Exhibit 10.1

 

Execution Version

 

 

AMENDMENT NUMBER ONE
TO LOAN AND SECURITY AGREEMENT

 

THIS AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT (this “Amendment”),
dated as of May 22, 2020, is entered into by and among GACP FINANCE CO., LLC
(“GACP”), in its capacity as agent for each of the Lenders (in such capacity,
“Agent”), VITAMIN SHOPPE INDUSTRIES LLC, a New York limited liability company
(the “Administrative Borrower”), VITAMIN SHOPPE MARINER, LLC, a Delaware limited
liability company, VITAMIN SHOPPE GLOBAL, LLC, a Delaware limited liability
company, VITAMIN SHOPPE FLORIDA, LLC, a Delaware limited liability company,
BETANCOURT SPORTS NUTRITION, LLC, a Florida limited liability company, VITAMIN
SHOPPE PROCUREMENT SERVICES, LLC, a Delaware limited liability company
(collectively, “Borrowers” and each individually, a “Borrower”), VALOR
ACQUISITION, LLC, a Delaware limited liability company (“Parent”), and all of
the lenders party to the below-defined Credit Agreement (such lenders, together
with their respective successors and permitted assigns, collectively, the
“Lenders” and each individually, a “Lender”), in light of the following:

 

W I T N E S S E T H

 

WHEREAS, Borrowers, Parent, Lenders and Agent are parties to that certain Loan
and Security Agreement, dated as of December 16, 2019 (as amended, restated,
supplemented, or otherwise modified from time to time prior to the date hereof,
the “Existing Credit Agreement”);

 

WHEREAS, Borrowers have requested that Agent and all Lenders make certain
amendments to the Existing Credit Agreement and waivers of the Fee Letter;

 

WHEREAS, JPMorgan Chase Bank, N.A., as the ABL Representative (as defined in the
Intercreditor Agreement) has consented to this Amendment in writing;

 

WHEREAS, upon the terms and conditions set forth herein, Agent and all Lenders
have agreed to make certain amendments to the Existing Credit Agreement and
waivers of the Fee Letter on the terms set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

 

1.                   Defined Terms. All initially capitalized terms used herein
(including the preamble and recitals hereof) without definition shall have the
meanings ascribed thereto in Section 1 of the Credit Agreement.

 

2.                   Amendments to Credit Agreement. Subject to the satisfaction
(or waiver in writing by all Lenders) of the conditions precedent set forth in
Section 3 hereof, the Existing Credit Agreement shall be amended to reflect the
changes which are attached as Annex A hereto (the Existing Credit Agreement as
amended hereby, the “Credit Agreement”), such that on the Amendment Effective
Date (as defined below) the terms set forth in Annex A hereto which appear in
bold and double underlined text (inserted text) shall be added to the Existing
Credit Agreement and the terms appearing as text which is stricken (deleted
text) shall be deleted from the Existing Credit Agreement.

 

3.                   Conditions Precedent to Amendment. The satisfaction (or
waiver in writing by Agent and all Lenders) of each of the following shall
constitute conditions precedent to the effectiveness of this Amendment (such
date being the “Amendment Effective Date”):

 

 

 

 

(a)                Agent shall have received this Amendment, duly executed by
the parties hereto, and the same shall be in full force and effect.

 

(b)                Agent shall have received the Specified Closing Amended Plan
in form and substance satisfactory to Agent.

 

(c)                Agent shall have received an Assignment and Assumption, dated
as of the date hereof, between GACP II, LP, as assignor, and Parent, as
assignee, duly executed by the parties thereto in form and substance
satisfactory to Agent.

 

(d)                Agent shall have received an Amendment Number One to Second
Amended and Restated Loan and Security Agreement, dated as of the date hereof,
between Borrowers, Parent and ABL Agent, duly executed by the parties thereto in
form and substance satisfactory to Agent.

 

(e)                After giving effect to this Amendment, with respect to each
Borrower and Parent, the representations and warranties contained herein, in the
Credit Agreement, and in the other Financing Agreements, in each case, shall be
true and correct in all material respects (except that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified as to “materiality” or “Material Adverse
Effect” in the text thereof, which representations and warranties are true and
correct in all respects subject to such qualification) on and as of the date
hereof, to the same extent as though made on and as of the date hereof, except
to the extent that such representations and warranties specifically relate to an
earlier date (provided, that the representations and warranties in Section 8.10
of the Credit Agreement are expressly deemed to specifically relate to the
Closing Date), in which case such representations and warranties shall have been
true and correct in all material respects (except that such materiality
qualifier shall not be applicable to any representations or warranties that
already are qualified or modified as to “materiality” or “Material Adverse
Effect” in the text thereof, which representations and warranties shall be true
and correct in all respects subject to such qualification) on and as of such
earlier date.

 

(f)                 No event has occurred and is continuing or would result from
the consummation of the transactions contemplated herein that would constitute a
Default or Event of Default.

 

(g)                Borrowers and Parent shall pay substantially concurrently
with the closing of this Amendment, all fees, costs, expenses and taxes then
payable pursuant to the Credit Agreement and Section 5 of this Amendment.

 

4.                   Representations and Warranties. Each Borrower and Parent,
jointly and severally, hereby:

 

(a)represents and warrants that, each of the representations and warranties made
to Agent and Lenders under the Credit Agreement and all of the other Financing
Agreements are true and correct in all material respects on and as of the date
hereof (after giving effect to this Amendment and the other documents executed
in connection with this Amendment) except to the extent that (i) such
representations or warranties are qualified by a materiality standard, in which
case they shall be true and correct in all respects, or (ii) such
representations or warranties expressly relate to an earlier date (provided,
that the representations and warranties in Section 8.10 of the Credit Agreement
are expressly deemed to expressly relate to the Closing Date) (in which case
such representations and warranties shall be true and correct in all material
respects as of such earlier date (or, if such representations or warranties are
qualified by a materiality standard, in all respects as of such earlier date));

 

2

 

 

(b)reaffirms all of the covenants contained in the Credit Agreement, as amended
hereby;

 

(c)represents and warrants that, after giving effect to this Amendment, no
Default or Event of Default has occurred and is continuing;

 

(d)represents and warrants that the execution, delivery and performance by each
Loan Party of this Amendment and the other documents, agreements and instruments
executed by any Loan Party in connection herewith (collectively, together with
this Amendment, the “Amendment Documents”) and the consummation of the
transactions contemplated hereby or thereby, are within such Loan Party’s
powers, have been duly authorized by all necessary organizational action, and do
not contravene (i) the charter or operating agreement or other organizational or
governing documents of such Loan Party or (ii) any law or any contractual
restriction binding on or affecting any Loan Party, except, for purposes of this
clause (ii), to the extent such contravention would not reasonably be expected
to have a Material Adverse Effect;

 

(e)represents and warrants that no authorization or approval or other action by,
and no notice to or filing with, any Governmental Authority or any other third
party is required for the due execution, delivery and performance by any Loan
Party of any Amendment Document to which it is a party that has not already been
obtained if the failure to obtain such authorization, approval or other action
could reasonably be expected to result in a Material Adverse Effect;

 

(f)represents and warrants that each Amendment Document has been duly executed
and delivered by each Loan Party party thereto; and

 

(g)represents and warrants that this Amendment constitutes, and each other
Amendment Document to be executed on the date hereof will constitute, upon
execution, the legal, valid and binding obligation of each Loan Party party
thereto enforceable against such Loan Party in accordance with its respective
terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization or moratorium or similar laws relating to or affecting the rights
of creditors generally and subject to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).

 

5.                   Payment of Costs and Fees. Borrowers and Parent shall pay
to Agent and each Lender all reasonable and documented out-of-pocket expenses
incurred in connection with the preparation, negotiation, execution and delivery
of this Amendment and any documents and instruments relating hereto.

 

6.                   Tax Refund Prepayment. Notwithstanding anything to the
contrary in the Credit Agreement or in any Financing Agreements or other related
letter or agreements, each Lender, Borrower and Agent hereby agrees that any
Early Termination Fee related to any prepayment pursuant to Section 2.3 of the
Credit Agreement shall be waived. For avoidance of doubt, each Lender makes such
waiver on behalf of such Lender and any and all of its successors and assigns.

 

7.                   GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY
TRIAL WAIVER. THIS AMENDMENT SHALL BE SUBJECT TO THE PROVISIONS REGARDING
GOVERNING LAW, CHOICE OF FORUM, SERVICE OF PROCESS AND JURY TRIAL WAIVER SET
FORTH IN SECTION 11.1 OF THE CREDIT AGREEMENT, AND SUCH PROVISIONS ARE
INCORPORATED HEREIN BY THIS REFERENCE, MUTATIS MUTANDIS.

 

3

 

 

8.                   Amendments. This Amendment cannot be altered, amended,
changed or modified in any respect except in accordance with Section 11.4 of the
Credit Agreement.

 

9.                   Counterpart Execution. This Amendment may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Amendment. The words “execution,” “signed,” “signature,” and words of like
import in this Amendment or in any other certificate, agreement or document
related to this Amendment or any other Financing Agreement shall include images
of manually executed signatures transmitted by facsimile or other electronic
format (including, without limitation, “pdf”, “tif” or “jpg”) and other
electronic signatures (including, without limitation, DocuSign).The use of
electronic signatures and electronic records (including, without limitation, any
contract or other record created, generated, sent, communicated, received, or
stored by electronic means) shall be of the same legal effect, validity and
enforceability as a manually executed signature or use of a paper-based
record-keeping system to the fullest extent permitted by applicable law,
including the Federal Electronic Signatures in Global and National Commerce Act,
the New York State Electronic Signatures and Records Act and any other
applicable law, including, without limitation, any state law based on the
Uniform Electronic Transactions Act or the Uniform Commercial Code.

 

10.               Effect on Financing Agreements.

 

(a)                The Credit Agreement, as amended hereby, the Fee Letter, as
waived hereby, and each of the other Financing Agreements shall be and remain in
full force and effect in accordance with their respective terms and hereby are
ratified and confirmed in all respects. The execution, delivery, and performance
of this Amendment shall not operate, except as expressly set forth herein, as a
modification or waiver of any right, power, or remedy of Agent or any Lender
under the Credit Agreement or any other Financing Agreement. Except for the
amendments to the Credit Agreement and waivers of the Fee Letter expressly set
forth herein, the Credit Agreement and the other Financing Agreements shall
remain unchanged and in full force and effect. The waivers, consents and
modifications set forth herein, if any, are limited to the specifics hereof
(including facts or occurrences on which the same are based), shall not apply
with respect to any facts or occurrences other than those on which the same are
based, shall neither excuse any future non-compliance with the Financing
Agreements nor operate as a waiver of any Default or Event of Default, shall not
operate as a consent to any further waiver, consent or amendment or other matter
under the Financing Agreements, and shall not be construed as an indication that
any future waiver or amendment of covenants or any other provision of the Credit
Agreement will be agreed to, it being understood that the granting or denying of
any waiver or amendment which may hereafter be requested by Borrower remains in
the sole and absolute discretion of Agent and Lenders. To the extent that any
terms or provisions of this Amendment conflict with those of the Credit
Agreement or the other Financing Agreements, the terms and provisions of this
Amendment shall control.

 

(b)                Upon and after the effectiveness of this Amendment, each
reference in the Credit Agreement to “this Agreement”, “hereunder”, “herein”,
“hereof” or words of like import referring to the Credit Agreement, and each
reference in the other Financing Agreements to “the Credit Agreement”,
“thereunder”, “therein”, “thereof” or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement as
modified and amended hereby.

 

(c)                To the extent that any of the terms and conditions in any of
the Financing Agreements shall contradict or be in conflict with any of the
terms or conditions of the Credit Agreement, after giving effect to this
Amendment, such terms and conditions are hereby deemed modified or amended
accordingly to reflect the terms and conditions of the Credit Agreement as
modified or amended hereby.

 

4

 

 

(d)                This Amendment is a Financing Agreement.

 

(e)                Unless the context of this Amendment clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the terms “includes” and “including” are not
limiting, and the term “or” has, except where otherwise indicated, the inclusive
meaning represented by the phrase “and/or”. The words “hereof,” “herein,”
“hereby,” “hereunder,” and similar terms in this Amendment refer to this
Amendment as a whole and not to any particular provision of this Amendment.
Section, subsection, clause, schedule, and exhibit references herein are to this
Amendment unless otherwise specified. Any reference in this Amendment to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). Any reference herein to the Obligations shall (i) mean
“Obligations” as defined in the Credit Agreement (including any interest and
other amounts which would accrue and become due but for the commencement of any
case with respect to a Borrower or Guarantor under the United States Bankruptcy
Code or any similar statute, whether or not such amounts are allowed or
allowable in whole or in part in such case) and (ii) include all or any portion
thereof and any extensions, modifications, renewals, or alterations thereof,
both prior and subsequent to the commencement of any case with respect to a
Borrower or Guarantor under the United States Bankruptcy Code or any similar
statute.

 

11.               Entire Agreement. This Amendment, and the terms and provisions
hereof, the Credit Agreement and the other Financing Agreements constitute the
entire understanding and agreement between the parties hereto with respect to
the subject matter hereof and supersede any and all prior or contemporaneous
amendments or understandings with respect to the subject matter hereof, whether
express or implied, oral or written.

 

12.               Integration. This Amendment, together with the other Financing
Agreements, incorporates all negotiations of the parties hereto with respect to
the subject matter hereof and is the final expression and agreement of the
parties hereto with respect to the subject matter hereof.

 

13.               Reaffirmation of Obligations. Each Loan Party hereby (a)
acknowledges and reaffirms its obligations owing to Agent and each Lender under
each Financing Agreement to which it is a party (including, in respect of
Parent, its guaranty of the Obligations), and (b) agrees that each of the
Financing Agreements to which it is a party is and shall remain in full force
and effect as modified hereby. Each Loan Party hereby (i) further ratifies and
reaffirms the validity and enforceability of all of the Liens and security
interests heretofore granted, pursuant to and in connection with the Credit
Agreement or any other Financing Agreement to Agent, on behalf and for the
benefit of each Lender, as collateral security for the obligations under the
Financing Agreements in accordance with their respective terms, and (ii)
acknowledges that all of such Liens and security interests, and all Collateral
heretofore pledged as security for such obligations, continue to be and remain
collateral for such obligations from and after the date hereof (including,
without limitation, from after giving effect to this Amendment).

 

14.               Severability. In case any provision in this Amendment shall be
invalid, illegal or unenforceable, such provision shall be severable from the
remainder of this Amendment and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

 

[Signature pages follow]

 

5

 

 

IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date
first above written.

 

VALOR ACQUISITION, LLC,

as Parent

 
By: /s/ Charles D. Knight
Name: Charles D. Knight

Title: Executive Vice President and Chief Financial Officer

 

VITAMIN SHOPPE INDUSTRIES LLC,

as a Borrower

 

By: Valor Acquisition, LLC, its sole member

 
By: /s/ Charles D. Knight
Name: Charles D. Knight

Title: Executive Vice President and Chief Financial Officer

 

VITAMIN SHOPPE MARINER, LLC,

as a Borrower

 

By: Vitamin Shoppe Industries LLC, its sole member

By: Valor Acquisition, LLC, its sole member

 
By: /s/ Charles D. Knight
Name: Charles D. Knight

Title: Executive Vice President and Chief Financial Officer

 

VITAMIN SHOPPE GLOBAL, LLC,

as a Borrower

 

By: Vitamin Shoppe Industries LLC, its sole member

By: Valor Acquisition, LLC, its sole member

 
By: /s/ Charles D. Knight
Name: Charles D. Knight

Title: Executive Vice President and Chief Financial Officer

 

[Signature Page to Amendment Number One]

 

 

VITAMIN SHOPPE FLORIDA, LLC

as a Borrower

 

By: Vitamin Shoppe Industries LLC, its sole member

By: Valor Acquisition, LLC, its sole member

 
By: /s/ Charles D. Knight
Name: Charles D. Knight

Title: Executive Vice President and Chief Financial Officer

 

BETANCOURT SPORTS NUTRITION, LLC,

as a Borrower

 

By: Vitamin Shoppe Industries LLC, its sole member

By: Valor Acquisition, LLC, its sole member

 
By: /s/ Charles D. Knight
Name: Charles D. Knight

Title: Executive Vice President and Chief Financial Officer

 

VITAMIN SHOPPE PROCUREMENT SERVICES, LLC

as a Borrower

 

By: Vitamin Shoppe Industries LLC, its sole member

By: Valor Acquisition, LLC, its sole member

 
By: /s/ Charles D. Knight
Name: Charles D. Knight

Title: Executive Vice President and Chief Financial Officer

 

[Signature Page to Amendment Number One]

 

 

GACP FINANCE CO., LLC,

as Agent

 

By:/s/ Robert Louzan
Name: Robert Louzan
Title: President

 

 

 

 

 

 

 

 

 

[Signature Page to Amendment Number One]

 

 

HANMI BANK, as a Lender

 

By:/s/ Michael Yu
Name: Michael Yu
Title: SVP & Credit Mgr.

 

 

 

 

 

 

 

 

 

[Signature Page to Amendment Number One]

 

 

GORDON BROTHERS FINANCE COMPANY, LLC, as a Lender

 

By:/s/ Lisa Galeota
Name: Lisa Galeota
Title: Managing Director

 

 

 

 

 

 

 

 

 

[Signature Page to Amendment Number One]

 

 

GACP II, LP, as a Lender

 

By:/s/ Robert Louzan
Name: Robert Louzan
Title: President

 

 

 

 

 

 

 

 

 

[Signature Page to Amendment Number One]

 

 

Annex A

 

Amended Credit Agreement

 

[See attached.]

 

 

 

 

 

 

 

 

 

 

ANNEX A

 

Conformed Copy

 

Execution Version

Amendment Number One to Loan and Security Agreement dated as of May 22, 2020

 

 

 

LOAN AND SECURITY AGREEMENT

by and among

 

VITAMIN SHOPPE INDUSTRIES LLC
VITAMIN SHOPPE MARINER, LLC
VITAMIN SHOPPE GLOBAL, LLC
VITAMIN SHOPPE FLORIDA, LLC
BETANCOURT SPORTS NUTRITION, LLC
VITAMIN SHOPPE PROCUREMENT SERVICES, LLC

as Borrowers

 

and

 

VALOR ACQUISITION, LLC

as Guarantor

 

THE LENDERS FROM TIME TO TIME PARTY HERETO

 

and

 

GACP FINANCE CO., LLC

as Agent

 

Dated: December 16, 2019

 

 

 

 

 

TABLE OF CONTENTS

 

Page

 

SECTION 1.  DEFINITIONS  1 SECTION 2.  CREDIT FACILITIES  5455 2.1  Term Loan 
5455 2.2  Mandatory Repayments and Prepayments of the Term Loan  55 2.3 
[Reserved]Tax Refund Prepayment  5657 2.4  [Reserved]  5657 2.5  [Reserved] 
5657 2.6  [Reserved]  5657 2.7  Joint and Several Liability  5658 2.8 
Defaulting Lenders  5758 2.9  Optional Prepayment of Term Loan  5859 SECTION 3. 
INTEREST AND FEES  5859 3.1  Interest  5859 3.2  Fees  5860 3.3  Changes in Laws
and Increased Costs of the Term Loan  5960 3.4  Effect of Benchmark Transition
Event  6062 SECTION 4.  CONDITIONS PRECEDENT  6163 SECTION 5.  GRANT AND
PERFECTION OF SECURITY INTEREST  6566 5.1  Grant of Security Interest  6566 5.2 
Perfection of Security Interests  6768 SECTION 6.  COLLECTION AND
ADMINISTRATION  7274 6.1  Borrowers’ Loan Accounts  7274 6.2  Statements  7274
6.3  Collection of Accounts  7374 6.4  Payments  7576 6.5  Taxes  7677 6.6 
[Reserved]  7981 6.7  Use of Proceeds  7981 6.8  Appointment of Administrative
Borrower as Agent for Receipts of Statements  8081 6.9  Pro Rata Payment
Treatment   8082 6.10  Sharing of Payments, Etc  8182 6.11  Settlement
Procedures  8283 6.12  Obligations Several; Independent Nature of Lenders’
Rights  8284 SECTION 7.  COLLATERAL REPORTING AND COVENANTS  8385 7.1 
Collateral Reporting  8385 7.2  Accounts Covenants  8586 7.3  Inventory
Covenants  8587 7.4  Equipment and Real Property Covenants  8688 7.5  Delivery
of Instruments, Chattel Paper and Documents  8789

 

ii

 

 

7.6  Post-Closing Appraisals  8789 7.7  Power of Attorney  8789 7.8  Right to
Cure  8991 7.9  Access to Premises  9091 SECTION 8.  REPRESENTATIONS AND
WARRANTIES  9092 8.1  Corporate Existence, Power and Authority  9092 8.2  Name;
State of Organization; Chief Executive Office; Collateral Locations  9193 8.3 
Financial Statements; No Material Adverse Change  9193 8.4  Priority of Liens;
Title to Properties  9294 8.5  Tax Returns  9294 8.6  Litigation  9294 8.7 
Compliance with Other Agreements and Applicable Laws  9395 8.8  Environmental
Compliance  9395 8.9  Employee Benefits  9496 8.10  Bank Accounts  9597 8.11 
Intellectual Property  9597 8.12  Subsidiaries; Capitalization; Solvency  9698
8.13  Labor Matters  9698 8.14  Restrictions on Subsidiaries  9799 8.15 
Material Contracts  9799 8.16  Credit Card Agreements  9799 8.17  Investment
Company Status  98100 8.18  Accuracy and Completeness of Information  98100
8.19  Survival of Warranties; Cumulative  98100 8.20  [Reserved]  98100 8.21 
Anti-Corruption Laws and Sanctions  98100 8.22  Regulatory Compliance  98100
SECTION 9.  AFFIRMATIVE AND NEGATIVE COVENANTS  100102 9.1  Maintenance of
Existence  100102 9.2  New Collateral Locations  101103 9.3  Compliance with
Laws, Regulations, Etc  101103 9.4  Payment of Taxes and Claims  102104 9.5 
Insurance  102104 9.6  Financial Statements and Other Information  103105 9.7 
Sale of Assets, Consolidation, Merger, Dissolution, Etc  106108 9.8 
Encumbrances  110113 9.9  Indebtedness  113115 9.10  Loans, Investments, Etc 
117119 9.11  Dividends and Redemptions  120122 9.12  Transactions with
Affiliates  121123 9.13  Compliance with ERISA  122124 9.14  Fiscal Year  122124
9.15  Change in Business  122124 9.16  Limitation of Restrictions Affecting
Subsidiaries  122124 9.17  Financial Covenants  123125

 

iii

 

 

9.18  Credit Card Agreements  124126 9.19  License Agreements  125127 9.20 
Foreign Assets Control Regulations, Etc  126128 9.21  After Acquired Real
Property  126128 9.22  Costs and Expenses  126128 9.23  Further Assurances 
127129 9.24  Permitted Payments of Indebtedness  128131 9.25  Amendment of ABL
Loan Documents  129132 9.26  Parent Holding Status  129132 9.27  Term Loan
Notes  130132 9.28  Post-Closing Equity Contribution; Fundamental Change Company
Notice  130132 9.29  Post-Closing Obligations  131133 SECTION 10.  EVENTS OF
DEFAULT AND REMEDIES  131133 10.1  Events of Default  131133 10.2  Remedies 
133136 10.3  Borrowers’ and Guarantors’ Obligations Upon Default  136139 10.4 
Grant of Intellectual Property License  137139 SECTION 11.  JURY TRIAL WAIVER;
OTHER WAIVERS AND CONSENTS; GOVERNING LAW  137140 11.1  Governing Law; Choice of
Forum; Service of Process; Jury Trial Waiver  137140 11.2  Waiver of Notices 
139141 11.3  Collateral Waivers  139141 11.4  Amendments and Waivers  139142
11.5  Waiver of Counterclaims  142145 11.6  Indemnification  142145 SECTION 12. 
THE AGENT  143146 12.1  Appointment, Powers and Immunities  143146 12.2 
Reliance by Agent  144146 12.3  Events of Default  144146 12.4  GACP in its
Individual Capacity  144147 12.5  Indemnification  145147 12.6  Non-Reliance on
Agent and Other Lenders  145148 12.7  Failure to Act  146148 12.8  [Reserved] 
146148 12.9  Concerning the Collateral and the Related Financing Agreements 
146148 12.10  Field Audit, Examination Reports and other Information; Disclaimer
by Lenders  146149 12.11  Collateral Matters  147149 12.12  Agency for
Perfection  148151 12.13  Successor Agent  148151 12.14  Other Agent
Designations  149151 12.15  Intercreditor Agreement  149152

 

iv

 

  

SECTION 13.  TERM OF AGREEMENT; MISCELLANEOUS  150152 13.1  Term  150152 13.2 
Interpretative Provisions  151153 13.3  Notices  152155 13.4  Partial
Invalidity  154156 13.5  Confidentiality  154157 13.6  Successors  155158 13.7 
Assignments; Participations  156158 13.8  Intercreditor Agreement  158161 13.9 
Entire Agreement  158162 13.10  USA Patriot Act  158162 13.11  Counterparts,
Etc  159162 13.12  Intercreditor Agreement  159162

 

 

 

 

 

 

 

v

 

 

INDEX

TO

EXHIBITS AND SCHEDULES

 

Exhibit A Form of Assignment and Acceptance Exhibit B Perfection Certificate
Exhibit C Form of Compliance Certificate Exhibit D Form of Borrowing Base
Certificate Exhibit E-1 Form of U.S. Tax Certificate Exhibit E-2 Form of
U.S. Tax Certificate Exhibit F Form of Guaranty Exhibit G Form of Pledge
Agreement Exhibit H Form of Intellectual Property Security Agreement Exhibit I
Form of Term Loan Note Exhibit J Form of Borrower Joinder Agreement Schedule 1
Term Loan Commitments Schedule 5.2(g) Commercial Tort Claims Schedule 8.2
Addresses Schedule 8.4 Liens Schedule 8.5 Litigation Schedule 8.10 Bank Accounts
Schedule 8.11 Intellectual Property Schedule 8.12 Affiliates and Subsidiaries,
etc. Schedule 8.13 Collective Bargaining Agreements Schedule 8.15 Material
Contracts Schedule 8.16 Credit Card Agreements Schedule 9.9 Existing
Indebtedness Schedule 9.10 Loans and Advances Schedule 9.29 Post-Closing
Obligations

 

 

 

vi

 

 

LOAN AND SECURITY AGREEMENT

 

This Loan and Security Agreement dated December 16, 2019 (this “Agreement”) is
entered into by and among Vitamin Shoppe Industries LLC, a New York limited
liability company (“Vitamin Shoppe Industries”), Vitamin Shoppe Mariner, LLC, a
Delaware limited liability company, Vitamin Shoppe Global, LLC, a Delaware
limited liability company, Vitamin Shoppe Florida, LLC, a Delaware limited
liability company, Betancourt Sports Nutrition, LLC, a Florida limited liability
company, and Vitamin Shoppe Procurement Services, LLC, a Delaware limited
liability company (collectively, “Borrowers” and each individually, “Borrower”,
as hereinafter further defined), Valor Acquisition, LLC, a Delaware limited
liability company (successor by merger to Vitamin Shoppe, Inc. a Delaware
corporation) (“Parent”), the parties hereto from time to time as lenders,
whether by execution of this Agreement or an Assignment and Acceptance (each
individually, a “Lender” and collectively, “Lenders”, as hereinafter further
defined) and GACP Finance Co., LLC (“GACP”), in its capacity as agent for
Lenders (in such capacity, “Agent”, as hereinafter further defined).

 

WITNESSETH:

 

WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of August 7,
2019 (as amended from time to time in accordance therewith, including by the
First Amendment to Agreement and Plan of Merger dated November 11, 2019 (such
amendment, the “First Acquisition Agreement Amendment”), the “Acquisition
Agreement”), by and among Vitamin Shoppe, Inc., a Delaware corporation, Ultimate
Parent and Parent, Vitamin Shoppe, Inc. will merge with and into Parent (the
“Acquisition”), with Parent surviving the Acquisition as an indirect Subsidiary
of Ultimate Parent;

 

WHEREAS, Borrowers and Guarantors have requested that Lenders now make available
a term loan which shall be used by Borrowers in accordance with Section 6.7
hereof; and

 

WHEREAS, each Lender is willing to agree (severally and not jointly) to make
such term loan and provide such financial accommodations to Borrowers on a
pro rata basis according to its Term Loan Commitment (as defined below) on the
terms and conditions set forth herein and Agent is willing to act as agent for
Lenders on the terms and conditions set forth herein and the other Financing
Agreements (as defined below);

 

NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto further agree as follows:

 

SECTION 1.    DEFINITIONS

 

For purposes of this Agreement, the following terms shall have the respective
meanings given to them below:

 

“ABL Agent” means JPMorgan Chase Bank, N.A., in its capacity as agent on behalf
of lenders under the ABL Credit Agreement.

 

1

 

 

“ABL Borrowing Base” shall have the meaning provided to the term “Borrowing
Base” in the ABL Credit Agreement.

 

“ABL Borrowing Base Certificate” means the “Borrowing Base Certificate” as
defined in the ABL Credit Agreement

 

“ABL Credit Agreement” means the Second Amended and Restated Credit Agreement,
dated as of December 16, 2019, by and among the Borrowers, the Parent, the
parties from time to time party thereto as lenders and JPMorgan Chase Bank,
N.A., a national baking association, in its capacity as agent for lenders, as
amended, restated, supplemented or otherwise modified from time to time;
provided that any such amendment, restatement, supplement or modification shall
be subject to the terms of the Intercreditor Agreement.

 

“ABL Excess Availability” shall be the amount calculated as “Excess
Availability” in the ABL Credit Agreement; provided that in all instances and
for all purposes hereunder, such amount shall be net of the Push Down Reserve,
if any, and the Availability Block (in each case, without duplication to the
extent the Availability Block and Push Down Reserve may already be included in
the calculation (including component definitions) of “Excess Availability” in
the ABL Credit Agreement.

 

“ABL Lenders” means the “Lenders” under the ABL Credit Agreement.

 

“ABL Loan Documents” means the “Financing Agreements” as defined in the ABL
Credit Agreement or the agreements and other documents governing other
Indebtedness incurred under Section 9.9(t).

 

“ABL Obligations” means all Indebtedness and other Obligations (as defined in
the ABL Credit Agreement) of the Borrowers and the Guarantors incurred or owing
under the ABL Loan Documents, including all obligations in respect of the
payment of principal, interest, fees, prepayment premiums and indemnification
obligations, and any refinancing of such Indebtedness permitted under this
Agreement and under the Intercreditor Agreement; provided that all ABL
Obligations are subject to the Intercreditor Agreement.

 

“ABL Termination Event” means the date on which the “Aggregate Revolving
Commitment Amounts” as defined in the ABL Credit Agreement are terminated and/or
are reduced to zero.

 

“Account Debtor” shall have the meaning set forth in Article 9 of the UCC.

 

“Accounts” shall have the meaning set forth in Article 9 of the UCC and
includes, without limitation, as to each Borrower and Guarantor, all present and
future rights of such Borrower and Guarantor to payment of a monetary
obligation, whether or not earned by performance, which is not evidenced by
Chattel Paper or an Instrument, (a) for property that has been or is to be sold,
leased, licensed, assigned, or otherwise disposed of, (b) for services rendered
or to be rendered, (c) for a secondary obligation incurred or to be incurred, or
(d) arising out of the use of a credit or charge card or information contained
on or for use with the card.

 

“Acquisition” shall have the meaning provided in the recitals to this Agreement.

 

2

 

 

“Acquisition Agreement” shall have the meaning provided in the recitals to this
Agreement.

 

“Adjusted Eurodollar Rate” shall mean, with respect to any day during any
Interest Period, the rate per annum (rounded upwards, if necessary, to the next
1/16 of 1%) determined by dividing (a) the London Interbank Offered Rate for
such Interest Period by (b) a percentage equal to: (i) one (1) minus (ii) the
Reserve Percentage. For purposes hereof, “Reserve Percentage” shall mean for any
day, that percentage (expressed as a decimal) which is in effect from time to
time under Regulation D of the Board of Governors of the Federal Reserve System
(or any successor), as such regulation may be amended from time to time or any
successor regulation, as the maximum reserve requirement (including, any basic,
supplemental, emergency, special, or marginal reserves) applicable with respect
to “Eurocurrency Liabilities” as that term is defined in Regulation D (or
against any other category of liabilities that includes deposits by reference to
the London Interbank Offered Rate), whether or not any Lender has any
“Eurocurrency Liabilities” subject to such reserve requirement at that time. The
Term Loan shall be deemed to constitute “Eurocurrency Liabilities” and as such
shall be deemed subject to reserve requirements without benefits of credits for
proration, exceptions or offsets that may be available from time to time to a
Lender. The Adjusted Eurodollar Rate shall be adjusted automatically on and as
of the effective date of any change in the Reserve Percentage. Notwithstanding
the foregoing, in no event shall Adjusted Eurodollar Rate be less than two
percent (2%).

 

“Administrative Borrower” shall mean Vitamin Shoppe Industries, in its capacity
as Administrative Borrower on behalf of itself and the other Borrowers pursuant
to Section 6.8 hereof and its successors and assigns in such capacity.

 

“Affiliate” shall mean, with respect to a specified Person, any other Person
which directly or indirectly, through one or more intermediaries, controls or is
controlled by or is under common control with such Person. For the purposes of
this definition, the term “control” (including with correlative meanings, the
terms “controlled by” and “under common control with”), as used with respect to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of Voting Stock, by agreement or otherwise. Without
limiting the foregoing, Ultimate Parent and any subsidiary of Ultimate Parent
shall be considered Affiliates of the Borrowers for purposes of this Agreement.

 

“Affiliated Lender” shall mean, at any time, a Lender that is (i) Vintage, (ii)
an Affiliate of Vintage, any Borrower or any Guarantor, or (iii) a direct or
indirect holding company of any Borrower, at such time.

 

“Affiliated Lender Loan Holdings” shall have the meaning given to such term in
Section 13.7(b) hereof.

 

“Agent” shall mean GACP, in its capacity as agent on behalf of Lenders pursuant
to the terms hereof, and any replacement or successor agent hereunder.

 

3

 

 

“Agent Payment Account” shall mean the account of Agent as Agent may from time
to time designate to Administrative Borrower as the Agent Payment Account for
purposes of this Agreement and the other Financing Agreements.

 

“Agreement” shall have the meaning provided in the preamble hereof.

 

“Alternate Base Rate” shall mean, for any day, a rate per annum equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate
in effect on such day plus ½ of 1% and (c) the Adjusted Eurodollar Rate on such
day (or if such day is not a Business Day, the immediately preceding Business
Day) plus 1%. Any change in the Alternate Base Rate due to a change in the Prime
Rate, the Federal Funds Rate or the Adjusted Eurodollar Rate shall be effective
from and including the effective date of such change in the Prime Rate, the
Federal Funds Rate or the Adjusted Eurodollar Rate, respectively.
Notwithstanding the foregoing, in no event shall Alternate Base Rate be less
than two percent (2%).

 

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

 

“Applicable Margin” shall mean nine percent (9%) per annum.

 

“Appraised IP Value” shall mean, with respect to Intellectual Property, the
amount equal to the amount of the recovery in respect of the applicable
Intellectual Property at such time on a “net orderly liquidation value” basis as
set forth in the most recent acceptable appraisal of such Intellectual Property
received by Agent in accordance with Section 7.6, net of operating expenses,
liquidation expenses and commissions.

 

“Asset Sale” shall mean:

 

(a)               the sale, lease, conveyance or other disposition of any assets
or rights; and

 

(b)               the issuance of Capital Stock in any of the Borrowers or
Subsidiary Guarantors or the sale of Capital Stock in any of the Borrowers or
Subsidiary Guarantors.

 

Notwithstanding the preceding, none of the following items will be deemed to be
an Asset Sale:

 

(i)                 any single transaction or series of related transactions
that involves assets having a fair market value of less than $1,000,000;

 

(ii)              a transfer of assets between or among any Borrower or
Subsidiary Guarantor and any other Borrower or Subsidiary Guarantor;

 

(iii)            an issuance of Capital Stock by a Subsidiary Guarantor or a
Borrower to a Loan Party;

 

(iv)             the sale or lease of products, services, inventory, equipment,
leasehold improvements, fixtures or accounts receivable in the ordinary course
of business and any sale or other disposition of damaged, worn-out or obsolete
assets in the ordinary course of business;

 

4

 

 

(v)               the sale or other disposition of cash or Cash Equivalents;

 

(vi)             the grant in the ordinary course of business of any
non-exclusive license of Intellectual Property;

 

(vii)          any release of intangible claims or rights in connection with the
loss or settlement of a bona-fide lawsuit, dispute or other controversy;

 

(viii)        leases or subleases in the ordinary course of business to third
persons not interfering in any material respect with the business of the
Borrowers or any of the Guarantors; and

 

(ix)             an Investment permitted under Section 9.10 and any dividend or
other distribution (whether in cash, securities or other property) with respect
to any Capital Stock of the Borrowers and the Subsidiary Guarantors that are
expressly permitted under Section 9.11.

 

“Assignment and Acceptance” shall mean an Assignment and Acceptance
substantially in the form of Exhibit A attached hereto (with blanks
appropriately completed) delivered to Agent in connection with an assignment of
a Lender’s interest hereunder in accordance with the provisions of Section 13.7
hereof.

 

“Authorized Officer” shall mean the individuals holding the position of
president, treasurer, vice president of finance, chief executive officer, chief
financial officer or controller of Administrative Borrower, or if no such
officers have been appointed or elected, the sole member of the Administrative
Borrower.

 

“Availability Block” shall have the meaning provided to the term “Availability
Block” in the ABL Credit Agreement.

 

“Benchmark Replacement” means the sum of: (a) the alternate benchmark rate
(which may include Term SOFR) that has been selected by the Agent and the
Administrative Borrower giving due consideration to (i) any selection or
recommendation of a replacement rate or the mechanism for determining such a
rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing
market convention for determining a rate of interest as a replacement to London
Interbank Offered Rate for U.S. dollar-denominated syndicated credit facilities
and (b) the Benchmark Replacement Adjustment; provided that, if the Benchmark
Replacement as so determined would be less than two percent (2.00%), the
Benchmark Replacement will be deemed to be two percent (2.00%) for the purposes
of this Agreement.

 

5

 

 

“Benchmark Replacement Adjustment” means, with respect to any replacement of
London Interbank Offered Rate with an Unadjusted Benchmark Replacement, the
spread adjustment, or method for calculating or determining such spread
adjustment (which may be a positive or negative value or zero), that has been
selected by the Agent and the Administrative Borrower giving due consideration
to (i) any selection or recommendation of a spread adjustment, or method for
calculating or determining such spread adjustment, for the replacement of London
Interbank Offered Rate with the applicable Unadjusted Benchmark Replacement by
the Relevant Governmental Body or (ii) any evolving or then-prevailing market
convention for determining a spread adjustment, or method for calculating or
determining such spread adjustment, for the replacement of London Interbank
Offered Rate with the applicable Unadjusted Benchmark Replacement for U.S.
dollar-denominated syndicated credit facilities at such time.

 

“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark
Replacement, any technical, administrative or operational changes that the Agent
decides may be appropriate to reflect the adoption and implementation of such
Benchmark Replacement and to permit the administration thereof by the Agent in a
manner substantially consistent with market practice (or, if the Agent decides
that adoption of any portion of such market practice is not administratively
feasible or if the Agent determines that no market practice for the
administration of the Benchmark Replacement exists, in such other manner of
administration as the Agent decides is reasonably necessary in connection with
the administration of this Agreement).

 

“Benchmark Replacement Date” means the earlier to occur of the following events
with respect to London Interbank Offered Rate:

 

(a)       in the case of clause (a) or (b) of the definition of “Benchmark
Transition Event,” the later of (i) the date of the public statement or
publication of information referenced therein and (ii) the date on which the
administrator of London Interbank Offered Rate permanently or indefinitely
ceases to provide London Interbank Offered Rate; or

 

(b)       in the case of clause (c) of the definition of “Benchmark Transition
Event,” the date of the public statement or publication of information
referenced therein.

 

“Benchmark Transition Event” means the occurrence of one or more of the
following events with respect to the London Interbank Offered Rate:

 

(a)       a public statement or publication of information by or on behalf of
the administrator of London Interbank Offered Rate announcing that such
administrator has ceased or will cease to provide London Interbank Offered Rate,
permanently or indefinitely, provided that, at the time of such statement or
publication, there is no successor administrator that will continue to provide
London Interbank Offered Rate;

 

(b)       a public statement or publication of information by the regulatory
supervisor for the administrator of London Interbank Offered Rate, the U.S.
Federal Reserve System, an insolvency official with jurisdiction over the
administrator for London Interbank Offered Rate, a resolution authority with
jurisdiction over the administrator for London Interbank Offered Rate or a court
or an entity with similar insolvency or resolution authority over the
administrator for London Interbank Offered Rate, which states that the
administrator of London Interbank Offered Rate has ceased or will cease to
provide London Interbank Offered Rate permanently or indefinitely, provided
that, at the time of such statement or publication, there is no successor
administrator that will continue to provide London Interbank Offered Rate; or

 

(c)       a public statement or publication of information by the regulatory
supervisor for the administrator of London Interbank Offered Rate announcing
that London Interbank Offered Rate is no longer representative.

 

6

 

 

“Benchmark Transition Start Date” means (a) in the case of a Benchmark
Transition Event, the earlier of (i) the applicable Benchmark Replacement Date
and (ii) if such Benchmark Transition Event is a public statement or publication
of information of a prospective event, the 90th day prior to the expected date
of such event as of such public statement or publication of information (or if
the expected date of such prospective event is fewer than 90 days after such
statement or publication, the date of such statement or publication) and (b) in
the case of an Early Opt-in Election, the date specified by the Agent or the
Required Lenders, as applicable, by notice to the Administrative Borrower, the
Agent (in the case of such notice by the Required Lenders) and the Lenders.

 

“Benchmark Unavailability Period” means, if a Benchmark Transition Event and its
related Benchmark Replacement Date have occurred with respect to London
Interbank Offered Rate and solely to the extent that London Interbank Offered
Rate has not been replaced with a Benchmark Replacement, the period (x)
beginning at the time that such Benchmark Replacement Date has occurred if, at
such time, no Benchmark Replacement has replaced London Interbank Offered Rate
for all purposes hereunder in accordance with Section 3.4 and (y) ending at the
time that a Benchmark Replacement has replaced London Interbank Offered Rate for
all purposes hereunder pursuant to Section 3.4.

 

“Blocked Accounts” shall have the meaning set forth in Section 6.3 hereof.

 

“Borrower Joinder Agreement” shall mean a joinder agreement in substantially the
form of Exhibit J hereto and otherwise in form and substance acceptable to
Agent.

 

“Borrowers” shall mean, collectively, the following (together with their
respective successors and assigns): (a) Vitamin Shoppe Industries LLC, a New
York limited liability company, (b) Vitamin Shoppe Mariner, LLC, a Delaware
limited liability company, (c) Vitamin Shoppe Global, LLC, a Delaware limited
liability company, (d) Vitamin Shoppe Florida, LLC, a Delaware limited liability
company, (e) Betancourt Sports Nutrition, LLC, a Florida limited liability
company, (f) Vitamin Shoppe Procurement Services, LLC , a Delaware limited
liability company, and (g) any other Person that at any time after the Closing
Date becomes a Borrower pursuant to the terms hereof, including, without
limitation, Section 9.23 hereof and by execution of a Borrower Joinder
Agreement; each sometimes being referred to herein individually as a “Borrower”.

 

“Borrowing Base” shall mean, at any time, the amount equal to:

 

(a)               from the Closing Date until January 10, 2020, $70,000,000; or

 

(b)               thereafter, the amount equal to:

 

(i)                five percent (5%) of the amount of Eligible Credit Card
Receivables of the Borrowers at such time, plus

 

(ii)              ten percent (10%) of the amount of Eligible Accounts of the
Borrowers at such time, plus

 

7

 

 

(iii)           twenty percent (20%) of the Net Recovery Percentage multiplied
by the Value of the Eligible Inventory of the Borrowers at such time, plus

 

(iv)            subject to Post-Closing Appraisals and adjustment pursuant to
the next succeeding paragraph up to seventy-five (75%) of the Net Recovery
Percentage multiplied by the Value of the Eligible Equipment of the Borrowers at
such time, plus

 

(v)              subject to Post-Closing Appraisals and adjustment pursuant to
the next succeeding paragraph up to seventy five (75%) of the Appraised IP Value
of the Eligible Intellectual Property of the Borrowers at such time, minus

 

(vi)            the Reserves.

 

The actual advance rate percentages to be used in calculating the amounts
pursuant to clause (b)(iv) and clause (b)(v) above, which advance rate
percentages shall not exceed the applicable maximum percentage as set forth in
such clauses, shall be determined by Agent in its Permitted Discretion. For
purposes of clarity, upon receipt of the Post-Closing Appraisals, the advance
rates set forth in clause (b)(iv) and clause (b)(v) above shall be adjusted and
reset upon 1 days notice by Agent to Administrative Borrower to reflect the
results of such appraisals. Once the applicable advance rate percentage has been
established by Agent, so long as no Event of Default has occurred and is
continuing, Agent shall give to the Administrative Borrower five (5) Business
Days’ telephonic or electronic notice of any change in such advance rate
percentage.

 

Notwithstanding anything to the contrary, in calculating the Borrowing Base
pursuant to clause (b), (1) the aggregate advance rate percentage of Eligible
Accounts that are included in the ABL Borrowing Base and the Borrowing Base
shall not exceed ninety-five percent (95%); (2) the aggregate advance rate
percentage of Eligible Credit Card Receivables that are included in the ABL
Borrowing Base and the Borrowing Base shall not exceed ninety-five percent
(95%); (3) the aggregate advance rate percentage of Eligible Inventory that is
included in the ABL Borrowing Base and the Borrowing Base shall not exceed a
hundred and ten percent (110%), and in each case, amounts in excess of
limitations set forth in clauses (1), (2) and (3) shall be excluded from the
Borrowing Base.

 

The amount of Eligible Inventory shall be determined based on the perpetual
inventory record maintained by the Borrowers.

 

Agent shall have the right to establish Reserves against or sublimits in the
Borrowing Base in such amounts and with respect to such matters as Agent shall
deem reasonably necessary or appropriate, based on new information received by
Agent and after Agent has completed its updated field audits, examinations and
appraisals of the Collateral; provided, however, that, so long as no Event of
Default has occurred and is continuing, Agent shall give to the Administrative
Borrower four (4) days’ telephonic or electronic notice if (A) Agent establishes
new categories of Reserves, (B) Agent changes the methodology of calculating
Reserves, or (C) Agent establishes new categories of sublimits in the Borrowing
Base. The foregoing notwithstanding, in the event Agent establishes Reserves to
preserve or protect or maximize the value of the Collateral during the
continuance of an Event of Default, Agent shall only provide the Administrative
Borrower with notice at the time such Reserves are established.

 

8

 

 

Accounts, Credit Card Receivables, Inventory, Equipment and Intellectual
Property of the Borrowers shall only be Eligible Accounts, Eligible Credit Card
Receivables, Eligible Inventory, Eligible Equipment and Eligible Intellectual
Property, as applicable, to the extent that (x) Agent has conducted and
completed a field examination, appraisal and other due diligence with respect
thereto (or, with respect to Eligible Equipment or Eligible Intellectual
Property, to the extent that Agent has agreed to deemed values for such items
prior to the completion of the initial field examination, appraisal or other due
diligence with respect thereto) and (y) the criteria for Eligible Accounts,
Eligible Credit Card Receivables, Eligible Inventory, Eligible Equipment and
Eligible Intellectual Property set forth herein, as applicable, are satisfied
with respect thereto in accordance with this Agreement (or such other or
additional criteria as Agent may, at its option, establish with respect thereto
in accordance with this Agreement and subject to such Reserves as Agent may
establish in its Permitted Discretion).

 

The Borrowing Base shall be determined at any time by Agent, on the basis of the
most recently delivered Borrowing Base Certificate, as adjusted by Agent for any
changes in Reserves or otherwise in accordance with the terms hereof.

 

“Borrowing Base II” shall mean, at any time, the amount equal to:

 

(a)               the amount equal to:

 

(i)                five percent (5%) of the amount of Eligible Credit Card
Receivables of the Borrowers at such time, plus

 

(ii)              ten percent (10%) of the amount of Eligible Accounts of the
Borrowers at such time, plus

 

(iii)           fifteen percent (15%) of the Net Recovery Percentage multiplied
by the Value of the Eligible Inventory of the Borrowers at such time, plus

 

(iv)            subject to Post-Closing Appraisals and adjustment pursuant to
the next succeeding paragraph up to fifty (50%) of the Net Recovery Percentage
multiplied by the Value of the Eligible Equipment of the Borrowers at such time,
minus

 

(v)              the Reserves.

 

The actual advance rate percentages to be used in calculating the amounts
pursuant to clause (b)(iv) above, which advance rate percentages shall not
exceed the applicable maximum percentage as set forth in such clauses, shall be
determined by Agent in its Permitted Discretion. For purposes of clarity, upon
receipt of the Post-Closing Appraisals, the advance rates set forth in clause
(b)(iv) above shall be adjusted and reset upon 1 days notice by Agent to
Administrative Borrower to reflect the results of such appraisals. Once the
applicable advance rate percentage has been established by Agent, so long as no
Event of Default has occurred and is continuing, Agent shall give to the
Administrative Borrower five (5) Business Days’ telephonic or electronic notice
of any change in such advance rate percentage.

 

9

 

 

Notwithstanding anything to the contrary, in calculating the Borrowing Base II,
(1) the aggregate advance rate percentage of Eligible Accounts that are included
in the ABL Borrowing Base and the Borrowing Base II shall not exceed ninety-five
percent (95%); (2) the aggregate advance rate percentage of Eligible Credit Card
Receivables that are included in the ABL Borrowing Base and the Borrowing Base
II shall not exceed ninety-five percent (95%); (3) the aggregate advance rate
percentage of Eligible Inventory that is included in the ABL Borrowing Base and
the Borrowing Base II shall not exceed a hundred and five percent (105%), and in
each case, amounts in excess of limitations set forth in clauses (1), (2) and
(3) shall be excluded from the Borrowing Base II.

 

The amounts of Eligible Inventory shall be determined based on the perpetual
inventory record maintained by the Borrowers.

 

Agent shall have the right to establish Reserves against or sublimits in the
Borrowing Base II in such amounts and with respect to such matters as Agent
shall deem reasonably necessary or appropriate, based on new information
received by Agent and after Agent has completed its updated field audits,
examinations and appraisals of the Collateral; provided, however, that, so long
as no Event of Default has occurred and is continuing, Agent shall give to the
Administrative Borrower four (4) days’ telephonic or electronic notice if (A)
Agent establishes new categories of Reserves, (B) Agent changes the methodology
of calculating Reserves, or (C) Agent establishes new categories of sublimits in
the Borrowing Base II. The foregoing notwithstanding, in the event Agent
establishes Reserves to preserve or protect or maximize the value of the
Collateral during the continuance of an Event of Default, Agent shall only
provide the Administrative Borrower with notice at the time such Reserves are
established.

 

Accounts, Credit Card Receivables, Inventory and Equipment of the Borrowers
shall only be Eligible Accounts, Eligible Credit Card Receivables, Eligible
Inventory and Eligible Equipment, as applicable, to the extent that (x) Agent
has conducted and completed a field examination, appraisal and other due
diligence with respect thereto (or, with respect to Eligible Equipment, to the
extent that Agent has agreed to deemed values for such item prior to the
completion of the initial field examination, appraisal or other due diligence
with respect thereto) and (y) the criteria for Eligible Accounts, Eligible
Credit Card Receivables, Eligible Inventory and Eligible Equipment set forth
herein, as applicable, are satisfied with respect thereto in accordance with
this Agreement (or such other or additional criteria as Agent may, at its
option, establish with respect thereto in accordance with this Agreement and
subject to such Reserves as Agent may establish in its Permitted Discretion).

 

The Borrowing Base II shall be determined at any time by Agent, on the basis of
the most recently delivered Borrowing Base Certificate, as adjusted by Agent for
any changes in Reserves or otherwise in accordance with the terms hereof.

 

“Borrowing Base II Period” shall have the meaning set forth in Section 5.1(d)
hereofEnd Date” shall mean the date on which the Term Loan Outstandings exceed
the then amount of Borrowing Base II.

 

“Borrowing Base II Period” shall mean the period (a) beginning on the first day
of any fiscal quarter immediately following any date on which the Term Loan
Outstandings equal or are less than the lesser of (x) $25,000,000 and (y) the
amount of Borrowing Base II as of the last day of the prior fiscal quarter, and
(b) ending on the Borrowing Base II End Date.

 

10

 

 

“Borrowing Base Certificate” shall mean a certificate substantially in the form
of Exhibit D hereto, as such form may from time to time be modified by Agent to
reflect modifications to the Borrowing Base or Borrowing Base II and the
reporting requirements pursuant to the terms of this Agreement, which is duly
completed (including all schedules thereto) and executed by the chief financial
officer, a vice president of finance, a controller or other appropriate
financial officer of Administrative Borrower reasonably acceptable to Agent (or
if no such officers have been appointed or elected, the sole member of
Administrative Borrower) and delivered to Agent.

 

“Borrowing Cap” shall mean, on any date of calculation, (x) prior to the making
of the Term Loan, the amount, equal to the lesser of (a) the aggregate Term Loan
Commitments and (b) the Borrowing Base, in each case, in effect at such time and
(y) after the making of the Term Loan, the amount equal to the lesser of (A) the
aggregate Term Loan Outstandings and (B) the Borrowing Base (or Borrowing Base
II, if then applicable), in each case, in effect at such time.

 

“Business Day” shall mean any day on which Agent is open for the transaction of
business other than a Saturday, Sunday, or other day on which commercial banks
are authorized or required to close under the laws of the State of New York,
except that if a determination of Business Day shall relate to any calculation
of the London Interbank Offered Rate, the term Business Day shall also exclude
any day on which banks are not open for general business in London.

 

“Capital Expenditures” shall mean, for any period, any expenditure of money
under a Capital Lease or for the lease, purchase or other acquisition of any
capital asset, or for the purchase or construction of assets, or for
improvements or additions thereto, which are capitalized on a Person’s balance
sheet, but excluding (i) any such expenditure to the extent of trade-ins thereon
and (ii) reimbursed leasehold improvements.

 

“Capital Leases” shall mean, as applied to any Person, any lease of (or any
agreement conveying the right to use) any property (whether real, personal or
mixed) by such Person as lessee which in accordance with GAAP, is required to be
reflected as a liability on the balance sheet of such Person.

 

“Capital Stock” shall mean, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person’s capital stock or partnership, limited liability company or other equity
interests at any time outstanding, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock or other interests (but
excluding any debt security that is exchangeable for or convertible into such
capital stock).

 

“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act (Pub.
L. 116-136, 134 Stat 281) and the Interim Final Rule set forth in 13 C.F.R. §120
– Business Loans, each as in effect on the First Amendment Effective Date.

 

11

 

 

“Cash Equivalents” shall mean, at any time, (a) any evidence of Indebtedness
with a maturity date of ninety (90) days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (b) certificates of deposit or
bankers’ acceptances with a maturity of ninety (90) days or less of any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$1,000,000,000; (c) commercial paper (including variable rate demand notes) with
a maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of any Borrower other than Guarantor) organized under the laws of any
State of the United States of America or the District of Columbia and rated at
least A-1 by Standard & Poor’s Ratings Service, a division of The McGraw-Hill
Companies, Inc. or at least P-1 by Moody’s Investors Service, Inc.;
(d) repurchase obligations with a term of not more than thirty (30) days for
underlying securities of the types described in clause (a) above entered into
with any financial institution having combined capital and surplus and undivided
profits of not less than $1,000,000,000; (e) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States of America or issued by any
governmental agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within ninety (90) days or less
from the date of acquisition; provided, that, the terms of such agreements
comply with the guidelines set forth in the Federal Financial Agreements of
Depository Institutions with Securities Dealers and Others, as adopted by the
Comptroller of the Currency on October 31, 1985; and (f) investments in money
market funds and mutual funds which invest substantially all of their assets in
securities of the types described in clauses (a) through (e) above; and
(g) other investments as reasonably agreed by Agent in writing.

 

“Change of Control” shall mean (a) a transfer (in one transaction or a series of
transactions) of all or substantially all of the assets of any Borrower or
Guarantor to any “person” or “group” (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than as permitted in Section 9.7 hereof;
(b) the liquidation or dissolution of any Borrower or Guarantor or the adoption
of a plan by the stockholders of any Borrower or Guarantor relating to the
dissolution or liquidation of any Borrower or Guarantor, other than as permitted
in Section 9.7 hereof; (c) any “person” or “group” (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), excluding Permitted Holders,
shall become, or obtain rights (whether by means of warrants, options or
otherwise) to become, the beneficial owner, directly or indirectly, of more than
thirty-five percent (35%) of the issued and outstanding shares of the Voting
Stock of Ultimate Parent entitled (without regard to the occurrence of any
contingency) to vote for the election of members of the board of directors of
Ultimate Parent; (d) other than the Permitted Holders, any Person and/or its
Affiliates shall at any time have the right to elect, or cause to be elected,
and have elected, or caused to be elected, a majority of the members of the
board of directors of Ultimate Parent, (e) Ultimate Parent fails to own directly
or indirectly at least a majority of the voting power of the total outstanding
Voting Stock of Parent, (f) Parent fails to own directly one hundred percent
(100%) of the Capital Stock of Vitamin Shoppe Industries, (g) other than as
permitted in Section 9.7 hereof, Vitamin Shoppe Industries fails to own directly
or indirectly one hundred percent (100%) of the Capital Stock of any of its
Subsidiaries that are a Borrower as of the Closing Date or become a Borrower
thereafter, (h) other than as permitted in Section 9.7, Parent fails to own
directly or indirectly one hundred percent (100%) of the Capital Stock of any
Person that becomes a Borrower after the date hereof, (i) the failure of Parent
to own directly or indirectly a majority of the voting power of the total
outstanding Voting Stock of any Person that becomes a Guarantor after the date
hereof, or (j) any “Change of Control” (or equivalent term) as defined in the
ABL Credit Agreement occurs. Notwithstanding the foregoing, no Change of Control
shall occur as a result of the Acquisition.

 

12

 

 

“Chattel Paper” shall have the meaning set forth in Article 9 of the UCC.

 

“Closing Date” shall mean the date on which the conditions specified in
Section 4 are satisfied or waived in accordance with Section 11.4.

 

“Closing Date Equity Contribution” shall have the meaning set forth in
Section 4(n) hereof.

 

“Code” shall mean the Internal Revenue Code of 1986, 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.

 

“Collateral” shall have the meaning set forth in Section 5.1 hereof.

