Exhibit 10.9

CREDIT AGREEMENT
dated as of January 4, 2006

among

ROSETTA STONE HOLDINGS INC.
as a Borrower,

THE OTHER PERSONS THAT JOIN THIS AGREEMENT AS A BORROWER
FROM TIME TO TIME PURSUANT TO A BORROWER JOINDER AGREEMENT,
as Borrowers

THE FINANCIAL INSTITUTIONS PARTY HERETO,
as Lenders,

and

MADISON CAPITAL FUNDING LLC,
as Agent

TABLE OF CONTENTS

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CREDIT AGREEMENT

Credit Agreement dated as of January 4, 2006 (as amended, restated or otherwise modified from time to time, this “Agreement”) among Rosetta Stone Holdings Inc., a Delaware corporation (“Holdings”), the other Persons that join this Agreement as a borrower pursuant to a Borrower Joinder Agreement and become party hereto from time to time (Holdings and such other Persons are referred to hereinafter each individually as a “Borrower” and collectively as the “Borrowers”), the financial institutions party hereto from time to time (together with their respective successors and assigns, “Lenders”) and Madison Capital Funding LLC (in its individual capacity, “Madison”), as Agent for all Lenders.

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

Section I.      Definitions; Interpretation.

1.1.           Definitions.

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

Administrative Borrower has the meaning set forth in Section 10.19.

Acceleration Event means the occurrence of any of the following: (i) an Event of Default under Section 8.1.3; (ii) an Event of Default under Section 8.1.1 and the termination of the Commitments: or (iii) any other Event of Default under Section 8.1 and the election by the Required Lenders to declare the Obligations to be due and payable or to terminate the Revolving Loan Commitment.

Account has the meaning set forth in the Guarantee and Collateral Agreement.

Account Debtor means any Person who is obligated to Opco Borrower or any Subsidiary with respect to any Account.

Acquisition means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or a substantial portion of the assets of a Person, or of all or a substantial portion of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests, membership interests or equity of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is already a Subsidiary).

Adjusted Working Capital means the remainder of (a) the consolidated current assets of Holdings and the Subsidiaries minus the amount of cash and cash equivalents included in such consolidated current assets, minus (b) the consolidated current liabilities of Holdings and the Subsidiaries minus the amount of consolidated short-term Debt (including current maturities of long-term Debt) of Holdings and the Subsidiaries included in such consolidated current liabilities.

Affiliate of any Person means (a) any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person, (b) any officer or director of such Person and (c) with respect to any Lender, any entity administered or managed by such Lender or an Affiliate or investment advisor thereof which is engaged in making, purchasing, holding or otherwise investing in commercial loans. A Person shall be deemed to be “controlled by” any other Person if such Person possesses, directly or indirectly, power to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managers or power to direct or cause the

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▇▇▇▇▇▇▇▇▇ of the management and policies of such Person whether by contract or otherwise. Unless expressly stated otherwise herein, neither Agent nor any Lender shall be deemed an Affiliate of any Borrower or of any Subsidiary.

Agent means Madison in its capacity as agent for all Lenders hereunder and any successor thereto in such capacity.

Agreement has the meaning set forth in the Preamble.

Applicable Margin means the applicable rate per annum corresponding to the applicable Total Debt to EBITDA Ratio, all as set forth in the following table:

The Applicable Margin shall be adjusted quarterly, to the extent applicable, on the date financial statements are required to be delivered pursuant to Section 6.1.2(a) (or, in the case of the last Fiscal Quarter of each Fiscal Year, Section 6.1.1) after the end of each related Fiscal Quarter based on the Total Debt to EBITDA Ratio as of the last day of such Fiscal Quarter. Notwithstanding the foregoing, (a) until the date that the financial statements for the Fiscal Year ending December 31, 2006 are required to be delivered pursuant to Section 6.1.2(a), the Applicable Margin shall be the rates corresponding to the Total Debt to EBITDA Ratio of ³ 1.50:1.00 in the foregoing table, (b) if Borrowers fail to deliver the financial statements required by Section 6.1.1 or 6.1.2(a), as applicable, and the related Compliance Certificate required by Section 6.1.3, by the respective date required thereunder after the end of any related Fiscal Quarter, the Applicable Margin shall be the rates corresponding to the Total Debt to EBITDA Ratio of ³ 1.50:1.00 in the foregoing table until such financial statements and Compliance Certificate are delivered, and (c) no reduction to the Applicable Margin shall become effective at any time when an Event of Default has occurred and is continuing.

Applicable Multiple means the maximum Total Debt to EBITDA Ratio permitted under Section 7.14.4 as of the last day of the then most recently ended Computation Period.

Assignment Agreement means an agreement substantially in the form of Exhibit A.

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

Base Rate means, for any day, the greater of (a) the rate of interest which is identified as the “Prime Rate” and normally published in the Money Rates section of The Wall Street Journal (or, if such rate ceases to be so published, as quoted from such other generally available and recognizable source as Agent may select) and (b) the sum of the Federal Funds Rate plus 0.5%. Any change in the Base Rate due to a change in such Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in such Prime Rate or the Federal Funds Rate.

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

Borrower has the meaning set forth in the Preamble.

Borrower Joinder Agreement means an agreement substantially in the form of Exhibit G.

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Borrowing Availability means, at the time of determination, an amount equal to the lesser of (a) the Revolving Loan Commitment and (b) the sum of (i) EBITDA for the most recently ended 12 month period multiplied by the Applicable Multiple minus (ii) outstanding Total Debt as of such date, in each case less such reserves and allowances as Agent deems necessary in its reasonable discretion to protect or preserve the Collateral or the value thereof.

Borrowing Notice means a notice in substantially the form of Exhibit E.

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

Capital Expenditures means all expenditures which, in accordance with GAAP, would be required to be capitalized and shown on the consolidated balance sheet of Holdings, but excluding expenditures made in connection with the replacement, substitution or restoration of assets to the extent financed (a) from insurance proceeds (or other similar recoveries) paid on account of the loss of or damage to the assets being replaced or restored or (b) with cash awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced.

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

Cash Equivalent Investment means, at any time, (a) any evidence of Debt, maturing not more than one year after such time, issued or guaranteed by the United States Government or any agency thereof, (b) commercial paper, or corporate demand notes, in each case (unless issued by a Lender or its holding company) rated at least A-l by Standard & Poor’s Ratings Group or P-l by ▇▇▇▇▇’▇ Investors Service. Inc., (c) any certificate of deposit (or time deposit represented by a certificate of deposit) or banker’s acceptance maturing not more than one year after such time, or any overnight Federal Funds transaction that is issued or sold by any Lender (or by a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000), (d) any repurchase agreement entered into with any Lender (or commercial banking institution of the nature referred to in clause (c) above) which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c) above and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such Lender (or other commercial banking institution) thereunder, (e) money market accounts or mutual funds which invest exclusively in assets satisfying the foregoing requirements and (f) other short term liquid investments approved in writing by Agent.

Closing Date means the date on which all conditions precedent set forth in Section 4.1 have been satisfied or waived in writing by Agent and Lenders.

Closing, Date Total Debt to EBITDA Ratio means, as of the Closing Date, the ratio of (a) Total Debt as of such day (and after giving effect to the initial Loans made hereunder) to (b) EBITDA as of such day, provided that, solely in the case of calculating Closing Date Total Debt to EBITDA Ratio, EBITDA shall be calculated by multiplying (i) EBITDA for the period from January 1, 2005 to September 30, 2005 by (ii) 1.336996.

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

Collateral Access Agreement means an agreement in form and substance reasonably satisfactory to Agent pursuant to which a mortgagee or lessor of real property on which Collateral is stored or

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otherwise located, or a warehouseman, processor or other bailee of Inventory or other property owned by any Loan Party acknowledges the Liens of Agent and waives or subordinates any Liens held by such Person on such property, and. in the case of any such agreement with a mortgagee or lessor, permits Agent reasonable access to and use of such real property during the continuance of an Event of Default to assemble, complete and sell any Collateral stored or otherwise located thereon.

