating bank claiming that it rightfully honored under the laws or practices of

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the place where such bank is located; and (vi) may settle or adjust any claim or demand made on Agent in any way related to any order issued at the applicant’s request to an air carrier, a letter of guarantee or of indemnity issued to a carrier or any similar document (each an “Order”) and honor any drawing in connection with any Letter of Credit that is the subject of such Order, notwithstanding that any drafts or other documents presented in connection with such Letter of Credit fail to conform in any way with such Letter of Credit.

In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by Agent under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith and without gross negligence (as determined by a court of competent jurisdiction in a final non-appealable judgment), shall not put Agent under any resulting liability to any Borrower or any Lender.

2.19. Cash Collateral. On demand, following the occurrence of an Event of Default, Borrowers will cause cash to be deposited and maintained in an account with Agent, as cash collateral, in an amount equal to one hundred and five percent (105%) of the Maximum Undrawn Amount of all Letters of Credit, and each Borrower hereby irrevocably authorizes Agent, in its discretion, on such Borrower’s behalf and in such Borrower’s name, to open such an account and to make and maintain deposits therein, or in an account opened by such Borrower, in the amounts required to be made by such Borrower, out of the proceeds of Receivables or other Collateral or out of any other funds of such Borrower coming into any Lender’s possession at any time.  Agent will invest such cash collateral (less applicable reserves) in such short-term money-market items as to which Agent and such Borrower mutually agree and the net return on such investments shall be credited to such account and constitute additional cash collateral.  No Borrower may withdraw amounts credited to any such account except upon the cure of such Event of Default or the occurrence of all of the following: (a) payment and performance in full of all Obligations, (b) expiration of all Letters of Credit and (c) termination of this Agreement.

2.20. Additional Payments.  Any sums expended by Agent or any Lender due to any Borrower’s failure to perform or comply with its obligations under this Agreement or any Other Document including any Borrower’s obligations under Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1, may be charged to Borrowers’ Account as a Revolving Advance and added to the Obligations.

2.21. Manner of Borrowing and Payment.

(a) Each borrowing of Revolving Advances shall be advanced according to the applicable Commitment Percentages of Lenders

(b) Each payment (including each prepayment) by any Borrower on account of the principal of and interest on the Revolving Advances, shall be applied to the Revolving Advances pro rata according to the applicable Commitment Percentages of Lenders.  Except as expressly provided herein, all payments (including prepayments) to be made by any Borrower on account of principal, interest and fees shall be made without set off or counterclaim and shall be made to Agent on behalf of the Lenders to the Payment Office, in each case on or prior to 1:00 P.M. in Dollars and in immediately available funds.

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(c) (i)Notwithstanding anything to the contrary contained in Sections 2.21(a) and (b), commencing with the first Business Day following the Closing Date, each borrowing of Revolving Advances shall be advanced by Agent and each payment by any Borrower on account of Revolving Advances shall be applied first to those Revolving Advances advanced by Agent.  On or before 1:00 P.M. on each Settlement Date commencing with the first Settlement Date following the Closing Date,  Agent and Lenders shall make certain payments as follows: (I) if the aggregate amount of new Revolving Advances made by Agent during the preceding Week (if any) exceeds the aggregate amount of repayments applied to outstanding Revolving Advances during such preceding Week, then each Lender shall provide Agent with funds in an amount equal to its applicable Commitment Percentage of the difference between (w) such Revolving Advances and (x) such repayments and (II) if the aggregate amount of repayments applied to outstanding Revolving Advances during such Week exceeds the aggregate amount of new Revolving Advances made during such Week, then Agent shall provide each Lender with funds in an amount equal to its applicable Commitment Percentage of the difference between (y) such repayments and (z) such Revolving Advances.

(i) Each Lender shall be entitled to earn interest at the applicable Contract Rate on outstanding Revolving Advances which it has funded.

(ii) Promptly following each Settlement Date,  Agent shall submit to each Lender a certificate with respect to payments received and Revolving Advances made during the Week immediately preceding such Settlement Date.  Such certificate of Agent shall be conclusive in the absence of manifest error.

(d) If any Lender or Participant (a “Benefited Lender”) shall at any time receive any payment of all or part of its Advances, or interest thereon, or receive any Collateral in respect thereof (whether voluntarily or involuntarily or by set-off) in a greater proportion than any such payment to and Collateral received by any other Lender, if any, in respect of such other Lender’s Advances, or interest thereon, and such greater proportionate payment or receipt of Collateral is not expressly permitted hereunder, such Benefited Lender shall purchase for cash from the other Lenders a participation in such portion of each such other Lender’s Advances, or shall provide such other Lender with the benefits of any such Collateral, or the proceeds thereof, as shall be necessary to cause such Benefited Lender to share the excess payment or benefits of such Collateral or proceeds ratably with each of the other Lenders;  provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.  Each Lender so purchasing a portion of another Lender’s Advances may exercise all rights of payment (including rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion.