 

“Collateral Access Agreement” shall mean an agreement in writing, in form and
substance reasonably satisfactory to Agent, from any lessor of premises to any
Borrower or Guarantor, or

any other Person to whom any Collateral is consigned or who has custody, control
or possession of any such Collateral or is otherwise the owner or operator of
any premises on which any of such Collateral is located, in favor of Agent (or
in favor of Agent and ABL Agent) with respect to the Collateral at such premises
or otherwise in the custody, control or possession of such lessor, consignee or
other Person, inter alia, acknowledges the seniority of the security interest of
Agent in such Collateral over that of any security interest of such lessor,
consignee or other Person (subject to any mutually agreed exceptions), agrees to
waive (or subordinate on terms acceptable to Agent) any and all claims such
lessor, consignee, processor or other person may, at any time, have against such
Collateral, whether for storage or otherwise, and agrees to permit Agent access
to, and the right to remain on, the premises of such lessor, consignee,
processor or other person so as to exercise Agent’s rights and remedies and
otherwise deal with such Collateral (which agreement may be subject to any prior
rights of ABL Agent), and in the case of any customs broker, cargo consolidator,
freight forwarder, consignee or other person who at any time has custody,
control or possession of any bills of lading or other documents of title, agrees
to hold such Collateral, acknowledges that it holds and will hold possession of
the Collateral for the benefit of the Agent and the ABL Agent and agrees to
follow all instructions of Agent or ABL Agent (as the case may be) with respect
thereto.

 

“Collateral Documents” shall mean, collectively, the Pledge Agreement, the
Deposit Account Control Agreements, the Investment Property Control Agreements
and any other agreements, instruments and documents executed in connection with
this Agreement that are intended to create, perfect or evidence liens to secure
the Obligations, including, without limitation, all other security agreements,
deposit account control agreements, pledge agreements, subordination agreements,
pledges, powers of attorney, assignments, financing statements and all other
written matter whether theretofore, now or hereafter executed by any Borrower or
any Guarantor and delivered to Agent, in each case as may be amended, restated,
supplemented or otherwise modified from time to time.

 

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

 

13

 

 

“Compliance Period” shall mean any period commencing on the first date on which
ABL Excess Availability is less than $10,000,000, in each case for three (3)
consecutive days, and continuing until the date that both (x) ABL Excess
Availability exceeds $10,000,000 for sixty (60) consecutive days, and (y) no
Default or Event of Default then exists and is continuing.

 

“Connection Income Taxes” means Other Connection Taxes that are imposed on or
measured by net income (however denominated) or that are franchise Taxes or
branch profits Taxes.

 

“Consolidated Depreciation and Amortization Expense” means, with respect to any
Person for any period, the total amount of depreciation and amortization
expense, including the amortization of deferred financing fees or costs,
capitalized expenditures, customer acquisition costs and incentive payments,
conversion costs and contract acquisition costs, the amortization of original
issue discount resulting from the issuance of Indebtedness at less than par and
amortization of favorable or unfavorable lease assets or liabilities, of such
Person and its Subsidiaries for such period on a consolidated basis and
otherwise determined in accordance with GAAP.

 

“Consolidated Net Income” shall mean with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided, that, the Net Income (but not loss) of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting will be
included only to the extent of the amount of dividends or similar distributions
paid in cash to the specified Person or a Subsidiary of the Person; and
provided, further that there shall be excluded:

 

(a)               the Net Income of any Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that Net Income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its stockholders;

 

(b)               the cumulative effect of a change in accounting principles
will be excluded;

 

(c)               any non-recurring costs and expenses included in connection
with (i) the transactions contemplated by this Agreement and the other Financing
Agreements, and (ii) any equity issuance by Parent;

 

(d)               any non-cash compensation charges, including, any such charges
arising from stock options, restricted stock grants or other equity-incentive
programs;

 

(e)               any non-cash costs, charges or expenses relating to the
application of purchase accounting;

 

(f)                any unrealized gain or loss resulting from the application of
SFAS 133 with respect to obligations in respect of a Hedge Agreement;

 

14

 

 

(g)               any non-cash goodwill impairment charges or other intangible
asset impairment charges incurred subsequent to the date of this Agreement
resulting from the application of SFAS 142 or other non-cash asset impairment
charges incurred subsequent to the date of this Agreement resulting from the
application of SFAS 144; and

 

(h)               the Net Income (or deficit) of any Person accrued prior to the
date it becomes a Subsidiary or is merged into or consolidated with Parent or
any of its Subsidiaries.

 

In addition, to the extent included in the Consolidated Net Income of such
Person and its Subsidiaries, notwithstanding anything to the contrary in the
foregoing, Consolidated Net Income shall exclude (i) any expenses and charges
that are reimbursed by indemnification or other reimbursement provisions in
connection with any investment or any sale, conveyance, transfer or other
disposition of assets permitted hereunder and (ii) the amount of business
interruption insurance proceeds received and, to the extent covered by insurance
and actually reimbursed, or, so long as the Borrowers have made a determination
that there exists reasonable evidence that such amount will in fact be
reimbursed by the insurer and only to the extent that such amount is (A) not
denied by the applicable carrier in writing within 180 days and (B) in fact
reimbursed within 365 days of the date of such evidence (with a deduction for
any amount so added back to the extent not so reimbursed within such 365 days),
expenses with respect to liability or casualty events or business interruption.

 

“Control” shall have the meaning set forth in Article 8 of the UCC or, if
applicable, in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the UCC.

 

“Convertible Note Documents” shall mean, collectively, the Convertible Notes,
the Convertible Note Indenture, the Convertible Note Hedge and Warrant Documents
and all other agreements, documents and instruments now or at any time executed
and delivered by any Borrower or Guarantor in connection therewith.

 

“Convertible Note Hedge and Warrant Counterparty” shall mean Bank of America,
N.A., JPMorgan Chase Bank, National Association or any other financial
institution in its capacity as counterparty to Parent under the applicable
Convertible Note Hedge and Warrant Documents and any successor, replacement or
additional counterparty and their respective successors and assigns.

 

“Convertible Note Hedge and Warrant Documents” shall mean the confirmations
related to the Convertible Note Hedge and Warrant Transactions, in each case,
entered into between Parent and the applicable Convertible Note Hedge and
Warrant Counterparty and all other agreements, documents and instruments now or
at any time executed and delivered by Parent in connection with the Convertible
Note Hedge and Warrant Transactions, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced to the
extent permitted herein.

 

“Convertible Note Hedge and Warrant Transactions” shall mean (x) the convertible
note hedge transactions entered into by Parent with the Convertible Note Hedge
and Warrant Counterparty to offset any cash payments required to be made by
Parent in excess of the principal amount of the Convertible Notes that are
converted or exchanged, so long as the Borrowers and Guarantors do not have any
payment obligation with respect to such convertible note hedge transactions
other than premiums and charges the total amount of which are fixed and known at
the time such convertible note hedge transactions are entered into and
(y) separate warrant transactions entered into by Parent with the Convertible
Note Hedge and Warrant Counterparty.

 

15

 

 

“Convertible Note Indenture” shall mean that certain Indenture by and between
Parent (as successor to Vitamin Shoppe, Inc.), as issuer, and Wilmington Trust,
National Association, as trustee, (or another similar financial institution)
with respect to the Convertible Notes due 2020, as amended by that certain First
Supplemental Indenture, dated as of December 16, 2019, among Parent and
Wilmington Trust National Association, as the same now exists or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced to
the extent permitted herein.

 

“Convertible Notes” shall mean, collectively, the Convertible Notes due 2020
issued by Parent (with an effective interest rate not to exceed 4%) and
outstanding on the Closing Date pursuant to the Convertible Note Indenture in
the original aggregate principal amount of up to $300,000,000.

 

“Convertible Notes Escrow” means an escrow arrangement reasonably satisfactory
to the Agent for the deposit of the Convertible Notes Repurchase Amount into a
Deposit Account reasonably acceptable to Agent, which Deposit Account shall, if
Agent requests, be subject to a Deposit Account Control Agreement.

 

“Convertible Notes Repurchase Amount” means the amount required to fully
repurchase, redeem and satisfy the then outstanding Convertible Notes (including
any make-whole premiums required thereby) in cash, which shall be funded solely
from proceeds of equity contributions to Parent and shall not for the avoidance
of doubt, be funded using proceeds from any (x) Asset Sale, (y) Event of Loss,
or (z) incurrence of Indebtedness.

 

“Credit Card Acknowledgments” shall mean, collectively, the agreements by Credit
Card Issuers or Credit Card Processors who are parties to Credit Card Agreements
in favor of Agent acknowledging Agent’s security interest (with the priority
required by the Financing Agreements), for and on behalf of Lenders, in the
monies due and to become due to a Borrower (including, without limitation,
credits and reserves) under the Credit Card Agreements, and agreeing to transfer
all such amounts to the Blocked Accounts, as the same now exist or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced
pursuant to their terms, sometimes being referred to herein individually as a
“Credit Card Acknowledgment”.

 

“Credit Card Agreements” shall mean all agreements entered into on, prior and
after the date hereof by any Borrower or for the benefit of any Borrower, in
each case with any Credit Card Issuer or any Credit Card Processor, as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, including, but not limited to, the agreements set
forth on Schedule 8.16 hereto.

 

“Credit Card Issuer” shall mean any Person (other than Parent and its
Subsidiaries) who issues or whose members issue credit cards, including, without
limitation, MasterCard or VISA bank credit or debit cards or other bank credit
or debit cards issued through MasterCard International, Inc., Visa, U.S.A., Inc.
or Visa International and American Express, Discover, Japan Credit Bureau (a/k/a
JCB Co.), Diners Club, Carte Blanche and other non-bank credit or debit cards,
including, without limitation, credit or debit cards issued by or through
American Express Travel Related Services Company, Inc., and Novus Services, Inc.

 

16

 

 

“Credit Card Processor” shall mean any servicing or processing agent or any
factor or financial intermediary (other than Parent and its Subsidiaries) who
facilitates, services, processes or manages the credit authorization, billing
transfer and/or payment procedures with respect to any Borrower’s sales
transactions involving credit card or debit card purchases by customers using
credit cards or debit cards issued by any Credit Card Issuer.

 

“Credit Card Receivables” shall mean collectively, (a) all present and future
rights of any Borrower to payment from any Credit Card Issuer or Credit Card
Processor arising from sales of goods or rendition of services to customers who
have purchased such goods or services using a credit or debit card, and (b) all
present and future rights of any Borrower to payment from any Credit Card
Issuer, Credit Card Processor or other third party in connection with the sale
or transfer of Credit Card Receivables arising pursuant to the sale of goods or
rendition of services to customers who have purchased such goods or services
using a credit card or a debit card, including, but not limited to, all amounts
at any time due or to become due from any Credit Card Issuer or Credit Card
Processor under the Credit Card Agreements or otherwise which in the case of
both clause (a) and (b) above have been earned by performance by such Borrower
but not yet been paid to such Borrower by the Credit Card Issuer or the Credit
Card Processor, as applicable.

 

“Cure Amount” shall have the meaning provided in Section 9.17.

 

“Cure Right” shall have the meaning provided in Section 9.17.

 

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

 

“Defaulting Lender” shall mean any Lender, as determined by Agent, that has
(a) failed to fund any portion of its Term Loan within three Business Days of
the date required to be funded by it hereunder, (b) notified any Borrower, Agent
or any Lender in writing that it does not intend to comply with any of its
funding obligations under this Agreement or has made a public statement to the
effect that it does not intend to comply with its funding obligations under this
Agreement or under other agreements in which it commits to extend credit,
(c) failed, within three Business Days after request by Agent, to confirm that
it will comply with the terms of this Agreement relating to its obligations to
fund the Term Loan, (d) otherwise failed to pay over Agent or any other Lender
any other amount required to be paid by it hereunder within three Business Days
of the date when due, unless the subject of a good faith dispute, or
(e) (i) become or is insolvent or has a parent company that has become or is
insolvent or (ii) become the subject of a bankruptcy or insolvency proceeding,
or has had a receiver, conservator, trustee or custodian appointed for it, or
has taken any action in furtherance of, or indicating its consent to, approval
of or acquiescence in any such proceeding or appointment or has a parent company
that has become the subject of a bankruptcy or insolvency proceeding, or has had
a receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment.

 

17

 

 

“Deposit Account Control Agreement” shall mean an agreement in writing, in form
and substance reasonably satisfactory to Agent, by and among Agent, ABL Agent
(if a party thereto), Borrowers or Guarantor with a Deposit Account at any bank
and the bank at which such Deposit Account is at any time maintained which
provides that such bank will comply with instructions originated by Agent or ABL
Agent (as the case may be) directing disposition of the funds in the Deposit
Account without further consent by such Borrower or Guarantor upon the
occurrence of an Event of Default or upon the commencement of a Compliance
Period and at all times during the continuance of such Event of Default or
Compliance Period, and has such other terms and conditions as Agent may
reasonably require including as to any such agreement with respect to any
Blocked Account, providing that all items received or deposited in the Blocked
Accounts are the property of Agent, for itself and the ratable benefit of the
Lenders, or ABL Agent, for itself and the ratable benefit of the Lenders and the
Bank Product Providers (each as defined in the ABL Credit Agreement) (as the
case may be) and, except as otherwise agreed with the corresponding bank and
with such other appropriate or customary exceptions for agreements of this kind,
that the bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for deposit therein, or the funds from time to time
on deposit therein and that the bank will upon the occurrence of an Event of
Default or upon the commencement of a Compliance Period and at all times during
the continuance of such Event of Default or Compliance Period, wire, or
otherwise transfer, in immediately available funds, on a daily basis to the
Agent Payment Account (as defined in this Agreement) or the Agent Payment
Account (as defined in the ABL Credit Agreement) (as the case may be) all funds
received or deposited into the Blocked Accounts.

 

“Deposit Accounts” shall have the meaning set forth in Article 9 of the UCC.

 

“Dividing Person” has the meaning assigned to it in the definition of
“Division.”

 

“Division” means the division of the assets, liabilities and/or obligations of a
Person (the “Dividing Person”) among two or more Persons (whether pursuant to a
“plan of division” or similar arrangement), which may or may not include the
Dividing Person and pursuant to which the Dividing Person may or may not
survive.

 

“Division Successor” means any Person that, upon the consummation of a Division
of a Dividing Person, holds all or any portion of the assets, liabilities and/or
obligations previously held by such Dividing Person immediately prior to the
consummation of such Division. A Dividing Person which retains any of its
assets, liabilities and/or obligations after a Division shall be deemed a
Division Successor upon the occurrence of such Division.

 

“Documents” shall have the meaning set forth in Article 9 of the UCC.

 

“dollars” or “$” refers to lawful money of the U.S., unless the context clearly
otherwise indicates.

 

“Early Opt-in Election” means the occurrence of:

 

(a)       a determination by the Agent or a notification by the Required Lenders
to the Agent (with a copy to the Administrative Borrower) that the Required
Lenders have determined that U.S. dollar-denominated syndicated credit
facilities being executed at such time, or that include language similar to that
contained in Section 3.4 are being executed or amended, as applicable, to
incorporate or adopt a new benchmark interest rate to replace London Interbank
Offered Rate, and

 

18

 

 

(b)       the election by the Agent or the election by the Required Lenders to
declare that an Early Opt-in Election has occurred and the provision, as
applicable, by the Agent of written notice of such election to the
Administrative Borrower and the Lenders or by the Required Lenders of written
notice of such election to the Agent.

 

“Early Termination Fee” shall have the meaning given to such term in the Fee
Letter.

 

“EBITDA” means, with respect to any Person for any period, the Consolidated Net
Income of such Person for such period:

 

(a)               increased (without duplication) by the following:

 

(i)                 provision for Taxes based on income or profits or capital,
including, without limitation, state franchise, excise and similar taxes,
property taxes and foreign withholding taxes of such Person paid or accrued
during such period, including any penalties and interest relating to any tax
examinations, deducted (and not added back) in computing Consolidated Net
Income; plus

 

(ii)              Interest Expense of such Person for such period (including (x)
net losses or any obligations under any Hedge Agreement, (y) bank fees and
(z) costs of surety bonds in connection with financing activities, to the extent
the same were deducted (and not added back) in computing Consolidated Net
Income); plus

 

(iii)            Consolidated Depreciation and Amortization Expense of such
Person for such period to the extent the same were deducted (and not added back)
in computing Consolidated Net Income; plus

 

(iv)             any expenses or charges (other than depreciation or
amortization expense) related to any equity offering, Investment, acquisition,
disposition or recapitalization permitted hereunder or the incurrence of
Indebtedness permitted to be incurred hereunder (including a refinancing
thereof) (whether or not successful), including (A) such fees, expenses or
charges related to this Agreement, the ABL Credit Agreement and any other credit
facilities and (B) any amendment or other modification of this Agreement, the
ABL Credit Agreement and any other credit facilities and (C) the costs and
expenses incurred in connection with the Acquisition on or prior to the Closing
Date, in each case, deducted (and not added back) in computing Consolidated Net
Income; plus

 

(v)               the amount of any restructuring charge or reserve, integration
cost, severance expense or other business optimization expense or cost or any
other unusual, non-recurring or extraordinary expense, loss or cost that is
deducted (and not added back) in such period in computing Consolidated Net
Income, including, any one-time costs incurred in connection with acquisitions
or divestitures after the Closing Date, costs related to the closure and/or
consolidation of facilities and to existing lines of business, costs related to
new product introductions or one-time compensation charges; provided that the
aggregate amount of add backs made pursuant to this clause (a)(v) and
clause (a)(vii) below (other than up to $10 million in severance expenses and
lease breakage costs contemplated by the Specified Closing Plan during the term
of this Agreement, which shall not be subject to or counted towards this cap)
shall not exceed an amount equal to 15% of EBITDA for such period (and such
determination shall be made after the making of, and after giving effect to, any
adjustments pursuant to this clause (a)(v)); plus

 

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(vi)             any other non-cash charges, write-downs, write-offs, expenses,
losses or items reducing Consolidated Net Income for such period including
deferred financing costs and other charges written off in connection with any
early extinguishment of Indebtedness, any impairment charges, write-downs or
write-offs relating to goodwill, intangible assets, long-lived assets,
investments in debt and equity securities or as a result of a change in law or
regulation or the impact of purchase accounting (excluding any such non-cash
charge, write-down or item to the extent it represents an accrual or reserve for
a cash expenditure for a future period), or other items classified by the
Borrowers as non-recurring items less other non-cash items of income increasing
Consolidated Net Income (excluding any such non-cash item of income to the
extent it represents a receipt of cash in any future period); plus

 

(vii)          the amount of “run-rate” cost savings, operating expense
reductions and synergies projected by the Borrowers in good faith to result from
actions taken prior to or during or expected to be taken following such period
(which cost savings, operating expense reductions or synergies shall be subject
only to certification by an authorized officer of the Borrowers (or if no
applicable officers have been appointed or elected, the sole member(s) of the
applicable Borrower(s)) and shall be calculated on a pro forma basis as though
such cost savings, operating expense reductions or synergies had been realized
on the first day of such period), net of the amount of actual benefits realized
prior to or during such period from such actions; provided that (1) an
authorized officer of the Borrowers (or if no applicable officers have been
appointed or elected, the sole member(s) of the applicable Borrower(s)) shall
have certified to the Agent that (x) such cost savings, operating expense
reductions or synergies are reasonably identifiable, reasonably attributable to
the actions specified and reasonably anticipated to result from such actions and
(y) such actions have been taken or are to be taken within twelve (12) months
from the date of such transaction and (2) the aggregate amount of add backs made
pursuant to clause (a)(v) above and this clause (a)(vii) (other than up to $10
million in severance expenses and lease breakage costs contemplated by the
Specified Closing Plan during the term of this Agreement, which shall not be
subject to or counted towards this cap) shall not exceed an amount equal to 15%
of EBITDA for such period (and such determination shall be made after the making
of, and after giving effect to, any adjustments pursuant to this
clause (a)(vii)); plus

 

(viii)        any costs or expense incurred by the Parent or any of its
Subsidiaries pursuant to any management equity plan or stock option plan or any
other management or employee benefit plan or agreement or any stock subscription
or shareholder agreement, to the extent that such cost or expenses are non-cash
or otherwise funded with cash proceeds contributed to the capital of the Parent
or any of its Subsidiaries or net cash proceeds of an issuance of Capital Stock
(other than disqualified equity interests) of the Parent or any of its
Subsidiaries; plus

 

(ix)             earnout and contingent consideration obligations (including to
the extent accounted for as bonuses or otherwise) and adjustments thereof and
purchase price adjustments to the extent deducted (and not added back) in
computing Consolidated Net Income; plus

 

20

 

 

(x)               any net loss included in Consolidated Net Income attributable
to non-controlling interests pursuant to the application of Accounting Standards
Codification Topic 810-10-45 of the Financial Accounting Standards Board
(“FASB”); plus

 

(xi)             non-cash realized foreign exchange losses resulting from the
impact of foreign currency changes on the valuation of assets or liabilities on
the balance sheet of the Loan Parties and their Subsidiaries;

 

(b)               decreased (without duplication) by the following:

 

(i)                 non-cash gains increasing Consolidated Net Income of such
Person for such period, excluding any non-cash gains to the extent they
represent the reversal of an accrual or cash reserve for a potential cash item
that reduced EBITDA in any prior period and any non-cash gains with respect to
cash actually received in a prior period so long as such cash did not increase
EBITDA in such prior period; plus

 

(ii)              realized foreign exchange income or gains resulting from the
impact of foreign currency changes on the valuation of assets or liabilities on
the balance sheet of the Borrowers and their Subsidiaries; plus

 

(iii)            any amount included in Consolidated Net Income of such Person
for such period attributable to non-controlling interests pursuant to the
application of FASB Accounting Standards Codification Topic 810-10-45;

 

(c)               increased or decreased (without duplication) by, as
applicable, any adjustments resulting from the application of FASB Accounting
Standards Codification Topic 460 or any comparable regulation; and

 

(d)               increased or decreased (without duplication) by any net gain
(or loss) from disposed, abandoned or discontinued operations and any net gain
(or loss) on disposal of disposed, discontinued or abandoned operations.

 

In determining EBITDA for any period, on a pro forma basis without duplication,
(A) the consolidated EBITDA of any Person acquired by Parent and or any of its
Subsidiaries, all or substantially all of the assets of a Person, or any
business unit, line of business or division of any Person acquired by the Parent
or any of its Subsidiaries during such period (but not the EBITDA of any related
Person, property, business or assets to the extent not so acquired), to the
extent not subsequently sold, transferred or otherwise disposed of by the Parent
or any of its Subsidiaries during such period (each such Person, property,
business or asset acquired and not subsequently so disposed of, an “Acquired
Entity or Business”), based on the actual acquired EBITDA of such Acquired
Entity or Business for such period (including the portion thereof occurring
prior to such acquisition) shall be included, and (B) the EBITDA of any Person
or business unit, line of business or division of any Person sold, transferred,
or otherwise disposed of or closed or classified as discontinued operations by
the Parent or any of its Subsidiaries to any Person (other than the Parent or
any of its Subsidiaries) during such period (each such Person, property,
business or asset sold, transferred or otherwise disposed of, closed or
classified as discontinued operations by the Parent or any of its Subsidiaries
during such period a “Disposed Entity or Business”), based on the actual EBITDA
of such Disposed Entity or Business for such period (including the portion
thereof occurring prior to such disposition) shall be excluded.

 

21

 

 

“Eligible Accounts” shall mean, at any time, the Accounts of a Borrower which
Agent determines in its Permitted Discretion are eligible as the basis for the
extension of the Term Loan. Without limiting Agent’s Permitted Discretion
provided herein, Eligible Accounts shall not include any Account of a Borrower:

 

(a)                  which is not subject to a perfected security interest in
favor of Agent with the priority required by the Financing Agreements;

 

(b)               which is subject to any lien other than (i) a lien in favor of
Agent, (ii) a Permitted Encumbrance which does not have priority over the lien
in favor of Agent, or (iii) a lien permitted pursuant to Section 9.8(t);

 

(c)               (i) with respect to which the scheduled due date is more than
sixty (60) days after the date of the original invoice therefor, (ii) which, is
unpaid more than ninety (90) days after the date of the original invoice
therefor or more than sixty (60) days after the original due date, therefor
(“Overage”) (when calculating the amount under this clause (ii), for the same
Account Debtor, Agent shall include the net amount of such Overage and add back
any credits, but only to the extent that such credits do not exceed the total
gross receivables from such Account Debtor), or (iii) which has been written off
the books of such Borrower or otherwise designated as uncollectible;

 

(d)               which is owing by an Account Debtor for which more than fifty
percent (50%) of the Accounts owing from such Account Debtor and its Affiliates
are ineligible hereunder;

 

(e)               which is owing by an Account Debtor to the extent the
aggregate amount of Accounts owing from such Account Debtor and its Affiliates
to all Borrowers exceeds ten percent (10%) of the aggregate amount of Eligible
Accounts of all Borrowers;

 

(f)                with respect to which any covenant, representation, or
warranty contained in this Agreement or any other Financing Agreement has been
breached in any material respect or is not true in any material respect;

 

(g)               which (i) does not arise from the sale of goods or performance
of services in the ordinary course of business, (ii) is not evidenced by an
invoice or other documentation satisfactory to Agent in its Permitted Discretion
which has been sent to the Account Debtor, (iii) represents a progress billing,
(iv) is contingent upon such Borrower’s completion of any further performance,
(v) represents a sale on a bill-and-hold, guaranteed sale, sale-and-return, sale
on approval, consignment, cash-on-delivery or any other repurchase or return
basis or (vi) relates to payments of interest (vii) constitutes a Franchisee
Receivable, other than a Franchisee Receivable arising after the Closing Date
owing by a franchisee that has been approved by Agent in its Permitted
Discretion pursuant to a franchise agreement that has been approved by Agent in
its Permitted Discretion;

 

22

 

 

(h)               for which the goods giving rise to such Account have not been
shipped to the Account Debtor or for which the services giving rise to such
Account have not been performed by such Borrower or if such Account was invoiced
more than once;

 

(i)                 with respect to which any check or other instrument of
payment has been returned uncollected for any reason;

 

(j)                 which is owed by an Account Debtor which has (i) applied
for, suffered, or consented to the appointment of any receiver, custodian,
trustee, or liquidator of its assets, (ii) had possession of all or a material
part of its property taken by any receiver, custodian, trustee or liquidator,
(iii) filed, or had filed against it, any request or petition for liquidation,
reorganization, arrangement, adjustment of debts, adjudication as bankrupt,
winding-up, or voluntary or involuntary case under any state or federal
bankruptcy laws (other than post-petition accounts payable of an Account Debtor
that is a debtor-in-possession under the United States Bankruptcy Code and
reasonably acceptable to Agent), (iv) admitted in writing its inability, or is
generally unable to, pay its debts as they become due, (v) become insolvent, or
(vi) ceased operation of its business;

 

(k)               which is owed by any Account Debtor which has sold all or a
substantially all of its assets;

 

(l)                 which is owed by an Account Debtor which (i) does not
maintain its chief executive office in the U.S.  or (ii) is not organized under
applicable law of the U.S., any state of the U.S., unless, in either case, such
Account is backed by a letter of credit acceptable to Agent which is in the
possession of, and is directly drawable by, Agent or ABL Agent;

 

(m)             which is owed in any currency other than U.S. dollars;

 

(n)               which is owed by (i) the government (or any department,
agency, public corporation, or instrumentality thereof) of any country other
than the U.S. unless such Account is backed by a letter of credit acceptable to
Agent which is in the possession of, and is directly drawable by, Agent or ABL
Agent, or (ii) the government of the U.S., or any department, agency, public
corporation, or instrumentality thereof, unless the Federal Assignment of Claims
Act of 1940, as amended (31 U.S.C. § 3727 et seq. and 41 U.S.C. § 15 et seq.),
and any other steps necessary to perfect the lien of Agent in such Account have
been complied with to Agent’s satisfaction;

 

(o)               which is owed by any Affiliate of any Borrower or any
Guarantor or any employee, officer, director, agent or stockholder of any
Borrower, any Guarantor or any of their Affiliates;

 

(p)               which, for any Account Debtor, exceeds a credit limit
determined by Agent in its Permitted Discretion, to the extent of such excess;

 

(q)               which is owed by an Account Debtor or any Affiliate of such
Account Debtor to which any Borrower or any Guarantor is indebted, but only to
the extent of such indebtedness, or is subject to any security, deposit,
progress payment, retainage or other similar advance made by or for the benefit
of an Account Debtor, in each case to the extent thereof;

 

23

 

 

(r)                which is subject to any counterclaim, deduction, defense,
setoff or dispute but only to the extent of any such counterclaim, deduction,
defense, setoff or dispute;

 

(s)                which is evidenced by any promissory note, chattel paper, or
instrument;

 

(t)                 which is owed by an Account Debtor (i) located in any
jurisdiction which requires filing of a “Notice of Business Activities Report”
or other similar report in order to permit such Borrower to seek judicial
enforcement in such jurisdiction of payment of such Account, unless such
Borrower has filed such report or qualified to do business in such jurisdiction
or (ii) which is a Sanctioned Person;

 

(u)               with respect to which such Borrower has made any agreement
with the Account Debtor for any reduction thereof, other than discounts and
adjustments given in the ordinary course of business, or any Account which was
partially paid and such Borrower created a new receivable for the unpaid portion
of such Account;

 

(v)               which does not comply in all material respects with the
requirements of all applicable laws and regulations, whether Federal, state or
local, including without limitation the Federal Consumer Credit Protection Act,
the Federal Truth in Lending Act and Regulation Z of the Federal Reserve Board;

 

(w)             which is for goods that have been sold under a purchase order or
pursuant to the terms of a contract or other agreement or understanding (written
or oral) that indicates or purports that any Person other than such Borrower has
or has had an ownership interest in such goods, or which indicates any party
other than such Borrower as payee or remittance party;

 

(x)               which was created on cash on delivery terms; or

 

(y)               which is a Credit Card Receivable;

 

provided that, the aggregate amount of Eligible Accounts in respect of
Franchisee Receivables shall not exceed the amount equal to ten percent (10%) of
the Borrowing Cap at any time.

 

In the event that an Account of a Borrower which was previously an Eligible
Account ceases to be an Eligible Account hereunder, such Borrower or
Administrative Borrower shall notify thereof on and at the time of submission to
Agent of the next Borrowing Base Certificate. In determining the amount of an
Eligible Account of a Borrower, the face amount of an Account may, in Agent’s
Permitted Discretion, be reduced by, without duplication, to the extent not
reflected in such face amount, (i) the amount of all accrued and actual
discounts, claims, credits or credits pending, promotional program allowances,
price adjustments, finance charges or other allowances (including any amount
that such Borrower may be obligated to rebate to an Account Debtor pursuant to
the terms of any agreement or understanding (written or oral)) and (ii) the
aggregate amount of all cash received in respect of such Account but not yet
applied by such Borrower to reduce the amount of such Account.

 

“Eligible Credit Card Receivables” shall mean, the gross amount of Credit Card
Receivables of Borrowers that are subject to a valid and fully perfected
security interest in favor of the Agent for itself and the Secured Parties (with
the priority required by the Financing Agreements), which conform to all
applicable warranties contained herein, less, without duplication, (a) the sum
of all Credit Card Receivables: (i) for which Agent has not received a Credit
Card Acknowledgment pursuant to Section 9.29 if the Credit Card Agreement exists
on the Closing Date (or if the Credit Card Agreement is entered into after the
Closing Date, no later than ninety (90) days after the date of such Credit Card
Agreement or such later date as is acceptable to Agent), and (ii) which are
unpaid more than five (5) Business Days after the date of the sale of Inventory
giving rise to such Credit Card Receivable, and (b) amounts owing to Credit Card
Issuers or Credit Card Processors in connection with the Credit Card Agreements.

 

24

 

 

“Eligible Depository Bank” means:

 

(a)                  Any Lender (other than an Affiliated Lender) or any of its
Affiliates;

 

(b)               Bank of America, N.A.; or

 

(c)               Any other Person who is a commercial bank or financial
institution having total assets in excess of $1,000,000,000; organized under the
laws of any country that is a member of the Basel Accord and the Organization of
Economic Cooperation and Development, or a political subdivision of any such
country, so long as such bank or financial institution is acting through a
branch or agency located in the United States.

 

“Eligible Equipment” shall mean, as to each Borrower, Equipment of such Borrower
that complies with each of the representations and warranties respecting
Eligible Equipment made in the Financing Agreements, and that is not excluded as
ineligible by virtue of one or more of the excluding criteria set forth below;
provided, that such criteria may be revised after receipt of Post-Closing
Appraisals by Agent in Agent’s Permitted Discretion to address the results of
any due diligence information with respect to the Borrower’s business or assets
of which Agent becomes aware from such Post-Closing Appraisals. An item of
Equipment shall not be included in Eligible Equipment if:

 

(a)               it is not subject to a valid, first priority and fully
perfected security interest in favor of Agent for itself and the Secured
Parties;

 

(b)               Borrower does not have good, valid, and marketable title
thereto;

 

(c)               Borrower does not have actual and exclusive possession thereof
(either directly or through a bailee or agent of a Borrower), including as a
result of the lease thereof by a Borrower;

 

(d)               it is not used in the business of Borrower;

 

(e)               it is not located at one of the locations in the continental
United States set forth in Schedule 8.2 hereof or at a location established in
accordance with Section 9.2 hereof (or in-transit from one such location to
another such location);

 

(f)                it is in-transit to or from a location of Borrower (other
than in-transit from one location set forth on Schedule 8.2 hereof or
established in accordance with Section 9.2 hereof to another location set forth
on Schedule 8.2 hereof or established in accordance with Section 9.2 hereof);

 

25

 

 

(g)               it is “subject to” (within the meaning of Section 9-311 of the
UCC) any certificate of title (or comparable) statute (unless Agent has a first
priority, perfected security interest under such statute and Agent has
possession and custody of such certificate);

 

(h)               it does not meet, or is not under repair or held for repair,
in each case in excess of 30 days, for the purpose of meeting, in each case in
all material respects, all applicable safety or regulatory requirements
applicable to it by law for the use for which it is intended or for which it is
being used;

 

(i)                 to the extent the amount of such Equipment, together with
all other Equipment out for repair exceeds $250,000 or such Equipment is out for
repair for more than 30 days;

 

(j)                 it is damaged, defective, worn out, obsolete, inoperable,
out-of-service and/or not in good order, running and in marketable condition;

 

(k)               it does not meet, or is not under repair or held for repair
for the purpose of meeting, in each case in all material respects, all
applicable requirements of all motor vehicle laws or other statutes and
regulations established by any Governmental Authority then applicable to such
Equipment, or is subject to any licensing or similar requirement;

 

(l)                 it is located in a contract warehouse, unless it is subject
to Collateral Access Agreement executed by the warehouseman and unless it is
segregated or otherwise separately identifiable from equipment of others, if
any, stored on the premises; provided, that if no such Collateral Access
Agreement has been received or is obtainable with respect to any such location,
Agent may establish a Reserve in its Permitted Discretion with respect to
estimated amounts due or payable to any such third parties, including without
limitation, vendors providing third party machining processes services;

 

(m)             its use or operation requires proprietary software that is not
freely assignable to Agent; or

 

(n)               an appraisal of such Equipment has not been completed by an
appraiser acceptable to Agent in its Permitted Discretion, using a scope,
methodology and sampling procedure acceptable to Agent in its Permitted
Discretion, the results of which shall be satisfactory to Agent in its Permitted
Discretion.

 

The criteria for Eligible Equipment set forth above may only be changed and any
new criteria for Eligible Equipment may only be established by Agent in its good
faith based on either: (i) an event, condition or other circumstance arising
after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Agent has no written notice thereof
from a Borrower prior to the date hereof in either case under clause (i) or (ii)
which materially and adversely affects or could reasonably be expected to
materially and adversely affect the Equipment, its value or the amount that
would be received by Agent from the sale or other disposition or realization
upon such Equipment as determined by Agent in its good faith and commercially
reasonable determination.

 

26

 

 

“Eligible Intellectual Property” shall mean, as to each Loan Party, Intellectual
Property of such Loan Party deemed by the Agent in its Permitted Discretion to
be eligible for inclusion in the calculation of the Borrowing Base and which,
except as otherwise agreed by the Agent in its Permitted Discretion, satisfies
all of the following conditions:

 

(a) Such Intellectual Property is validly registered with the United States
Patent and Trademark Office or the United States Copyright Office, as
applicable;

 

(b) A Loan Party owns such Intellectual Property;

 

(c) Such Loan Party is in compliance in all material respects with the
representations, warranties and covenants set forth in the Financing Agreements
relating to such Intellectual Property;

 

(d) The Agent shall have received evidence that all actions that the Agent may
reasonably deem necessary or appropriate in order to create a valid first
priority security interest in such Intellectual Property (including, without
limitation, filings at the United States Patent and Trademark Office or United
States Copyright Office, as applicable) has been taken;

 

(e) Such Intellectual Property is not subject to any lien other than (i) a lien
in favor of Agent, (ii) a Permitted Encumbrance which does not have priority
over the lien in favor of Agent, or (iii) a lien permitted pursuant to Section
9.8(t); and

 

(f) The Agent shall have received written reports or appraisals as to such
Intellectual Property in form, scope and methodology reasonably acceptable to
Agent and by an appraiser reasonably acceptable to Agent, addressed to Agent and
Lenders and upon which Agent and Lenders are expressly permitted to rely.

 

27

 

 

“Eligible Inventory” shall mean, as to each Borrower, Inventory of such Borrower
consisting of finished goods held for resale in the ordinary course of the
business of such Borrower, that satisfy the criteria set forth below as
reasonably determined by Agent. Eligible Inventory shall not include:
(a) work-in-process; (b) raw materials; (c) spare parts for Equipment;
(d) packaging and shipping materials; (e) supplies used or consumed in such
Borrower’s business; (f) Inventory located (i) at premises other than a premise
which is owned or leased by any Borrower or (ii) in any third party warehouse or
in the possession of a bailee (other than a third party processor) unless Agent
has received, subject to Section 9.29, a Collateral Access Agreement in respect
of such premises on terms and conditions reasonably satisfactory to Agent
(Inventory of any Borrower which is in-transit from any location of Borrower
permitted herein to another such location shall be considered Eligible
Inventory, provided, that, it otherwise satisfies the criteria for Eligible
Inventory set forth herein and is not in-transit more than ten (10) consecutive
days; provided, further, that, the aggregate amount of Eligible Inventory
consisting of in-transit Inventory shall not exceed the amount equal to ten
percent (10%) of the Value of all Eligible Inventory of Borrowers at such time);
(g) Inventory subject to a security interest or lien in favor of any Person
other than Agent except those permitted in this Agreement that are subject to an
intercreditor agreement in form and substance satisfactory to Agent between the
holder of such security interest or lien and Agent and those liens described in
clause (j) below; (h) bill and hold goods; (i) Inventory which is past its
expiration date; (j) Inventory that is not subject to a valid and perfected
security interest of Agent (with the priority required by the Financing
Agreements) except in the case of those non-consensual statutory liens described
in Section 9.8(c)(i) hereof, liens permitted under Section 9.8(t) and landlord,
warehouseman or similar liens (i) in respect of which Agent has established a
Reserve (if and only to the extent establishment of a Reserve is permitted by
the terms hereof) or (ii) for which no Reserve is provided by the terms hereof,
or (iii) in respect of which premises Agent has received, subject to Section
9.29, a Collateral Access Agreement pursuant to which the landlord, warehouseman
or bailee, as applicable, has either waived or subordinated its lien on terms
and conditions reasonably satisfactory to Agent; (k) returned Inventory which is
not held for sale in the ordinary course of business; (l) damaged and/or
defective Inventory; (m) Inventory purchased or sold on consignment;
(n) Inventory located outside the United States of America, unless otherwise
approved by Agent in writing; and (o) Inventory which has been acquired from a
Sanctioned Person. The criteria for Eligible Inventory set forth above may only
be changed and any new criteria for Eligible Inventory may only be established
by Agent in its good faith based on either: (i) an event, condition or other
circumstance arising after the date hereof, or (ii) an event, condition or other
circumstance existing on the date hereof to the extent Agent has no written
notice thereof from a Borrower prior to the date hereof in either case under
clause (i) or (ii) which materially and adversely affects or could reasonably be
expected to materially and adversely affect the Inventory, its value or the
amount that would be received by Agent from the sale or other disposition or
realization upon such Inventory as determined by Agent in its good faith and
commercially reasonable determination. Any Inventory that is not Eligible
Inventory shall nevertheless be part of the Collateral. The amounts of Eligible
Inventory shall be determined based on the perpetual inventory record maintained
by the Borrowers.

 

“Eligible Transferee” shall mean (a) any Lender; (b (excluding Affiliated
Lender); (b) on the First Amendment Effective Date, any Affiliated Lender solely
with respect to the Affiliated Lender Loan Holdings subject to Section 13.7(b);
(c) the parent company of any Lender and/or any Affiliate of such Lender which
is at least fifty (50%) percent owned by such Lender or its parent company;
(cd) any Person, including without limitation, any bona fide debt fund,
investment vehicle, regulated banking entity or non-regulated lending entity
that is engaged in the business of making, purchasing, holding or otherwise
investing in commercial loans and similar extensions of credit in the ordinary
course of its business and is administered or managed by a Lender or with
respect to any Lender that is a fund which invests in commercial loans and
similar extensions of credit, any other fund that invests in commercial loans
and similar extensions of credit and is managed by the same investment advisor
as such Lender or by an Affiliate of such investment advisor, in each case is
approved by Agent and, unless an Event of Default under Section 10.1(a),
Section 10.1(g) or Section 10.1(h) has occurred and is continuing at the time
any assignment is effected hereunder, Administrative Borrower (such approval not
to be unreasonably withheld, conditioned or delayed by Administrative Borrower,
provided, that, no such consent shall be required in connection with any
assignment to another Lender or to an Affiliate of any Lender); and (de) any
other commercial bank, financial institution or “accredited investor” (as
defined in Regulation D under the Securities Act of 1933) approved by Agent
(such approval not to be unreasonably withheld, conditioned or delayed) and,
unless an Event of Default under Section 10.1(a), Section 10.1(g) or
Section 10.1(h) has occurred and is continuing at the time any assignment is
effected hereunder, Administrative Borrower, provided, that, (i) neither any
Borrower nor any Guarantor or any Affiliate of any Borrower or Guarantor, except
any Affiliated Lender specified in clause (b) above, shall qualify as an
Eligible Transferee; (ii) no Person to whom any Indebtedness which is in any way
subordinated in right of payment to any other Indebtedness of any Borrower or
Guarantor shall qualify as an Eligible Transferee, except, in each case, any
Affiliated Lenders specified in clause (b) above and as Agent may otherwise
specifically agree; and (iii) a competitor of Borrowers shall not be deemed an
“Eligible Transferee” under any circumstances except after the occurrence of
either (A) an Event of Default for non-payment of any principal amount of
Obligations owing hereunder or (B) the occurrence of an Event of Default with
respect to any Borrower or Guarantor set forth in Section 10.1(g) or
Section 10.1(h) hereof. For the avoidance of doubt, following the First
Amendment Effective Date, no Affiliated Lender shall be an Eligible Transferee
hereunder.

 

28

 

 

“Environmental Events” shall have the meaning set forth in Section 9.3(b)
hereof.

 

“Environmental Laws” shall mean all foreign, Federal, State and local laws
(including common law), rules, codes, licenses, permits (including any
conditions imposed therein), authorizations, legally binding judicial or
administrative decisions, injunctions or agreements between Borrower and any
Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource),
(b) relating to the exposure of humans to, or the use, storage, recycling,
treatment, generation, manufacture, processing, distribution, transportation,
handling, labeling, production, release or disposal, or threatened release, of
hazardous, toxic or dangerous substances, materials, and wastes, or (c) imposing
requirements with regard to recordkeeping, notification, disclosure and
reporting respecting hazardous, toxic or dangerous substances, materials, and
wastes. The term “Environmental Laws” includes (i) the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Federal
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Safe Drinking Water Act of 1974,
(ii) applicable state counterparts to such laws and (iii) any common law or
equitable doctrine that imposes liability or obligations for injuries or damages
due to, or threatened as a result of, the presence of or exposure to any
hazardous, toxic or dangerous substances, materials, and wastes.

 

“Equipment” shall have the meaning set forth in Article 9 of the UCC and
includes, without limitation, as to each Borrower and Guarantor, all of such
Borrower’s and Guarantor’s now owned and hereafter acquired equipment, wherever
located, including machinery, data processing and computer equipment (whether
owned or licensed and including embedded software), vehicles, tools, furniture,
fixtures, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and replacements
thereof, wherever located.

 

“Equity Commitment Letter” shall mean that certain letter agreement dated August
7, 2019 (as amended by that certain letter agreement dated December 16, 2019) by
and between Tributum, L.P., a Delaware limited partnership (“Tributum”) and
Ultimate Parent pursuant to which Tributum will provide no less than $60,000,000
in equity to Ultimate Parent on or after the Closing Date.

 

29

 

 

“ERISA” shall mean the United States Employee Retirement Income Security Act of
1974, as amended, together with all rules, regulations and interpretations
thereunder or related thereto.

 

“ERISA Affiliate” shall mean any Person required to be aggregated with any
Borrower, any Guarantor or any of its or their respective Subsidiaries under
Sections 414(b), 414(c), 414(m) or 414(o) of the Code.

 

“ERISA Event” shall mean (a) any “reportable event”, as defined in
Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a
Plan, except for any such event with respect to which notice has been waived
pursuant to applicable regulations; (b) the adoption of any amendment to a Plan
that would require the provision of security pursuant to Section 401(a)(29) of
the Code or Section 307 of ERISA; (c) the existence with respect to any Plan of
an “accumulated funding deficiency” (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (d) the filing pursuant to
Section 412 of the Code or Section 303(d) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Plan; (e) the
occurrence of a non-exempt “prohibited transaction” with respect to which
Borrower, or any of their respective Subsidiaries is a “disqualified person”
(within the meaning of Section 4975 of the Code); (f) a complete or partial
withdrawal by Borrower, or any ERISA Affiliate from a Multiemployer Plan or a
cessation of operations which is treated as such a withdrawal or notification
that a Multiemployer Plan is in reorganization; (g) the filing of a notice of
intent to terminate, the treatment of a Plan amendment as a termination under
Section 4041 or 4041A of ERISA, or the commencement of proceedings by the
Pension Benefit Guaranty Corporation to terminate a Plan; (h) an event or
condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; (i) the imposition of any liability under Title IV of
ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not
delinquent under Section 4007 of ERISA, upon Borrower, or any ERISA Affiliate in
an amount that could reasonably be expected to have a Material Adverse Effect.

 

“Event of Default” shall mean the occurrence or existence of any event or
condition described in Section 10.1 hereof.

 

“Event of Loss” means, with respect to any Property, any of the following: (a)
any loss, destruction or damage of such Property; or (b) any actual
condemnation, seizure or taking, by exercise of the power of eminent domain or
otherwise, of such Property, or confiscation of such Property or the requisition
of the use of such Property; which for the avoidance of doubt, shall not include
store closings or liquidations.

 

“Excess Cash Flow” means, for any fiscal quarter of the Loan Parties, the excess
(if any) of (a) EBITDA for such fiscal quarter over (b) the sum (for such fiscal
quarter) of (i) Interest Expense actually paid or payable in cash by the Loan
Parties and their Subsidiaries (including, without limitation, related fees and
expenses, to the extent such payments are permitted hereunder), (ii) scheduled
principal repayments and mandatory prepayments (together with any Early
Termination Fee thereon), to the extent actually made, of the Term Loan, (iii)
all Taxes actually paid or payable in cash by the Loan Parties and their
Subsidiaries (including, without limitation, any direct or indirect
distributions for the payment of such Tax expenses, and including Permitted Tax
Distributions), (iv) Capital Expenditures actually made by the Loan Parties and
their Subsidiaries in such fiscal quarter, and (v) any increase (or decrease) in
Borrowers’ Net Working Capital for such fiscal quarter.

 

30

 

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, together with all
rules, regulations and interpretations thereunder or related thereto.

 

“Excluded Accounts” means (i) Zero Balance Accounts, (ii) Store Accounts, (iii)
accounts into which government receivables and government reimbursement payments
are deposited, (iv) payroll accounts (including accounts used for the
disbursement of payroll, payroll taxes and other employee wage and benefit
payments, including 401(k) and other retirement plans, rabbi trusts for deferred
compensation and health care benefits), (v) withholding and trust accounts,
escrow and other fiduciary accounts, and (vi) Manual Sweeping Accounts.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
a Recipient or required to be withheld or deducted from a payment to a
Recipient: (a) Taxes imposed on or measured by net income (however denominated),
franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result
of such Recipient being organized under the laws of, or having its principal
office or, in the case of any Lender, its applicable lending office located in,
the jurisdiction imposing such Tax (or any political subdivision thereof) or
(ii) that are Other Connection Taxes; (b) in the case of a Lender, U.S. Federal
withholding Taxes imposed on amounts payable to or for the account of such
Lender with respect to an applicable interest in any Financing Agreement
pursuant to a law in effect on the date on which (i) such Lender acquires such
interest in the Financing Agreements or (ii) such Lender changes its lending
office, except in each case to the extent that, pursuant to Section 3.5, amounts
with respect to such Taxes were payable either to such Lender'sLender’s assignor
immediately before such Lender acquired the applicable interest in the Financing
Agreements or to such Lender immediately before it changed its lending office;
(c) Taxes attributable to such Recipient'sRecipient’s failure to comply with
Section 3.5(f); and (d) any withholding Taxes imposed under FATCA.

 

“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), any current or
future regulations or official interpretations thereof, any agreements entered
into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory
legislation, rules or practices adopted pursuant to any intergovernmental
agreement, treaty or convention among Governmental Authorities and implementing
such Sections of the Code.

 

“Federal Funds Rate” means, for any day, the weighted average (rounded upwards,
if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average (rounded upwards, if necessary, to the next 1/100
of 1%) of the quotations for such day for such transactions received by Agent
from three Federal funds brokers of recognized standing reasonably selected by
it.

 

“Federal Reserve Bank of New York’s Website” shall mean the website of the
Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor
source.

 

31

 

 

“Federal Reserve Board” shall mean the Board of Governors of the Federal Reserve
System, or any entity succeeding to any of its principal functions.

 

“Fee Letter” shall mean the letter agreement, dated as of the Closing Date, by
and among Borrowers, Guarantors and Agent, setting forth certain fees payable by
Borrowers to Agent for the benefit of itself and Lenders, as the same now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.

 

“Financing Agreements” shall mean, collectively, this Agreement, the
Intercreditor Agreement, the Collateral Documents, the Guaranty, each Term Loan
Note, and all notes, guarantees, security agreements relating to this Agreement,
(if any), other intercreditor agreements (if any), the Fee Letter and all other
agreements, documents and instruments now or at any time hereafter executed
and/or delivered by any Borrower or Guarantor in connection with this Agreement.

 

“First Acquisition Agreement Amendment” shall have the meaning provided in the
recitals to this Agreement.

 

“First Amendment Effective Date” means May 22, 2020.

 

“Fixed Charge Coverage Ratio” shall mean, as to any Person for any period, the
ratio of: (a) EBITDA for such Person and its Subsidiaries minus the unfinanced
portion of Capital Expenditures paid in cash during such period to (b) Fixed
Charges, all calculated for any Person on a consolidated basis in accordance
with GAAP.

 

“Fixed Charges” shall mean, with respect to any Person for any period, the sum
of, without duplication, (a) all cash Interest Expense paid during such period
(net of interest income of such Person during such period and excluding, to the
extent taken into account in the calculation of Interest Expense, upfront fees,
costs and expenses in respect of this Agreement and any other issuance of
Indebtedness permitted hereunder and the transactions contemplated hereby and
thereby), plus (b) all prepayments (other than (i) prepayments and refinancings
with respect to the Permitted Subordinated Indebtedness and the Convertible
Notes, in each case to the extent permitted hereunder, (ii) prepayments made
with the proceeds of refinancings of such Indebtedness prepaid to the extent
permitted hereunder, (iii) prepayments made with, and within one-hundred eighty
(180) days of receipt of, the net proceeds of new equity capital contributed
after the date of this Agreement, and (iv) prepayments of Indebtedness permitted
under Section 9.9(b) required in connection with any disposition or casualty of
assets financed and securing such Indebtedness, which prepayments shall be in an
amount not to exceed the net proceeds received as a result of such disposition
or casualty event) and regularly scheduled principal repayments in respect of
Indebtedness for borrowed money and Indebtedness with respect to Capital Leases
paid during such period in cash (excluding the interest component with respect
to Indebtedness under Capital Leases), plus (c) all income taxes paid during
such period in cash (net of refunds or tax credits to such Person in respect of
income taxes, and excluding income tax on extraordinary or non-recurring gains
or gains from asset sales outside of the ordinary course of business) plus
(d) dividends or distributions paid in cash including, without limitation,
Permitted Tax Distributions), all as determined for any Person on a consolidated
basis and in accordance with GAAP; provided, that notwithstanding anything to
the contrary in this definition, no Tax Refund Additional Payment Amount shall
be included in the calculation of Fixed Charges.

 

32

 

 

“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” shall mean a Subsidiary of Parent that is organized or
incorporated under the laws of any jurisdiction outside of the United States of
America; sometimes being referred to herein collectively as “Foreign
Subsidiaries”.

 

“Franchisee Receivable” shall mean an Account of a Borrower owed by an Account
Debtor in respect of payment obligations of such Account Debtor under any
franchise agreement arising from the sale of Inventory by a Borrower to a
franchisee (excluding, for the avoidance of doubt, franchise fees).

 

“Frequent Buyer Program” shall mean the Borrowers’ “Healthy Awards” customer
loyalty program, which as in effect on the Closing Date is described at
https://www.vitaminshoppe.com/lp/Newhealthyaward.

 

“Funding Bank” shall have the meaning given to such term in Section 3.3 hereof.

 

“GAAP” shall mean generally accepted accounting principles in the United States
of America as in effect from time to time as set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board or such other principles as may be approved
by a significant segment of the accounting profession in the United States
(including any principles required by the Securities and Exchange Commission),
that are applicable to the circumstances as of the date of determination,
consistently applied. If there occurs after the date of this Agreement any
change in GAAP that affects the calculation of any requirements, terms or
covenants set forth in this Agreement or any other Financing Agreement (whether
contained in Section 9.17, Section 9.24 or otherwise), Agent and Borrowers shall
negotiate in good faith to amend the provisions of this Agreement and the other
Financing Agreements that relate to the calculation of such requirements, terms
and covenants with the intent of having the respective positions of the Lenders
and Borrowers after such change in GAAP conform as nearly as possible to their
respective positions as of the date of this Agreement and, until any such
amendments have been agreed upon, the implicated requirements and covenants
shall be calculated as if no such change in GAAP has occurred; provided, that,
for the avoidance of doubt, the parties agree that all financial statements
required to be delivered hereunder shall and will be delivered giving effect to
any such change in GAAP.

 

“GACP” shall have the meaning provided in the preamble to this Agreement.

 

“General Intangibles” shall have the meaning set forth in Article 9 of the UCC.

 

“Goods” shall have the meaning set forth in Article 9 of the UCC.

 

33

 

 

“Governmental Authority” shall mean any nation or government, any state,
province, or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of government.

 

“Guarantors” shall mean, collectively, the following (together with their
respective successors and assigns): (a) Parent and (b) any Subsidiary of Parent
that at any time after the date hereof becomes party to a Guaranty in favor of
Agent or any Lender or otherwise liable on or with respect to the Obligations
(other than Borrowers) (each a “Subsidiary Guarantor”); each sometimes being
referred to herein individually as a “Guarantor”; provided, that, if at any time
after the date hereof, a Guarantor which is directly or indirectly wholly owned
by Parent shall own any assets that would constitute Eligible Inventory if owned
by a Borrower, upon Administrative Borrower’s request, such Guarantor shall
cease to be a Guarantor hereunder and shall be deemed a Borrower effective on
the date of the confirmation by Agent to Administrative Borrower that Agent has
received such request and that Agent has received an appraisal with respect to
such Inventory and conducted a field examination with respect thereto, the
results of which are satisfactory to Agent in good faith, or alternatively, at
Agent’s option, Agent shall have received such information with respect thereto
as Agent may in its good faith require.

 

“Guaranty” shall mean (a) that certain Guaranty Agreement dated as of the
Closing Date, by each of the Loan Parties from time to time party thereto in
favor of Agent and the other Secured Parties and (b) any other guaranty
agreement executed by Parent or a Subsidiary of Parent substantially in the form
of Exhibit F attached hereto in favor of Agent and the other Secured Parties, in
each case, as the same may be amended, restated or otherwise modified from time
to time.

 

“Hazardous Materials” shall mean any hazardous, toxic or dangerous substances,
materials and wastes, including petroleum hydrocarbons, flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, polychlorinated
biphenyls, pesticides, herbicides and any other kind and/or type of pollutants
or contaminants, sewage, sludge, industrial slag, solvents and/or any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).

 

“Hedge Agreement” shall mean an agreement between any Borrower or Guarantor and
a third party that is a rate swap agreement, basis swap, forward rate agreement,
commodity swap, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options, forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange agreement, spot foreign exchange agreement, rate cap
agreement rate, floor agreement, rate collar agreement, currency swap agreement,
cross-currency rate swap agreement, currency option, any other similar agreement
or any combination of these transactions (including any agreement, contract or
transaction that constitutes a “swap” within the meaning of section 1a(47) of
the Commodity Exchange Act and any option to enter into any of the foregoing or
a master agreement for any the foregoing together with all supplements thereto)
for the purpose of protecting against or managing exposure to fluctuations in
interest or exchange rates, currency valuations or commodity prices; provided
that no phantom stock or similar plan providing for payments only on account of
services provided by current or former directors, officers, employees or
consultants of the Borrowers or their Subsidiaries shall be a Hedge Agreement;
sometimes being collectively referred to herein as “Hedge Agreements”; provided
further, however, the definition of Hedge Agreement shall not include the
Convertible Note Hedge and Warrant Transactions.

 

34

 

 

“Impacted Interest Period” has the meaning assigned to such term in the
definition of “London Interbank Offered Rate”.

 

“Increased Reporting Period” shall mean any period commencing on the first date
on which ABL Excess Availability is less than the greater of (a) twenty percent
(20%) of the Borrowing Cap or (b) $20,000,000, in each case for three (3)
consecutive days, and continuing until the date that both (x) ABL Excess
Availability exceeds the greater of (i) twenty percent (20%) of the Borrowing
Cap or (ii) $20,000,000 for sixty (60) consecutive days, and (y) no Default or
Event of Default then exists and is continuing.