Collateral Documents means, collectively, the Guarantee and Collateral Agreement, each Mortgage, and each other agreement or instrument pursuant to or in connection with which any Loan Party or any other Person grants a security interest in any Collateral to Agent for the benefit of Lenders, each as amended, restated or otherwise modified from time to time.

Commercial Software means packaged commercially available software programs generally available to the public which have been licensed to a Loan Party pursuant to end-user licenses and which are used in a Loan Party’s business but not a component of or incorporated into any Loan Party product.

Commitment means, as to any Lender, such Lender’s Pro Rata Revolving Share of the Revolving Loan Commitment and such Lender’s Pro Rata Term A Share of the Term A Loan Commitment.

Commitment Fee means the fee payable by Borrowers to Lenders pursuant to Section 2.8.1.

Company Software means proprietary rights in the software for which Proprietary Rights are owned by any Loan Party, including copyrights, trademarks, and trade secrets.

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

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

Consolidated Net Income means, with respect to Holdings and the Subsidiaries for any period, the consolidated net income (or loss) of Holdings and the Subsidiaries for such period, excluding any gains from Dispositions, any extraordinary gains and any gains from discontinued operations.

Contingent Obligation means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to or otherwise to invest in a debtor, or otherwise to assure a creditor against loss) any indebtedness, obligation or other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person’s obligation in respect of any Contingent Obligation shall (subject to any limitation set forth therein) be deemed to be the principal amount of the debt, obligation or other liability supported thereby.

Controlled Group means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with Holdings, are treated as a single employer under Section 414 of the IRC or Section 4001 of ERISA.

Conversion/Continuation Notice means a notice in substantially the form of Exhibit F.

Debt of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, whether or not evidenced by bonds, debentures, notes or similar instruments, (b) all obligations of such Person as lessee under Capital Leases which have been or should be recorded as liabilities on a balance sheet of such Person in accordance with GAAP, (c) all obligations of such Person to pay the

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deferred purchase price of property or services (excluding trade accounts payable in the ordinary course of business and obligations with respect to post-closing adjustments and other payments to be made under Sections 2.5, 2.6, 5.4, 5.5, 5.9 and 8.1 of the Stock Purchase Agreement), (d) all indebtedness secured by a Lien on the property of such Person, whether or not such indebtedness shall have been assumed by such Person (with the amount thereof being measured as the fair market value of such property), (e) all obligations, contingent or otherwise, with respect to the undrawn amount of all letters of credit, the drawn but not reimbursed amount of all letters of credit and banker’s acceptances issued for the account of such Person (including the Letters of Credit), (f) all Hedging Obligations of such Person, (g) all Contingent Obligations of such Person, (h) all full recourse indebtedness of any partnership of which such Person is a general partner, (i) all earn-out and non-compete obligations to the extent such obligations are required to be shown as liabilities of such Person in accordance with GAAP and (j) all obligations of such Person under any synthetic lease transaction, where such obligations are considered borrowed money indebtedness for tax purposes but the transaction is classified as an operating lease in accordance with GAAP.

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

Disposition means, as to any asset or right of any Loan Party, (a) any sale, lease, assignment or other transfer (other than to Opco Borrower or any of its Domestic Subsidiaries), (b) any loss, abandonment, destruction or damage thereof or (c) any actual or threatened condemnation, confiscation, requisition, seizure or taking thereof, in each case described in clauses (a), (b) and (c) above excluding (i) assets subject to a Disposition which are repaired, restored or replaced within 180 days with assets performing the same or a similar function, (ii) Dispositions in any Fiscal Year, the Net Cash Proceeds of which do not in the aggregate exceed $100,000 and (iii) the sale or other transfer of Inventory in the ordinary course of business.

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

Domestic Subsidiary means any Subsidiary that is incorporated or organized under the laws of a Slate within the United States of America or the District of Columbia.

EBITDA means, for any period, Consolidated Net Income for such period plus, to the extent deducted in determining such Consolidated Net Income, the sum of (a) Interest Expense, amortization or write-off of Debt discount. Debt issuance costs and other fees and charges with respect to Debt, (b) income tax expense, (c) depreciation and amortization for such period including but not limited to amortization of intangibles, (d) any extraordinary or non-recurring non-cash expenses or non-cash losses, including but not limited to non-cash losses on sales of assets outside the ordinary course of business and write-downs of intangibles, (e) any other non-cash expenses or non-cash losses, including but not limited to any stock-based compensation expense, (f) transaction costs and other expenses associated with the Related Transactions, including but not limited to legal and advisory fees and incentives based on the performance of Opco Borrower, (g) management fees paid to Sponsor (and/or any Affiliates of Sponsor) to the extent permitted under Section 7.4 and (h) any purchase accounting adjustments associated with the Related Transactions, including but not limited to expensing in-process research and development, minus, to the extent not otherwise deducted from Consolidated Net Income, any cash payments made in such period related to any non-cash expenses deducted from Consolidated Net Income during such period or prior periods. For the 12 month period following the consummation of the Related Transactions, EBITDA may be adjusted, in an amount acceptable to Agent, to reflect the impact, if any, of the non-cash purchase price adjustments to the current deferred revenue balance and inventory carrying value and other similar purchase price adjustments;

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provided, that, notwithstanding anything to the contrary contained herein, (i) EBITDA for the month of December, 2005 shall be adjusted in a manner consistent with the adjustments to EBITDA for the months of January, 2005 through November, 2005 set forth below, and (ii) for each of the calendar months listed below, EBITDA shall be deemed to be the amount set forth below opposite such month:

ECF Percentage means, for any fiscal year, 50% if the Total Debt to EBITDA Ratio equals or exceeds 1.0:1.0 as of the last day of such fiscal year; and 0% if the Total Debt to EBITDA Ratio is less than 1.0:1.0 as of the last day of such fiscal year.

Embedded Products means all products containing components that are subject to licenses, sublicenses and other agreements as to which any Loan Party is a party and pursuant to which any Loan Party is authorized to use any third party patents, patent rights, trademarks, service marks, trade secrets or copyrights, including software, which are distributed by a Loan Party or incorporated in any existing product or service of a Loan Party.

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

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

ERISA means the Employee Retirement Income Security Act of 1974, as amended.

Escrow Agreement means the Escrow Agreement dated as of January 4, 2006 among Parent, Holdings, Opco Borrower, Sponsor, Madison, ▇▇▇ ▇▇▇▇▇, the holders of the capital stock of Opco Borrower, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, and U.S. Bank Trust National Association, as escrow agent.

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Event of Default means any of the events described in Section 8.1.

Excess Cash Flow means, for any period, the remainder of (a) the sum of (i) EBITDA for such period, plus (ii) any net decrease in Adjusted Working Capital during such period, minus (b) the sum, without duplication, of (i) scheduled repayments of principal of Term A Loan made during such period, plus (ii) voluntary prepayments of the Term A Loan pursuant to Section 2.10.1 during such period, plus (iii) cash payments (not financed with the proceeds of Debt) made in such period with respect to Capital Expenditures permitted under Section 7.14.6. plus (iv) all federal, state, local and foreign income taxes paid in cash by Opco Borrower and the Subsidiaries, or paid in cash by Holdings on account of the income of Opco Borrower and the Subsidiaries, during such period, plus (v) any net increase in Adjusted Working Capital during such period, plus (vi) transaction costs and other cash expenses associated with the Related Transactions, plus (vii) Interest Expense paid in cash during such period, plus (viii) amounts paid in cash during such period to repurchase or fund the repurchase of equity securities pursuant to Section 7.4f(v), plus (ix) management fees paid to Sponsor (and/or any Affiliates of Sponsor) during such period to the extent permitted under Section 7.4.

Excess Cash Flow Certificate means a certificate substantially in the form of Exhibit H.

Fairfield U.K. means Fairfield & Sons Limited, a private limited company organized under the laws of England and Wales.