(e) Unless Agent shall have been notified by telephone, confirmed in writing, by any Lender that such Lender will not make the amount which would constitute its applicable Commitment Percentage of the Revolving Advances available to Agent,  Agent may (but shall not be obligated to) assume that such Lender shall make such amount available to Agent on the next Settlement Date and, in reliance upon such assumption, make available to Borrowers a corresponding amount.  Agent will promptly notify Borrowing Agent of its receipt of any such notice from a Lender.  If such amount is made available to Agent on a date after such next

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Settlement Date, such Lender shall pay to Agent on demand an amount equal to the product of (i) the daily average Federal Funds Rate (computed on the basis of a year of 360 days) during such period as quoted by Agent, times (ii) such amount, times (iii) the number of days from and including such Settlement Date to the date on which such amount becomes immediately available to Agent.  A certificate of Agent submitted to any Lender with respect to any amounts owing under this paragraph (e) shall be conclusive, in the absence of manifest error.  If such amount is not in fact made available to Agent by such Lender within three (3) Business Days after such Settlement Date,  Agent shall be entitled to recover such an amount, with interest thereon at the rate per annum then applicable to such Revolving Advances hereunder, on demand from Borrowers; provided, however, that Agent’s right to such recovery shall not prejudice or otherwise adversely affect Borrowers’ rights (if any) against such Lender.

2.22. Mandatory Prepayments.  Subject to Section 4.3,  to the extent there are outstanding Advances, when any Borrower sells or otherwise disposes of any Collateral other than Inventory in the Ordinary Course of Business, Borrowers shall repay the Advances in an amount equal to the net proceeds of such sale (i.e., gross proceeds less the reasonable costs of such sales or other dispositions), such repayments to be made promptly but in no event more than one (1) Business Day following receipt of such net proceeds, and until the date of payment, such proceeds shall be held in trust for Agent.  The foregoing shall not be deemed to be implied consent to any such sale otherwise prohibited by the terms and conditions hereof.   Such repayments shall be applied to the Revolving Advances or other remaining Advances in such order as Agent may determine, subject to Borrower’s ability to reborrow Revolving Advances in accordance with the terms hereof.

2.23. Use of Proceeds.  Borrowers shall apply the proceeds of Advances to (a) to repay existing Indebtedness owed to PNC Bank, National Association, (b)  partially fund permitted Capital Expenditures,  (c)  fund Permitted Acquisitions and dividends permitted hereunder,  (d)  issue Letters of Credit,  (e)  pay the fees and expenses associated with this transaction at closing, and (f)  provide for working capital needs and reimburse drawings under Letters of Credit, and (g)  for other lawful purposes of Parent and its Subsidiaries permitted under the Agreement.   Borrowers shall not use, or lend, contribute or otherwise make available such proceeds to any Subsidiary, the proceeds of any Advances (A) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (B) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (C)  in any manner that would result in the violation of  any Sanctions applicable to any party hereto.

2.24. Defaulting Lender.

(a) Notwithstanding anything to the contrary contained herein, in the event any Lender has failed, within two (2) Business Days of the date required hereunder (and such failure constitutes a breach by such Lender of its obligations under this Agreement) to make available its portion of any Advance, its participation in any Letter of Credit, or any payment due on a Settlement Date, or (x) notifies either Agent or Borrowing Agent that it does not intend to make available its portion of any Advance or any such participation or payment or (y) has otherwise failed to pay over to Agent or any other Lender any other amount required to be paid by it hereunder within two (2) Business Days of the date when due, or (z) has since the date of this Agreement been deemed insolvent by a Governmental Body or become the subject of a

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bankruptcy, receivership, monitorship, conservatorship or Insolvency Proceeding, or has a parent company that since the date of this Agreement been deemed insolvent by a Governmental Body or become the subject of a bankruptcy, receivership, monitorship, conservatorship or Insolvency Proceeding  (each, a “Lender Default”), all rights and obligations hereunder of such Lender (a “Defaulting Lender”) as to which a Lender Default is in effect and of the other parties hereto shall be modified to the extent of the express provisions of this Section 2.24 while such Lender Default remains in effect.