 

“Indebtedness” shall mean, with respect to any Person, any liability, whether or
not contingent, (a) in respect of borrowed money (whether or not the recourse of
the lender is to the whole of the assets of such Person or only to a portion
thereof) or evidenced by bonds, notes, debentures or similar instruments;
(b) representing the balance deferred and unpaid of the purchase price of any
property or services (except any such balance that constitutes an account
payable to a trade creditor (whether or not an Affiliate) created, incurred,
assumed or guaranteed by such Person in the ordinary course of business of such
Person); (c) all obligations as lessee under leases which have been, or should
be, in accordance with GAAP recorded as Capital Leases; (d) any contractual
obligation, contingent or otherwise, of such Person to pay or be liable for the
payment of any indebtedness described in this definition of another Person,
including, any such indebtedness, directly or indirectly guaranteed, or any
agreement to purchase, repurchase, or otherwise acquire such indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof, or to maintain solvency, assets, level of income,
or other financial condition; (e) all obligations with respect to redeemable
stock and redemption or repurchase obligations under any Capital Stock or other
equity securities issued by such Person; (f) all reimbursement obligations and
other liabilities of such Person with respect to surety bonds (whether bid,
performance or otherwise), letters of credit, banker’s acceptances, drafts or
similar documents or instruments issued for such Person’s account other than
bonds to stay execution of a judgment on appeal; (g) all indebtedness of such
Person in respect of indebtedness of another Person for borrowed money or
indebtedness of another Person otherwise described in this definition which is
secured by any consensual lien, security interest, collateral assignment,
conditional sale, mortgage, deed of trust, or other encumbrance on any asset of
such Person, whether or not such obligations, liabilities or indebtedness are
assumed by or are a personal liability of such Person, all as of such time;
(h) all obligations, liabilities and indebtedness of such Person (marked to
market) arising under swap agreements, cap agreements and collar agreements and
other agreements or arrangements designed to protect such Person against
fluctuations in interest rates or currency or commodity values or other Hedge
Agreements; (i) indebtedness of any partnership or joint venture in which such
Person is a general partner or a joint venturer to the extent such Person is
liable therefor as a result of such Person’s ownership interest in such entity,
except to the extent that the terms of such indebtedness expressly provide that
such Person is not liable therefor or such Person has no liability therefor as a
matter of law; (j) all sales by such Person (except for sales without recourse
to such Person) of (i) Accounts or General Intangibles for money due or to
become due, (ii) Chattel Paper, Instruments or documents creating or evidencing
a right to payment of money or (iii) other receivables whether pursuant to a
purchase facility or otherwise, other than in connection with the disposition of
the business operations of such Person relating thereto or a disposition of
defaulted receivables for collection and not as a financing arrangement, and
together with any obligation of such Person to pay any discount, interest, fees,
indemnities, penalties, recourse, expenses or other amounts in connection
therewith; and (k) the principal and interest portions of all rental obligations
of such Person under any synthetic lease or similar off-balance sheet financing
where such transaction is considered to be indebtedness for borrowed money for
tax purposes but is classified as an operating lease in accordance with GAAP;
provided, however, the definition of Indebtedness shall not include the
obligations owed with respect to the Convertible Note Hedge and Warrant
Transactions.

 

35

 

 

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by, or on account of any obligation of the
Borrowers under any Financing Agreement and (b) to the extent not otherwise
described in the foregoing clause (a) hereof, Other Taxes.

 

“Indemnitee” shall have the meaning set forth in Section 11.6 hereof.

 

“Instruments” shall have the meaning set forth in Article 9 of the UCC.

 

“Intellectual Property” shall mean, as to each Borrower and Guarantor, such
Borrower’s and Guarantor’s now owned and hereafter arising or acquired:
proprietary content, trademarks, Internet domain names, service marks, trade
names, business names, designs, logos, slogans (and all translations,
adaptations, derivations and combinations of the foregoing), indicia and other
source and/or business identifiers, all of the goodwill related thereto, and all
registrations and applications for registrations thereof; works of authorship
and other copyrighted works (including copyrights for computer programs), and
all registrations and applications for registrations thereof; inventions
(whether or not patentable) and all improvements thereto; patents and patent
applications, together with all continuances, continuations, divisions,
revisions, extensions, reissuances, and reexaminations thereof; industrial
design applications and registered industrial designs; books, records, writings,
computer tapes or disks, flow diagrams, specification sheets, computer software,
source codes, object codes, executable code, data, databases and other physical
manifestations, embodiments or incorporations of any of the foregoing; all
proceeds and products of the foregoing and all rights to sue and recover at law
or in equity for any past, present or future infringement, dilution or
misappropriation, or other violation thereof.

 

“Intercreditor Agreement” means the intercreditor agreement dated as of the date
hereof among the Agent and the ABL Agent and acknowledged by the Loan Parties,
as the same may be amended, restated, amended and restated, supplemented,
replaced or otherwise modified from time to time in accordance with the
provisions hereof and thereof.

 

“Interest Expense” shall mean, for any period, as to any Person, as determined
on a consolidated basis in accordance with GAAP, the total interest expense of
such Person, whether paid or accrued during such period (including the interest
component of Capital Leases for such period), including, discounts in connection
with the sale of any Accounts and bank fees, commissions, discounts and other
fees and charges owed with respect to letters of credit, banker’s acceptances or
similar instruments, losses, fees, net costs and early termination costs under
Hedge Agreements, amortization or write-off of debt discounts and debt issuance
costs and commissions, and other discounts and other fees and charges associated
with Indebtedness.

 

36

 

 

“Interest Period” shall mean, (a) initially, the period commencing on the
Closing Date and ending on the numerically corresponding calendar day in the
immediately succeeding calendar month, and (b) thereafter, each period
commencing on the last day of an Interest Period and ending on the numerically
corresponding calendar day of the immediately succeeding calendar month;
provided, that (a) if any Interest Period would end on a day other than a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day and (b) any Interest Period that commences on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the last calendar month of such Interest Period) shall end
on the last Business Day of the last calendar month of such Interest Period.

 

“Interest Rate” shall mean,

 

(a)               Prior to the occurrence and continuance of an Event of
Default, a rate equal to the Applicable Margin plus the Adjusted Eurodollar
Rate.

 

(b)               Upon the occurrence and during the continuance of an Event of
Default, a rate equal to the Applicable Margin plus the Alternate Base Rate.

 

(c)               Notwithstanding anything to the contrary contained herein,
(i) Agent may, at its option, and Agent shall, at the direction of the Required
Lenders, increase the Applicable Margin by three (3%) percent per annum for the
period from and after the effective date of termination or non-renewal hereof
until Agent and Lenders have received full and final payment in cash of all
outstanding and unpaid Obligations which are not contingent and cash collateral
or letter of credit, as Agent may specify, in the amounts and on the terms
required under Section 13.1 hereof for contingent Obligations (notwithstanding
entry of a judgment against any Borrower or Guarantor) and (ii) during the
occurrence and continuance of an Event of Default, the Applicable Margin shall
automatically increase by three percent (3%)  per annum, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
each Borrower and Guarantor for the period from and after the date of the
occurrence of such Event of Default and for so long as such Event of Default is
continuing.

 

“Interpolated Rate” means, at any time, the rate per annum (rounded upward to
four decimal places) determined by Agent (which determination shall be
conclusive and binding absent manifest error) to be equal to the rate that
results from interpolating on a linear basis between: (a) the LIBO Screen Rate
for the longest period (for which the LIBO Screen Rate is available) that is
shorter than the Impacted Interest Period and (b) the LIBO Screen Rate for the
shortest period (for which the LIBO Screen Rate is available) that exceeds the
Impacted Interest Period, in each case, at such time. When determining the rate
for a period which is less than the shortest period for which the LIBO Screen
Rate is available, the LIBO Screen Rate for purposes of clause (a) above shall
be deemed to be the overnight screen rate where “overnight screen rate” means
the overnight rate determined by Agent from such service as Agent may reasonably
select.

 

37

 

 

“Inventory” shall have the meaning set forth in Article 9 of the UCC and
includes, without limitation, as to each Borrower and Guarantor, all of such
Borrower’s and Guarantor’s now owned and hereafter existing or acquired goods,
wherever located, which (a) are leased by such Borrower or Guarantor as lessor;
(b) are held by such Borrower or Guarantor for sale or lease or to be furnished
under a contract of service; (c) are furnished by such Borrower or Guarantor
under a contract of service; or (d) consist of raw materials, work in process,
finished goods or materials used or consumed in its business.

 

“Investment” shall have the meaning set forth in Section 9.10 hereof.

 

“Investment Property” shall have the meaning set forth in Article 9 of the UCC.

 

“Investment Property Control Agreement” shall mean an agreement in writing, in
form and substance reasonably satisfactory to Agent, by and among Agent, ABL
Agent (if party thereto), any Borrower or Guarantor (as the case may be) and any
securities intermediary, commodity intermediary or other Person who has custody,
control or possession of any Investment Property of such Borrower or Guarantor
acknowledging that such securities intermediary, commodity intermediary or other
Person has custody, control or possession of such Investment Property on behalf
of Agent or ABL Agent (as the case may be), that it will comply with entitlement
orders originated by Agent or ABL Agent (as the case may be) after the
occurrence and during the continuance of an Event of Default with respect to
such Investment Property, or other instructions of Agent or ABL Agent (as the
case may be), and has such other terms and conditions as Agent may reasonably
require.

 

“Landlord Lien States” shall mean the States of Washington and Virginia and the
Commonwealth of Pennsylvania and such other states, provinces or jurisdictions
in which a landlord’s claim for rent (including a portion of rent) has or may
have priority by operation of applicable law over the lien of the Agent on
behalf of the Secured Parties in any of the Collateral.

 

“Lenders” shall mean the financial institutions who are signatories hereto as
Lenders and other Persons made a party to this Agreement as a Lender in
accordance with Section 13.7 hereof, and their respective successors and
assigns; each sometimes being referred to herein individually as a “Lender”.

 

“Letter-of-Credit Rights” shall have the meaning set forth in Article 9 of the
UCC.

 

“LIBO Screen Rate” has the meaning assigned to such term in the definition of
“London Interbank Offered Rate”.

 

“License Agreements” shall have the meaning set forth in Section 8.11 hereof.

 

“Lien” and “lien” mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.

 

38

 

 

“Liquidity” means, at any time, the sum of (a) the aggregate amount of cash of
the Parent and the Borrowers contained in any deposit account for which such
Person has delivered to the Agent an account control agreement or other
documentation reasonably required by the Agent, each in form and substance
reasonably satisfactory to the Agent, pursuant to which (i) the Agent has been
granted a lien on and security interest in such account and all cash held from
time to time therein with the lien priority required by the Financing Agreements
and (ii) the Agent or the ABL Agent has been granted control over the amounts
held from time to time therein and (b) any ABL Excess Availability.

 

“Loan Parties” shall mean, collectively, the Borrowers and the Guarantors and
their respective successors and assigns, and the term “Loan Party” shall mean
any one of them or all of them individually, as the context may require.

 

“London Interbank Offered Rate” shall mean, for any Interest Period, the London
interbank offered rate administered by the ICE Benchmark Association (or any
other Person that takes over the administration of such rate for U.S. dollars)
for an interest period of one month as displayed on pages LIBOR01 or LIBOR02 of
the Reuters screen or, in the event such rate does not appear on a Reuters page
or screen, on any successor or substitute page on such screen that displays such
rate, or on the appropriate page of such other information service that
publishes such rate as shall be selected by the Agent from time to time in its
reasonable discretion (the “LIBO Screen Rate”) at approximately 11:00 a.m.,
London time, two (2) Business Days prior to the commencement of such Interest
Period; provided that, if the LIBO Screen Rate shall not be available at such
time for a one-month interest period (an “Impacted Interest Period”), then the
LIBO Screen Rate shall be the Interpolated Rate at such time, except to the
extent the Agent concludes that it is not possible to determine the Interpolated
Rate at such time (which conclusion shall be conclusive and binding absent
manifest error). If at any time the London Interbank Offered Rate is less than
zero, the London Interbank Offered Rate shall be deemed to be zero for purposes
of this Agreement.

 

“Make-Whole Amount” means, the sum of (i) all interest on the portion of the
Term Loan prepaid or required to be paid or prepaid that would otherwise have
accrued within the twelve (12) month period following the Closing Date
(calculated based on the per annum interest rate (including, for the avoidance
of doubt, the Applicable Margin and the default rate, if applicable) applicable
to the Term Loan on the date of such prepayment or required prepayment), minus
(ii) actual cash payments of interest on such portion of the Term Loan paid by
the Borrowers from the Closing Date through the date of such prepayment or
required prepayment.

 

“Manual Sweeping Accounts” shall mean the Deposit Accounts maintained by the
Borrowers as of the Closing Date that are identified as “Manual Sweeping
Accounts” on Schedule 8.10 hereto, and any replacement or additional accounts of
the Borrowers.

 

“Material Adverse Effect” shall mean a material adverse effect on (a) the
financial condition, business, performance or operations of Borrowers and the
Guarantors taken as a whole; (b) the legality, validity or enforceability of
this Agreement, the Deposit Account Control Agreements, the Intercreditor
Agreement, the Pledge Agreement, the Guaranty(ies), or any of the other material
Financing Agreements; (c) the legality, validity, enforceability, perfection or
priority of the security interests and liens of Agent upon the Collateral;
(d) the Collateral (taken as a whole) or its value; (e) the ability of Borrowers
(taken as a whole) to repay the Obligations or of Borrowers (taken as a whole)
to perform their obligations under this Agreement or any of the other Financing
Agreements as and when to be performed; or (f) the ability of Agent or any
Lender to enforce the Obligations or realize upon the Collateral or otherwise
with respect to the material rights and remedies of Agent and Lenders under this
Agreement or any of the other Financing Agreements.

 

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“Material Contract” shall mean the ABL Credit Agreement and any contract or
other agreement (other than the Financing Agreements and the Credit Card
Agreements), whether written or oral, to which any Borrower or Guarantor is a
party as to which the breach, nonperformance, cancellation or failure to renew
by any party thereto (unless a replacement Material Contract has been entered
into either prior to or contemporaneously with the date of such termination or
cancellation) would have a Material Adverse Effect.

 

“Maturity Date” shall mean the earliest of (a) the third anniversary of the
Closing Date, (b) the date on which the maturity of the Term Loan is accelerated
or deemed accelerated, (c) the first date on which an ABL Termination Event
shall occur and (d) the day that is 91 days prior to the maturity date of any
Indebtedness of any Borrower or any Guarantor with an aggregate outstanding
principal amount in excess of $5,000,000 other than the ABL Obligations,
including without limitation, the Convertible Notes; provided that this clause
(d) shall not apply to the Convertible Notes, if the Loan Parties place cash in
an amount equal to the Convertible Notes Repurchase Amount into a Convertible
Notes Escrow on or before January 31, 2020 and the Convertible Notes Repurchase
Amount remains in such Convertible Notes Escrow until such Convertible Notes
Repurchase Amount is used to repurchase, redeem, retire, satisfy and/or defease
all then outstanding Convertible Notes in full (for avoidance of doubt, such
repurchases, redemptions, retirements, satisfactions and/or defeasances need not
all occur on the same date, so long as sufficient cash to meet the Convertible
Notes Repurchase Amount as of any date remains in the Convertible Notes Escrow
on such date).

 

“Multiemployer Plan” shall mean a “multi-employer plan” as defined in
Section 4001(a)(3) of ERISA which is contributed to by any Borrower, Guarantor
or any ERISA Affiliate or with respect to which any Borrower, Guarantor or any
ERISA Affiliate may reasonably be expected to incur any liability.

 

“Net Income” shall mean, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however;

 

(a)               any gain or loss, together with any related provision for
taxes on such gain or loss, realized in connection with (i) any Asset Sale;
(ii) the disposition of any Securities by such Person or any of its Subsidiaries
or the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries; and

 

(b)               any extraordinary gain or loss, together with any related
provision for taxes on such extraordinary gain or loss.

 

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“Net Proceeds” means, with respect to any Prepayment Event, (a) the cash
proceeds received in respect of such event or transaction (including (i) any
cash received in respect of any non-cash proceeds (including, without
limitation, the monetization of notes receivables), but only as and when
received and (ii) in the case of any insurance proceeds, proceeds of a
condemnation award or other compensation payments), net of (b) the sum of all
bona fide direct costs, fees and out-of-pocket expenses (including, without
limitation, (A) appraisals, (B) brokerage, legal, advisory, banking, title and
recording tax expenses and commissions, (C) income or gains taxes payable by a
Loan Party as a result of any gain recognized in connection with any applicable
Asset Sale during the tax period in which the sale occurs, (D) payment of the
outstanding principal amount of, premium or penalty on, and interest on, any
Indebtedness (other than the Indebtedness under the Financing Agreements (as
defined in each of this Agreement and the ABL Credit Agreement) that is
permitted hereunder, is secured by a lien on the stock or assets in question and
is required to be repaid under the terms thereof as a result of any applicable
Asset Sale, (E) [reserved] and (F) a reasonable reserve for any indemnification
payments (fixed or contingent) attributable to seller’s indemnities and
representations and warranties to purchaser in respect of any applicable Asset
Sale undertaken by any Loan Party in connection with such Asset Sale (provided
that upon release of any such reserve, the amount released shall be considered
Net Proceeds)) paid by any Borrower or Guarantor to third parties (other than
Affiliates) in connection with such event.

 

“Net Recovery Percentage” shall mean with respect to Inventory or Equipment, the
fraction, expressed as a percentage, (a) the numerator of which is the amount
equal to the amount of the recovery in respect of the applicable Inventory or
Equipment at such time on a “net orderly liquidation value” basis as set forth
in the most recent acceptable appraisal of such Inventory or Equipment received
by Agent in accordance with Sections 4(o), 7.3, 7.4 or 7.6 (or any deemed
Closing Date value specified herein), net of operating expenses, liquidation
expenses and commissions, and (b) the denominator of which is the applicable
original cost of the aggregate amount of such Inventory or Equipment subject to
such appraisal.

 

“Net Working Capital” shall mean Borrowers’ (a) current assets other than cash
and Cash Equivalents and any deferred tax assets, less (b) current liabilities
(excluding the current portion of Indebtedness and deferred tax liabilities),
determined on a consolidated basis consistent with GAAP.

 

“Notice of Default or Failure of Condition” shall have the meaning set forth in
Section 12.3(a) hereof.

 

“Obligations” shall mean the Term Loan and all other obligations, liabilities
and indebtedness of every kind, nature and description owing by any or all of
Borrowers and Guarantors to Agent or any Lender, including principal, interest,
charges, fees, costs and expenses, however evidenced, whether as principal,
surety, endorser, guarantor or otherwise, arising under this Agreement or any of
the other Financing Agreements, whether now existing or hereafter arising,
whether arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to such Borrower or
Guarantor under the United States Bankruptcy Code or any similar statute
(including the payment of interest and other amounts which would accrue and
become due but for the commencement of such case, whether or not such amounts
are allowed or allowable in whole or in part in such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, or secured or unsecured.

 

41

 

 

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as
a result of a present or former connection between such Recipient and the
jurisdiction imposing such Taxes (other than a connection 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
Financing Agreement, or sold or assigned an interest in any Term Loan or any
Financing Agreement).

 

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Financing Agreement, except any such Taxes that are Other
Connection Taxes imposed with respect to an assignment (other than an assignment
made at Borrowers’ request).

 

“Paid in Full” or “Payment in Full” means, (a) the payment in full in cash of
all Term Loan Outstandings together with accrued and unpaid interest thereon,
(b) the payment in full in cash of the accrued and unpaid fees thereon or
otherwise under the Financing Agreements, and (c) the payment in full in cash of
all reimbursable expenses and other Obligations (other than Unliquidated
Obligations for which no claim has been made and other obligations expressly
stated to survive such payment and termination of this Agreement), together with
accrued and unpaid interest thereon.

 

“Parent” shall have the meaning provided in the preamble to this Agreement.

 

“Participant” shall mean any Person that acquires and holds a participation in
the interest of any Lender in the Term Loan in conformity with the provisions of
Section 13.7 of this Agreement governing participations.

 

“Perfection Certificate” shall mean the Perfection Certificate of Borrowers and
Guarantor in the form of Exhibit B hereto containing material information with
respect to Borrowers and Guarantors, and their respective businesses and assets,
provided by or on behalf of Borrowers and Guarantors to Agent in connection with
the preparation of this Agreement and the other Financing Agreements and the
financing arrangements provided for herein.

 

“Permitted Acquisitions” shall mean the purchase by a Borrower or Guarantor
after the date hereof of all or a substantial portion of all of the assets of
any Person or a business or division of such Person (including pursuant to a
merger with such Person or the formation of a wholly owned Subsidiary solely for
such purpose that is merged with such Person) or of all or a majority of the
Capital Stock (such assets or Person being referred to herein as the “Acquired
Business”) and in one or a series of transactions that satisfies each of the
following conditions as reasonably determined by Agent:

 

(a)               Agent shall have received not less than five (5) Business
Days’ prior written notice of the proposed acquisition and such information with
respect thereto as Agent may request, in each case with such information to
include (i) the proposed date and amount of the acquisition, (ii) the total
purchase price for the assets to be purchased (and the terms of payment of such
purchase price), and (iii) with respect to the purchase of an Acquired Business,
the aggregate consideration to be paid in respect of which exceeds $1,000,000
(each such acquisition being a “Material Permitted Acquisition”), (A) a summary
of the due diligence undertaken by Borrowers in connection with such acquisition
(including a quality of earnings report, if one has been commissioned) and (B) a
description of the assets or shares to be acquired,

 

42

 

 

(b)               With respect to a Material Permitted Acquisition, Agent shall
have received: (i) the most recent annual and interim financial statements with
respect to the Acquired Business, (ii) projections for Parent and its
Subsidiaries through the Maturity Date, on a monthly basis for the first year
after the acquisition and on an annual basis thereafter, giving pro forma effect
to such acquisition, based on assumptions reasonably satisfactory to Agent and
demonstrating pro forma compliance with all financial covenants set forth in
this Agreement, prepared in good faith an in a manner and using such methodology
as is consistent with the most recent financial statements delivered to Agent
pursuant to Section 9.6 hereof and in form and substance reasonably satisfactory
to Agent, and (iii) current, updated projections of the amount of the Borrowing
Base and Borrowing Base II for the twelve (12) month period after the date of
such acquisition, in a form reasonably satisfactory to Agent, representing
Borrowers’ reasonable best estimate of the future Borrowing Base and Borrowing
Base II for the period set forth therein as of the date not more than ten
(10) days prior to the date of such acquisition, which projections shall have
been prepared on the basis of the assumptions set forth therein which Borrowers
believe are fair and reasonable as of the date of preparation in light of
current and reasonably foreseeable business conditions,

 

(c)               EBITDA of the Acquired Business for the most recently ended
twelve (12) month period for which financial information is available shall be
positive,

 

(d)               Agent shall have received true, correct and complete copies of
all agreements, documents and instruments relating to such acquisition, which
documents, in the case of a Material Permitted Acquisition, shall be reasonably
satisfactory to Agent,

 

(e)               Agent shall have received a certificate of the chief financial
officer or chief executive officer of Administrative Borrower (or if no such
officer has been appointed or elected, the sole member of Administrative
Borrower) on behalf of Administrative Borrower certifying to Agent and Lenders
as to the matters set forth in this definition,

 

(f)                Accounts, Credit Card Receivables, Inventory, Intellectual
Property and Equipment of the Acquired Business shall only be Eligible Accounts,
Eligible Credit Card Receivables, Eligible Inventory, Eligible Intellectual
Property and Eligible Equipment to the extent that (i) such Accounts, Credit
Card Receivables, Inventory, Intellectual Property and Equipment are owned by a
Borrower, (ii) Agent has conducted and completed a field examination or
appraisal with respect thereto and (iii) the criteria for Eligible Accounts,
Eligible Credit Card Receivables, Eligible Inventory, Eligible Intellectual
Property and Eligible Equipment set forth herein are satisfied with respect
thereto in accordance with this Agreement (or such other or additional criteria
as Agent may, at its option, establish with respect thereto in accordance with
this Agreement and subject to such Reserves as Agent may establish in connection
with the Acquired Business),

 

(g)               the Acquired Business, if a Person, shall be an operating
company that engages in a Permitted Business,

 

43

 

 

(h)               [Reserved.],

 

(i)                 Agent shall have received all items required by Sections 5.2
and 9.23 in connection with the Acquired Business to the extent required under
such Sections,

 

(j)                 in the case of the acquisition of the Capital Stock of
another Person, the board of directors (or other comparable governing body) of
such other Person shall have duly approved such acquisition and such Person
shall not have announced that it will oppose such acquisition or shall not have
commenced any action which alleges that such acquisition will violate applicable
law,

 

(k)               (i) ABL Excess Availability shall have been not less than the
greater of (x) fifteen percent (15%) of the Borrowing Cap and (y) $14,000,000
for the thirty (30) day period ending on the date of consummation of such
acquisition, and (ii) the Borrowers shall have projected ABL Excess Availability
of not less than the greater of (x) fifteen percent (15%) of the Borrowing Cap
and (y) $14,000,000 immediately after giving effect to such acquisition and any
payments made in respect of such acquisition and for the succeeding thirty (30)
day period thereafter on a pro forma basis using the most recent calculation of
the ABL Borrowing Base immediately prior to such acquisition or payment; and

 

(l)                 no Event of Default shall exist or have occurred as of the
date of the acquisition both prior to and after giving effect to such
acquisition and any payment(s) made in respect of such acquisition.

 

“Permitted Business” shall mean any business engaged in by any of the Loan
Parties on the date hereof, and any business or other activities that are
reasonably similar, ancillary, complementary or related to, or a reasonable
extension, development or expansion of, the businesses in which the Loan Parties
are engaged as of the Closing Date.

 

“Permitted Discretion” shall mean a determination made in good faith and in the
exercise of reasonable (from the perspective of a secured asset-based lender)
business judgment.

 

“Permitted Distribution” shall mean any payment made in cash in accordance with
Section 9.11.

 

“Permitted Encumbrances” shall mean, collectively, the encumbrances permitted
under Section 9.8(b), Section 9.8(c), Section 9.8(d), Section 9.8(f),
Section 9.8(h) and Section 9.8(k); provided that the term “Permitted
Encumbrances” shall not include any lien securing Indebtedness, except with
respect to Section 9.8(k).

 

“Permitted Holders” means (a) Vintage (and its controlled investment funds) and
(b) Vintage’s controlling persons who are Brian Kahn and Andrew Laurence
(together with their controlled family trusts and personal investment vehicles).

 

“Permitted Subordinated Indebtedness” means Indebtedness of Borrowers; provided,
that (a) such Indebtedness does not mature or require any scheduled payments of
principal prior to one hundred eighty (180) days after the Maturity Date in
effect on the date of issuance, (b) such Indebtedness bears no greater than a
market interest rate as of the time of its issuance or incurrence (as determined
in good faith by Borrowers), (c) no indenture or other agreement governing such
Indebtedness contains (i) maintenance financial covenants or (ii) covenants or
events of default that are more restrictive on Borrowers or any of its
subsidiaries than those contained in this Agreement, (d) after giving effect to
the issuance or incurrence of such Indebtedness on a pro forma basis, Borrowers
shall be in compliance with all covenants set forth in this Agreement, (e) the
payment of such Indebtedness and, to the extent such Indebtedness is secured,
the liens securing such Indebtedness are subordinated to the payment of and the
liens securing the Obligations to the written satisfaction of Agent (as
determined in its sole discretion) and (f) there is no scheduled amortization
with respect to such Indebtedness.

 

44

 

 

“Permitted Tax Distributions” means, for any taxable period or portion thereof
in which Parent is a pass through entity (including a disregarded entity or
partnership) for U.S. federal income tax purposes, distributions to the direct
or indirect holders of the equity interests of Parent on or prior to each
estimated payment date as well as each other applicable due date to enable such
holders to timely make payments of U.S. federal, state and local income taxes
for such taxable period arising solely as a result of the operations of Parent
and its Subsidiaries not to exceed the product of (a) the taxable income (which
shall mean the taxable income required to be reported to Parent’s direct or
indirect holders for U.S. federal income tax purposes) attributable to Parent
and its Subsidiaries for such period, calculated (i) with taking into account
loss carryforwards of such holders available from losses of such holders
attributable to Parent and its Subsidiaries for prior taxable periods, and (ii)
without taking into account any basis step-up after the date hereof (including
under Sections 1012, 732, 734(b), 743(b) or 754 of the Code or similar
provisions of state and local law), and (b) 28%.

 

“Person” or “person” shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.

 

“Plan” shall mean an employee pension benefit plan (as defined in Section 3(2)
of ERISA) which Borrower or any Guarantor or, solely with respect to an employee
benefit plan subject to Title IV of ERISA, an ERISA Affiliate sponsors or to
which it contributes, or a Multiemployer Plan.

 

“Pledge Agreement” shall mean that certain Pledge Agreement dated as of the
Closing Date, executed by the Loan Parties in favor of Agent, as the same may be
amended, restated or otherwise modified from time to time.

 

“Post-Closing Equity Contribution” shall have the meaning set forth in Section
9.28 hereof.

 

“Post-Closing Equity Contribution Deadline” shall have the meaning set forth in
Section 9.28 hereof.

 

“Post-Closing Appraisals” shall have the meaning set forth in Section 7.6
hereof.

 

“Prepayment Event” shall have the meaning set forth in Section 2.2(b) hereof.

 

45

 

 

“Prime Rate” shall mean, for any day, a fluctuating rate per annum equal to the
greatest of (a) the rate last quoted by The Wall Street Journal as the “Prime
Rate” in the United States or, if The Wall Street Journal ceases to quote such
rate, the greatest per annum interest rate published by the Federal Reserve
Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest
Rates) as the “bank prime loan” rate or, if such rate is no longer quoted
therein, any similar rate quoted therein (as reasonably determined by the Agent)
or any similar release by the Federal Reserve Board (as reasonably determined by
the Agent), (b) the sum of the Federal Funds Rate on such day plus 0.50%, and
(c) 2.00%. Any change in the Prime Rate due to a change in any of the rates
referred to in the foregoing clauses (a) through (c) shall be effective from and
including the effective date of such change. The Prime Rate is a reference rate
and not necessarily the lowest interest rate at which any Lender (other than any
Affiliated Lender) may make loans or other extensions of credit to other
customers.

 

“pro forma basis” means, with respect to compliance with any test hereunder for
an applicable period of measurement, that all Specified Transactions and the
following transactions in connection therewith that have been made during the
applicable period of measurement or subsequent to such period and prior to or
simultaneously with the event for which the calculation is made shall be deemed
to have occurred as of the first day of the applicable measurement period with
respect to such covenant or condition: (a) income statement items (whether
positive or negative) attributable to the property or Person subject to such
Specified Transaction, (i) in the case of a sale, transfer or other disposition
of all or substantially all Capital Stock in the Parent or any of its
Subsidiaries or any division or product line of the Parent or any of its
Subsidiaries, shall be excluded, and (ii) in the case of an Investment described
in the definition of the term “Specified Transaction”, shall be included,
(b) any retirement of Indebtedness and (c) any Indebtedness incurred or assumed
by the Parent or any of its Subsidiaries in connection with such Specified
Transaction, and assuming all Indebtedness so incurred or assumed to be
outstanding shall be deemed to have borne interest (i) in the case of fixed rate
Indebtedness, at the rate applicable thereto or (ii) in the case of floating
rate Indebtedness, at the rates which were or would have been applicable thereto
during the period when such Indebtedness was or was deemed to be outstanding.

 

“Pro Rata Share” shall mean as to any Lender, the fraction (expressed as a
percentage) the numerator of which is such Lender’s Term Loan Outstandings and
the denominator of which is the aggregate amount of the then existing Term Loan
Outstandings of all Lenders, as adjusted from time to time in accordance with
the provisions of Section 13.7 hereof; provided, that at any time prior to the
making of the Term Loan, the Pro Rata Share of any Lender shall be the fraction
(expressed as a percentage) the numerator of which is such Lender’s Term Loan
Commitment and the denominator of which is the aggregate amount of the then
existing Term Loan Commitments of all Lenders, as adjusted from time to time in
accordance with the provisions of Section 13.7 hereof.

 

“Promotional Agreements” shall mean all manufacturer ingredient promotional
agreements between any Borrower or Guarantor and any product supplier or a
contract manufacturer pursuant to which, among other things, such Borrower or
Guarantor agrees to promote certain ingredients contained in the products
manufactured by such supplier and/or contract manufacturer or the packaging for
such products contains certain Intellectual Property of such supplier or
contract manufacturer, and such Borrower or Guarantor is granted an express or
implicit non-exclusive, royalty-free license to use certain Intellectual
Property of such supplier or contract manufacturer, as the same may be amended,
modified, supplemented, extended, renewed, restated or replaced.

 

46

 

 

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, and whether tangible or intangible.

 

“Push Down Reserve” shall mean the amount, if any, by which the Term Loan
Outstandings exceeds the Borrowing Base or Borrowing Base II, as applicable,
(including on account of any Reserves imposed or to be imposed by Agent), as
calculated by the Agent based upon the most recent Borrowing Base Certificate
delivered to the Agent by the Borrower.

 

“Real Property” shall mean all now owned and hereafter acquired real property of
each Borrower and Guarantor, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.

 

“Receivables” shall mean all of the following now owned or hereafter arising or
acquired property of each Borrower and Guarantor: (a) all Accounts; (b) all
interest, fees, late charges, penalties, collection fees and other amounts due
or to become due or otherwise payable in connection with any Account; (c) all
payment intangibles of such Borrower or Guarantor; (d) letters of credit,
indemnities, guarantees, security or other deposits and proceeds thereof issued
payable to any Borrower or Guarantor or otherwise in favor of or delivered to
any Borrower or Guarantor in connection with any Account; or (e) all other
Accounts, contract rights, Chattel Paper, Documents, Instruments, notes, General
Intangibles and other forms of obligations owing to any Borrower or Guarantor,
whether from the sale and lease of goods or other property, licensing of any
property (including Intellectual Property or other General Intangibles),
franchising, rendition of services or from loans or advances by any Borrower or
Guarantor or to or for the benefit of any third Person (including loans or
advances to any Affiliates or Subsidiaries of any Borrower or Guarantor) or
otherwise associated with any Accounts, Inventory or General Intangibles of any
Borrower or Guarantor (including choices in action, causes of action, tax
refunds, tax refund claims, any funds which may become payable to any Borrower
or Guarantor in connection with the termination of any Plan or other employee
benefit plan and any other amounts payable to any Borrower or Guarantor from any
Plan or other employee benefit plan, rights and claims against carriers and
shippers, rights to indemnification, business interruption insurance and
proceeds thereof, casualty or any similar types of insurance and any proceeds
thereof and proceeds of insurance covering the lives of employees on which any
Borrower or Guarantor is a beneficiary).

 

“Recipient” means, as applicable, (a) the Agent and (b) any Lender (other than
the Affiliated Lender), or any combination thereof (as the context requires).

 

“Records” shall mean, as to each Borrower and Guarantor, all of such Borrower’s
and Guarantor’s present and future books of account of every kind or nature,
purchase and sale agreements, invoices, ledger cards, bills of lading and other
shipping evidence, statements, correspondence, memoranda, credit files and other
data relating to the Collateral or any Account Debtor, together with the tapes,
disks, diskettes and other data and software storage media and devices, file
cabinets or containers in or on which the foregoing are stored (including any
rights of any Borrower or Guarantor with respect to the foregoing maintained
with or by any other Person).

 

47

 

 

“Register” shall have the meaning set forth in Section 13.7 hereof.

 

“Related Parties” means, with respect to any specified Person, such
Person'sPerson’s Affiliates and the respective directors, officers, partners,
members, trustees, employees, agents, administrators, managers, representatives
and advisors of such Person and such Person'sPerson’s Affiliates.

 

“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal
Reserve Bank of New York, or a committee officially endorsed or convened by the
Federal Reserve Board and/or the Federal Reserve Bank of New York or any
successor thereto.

 

“Required Amortization Amount” shall have the meaning set forth in Section
2.2(a)(i) hereof.

 

“Required Conditions” shall mean, with respect to any Specified Transaction,
either (a) ABL Excess Availability exceeds fifteen percent (15%) of the
Borrowing Cap and the Fixed Charge Coverage Ratio is equal to or greater than
1.10 to 1.00, calculated as of the date of such Specified Transaction both prior
to and after giving effect to such Specified Transaction, on a pro forma basis
using the most recent calculation of the Borrowing Base (or, Borrowing Base II,
if applicable) immediately prior to such Specified Transaction; provided that
the pro forma Fixed Charge Coverage Ratio shall be calculated as of the last
fiscal month prior to the date of such Specified Transaction for which financial
statements for the fiscal month or fiscal year then ended have been (or have
been required to be) delivered pursuant to Section 9.6(a)(i) and
Section 9.6(a)(ii), as applicable or (b) ABL Excess Availability exceeds the
greater of (x) twenty percent (20%) of the Borrowing Cap and (y) $20,000,000
calculated as of the date of such Specified Transaction both prior to and after
giving effect to such Specified Transaction, on a pro forma basis using the most
recent calculation of the Borrowing Base (or, Borrowing Base II, if applicable)
immediately prior to such Specified Transaction.

 

“Required Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares
aggregate fifty percent (50%) or more of the Term Loan Outstandings of all
Lenders, provided, that to the same extent set forth in Section 13.7(b)(v), the
Term Loan Outstandings of Affiliated Lenders shall be excluded for all purposes
in the determination of Required Lenders.

 

“Reserves” shall mean as of any date of determination, such amounts as Agent may
from time to time, establish and revise reasonably and in good faith reducing
the amount of Borrowing Base or Borrowing Base II, as applicable, provided for
herein:

 

(a)               to reflect events, conditions, contingencies or risks which,
as determined by Agent reasonably and in good faith, materially and adversely
affect, either (i) the Collateral, its value or the amount that might be
received by Agent from the sale or other disposition or realization upon such
Collateral, or (ii) the assets or business of any Borrower or Guarantor or
(iii) the security interests and other rights of Agent or any Lender in the
Collateral (including the enforceability, perfection and priority thereof); or

 

(b)               to reflect Agent’s reasonable and good faith belief that any
collateral report or financial information furnished by or on behalf of any
Borrower or Guarantor to Agent is or may have been incomplete, inaccurate or
misleading in any material respect; or

 

48

 

 

(c)               [reserved]; or

 

(d)               in respect of any state of facts which Agent believes
reasonably and in good faith determines constitutes a Default or an Event of
Default (which reasonable and good faith belief shall be relevant for purposes
of this definition regardless of whether the Agent has explicitly asserted any
other rights to which it may be entitled).

 

Without limiting the generality of the foregoing, Reserves may, at Agent’s
option, be established to reflect any of the following:

 

(i)                 Inventory shrinkage,

 

(ii)              reserves in respect of markdowns and cost variances (pursuant
to discrepancies between the purchase order price of Inventory and the actual
cost thereof),

 

(iii)            past due amounts in respect of sales, use and/or withholding
taxes,

 

(iv)             any amounts which are past due in respect of rental payments,
service charges or other amounts which are past due to (i) lessors of real
property other than retail store locations (“Non-Retail Store Locations”) or
(ii) consignees, warehousemen or bailees of Inventory or personal property
(“Warehouse Locations”), to the extent Inventory or Records are located in or on
such property (but not in respect of Non-Retail Store Locations or Warehouse
Locations (A) where Agent has received a Collateral Access Agreement executed
and delivered by the owner and lessor of such real property that Agent has
acknowledged in writing is in form and substance satisfactory to Agent or
(B) which do not (1) contain Records relating to Receivables or Inventory or
(2) in which either no Inventory or Inventory having a Value of less than
$250,000 is located, provided, that, notwithstanding, the foregoing Agent may,
at its option, establish Reserves in respect of amounts at any time due or to
become due to the owner and operator of such Non-Retail Store Location and
Warehouse Location as Agent shall reasonably determine in the event that any of
the following shall have occurred: (A) an Event of Default shall have occurred
and be continuing, (B) any Borrower, Guarantor or Agent shall have received
notice of any event of default under (i) the lease with respect to such
Non-Retail Store Location or (ii) the bailee or warehouse agreement with respect
to such Warehouse Location or (C) any Borrower or Guarantor has granted to the
lessor, consignee, warehousemen or bailee a consensual security interest or lien
upon any assets of such Borrower or Guarantor (unless such security interest is
waived or subordinated to the security interest of Agent on terms and conditions
reasonably satisfactory to Agent)),

 

(v)               any rental payments, service charges or other amounts owing to
lessors of retail store locations,

 

(A)             which are past due and owing to lessors of retail store
locations in states other than Landlord Lien States (but not in respect of
retail store locations where Agent has received a Collateral Access Agreement
executed and delivered by the owner and lessor of such real property that Agent
has acknowledged in writing is in form and substance satisfactory to Agent),
provided, that, Agent may, at its option, establish Reserves in respect of
amounts at any time due or to become due to the owner and lessor of such a
retail store location as Agent shall reasonably determine in the event that any
of the following shall have occurred: (1) an Event of Default shall have
occurred and be continuing, (2) any Borrower, Guarantor or Agent shall have
received notice of any event of default under the lease with respect to such
location, or (3) any Borrower or Guarantor has granted to the lessor a security
interest or lien upon any assets of such Borrower or Guarantor (unless such
security interest is waived or subordinated to the security interest of Agent on
terms and conditions reasonably satisfactory to Agent), and

 

49

 

 

(B)              which are due or to become due to lessors of retail store
locations located in Landlord Lien States (but not in respect of retail store
locations where Agent has received a Collateral Access Agreement executed and
delivered by the owner and lessor of such real property that Agent has
acknowledged in writing is in form and substance satisfactory to Agent),
provided, that, the Reserves established pursuant to this clause (v)(B) as to
any particular retail store location shall not exceed at any time the aggregate
of such amounts payable for the next two (2) months to the lessors of such
retail store locations, provided, that, such limitation on the amount of the
Reserves which may be established by Agent pursuant to this clause (v)(B) with
respect to any such location shall only apply so long as: (1) no Event of
Default shall have occurred and be continuing, (2) neither a Borrower, Guarantor
nor Agent shall have received notice of any event of default under the lease
with respect to such location or (3) no Borrower or Guarantor has granted to
such lessor a consensual lien or security interest upon any assets of such
Borrower or Guarantor (unless such security interest is waived or subordinated
to the security interest of Agent on terms and conditions reasonably
satisfactory to Agent),

 

(vi)             any rental payments, service charges or other amounts which are
past due to lessors of personal property,

 

(vii)          up to fifty (50%) percent of the aggregate amount of
(A) merchandise gift certificates, and (B) the dollar value of Frequent Buyer
Program points as accrued by Borrowers in accordance with GAAP,

 

(viii)        an adverse change in the number of days of the turnover of
Inventory or a material change in the mix of the Inventory that results in an
overall decrease in the value thereof or a material deterioration in its nature
or quality that results in an overall decrease in the value thereof (but only to
the extent not addressed by the lending formulas in a manner satisfactory to
Agent),

 

(ix)             variances between the perpetual inventory records of Borrowers
and the results of test counts of Inventory conducted by Agent or at the request
of Agent pursuant to the terms of this Agreement, with respect thereto in excess
of the percentage reasonably acceptable to Agent but only to the extent that
such variances are not accounted for as Inventory shrinkage,

 

(x)               Inventory that may become obsolete, based on prior twelve
(12) months expired product expenses or Inventory currently in retail store
locations that was subject to previous store “giveaways” within the prior twelve
(12) months, and

 

(xi)             the aggregate amount of deposits, if any, received by any
Borrower from its retail customers in respect of unfilled orders for
merchandise.

 

50

 

 

Agent will not establish new Reserves after the Closing Date on account of any
circumstances, conditions, events or contingencies of which Agent has actual
knowledge as of the Closing Date. To the extent Agent may establish new criteria
or revise existing criteria (including percentages applied to determine the
amount of) for Eligible Credit Card Receivables, Eligible Accounts, Eligible
Equipment, Eligible Intellectual Property or Eligible Inventory so as to address
any circumstances, condition, event or contingency in a manner reasonably
satisfactory to Agent, Agent shall not establish or increase a Reserve for the
same purpose. The amount of any Reserve established or increased by Agent shall
have a reasonable relationship to the event, condition or other matter which is
the basis for such Reserve as reasonably determined by Agent in good faith.
Agent shall provide prior written notice to Administrative Borrower of any
material change in the categories of Reserves established after the date hereof
or in the manner such Reserves are calculated or any other change to any item
for the calculation thereof.

 

“Sanctioned Country” means, at any time, a country, region or territory which is
itself the subject or target of any Sanctions (as of the Closing Date, Crimea,
Cuba, Iran, North Korea, 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 or other relevant sanctions authority, (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 all economic or financial sanctions or trade embargoes
imposed, administered or enforced from time to time by (a) 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, or (b) any
other relevant sanctions authority.

 

“Secured Parties” shall mean, collectively, (a) Agent and (b) Lenders; such
parties are sometimes referred to herein individually as a “Secured Party”.

 

“Security” shall have the meaning set forth in Article 8 of the UCC.

 

“SOFR” with respect to any day means the secured overnight financing rate
published for such day by the Federal Reserve Bank of New York, as the
administrator of the benchmark, (or a successor administrator) on the Federal
Reserve Bank of New York’s Website.

 

“Solvent” shall mean, at any time with respect to any Person, that at such time
such Person (a) is able to pay its debts as they mature and has (and has a
reasonable basis to believe it will continue to have) sufficient capital (and
not unreasonably small capital) to carry on its business consistent with its
practices as of the Closing Date, and (b) the assets and properties of such
Person at a fair valuation on a going concern basis (and including as assets for
this purpose at a fair valuation all rights of subrogation, contribution or
indemnification arising pursuant to any guarantees given by such Person) are
greater than the Indebtedness of such Person, and including subordinated and
contingent liabilities computed at the amount which, such Person has a
reasonable basis to believe, represents an amount which can reasonably be
expected to become an actual or matured liability (and including as to
contingent liabilities arising pursuant to any guarantee the face amount of such
liability as reduced to reflect the probability of it becoming a matured
liability).

 

51

 

 

“Special Agent Advances” shall have the meaning set forth in Section 12.11
hereof.

 

“Specified Closing Plan” meansshall mean the model delivered to the Agent prior
to the Closing Date with the file name “Project Valor Model v2019-11-25 vF (70mm
JPM & 70mm GACP - L + 900 BPS)” and titled “Project Valor Financial Model.”

 

“Specified Closing Amended Plan” shall mean the model delivered to the Agent on
or prior to the First Amendment Effective Date with the file name “050120 VSI
Forecast vs. Specified Closing Plan” and titled “Vitamin Shoppe, LLC. 2020
Forecast”.

 

“Specified Transaction” meansshall mean any (a) disposition of all or
substantially all the assets of or all the Capital Stock of any Subsidiary of
the Parent or of any business unit, line of business or division of the Parent
or any of its Subsidiaries for which historical financial statements are
available, (b) Permitted Acquisitions, (c) Investment that results in a Person
becoming a Borrower or Subsidiary, (d) the proposed incurrence of Permitted
Subordinated Indebtedness or (e) the making of an Investment, dividend or
distribution or repurchase of Capital Stock in respect of which compliance with
the Required Conditions or any other financial ratio is by the terms of this
Agreement is required to be calculated on a pro forma basis.

 

“Store Accounts” shall have the meaning set forth in Section 6.3; provided that
the Store Accounts maintained by the Borrowers as of the Closing Date are
identified as “Store Accounts” on Schedule 8.10 hereto, and any replacement or
additional accounts of the Borrowers.

 

“Subsidiary” or “subsidiary” shall mean, with respect to any Person, any
corporation, limited liability company, limited liability partnership or other
limited or general partnership, trust, association or other business entity of
which an aggregate of at least a majority of the outstanding Capital Stock or
other interests entitled to vote in the election of the board of directors of
such corporation (irrespective of whether, at the time, Capital Stock of any
other class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency), managers, trustees or other
controlling Persons, or an equivalent controlling interest therein, of such
Person is, at the time, directly or indirectly, owned by such Person and/or one
or more subsidiaries of such Person. Unless the context indicates otherwise,
references to a Subsidiary shall be deemed to refer to a Subsidiary of
Administrative Borrower.

 

“Subsidiary Guarantors” shall have the meaning assigned to such term in the
definition of “Guarantors”.

 

“Supporting Obligations” shall have the meaning set forth in Article 9 of the
UCC.

 

“Tax Refund” shall mean all Tax refunds expected to be received in the fiscal
year of 2020 by any Borrower or any Guarantor from any Governmental Authority,
including but not limited to refunds under provisions of the Cares Act. As of
the First Amendment Effective Date, the Loan Parties expect to receive Tax
refunds in the approximate amount of $30,000,000.

 

“Tax Refund Additional Payment Amount” shall have the meaning set forth in
Section 2.2(a) hereof.

 

52

 

 

“Tax Refund Prepayment Cap” shall mean (i) $12,500,000, to the extent that the
Tax Refund prepayment is made prior to September 26, 2020 in accordance with
Section 2.3(a) or (ii) $12,500,000 minus any Tax Refund Additional Payment
Amount paid pursuant to Section 2.2(a), in the event that the Tax Refund
prepayment is made on or after September 26, 2020 in accordance with Section
2.3(a).

 

“Tax Refund Prepayment Date” shall have the meaning set forth in Section 2.3(a)
hereof.

 

“Taxes” shall mean any and all present or future taxes, levies, imposts, duties,
deductions, withholdings (including backup withholding), value added taxes, or
any other goods and services, use or sales taxes, assessments, fees or other
charges imposed by any Governmental Authority, including any interest, additions
to tax or penalties applicable thereto. “Term Loan” shall have the meaning set
forth in Section 2.1(a) hereof.

 

“Term Loan Commitment” means, with respect to each Lender, the commitment, if
any, of such Lender to make the Term Loan, expressed as an amount representing
the maximum possible aggregate amount of such Lender’s portion of the Term Loan
hereunder, as such commitment may be increased or reduced from time to time
pursuant to assignments by or to such Lender pursuant to Section 13.7. Each
Lender’s Term Loan Commitment as of the Closing Date is the amount set forth
opposite such Lender’s name on Schedule 1 under the caption “Term Loan
Commitment”.

 

“Term Loan Note” means a promissory note in the form of Exhibit I.

 

“Term Loan Outstandings” means, at any time of calculation, (a) the sum of the
then existing aggregate outstanding principal amount of the Term Loan, and (b)
when used with reference to any single Lender, the sum of the then existing
outstanding principal amount of the Term Loan advanced by such Lender.

 

“Term SOFR” means the forward-looking term rate based on SOFR that has been
selected or recommended by the Relevant Governmental Body.

 

“UCC” shall mean the Uniform Commercial Code as in effect in the State of New
York, and any successor statute, as in effect from time to time (except that
terms used herein which are defined in the Uniform Commercial Code as in effect
in the State of New York on the date hereof shall continue to have the same
meaning notwithstanding any replacement or amendment of such statute except as
Agent may otherwise determine); provided, that, if, with respect to any
financing statement or by reason of any provisions of law, the perfection or the
effect of perfection or non-perfection of the security interests granted to the
Agent pursuant to applicable Financing Agreement is governed by the Uniform
Commercial Code as in effect in a jurisdiction of the United States other than
the State of New York, then “UCC” means the Uniform Commercial Code as in effect
from time to time in such other jurisdiction for purposes of the provisions of
each Financing Agreement and any financing statement relating to such perfection
or effect of perfection or non-perfection.

 

“Ultimate Parent” shall mean Franchise Group, Inc., a Delaware corporation
(formerly known as Liberty Tax, Inc.).

 

53

 

 

“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the
Benchmark Replacement Adjustment.

 

“Unliquidated Obligations” means, at any time, any Obligations (or portion
thereof) that are contingent in nature or unliquidated at such time.

 

“U.S. Person” shall mean any Person that is a “United States Person” as defined
in Section 7701(a)(30) of the Code.

 

“U.S. Tax Compliance Certificate” shall have the meaning assigned to such term
in Section 6.5(f)(ii)(B)(3).

 

“Value” shall mean, as reasonably determined by Agent in good faith, with
respect to Inventory or Equipment, the lower of (a) cost determined on the
weighted average cost basis in accordance with GAAP or (b) market value,
provided, that, for purposes of the calculation of the Borrowing Base or,
Borrowing Base II, as applicable), (i) the Value of the Inventory or Equipment
shall not include: (A) the portion of the value of Inventory or Equipment equal
to the profit earned by any Affiliate on the sale thereof to any Borrower unless
the sale by such Affiliate is a bona fide arm’s length transaction consistent
with the most recent appraisal received and accepted by Agent for the Inventory
or Equipment (as applicable) and consistent with the prices previously paid by
such Borrower in comparable dealings with non-Affiliates, or (B) write-ups or
write-downs in value with respect to currency exchange rates and
(ii) notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Agent prior to the
date hereof, if any.

 

“Vintage” shall mean Vintage Capital Management LLC, a Delaware limited
liability company.

 

“Voting Stock” shall mean with respect to any Person, (a) one (1) or more
classes of Capital Stock of such Person having general voting powers to elect at
least a majority of the board of directors, managers or trustees of such Person,
irrespective of whether at the time Capital Stock of any other class or classes
have or might have voting power by reason of the happening of any contingency,
and (b) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such
Person described in clause (a) of this definition.

 

“Zero Balance Accounts” shall mean Deposit Accounts in which a balance of zero
is maintained by the depository institution at all times by automatically
transferring funds from a master Deposit Account to such Zero Balance Account in
an amount only large enough to cover checks presented and other debits to such
account, such that any such Zero Balance Account maintains an overnight balance
of zero dollars at all times.

 

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SECTION 2.    CREDIT FACILITIES

 

2.1              Term Loan.

 

(a)               Subject to and upon the terms and conditions contained herein,
each Lender severally (and not jointly) agrees to make a term loan to the
Borrowers (such loans, collectively, the “Term Loan”) on the Closing Date in an
aggregate principal amount equal to the lesser of (x) such Lender’s Term Loan
Commitment and (y) such Lender’s Pro Rata Share of the Borrowing Base as of such
date (based upon the Borrowing Base Certificate delivered by the Administrative
Borrower to Agent on the Closing Date). The execution and delivery of this
Agreement by Borrowers and the satisfaction of, or waiver of, the conditions
precedent set forth in Section 4 shall be deemed to constitute Borrowers’
request to borrow the Term Loan on the Closing Date. Upon such Lender’s making
of its portion of the Term Loan, the Term Loan Commitment of such Lender shall
be terminated automatically in full. Any portion of the Term Loan repaid or
prepaid may not be reborrowed.

 

(b)               To the extent that any facts or circumstances (i) have led to
Agent establishing a Reserve pursuant to one provision of this Agreement, Agent
shall not establish any Reserves based on the same such facts or circumstances
pursuant to any other provision of this Agreement, and (ii) were taken into
account in calculating any component of the Borrowing Base or Borrowing Base II,
as applicable, Agent shall not establish any Reserves based on the same such
facts or circumstances.

 

(c)               Subject to the payment of any applicable Early Termination
Fee, on the date of delivery of any Borrowing Base Certificate, if the Term Loan
Outstandings at any time exceed the Borrowing Cap, then the Agent shall instruct
the ABL Agent (with notice to the Borrower) in writing to immediately implement
the Push Down Reserve (as defined in this Agreement) under the ABL Credit
Agreement; provided that if the ABL Agent refuses to implement the Push Down
Reserve in full under the ABL Credit Agreement (including, without limitation,
due to ABL Excess Availability being insufficient) within three (3) Business
Days after receipt of such instruction, Borrowers shall immediately repay to
Agent the entire amount (less the amount of any Push Down Reserve implemented)
of any such excess of the Term Loan Outstandings over the Borrowing Cap plus any
accrued, unpaid interest and fees payable thereon.

 

(d)               If at any point after March 28, 2020 the, a Borrowing Base II
Period is no longer applicablehas been triggered then, upon the next Borrowing
Base II End Date, at Agent’s election, the Agent may implement either (ai) a
Push Down Reserve pursuant to Section 2.1(dc) of anin the amount by which the
Term Loan Outstandings exceed Borrowing Base II or (bii) apply Section
2.2(a)(i)(B) requiring the payments required therein. For purposes herein,
“Borrowing Base II Period” shall mean the period beginning on the first day of
any fiscal quarter after which the Term Loan Outstandings equal or are less than
the lesser of (x) $25,000,000 and (y) the then amount of Borrowing Base II for
the prior quarter ended until the Term Loan Outstandings exceed the lesser of
(x) $25,000,000 and (y) the then amount of Borrowing Base II.

 

2.2              Mandatory Repayments and Prepayments of the Term Loan.

 

(a)                

 

(i) Beginning with the fiscal quarter ending March 28, 2020 and for each fiscal
quarter thereafter until the first Borrowing Base II Period or if Section 2.1(d)
is elected, the Borrowers shall make on the last Business Day of each fiscal
quarter a payment of principal on the Term Loan in an amount equal to $4,250,000
(“Required Amortization Amount”).

 

55

 

 

(i)                 The Borrowers shall make the following payments of principal
on the Term Loans: (A) on the last Business Day of the fiscal quarters ending on
March 28, 2020 and June 27, 2020, respectively, a payment in an amount equal to
$4,250,000; (B) on the last Business Day of each fiscal quarter thereafter until
the first Borrowing Base II End Date or if Section 2.1(d)(ii) is elected by the
Agent, a payment in an amount equal to $4,250,000; and (C) in the event that the
Tax Refund Prepayment Date has not occurred prior to September 26, 2020, on the
last Business Day of each fiscal quarter beginning with the fiscal quarter
ending on September 26, 2020 and continuing until the occurrence of the Tax
Refund Prepayment Date, an additional payment in an amount equal to $3,125,000
(any such additional payments referred to in this clause (C), the “Tax Refund
Additional Payment Amount”), which Tax Refund Additional Payment Amount shall
only be distributed to non-Affiliated Lenders; provided, for avoidance of doubt,
that no payment shall be required pursuant to the preceding clauses (a)(i)(A) or
(a)(i)(B) for any fiscal quarter ending after the first Borrowing Base II End
Date or if Section 2.1(d)(i) is elected by the Agent (the payment required for
any particular fiscal quarter pursuant to this clause (a)(i), including any Tax
Refund Additional Payment Amount required for such fiscal quarter, is referred
to herein as the “Required Amortization Amount”).

 

(ii)              Beginning with the fiscal quarter ending March 28, 2020 and
for each fiscal quarter thereafter until the commencement of the first Borrowing
Base II Period or if Section 2.1(d)(ii) is elected, the Borrowers shall make,
within five (5) Business Days after financial statements for the last fiscal
month in such fiscal quarter were required to have been delivered pursuant to
Section 9.6(a)(i), make a payment of principal on the Term Loan in an amount,
equal to the sum, if positive, of (A) sixty percent (60%) of Excess Cash Flow
for such fiscal quarter minus (B) the aggregate amount of all voluntary
principal prepayments of the Term Loan during such fiscal quarter, to the extent
actually made, of the Term Loan (together with any Early Termination Fee
thereon) during such fiscal quarter (the sum of (A) andminus (B), the “ECF
Amount”); provided that the amount of the ECF Amount into be paid on account of
any quarter shall not cause the aggregate ECF Amount paid during any fiscal year
to exceed $12,500,0012,500,000 (which cap, for the avoidance of doubt, shall be
in addition to the applicable Required Amortization Amount).

 

(b)               If at any time or from time to time:

 

(i)                 any Borrower or Guarantor shall undertake an Asset Sale
which results in Net Proceeds in excess of $250,000 in the aggregate in any
fiscal year;

 

(ii)              any Borrower or Guarantor shall issue or incur Indebtedness
(other than any Indebtedness permitted by Section 9.9);

 

(iii)            any Borrower or Guarantor shall issue any Capital Stock (other
than any issuances of Capital Stock permitted by Section 9.7); or

 

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(iv)             any Borrower or Guarantor shall suffer Events of Loss in excess
of $250,000 in the aggregate in any fiscal year;

 

(the events described in clauses (i) through (iv) of this clause (b) being
collectively referred to herein as “Prepayment Events”),

 

then, subject to the Intercreditor Agreement, (A) the Administrative Borrower
shall promptly notify the Agent in writing of such Prepayment Event (including
the amount of the estimated Net Proceeds to be received by a Borrower or a
Guarantor thereofin respect of such Prepayment Event) and (B) within five (5)
Business Days (or immediately in the case of any issuance or incurrence of
Indebtedness or the issuance of Capital Stock, as the case may be) after receipt
by any Borrower or Guarantor of any Net Proceeds of such Prepayment Event, the
Administrative Borrower shall deliver, or cause to be delivered, an amount equal
to such Net Proceeds to the Agent for distribution to the Lenders (other than
Affiliated Lenders) as a prepayment of the Term Loan, which prepayment, subject
to the Intercreditor Agreement, shall be applied in accordance with Section 6.4;
provided, however, that the Loan Parties shall be permitted to apply such Net
Proceeds (or any portion thereof) from Events of Loss to replace, repair,
restore or rebuild the assets subject to an Event of Loss or to purchase or
construct other assets useful in the business of the Loan Parties, provided that
(i) no Event of Default has occurred and is continuing and (ii)  any such Net
Proceeds arising from such Event of Loss not (x) used to so replace, repair,
restore or rebuild the assets subject to such Event of Loss, or to purchase or
construct other assets useful in the business of the Loan Parties following such
Event of Loss, within 180 days after the receipt of such Net Proceeds, or (y)
committed to be used to so replace, repair, restore or rebuild the assets
subject to such Event of Loss, or to purchase or construct other assets useful
in the business of the Loan Parties following such Event of Loss, within 180
days after the receipt of such Net Proceeds, and subsequently used as so
committed within 180 days after the end of such initial 180-day period, in each
case (as to clauses (x) and (y)), shall be applied to the prepayment of the Term
Loan in accordance with Section 6.4. All prepayments of the principal amount of
the Term Loan from events described in this Section 2.2(b) shall be accompanied
by interest on the amount prepaid and any related Early Termination Fee.