Federal Funds Rate means, for any day, a rate per annum (rounded upward to the nearest l/100th of 1%) equal to the rate published by the Federal Reserve Bank of New York on the preceding Business Day or, if no such rate is so published, the average rate per annum, as determined by Agent, quoted for overnight Federal Funds transactions last arranged prior to such day by three (3) Federal Funds brokers of recognized standing.

Fee Letter means that certain amended and restated letter agreement dated as of even date herewith by Agent and acknowledged by each Borrower, as further amended, restated or otherwise modified from time to time.

Fiscal Quarter means a fiscal quarter of a Fiscal Year.

Fiscal Year means the fiscal year of Holdings and the Subsidiaries, which period shall be the 12-month period ending on December 31 of each year.

Fixed Charge Coverage Ratio means, for any Computation Period, the ratio of (a) the total for such period of EBITDA minus the sum of all income taxes and tax distributions described in Section 7.4 paid by Holdings and the Subsidiaries and all Capital Expenditures to (b) the sum for such period of (i) Interest Expense paid in cash by Holdings and the Subsidiaries plus (ii) required payments of principal of Debt by Holdings and the Subsidiaries (including the Term A Loan but excluding the Revolving Loans) plus (iii) management fees paid to Sponsor (and/or any Affiliates of Sponsor); provided, for purposes of calculating the Fixed Charge Coverage Ratio for any Computation Period ending on or prior to September 30, 2006, (A) income taxes and tax distributions, Interest Expense paid in cash, required payments of principal of Debt and management fees shall each be deemed to be the actual amount for each such category for the period commencing January 1, 2006 and ending on the last day of such Computation Period, multiplied by (x) 4, for the Computation Period ending March 31, 2006, (y) 2, for the Computation Period ending June 30, 2006, and (z) 1.33, for the Computation Period ending September 30, 2006, and (B) Capital Expenditures shall be deemed to be the sum of (I) the actual amount of Capital Expenditures (up to $1,000,000) incurred in the Fiscal Quarter ending March 31, 2006 in connection with the purchase of a parcel of real property and improvements thereon in Harrisonburg, Virginia (such Capital Expenditure (up to $1,000,000), the “Harrisonburg Real Property Expenditures”).

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plus (II) the actual amount of all other Capital Expenditures (excluding the Harrisonburg Real Property Expenditures) for the period commencing January 1, 2006 and ending on the last day of such Computation Period, multiplied by (1) 4, for the Computation Period ending March 31, 2006, (2) 2, for the Computation Period ending June 30, 2006, and (3) 1.33, for the Computation Period ending September 30, 2006.

Foreign Subsidiary means any Subsidiary that is not incorporated or organized under the laws of a State within the United States of America or the District of Columbia.

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

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

Guarantee and Collateral Agreement means the Guarantee and Collateral Agreement dated as of the Closing Date by each Loan Party signatory thereto in favor of Agent and Lenders, as amended, restated or otherwise modified from time to time.

Harrisonburg Real Property Expenditures has the meaning set forth in the definition of Fixed Charge Coverage Ratio.

Hazardous Substances means hazardous waste, hazardous substance, pollutant, contaminant, toxic substance, oil, hazardous material, chemical or other substance regulated by any Environmental Law.

Hedging Obligation means, with respect to any Person, any liability of such Person under any interest rate, currency or commodity swap agreement, cap agreement or collar agreement, and any other agreement or arrangement designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity prices. The amount of any Person’s obligation in respect of any Hedging Obligation shall be deemed to be the incremental obligation that would be reflected in the financial statements of such Person in accordance with GAAP.

Holdings has the meaning set forth in the Preamble.

Holdings Promissory Note means that certain Promissory Note dated January 4, 2006 issued by Holdings and guaranteed by Parent, in the amount of $51,924,177.00 in cash, 12,238 shares of Class A Common Stock of Parent and 111,031 shares of Class B Convertible Preferred Stock of Parent, due and payable in full on January 5, 2006.

Inactive Subsidiary means Language Success!, Inc., a Virginia corporation.

Intellectual Property has the meaning set forth in the Guarantee and Collateral Agreement.

Interest Coverage Ratio means, for any Computation Period, the ratio of (a) EBITDA for such Computation Period to (b) Interest Expense paid in cash by Holdings and the Subsidiaries for such Computation Period; provided, for purposes of calculating the Interest Coverage Ratio for any Computation Period ending on or prior to September 30, 2006. Interest Expense shall be deemed to be the actual amount of Interest Expense for the period commencing January 1, 2006 and ending on the last day

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of such Computation Period, multiplied by (i) 4, for the Computation Period ending ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) 2, for the Computation Period ending June 30, 2006, and (iii) 1.33, for the Computation Period ending September 30, 2006.

Interest Expense means for any period the consolidated interest expense of Holdings and the Subsidiaries for such period (including all imputed interest on Capital Leases).

Interest Period means, as to any LIBOR Loan, the period commencing on the date such Loan is borrowed or continued as, or converted into, a LIBOR Loan and ending on the date one, two, three or six months thereafter, as selected by Administrative Borrower pursuant to Section 2.2.2 or 2.2.3, as the case may be; provided, that: (a) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the following Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (b) any Interest Period that begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall end on the last Business Day of the calendar month at the end of such Interest Period; (c) Administrative Borrower may not select any Interest Period for a Revolving Loan which would extend beyond the scheduled Termination Date; and (d) Administrative Borrower may not select any Interest Period for the Term A Loan if, after giving effect to such selection, the aggregate principal amount of the Term A Loan having Interest Periods ending after any date on which an installment of the Term A Loan is scheduled to be repaid would exceed the aggregate principal amount of the Term A Loan scheduled to be outstanding after giving effect to such repayment.

Inventory has the meaning set forth in the Guarantee and Collateral Agreement.

Investment means, with respect to any Person, (a) the purchase of any debt or equity security of any other Person, (b) the making of any loan or advance to any other Person, (c) becoming obligated with respect to a Contingent Obligation in respect of obligations of any other Person (other than travel and similar advances to employees in the ordinary course of business) or (d) the making of an Acquisition. The amount of any Investment of any Loan Party in any Subsidiary shall be determined on a GAAP basis, thus meaning that the amount of any such Investment shall be adjusted for net income and losses of such Subsidiary, reduced by the amount of cash dividends paid by such Subsidiary and increased by loans, advances and equity contributions by such Loan Party to such Subsidiary (provided, that for any period, only those items of income included in the calculation of EBITDA for such period, and only those items of expenses deducted in determining EBITDA for such period, shall be taken into account in the calculation of losses of such Subsidiary for such period).

Investment Affiliate means, with respect to Sponsor, any fund or investment vehicle that (a) is organized by Sponsor for the purpose of making equity or debt investments in one or more companies and (b) is controlled by Sponsor. For purposes of this definition “control” means the power to direct or cause the direction of management and policies of a Person, whether by contract or otherwise.

IRC means the Internal Revenue Code of 1986, as amended.

Issuing Lender means Madison, or such other financial institution approved by Agent and specified to Administrative Borrower by Agent.

Legal Costs means, with respect to any Person, (a) all reasonable fees and charges of any counsel, accountants, auditors, appraisers, consultants and other professionals to such Person, (b) the reasonable allocable cost of internal legal services of such Person and all reasonable disbursements of such internal counsel and (c) all court costs and similar legal expenses.

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Lenders has the meaning set forth in the Preamble.

Letter of Credit has the meaning set forth in Section 2.3.1.

Letter of Credit Fee means the fee payable by Borrowers to Lenders pursuant to Section 2.8.2.

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

LIBOR Rate means, with respect to any LIBOR Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to (i) the offered rate for deposits in Dollars for the applicable Interest Period and for the amount of the applicable LIBOR Loan that appears on Telerate Page 3750 at 11:00 a.m. London time (or, if not so appearing, as published in the “Money Rates” section of The Wall Street Journal or another national publication selected by Agent) two Business Days prior to the first day of such Interest Period, divided by (ii) the sum of one minus the daily average during such Interest Period of the aggregate maximum reserve requirement (expressed as a decimal) then imposed under Regulation D of the FRB for “Eurocurrency Liabilities” (as defined therein).