(b) Advances shall be incurred pro rata from Lenders which are not Defaulting Lenders based on their respective Commitment Percentages, and no Commitment Percentage of any Lender or any pro rata share of any Advances required to be advanced by any Lender shall be increased as a result of such Lender Default.  Amounts received in respect of principal of any type of Advances shall be applied to reduce the applicable Advances of each Lender (other than any Defaulting Lender) pro rata based on the aggregate of the outstanding Advances of that type of all Lenders at the time of such application; provided, that, Agent shall not be obligated to transfer to a Defaulting Lender any payments received by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder (including any principal, interest or fees).  Amounts payable to a Defaulting Lender shall instead be paid to or retained by AgentAgent may hold and, in its discretion, re-lend to a Borrower the amount of such payments received or retained by it for the account of such Defaulting Lender.

(c) A  Defaulting Lender shall not be entitled to give instructions to Agent or to approve, disapprove, consent to or vote on any matters relating to this Agreement and the Other Documents.  All amendments, waivers and other modifications of this Agreement and the Other Documents may be made without regard to a Defaulting Lender and, for purposes of the definition of “Required Lenders”, a Defaulting Lender shall be deemed not to be a Lender and not to have either Advances outstanding or a Commitment Percentage.

(d) Other than as expressly set forth in this Section 2.24, the rights and obligations of a Defaulting Lender (including the obligation to indemnify Agent) and the other parties hereto shall remain unchanged.  Nothing in this Section 2.24 shall be deemed to release any Defaulting Lender from its obligations under this Agreement and the Other Documents, shall alter such obligations, shall operate as a waiver of any default by such Defaulting Lender hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender may have against any Defaulting Lender as a result of any default by such Defaulting Lender hereunder.

(e) In the event a Defaulting Lender retroactively cures to the satisfaction of Agent the breach which caused a Lender to become a Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall be treated as a Lender under this Agreement.

2.25. Increase of the Maximum Revolving Advance Amount.   Borrowers shall have the option, upon at least thirty (30) days' prior written notice to Agent, to increase the Maximum Revolving Advance Amount by up to $25,000,000, subject to the following conditions precedent:

(a) no Default or Event of Default shall have occurred and be continuing on the date of such notice or on the date which such increase is to become effective;

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(b) the representations and warranties set forth in Article V shall be true and correct on and as of the date on which such increase is to become effective, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date;

(c) such increase shall be in a minimum amount of $5,000,000 and in integral multiples of $1,000,000 in excess thereof;

(d) Borrowers shall have solicited and obtained additional lenders to join in this Agreement and provide the additional commitments necessary to fund the increase in the Maximum Revolving Advance Amount, which additional lenders must not be Affiliates of any Borrower and must be acceptable to the Agent and Lenders in their reasonable discretion; provided that any then-existing Lender shall be acceptable;

(e) Agent shall have received all documents (including appropriate authorizing resolutions) it may reasonably request relating to the corporate or other necessary authority for such increase, and any other matters relevant thereto, all in form and substance reasonably satisfactory to Agent;  

(f) the Quarterly Liquidity threshold amounts set forth in the pricing table in the definition of Applicable Rate shall be increased by the same percentage increase in the Maximum Revolving Advance Amount; and

(g) all costs and expenses of Agent and Lenders incurred in connection with any such increase or requested increase, including reasonable attorneys’ fees and expenses shall be paid by Borrowers.

The foregoing option may be exercised once during the Term and such increase shall apply to the Maximum Revolving Advance Amount in effect at the time of the Borrowers’ notice to Agent.  Promptly following receipt of a notice under this Section, the Agent shall advise the Lenders thereof.  Each notice delivered by the Borrowers pursuant to this Section shall be irrevocable. An increase to the Maximum Revolving Advance Amount shall not require or cause a change in the commitment of any existing Lender in effect at such time, unless such existing Lender chooses, in its sole discretion, to fund in whole or in part, the increase in the Maximum Revolving Advance AmountAgent shall not be obligated to solicit or obtain lenders to provide the additional commitments necessary for such increase. 

2.26. Reduction of the Maximum Revolving Advance Amount.   Borrowers shall have the option, upon at least thirty (30) days' prior written notice to Agent, to reduce the Maximum Revolving Advance Amount to no less than $60,000,000, subject to the following conditions precedent:    

(a) no Default or Event of Default shall have occurred and be continuing on the date of such notice or on the date which such reduction is to become effective;

(b) such reduction shall be in a minimum amount of $1,000,000 and in integral multiples of $1,000,000 in excess thereof; and

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(c) after giving effect to any concurrent prepayment of the Advances, the sum of the outstanding Revolving Advances shall not exceed the lesser of: (i) the Maximum Revolving Advance Amount minus the Maximum Undrawn Amount of all Letters of Credit, and (ii) the Formula Amount. 