 

2.3              [Reserved]Tax Refund Prepayment

 

(a)               Within five (5) Business Days after receipt by any Loan Party
of any Tax Refund, the Administrative Borrower shall pay, or cause to be paid,
such Tax Refund in an amount for all payments made pursuant to this Section
2.3(a) up to Tax Refund Prepayment Cap (the date of such payment, the “Tax
Refund Prepayment Date”) to the Agent for distribution to the Lenders (other
than Affiliated Lenders) as a prepayment of the Term Loan, which prepayment (i)
shall be applied in accordance with Section 6.4, and (ii) shall be accompanied
by interest on the amount so prepaid and, in lieu of any Early Termination Fee
otherwise payable hereunder or under the Fee Letter, a fee equal to two percent
(2.0%) of the amount of the Term Loan so prepaid for distribution to the Lenders
(other than Affiliated Lenders).

 

(b)               In the event that the Tax Refund Prepayment Date does not
occur on or prior to July 31, 2020, then the Borrowers shall pay to the Agent,
for the ratable benefit of each Lender (other than an Affiliated Lender) in
accordance with its respective Pro Rata Share, a fee equal to one-half of one
percent (0.5%) of the aggregate Term Loan Outstandings of the Lenders (other
than the Affiliated Lender), which shall be fully earned, non-refundable and due
and payable on August 3, 2020. For the avoidance of doubt, the payment of the
fee contemplated by this Section 2.3(b) shall not limit the obligations of the
Borrowers under Section 2.3(a) to the extent a Tax Refund is received after July
31, 2020.

 

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2.4              [Reserved]

 

2.5              [Reserved]

 

2.6              [Reserved]

 

2.7              Joint and Several Liability. Borrowers shall be liable for all
Obligations due to Agent and Secured Parties under this Agreement, regardless of
which Borrower actually receives the Term Loan or other extensions of credit
hereunder or the amount of the Term Loan received or the manner in which Agent
accounts for the Term Loan or other extensions of credit on its books and
records. The Obligations with respect to the Term Loan or other extensions of
credit made to a Borrower, and the Obligations arising as a result of the joint
and several liability of a Borrower hereunder, with respect to the Term Loan or
other extensions of credit made to the other Borrowers hereunder, shall be
separate and distinct obligations, but all such Obligations shall be primary
obligations of all Borrowers. The Obligations arising as a result of the joint
and several liability of a Borrower hereunder with respect to the Term Loan or
other extensions of credit made to the other Borrowers hereunder shall, to the
fullest extent permitted by law, be unconditional irrespective of (a) the
validity or enforceability, avoidance or subordination of the Obligations of the
other Borrowers or of any promissory note or other document evidencing all or
any part of the Obligations of the other Borrowers, (b) the absence of any
attempt to collect the Obligations from the other Borrowers, any Guarantor or
any other security therefor, or the absence of any other action to enforce the
same, (c) the failure by Agent to take any steps to perfect and maintain its
security interest in, or to preserve its rights and maintain its security or
collateral for the Obligations of the other Borrowers and Guarantors, (d) the
election of Agent in any proceeding instituted under the Bankruptcy Code, of the
application of Section 1111(b)(2) of the Bankruptcy Code, (e) the disallowance
of all or any portion of the claim(s) of Agent for the repayment of the
Obligations of the other Borrowers and Guarantors under Section 502 of the
Bankruptcy Code, or (f) any other circumstances which might constitute a legal
or equitable discharge or defense of any obligor, other than the payment of the
Obligations and the willful misconduct, bad faith or gross negligence of Agent
or Lenders as determined pursuant to a final, non-appealable order of a court of
competent jurisdiction. With respect to the Obligations arising as a result of
the joint and several liability of a Borrower hereunder with respect to the Term
Loan or other extensions of credit made to the other Borrowers hereunder, each
Borrower and Guarantor waives, until the Obligations shall have been paid in
full in immediately available funds and this Agreement shall have been
terminated, any right to enforce any right of subrogation or any remedy which
Agent now has or may hereafter have against Borrowers and Guarantors, any
endorser or any guarantor of all or any part of the Obligations, and any benefit
of, and any right to participate in, any security or collateral given to Agent.
Upon any Event of Default and for so long as the same is continuing, subject to
Section 10 and the Intercreditor Agreement, Agent may proceed directly and at
once, without notice, against any Borrower or Guarantor to collect and recover
the full amount, or any portion of the Obligations, without first proceeding
against the other Borrowers or any other Person, or against any security or
collateral for the Obligations. Each Borrower and Guarantor consents and agrees
that Agent and Lenders shall be under no obligation to marshal any assets in
favor of Borrower(s) or Guarantors against or in payment of any or all of the
Obligations.

 

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2.8              Defaulting Lenders. Notwithstanding any provision of this
Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the
following provisions shall apply for so long as such Lender is a Defaulting
Lender:

 

(a)               the Pro Rata Share of the then outstanding Obligations of such
Defaulting Lender shall not be included in determining whether all Lenders or
the Required Lenders or all affected Lenders have taken or may take any action
hereunder (including any consent to any amendment or waiver pursuant to
Section 11.4), provided that any waiver, amendment or modification requiring the
consent of all Lenders or each affected Lender which affects such Defaulting
Lender disproportionately than other affected Lenders shall require the consent
of such Defaulting Lender; and

 

(b)               [Reserved]

 

(c)               [Reserved]

 

(d)               [Reserved]

 

(e)               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 Agent. Agent may hold and, in its
discretion, relend to a Borrower the amount of all such payments received or
retained by it for the account of such Defaulting Lender. The operation of this
Section shall not be construed to increase or otherwise affect the Term Loan
Commitment of any Lender, or relieve or excuse the performance by any Borrower
or Guarantor of their duties and obligations hereunder.

 

2.9              Optional Prepayment of Term Loan.

 

(a)               Borrowers shall have the right at any time and from time to
time to prepay the Term Loan in whole or in part, subject to prior notice in
accordance with paragraph (b) of this Section and such prepayment shall be
accompanied by interest on the amount so prepaid and any related Early
Termination Fee. Any amounts prepaid pursuant to this Section 2.9 in respect of
the principal amount of the Term Loan shall be applied to the principal
repayment installments thereof in reverse order of maturity.

 

(b)               Administrative Borrower shall notify Agent by telephone
(confirmed by facsimile or email) or in writing of any prepayment hereunder not
later than 11:00 a.m., New York time, three Business Days before the date of
prepayment (or such later date agreed to by the Agent in its sole discretion).
Each such notice shall be irrevocable, unless such notice is expressly
conditioned on the occurrence of another transaction, and such notice shall
specify the prepayment date and the principal amount of the Term Loan to be
prepaid. Promptly following receipt of any such notice, Agent shall advise the
Lenders of the contents thereof. The payment amount specified in such notice
shall be due and payable on the date specified therein. Together with each
prepayment under this Section 2.9, the Borrowers shall pay any related Early
Termination Fee .

 

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SECTION 3.    INTEREST AND FEES

 

3.1              Interest.

 

(a)               Borrowers shall pay to Agent, for the benefit of Lenders,
interest on the Term Loan Outstandings at the applicable Interest Rate. All
interest accruing hereunder on and after the date of any Event of Default (for
as long as such Event of Default is continuing) or termination hereof shall be
payable on demand.

 

(b)               [Reserved].

 

(c)               [Reserved].

 

(d)               Interest shall be payable by Borrowers to Agent, for the
account of Lenders, monthly in arrears not later than the first Business Day of
each calendar month and shall be calculated on the basis of a three hundred
sixty (360) day year (or a 365 or 366 day year, as applicable, for interest
calculated based on the Alternate Base Rate, other than clause (c) of the
definition of Alternate Base Rate) and actual days elapsed. The Interest Rate on
non-contingent Obligations (other than the Term Loan) shall increase or decrease
by an amount equal to each increase or decrease in the Alternate Base Rate
effective on the date of any change in such Alternate Base Rate. In no event
shall charges constituting interest payable by Borrowers to Agent and Lenders
exceed the maximum amount or the rate permitted under any applicable law or
regulation, and if any such part or provision of this Agreement is in
contravention of any such law or regulation, such part or provision shall be
deemed amended to conform thereto.

 

3.2              Fees.

 

(a)               [Reserved].

 

(b)               [Reserved.]

 

(c)               Borrowers shall pay to Agent the fees and amounts set forth in
the Fee Letter in the amounts and at the times specified therein. To the extent
payment in full of any applicable fee due to the Lenders (other than Affiliated
Lenders) is received by Agent from Borrowers, Agent shall pay to each Lender
(other than an Affiliated Lender) its share of such fees in accordance with the
terms of the arrangements of Agent with such Lender.

 

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3.3              Changes in Laws and Increased Costs of the Term Loan.

 

(a)               If after the date hereof, either (i) any change in, or in the
interpretation of, any law or regulation is introduced, including, with respect
to reserve requirements, applicable to any Lender or any banking or financial
institution from whom any Lender borrows funds or obtains credit (a “Funding
Bank”), or (ii) a Funding Bank or any Lender complies with any future guideline
or request from any Governmental Authority or (iii) a Funding Bank or any Lender
determines that the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof has or would
have the effect described below, or a Funding Bank or any Lender complies with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such Governmental Authority, and in the case of any event
set forth in this clause (iii), such adoption, change or compliance has or would
have the effect of reducing the rate of return on any Lender’s capital as a
consequence of its obligations hereunder to a level below that which such Lender
could have achieved but for such adoption, change or compliance (taking into
consideration the Funding Bank’s or Lender’s policies with respect to capital
adequacy) by an amount reasonably deemed by such Lender to be material, and the
result of any of the foregoing events described in clauses (i), (ii) or (iii) is
or results in an increase in the cost to any Lender of funding or maintaining
the Term Loan or its Term Loan Commitment (other than any increased cost
resulting from (A) Taxes (as to which Section 6.5 and the limitations thereto
shall govern) or (B) changes in the basis of taxation of overall net income by
the jurisdiction under the laws of which the Agent or such Lender is organized
or in which the Agent’s or such Lender’s lending office is located or any
political subdivision thereof), then Borrowers and Guarantors shall from time to
time upon demand by Agent pay to Agent additional amounts sufficient to
indemnify such Lender, as the case may be, against such increased cost on an
after-tax basis (after taking into account applicable deductions and credits in
respect of the amount indemnified). A certificate as to the amount of such
increased cost and the calculation thereof, including reasonable supporting
information, shall be submitted to Administrative Borrower by Agent or the
applicable Lender and shall be prima facie evidence, absent manifest error.
Notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street
Reform and Consumer Protection Act and all requests, rules, guidelines or
directives thereunder, issued in connection therewith or in implementation
thereof, and (y) all requests, rules, guidelines and 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, shall in each case be deemed to be a change in
law after the date hereof regardless of the date enacted, adopted, issued or
implemented.

 

(b)               [Reserved].

 

(c)               [Reserved].

 

(d)               Prior to requesting indemnification from the Borrowers for any
material increased costs described in Sections 3.3(a) hereto (“Increased
Costs”),

 

(i)                 any Lender (in each case, other than an Affiliated Lender)
affected by any Increased Costs (an “Affected Lender”) shall make commercially
reasonable efforts to designate a different lending office, if such designation
would prevent the accruing of Increased Costs or decrease the amount thereof by
a material amount, and would not, in the commercially reasonable judgment of
Affected Lender, be otherwise disadvantageous to Affected Lender, and

 

(ii)              if such designating of a different lending office would, in
the reasonable judgment of Affected Lender, be disadvantageous to Affected
Lender, then such Lender shall either:

 

(A)             assign all of its rights and obligations under this Agreement to
an Eligible Transferee, if such assignment would eliminate or materially reduce
the amount of the Increased Costs, and would not, in the reasonable judgment of
Affected Lender, be disadvantageous to Affected Lender; or

 

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(B)              offer the Borrower to repay within fifteen (15) Business Days
after written notice provided to the Borrower (with a copy to Agent) to that
effect, all of Affected Lender’s interest in the Term Loan. Any repayment by the
Borrower pursuant to this Section 3.3(d)(ii)(B) shall be made directly to the
Affected Lender without giving effect to Section 6.4, Section 6.10 or any other
provision in this Agreement to the contrary.

 

(e)               [Reserved].

 

3.4              Effect of Benchmark Transition Event.

 

(a)               Benchmark Replacement. Notwithstanding anything to the
contrary herein or in any other Financing Agreement, upon the occurrence of a
Benchmark Transition Event or an Early Opt-in Election, as applicable, the Agent
and the Borrowers may amend this Agreement to replace London Interbank Offered
Rate with a Benchmark Replacement. Any such amendment with respect to a
Benchmark Transition Event will become effective at 5:00 p.m. on the fifth (5th)
Business Day after the Agent has posted such proposed amendment to all Lenders
and the Borrowers so long as the Agent has not received, by such time, written
notice of objection to such amendment from Lenders comprising the Required
Lenders. Any such amendment with respect to an Early Opt-in Election will become
effective on the date that Lenders comprising the Required Lenders have
delivered to the Agent written notice that such Required Lenders accept such
amendment. No replacement of London Interbank Offered Rate with a Benchmark
Replacement pursuant to this Section 3.4 will occur prior to the applicable
Benchmark Transition Start Date.

 

(b)               Benchmark Replacement Conforming Changes. In connection with
the implementation of a Benchmark Replacement, the Agent will have the right to
make Benchmark Replacement Conforming Changes from time to time and,
notwithstanding anything to the contrary herein or in any other Financing
Agreement, any amendments implementing such Benchmark Replacement Conforming
Changes will become effective without any further action or consent of any other
party to this Agreement.

 

(c)               Notices; Standards for Decisions and Determinations. The Agent
will promptly notify the Administrative Borrower and the Lenders of (i) any
occurrence of a Benchmark Transition Event or an Early Opt-in Election, as
applicable, and its related Benchmark Replacement Date and Benchmark Transition
Start Date, (ii) the implementation of any Benchmark Replacement, (iii) the
effectiveness of any Benchmark Replacement Conforming Changes and (iv) the
commencement or conclusion of any Benchmark Unavailability Period. Any
determination, decision or election that may be made by the Agent or Lenders
pursuant to this Section 3.4, including any determination with respect to a
tenor, rate or adjustment or of the occurrence or non-occurrence of an event,
circumstance or date and any decision to take or refrain from taking any action,
will be conclusive and binding absent manifest error and may be made in its or
their sole discretion and without consent from any other party hereto, except,
in each case, as expressly required pursuant to this Section 3.4.

 

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(d)               Benchmark Unavailability Period. Upon the Administrative
Borrower’s receipt of notice of the commencement of a Benchmark Unavailability
Period, interest on the Term Loan shall accrue and be payable at the Alternate
Base Rate; provided that during any Benchmark Unavailability Period, the
component of the Alternate Base Rate based upon the Adjusted Eurodollar Rate
will not be used in any determination of the Alternate Base Rate.

 

(e)               Benchmark Replacement Floor. Notwithstanding anything else
herein, any definition of Benchmark Replacement shall provide that in no event
shall such Benchmark Replacement be less than two percent (2.00%) for purposes
of this Agreement.

 

SECTION 4.    CONDITIONS PRECEDENT

 

The obligation of Lenders to make the Term Loan is subject to the satisfaction,
or waiver (in accordance with Section 11.4), immediately prior to or
concurrently with the making of such Term Loan, of each of the following
conditions precedent:

 

(a)               all requisite company action and proceedings in connection
with this Agreement and the other Financing Agreements shall be reasonably
satisfactory in form and substance to Agent, and Agent shall have received all
information and copies of all documents, including records of requisite company
action and proceedings which Agent may have reasonably requested in connection
therewith, such documents where reasonably requested by Agent or its counsel to
be certified by appropriate company officers (or if no appropriate officers have
been elected or appointed, by the sole member or managers of the applicable
Borrower or Guarantor) or Governmental Authority (and including a copy of the
certificate of formation (or equivalent) of each Borrower and Guarantor
certified by the Secretary of State (or equivalent Governmental Authority) which
shall set forth the same complete legal name of such Borrower or Guarantor as is
set forth herein);

 

(b)               no material adverse change shall have occurred in the assets
or business of Borrower since the date of Agent’s latest field examination and
no change or event shall have occurred which would materially impair the ability
of any Borrower or Guarantor to perform its obligations hereunder or under any
of the other Financing Agreements to which it is a party or of Agent or any
Lender to enforce the Obligations or realize upon the Collateral;

 

(c)               Agent shall have received satisfactory projections for the
fiscal years ending 2020 through 2024;

 

(d)               all fees, costs and expenses payable by Borrower, as of the
effectiveness of this Agreement, under the terms of this Agreement, the Fee
Letter and the other Financing Agreements shall have been paid in full;

 

(e)               Agent shall have received, in form and substance satisfactory
to Agent, such opinion letters of counsel to Borrowers and Guarantors with
respect to the Financing Agreements, and such other matters as Agent may
reasonably request;

 

(f)                this Agreement and the other Financing Agreements to be
entered into on or prior to the Closing Date and all instruments and documents
hereunder and thereunder shall have been duly executed by the applicable parties
thereto and delivered to Agent, in form and substance reasonably satisfactory to
Agent;

 

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(g)               all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the Closing Date, except to the extent that such representations
and warranties expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and correct in all material
respects on and as of such earlier date);

 

(h)               no law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or before any Governmental Authority,
which (i) purports to enjoin, prohibit, restrain or otherwise affect (A) the
making of the Term Loan, or (B) the consummation of the transactions
contemplated pursuant to the terms hereof or the other Financing Agreements or
(ii) has a reasonable likelihood of having a Material Adverse Effect;

 

(i)                 substantially contemporaneously with the making of the Term
Loan hereunder, the Acquisition shall have been consummated in accordance with
the Acquisition Agreement so that, immediately after giving effect thereto, the
Loan Parties are indirect Subsidiaries of Ultimate Parent;

 

(j)                 no Default or Event of Default shall exist or have occurred
and be continuing on and as of the date of the making of the Term Loan and
immediately after giving effect thereto;

 

(k)               the ABL Credit Agreement in form and substance satisfactory to
the Agent shall have been executed with “Revolving Commitments” thereunder of at
least $100,000,000;

 

(l)                 the Intercreditor Agreement shall have been executed by each
party thereto;

 

(m)             Agent shall have received a duly completed written calculation
in form and substance reasonably acceptable to the Agent, dated as of Closing
Date, certified by an Authorized Officer of the Administrative Borrower, which
shall evidence that after giving effect to the making of the Term Loan and the
other transactions contemplated to be effective on the Closing Date, on a pro
forma basis, Liquidity shall not be less than $20,000,000;

 

(n)               Agent shall have received evidence satisfactory to it that
Ultimate Parent and/or the Permitted Holders shall have contributed (or caused
to be contributed), directly or indirectly, cash equity contributions to Parent
and its subsidiaries (in the form of (i) common equity or (ii) pay-in-kind
preferred equity reasonably satisfactory to Agent) in an aggregate amount of not
less than $30,000,000 (the “Closing Date Equity Contribution”), the proceeds of
which may be used to pay the aggregate purchase price for the Acquisition
(notwithstanding anything to the contrary in this Agreement) or for other
general corporate purposes;

 

(o)               (A) appraisals by a third party appraiser acceptable to the
Agent of all Inventory, Accounts and Credit Card Receivables of the Borrowers,
the results of which are satisfactory to the Agent and (B) a written report
regarding the results of a commercial finance examination of the Borrowers and
Guarantors, which shall be reasonably satisfactory to the Agent;

 

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(p)               results of such diligence as the Agent and each of the Lenders
may reasonably require, including compliance with “know your customer” and
anti-money laundering rules and regulations, in each case to the extent
requested no later than three (3) days prior to the Closing Date;

 

(q)               all governmental and third party approvals, if any, necessary
in connection with the Acquisition, this Agreement and the transactions
contemplated hereby (including equity interest holder approvals, if any) shall
have been obtained on terms reasonably satisfactory to Agent and shall be in
full force and effect;

 

(r)                [reserved];

 

(s)                Agent shall have received a duly executed certificate from an
Authorized Officer of the Administrative Borrower certifying that (i) the
conditions precedent set forth in clauses (j), (w), (x) and (y) of this Section
4 have been satisfied as of the Closing Date, and (ii) attached to such
certificate is a true, correct and complete copy of the Acquisition Agreement
(which shall not have been amended, changed, modified, supplemented or had its
terms waived in a manner other than as set forth in clause (w) of this Section
4) and all amendments thereto;

 

(t)                 Agent shall have received a duly executed certificate from
an Authorized Officer of the Administrative Borrower certifying that the Loan
Parties, taken as a whole, are Solvent and will continue to be Solvent
immediately after giving effect to this Agreement, the Acquisition, the
incurrence of the ABL Obligations, the payment of all fees and expenses to be
paid by the Loan Parties in connection with any of the foregoing, and the other
transactions to be consummated in connection with the foregoing;

 

(u)               Agent shall have received the results of a recent lien search
in each jurisdiction where the Loan Parties are organized, and in each other
jurisdiction reasonably requested by the Agent no later than five (5) Business
Days prior to the Closing Date, and such search shall reveal no liens on any of
the assets of the Loan Parties except for liens permitted by Section 9.8, or
discharged on or prior to the Closing Date pursuant to a pay-off letter or other
documentation satisfactory to Agent;

 

(v)               Agent or ABL Agent shall have received (i) if applicable, the
certificates representing the Capital Stock pledged pursuant to the Pledge
Agreement, together with an undated stock power (or other appropriate
instruments of transfer) for each such certificate executed in blank by an
Authorized Officer of the pledgor thereof and (ii) each promissory note (if any)
pledged to Agent pursuant to this Agreement, endorsed (without recourse) in
blank (or accompanied by an executed transfer form in blank) by the pledgor
thereof;

 

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(w)             the Acquisition shall have been, or shall substantially
concurrently with the effectiveness of this Agreement be, consummated in
accordance with the terms of the Acquisition Agreement as in effect on August 7,
2019 without giving effect to any amendment (other than the First Acquisition
Agreement Amendment), change, modification, supplement or waiver of any
provision thereof, in each case, in any manner that is materially adverse to the
interests of the Lenders and Agent without the prior written consent (not to be
unreasonably withheld, delayed or conditioned) of the Lenders and Agent (it
being understood that (i) any increase in the consideration for the Acquisition
shall not be deemed to be materially adverse to the interests of the Lenders and
Agent so long as such increase in consideration (A) is pursuant to any purchase
price or similar adjustment provisions set forth in the Acquisition Agreement as
modified by the First Acquisition Agreement Amendment and as in effect on the
date of such First Acquisition Agreement Amendment, or (B) is not funded with
additional Indebtedness, (ii) the following decreases in the consideration for
the Acquisition shall not be deemed to be materially adverse to the interests of
the Lenders and Agent: (A) decreases pursuant to any purchase price or similar
adjustment provisions set forth in the Acquisition Agreement as modified by the
First Acquisition Agreement Amendment and as in effect on the date of such First
Acquisition Agreement Amendment and (B) decreases to the extent they are applied
to reduce the amount of Indebtedness issued under this Agreement and the equity
contribution described in clause (n) of this Section 4 on a pro rata basis,
(iii) any change in third party beneficiary rights applicable to the Lenders or
Agent or in the governing law without the prior written consent of the Lenders
and Agent shall be deemed to be materially adverse to the interests of the
Lenders and Agent, and (iv) any modification to the definition of “Company
Material Adverse Effect” (as defined in the Acquisition Agreement as amended by
the First Acquisition Agreement Amendment and as in effect on the date of such
First Acquisition Agreement Amendment) without the prior written consent of the
Agent shall be deemed to be materially adverse to the interests of the Lenders
and Agent);

 

(x)               No “Company Material Adverse Effect” (as defined in the
Acquisition Agreement as amended by the First Acquisition Agreement Amendment
and as in effect on the date of such First Acquisition Agreement Amendment)
shall have occurred since the date of the Acquisition Agreement; and

 

(y)               No Loan Party shall have any outstanding Indebtedness for
borrowed money other than Indebtedness permitted under Section 9.9.

 

SECTION 5.    GRANT AND PERFECTION OF SECURITY INTEREST

 

5.1              Grant of Security Interest. To secure payment and performance
of all Obligations, each Borrower and Guarantor, including Parent, hereby grants
to Agent, for itself and the benefit of the Secured Parties, a continuing
security interest in, a lien upon, and a right of set off against, as security,
all of the following personal property and fixtures, and interests in personal
property and fixtures, of each Borrower and Guarantor, whether now owned or
hereafter acquired or existing, and wherever located (together with all other
collateral security for the Obligations at any time granted to or held or
acquired by Agent or any Secured Party, collectively, the “Collateral”),
including:

 

(a)               all Accounts;

 

(b)               all General Intangibles;

 

(c)               all Intellectual Property;

 

(d)               all Goods, including but not limited to, Inventory and
Equipment;

 

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(e)               all Chattel Paper, including, all tangible and electronic
Chattel Paper;

 

(f)                all Instruments, including, all promissory notes;

 

(g)               all Documents;

 

(h)               all Deposit Accounts;

 

(i)                 all letters of credit, banker’s acceptances and similar
instruments and including all Letter-of-Credit Rights;

 

(j)                 all Supporting Obligations and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Receivables and other Collateral, including (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (iii) Goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed Goods, and (iv) deposits by and property of Account Debtors or
other Persons securing the obligations of Account Debtors;

 

(k)               all (i) Investment Property (including, but not limited to,
Securities, whether certificated or uncertificated, Securities accounts,
Security entitlements, commodity contracts or commodity accounts) and
(ii) monies, credit balances, deposits and other property of any Borrower or
Guarantor now or hereafter held or received by or in transit to Agent, any
Lender or its Affiliates or at any other depository or other institution from or
for the account of any Borrower or Guarantor, whether for pledge, custody,
transmission, collection or otherwise;

 

(l)                 all commercial tort claims, including, those identified in
Schedule 5.2(g) hereto;

 

(m)             to the extent not otherwise described above, all Receivables;

 

(n)               all Records; and

 

(o)               all accessions to, substitutions for and replacements,
products and proceeds of the foregoing, in any form, including insurance
proceeds and all claims against third parties for loss or damage to or
destruction of or other involuntary conversion of any kind or nature of any or
all of the other Collateral.

 

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Notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and Borrowers and Guarantors shall not be deemed to have
granted a security interest in, (i) any personal and Real Property, fixtures and
interest of any Borrower or Guarantor which are not assignable or are incapable
of being encumbered as a matter of law (after giving effect 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), except for the products
and proceeds thereof (except to the extent such products and proceeds would
independently be subject to this clause (i)), (ii) any Borrower’s or Guarantor’s
rights or interests in any license, contract or agreement with respect to
Intellectual Property (which is not owned by such Borrower or Guarantor) to
which such Borrower or Guarantor is a party or any of its rights or interests
thereunder to the extent, but only to the extent, that such a grant would, under
applicable law, result in a breach of the terms of, or constitute a default
under any license, contract or agreement to which such Borrower or Guarantor is
a party (after giving effect 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) (except for the products and proceeds thereof); provided,
however, upon the ineffectiveness, lapse or termination of any such provision,
the Collateral shall include, and such Borrower or Guarantor shall be deemed to
have granted a security interest in, all such rights and interests as if such
provision had never been in effect, and (iii) the Capital Stock of any Foreign
Subsidiary to the extent that such Capital Stock constitutes more than
sixty-five percent (65%) of the Voting Stock of all classes of the Capital Stock
of such Foreign Subsidiary that are entitled to vote, except for the products
and proceeds thereof as long as such products or proceeds do not cause the
aggregate amount of the Voting Stock of such Foreign Subsidiary part of the
Collateral to exceed at any time sixty-five percent (65%) of the Voting Stock of
all classes of the Capital Stock of such Foreign Subsidiary. Notwithstanding the
foregoing, the Collateral shall exclude any rights to any Intellectual Property,
or License Agreements that would be cancelled or rendered invalid or
unenforceable under applicable law by the grant of a security interest created
pursuant to the terms of this Agreement, for as long as such prohibition or
reason for invalidity under applicable law exists, except for the products and
proceeds thereof that would not independently be subject to this sentence. If
any Borrower or Guarantor is required to deliver an estoppel letter with respect
to any leasehold to the landlord party to such lease (or to the mortgagor of
such landlord), the Collateral shall also exclude any rights to such leasehold
to the extent necessary to permit such Borrower or Guarantor to certify that
such leasehold is not subject to any assignment or hypothecation, and solely for
purposes of such estoppel letter.

 

5.2              Perfection of Security Interests.

 

(a)               Each Borrower and Guarantor irrevocably and unconditionally
authorizes Agent (or its agent) to file at any time and from time to time such
financing statements with respect to the Collateral naming Agent or its designee
as the secured party and such Borrower or Guarantor as debtor, as Agent may
reasonably require, and including any other information with respect to such
Borrower or Guarantor or otherwise required by part 5 of Article 9 of the
Uniform Commercial Code of such jurisdiction, as Agent may reasonably determine,
together with any amendment and continuations with respect thereto, which
authorization shall apply to all financing statements filed on, prior to or
after the date hereof. Any such financing statements may indicate the Collateral
as (i) all assets of the debtor now owned or hereafter acquired or words of
similar effect, regardless of whether any particular asset comprised in the
Collateral falls within the scope of Article 9 of the UCC of such jurisdiction,
or (ii) by any other description which reasonably approximates the description
contained herein. Each Borrower and Guarantor hereby ratifies and approves all
financing statements naming Agent or its designee as secured party and such
Borrower or Guarantor, as the case may be, as debtor with respect to the
Collateral (and any amendments with respect to such financing statements) filed
by or on behalf of Agent prior to the date hereof and ratifies and confirms the
authorization of Agent to file such financing statements (and amendments, if
any). Each Borrower and Guarantor hereby authorizes Agent to adopt on behalf of
such Borrower and Guarantor any symbol required for authenticating any
electronic filing. In the event that the description of the collateral in any
financing statement naming Agent or its designee as the secured party and any
Borrower or Guarantor as debtor includes assets and properties of such Borrower
or Guarantor that do not at any time constitute Collateral, whether hereunder,
under any of the other Financing Agreements or otherwise, the filing of such
financing statement shall nonetheless be deemed authorized by such Borrower or
Guarantor to the extent of the Collateral included in such description and it
shall not render the financing statement ineffective as to any of the Collateral
or otherwise affect the financing statement as it applies to any of the
Collateral, provided, that, the inclusion of the description of assets and
properties of such Borrower or Guarantor that do not constitute Collateral in
any financing statement shall not be deemed a grant of a security interest in
such asset of such Borrower or Guarantor in favor of Agent and Secured Parties.
In no event shall any Borrower or Guarantor at any time file, or permit or cause
to be filed, any correction statement or termination statement with respect to
any financing statement (or amendment or continuation with respect thereto)
naming Agent or its designee as secured party and such Borrower or Guarantor as
debtor without the prior written consent of Agent. Each Borrower and Guarantor
acknowledges that it is not authorized to file any financing statement,
amendment, termination statement or correction statement with respect to any
financing statement without the prior written consent of Agent.

 

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(b)               Each Borrower and Guarantor does not have any Chattel Paper
(whether tangible or electronic) or Instruments as of the Closing Date, except
as set forth in the Perfection Certificate. In the event that any Borrower or
Guarantor shall be entitled to or shall receive any Chattel Paper or Instrument
after the date hereof, which together with all other Chattel Paper or
Instruments that Borrower has become entitled to or has received after the date
hereof has an aggregate fair market value in excess of $100,000, Borrowers and
Guarantors shall promptly notify Agent thereof in writing. Promptly upon the
receipt thereof by or on behalf of any Borrower or Guarantor (including by any
agent or representative), such Borrower or Guarantor shall deliver, or cause to
be delivered to Agent or ABL Agent, all such tangible Chattel Paper and
Instruments that such Borrower or Guarantor has or may at any time acquire,
accompanied by such instruments of transfer or assignment duly executed in blank
as Agent may from time to time specify, in each case except as Agent may
otherwise agree. Subject to the Intercreditor Agreement, at Agent’s option, each
Borrower and Guarantor shall, or ABL Agent may, or Agent may, at any time on
behalf of any Borrower or Guarantor, cause the original of any such Instrument
or Chattel Paper with an aggregate fair market value in excess of $100,000, to
be conspicuously marked in a form and manner acceptable to Agent with the
following legend (or any substantially similar legend, including any legend also
referring to the security interests of the ABL Agent, as Agent may agree to in
its reasonable discretion) referring to Chattel Paper or Instruments as
applicable: “This [chattel paper] [instrument] is subject to the security
interests of GACP Finance Co., LLC and any sale, transfer, assignment or
encumbrance of this [chattel paper] [instrument] violates the rights of such
secured party.”

 

(c)               In the event that any Borrower or Guarantor shall at any time
hold or acquire an interest in any electronic Chattel Paper or any “transferable
record” (as such term is defined in Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or in Section 16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction, or any
similar or successor act, law or statute) which together with all other
electronic Chattel Paper or “transferable record” that Borrower has become
entitled to or has received after the date hereof has an aggregate fair market
value in excess of $100,000, such Borrower or Guarantor shall promptly notify
Agent thereof in writing. Subject to the Intercreditor Agreement, promptly upon
Agent’s request, such Borrower or Guarantor shall take, or cause to be taken,
such actions as Agent may request to give Agent or ABL Agent control of such
electronic Chattel Paper under Section 9-105 of the UCC and control of such
transferable record under Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as in effect in such jurisdiction, or any
similar or successor act, law or statute.

 

 

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(d)               Each Borrower and Guarantor does not have any Deposit Accounts
as of the Closing Date, except (x) Store Accounts or (y) as set forth in the
Perfection Certificate. Borrowers and Guarantors shall not, directly or
indirectly, after the date hereof open, establish or maintain any Deposit
Account unless each of the following conditions is satisfied: (i) Agent shall
have received not less than five (5) Business Days prior written notice of the
intention of any Borrower or Guarantor to open or establish such account which
notice shall specify in reasonable detail and specificity reasonably acceptable
to Agent the name of the account, the owner of the account, the name and address
of the bank at which such account is to be opened or established, the individual
at such bank with whom such Borrower or Guarantor is dealing and the purpose of
the account, (ii) the bank where such account is opened or maintained shall be
an Eligible Depository Bank or shall be reasonably acceptable to Agent, and
(iii) within fifteen (15) Business Days after the opening of such Deposit
Account, such Borrower or Guarantor shall either (A) deliver to Agent a Deposit
Account Control Agreement with respect to such Deposit Account duly authorized,
executed and delivered by such Borrower or Guarantor and the bank at which such
Deposit Account is opened and maintained or (B) arrange for Agent or ABL Agent
to become the customer of the bank with respect to the Deposit Account on terms
and conditions reasonably acceptable to Agent; provided, that to the extent a
Deposit Account Control Agreement has not been delivered to Agent as of the
Closing Date for any Deposit Account in existence at such time, Borrowers shall
deliver a Deposit Account Control Agreement pursuant to Section 9.29. The terms
of this subsection (d) shall not apply Excluded Accounts. Subject to the
Intercreditor Agreement, Agent shall not exercise control over any Deposit
Account until an Event of Default has occurred, and thereafter for only so long
as it is continuing; and Agent shall cease to exercise control over any Deposit
Accounts at such time as no Event of Default is then continuing.

 

(e)               No Borrower or Guarantor owns or holds, directly or
indirectly, beneficially or as record owner or both, any Investment Property, as
of the Closing Date, or has any investment account, Securities account,
commodity account or other similar account with any bank or other financial
institution or other securities intermediary or commodity intermediary as of the
Closing Date, in each case except as set forth in the Perfection Certificate.

 

(i)               In the event that any Borrower or Guarantor shall be entitled
to or shall at any time after the date hereof hold or acquire any certificated
Securities, which together with all other certificated Securities that Borrower
holds or acquires an interest in after the date hereof have an aggregate fair
market value in excess of $100,000, subject to the Intercreditor Agreement, such
Borrower or Guarantor shall promptly endorse, assign and deliver the same to
Agent or ABL Agent, accompanied by such instruments of transfer or assignment
duly executed in blank as Agent or ABL Agent may from time to time specify. If
any Securities, now or hereafter acquired by any Borrower or Guarantor are
uncertificated and are issued to such Borrower or Guarantor or its nominee
directly by the issuer thereof, and such Securities together with all other such
Securities acquired by Borrower have an aggregate fair market value in excess of
$100,000, such Borrower or Guarantor shall immediately notify Agent thereof and,
subject to the Intercreditor Agreement, either (A) cause the issuer to agree to
comply with instructions from Agent or ABL Agent as to such Securities, without
further consent of any Borrower or Guarantor or such nominee (it being
understood that Agent shall not give any such issuer any such instructions
unless an Event of Default has occurred and is continuing), or (B) arrange for
Agent or ABL Agent to become the registered owner of the Securities.

 

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(ii)              Borrowers and Guarantors shall not, directly or indirectly,
after the date hereof open, establish or maintain any investment account,
securities account, commodity account or any other similar account (other than a
Deposit Account) with any securities intermediary or commodity intermediary
unless each of the following conditions is satisfied: (A) Agent shall have
received not less than five (5) Business Days prior written notice of the
intention of such Borrower or Guarantor to open or establish such account which
notice shall specify in reasonable detail and specificity reasonably acceptable
to Agent the name of the account, the owner of the account, the name and address
of the securities intermediary or commodity intermediary at which such account
is to be opened or established, the individual at such intermediary with whom
such Borrower or Guarantor is dealing and the purpose of the account, (B) the
securities intermediary or commodity intermediary (as the case may be) where
such account is opened or maintained shall be acceptable to Agent, and
(C) within fifteen (15) Business Days after the opening of such investment
account, securities account or other similar account with a securities
intermediary or commodity intermediary, such Borrower or Guarantor shall either
(1) execute and deliver, and cause to be executed and delivered to Agent, an
Investment Property Control Agreement with respect thereto duly authorized,
executed and delivered by such Borrower or Guarantor and such securities
intermediary or commodity intermediary or (2) arrange for Agent or ABL Agent to
become the entitlement holder with respect to such Investment Property on terms
and conditions reasonably acceptable to Agent; provided, that to the extent an
Investment Property Control Agreement has not been delivered to Agent as of the
Closing Date for any investment account, securities account or other similar
account with a securities intermediary or commodity intermediary in existence at
such time, Borrowers shall deliver an Investment Property Control Agreement
pursuant to Section 9.29. Subject to the Intercreditor Agreement, Agent shall
not exercise control over any investment account, securities account, commodity
account or other similar account (other than any Deposit Accounts which shall be
governed by Section 5.2(d) above) unless an Event of Default has occurred, and
thereafter for only so long as it is continuing; and Agent shall cease to
exercise control over any investment account, securities account, commodity
account or other similar account at such time as no Event of Default is then
continuing.

 

(f)                Borrowers and Guarantors are not the beneficiary or otherwise
entitled to any right to payment under any letter of credit, banker’s acceptance
or similar instrument as of the Closing Date, except as set forth in the
Perfection Certificate. In the event that any Borrower or Guarantor shall be
entitled to or shall receive any right to payment under any letter of credit,
banker’s acceptance or any similar instrument, whether as beneficiary thereof or
otherwise after the date hereof, which together with all other letters of
credit, banker’s acceptances and similar instruments that Borrower has become
entitled to or has received after the date hereof has an aggregate fair market
value in excess of $250,000, such Borrower or Guarantor shall promptly notify
Agent thereof in writing. Such Borrower or Guarantor shall promptly, subject to
the Intercreditor Agreement, either (i) deliver, or cause to be delivered to
Agent or ABL Agent, with respect to any such letter of credit, banker’s
acceptance or similar instrument, the written agreement of the issuer and any
other nominated Person obligated to make any payment in respect thereof
(including any confirming or negotiating bank), in form and substance reasonably
satisfactory to Agent, consenting to the assignment of the proceeds of the
letter of credit to Agent and/or ABL Agent by such Borrower or Guarantor and
agreeing to make all payments thereon directly to Agent or ABL Agent or as Agent
or ABL Agent may otherwise direct upon the occurrence and during the continuance
of an Event of Default or (ii) cause Agent or ABL Agent to become, at Borrowers’
expense, the transferee beneficiary of the letter of credit, banker’s acceptance
or similar instrument (as the case may be) upon the occurrence and during the
continuance of an Event of Default.

 

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(g)               Except as set forth in Schedule 5.2(g) hereto, on the Closing
Date, Borrowers and Guarantors do not have any commercial tort claims with
respect to which the amount claimed exceeds $250,000 and either a written demand
therefor has been made or legal action has commenced. In the event that any
Borrower or Guarantor shall at any time after the date hereof have any
commercial tort claims with respect to which the amount claimed exceeds $250,000
and either a written demand therefor has been made or legal action has
commenced, or if any Event of Default exists, upon Agent’s request, if any
Borrower or Guarantor has any commercial tort claims, such Borrower or Guarantor
shall promptly notify Agent thereof in writing, which notice shall (i) set forth
in reasonable detail the basis for and nature of such commercial tort claim and
(ii) include the express grant by such Borrower or Guarantor to Agent of a
security interest in such commercial tort claim (and the proceeds thereof). In
the event that such notice does not include such grant of a security interest,
the sending thereof by such Borrower or Guarantor to Agent shall be deemed to
constitute such grant to Agent. Upon the sending of such notice, any commercial
tort claim described therein shall constitute part of the Collateral and shall
be deemed included therein. Without limiting the authorization of Agent provided
in Section 5.2(a) hereof or otherwise arising by the execution by such Borrower
or Guarantor of this Agreement or any of the other Financing Agreements, Agent
is hereby irrevocably authorized from time to time and at any time to file such
financing statements naming Agent or its designee as secured party and such
Borrower or Guarantor as debtor, or any amendments to any financing statements,
covering any such commercial tort claim as Collateral. In addition, each
Borrower and Guarantor shall promptly upon Agent’s reasonable request, execute
and deliver, or cause to be executed and delivered, to Agent such other
agreements, documents and instruments as Agent may require in connection with
such commercial tort claim.

 

(h)               Borrowers and Guarantors do not have any Goods, documents of
title or other Collateral in the custody, control or possession of a third party
as of the Closing Date, except as set forth in the Perfection Certificate and
except for Goods located in the United States in transit to a location of a
Borrower or Guarantor permitted herein in the ordinary course of business of
such Borrower or Guarantor in the possession of any carrier transporting such
Goods. In the event that any Goods covered by documents of title or other
Collateral with a fair market value in excess of $250,000 are at any time after
the date hereof in the custody, control or possession of any other Person not
referred to in the Perfection Certificate or such carriers, Borrowers and
Guarantors shall promptly notify Agent thereof in writing. Promptly upon Agent’s
reasonable request, Borrowers and Guarantors shall deliver to Agent a Collateral
Access Agreement, subject to Section 9.29 hereof, duly authorized, executed and
delivered by such Person and the Borrower or Guarantor that is the owner of such
Collateral, except where the fair market value of the Collateral involved is
less than $250,000 so long as the aggregate Value of all Collateral located at
such locations without a Collateral Access Agreement shall not exceed
$2,000,000.

 

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(i)                 Each Borrower and Guarantor will use commercially reasonable
efforts to maintain the Intellectual Property owned by it, defend the
Intellectual Property against the claims of all persons, and will maintain and
renew all registrations of the Intellectual Property, if applicable, in each
case in the ordinary course of business; provided, that, Borrowers and
Guarantors shall not be required to maintain, defend or renew any Intellectual
Property which is not material to the Borrowers’ business or has no material
economic value. If any trademark is material to the conduct of any Borrower’s or
Guarantor’s business or has material economic value, such Borrower or Guarantor,
as the case may be, shall not permit the expiration or abandonment of such
trademark without the prior written consent of Agent (which consent shall not be
unreasonably withheld). If, before the Obligations have been satisfied in full
and the Financing Agreements have been terminated, any Borrower or Guarantor
shall obtain or acquire any new trademark registration or file or acquire any
new trademark application, Administrative Borrower shall give Agent notice
thereof in the compliance certificate delivered to Agent pursuant to
Section 9.6(a)(i) hereof.

 

(i)                 Until the Obligations shall have been Paid in Full and the
Financing Agreements have been terminated (other than indemnification and other
contingent obligations not yet accrued at such time), each Borrower and
Guarantor shall use commercially reasonable efforts to preserve and maintain all
rights in the trademarks and the other Intellectual Property; provided, that
Borrowers and Guarantors are not required to preserve or maintain any trademarks
which are not material to the Borrowers’ business or have no material economic
value. Any expenses incurred in connection with such actions shall be borne by
Borrowers.

 

(ii)              Borrowers and Guarantors shall not expressly abandon any right
to file a trademark, copyright or patent application or registration for any
trademark, copyright or patent, or abandon any pending trademark, copyright or
patent application or registration without the prior written consent of Agent
(which consent shall not be unreasonably withheld), except to the extent that
the trademark, copyright or patent covered by such application or registration
is not material to the Borrowers’ business or has no material economic value.

 

(j)                 Subject to Section 9.2 hereof, Borrowers and Guarantors
shall take any other actions reasonably requested by Agent from time to time to
cause the attachment and perfection (with the priority required by the Financing
Agreements), and, subject to the Intercreditor Agreement, the ability of Agent
to enforce, the security interest of Agent in any and all of the Collateral,
including, (i) executing, delivering and, where appropriate, filing financing
statements and amendments relating thereto under the UCC or other applicable
law, to the extent, if any, that any Borrower’s or Guarantor’s signature thereon
is required therefor, (ii) upon Agent’s request after the occurrence and during
the continuance of an Event of Default, causing Agent’s (or, if only one name
may be noted, whichever of Agent and ABL Agent has priority with respect to such
Collateral pursuant to the Intercreditor Agreement) name to be noted as secured
party on any certificate of title for a titled good if such notation is a
condition to attachment, perfection or priority of, or ability of Agent or ABL
Agent to enforce, the security interest of Agent in such Collateral,
(iii) complying with any provision of any statute, regulation or treaty of the
United States as to any Collateral if compliance with such provision is a
condition to attachment, perfection or priority of, or ability of Agent to
enforce, the security interest of Agent in such Collateral, (iv) obtaining the
required consents and approvals of any Governmental Authority or third party,
including, any consent of any licensor, lessor or other Person obligated on
Collateral, and taking all actions required by other law, as applicable in any
relevant jurisdiction; and (v) executing, delivering and filing Intellectual
Property Security Agreements substantially in the form of Exhibit H attached
hereto in the United States Patent and Trademark Office and the United States
Copyright Office, as applicable, and any other appropriate filing offices as the
Agent may reasonably request.

 

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SECTION 6.    COLLECTION AND ADMINISTRATION

 

6.1              Borrowers’ Loan Accounts. Agent shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Term Loan
Outstandings and other Obligations and the Collateral, (b) all payments made by
or on behalf of any Borrower or Guarantor and (c) all other appropriate debits
and credits as provided in this Agreement, including fees, charges, costs,
expenses and interest. All entries in the loan account(s) shall be made in
accordance with Agent’s customary practices as in effect from time to time and
shall be deemed conclusive absent manifest error or omissions.

 

6.2              Statements. Agent shall render to Administrative Borrower each
month a statement setting forth the balance in the Borrowers’ loan account(s)
maintained by Agent for Borrowers pursuant to the provisions of this Agreement,
including principal, interest, fees, costs and expenses. Each such statement
shall be subject to subsequent adjustment by Agent but shall, absent manifest
errors or omissions, be considered correct and deemed accepted by Borrowers and
Guarantors and conclusively binding upon Borrowers and Guarantors as an account
stated except to the extent that Agent receives a written notice from
Administrative Borrower of any specific exceptions of Administrative Borrower
thereto within thirty (30) days after the date such statement has been received
by Administrative Borrower. Until such time as Agent shall have rendered to
Administrative Borrower a written statement as provided above, the balance in
any Borrower’s loan account(s) shall be presumptive evidence of the amounts due
and owing to Agent and Lenders by Borrowers and Guarantors.

 

6.3              Collection of Accounts.

 

(a)               Each Borrower and Guarantor shall establish and maintain, at
its expense, deposit account arrangements and merchant payment arrangements with
the banks set forth on Schedule 8.10 hereto and subject to Section 5.2(d) hereof
such other banks as such Borrower or Guarantor may hereafter select and which
shall be reasonably satisfactory to the Agent. The banks set forth on
Schedule 8.10 hereto constitute all of the banks with which Borrowers and
Guarantors have deposit account arrangements and merchant payment arrangements
as of the Closing Date and identifies each of the Deposit Accounts at such banks
that are used solely for receiving store receipts from a retail store location
of a Borrower (together with any other Deposit Accounts at any time established
or used by any Borrower for receiving such store receipts from any retail store
location, collectively, the “Store Accounts” and each individually, a “Store
Account”) or otherwise describes the nature of the use of such Deposit Account
by such Borrower or Guarantor.

 

 

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(i)                 Each Borrower shall deposit all proceeds from sales of
Inventory in every form, including, without limitation, cash, checks, credit
card sales drafts, credit card sales or charge slips or receipts and other forms
of daily store receipts, from each retail store location of such Borrower into
the Store Account of such Borrower used solely for such purpose in accordance
with the current and prior practices of such Borrower, but in any event no less
frequently than once every three (3) Business Days; provided, that, each retail
store of a Borrower may retain in such store funds of up to $10,000 immediately
after each deposit of funds from such store into the applicable Store Account.
All such funds deposited into the Store Accounts shall be sent by wire transfer
or other electronic funds transfer on each Business Day to the Blocked Accounts
as provided in Section 6.3(a)(ii) below, except for (A) nominal amounts which
are required to be maintained in such Store Accounts under the terms of such
Borrower’s arrangements with the bank at which such Store Accounts are
maintained or (B) with respect to funds deposited in Manual Sweeping Accounts,
which shall be sent to the Blocked Accounts not less than twice every week (and
which amounts, together with all amounts held at the retail store locations and
not yet deposited in the Store Accounts and amounts in Store Accounts, shall not
in the aggregate exceed $3,500,000 at any one time, except (1) to the extent
from time to time additional amounts may be held in the retail stores or the
Store Accounts on Saturday, Sunday or other days where the applicable depository
bank is closed, which additional amounts are to be, and shall be, transferred on
the next Business Day to the Blocked Accounts, and (2) as Agent may otherwise
agree in its sole discretion).

 

(ii)              Each Borrower shall establish and maintain, at its expense,
Deposit Accounts with such banks as are reasonably acceptable to Agent (the
“Blocked Accounts”) into which each Borrower shall promptly either cause all
amounts on deposit in the Store Accounts of such Borrower to be sent as provided
in Section 6.3(a)(i) above or shall itself deposit or cause to be deposited all
proceeds of Collateral, including all proceeds from sales of Inventory, all
amounts payable to each Borrower from Credit Card Issuers and Credit Card
Processors, and all other proceeds of Collateral. Any Eligible Depository Bank
shall be deemed acceptable to Agent.

 

(iii)            Borrowers and Guarantors shall deliver, or cause to be
delivered to Agent a Deposit Account Control Agreement duly authorized, executed
and delivered by each bank where a Blocked Account is maintained as provided in
Section 5.2 hereof. Without limiting any other rights or remedies of Agent or
Lenders, subject to the terms of the Intercreditor Agreement, Agent may, at its
option, and shall (at the direction of Required Lenders), instruct the
depository banks at which the Blocked Accounts are maintained to transfer all
available funds received or deposited into the Blocked Accounts to the Agent
Payment Account at any time that an Event of Default is continuing and Agent
shall send to Administrative Borrower a copy of any such written instruction
sent by Agent to the depository bank promptly thereafter. Subject to the terms
of the Intercreditor Agreement, at all times that Agent shall have notified any
depository bank to transfer funds from a Blocked Account to the Agent Payment
Account, all payments made to such Blocked Accounts, whether in respect of the
Receivables, as proceeds of Inventory or other Collateral or otherwise shall be
treated as payments to Agent in respect of the Obligations and therefore shall
constitute the property of Agent and Lenders to the extent of the then
outstanding Obligations.

 

(b)               For purposes of calculating the Term Loan Outstandings,
subject to the Intercreditor Agreement, any payment made pursuant to Section
6.3(a)(iii) will be applied (conditional upon final collection) to the
Obligations on the Business Day of receipt by Agent of immediately available
funds in the Agent Payment Account provided such payments and notice thereof are
received in accordance with Agent’s usual and customary practices as in effect
from time to time and within sufficient time to credit the applicable loan
account on such day, and if not, then on the next Business Day. Subject to the
Intercreditor Agreement, for the purposes of calculating interest on the
Obligations, such payments or other funds received will be applied (conditional
upon final collection) to the Obligations in accordance with Section 6.4(a)
hereof on the same Business Day of receipt by Agent of immediately available
funds in the Agent Payment Account provided such payments or other funds and
notice thereof are received in accordance with Agent’s usual and customary
practices as in effect from time to time, by 11:00 a.m. New York City time and
if not, then on the next Business Day.

 

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(c)               Subject to the terms of the Intercreditor Agreement, upon the
occurrence and during the continuance of an Event of Default, Parent and its
shareholders, directors, employees, agents, each Borrower and Guarantor and
their respective employees, agents and Subsidiaries or other Affiliates shall
receive and promptly remit to Agent, as the property of Agent, any monies,
checks, notes, drafts or any other payment relating to and/or proceeds of
Accounts or other Collateral which come into their possession or under their
control and promptly upon receipt thereof, shall deposit or cause the same to be
deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Agent. In no event shall the same be commingled with any
Borrower’s or Guarantor’s own funds. Borrowers agree to reimburse Agent on
demand for any amounts owed or paid to any bank or other financial institution
at which a Blocked Account or any other Deposit Account or investment account is
established or any other bank, financial institution or other Person involved in
the transfer of funds to or from the Blocked Accounts arising out of Agent’s
payments to or indemnification of such bank, financial institution or other
Person. The obligations of Borrowers to reimburse Agent for such amounts
pursuant to this Section 6.3 shall survive the termination or non-renewal of
this Agreement.

 

6.4              Payments.

 

(a)               All Obligations shall be payable to the Agent Payment Account
as provided in Section 6.3 or such other place as Agent may designate from time
to time. Subject to the terms of the Intercreditor Agreement, Agent shall apply
payments received or collected from any Borrower or Guarantor or for the account
of any Borrower or Guarantor (including the monetary proceeds of collections or
of realization upon any Collateral) as follows:

 

(i)                 first, to pay any fees, indemnities or expense
reimbursements then due to Agent from any Borrower or Guarantor;

 

(ii)              second, to pay any fees, indemnities, or expense
reimbursements then due to Lenders (other than Affiliated Lenders) from any
Borrower or Guarantor;

 

(iii)            third, to pay interest due in respect of the Term Loan (and
including any Special Agent Advances);

 

(iv)             fourth, to pay or prepay principal in respect of Special Agent
Advances;

 

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(v)               fifth, to pay or prepay principal in respect of the Term Loan;
and

 

(vi)             sixth, to pay or prepay any other Obligations whether or not
then due, in such order and manner as Agent determines.

 

Each of the clauses (ii), and (iv) through (vi) above in respect of payments to
any Affiliated Lender shall be further subject to Section 6.9(b).

 

Notwithstanding anything to the contrary contained in this Agreement, (A) to the
extent any Borrower uses any proceeds of the Term Loan to acquire rights in or
the use of any Collateral or to repay any Indebtedness used to acquire rights in
or the use of any Collateral, payments in respect of the Obligations shall be
deemed applied first to the Obligations arising from the Term Loan that were not
used for such purposes and second to the Obligations arising from Term Loan the
proceeds of which were used to acquire rights in or the use of any Collateral in
the chronological order in which such Borrower acquired such rights in or the
use of such Collateral.

 

(b)               Subject to Section 6.5, Borrower shall make all payments to
Agent and Lenders on the Obligations free and clear of, and without deduction or
withholding for or on account of, any setoff, counterclaim, defense,
restrictions or conditions of any kind. If after receipt of any payment of, or
proceeds of Collateral applied to the payment of, any of the Obligations, Agent
or any Lender (other than an Affiliated Lender) is required to surrender or
return such payment or proceeds to any Person for any reason, then the
Obligations intended to be satisfied by such payment or proceeds shall be
reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Agent or such
Lender. Borrowers and Guarantors shall be liable to pay to Agent and Lenders,
and do hereby indemnify and hold Agent and Lenders harmless for the amount of
any payments or proceeds so surrendered or returned and to the extent thereof.
This Section 6.4(b) shall remain effective notwithstanding any contrary action
which may be taken by Agent or any Lender in reliance upon such payment or
proceeds. This Section 6.4 shall survive the payment of the Obligations and the
termination of this Agreement.

 

6.5              Taxes.

 

(a)               Payment Free of Taxes. Any and all payments by or on account
of any obligation of any Borrower under any Financing Agreement shall be made
without deduction or withholding for any Taxes, except as required by applicable
law. If any applicable law (as determined in the good faith discretion of an
applicable withholding agent) requires the deduction or withholding of any Tax
from any such payment by a withholding agent, then the applicable withholding
agent shall be entitled to make such deduction or withholding and shall timely
pay the full amount deducted or withheld to the relevant Governmental Authority
in accordance with applicable law and, if such Tax is an Indemnified Tax, then
the sum payable by the applicable Loan Party shall be increased as necessary so
that after such deduction or withholding has been made (including such
deductions and withholdings applicable to additional sums payable under this
Section 6.5) the applicable Recipient receives an amount equal to the sum it
would have received had no such deduction or withholding been made.

 

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(b)               Payment of Other Taxes by the Borrowers. The Borrowers shall
timely pay to the relevant Governmental Authority in accordance with applicable
law, or at the option of the Agent timely reimburse it for, Other Taxes.

 

(c)               Evidence of Payment. As soon as practicable after any payment
of Taxes by any Borrower to a Governmental Authority pursuant to this Section
6.5, such Borrower shall deliver to the Agent the original or a certified copy
of a receipt issued by such Governmental Authority evidencing such payment, a
copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Agent.

 

(d)               Indemnification by the Loan Parties. The Loan Parties shall
jointly and severally indemnify each Recipient, within ten (10) days after
demand therefor, for the full amount of any Indemnified Taxes (including
Indemnified Taxes imposed or asserted on or attributable to amounts payable
under this Section) payable or paid by such Recipient or required to be withheld
or deducted from a payment to such Recipient and any reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability delivered to any
Borrower by a Lender (with a copy to the Agent), or by the Agent on its own
behalf or on behalf of a Lender, shall be conclusive absent manifest error.