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

Loan Documents means this Agreement, the Notes, the Letters of Credit, the Collateral Documents, the Fee Letter, and all documents, instruments and agreements delivered in connection with the foregoing, all as amended, restated or otherwise modified from time to time.

Loan Party means Parent, Holdings, Opco Borrower and each other Domestic Subsidiary.

Loans means Revolving Loans and the Term A Loan.

Madison has the meaning set forth in the Preamble.

Margin Stock means any “margin stock” as defined in Regulation T, U or X of the FRB.

Material Adverse Effect means (a) a material adverse change in, or a material adverse effect upon, the financial condition, operations, assets, business or properties of the Loan Parties taken as a whole, (b) a material impairment of the ability of any Loan Party to perform any of its Obligations under any Loan Document or (c) a material adverse effect upon the Lien of Agent on any substantial portion of the Collateral under the Collateral Documents or upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document.

Maximum Capital Expenditures Limit means an amount equal to $3,000,000.

Mortgage means a mortgage, deed of trust, leasehold mortgage or similar instrument granting Agent a Lien on a real property interest of any Loan Party, each as amended, restated or otherwise modified from time to time.

Multiemployer Pension Plan means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Loan Party or any member of the Controlled Group may have any liability.

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Net Cash Proceeds means:

(a) with respect to any Disposition, the aggregate cash proceeds (including cash proceeds received pursuant to policies of insurance and by way of deferred payment of principal pursuant to a note, installment receivable or otherwise, but only as and when received) received by Holdings or any Subsidiary pursuant to such Disposition net of (i) the reasonable direct costs relating to such Disposition (including sales commissions and legal, accounting and investment banking fees, commissions and expenses), (ii) any portion of such proceeds deposited in an escrow account pursuant to the documentation relating to such Disposition (provided that such amounts shall be treated as Net Cash Proceeds upon their release from such escrow account to the Holdings or the applicable Subsidiary), (iii) taxes paid or reasonably estimated by Holdings to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), (iv) amounts required to be applied to the repayment of any Debt secured by a Lien prior to the Lien of Agent on the asset subject to such Disposition and (v) with respect to any Disposition described in clause (b) or (c) of the definition thereof, all money actually applied within 180 days to repair, replace or reconstruct damaged property or property affected by loss, destruction, damage, condemnation, confiscation, requisition, seizure or taking, all of the costs and expenses reasonably incurred in connection with the collection of such proceeds, award or other payments, and any amounts retained by or paid to parties having superior rights to such proceeds, awards or other payments; and

(b) with respect to any issuance of equity securities not permitted by Section 7.10(a), (b) or (c), the aggregate cash proceeds received by Holdings or any Subsidiary pursuant to such issuance, net of the reasonable direct costs relating to such issuance (including reasonable sales and underwriter’s commission).

Note means a promissory note substantially in the form of Exhibit D, as the same may be amended, restated or otherwise modified from time to time.

Note Payment Account means deposit account number 1000037861696 of Holdings located at SunTrust Bank.

Obligations means all liabilities, indebtedness and obligations (monetary (including post-petition interest, allowed or not) or otherwise) of any Loan Party under this Agreement, any other Loan Document, any Collateral Document or any other document or instrument executed in connection herewith or therewith (excluding the Related Agreements) and all Hedging Obligations permitted hereunder which are owed to any Lender or its Affiliate, in each case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become clue.

Opco Borrower means Fairfield & Sons, Ltd., a Virginia corporation, which does business under the fictitious name of Fairfield Language Technologies.

Operating Lease means any lease of (or other agreement conveying the right to use) any real or personal property by Holdings or any Subsidiary, as lessee, other than any Capital Lease.

Paid in Full means, with respect to any Obligations, (a) the payment in full in cash and performance of all such Obligations, (b) the termination of all Commitments relating to such Obligations and (c) in connection with the termination of the Revolving Loan Commitment, either (i) the cancellation and return to Agent of all Letters of Credit or (ii) the cash collateralization of all Letters of Credit in accordance with the terms of this Agreement.

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Parent means Rosetta Stone Inc., a Delaware corporation.

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

Pension Plan means a “pension plan”, as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer Pension Plan), and to which any Loan Party or any member of the Controlled Group may have any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

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

Prior Debt means the Debt listed on Schedule 4.1.4.

Proprietary Rights means (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part. revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (f) all computer software (including data and related documentation), (g) all other proprietary rights, and (h) all copies and tangible embodiments thereof (in whatever form or medium).

Pro Rata Revolving Share means, with respect to any Lender, the applicable percentage (as adjusted from time to time in accordance with the terms hereof) specified opposite such Lender’s name on Annex I which corresponds to the Revolving Loan Commitment, which percentage shall be with respect to Revolving Outstandings if the Revolving Loan Commitment has terminated.

Pro Rata Share means, with respect to any Lender, the applicable percentage (as adjusted from time to time in accordance with the terms hereof) obtained by dividing (a) the sum of (i) such Lender’s Pro Rata Revolving Share of the Revolving Loan Commitment (or if the Revolving Loan Commitment has terminated, such Lender’s Pro Rata Revolving Share of the Revolving Outstandings) and (ii) such Lender’s Pro Rata Term A Share of the Term A Loan Commitment (or if the Term A Commitment has terminated, such Lender’s Pro Rata Term A Share of the Term A Loan) by (b) the Total Loan Commitment.

Pro Rata Term A Loan Share means, with respect to any Lender, the applicable percentage (as adjusted from time to time in accordance with the terms hereof) specified opposite such Lender’s name on Annex I which corresponds to the Term A Loan Commitment, which percentage shall be with respect to the Term A Loan if the Term A Loan Commitment has terminated.

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Purchase Money Debt Limit means (i) $500,000, if EBITDA for the previous Fiscal Year is less than $12,000,000, (ii) $1,000,000, if EBITDA for the previous Fiscal Year equals or exceeds $12,000,000 but is less than $16,000,000, (iii) $1,500,000, if EBITDA for the previous Fiscal Year equals or exceeds $16,000,000 but is less than $20,000,000, or (iv) $2,000,000, if EBITDA for the previous Fiscal Year equals or exceeds $20,000,000.

Registration Rights Agreement means the Registration Rights Agreement dated as of January 4, 2006 among Parent, Madison and certain other shareholders of Parent.

Related Agreements means the Stock Purchase Agreement, the Escrow Agreement, the Registration Rights Agreement, the Shareholders Agreement and the Subscription Agreement.

Related Fund means (a) any fund, trust or similar entity that invests in commercial loans in the ordinary course of business and is advised or managed by (i) a Lender, (ii) an affiliate of a Lender, (iii) the same investment advisor that manages a Lender or (iv) an affiliate of an investment advisor that manages a Lender or (b) any finance company, insurance company or other financial institution which temporarily warehouses Loans for any Lender or any Person described in clause (a) above.

Related Transactions means the transactions contemplated by the Related Agreements.

Required Lenders means Lenders having Pro Rata Shares the aggregate Dollar equivalent amount of which equals or exceeds 66 2/3% of the Revolving Loan Commitment (or, if the Revolving Loan Commitments have been terminated, Revolving Outstandings) and the outstanding Term A Loan, collectively.

Revolving Loan Commitment means $4,000,000, as reduced from time to time pursuant to the terms hereof.

Revolving Loans has the meaning set forth in Section 2.1.1.

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

Shareholders Agreement means the Shareholders Agreement dated as of January 4, 2006 among Parent, Madison and certain other shareholders of Parent.

Short Term Kiosk Leases means those Operating Leases with a lease term of not greater than one year which pertain to the lease of real or personal property at kiosk sales locations of any Loan Party.

Sponsor means collectively ABS Capital Partners IV, L.P., ABS Capital Partners IV-A, L.P., ABS Capital Partners IV Offshore, L.P., ABS Capital Partners IV Special Offshore, L.P. and Norwest Equity Partners VIII, L.P.

Stated Amount means, with respect to any Letter of Credit at any date of determination, (a) the maximum aggregate amount available for drawing thereunder under any and all circumstances, plus (b) the aggregate amount of all unreimbursed payments and disbursements under such Letter of Credit.