The foregoing option may be exercised three (3) times during the Term and such reduction shall apply to the Maximum Revolving Advance Amount in effect at the time of the Borrowers’ notice to Agent; provided, however, nothing contained herein shall limit the Borrowers’ ability to pay in full all Obligations and terminate this Agreement at any time in accordance with Section 13.1.  Promptly following receipt of a notice under this Section, the Agent shall advise the Lenders thereof.  Each notice delivered by the Borrowers pursuant to this Section shall be irrevocable. Any reduction of the Maximum Revolving Advance Amount shall be permanent subject only to an increase in accordance with Section 2.25.  Each reduction shall be made ratably among the Lenders in accordance with their Commitment Percentages.

III INTEREST AND FEES.

3.1. Interest

(b) PaymentInterest on Advances shall be payable in arrears on the first day of each month with respect to Domestic Rate Loans and, with respect to Eurodollar Rate Loans, at the end of each Interest Period or, for Eurodollar Rate Loans with an Interest Period in excess of three months, at the earlier of (a) each three months from the commencement of such Eurodollar Rate Loan or (b) the end of the Interest Period

(c) Rate ChangesInterest charges shall be computed on the actual principal amount of Advances outstanding during the month at a rate per annum equal to the applicable Revolving Interest Rate (also referred to herein as the “Contract Rate”). Whenever, subsequent to the date of this Agreement, the Alternate Base Rate is increased or decreased, the applicable Contract Rate for Domestic Rate Loans shall be similarly changed without notice or demand of any kind by an amount equal to the amount of such change in the Alternate Base Rate during the time such change or changes remain in effect.  The Eurodollar Rate shall be adjusted with respect to Eurodollar Rate Loans without notice or demand of any kind on the effective date of any change in the Reserve Percentage as of such effective date

(d) Default Rate.  Upon and after the occurrence of an Event of Default, and during the continuation thereof, (i) at the option of Agent or at the direction of Required Lenders, the Obligations shall bear interest at the highest Contract Rate payable under this Agreement plus two (2%) percent per annum (as applicable, the “Default Rate”).

3.2. Letter of Credit Fees.  Borrowers shall pay (x) to Agent, for the ratable benefit of Lenders, fees for each Letter of Credit for the period from and excluding the date of issuance of same to and including the date of expiration or termination, equal to the average daily face amount of each outstanding Letter of Credit multiplied by the Applicable Rate for Eurodollar Rate Loans consisting of Revolving Advances then in effect per annum, such fees to be calculated on the basis of a 360-day year for the actual number of days elapsed and to be payable quarterly in arrears on the first day of each quarter and on the last day of the Term, and (y) to the Issuer, a fronting fee of

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one quarter of one percent (0.25%) per annum, together with any and all administrative, issuance, amendment, payment and negotiation charges with respect to Letters of Credit and all fees and expenses as agreed upon by the Issuer and the Borrowing Agent in connection with any Letter of Credit,  including in connection with the opening, amendment or renewal of any such Letter of Credit and any acceptances created thereunder and shall reimburse Agent for any and all fees and expenses, if any, paid by Agent to the Issuer (all of the foregoing fees, the “Letter of Credit Fees”).  All such charges shall be deemed earned in full on the date when the same are due and payable hereunder and shall not be subject to rebate or pro-ration upon the termination of this Agreement for any reason.  Any such charge in effect at the time of a particular transaction shall be the charge for that transaction, notwithstanding any subsequent change in the Issuer’s prevailing charges for that type of transaction.  All Letter of Credit Fees and Acceptance Fees payable hereunder shall be deemed earned in full on the date when the same are due and payable hereunder and shall not be subject to rebate or pro-ration upon the termination of this Agreement for any reason.  Upon and after the occurrence of an Event of Default, and during the continuation thereof, at the option of Agent or at the direction of Required Lenders, the Letter of Credit Fees described in clause (x) of this Section 3.2 shall be increased by an additional two percent (2%) per annum.

3.3. Facility Fee.  If, for any calendar quarter during the Term, the average daily unpaid balance of the Revolving Advances and the Maximum Undrawn Amount of all Letters of Credit for each day of such calendar quarter does not equal the Maximum Revolving Advance Amount, then Borrowers shall pay to Agent for the ratable benefit of Lenders a  facility fee at a rate equal to the Applicable Rate (under the column entitled “Applicable Rates for Facility Fee”) per annum on the amount by which the Maximum Revolving Advance Amount exceeds such average daily unpaid balance (the “Facility Fee”).  The Facility Fee shall be calculated on the basis of a 360 day year using the actual number of days elapsed and will be payable to Agent in arrears on the first day of each calendar quarter with respect to the previous calendar quarter.

3.4. Other Fees and Charges.

(e) Reserved