 

(e)               Indemnification by the Lenders. Each Lender shall severally
indemnify the Agent, within ten (10) days after demand therefor, for (i) any
Indemnified Taxes attributable to such Lender (but only to the extent that any
Borrower has not already indemnified the Agent for such Indemnified Taxes and
without limiting the obligation of the Borrowers to do so) and (ii) any Excluded
Taxes attributable to such Lender, in each case, that are payable or paid by the
Agent in connection with any Financing Agreement, and any reasonable expenses
arising therefrom or with respect thereto, whether or not such Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority.
A certificate as to the amount of such payment or liability delivered to any
Lender by the Agent shall be conclusive absent manifest error. Each Lender
hereby authorizes the Agent to setoff and apply any and all amounts at any time
owing to such Lender under any Financing Agreement or otherwise payable by the
Agent to such Lender from any other source against any amount due to the Agent
under this paragraph (e).

 

(f)                Status of Lenders.

 

(i)                 Any Lender that is entitled to an exemption from or
reduction of withholding Tax with respect to payments made under any Financing
Agreement shall deliver to the Administrative Borrower and the Agent, at the
time or times reasonably requested by the Administrative Borrower or the Agent,
such properly completed and executed documentation reasonably requested by the
Administrative Borrower or the Agent as will permit such payments to be made
without withholding or at a reduced rate of withholding. In addition, any
Lender, if reasonably requested by the Administrative Borrower or the Agent,
shall deliver such other documentation prescribed by applicable law or
reasonably requested by the Administrative Borrower or the Agent as will enable
the Borrowers or the Agent to determine whether or not such Lender is subject to
backup withholding or information reporting requirements. Notwithstanding
anything to the contrary in the preceding two sentences, the completion,
execution and submission of such documentation (other than such documentation
set forth in Section 6.5(f)(ii)(A), (ii)(B) and (ii)(D) below) shall not be
required if in the Lender'sLender’s reasonable judgment such completion,
execution or submission would subject such Lender to any material unreimbursed
cost or expense or would materially prejudice the legal or commercial position
of such Lender.

 

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(ii)              Without limiting the generality of the foregoing, in the event
that any Borrower is a U.S. Person,

 

(A)             any Lender that is a U.S. Person shall deliver to the
Administrative Borrower and the Agent on or prior to the date on which such
Lender becomes a Lender under this Agreement (and from time to time thereafter
upon the reasonable request of the Administrative Borrower or the Agent), an
executed copy of IRS Form W-9 certifying that such Lender is exempt from U.S.
federal backup withholding tax;

 

(B)              any Foreign Lender shall, to the extent it is legally entitled
to do so, deliver to the Administrative Borrower and the Agent (in such number
of copies as shall be requested by the recipient) on or prior to the date on
which such Foreign Lender becomes a Lender under this Agreement (and from time
to time thereafter upon the reasonable request of the Administrative Borrower or
the Agent), whichever of the following is applicable:

 

(1)               in the case of a Foreign Lender claiming the benefits of an
income tax treaty to which the United States is a party (x) with respect to
payments of interest under any Financing Agreement, an executed copy of IRS Form
W-8BEN or IRS Form W-8BEN-E, as applicable, establishing an exemption from, or
reduction of, U.S. federal withholding Tax pursuant to the “interest” article of
such tax treaty and (y) with respect to any other applicable payments under any
Financing Agreement, IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable,
establishing an exemption from, or reduction of, U.S. Federal withholding Tax
pursuant to the “business profits” or “other income” article of such tax treaty;

 

(2)               in the case of a Foreign Lender claiming that its extension of
credit will generate U.S. effectively connected income, an executed copy of IRS
Form W-8ECI;

 

(3)               in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under Section 881(c) of the Code, (x) a
certificate substantially in the form of Exhibit E-1 to the effect that such
Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the
Code, a “10 percent shareholder” of a Borrower within the meaning of Section
881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in
Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y)
an executed copy of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable; or

 

(4)               to the extent a Foreign Lender is not the beneficial owner, an
executed copy of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form
W-8BEN or IRS Form W-8BEN-E, as applicable, a U.S. Tax Compliance Certificate
substantially in the form of Exhibit E-1, IRS Form W-9, and/or other
certification documents from each beneficial owner, as applicable; provided that
if the Foreign Lender is a partnership and one or more direct or indirect
partners of such Foreign Lender are claiming the portfolio interest exemption,
such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially
in the form of Exhibit E-2 on behalf of each such direct and indirect partner;

 

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(C)              any Foreign Lender shall, to the extent it is legally entitled
to do so, deliver to the Administrative Borrower and the Agent (in such number
of copies as shall be requested by the recipient) on or prior to the date on
which such Foreign Lender becomes a Lender under this Agreement (and from time
to time thereafter upon the reasonable request of the Administrative Borrower or
the Agent), executed copies of any other form prescribed by applicable law as a
basis for claiming exemption from or a reduction in U.S. federal withholding
Tax, duly completed, together with such supplementary documentation as may be
prescribed by applicable law to permit the Borrowers or the Agent to determine
the withholding or deduction required to be made;

 

(D)             if a payment made to a Lender under any Financing Agreement
would be subject to U.S. Federal withholding Tax imposed by FATCA if such Lender
were to fail to comply with the applicable reporting requirements of FATCA
(including those contained in Section 1471(b) or 1472(b) of the Code, as
applicable), such Lender shall deliver to the Administrative Borrower and the
Agent at the time or times prescribed by law and at such time or times
reasonably requested by the Administrative Borrower or the Agent such
documentation prescribed by applicable law (including as prescribed by Section
1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably
requested by the Administrative Borrower or the Agent as may be necessary for
the Borrowers and the Agent to comply with their obligations under FATCA and to
determine that such Lender has complied with such Lender'sLender’s obligations
under FATCA or to determine the amount to deduct and withhold from such payment.
Solely for purposes of this clause (D), “FATCA” shall include any amendments
made to FATCA after the date of this Agreement; and

 

(E)              any other form prescribed by law as a basis for claiming
exemption from, or a reduction of, U.S. Federal withholding Tax together with
such supplementary documentation necessary to enable Administrative Borrower or
Agent to determine the amount of Tax (if any) required by law to be withheld.

 

(g)               Each Lender agrees that if any form or certification it
previously delivered expires or becomes obsolete or inaccurate in any respect,
it shall update such form or certification or promptly notify the Administrative
Borrower and the Agent in writing of its legal inability to do so.If any party
determines, in its sole discretion exercised in good faith, that it has received
a refund of any Taxes as to which it has been indemnified pursuant to this
Section (including by the payment of additional amounts pursuant to this
Section), it shall pay to the indemnifying party an amount equal to such refund
(but only to the extent of indemnity payments made under this Section with
respect to the Taxes giving rise to such refund), net of all out-of-pocket
expenses (including Taxes) of such indemnified party and without interest (other
than any interest paid by the relevant Governmental Authority with respect to
such refund). Such indemnifying party, upon the request of such indemnified
party, shall repay to such indemnified party the amount paid over pursuant to
this paragraph (g) (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) in the event that such indemnified party is
required to repay such refund to such Governmental Authority. Notwithstanding
anything to the contrary in this paragraph (g), in no event will the indemnified
party be required to pay any amount to an indemnifying party pursuant to this
paragraph (g) the payment of which would place the indemnified party in a less
favorable net after-Tax position than the indemnified party would have been in
if the Tax subject to indemnification and giving rise to such refund had not
been deducted, withheld or otherwise imposed and the indemnification payments or
additional amounts with respect to such Tax had never been paid. This paragraph
(g) shall not be construed to require any indemnified party to make available
its Tax returns (or any other information relating to its Taxes that it deems
confidential) to the indemnifying party or any other Person.

 

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(h)               Survival. Each party'sparty’s obligations under this Section
shall survive the resignation or replacement of the Agent or any assignment of
rights by, or the replacement of, a Lender, the termination of the Term Loan
Commitments and the repayment, satisfaction or discharge of all obligations
under any Financing Agreement (including the Payment in Full of the
Obligations).

 

6.6              [Reserved].

 

6.7              Use of Proceeds.

 

(a)               Borrowers shall use the proceeds of the Term Loan hereunder
only to (i) pay the purchase price payable in connection with the Acquisition
under the Acquisition Agreement, (ii) pay for costs, expenses and fees in
connection with the Acquisition, the Acquisition Agreement, this Agreement, the
other Financing Agreements, the ABL Credit Agreement and the other Financing
Agreements (as defined in the ABL Credit Agreement) and the consummation of any
other permitted transactions contemplated hereby which will take place on or
about the Closing Date and (iii) finance general operating, working capital and
other proper corporate purposes of such Borrower (including the intercompany
funding of Borrowers, Guarantors and their Subsidiaries) not otherwise
prohibited by the terms hereof. None of the proceeds of the Term Loan will be
used, directly or indirectly, for the purpose of purchasing or carrying any
margin security or for the purposes of reducing or retiring any Indebtedness
which was originally incurred to purchase or carry any margin security or for
any other purpose which might cause the Term Loan to be considered a “purpose
credit” within the meaning of Regulation U of the Federal Reserve Board, as
amended.

 

(b)               No Borrower or Guarantor shall use, and each Borrower and
Guarantor shall ensure that its Subsidiaries and their respective directors,
officers and agents shall not use, the proceeds of the Term Loan (i) 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, (ii) for the purpose of funding,
financing or facilitating any activities, business or transaction of or with any
Sanctioned Person, or in any Sanctioned Country, to the extent that such
activities, businesses or transaction would be prohibited by applicable
Sanctions, or (iii) in any manner that would result in the violation of any
Sanctions applicable to any party hereto.

 

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6.8              Appointment of Administrative Borrower as Agent for Receipts of
Statements.

 

(a)               [Reserved].

 

(b)               [Reserved].

 

(c)               Each Borrower and other Guarantor hereby irrevocably appoints
Vitamin Shoppe Industries as Administrative Borrower and, as such constitutes
Administrative Borrower as its respective agent to receive statements on account
and all other notices from Agent and Lenders with respect to the Obligations or
otherwise under or in connection with this Agreement and the other Financing
Agreements.

 

(d)               Any notice, election, representation, warranty, agreement or
undertaking by or on behalf of any other Borrower or any Guarantor by
Administrative Borrower shall be deemed for all purposes to have been made by
such Borrower or Guarantor, as the case may be, and shall be binding upon and
enforceable against such Borrower or Guarantor to the same extent as if made
directly by such Borrower or Guarantor.

 

(e)               The Administrative Borrower may execute any of its duties as
the Administrative Borrower hereunder and under any other Financing Agreements
by or through Authorized Officers.

 

(f)                No purported termination of the appointment of Administrative
Borrower as agent as aforesaid shall be effective, except after ten (10) days’
prior written notice to Agent.

 

6.9              Payment Treatment.

 

(a)               6.9 Pro Rata Treatment. ExceptSubject to Section 6.9(b) below,
except to the extent otherwise provided in this Agreement or as otherwise agreed
by Lenders: (ai)  the Term Loan shall be made among the Lenders based on their
respective Pro Rata Shares as to the Term Loan and (bii) each payment on account
of any Obligations to or for the account of one or more of Lenders in respect of
any Obligations due on a particular day shall be allocated among the Lenders
entitled to such payments based on their respective Pro Rata Shares of the Term
Loan, as applicable, and shall be distributed accordingly.

 

(b)               Affiliated Lender Treatment. Notwithstanding anything contrary
contained herein, in any other Financing Agreement or other related letter or
agreements, each payment on account of any Obligations, other than any payment
with respect to (x) Tax Refund Additional Payment Amount in accordance with
Section 2.2(a) and (z) Tax Refund in accordance with Section 2.3(a), to or for
the account of one or more of Affiliated Lenders due on a particular day shall
be paid directly to such Affiliated Lenders (unless otherwise agreed between the
Borrowers and any such Affiliated Lenders). For greater clarity, Affiliated
Lenders shall not be entitled to the sharing of (i) any payment of Tax Refund
Additional Payment Amount in accordance with Section 2.2(a) and (ii) any payment
with respect to Tax Refund in accordance with Section 2.3(a) with non-Affiliated
Lenders, and such payments shall be allocated among non-Affiliated Lenders
entitled to such payments based on their respective Pro Rata Share of the Term
Loan and shall be distributed accordingly.

 

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6.10          Sharing of Payments, Etc.

 

(a)               Each Borrower and Guarantor agrees that, in addition to (and
without limitation of) any right of setoff, banker’s lien or counterclaim Agent
or any Lender may otherwise have, each Lender shall be entitled, at its option
(but subject, as among Agent and Lenders, to the provisions of Section 12.3(b)
hereof), to offset balances held by it for the account of such Borrower or
Guarantor at any of its offices, in dollars or in any other currency, against
any principal of or interest on the Term Loan owed to such Lender or any other
amount payable to such Lender hereunder, that is not paid when due (regardless
of whether such balances are then due to such Borrower or Guarantor), in which
case it shall promptly notify Administrative Borrower and Agent thereof;
provided, that, such Lender’s failure to give such notice shall not affect the
validity thereof.

 

(b)               If, except as otherwise expressly provided herein, any Lender
shall, by exercising any right of setoff or counterclaim or otherwise, obtain
payment in respect of any principal of or interest on any of its Term Loans or
participations resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Term Loans and participations and
accrued interest thereon than the proportion received by any other similarly
situated Lender, then the Lender receiving such greater proportion shall
purchase (for cash at face value) participations in the Term Loans of other
Lenders to the extent necessary so that the benefit of all such payments shall
be shared by all such Lenders ratably in accordance with their respective Pro
Rata Shares; provided that (i) if any such participations are purchased and all
or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this paragraph
shall not be construed to apply to any payment made by the Borrowers pursuant to
and in accordance with the express terms of this Agreement or any payment
obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Term Loans to any assignee or participant, other
than to the Borrowers or any Subsidiary or Affiliate thereof (as to which the
provisions of this paragraph shall apply). Each Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable
law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against such Borrower rights of setoff and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of such Borrower in the amount of such participation.

 

(c)               Each Borrower and Guarantor agrees that any Lender purchasing
a participation (or direct interest) as provided in this Section may exercise,
in a manner consistent with this Section, all rights of setoff, banker’s lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender were a direct holder of Term Loan or other amounts (as the case may
be) owing to such Lender in the amount of such participation.

 

(d)               Nothing contained herein shall require any Lender to exercise
any right of setoff, banker’s lien, counterclaims or similar rights or shall
affect the right of any Lender to exercise, and retain the benefits of
exercising, any such right with respect to any other Indebtedness or obligation
of any Borrower or Guarantor. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a setoff to
which this Section applies, such Lender shall, to the extent practicable, assign
such rights to Agent for the benefit of Secured Parties and, in any event,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of Lenders entitled under this Section to share in the benefits of
any recovery on such secured claim.

 

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6.11          Settlement Procedures.

 

(a)               [Reserved].

 

(b)               [Reserved].

 

(c)               No Lender shall be responsible for any default by any other
Lender in the other Lender’s obligation to make Term Loan hereunder nor shall
the Term Loan Commitment of any Lender be increased or decreased as a result of
the default by any other Lender in the other Lender’s obligation to make the
Term Loan hereunder.

 

(d)               Agent may assume that each Lender will make available to Agent
such Lender’s Pro Rata Share of the Term Loan and Agent may, in its discretion,
but shall not be obligated to, cause a corresponding amount to be made available
to or for the benefit of such Borrower on the Closing Date. If Agent makes such
corresponding amount available to a Borrower and such corresponding amount is
not in fact made available to Agent by such Lender, Agent shall be entitled to
recover such corresponding amount on demand from such Lender together with
interest thereon for each day from the date such payment was due until the date
such amount is paid to Agent at the Federal Funds Rate for each day during such
period (as published by the Federal Reserve Bank of New York or at Agent’s
option based on the arithmetic mean determined by Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of the three leading brokers of Federal
funds transactions in New York City selected by Agent) and if such amounts are
not paid within three (3) days of Agent’s demand, at the highest Interest Rate
provided for in Section 3.1 hereof. During the period in which such Lender has
not paid such corresponding amount to Agent, notwithstanding anything to the
contrary contained in this Agreement or any of the other Financing Agreements,
the amount so advanced by Agent to or for the benefit of any Borrower shall, for
all purposes hereof, be a part of the Term Loan made by Agent for its own
account. Upon any such failure by a Lender to pay Agent, Agent shall promptly
thereafter notify Administrative Borrower of such failure and Borrowers shall
pay such corresponding amount to Agent for its own account within five
(5) Business Days of Administrative Borrower’s receipt of such notice, which
shall constitute a payment on account of Obligations.

 

(e)               Nothing in this Section or elsewhere in this Agreement or the
other Financing Agreements shall be deemed to require Agent to advance funds on
behalf of any Lender or to relieve any Lender from its obligation to fulfill its
Term Loan Commitment hereunder or to prejudice any rights that any Borrower may
have against any Lender as a result of any default by any Lender hereunder in
fulfilling its Term Loan Commitment.

 

6.12          Obligations Several; Independent Nature of Lenders’ Rights. The
obligation of each Lender hereunder is several, and no Lender shall be
responsible for the obligation or the Term Loan Commitment of any other Lender
hereunder. Nothing contained in this Agreement or any of the other Financing
Agreements and no action taken by the Lenders pursuant hereto or thereto shall
be deemed to constitute the Lenders to be a partnership, an association, a joint
venture or any other kind of entity. The amounts payable at any time hereunder
to each Lender shall be a separate and independent debt, and subject to
Section 12.3 hereof, each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.

 

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SECTION 7.    COLLATERAL REPORTING AND COVENANTS

 

7.1              Collateral Reporting.

 

(a)               Borrowers and Guarantors shall maintain complete and accurate
books and records in all material respects with respect to the Collateral owned
by it. Borrowers and Guarantors shall provide Agent with the following documents
in a form reasonably satisfactory to Agent:

 

(i)                 promptly after the end of (but in no event more than fifteen
(15) Business Days thereafter) each fiscal month, so long as no Event of Default
has occurred and is continuing and no Increased Reporting Period is then in
effect (at any time an Event of Default has occurred and is continuing or if an
Increased Reporting Period is in effect, weekly on each Wednesday (or if such
day is not a Business Day, then the next succeeding Business Day)), a Borrowing
Base Certificate setting forth the calculation of the Borrowing Base and
Borrowing Base II, as applicable, as of the last Business Day of the immediately
preceding fiscal month for monthly reporting (or the Friday of the immediately
preceding week for weekly reporting) as to the Inventory, duly completed and
executed by the chief financial officer, vice president of finance, treasurer,
controller or other similar financial officer of Administrative Borrower (or if
no such officer has been appointed or elected, the sole member of the
Administrative Borrower), together with all schedules required pursuant to the
terms of the Borrowing Base Certificate duly completed, including but not
limited to an inventory summary report by category as determined by Borrowers in
accordance with their current and prior inventory management policies (and upon
Agent’s reasonable request, upon the occurrence and during the continuance of an
Event of Default letter of credit inventory summary) and identifying where such
Inventory is located;

 

(ii)              promptly after the end of (but in no event more than fifteen
(15) Business Days thereafter) each fiscal month, so long as no Event of Default
has occurred and is continuing and no Increased Reporting Period is then in
effect (at any time an Event of Default has occurred and is continuing or if an
Increased Reporting Period is in effect, weekly on each Wednesday (or if such
day is not a Business Day, then the next succeeding Business Day)), a schedule
and aging of the Borrowers’ accounts payable, delivered electronically in a text
formatted file reasonably acceptable to Agent;

 

(iii)            promptly after the end of (but in no event more than fifteen
(15) Business Days thereafter) each fiscal month, so long as no Event of Default
has occurred and is continuing and no Increased Reporting Period is then in
effect (at any time an Event of Default has occurred and is continuing or if an
Increased Reporting Period is in effect, weekly on each Wednesday (or if such
day is not a Business Day, then the next succeeding Business Day)), inventory
summary reports by location and category of Inventory (including the amounts of
Inventory and the aggregate value thereof at each retail store location and at
premises of warehouses or other third parties or is consigned Inventory); and

 

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(iv)             in connection with the delivery of the financial statements
pursuant to Section 9.6(a)(i) and Section 9.6(a)(ii), a compliance certificate
by the chief financial officer, vice president of finance, treasurer or
controller or other similar financial or senior officer of Administrative
Borrower (or if no such officer has been appointed or elected, the sole member
of Administrative Borrower) consisting of: (1) a statement confirming there are
no material past due amounts owing to owners and lessors of leased premises
(including retail store locations), warehouses, fulfillment centers, processors,
custom brokers, freight forwarders and other third parties from time to time in
possession of any Collateral having an aggregate Value (with respect to
Inventory or Equipment) or an aggregate value (with respect to all other
Collateral) equal to or greater than $250,000, (2) the addresses of all new
retail store or distribution center locations of Borrowers and Guarantors opened
and existing retail store or distribution center locations closed or sold, in
each case since the date of the most recent certificate delivered to Agent
containing the information required under this clause, (3) a list of any new
Deposit Account established by any Borrower or Guarantor with any bank or other
financial institution, including the Borrower or Guarantor in whose name the
account is maintained, the account number, the name and address of the financial
institution at which such account is maintained, the purpose of such account
and, if any, the amount held in such account on or about the date of such
compliance certificate, and (4) a statement that all sales and use taxes have
been paid when due as of the date of the compliance certificate, except as
specifically described in such compliance certificate and except where the
non-payment of such sales and use taxes involves an aggregate amount of less
than $200,000.

 

(b)               Upon Agent’s reasonable request, Borrowers shall provide Agent
with the following documents in a form reasonably satisfactory to Agent:
(i) perpetual inventory summary reports by sku for each retail store location,
(ii) summary reports on sales and use tax collections, deposits and payments,
including monthly sales and use tax accruals, (iii) a report of aggregate credit
card sales for the requested period, including the amount of the chargebacks,
fees, and credits with respect thereto and providing an aging of such related
Receivables identifying those outstanding more than five (5) Business Days since
the sale date giving rise thereto, and (iv) true, correct and complete copies of
all agreements, documents and instruments relating to any Permitted Acquisition
which Agent has not otherwise received; and

 

(c)               Upon Agent’s reasonable request, Borrowers shall provide such
other reports as to the Collateral as Agent shall reasonably request from time
to time. If any Borrower’s or Guarantor’s records or reports of the Collateral
are prepared or maintained by an accounting service, contractor, shipper or
other agent, such Borrower and Guarantor hereby irrevocably authorizes such
service, contractor, shipper or agent to deliver such records, reports, and
related documents to Agent and, subject to the Intercreditor Agreement, to
follow Agent’s instructions with respect to further reasonable services, in each
case, at any time that an Event of Default has occurred and is continuing.

 

7.2              Accounts Covenants.

 

(a)               Borrowers shall notify Agent promptly of the assertion of any
claims, offsets, defenses or counterclaims by any Account Debtor, Credit Card
Issuer or Credit Card Processor or any disputes with any of such Persons or any
settlement, adjustment or compromise thereof, to the extent any of the foregoing
exceeds $500,000 in any one case or $2,000,000 in the aggregate. No credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any Account Debtor, Credit Card Issuer or Credit Card Processor
except in the ordinary course of a Borrower’s business in accordance with the
current and prior practices of such Borrower. So long as an Event of Default has
occurred and is continuing, no Borrower shall, without the prior written consent
of Agent, settle, adjust or compromise any material claim, offset, counterclaim
or dispute with any Account Debtor, Credit Card Issuer or Credit Card Processor.
At any time that an Event of Default has occurred and is continuing, subject to
the Intercreditor Agreement, Agent or ABL Agent shall, at its option, have the
exclusive right to approve, settle, adjust or compromise any claim, offset,
counterclaim or dispute with Account Debtors, Credit Card Issuers or Credit Card
Processors or grant any credits, discounts or allowances.

 

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(b)               Each Borrower shall notify Agent promptly of: (i) any notice
of a material default by such Borrower under any of the Credit Card Agreements,
(ii) any default by such Borrower which has a reasonable likelihood of resulting
in the Credit Card Issuer or Credit Card Processor ceasing to make payments or
suspending payments to such Borrower, and (iii) any notice from any Credit Card
Issuer or Credit Card Processor that such Person is ceasing or suspending, or
will or may cease or suspend, any present or future payments due or to become
due to any Borrower from such Person, or that such Person is terminating or will
or may terminate any of the Credit Card Agreements.

 

(c)               Agent shall have the right at any time or times, in Agent’s
name or in the name of a nominee of Agent, to verify the validity, amount or any
other matter relating to any Receivables or other Collateral, by mail,
telephone, facsimile transmission or otherwise.

 

7.3              Inventory Covenants. With respect to the Inventory: (a) each
Borrower and Guarantor shall at all times maintain inventory records reasonably
satisfactory to Agent, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, such Borrower’s or
Guarantor’s cost therefor and daily withdrawals therefrom and additions thereto;
(b) Borrowers and Guarantors shall conduct physical counts of the Inventory
(excluding Inventory located in retail stores that have not been open for more
than twelve (12) months) either through periodic cycle counts or wall to wall
counts, so that all Inventory located at distribution centers and retail stores
that have been open for more than twelve months is subject to such counts at
least once each year but at any time or times as Agent may request upon the
occurrence and during the continuance of an Event of Default, and promptly
following such physical counts of the Inventory (whether through periodic cycle
counts or wall to wall counts) shall supply Agent with a report in the form and
with such specificity as may be reasonably satisfactory to Agent concerning such
physical count; (c) Borrowers and Guarantors shall not remove any Inventory from
the locations set forth or permitted herein, without the prior written consent
of Agent (unless such removal is at the direction of the ABL Agent to the extent
such direction is not in violation of the Intercreditor Agreement), except
(i) for sales of Inventory in the ordinary course of its business, (ii) for
sales, returns and exchanges of Inventory to manufacturers and suppliers in the
ordinary course of business; (iii) to move Inventory directly from one location
set forth or permitted herein to another such permitted location and (iv) for
Inventory shipped from the manufacturer thereof to such Borrower or Guarantor
which is in transit to the locations set forth or permitted herein; (d) upon
Agent’s request, Borrowers shall, at their expense, no more than two (2) times
in any twelve (12) month period (or one (1) additional time in any twelve (12)
month period as Agent may request but not at Borrowers’ expense), but at any
time or times as Agent may reasonably request upon the occurrence and during the
continuance of an Event of Default, during a Compliance Period or if there is a
Material Adverse Effect (at Borrowers’ sole expense), deliver or cause to be
delivered to Agent written appraisals as to the Inventory in form, scope and
methodology reasonably acceptable to Agent and by an appraiser reasonably
acceptable to Agent, addressed to Agent and Lenders and upon which Agent and
Lenders are expressly permitted to rely; (e) Borrowers and Guarantors shall
produce, use, store and maintain the Inventory with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including, to the extent applicable, the
requirements of the Federal Fair Labor Standards Act of 1938, as amended and all
rules, regulations and orders related thereto); (f) none of the Inventory or
other Collateral constitutes farm products or the proceeds thereof; (g) as
between Agent and Secured Parties and Borrowers and Guarantors, each Borrower
and Guarantor assumes all responsibility and liability arising from or relating
to the production, use, sale or other disposition of the Inventory;
(h) Borrowers and Guarantors shall not sell Inventory to any customer on
approval, or any other basis which entitles the customer to return or may
obligate any Borrower or Guarantor to repurchase such Inventory other than
returns and exchanges of Inventory from customers in the ordinary course
business of such Borrower or Guarantor consistent with the then current return
policy of such Borrower or Guarantor; (i) Borrowers and Guarantors shall keep
the Inventory in good and marketable condition; and (j) Borrowers and Guarantors
shall not, without prior written notice to Agent or the specific identification
of such Inventory in a report with respect thereto provided by Administrative
Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any
Inventory on consignment or approval except for (x) magazines, stationery and
greeting cards, and (y) perishable food stuffs of a de minimus value.

 

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7.4              Equipment and Real Property Covenants. With respect to the
Equipment and Real Property: (a)  Borrowers and Guarantors shall, at their
expense, no more than two (2) times in any twelve (12) month period, but at any
time or times as Agent may reasonably request upon the occurrence and during the
continuance of an Event of Default or during a Compliance Period, deliver or
cause to be delivered to Agent written appraisals as to the Equipment and/or the
fee owned Real Property in form, scope and methodology reasonably acceptable to
Agent and by an appraiser reasonably acceptable to Agent, addressed to Agent and
upon which Agent is expressly permitted to rely; (b) Borrowers and Guarantors
shall keep the Equipment in good order, repair, running and marketable condition
(ordinary wear and tear and casualty and condemnation excepted); (c) Borrowers
and Guarantors shall use the Equipment with all reasonable care and caution and
in accordance with applicable standards of any insurance and in conformity with
all applicable laws except where the failure to so use would not result in a
Material Adverse Effect; (d) the Equipment is and shall be used in the business
of Borrowers and Guarantors and not for personal, family, household or farming
use; (e) Borrowers and Guarantors shall not remove any Equipment from the
locations set forth or permitted herein, except to the extent necessary to have
any Equipment repaired or maintained in the ordinary course of its business or
to move Equipment directly from one location set forth or permitted herein to
another such location and except for the movement of motor vehicles used by or
for the benefit of such Borrower or Guarantor in the ordinary course of
business; (f) the Equipment is now and shall remain personal property and
Borrowers and Guarantors shall not permit any part of the Equipment to be or
become a part of or affixed to real property except where the failure to do so
would not have a Material Adverse Effect; and (g) each Borrower and Guarantor
assumes all responsibility and liability arising from the use of the Equipment
and Real Property.

 

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7.5              Delivery of Instruments, Chattel Paper and Documents. In the
event that any Borrower or Guarantor shall be entitled to or shall at any time
after the Closing Date hold or acquire any Chattel Paper or Instruments
constituting Collateral or any Documents evidencing or constituting Collateral
which together with all other Chattel Paper, Instruments and Documents that
Borrower or Guarantor holds or acquires an interest in after the date hereof
have an aggregate fair market value in excess of $500,000, subject to the
Intercreditor Agreement, such Borrower or Guarantor shall promptly deliver to
Agent or ABL Agent any such Chattel Paper, Instruments and/or Documents along
with such other documents as Agent may reasonably require pursuant to which such
Borrower or Guarantor will pledge such additional Collateral. Such Borrower or
Guarantor herby authorizes Agent to attach such supplemental documents to this
Agreement and agrees that all additional Collateral owned by it set forth in
such supplemental documents shall be considered to be part of the Collateral.

 

7.6              Post-Closing Appraisals. Borrowers and Guarantors shall, at
their expense, deliver or cause to be delivered to Agent, within three (3) weeks
after the Closing Date (or such later period as the Agent may agree to in its
reasonable discretion, taking into consideration any delays not within the
control of the Borrowers and Guarantors), written reports or appraisals as to
the Equipment and Intellectual Property proposed to be included in Eligible
Equipment and Eligible Intellectual Property, as applicable, in form, scope and
methodology reasonably acceptable to Agent and by an appraiser reasonably
acceptable to Agent, addressed to Agent and Lenders and upon which Agent and
Lenders are expressly permitted to rely (such appraisals, the “Post-Closing
Appraisals”). Thereafter, Borrowers and Guarantors shall, at their expense, no
more than two (2) times in any twelve (12) month period (counting the appraisals
referred to in the previous sentence), but at any time or times as Agent may
reasonably request upon the occurrence and during the continuance of an Event of
Default or during a Compliance Period, deliver or cause to be delivered to Agent
written appraisals as to the Equipment and/or Intellectual Property in form,
scope and methodology reasonably acceptable to Agent and by an appraiser
reasonably acceptable to Agent, addressed to Agent and upon which Agent is
expressly permitted to rely.

 

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7.7              Power of Attorney.

 

(a)               Each Borrower and Guarantor hereby irrevocably designates and
appoints Agent (and all Persons reasonably designated by Agent) as such
Borrower’s and Guarantor’s true and lawful attorney-in-fact, and authorizes
Agent, in such Borrower’s, Guarantor’s or Agent’s name, to: (i) at any time an
Event of Default has occurred and is continuing (A) demand payment on
Receivables or other Collateral, (B) clear Inventory the purchase of which was
financed with letters of credit through U.S. Customs or foreign export control
authorities in any Borrower’s or Guarantor’s name, Agent’s name or the name of
Agent’s designee, and to sign and deliver to customs officials powers of
attorney in such Borrower’s or Guarantor’s name for such purpose, and to
complete in Borrower’s, Guarantor’s or Agent’s name, any order, sale or
transaction, obtain the necessary documents in connection therewith and collect
the proceeds thereof, (C) enforce payment of Receivables by legal proceedings or
otherwise, (D) exercise all of such Borrower’s or Guarantor’s rights and
remedies to collect any Receivable or other Collateral, (E) in a commercially
reasonable manner, sell or assign any Receivable upon such terms, for such
amount and at such time or times as the Agent deems advisable, (F) settle,
adjust, compromise, extend or renew an Account, (G) discharge and release any
Receivable, (H) prepare, file and sign such Borrower’s or Guarantor’s name on
any proof of claim in bankruptcy or other similar document against an Account
Debtor or other such Borrower or Guarantor in respect of any Receivables or
other Collateral, (I) notify the post office authorities to change the address
for delivery of remittances from Account Debtors or other Borrowers or
Guarantors in respect of Receivables or other proceeds of Collateral to an
address designated by Agent, and open and dispose of all mail addressed to any
Borrower or Guarantor and handle and store all mail relating to the Collateral,
provided, that Agent shall turn over to such Borrower or Guarantor any such mail
that that does not constitute a remittance from an Account Debtor or other
Borrower or Guarantor in respect of Receivables or other proceeds of Collateral;
(J) do all acts and things which are necessary, in Agent’s determination, to
fulfill such Borrower’s or Guarantor’s obligations under this Agreement and the
other Financing Agreements; (K) with respect to Intellectual Property, execute,
deliver and record, any and all agreements, instruments, documents and papers to
evidence the Agent’s security interest in such Intellectual Property and the
goodwill and general intangibles of Borrowers and Guarantors relating thereto or
represented thereby, assign any Intellectual Property or license, throughout the
world; (ii) at any time an Event of Default has occurred and is continuing and
during any Compliance Period, (A) have access to any lockbox or postal box into
which remittances from Account Debtors or other Borrowers or Guarantors in
respect of Receivables or other proceeds of Collateral are sent or received,
(B) endorse such Borrower’s or Guarantor’s name upon any items of payment in
respect of Receivables or constituting Collateral or otherwise received by Agent
and any Lender and deposit the same in Agent’s account for application to the
Obligations, (C) take control in any manner of any item of payment in respect of
Receivables or constituting collateral or otherwise received in or for deposit
in the Blocked Accounts or otherwise received by Agent or any Lender, (D) to
file a carbon, photographic or other reproduction of this Agreement or any
financing statement with respect to the Collateral as a financing statement and
to file any other financing statement or amendment of a financing statement
(which does not add new collateral or add a debtor) in such offices as Agent in
its sole discretion deems necessary or desirable to perfect and to maintain the
perfection and priority of Agent’s security interest in the Collateral, (E) to
contact and enter into one or more agreements with the issuers of uncertificated
Securities which are Collateral or with securities intermediaries holding
Collateral as may be necessary or advisable to give Agent Control over such
Collateral, (F) to demand payment or enforce payment of the Receivables in the
name of Agent or such Borrower or Guarantor and to endorse any and all checks,
drafts, and other instruments for the payment of money relating to the
Receivables, (G) to sign such Borrower’s or Guarantor’s name on any invoice or
bill of lading relating to the Receivables, drafts against any Account Debtor of
the Borrower or Guarantor, assignments and verifications of Receivables, (H) to
settle, adjust, compromise, extend or renew the Receivables, (I) to settle,
adjust or compromise any legal proceedings brought to collect Receivables,
(J) to prepare, file and sign such Borrower’s or Guarantor’s name on any notice
of lien, assignment or satisfaction of lien or similar document in connection
with the Receivables, and (K) to change the address for delivery of mail
addressed to such Borrower or Guarantor to such address as Agent may designate
and to receive, open and dispose of all mail addressed to such Borrower or
Guarantor, (iii) at any time to (A) endorse Borrower’s name upon any Chattel
Paper, document, Instrument, invoice, or similar document or agreement relating
to any Receivable or any Goods pertaining thereto or any other Collateral,
including any warehouse or other receipts, or bills of lading and other
negotiable or non-negotiable documents, and (B) sign such Borrower’s or
Guarantor’s name on any verification of Receivables and notices thereof to
Account Debtors or any secondary Guarantors or other Guarantors in respect
thereof. Such Borrower or Guarantor agrees to reimburse Agent on demand for any
payment made or any expense incurred by Agent in connection with any of the
foregoing; provided that, this authorization shall not relieve such Borrower or
Guarantor of any of its obligations under this Agreement. All acts of said
attorney or designee are hereby ratified and approved. The powers conferred on
Agent, for the benefit of the Agent and Lenders under this Section 7.7 are
solely to protect Agent’s interests in the Collateral and shall not impose any
duty upon Agent or any Lender to exercise any such powers. Each Borrower and
Guarantor hereby releases Agent and Lenders and their respective officers,
employees and designees from any liabilities arising from any act or acts under
this power of attorney and in furtherance thereof, whether of omission or
commission, except as a result of Agent’s or any Lender’s own gross negligence
or willful misconduct.

 

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(b)               Nature of Appointment; Limitation of Duty. THE APPOINTMENT OF
AGENT AS PROXY AND ATTORNEY-IN-FACT IN THIS SECTION 7.7 IS COUPLED WITH AN
INTEREST AND SHALL BE IRREVOCABLE UNTIL THE DATE ON WHICH THIS AGREEMENT IS
TERMINATED IN ACCORDANCE WITH SECTION 13. NOTWITHSTANDING ANYTHING CONTAINED
HEREIN, NEITHER AGENT, NOR ANY LENDER, NOR ANY OF THEIR RESPECTIVE AFFILIATES,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL HAVE ANY DUTY TO
EXERCISE ANY RIGHT OR POWER GRANTED HEREUNDER OR OTHERWISE OR TO PRESERVE THE
SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO SO OR FOR ANY DELAY IN DOING
SO, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION; PROVIDED THAT, IN NO EVENT SHALL THEY BE LIABLE FOR ANY PUNITIVE,
EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

 

7.8              Right to Cure. Agent may, at its option, upon written notice to
Administrative Borrower, (a) cure any default by any Borrower or Guarantor under
any material agreement with a third party that materially and adversely affects
the Collateral, its value or the ability of Agent to collect, sell or otherwise
dispose of the Collateral or the rights and remedies of Agent or any Lender
therein or the ability of any Borrower or Guarantor to perform its obligations
hereunder or under any of the other Financing Agreements, (b) pay or bond on
appeal any judgment entered against any Borrower or Guarantor, (c) discharge
taxes, liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and (d) pay any amount, incur any
expense or perform any act which, in Agent’s reasonable judgment, is necessary
or appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Agent and Lenders with respect thereto. Agent may add any amounts so
expended to the Obligations and charge any Borrower’s account therefor, such
amounts to be repayable by Borrowers on demand. Agent and Lenders shall be under
no obligation to effect such cure, payment or bonding and shall not, by doing
so, be deemed to have assumed any obligation or liability of any Borrower or
Guarantor. Any payment made or other action taken by Agent or any Lender under
this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.

 

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7.9              Access to Premises. From time to time as reasonably requested
by Agent, at the cost and expense (subject to Section 9.22 hereof) of Borrowers,
(a) Agent or its designee shall have reasonable access, so as (if no Event of
Default has occurred and is continuing) not to interfere with the operations of
such Borrower or Guarantor to all of each Borrower’s and Guarantor’s premises
during normal business hours and after notice to Administrative Borrower, or at
any reasonable time and without notice to any Borrower or any Guarantor if an
Event of Default has occurred and is continuing, for the purposes of inspecting,
verifying and auditing the Collateral and all of each Borrower’s and Guarantor’s
leases, books and records, including the Records, and (b) each Borrower and
Guarantor shall promptly furnish to Agent such copies of such leases, books and
records or extracts therefrom as Agent may request (subject to the
confidentiality agreement set forth in Section 13.5 hereof), and Agent or any
Lender or Agent’s designee may use during normal business hours such of any
Borrower’s and Guarantor’s personnel, Equipment, supplies and premises as may be
reasonably necessary for the foregoing (and as will not materially interfere
with the business of the Loan Parties) and if an Event of Default has occurred
and is continuing for the collection of Receivables and realization of other
Collateral. Borrowers and Guarantors further agree that during the course of
such on-site Record examinations, Agent may review reports by retail store
location of sales and operating profits of Borrowers and Guarantors, but may not
make copies of such reports or remove them from such Borrower’s or Guarantor’s
premises.

 

SECTION 8.    REPRESENTATIONS AND WARRANTIES

 

Each Borrower and Guarantor hereby represents and warrants to Agent and Lenders
the following, the truth and accuracy of which are a condition precedent to the
making of the Term Loan:

 

8.1              Corporate Existence, Power and Authority. Each Borrower and
Guarantor is a corporation duly organized and in good standing under the laws of
its jurisdiction of incorporation and is duly qualified as a foreign corporation
and in good standing in all states or other jurisdictions where the nature and
extent of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those other jurisdictions in which the
failure to so qualify would not have a Material Adverse Effect. The execution,
delivery and performance of this Agreement, the other Financing Agreements and
the transactions contemplated hereunder and thereunder (a) are all within each
Borrower’s and Guarantor’s company powers, (b) have been duly authorized,
(c) are not in contravention of law or the terms of any Borrower’s or
Guarantor’s certificate of formation, operating agreement, or other
organizational documentation, or any indenture, agreement or undertaking to
which any Borrower or Guarantor is a party or by which any Borrower or Guarantor
or its property are bound and (d) will not result in the creation or imposition
of, or require or give rise to any obligation to grant, any lien, security
interest, charge or other encumbrance upon any property of any Borrower or
Guarantor, except, (i) with respect to (c) above, where such contravention of
law would not have a Material Adverse Effect and (ii) with respect to (d) above,
the creation of the security interest in the Collateral in favor of Agent and
Secured Parties pursuant to the terms of the Financing Agreements. This
Agreement and the other Financing Agreements to which any Borrower or Guarantor
is a party constitute legal, valid and binding obligations of such Borrower and
Guarantor enforceable in accordance with their respective terms except as such
enforceability may be limited by bankruptcy, insolvency, moratorium or similar
laws limiting creditors’ rights generally or by general equitable principles.

 

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8.2              Name; State of Organization; Chief Executive Office; Collateral
Locations.

 

(a)               The exact legal name of each Borrower and Guarantor as of the
Closing Date is as set forth on the signature page of this Agreement and in the
Perfection Certificate. No Borrower or Guarantor has, during the five years
prior to the Closing Date, been known by or used any other corporate or
fictitious name or been a party to any merger or consolidation, or acquired all
or substantially all of the assets of any Person, or acquired any of its
property or assets out of the ordinary course of business, except as set forth
in the Perfection Certificate.

 

(b)               As of the Closing Date, each Borrower and Guarantor is an
organization of the type and organized in the jurisdiction set forth in the
Perfection Certificate. As of the Closing Date, the Perfection Certificate
accurately sets forth the federal employer identification number of each
Borrower and Guarantor.

 

(c)               The chief executive office and mailing address of each
Borrower and Guarantor and each Borrower’s and Guarantor’s Records concerning
Accounts are located only at the addresses identified as such in Schedule 8.2
hereto and its only other places of business and the only other locations of
Collateral, if any, are the addresses set forth in Schedule 8.2 hereto, in each
case as of the Closing Date subject to the rights of any Borrower or Guarantor
to establish new locations after the Closing Date in accordance with Section 9.2
below. The Perfection Certificate correctly identifies, as of the Closing Date,
any of such locations which are not owned by a Borrower or Guarantor and sets
forth the owners and/or operators of all locations which are not retail store
locations.

 

8.3              Financial Statements; No Material Adverse Change. All financial
statements relating to any Borrower or Guarantor which have been or may
hereafter be delivered by any Borrower or Guarantor to Agent and Lenders have
been prepared in accordance with GAAP (except as otherwise disclosed in any
notes thereto and as indicated in the notes thereto and as to any interim
financial statements, to the extent such statements are subject to normal
year-end adjustments and do not include any notes) and fairly present in all
material respects the financial condition and the results of operation of such
Borrower and Guarantor as at the dates and for the periods set forth therein.
Except as disclosed in any interim financial statements furnished by Borrowers
and Guarantors to Agent prior to the date of this Agreement, there has been no
act, condition or event which has had or is reasonably likely to have a Material
Adverse Effect since the date of the most recent audited financial statements of
any Borrower or Guarantor furnished by any Borrower or Guarantor to Agent prior
to the date of this Agreement. The projections for the fiscal years ending 2020
through 2024 that have been delivered to Agent or any projections hereafter
delivered to Agent have been prepared in light of the past operations of the
businesses of Borrowers and Guarantors and are based upon estimates and
assumptions stated therein, all of which Borrowers and Guarantors have
determined to be reasonable and fair in light of the then current conditions and
current facts and reflect the good faith and reasonable estimates of Borrowers
and Guarantors of the future financial performance of Parent and its
Subsidiaries and of the other information projected therein for the periods set
forth therein.

 

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8.4              Priority of Liens; Title to Properties. Upon the filing of the
UCC financing statements required pursuant to the Financing Agreements and the
recording of security agreements substantially in the form of Exhibit H attached
hereto with the United States Patent and Trademark Office within fifteen
(15) days of the date hereof and United States Copyright Office within fifteen
(15) days of the date hereof, the security interests and liens granted to Agent
under this Agreement and the other Financing Agreements shall constitute valid
and perfected liens and security interests in and upon the Collateral in
accordance with the terms hereof and with the priority required by the Financing
Agreements, subject only to the liens indicated on Schedule 8.4 hereto and the
other liens permitted under Section 9.8 hereof (a) except for Borrower’s money,
and vehicles and other assets the perfection of a security interest in which is
governed by Section 9-303 of the Uniform Commercial Code, (b) subject to, with
respect to Deposit Accounts, Section 5.2(d) hereof, and (c) with respect to
Intellectual Property, only if and to the extent perfection may be achieved by
the filing of security interests in the United States Patent and Trademark
Office and United States Copyright Office, except that additional filings may
have to be made in the United States Patent and Trademark Office and United
States Copyright Office, as applicable, to perfect the security interest and
lien of Agent in any issuances, registrations, or applications for registration
of any Intellectual Property acquired by any Borrower or Guarantor after the
date hereof. Each Borrower and Guarantor has good and marketable fee simple
title to or valid leasehold interests in all of its Real Property and good,
valid and merchantable title to, or a license, option or other right to use, all
of its other properties and assets subject to no liens, mortgages, pledges,
security interests, charges or other encumbrances of any kind, except those
granted to Agent and such others as are specifically listed on Schedule 8.4
hereto or permitted under Section 9.8 hereof.

 

8.5              Tax Returns. Each Borrower and Guarantor has filed, or caused
to be filed, in a timely manner (including any extensions) all Federal income
Tax returns and all other material Tax returns, reports and declarations which
are required to be filed by it. All information in such Tax returns, reports and
declarations is complete and accurate in all material respects. Each Borrower
and Guarantor has paid or caused to be paid all Taxes due and payable or claimed
due and payable in any assessment received by it, except Taxes (a) the validity
or amount of which are being contested in good faith by appropriate proceedings
diligently pursued and available to such Borrower or Guarantor and with respect
to which adequate reserves have been set aside on its books or (b) the
non-payment of which could not reasonably be expected to have a Material Adverse
Effect. Adequate provision has been made for the payment of all accrued and
unpaid material Federal, State, county, local, foreign and other Taxes whether
or not yet due and payable and whether or not disputed.

 

8.6              Litigation. Except as set forth on Schedule 8.6 hereto, there
is no investigation, action, suit, proceeding or claim by any Governmental
Authority or Person pending, or to the best of any Borrower’s or Guarantor’s
knowledge threatened in writing, against or affecting any Borrower or Guarantor,
its or their assets or business, or against or affecting any transactions
contemplated by this Agreement that (i) is not covered by insurance (except for
normal deductibles) as to which there is a reasonable possibility of an adverse
determination that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect, or
(ii) involves any challenge to the validity or enforceability of any material
provision of any Financing Agreement (including, without limitation, any
provision relating to the Borrowers’ or Guarantors’ obligations to repay the
Obligations or any provision relating to the validity or perfection of any lien
created by any Financing Agreement).

 

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8.7              Compliance with Other Agreements and Applicable Laws. Borrowers
and Guarantors are not in default in any respect under, or in violation in any
material respect of any the terms of, any agreement, contract, instrument, lease
or other commitment to which it is a party or by which it or any of its assets
are bound which could reasonably be expected to have a Material Adverse Effect.
Except as could not reasonably be expected to have a Material Adverse Effect,
Borrowers and Guarantors are in compliance with the requirements of all
applicable laws, rules, regulations and orders of any Governmental Authority
relating to their businesses.

 

8.8              Environmental Compliance.

 

(a)               Except as would not reasonably be expected to have a Material
Adverse Effect, (i) Borrowers, Guarantors and any Subsidiary of any Borrower or
Guarantor have not generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner which at any time violates in any
material respect any applicable Environmental Law or any permit issued to
Borrower under Environmental Law, and (ii) the operations of Borrowers,
Guarantors and any Subsidiary of any Borrower or Guarantor complies in all
material respects with all Environmental Laws and all permits issued to
Borrowers and Guarantors under Environmental Law.

 

(b)               Except as would not reasonably be expected to have a Material
Adverse Effect, there has been no investigation by any Governmental Authority or
any proceeding, complaint, order, directive, claim, citation or notice by any
Governmental Authority or any other Person nor is any pending or to the best of
any Borrower’s or Guarantor’s knowledge threatened, with respect to any non
compliance with or violation of the requirements of any Environmental Law by any
Borrower or Guarantor and any Subsidiary of any Borrower or Guarantor or the
release, spill or discharge, threatened or actual, of any Hazardous Material or
the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials by any Borrower or Subsidiary
of Borrower or any other environmental matter involving Borrower or any
Subsidiary of Borrower.

 

(c)               Except as would not reasonably be expected to have a Material
Adverse Effect, Borrowers, Guarantors and their Subsidiaries have no material
liability (contingent or otherwise) in connection with a release, spill or
discharge, threatened or actual, of any Hazardous Materials or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.

 

(d)               Except as would not reasonably be expected to have a Material
Adverse Effect, Guarantors and their Subsidiaries have all permits required to
be obtained or filed in connection with the operations of Borrowers and
Guarantors under any Environmental Law and all of such licenses, certificates,
approvals or similar authorizations and other permits are valid and in full
force and effect.

 

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(e)               This Section 8.8 sets forth the sole representations and
warranties of Borrower with respect to Environmental Laws and Hazardous
Materials and, notwithstanding any other provision in this Agreement to the
contrary, no other representation or warranty is made in this Agreement with
respect to environmental matters.

 

8.9              Employee Benefits.

 

(a)               Except as could not reasonably be expected to have a Material
Adverse Effect, each Plan has been established, maintained, funded, operated and
administrated in compliance in all material respects with the applicable
provisions of ERISA, the Code and other Federal or State law and each Plan which
is intended to qualify under Section 401(a) of the Code has received a favorable
determination letter (or a favorable opinion letter) from the Internal Revenue
Service or is still within the remedial amendment period (as defined in
Section 401(b) of the Code) to obtain a favorable determination letter and, to
the best of each Borrower’s and Guarantor’s knowledge, nothing has occurred that
could reasonably be expected to cause the revocation of such letter or the
unavailability of reliance on such letter. Each Borrower and Guarantor and its
respective ERISA Affiliates have made all required contributions to any Plan
subject to Section 412 of the Code, and no application for a funding waiver or
an extension of any amortization period pursuant to Section 412 of the Code has
been made with respect to any such Plan.

 

(b)               Except as could not reasonably be expected to have a Material
Adverse Effect, (i) there are no pending, or to the best of each Borrower’s and
Guarantor’s knowledge, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan, and (ii) there has been no
non-exempt prohibited transaction under Section 406 of ERISA or violation of the
fiduciary responsibility rules under Section 404(a)(1) of ERISA with respect to
any Plan.

 

(c)               Except as could not reasonably be expected to have a Material
Adverse Effect, (i) no ERISA Event has occurred or is reasonably expected to
occur; (ii) the current value of the assets of each Plan (determined in
accordance with the assumptions used for funding such Plan pursuant to
Section 412 of the Code) are not exceeded by such Plan’s liabilities under
Section 4001(a)(16) of ERISA in an amount that could reasonably be expected to
have a Material Adverse Effect; (iii) no Borrower or Guarantor nor any of its
respective ERISA Affiliates have incurred nor do any of them reasonably expect
to incur any liability under Title IV of ERISA with respect to any Plan (other
than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither
Borrower nor any of its ERISA Affiliates have incurred nor do any of them
reasonably expect to incur any liability (and no event has occurred which, with
the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; (v) neither Borrower nor any of its ERISA Affiliates has engaged in a
transaction that would be subject to Section 4069 or 4212(c) of ERISA; and (vi)
no Plan is a “welfare benefit plan” (as defined in Section 3(1) of ERISA) that
provides post-termination or retiree life insurance, health or other welfare
benefits to any person, except pursuant to Section 4980B of the Code or any
other applicable law and with respect to which the recipient pays the full
premium cost of such coverage.

 

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8.10          Bank Accounts. All of the Deposit Accounts, investment accounts or
other accounts in the name of or used by any Borrower or Guarantor maintained at
any bank or other financial institution are set forth in Schedule 8.10 hereto,
subject to the right of each Borrower and Guarantor to establish new accounts in
accordance with Section 5.2 hereof.

 

8.11          Intellectual Property. Each Borrower and Guarantor owns or
licenses or otherwise has the right to use all Intellectual Property necessary
for the operation of its business as presently conducted (collectively, “IP
Rights”). On the Closing Date, no Borrower or Guarantor owns any Intellectual
Property registered, or subject to pending applications, in the United States
Patent and Trademark Office or any similar office or agency in the United
States, any State thereof, any political subdivision thereof or in any other
country, other than those described in Schedule 8.11(a) hereto and, as of the
Closing Date, has not granted any licenses with respect to any Intellectual
Property that is material to the conduct of such Borrower’s or Guarantor’s
business other than as set forth in Schedule 8.11(b) hereto. Each Borrower and
Guarantor is the sole and exclusive owner of the entire and unencumbered right,
title, and interest in and to all Intellectual Property used in the operation of
its business, or, in the case of licenses and options granted to such Borrower
or Guarantor with respect to Intellectual Property owned by other Persons, each
Borrower or Guarantor, as the case may be, has a valid and enforceable license,
option or other right, as the case may be, to use such Intellectual Property;
and except as could not reasonably be expected to have a Material Adverse
Effect, the Intellectual Property owned by each Borrower or Guarantor is valid,
subsisting, unexpired (except as the result of the expiration of patents and
copyrights at the end of their statutory term), and enforceable and has not been
abandoned or adjudged invalid or unenforceable, in whole or part. Except as
described in Schedule 8.11(c) hereto, to each Borrowers’ and Guarantor’s
knowledge, no event has occurred which could reasonably be expected to result in
after notice or passage of time or both, the revocation, suspension or
termination of Intellectual Property rights included in the Collateral, the
revocation, suspension or termination of which could reasonably be expected to
have a Material Adverse Effect. To the best of each Loan Party’s knowledge,
except as could not reasonably be expected to have a Material Adverse Effect, no
IP Rights, advertising, product, process, method, substance, part or other
material used by any Loan Party or any Subsidiary in the operation of their
respective businesses as currently conducted infringes upon any rights held by
any Person. No written claim or litigation regarding any of the IP Rights, is
pending or, to the knowledge of any Loan Party, threatened against any Loan
Party or Subsidiary. Schedule 8.11(d) hereto sets forth all of the agreements or
other arrangements of Borrowers and Guarantors pursuant to which Borrower has a
license, option, or other right to use any trademarks, logos, designs or other
intellectual property that is material to such Borrower’s or Guarantor’s
business and owned by another Person as in effect on the date hereof
(collectively, together with such agreements or other arrangements as may be
entered into by any Borrower or Guarantor after the Closing Date, collectively,
the “License Agreements” and individually, a “License Agreement”). No material
trademark, service mark, copyright or other Intellectual Property at any time
used by a Borrower which is owned by another Person, or owned by any Borrower or
Guarantor subject to any security interest, lien, collateral assignment, pledge
or other encumbrance in favor of any Person other than Agent, is affixed to any
Eligible Inventory, except (x) as set forth in any Promotional Agreement, (y) to
the extent permitted under the terms of the License Agreements listed on
Schedule 8.11(e) hereto or (z) to the extent the sale of Inventory to which such
Intellectual Property is affixed is permitted to be sold by any Borrower or
Guarantor under applicable law (including the United States Copyright Act of
1976). As of the date hereof, no Borrower or Guarantor licenses any Intellectual
Property, except pursuant to the Promotional Agreements.

 

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8.12          Subsidiaries; Capitalization; Solvency.

 

(a)               Each Borrower and Guarantor does not have any direct or
indirect Subsidiaries and is not engaged in any joint venture or partnership
except as set forth in Schedule 8.12 hereto and except as may be acquired,
formed or entered into in connection with a Permitted Acquisition or otherwise
and in accordance with Section 9.23 hereof.

 

(b)               Each Borrower and Guarantor is the record and beneficial owner
of all of the issued and outstanding shares of Capital Stock of each of the
Subsidiaries listed on Schedule 8.12 hereto as being owned by such Borrower or
Guarantor and except as described on Schedule 8.12 hereto, there are no proxies,
irrevocable or otherwise, with respect to such shares and no equity Securities
of any of the Subsidiaries are or may become required to be issued by reason of
any options, warrants, rights to subscribe to, calls or commitments of any kind
or nature and there are no contracts, commitments, understandings or
arrangements by which any Subsidiary is or may become bound to issue additional
shares of its Capital Stock or Securities convertible into or exchangeable for
such shares.

 

(c)               As of the Closing Date, the issued and outstanding shares of
Capital Stock of each Borrower and Subsidiary Guarantor are directly and
beneficially owned and held by the Persons indicated in the Perfection
Certificate, and in each case all of such shares have been duly authorized and
are fully paid and non-assessable, free and clear of all claims, liens, pledges
and encumbrances of any kind, except for liens created hereunder and under the
other Financing Agreements or as permitted by Section 9.8 hereof.

 

(d)               The Borrowers and Guarantors, taken as a whole, are Solvent
prior to, and will continue to be Solvent immediately after giving effect to,
the creation of the Obligations, the granting of the security interests in favor
of Agent contemplated hereunder and the other transactions contemplated
hereunder.

 

8.13          Labor Matters.

 

(a)               Set forth on Schedule 8.13 hereto is a list of all collective
bargaining or similar agreements between or applicable to each Borrower and
Guarantor and any union, labor organization or other bargaining agent in respect
of the employees of any Borrower or Guarantor in force on the Closing Date.

 

(b)               Except as could not reasonably be expected to have a Material
Adverse Effect, (i) there is no unfair labor practice complaint pending against
any Borrower or Guarantor or, to the best of any Borrower’s or Guarantor’s
knowledge, threatened against it, before the National Labor Relations Board, and
no grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is pending on the Closing Date against any
Borrower or Guarantor or, to best of any Borrower’s or Guarantor’s knowledge,
threatened against it, (ii) there is no strike, labor dispute, slowdown or
stoppage is pending against any Borrower or Guarantor or, to the best of any
Borrower’s or Guarantor’s knowledge, threatened against any Borrower or
Guarantor, and (iii) each Borrower and Guarantor is in compliance with all
applicable laws and orders with respect to employment (including applicable laws
regarding wage and hour requirements, immigration status, discrimination in
employment, employee health and safety, and collective bargaining).