Stock Purchase Agreement means the Stock Purchase Agreement dated as of January 4, 2006 by and among Opco Borrower, Holdings, Parent, the shareholders of Opco Borrower, ▇▇▇ ▇▇▇▇▇ and, solely for the purposes of Section 7.7 thereof, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, as the Shareholders’ Representative.

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Subscription Agreement means the Subscription Agreement dated as of January 4, 2006 among Parent, Sponsor, Madison and certain individual purchasers.

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

Term A Loan Commitment means $ 17,000,000.

Term A Loan Maturity Date means January 4, 2011 or such earlier date on which the Commitments terminate pursuant to Section 8.

Term A Loan has the meaning set forth in Section 2.1.2.

Termination Date means January 4, 2011 or such earlier date on which the Revolving Loan Commitment terminates pursuant to Section 2.9 or 8.

Total Debt means all Debt (other than Debt described in clause (g) of the definition thereof unless reflected on the balance sheet of Holdings as a liability in accordance with GAAP) of Holdings and the Subsidiaries, determined on a consolidated basis.

Total Debt to EBITDA Ratio means, as of the last day of any Fiscal Quarter, the ratio of (a) Total Debt as of such day to (b) EBITDA for the Computation Period ending on such day.

Total Loan Commitment means at any date of determination, the sum of (i) the Revolving Loan Commitment at such date (or if the Revolving Loan Commitment has terminated, the Revolving Outstandings) plus (ii) the outstanding principal balance of the Term A Loan at such date.

Wholly-Owned Subsidiary means, as to any Person, another Person all of the equity interests of which (except directors’ qualifying shares) are at the time directly or indirectly owned by such Person and/or another Wholly-Owned Subsidiary of such Person.

1.2.           Interpretation.

In the case of this Agreement and each other Loan Document, (a) the meanings of defined terms are equally applicable to the singular and plural forms of the defined terms; (b) Annex, Exhibit, Schedule and Section references are to such Loan Document unless otherwise specified; (c) the term “including” is not limiting and means “including but not limited to”; (d) in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including”; (e) unless otherwise expressly provided in such Loan Document, (i) references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation shall be construed as including all statutory and regulatory provisions amending, replacing, supplementing or interpreting such statute or regulation; (f) this Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters, all of which are cumulative and each shall be performed in accordance with its terms; and (g) this Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to Agent, Borrowers, Lenders and the

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other parties hereto and thereto and are the products of all parties; accordingly, they shall not be construed against Agent or Lenders merely because of Agent’s or Lenders’ involvement in their preparation.

Section 2.                 Credit Facilities.

2.1.           Commitments.

On and subject to the terms and conditions of this Agreement, each Lender, severally and for itself alone, agrees as follows:

2.1.1.                Revolving Loan Commitments.

Each Lender will make loans to Borrowers on a revolving basis (“Revolving Loans”) from time to time until the Termination Date in such Lender’s applicable Pro Rata Revolving Share of such aggregate amounts as Administrative Borrower may request from all Lenders; provided, that after giving effect to such Revolving Loans, the Revolving Outstandings will not at any time exceed Borrowing Availability. No Revolving Loans shall be made until Opco Borrower becomes a Borrower hereunder and all proceeds of Revolving Loans shall be remitted to Opco Borrower. Borrowers may repay the Revolving Loans from time to time without prior notice and without penalty or premium (but subject to the provisions of Section 3.5).

2.1.2.                Term A Loan Commitments.

Each Lender agrees to make a loan to Borrowers (all of such loans, collectively the “Term A Loan”) on the Closing Date in such Lender’s applicable Pro Rata Term A Share of the Term A Loan Commitment. The Commitments of Lenders to make the Term A Loan shall terminate concurrently with the making of the Term A Loan on the Closing Date. Any portion of the Term A Loan which is repaid or prepaid by Borrowers, in whole or in part, may not be reborrowed.

2.2.           Loan Procedures.

2.2.1.                Loan Types.

Each Loan shall be either a Base Rate Loan or a LIBOR Loan, as Administrative Borrower shall specify in the related notice of borrowing or conversion pursuant to Section 2.2.2 or 2.2.3. Base Rate Loans and LIBOR Loans may be outstanding at the same time, provided that not more than five different Interest Periods shall exist among outstanding LIBOR Loans at any one time. All borrowings, conversions and repayments of Revolving Loans shall be effected so that each Lender will have a ratable share (according to its Pro Rata Revolving Share) of all Revolving Loans and all Interest Periods of LIBOR Loans.

2.2.2.                Borrowing.

Administrative Borrower shall give written notice or telephonic notice (followed immediately by written confirmation thereof) to Agent of each proposed borrowing of a Revolving Loan not later than (a) in the case of a Base Rate borrowing, 11:00 a.m. Chicago time on the proposed date of such borrowing, and (b) in the case of a LIBOR borrowing. 11:00 a.m. Chicago time at least three Business Days prior to the proposed date of such borrowing. Each such notice shall be effective upon receipt by Agent, shall be irrevocable, and shall specify, in the form of a Borrowing Notice, the date, amount and type of borrowing and, in the case of a LIBOR borrowing, the initial Interest Period therefor. Promptly upon receipt of such notice, Agent shall advise each Lender with a Revolving Loan Commitment thereof in writing. Not later than 1:00 p.m. Chicago time on the date of a proposed

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Revolving Loan borrowing, each Lender with a Revolving Loan Commitment shall provide Agent at the office specified by Agent with immediately available funds covering such Lender’s applicable Pro Rata Revolving Share of such borrowing and, so long as Agent has not received written notice that the conditions precedent set forth in Section 4 with respect to such borrowing have not been satisfied, Agent shall pay over the funds received by Agent to Opco Borrower on the requested borrowing date. Each borrowing shall be on a Business Day. Each Base Rate borrowing shall be in an aggregate amount of at least $100,000 and an integral multiple of $50,000, and each LIBOR borrowing shall be in an aggregate amount of at least $100,000 and an integral multiple of at least $50,000.

2.2.3.                Conversion; Continuation.

(a) Subject to Section 2.2.1, Administrative Borrower may, upon irrevocable written notice to Agent in accordance with clause (b) below, elect (i) as of any Business Day, to convert any Loans (or any part thereof in an aggregate amount of not less than $100,000 or a higher integral multiple of $50,000) into Loans of the other type or (ii) as of the last day of the applicable Interest Period, to continue any LIBOR Loans having Interest Periods expiring on such day (or any part thereof in an aggregate amount not less than $100,000 or a higher integral multiple of $50,000) for a new Interest Period; provided, that any conversion of a LIBOR Loan on a day other than the last day of an Interest Period therefor shall be subject to Section 3.5.

(b) Administrative Borrower shall give written or telephonic notice (followed immediately by written confirmation thereof) to Agent of each proposed conversion or continuation not later than (i) in the case of conversion into Base Rate Loans, 11:00 a.m. Chicago time on the proposed date of such conversion and (ii) in the case of conversion into or continuation of LIBOR Loans, 11:00 a.m. Chicago time at least three Business Days prior to the proposed date of such conversion or continuation, specifying in each case in the form of a Conversion/Continuation Notice: (i) the proposed date of conversion or continuation; (ii) the aggregate amount of Loans to be converted or continued; (iii) the type of Loans resulting from the proposed conversion or continuation; and (iv) in the case of conversion into, or continuation of, LIBOR Loans, the duration of the requested Interest Period therefor.

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

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

2.3.           Letters of Credit.

2.3.1.                Commitment.

At the request of Administrative Borrower, Issuing Lender will issue from time to time before the date which is 30 days prior to the Termination Date either (at Issuing Lender’s election) (a) standby letters of credit and/or (b) participation agreements confirming payment to issuers (reasonably acceptable to Issuing Lender) of standby letters of credit, in each case for the account of Opco Borrower and containing terms and conditions which are consistent with this Agreement and reasonably satisfactory to Issuing Lender (each such letter of credit or participation agreement, a “Letter of Credit”). After giving effect to each such issuance, (i) the aggregate Stated Amount of all Letters of Credit shall not at any time exceed $1,000,000 and (ii) Revolving Outstandings will not at any time exceed Borrowing Availability. No Letter of Credit shall be issued until Opco Borrower becomes a Borrower hereunder.