 

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8.14          Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement, the other Financing Agreements or any other agreement with
respect to Indebtedness of any Borrower or Guarantor permitted hereunder, there
are no contractual restrictions binding on any Subsidiary of any Borrower or
Guarantor which prohibit or otherwise materially restrict (unless permitted
pursuant to Section 9.16) (a) the transfer of cash or other assets (i) between
any Borrower or Guarantor and any of its or their Subsidiaries or (ii) between
any Subsidiaries of any Borrower or Guarantor or (b) the ability of any Borrower
or Guarantor or any of its or their Subsidiaries to incur Indebtedness or grant
security interests to Agent or any Lender in the Collateral.

 

8.15          Material Contracts.  Schedule 8.15 hereto sets forth all Material
Contracts to which any Borrower or Guarantor is a party or is bound as of the
Closing Date. Borrowers and Guarantors have delivered true, correct and complete
copies of such Material Contracts to Agent on or before the Closing Date.
Borrowers and Guarantors are not in breach or in default in any material respect
of or under any Material Contract and have not received any notice of the
intention of any other party thereto to terminate any Material Contract except
as would not result in a Material Adverse Effect.

 

8.16          Credit Card Agreements. Set forth in Schedule 8.16 hereto is a
correct and complete list of all of the Credit Card Agreements existing as of
the Closing Date between or among any Borrower, Guarantor or any of its
Subsidiaries, the Credit Card Issuers and/or the Credit Card Processors. The
Credit Card Agreements constitute all of such agreements necessary for each
Borrower to operate its business as presently conducted with respect to credit
cards and debit cards and no Receivables of any Borrower arise from purchases by
customers of Inventory with credit cards or debit cards, other than those which
are issued by Credit Card Issuers with whom such Borrower has entered into one
of the Credit Card Agreements set forth on Schedule 8.16 hereto or with whom
such Borrower has entered into a Credit Card Agreement in accordance with
Section 9.18 hereof. Each of the Credit Card Agreements constitutes the legal,
valid and binding obligations of the Borrower that is party thereto and to the
best of each Borrower’s and Guarantor’s knowledge, the other parties thereto,
enforceable in accordance with their respective terms and is in full force and
effect. Except as could not reasonably be expected to (a) have a Material
Adverse Effect or (b) result in the cessation of the transfer of payments under
any Credit Card Agreement to Blocked Accounts as required under this Agreement,
no default or event of default, or act, condition or event which after notice or
passage of time or both, would constitute a material default or a material event
of default under any of the Credit Card Agreements has occurred and is
continuing. The applicable Borrower and the other parties thereto have complied
with all of the terms and conditions of the Credit Card Agreements to the extent
necessary for such Borrower to be entitled to receive all payments thereunder
which constitute proceeds of Eligible Credit Card Receivables. As of the Closing
Date, Borrowers have delivered, or caused to be delivered to Agent, true,
correct and complete copies of all of the Credit Card Agreements.

 

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8.17          Investment Company Status. No Borrower or Guarantor nor any of
their Subsidiaries is an “investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940.

 

8.18          Accuracy and Completeness of Information. All information
furnished by or on behalf of any Borrower or Guarantor in writing to Agent or
any Lender in connection with this Agreement or any of the other Financing
Agreements or any transaction, when taken as a whole, contemplated hereby or
thereby, including all information on the Perfection Certificate is true and
correct in all material respects on the date as of which such information is
dated or certified and does not omit any material fact necessary in order to
make such information not materially misleading. Since the date of the most
recently delivered audited financial statements, described in Section 8.3, no
event or circumstance has occurred which has had or could reasonably be expected
to have a Material Adverse Effect, which has not been fully and accurately
disclosed to Agent in writing prior to the date hereof.

 

8.19          Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Agent and Lenders on the date of each additional
borrowing or other credit accommodation hereunder and shall be conclusively
presumed to have been relied on by Agent and Lenders regardless of any
investigation made or information possessed by Agent or any Lender. The
representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which any Borrower or
Guarantor shall now or hereafter give, or cause to be given, to Agent or any
Lender.

 

8.20          [Reserved].

 

8.21          Anti-Corruption Laws and Sanctions. Each Borrower or Guarantor,
their respective Subsidiaries and their respective officers and directors and,
to the knowledge of such Borrower or Guarantor, its employees and agents, are in
compliance with Anti-Corruption Laws and applicable Sanctions in all material
respects and are not knowingly engaged in any activity that would reasonably be
expected to result in any Borrower or Guarantor being designated as a Sanctioned
Person. None of (a) any Borrower or Guarantor, any Subsidiary or any of their
respective directors or officers, or (b) to the knowledge of any such Borrower
or Guarantor or Subsidiary, any employee or agent of such Borrower or Guarantor
or any Subsidiary that will act in any capacity in connection with or benefit
from the Term Loan established hereby, is a Sanctioned Person. The Term Loan,
use of proceeds or other transaction contemplated by this Agreement or the other
Financing Agreements will not violate Anti-Corruption Laws or applicable
Sanctions.

 

8.22          Regulatory Compliance.

 

(a)               Each Borrower and Subsidiary Guarantor possesses all licenses,
permits and registrations that are required to be obtained for the operation of
its business subject to renewal in the ordinary course of business, except where
the failure to possess such licenses, permits and registrations would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. All such licenses, permits and registrations are in full force
and effect, and there are no actions pending or threatened in writing or, to
each Borrower’s or Subsidiary Guarantor’s knowledge, otherwise threatened by any
Governmental Authority that seek the revocation, cancellation, suspension or
adverse modification thereof, except as would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. Each
Borrower or Subsidiary Guarantor is in compliance with all such licenses,
permits and registrations, except for such non-compliance as would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.

 

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(b)               Each Borrower and Subsidiary Guarantor is in compliance with,
and at all times during the last three (3) years has complied in all respects
with, the Federal Food, Drug and Cosmetic Act (“FDCA”) and all regulations
promulgated thereunder and with all other laws enforced by the Food and Drug
Administration (“FDA”), except for such non-compliance as would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect. Each Borrower and Subsidiary Guarantor has in effect Standard Operating
Procedures governing, for its private label products, recalls, product
ingredient safety reviews and regulatory filings, product claims and claim
substantiation, adverse event reporting and complaint handlings. To each
Borrower’s and Subsidiary Guarantor’s knowledge, during the three (3) years
prior to the Closing Date, products sold by such Borrower or Subsidiary
Guarantor were not adulterated or misbranded as defined in the applicable
provisions of the FDCA and relevant regulations; except to the extent that the
liability to the Borrowers and Subsidiary Guarantors that could reasonably be
expected to result from such adulterations or misbrandings would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.

 

(c)               No Borrower or Subsidiary Guarantor has received any written
or oral notice from the FDA during the three (3) years prior to the Closing Date
of any material violation or alleged material violation of the FDCA, except to
the extent that the liability to the Borrowers and Subsidiary Guarantors that
could reasonably be expected to result from such violations and alleged
violations would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect. No Borrower or Subsidiary Guarantor has received any
written or oral notice during the last three (3) years that the products it has
sold have been the subject of any warning letter, notice of violation, seizure,
recall, injunction, regulatory enforcement action, or criminal action issued,
initiated, threatened in writing, or to any Borrower’s or Subsidiary Guarantor’s
knowledge, otherwise threatened by the FDA or any comparable Governmental
Authority, except to the extent that the liability to the Borrowers and
Subsidiary Guarantors that could reasonably be expected to result from the
foregoing would not, in the aggregate, reasonably be expected to have a Material
Adverse Effect. As of the Closing Date, no Borrower or Subsidiary Guarantor has
any open product recalls; except to the extent that the liability to the
Borrowers and Subsidiary Guarantors that could reasonably be expected to result
from such open product recalls would not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.

 

(d)               In the three (3) years prior to the Closing Date, each
Borrower and Subsidiary Guarantor has been in compliance with the Federal Trade
Commission Act with respect to the advertising and promotion, product
descriptions, and claims for the products it sells, except to the extent that
such non-compliance would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. No Borrower or Subsidiary
Guarantor has received written notice of and, to each Borrower’s and Subsidiary
Guarantor’s knowledge, there is no written claim filed by the Federal Trade
Commission against such Borrower or Subsidiary Guarantor, alleging any violation
of any of the laws implemented by it, except to the extent that such violations
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.

 

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(e)               To each Borrower’s or Subsidiary Guarantor’s knowledge, during
the past three (3) years, all products sold by such Borrower or Subsidiary
Guarantor were manufactured in compliance with, as applicable, FDA current Good
Manufacturing Practice regulations set forth at 21 C.F.R. Parts 110 and 111 and
FDA Hazard Analysis and Critical Control Point systems and acidified food
process requirements, where relevant, except for such non-compliance that would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.

 

SECTION 9.    AFFIRMATIVE AND NEGATIVE COVENANTS

 

Until the Obligations have been Paid in Full, each Borrower and each Guarantor
on behalf of themselves and their Subsidiaries covenants and agrees, jointly and
severally with all of the other Borrowers and Guarantors and the Lenders, to the
covenants contained in this Section 9; provided that, notwithstanding anything
to the contrary in this Section 9, all references to the defined terms
“Subsidiaries” or “Subsidiary” in this Section 9 shall exclude any Foreign
Subsidiary.

 

9.1              Maintenance of Existence.

 

(a)               Except as permitted by Section 9.6, each Borrower and
Guarantor shall at all times preserve, renew and keep in full force and effect
its corporate existence and material rights and franchises with respect thereto
and maintain in full force and effect all material governmental licenses,
Intellectual Property, approvals, authorizations, leases, contracts and permits
necessary to carry on the business as presently conducted, except where the
failure to so preserve, renew or keep in full force and effect would not result
in a Material Adverse Effect.

 

(b)               No Borrower or Guarantor shall change its name, type of
organization, jurisdiction of organization or other legal structure unless each
of the following conditions is satisfied: (i) Agent shall have received not less
than thirty (30) days prior written notice from Administrative Borrower of such
proposed change (or such shorter notice period as the Agent may agree to in its
reasonable discretion), which notice shall accurately set forth the new name;
and (ii) Agent shall have received a copy of the amendment to the certificate of
formation of such Borrower or Guarantor providing for such change certified by
the Secretary of State of the jurisdiction of incorporation or organization of
such Borrower or Guarantor as soon as it is available.

 

(c)               No Borrower or Guarantor shall change its chief executive
office or its mailing address or organizational identification number (or if it
does not have one, shall not acquire one) unless Agent shall have received not
less than thirty (30) days’ prior written notice from Administrative Borrower of
such proposed change, which notice shall set forth such information with respect
thereto as Agent may require and Agent shall have received such agreements as
Agent may reasonably require in connection therewith.

 

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9.2              New Collateral Locations. Each Borrower and Guarantor may only
open new locations within the United States. Borrower or Guarantor shall
(a) give Agent ten (10) days prior written notice of the intended opening of any
such new location at which Collateral will be located (other than with respect
to the opening of a retail store location for which no notice shall be required)
and (b) execute and deliver, or cause to be executed and delivered, to Agent
such agreements, documents, and instruments as Agent may deem reasonably
necessary or desirable to protect its interests in the Collateral held at such
location; except, that, if (i) such new location is a retail store location, or
(ii) the fair market value of all of the Collateral located at such location is
less than $250,000 (provided that the aggregate Value of all Collateral located
at such locations shall not exceed $2,000,000), no Collateral Access Agreement
will be required by Agent.

 

9.3              Compliance with Laws, Regulations, Etc.

 

(a)               Except as could not reasonably be expected to cause a Material
Adverse Effect, each Borrower and Guarantor shall, and shall cause any
Subsidiary to, at all times, comply in all material respects with all laws,
rules, regulations, licenses, approvals, orders and other permits applicable to
it and duly observe all applicable requirements of any foreign, Federal, State
or local Governmental Authority, the Code, the Fair Labor Standards Act of 1938,
as amended, all Federal, State and local statutes, regulations, rules and orders
pertaining to sales of consumer goods (including the Federal Trade Commission
Act of 1914, as amended, and all regulations, rules and orders promulgated
thereunder, and the Federal Food, Drug, and Cosmetic Act, as amended, and all
regulations, rules, guidance and orders promulgated thereunder) and all
statutes, rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including all of the
Environmental Laws.

 

(b)               Administrative Borrower shall give written notice to Agent
promptly upon any Borrower’s or Guarantor’s receipt of any notice of the
following, except if the condition giving rise to such notice could not
reasonably be expected to have a Material Adverse Effect (collectively,
“Environmental Events”), (i) the occurrence of any event involving the
unpermitted release, spill or discharge, threatened or actual, of any Hazardous
Material by any Borrower or Guarantor or (ii) any investigation, proceeding,
complaint, order, directive, claims, citation or notice with respect to: (A) any
non-compliance with or violation of any Environmental Law by any Borrower or
Guarantor or (B) the release, spill or discharge, threatened or actual, of any
Hazardous Material by any Borrower or Guarantor (as applicable) other than in
the ordinary course of business and other than as permitted under any applicable
Environmental Law. Copies of all non-privileged environmental surveys, audits,
assessments, feasibility studies and results of remedial investigations
conducted in connection with an Environmental Event shall be promptly furnished,
or caused to be furnished, by such Borrower or Guarantor to Agent. Each Borrower
and Guarantor shall take prompt action to respond to any such material
non-compliance with any of the Environmental Events and shall regularly report
to Agent on its response.

 

(c)               Without limiting the generality of the foregoing, whenever
Agent reasonably determines that there is material non-compliance, or any
condition which requires any action by or on behalf of any Borrower or Guarantor
in order to avoid any non compliance, with any Environmental Law except with
respect to such non-compliance that could not reasonably be expected to have a
Material Adverse Effect, Borrowers shall, at Agent’s reasonable request and
Borrowers’ expense: (i) cause an independent environmental consultant reasonably
acceptable to Agent to conduct such tests of the site where non-compliance or
alleged non compliance with such Environmental Laws (including sampling and
analysis, if necessary) has occurred as to such non-compliance and prepare and
deliver to Agent a report as to such non-compliance setting forth the results of
such tests, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof and (ii) provide to
Agent a supplemental report of such consultant whenever the scope of such
non-compliance, or such Borrower’s or Guarantor’s response thereto or the
estimated costs thereof, shall change in any material respect.

 

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(d)               Each Borrower and Guarantor shall indemnify and hold harmless
Agent and Lenders (other than Affiliated Lenders) and their respective
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including reasonable attorneys’ fees and expenses) directly
or indirectly arising out of or attributable to the use, generation,
manufacture, reproduction, storage, release, threatened release, spill,
discharge, disposal or presence of a Hazardous Material on any property of a
Borrower or resulting from a Borrower’s conduct, including the costs of any
required or necessary repair, cleanup or other remedial work with respect to any
property of any Borrower or Guarantor and the preparation and implementation of
any closure, remedial or other required plans relating to such Hazardous
Materials except to the extent such losses, claims, damages, liabilities, costs,
and expenses arise out of or are attributable to the gross negligence, bad faith
or willful misconduct of Agent or any Lender (other than Affiliated Lenders).
All indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination of this Agreement.

 

9.4              Payment of Taxes and Claims. Each Borrower and Guarantor shall,
and shall cause any Subsidiary to, duly pay and discharge all Taxes,
assessments, contributions and governmental charges upon or against it or its
properties or assets, except for Taxes (a) the validity or amount of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower, Guarantor or such Subsidiary, as the case may be,
and with respect to which adequate reserves have been set aside on its books or
(b) the non-payment of which could not reasonably be expected to have a Material
Adverse Effect.

 

9.5              Insurance. Each Borrower and Guarantor shall, and shall cause
any Subsidiary to, at all times, maintain with financially sound and reputable
insurers insurance with respect to the Collateral against loss or damage and all
other insurance of the kinds and in the amounts customarily insured against or
carried by companies of established reputation engaged in the same or similar
businesses and similarly situated. Such policies of insurance shall be
reasonably satisfactory to Agent as to form, amount and insurer. Borrowers and
Guarantors shall furnish certificates, policies or endorsements to Agent as
Agent shall reasonably require as proof of such insurance, and, if any Borrower
or Guarantor fails to do so, in the case of endorsements, subject to Section
9.29, Agent is authorized, but not required, to obtain such insurance at the
expense of Borrowers, provided, however, that by purchasing such insurance,
Agent shall not be deemed to have waived any Default arising from any Borrower’s
or Guarantor’s failure to maintain such insurance or pay any premiums therefor.
All such insurance policies shall provide for at least thirty (30) days prior
written notice to Agent of any cancellation, amendment or reduction of coverage
and that Agent may act as attorney for each Borrower and Guarantor in obtaining,
and at any time an Event of Default has occurred and is continuing, adjusting,
settling, amending and canceling, such insurance. Borrowers and Guarantors shall
cause Agent to be named as a loss payee and/or an additional insured, as
applicable (but without any liability for any premiums) under all casualty and
property insurance policies (but not any business interruption insurance
policies) and, subject to Section 9.29, Borrowers and Guarantors shall obtain
non-contributory lender’s loss payable endorsements to all property and casualty
insurance policies in form and substance reasonably satisfactory to Agent, which
provide that all proceeds thereunder with respect to any Collateral shall be
payable to Agent, and that no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such policy. Except
(a) upon the occurrence and during the continuance of an Event of Default or (b)
during a Compliance Period, to the extent the insurance proceeds relate to any
Collateral which at the time of loss was included in the calculation of the
Borrowing Base or Borrowing Base II, insurance proceeds may be applied by
Borrower in its discretion to the repair or replacement of any lost or damaged
Collateral that gave rise to such insurance proceeds so long as (i) in the
context of replacing lost or damaged Collateral, the insurance proceeds are used
to replace such lost or damaged Collateral with like Collateral, and (ii) such
repair or replacement is completed within one hundred eighty (180) days of the
receipt of insurance proceeds, or if Borrower commits in writing to undertake
such repair or replacement within such one hundred eighty (180) day period,
within two hundred seventy (270) days of the date of the receipt of insurance
proceeds. Such lender’s loss payable endorsements shall specify that the
proceeds of such insurance shall be payable to Agent, for itself and the ratable
benefit of the Secured Parties and Lenders, as its interests may appear and
further specify that Agent shall be paid regardless of any act or omission by
any Borrower, Guarantor or any of its or their Affiliates. Without limiting any
other rights of Agent or Lenders, and subject to Borrowers’ right to otherwise
use insurance proceeds as provided in this Section 9.5, any insurance proceeds
received by Agent at any time may be applied to payment of the Obligations,
whether or not then due, in any order and in such manner as Agent may determine.

 

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9.6              Financial Statements and Other Information.

 

(a)               Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, keep proper books and records in which true and complete entries
shall be made of all dealings or transactions of or in relation to the
Collateral and the business of such Borrower, Guarantor and its Subsidiaries in
accordance with GAAP. Borrowers and Guarantors shall promptly furnish to Agent
and Lenders all such financial and other information as Agent shall reasonably
request relating to the Collateral and the assets, business and operations of
Borrowers and Guarantors, and Borrower shall notify the auditors and accountants
of Borrowers and Guarantors that Agent is authorized to obtain such information
directly from them. Without limiting the foregoing, Administrative Borrower
shall furnish or cause to be furnished to Agent, the following:

 

(i)                 within forty-five (45) days after the end of each fiscal
month, monthly unaudited consolidated financial statements and unaudited
consolidating financial statements (including in each case balance sheets,
statements of income and loss, and statements of cash flow), all in reasonable
detail, fairly presenting in all material respects the financial position and
the results of the operations of Parent and its Subsidiaries as of the end of
and through such fiscal month, certified to be correct in all material respects
by the chief financial officer, treasurer, or other similar officer of
Administrative Borrower (or if no such officer has been appointed or elected,
the sole member of Administrative Borrower), subject to normal year-end
adjustments and accompanied by a compliance certificate substantially in the
form of Exhibit C hereto, along with a schedule in form reasonably satisfactory
to Agent of the calculations used in determining, as of the end of such month,
whether Borrowers and Guarantors were in compliance with the covenants set forth
in Section 9.17 of this Agreement (to the extent applicable) for such month; and

 

 

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(ii)              within ninety (90) days after the end of each fiscal year,
audited consolidated financial statements and unaudited consolidating financial
statements of Parent and its Subsidiaries (including in each case balance
sheets, statements of income and loss, statements of cash flow and statements of
shareholders’ equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting in all material respects the financial position and
the results of the operations of Parent and its Subsidiaries as of the end of
and for such fiscal year, together with the unqualified opinion of independent
certified public accountants with respect to the audited consolidated financial
statements, which accountants shall be an independent accounting firm selected
by Administrative Borrower and reasonably acceptable to Agent (provided that
Deloitte is deemed to be reasonably acceptable to Agent), that such audited
consolidated financial statements have been prepared in accordance with GAAP,
and present fairly in all material respects the results of operations and
financial condition of Parent and its Subsidiaries as of the end of and for the
fiscal year then ended, and accompanied by a compliance certificate
substantially in the form of Exhibit C hereto, and

 

(iii)            (A) at such time as available, but in no event later than
thirty (30) days after the end of each fiscal year (commencing with the fiscal
year of Borrowers ending December 31, 2019), projected consolidated financial
statements (including in each case, forecasted balance sheets and statements of
income and loss, statements of cash flow, and projected Borrowing Base
availability and Borrowing Base II availability) of Parent and its Subsidiaries
for the next fiscal year, all in reasonable detail, and in a format consistent
with the projections delivered by Borrowers to Agent prior to the date hereof,
together with such supporting information as Agent may reasonably request. Such
projected financial statements shall be prepared on a monthly basis for the next
succeeding year. Such projections shall represent the reasonable best estimate
by Administrative Borrower of the future financial performance of Parent and its
Subsidiaries for the periods set forth therein and shall have been prepared on
the basis of the assumptions set forth therein which Administrative Borrower
believes is fair and reasonable as of the date of preparation in light of
current and reasonably foreseeable business conditions (it being understood that
actual results may differ from those set forth in such projected financial
statements), and

 

(B)              at such time as the aggregate amount of consideration paid by
Borrowers and Guarantors in respect of Permitted Acquisitions equals or exceeds
$7,500,000 since the date that the last projections were received by Agent
pursuant to Section 9.6(a)(iii)(A) hereof or this Section 9.6(a)(iii)(B), or in
conjunction with a Material Permitted Acquisition the aggregate consideration to
be paid in respect of which exceeds $5,000,000, Administrative Borrower shall
deliver updated (from the date of the last projections received) projected
financial statements, in form and substance as required in
Section 9.6(a)(iii)(A) hereof.

 

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(b)               Administrative Borrower shall, and shall cause the other
Borrower(s) to notify Administrative Borrower so that it may, promptly notify
Agent in writing of the details of (i) any loss, damage, investigation, action,
suit, proceeding or claim relating to Collateral having a value of more than
$1,000,000 or which if adversely determined would result in a Material Adverse
Effect, (ii) any Material Contract being terminated or materially amended or any
new Material Contract entered into (in which event Administrative Borrower shall
provide Agent with a copy of such Material Contract to the extent permitted by
any applicable confidentiality provisions contained in such Material Contract,
provided, that, Borrowers shall use commercially reasonable efforts to get any
appropriate consent necessary to provide Agent with such a copy), (iii) any
order, judgment or decree in excess of $1,000,000 shall have been entered
against any Borrower or Guarantor any of its or their properties or assets,
(iv) any notification of a material violation of laws or regulations received by
any Borrower or Guarantor from a Governmental Authority, (v) any ERISA Event
that could be reasonably expected to have a Material Adverse Effect, and
(vi) the occurrence of any Default or Event of Default.

 

(c)               Promptly after the sending or filing thereof, Administrative
Borrower shall send to Agent copies of (i) all reports and registration
statements which Ultimate Parent or any of its Subsidiaries files with the
Securities Exchange Commission (except to the extent such reports or
registration statements are publicly available via a website maintained by the
Securities and Exchange Commission), any national or foreign securities exchange
or the National Association of Securities Dealers, Inc., and such other reports
as Agent may hereafter specifically identify to Administrative Borrower that
Agent will require be provided to Agent, (ii) all press releases and (iii) all
other statements concerning material changes or developments in the material
business of a Borrower or Guarantor made available by any Borrower or Guarantor
to the public.

 

(d)               Administrative Borrower shall furnish or cause to be furnished
to Agent such budgets, forecasts, projections and other information respecting
the Collateral and the business of Borrowers and Guarantors, as Agent may, from
time to time, reasonably request. Subject to Section 13.5, Agent is hereby
authorized to deliver a copy of any financial statement or any other information
relating to the business of Borrowers and Guarantors to any court or other
Governmental Authority or to any Lender or Participant or prospective Lender or
Participant or any Affiliate of any Lender or Participant. Each Borrower and
Guarantor hereby irrevocably authorizes and directs all accountants or auditors
to deliver to Agent, at Borrowers’ expense and without affecting any
confidentiality obligations of such accountants and auditors to Persons other
than Agent, copies of the financial statements of any Borrower and Guarantor and
any reports or management letters prepared by such accountants or auditors on
behalf of any Borrower or Guarantor and to disclose to Agent and Lenders such
information as they may have regarding the business of any Borrower and
Guarantor. Any documents, schedules, invoices or other papers delivered to Agent
or any Lender may be destroyed or otherwise disposed of by Agent or such Lender
one (1) year after the same are delivered to Agent or such Lender, except as
otherwise designated by Administrative Borrower to Agent or such Lender in
writing.

 

(e)               Administrative Borrower shall furnish to Agent all material
notices or demands in connection with Indebtedness incurred pursuant to
Section 9.9(e), Section 9.9(g), Section 9.9(i) and Section 9.9(j) and the loans
and advances made pursuant to Section 9.10(i), in each case either received by
any Borrower or Guarantor or on its behalf promptly after the receipt thereof,
or sent by any Borrower or Guarantor or on its behalf concurrently with the
sending thereof, as the case may be.

 

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(f)                Administrative Borrower shall furnish to Agent, promptly, but
in any event within three (3) Business Days (or one (1) Business Day with
respect to notices pursuant to clause (ii) hereof) after the furnishing, receipt
or execution thereof, copies of (i) any amendment, waiver, consent or other
written modification of the ABL Loan Documents (other than immaterial amendments
to ABL Loan Documents other than the ABL Credit Agreement), (ii) any notice of
default or any notice related to the exercise of remedies under the ABL Loan
Documents, and (iii) any other material notice, certificate or other information
or document provided to, or received from, the ABL Agent or the ABL Lenders;
provided, that this clause (f) shall not apply to the Fee Letter or any other
documents and information relating to fees under the ABL Loan Documents (and
Administrative Borrower may make redactions of such fees in its reasonable
discretion).

 

(g)               Administrative Borrower shall furnish to Agent substantially
concurrently with any delivery thereof to the ABL Agent, each ABL Borrowing Base
Certificate and supporting information in connection therewith and any other
additional reports related thereto that are delivered to the ABL Agent.

 

(h)               Administrative Borrower shall furnish promptly following any
request therefor, (i) such other information regarding the operations, material
changes in ownership of its Capital Stock, business affairs and financial
condition of any Borrower or Guarantor, or compliance with the terms of this
Agreement, as the Agent may reasonably request, and (ii) information and
documentation reasonably requested by the Agent or any Lender for purposes of
compliance with applicable “know your customer” and anti-money laundering rules
and regulations, including the USA PATRIOT Act.

 

(i)                 Administrative Borrower shall furnish to Agent copies of (i)
any franchise agreements not previously delivered to Agent prior to any related
Franchise Receivable being included in either Borrowing Base or Borrowing Base
II and (ii) any material amendments or modifications to any franchise agreement
to which any Franchise Receivables included in the either Borrowing Base or
Borrowing Base II are attributable.

 

9.7              Sale of Assets, Consolidation, Merger, Dissolution, Etc.
Borrowers and Guarantors shall not and shall not permit any Subsidiary to,
directly or indirectly, (a) merge into or with or consolidate with any other
Person or permit any other Person to merge into or with or consolidate with it;
provided, however, upon prior written notice to Agent:

 

(i)                 a Subsidiary (other than a Borrower) may (A) merge into or
with or consolidate with another Subsidiary or (B) dissolve or liquidate if
prior to or concurrent with such dissolution or liquidation the assets of such
Subsidiary are transferred to one or more other Subsidiaries;

 

(ii)              [reserved];

 

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(iii)            (w) a Subsidiary may merge into or with or consolidate with a
Borrower or Guarantor (other than Parent), (x) a Borrower may merge into or with
or consolidate with another Borrower, (y) a Subsidiary may dissolve or liquidate
if prior to or concurrent with such dissolution or liquidation the assets of
such Subsidiary are transferred to one or more Borrowers or Guarantors (other
than Parent) and (z) a Borrower may dissolve or liquidate if prior to or
concurrent with such dissolution or liquidation the assets of such Borrower are
transferred to one or more other Borrowers, in each case, so long as (A) other
than with respect to clauses (y) or (z) above, a Borrower (in the case of any
such event involving a Borrower) or Guarantor (other than Parent) is the
surviving entity with respect thereto and such Borrower or Guarantor has
otherwise complied with Section 9.1(b) of this Agreement (if applicable) and all
other terms of this Agreement, (B) no Default or Event of Default then exists or
would occur as a result thereof, (C) no liens, other than those permitted under
the terms of this Agreement or the other Financing Agreement with regard to any
Borrower or Guarantor, on the assets of such Subsidiary then exist, and (D) such
Borrower or Guarantor would not, as a result of such transaction and upon
consummation thereof, be liable for any Indebtedness or other obligations of
such Subsidiary, other than Indebtedness or other obligations which are
permitted under the terms of this Agreement and the other Financing Agreements
with regard to a Borrower or Guarantor; and

 

(iv)             a Guarantor or Borrower (x) may merge into or with or
consolidate with a Borrower, or (y) dissolve or liquidate if prior to or
concurrent with such dissolution or liquidation the assets of such Guarantor or
Borrower are transferred to one or more other Borrowers, in each case, so long
as (A) other than with respect to clause (y) above, a Borrower is the surviving
entity with respect thereto and continues to be an organization of the type,
domiciled in the state and bearing the same company name as existed prior to
such merger or consolidation, (B) no Default or Event of Default then exists or
would occur, (C) no liens, other than those permitted under the terms of this
Agreement with regard to such surviving Borrower, on the assets of such other
Borrower or Guarantor then exist, and (D) such surviving Borrower would not, as
a result of such transaction, be liable for any Indebtedness or other
obligations of such Guarantor or other Borrower, other than Indebtedness or
other obligations which are permitted under the terms of this Agreement with
regard to such surviving Borrower.

 

(b)               sell, issue, assign, lease, license, transfer, abandon or
otherwise dispose of any Capital Stock or any of its assets to any other Person
(whether by Division or otherwise) (or agree to do any of the foregoing unless
the terms of such agreement provide that: (i) Agent’s written consent is a
condition to consummation of the prohibited action, or (ii) Payment in Full of
the Obligations and termination of this Agreement is a condition to consummation
of the prohibited action), except for:

 

(A)             sales of Inventory in the ordinary course of business,

 

(B)              returns and exchanges of Inventory to vendors in the ordinary
course of business of a Borrower on terms and conditions consistent with the
current or prior practices of such Borrower;

 

(C)              the sale or other disposition of assets (other than Collateral
and other than assets subject to clause (D) of this Section below) by a Borrower
or Guarantor or any Subsidiary in the ordinary course of its business that are
no longer necessary or required, worn out, non-core or obsolete, in the conduct
of such Borrower’s or Guarantor’s business;

 

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(D)             sales or other dispositions by any Borrower or Guarantor or any
Subsidiary of assets in connection with the closing or sale of a retail store
location (the closure of a store is not in and of itself the disposition of
assets), warehouse, distribution center or corporate office of such Borrower,
Guarantor or Subsidiary in the ordinary course of business of such Borrower,
Guarantor or Subsidiary, which sale or disposition consists of leasehold
interests in the premises of such store or distribution center, the Equipment
and fixtures located at such premises and the books and records relating
exclusively and directly to the operations of such store or distribution center;
provided, that, as to each and all such sales and closings, (1) Agent shall have
received written notice of such sale or closing in accordance with
Section 7.1(a) hereof, (2) after giving effect thereto, no Default or Event of
Default shall have occurred and be continuing, (3) such sale shall be on
commercially reasonable prices and terms in a bona fide arm’s length
transaction, (4) all Net Proceeds thereof shall be subject to Section 2.2, and
(5) in connection with the closure of any retail store locations pursuant to a
plan where the aggregate Value of Inventory in all such stores is greater than
$10,000,000, the Loan Parties shall solicit, on a competitive basis, reasonably
detailed proposals from potential Liquidation Agents and the Loan Parties shall
retain an independent, nationally recognized, professional retail inventory
liquidation firm that provides full liquidation services reasonably acceptable
to the Agent (the “Liquidation Agent”) (which for the avoidance of doubt, shall
be subject to maintenance of “Chinese walls” between any Affiliate of the Agent
submitting such proposal as a potential Liquidation Agent and the Agent),

 

(E)              in addition to the dispositions permitted in subclause (D)
above, the sale or other disposition of Equipment (including worn-out, non-core
or obsolete Equipment or Equipment no longer used or useful in the business of
such Borrower or Guarantor) so long as the value of such Equipment sold in any
fiscal year is equal to or less than the value of all Equipment acquired in such
year,

 

(F)              the grant by any Borrower or Guarantor after the date hereof of
a non-exclusive or exclusive license to any Person for the use of commercially
reasonable terms of Intellectual Property in the ordinary course of business, so
long as no Event of Default has occurred and is continuing at the time of the
execution and delivery of the subject license or sublicense; provided, however,
(1) any such licenses or sublicenses, if exclusive, are for commercially
reasonable periods of time and have commercially reasonable geographical
limitations, (2) if any such license or sublicense is for use within the United
States or in any territory or possession thereof, then, after giving effect to
such license, such Borrower or Guarantor must retain sufficient rights to use
its Intellectual Property as to enable such Borrower or Guarantor to continue to
conduct the material aspects of its business in the ordinary course, (3) any
such licenses or sublicenses are on commercially reasonable terms to such
Borrower or Guarantor pursuant to bona fide arm’s length transactions, (4) any
such licenses or sublicenses do not impair in any material respect the value (to
Borrower, Agent or Lenders) of the Intellectual Property or the Collateral as a
whole or the marketability of the Intellectual Property or the Collateral taken
as a whole, and (5) any such licenses or sublicenses do not otherwise materially
and adversely affect the potential realization by Agent and Lenders of the value
of the Intellectual Property or the Collateral taken as a whole when exercising
their remedies under the terms of this Agreement and applicable law,

 

(G)             sales, transfers and dispositions of assets of (1) a Borrower to
another Borrower, or (2) by a Guarantor to a Borrower or another Guarantor
(other than Parent (other than assets the Parent is permitted to own pursuant to
Section 9.15(b))), provided, that, in each case such transfer is otherwise
consummated (and the lien and security interest of Agent and Secured Parties
continues in such assets) in accordance with the terms of this Agreement and the
other Financing Agreements,

 

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(H)             the issuance and sale by any Borrower or Guarantor of Capital
Stock of such Borrower or Guarantor after the date hereof; provided, that,
(1) Agent shall have received not less than ten (10) Business Days’ prior
written notice of such issuance and sale by such Borrower, Guarantor or
Subsidiary, which notice shall specify whether such shares are to be sold
pursuant to a public offering or if not a public offering, then the parties to
whom such shares are to be sold, the terms of such sale, the total amount which
it is anticipated will be realized from the issuance and sale of such stock and
the net cash proceeds which it is anticipated will be received by such Borrower
or Guarantor from such sale, (2) such Borrower or Guarantor shall not be
required to pay any cash dividends or repurchase or redeem such Capital Stock or
make any other payments in respect thereof, (3) the terms of such Capital Stock,
and the terms and conditions of the purchase and sale thereof, shall not include
any terms that include any limitation on the right of any Borrower to request or
receive the Term Loan or the right of any Borrower and Guarantor to amend or
modify any of the terms and conditions of this Agreement or any of the other
Financing Agreements or otherwise in any way relate to or affect the
arrangements of Borrowers and Guarantors with Agent and Lenders (other than
Affiliated Lenders) or are more restrictive or burdensome to any Borrower or
Guarantor than the terms of any Capital Stock in effect on the date hereof,
(4) except as Agent may otherwise agree in writing, upon the occurrence and
continuance of an Event of Default or during a Compliance Period, all of the
proceeds of the sale and issuance of such Capital Stock shall be paid to Agent
for application to the Obligations in accordance with Section 6.4(a) or at
Agent’s option, to be held as cash collateral for the Obligations provided,
that, in no event shall any Borrower or Guarantor issue any Capital Stock which
would result in a Change of Control or other Event of Default; provided,
further, that conditions (1) through (3) above shall not apply to issuances and
sales of Capital Stock by any Borrower or Guarantor to any other Borrower or
Guarantor (so long as such issued Capital Stock is pledged as Collateral),

 

(I)                [Reserved]

 

(J)                the abandonment, non-renewal, failure to maintain,
cancellation or sale, transfer or other disposition of Intellectual Property
which is not material to the conduct of any Borrower’s or Guarantor’s business
and which has no material economic value, and

 

(K)             leases and subleases and other agreements related to Real
Property in the ordinary course of business,

 

(L)              the transactions permitted under Sections 9.9, 9.10(h), 9.12
and 9.19 hereof,

 

(M)            dispositions of cash and Cash Equivalents subject to compliance
with Section 9.10(b) hereof,

 

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(N)             the issuance of Capital Stock in connection with the Closing
Date Equity Contribution or the Post-Closing Equity Contribution,

 

(O)             [Reserved], and

 

(P)              in addition to the sales and dispositions permitted in
clauses (A) through (O) of this Section 9.7(b), the sale or other disposition of
assets, including, without limitation, any dispositions relating to store
closings, with an aggregate fair market value not in excess of $20,000,000 for
all such assets disposed of in any fiscal year of Borrowers or as Agent may
otherwise agree; provided that for the avoidance of doubt, Net Proceeds received
under this clause (N) shall be subject to Section 2.2.

 

provided that no sales or dispositions pursuant to this Section 9.7(b) other
than as permitted pursuant to clauses (F), (G) or (J) shall include any
Intellectual Property of the Loan Parties.

 

In connection with any disposition set forth in Section 9.7(b) hereof, Agent
shall (and is hereby irrevocably authorized by Lenders to) upon the request of
Administrative Borrower and at Borrowers’ expense, (1) upon the sale or other
disposition of any Collateral permitted under Section 9.7(b) hereof, release
such Collateral from the lien of Agent hereunder, and (2) in connection with the
transactions described in clause (1), deliver to Administrative Borrower a UCC-3
partial release (or other appropriate instrument, as the case may be, including
without limitation any terminations of intellectual property security
agreements) in form and substance reasonably satisfactory to Agent, as may be
necessary to evidence the release of the lien in favor of Agent upon any
Collateral to the extent such Collateral is sold, transferred or otherwise
disposed of in accordance with Section 9.7(b) hereof; provided, that,
(a) Administrative Borrower certifies to Agent and Lenders in writing that such
sale, disposition or other transaction is being consummated in accordance with
the terms of this Agreement (and Agent and Lenders may rely conclusively upon
such certificate without any further inquiry) and such release shall only be
effective upon the consummation of such transaction, sale or other disposition,
(b) Agent shall not be required to execute any such document on terms which, in
Agent’s opinion, would expose Agent to liability to any third Person or create
any obligations or entail any consequence to Agent or Lenders other than the
release of such obligor or such lien without recourse or warranty, and (c) such
release shall not in any manner discharge, affect or impair the Obligations of
any Person not released or any lien upon (or obligations of obligors in respect
of) the Collateral retained by such Borrower or Guarantor;

 

(c)               wind up, liquidate or dissolve, except (i) as permitted in
clause (a) above or (ii) if such Person is a Subsidiary of any Borrower with
assets having an aggregate fair market value of less than or equal to $100,000;
and

 

(d)               consummate a Division as a Dividing Person without the prior
written consent of the Agent (such consent not to be unreasonably withheld,
conditioned or delayed). Without limiting the foregoing, if any Borrower or
Guarantor that is a limited liability company consummates a Division (with or
without the prior consent of the Agent as required above), each Division
Successor shall be required to comply with the obligations set forth in Section
9.23 and the other further assurances obligations set forth in the Financing
Agreements and become a Borrower or Guarantor, as applicable, under this
Agreement and the other Financing Agreements.

 

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9.8              Encumbrances. Each Borrower and Guarantor shall not, and shall
not permit any Subsidiary to, create, incur, assume or suffer to exist any
security interest, mortgage, pledge, lien, charge or other encumbrance of any
nature whatsoever on any of its assets or properties, including the Collateral,
or file or permit the filing of, or permit to remain in effect, any financing
statement or other similar notice of any security interest or lien with respect
to any such assets or properties, except:

 

(a)               the security interests and liens of Agent for itself and the
benefit of the Secured Parties and the rights of setoff of Secured Parties
provided for herein or under applicable law;

 

(b)               liens securing the payment of taxes, assessments or other
governmental charges or levies either not yet delinquent or the validity or
amount of which are being contested in good faith by appropriate proceedings
diligently pursued and available to such Borrower, or Guarantor or Subsidiary,
as the case may be and with respect to which adequate reserves have been set
aside on its books;

 

(c)               non-consensual statutory liens (including without limitation,
landlords’, carriers’, warehousemen’s, mechanics, materialmen’s or other like
liens but excluding liens securing the payment of taxes) arising in the ordinary
course of such Borrower’s, Guarantor’s or Subsidiary’s business to the extent:
(i) such liens secure Indebtedness which is not overdue or (ii) such liens
secure Indebtedness relating to claims or liabilities which are fully insured
and being defended at the sole cost and expense and at the sole risk of the
insurer or being contested in good faith by appropriate proceedings diligently
pursued and available to such Borrower, Guarantor or such Subsidiary, in each
case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books;

 

(d)               zoning restrictions, building codes, easements, licenses,
covenants, land use laws, and other restrictions affecting the use of Real
Property and other similar matters of record affecting title to Real Property
which do not interfere in any material respect with the use of such Real
Property or ordinary conduct of the business of such Borrower, Guarantor or such
Subsidiary as presently conducted thereon or materially impair the value of the
Real Property which may be subject thereto;

 

(e)               purchase money security interests in Equipment (including
Capital Leases) and purchase money mortgages on Real Property to secure
Indebtedness permitted under Section 9.9(b) hereof;

 

(f)                pledges and deposits of cash by any Borrower or Guarantor or
Subsidiary after the date hereof in the ordinary course of business in
connection with workers’ compensation, unemployment insurance and other types of
social security benefits consistent with the current or prior practices of such
Borrower or Guarantor;

 

(g)               liens or rights of setoff against credit balances of
Borrowers, Guarantors or any of their Subsidiaries with Credit Card Issuers or
Credit Card Processors or amounts owing by such Credit Card Issuers or Credit
Card Processors to Borrower in the ordinary course of business, but not liens on
or rights of setoff against any other property or assets of Borrowers, pursuant
to the Credit Card Agreements to secure the obligations of Borrowers to the
Credit Card Issuers or Credit Card Processors as a result of fees and
chargebacks;

 

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(h)               pledges and deposits of cash by any Borrower or Guarantor or
Subsidiary after the date hereof to secure the performance of tenders, bids,
leases, trade contracts, statutory obligations and other similar obligations in
each case (1) in the ordinary course of business of such Borrower, Guarantor or
Subsidiary and (2) other than for the repayment of Indebtedness;

 

(i)                 liens arising from (i) operating leases and the
precautionary UCC financing statement or fixture filings in respect thereof and
(ii) Equipment or other materials which are not owned by any Borrower, Guarantor
or Subsidiary located on the premises of such Borrower, Guarantor or Subsidiary
(but not in connection with, or as part of, the financing thereof) from time to
time in the ordinary course of business of such Borrower, Guarantor or
Subsidiary and the precautionary UCC financing statement or fixture filings in
respect thereof;

 

(j)                 deposits of cash with the owner or lessor of premises leased
and operated by any Borrower, Guarantor or Subsidiary in the ordinary course of
the business of such Borrower, Guarantor or Subsidiary to secure the performance
by such Borrower, Guarantor or Subsidiary of its obligations under the terms of
the Real Property lease for such premises;

 

(k)               judgments and other similar liens arising in connection with
court proceedings that do not constitute an Event of Default, provided, that,
(i) such liens are being contested in good faith and by appropriate proceedings
diligently pursued, (ii) adequate reserves or other appropriate provision, if
any, as are required by GAAP have been made therefor, (iii) a stay of
enforcement of any such liens is in effect and (iv) Agent may establish Reserves
with respect thereto;

 

(l)                 security interests in assets of a Borrower, Guarantor or
Subsidiary existing at the time such Borrower, Guarantor or Subsidiary is
acquired pursuant to a Permitted Acquisition after the date hereof; provided,
that, each of the following conditions is satisfied as determined by Agent:
(i) such security interests were not granted and did not arise in connection
with, or in anticipation or contemplation of, such Permitted Acquisition,
(ii) the assets subject to such security interests do not include any assets of
the type or categories that constitute Collateral other than Equipment or Real
Property and do not apply to any assets or properties of any Borrower or other
Guarantor other than Equipment and Real Property of the Borrower, Guarantor or
Subsidiary so acquired, (iii) the Indebtedness secured by such assets is
permitted under Section 9.9(h) hereof;

 

(m)             other liens not otherwise permitted under any other subsection
of this Section 9.8 with respect to property or assets of any Borrower,
Guarantor or Subsidiary; provided that the aggregate principal amount of the
Indebtedness or other obligations secured by such liens does not exceed
$1,000,000 at any time outstanding;

 

(n)               liens or security interests arising by law or granted by any
Borrower or any Guarantor in favor of a lessor, landlord, consignee,
warehouseman or bailee of a retail store location, Non-Retail Store Location or
Warehouse Location, as applicable, on personal property and/or trade fixtures
owned by any Borrower or Guarantor located at such locations granted pursuant to
a lease agreement between such Borrower or Guarantor and such lessor, landlord,
consignee, warehouseman or bailee, as applicable, entered into in the ordinary
course of business, in each case granted to secure obligations owed by such
Borrower or Guarantor with respect to any rental payments, service charges or
other amounts owing to such lessor, landlord, consignee, warehouseman or bailee,
as applicable, pursuant to such lease agreement; provided, that, in the event
that Administrative Borrower does not obtain a Collateral Access Agreement with
respect to such locations, Agent at its option, may establish a Reserve with
respect to each such location in respect of amounts at any time due or to become
due to the lessor, landlord, consignee, warehouseman or bailee, as applicable,
of such location as Agent shall reasonably determine but in no event shall any
Reserve with respect to rent be maintained in respect of any location for which
a Collateral Access Agreement has been delivered to Agent;

 

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(o)               [reserved];

 

(p)               liens incurred by any Borrower or Guarantor on any unearned
premiums paid by any Borrower or Guarantor or any return of the premium for such
policy pursuant to the Indebtedness described in Section 9.9(j) hereof;

 

(q)               the security interests and liens set forth on Schedule 8.4
hereto;

 

(r)                [reserved];

 

(s)                [reserved];

 

(t)                 liens securing the ABL Obligations to the extent permitted
to be incurred pursuant to Section 9.9(t); provided that such liens are at all
times subject to the Intercreditor Agreement.

 

For the avoidance of doubt, for purposes of this Agreement, “encumbrance” shall
not be deemed to include licenses of Intellectual Property which are otherwise
permitted under the terms of this Agreement.

 

9.9              Indebtedness. Each Borrower and Guarantor shall not, and shall
not permit any Subsidiary to, incur, create, assume, become or be liable in any
manner with respect to, or permit to exist, any Indebtedness, or guarantee,
assume, endorse, or otherwise become responsible for (directly or indirectly),
the Indebtedness, performance, obligations or dividends of any other Person,
except:

 

(a)               the Obligations;

 

(b)               purchase money Indebtedness (including Capital Leases) arising
after the date hereof to the extent secured by purchase money security interests
in Equipment (including Capital Leases) and purchase money mortgages on Real
Property not to exceed $10,000,000 in the aggregate at any time outstanding so
long as such security interests and mortgages do not apply to any property of
such Borrower, Guarantor or Subsidiary other than the Equipment or Real Property
so acquired, and the Indebtedness secured thereby does not exceed the cost of
the Equipment or Real Property so acquired, as the case may be;

 

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(c)               guarantees by any Borrower or Guarantor or other Subsidiary of
the Indebtedness or other obligations of any other Borrowers or Guarantors so
long as such Indebtedness is otherwise permitted under this Section 9.9 and such
other obligations are not prohibited by the terms of this Agreement;

 

(d)               the Indebtedness of any Borrower, Guarantor or other
Subsidiary to any other Borrower or Guarantor or other Subsidiary arising after
the date hereof pursuant to loans by any Borrower or Guarantor permitted under
Sections 9.10(h) or 9.10(i) hereof;

 

(e)               unsecured Indebtedness of any Borrower, Guarantor or
Subsidiary arising after the date hereof to any third Person (but not to any
other Borrower or Guarantor), provided, that, each of the following conditions
is satisfied as determined by Agent: (i) such Indebtedness shall be on terms and
conditions reasonably acceptable to Agent and shall be subject and subordinate
in right of payment to the right of Agent and Lenders to receive the prior
payment and satisfaction in full payment of all of the Obligations pursuant to
the terms of an intercreditor and subordination agreement between Agent and such
third party, in form and substance satisfactory to Agent, (ii) Agent shall have
received not less than ten (10) days prior written notice of the intention of
such Borrower or Guarantor to incur such Indebtedness, which notice shall set
forth in reasonable detail satisfactory to Agent the amount of such
Indebtedness, the Person or Persons to whom such Indebtedness will be owed, the
interest rate, the schedule of repayments and maturity date with respect thereto
and such other information as Agent may request with respect thereto,
(iii) Agent shall have received true, correct and complete copies of all
agreements, documents and instruments evidencing or otherwise related to such
Indebtedness, (iv) except as Agent may otherwise agree in writing, upon the
occurrence and continuance of an Event of Default or during a Compliance Period,
all of the cash proceeds of such loans or other accommodations incurred during
the occurrence of such Event of Default or during such Compliance Period shall
be paid to Agent for application to the Obligations in such order and manner as
Agent may determine or at Agent’s option, to be held as cash collateral for the
Obligations, (v) in no event shall the aggregate principal amount of such
Indebtedness incurred during the term of this Agreement exceed $5,000,000,
(vi) as of the date of incurring such Indebtedness and after giving effect
thereto, no Default or Event of Default shall have occurred and be continuing,
and (vii) such Borrower and Guarantor shall not, directly or indirectly,
(A) amend, modify, alter or change the terms of such Indebtedness or any
agreement, document or instrument related thereto, except, that, such Borrower
or Guarantor may, after prior written notice to Agent, amend, modify, alter or
change the terms thereof so as to extend the maturity thereof, or defer the
timing of any payments in respect thereof, or to forgive or cancel any portion
of such Indebtedness (other than pursuant to payments thereof), or to reduce the
interest rate or any fees in connection therewith, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness (except as permitted by
Section 9.24), or set aside or otherwise deposit or invest any sums for such
purpose, in each case without the written consent of Agent;

 

(f)                Indebtedness of any Borrower, Guarantor or any of their
Subsidiaries entered into in the ordinary course of business pursuant to a Hedge
Agreement; provided, that, (i) such arrangements are not for speculative
purposes, and (ii) such Indebtedness shall be unsecured, except to the extent
secured by pledges or deposits of cash as permitted under Section 9.8 hereof;

 

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(g)               the Indebtedness set forth on Schedule 9.9 hereto; provided,
that, (i) Borrowers and Guarantors may only make regularly scheduled payments of
principal and interest in respect of such Indebtedness in accordance with the
terms of the agreement or instrument evidencing or giving rise to such
Indebtedness as in effect on the date hereof, and (ii) Borrowers and Guarantors
shall not, directly or indirectly, (A) amend, modify, alter or change the terms
of such Indebtedness or any agreement, document or instrument related thereto as
in effect on the date hereof except, that, Borrowers and Guarantors may, after
prior written notice to Agent, amend, modify, alter or change the terms thereof
so as to extend the maturity thereof, or defer the timing of any payments in
respect thereof, or to forgive or cancel any portion of such Indebtedness (other
than pursuant to payments thereof), or to reduce the interest rate or any fees
in connection therewith, or (B) redeem, retire, defease, purchase or otherwise
acquire such Indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose;

 

(h)               Indebtedness of a Borrower, Guarantor or Subsidiary existing
at the time such Borrower, Guarantor or Subsidiary is acquired pursuant to a
Permitted Acquisition; provided, that, each of the following conditions is
satisfied as reasonably determined by Agent: (i) such Indebtedness was not
incurred in connection with, or in anticipation or contemplation of, such
Permitted Acquisition, (ii) such Indebtedness is not secured by any assets of
any Borrower or Guarantor other than Equipment or Real Property of the Borrower,
Guarantor or Subsidiary so acquired, (iii) no other Borrower or Guarantor shall
have any obligation or liability in respect of such Indebtedness except as
otherwise permitted hereof, (iv) if the amount of such Indebtedness is greater
than $1,000,000, it shall be on terms and conditions reasonably acceptable to
Agent, and (v) the aggregate amount of such Indebtedness pursuant to all
Permitted Acquisitions shall not exceed $2,000,000 at any time outstanding;

 

(i)                 unsecured Indebtedness of the Parent evidenced by the
Convertible Notes not to exceed the aggregate principal amount outstanding on
the Closing Date;

 

(j)                 Indebtedness of Borrowers and Guarantors and their
Subsidiaries in connection with the financing of insurance premiums in respect
of unearned premiums payable on certain insurance policies maintained by
Borrower, provided, that, (i) in no event shall the total amount of such
Indebtedness outstanding at any time exceed $4,000,000, and (ii) such
Indebtedness shall be unsecured except to the extent of any unearned premiums
paid by any Borrower or Guarantor or any return of the premium for such policy;

 

(k)               unsecured Indebtedness in respect of workers’ compensation
claims, self insurance obligations, bankers acceptances, performance, surety
bonds and other similar obligations in the ordinary course of business;

 

(l)                 other unsecured Indebtedness of any Borrower, Guarantor or
Subsidiary, in an aggregate outstanding principal amount that at the time of,
and after giving effect to, the incurrence thereof, together with any
refinancing Indebtedness in respect thereof, would not exceed $25,000,000;

 

(m)             unsecured Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently drawn against insufficient funds, so long as such Indebtedness is
repaid within five (5) Business Days;

 

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(n)               unsecured Indebtedness resulting from agreements to provide
for working capital adjustments of purchase price, earnouts or other similar
obligations incurred in connection with Permitted Acquisitions, provided, that,
such Indebtedness shall be on terms and conditions reasonably acceptable to
Agent and shall be subject and subordinate in right of payment to the right of
Agent and Lenders to receive the prior payment and satisfaction in full payment
of all of the Obligations pursuant to the terms of a subordinations agreement
between Agent and such third party, in form and substance reasonably
satisfactory to Agent;

 

(o)               the Indebtedness of any Borrower or Guarantor to any other
Borrower or Guarantor arising after the date hereof pursuant to Investments
consisting of loans and advances permitted under Sections 9.10(d), 9.10(h) or
9.10(i) hereof, provided, that, as to any such Indebtedness at any time owing by
a Borrower to a Guarantor or another Borrower, (i) the Indebtedness arising
pursuant to such Investment shall be subject to, and subordinate in right of
payment to, the right of Agent and Lenders to receive the prior final payment
and satisfaction in full of all of the Obligations on terms and conditions
acceptable to Agent, and (ii) any such Indebtedness arising pursuant to any such
loan shall not be evidenced by a promissory note or other instrument, unless the
single original of such note or other instrument is promptly delivered, subject
to the Intercreditor Agreement, to Agent or ABL Agent upon Agent’s or ABL
Agent’s request to hold as part of the Collateral (as defined in this Agreement
or in the ABL Credit Agreement), with such endorsement and/or assignment by the
payee of such note or other instrument as Agent may require;

 

(p)               refinancing of the Indebtedness referenced in the
subsections (a), (b), (c), (d), (e), (f), (g), (h), (i), (j) or (l) of this
Section 9.9 (or this subsection (p))(such Indebtedness being referred to herein
as the “Refinanced Indebtedness” so long as (i) such Indebtedness continues to
comply with all provisions of such subsections (a), (b), (c), (d), (e), (f),
(g), (h), (i), (j), or (l), as applicable, (ii) the incurrence of such
Indebtedness would not otherwise cause a Default or Event of Default to occur,
and (iii) the terms of such Indebtedness (including subordination terms, if
applicable) are not on terms which, taken as a whole, are materially more
adverse to Borrowers, Guarantors, Agent or any Lender than the Refinanced
Indebtedness, (iv) the principal amount of such Refinanced Indebtedness does not
exceed the outstanding principal balance of the original amount of such
Indebtedness plus costs, fees, expenses and accrued interest, and (v) the final
maturity date of such refinancing Indebtedness is a maturity date that is not
earlier than ninety days after the scheduled Maturity Date;

 

(q)               [reserved]Indebtedness of any Affiliated Lender arising in
connection with the Affiliated Lender Loan Holdings;

 

(r)                [reserved];

 

(s)                Permitted Subordinated Indebtedness; provided that at the
time of incurrence of such Permitted Subordinated Indebtedness and immediately
after giving effect thereto (i) the Required Conditions shall have been
satisfied and (ii) no Event of Default shall have occurred and be continuing;
and

 

(t)                 Indebtedness under the ABL Credit Agreement and the other
Financing Agreements (as defined in the ABL Credit Agreement) so long as it
remains subject to the terms of the Intercreditor Agreement and such ABL
Obligations in aggregate amount do not exceed the ABL Cap Amount (as defined in
the Intercreditor Agreement) and any refinancing of such Indebtedness subject to
the conditions set forth in clause (p) above.

 

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Notwithstanding anything in this Section 9.9 to the contrary, (x) the aggregate
amount of any refinancing Indebtedness incurred pursuant to subsection (p) of
this Section 9.9 in respect of Refinanced Indebtedness originally incurred under
subsections (b), (e), (h), (i), (j) or (l) shall be subject to, and shall
continue to count towards, the dollar limitations applicable to Indebtedness set
forth in the applicable subsection pursuant to which the Refinanced Indebtedness
was incurred and (y) ABL Obligations may only be incurred under Section 9.9(t).