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2.3.2                 Application.

Administrative Borrower shall give notice to Agent and Issuing Lender of the proposed issuance of each Letter of Credit on a Business Day which is at least ten Business Days (or such lesser number of days as Agent and Issuing Lender shall agree) prior to the proposed date of issuance of such Letter of Credit. Each such notice shall be accompanied by a Letter of Credit application in Issuing Lender’s form (or, as the case may be, in the form of application of the underlying letter of credit), duly executed by Opco Borrower and in all respects satisfactory to Agent and Issuing Lender, together with such other documentation as Agent or Issuing Lender may request in support thereof, it being understood that each Letter of Credit application (or, as the case may be, form of application of underlying letter of credit) shall specify, among other things, the date on which the proposed Letter of Credit is to be issued, and the expiration date of such Letter of Credit (which shall not be later than the earlier to occur of (a) one year after the date of issuance thereof and (b) 15 days prior to the scheduled Termination Date). So long as Issuing Lender has not received written notice that the conditions precedent set forth in Section 4 with respect to the issuance of such Letter of Credit have not been satisfied, Issuing Lender shall issue (or cause to be issued) such Letter of Credit on the requested issuance date. Issuing Lender shall promptly advise Agent of the issuance of each Letter of Credit and of any amendment thereto, extension thereof or event or circumstance changing the amount available for drawing thereunder. In the event of any inconsistency between the terms of any Letter of Credit application and the terms of this Agreement, the terms of this Agreement shall control. Issuing Lender shall deliver to Agent upon its request a list of all outstanding Letters of Credit issued by Issuing Lender, together with such information related thereto as Agent may reasonably request.

2.3.3.                Reimbursement Obligations.

(a) Borrowers hereby unconditionally and irrevocably agree to reimburse Issuing Lender for each payment or disbursement made by Issuing Lender under any Letter of Credit honoring any demand for payment made thereunder, in each case on the date that such payment or disbursement is made. Issuing Lender shall promptly notify Administrative Borrower and Agent whenever any demand for payment is made under any Letter of Credit; provided, that the failure of Issuing Lender to so notify Administrative Borrower shall not affect the rights of Issuing Lender or Lenders in any manner whatsoever. Any amount not reimbursed on the date of such payment or disbursement (whether or not through the making of a Loan pursuant to Section 2.3.4) shall bear interest from the date of such payment or disbursement to the date that Issuing Lender is reimbursed by Borrowers therefor, payable on demand, at the interest rate per annum from time to time in effect for Revolving Loans which are Base Rate Loans.

(b) Borrowers’ reimbursement obligations hereunder shall be irrevocable and unconditional under all circumstances, including (i) any lack of validity or enforceability of any Letter of Credit, this Agreement or any other Loan Document, (ii) the existence of any claim, set-off, defense or other right which any Loan Party may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), Agent, Issuing Lender, any Lender or any other Person, whether in connection with any Letter of Credit, this Agreement, any other Loan Document, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between any Loan Party and the beneficiary named in any Letter of Credit), (iii) the validity, sufficiency or genuineness of any document which Issuing Lender (or, as applicable, the issuer of any underlying letter of credit) has determined complies on its face with the terms of the applicable Letter of Credit (or. if applicable, underlying letter of credit), even if such document should later prove to have been forged, fraudulent, invalid or insufficient in any respect or any statement therein shall have been untrue or inaccurate in any respect, or (iv) the surrender or impairment of any security for the performance or observance of any of the terms hereof.

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2.3.4.                Participations in Letters of Credit.

(a) Concurrently with the issuance of each Letter of Credit, Issuing Lender shall be deemed to have sold and transferred to each other Lender with a Revolving Loan Commitment, and each other Lender with a Revolving Loan Commitment shall be deemed irrevocably and unconditionally to have purchased and received from Issuing Lender, without recourse or warranty, an undivided interest and participation, to the extent of such Lender’s Pro Rata Revolving Share, in such Letter of Credit and Borrowers’ reimbursement obligations with respect thereto. If Borrowers do not pay any reimbursement obligation when due, then Borrowers shall be deemed to have immediately requested that Lenders with a Revolving Loan Commitment make a Revolving Loan which is a Base Rate Loan in a principal amount equal to such reimbursement obligation. Agent shall promptly notify Lenders that have a Revolving Loan Commitment of such deemed request and, without the necessity of compliance with the requirements of Section 2.2.2 or 4.2, each such Lender shall make available to Agent its Pro Rata Revolving Share of such Loan. The proceeds of such Loan shall be paid over by Agent to Issuing Lender for the account of Borrowers in satisfaction of such reimbursement obligations.

(b) If Issuing Lender makes any payment or disbursement under any Letter of Credit and (i) Borrowers have not reimbursed Issuing Lender in full for such payment or disbursement in accordance with Section 2.3.3, (ii) a Revolving Loan may not be made pursuant to Section 2.3.4(a) or (iii) any reimbursement received by Issuing Lender from Borrowers is or must be returned or rescinded upon or during any bankruptcy or reorganization of any Loan Party or otherwise, each other Lender with a Revolving Loan Commitment shall be irrevocably and unconditionally obligated to pay to Agent for the account of Issuing Lender its Pro Rata Revolving Share of such payment or disbursement (but no such payment shall diminish the Obligations of Borrowers under Section 2.3.3). Upon notice from Issuing Lender to Agent that it has not received any such amount, Agent shall promptly notify each such other Lender thereof. To the extent any such Lender shall not have made such amount available to Agent by 2:00 p.m. Chicago time on the Business Day on which such Lender receives notice from Agent of such payment or disbursement (it being understood that any such notice received after 12:00 noon Chicago time on any Business Day shall be deemed to have been received on the next following Business Day), such Lender agrees to pay interest on such amount to Agent for Issuing Lender’s account forthwith on demand, for each day from the date such amount was to have been delivered to Agent to the date such amount is paid, at a rate per annum equal to (x) for the first 3 days after demand, the Federal Funds Rate from time to time in effect and (y) thereafter, the Base Rate from time to time in effect for Revolving Loans. Any such Lender’s failure to make available to Agent its Pro Rata Revolving Share of any such payment or disbursement shall not relieve any other Lender of its obligation hereunder to make available to Agent such other Lender’s Pro Rata Revolving Share of such payment, but no Lender shall be responsible for the failure of any other Lender to make available to Agent such other Lender’s Pro Rata Revolving Share of any such payment or disbursement.

2.4.           Commitments Several.

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

2.5.           Certain Conditions.

Notwithstanding any other provision of this Agreement, no Lender shall have an obligation to make any Loan, or to permit the continuation of or any conversion into any LIBOR Loan, and Issuing Lender shall not have any obligation to issue any Letter of Credit, if an Event of Default or Default exists.

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2.6.           Loan Accounting.

2.6.1.                Recordkeeping.

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

2.6.2.                Notes.

At the request of any Lender, the Loans of such Lender shall be evidenced by a Note, with appropriate insertions, payable to the order of such Lender in a face principal amount equal to the sum of such Lender’s Pro Rata Share of the Total Loan Commitment and payable in such amounts and on such dates as are set forth herein.