 

9.10          Loans, Investments, Etc. Each Borrower and Guarantor shall not,
and shall not permit any Subsidiary to, directly or indirectly, purchase, hold
or acquire (including pursuant to any merger with any Person that was not a
wholly owned Subsidiary immediately prior to such merger) any Capital Stock,
evidences of Indebtedness or other Securities (including any option, warrant or
other right to acquire any of the foregoing) of, make or permit to exist any
loans or advances to, or make or permit to exist any investment or any other
interest in, any other Person, or purchase or otherwise acquire (in one
transaction or a series of transactions) any assets of any other Person
constituting a business unit or all or a substantial part of the assets or
property of any other Person (whether through purchase of assets, merger or
otherwise), or form or acquire any Subsidiaries, or agree to do any of the
foregoing (each of the foregoing an “Investment”), except:

 

(a)               the endorsement of instruments for collection or deposit in
the ordinary course of business;

 

(b)               Investments in cash or Cash Equivalents; provided, that, the
terms and conditions of Section 5.2 and Section 6.3 hereof shall have been
satisfied with respect to the Deposit Account, investment account or other
account in which such cash or Cash Equivalents are held;

 

(c)               (i) the existing equity Investments of each Borrower and
Guarantor as of the Closing Date in its Subsidiaries, provided, that, no
Borrower or Guarantor shall have any further obligations or liabilities to make
any capital contributions or other additional investments or other payments to
or in or for the benefit of any of such Subsidiaries;

 

(i)                 a Borrower or Guarantor may form a Subsidiary, provided,
that,

 

(A)             Agent shall have received promptly upon any such formation or
acquisition all of the agreements, documents and instruments required by the
terms of Sections 5.2 and 9.23 hereof,

 

(B)              as of the date of the organization, formation or acquisition of
any such Subsidiary and immediately after giving effect thereto, no Event of
Default shall have occurred and be continuing, and

 

(C)              in the event that Administrative Borrower requests that any
such new Subsidiary that is directly or indirectly wholly owned by Parent be
designated a Borrower hereunder, in no event shall any Inventory, Accounts,
Credit Card Receivables, Equipment or Intellectual Property of such Subsidiary
be deemed Eligible Inventory, Eligible Accounts, Eligible Credit Card
Receivables, Eligible Equipment or Eligible Intellectual Property until Agent
shall have conducted a field examination and appraisal with respect to such
assets and the results of such field examination, appraisal, and other due
diligence shall be reasonably satisfactory to Agent, and then only to the extent
the criteria for Eligible Inventory, Eligible Accounts, Eligible Credit Card
Receivables, Eligible Equipment and Eligible Intellectual Property set forth
herein are satisfied with respect thereto (as such criteria may be reasonably
modified by Agent to reflect the results of Agent’s field examination and
appraisal); and

 

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(D)             such Subsidiary shall be an operating company that engages in a
Permitted Business or an operating company or a holding company formed to make a
Permitted Acquisition;

 

(d)               Investments by (x) a Borrower, Guarantor or Subsidiary in
another Borrower or Guarantor, in each case after the date hereof or (y) a
Subsidiary that is not a Loan Party in another Subsidiary that is not a Loan
Party; provided, in each case, that, (i) to the extent that such Investment
gives rise to any Indebtedness, such Indebtedness is permitted hereunder, and
(ii) to the extent that such Investment gives rise to the issuance of any shares
of Capital Stock, such issuance is permitted hereunder;

 

(e)               loans and advances by any Borrower, Guarantor or Subsidiary to
employees of such Borrower, Guarantor or Subsidiary not to exceed the principal
amount of $500,000 in the aggregate at any time outstanding;

 

(f)                stock or obligations issued to any Borrower, Guarantor or
Subsidiary by any Person (or the representative of such Person) in respect of
Indebtedness of such Person owing to such Borrower or Guarantor in connection
with the insolvency, bankruptcy, receivership or reorganization of such Person
or a composition or readjustment of the debts of such Person; provided, that,
the original of any such stock or instrument issued to any Borrower or Guarantor
evidencing such obligations shall be promptly delivered to, subject to the
Intercreditor Agreement, Agent or ABL Agent, upon the request of Agent or ABL
Agent, together with such stock power, assignment or endorsement by such
Borrower or Guarantor as Agent may request;

 

(g)               obligations of Account Debtors to any Borrower, Guarantor or
Subsidiary arising from Accounts which are past due whether or not evidenced by
a promissory note made by such Account Debtor payable to such Borrower,
Guarantor or Subsidiary; provided, that, promptly upon the receipt of the
original of any such promissory note by any such Borrower or Guarantor, subject
to the Intercreditor Agreement, such promissory note shall be endorsed to the
order of Agent or ABL Agent by such Borrower or Guarantor and promptly delivered
to Agent or ABL Agent as so endorsed;

 

(h)               loans by (x) a Borrower or Guarantor or Subsidiary to another
Borrower or Guarantor or (y) a Subsidiary that is not a Loan Party to a Borrower
or Guarantor, in each case after the date hereof, provided, that,

 

(i)                 as to all of such loans by a Borrower or Guarantor, (A) the
Indebtedness arising pursuant to any such loan shall not be evidenced by a
promissory note or other instrument, unless the single original of such note or
other instrument is promptly delivered, subject to the Intercreditor Agreement,
to Agent or ABL Agent upon Agent’s or ABL Agent’s request to hold as part of the
Collateral (as defined in this Agreement or in the ABL Credit Agreement), with
such endorsement and/or assignment by the payee of such note or other instrument
as Agent may require, (B) as of the date of any such loan and after giving
effect thereto, the Borrower or Guarantor making such loan shall be Solvent, and
(C) as of the date of any such loan and after giving effect thereto, no Default
or Event of Default shall have occurred and be continuing, and

 

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(ii)              as to loans by a Guarantor or Subsidiary to a Borrower,
(A) the Indebtedness arising pursuant to such loan shall be subject to, and
subordinate in right of payment to, the right of Agent and Lenders to receive
the prior final payment and satisfaction in full of all of the Obligations on
terms and conditions reasonably acceptable to Agent, (B) promptly upon Agent’s
request, Agent shall have received a subordination agreement, in form and
substance reasonably satisfactory to Agent, providing for the terms of the
subordination in right of payment of such Indebtedness of such Borrower to the
prior final payment and satisfaction in full of all of the Obligations, duly
authorized, executed and delivered by such Guarantor and such Borrower, and
(C) such Borrower shall not, directly or indirectly make, or be required to
make, any payments in respect of such Indebtedness owing to any Subsidiary that
is not a Borrower or Guarantor prior to the end of the then current term of this
Agreement;

 

(i)                 the loans and advances set forth on Schedule 9.10 hereto;
provided, that, as to such loans and advances, Borrowers and Guarantors shall
not, directly or indirectly, amend, modify, alter or change the terms of such
loans and advances or any agreement, document or instrument related thereto;

 

(j)                 [reserved]the acquisition of the Affiliated Lender Loan
Holdings by any Affiliated Lender;

 

(k)               Permitted Acquisitions;

 

(l)                 the Convertible Note Hedge and Warrant Transactions;

 

(m)             [reserved];

 

(n)               Investments by any Borrower or Guarantor in any Foreign
Subsidiary, or acquisitions by any Borrower or Guarantor of any foreign Acquired
Business, not to exceed aggregate consideration for all such Investments and
acquisitions under this subsection (n) of $500,000 (plus the Net Proceeds of any
subsequent sale of any portion of the interests in such Foreign Subsidiary or
foreign Acquired Business acquired pursuant to this subsection (n) but in no
event shall Investments pursuant to this subsection (n) exceed $500,000);
provided, that, at the time of making any such Investment or acquisition and
immediately after giving effect thereto (i) the Required Conditions shall have
been satisfied and (ii) no Event of Default shall have occurred and be
continuing; and

 

(o)               other Investments by Borrowers and Guarantors and their
Subsidiaries not otherwise permitted pursuant to subsections (a) through (n) of
this Section 9.10, (other than Foreign Subsidiaries), provided, that, (i) the
aggregate outstanding amount of all such Investments (valued at cost) shall not
exceed $5,000,000 at any time (in each case determined without regard to any
write-downs or write offs), and (ii) at the time of making any such Investment
and immediately after giving effect thereto no Event of Default shall have
occurred and be continuing.

 

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Notwithstanding the foregoing, in no event shall any Intellectual Property of
the Loan Parties be included in any of the foregoing Investments.

 

9.11          Dividends and Redemptions. Each Borrower and Guarantor shall not,
directly or indirectly, declare or pay any dividends on account of any shares of
class of any Capital Stock of such Borrower or Guarantor now or hereafter
outstanding, or set aside or otherwise deposit or invest any sums for such
purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of
any class of Capital Stock (or set aside or otherwise deposit or invest any sums
for such purpose) for any consideration or apply or set apart any sum, or make
any other distribution (by reduction of capital or otherwise) in respect of any
such shares or agree to do any of the foregoing, except that:

 

(a)               any Borrower or Guarantor may declare and pay such dividends
or redeem, retire, defease, purchase or otherwise acquire any shares of any
class of Capital Stock for consideration in the form of shares of Capital Stock
(other than capital stock described in clause (e) of the definition of
“Indebtedness”);

 

(b)               Borrowers and Guarantors may pay dividends or make
distributions to the extent of payments permitted in Section 9.12 below;

 

(c)               any Subsidiary of a Borrower or Guarantor may pay dividends or
make distributions (directly or indirectly) to a Borrower or Guarantor;

 

(d)               for any fiscal quarter ending after June 27, 2020, Parent may
pay cash dividends to its shareholders once per fiscal quarter in an amount not
to exceed the lesser of (x) 40% of Excess Cash Flow for the prior fiscal quarter
and (y) 30% of EBITDA for the prior fiscal quarter, provided, that, (i) the
Required Conditions have been satisfied, (ii) no Default or Event of Default
shall have occurred and be continuing as of the date of any such payment and
after giving effect to such payment, and (iii) 60% of Excess Cash Flow for such
prior fiscal quarter minus the applicable Required Amortization Amount for such
prior fiscal quarter is positive;

 

(e)               [reserved];

 

(f)                the Loan Parties may make Permitted Tax Distributions so long
as no Event of Default pursuant to Sections 10.1(a)(i), 10.1(g) or 10.1(h) has
occurred and is continuing or would result therefrom; and

 

(g)               Borrowers and Guarantors may repurchase (or may pay dividends
or make distributions to Parent, and Parent may make further distributions
thereon, in each case to permit such repurchase) Capital Stock of Parent,
Ultimate Parent or any Person that owns, directly or indirectly, 100% of the
Capital Stock of Parent, including Capital Stock to be repurchased pursuant to
any share repurchase agreement or similar agreement (which shall include, for
the avoidance of doubt, the Convertible Note Hedge and Warrant Documents ) and
Capital Stock held by or to be issued to current or former employees, directors
and officers pursuant to or in connection with any employee stock ownership,
option or other equity compensation plan thereof or pursuant to any employment
or consulting arrangement or equity subscription agreement, shareholders
agreement or similar agreement in an aggregate amount not to exceed $1,000,000
in any fiscal year, so long as no Default or Event of Default shall have
occurred and be continuing as of the date of any such payment and after giving
effect to such payment;

 

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provided that no Intellectual Property shall be included in any such dividends,
distributions or payments made pursuant to this Section 9.11.

 

9.12          Transactions with Affiliates. Each Borrower and Guarantor shall
not, directly or indirectly:

 

(a)               purchase, acquire or lease any property from, or sell,
transfer or lease any property or provide services to, any officer, director or
other Affiliate of such Borrower or Guarantor (other than another Borrower or
Guarantor), except:

 

(i)                 in the ordinary course of (except with respect to
transactions permitted under Sections 9.7, 9.8, 9.9, 9.10 or 9.11) and pursuant
to the reasonable requirements of such Borrower’s or Guarantor’s business (as
the case may be) and upon fair and reasonable terms no less favorable to such
Borrower or Guarantor than such Borrower or Guarantor would obtain in a
comparable arm’s length transaction with an unaffiliated Person;

 

(ii)              transactions permitted under Section 9.7(a) hereof;

 

(iii)            transactions permitted under Section 9.12(b) hereof;

 

(iv)             transactions between any Borrower and/or Guarantor and any
other Borrower and/or Guarantor, provided, that, in each case such transaction
is in accordance with the terms of this Agreement and the other Financing
Agreements;

 

(v)               any Indebtedness permitted by Section 9.9(c), (d), (g), (h)
and (o);

 

(vi)             any Investments in a Subsidiary, or joint venture permitted by
Section 9.10; and

 

(vii)          issuances of Capital Stock.

 

(b)               make any payments (whether by dividend, loan or otherwise) of
management, consulting or other fees for management or similar services, or of
any Indebtedness owing to any officer, employee, shareholder, director or any
other Affiliate of such Borrower or Guarantor, except

 

(i)                 reasonable compensation to officers, employees and directors
for services rendered to such Borrower or Guarantor and reimbursement of
expenses in the ordinary course of business of such Borrower or Guarantor;

 

(ii)              payments to any Person that owns, directly or indirectly, 100%
of the Capital Stock of Parent for actual and necessary reasonable out-of-pocket
legal and accounting, insurance, marketing, payroll and similar types of
services (other than management or sponsor fees) paid by such Person on behalf
of such Borrower or Guarantor, in the ordinary course of their respective
businesses or as the same may be directly attributable to such Borrower or
Guarantor, provided, that, the aggregate amount of all such payments in any
fiscal year shall not exceed $3,000,000; and

 

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(iii)            payments to the extent permitted under Section 9.24 hereof.

 

For avoidance of doubt, the payment of Permitted Tax Distributions shall not be
subject to this Section 9.12.

 

9.13          Compliance with ERISA. Except as could not reasonably be expected
to have a Material Adverse Effect, each Borrower and Guarantor shall, and shall
with respect to any Plan cause each of its ERISA Affiliates, to: (a) maintain
each Plan in compliance in all material respects with the applicable provisions
of ERISA, the Code and other Federal and State law; (b) cause each Plan which is
qualified under Section 401(a) of the Code to maintain such qualification;
(c) not terminate any Plan so as to incur any material liability to the Pension
Benefit Guaranty Corporation; (d) not allow or suffer to exist any non-exempt
“prohibited transaction” (within the meaning of Section 4975(c)(1) of the Code)
which would be reasonably likely to subject Borrower or any ERISA Affiliate to a
material tax or penalty or other liability on prohibited transactions imposed
under Section 4975(a) or (b) of the Code or Section 406 of ERISA; (e) make all
required contributions to any Plan under Section 302 of ERISA, Section 412 of
the Code or the terms of such Plan; (f) not allow or suffer to exist any
“accumulated funding deficiency” (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived, with respect to any Plan; or
(g) allow or suffer to exist any occurrence of a “reportable event” (as defined
in Section 4043(c) of ERISA or the regulations issued thereunder, except for any
such event with respect to which notice has been waived pursuant to applicable
regulations) or any other event or condition which presents a material risk of
termination by the Pension Benefit Guaranty Corporation of any Plan that is a
single employer plan, which termination could reasonably be expected to result
in any material liability to any Borrower or Guarantor.

 

9.14          Fiscal Year. Each Borrower and Guarantor shall, for financial
reporting purposes, cause its fiscal year, and the fiscal year of each of its
Subsidiaries (including any Foreign Subsidiary) to end on the last Saturday of
December of each calendar year (except for 53-week years). In no event shall any
Borrower or Guarantor thereafter change its fiscal year.

 

9.15          Change in Business.

 

Each Borrower and Guarantor shall not engage in any business other than the
Permitted Business.

 

9.16          Limitation of Restrictions Affecting Subsidiaries. Each Borrower
and Guarantor (other than Parent) shall not, directly, or indirectly, create or
otherwise cause or suffer to exist any encumbrance or restriction which
prohibits or materially limits the ability of any Subsidiary of such Borrower or
Guarantor to (a) pay dividends or make other distributions or pay any
Indebtedness owed to such Borrower or Guarantor or any Subsidiary of such
Borrower or Guarantor, (b) make loans or advances to such Borrower or Guarantor
or any Subsidiary of such Borrower or Guarantor, (c) transfer any of its
properties or assets to such Borrower or Guarantor or any Subsidiary of such
Borrower or Guarantor, or (d) create, incur, assume or suffer to exist any lien
upon any of its property, assets or revenues, whether now owned or hereafter
acquired, other than encumbrances and restrictions arising under (i) applicable
law, (ii) this Agreement or the ABL Credit Agreement, (iii) customary provisions
restricting subletting or assignment of any lease (or hypothecation thereof)
governing a leasehold interest of such Borrower or Guarantor or any Subsidiary
of such Borrower or Guarantor, (iv) customary restrictions on dispositions of
real property interests found in reciprocal easement agreements of such Borrower
or Guarantor or any Subsidiary of such Borrower or Guarantor, (v) any agreement
relating to permitted Indebtedness incurred by a Subsidiary of such Borrower or
Guarantor prior to the date on which such Subsidiary was acquired by such
Borrower or such Guarantor and outstanding on such acquisition date, (vi) the
extension or continuation of contractual obligations in existence on the date
hereof and otherwise permitted hereunder; provided, that, any such encumbrances
or restrictions contained in such extension or continuation are no less
favorable to Agent and Lenders than those encumbrances and restrictions under or
pursuant to the contractual obligations so extended or continued, (vii) any
agreement related to an otherwise permitted refinancing of Indebtedness
permitted under the terms of this Agreement, and (viii) Indebtedness permitted
to be incurred under the terms of this Agreement with terms no more restrictive
than those set forth herein.

 

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9.17          Financial Covenants.

 

(a)               Borrowers and Guarantors shall not incur, or permit to be
incurred, Capital Expenditures in the aggregate during each fiscal year to
exceed $20,000,000, excluding any Capital Expenditures made with the Net
Proceeds of Events of Loss in accordance with Section 2.2; provided, however,
that so long as no Event of Default is continuing and no Compliance Period is in
effect, to the extent that actual Capital Expenditures (excluding any Capital
Expenditures made with the Net Proceeds of Events of Loss in accordance with
Section 2.2) incurred in any fiscal year shall be less than the maximum amount
for such fiscal year (without giving effect to the carryover permitted by this
proviso), the difference between such stated maximum amount and such actual
Capital Expenditures shall, in addition to any amount permitted above, be
available for Capital Expenditures in the next succeeding fiscal year (it being
agreed that Capital Expenditures incurred in any fiscal year shall be deemed to
have been incurred first, in respect of amounts permitted pursuant to this
Section 9.17(a) without giving effect to this proviso and then, in respect of
any amount permitted solely by reason of this proviso).

 

(b)               Borrowers and Guarantors shall not permit Liquidity, as of the
close of business of the Administrative Borrower on the last Business Day of
each week, to be less than $10,000,000.

 

(c)               Borrowers and Guarantors shall not permit consolidated EBITDA
of the Borrowers and Guarantors, (i) for anythe fiscal quarter, calculated as of
the last day of such fiscal quarter ended as of March 28, 2020, to be less than
sixty-five percent (65%) of the EBITDA set forth for such fiscal quarter in the
Specified Closing Plan., (ii) for the fiscal quarter ended as of June 27, 2020,
to be less than eighty percent (80%) of the EBITDA set forth for such fiscal
quarter in the Specified Closing Amended Plan; (iii) for the fiscal quarters
ended as of September 26, 2020 and December 26, 2020, respectively, to be less
than sixty-five percent (65%) of the EBITDA set forth for such fiscal quarters
in the Specified Closing Amended Plan; and (iv) for any fiscal quarter
thereafter, to be less than sixty-five percent (65%) of the EBITDA set forth for
such fiscal quarter in the Specified Closing Plan, in each case, calculated as
of the last day of such fiscal quarter.

 

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(d)               Equity Cure

 

(i)                 Notwithstanding anything to the contrary contained in
Section 10, in the event that the Borrowers and Guarantors fail to comply with
the requirement of any financial covenant set forth in Section 9.17, until the
expiration of the 10th Business Day following the date of the delivery of the
Compliance Certificate under Section 9.6(a) in respect of the fiscal period for
which such financial covenant is being measured, the Borrowers and Guarantors
shall have the right to cure such failure (the “Cure Right”) by receipt of cash
equity proceeds derived from an issuance of Capital Stock in the Parent, and
upon receipt by the Parent of such cash equity proceeds (such cash amount being
referred to as the “Cure Amount”) pursuant to the exercise of such Cure Right,
such financial covenant shall be recalculated giving effect to the following pro
forma adjustments:

 

(ii)              EBITDA shall be increased, solely for the purpose of
determining the existence or non-existence of an Event of Default resulting from
a breach of the financial covenants set forth in Section 9.17(c), with respect
to the fiscal quarter for which the Cure Right was exercised and not for any
other purpose under this Agreement, by an amount equal to the Cure Amount; and

 

(iii)            if, after giving effect to the foregoing recalculations, the
Borrowers shall then be in compliance with the requirements of the financial
covenants set forth in Section 9.17, the Borrowers shall be deemed to have
satisfied the requirements of the financial covenants set forth in Section 9.17
as of the relevant date of determination with the same effect as though there
had been no failure to comply therewith at such date, and the applicable breach
or default of such financial covenants that had occurred shall be deemed cured
for the purposes of this Agreement; provided that (i) in each period of four
consecutive fiscal quarters there shall be at least two fiscal quarters in which
no Cure Right is made, (ii) there shall be a maximum of four Cure Rights made
during the term of this Agreement, (iii) each Cure Amount shall be no greater
than the amount required to cause the Borrowers to be in compliance with
applicable financial covenants set forth in Section 9.17; (iv) all Cure Amounts
shall be disregarded for the purposes of any financial ratio determination under
the Loan Documents other than for determining compliance with Section 9.17; and
(v) no cash dividends may be made pursuant to Section 9.11(d) for two
consecutive quarters following the exercise of any Cure Right.

 

9.18          Credit Card Agreements. Each Borrower shall (a) observe and
perform in all material respects all material terms, covenants, conditions and
provisions of the Credit Card Agreements to be observed and performed by it at
the times set forth therein; (b) not do or permit, suffer or refrain from doing
anything, as a result of which there could be a default or breach of any of the
terms of the Credit Card Agreements and at all times maintain in full force and
effect the Credit Card Agreements and not terminate, cancel, surrender, modify,
amend, waive or release any of the Credit Card Agreements, or consent to or
permit to occur any of the foregoing; except, that, (i) any Borrower may
terminate or cancel any of the Credit Card Agreements in the ordinary course of
the business of such Borrower; provided, that, such Borrower shall give Agent
not less than ten (10) days prior written notice of its intention to so
terminate or cancel any of the Credit Card Agreements; (c) not enter into any
new Credit Card Agreements with any new Credit Card Issuer unless (i) Agent
shall have received not less than ten (10) days prior written notice of the
intention of such Borrower to enter into such agreement (together with such
other information with respect thereto as Agent may reasonably request) and
(ii) such Borrower delivers, or causes to be delivered to Agent, subject to
Section 9.29, a Credit Card Acknowledgment in favor of Agent; (d) give Agent
prompt written notice of any Credit Card Agreement or material amendment or
other material modification of any Credit Card Agreement entered into by such
Borrower after the date hereof, together with a true, correct and complete copy
thereof and such other information with respect thereto as Agent may reasonably
request; (e) furnish to Agent, promptly upon the request of Agent, such material
information and evidence as Agent may require from time to time concerning the
observance, performance and compliance by such Borrower or the other party or
parties thereto with the terms, covenants or provisions of the Credit Card
Agreements; and (f) not modify in any material respect any payment instruction
given by Agent to any Credit Card Issuer or Credit Card Processor provided for
in any Credit Card Acknowledgment to the extent given in accordance with the
terms thereof or otherwise direct the remittance of payments under any Credit
Card Agreement to any account other than the Blocked Accounts.

 

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9.19          License Agreements.

 

(a)               Except as could not reasonably be expected to have a Material
Adverse Effect, Borrower shall (i) promptly and faithfully observe and perform
all of the material terms, covenants, conditions and provisions of the material
License Agreements to which it is a party to be observed and performed by it, at
the times set forth therein, if any, (ii) not do, permit, suffer or refrain from
doing anything that could reasonably be expected to result in a default under or
breach of any of the terms of any material License Agreement, (iii) not cancel,
surrender, modify, amend, waive or release any material License Agreement in any
material respect or any term, provision or right of the licensee thereunder in
any material respect, or consent to or permit to occur any of the foregoing
except as permitted pursuant to Section 9.19(b) below, (iv) give Agent prompt
written notice of any material License Agreement (other than Promotional
Agreements or licenses by a Borrower, Guarantor or any of their Subsidiaries to
a private label manufacturer entered into in the ordinary course of business for
the production of Inventory on behalf of a Borrower or “click through” licenses
to website hosts or providers in connection with on-line purchasing or licenses
to a Borrower by a customer to use such customer’s trademarks or service marks
for purposes of goods or services provided by such Borrower to or for such
customer or licenses for commercially available off the shelf software) entered
into by any Borrower, Guarantor or any of their Subsidiaries after the date
hereof, together with (A) either (x) a description of such License Agreement
listing the Intellectual Property subject thereto, the name and address of the
parties thereto, the term of the license arrangement and the products and
territory subject to such license, or (y) a true, correct and complete copy of
such License Agreement, and (B) such other information with respect thereto as
Agent may reasonably request (subject to any obligation of confidentiality
contained therein), (v) give Agent prompt written notice of any notice of
default sent to another party to a material License Agreement by Borrower of any
material breach of any obligation, or any default, by any party under any
material License Agreement, and deliver to Agent (promptly upon the receipt
thereof by Borrower in the case of a notice to Borrower and concurrently with
the sending thereof in the case of a notice from Borrower) a copy of each notice
of default and every other notice and other communication received or delivered
by Borrower in connection with any material License Agreement which relates to
the right of Borrower to continue to use the property subject to such License
Agreement, and (vi) furnish to Agent, promptly upon the request of Agent, such
information and evidence as Agent may reasonably require from time to time
concerning the observance, performance and compliance by Borrower or the other
party or parties thereto with the material terms, covenants or provisions of any
material License Agreement.

 

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(b)               Except as could not reasonably be expected to have a Material
Adverse Effect, each Borrower will either exercise any option to renew or extend
the term of each material License Agreement to which it is a party in such
manner as will cause the term of such material License Agreement to be
effectively renewed or extended for the period provided by such option.

 

9.20          Foreign Assets Control Regulations, Etc. Neither the requesting or
borrowing of the Term Loan or the use of the proceeds thereof will violate the
Trading With the Enemy Act (50 U.S.C. §1 et seq., as amended) (the “Trading With
the Enemy Act”) or any of the foreign assets control regulations of the United
States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) (the
“Foreign Assets Control Regulations”) or any enabling legislation or executive
order relating thereto (including, but not limited to (a) Executive order 13224
of September 21, 2001 Blocking Property and Prohibiting Transactions With
Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079
(2001)) (the “Executive Order”) and (b) the USA PATRIOT Act). None of Borrowers
or any of their Subsidiaries or other Affiliates is or will become a “blocked
person” as described in the Executive Order, the Trading with the Enemy Act or
the Foreign Assets Control Regulations or engages or will engage in any dealings
or transactions, or be otherwise associated, with any such “blocked person”.

 

9.21          After Acquired Real Property. If any Borrower or Guarantor
hereafter acquires fee simple title to any Real Property, such Real Property and
related fixtures or other property is adjacent to, contiguous with or necessary
or related to or used in connection with any Real Property then subject to a
mortgage in favor of Agent, or if such Real Property is not adjacent to,
contiguous with or related to or used in connection with such Real Property,
then if such Real Property, at any location (or series of adjacent, contiguous
or related locations, and regardless of the number of parcels) has a fair market
value in an amount equal to or greater than $1,000,000 (or if a Default or Event
of Default has occurred and is continuing, then regardless of the fair market
value of such assets), and excluding any Real Property subject to a lien
permitted under Sections 9.8(e) and 9.8(l) hereof, without limiting any other
rights of Agent or any Lender, or duties or obligations of any Borrower or
Guarantor, promptly as reasonably practical upon Agent’s request, such Borrower
or Guarantor shall execute and deliver to Agent a mortgage, deed of trust or
deed to secure debt, as Agent may determine, in form and substance reasonably
satisfactory to Agent and in form appropriate for recording in the real estate
records of the jurisdiction in which such Real Property or other property is
located granting to Agent a first lien and mortgage on and security interest in
such Real Property, fixtures or other property (except for liens permitted under
Section 9.8 hereof or as otherwise consented to in writing by Agent) and such
other agreements, documents and instruments as Agent may reasonably require in
connection therewith.

 

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9.22          Costs and Expenses. Borrowers and Guarantors shall pay to (I)
Agent on demand all reasonable and documented out-of-pocket costs, expenses and
filing fees paid or payable in connection with the preparation, negotiation,
execution, delivery, recording, syndication, administration, collection,
liquidation, enforcement and defense of the Obligations, Agent’s rights in the
Collateral, this Agreement, the other Financing Agreements and all other
documents related hereto or thereto, including any amendments, supplements or
consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: subject to Section 6.5(b)
(a) all costs and expenses of filing or recording (including UCC financing
statement filing fees and mortgage recording fees, if applicable); (b) costs and
expenses and fees for insurance premiums, environmental audits, title insurance
premiums, surveys, assessments, engineering reports and inspections, appraisal
fees and search fees, background checks, costs and expenses of remitting loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining the Blocked Accounts, together with Agent’s customary charges and
fees with respect thereto; (c) [Reserved]; (d) costs and expenses of preserving
and protecting the Collateral; (e) costs and expenses paid or incurred in
connection with obtaining payment of the Obligations, enforcing the security
interests and liens of Agent, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Agent or any Lender arising out of the transactions contemplated hereby and
thereby (including preparations for and consultations concerning any such
matters); (fII) after an Event of Default has occurred and is continuing,
reasonable and documented out-of-pocket attorneys’ fees of Agent and the Lenders
(other than Affiliated Lenders) incurred in connection with obtaining payment of
the Obligations, enforcing the security interests and liens of Agent, selling or
otherwise realizing upon the Collateral, and otherwise enforcing the provisions
of this Agreement and the other Financing Agreements or defending any claims
made or threatened against Agent or any Lender (other than Affiliated Lenders)
arising out of the transactions contemplated hereby and thereby (including
preparations for and consultations concerning any such matters) (limited to one
primary counsel (to be retained by Agent) to Agent and all Lenders (other than
Affiliated Lenders), taken as a whole, plus (x) if reasonably necessary, one
local counsel in any relevant jurisdiction (which may include a single firm of
counsel acting in multiple jurisdictions) and (y) in the case of an actual or
perceived conflict of interest where such Person affected by such conflict
informs Administrative Borrower of such conflict, in each case, a single
additional firm of counsel in each relevant jurisdiction for all similarly
situated affected Persons); (gIII) all out-of-pocket expenses and costs
heretofore and from time to time hereafter incurred by Agent during the course
of periodic field examinations of the Collateral and such Borrower’s or
Guarantor’s operations, plus a per diem charge at Agent’s then standard rate for
Agent’s examiners in the field and office for no more than two (2) periodic
field exams during a consecutive twelve (12) month period; provided, that, any
field exam during the occurrence and continuance of an Event of Default or
during a Compliance Period shall be at the Borrowers’ expense; and (hIV) the
reasonable and documented out-of-pocket fees and disbursements of counsel
(including legal assistants) to Agent in connection with any of the foregoing
(limited to one primary counsel, plus, if reasonably necessary one local counsel
in any relevant jurisdiction (which may include a single firm of counsel acting
in multiple jurisdictions)).

 

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9.23          Further Assurances.

 

(a)               In the case of the formation or acquisition by a Borrower or
Guarantor of any Subsidiary (other than a Foreign Subsidiary) after the date
hereof, as to any such Subsidiary, (i) the Borrower or Guarantor forming such
Subsidiary shall cause any such Subsidiary to execute and deliver to Agent, the
following (each in form and substance reasonably satisfactory to Agent), (A) an
absolute and unconditional guarantee of payment of the Obligations in the form
of a Guaranty (or a joinder or assumption agreement to the existing Guaranty),
(B) a joinder to this Agreement granting to Agent a security interest and lien
(except as otherwise consented to in writing by Agent) upon all of the assets of
any such Subsidiary to the extent such assets constitute Collateral hereunder
and subject to and in accordance with the terms hereof and with the lien
priority required by the Financing Agreements, (C) a joinder to the
Intercreditor Agreement acknowledging the lien priorities granted thereby and
(D) such other agreements, documents and instruments as Agent may reasonably
require in connection with the documents referred to above in order to make such
Subsidiary a party to this Agreement as a “Borrower” (to the extent directly or
indirectly wholly owned by Parent) or as a “Guarantor”, as Agent may determine,
including, but not limited to, supplements and amendments hereto and to the
other Financing Agreements (including any a Borrower Joinder Agreement with
respect to a Subsidiary that is to become a party hereto as a “Borrower”),
authorization to file UCC financing statements, Collateral Access Agreements
(subject to the requirements of Section 9.2 hereof) and other consents, waivers,
acknowledgments and other agreements from third persons which Agent may deem
necessary or desirable in order to permit, protect and perfect its security
interests in and liens upon the assets purchased, company resolutions and other
organization and authorizing documents of such Person, and favorable opinions of
counsel to such person and (ii) the Borrower or Guarantor forming such
Subsidiary shall, subject to the Intercreditor Agreement, (A) execute and
deliver to Agent, a supplement to this Agreement to which it is a party, in form
and substance reasonably satisfactory to Agent, granting to Agent a pledge of
and lien on all of the issued and outstanding shares of Capital Stock of any
such Subsidiary (but no more than 65% of the Voting Stock of any Foreign
Subsidiary) with the lien priority required by the Financing Agreements, and
(B) deliver the original stock certificates evidencing such shares of Capital
Stock (or such other evidence as may be issued in the case of a limited
liability company) to Agent or ABL Agent, together with stock powers with
respect thereto duly executed in blank (or the equivalent thereof in the case of
a limited liability company in which such interests are certificated, or
otherwise take such actions as Agent shall reasonably require with respect to
Agent’s security interests therein).

 

(b)               In the case of an acquisition of assets (other than Capital
Stock and Real Property) by a Borrower or Guarantor after the date hereof, Agent
shall have received, in form and substance reasonably satisfactory to Agent,
(i) evidence that Agent has valid and perfected security interests in and liens
upon all purchased assets to the extent such assets constitute Collateral
hereunder and subject to and in accordance with the terms hereof, and
(ii) subject to Section 9.2 hereof, all Collateral Access Agreements and other
consents, waivers, acknowledgments and other agreements from third persons which
Agent may deem necessary or desirable in order to permit, protect and perfect
its security interests in and liens upon the assets purchased, (iii) in the case
of a Material Permitted Acquisition, at the option of Agent, the agreement of
the seller consenting to the collateral assignment by the Borrower or Guarantor
purchasing such assets of all rights and remedies and claims for damages of such
Borrower or Guarantor relating to the Collateral (including, without limitation,
any bulk sales indemnification) under the agreements, documents and instruments
relating to such acquisition and (iv) such other agreements, documents and
instruments as Agent may require in connection with the documents referred to
above, including, but not limited to, supplements and amendments hereto, company
resolutions and other organization and authorizing documents and favorable
opinions of counsel to such person.

 

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(c)               At the request of Agent at any time and from time to time,
Borrowers and Guarantors shall, at their expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements.

 

The Borrowers will cause any Person guaranteeing ABL Obligations to
contemporaneously become a Guarantor of the Obligations in accordance with
Section 9.23(a).

 

9.24          Permitted Payments of Indebtedness. No Borrower and no Guarantor
will, nor will it permit any Subsidiary to, make, directly or indirectly, any
payment or other distribution (whether in cash, Securities or other property) of
or in respect of principal of or interest on any Indebtedness (other than
Indebtedness between any Borrower or Guarantor and Indebtedness permitted under
Sections 9.9(j), 9.9(k), or 9.9(m)), or any payment or other distribution
(whether in cash, Securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such Indebtedness, except:

 

(a)               payment of Indebtedness created under the Financing
Agreements;

 

(b)               payment of regularly scheduled interest and principal payments
as and when due in respect of any Indebtedness permitted under Section 9.9,
other than payments in respect of the subordinated Indebtedness prohibited by
the subordination provisions thereof;

 

(c)               refinancings of Indebtedness to the extent permitted by
Section 9.9(p);

 

(d)               payment of secured Indebtedness permitted under Section 9.10
that becomes due as a result of any sale or transfer of, or casualty,
condemnation or taking with respect to, the property or assets securing such
Indebtedness;

 

(e)               optional prepayments of Indebtedness (other than with respect
to Permitted Subordinated Indebtedness and Indebtedness under the ABL Credit
Agreement); provided, that (i) the Required Conditions are satisfied and (ii) no
Default or Event of Default shall have occurred and be continuing as of the date
of such prepayment;

 

(f)                cash payments or other distributions with respect to the
Convertible Notes, including any redemption, conversion or other repurchase or
repayment of the Convertible Notes not to exceed the Convertible Notes
Repurchase Amount;

 

(g)               [reserved];

 

(h)               optional prepayments of Permitted Subordinated Indebtedness
(subject to the terms of an intercreditor subordination agreement in form and
substance acceptable to Agent in its sole reasonable discretion) so long as
(i) the Required Conditions are satisfied and (ii) no Default or Event of
Default shall have occurred and be continuing as of the date of such prepayment;
and

 

(i)                 optional prepayments of Indebtedness under the ABL Credit
Agreement (subject to the terms of Intercreditor Agreement).

 

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9.25          Amendment of ABL Loan Documents. The Borrowers and the Guarantors
will not amend, waive, modify or supplement or consent to any amendment, waiver,
modification or supplement of any ABL Loan Documents, if such amendment, waiver
or other modification would contravene any provision of the Intercreditor
Agreement.

 

9.26          Parent Holding Status. With respect to Parent, engage in any
business or activity, hold any assets or incur any Indebtedness or other
liabilities, other than (i) its ownership of the Capital Stock in the Borrowers,
intercompany notes permitted hereunder, cash and Cash Equivalents, notes of
officers, directors and employees permitted hereunder, and all other assets
incidental to its ownership of Capital Stock in the Borrowers, or related to the
management of its investment in the other Loan Parties, (ii) maintaining its
corporate existence, (iii) participating in Tax, accounting, corporate,
housekeeping and other administrative activities as a holding company or as a
member of the consolidated group of companies including the Loan Parties,
(iv) executing, delivering and performing its rights and obligations under the
Financing Agreements, the ABL Loan Documents and any documents and agreements
governing any Permitted Acquisitions or Investments permitted hereunder to which
it is a party, including, for the avoidance of doubt (and to the extent
permitted hereunder and otherwise in accordance herewith), the formation,
maintenance, merger, amalgamation, consolidation, liquidation or dissolution of
a Subsidiary in connection with a Permitted Acquisition or Investment permitted
hereunder, (v) making any Permitted Distribution hereunder and any other
payments permitted to be made by Parent pursuant to Section 9.12 hereunder,
(vi) purchasing or acquiring Capital Stock of the Borrowers, (vii) making
capital contributions to the other Loan Parties, (viii) executing, delivering
and performing its rights and obligations under any employment agreements and
any documents related thereto, (ix) the buyback and sales of equity from or to
officers, directors, managers and employees of Parent and its Subsidiaries and
other persons in accordance with Section 9.11, (xiii) transactions expressly
described in this Agreement as involving Parent and permitted under this
Agreement, (xiv) retaining employees and consultants, (xv) making filings, (xvi)
issuing financial statements, (xvii) administering employee benefit and other
equity programs, (xviii) maintaining directors and officers insurance, (xviii)
issuing and selling Capital Stock and accepting capital contributions (to the
extent otherwise permitted under this Agreement), (xix) opening bank accounts,
(xx) engaging counsel, auditors and financial advisors, and (xxi) acquiring,
holding and otherwise acting with respect to the Affiliated Lender Loan
Holdings, and (xxii) activities incidental to the business or activities
described in clauses (i)-(xxxxi) above.

 

9.27          Term Loan Notes. If so requested by any Lender by written notice
to the Administrative Borrower (with a copy to the Agent), the Borrowers shall
execute and deliver to such Lender (and/or, if applicable and if so specified in
such notice, to any Person who is an assignee of such Lender pursuant to Section
13.7) (promptly after such Borrower’s receipt of such notice) a Term Loan Note
or Term Loan Notes to evidence such Lender’s Term Loans to such Borrower.

 

9.28          Post-Closing Equity Contribution; Fundamental Change Company
Notice.

 

(a)               On or prior to January 31, 2020 (or such later date that Agent
may agree to in its sole discretion) (the “Post-Closing Equity Contribution
Deadline”), the Permitted Holders shall have contributed (or caused to be
contributed), directly or indirectly, cash equity contributions (the
“Post-Closing Equity Contribution”) to Ultimate Parent or Parent (in the form of
(i) common equity or (ii) pay-in-kind preferred equity reasonably satisfactory
to Agent) in an aggregate amount of not less than $60,000,000. The proceeds of
the Post-Closing Equity Contribution shall be deposited and maintained in either
(i) the Convertible Notes Escrow or (ii) another Deposit Account reasonably
acceptable to the Agent and the ABL Agent that is subject to a Deposit Account
Control Agreement, and such proceeds may be used to redeem, convert or otherwise
repurchase or repay the Convertible Notes (or to fund the Convertible Notes
Escrow for such purposes), or , after the Convertible Notes have been redeemed
in full, for other general corporate purposes.

 

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(b)               Parent shall deliver a Fundamental Change Company Notice (as
defined in the Convertible Note Indenture) with respect to the Acquisition to
all holders of Convertible Notes and the trustee under the Convertible Note
Indenture not later than the date that is twenty days following the Closing
Date. Such Fundamental Change Company Notice shall (i) provide that the
Fundamental Change Repurchase Date (as defined in the Convertible Note
Indenture) shall be the date that is 35 calendar days following the date of the
Fundamental Change Company Notice and (ii) otherwise be in accordance with the
terms of the Convertible Note Indenture.

 

9.29          Post-Closing Obligations. Borrowers shall deliver, or cause to be
delivered, to Agent each of the agreements, documents, instruments and other
items set forth on Schedule 9.29 hereto, in each case within the periods
provided for therein (subject, in each case, to Agent’s right to extend such
period in its sole discretion).

 

SECTION 10.                        EVENTS OF DEFAULT AND REMEDIES

 

10.1          Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an “Event of
Default”, and collectively as “Events of Default”:

 

(a)               (i) any Borrower fails to make any principal payment or any
payment required under Section 2.1(c), in each case, after the same becomes due
and payable, or any Borrower fails to pay any of the other Obligations (other
than with respect to principal payments) within two (2) Business Days after the
same becomes due and payable, (ii) any Borrower or Guarantor fails to perform
any of the covenants contained in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12,
9.17, 9.25, 9.26, 9.28, or 9.29 of this Agreement, (iii) any Borrower or
Guarantor fails to perform any of the covenants contained in Sections 9.1(a),
9.2, 9.3, 9.4, 9.5, 9.13, 9.16, 9.18, 9.20 and 9.22 of this Agreement and such
failure shall continue for five (5) Business Days; provided, that, such five (5)
Business Days period shall not apply in the case of: (A) any failure to observe
any such covenant which is not capable of being cured at all or within such five
(5) Business Days period or which has been the subject of a prior failure within
a six (6) month period or (B) an intentional breach by Borrower or any Guarantor
of any such covenant or (iv) any Borrower or Guarantor fails to perform any of
the terms, covenants, conditions or provisions contained in this Agreement or
any of the other Financing Agreements other than those described in
Sections 10.1(a)(i), 10.1(a)(ii) or 10.1(a)(iii) above and Section 10.1(m) below
and such failure shall continue unremedied for thirty (30) days after the
earlier of (A) notice thereof from the Agent or (B) any Borrower’s or
Guarantor’s knowledge of such breach;

 

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(b)               any representation or warranty made by any Borrower or
Guarantor to Agent or any Secured Party in this Agreement, the other Financing
Agreements or any other written agreement, schedule, confirmatory assignment or
otherwise, in each case relating to the Financing Agreements or the Term Loan,
shall when made or deemed made be false or misleading in any material respect;

 

(c)               any Guarantor revokes or terminates or attempts to revoke or
terminate any guarantee in favor of Agent or any Lender;

 

(d)               any judgment for the payment of money is rendered against any
Borrower or Guarantor in excess of $2,500,000 in the aggregate (to the extent
not covered by insurance) and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against any
Borrower or Guarantor which would result in a Material Adverse Effect;

 

(e)               [Reserved];

 

(f)                any Borrower or Guarantor makes a general assignment for the
benefit of creditors, makes or sends notice of a bulk transfer or calls a
meeting of its creditors or principal creditors in connection with a moratorium
or adjustment of the Indebtedness due to them;

 

(g)               a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or Guarantor or all or any substantial
part of its properties and such petition or application is not dismissed within
sixty (60) days after the date of its filing or any Borrower or Guarantor by
corporate action shall file any answer admitting or not contesting such petition
or application or indicates its consent to, acquiescence in or approval of, any
such action or proceeding or the relief requested is granted sooner;

 

(h)               a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or Guarantor or for all or any substantial
part of its property;

 

(i)                 any default in respect of the ABL Obligations or any other
Indebtedness (excluding any default under the Convertible Note Documents) of any
Borrower or Guarantor, the effect of which default is to cause, or to permit the
holder or beneficiary of such Indebtedness to cause, with the giving of notice
if required, such Indebtedness to become due prior to its stated maturity (other
than Indebtedness owing to Agent and Lenders hereunder), in any case in an
amount in excess of $2,500,000, which default continues for more than the
applicable cure period, if any, with respect thereto; provided that (x) this
clause shall not apply to secured Indebtedness that becomes due as a result of
the voluntary sale or transfer of the property or assets securing such
Indebtedness, if such sale or transfer is permitted hereunder and (y) any such
default (other than a default in respect of the ABL Obligations) is unremedied
and is not waived by the holders of such Indebtedness prior to acceleration of
the Term Loan pursuant to this Section 10.1;

 

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(j)                 any material provision hereof or of any of the other
Financing Agreements shall for any reason cease to be valid, binding and
enforceable with respect to any party hereto or thereto (other than Agent) in
accordance with its terms, or any such party shall challenge the enforceability
hereof or thereof, or shall assert in writing, or take any action or fail to
take any action based on the assertion that any provision hereof or of any of
the other Financing Agreements has ceased to be or is otherwise not valid,
binding or enforceable in accordance with its terms, or any security interest
provided for herein or in any of the other Financing Agreements shall cease to
be a valid and perfected (subject only to Permitted Encumbrances and Liens
Permitted under Section 9.8(t)) security interest in any of the Collateral
purported to be subject thereto (except as otherwise permitted herein or
therein) with the priority required by the Financing Agreements;

 

(k)               an ERISA Event shall occur which results in liability of any
Borrower or Guarantor in an amount which could reasonably be expected to have a
Material Adverse Effect;

 

(l)                 any Change of Control;

 

(m)             fails at any time to comply with Section 6.7(b) of this
Agreement;

 

(n)               any Credit Card Issuer or Credit Card Processor (i) withholds
payment of amounts otherwise payable to any Borrower or Guarantor to fund a
reserve account or otherwise hold as collateral, or shall require any Borrower
or Guarantor to pay funds into a reserve account or for such Credit Card Issuer
or Credit Card Processor to otherwise hold as collateral, or any Borrower or
Guarantor shall provide a letter of credit to or in favor of such Credit Card
Issuer or Credit Card Processor such that in the aggregate all of such funds in
the reserve account, other amounts held as collateral and the amount of such
letters of credit shall exceed an aggregate for all Borrowers and Guarantors of
$1,000,000, or (ii) shall debit or deduct any amounts from any Deposit Account
of any Borrower or Guarantor or (iii) shall send notice to a Borrower or
Guarantor that it is ceasing to make or suspending payments to such Borrower or
Guarantor of amounts due or to become due to any Borrower or Guarantor or
(iv) shall send notice to any Borrower that it is terminating its arrangements
with such Borrower or Guarantor or such arrangements, except where (A) the loss
of services by a Credit Card Issuer or Credit Card Processor would not result in
non-payment of amounts due to any Borrower or could not reasonably be expected
to cause a Material Adverse Effect or (B) such Borrower or Guarantor shall have
entered into arrangements with another Credit Card Issuer or Credit Card
Processor, as the case may be, within forty-five (45) days after the date of any
such notice;

 

(o)               the Intercreditor Agreement shall for any reason, except to
the extent permitted by the terms thereof, cease to be in full force and effect
and valid, binding and enforceable in accordance with its terms against any
Borrower, any Guarantor, the ABL Agent, any ABL Lender, or any other party
thereto, or shall be repudiated by any of them, or cease to establish the
relative lien priorities required or purported thereby, or any Borrower, any
Guarantor, the ABL Agent, any ABL Lender, or any of their respective Affiliates
shall so state in writing;

 

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(p)               the Acquisition has not been consummated in compliance with
Section 4(w) within one (1) Business Day following the Closing Date; or

 

(q)               the Equity Commitment Letter shall for any reason cease to be
in full force and effect and valid, binding and enforceable in accordance with
its terms against Tributum before the funding of the full Convertible Notes
Repurchase Amount into the Convertible Notes Escrow.

 

10.2          Remedies.

 

(a)               At any time an Event of Default exists or has occurred and is
continuing, Agent and Lenders shall have all rights and remedies provided in
this Agreement, the other Financing Agreements, the UCC and other applicable
law, all of which rights and remedies may be exercised without notice to or
consent by any Borrower or Guarantor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Agent and Lenders hereunder, under any of the
other Financing Agreements, the UCC or other applicable law, are cumulative, not
exclusive and enforceable, in Agent’s discretion, alternatively, successively,
or concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by any Borrower or Guarantor of this
Agreement or any of the other Financing Agreements. Subject to Section 12
hereof, Agent may, and at the direction of the Required Lenders shall, at any
time or times, proceed directly against any Borrower or Guarantor to collect the
Obligations without prior recourse to the Collateral.

 

(b)               Without limiting the foregoing, at any time an Event of
Default has occurred and is continuing, Agent may, in its discretion, and upon
the direction of the Required Lenders, shall (in each case subject to the
Intercreditor Agreement) (i) accelerate the payment of all Obligations and
demand immediate payment thereof to Agent, for itself and the benefit of the
Secured Parties (provided, that, upon the occurrence of any Event of Default
described in Sections 10.1(g) and 10.1(h), all Obligations shall automatically
become immediately due and payable), (ii) with or without judicial process or
the aid or assistance of others, enter upon any premises on or in which any of
the Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(iii) require any Borrower or Guarantor, at Borrowers’ expense, to assemble and
make available to Agent any part or all of the Collateral at any place and time
designated by Agent, (iv) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, (v) remove any or all of the Collateral
from any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any other
purpose, (vi) sell, lease, transfer, assign, deliver or otherwise dispose of any
and all Collateral (including entering into contracts with respect thereto,
public or private sales at any exchange, broker’s board, at any office of Agent
or elsewhere) at such prices or terms as Agent may deem reasonable, for cash,
upon credit or for future delivery, with the Agent having the right to purchase
the whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of any Borrower or
Guarantor, which right or equity of redemption is hereby expressly waived and
released by Borrowers and Guarantors, (vii) give notice of sole control or any
other instruction under any Deposit Account Control Agreement (to the extent of
Agent’s authority therefor under such Deposit Account Control Agreement), and/or
(viii) terminate this Agreement. If any of the Collateral is sold or leased by
Agent upon credit terms or for future delivery, the Obligations shall not be
reduced as a result thereof until payment therefor is finally collected by
Agent. If notice of disposition of Collateral is required by law, ten (10) days’
prior notice by Agent to Administrative Borrower designating the time and place
of any public sale or the time after which any private sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable notice
thereof and Borrowers and Guarantors waive any other notice. In the event Agent
institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, each Borrower and Guarantor waives the
posting of any bond which might otherwise be required. Agent shall have no
obligation to clean-up or otherwise prepare the Collateral for sale. Agent and
each Lender shall use reasonable care with respect to the Collateral in its
possession or under its control. The Agent shall be deemed to have exercised
reasonable care in the custody and preservation of Collateral in its possession
if such Collateral is accorded treatment substantially equal to that which the
Agent accords its own property. Neither Agent nor any Lender shall have any
other duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of Agent or such Lender, or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto.

 

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(c)               At any time or times that an Event of Default has occurred and
is continuing, Agent may, in its discretion, and upon the direction of the
Required Lenders, Agent shall (in each case subject to the Intercreditor
Agreement), enforce the rights of any Borrower or any Guarantor against any
Account Debtor, secondary obligor or other obligor in respect of any of the
Accounts or other Receivables. Without limiting the generality of the foregoing,
Agent may, in its discretion, and upon the direction of the Required Lenders,
Agent shall (in each case subject to the Intercreditor Agreement), at such time
or times (i) notify any or all Account Debtors, secondary obligors or other
obligor in respect thereof that the Receivables have been assigned to Agent and
that Agent has a security interest therein and Agent may direct any or all
Account Debtors, secondary obligors and other obligors to make payment of
Receivables directly to Agent, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Receivables or other obligations included
in the Collateral and thereby discharge or release the Account Debtor or any
secondary obligors or other obligors in respect thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Receivables or
such other obligations, but without any duty to do so, and Agent and Lenders
shall not be liable for any failure to collect or enforce the payment thereof
nor for the negligence of its agents or attorneys with respect thereto and
(iv) take whatever other action Agent may deem necessary or desirable for the
protection of its interests and the interests of Lenders. At any time that an
Event of Default exists or has occurred and is continuing, at Agent’s request,
subject to the Intercreditor Agreement, all invoices and statements sent to any
Account Debtor shall state that the Accounts and such other obligations have
been assigned to Agent and are payable directly and only to Agent and any
Borrower shall deliver to Agent such originals of documents evidencing the sale
and delivery of goods or the performance of services giving rise to any Accounts
as Agent may reasonably require. Subject to the Intercreditor Agreement, in the
event any Account Debtor returns Inventory when an Event of Default exists or
has occurred and is continuing, Borrower shall, upon Agent’s request, hold the
returned Inventory in trust for Agent, segregate all returned Inventory from all
of its other property, dispose of the returned Inventory solely according to
Agent’s instructions, and not issue any credits, discounts or allowances with
respect thereto without Agent’s prior written consent.

 

 

 

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(d)               To the extent that applicable law imposes duties on Agent or
any Lender to exercise remedies in a commercially reasonable manner (which
duties cannot be waived under such law), each Borrower and Guarantor
acknowledges and agrees that it is not commercially unreasonable for Agent or
any Lender (i) to fail to incur expenses reasonably deemed significant by Agent
or any Lender to prepare Collateral for disposition or otherwise to complete raw
material or work in process into finished goods or other finished products for
disposition, (ii) to fail to obtain third party consents for access to
Collateral to be disposed of, or to obtain or, if not required by other law, to
fail to obtain consents of any Governmental Authority or other third party for
the collection or disposition of Collateral to be collected or disposed of,
(iii) to fail to exercise collection remedies against Account Debtors, secondary
obligors or other Persons obligated on Collateral or to remove liens or
encumbrances on or any adverse claims against Collateral, (iv) to exercise
collection remedies against Account Debtors and other Persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (v) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (vi) to contact other Persons, whether or not in the
same business as any Borrower or Guarantor, for expressions of interest in
acquiring all or any portion of the Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (ix) to dispose of assets in
wholesale rather than retail markets, (x) to disclaim disposition warranties,
such as title, possession or quiet enjoyment, (xi) to purchase insurance or
credit enhancements to insure Agent or Lenders against risks of loss, collection
or disposition of Collateral or to provide to Agent or Lenders a guaranteed
return from the collection or disposition of Collateral, or (xii) to the extent
deemed appropriate by Agent, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist Agent in the collection
or disposition of any of the Collateral. Each Borrower and Guarantor
acknowledges that the purpose of this Section is to provide non-exhaustive
indications of what actions or omissions by Agent or any Lender would not be
commercially unreasonable in the exercise by Agent or any Lender of remedies
against the Collateral and that other actions or omissions by Agent or any
Lender shall not be deemed commercially unreasonable solely on account of not
being indicated in this Section. Without limitation of the foregoing, nothing
contained in this Section shall be construed to grant any rights to any Borrower
or Guarantor or to impose any duties on Agent or Lenders that would not have
been granted or imposed by this Agreement or by applicable law in the absence of
this Section. Agent, on behalf of the Lenders, may comply with any applicable
state or federal law requirements in connection with a disposition of the
Collateral and compliance will not be considered to adversely affect the
commercial reasonableness of any sale of the Collateral.

 

(e)               [Reserved]

 

(f)                Agent may apply the cash proceeds of Collateral actually
received by Agent from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Agent may elect, whether or not then due. Borrower and Guarantors shall
remain liable to Agent and Lenders for the payment of any deficiency with
interest at the highest rate provided for herein and, subject to Section 9.22,
all costs and expenses of collection or enforcement, including attorneys’ fees
and expenses.

 

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(g)               Without limiting the foregoing, upon the occurrence of an
Event of Default, Agent may, at its option, establish such Reserves as Agent
determines without limitation or restriction, notwithstanding anything to the
contrary provided herein.

 

10.3          Borrowers’ and Guarantors’ Obligations Upon Default. Subject to
the Intercreditor Agreement, upon the request of Agent after the occurrence and
during the continuance of an Event of Default, each Borrower and Guarantor will:

 

(a)               assemble and make available to Agent the Collateral and all
books and records relating thereto at any place or places specified by Agent,
whether at a Borrower’s or Guarantor’s premises or elsewhere;

 

(b)               permit Agent, by Agent’s representatives and agents, to enter,
occupy and use any premises where all or any part of the Collateral, or the
books and records relating thereto, or both, are located, to take possession of
all or any part of the Collateral or the books and records relating thereto, or
both, to remove all or any part of the Collateral or the books and records
relating thereto, or both, and to conduct sales of the Collateral, without any
obligation to pay the Borrower or Guarantor for such use and occupancy.

 

10.4          Grant of Intellectual Property License. For the purpose of
enabling the Agent to exercise the rights and remedies under this Section 10 at
such time as Agent shall be lawfully entitled to exercise such rights and
remedies, each Borrower and Guarantor hereby (a) grants to Agent, for the
benefit of Agent and the Lenders, to the extent licensable and to the extent
that the same would not conflict with or, under applicable law and the terms of
such agreement, result in the invalidity or breach of any agreements (other than
any agreement between any Borrower or any Guarantor) or otherwise result in the
revocation, cancellation, abandonment, infringement, unenforceability,
misappropriation or dilution or impair the validity or enforceability, of any
rights in any Intellectual Property forming the subject thereof (including
rights to Intellectual Property which is the subject of Promotional Agreements),
an irrevocable, nonexclusive license (exercisable without payment of royalty or
other compensation to any Borrower or Guarantor) to use, license or sublicense
any Intellectual Property rights now owned or hereafter acquired by such
Borrower or Guarantor, and wherever the same may be located, and including in
such license access to all media in which any of the licensed items may be
recorded or stored and to all computer software and programs used for the
compilation or printout thereof and (b) irrevocably agrees that, subject to the
Intercreditor Agreement, Agent may sell any of such Borrower’s or Guarantor’s
Inventory directly to any person, including without limitation persons who have
previously purchased the Borrower’s or Guarantor’s Inventory from such Borrower
or Guarantor and in connection with any such sale or other enforcement of
Agent’s rights under this Agreement, may sell Inventory which bears any
trademark owned by or licensed to such Borrower or Guarantor and any Inventory
that is covered by any copyright owned by or licensed to such Borrower or
Guarantor and Agent may finish any work in process and affix any trademark owned
by or licensed to such Borrower or Guarantor and sell such Inventory as provided
herein.

 

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SECTION11.                        JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS;
GOVERNING LAW

 

11.1          Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.

 

(a)               The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York but
excluding any principles of conflicts of law or other rule of law that would
cause the application of the law of any jurisdiction other than the laws of the
State of New York.

 

(b)               Borrowers, Guarantors, Agent and Lenders irrevocably consent
and submit to the non-exclusive jurisdiction of the State of New York and the
State and Federal courts located in the Borough of Manhattan, County of New
York, State of New York and the United States District Court for the Southern
District of New York whichever Agent may elect, and waive any objection based on
venue or forum non conveniens with respect to any action instituted therein
arising under this Agreement or any of the other Financing Agreements or in any
way connected with or related or incidental to the dealings of the parties
hereto in respect of this Agreement or any of the other Financing Agreements or
the transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether in contract, tort, equity or otherwise, and agree
that any dispute with respect to any such matters shall be heard only in the
courts described above (except that Agent and Lenders shall have the right to
bring any action or proceeding against any Borrower or Guarantor or its or their
property in the courts of any other jurisdiction which Agent deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its
rights against any Borrower or Guarantor or its or their property).

 

(c)               Each Borrower and Guarantor hereby waives personal service of
any and all process upon it and consents that all such service of process may be
made by certified mail (return receipt requested) directed to its address for
notices pursuant to Section 13.3 and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the
U.S. mails, or, at Agent’s option, by service upon any Borrower or Guarantor (or
Administrative Borrower on behalf of such Borrower or Guarantor) in any other
manner provided under the rules of any such courts.

 

(d)               BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR IN ANY
WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR
THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.
BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT ANY BORROWER, ANY GUARANTOR, AGENT OR ANY LENDER
MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.

 

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(e)               Agent and Lenders shall not have any liability to any Borrower
or Guarantor (whether in tort, contract, equity or otherwise) for losses
suffered by such Borrower or Guarantor in connection with, arising out of, or in
any way related to the transactions or relationships contemplated by this
Agreement, or any act, omission or event occurring in connection herewith,
unless it is determined by a final and non-appealable judgment or court order
binding on such Agent or such Lender, as applicable, that the losses were the
result of acts or omissions constituting gross negligence or willful misconduct.
In any such litigation, Agent and Lenders shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement. Each
Borrower and Guarantor: (i) certifies that neither Agent, any Lender, nor any
representative, agent or attorney acting for or on behalf of Agent or any Lender
has represented, expressly or otherwise, that Agent and Lenders would not, in
the event of litigation, seek to enforce any of the waivers provided for in this
Agreement or any of the other Financing Agreements and (ii) acknowledges that in
entering into this Agreement and the other Financing Agreements, Agent and
Lenders are relying upon, among other things, the waivers and certifications set
forth in this Section 11.1 and elsewhere herein and therein.

 

11.2          Waiver of Notices. Each Borrower and Guarantor hereby expressly
waives demand, presentment, protest and notice of protest and notice of dishonor
with respect to any and all Instruments and Chattel Paper, included in or
evidencing any of the Obligations or the Collateral, and any and all other
demands and notices of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein. No notice to or demand on any Borrower or Guarantor which
Agent or any Lender may elect to give shall entitle such Borrower or Guarantor
to any other or further notice or demand in the same, similar or other
circumstances. Each Borrower and Guarantor hereby waives notice of the time and
place of any public sale or the time after which any private sale or other
disposition of all or any part of the Collateral may be made. To the extent such
notice may not be waived under applicable law, any notice made shall be deemed
reasonable if sent to the Borrowers and Guarantors, addressed as set forth in
Section 13.3, at least ten days prior to (i) the date of any such public sale or
(ii) the time after which any such private sale or other disposition may be
made.

 

11.3          Collateral Waivers. To the maximum extent permitted by applicable
law, each Borrower and Guarantor waives all claims, damages, and demands against
Agent or any Lender arising out of the repossession, retention or sale of the
Collateral, except such as arise solely out of the gross negligence, bad faith
or willful misconduct of Agent or such Lender as finally determined by a court
of competent jurisdiction. To the extent it may lawfully do so, each Borrower
and Guarantor absolutely and irrevocably waives and relinquishes the benefit and
advantage of, and covenants not to assert against Agent or any Lender, any
valuation, stay, appraisal, extension, moratorium, redemption or similar laws
and any and all rights or defenses it may have as a surety now or hereafter
existing which, but for this provision, might be applicable to the sale of any
Collateral made under the judgment, order or decree of any court, or privately
under the power of sale conferred by this Agreement, or otherwise.

 

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11.4          Amendments and Waivers.

 

(a)               NeitherSubject to Section 13.7(b), neither this Agreement nor
any other Financing Agreement nor any terms hereof or thereof may be amended,
waived, discharged or terminated unless such amendment, waiver, discharge or
termination is in writing signed by Agent and the Required Lenders or at Agent’s
option, by Agent with the authorization or consent of the Required Lenders, and,
other than with respect to any provision of Section 12 of this Agreement, by any
Borrower, and such amendment, waiver, discharge or termination shall be
effective and binding as to all Lenders only in the specific instance and for
the specific purpose for which given; except, that, no such amendment, waiver,
discharge or termination shall:

 

(i)                 reduce the Interest Rate (including by amendment of such
definition or any component definition) or any fees hereunder or the Fee Letter
or extend the time of payment of principal, interest or any fees or reduce the
principal amount hereunder of the Term Loan, in each case without the consent of
each Lender directly affected thereby;

 

(ii)              amend Maturity Date (including any component definition) in a
manner to extend, or extend any other date of scheduled payment without the
consent of each Lender directly affected thereby;

 

(iii)            modify the definition of Push Down Reserve or Sections 2.1(c)
or 2.2(a) or any other component definition of such sections in any manner to
reduce the amounts of mandatory prepayments due without the consent of each
Lender directly affected thereby;

 

(iv)             release a material portion of the Collateral (except as
expressly permitted or required hereunder or under any of the other Financing
Agreements or applicable law and except as permitted under Section 12.11(b)
hereof), without the consent of Agent and all of the Lenders;

 

(v)               reduce any percentage specified in the definition of Required
Lenders or amend the definition of Pro Rata Share without the consent of Agent
and all of Lenders;

 

(vi)             consent to the assignment or transfer by any Borrower or
Guarantor of any of their rights and obligations under this Agreement, without
the consent of Agent and all of Lenders;

 

(vii)          amend the definition of Borrowing Base, Borrowing Base II or any
component definition thereof if as a result thereof the amounts available to be
borrowed by any Borrower would be increased (or, in the case of Borrowing Base
II, the amount of required principal payments would be reduced), without the
consent of Agent and all Lenders, provided, that the foregoing shall not limit
the discretion of Agent to change, establish or eliminate any Reserves;

 

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(viii)        amend, modify or waive any provision of the definitions of
Increased Reporting Period, Term Loan Commitment, Compliance Period or ABL
Excess Availability, without the consent of Agent and all of the Lenders;

 

(ix)             [Reserved];

 

(x)               amend, modify or waive any provision of Section 6.4, without
the consent of Agent and all of the Lenders;

 

(xi)             except as authorized pursuant to 12.15, subordinate the
Obligations hereunder or the liens granted hereunder or under the other
Financing Agreements, to any other Indebtedness or lien, as the case may be
(except for the liens permitted in Section 9.8 hereof having priority by
operation of law), without the consent of Agent and all of the Lenders;

 

(xii)          [Reserved];

 

(xiii)        [Reserved];

 

(xiv)         amend, modify or waive any terms of this Section 11.4 hereof,
without the consent of Agent and all of the Lenders;

 

(xv)           increase the advance rates constituting part of the Borrowing
Base or Borrowing Base II beyond the levels specified in the definition of
Borrowing Base and Borrowing Base II, respectively (and with respect to any
advance rates specified therein as being “up to” a certain percentage, solely to
the extent such increase would increase such advance rate beyond such specified
percentage) without the consent of Agent and all of the Lenders; or

 

(xvi)         amend or modify any provision of Section 10.1 (exclusive of any
definitions set forth therein), without the consent of Agent and Required
Lenders (except that waivers of any provision of Section 10.1shall only require
the consent of the Required Lenders); or

 

(xvii)      amend the Intercreditor Agreement, without the consent of Agent and
Required Lenders.

 

(b)               Notwithstanding anything to the contrary contained in
Section 11.4(a) above, Agent may, in its discretion and without the consent of
the any LendersLender, amend or otherwise modify the Borrowing Base, Borrowing
Base II, the Reserves or any of their respective components which amendments or
modifications have the effect of increasing the Borrowing Base and Borrowing
Base II, decreasing the Reserves or otherwise increasing the amounts available
for borrowing hereunder to the extent that such amendment or modification is
made to undo changes made after the date hereof and restore the Borrowing Base,
Borrowing Base II, Reserves or other components thereof back to a level or
standard, as applicable, that exists on the date hereof if the reason for such
reduction or increase established after the date hereof no longer exists, as
determined by Agent.

 

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(c)               Agent and Lenders shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its or their
rights, powers and/or remedies unless such waiver shall be in writing and signed
as provided herein. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Agent or any Lender of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which Agent or any Lender would
otherwise have on any future occasion, whether similar in kind or otherwise.

 

(d)               Notwithstanding anything to the contrary contained in
Section 11.4(a) above, in connection with any amendment, waiver, discharge or
termination, in the event that any Lender whose consent thereto is required
shall fail to consent or fail to consent in a timely manner (such Lender being
referred to herein as a “Non-Consenting Lender”), but the consent of any other
Lenders to such amendment, waiver, discharge or termination that is required are
obtained, if any, then GACP shall have the right, but not the obligation, at any
time thereafter, and upon the exercise by GACP of such right, such
Non-Consenting Lender shall have the obligation, to sell, assign and transfer to
GACP or such Eligible Transferee as GACP may specify, the Term Loan Outstandings
or Term Loan Commitment of such Non-Consenting Lender and all rights and
interests of such Non-Consenting Lender pursuant thereto; provided, that, if
GACP does not exercise such right, and Administrative Borrower presents an
Eligible Transferee and requests in writing that GACP replace such
Non-Consenting Lender with such Eligible Transferee, then, subject to GACP’s
consent rights as Agent contained in the within definition of “Eligible
Transferee”, such Non-Consenting Lender shall have the obligation, to sell,
assign and transfer to such Eligible Transferee as Administrative Borrower has
specified, the Term Loan Outstandings and Term Loan Commitment of such
Non-Consenting Lender and all rights and interests of such Non-Consenting Lender
pursuant thereto. GACP shall provide the Non-Consenting Lender with prior
written notice of its intent to exercise its right under this Section, which
notice shall specify on date on which such purchase and sale shall occur. Such
purchase and sale shall be pursuant to the terms of an Assignment and Acceptance
(whether or not executed by the Non-Consenting Lender), except that on the date
of such purchase and sale, GACP, or such Eligible Transferee specified by GACP,
shall pay to the Non-Consenting Lender (except as GACP and such Non-Consenting
Lender may otherwise agree) the amount equal to: (i) the principal balance of
the Term Loan Outstandings held by the Non-Consenting Lender outstanding as of
the close of business on the Business Day immediately preceding the effective
date of such purchase and sale, plus (ii) amounts accrued and unpaid in respect
of interest and fees payable to the Non-Consenting Lender to the effective date
of the purchase (but in no event shall the Non-Consenting Lender be deemed
entitled to any early termination fee (including without limitation the Early
Termination Fee and any Make-Whole Amount)). Such purchase and sale shall be
effective on the date of the payment of such amount to the Non-Consenting
Lender, and the Term Loan Outstandings and Term Loan Commitment of the
Non-Consenting Lender shall terminate on such date and be transferred to such
Eligible Transferee.

 

(e)               The consent of Agent shall be required for any amendment,
waiver or consent affecting the rights or duties of Agent hereunder or under any
of the other Financing Agreements, in addition to the consent of the Lenders
otherwise required by this Section and the exercise by Agent of any of its
rights hereunder with respect to Reserves or Eligible Accounts, Eligible
Inventory, Eligible Equipment, Eligible Credit Card Receivables or Eligible
Intellectual Property shall not be deemed an amendment to the advance rates
provided for in this Section 11.4. Notwithstanding anything to the contrary
contained in Section 11.4(a) above, (i) in the event that Agent shall agree that
any items otherwise required to be delivered to Agent as a condition of the Term
Loan hereunder may be delivered after the date hereof, Agent may, in its
discretion, agree to extend the date for delivery of such items or take such
other action as Agent may deem appropriate as a result of the failure to receive
such items as Agent may determine or may waive any Event of Default as a result
of the failure to receive such items, in each case without the consent of any
Lender and (ii) Agent may consent to any change in the type of organization,
jurisdiction of organization or other legal structure of any Borrower, Guarantor
or any of their Subsidiaries and amend the terms hereof or of any of the other
Financing Agreements as may be necessary or desirable to reflect any such
change, in each case without the approval of any Lender.

 

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(f)                [Reserved].

 

11.5          Waiver of Counterclaims. Each Borrower and Guarantor waives all
rights to interpose any claims, deductions, setoffs or counterclaims of any
nature (other than compulsory counterclaims) in any action or proceeding with
respect to this Agreement, the Obligations, the Collateral or any matter arising
therefrom or relating hereto or thereto.

 

11.6          Indemnification. Each Borrower and Guarantor shall, jointly and
severally, indemnify and hold Agent and each Lender (other than Affiliated
Lenders), and their respective officers, directors, agents, employees, advisors
and counsel and their respective Affiliates (each such Person being an
“Indemnitee”), harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses (including reasonable and documented
out-of-pocket attorneys’ fees and expenses) imposed on, incurred by or asserted
against any of them in connection with any litigation, investigation, claim or
proceeding commenced or threatened related to the negotiation, preparation,
execution, delivery, enforcement, performance or administration of this
Agreement, any other Financing Agreements, or any undertaking or proceeding
related to any of the transactions contemplated hereby or any act, omission,
event or transaction related or attendant thereto, including amounts paid in
settlement, court costs, and the reasonable and documented out-of-pocket fees
and expenses of counsel except that Borrowers and Guarantors shall not have any
obligation under this Section 11.6 to indemnify an Indemnitee with respect to a
matter covered hereby resulting from the gross negligence, bad faith or willful
misconduct of such Indemnitee (but without limiting the obligations of Borrowers
or Guarantors as to any other Indemnitee). To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section may be unenforceable
because it violates any law or public policy, Borrowers and Guarantors shall pay
the maximum portion which it is permitted to pay under applicable law to Agent
and Lenders in satisfaction of indemnified matters under this Section. To the
extent permitted by applicable law, no Borrower or Guarantor shall assert, and
each Borrower and Guarantor hereby waives, any claim against any Indemnitee, on
any theory of liability for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any of the other Financing Agreements or any
undertaking or transaction contemplated hereby. Absent gross negligence, bad
faith or willful misconduct, no Indemnitee referred to above shall be liable for
any damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or
other information transmission systems in connection with this Agreement or any
of the other Financing Agreements or the transaction contemplated hereby or
thereby. All amounts due under this Section shall be payable upon demand. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement. This Section 11.6 shall not apply
with respect to Taxes other than any Taxes that represent losses, claims,
damages, etc. arising from any non-Tax claim.

 

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SECTION 12.                        THE AGENT

 

12.1          Appointment, Powers and Immunities. Each Secured Party irrevocably
designates, appoints and authorizes GACP to act as Agent hereunder and under the
other Financing Agreements, including the Intercreditor Agreement, with such
powers as are specifically delegated to Agent by the terms of this Agreement and
of the other Financing Agreements, together with such other powers as are
reasonably incidental thereto. Agent (a) shall have no duties or
responsibilities except those expressly set forth in this Agreement and in the
other Financing Agreements, and shall not by reason of this Agreement or any
other Financing Agreement be a trustee or fiduciary for any Secured Party;
(b) shall not be responsible to Secured Parties for any recitals, statements,
representations or warranties contained in this Agreement or in any of the other
Financing Agreements, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any other
Financing Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Financing Agreement
or any other document referred to or provided for herein or therein or for any
failure by any Borrower or any Guarantor or any other Person to perform any of
its obligations hereunder or thereunder; and (c) shall not be responsible to
Secured Parties for any action taken or omitted to be taken by it hereunder or
under any other Financing Agreement or under any other document or instrument
referred to or provided for herein or therein or in connection herewith or
therewith, except for its own gross negligence or willful misconduct as
determined by a final non-appealable judgment of a court of competent
jurisdiction. Agent may employ agents and attorneys in fact and shall not be
responsible for the negligence or misconduct of any such agents or attorneys in
fact selected by it in good faith. Agent may deem and treat the payee of any
note as the holder thereof for all purposes hereof unless and until the
assignment thereof pursuant to an agreement (if and to the extent permitted
herein) in form and substance satisfactory to Agent shall have been delivered to
and acknowledged by Agent.

 

12.2          Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) reasonably believed by it to be
genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by Agent. As to any matters
not expressly provided for by this Agreement or any other Financing Agreement,
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder or thereunder in accordance with instructions given by the
Required Lenders or all of Lenders as is required in such circumstance, and such
instructions of such Agents and any action taken or failure to act pursuant
thereto shall be binding on all Lenders.

 

12.3          Events of Default.

 

(a)               Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or an Event of Default or other failure of a condition
precedent to the Term Loan hereunder, unless and until Agent has actual
knowledge or same and has received written notice from a Lender or Borrower
specifying such Event of Default or any unfulfilled condition precedent, and
stating that such notice is a “Notice of Default or Failure of Condition” (each
a “Notice of Default or Failure of Condition”). In the event that Agent obtains
actual knowledge or receives such a Notice of Default or Failure of Condition,
Agent shall give prompt notice thereof to the Lenders. Agent shall (subject to
Section 12.7) take such action with respect to any such Event of Default or
failure of condition precedent as shall be directed by the Required Lenders to
the extent provided for herein; provided, that, unless and until Agent shall
have received such directions, Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to or by reason of
such Event of Default or failure of condition precedent, as it shall deem
advisable in the best interest of Lenders.

 

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(b)               Except with the prior written consent of Agent, no Secured
Party may assert or exercise any enforcement right or remedy in respect of the
Term Loan or other Obligations, as against any Borrower or Guarantor or any of
the Collateral or other property of any Borrower or Guarantor.

 

12.4          GACP in its Individual Capacity. At any time GACP (or any
successor acting as Agent) is a Lender hereunder, then with respect to its Term
Loan Commitment and its Term Loan Outstandings hereunder from time to time, if
any, so long as GACP (or such successor) shall be a Lender hereunder, it shall
have the same rights and powers hereunder as any other Lender and may exercise
the same as though it were not acting as Agent, and the term “Lender” or
“Lenders” shall, unless the context otherwise indicates, include GACP (or such
successor) in its individual capacity as Lender hereunder. GACP (and any
successor acting as Agent) and its Affiliates may (without having to account
therefor to any Lender) lend money to, make investments in and generally engage
in any kind of business with Borrowers (and any of its Subsidiaries or
Affiliates) as if it were not acting as Agent, and GACP and its Affiliates may
accept fees and other consideration from any Borrower or Guarantor and any of
its Subsidiaries and Affiliates for services in connection with this Agreement
or otherwise without having to account for the same to Lenders.

 

12.5          Indemnification.

 

(a)               Neither the Agent nor any of its Related Parties shall be (i)
liable for any action taken or omitted to be taken by such party or any of its
Related Parties under or in connection with this Agreement or the other
Financing Agreements (x) with the consent of or at the request of the Required
Lenders (or such other number or percentage of the Lenders as shall be
necessary, or as the Agent shall reasonably believe in good faith to be
necessary, under the circumstances as provided in the Financing Agreements)
(except to the extent the Agent or such Related Party shall have acted with
gross negligence or willful misconduct with respect thereto (such absence to be
presumed unless otherwise determined by a court of competent jurisdiction in a
final and non-appealable judgment)) or (y) in the absence of its own gross
negligence or willful misconduct (such absence to be presumed unless otherwise
determined by a court of competent jurisdiction by a final and non-appealable
judgment) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by any Loan Party or
any officer thereof contained in this Agreement or any other Financing Agreement
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Agent under or in connection with, this
Agreement or any other Financing Agreement or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Financing Agreement or for any failure of any Loan Party to perform
its obligations hereunder or thereunder.

 

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(b)               Lenders agree to indemnify Agent (to the extent not reimbursed
by Borrowers hereunder and without limiting any obligations of Borrowers
hereunder) ratably, in accordance with their Pro Rata Shares of the Term Loan,
for any and all claims of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against Agent (including by any Lender) arising out of
or by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other Financing Agreement or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that Agent is
obligated to pay hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided, that, no Lender shall be
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of the party to be indemnified as determined by
a final non-appealable judgment of a court of competent jurisdiction. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.

 

12.6          Non-Reliance on Agent and Other Lenders. Each Secured Party agrees
that it has, independently and without reliance on Agent or any other Secured
Party, and based on such documents and information as it has deemed appropriate,
made its own credit analysis of Borrowers and Guarantors and has made its own
decision to enter into this Agreement and that it will, independently and
without reliance upon Agent or any other Secured Party, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under this
Agreement or any of the other Financing Agreements. Agent shall not be required
to keep itself informed as to the performance or observance by any Borrower or
Guarantor of any term or provision of this Agreement or any of the other
Financing Agreements or any other document referred to or provided for herein or
therein or to inspect the properties or books of any Borrower or Guarantor.
Agent will use reasonable efforts to provide Lenders with any information
received by Agent from any Borrower or Guarantor which is required to be
provided to Lenders or deemed to be requested by Lenders hereunder and with a
copy of any Notice of Default or Failure of Condition received by Agent from any
Borrower or any Lender; provided, that, Agent shall not be liable to any Lender
for any failure to do so, except to the extent that such failure is attributable
to Agent’s own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction. Except for
notices, reports and other documents expressly required to be furnished to
Lenders by Agent or deemed requested by Lenders hereunder (including the
documents provided for in Section 12.10 hereof), Agent shall not have any duty
or responsibility to provide any Lender with any other credit or other
information concerning the affairs, financial condition or business of any
Borrower or Guarantor that may come into the possession of Agent.

 

12.7          Failure to Act. Except for action expressly required of Agent
hereunder and under the other Financing Agreements, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.

 

12.8          [Reserved]

 

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12.9          Concerning the Collateral and the Related Financing Agreements.
Each Secured Party authorizes and directs Agent to enter into this Agreement and
the other Financing Agreements. Each Secured Party agrees that any action taken
by Agent or Required Lenders in accordance with the terms of this Agreement or
the other Financing Agreements and the exercise by Agent or Required Lenders of
their respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all of the
Secured Parties.

 

12.10      Field Audit, Examination Reports and other Information; Disclaimer by
Lenders. By signing this Agreement, each Lender:

 

(a)               is deemed to have requested that Agent furnish such Lender
(and Agent agrees that it will furnish to such Lender), promptly after it
becomes available, a copy of each field audit or examination report and report
with respect to the Borrowing Base and Borrowing Base II prepared or received by
Agent (each field audit or examination report and report with respect to the
Borrowing Base and Borrowing Base II being referred to herein as a “Report” and
collectively, “Reports”), appraisals with respect to the Collateral and
financial statements with respect to Parent and its Subsidiaries received by
Agent;

 

(b)               expressly agrees and acknowledges that Agent (i) does not make
any representation or warranty as to the accuracy of any Report, appraisal or
financial statement or (ii) shall not be liable for any information contained in
any Report, appraisal or financial statement;

 

(c)               expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or any other party performing
any audit or examination will inspect only specific information regarding
Borrowers and Guarantors and will rely significantly upon Borrowers’ and
Guarantors’ books and records, as well as on representations of Borrowers’ and
Guarantors’ personnel; and

 

(d)               agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of Section 13.5 hereof, and not to
distribute or use any Report in any other manner.

 

12.11      Collateral Matters.

 

(a)               Agent may, at its option, from time to time, at any time on or
after an Event of Default and for so long as the same is continuing, make such
disbursements and advances (“Special Agent Advances”) which Agent, in its sole
discretion, (i) deems necessary or desirable either to preserve or protect the
Collateral or any portion thereof or (ii) to enhance the likelihood or maximize
the amount of repayment by Borrowers and Guarantors of the Term Loan and other
Obligations. All Special Agent Advances made pursuant to this Section 12.11
shall (i) be repaid within ninety (90) days after the date such Special Agent
Advance is made, except as Required Lenders may otherwise agree, (ii) be
repayable on demand and together with all interest thereon shall constitute
Obligations secured by the Collateral and (iii) bear interest at the rate
specified in clause (c)(ii) of the definition of “Interest Rate”. Without
limitation of its obligations pursuant to Section 6.11, each Lender agrees that
it shall make available to Agent, upon Agent’s demand, in immediately available
funds, the amount equal to such Lender’s Pro Rata Share of each such Special
Agent Advance. If such funds are not made available to Agent by such Lender,
such Lender shall be deemed a Defaulting Lender and Agent shall be entitled to
recover such funds, on demand from such Lender together with interest thereon
for each day from the date such payment was due until the date such amount is
paid to Agent at the Federal Funds Rate for each day during such period (as
published by the Federal Reserve Bank of New York or at Agent’s option based on
the arithmetic mean determined by Agent of the rates for the last transaction in
overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that
day by each of the three leading brokers of Federal funds transactions in New
York City selected by Agent) and if such amounts are not paid within three
(3) days of Agent’s demand, at the highest Interest Rate provided for in
Section 3.1 hereof.

 

149

 

 

(b)               Lenders hereby irrevocably authorize Agent, at its option and
in its discretion to release any security interest in, mortgage or lien upon,
any of the Collateral (i) upon termination of the Term Loan Commitments and
Payment in Full of the Obligations (other than indemnification and other
contingent obligations not yet accrued at such time), or (ii) constituting
property being sold or disposed of if Administrative Borrower or any Borrower or
Guarantor certifies to Agent that the sale or disposition is made in compliance
with Section 9.7 hereof (and Agent may rely conclusively on any such
certificate, without further inquiry), or (iii) constituting property in which
any Borrower or Guarantor did not own an interest at the time the security
interest, mortgage or lien was granted or at any time thereafter, or (iv) having
a value in the aggregate in any twelve (12) month period of less than
$1,000,000, and to the extent Agent may release its security interest in and
lien upon any such Collateral pursuant to the sale or other disposition thereof,
such sale or other disposition shall be deemed consented to by Lenders, or
(v) if required or permitted under the terms of any of the other Financing
Agreements, including any intercreditor agreement, or (vi) if approved,
authorized or ratified in writing by all of Lenders. Except as provided above,
Agent will not release any security interest in, mortgage or lien upon, any of
the Collateral without the prior written authorization of all of Lenders. Upon
request by Agent at any time, Lenders will promptly confirm in writing Agent’s
authority to release particular types or items of Collateral pursuant to this
Section.

 

(c)               Without in any manner limiting Agent’s authority to act
without any specific or further authorization or consent by the Required
Lenders, each Lender agrees to confirm in writing, upon request by Agent, the
authority to release Collateral conferred upon Agent under this Section. Agent
shall (and is hereby irrevocably authorized by Lenders to) execute such
documents as may be necessary to evidence the release of the security interest,
mortgage or liens granted to Agent upon any Collateral to the extent set forth
above; provided, that, (i) Agent shall not be required to execute any such
document on terms which, in Agent’s opinion, would expose Agent to liability or
create any obligations or entail any consequence other than the release of such
security interest, mortgage or liens without recourse or warranty and (ii) such
release shall not in any manner discharge, affect or impair the Obligations or
any security interest, mortgage or lien upon (or obligations of any Borrower or
Guarantor in respect of) the Collateral retained by such Borrower or Guarantor.

 

(d)               Agent shall have no obligation whatsoever to any Secured Party
or any other Person to investigate, confirm or assure that the Collateral exists
or is owned by any Borrower or Guarantor or is cared for, protected or insured
or has been encumbered, or that any particular items of Collateral meet the
eligibility criteria applicable in respect of the Term Loan hereunder, or
whether any particular Reserves are appropriate, or that the liens and security
interests granted to Agent pursuant hereto or any of the Financing Agreements or
otherwise have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to Agent in this Agreement or in any of the other Financing
Agreements, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, subject to the other terms and
conditions contained herein, Agent may act in any manner it may deem
appropriate, in its discretion, given Agent’s own interest in the Collateral as
a Lender and that Agent shall have no duty or liability whatsoever to any other
Lender.

 

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12.12      Agency for Perfection. Each Secured Party hereby appoints Agent and
each other Secured Party as agent and bailee for the purpose of perfecting the
security interests in and liens upon the Collateral of Agent in assets which, in
accordance with Article 9 of the UCC can be perfected only by possession (or
where the security interest of a secured party with possession has priority over
the security interest of another secured party) and Agent and each Secured Party
hereby acknowledges that it holds possession of any such Collateral for the
benefit of Agent as secured party. Should any Secured Party obtain possession of
any such Collateral, such Lender shall notify Agent thereof, and, promptly upon
Agent’s request therefor shall deliver such Collateral to Agent or in accordance
with Agent’s instructions.

 

12.13      Successor Agent. Agent may resign as Agent upon thirty (30) days’
notice to Lenders and Administrative Borrower. If Agent resigns under this
Agreement, the Required Lenders shall appoint from among the Lenders a successor
agent for Lenders. If no successor agent is appointed prior to the effective
date of the resignation of Agent, Agent may appoint, after consulting with
Lenders and Administrative Borrower, a successor agent from among Lenders and
Administrative Borrower. Upon the acceptance by the Lender so selected of its
appointment as successor agent hereunder, such successor agent shall succeed to
all of the rights, powers and duties of the retiring Agent and the term “Agent”
as used herein and in the other Financing Agreements shall mean such successor
agent and the retiring Agent’s appointment, powers and duties as Agent shall be
terminated. After any retiring Agent’s resignation hereunder as Agent, the
provisions of this Section 12 shall inure to its benefit as to any actions taken
or omitted by it while it was Agent under this Agreement. If no successor agent
has accepted appointment as Agent by the date which is thirty (30) days after
the date of a retiring Agent’s notice of resignation, the retiring Agent’s
resignation shall nonetheless thereupon become effective and Lenders shall
perform all of the duties of Agent hereunder until such time, if any, as the
Required Lenders appoint a successor agent as provided for above.

 

12.14      Other Agent Designations. Agent may at any time and from time to time
determine that a Lender may, in addition, be a “Co-Agent”, “Syndication Agent”,
“Documentation Agent” or similar designation hereunder and enter into an
agreement with such Lender to have it so identified for purposes of this
Agreement. Any such designation shall be effective upon written notice by Agent
to Administrative Borrower of any such designation. Any Lender that is so
designated as a Co-Agent, Syndication Agent, Documentation Agent or such similar
designation by Agent shall have no right, power, obligation, liability,
responsibility or duty under this Agreement or any of the other Financing
Agreements other than those applicable to all Lenders as such. Without limiting
the foregoing, the Lenders so identified shall not have or be deemed to have any
fiduciary relationship with any Lender and no Lender shall be deemed to have
relied, nor shall any Lender rely, on a Lender so identified as a Co-Agent,
Syndication Agent, Documentation Agent or such similar designation in deciding
to enter into this Agreement or in taking or not taking action hereunder.

 

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12.15      Intercreditor Agreement. Each Lender, by its acceptance of the
benefits of the Collateral Documents creating Liens to secure the Obligations:

 

(a)               acknowledges that it has received a copy of the Intercreditor
Agreement and is satisfied with the terms and provisions thereof;

 

(b)               authorizes and instructs Agent to (i) enter into the
Intercreditor Agreement, as Agent and on behalf of such Lender, (ii) to exercise
all of Agent’s rights and to comply with all of its obligations under the
Intercreditor Agreement and to take all other actions necessary to carry out the
provisions and intent thereof and (iii) to take actions on its behalf in
accordance with the terms of the Intercreditor Agreement;

 

(c)               agrees that it will be bound by and will take no actions
contrary to the provisions of the Intercreditor Agreement as if it was a
signatory thereto;

 

(d)               consents to the treatment of Liens provided for under the
Intercreditor Agreement and in furtherance thereof authorizes the Agent to
subordinate the liens on the Collateral securing the Obligations (other than
liens on Term Priority Collateral (as defined in the Intercreditor Agreement))
in accordance with the terms set forth in the Intercreditor Agreement;

 

(e)               authorizes and directs Agent to execute and deliver, in each
case on behalf of such Secured Party and without any further consent or
authorization from such Lender, any amendments, supplements or other
modifications of the Intercreditor Agreement that the Borrowers may from time to
time request to give effect to any incurrence, amendment, or refinancing of any
Indebtedness incurred pursuant to Section 9.9(t); and

 

(f)                agrees that no Lender shall have any right of action
whatsoever against Agent as a result of any action taken by Agent pursuant to
this Section 12.15 or in accordance with the terms of the Intercreditor
Agreement.

 

SECTION 13.                        TERM OF AGREEMENT; MISCELLANEOUS

 

13.1          Term.

 

(a)               This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the Maturity Date, unless sooner
terminated pursuant to the terms hereof. In addition, Borrowers may terminate
this Agreement at any time upon ten (10) days prior written notice to Agent (or
such shorter period as agreed to by Agent in its sole discretion) (which notice
shall be irrevocable, unless such notice is expressly conditioned on the
occurrence of another transaction) and Agent may, at its option, and shall at
the direction of Required Lenders, terminate this Agreement at any time upon the
occurrence and during the continuation of an Event of Default. Upon the Maturity
Date or any other effective date of termination of the Financing Agreements,
Borrowers shall pay all amounts and take all other actions necessary to cause
Payment in Full to occur. All such payments required to cause Payment in Full to
occur in respect of the Obligations and cash collateral shall be remitted by
wire transfer in Federal funds to the Agent Payment Account or such other bank
account of Agent, as Agent may, in its discretion, designate in writing to
Administrative Borrower for such purpose. Interest shall be due until and
including the next Business Day, if the amounts so paid by Borrowers to the
Agent Payment Account or other bank account designated by Agent are received in
such bank account later than 2:00 p.m., New York City time (or such later time
as Agent may agree in its sole discretion). Notwithstanding the above, Borrowers
shall pay to Agent all unpaid Term Loan Outstandings (including accrued and
unpaid interest thereon) on the Maturity Date.

 

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(b)               No termination of the Term Loan Commitments, this Agreement or
any of the other Financing Agreements shall relieve or discharge any Borrower or
Guarantor of its respective duties, obligations and covenants under this
Agreement or any of the other Financing Agreements until all Obligations (other
than indemnities and contingent Obligations which survive the termination of
this Agreement and the other Financing Agreements) have been fully and finally
discharged and paid, and Agent’s continuing security interest in the Collateral
and the rights and remedies of Agent and Lenders hereunder, under the other
Financing Agreements and applicable law, shall remain in effect until all such
Obligations (other than indemnities and contingent Obligations which survive the
termination of this Agreement and the other Financing Agreements) have been
fully and finally discharged and paid and Lenders have no further obligations
hereunder (other than indemnities and contingent Obligations which survive the
termination of this Agreement and the other Financing Agreements) (following
which all security interests and liens shall be released). Accordingly, each
Borrower and Guarantor waives any rights it may have under the UCC to demand the
filing of termination statements with respect to the Collateral and Agent shall
not be required to send such termination statements to Borrowers or Guarantors,
or to file them with any filing office, unless and until this Agreement and all
Term Loan Commitments of all Lenders shall have been terminated in accordance
with its terms and all Obligations (other than indemnities and contingent
Obligations which survive the termination of this Agreement and the other
Financing Agreements) paid and satisfied in full in immediately available funds.
Upon such termination, Agent will contemporaneously provide (assuming Agent has
received written notice a reasonable amount of time prior to such termination)
an appropriate payoff instrument, in form and substance reasonably satisfactory
to Agent, which shall, among other things, give Borrowers and Guarantors
authority to file appropriate UCC-3 termination statements.

 

13.2          Interpretative Provisions.

 

(a)               All terms used herein which are defined in Article 1,
Article 8 or Article 9 of the UCC shall have the meanings given therein unless
otherwise defined in this Agreement.

 

(b)               All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires.

 

(c)               All references to any Borrower, Guarantor, Agent and Lenders
pursuant to the definitions set forth in the recitals hereto, or to any other
Person herein, shall include their respective successors and assigns.

 

(d)               The words “hereof”, “herein”, “hereunder”, “this Agreement”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.

 

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(e)               The word “including” when used in this Agreement shall mean
“including, without limitation” and the word “will” when used in this Agreement
shall be construed to have the same meaning and effect as the word “shall”.

 

(f)                A Default or an Event of Default shall continue or be
continuing until such Default or Event of Default is waived in accordance with
Section 11.4 or is cured in a manner satisfactory to Agent; provided that, such
Event of Default is capable of being cured as determined by Agent.

 

(g)               All references to the term “good faith” used herein when
applicable to Agent or any Lender shall mean, notwithstanding anything to the
contrary contained herein or in the UCC, honesty in fact in the conduct or
transaction concerned. Borrowers and Guarantors shall have the burden of proving
any lack of good faith on the part of Agent or any Lender alleged by any
Borrower or Guarantor at any time.

 

(h)               Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Parent most recently received
by Agent prior to the date hereof. Notwithstanding anything to the contrary
contained in GAAP or any interpretations or other pronouncements by the
Financial Accounting Standards Board or otherwise, the term “unqualified
opinion” as used herein to refer to opinions or reports provided by accountants
shall mean an opinion or report that is unqualified and also does not include
any explanation, supplemental comment or other comment concerning the ability of
the applicable Person to continue as a going concern or the scope of the audit.

 

(i)                 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”.

 

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(j)                 Unless otherwise expressly provided herein, (i) references
herein to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.

 

(k)               The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.

 

(l)                 This Agreement and other Financing Agreements may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms.

 

(m)             This Agreement and the other Financing Agreements are the result
of negotiations among and have been reviewed by counsel to Agent and the other
parties, and are the products of all parties. Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Agent or Lenders
merely because of Agent’s or any Lender’s involvement in their preparation.

 

(n)               Unless the context of this Agreement or any other Financing
Agreement clearly requires otherwise, all references to a fiscal month, fiscal
quarter or fiscal year ending on a certain date shall be deemed to refer to the
fiscal month, fiscal quarter or fiscal year, respectively, of Parent ending on
or closest to such date; provided that this Section 13.2(n) shall not apply to
any references to fiscal months, fiscal quarters or fiscal years that are
expressly stated to relate to any Person other than a Loan Party or a Subsidiary
of a Loan Party.

 

13.3          Notices.

 

(a)               All notices, requests and demands hereunder shall be in
writing and deemed to have been given or made: (i) if delivered in Person,
immediately upon delivery; (ii) if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; (iii) if by
nationally recognized overnight courier service with instructions to deliver the
next Business Day, one (1) Business Day after sending; and (iv) if by certified
mail, return receipt requested, five (5) days after mailing. Notices delivered
through electronic communications shall be effective to the extent set forth in
Section 13.3(b) below. All notices, requests and demands upon the parties are to
be given to the following addresses (or to such other address as any party may
designate by notice in accordance with this Section) provided, however, that
notice of Default or Event of Default may only be given as set forth in (i) or
(iii) above:

 

If to any Borrower or Guarantor:

 

Vitamin Shoppe Industries LLC

c/o Vintage Capital Management

4705 S. Apopka Vineland Road, Suite 206

Orlando, FL 32819

Attn: Brian Kahn

Telecopy No.: (208) 728-8007

Email: bkahn@vintcap.com

 

with copies (which shall not constitute notice) to:

 

Vitamin Shoppe Industries LLC

c/o Franchise Group, Inc.

1716 Corporate Landing Parkway

Virginia Beach, VA 23454

Attn: Michael Piper, Chief Financial Officer

Email: Msp@libtax.com

 

and

 

155

 

 

Willkie Farr & Gallagher LLP

787 Seventh Avenue

New York, NY 10019

Attn: Jeffrey Goldfarb

Telecopy No.: (212) 728-9507

Email: jgoldfarb@willkie.com

 

If to Agent:

 

GACP Finance Co., LLC

11100 Santa Monica Blvd., Suite 800

Los Angeles, California 90025

Attn: Robert Louzan

Telephone No.: (203) 663-5101

Telecopy No.: (310) 966-1448

Email: rlouzan@gacapitalpartners.com

with a copy to:

 

Sidley Austin LLP

787 Seventh Avenue

New York, NY 10019

Attn: Leslie Plaskon

Telephone No.: (212) 839-5572

Telecopy No.: (212) 839-5599

Email: lplaskon@sidley.com

 

(b)               Notices and other communications hereunder may be delivered or
furnished by electronic communication (including e-mail and Internet or intranet
websites) pursuant to procedures approved by Agent or as otherwise determined by
Agent, provided, that, the foregoing shall not apply to notices to any Lender
pursuant to Section 2 hereof if such Lender has notified Agent that it is
incapable of receiving notices under such Section by electronic communication.
Unless Agent otherwise requires, (i) notices and other communications sent to an
e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement), provided, that, if such notice or other communication is not
given during the normal business hours of the recipient, such notice shall be
deemed to have been sent at the opening of business on the next Business Day for
the recipient, and (ii) notices or communications posted to an Internet or
intranet website shall be deemed received upon the deemed receipt by the
intended recipient at its e-mail address as described in the foregoing
clause (i) of notification that such notice or communications is available and
identifying the website address therefor.

 

(c)               Any party hereto may change its address, facsimile number or
e-mail address for notices and other communications hereunder by notice to the
other parties hereto.

 

156

 

 

13.4          Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.

 

13.5          Confidentiality.

 

(a)               Agent and each Lender shall use all reasonable efforts to keep
confidential, and shall use reasonable efforts to cause its agents (including
accountants, auditors and filed examiners) to keep confidential, in accordance
with its customary procedures for handling confidential information and safe and
sound lending practices, any non-public information supplied to it by any
Borrower pursuant to this Agreement, provided, that, nothing contained herein
shall limit the disclosure of any such information: (i) to the extent required
by statute, rule, regulation, subpoena or court order, (ii) to bank examiners
and other regulators, auditors and/or accountants, in connection with any
litigation to which Agent or such Lender is a party, (iii) to any Lender or
Participant (or prospective Lender or Participant), any Affiliate of any Lender,
any Lender’s investors or funding sources so long as such Lender, Participant
(or prospective Lender or Participant), Affiliate, investor or funding source
shall have been instructed to treat such information as confidential in
accordance with this Section 13.5, or (iv) to counsel for Agent, any Lender or
any Participant (or any prospective Lender or Participant). Agent and Lenders
shall not publicly disclose consummation of this Agreement prior to a public
disclosure of the same by Ultimate Parent, Parent or any of their respective
Affiliates.

 

(b)               In the event that Agent, any Lender receives a request or
demand to disclose any confidential information pursuant to any subpoena or
court order, Agent or such Lender, as the case may be, agrees (i) to the extent
permitted by applicable law or if permitted by applicable law, to the extent
Agent or such Lender determines in good faith that it will not create any risk
of liability to Agent or such Lender, Agent or such Lender will promptly notify
Administrative Borrower of such request so that Administrative Borrower may seek
a protective order or other appropriate relief or remedy and (ii) if disclosure
of such information is required, disclose such information and, subject to
reimbursement by Borrowers of Agent’s or such Lender’s expenses, cooperate with
Administrative Borrower in the reasonable efforts to obtain an order or other
reliable assurance that confidential treatment will be accorded to such portion
of the disclosed information which Administrative Borrower so designates, to the
extent permitted by applicable law or if permitted by applicable law, to the
extent Agent or such Lender determines in good faith that it will not create any
risk of liability to Agent or such Lender.

 

(c)               In no event shall this Section 13.5 or any other provision of
this Agreement, any of the other Financing Agreements or applicable law be
deemed: (i) to apply to or restrict disclosure of information that has been or
is made public by any Borrower, Guarantor or any third party or otherwise
becomes generally available to the public other than as a result of a disclosure
in violation hereof, (ii) to apply to or restrict disclosure of information that
was or becomes available to Agent or any Lender (or any Affiliate of any Lender)
on a non-confidential basis from a Person other than a Borrower or Guarantor,
(iii) to require Agent or any Lender to return any materials furnished by a
Borrower or Guarantor to Agent or a Lender or prevent Agent or a Lender from
responding to routine informational requests in accordance with applicable
industry standards relating to the exchange of credit information. The
obligations of Agent and Lenders under this Section 13.5 shall supersede and
replace the obligations of Agent and Lenders under any confidentiality letter
signed prior to the date hereof or any other arrangements concerning the
confidentiality of information provided by any Borrower or Guarantor to Agent or
any Lender.

 

157

 

 

(d)               Agent and Lenders may share with their respective Affiliates
any information relating to the Term Loan and Borrowers and Guarantors;
provided, that Agent and each Lender shall be responsible for any breach of this
Section 13.5 by its respective Affiliates. Agent and Lenders may disclose
information relating to the Term Loan to Gold Sheets and other similar bank
trade publications with such information to consist of deal terms and other
information customarily found in such publications. In addition, Agent and
Lenders and their respective Affiliates may otherwise use the corporate names,
logos and other insignia of Borrowers and Guarantors in “tombstones” or other
advertisements or public statements or other marketing materials of Agent and
Lenders and their respective Affiliates.

 

13.6          Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Agent, Secured Parties, Borrowers,
Guarantors and their respective successors and assigns, except that no Borrower
may assign its rights under this Agreement, the other Financing Agreements and
any other document referred to herein or therein without the prior written
consent of Agent and Lenders. Any such purported assignment without such express
prior written consent shall be void. No Secured Party may assign its rights and
obligations under this Agreement unless such assignment is in compliance with
Section 13.7. The terms and provisions of this Agreement and the other Financing
Agreements are for the purpose of defining the relative rights and obligations
of Borrowers, Guarantors, Agent and Secured Parties with respect to the
transactions contemplated hereby and there shall be no third party beneficiaries
of any of the terms and provisions of this Agreement or any of the other
Financing Agreements.

 

13.7          Assignments; Participations.

 

(a)               Each Lender may, with the prior written consent of Agent as
required pursuant to the within definition of “Eligible Transferee”, assign all
or, if less than all, a portion equal to at least $5,000,000 in the aggregate
for the assigning Lender, of such rights and obligations under this Agreement to
one or more Eligible Transferees (but not including for this purpose any
assignments in the form of a participation), each of which assignees shall
become a party to this Agreement as a Lender by execution of an Assignment and
Acceptance; provided, that, (i) such transfer or assignment will not be
effective until recorded by Agent on the Register and (ii) Agent shall have
received for its sole account payment of a processing fee from the assigning
Lender or the assignee in the amount of $5,000.

 

(b)               On the First Amendment Effective Date, GACP II, LP, as a
Lender, may assign to an Affiliated Lender, on a non-pro rata basis, a portion
of its rights and obligations under this Agreement in the aggregate principal
amount of $5,325,000 (such assignment, and the rights and obligations assigned
thereby, the “Affiliated Lender Loan Holdings”), subject to the following
limitations:

 

(i)                 No Affiliated Lender will receive information provided
solely to Lenders by the Agent or any Lender and will not be permitted to attend
or participate in conference calls or meetings attended solely by the Lenders
and the Agent, other than the right to receive administrative notices in respect
of its Term Loan Outstandings required to be delivered to Lenders and financial
statements and reports delivered to Lenders;

 

158

 

 

(ii)              GACP II, LP, as assigning Lender, and such Affiliated Lender
purchasing such Lender’s Term Loan Outstandings, shall execute and deliver to
the Agent an Assignment and Acceptance dated as of the First Amendment Effective
Date; provided, that no Person other than GACP II, LP, as assigning Lender, such
Affiliated Lender, as assignee, and Agent shall be required to consent to such
assignment;

 

(iii)            notwithstanding anything to the contrary contained herein, an
Affiliated Lender that has purchased Term Loan Outstandings pursuant to this
subsection (b) may, in its sole discretion, contribute, assign or transfer,
directly or indirectly, such Term Loan Outstandings or any portion thereof to
the Borrowers for the purpose of cancelling and extinguishing such Term Loan
Outstandings. Upon the date of such contribution, assignment or transfer, (x)
the aggregate Term Loan Outstandings shall reflect such cancellation and
extinguishing of the Term Loan Outstandings then held by the Borrowers and (y)
the Borrowers shall promptly provide notice to the Agent of such contribution,
assignment or transfer of such Term Loan Outstandings, and the Agent, upon
receipt of such notice, shall reflect the cancellation of the applicable Term
Loan Outstandings in the Register;

 

(iv)             notwithstanding anything to the contrary contained herein or in
any other Financing Agreements, if a proceeding under the United States
Bankruptcy Code or any similar statute shall be commenced by or against any
Borrower or any other Loan Party at a time when any Affiliated Lender is a
Lender hereunder, each Affiliated Lender irrevocably authorizes and empowers the
Agent to vote on behalf of such Affiliated Lender with respect to the Term Loan
Outstandings held by such Affiliated Lender in the manner in which the Required
Lenders vote hereunder, or in the absence of a vote of the Required Lenders, in
the Agent’s sole discretion; and

 

(v)               notwithstanding anything to the contrary contained herein or
in any other Financing Agreements, the Pro Rata Share of the then outstanding
Obligations of any Affiliated Lender shall not be included in determining
whether all Lenders or the Required Lenders or all affected Lenders have taken
or may take any action hereunder (including any consent to any amendment or
waiver pursuant to Section 11.4). No Lender shall take any action hereunder
(including any consent to any amendment or waiver pursuant to Section 11.4) that
affects the Affiliated Lenders solely in their capacity as a Lender hereto in a
disproportionately adverse manner relative to any other Lenders. For the
avoidance of doubt, the immediately preceding sentence shall not be interpreted
to limit in any manner any action or inaction under Section 10.2 by Agent and
Lenders herein or any other rights in respect to remedies in any other Financing
Agreements.

 

(c)               (b) Agent, acting for this purpose as anyan agent of the
Borrowers, shall maintain at one of its offices a register of the names and
addresses of the Lenders, the Lender’sLenders’ Term Loan CommitmentCommitments
and the Term Loan Outstandings owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). Agent shall also maintain a copy of
each Assignment and Acceptance delivered to and accepted by it and shall modify
the Register to give effect to each Assignment and Acceptance. The entries in
the Register shall be conclusive and binding for all purposes, absent manifest
error, and any Borrowers, Guarantors, Agent and Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement. The Register shall be available for inspection by Administrative
Borrower and any Lender at any reasonable time and from time to time upon
reasonable prior notice.

 

159

 

 

(d)               (c) Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in each Assignment and Acceptance,
the assignee thereunder shall be a party hereto and to the other Financing
Agreements and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and thereunder and the assigning Lender shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement but shall continue to be
entitled to the benefits of Sections 3.4 and 11.6).

 

(e)               (d) By execution and delivery of an Assignment and Acceptance,
the assignor and assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, the assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any of the other Financing Agreements or the execution, legality,
enforceability, genuineness, sufficiency or value of this Agreement or any of
the other Financing Agreements furnished pursuant hereto; (ii) the assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower, Guarantor or any of their
Subsidiaries or the performance or observance by any Borrower or Guarantor of
any of the Obligations; (iii) such assignee confirms that it has received a copy
of this Agreement and the other Financing Agreements, together with such other
documents and information it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the assigning Lender or
Agent and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Financing Agreements; (v) such
assignee appoints and authorizes Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Financing
Agreements as are delegated to Agent by the terms hereof and thereof, together
with such powers as are reasonably incidental thereto; and (vi) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement and the other Financing
Agreements are required to be performed by it as a Lender. Agent and Lenders may
furnish any information concerning any Borrower or Guarantor in the possession
of Agent or any Lender from time to time to assignees and Participants.

 

(f)                (e) Each Lender may sell participations to one or more banks
or other entities in or to all or a portion of its rights and obligations under
this Agreement and the other Financing Agreements; provided, that, (i) such
Lender’s obligations under this Agreement (including, without limitation, its
Term Loan Commitment hereunder) and the other Financing Agreements shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, and Borrowers, Guarantors, the
other Lenders and Agent shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement and the other Financing Agreements, (iii) the Participant shall not
have any rights under this Agreement or any of the other Financing Agreements
(the Participant’s rights against such Lender in respect of such participation
to be those set forth in the agreement executed by such Lender in favor of the
Participant relating thereto) and all amounts payable by any Borrower or
Guarantor hereunder shall be determined as if such Lender had not sold such
participation, and (iv) the Participant (unless an Affiliate of a Lender
granting such participation) shall not be entitled to require such Lender to
take or omit to take any action hereunder except with respect to any amendment,
modification or waiver that would extend the final scheduled maturity of the
Term Loan, reduce the rate or extend the time for payment of interest or fees
thereon (except in connection with a waiver of applicability of any post default
increase in interest rates) or reduce the principal amount of the Term Loan or
increase the amount of the Participant’s participation over the amount thereof
then in effect (it being understood that a waiver of any Default or Event of
Default or a change in the Borrowing Base or Borrowing Base II (in each case, or
any component definitions thereof) or the calculation thereof shall not
constitute a change in the terms of such participation, and that any increase in
the Term Loan Commitment or Term Loan Outstandings shall be permitted without
the consent of any Participant if the Participant’s participation is not
increased as a result thereof). The Borrowers hereby agree that each Participant
shall be entitled to the benefits of Section 3.3 and Section 6.5 (subject to the
requirements and limitations therein, including the requirements under Section
6.5(f) (it being understood that the documentation required under Section 6.5(f)
shall be delivered to the participating Lender)) to the same extent as if it
were a Lender and had acquired its interest by assignment pursuant to paragraph
(a) of this Section; provided that such Participant (A) agrees to be subject to
the provisions of Section 6.5(g) as if it were an assignee under paragraph (a)
of this Section and (B) shall not be entitled to receive any greater payment
under Section 3.3 and Section 6.5, with respect to any participation, than its
participating Lender would have been entitled to receive, except to the extent
such entitlement to receive a greater payment results from a change in law that
occurs after the Participant acquired the applicable participation.

 

160

 

 

(g)               (f) Nothing in this Agreement shall prevent or prohibit any
Lender from pledging its Pro Rata Share of the Term Loan Outstandings hereunder
to a Federal Reserve Bank in support of borrowings made by such Lenders from
such Federal Reserve Bank; provided, that, no such pledge shall release such
Lender from any of its obligations hereunder or substitute any such pledgee for
such Lender as a party hereto.

 

(h)               (g) Borrowers and Guarantors shall assist Agent or any Lender
permitted to sell assignments or participations under this Section 13.7 in
whatever manner reasonably necessary in order to enable or effect any such
assignment or participation, including (but not limited to) the execution and
delivery of any and all agreements, notes and other documents and instruments as
shall be reasonably requested and the delivery of informational materials,
appraisals or other documents as shall be reasonably requested for, and the
participation of relevant management in meetings and conference calls as shall
be reasonably requested with, potential Lenders or Participants. Borrowers shall
certify the correctness, completeness and accuracy, in all material respects, of
all descriptions of Borrowers and Guarantors and their affairs provided,
prepared or reviewed by any Borrower or Guarantor that are contained in any
selling materials and all other information provided by it and included in such
materials.

 

13.8          Intercreditor Agreement. Each Lender hereby agrees that it will be
bound by and will take no actions contrary to the provisions of the
Intercreditor Agreement or any intercreditor agreement entered into in
accordance with the terms of this Agreement and hereby authorizes and instructs
the Agent to enter into the Intercreditor Agreement and each other intercreditor
agreement and to subject the security interest and the Obligations to the
provisions thereof.

 

 

161

 

 

13.9          Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.

 

13.10      USA Patriot Act. Each Lender subject to the USA PATRIOT Act
(Title III of Pub.L. 107-56 (signed into law October 26, 2001)) (the “Act”)
hereby notifies Borrowers and Guarantors that pursuant to the requirements of
the Act, it is required to obtain, verify and record information that identifies
each Person or corporation who opens an account and/or enters into a business
relationship with it, which information includes the name and address of
Borrowers and Guarantors and other information that will allow such Lender to
identify such Person in accordance with the Act and any other applicable law.
Borrowers and Guarantors are hereby advised that the making of the Term Loan
hereunder is subject to satisfactory results of such verification.

 

13.11      Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile or other electronic method of
transmission shall have the same force and effect as the delivery of an original
executed counterpart of this Agreement or any of such other Financing
Agreements. Any party delivering an executed counterpart of any such agreement
by telefacsimile or other electronic method of transmission shall also deliver
an original executed counterpart, but the failure to do so shall not affect the
validity, enforceability or binding effect of such agreement.

 

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13.12      Intercreditor Agreement. This Agreement and the other Financing
Agreements are subject to the terms and conditions set forth in the
Intercreditor Agreement in all respects and, in the event of any conflict
between the terms of the Intercreditor Agreement and this Agreement, the terms
of the Intercreditor Agreement shall govern. Notwithstanding anything herein to
the contrary, the lien and security interest granted to the Agent or the ABL
Agent, as applicable, pursuant to any Financing Agreement or ABL Loan Document,
and the exercise of any right or remedy in respect of the Collateral by the
Agent or the ABL Agent, as applicable hereunder, under any other Financing
Agreement, or under the ABL Credit Agreement and any other agreement entered
into in connection therewith are subject to the provisions of the Intercreditor
Agreement and in the event of any conflict between the terms of the
Intercreditor Agreement, this Agreement, any other Financing Agreement, the ABL
Credit Agreement and any other agreement entered into in connection therewith,
the terms of the Intercreditor Agreement shall govern and control with respect
to the exercise of any such right or remedy or the Loan Parties’ covenants and
obligations.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

 

 

 

 

 

 

 

163

 

 

IN WITNESS WHEREOF, Agent, Lenders, Borrowers and Guarantors have caused these
presents to be duly executed as of the day and year first above written.

 

BORROWERS

 

VITAMIN SHOPPE INDUSTRIES LLC

 

By: Valor Acquisition, LLC, its sole member

 
By: ______________________________________
Name: ____________________________________
Title: _____________________________________

 
VITAMIN SHOPPE MARINER, LLC

 

By: Vitamin Shoppe Industries LLC, its sole member
By: Valor Acquisition, LLC, its sole member

 

By: ______________________________________
Name: ____________________________________
Title: _____________________________________

 
VITAMIN SHOPPE GLOBAL, LLC

 

By: Vitamin Shoppe Industries LLC, its sole member
By: Valor Acquisition, LLC, its sole member

 

By: ______________________________________
Name: ____________________________________
Title: _____________________________________

 

164

 

 

VITAMIN SHOPPE FLORIDA, LLC

 

By: Vitamin Shoppe Industries LLC, its sole member
By: Valor Acquisition, LLC, its sole member

 

By: ______________________________________
Name: ____________________________________
Title: _____________________________________

 
BETANCOURT SPORTS NUTRITION, LLC

 

By: Vitamin Shoppe Industries LLC, its sole member
By: Valor Acquisition, LLC, its sole member

 

By: ______________________________________
Name: ____________________________________
Title: _____________________________________

 
VITAMIN SHOPPE PROCUREMENT SERVICES, LLC

 

By: Vitamin Shoppe Industries LLC, its sole member
By: Valor Acquisition, LLC, its sole member

 

By: ______________________________________
Name: ____________________________________
Title: _____________________________________

 

GUARANTOR:

 

VALOR ACQUISITION, LLC

 

By: ______________________________________
Name: ____________________________________
Title: _____________________________________

 

[SIGNATURES CONTINUED ON NEXT PAGE]

 

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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

 

AGENT

 

GACP FINANCE CO., LLC,

as Agent

 

By: ______________________________________
Name:
Title: Authorized Officer

 

LENDERS

 

GACP II, LP,

as a Lender

 

By: ______________________________________
Name:
Title: Authorized Officer

 

 

 

 

 

 

 

 

 

 

 

166

 

 

Schedule 1

 

TERM LOAN COMMITMENT

(AS OF THE CLOSING DATE)

 

Lender Term Loan Commitment GACP II, LP $70,000,000.00 Total $70,000,000.00

 

 

 

 

 

 

 

 

 

 

 

 

Schedule 1-1