2.7.           Interest.

2.7.1.                Interest Rates.

Borrowers promise to pay interest on the unpaid principal amount of each Loan for the period commencing on the date of such Loan until such Loan is paid in full as follows: (a) at all times while such Loan is a Base Rate Loan, at a rate per annum equal to the sum of the Base Rate from time to time in effect plus the Applicable Margin from time to time in effect; and (b) at all times while such Loan is a LIBOR Loan, at a rate per annum equal to the sum of the LIBOR Rate applicable to each Interest Period for such Loan plus the Applicable Margin from time to time in effect; provided, that (i) at any time an Event of Default exists, if requested by Required Lenders, the Applicable Margin corresponding to each Loan shall be increased by two percentage points per annum (and, in the case of Obligations not subject to an Applicable Margin, such Obligations shall bear interest at the Base Rate applicable to Revolving Loans plus the Applicable Margin plus two percentage points per annum), (ii) any such increase may thereafter be rescinded by Required Lenders, notwithstanding Section 10.1 and (iii) upon the occurrence of an Event of Default under Section 8.1.1 or 8.1.3, any such increase described in the foregoing clause (i) shall occur automatically. In no event shall interest payable by Borrowers to Agent and Lenders hereunder exceed the maximum rate permitted under applicable law, and if any such provision of this Agreement is in contravention of any such law, such provision shall be deemed modified to limit such interest to the maximum rate permitted under such law.

2.7.2.                Interest Payment Dates.

Accrued interest on each Base Rate Loan shall be payable in arrears on the first day of each calendar month and at maturity. Accrued interest on each LIBOR Loan shall be payable on the last day of each Interest Period relating to such Loan (and, in the case of a LIBOR Loan with an Interest Period in excess of 3 months, on the last day of each 3-month interval of such Interest Period), upon a prepayment of such Loan in accordance with Section 2.10 and at maturity in cash. After maturity and at any time an Event of Default exists, all accrued interest on all Loans shall be payable in cash on demand at the rates specified in Section 2.7.1.

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2.7.3.                Setting and Notice of LIBOR Rates.

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

2.7.4.                Computation of Interest.

Interest shall be computed for the actual number of days elapsed on the basis of a year of (a) 360 days for interest calculated at the LIBOR Rate and (b) 365 or 366 days, as the case may be, for interest calculated at the Base Rate. The applicable interest rate for each Base Rate Loan shall change simultaneously with each change in the Base Rate.

2.8.           Fees.

2.8.1.                Commitment Fee.

For the period from the Closing Date to the Termination Date, Borrowers agree to pay to Agent, for the account of each Lender according to such Lender’s Pro Rata Revolving Share (as adjusted from time to time), a Commitment Fee equal to 0.50% per annum multiplied by the amount by which the Revolving Loan Commitment exceeds the average daily Revolving Outstandings. The Commitment Fee shall be payable in arrears on the first day of each calendar quarter and on the Termination Date for any period then ending for which the Commitment Fee shall not have previously been paid. The Commitment Fee shall be computed for the actual number of days elapsed on the basis of a year of 360 days.

2.8.2.                Letter of Credit Fees.

(a) Borrowers agree to pay to Agent, for the account of each Lender according to such Lender’s Pro Rata Revolving Share (as adjusted from time to time), a Letter of Credit Fee equal to the Applicable Margin in effect from time to time for Revolving Loans which are LIBOR Loans multiplied by the Stated Amount of each Letter of Credit. Each Letter of Credit Fee shall be payable in arrears on the first day of each calendar quarter and on the Termination Date (or such later date on which such Letter of Credit expires or is terminated) for the period from the date of the issuance of each Letter of Credit (or the last day on which the Letter of Credit Fee was paid with respect thereto) to the date such payment is due or, if earlier, the date on which such Letter of Credit expired or was terminated. Each Letter of Credit Fee shall be computed for the actual number of days elapsed on the basis of a year of 360 days.

(b) In addition, with respect to each Letter of Credit, Borrowers agree to pay to Issuing Lender, for its own account, (i) such fees and expenses as Issuing Lender customarily requires (or, as the case may be, is required to pay to the issuer of the letter of credit) in connection with the issuance, negotiation, processing and/or administration of letters of credit in similar situations and (ii) a letter of credit fronting fee in the amount and at the times agreed to by Borrowers and Issuing Lender.

2.8.3.                Agent’s Fees.

Borrowers agree to pay to Agent, for its accounts, on the Closing Date and on certain other dates pursuant to the Fee Letter and as otherwise agreed to from time to time by Borrowers and Agent, fees in the amounts agreed to between Borrowers and Agent.

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2.9.           Commitment Reduction.

2.9.1.                Voluntary Reduction or Termination of Revolving Loan Commitment.

Borrowers may from time to time, after the Term A Loan has been Paid in Full and on at least five Business Days’ prior written notice received by Agent (which shall promptly advise each Lender thereof), permanently reduce the Revolving Loan Commitment to an amount not less than the Revolving Outstandings. Any such reduction shall be in an amount not less than $1,000,000 or a higher integral multiple of $500,000. Concurrently with any reduction of the Revolving Loan Commitment to zero, Borrowers shall pay all interest on the Revolving Loans, all commitment fees and all letter of credit fees and shall cash collateralize in full all Obligations arising with respect to the Letters of Credit in a manner reasonably acceptable to Agent.

2.9.2.                Mandatory Reduction of Revolving Loan Commitment.

On the date of any mandatory prepayment pursuant to Section 2.10.2(a), the Revolving Loan Commitment shall be permanently reduced by the amount of such mandatory prepayment applied to prepay the Revolving Loans pursuant to Section 2.10.2(a).

2.9.3.                All Reductions of Revolving Loan Commitment.

All reductions of the Revolving Loan Commitment shall reduce the Revolving Loan Commitments pro rata among Lenders according to their respective Pro Rata Revolving Shares.

2.10.         Prepayment.

2.10.1.              Voluntary Prepayment.

Borrowers may from time to time, on at least one Business Day’s written notice or telephonic notice (followed immediately by written confirmation thereof) to Agent (which shall promptly advise each Lender thereof) not later than 11:00 a.m. Chicago time on such day, prepay the Term A Loan in whole or in part without penalty or premium (but subject to the provisions of Section 3.5 hereof). Such notice to Agent shall specify the Loans to be prepaid and the date and amount of prepayment. Any such partial prepayment shall be in an amount equal to $500,000 or a higher integral multiple of $100,000.

2.10.2.              Mandatory Prepayment.

(a) Borrowers shall (x) prepay the Term A Loan (in the order set forth in Section 2.10.3) until paid in full and (y) thereafter repay the Revolving Loans in each case, at the following times and in the following amounts:

(i)        concurrently with the receipt by Holdings or any Subsidiary of any Net Cash Proceeds (or to the extent such Loan Party may wish to reinvest such Net Cash Proceeds, on or before the end of the 180 day period described in the definition of Net Cash Proceeds) from any Disposition, in an amount equal lo such Net Cash Proceeds;

(ii)       concurrently with the receipt by Parent, Holdings or any Subsidiary of any Net Cash Proceeds from any issuance of its equity securities (other than equity securities that are issued pursuant to Section 7.10(a) or to equity holders of Parent and the proceeds of which are used to fund an Acquisition approved by Agent in an amount equal to such Net Cash Proceeds), in an amount equal to such Net Cash Proceeds; and

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(iii)      within 120 days after the end of each Fiscal Year (commencing with Fiscal Year ending December 31, 2006), in an amount equal to the ECF Percentage of Excess Cash Flow for such Fiscal Year.

(b) If on any day the Revolving Outstandings exceed Borrowing Availability, whether pursuant to a reduction of the Revolving Loan Commitment pursuant to Section 2.9.2 or otherwise, Borrowers shall immediately prepay Revolving Loans and/or cash collateralize the outstanding Letters of Credit in a manner acceptable to Agent, or do a combination of the foregoing, in an amount sufficient to eliminate such excess.

2.10.3.              All Prepayments.

(a) Any prepayment of a LIBOR Loan on a day other than the last day of an Interest Period therefor shall include interest on the principal amount being repaid and shall be subject to Section 3.5. All prepayments of a Loan shall be applied first to that portion of such Loan comprised of Base Rate Loans and then to that portion of such Loan comprised of LIBOR Loans, in direct order of Interest Period maturities. All prepayments of the Term A Loan shall be applied pro rata to the remaining installments thereof.

2.11.         Repayment.

2.11.1.              Revolving Loans.

The Revolving Loans shall be paid, for the account of each Lender according to its Pro Rata Revolving Share, in full on the Termination Date.

2.11.2.              Term A Loan.

The Term A Loan shall be paid, for the account of each Lender according to its Pro Rata Term A Share thereof, in the installments and on the dates set forth below:

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Notwithstanding the foregoing, the outstanding principal balance of the Term A Loan shall be paid in full on the Term A Loan Maturity Date.

2.12.         Payment.

2.12.1.              Making and Settlement of Payments.

All payments of principal of or interest on the Notes, and of all fees, shall be made by Borrowers to Agent without setoff, recoupment or counterclaim and in immediately available funds at the office specified by Agent not later than 12:00 noon Chicago time on the date due, and funds received after that hour shall be deemed to have been received by Agent on the following Business Day. Agent shall promptly remit to each Lender its share of all principal payments received in collected funds by Agent for the account of such Lender. On the first Business Day of each week or more frequently as Agent may elect (each such day being a “Settlement Date”). Agent will notify each Lender with a Revolving Loan Commitment in writing of the amount of such Lender’s actual share of the Revolving Loans as of the close of business of the Business Day immediately preceding the Settlement Date. In the event that payments are necessary to adjust the amount of such Lender’s actual share of the Revolving Loans to equal such Lender’s Pro Rata Revolving Share of the Revolving Loans as of any Settlement Date, such Lender will pay to Agent, or Agent will pay to such Lender (as applicable) the amount necessary in same day funds by wire transfer to the other’s account not later than 2:00 p.m. Chicago time on the first Business Day following the Settlement Date. On the first Business Day of each month (each, an “Interest Settlement Date”). Agent will notify each Lender in writing of the amount of such Lender’s applicable (i) Pro Rata Revolving Share of interest and fees on the Revolving Outstandings and Revolving Loan Commitment and (ii) Pro Rata Term A Loan Share of interest and fees on the Term A Loan as of the end of the last day of the immediately preceding month. Provided that such Lender has made all payments required to be made by it under this Agreement. Agent will pay to such Lender, by wire transfer to such Lender’s account not later than 2:00 p.m. Chicago time on the next Business Day following the Interest Settlement Date, such Lender’s Pro Rata Revolving Share and Pro Rata Term A Loan Share, as applicable, of interest and fees, in each instance, received by Agent for the immediately preceding month. All payments under Section 3.2 shall be made by Borrowers directly to Lender entitled thereto.

2.12.2.              Application of Payments and Proceeds.

(a) Except as set forth in Section 2.10.2 and Section 2.10.3. and subject to the provisions of Sections 2.12.2(b) and 2.12.2(c) below, each payment of principal shall be applied to such Loans as Administrative Borrower shall direct by notice to be received by Agent on or before the date of such payment or, in the absence of such notice, as Agent shall determine in its discretion. Concurrently with each remittance to any Lender of its share of any such payment. Agent shall advise such Lender as to the application of such payment.

(b) If an Acceleration Event shall have occurred and be continuing, notwithstanding anything herein or in any other Loan Document to the contrary, Agent shall apply all or any part of payments in respect of the Obligations and proceeds of Collateral, in each case as received by Agent, to the payment of the Obligations in the following order:

(i)        FIRST, to the payment of all fees, costs, expenses and indemnities due and owing to Agent under this Agreement or any other Loan Document, and any other Obligations owing to Agent in respect of sums advanced by Agent to preserve or protect the Collateral or to preserve or protect its security interest in the Collateral (whether or not such Obligations are then due and owing to Agent), until paid in full;

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(ii)       SECOND, to the payment of all fees, costs, expenses and indemnities due and owing to Lenders, pro rata based on each Lender’s Pro Rata Share thereof, until paid in full;

(iii)      THIRD, to the payment of all accrued and unpaid interest due and owing to Lenders, pro rata based on each Lender’s Pro Rata Share thereof, until paid in full;

(iv)      FOURTH, to the payment of all principal of the Loans due and owing and to cash collateralize Obligations in respect of outstanding Letters of Credit in a manner consistent with the provisions of Section 8.2, pro rata based on each Lender’s Pro Rata Share thereof, until paid in full;

(v)       FIFTH, to the payment of all Hedging Obligations due and owing to any Lender or its Affiliates, pro rata in accordance with each Lender’s (or one of its Affiliate’s) share thereof, until paid in full; and

(vi)      SIXTH, to the payment of all other Obligations owing to each Lender, pro rata based on each Lender’s Pro Rata Share thereof, until paid in full.

(c) If an Event of Default shall have occurred and be continuing but an Acceleration Event shall not exist, notwithstanding anything herein or in any other Loan Document to the contrary, Agent shall apply all or any part of payments in respect of the obligations and proceeds of Collateral, in each case as received by Agent, to the payment of the Obligations in such order as Agent may elect. In the absence of a specific determination by Agent, payments in respect of the Obligations and proceeds of Collateral received by Agent shall be applied in the following order;

(i)        FIRST, to the payment of all fees, costs, expenses and indemnities due and owing to Agent under this Agreement or any other Loan Document, and any other Obligations owing to Agent in respect of sums advanced by Agent to preserve or protect the Collateral or to preserve or protect its security interest in the Collateral (whether or not such Obligations are then due and owing to Agent), until paid in full:

(ii)       SECOND, to the payment of all fees, costs, expenses and indemnities due and owing to Lenders, pro rata based on each Lender’s Pro Rata Share thereof, until paid in full;

(iii)      THIRD, to the payment of all accrued and unpaid interest due and owing to Lenders, pro rata based on each Lender’s Pro Rata Share thereof, until paid in full;

(iv)      FOURTH, to the payment of all principal of Loans then due and owing, pro rata based on each Lender’s Pro Rata Share thereof, until paid in full;

(v)       FIFTH, to the payment of Revolving Loans not then due and owing, pro rata based on each Lender’s Pro Rata Revolving Share thereof, until paid in full;

(vi)      SIXTH, to cash collateralize Obligations consisting of the Term A Loan not yet due and owing and Letters of Credit (in the case of such Letters of Credit, in a manner consistent with the provisions of Section 8.2), pro rata based on each Lender’s Pro Rata Share thereof, until paid in full;

(vii)     SEVENTH, to the payment of all Hedging Obligations then due and owing to any Lender or its Affiliates, pro rata in accordance with each Lender’s (or one of its Affiliate’s) share thereof, until paid in full; and

(viii)    EIGHTH, to the payment of all other Obligations owing to each Lender, pro rata based on each Lender’s Pro Rata Share thereof, until paid in full.

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In the event payments in respect of the Obligations and proceeds of collateral received by Agent are applied in the manner provided for in clause (vi) of this Section 2.l2.2(c) as a result of an Event of Default and such Event of Default is subsequently waived in writing by Agent, the cash collateral held by Agent pursuant to such clause (vi) shall be released by Agent to Opco Borrower so long as no Event of Default shall then exist or would be caused thereby.

2.12.3.              Payment Dates.

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

2.12.4.              Set-off.

Borrowers agree that Agent and each Lender and its Affiliates have all rights of set-off and bankers’ lien provided by applicable law, and in addition thereto, Borrowers agree that at any time an Event of Default has occurred and is continuing, Agent and each Lender may apply to the payment of any Obligations of Borrowers hereunder, whether or not then due, any and all balances, credits, deposits, accounts or moneys of Borrowers then or thereafter with Agent or such Lender. Notwithstanding the foregoing, no Lender shall exercise any rights described in the preceding sentence without the prior written consent of Agent.

2.12.5.              Proration of Payments.

If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of set-off or otherwise, on account of (a) principal of or interest on an Loan, but excluding (i) any payment pursuant to Section 3.1, 3.2. 3.7 or 10.8 and (ii) payments of interest on any Base Rate Loan referred to in the last sentence of Section 3.4, or (b) its participation in any Letter of Credit) in excess of its applicable Pro Rata Revolving Share or Pro Rata Term A Share, respectively, of payments and other recoveries obtained by all Lenders on account of principal of and interest on such Revolving Loans or Term A Loan (or such participation) then held by them, then such Lender shall purchase from the other Lenders such participations in the Loans or sub-participations in Letters of Credit held by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery.