Document:

exh_101.htm

EXHIBIT 10.1

 

	  

EXECUTION VERSION

 

CREDIT AGREEMENT

 

by and among

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

 

as Administrative Agent,

 

THE LENDERS THAT ARE PARTIES HERETO

 

as the Lenders,

 

and

 

MEDICAL ACTION INDUSTRIES INC.,

 

as Borrower

 

Dated as of May 17, 2013

 

	  

                                                                                                                                                                                                             

  

  

  

TABLE OF CONTENTS

	 	 	Page
	 	 	 
	
1.

	
DEFINITIONS AND CONSTRUCTION.

	
1

	  	
1.1

	
Definitions

	
1

	  	
1.2

	
Accounting Terms

	
1

	  	
1.3

	
Code

	
1

	  	
1.4

	
Construction

	
1

	  	
1.5

	
Time References

	
2

	  	
1.6

	
Schedules and Exhibits

	
2

	
2.

	
LOANS AND TERMS OF PAYMENT.

	
3

	  	
2.1

	
Revolving Loans.

	
3

	  	
2.2

	
Term Loan and Delayed Draw Term Loan.

	
3

	  	
2.3

	
Borrowing Procedures and Settlements.

	
4

	  	
2.4

	
Payments; Reductions of Commitments; Prepayments.

	
10

	  	
2.5

	
Promise to Pay; Promissory Notes.

	
15

	  	
2.6

	
Interest Rates and Letter of Credit Fee:  Rates, Payments, and Calculations.

	
15

	  	
2.7

	
Crediting Payments

	
16

	  	
2.8

	
Designated Account

	
17

	  	
2.9

	
Maintenance of Loan Account; Statements of Obligations

	
17

	  	
2.10

	
Fees.

	
17

	  	
2.11

	
Letters of Credit.

	
18

	  	
2.12

	
LIBOR Option.

	
24

	  	
2.13

	
Capital Requirements.

	
25

	  	
2.14

	
Accordion.

	
26

	
3.

	
CONDITIONS; TERM OF AGREEMENT.

	
28

	  	
3.1

	
Conditions Precedent to the Initial Extension of Credit

	
28

	  	
3.2

	
Conditions Precedent to all Extensions of Credit

	
28

	  	
3.3

	
Maturity

	
28

	  	
3.4

	
Effect of Maturity

	
28

	  	
3.5

	
Early Termination by Borrower

	
29

	  	
3.6

	
Conditions Subsequent

	
29

	
4.

	
REPRESENTATIONS AND WARRANTIES.

	
29

	  	
4.1

	
Due Organization and Qualification; Subsidiaries.

	
29

	  	
4.2

	
Due Authorization; No Conflict.

	
30

	  	
4.3

	
Governmental Consents

	
30

	  	
4.4

	
Binding Obligations; Perfected Liens.

	
30

	  	
4.5

	
Title to Assets; No Encumbrances

	
30

	  	
4.6

	
Litigation.

	
31

	  	
4.7

	
Compliance with Laws

	
31

	  	
4.8

	
No Material Adverse Effect

	
31

	  	
4.9

	
Solvency.

	
31

	  	
4.10

	
Employee Benefits.

	
31

	  	
4.11

	
Environmental Condition

	
32

	  	
4.12

	
Complete Disclosure

	
32

	  	
4.13

	
Patriot Act

	
33

	  	
4.14

	
Indebtedness

	
33

	  	
4.15

	
Payment of Taxes

	
33

	  	
4.16

	
Margin Stock

	
33

 

  

- ii -

  

TABLE OF CONTENTS

(continued)

 

	 	 	 	Page
	 	 	 	 
	
 

	
4.17

	
Governmental Regulation

	
33

	  	
4.18

	
OFAC

	
33

	  	
4.19

	
Employee and Labor Matters

	
33

	  	
4.20

	
Material Contracts

	
34

	  	
4.21

	
Leases

	
34

	  	
4.22

	
Eligible Accounts

	
34

	  	
4.23

	
Eligible Inventory

	
34

	  	
4.24

	
Location of Inventory and Equipment

	
34

	  	
4.25

	
Inventory Records

	
34

	  	
4.26

	
Eligible Equipment

	
34

	  	
4.27

	
Hedge Agreements

	
34

	  	
4.28

	
Casualty

	
34

	
5.

	
AFFIRMATIVE COVENANTS.

	
35

	  	
5.1

	
Financial Statements, Reports, Certificates

	
35

	  	
5.2

	
Reporting

	
35

	  	
5.3

	
Existence

	
35

	  	
5.4

	
Maintenance of Properties

	
35

	  	
5.5

	
Taxes

	
35

	  	
5.6

	
Insurance

	
35

	  	
5.7

	
Inspection.

	
36

	  	
5.8

	
Compliance with Laws

	
36

	  	
5.9

	
Environmental.  Borrower will, and will cause each of its Subsidiaries to,

	
36

	  	
5.10

	
Disclosure Updates

	
37

	  	
5.11

	
Formation of Subsidiaries

	
37

	  	
5.12

	
Further Assurances

	
37

	  	
5.13

	
Lender Meetings

	
38

	  	
5.14

	
Location of Inventory and Equipment

	
38

	  	
5.15

	
Bank Products

	
38

	  	
5.16

	
Hedge Agreements.

	
38

	  	
5.17

	
Compliance with ERISA and the IRC

	
38

	  	
5.18

	
Assignable Material Contracts

	
39

	
6.

	
NEGATIVE COVENANTS.

	
39

	  	
6.1

	
Indebtedness

	
39

	  	
6.2

	
Liens

	
39

	  	
6.3

	
Restrictions on Fundamental Changes

	
39

	  	
6.4

	
Disposal of Assets

	
39

	  	
6.5

	
Nature of Business

	
40

	  	
6.6

	
Prepayments and Amendments

	
40

	  	
6.7

	
Restricted Payments

	
40

	  	
6.8

	
Accounting Methods

	
41

	  	
6.9

	
Investments

	
41

	  	
6.10

	
Transactions with Affiliates

	
41

	  	
6.11

	
Use of Proceeds

	
41

	  	
6.12

	
Limitation on Issuance of Equity Interests

	
41

	  	
6.13

	
Inventory with Bailees

	
42

	  	
6.14

	
Employee Benefits

	
42

	
7.

	
FINANCIAL COVENANTS.

	
42

	
8.

	
EVENTS OF DEFAULT.

	
43

	  	
8.1

	
Payments

	
43

 

  

- iii -

  

TABLE OF CONTENTS

(continued)

 

	 	 	 	Page
	 	 	 	 
	  	
8.2

	
Covenants.  If any Loan Party or any of its Subsidiaries:

	
43

	  	
8.3

	
Judgments

	
43

	  	
8.4

	
Voluntary Bankruptcy, etc.

	
44

	  	
8.5

	
Involuntary Bankruptcy, etc.

	
44

	  	
8.6

	
Default Under Other Agreements

	
44

	  	
8.7

	
Representations, etc.

	
44

	  	
8.8

	
Guaranty

	
44

	  	
8.9

	
Security Documents

	
44

	  	
8.10

	
Loan Documents

	
44

	  	
8.11

	
Change of Control

	
44

	  	
8.12

	
ERISA

	
44

	
9.

	
RIGHTS AND REMEDIES.

	
44

	  	
9.1

	
Rights and Remedies

	
44

	  	
9.2

	
Remedies Cumulative

	
45

	
10.

	
WAIVERS; INDEMNIFICATION.

	
45

	  	
10.1

	
Demand; Protest; etc.

	
45

	  	
10.2

	
The Lender Group’s Liability for Collateral

	
45

	  	
10.3

	
Indemnification

	
46

	
11.

	
NOTICES.

	
46

	
12.

	
CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; JUDICIAL REFERENCE PROVISION.

	
47

	
13.

	
ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.

	
50

	  	
13.1

	
Assignments and Participations.

	
50

	  	
13.2

	
Successors

	
53

	
14.

	
AMENDMENTS; WAIVERS.

	
53

	  	
14.1

	
Amendments and Waivers.

	
53

	  	
14.2

	
Replacement of Certain Lenders.

	
55

	  	
14.3

	
No Waivers; Cumulative Remedies

	
55

	
15.

	
AGENT; THE LENDER GROUP.

	
55

	  	
15.1

	
Appointment and Authorization of Agent

	
55

	  	
15.2

	
Delegation of Duties

	
56

	  	
15.3

	
Liability of Agent

	
56

	  	
15.4

	
Reliance by Agent

	
56

	  	
15.5

	
Notice of Default or Event of Default

	
57

	  	
15.6

	
Credit Decision

	
57

	  	
15.7

	
Costs and Expenses; Indemnification

	
57

	  	
15.8

	
Agent in Individual Capacity

	
58

	  	
15.9

	
Successor Agent

	
58

	  	
15.10

	
Lender in Individual Capacity

	
58

	  	
15.11

	
Collateral Matters.

	
59

	  	
15.12

	
Restrictions on Actions by Lenders; Sharing of Payments.

	
60

	  	
15.13

	
Agency for Perfection

	
60

	  	
15.14

	
Payments by Agent to the Lenders

	
60

	  	
15.15

	
Concerning the Collateral and Related Loan Documents

	
61

	  	
15.16

	
Field Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information

	
61

 

  

- iv -

  

TABLE OF CONTENTS

(continued)

 

	 	 	 	Page
	 	 	 	 
	  	
15.17

	
Several Obligations; No Liability

	
61

	
16.

	
WITHHOLDING TAXES.

	
62

	  	
16.1

	
Payments

	
62

	  	
16.2

	
Exemptions.

	
62

	  	
16.3

	
Reductions.

	
63

	  	
16.4

	
Refunds

	
64

	
17.

	
GENERAL PROVISIONS.

	
64

	  	
17.1

	
Effectiveness

	
64

	  	
17.2

	
Section Headings

	
64

	  	
17.3

	
Interpretation

	
64

	  	
17.4

	
Severability of Provisions

	
64

	  	
17.5

	
Bank Product Providers

	
64

	  	
17.6

	
Debtor-Creditor Relationship

	
65

	  	
17.7

	
Counterparts; Electronic Execution

	
65

	  	
17.8

	
Revival and Reinstatement of Obligations; Certain Waivers

	
65

	  	
17.9

	
Confidentiality.

	
65

	  	
17.10

	
Survival

	
66

	  	
17.11

	
Patriot Act

	
67

	  	
17.12

	
Integration

	
67

  

- v -

  

EXHIBITS AND SCHEDULES

 

	
Exhibit A-1

	
Form of Assignment and Acceptance

	
Exhibit B-1

	
Form of Borrowing Base Certificate

	
Exhibit C-1

	
Form of Compliance Certificate

	
Exhibit L-1

	
Form of LIBOR Notice

	
Exhibit P-1

	
Form of Perfection Certificate

	
Exhibit 3.6

	
Form of Carrier, Freight Forwarder/Customs Broker Agreement

	  	  
	
Schedule A-1

	
Agent’s Account

	
Schedule A-2

	
Authorized Persons

	
Schedule C-1

	
Commitments

	
Schedule D-1

	
Designated Account

	
Schedule P-1

	
Permitted Investments

	
Schedule P-2

	
Permitted Liens

	
Schedule R-1

	
Real Property Collateral

	
Schedule 1.1

	
Definitions

	
Schedule 3.1

	
Conditions Precedent

	
Schedule 3.6

	
Conditions Subsequent

	
Schedule 4.1(b)

	
Capitalization of Borrower

	
Schedule 4.1(c)

	
Capitalization of Borrower’s Subsidiaries

	
Schedule 4.6

	
Litigation

	
Schedule 4.10

	
Employee Benefits

	
Schedule 4.11

	
Environmental Matters

	
Schedule 4.14

	
Permitted Indebtedness

	
Schedule 4.20

	
Material Contracts

	
Schedule 4.24

	
Location of Inventory and Equipment

	
Schedule 5.1

	
Financial Statements, Reports, Certificates

	
Schedule 5.2

	
Collateral Reporting

 

 

  

- vi -

  

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this “Agreement”), is entered into as of May 17, 2013, by and among the lenders identified on the signature pages hereof (each of such lenders, together with its successors and permitted assigns, is referred to hereinafter as a “Lender”, as that term is hereinafter further defined), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as administrative agent for each member of the Lender Group and the Bank Product Providers (in such capacity, together with its successors and assigns in such capacity, “Agent”), and MEDICAL ACTION INDUSTRIES INC., a Delaware corporation (“Borrower”).

 

The parties agree as follows:

 

1. DEFINITIONS AND CONSTRUCTION.

 

1.1 Definitions.  Capitalized terms used in this Agreement shall have the meanings specified therefor on Schedule 1.1.

 

1.2 Accounting Terms.  All accounting terms not specifically defined herein shall be construed in accordance with GAAP; provided, that if Borrower notifies Agent that Borrower requests an amendment to any provision hereof to eliminate the effect of any Accounting Change occurring after the Closing Date or in the application thereof on the operation of such provision (or if Agent notifies Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such Accounting Change or in the application thereof, then Agent and Borrower agree that they will negotiate in good faith amendments to the provisions of this Agreement that are directly affected by such Accounting Change with the intent of having the respective positions of the Lenders and Borrower after such Accounting Change 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 and agreed to by the Required Lenders, the provisions in this Agreement shall be calculated as if no such Accounting Change had occurred.  When used herein, the term “financial statements” shall include the notes and schedules thereto.  Whenever the term “Borrower” is used in respect of a financial covenant or a related definition, it shall be understood to mean Borrower and its Subsidiaries on a consolidated basis, unless the context clearly requires otherwise.  Notwithstanding anything to the contrary contained herein, (a) all financial statements delivered hereunder shall be prepared, and all financial covenants contained herein shall be calculated, without giving effect to any election under the Statement of Financial Accounting Standards No. 159  (or any similar accounting principle) permitting a Person to value its financial liabilities or Indebtedness at the fair value thereof, and (b) the term “unqualified opinion” as used herein to refer to opinions or reports provided by accountants shall mean an opinion or report that is (i) unqualified, and (ii) does not include any explanation, supplemental comment, or other comment concerning the ability of the applicable Person to continue as a going concern or concerning the scope of the audit (other than as a result of an upcoming maturity date under the Loan Documents occurring within one year from the time such report is delivered).

 

1.3 Code.  Any terms used in this Agreement that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein; provided, that to the extent that the Code is used to define any term herein and such term is defined differently in different Articles of the Code, the definition of such term contained in Article 9 of the Code shall govern.

 

1.4 Construction.  Unless the context of this Agreement or any other Loan Document 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 Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document, as the case may be.  Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified.  Any reference in this Agreement or in any other Loan Document 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).  The words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties.  Any reference herein or in any other Loan Document to the satisfaction, repayment, or payment in full of the Obligations shall mean (a) the payment or repayment in full in immediately available funds of (i) the principal amount of, and interest accrued and unpaid with respect to, all outstanding Loans, together with the payment of any premium applicable to the repayment of the Loans, (ii) all Lender Group Expenses that have accrued and are unpaid regardless of whether demand has been made therefor, (iii) all fees or charges that have accrued hereunder or under any other Loan Document (including the Letter of Credit Fee and the Unused Line Fee) and are unpaid, (b) in the case of contingent reimbursement obligations with respect to Letters of Credit, providing Letter of Credit Collateralization, (c) in the case of obligations with respect to Bank Products (other than Hedge Obligations), providing Bank Product Collateralization, (d) the receipt by Agent of cash collateral in order to secure any other contingent Obligations for which a claim or demand for payment has been made on or prior to such time or in respect of matters or circumstances known to Agent or a Lender at such time that are reasonably expected to result in any loss, cost, damage, or expense (including reasonable attorneys’ fees and legal expenses), such cash collateral to be in such amount as Agent determines in its Permitted Discretion is appropriate to secure such contingent Obligations, (e) the payment or repayment in full in immediately available funds of all other outstanding Obligations (including the payment of any termination amount then applicable (or which would or could become applicable as a result of the repayment of the other Obligations) under Hedge Agreements provided by Hedge Providers) other than (i) unasserted contingent indemnification Obligations, (ii) any Bank Product Obligations (other than Hedge Obligations) that, at such time, are allowed by the applicable Bank Product Provider to remain outstanding without being required to be repaid or cash collateralized, and (iii) any Hedge Obligations that, at such time, are allowed by the applicable Hedge Provider to remain outstanding without being required to be repaid, and (f) the termination of all of the Commitments of the Lenders.  Any reference herein to any Person shall be construed to include such Person’s successors and assigns.  Any requirement of a writing contained herein or in any other Loan Document shall be satisfied by the transmission of a Record.

 

1.5 Time References.  Unless the context of this Agreement or any other Loan Document clearly requires otherwise, all references to time of day refer to Pacific standard time or Pacific daylight saving time, as in effect in Los Angeles, California on such day.  For purposes of the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each means “to and including”; provided that, with respect to a computation of fees or interest payable to Agent or any Lender, such period shall in any event consist of at least one full day.

 

1.6 Schedules and Exhibits.  All of the schedules and exhibits attached to this Agreement shall be deemed incorporated herein by reference.

 

1.7 EBITDA. For purposes of calculating the Leverage Ratio and Fixed Charge Coverage Ratio for any 12-month period from April 1, 2013 (the “Start Date”) until April 1, 2014, EBITDA shall be calculated as follows: for the (A) first full month following the Start Date, the actual amount for such month times 12, (B) second full month following the Start Date, the actual amount for the first two full months following the Start Date times 6, (C) third full month following the Start Date, the actual amount for the first three full months following the Start Date times 4, (D) fourth full month following the Start Date, the actual amount for the first four full months following the Start Date times 3, (E) fifth full month following the Start Date, the actual amount for the first five full months following the Start Date times 12/5, (F) sixth full month following the Start Date, the actual amount for the first six full months following the Start Date times 2, (G) seventh full month following the Start Date, the actual amount for the first seven full months following the Start Date times 12/7, (H) eighth full month following the Start Date, the actual amount for the first eight full months following the Start Date times 1.5, (I) ninth full month following the Start Date, the actual amount for the first nine full months following the Start Date times 12/9, (J) tenth full month following the Start Date, the actual amount for the first ten full months following the Start Date times 12/10, (L) eleventh full month following the Start Date, the actual amount for the first eleven full months following the Start Date times 12/11, and (M) twelfth full month following the Start Date, the actual amount for the first 12 full months following the Start Date.

 

  

- 2 -

  

2. LOANS AND TERMS OF PAYMENT.

 

2.1 Revolving Loans.

 

(a) Subject to the terms and conditions of this Agreement, and during the term of this Agreement, each Revolving Lender agrees (severally, not jointly or jointly and severally) to make revolving loans (“Revolving Loans”) to Borrower in an amount at any one time outstanding not to exceed the lesser of:

 

(i) such Lender’s Revolver Commitment, or

 

(ii) such Lender’s Pro Rata Share of an amount equal to the lesser of:

 

(A) the amount equal to (1) the Maximum Revolver Amount less (2) the sum of (y) the Letter of Credit Usage at such time, plus (z) the principal amount of Swing Loans outstanding at such time, and

 

(B) the amount equal to (1) the Borrowing Base as of such date (based upon the most recent Borrowing Base Certificate delivered by Borrower to Agent) less the sum of (1) the Letter of Credit Usage at such time, plus (2) the principal amount of Swing Loans outstanding at such time.

 

(b) Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement.  The outstanding principal amount of the Revolving Loans, together with interest accrued and unpaid thereon, shall constitute Obligations and shall be due and payable on the Maturity Date or, if earlier, on the date on which they are declared due and payable pursuant to the terms of this Agreement.

 

(c) Anything to the contrary in this Section 2.1 notwithstanding, Agent shall have the right (but not the obligation), in the exercise of its Permitted Discretion, to establish and increase or decrease Receivable Reserves, Inventory Reserves, Bank Product Reserves, and other Reserves against the Borrowing Base or the Maximum Revolver Amount.  The amount of any Receivable Reserve, Inventory Reserve, Bank Product Reserve, or other Reserve established by Agent shall have a reasonable relationship to the event, condition, other circumstance, or fact that is the basis for such reserve and shall not be duplicative of any other reserve established and currently maintained.

 

2.2 Term Loan and Delayed Draw Term Loan.

 

(a) Term Loan.

 

(i) Subject to the terms and conditions of this Agreement, on the Closing Date each Lender with a Term Loan Commitment agrees (severally, not jointly or jointly and severally) to make term loans (collectively, the “Term Loan”) to Borrower in an amount equal to such Lender’s Pro Rata Share of the Term Loan Amount.  The principal of the Term Loan shall be repaid in consecutive monthly installments, each in the principal amount of $136,964.28 on the first day of each calendar month, commencing on June 1, 2013. 

 

(ii) The outstanding unpaid principal balance and all accrued and unpaid interest on the Term Loan shall be due and payable on the earlier of (A) the Maturity Date, and (B) the date of the acceleration of the Term Loan in accordance with the terms hereof.  Any principal amount of the Term Loan that is repaid or prepaid may not be reborrowed.  All principal of, interest on, and other amounts payable in respect of the Term Loan shall constitute Obligations hereunder.

 

(b) Delayed Draw Term Loan

 

(i) Subject to the terms and conditions of this Agreement, (i) during the period from the Closing Date to May 17, 2015, each Lender with a Delayed Draw Term Loan Commitment agrees (severally, not jointly or jointly and severally) to make term loans (collectively, the “Delayed Draw Term Loan 1”) to 

 

  

- 3 -

  

Borrower in an amount equal to such Lender’s Pro Rata Share of the Delayed Draw Term Loan 1 Amount and (ii) during the period from the date that the Delayed Draw Term Loan 1 is made to May 17, 2015, each Lender with a Delayed Draw Term Loan Commitment agrees (severally, not jointly or jointly and severally) to make term loans (collectively, the “Delayed Draw Term Loan 2” and together with the Delayed Draw Term Loan 1, each a “Delayed Draw Term Loan” and collectively, the “Delayed Draw Term Loans”) to Borrower in an amount equal to such Lender’s Pro Rata Share of the Delayed Draw Term Loan 2 Amount.  Each of the Delayed Draw Term Loan 1 and the Delayed Draw Term Loan 2 shall be available to Borrower in a single drawing of not less than $1,000,000 (or if the Delayed Draw Term Loan Commitment on the applicable date of determination is less than $1,000,000, the full amount of the remaining Delayed Draw Term Loan Commitment) upon not less than five (5) Business Days’ written notice to Agent.

 

(ii) The principal of the Delayed Draw Term Loan 1 shall be repaid in consecutive monthly installments, each in the principal amount equal to the result of (a) the original principal amount of the Delayed Draw Term Loan 1 divided by (b) the number of months remaining from the date the Delayed Draw Term Loan 1 was made until May 17, 2015.   The outstanding unpaid principal balance and all accrued and unpaid interest on the Delayed Draw Term Loan 1 shall be due and payable on the earlier of (i) May 17, 2015 and (ii) the date of the acceleration of the Delayed Draw Term Loan 1 in accordance with the terms hereof.  Any principal amount of the Delayed Draw Term Loan 1 that is repaid or prepaid may not be reborrowed.  All principal of, interest on, and other amounts payable in respect of the Delayed Draw Term Loan 1 shall constitute Obligations hereunder.

 

(iii) The principal of the Delayed Draw Term Loan 2 shall be repaid in consecutive monthly installments, each in the principal amount equal to the result of (a) the original principal amount of the Delayed Draw Term Loan 2 divided by (b) the number of months remaining from the date the Delayed Draw Term Loan 2 was made until May 17, 2015.  The outstanding unpaid principal balance and all accrued and unpaid interest on the Delayed Draw Term Loan 2 shall be due and payable on the earlier of (i) May 17, 2015 and (ii) the date of the acceleration of the Delayed Draw Term Loan 2 in accordance with the terms hereof.  Any principal amount of the Delayed Draw Term Loan 2 that is repaid or prepaid may not be reborrowed.  All principal of, interest on, and other amounts payable in respect of the Delayed Draw Term Loan 2 shall constitute Obligations hereunder.

 

2.3 Borrowing Procedures and Settlements.

 

(a) Procedure for Borrowing Revolving Loans.  Each Borrowing shall be made by a written request by an Authorized Person delivered to Agent and received by Agent no later than 10:00 a.m. (i) on the Business Day that is the requested Funding Date in the case of a request for a Swing Loan, and (ii) on the Business Day that is 1 Business Day prior to the requested Funding Date in the case of all other requests, specifying (A) the amount of such Borrowing, and (B) the requested Funding Date (which shall be a Business Day); provided, that Agent may, in its sole discretion, elect to accept as timely requests that are received later than 10:00 a.m. on the applicable Business Day.  At Agent’s election, in lieu of delivering the above-described written request, any Authorized Person may give Agent telephonic notice of such request by the required time.  In such circumstances, Borrower agrees that any such telephonic notice will be confirmed in writing within 24 hours of the giving of such telephonic notice, but the failure to provide such written confirmation shall not affect the validity of the request.

 

(b) Making of Swing Loans.  In the case of a request for a Revolving Loan and so long as either (i) the aggregate amount of Swing Loans made since the last Settlement Date, minus all payments or other amounts applied to Swing Loans since the last Settlement Date, plus the amount of the requested Swing Loan does not exceed $5,000,000, or (ii) Swing Lender, in its sole discretion, agrees to make a Swing Loan notwithstanding the foregoing limitation, Swing Lender shall make a Revolving Loan (any such Revolving Loan made by Swing Lender pursuant to this Section 2.3(b) being referred to as a “Swing Loan” and all such Revolving Loans being referred to as “Swing Loans”) available to Borrower on the Funding Date applicable thereto by transferring immediately available funds in the amount of such requested Borrowing to the Designated Account. Each Swing Loan shall be deemed to be a Revolving Loan hereunder and shall be subject to all the terms and conditions (including Section 3) applicable to other Revolving Loans, except that all payments (including interest) on any Swing Loan shall be payable to Swing Lender solely for its own account.  Subject to the provisions of Section 

 

  

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2.3(d)(ii), Swing Lender shall not make and shall not be obligated to make any Swing Loan if Swing Lender has actual knowledge that (i) one or more of the applicable conditions precedent set forth in Section 3 will not be satisfied or waived in accordance with the terms and conditions of this Agreement on the requested Funding Date for the applicable Borrowing, or (ii) the requested Borrowing would exceed the Availability on such Funding Date.  Swing Lender shall not otherwise be required to determine whether the applicable conditions precedent set forth in Section 3 have been satisfied or waived in accordance with the terms and conditions of this Agreement on the Funding Date applicable thereto prior to making any Swing Loan.  The Swing Loans shall be secured by Agent’s Liens, constitute Revolving Loans and Obligations, and bear interest at the rate applicable from time to time to Revolving Loans that are Base Rate Loans.

 

(c) Making of Revolving Loans.

 

(i) In the event that Swing Lender is not obligated to make a Swing Loan, then after receipt of a request for a Borrowing pursuant to Section 2.3(a), Agent shall notify the Lenders by telecopy, telephone, email, or other electronic form of transmission, of the requested Borrowing; such notification to be sent on the Business Day that is 1 Business Day prior to the requested Funding Date.  If Agent has notified the Lenders of a requested Borrowing on the Business Day that is 1 Business Day prior to the Funding Date, then each Lender shall make the amount of such Lender’s Pro Rata Share of the requested Borrowing available to Agent in immediately available funds, to Agent’s Account, not later than 10:00 a.m. on the Business Day that is the requested Funding Date.  After Agent’s receipt of the proceeds of such Revolving Loans from the Lenders, Agent shall make the proceeds thereof available to Borrower on the applicable Funding Date by transferring immediately available funds equal to such proceeds received by Agent to the Designated Account; provided, that, subject to the provisions of Section 2.3(d)(ii), no Lender shall have an obligation to make any Revolving Loan, if (1) one or more of the applicable conditions precedent set forth in Section 3 will not be satisfied or waived in accordance with the terms and conditions of this Agreement on the requested Funding Date for the applicable Borrowing unless such condition has been waived, or (2) the requested Borrowing would exceed the Availability on such Funding Date.

 

(ii) Unless Agent receives notice from a Lender prior to 9:30 a.m. on the Business Day that is the requested Funding Date relative to a requested Borrowing as to which Agent has notified the Lenders of a requested Borrowing that such Lender will not make available as and when required hereunder to Agent for the account of Borrower the amount of that Lender’s Pro Rata Share of the Borrowing, Agent may assume that each Lender has made or will make such amount available to Agent in immediately available funds on the Funding Date and Agent may (but shall not be so required), in reliance upon such assumption, make available to Borrower a corresponding amount.  If, on the requested Funding Date, any Lender shall not have remitted the full amount that it is required to make available to Agent in immediately available funds and if Agent has made available to Borrower such amount on the requested Funding Date, then such Lender shall make the amount of such Lender’s Pro Rata Share of the requested Borrowing available to Agent in immediately available funds, to Agent’s Account, no later than 10:00 a.m. on the Business Day that is the first Business Day after the requested Funding Date (in which case, the interest accrued on such Lender’s portion of such Borrowing for the Funding Date shall be for Agent’s separate account).  If any Lender shall not remit the full amount that it is required to make available to Agent in immediately available funds as and when required hereby and if Agent has made available to Borrower such amount, then that Lender shall be obligated to immediately remit such amount to Agent, together with interest at the Defaulting Lender Rate for each day until the date on which such amount is so remitted.  A notice submitted by Agent to any Lender with respect to amounts owing under this Section 2.3(c)(ii) shall be conclusive, absent manifest error.  If the amount that a Lender is required to remit is made available to Agent, then such payment to Agent shall constitute such Lender’s Revolving Loan for all purposes of this Agreement.  If such amount is not made available to Agent on the Business Day following the Funding Date, Agent will notify Borrower of such failure to fund and, upon demand by Agent, Borrower shall pay such amount to Agent for Agent’s account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Revolving Loans composing such Borrowing.

 

(d) Protective Advances and Optional Overadvances.

 

  

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(i) Any contrary provision of this Agreement or any other Loan Document notwithstanding, but subject to Section 2.3(d)(iv), at any time (A) after the occurrence and during the continuance of a Default or an Event of Default, or (B) that any of the other applicable conditions precedent set forth in Section 3 are not satisfied or waived in accordance with the terms and conditions of this Agreement, Agent hereby is authorized by Borrower and the Lenders, from time to time, in Agent’s sole discretion, to make Revolving Loans to, or for the benefit of, Borrower, on behalf of the Revolving Lenders, that Agent, in its Permitted Discretion, deems necessary or desirable (1) to preserve or protect the Collateral, or any portion thereof, or (2) to enhance the likelihood of repayment of the Obligations (other than the Bank Product Obligations) (the Revolving Loans described in this Section 2.3(d)(i) shall be referred to as “Protective Advances”).

 

(ii) Any contrary provision of this Agreement or any other Loan Document notwithstanding, but subject to Section 2.3(d)(iv), the Lenders hereby authorize Agent or Swing Lender, as applicable, and either Agent or Swing Lender, as applicable, may, but is not obligated to, knowingly and intentionally, continue to make Revolving Loans (including Swing Loans) to Borrower notwithstanding that an Overadvance exists or would be created thereby, so long as (A) after giving effect to such Revolving Loans, the outstanding Revolver Usage does not exceed the Borrowing Base by more than 5.0% of the Maximum Revolver Amount and (B) after giving effect to such Revolving Loans, the outstanding Revolver Usage (except for and excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) does not exceed the Maximum Revolver Amount.  In the event Agent obtains actual knowledge that the Revolver Usage exceeds the amounts permitted by the immediately foregoing provisions, regardless of the amount of, or reason for, such excess, Agent shall notify the Lenders as soon as practicable (and prior to making any (or any additional) intentional Overadvances (except for and excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) unless Agent determines that prior notice would result in imminent harm to the Collateral or its value, in which case Agent may make such Overadvances and provide notice as promptly as practicable thereafter), and the Lenders with Revolver Commitments thereupon shall, together with Agent, jointly determine the terms of arrangements that shall be implemented with Borrower intended to reduce, within a reasonable time, the outstanding principal amount of the Revolving Loans to Borrower to an amount permitted by the preceding sentence.  In such circumstances, if any Lender with a Revolver Commitment objects to the proposed terms of reduction or repayment of any Overadvance, the terms of reduction or repayment thereof shall be implemented according to the determination of the Required Lenders.  The foregoing provisions are meant for the benefit of the Lenders and Agent and are not meant for the benefit of Borrower, which shall continue to be bound by the provisions of Section 2.4(e)(1).  Each Lender with a Revolver Commitment shall be obligated to settle with Agent as provided in Section 2.3(e) for the amount of such Lender’s Pro Rata Share of any unintentional Overadvances by Agent reported to such Lender, any intentional Overadvances made as permitted under this Section 2.3(d)(ii), and any Overadvances resulting from the charging to the Loan Account of interest, fees, or Lender Group Expenses.

 

(iii) Each Protective Advance and each Overadvance (each, an “Extraordinary Advance”) shall be deemed to be a Revolving Loan hereunder, except that no Extraordinary Advance shall be eligible to be a LIBOR Rate Loan and, prior to Settlement therefor, all payments on the Extraordinary Advances shall be payable to Agent solely for its own account.  The Extraordinary Advances shall be repayable on demand, secured by Agent’s Liens, constitute Obligations hereunder, and bear interest at the rate applicable from time to time to Revolving Loans that are Base Rate Loans.  The provisions of this Section 2.3(d) are for the exclusive benefit of Agent, Swing Lender, and the Lenders and are not intended to benefit Borrower (or any other Loan Party) in any way.

 

(iv) Notwithstanding anything contained in this Agreement or any other Loan Document to the contrary: (A) no Extraordinary Advance may be made by Agent if such Extraordinary Advance would cause the aggregate principal amount of Extraordinary Advances outstanding to exceed an amount equal to 10% of the Maximum Revolver Amount; and (B) to the extent that the making of any Extraordinary Advance causes the aggregate Revolver Usage to exceed the Maximum Revolver Amount, such portion of such Extraordinary Advance shall be for Agent’s sole and separate account and not for the account of any Lender and shall be entitled to priority in repayment in accordance with Section 2.4(b).

 

  

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(e) Settlement.  It is agreed that each Lender’s funded portion of the Revolving Loans is intended by the Lenders to equal, at all times, such Lender’s Pro Rata Share of the outstanding Revolving Loans.  Such agreement notwithstanding, Agent, Swing Lender, and the other Lenders agree (which agreement shall not be for the benefit of Borrower) that in order to facilitate the administration of this Agreement and the other Loan Documents, settlement among the Lenders as to the Revolving Loans, the Swing Loans, and the Extraordinary Advances shall take place on a periodic basis in accordance with the following provisions:

 

(i) Agent shall request settlement (“Settlement”) with the Lenders on a weekly basis, or on a more frequent basis if so determined by Agent in its sole discretion (1) on behalf of Swing Lender, with respect to the outstanding Swing Loans, (2) for itself, with respect to the outstanding Extraordinary Advances, and (3) with respect to Borrower’s or its Subsidiaries’ payments or other amounts received, as to each by notifying the Lenders by telecopy, telephone, or other similar form of transmission, of such requested Settlement, no later than 2:00 p.m. on the Business Day immediately prior to the date of such requested Settlement (the date of such requested Settlement being the “Settlement Date”).  Such notice of a Settlement Date shall include a summary statement of the amount of outstanding Revolving Loans, Swing  Loans, and Extraordinary Advances for the period since the prior Settlement Date.  Subject to the terms and conditions contained herein (including Section 2.3(g)):  (y) if the amount of the Revolving Loans (including Swing Loans, and Extraordinary Advances) made by a Lender that is not a Defaulting Lender exceeds such Lender’s Pro Rata Share of the Revolving Loans (including Swing Loans, and Extraordinary Advances) as of a Settlement Date, then Agent shall, by no later than 12:00 p.m. on the Settlement Date, transfer in immediately available funds to a Deposit Account of such Lender (as such Lender may designate), an amount such that each such Lender shall, upon receipt of such amount, have as of the Settlement Date, its Pro Rata Share of the Revolving Loans (including Swing Loans, and Extraordinary Advances), and (z) if the amount of the Revolving Loans (including Swing Loans, and Extraordinary Advances) made by a Lender is less than such Lender’s Pro Rata Share of the Revolving Loans (including Swing Loans, and Extraordinary Advances) as of a Settlement Date, such Lender shall no later than 12:00 p.m. on the Settlement Date transfer in immediately available funds to Agent’s Account, an amount such that each such Lender shall, upon transfer of such amount, have as of the Settlement Date, its Pro Rata Share of the Revolving Loans (including Swing Loans and Extraordinary Advances).  Such amounts made available to Agent under clause (z) of the immediately preceding sentence shall be applied against the amounts of the applicable Swing Loans or Extraordinary Advances and, together with the portion of such Swing Loans or Extraordinary Advances representing Swing Lender’s Pro Rata Share thereof, shall constitute Revolving Loans of such Lenders.  If any such amount is not made available to Agent by any Lender on the Settlement Date applicable thereto to the extent required by the terms hereof, Agent shall be entitled to recover for its account such amount on demand from such Lender together with interest thereon at the Defaulting Lender Rate.

 

(ii) In determining whether a Lender’s balance of the Revolving Loans, Swing Loans, and Extraordinary Advances is less than, equal to, or greater than such Lender’s Pro Rata Share of the Revolving Loans, Swing Loans, and Extraordinary Advances as of a Settlement Date, Agent shall, as part of the relevant Settlement, apply to such balance the portion of payments actually received in good funds by Agent with respect to principal, interest, fees payable by Borrower and allocable to the Lenders hereunder, and proceeds of Collateral.

 

(iii) Between Settlement Dates, Agent, to the extent Extraordinary Advances or Swing Loans are outstanding, may pay over to Agent or Swing Lender, as applicable, any payments or other amounts received by Agent, that in accordance with the terms of this Agreement would be applied to the reduction of the Revolving Loans, for application to the Extraordinary Advances or Swing Loans.  Between Settlement Dates, Agent, to the extent no Extraordinary Advances or Swing Loans are outstanding, may pay over to Swing Lender any payments or other amounts received by Agent, that in accordance with the terms of this Agreement would be applied to the reduction of the Revolving Loans, for application to Swing Lender’s Pro Rata Share of the Revolving Loans.  If, as of any Settlement Date, payments or other amounts of Borrower or its Subsidiaries received since the then immediately preceding Settlement Date have been applied to Swing Lender’s Pro Rata Share of the Revolving Loans other than to Swing Loans, as provided for in the previous sentence, Swing Lender shall pay to Agent for the accounts of the Lenders, and Agent shall pay to the Lenders (other than a Defaulting Lender if Agent has implemented the provisions of Section 2.3(g)), to be applied to the outstanding Revolving Loans of such Lenders, an amount such that each such Lender shall, upon receipt of such amount, have, as of such Settlement Date, its Pro 

  

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Rata Share of the Revolving Loans.  During the period between Settlement Dates, Swing Lender with respect to Swing Loans, Agent with respect to Extraordinary Advances, and each Lender with respect to the Revolving Loans other than Swing Loans and Extraordinary Advances, shall be entitled to interest at the applicable rate or rates payable under this Agreement on the daily amount of funds employed by Swing Lender, Agent, or the Lenders, as applicable.

 

(iv) Anything in this Section 2.3(e) to the contrary notwithstanding, in the event that a Lender is a Defaulting Lender, Agent shall be entitled to refrain from remitting settlement amounts to the Defaulting Lender and, instead, shall be entitled to elect to implement the provisions set forth in Section 2.3(g).

 

(f) Notation.  Agent, as a non-fiduciary agent for Borrower, shall maintain a register showing the principal amount of the Revolving Loans (and portion of the Term Loan Delayed Draw Term Loan 1 and Delayed Draw Term Loan 2, as applicable), owing to each Lender, including the Swing Loans owing to Swing Lender, and Extraordinary Advances owing to Agent, and the interests therein of each Lender, from time to time and such register shall, absent manifest error, conclusively be presumed to be correct and accurate.

 

(g) Defaulting Lenders.

 

(i) Notwithstanding the provisions of Section 2.4(b)(ii), Agent shall not be obligated to transfer to a Defaulting Lender any payments made by Borrower to Agent for the Defaulting Lender’s benefit or any proceeds of Collateral that would otherwise be remitted hereunder to the Defaulting Lender, and, in the absence of such transfer to the Defaulting Lender, Agent shall transfer any such payments (A) first, to Swing Lender to the extent of any Swing Loans that were made by Swing Lender and that were required to be, but were not, paid by the Defaulting Lender, (B) second, to Issuing Bank, to the extent of the portion of a Letter of Credit Disbursement that was required to be, but was not, paid by the Defaulting Lender, (C) third, to each Non-Defaulting Lender ratably in accordance with their Commitments (but, in each case, only to the extent that such Defaulting Lender’s portion of a Revolving Loan (or other funding obligation) was funded by such other Non-Defaulting Lender), (D) to a suspense account maintained by Agent, the proceeds of which shall be retained by Agent and may be made available to be re-advanced to or for the benefit of Borrower (upon the request of Borrower and subject to the conditions set forth in Section 3.2) as if such Defaulting Lender had made its portion of Revolving Loans (or other funding obligations) hereunder, and (E) from and after the date on which all other Obligations have been paid in full, to such Defaulting Lender in accordance with tier (L) of Section 2.4(b)(ii).  Subject to the foregoing, Agent may hold and, in its discretion, re-lend to Borrower for the account of such Defaulting Lender the amount of all such payments received and retained by Agent for the account of such Defaulting Lender.  Solely for the purposes of voting or consenting to matters with respect to the Loan Documents (including the calculation of Pro Rata Share in connection therewith) and for the purpose of calculating the fee payable under Section 2.10(b), such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to be zero; provided, that the foregoing shall not apply to any of the matters governed by Section 14.1(a)(i) through (iii).  The provisions of this Section 2.3(g) shall remain effective with respect to such Defaulting Lender until the earlier of (y) the date on which all of the Non-Defaulting Lenders, Agent, Issuing Bank, and Borrower shall have waived, in writing, the application of this Section 2.3(g) to such Defaulting Lender, or (z) the date on which such Defaulting Lender makes payment of all amounts that it was obligated to fund hereunder, pays to Agent all amounts owing by Defaulting Lender in respect of the amounts that it was obligated to fund hereunder, and, if requested by Agent, provides adequate assurance of its ability to perform its future obligations hereunder (on which earlier date, so long as no Event of Default has occurred and is continuing, any remaining cash collateral held by Agent pursuant to Section 2.3(g)(ii) shall be released to Borrower).  The operation of this Section 2.3(g) shall not be construed to increase or otherwise affect the Commitment of any Lender, to relieve or excuse the performance by such Defaulting Lender or any other Lender of its duties and obligations hereunder, or to relieve or excuse the performance by Borrower of its duties and obligations hereunder to Agent, Issuing Bank, or to the Lenders other than such Defaulting Lender.  Any failure by a Defaulting Lender to fund amounts that it was obligated to fund hereunder shall constitute a material breach by such Defaulting Lender of this Agreement and shall entitle Borrower, at its option, upon written notice to Agent, to arrange for a substitute Lender to assume the Commitment of such Defaulting Lender, such substitute Lender to be reasonably acceptable to Agent.  In connection with the arrangement of such a substitute Lender, the Defaulting Lender shall have no right to refuse to be replaced hereunder, and agrees to execute and deliver a completed form 

 

  

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of Assignment and Acceptance in favor of the substitute Lender (and agrees that it shall be deemed to have executed and delivered such document if it fails to do so) subject only to being paid its share of the outstanding Obligations (other than Bank Product Obligations, but including (1) all interest, fees, and other amounts that may be due and payable in respect thereof, and (2) an assumption of its Pro Rata Share of its participation in the Letters of Credit); provided, that any such assumption of the Commitment of such Defaulting Lender shall not be deemed to constitute a waiver of any of the Lender Groups’ or Borrower’s rights or remedies against any such Defaulting Lender arising out of or in relation to such failure to fund.  In the event of a direct conflict between the priority provisions of this Section 2.3(g) and any other provision contained in this Agreement or any other Loan Document, it is the intention of the parties hereto that such provisions be read together and construed, to the fullest extent possible, to be in concert with each other.  In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this Section 2.3(g) shall control and govern.

 

(ii) If any Swing Loan or Letter of Credit is outstanding at the time that a Lender becomes a Defaulting Lender then:

 

(A) such Defaulting Lender’s Swing Loan Exposure and Letter of Credit Exposure shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Pro Rata Shares but only to the extent (x) the sum of all Non-Defaulting Lenders’ Revolving Loan Exposures plus such Defaulting Lender’s Swing Loan Exposure and Letter of Credit Exposure does not exceed the total of all Non-Defaulting Lenders’ Revolver Commitments and (y) the conditions set forth in Section 3.2 are satisfied or waived in accordance with the terms and conditions of this Agreement at such time;

 

(B) if the reallocation described in clause (A) above cannot, or can only partially, be effected, Borrower shall within one Business Day following notice by Agent (x) first, prepay such Defaulting Lender’s Swing Loan Exposure (after giving effect to any partial reallocation pursuant to clause (A) above) and (y) second, cash collateralize such Defaulting Lender’s Letter of Credit Exposure (after giving effect to any partial reallocation pursuant to clause (A) above), pursuant to a cash collateral agreement to be entered into in form and substance reasonably satisfactory to Agent, for so long as such Letter of Credit Exposure is outstanding; provided, that Borrower shall not be obligated to cash collateralize any Defaulting Lender’s Letter of Credit Exposure if such Defaulting Lender is also Issuing Bank;

 

(C) if Borrower cash collateralizes any portion of such Defaulting Lender’s Letter of Credit Exposure pursuant to this Section 2.3(g)(ii), Borrower shall not be required to pay any Letter of Credit Fees to Agent for the account of such Defaulting Lender pursuant to Section 2.6(b) with respect to such cash collateralized portion of such Defaulting Lender’s Letter of Credit Exposure during the period such Letter of Credit Exposure is cash collateralized;

 

(D) to the extent the Letter of Credit Exposure of the Non-Defaulting Lenders is reallocated pursuant to this Section 2.3(g)(ii), then the Letter of Credit Fees payable to the Non-Defaulting Lenders pursuant to Section 2.6(b) shall be adjusted in accordance with such Non-Defaulting Lenders’ Letter of Credit Exposure;

 

(E) to the extent any Defaulting Lender’s Letter of Credit Exposure is neither cash collateralized nor reallocated pursuant to this Section 2.3(g)(ii), then, without prejudice to any rights or remedies of Issuing Bank or any Lender hereunder, all Letter of Credit Fees that would have otherwise been payable to such Defaulting Lender under Section 2.6(b) with respect to such portion of such Letter of Credit Exposure shall instead be payable to Issuing Bank until such portion of such Defaulting Lender’s Letter of Credit Exposure is cash collateralized or reallocated;

 

(F) so long as any Lender is a Defaulting Lender, Swing Lender shall not be required to make any Swing Loan and Issuing Bank shall not be required to issue, amend, or increase any Letter of Credit, in each case, to the extent (x) the Defaulting Lender’s Pro Rata Share of such Swing Loans or Letter of Credit cannot be reallocated pursuant to this Section 2.3(g)(ii) or (y) Swing Lender or Issuing Bank, as applicable, has not otherwise entered into arrangements reasonably satisfactory to Swing Lender or Issuing Bank, as 

 

  

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applicable, and Borrower to eliminate Swing Lender’s or Issuing Bank’s risk with respect to the Defaulting Lender’s participation in Swing Loans or Letters of Credit; and

 

(G) Agent may release any cash collateral provided by Borrower pursuant to this Section 2.3(g)(ii) to Issuing Bank and Issuing Bank may apply any such cash collateral to the payment of such Defaulting Lender’s Pro Rata Share of any Letter of Credit Disbursement that is not reimbursed by Borrower pursuant to Section 2.11(d).

 

(h) Independent Obligations.  All Revolving Loans (other than Swing Loans and Extraordinary Advances) shall be made by the Lenders contemporaneously and in accordance with their Pro Rata Shares.  It is understood that (i) no Lender shall be responsible for any failure by any other Lender to perform its obligation to make any Revolving Loan (or other extension of credit) hereunder, nor shall any Commitment of any Lender be increased or decreased as a result of any failure by any other Lender to perform its obligations hereunder, and (ii) no failure by any Lender to perform its obligations hereunder shall excuse any other Lender from its obligations hereunder.

 

2.4 Payments; Reductions of Commitments; Prepayments.

 

(a) Payments by Borrower.

 

(i) Except as otherwise expressly provided herein, all payments by Borrower shall be made to Agent’s Account for the account of the Lender Group and shall be made in immediately available funds, no later than 1:30 p.m. on the date specified herein.  Any payment received by Agent later than 1:30 p.m. shall be deemed to have been received (unless Agent, in its sole discretion, elects to credit it on the date received) on the following Business Day and any applicable interest or fee shall continue to accrue until such following Business Day.

 

(ii) Unless Agent receives notice from Borrower prior to the date on which any payment is due to the Lenders that Borrower will not make such payment in full as and when required, Agent may assume that Borrower has made (or will make) such payment in full to Agent on such date in immediately available funds and Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender.  If and to the extent Borrower does not make such payment in full to Agent on the date when due, each Lender severally shall repay to Agent on demand such amount distributed to such Lender, together with interest thereon at the Defaulting Lender Rate for each day from the date such amount is distributed to such Lender until the date repaid.

 

(b) Apportionment and Application.

 

(i) So long as no Application Event has occurred and is continuing and except as otherwise provided herein with respect to Defaulting Lenders, all principal and interest payments received by Agent shall be apportioned ratably among the Lenders (according to the unpaid principal balance of the Obligations to which such payments relate held by each Lender) and all payments of fees and expenses received by Agent (other than fees or expenses that are for Agent’s separate account or for the separate account of Issuing Bank) shall be apportioned ratably among the Lenders having a Pro Rata Share of the type of Commitment or Obligation to which a particular fee or expense relates.  Subject to Section 2.4(b)(iv), Section 2.4(d)(ii), and Section 2.4(e), all payments to be made hereunder by Borrower shall be remitted to Agent and all such payments, and all proceeds of Collateral received by Agent, shall be applied, so long as no Application Event has occurred and is continuing and except as otherwise provided herein with respect to Defaulting Lenders, to reduce the balance of the Revolving Loans outstanding and, thereafter, to Borrower (to be wired to the Designated Account) or such other Person entitled thereto under applicable law.

 

  

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(ii) At any time that an Application Event has occurred and is continuing and except as otherwise provided herein with respect to Defaulting Lenders, all payments remitted to Agent and all proceeds of Collateral received by Agent shall be applied as follows:

 

(A) first, to pay any Lender Group Expenses (including cost or expense reimbursements) or indemnities then due to Agent under the Loan Documents, until paid in full,

 

(B) second, to pay any fees or premiums then due to Agent under the Loan Documents until paid in full,

 

(C) third, to pay interest due in respect of all Protective Advances until paid in full,

 

(D) fourth, to pay the principal of all Protective Advances until paid in full,

 

(E) fifth, ratably, to pay any Lender Group Expenses (including cost or expense reimbursements) or indemnities then due to any of the Lenders under the Loan Documents, until paid in full,

 

(F) sixth, ratably, to pay any fees or premiums then due to any of the Lenders under the Loan Documents until paid in full,

 

(G) seventh, to pay interest accrued in respect of the Swing Loans until paid in full,

 

(H) eighth, to pay the principal of all Swing Loans until paid in full,

 

(I) ninth, ratably, to pay interest accrued in respect of the Revolving Loans (other than Protective Advances), the Term Loan, the Delayed Draw Term Loan 1 and the Delayed Draw Term Loan 2 until paid in full,

 

(J) tenth, ratably

 

i. ratably, to pay the principal of all Revolving Loans, the Term Loan, the Delayed Draw Term Loan 1 and the Delayed Draw Term Loan 2 until paid in full,

 

ii. to Agent, to be held by Agent, for the benefit of Issuing Bank (and for the ratable benefit of each of the Lenders that have an obligation to pay to Agent, for the account of Issuing Bank, a share of each Letter of Credit Disbursement), as cash collateral in an amount up to 105% of the Letter of Credit Usage (to the extent permitted by applicable law, such cash collateral shall be applied to the reimbursement of any Letter of Credit Disbursement as and when such disbursement occurs and, if a Letter of Credit expires undrawn, the cash collateral held by Agent in respect of such Letter of Credit shall, to the extent permitted by applicable law, be reapplied pursuant to this Section 2.4(b)(ii), beginning with tier (A) hereof),

 

iii. ratably, up to the amount (after taking into account any amounts previously paid pursuant to this clause iii. during the continuation of the applicable Application Event) of the most recently established Bank Product Reserve to (y) the Bank Product Providers based upon amounts then certified by the applicable Bank Product Provider to Agent (in form and substance reasonably satisfactory to Agent) to be due and payable to such Bank Product Providers on account of Bank Product Obligations, and (z) with any balance to be paid to Agent, to be held by Agent, for the ratable benefit of the Bank Product Providers, as cash collateral (which cash collateral may be released by Agent to the applicable Bank Product Provider and applied by such Bank Product Provider to the payment or reimbursement of any amounts due and payable with respect to Bank Product Obligations owed to the applicable Bank Product Provider as and when such amounts first become due and payable and, if and at such time as all such Bank Product Obligations are paid or otherwise satisfied in full, the cash 

 

  

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collateral held by Agent in respect of such Bank Product Obligations shall be reapplied pursuant to this Section 2.4(b)(ii), beginning with tier (A) hereof,

 

(K) eleventh, to pay any other Obligations other than Obligations owed to Defaulting Lenders,

 

(L) twelfth, ratably to pay any Obligations owed to Defaulting Lenders; and

 

(M) thirteenth, to Borrower (to be wired to the Designated Account) or such other Person entitled thereto under applicable law.

 

(iii) Agent promptly shall distribute to each Lender, pursuant to the applicable wire instructions received from each Lender in writing, such funds as it may be entitled to receive, subject to a Settlement delay as provided in Section 2.3(e).

 

(iv) In each instance, so long as no Application Event has occurred and is continuing, Section 2.4(b)(i) shall not apply to any payment made by Borrower to Agent and specified by Borrower to be for the payment of specific Obligations then due and payable (or prepayable) under any provision of this Agreement or any other Loan Document.

 

(v) For purposes of Section 2.4(b)(ii), “paid in full” of a type of Obligation means payment in cash or immediately available funds of all amounts owing on account of such type of Obligation, including interest accrued after the commencement of any Insolvency Proceeding, default interest, interest on interest, and expense reimbursements, irrespective of whether any of the foregoing would be or is allowed or disallowed in whole or in part in any Insolvency Proceeding.

 

(vi) In the event of a direct conflict between the priority provisions of this Section 2.4 and any other provision contained in this Agreement or any other Loan Document, it is the intention of the parties hereto that such provisions be read together and construed, to the fullest extent possible, to be in concert with each other.  In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, if the conflict relates to the provisions of Section 2.3(g) and this Section 2.4, then the provisions of Section 2.3(g) shall control and govern, and if otherwise, then the terms and provisions of this Section 2.4 shall control and govern.

 

(c) Reduction of Commitments.

 

(i) Revolver Commitments.  The Revolver Commitments shall terminate on the Maturity Date.  Borrower may at any time or from time to time reduce the Revolver Commitments, without premium or penalty, to an amount not less than the greater of (A) $25,000,000 and (B) an amount not less than the sum of (1) the Revolver Usage as of such date, plus (2) the principal amount of all Revolving Loans not yet made as to which a request has been given by Borrower under Section 2.3(a), plus (3) the amount of all Letters of Credit not yet issued as to which a request has been given by Borrower pursuant to Section 2.11(a).  Each such reduction shall be in an amount which is not less than $500,000, shall be made by providing not less than 5 Business Days prior written notice to Agent, and shall be irrevocable.  Once reduced, the Revolver Commitments may not be increased.  Each such reduction of the Revolver Commitments shall reduce the Revolver Commitments of each Lender proportionately in accordance with its ratable share thereof.

 

(ii) Term Loan Commitments.  The Term Loan Commitments shall terminate upon the making of the Term Loan.

 

(iii) Delayed Draw Term Loan Commitments.  The Delayed Draw Term Loan Commitments shall terminate on the earliest of (A) May 17, 2015, (B) the reduction of the Delayed Draw Term Loan Commitments to $0.00 and (C) the making of the Delayed Draw Term Loan 2.  Borrower may reduce the Delayed Draw Term Loan Commitments, without premium or penalty in whole or in part.  Each such reduction shall be in an amount which is not less than $1,000,000 (unless the Delayed Draw Term Loan Commitments are being reduced to zero and the amount of the Delayed Draw Term Loan Commitments in effect immediately prior to 

 

  

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such reduction are less than $1,000,000), shall be made by providing not less than 5 Business Days prior written notice to Agent, and shall be irrevocable.  Once reduced, the Delayed Draw Term Loan Commitments may not be increased.  Each such reduction of the Delayed Draw Term Loan Commitments shall reduce the Delayed Draw Term Loan Commitments of each Lender proportionately in accordance with its ratable share thereof.

 

(d) Optional Prepayments.

 

(i) Revolving Loans.  Borrower may prepay the principal of any Revolving Loan at any time in whole or in part, without premium or penalty.

 

(ii) Term Loan and Delayed Draw Term Loan.  Borrower may, upon at least 10 Business Days prior written notice to Agent, prepay the principal of the Term Loan, the Delayed Draw Term Loan 1 or the Delayed Draw Term Loan 2, in whole or in part, without premium or penalty.  Each prepayment made pursuant to this Section 2.4(d)(ii) shall be accompanied by the payment of accrued interest to the date of such payment on the amount prepaid.  Each such prepayment shall be applied against the remaining installments of principal due on the Term Loan, the Delayed Draw Term Loan 1 and the Delayed Draw Term Loan 2 in the inverse order of maturity (for the avoidance of doubt, any amount that is due and payable on the Maturity Date shall constitute an installment).

 

(e) Mandatory Prepayments.

 

(i) Borrowing Base.  If, at any time, (A) the Revolver Usage on such date exceeds (B) the Borrowing Base reflected in the Borrowing Base Certificate most recently delivered by Borrower to Agent, then Borrower shall within 1 Business Day prepay the Obligations in accordance with Section 2.4(f)(i) in an aggregate amount equal to the amount of such excess.

 

(ii) Dispositions.  Within 1 Business Day of the date of receipt by Borrower or any of its Subsidiaries of any Net Cash Proceeds, in excess of $500,000 in the aggregate in any fiscal year, of any voluntary or involuntary sale or disposition by Borrower or any of its Subsidiaries of assets (including casualty losses or condemnations (provided that in the event of a casualty loss or condemnation involving Real Property Collateral, subject to the provisions of the Mortgages, which shall control in the event of any inconsistency with the terms of this clause (ii)) but excluding sales or dispositions which qualify as Permitted Dispositions under clauses (a) (unless such sale or disposition is of Eligible Equipment or Specified Real Property Collateral, in which case the Net Cash Proceeds thereof shall be subject to mandatory prepayment), (b), (c), (d), (e), (f), (i), (j), (k), (l), (m), (n), (o) or (q) of the definition of Permitted Dispositions), Borrower shall prepay the outstanding principal amount of the Obligations in accordance with Section 2.4(f)(ii) in an amount equal to 100% of such Net Cash Proceeds (including condemnation awards and payments in lieu thereof) received by such Person in connection with such sales or dispositions; provided that, so long as (A) no Default or Event of Default shall have occurred and is continuing or would result therefrom, (B) Borrower shall have given Agent prior written notice of Borrower’s intention to apply such monies to the costs of replacement of the properties or assets that are the subject of such sale or disposition or the cost of purchase or construction of other assets useful in the business of Borrower or its Subsidiaries, (C) the monies are held in a Deposit Account in which Agent has a perfected first-priority security interest, and (D) Borrower or its Subsidiaries, as applicable, complete such replacement, purchase, or construction within 180 days after the initial receipt of such monies, then the Loan Party whose assets were the subject of such disposition shall have the option to apply such monies to the costs of replacement of the assets that are the subject of such sale or disposition or the costs of purchase or construction of other assets useful in the business of such Loan Party unless and to the extent that such applicable period shall have expired without such replacement, purchase, or construction being made or completed, in which case, any amounts remaining in the Deposit Account referred to in clause (C) above shall be paid to Agent and applied in accordance with Section 2.4(f)(ii).  Nothing contained in this Section 2.4(e)(ii) shall permit Borrower or any of its Subsidiaries to sell or otherwise dispose of any assets other than in accordance with Section 6.4.

 

(iii) Extraordinary Receipts.  Within 1 Business Day of the date of receipt by Borrower or any of its Subsidiaries of any Net Cash Proceeds of Extraordinary Receipts, Borrower shall prepay the 

 

  

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outstanding principal amount of the Obligations in accordance with Section 2.4(f)(iii) in an amount equal to 100% of such Extraordinary Receipts, net of any reasonable expenses incurred in collecting such Extraordinary Receipts.

 

(iv) Indebtedness.  Within 1 Business Day of the date of incurrence by Borrower or any of its Subsidiaries of any Indebtedness (other than Permitted Indebtedness), Borrower shall prepay the outstanding principal amount of the Obligations in accordance with Section 2.4(f)(iv) in an amount equal to 100% of the Net Cash Proceeds received by such Person in connection with such incurrence.  The provisions of this Section 2.4(e)(iv) shall not be deemed to be implied consent to any such incurrence otherwise prohibited by the terms of this Agreement.

 

(v) Equity.  At any time that a Triggering Event (as defined in the Guaranty and Security Agreement) has occurred and is continuing, within 1 Business Day of the date of the receipt of Net Cash Proceeds from the issuance by Borrower or any of its Subsidiaries of any Equity Interests (other than (A) in the event that Borrower or any of its Subsidiaries forms any Subsidiary in accordance with the terms hereof, the issuance by such Subsidiary of Equity Interests to Borrower or such Subsidiary, as applicable, (B)  the issuance of Equity Interest of Borrower to directors, officers and employees of Borrower and its Subsidiaries pursuant to employee stock option plans (or other employee incentive plans or other compensation arrangements) approved by the Board of Directors, and (C) the issuance of Equity Interest by a Subsidiary of Borrower to another Loan Party), Borrower shall prepay the outstanding principal amount of the Obligations in accordance with Section 2.4(f)(iii) in an amount equal to 100% of the Net Cash Proceeds received by such Person in connection with such issuance; The provisions of this Section 2.4(e)(v) shall not be deemed to be implied consent to any such issuance otherwise prohibited by the terms of this Agreement.

 

(vi) Term Loan Amount.  If at any time the outstanding principal amount of the Term Loan exceeds the Term Loan Amount, Borrower shall immediately pay to Agent an amount equal to such excess, to be applied to the principal installments of the Term Loan in the inverse order of maturity.

 

(f) Application of Payments.

 

(i) Each prepayment pursuant to Section 2.4(e)(i) (Borrowing Base) shall, (A) so long as no Application Event shall have occurred and be continuing, be applied, first, to the outstanding principal amount of the Revolving Loans until paid in full, and second, to cash collateralize the Letters of Credit in an amount equal to 105% of the then outstanding Letter of Credit Usage, and (B) if an Application Event shall have occurred and be continuing, be applied in the manner set forth in Section 2.4(b)(ii).

 

(ii) Each prepayment pursuant to Section 2.4(e)(ii) (Dispositions) shall (A) so long as no Application Event shall have occurred and be continuing and the applicable Net Cash Proceeds are from the sale or disposition of assets other than Eligible Equipment or Specified Real Property Collateral, be applied, first, to the outstanding principal amount of the Revolving Loans until paid in full, and second, to cash collateralize the Letters of Credit in an amount equal to 105% of the then outstanding Letter of Credit Usage, (B) if an Application Event shall have occurred and be continuing, be applied in the manner set forth in Section 2.4(b)(ii) and (C) so long as no Application Event shall have occurred and be continuing and the applicable Net Cash Proceeds are from the sale or disposition of Eligible Equipment or Specified Real Property Collateral, be applied, first, ratably to the outstanding principal amount of the Term Loan, Delayed Draw Term Loan 1 and the Delayed Draw Term Loan 2 until paid in full, second, to the outstanding principal amount of the Revolving Loans until paid in full, and third, to cash collateralize the Letters of Credit in an amount equal to 105% of the then outstanding Letter of Credit Usage, and Each such prepayment of the Term Loan the Delayed Draw Term Loan 1 and the Delayed Draw Term Loan 2 shall be applied against the remaining installments of principal of the Term Loan, the Delayed Draw Term Loan 1 and the Delayed Draw Term Loan 2 in the inverse order of maturity (for the avoidance of doubt, any amount that is due and payable on the Maturity Date shall constitute an installment).

 

(iii) Each prepayment pursuant to 2.4(e)(iii) Extraordinary Receipts and 2.4(e)(v) (Equity) shall (A) so long as no Application Event shall have occurred and be continuing, be applied, first, to the outstanding principal amount of the Revolving Loans until paid in full, and second, to cash collateralize the Letters 

 

  

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of Credit in an amount equal to 105% of the then outstanding Letter of Credit Usage, and (B) if an Application Event shall have occurred and be continuing, be applied in the manner set forth in Section 2.4(b)(ii).

 

(iv) Each prepayment pursuant to Section 2.4(e)(iv) (Indebtedness), shall (A) so long as no Application Event shall have occurred and be continuing, be applied, first, ratably to the outstanding principal amount of the Term Loan, Delayed Draw Term Loan 1 and the Delayed Draw Term Loan 2 until paid in full, second, to the outstanding principal amount of the Revolving Loans until paid in full, and third, to cash collateralize the Letters of Credit in an amount equal to 105% of the then outstanding Letter of Credit Usage, and (B) if an Application Event shall have occurred and be continuing, be applied in the manner set forth in Section 2.4(b)(ii).  Each such prepayment of the Term Loan the Delayed Draw Term Loan 1 and the Delayed Draw Term Loan 2 shall be applied against the remaining installments of principal of the Term Loan, the Delayed Draw Term Loan 1 and the Delayed Draw Term Loan 2 in the inverse order of maturity (for the avoidance of doubt, any amount that is due and payable on the Maturity Date shall constitute an installment).

 

2.5 Promise to Pay; Promissory Notes.

 

(a) Borrower agrees to pay the Lender Group Expenses on the earlier of (i) the first day of the month following the date on which the applicable Lender Group Expenses were first incurred or (ii) the date on which demand therefor is made by Agent (it being acknowledged and agreed that any charging of such costs, expenses or Lender Group Expenses to the Loan Account pursuant to the provisions of Section 2.6(d) shall be deemed to constitute a demand for payment thereof for the purposes of this subclause (ii)).  Borrower promises to pay all of the Obligations (including principal, interest, premiums, if any, fees, costs, and expenses (including Lender Group Expenses)) in full on the Maturity Date or, if earlier, on the date on which the Obligations (other than the Bank Product Obligations) become due and payable pursuant to the terms of this Agreement.  Borrower agrees that its obligations contained in the first sentence of this Section 2.5(a) shall survive payment or satisfaction in full of all other Obligations.

 

(b) Any Lender may request that any portion of its Commitments or the Loans made by it be evidenced by one or more promissory notes.  In such event, Borrower shall execute and deliver to such Lender the requested promissory notes payable to such Lender in a form furnished by Agent and reasonably satisfactory to Borrower.  Thereafter, the portion of the Commitments and Loans evidenced by such promissory notes and interest thereon shall at all times be represented by one or more promissory notes in such form payable to the payee named therein. 

 

2.6 Interest Rates and Letter of Credit Fee:  Rates, Payments, and Calculations.

 

(a) Interest Rates.  Except as provided in Section 2.6(c), all Obligations (except for undrawn Letters of Credit) that have been charged to the Loan Account pursuant to the terms hereof shall bear interest as follows:

 

(i) if the relevant Obligation is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the Applicable Margin for Revolving Loans, the Term Loan and the Delayed Draw Term Loans, as applicable, and

 

(ii) otherwise, at a per annum rate equal to the Base Rate plus the Applicable Margin for Revolving Loans, the Term Loan and the Delayed Draw Term Loans that are Base Rate Loans, as applicable.

 

(b) Letter of Credit Fee.  Borrower shall pay Agent (for the ratable benefit of the Revolving Lenders), a Letter of Credit fee (the “Letter of Credit Fee”) (which fee shall be in addition to the fronting fees and  commissions, other fees, charges and expenses set forth in Section 2.11(k)) that shall accrue at a per annum rate equal to the Applicable Margin for Revolving Loans that are LIBOR Rate Loans times the undrawn amount of all outstanding Letters of Credit.

 

(c)  Default Rate.  Upon the occurrence and during the continuation of an Event of Default and at the election of Agent or the Required Lenders,

 

  

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(i) all Obligations (except for undrawn Letters of Credit) that have been charged to the Loan Account pursuant to the terms hereof shall bear interest at a per annum rate equal to 2 percentage points above the per annum rate otherwise applicable thereunder, and

 

(ii) the Letter of Credit Fee shall be increased to 2 percentage points above the per annum rate otherwise applicable hereunder.

 

(d) Payment.  Except to the extent provided to the contrary in Section 2.10, Section 2.11(k) or Section 2.12(a), (i) all interest, all Letter of Credit Fees and all other fees payable hereunder or under any of the other Loan Documents shall be due and payable, in arrears, on the first day of each month and (ii) all costs and expenses payable hereunder or under any of the other Loan Documents, and all Lender Group Expenses shall be due and payable on the earlier of (x) the first day of the month following the date on which the applicable costs, expenses, or Lender Group Expenses were first incurred or (y) the date on which demand therefor is made by Agent (it being acknowledged and agreed that any charging of such costs, expenses or Lender Group Expenses to the Loan Account pursuant to the provisions of the following sentence shall be deemed to constitute a demand for payment thereof for the purposes of this subclause (y)).  Borrower hereby authorizes Agent, from time to time without prior notice to Borrower, to charge to the Loan Account (A) on the first day of each month, all interest accrued during the prior month on the Revolving Loans, the Term Loan or the Delayed Draw Term Loans hereunder, (B) on the first day of each month, all Letter of Credit Fees accrued or chargeable hereunder during the prior month, (C) as and when incurred or accrued, all fees and costs provided for in Section 2.10 (a) or (c), (D) on the first day of each month, the Unused Line Fee accrued during the prior month pursuant to Section 2.10(b), (E) as and when due and payable, all other fees payable hereunder or under any of the other Loan Documents, (F) as and when incurred or accrued, the fronting fees and all commissions, other fees, charges and expenses provided for in Section 2.11(k), (G) as and when incurred or accrued, all other Lender Group Expenses, and (H) as and when due and payable all other payment obligations payable under any Loan Document or any Bank Product Agreement (including any amounts due and payable to the Bank Product Providers in respect of Bank Products).  All amounts (including interest, fees, costs, expenses, Lender Group Expenses, or other amounts payable hereunder or under any other Loan Document or under any Bank Product Agreement) charged to the Loan Account shall thereupon constitute Revolving Loans hereunder, shall constitute Obligations hereunder, and shall initially accrue interest at the rate then applicable to Revolving Loans that are Base Rate Loans (unless and until converted into LIBOR Rate Loans in accordance with the terms of this Agreement).

 

(e) Computation.  All interest (other than for Base Rate Loans) and fees chargeable under the Loan Documents shall be computed on the basis of a 360 day year, in each case, for the actual number of days elapsed in the period during which the interest or fees accrue.  Interest for Base Rate Loans shall be calculated on the basis of 365 or 366 day year, as applicable, and actual days elapsed.  In the event the Base Rate is changed from time to time hereafter, the rates of interest hereunder based upon the Base Rate automatically and immediately shall be increased or decreased by an amount equal to such change in the Base Rate.

 

(f) Intent to Limit Charges to Maximum Lawful Rate.  In no event shall the interest rate or rates payable under this Agreement, plus any other amounts paid in connection herewith, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable.  Borrower and the Lender Group, in executing and delivering this Agreement, intend legally to agree upon the rate or rates of interest and manner of payment stated within it; provided, that, anything contained herein to the contrary notwithstanding, if such rate or rates of interest or manner of payment exceeds the maximum allowable under applicable law, then, ipso facto, as of the date of this Agreement, Borrower is and shall be liable only for the payment of such maximum amount as is allowed by law, and payment received from Borrower in excess of such legal maximum, whenever received, shall be applied to reduce the principal balance of the Obligations to the extent of such excess.

 

2.7 Crediting Payments.  The receipt of any payment item by Agent shall not be required to be considered a payment on account unless such payment item is a wire transfer of immediately available federal funds made to Agent’s Account or unless and until such payment item is honored when presented for payment.  Should any payment item not be honored when presented for payment, then Borrower shall be deemed not to have made such payment and interest shall be 

 

  

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calculated accordingly.  Anything to the contrary contained herein notwithstanding, any payment item shall be deemed received by Agent only if it is received into Agent’s Account on a Business Day on or before 1:30 p.m.  If any payment item is received into Agent’s Account on a non-Business Day or after 1:30 p.m. on a Business Day (unless Agent, in its sole discretion, elects to credit it on the date received), it shall be deemed to have been received by Agent as of the opening of business on the immediately following Business Day.

 

2.8 Designated Account.  Agent is authorized to make the Revolving Loans, the Term Loan and the Delayed Draw Term Loans, and Issuing Bank is authorized to issue the Letters of Credit, under this Agreement based upon telephonic or other instructions received from anyone purporting to be an Authorized Person or, without instructions, if pursuant to Section 2.6(d).  Borrower agrees to establish and maintain the Designated Account with the Designated Account Bank for the purpose of receiving the proceeds of the Revolving Loans and Delayed Draw Term Loans requested by Borrower and made by Agent or the Lenders hereunder.  Unless otherwise agreed by Agent and Borrower, any Revolving Loan, Delayed Draw Term Loans or Swing Loan requested by Borrower and made by Agent or the Lenders hereunder shall be made to the Designated Account.

 

2.9 Maintenance of Loan Account; Statements of Obligations.  Agent shall maintain an account on its books in the name of Borrower (the “Loan Account”) on which Borrower will be charged with the Term Loan, Delayed Draw Term Loan 1, Delayed Draw Term Loan 2, all Revolving Loans (including Extraordinary Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders to Borrower or for Borrower’s account, the Letters of Credit issued or arranged by Issuing Bank for Borrower’s account, and with all other payment Obligations hereunder or under the other Loan Documents, including, accrued interest, fees and expenses, and Lender Group Expenses.  In accordance with Section 2.7, the Loan Account will be credited with all payments received by Agent from Borrower or for Borrower’s account.  Agent shall make available to Borrower monthly statements regarding the Loan Account, including the principal amount of the Term Loan, Delayed Draw Term Loan 1, Delayed Draw Term Loan 2 and the Revolving Loans, interest accrued hereunder, fees accrued or charged hereunder or under the other Loan Documents, and a summary itemization of all charges and expenses constituting Lender Group Expenses accrued hereunder or under the other Loan Documents, and each such statement, absent manifest error, shall be conclusively presumed to be correct and accurate and constitute an account stated between Borrower and the Lender Group unless, within 30 days after Agent first makes such a statement available to Borrower, Borrower shall deliver to Agent written objection thereto describing the error or errors contained in such statement.

 

2.10 Fees.

 

(a) Agent Fees.  Borrower shall pay to Agent, for the account of Agent, as and when due and payable under the terms of the Fee Letter, the fees set forth in the Fee Letter.

 

(b) Unused Line Fee.  Borrower shall pay to Agent, for the ratable account of the Revolving Lenders, an unused line fee (the “Unused Line Fee”) in an amount equal to the Applicable Unused Line Fee Percentage per annum times the result of (i) the aggregate amount of the Revolver Commitments, less (ii) the average amount of the Revolver Usage during the immediately preceding month (or portion thereof), which Unused Line Fee shall be due and payable on the first day of each month from and after the Closing Date up to the first day of the month prior to the date on which the Obligations are paid in full and on the date on which the Obligations are paid in full.

 

(c) Field Examination and Other Fees.  Borrower shall pay to Agent, field examination, appraisal, environmental site assessment and valuation fees and charges, as and when incurred or chargeable, as follows (i) a fee of $1,000 per day, per examiner, plus out-of-pocket expenses (including travel, meals, and lodging) for each field examination of Borrower performed by personnel employed by Agent, and (ii) the fees or charges paid or incurred by Agent (but, in any event, no less than a charge of $1,000 per day, per Person, plus out-of-pocket expenses (including travel, meals, and lodging)) if it elects to employ the services of one or more third Persons to perform field examinations of Borrower or its Subsidiaries, to establish electronic collateral reporting systems, to appraise the Collateral, or any portion thereof, or to assess Borrower’s or its Subsidiaries' business valuation; provided, that (i) so long as no Event of Default shall have occurred and be continuing and Borrower has Excess Availability of at least $7,500,000, Borrower shall not be obligated to reimburse Agent 

 

  

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for more than 2 field examinations during any calendar year, (ii) so long as no Event of Default shall have occurred and be continuing and Borrower has Excess Availability of less than $7,500,000, Borrower shall not be obligated to reimburse Agent for more than 3 field examinations during any calendar year, (iii) so long as no Event of Default shall have occurred and be continuing, Borrower shall not be obligated to reimburse Agent for more than (A) 2 appraisals of each component of the Real Property Collateral during the term of this Agreement and (B) 1 appraisal of the Loan Parties’ Equipment during any calendar year, (iv) so long as no Event of Default shall have occurred and be continuing and Borrower has Excess Availability of at least $12,500,000, Borrower shall not be obligated to reimburse Agent for more than 1 appraisal of the Loan Parties’ Inventory during any calendar year and (v) so long as no Event of Default shall have occurred and be continuing and Borrower has Excess Availability of less than $12,500,000, Borrower shall not be obligated to reimburse Agent for more than 2 appraisals of the Loan Parties’ Inventory during any calendar year.

 

2.11 Letters of Credit.

 

(a) Subject to the terms and conditions of this Agreement, upon the request of Borrower made in accordance herewith, and prior to the Maturity Date, Issuing Bank agrees to issue a requested Letter of Credit for the account of Borrower.  By submitting a request to Issuing Bank for the issuance of a Letter of Credit, Borrower shall be deemed to have requested that Issuing Bank issue the requested Letter of Credit.  Each request for the issuance of a Letter of Credit, or the amendment, renewal, or extension of any outstanding Letter of Credit, shall be irrevocable and shall be made in writing by an Authorized Person and delivered to Issuing Bank via telefacsimile or other electronic method of transmission reasonably acceptable to Issuing Bank and reasonably in advance of the requested date of issuance, amendment, renewal, or extension.  Each such request shall be in form and substance reasonably satisfactory to Issuing Bank and (i) shall specify (A) the amount of such Letter of Credit, (B) the date of issuance, amendment, renewal, or extension of such Letter of Credit, (C) the proposed expiration date of such Letter of Credit, (D) the name and address of the beneficiary of the Letter of Credit, and (E) such other information (including, the conditions to drawing, and, in the case of an amendment, renewal, or extension, identification of the Letter of Credit to be so amended, renewed, or extended) as shall be necessary to prepare, amend, renew, or extend such Letter of Credit, and (ii) shall be accompanied by such Issuer Documents as Agent or Issuing Bank may request or require, to the extent that such requests or requirements are consistent with the Issuer Documents that Issuing Bank generally requests for Letters of Credit in similar circumstances.  Bank’s records of the content of any such request will be conclusive.  Anything contained herein to the contrary notwithstanding, Issuing Bank may, but shall not be obligated to, issue a Letter of Credit that supports the obligations of Borrower or its Subsidiaries in respect of (x) a lease of real property, or (y) an employment contract.

 

(b) Issuing Bank shall have no obligation to issue a Letter of Credit if any of the following would result after giving effect to the requested issuance:

 

(i) the Letter of Credit Usage would exceed $5,000,000, or

 

(ii) the Letter of Credit Usage would exceed the Maximum Revolver Amount less the outstanding amount of Revolving Loans (including Swing Loans), or

 

(iii) the Letter of Credit Usage would exceed the Borrowing Base at such time less the outstanding principal balance of the Revolving Loans (inclusive of Swing Loans) at such time.

 

(c) In the event there is a Defaulting Lender as of the date of any request for the issuance of a Letter of Credit, Issuing Bank shall not be required to issue or arrange for such Letter of Credit to the extent (i) the Defaulting Lender’s Letter of Credit Exposure with respect to such Letter of Credit may not be reallocated pursuant to Section 2.3(g)(ii), or (ii) Issuing Bank has not otherwise entered into arrangements reasonably satisfactory to it and Borrower to eliminate Issuing Bank’s risk with respect to the participation in such Letter of Credit of the Defaulting Lender, which arrangements may include Borrower cash collateralizing such Defaulting Lender’s Letter of Credit Exposure in accordance with Section 2.3(g)(ii).  Additionally, Issuing Bank shall have no obligation to issue a Letter of Credit if (A) any order, judgment, or decree of any Governmental Authority or arbitrator shall, by its terms, purport to enjoin or restrain Issuing Bank from issuing such Letter of Credit, or any law applicable to Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over Issuing Bank shall prohibit or request that Issuing Bank refrain from the issuance of letters of 

 

  

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credit generally or such Letter of Credit in particular, (B) the issuance of such Letter of Credit would violate one or more policies of Issuing Bank applicable to letters of credit generally, or (C) if amounts demanded to be paid under any Letter of Credit will or may not be in United States Dollars.

 

(d) Any Issuing Bank (other than Wells Fargo or any of its Affiliates) shall notify Agent in writing no later than the Business Day immediately following the Business Day on which such Issuing Bank issued any Letter of Credit; provided that (i) until Agent advises any such Issuing Bank that the provisions of Section 3.2 are not satisfied, or (ii) unless the aggregate amount of the Letters of Credit issued in any such week exceeds such amount as shall be agreed by Agent and such Issuing Bank, such Issuing Bank shall be required to so notify Agent in writing only once each week of the Letters of Credit issued by such Issuing Bank during the immediately preceding week as well as the daily amounts outstanding for the prior week, such notice to be furnished on such day of the week as Agent and such Issuing Bank may agree.  Each Letter of Credit shall be in form and substance reasonably acceptable to Issuing Bank, including the requirement that the amounts payable thereunder must be payable in Dollars.  If Issuing Bank makes a payment under a Letter of Credit, Borrower shall pay to Agent an amount equal to the applicable Letter of Credit Disbursement on the Business Day such Letter of Credit Disbursement is made and, in the absence of such payment, the amount of the Letter of Credit Disbursement immediately and automatically shall be deemed to be a Revolving Loan hereunder (notwithstanding any failure to satisfy any condition precedent set forth in Section 3) and, initially, shall bear interest at the rate then applicable to Revolving Loans that are Base Rate Loans. If a Letter of Credit Disbursement is deemed to be a Revolving Loan hereunder, Borrower’s obligation to pay the amount of such Letter of Credit Disbursement to Issuing Bank shall be automatically converted into an obligation to pay the resulting Revolving Loan.  Promptly following receipt by Agent of any payment from Borrower pursuant to this paragraph, Agent shall distribute such payment to Issuing Bank or, to the extent that Revolving Lenders have made payments pursuant to Section 2.11(e) to reimburse Issuing Bank, then to such Revolving Lenders and Issuing Bank as their interests may appear.

 

(e) Promptly following receipt of a notice of a Letter of Credit Disbursement pursuant to Section 2.11(d), each Revolving Lender agrees to fund its Pro Rata Share of any Revolving Loan deemed made pursuant to Section 2.11(d) on the same terms and conditions as if Borrower had requested the amount thereof as a Revolving Loan and Agent shall promptly pay to Issuing Bank the amounts so received by it from the Revolving Lenders.  By the issuance of a Letter of Credit (or an amendment, renewal, or extension of a Letter of Credit) and without any further action on the part of Issuing Bank or the Revolving Lenders, Issuing Bank shall be deemed to have granted to each Revolving Lender, and each Revolving Lender shall be deemed to have purchased, a participation in each Letter of Credit issued by Issuing Bank, in an amount equal to its Pro Rata Share of such Letter of Credit, and each such Revolving Lender agrees to pay to Agent, for the account of Issuing Bank, such Revolving Lender’s Pro Rata Share of any Letter of Credit Disbursement made by Issuing Bank under the applicable Letter of Credit.  In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to Agent, for the account of Issuing Bank, such Revolving Lender’s Pro Rata Share of each Letter of Credit Disbursement made by Issuing Bank and not reimbursed by Borrower on the date due as provided in Section 2.11(d), or of any reimbursement payment that is required to be refunded (or that Agent or Issuing Bank elects, based upon the advice of counsel, to refund) to Borrower for any reason.  Each Revolving Lender acknowledges and agrees that its obligation to deliver to Agent, for the account of Issuing Bank, an amount equal to its respective Pro Rata Share of each Letter of Credit Disbursement pursuant to this Section 2.11(e) shall be absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuation of an Event of Default or Default or the failure to satisfy any condition set forth in Section 3.  If any such Revolving Lender fails to make available to Agent the amount of such Revolving Lender’s Pro Rata Share of a Letter of Credit Disbursement as provided in this Section, such Revolving Lender shall be deemed to be a Defaulting Lender and Agent (for the account of Issuing Bank) shall be entitled to recover such amount on demand from such Revolving Lender together with interest thereon at the Defaulting Lender Rate until paid in full.

 

(f) Borrower agrees to indemnify, defend and hold harmless each member of the Lender Group (including Issuing Bank and its branches, Affiliates, and correspondents) and each such Person’s respective directors, officers, employees, attorneys and agents (each, including Issuing Bank, a “Letter of Credit Related Person”) (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, liabilities, fines, costs, penalties, and damages, and all reasonable fees and 

 

  

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disbursements of attorneys, experts, or consultants and all other costs and expenses actually incurred in connection therewith or in connection with the enforcement of this indemnification (as and when they are incurred and irrespective of whether suit is brought), which may be incurred by or awarded against any such Letter of Credit Related Person (other than Taxes, which shall be governed by Section 16) (the “Letter of Credit Indemnified Costs”), and which arise out of or in connection with, or as a result of:

 

(i) any Letter of Credit or any pre-advice of its issuance;

 

(ii) any transfer, sale, delivery, surrender or endorsement of any Drawing Document at any time(s) held by any such Letter of Credit Related Person in connection with any Letter of Credit;

 

(iii) any action or proceeding arising out of, or in connection with, any Letter of Credit (whether administrative, judicial or in connection with arbitration), including any action or proceeding to compel or restrain any presentation or payment under any Letter of Credit, or for the wrongful dishonor of, or honoring a presentation under, any Letter of Credit;

 

(iv) any independent undertakings issued by the beneficiary of any Letter of Credit;

 

(v) any unauthorized instruction or request made to Issuing Bank in connection with any Letter of Credit or requested Letter of Credit or error in computer or electronic transmission;

 

(vi) an adviser, confirmer or other nominated person seeking to be reimbursed, indemnified or compensated;

 

(vii) any third party seeking to enforce the rights of an applicant, beneficiary, nominated person, transferee, assignee of Letter of Credit proceeds or holder of an instrument or document;

 

(viii) the fraud, forgery or illegal action of parties other than the Letter of Credit Related Person;

 

(ix) Issuing Bank’s performance of the obligations of a confirming institution or entity that wrongfully dishonors a confirmation; or

 

(x) the acts or omissions, whether rightful or wrongful, of any present or future de jure or de facto governmental or regulatory authority or cause or event beyond the control of the Letter of Credit Related Person;

 

in each case, including that resulting from the Letter of Credit Related Person’s own negligence; provided, however,  that such indemnity shall not be available to any Letter of Credit Related Person claiming indemnification under clauses (i) through (x) above to the extent that such Letter of Credit Indemnified Costs may be finally determined in a final, non-appealable judgment of a court of competent jurisdiction to have resulted directly from the gross negligence or willful misconduct of the Letter of Credit Related Person claiming indemnity.  Borrower hereby agrees to pay the Letter of Credit Related Person claiming indemnity on demand from time to time all amounts owing under this Section 2.11(f).  If and to the extent that the obligations of Borrower under this Section 2.11(f) are unenforceable for any reason, Borrower agrees to make the maximum contribution to the Letter of Credit Indemnified Costs permissible under applicable law.  This indemnification provision shall survive termination of this Agreement and all Letters of Credit.

 

(g) The liability of Issuing Bank (or any other Letter of Credit Related Person) under, in connection with or arising out of any Letter of Credit (or pre-advice), regardless of the form or legal grounds of the action or proceeding, shall be limited to direct damages suffered by Borrower that are caused directly by Issuing Bank’s gross negligence or willful misconduct in (i) honoring a presentation under a Letter of Credit that on its face does not at least substantially comply with the terms and conditions of such Letter of Credit, (ii) failing to honor a presentation under a Letter of Credit that strictly complies with the terms and conditions of such Letter of Credit or (iii) retaining Drawing Documents presented under a Letter of Credit.  Issuing Bank shall be deemed to have acted 

 

  

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with due diligence and reasonable care if Issuing Bank’s conduct is in accordance with Standard Letter of Credit Practice or in accordance with this Agreement.  Borrower’s aggregate remedies against Issuing Bank and any Letter of Credit Related Person for wrongfully honoring a presentation under any Letter of Credit or wrongfully retaining honored Drawing Documents shall in no event exceed the aggregate amount paid by Borrower to Issuing Bank in respect of the honored presentation in connection with such Letter of Credit under Section 2.11(d), plus interest at the rate then applicable to Base Rate Loans hereunder.  Borrower shall take action to avoid and mitigate the amount of any damages claimed against Issuing Bank or any other Letter of Credit Related Person, including by enforcing its rights against the beneficiaries of the Letters of Credit.  Any claim by Borrower under or in connection with any Letter of Credit shall be reduced by an amount equal to the sum of (x) the amount (if any) saved by Borrower as a result of the breach or alleged wrongful conduct complained of; and (y) the amount (if any) of the loss that would have been avoided had Borrower taken all reasonable steps to mitigate any loss, and in case of a claim of wrongful dishonor, by specifically and timely authorizing Issuing Bank to effect a cure.

 

(h) Borrower is responsible for preparing or approving the final text of the Letter of Credit as issued by Issuing Bank, irrespective of any assistance Issuing Bank may provide such as drafting or recommending text or by Issuing Bank’s use or refusal to use text submitted by Borrower.  Borrower is solely responsible for the suitability of the Letter of Credit for Borrower’s purposes.  With respect to any Letter of Credit containing an “automatic amendment” to extend the expiration date of such Letter of Credit, Issuing Bank, in its sole and absolute discretion, may give notice of nonrenewal of such Letter of Credit and, if Borrower does not at any time want such Letter of Credit to be renewed, Borrower will so notify Agent and Issuing Bank at least 15 calendar days before Issuing Bank is required to notify the beneficiary of such Letter of Credit or any advising bank of such nonrenewal pursuant to the terms of such Letter of Credit.

 

(i) Borrower’s reimbursement and payment obligations under this Section 2.11 are absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever, including:

 

(i) any lack of validity, enforceability or legal effect of any Letter of Credit or this Agreement or any term or provision therein or herein;

 

(ii) payment against presentation of any draft, demand or claim for payment under any Drawing Document that does not comply in whole or in part with the terms of the applicable Letter of Credit or which proves to be fraudulent, forged or invalid in any respect or any statement therein being untrue or inaccurate in any respect, or which is signed, issued or presented by a Person or a transferee of such Person purporting to be a successor or transferee of the beneficiary of such Letter of Credit;

 

(iii) Issuing Bank or any of its branches or Affiliates being the beneficiary of any Letter of Credit;

 

(iv) Issuing Bank or any correspondent honoring a drawing against a Drawing Document up to the amount available under any Letter of Credit even if such Drawing Document claims an amount in excess of the amount available under the Letter of Credit;

 

(v) the existence of any claim, set-off, defense or other right that Borrower or any other Person may have at any time against any beneficiary, any assignee of proceeds, Issuing Bank or any other Person;

 

(vi) any other event, circumstance or conduct whatsoever, whether or not similar to any of the foregoing that might, but for this Section 2.11(i), constitute a legal or equitable defense to or discharge of, or provide a right of set-off against, Borrower’s reimbursement and other payment obligations and liabilities, arising under, or in connection with, any Letter of Credit, whether against Issuing Bank, the beneficiary or any other Person; or

 

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

 

  

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provided, however, that subject to Section 2.11(g) above, the foregoing shall not release Issuing Bank from such liability to Borrower as may be finally determined in a final, non-appealable judgment of a court of competent jurisdiction against Issuing Bank following reimbursement or payment of the obligations and liabilities, including reimbursement and other payment obligations, of Borrower to Issuing Bank arising under, or in connection with, this Section 2.11 or any Letter of Credit.

 

(j) Without limiting any other provision of this Agreement, Issuing Bank and each other Letter of Credit Related Person (if applicable) shall not be responsible to Borrower for, and Issuing Bank’s rights and remedies against Borrower and the obligation of Borrower to reimburse Issuing Bank for each drawing under each Letter of Credit shall not be impaired by:

 

(i) honor of a presentation under any Letter of Credit that on its face substantially complies with the terms and conditions of such Letter of Credit, even if the Letter of Credit requires strict compliance by the beneficiary;

 

(ii) honor of a presentation of any Drawing Document that appears on its face to have been signed, presented or issued (A) by any purported successor or transferee of any beneficiary or other Person required to sign, present or issue such Drawing Document or (B) under a new name of the beneficiary;

 

(iii) acceptance as a draft of any written or electronic demand or request for payment under a Letter of Credit, even if nonnegotiable or not in the form of a draft or notwithstanding any requirement that such draft, demand or request bear any or adequate reference to the Letter of Credit;

 

(iv) the identity or authority of any presenter or signer of any Drawing Document or the form, accuracy, genuineness or legal effect of any Drawing Document (other than Issuing Bank’s determination that such Drawing Document appears on its face substantially to comply with the terms and conditions of the Letter of Credit);

 

(v) acting upon any instruction or request relative to a Letter of Credit or requested Letter of Credit that Issuing Bank in good faith believes to have been given by a Person authorized to give such instruction or request;

 

(vi) any errors, omissions, interruptions or delays in transmission or delivery of any message, advice or document (regardless of how sent or transmitted) or for errors in interpretation of technical terms or in translation or any delay in giving or failing to give notice to Borrower;

 

(vii) any acts, omissions or fraud by, or the insolvency of, any beneficiary, any nominated person or entity or any other Person or any breach of contract between the beneficiary and Borrower or any of the parties to the underlying transaction to which the Letter of Credit relates;

 

(viii) assertion or waiver of any provision of the ISP or UCP that primarily benefits an issuer of a letter of credit, including any requirement that any Drawing Document be presented to it at a particular hour or place;

 

(ix) payment to any paying or negotiating bank (designated or permitted by the terms of the applicable Letter of Credit) claiming that it rightfully honored or is entitled to reimbursement or indemnity under Standard Letter of Credit Practice applicable to it;

 

(x) acting or failing to act as required or permitted under Standard Letter of Credit Practice applicable to where Issuing Bank has issued, confirmed, advised or negotiated such Letter of Credit, as the case may be;

 

(xi) honor of a presentation after the expiration date of any Letter of Credit notwithstanding that a presentation was made prior to such expiration date and dishonored by Issuing Bank if 

 

  

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subsequently Issuing Bank or any court or other finder of fact determines such presentation should have been honored;

 

(xii) dishonor of any presentation that does not strictly comply or that is fraudulent, forged or otherwise not entitled to honor; or

 

(xiii) honor of a presentation that is subsequently determined by Issuing Bank to have been made in violation of international, federal, state or local restrictions on the transaction of business with certain prohibited Persons.

 

(k) Borrower shall pay within 1 Business Day after demand to Agent for the account of Issuing Bank as non-refundable fees, commissions, and charges (it being acknowledged and agreed that any charging of such fees, commissions and charges to the Loan Account pursuant to the provisions of Section 2.6(d) shall be deemed to constitute a demand for payment thereof for the purposes of this Section 2.11(k)):  (i) a fronting fee which shall be imposed by Issuing Bank upon the issuance of each Letter of Credit of 0.250% per annum of the face amount thereof, plus (ii) any and all other customary commissions, fees and charges then in effect imposed by, and any and all expenses incurred by, Issuing Bank, or by any adviser, confirming institution or entity or other nominated person, relating to Letters of Credit, at the time of issuance of any Letter of Credit and upon the occurrence of any other activity with respect to any Letter of Credit (including transfers, assignments of proceeds, amendments, drawings, renewals or cancellations). 

 

(l) If by reason of (x) any Change in Law, or (y) compliance by Issuing Bank or any other member of the Lender Group with any direction, request, or requirement (irrespective of whether having the force of law) of any Governmental Authority or monetary authority including, Regulation D of the Board of Governors as from time to time in effect (and any successor thereto):

 

(i) any reserve, deposit, or similar requirement is or shall be imposed or modified in respect of any Letter of Credit issued or caused to be issued hereunder or hereby, or

 

(ii) there shall be imposed on Issuing Bank or any other member of the Lender Group any other condition regarding any Letter of Credit,

 

and the result of the foregoing is to increase, directly or indirectly, the cost to Issuing Bank or any other member of the Lender Group of issuing, making, participating in, or maintaining any Letter of Credit or to reduce the amount receivable in respect thereof, then, and in any such case, Agent may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify Borrower, and Borrower shall pay within 30 days after demand therefor, such amounts as Agent may specify to be necessary to compensate Issuing Bank or any other member of the Lender Group for such additional cost or reduced receipt, together with interest on such amount from the date of such demand until payment in full thereof at the rate then applicable to Base Rate Loans hereunder; provided, that (A) Borrower shall not be required to provide any compensation pursuant to this Section 2.11(l) for any such amounts incurred more than 180 days prior to the date on which the demand for payment of such amounts is first made to Borrower, and (B) if an event or circumstance giving rise to such amounts is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.  The determination by Agent of any amount due pursuant to this Section 2.11(l), as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable error, be final and conclusive and binding on all of the parties hereto.

 

(m) Unless otherwise expressly agreed by Issuing Bank and Borrower when a Letter of Credit is issued, (i) the rules of the ISP and the UCP shall apply to each standby Letter of Credit, and (ii) the rules of the UCP shall apply to each commercial Letter of Credit.

 

(n) In the event of a direct conflict between the provisions of this Section 2.11 and any provision contained in any Issuer Document, it is the intention of the parties hereto that such provisions be read together and construed, to the fullest extent possible, to be in concert with each other.  In the event of any actual, 

 

  

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irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this Section 2.11 shall control and govern.

 

2.12 LIBOR Option.

 

(a) Interest and Interest Payment Dates.  In lieu of having interest charged at the rate based upon the Base Rate, Borrower shall have the option, subject to Section 2.12(b) below (the “LIBOR Option”) to have interest on all or a portion of the Revolving Loans, the Term Loan,  the Delayed Draw Term Loan 1 or the Delayed Draw Term Loan 2 be charged (whether at the time when made (unless otherwise provided herein), upon conversion from a Base Rate Loan to a LIBOR Rate Loan, or upon continuation of a LIBOR Rate Loan as a LIBOR Rate Loan) at a rate of interest based upon the LIBOR Rate.  Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the last day of the Interest Period applicable thereto; provided, that, subject to the following clauses (ii) and (iii), in the case of any Interest Period greater than 3 months in duration, interest shall be payable at 3 month intervals after the commencement of the applicable Interest Period and on the last day of such Interest Period), (ii) the date on which all or any portion of the Obligations are accelerated pursuant to the terms hereof, or (iii) the date on which this Agreement is terminated pursuant to the terms hereof.  On the last day of each applicable Interest Period, unless Borrower properly has exercised the LIBOR Option with respect thereto, the interest rate applicable to such LIBOR Rate Loan automatically shall convert to the rate of interest then applicable to Base Rate Loans of the same type hereunder.  At any time that an Event of Default has occurred and is continuing, Borrower no longer shall have the option to request that Revolving Loans bear interest at a rate based upon the LIBOR Rate.

 

(b) LIBOR Election.

 

(i) Borrower may, at any time and from time to time, so long as no Event of Default has occurred and is continuing, elect to exercise the LIBOR Option by notifying Agent prior to 11:00 a.m. at least 1 Business Day prior to the commencement of the proposed Interest Period (the “LIBOR Deadline”).  Notice of Borrower’s election of the LIBOR Option for a permitted portion of the Revolving Loans, the Term Loan, the Delayed Draw Term Loan 1 and the Delayed Draw Term Loan 2 and an Interest Period pursuant to this Section shall be made by delivery to Agent of a LIBOR Notice received by Agent before the LIBOR Deadline, or by telephonic notice received by Agent before the LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice received by Agent prior to 5:00 p.m. on the same day).  Promptly upon its receipt of each such LIBOR Notice, Agent shall provide a copy thereof to each of the affected Lenders.

 

(ii) Each LIBOR Notice shall be irrevocable and binding on Borrower.  In connection with each LIBOR Rate Loan, Borrower shall indemnify, defend, and hold Agent and the Lenders harmless against any loss, cost, or expense actually incurred by Agent or any Lender as a result of (A) the payment of any principal of any LIBOR Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (B) the conversion of any LIBOR Rate Loan other than on the last day of the Interest Period applicable thereto, or (C) the failure to borrow, convert, continue or prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered pursuant hereto (such losses, costs, or expenses, “Funding Losses”).  A certificate of Agent or a Lender delivered to Borrower setting forth in reasonable detail any amount or amounts that Agent or such Lender is entitled to receive pursuant to this Section 2.12 shall be conclusive absent manifest error.  Borrower shall pay such amount to Agent or the Lender, as applicable, within 30 days of the date of its receipt of such certificate.  If a payment of a LIBOR Rate Loan on a day other than the last day of the applicable Interest Period would result in a Funding Loss, Agent may, in its sole discretion at the request of Borrower, hold the amount of such payment as cash collateral in support of the Obligations until the last day of such Interest Period and apply such amounts to the payment of the applicable LIBOR Rate Loan on such last day, it being agreed that Agent has no obligation to so defer the application of payments to any LIBOR Rate Loan and that, in the event that Agent does not defer such application, Borrower shall be obligated to pay any resulting Funding Losses.

 

(iii) Unless Agent, in its sole discretion, agrees otherwise, Borrower shall have not more than 5 LIBOR Rate Loans in effect at any given time.  Borrower only may exercise the LIBOR Option for proposed LIBOR Rate Loans of at least $1,000,000.

 

  

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(c) Conversion.  Borrower may convert LIBOR Rate Loans to Base Rate Loans at any time; provided, that in the event that LIBOR Rate Loans are converted or prepaid on any date that is not the last day of the Interest Period applicable thereto, including as a result of any prepayment through the required application by Agent of any payments or proceeds of Collateral in accordance with Section 2.4(b) or for any other reason, including early termination of the term of this Agreement or acceleration of all or any portion of the Obligations pursuant to the terms hereof, Borrower shall indemnify, defend, and hold Agent and the Lenders and their Participants harmless against any and all Funding Losses in accordance with Section 2.12 (b)(ii).

 

(d) Special Provisions Applicable to LIBOR Rate.

 

(i) The LIBOR Rate may be adjusted by Agent with respect to any Lender on a prospective basis to take into account any additional or increased costs to such Lender of maintaining or obtaining any eurodollar deposits or increased costs, in each case, due to changes in applicable law occurring subsequent to the commencement of the then applicable Interest Period, including any Changes in Law (including any changes in tax laws (except changes of general applicability in corporate income tax laws)) and changes in the reserve requirements imposed by the Board of Governors, which additional or increased costs would increase the cost of funding or maintaining loans bearing interest at the LIBOR Rate.  In any such event, the affected Lender shall give Borrower and Agent notice of such a determination and adjustment and Agent promptly shall transmit the notice to each other Lender and, upon its receipt of the notice from the affected Lender,  Borrower may, by notice to such affected Lender (A) require such Lender to furnish to Borrower a statement setting forth in reasonable detail the basis for adjusting such LIBOR Rate and the method for determining the amount of such adjustment, or (B) repay the LIBOR Rate Loans of such Lender with respect to which such adjustment is made (together with any amounts due under Section 2.12(b)(ii)).

 

(ii) In the event that any change in market conditions or any Change in Law shall at any time after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for such Lender to fund or maintain LIBOR Rate Loans or to continue such funding or maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed circumstances to Agent and Borrower and Agent promptly shall transmit the notice to each other Lender and (y) in the case of any LIBOR Rate Loans of such Lender that are outstanding, the date specified in such Lender’s notice shall be deemed to be the last day of the Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of such Lender thereafter shall accrue interest at the rate then applicable to Base Rate Loans, and (z) Borrower shall not be entitled to elect the LIBOR Option until such Lender determines that it would no longer be unlawful or impractical to do so.

 

(e) No Requirement of Matched Funding.  Anything to the contrary contained herein notwithstanding, neither Agent, nor any Lender, nor any of their Participants, is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues at the LIBOR Rate.

 

2.13 Capital Requirements.

 

(a) If, after the date hereof, Issuing Bank or any Lender determines that (i) any Change in Law regarding capital or reserve requirements for banks or bank holding companies, or (ii) compliance by Issuing Bank or such Lender, or their respective parent bank holding companies, with any guideline, request or directive of any Governmental Authority regarding capital adequacy (whether or not having the force of law), has the effect of reducing the return on Issuing Bank’s, such Lender’s, or such holding companies’ capital as a consequence of Issuing Bank’s or such Lender’s commitments hereunder to a level below that which Issuing Bank, such Lender, or such holding companies could have achieved but for such Change in Law or compliance (taking into consideration Issuing Bank’s, such Lender’s, or such holding companies’ then existing policies with respect to capital adequacy and assuming the full utilization of such entity’s capital) by any amount deemed by Issuing Bank or such Lender to be material, then Issuing Bank or such Lender may notify Borrower and Agent thereof.  Following receipt of such notice, Borrower agrees to pay Issuing Bank or such Lender on demand the amount of such reduction of return of capital as and when such reduction is determined, payable within 30 days after presentation by Issuing Bank or such Lender of a statement in the amount and setting forth in reasonable detail Issuing Bank’s or such Lender’s calculation thereof and the assumptions upon which such calculation was based (which statement shall be deemed 

 

  

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true and correct absent manifest error).  In determining such amount, Issuing Bank or such Lender may use any reasonable averaging and attribution methods.  Failure or delay on the part of Issuing Bank or any Lender to demand compensation pursuant to this Section shall not constitute a waiver of Issuing Bank’s or such Lender’s right to demand such compensation; provided that Borrower shall not be required to compensate Issuing Bank or a Lender pursuant to this Section for any reductions in return incurred more than 180 days prior to the date that Issuing Bank or such Lender notifies Borrower of such Change in Law giving rise to such reductions and of such Lender’s intention to claim compensation therefor; provided further that if such claim arises by reason of the Change in Law that is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

 

(b) If Issuing Bank or any Lender requests additional or increased costs referred to in Section 2.11(l) or  Section 2.12(d)(i) or amounts under Section 2.13(a) or sends a notice under Section 2.12(d)(ii) relative to changed circumstances (such Issuing Bank or Lender, an “Affected Lender”), then such Affected Lender shall use reasonable efforts to promptly designate a different one of its lending offices or to assign its rights and obligations hereunder to another of its offices or branches, if (i) in the reasonable judgment of such Affected Lender, such designation or assignment would eliminate or reduce amounts payable pursuant to Section 2.11(l), Section 2.12(d)(i) or Section 2.13(a), as applicable, or would eliminate the illegality or impracticality of funding or maintaining LIBOR Rate Loans and (ii) in the reasonable judgment of such Affected Lender, such designation or assignment would not subject it to any material unreimbursed cost or expense and would not otherwise be materially disadvantageous to it.  Borrower agrees to pay all reasonable out-of-pocket costs and expenses incurred by such Affected Lender in connection with any such designation or assignment.  If, after such reasonable efforts, such Affected Lender does not so designate a different one of its lending offices or assign its rights to another of its offices or branches so as to eliminate Borrower’s obligation to pay any future amounts to such Affected Lender pursuant to Section 2.11(l), Section 2.12(d)(i) or Section 2.13(a), as applicable, or to enable Borrower to obtain LIBOR Rate Loans, then Borrower (without prejudice to any amounts then due to such Affected Lender under Section 2.11(l), Section 2.12(d)(i) or Section 2.13(a), as applicable) may, unless prior to the effective date of any such assignment the Affected Lender withdraws its request for such additional amounts under Section 2.11(l),  Section 2.12(d)(i) or Section 2.13(a), as applicable, or indicates that it is no longer unlawful or impractical to fund or maintain LIBOR Rate Loans, may designate a different Issuing Bank or substitute a Lender, in each case,  reasonably acceptable to Agent to purchase the Obligations owed to such Affected Lender and such Affected Lender’s commitments hereunder (a “Replacement Lender”), and if such Replacement Lender agrees to such purchase, such Affected Lender shall assign to the Replacement Lender its Obligations and commitments, and upon such purchase by the Replacement Lender, which such Replacement Lender shall be deemed to be “Issuing Bank” or a “Lender” (as the case may be) for purposes of this Agreement and such Affected Lender shall cease to be “Issuing Bank” or a “Lender” (as the case may be) for purposes of this Agreement.

 

(c) Notwithstanding anything herein to the contrary, the protection of Sections 2.11(l), 2.12(d), and 2.13 shall be available to Issuing Bank and each Lender (as applicable) regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, judicial ruling, judgment, guideline, treaty or other change or condition which shall have occurred or been imposed, so long as it shall be customary for issuing banks or lenders affected thereby to comply therewith.  Notwithstanding any other provision herein, neither Issuing Bank nor any Lender shall demand compensation pursuant to this Section 2.13 if it shall not at the time be the general policy or practice of Issuing Bank or such Lender (as the case may be) to demand such compensation in similar circumstances under comparable provisions of other credit agreements, if any.

 

2.14 Accordion.

 

(a) At any time during the period from and after the Closing Date through but excluding the date that is the fourth year anniversary of the Closing Date, at the option of Borrower (but subject to the conditions set forth in clause (b) below), the Revolver Commitments and the Maximum Revolver Amount may be increased by an amount in the aggregate for all such increases of the Revolver Commitments and the Maximum Revolver Amount not to exceed the Available Increase Amount (each such increase, an “Increase”).  Agent shall invite each Lender to increase its Revolver Commitments (as the case may be) (it being understood that no Lender shall be obligated to increase its Revolver Commitments) in connection with a proposed Increase at the interest margin 

 

  

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proposed by Borrower, and if sufficient Lenders do not agree to increase their Revolver Commitments (as the case may be) in connection with such proposed Increase, then Agent or Borrower may invite any prospective lender who is reasonably satisfactory to Agent and Borrower to become a Lender in connection with a proposed Increase.  Any Increase shall be in an amount of at least $5,000,000 and integral multiples of $1,000,000 in excess thereof.  In no event may the Revolver Commitments and the Maximum Revolver Amount be increased pursuant to this Section 2.14 on more than 2 occasions in the aggregate for all such Increases.  Additionally, for the avoidance of doubt, it is understood and agreed that in no event shall the aggregate amount of the Increases to the Revolver Commitments exceed $25,000,000.

 

(b) Each of the following shall be conditions precedent to any Increase of the Revolver Commitments and the Maximum Revolver Amount in connection therewith:

 

(i) Agent or Borrower have obtained the commitment of one or more Lenders (or other prospective lenders) reasonably satisfactory to Agent and Borrower to provide the applicable Increase and any such Lenders (or prospective lenders), Borrower, and Agent have signed a joinder agreement to this Agreement (an “Increase Joinder”), in form and substance reasonably satisfactory to Agent, to which such Lenders (or prospective lenders), Borrower, and Agent are party,

 

(ii) each of the conditions precedent set forth in Section 3.2 are satisfied or waived in accordance with the terms and conditions of this Agreement,

 

(iii) Borrower shall have reached agreement with the Lenders (or prospective lenders) agreeing to the increased Revolver Commitments with respect to the interest margins applicable to Revolving Loans to be made pursuant to the increased Revolver Commitments (which interest margins may be made pursuant to the increased Revolver Commitments, higher than or equal to the interest margins applicable to Revolving Loans set forth in this Agreement immediately prior to the date of the increased Revolver Commitments (the date of the effectiveness of the increased Revolver Commitments and the Maximum Revolver Amount, the “Increase Date”)) and shall have communicated the amount of such interest margins to Agent.  Any Increase Joinder may, with the consent of Agent, Borrower and the Lenders or prospective lenders agreeing to the proposed Increase, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate to effectuate the provisions of this Section 2.14 (including any amendment necessary to effectuate the interest margins for the Revolving Loans to be made pursuant to the increased Revolver Commitments.  Anything to the contrary contained herein notwithstanding, if the interest margin that is to be applicable to the Revolving Loans to be made pursuant to the increased Revolver Commitments is higher than the interest margin applicable to the Revolving Loans immediately prior to the applicable Increase Date (the amount by which the interest margin is higher, the “Excess”), then the interest margin applicable to the Revolving Loans immediately prior to the Increase Date shall be increased by the amount of the Excess, effective on the applicable Increase Date, and without the necessity of any action by any party hereto.

 

(c) Unless otherwise specifically provided herein, all references in this Agreement and any other Loan Document to Revolving Loans shall be deemed, unless the context otherwise requires, to include Revolving Loans made pursuant to the increased Revolver Commitments and Maximum Revolver Amount pursuant to this Section 2.14.

 

(d) Each of the Lenders having a Revolver Commitment prior to the Increase Date (the “Pre-Increase Revolver Lenders”) shall assign to any Lender which is acquiring a new or additional Revolver Commitment on the Increase Date (the “Post-Increase Revolver Lenders”), and such Post-Increase Revolver Lenders shall purchase from each Pre-Increase Revolver Lender, at the principal amount thereof, such interests in the Revolving Loans and participation interests in Letters of Credit on such Increase Date as shall be necessary in order that, after giving effect to all such assignments and purchases, such Revolving Loans and participation interests in Letters of Credit will be held by Pre-Increase Revolver Lenders and Post-Increase Revolver Lenders ratably in accordance with their Pro Rata Share after giving effect to such increased Revolver Commitments.

 

  

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(e) The Revolving Loans, Revolver Commitments, and Maximum Revolver Amount established pursuant to this Section 2.14 shall constitute Revolving Loans, Revolver Commitments, and Maximum Revolver Amount under, and shall be entitled to all the benefits afforded by, this Agreement and the other Loan Documents, and shall, without limiting the foregoing, benefit equally and ratably from any guarantees and the security interests created by the Loan Documents.  Borrower shall take any actions reasonably required by Agent to ensure and demonstrate that the Liens and security interests granted by the Loan Documents continue to be perfected under the Code or otherwise after giving effect to the establishment of any such new Revolver Commitments and Maximum Revolver Amount.

 

3. CONDITIONS; TERM OF AGREEMENT.

 

3.1 Conditions Precedent to the Initial Extension of Credit.  The obligation of each Lender to make the initial extensions of credit provided for hereunder is subject to the fulfillment, to the satisfaction of Agent and each Lender, of each of the conditions precedent set forth on Schedule 3.1 (the making of such initial extensions of credit by a Lender being conclusively deemed to be its satisfaction or waiver of the conditions precedent ).

 

3.2 Conditions Precedent to all Extensions of Credit.  The obligation of the Lender Group (or any member thereof) to make any Revolving Loans or any Delayed Draw Term Loan hereunder (or to extend any other credit hereunder) at any time shall be subject to the following conditions precedent:

 

(a) the representations and warranties of Borrower and its Subsidiaries contained in this Agreement or in the other Loan Documents 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 by materiality in the text thereof) on and as of the date of such extension of credit, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties 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 by materiality in the text thereof) as of such earlier date);

 

(b) no Default or Event of Default shall have occurred and be continuing on the date of such extension of credit, nor shall either result from the making thereof; and

 

(c) solely in the case of a Delayed Draw Term Loan, (i) Borrower shall be in compliance with the Leverage Ratio covenant in Section 7(c) to be measured: (A) if applicable, in the case of the fiscal month in which the Closing Date occurs, as of the end of the most recent fiscal month before the Closing Date for which financial statements have been delivered, and (B) thereafter, as of the end of the fiscal month for which financial statements have been most recently delivered pursuant to Section 5.1, in each case, both immediately before and immediately after giving effect to the making of such Delayed Draw Term Loan, and (ii) the Loan Parties have satisfied the conditions subsequent in items (b) through (i) of Schedule 3.6 (relating to the Real Property Collateral located in Brentwood, New York) and item (j) of Schedule 3.6 (relating to the delivery for carrier, freight forwarder and customs broker agreements).

 

3.3 Maturity.  This Agreement shall continue in full force and effect for a term ending on the Maturity Date.

 

3.4 Effect of Maturity.  On the Maturity Date, all commitments of the Lender Group to provide additional credit hereunder shall automatically be terminated and all of the Obligations immediately shall become due and payable without notice or demand and Borrower shall be required to repay all of the Obligations in full.  No termination of the obligations of the Lender Group (other than payment in full of the Obligations and termination of the Commitments) shall relieve or discharge any Loan Party of its duties, obligations, or covenants hereunder or under any other Loan Document and Agent’s Liens in the Collateral shall continue to secure the Obligations and shall remain in effect until all Obligations have been paid in full and the Commitments have been terminated.  When all of the Obligations have been paid in full and the Lender Group’s obligations to provide additional credit under the Loan Documents have been terminated irrevocably, Agent will, at Borrower’s sole expense, execute and deliver any termination statements, lien releases, discharges of security interests, and other similar discharge or release documents (and, if applicable, in recordable form) as are 

 

  

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reasonably necessary to release, as of record, Agent’s Liens and all notices of security interests and liens previously filed by Agent.

 

3.5 Early Termination by Borrower.  Borrower has the option, at any time upon 5 Business Days prior written notice to Agent, to terminate this Agreement and terminate the Commitments and the Delayed Draw Term Loan Commitments hereunder by repaying to Agent all of the Obligations in full.  The foregoing notwithstanding, (a) Borrower may rescind termination notices relative to proposed payments in full of the Obligations with the proceeds of third party Indebtedness if the closing for such issuance or incurrence does not happen on or before the date of the proposed termination (in which case, a new notice shall be required to be sent in connection with any subsequent termination), and (b) Borrower may extend the date of termination at any time with the consent of Agent (which consent shall not be unreasonably withheld or delayed).

 

3.6 Conditions Subsequent.  The obligation of the Lender Group (or any member thereof) to continue to make Revolving Loans (or otherwise extend credit hereunder) is subject to the fulfillment, on or before the date applicable thereto, of the conditions subsequent set forth on Schedule 3.6 (the failure by Borrower to so perform or cause to be performed such conditions subsequent as and when required by the terms thereof (unless such date is extended, in writing, by Agent, which Agent may do without obtaining the consent of the other members of the Lender Group), shall constitute an Event of Default).

 

4. REPRESENTATIONS AND WARRANTIES.

 

In order to induce the Lender Group to enter into this Agreement, Borrower makes the following representations and warranties to the Lender Group which shall be true, correct, and complete, in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof), as of the Closing Date, and shall be true, correct, and complete, in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof), as of the date of the making of each Revolving Loan or Delayed Draw Term Loan (or other extension of credit) made thereafter, as though made on and as of the date of such Revolving Loan or Delayed Draw Term Loan (or other extension of credit) (except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties 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 by materiality in the text thereof) as of such earlier date) and such representations and warranties shall survive the execution and delivery of this Agreement:

 

4.1 Due Organization and Qualification; Subsidiaries.

 

(a) Each Loan Party (i) is duly organized and existing and in good standing under the laws of the jurisdiction of its organization, (ii) is qualified to do business in any state where the failure to be so qualified could reasonably be expected to result in a Material Adverse Effect, and (iii) has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents to which it is a party and to carry out the transactions contemplated thereby.

 

(b) Set forth on Schedule 4.1(b) is a complete and accurate description, as of the Closing Date, of the authorized Equity Interests of Borrower, by class and a description of the number of shares of each such class that are issued and outstanding.  Except as disclosed by the Borrower from time to time in filings with the Securities and Exchange Commission, Borrower is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its Equity Interests or any security convertible into or exchangeable for any of its Equity Interests.

 

(c) Set forth on Schedule 4.1(c) (as such Schedule may be updated from time to time to reflect changes resulting from transactions permitted under this Agreement), is a complete and accurate list of the Loan Parties’ direct and indirect Subsidiaries, showing: (i) the number of shares of each class of common and preferred Equity Interests authorized for each of such Subsidiaries, and (ii) the number and the percentage of the outstanding 

 

  

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shares of each such class owned directly or indirectly by Borrower.  All of the outstanding Equity Interests of each such Subsidiary have been validly issued and are fully paid and non-assessable.

 

(d) Except in connection with compensatory programs, there are no subscriptions, options, warrants, or calls relating to any shares of Borrower’s or its Subsidiaries’ Equity Interests, including any right of conversion or exchange under any outstanding security or other instrument.

 

4.2 Due Authorization; No Conflict.

 

(a) As to each Loan Party, the execution, delivery, and performance by such Loan Party of the Loan Documents to which it is a party have been duly authorized by all necessary action on the part of such Loan Party.

 

(b) As to each Loan Party, the execution, delivery, and performance by such Loan Party of the Loan Documents to which it is a party do not and will not (i) violate any material provision of federal, state, or local law or regulation applicable to any Loan Party or its Subsidiaries, the Governing Documents of any Loan Party or its Subsidiaries, or any order, judgment, or decree of any court or other Governmental Authority binding on any Loan Party or its Subsidiaries, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any Material Contract where any such conflict, breach or default could individually or in the aggregate reasonably be expected to have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any assets of any Loan Party, other than Permitted Liens, or (iv) require any approval of any holder of Equity Interests of a Loan Party or any approval or consent of any Person under any Material Contract, other than consents or approvals that have been obtained and that are still in force and effect and except, in the case of Material Contracts, for consents or approvals, the failure to obtain could not individually or in the aggregate reasonably be expected to cause a Material Adverse Effect.

 

4.3 Governmental Consents.  The execution, delivery, and performance by each Loan Party of the Loan Documents to which such Loan Party is a party and the consummation of the transactions contemplated by the Loan Documents do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any Governmental Authority, other than registrations, consents, approvals, notices, or other actions that have been obtained and that are still in force and effect and except for filings and recordings with respect to the Collateral to be made, or otherwise delivered to Agent for filing or recordation, as of the Closing Date.

 

4.4 Binding Obligations; Perfected Liens.

 

(a) Each Loan Document has been duly executed and delivered by each Loan Party that is a party thereto and is the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.

 

(b) Agent’s Liens are validly created, perfected (other than (i) in respect of motor vehicles that are subject to a certificate of title, (ii) money, (iii) letter-of-credit rights (other than supporting obligations), (iv) commercial tort claims (other than those that, by the terms of the Guaranty and Security Agreement, are required to be perfected), and (v) any Deposit Accounts and Securities Accounts not subject to a Control Agreement as permitted by Section 7(k)(iv) of the Guaranty and Security Agreement, and subject only to the filing of financing statements, the recordation of the Copyright Security Agreement, and the recordation of the Mortgages, in each case, in the appropriate filing offices), and first priority Liens, subject only to Permitted Liens which are non-consensual Permitted Liens, permitted purchase money Liens, or the interests of lessors under Capital Leases.

 

4.5 Title to Assets; No Encumbrances.  Each of the Loan Parties and its Subsidiaries has (a) good, sufficient and legal title to (in the case of fee interests in Real Property), (b) valid leasehold interests in (in the case of leasehold interests in real or personal property), and (c) good and marketable title to (in the case of all other personal property), all of their respective material assets reflected in their most recent financial statements delivered pursuant to 

 

  

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Section 5.1, in each case except for assets disposed of since the date of such financial statements to the extent permitted hereby.  All of such assets are free and clear of Liens except for Permitted Liens.

 

4.6 Litigation.

 

(a) There are no actions, suits, or proceedings pending or, to the knowledge of Borrower, threatened in writing against a Loan Party or any of its Subsidiaries that either individually or in the aggregate could reasonably be expected to result in a Material Adverse Effect.

 

(b) Schedule 4.6(b) sets forth a complete and accurate description, as of the Closing Date, with respect to each of the actions, suits, or proceedings with asserted liabilities in excess of, or that could reasonably be expected to result in liabilities in excess of, $250,000 that, as of the Closing Date, is pending or, to the knowledge of Borrower, threatened against a Loan Party or any of its Subsidiaries, of (i) the parties to such actions, suits, or proceedings, (ii) the nature of the dispute that is the subject of such actions, suits, or proceedings, (iii) the procedural status, as of the Closing Date, with respect to such actions, suits, or proceedings, and (iv) whether any liability of the Loan Parties’ and their Subsidiaries in connection with such actions, suits, or proceedings is covered by insurance.

 

4.7 Compliance with Laws.  No Loan Party nor any of its Subsidiaries (a) is in violation of any applicable laws, rules, regulations, executive orders, or codes (including Environmental Laws) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, or (b) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

 

4.8 No Material Adverse Effect.  All historical financial statements relating to the Loan Parties and their Subsidiaries that have been delivered by Borrower to Agent have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and present fairly in all material respects, the Loan Parties’ and their Subsidiaries’ consolidated financial condition as of the date thereof and results of operations for the period then ended.  Since March 31, 2012, no event, circumstance, or change has occurred that has or could reasonably be expected to result in a Material Adverse Effect with respect to the Loan Parties and their Subsidiaries.

 

4.9 Solvency.

 

(a) The Loan Parties, on a consolidated basis, are Solvent.

 

(b) No transfer of property is being made by any Loan Party and no obligation is being incurred by any Loan Party in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of such Loan Party.

 

4.10 Employee Benefits.

 

(a) Except as set forth on Schedule 4.10, no Loan Party, none of its Subsidiaries, nor any of their respective ERISA Affiliates maintains or contributes to any Benefit Plan.

 

(b) Except as could not be reasonably likely to result in a Material Adverse Effect:

 

(i) Each Loan Party and each of the ERISA Affiliates has complied in all respects with ERISA, the IRC and all applicable laws regarding each Employee Benefit Plan.

 

(ii) Each Employee Benefit Plan is, and has been, maintained in compliance with ERISA, the IRC, all applicable laws and the terms of each such Employee Benefit Plan.

 

(iii) Each Employee Benefit Plan that is intended to qualify under Section 401(a) of the IRC has received a favorable determination letter from the Internal Revenue Service or an application for such 

 

  

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letter is currently being processed by the Internal Revenue Service.  To the best knowledge of each Loan Party and the ERISA Affiliates, nothing has occurred which would prevent, or cause the loss of, such qualification.

 

(iv) No liability to the PBGC (other than for the payment of current premiums which are not past due) by any Loan Party or ERISA Affiliate has been incurred or is expected by any Loan Party or ERISA Affiliate to be incurred with respect to any Pension Plan.

 

(v) No Notification Event exists or has occurred in the past six (6) years.

 

(vi) No Loan Party or ERISA Affiliate sponsors, maintains, or contributes to any Employee Benefit Plan, including, without limitation, any such plan maintained to provide benefits to former employees of such entities that may not be terminated by any Loan Party or ERISA Affiliate in its sole discretion at any time without liability.

 

(vii) No Loan Party or ERISA Affiliate has provided any security under Section 436 of the IRC.

 

4.11 Environmental Condition.  Except as set forth on Schedule 4.11, (a) to Borrower’s knowledge, (i) other than with respect to the Real Property Collateral, no Loan Party’s nor any of its Subsidiaries’ properties or assets has ever been used by a Loan Party, its Subsidiaries, or by previous owners or operators in the disposal of, or to produce, store, handle, treat, release, or transport, any Hazardous Materials, where such disposal, production, storage, handling, treatment, release or transport was in violation of any applicable Environmental Law to the extent such violation could reasonably be expected to result in a Material Adverse Effect and (ii) with respect to the Real Property Collateral, no Loan Party’s nor any of its Subsidiaries’ properties or assets has ever been used by a Loan Party, its Subsidiaries, or by previous owners or operators in the disposal of, or to produce, store, handle, treat, release, or transport, any Hazardous Materials, where such disposal, production, storage, handling, treatment, release or transport was in violation of any applicable Environmental Law to the extent such violation could either materially impair the value of such property or result in a material liability to a Loan Party, (b) to Borrower’s knowledge, no Loan Party’s nor any of its Subsidiaries’ properties or assets has ever been designated or identified in any manner pursuant to any environmental protection statute as a Hazardous Materials disposal site, (c) no Loan Party nor any of its Subsidiaries has received notice that a Lien arising under any Environmental Law has attached to any revenues or to any Real Property owned or operated by a Loan Party or its Subsidiaries, and (d) no Loan Party nor any of its Subsidiaries nor any of their respective facilities or operations is subject to any outstanding written order, consent decree, or settlement agreement with any Person relating to any Environmental Law or Environmental Liability that in each case as set forth in (c) and (d) above, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

 

4.12 Complete Disclosure.  All factual information taken as a whole (other than forward-looking information and projections and information of a general economic nature and general information about Borrower’s industry) furnished by or on behalf of a Loan Party or its Subsidiaries in writing to Agent or any Lender (including all information contained in the Schedules hereto or in the other Loan Documents) for purposes of or in connection with this Agreement or the other Loan Documents, and all other such factual information taken as a whole (other than forward-looking information and projections and information of a general economic nature and general information about Borrower’s industry) hereafter furnished by or on behalf of a Loan Party or its Subsidiaries in writing to Agent or any Lender will be, true and accurate, in all material respects, on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided.  The Projections delivered to Agent on April 11, 2013 represent as of the Closing Date, and as of the date on which any other Projections are delivered to Agent, such additional Projections represent, Borrower’s good faith estimate, on the date such Projections are delivered, of the Loan Parties’ and their Subsidiaries’ future performance for the periods covered thereby based upon assumptions believed by Borrower to be reasonable at the time of the delivery thereof to Agent (it being understood that such Projections are subject to significant uncertainties and contingencies, many of which are beyond the control of the Loan Parties and their Subsidiaries, and no assurances can be given that such Projections will be realized, and although reflecting Borrower’s good faith estimate, projections or forecasts based on methods and assumptions which Borrower believed to be reasonable at the time such Projections were prepared, are not to be viewed as facts, and that actual results during the period or periods covered by the Projections may differ materially from projected or estimated results).

 

  

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4.13 Patriot Act.  To the extent applicable, each Loan Party is in compliance, in all material respects, with the (a) Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (b) Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001) (the “Patriot Act”).  No part of the proceeds of the loans made hereunder will be used by any Loan Party or any of their Affiliates, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

4.14 Indebtedness.  Set forth on Schedule 4.14 is a true and complete list of all Indebtedness of each Loan Party (other than (a) any Indebtedness among Loan Parties that is not evidenced by a promissory note and (b) the Obligations) and each of its Subsidiaries outstanding immediately prior to the Closing Date that is to remain outstanding immediately after giving effect to the closing hereunder on the Closing Date and such Schedule accurately sets forth the aggregate principal amount of such Indebtedness as of the Closing Date.

 

4.15 Payment of Taxes.  Except as otherwise permitted under Section 5.5, all U.S. federal and all material state and local tax returns and reports of each Loan Party and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable and all material assessments, fees and other governmental charges upon a Loan Party and its Subsidiaries and upon their respective assets, income, businesses and franchises that are due and payable have been paid when due and payable.  Each Loan Party and each of its Subsidiaries have made adequate provision in accordance with GAAP for all taxes not yet due and payable.  Borrower knows of no material proposed tax assessment against a Loan Party or any of its Subsidiaries that is not being actively contested by such Loan Party or such Subsidiary diligently, in good faith, and by appropriate proceedings; provided such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor.

 

4.16 Margin Stock.  No Loan Party nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock.  No part of the proceeds of the loans made to Borrower will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock or for any purpose that violates the provisions of Regulation T, U or X of the Board of Governors.

 

4.17 Governmental Regulation.  No Loan Party nor any of its Subsidiaries is subject to regulation under the Federal Power Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur the Obligations or which may otherwise render all or any portion of the Obligations unenforceable.  No Loan Party nor any of its Subsidiaries is a “registered investment company” or a company “controlled” by a “registered investment company” or a “principal underwriter” of a “registered investment company” as such terms are defined in the Investment Company Act of 1940.

 

4.18 OFAC.  No Loan Party nor any of its Subsidiaries is in violation of any of the country or list based economic and trade sanctions administered and enforced by OFAC.  No Loan Party nor any of its Subsidiaries (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its assets located in Sanctioned Entities, or (c) derives revenues from investments in, or transactions with Sanctioned Persons or Sanctioned Entities.  No proceeds of any loan made hereunder will be used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.

 

4.19 Employee and Labor Matters.  There is (i) no unfair labor practice complaint pending or, to the knowledge of Borrower, threatened against Borrower or its Subsidiaries before any Governmental Authority and no grievance or arbitration proceeding pending or threatened against Borrower or its Subsidiaries which arises out of or under any collective bargaining agreement and that could reasonably be expected to result in a material liability, (ii) no strike, labor dispute, slowdown, stoppage or similar action or grievance pending or threatened in writing against Borrower or its Subsidiaries that could reasonably be expected to result in a material liability, or (iii) to the knowledge of Borrower, except as could not reasonably be expected to result in a Material Adverse Effect, no union representation question existing with respect to the employees of Borrower or its Subsidiaries and no union organizing activity taking place with respect to any of the employees of Borrower or its Subsidiaries.  None of Borrower or its Subsidiaries has incurred any 

 

  

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liability or obligation under the Worker Adjustment and Retraining Notification Act or similar state law, which remains unpaid or unsatisfied.  The hours worked and payments made to employees of Borrower or its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable legal requirements, except to the extent such violations could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  All material payments due from Borrower or its Subsidiaries on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as a liability on the books of Borrower, except where the failure to do so could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

4.20 Material Contracts.  Set forth on Schedule 4.20 is a list of the Material Contracts of the Loan Parties as of the Closing Date.  Except for matters which, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, each Material Contract (other than those that have expired at the end of their normal terms) (a) is in full force and effect and is binding upon and enforceable against the applicable Loan Party or its Subsidiary and, to Borrower’s knowledge each other Person that is a party thereto in accordance with its terms, (b) has not been otherwise amended or modified (other than amendments or modifications permitted by Section 6.6(b)), and (c) is not in default due to the action or inaction of the applicable Loan Party or its Subsidiary.

 

4.21 Leases.  Each Loan Party and its Subsidiaries enjoy peaceful and undisturbed possession under all leases material to their business and to which they are parties or under which they are operating, and, subject to Permitted Protests, all of such material leases are valid and subsisting and no material default by the applicable Loan Party or its Subsidiaries exists under any of them.

 

4.22 Eligible Accounts.  As to each Account that is identified by Borrower as an Eligible Account in a Borrowing Base Certificate submitted to Agent, such Account is (a) a bona fide existing payment obligation of the applicable Account Debtor created by the sale and delivery of Inventory or the rendition of services to such Account Debtor in the ordinary course of a Loan Party’s business, (b) owed to a Loan Party without any known defenses, disputes, offsets, counterclaims, or rights of return or cancellation, and (c) not excluded as ineligible by virtue of one or more of the excluding criteria (other than any Agent-discretionary criteria) set forth in the definition of Eligible Accounts.

 

4.23 Eligible Inventory.  As to each item of Inventory that is identified by Borrower as Eligible Finished Goods Inventory, Eligible In-Transit Inventory, Eligible Work-in-Process Inventory or Eligible Raw Materials Inventory in a Borrowing Base Certificate submitted to Agent, such Inventory is (a) of good and merchantable quality, free from known defects, and (b) not excluded as ineligible by virtue of one or more of the excluding criteria (other than any Agent-discretionary criteria) set forth in the definition of Eligible Inventory (in the case of Eligible In-Transit Inventory, after giving effect to any exclusions therefrom specified in the definition of Eligible In-Transit Inventory).

 

4.24 Location of Inventory and Equipment.  The Inventory and Equipment of Borrower and its Subsidiaries is not stored with a bailee, warehouseman, or similar party (unless the Loan Parties have complied with Section 6.13) and is located only at, or in-transit between, the locations identified on Schedule 4.24 (as such Schedule may be updated pursuant to Section 5.14).

 

4.25 Inventory Records.  Each Loan Party keeps correct and accurate records itemizing and describing the type, quality, and quantity of its and its Subsidiaries’ Inventory and the book value thereof.

 

4.26 Eligible Equipment.  All of the Eligible Equipment is used or held for use in the Loan Parties' business and is fit for such purposes.  As to each item of Equipment that is identified from time to time by Borrower as Eligible Equipment, such equipment is not excluded as ineligible by virtue of one or more of the excluding criteria set forth in the definition of Eligible Equipment.

 

4.27 Hedge Agreements.  On each date that any Hedge Agreement is executed by any Hedge Provider, Borrower and each other Loan Party satisfy all eligibility, suitability and other requirements under the Commodity Exchange Act (7 U.S.C. § 1, et seq., as in effect from time to time) and the Commodity Futures Trading Commission regulations.

 

4.28 Casualty. Neither the businesses nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, 

 

  

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act of God or of the public enemy or other casualty (whether or not covered by insurance) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

5. AFFIRMATIVE COVENANTS.

 

Borrower covenants and agrees that, until termination of all of the Commitments and payment in full of the Obligations (other than contingent indemnification obligations and expense reimbursement obligations for which no claim has been asserted):

 

5.1 Financial Statements, Reports, Certificates.  Borrower (a) will deliver to Agent, with copies to each Lender, each of the financial statements, reports, and other items set forth on Schedule 5.1 no later than the times specified therein, (b) agrees that no Subsidiary of a Loan Party will have a fiscal year different from that of Borrower, (c) agrees to maintain a system of accounting that enables Borrower to produce financial statements in accordance with GAAP, and (d) agrees that it will, and will cause each other Loan Party to, (i) keep a reporting system that shows all additions, sales, claims, returns, and allowances with respect to its and its Subsidiaries’ sales, and (ii) maintain its billing systems and practices substantially as in effect as of the Closing Date and shall only make material modifications thereto with notice to, and with the consent of, Agent.

 

5.2 Reporting.  Borrower (a) will deliver to Agent (and if so requested by Agent, with copies for each Lender) each of the reports set forth on Schedule 5.2 at the times specified therein, and (b) agrees to use commercially reasonable efforts in cooperation with Agent to facilitate and implement a system of electronic collateral reporting in order to provide electronic reporting of each of the items set forth on such Schedule.

 

5.3 Existence.  Except as otherwise permitted under Section 6.3 or Section 6.4, Borrower will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect such Person’s valid existence and good standing in its jurisdiction of organization and, except as could not reasonably be expected to result in a Material Adverse Effect, good standing with respect to all other jurisdictions in which it is qualified to do business and any rights, franchises, permits, licenses, accreditations, authorizations, or other approvals material to their businesses.

 

5.4 Maintenance of Properties.  Borrower will, and will cause each of its Subsidiaries  to, maintain and preserve all of its material assets that are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear, tear, casualty, and condemnation and Permitted Dispositions excepted.

 

5.5 Taxes.  Borrower will, and will cause each of its Subsidiaries to, pay in full before delinquency or before the expiration of any extension period all material governmental assessments and taxes imposed, levied, or assessed against it, or any of its assets or in respect of any of its income, businesses, or franchises, except to the extent that the validity of such governmental assessment or tax is the subject of a Permitted Protest.

 

5.6 Insurance.  Borrower will, and will cause each of its Subsidiaries to, at Borrower’s expense, maintain insurance respecting each of Borrower’s and its Subsidiaries’ assets wherever located, covering liabilities, losses or damages as are customarily insured against by other Persons engaged in same or similar businesses and similarly situated and located.  If at any time the area in which any Real Property Collateral located is designated (i) a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), the applicable Loan Party shall have delivered to Agent evidence of flood insurance naming Agent as mortgagee as required by the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as amended and in effect, which shall be reasonably satisfactory in form and substance to Agent.  All such policies of insurance shall be with financially sound and reputable insurance companies reasonably acceptable to Agent (it being agreed that, as of the Closing Date, St. Paul Fire & Marine Insurance Company, Federal Insurance Company, a member of the Chubb Group of Insurance Companies, The Phoenix Insurance Company, Travelers Property and Casualty Company of America, The Travelers Indemnity Company, Travelers Commercial Casualty Company, PPIC Property and Casualty Company Limited, part of Travelers Insurance Co. Ltd, U.S.A, Aspen Specialty Insurance Company, Arch Specialty Insurance Company, Travelers Casualty and Surety Company of America and Illinois National Insurance Company are acceptable to Agent) and in such amounts as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated and located and, in any event, in amount, adequacy, and scope reasonably satisfactory to Agent (it being agreed that the amount, adequacy, and scope of the policies of insurance of Borrower in effect as of the Closing Date are acceptable to Agent).  All property insurance policies covering the 

 

  

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Collateral are to be made payable to Agent for the benefit of Agent and the Lenders, as their interests may appear, in case of loss, pursuant to a standard loss payable endorsement with a standard non contributory “lender” or “secured party” clause and are to contain such other provisions as Agent may reasonably require to fully protect the Lenders’ interest in the Collateral and to any payments to be made under such policies.  All certificates of property and general liability insurance are to be delivered to Agent, with the loss payable (but only in respect of Collateral) and additional insured endorsements in favor of Agent and shall provide for not less than 30 days (10 days in the case of non-payment) prior written notice to Agent of the exercise of any right of cancellation.  If Borrower or its Subsidiaries fail to maintain such insurance, Agent may arrange for such insurance, but at Borrower’s expense and without any responsibility on Agent’s part for obtaining the insurance, the solvency of the insurance companies, the adequacy of the coverage, or the collection of claims.  Borrower shall give Agent prompt notice of any loss exceeding $2,500,000 covered by its or its Subsidiaries’ casualty or business interruption insurance.  Upon the occurrence and during the continuance of an Event of Default and upon the written notice to Borrower from Agent, Agent shall have the sole right to file claims under any property and general liability insurance policies in respect of the Collateral, to receive, receipt and give acquittance for any payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies.

 

5.7 Inspection.

 

(a) Borrower will, and will cause each of its Subsidiaries to, permit Agent, any Lender, and each of their respective duly authorized representatives or agents to visit any of its properties and inspect any of its assets or books and records, to examine and make copies of its books and records, and to discuss its affairs, finances, and accounts with, and to be advised as to the same by, its officers and employees (provided an authorized representative of Borrower shall be allowed to be present) at such reasonable times and intervals as Agent may designate and, so long as no Default or Event of Default has occurred and is continuing, with reasonable prior notice to Borrower and during regular business hours.

 

(b) Subject to the limitations on reimbursement set forth in Section 2.10(c), Borrower will, and will cause each of its Subsidiaries to, permit Agent and each of its duly authorized representatives or agents to conduct appraisals of the Collateral, valuations, field examinations and undertake environmental site assessments of the Real Property Collateral at such reasonable times and intervals as Agent may designate.

 

5.8 Compliance with Laws.  Borrower will, and will cause each of its Subsidiaries to, comply with the requirements of all applicable laws, rules, regulations, and orders of any Governmental Authority, other than laws, rules, regulations, and orders the non-compliance with which, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

 

5.9 Environmental. Borrower will, and will cause each of its Subsidiaries to,

 

(a) Keep any property either owned or operated by Borrower or its Subsidiaries free of any Environmental Liens or post bonds or other financial assurances sufficient to satisfy the obligations or liability evidenced by such Environmental Liens,

 

(b) Comply, in all material respects, with Environmental Laws and provide to Agent documentation of such compliance which Agent reasonably requests,

 

(c) Promptly notify Agent of any release of which Borrower has knowledge of a Hazardous Material in any reportable quantity from or onto property owned or operated by Borrower or its Subsidiaries and take any Remedial Actions required of Borrower or any of its Subsidiaries to abate said release or otherwise to come into compliance, in all material respects, with applicable Environmental Law, and

 

(d) Promptly, but in any event within 5 Business Days of its receipt thereof, provide Agent with written notice of any of the following:  (i) notice that an Environmental Lien has been filed against any of the real or personal property of Borrower or its Subsidiaries, (ii) commencement of any Environmental Action or written notice that an Environmental Action will be filed against Borrower or its Subsidiaries, and (iii) written notice of a violation, citation, or other administrative order from a Governmental Authority.

 

  

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5.10 Disclosure Updates.  Borrower will, promptly and in no event later than 5 Business Days after obtaining knowledge thereof, notify Agent if any written information, exhibit, or report furnished to Agent or the Lenders contained, at the time it was furnished, any untrue statement of a material fact or omitted to state any material fact necessary to make the statements contained therein not materially misleading in light of the circumstances in which made.  The foregoing to the contrary notwithstanding, any notification pursuant to the foregoing provision will not cure or remedy the effect of the prior untrue statement of a material fact or omission of any material fact nor shall any such notification have the effect of amending or modifying this Agreement or any of the Schedules hereto.

 

5.11 Formation of Subsidiaries; Acquired Real Property.

 

(a) Borrower will, at the time that any Loan Party forms any direct or indirect Subsidiary or acquires any direct or indirect Subsidiary after the Closing Date, within 15 days of such formation or acquisition (or such later date as permitted by Agent in its sole discretion) (i) cause such new Subsidiary to provide to Agent a joinder to the Guaranty and Security Agreement, together with such other security agreements (including mortgages with respect to any Real Property owned in fee of such new Subsidiary that is not a CFC with a fair market value in excess of $1,000,000 as required, and in the time period contemplated, by clause (b) below), as well as appropriate financing statements (and with respect to all property subject to a mortgage, fixture filings), all in form and substance reasonably satisfactory to Agent (including being sufficient to grant Agent a first priority Lien (subject to Permitted Liens) in and to the assets of such newly formed or acquired Subsidiary); provided, that the joinder to the Guaranty and Security Agreement, and such other security agreements shall not be required to be provided to Agent with respect to any Subsidiary of Borrower that is a CFC if providing such agreements would result in adverse tax consequences or the costs to the Loan Parties of providing such guaranty or such security agreements are unreasonably excessive (as determined by Agent in consultation with Borrower) in relation to the benefits to Agent and the Lenders of the security or guarantee afforded thereby, (ii) provide, or cause the applicable Loan Party to provide, to Agent a pledge agreement (or an addendum to the Guaranty and Security Agreement) and appropriate certificates and powers or financing statements, pledging all of the direct or beneficial ownership interest in such new Subsidiary in form and substance reasonably satisfactory to Agent; provided, that only 65% of the total outstanding voting Equity Interests of any first tier Subsidiary of Borrower that is a CFC (and none of the Equity Interests of any Subsidiary of such CFC) shall be required to be pledged if pledging a greater amount would result in adverse tax consequences or the costs to the Loan Parties of providing such pledge are unreasonably excessive (as determined by Agent in consultation with Borrower) in relation to the benefits to Agent and the Lenders of the security afforded thereby (which pledge, if reasonably requested by Agent, shall be governed by the laws of the jurisdiction of such Subsidiary), and (iii) provide to Agent all other documentation, including one or more opinions of counsel reasonably satisfactory to Agent, which, in its reasonable opinion, is appropriate with respect to the execution and delivery of the applicable documentation referred to above (including policies of title insurance or other documentation with respect to all Real Property owned in fee and subject to a mortgage).  Any document, agreement, or instrument executed or issued pursuant to this Section 5.11 shall constitute a Loan Document.

 

(b) Borrower will and will cause each of the Loan Parties to, upon the acquisition of any fee interest in Real Property having a fair market value in excess of $1,000,000, promptly (and in any event within 5 Business Days of acquisition) notify Agent of the acquisition of such Real Property and will, upon 60 days (or such longer period as permitted by Agent is in its reasonable discretion) after request from Agent, grant to Agent, for the benefit of the Lender Group and the Bank Product Providers, a first priority Mortgage on such Real Property and shall deliver such other documentation and opinions, in form and substance reasonably satisfactory to Agent, in connection with the grant of such Mortgage as Agent shall reasonably request in its Permitted Discretion, including title insurance policies, financing statements, fixture filings and environmental audits and Borrower or such Loan Party shall pay all recording costs, intangible taxes and other fees and costs (including reasonable attorneys fees and expenses) incurred in connection therewith.  Borrower acknowledges and agrees that, to the extent permitted by applicable law, all of the Collateral shall remain personal property regardless of the manner of its attachment or affixation to real property.

 

5.12 Further Assurances.  Borrower will, and will cause each of the other Loan Parties to, at any time upon the reasonable request of Agent, execute or deliver to Agent any and all financing statements, fixture filings, security agreements, pledges, assignments, mortgages, deeds of trust, opinions of counsel, and all other documents (the “Additional Documents”) that Agent may reasonably request in form and substance reasonably satisfactory to Agent, to 

 

  

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create, perfect, and continue perfected or to better perfect Agent’s Liens in all of the assets of Borrower and its Subsidiaries (whether now owned or hereafter arising or acquired, tangible or intangible, real or personal) to the extent such Liens are required under the Loan Documents, to create and perfect Liens in favor of Agent in any Real Property acquired by Borrower or any other Loan Party to the extent such Liens are required under the Loan Documents, and in order to fully consummate all of the transactions contemplated hereby and under the other Loan Documents; provided that the foregoing shall not apply to any Subsidiary of Borrower that is a CFC if providing such documents would result in adverse tax consequences or the costs to the Loan Parties of providing such documents are unreasonably excessive (as determined by Agent in consultation with Borrower) in relation to the benefits to Agent and the Lenders of the security afforded thereby.  To the maximum extent permitted by applicable law, if Borrower  or any other Loan Party refuses or fails to execute or deliver any reasonably requested Additional Documents within a reasonable period of time following the request to do so, Borrower and each other Loan Party hereby authorizes Agent to execute any such Additional Documents in the applicable Loan Party’s name and authorizes Agent to file such executed Additional Documents in any appropriate filing office.  In furtherance of, and not in limitation of, the foregoing, each Loan Party shall take such actions as Agent may reasonably request from time to time to ensure that the Obligations are guarantied by the Guarantors and are secured by substantially all of the assets of Borrower and its Subsidiaries, including all of the outstanding capital Equity Interests of Borrower’s Subsidiaries (in each case, subject to exceptions and limitations contained in the Loan Documents).

 

5.13 Lender Meetings.  Borrower will, within 90 days after the close of each fiscal year of Borrower, at the request of Agent or of the Required Lenders and upon reasonable prior notice, hold a meeting (at a mutually agreeable location and time or, at the mutual agreement of Agent and Borrower, by conference call) with all Lenders who choose to attend such meeting at which meeting shall be reviewed the financial results of the previous fiscal year and the financial condition of Borrower and its Subsidiaries and the projections presented for the current fiscal year of Borrower.

 

5.14 Location of Inventory and Equipment.  Borrower will, and will cause each of its Subsidiaries to, keep its Inventory and Equipment only at the locations identified on Schedule 4.24; provided, that Borrower may amend Schedule 4.24 so long as such amendment occurs by written notice to Agent not less than 5 days prior to the date on which such Inventory or Equipment is moved to such new location or such chief executive office is relocated and so long as such new location is within the continental United States.

 

5.15 Bank Products.  On or before the 90th day after the Closing Date or such later date as Agent may reasonably agree, the Loan Parties shall establish their primary depository and treasury management relationships with Wells Fargo or one or more of its Affiliates and will maintain such depository and treasury management relationships at all times during the term of the Agreement; provided that nothing herein shall obligate the Loan Parties to close or terminate their existing depository accounts until the Loan Parties’ customers are making payments to accounts at Wells Fargo, it being agreed that the Loan Parties shall use commercially reasonably efforts to cause such customers to do so.

 

5.16 Hedge Agreements.

 

Borrower agrees that it shall offer to Wells Fargo or one or more of its Affiliates the first opportunity to bid for all Hedge Agreements to be entered into by any Loan Party or any of its Subsidiaries during the term of the Agreement.

 

5.17 Compliance with ERISA and the IRC.  In addition to and without limiting the generality of Section 5.8, (a) comply in all material respects with applicable provisions of ERISA and the IRC with respect to all Employee Benefit Plans, (b) without the prior written consent of Agent and the Required Lenders, not take any action or fail to take action the result of which could result in a Loan Party or ERISA Affiliate incurring a material liability to the PBGC or to a Multiemployer Plan (other than  to pay contributions or premiums payable in the ordinary course), (c) allow any facts or circumstances to exist with respect to one or more Employee Benefit Plans that, in the aggregate, reasonably could be expected to result in a Material Adverse Effect, (d) not participate in any prohibited transaction that could result in other than a de minimis civil penalty  excise tax, fiduciary liability or correction obligation under ERISA or the IRC, (e) operate each Employee Benefit Plan in such a manner that will not incur any material tax liability under the IRC (including Section 4980B of the IRC), and (e) furnish to Agent upon Agent’s written request such additional information about any Employee Benefit Plan for which any Loan Party or ERISA Affiliate could reasonably expect to incur any material liability.  With respect to each Pension Plan (other than a Multiemployer Plan) except as could not reasonably be expected to result in liability to the Loan Parties, the Loan Parties and the ERISA Affiliates shall (i) satisfy in full and in a timely 

 

  

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manner, without incurring any late payment or underpayment charge or penalty and without giving rise to any Lien, all of the contribution and funding requirements of the IRC and of ERISA, and (ii) pay, or cause to be paid, to the PBGC in a timely manner, without incurring any late payment or underpayment charge or penalty, all premiums required pursuant to ERISA.

 

5.18 Assignable Material Contracts.  The Loan Parties shall use commercially reasonable efforts to ensure that any Material Contract entered into after the Closing Date by Borrower or one of its Subsidiaries that generates or, by its terms, will generate revenue, permits the assignment of such agreement (and all rights of Borrower or such Subsidiary, as applicable, thereunder) to Borrower’s or such Subsidiary’s lenders or an agent for any lenders (and any transferees of such lenders or such agent, as applicable).

 

6. NEGATIVE COVENANTS.

 

 Borrower covenants and agrees that, until termination of all of the Commitments and payment in full of the Obligations (other than contingent indemnification obligations and expense reimbursement obligations for which no claim has been asserted):

 

6.1 Indebtedness.  Borrower will not, and will not permit any of its Subsidiaries to create, incur, assume, suffer to exist, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness, except for Permitted Indebtedness.

 

6.2 Liens.  Borrower will not, and will not permit any of its Subsidiaries to create, incur, assume, or suffer to exist, directly or indirectly, any Lien on or with respect to any of its assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for Permitted Liens.

 

6.3 Restrictions on Fundamental Changes.  Borrower will not, and will not permit any of its Subsidiaries to,

 

(a) other than in order to consummate a Permitted Acquisition, enter into any merger, consolidation, reorganization, or recapitalization, or reclassify its Equity Interests, except for (i) any merger between Loan Parties, provided, that Borrower must be the surviving entity of any such merger to which it is a party, (ii) any merger between a Loan Party and a Subsidiary of such Loan Party that is not a Loan Party so long as such Loan Party is the surviving entity of any such merger, and (iii) any merger between Subsidiaries of Borrower that are not Loan Parties,

 

(b) liquidate, wind up, or dissolve itself (or suffer any liquidation or dissolution), except for (i) the liquidation or dissolution of non-operating Subsidiaries of Borrower with nominal assets and nominal liabilities, (ii) the liquidation or dissolution of a Loan Party (other than Borrower) or any of its wholly-owned Subsidiaries so long as all of the assets (including any interest in any Equity Interests) of such liquidating or dissolving Loan Party or Subsidiary are transferred to a Loan Party that is not liquidating or dissolving, or (iii) the liquidation or dissolution of a Subsidiary of Borrower that is not a Loan Party (other than any such Subsidiary the Equity Interests of which (or any portion thereof) is subject to a Lien in favor of Agent) so long as all of the assets of such liquidating or dissolving Subsidiary are transferred to a Subsidiary of Borrower that is not liquidating or dissolving, or

 

(c) suspend or cease operating a substantial portion of its or their business, except as permitted pursuant to clauses (a) or (b) above or in connection with a transaction permitted under Section 6.4.

 

6.4 Disposal of Assets.  Other than Permitted Dispositions or transactions expressly permitted by Sections 6.3 or 6.9, Borrower will not, and will not permit any of its Subsidiaries to convey, sell, lease, license, assign, transfer, or otherwise dispose of (or enter into an agreement to convey, sell, lease, license, assign, transfer, or otherwise dispose of) any of its or their assets.  Notwithstanding anything herein to the contrary (including, without limitation, in the definition of Permitted Dispositions), the Loan Parties will not voluntarily convey, sell, lease, license, assign, transfer, or otherwise dispose of any Eligible Equipment or Specified Real Property Collateral for less than the amount being advanced against such property.

 

  

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6.5 Nature of Business.  Borrower will not, and will not permit any of its Subsidiaries to make any change in the nature of its or their business as conducted on the Closing Date or acquire any properties or assets that are not reasonably related to the conduct of such business activities; provided, that the foregoing shall not prevent Borrower and its Subsidiaries from engaging in any business that is reasonably related or ancillary to its or their business.

 

6.6 Prepayments and Amendments.  Borrower will not, and will not permit any of its Subsidiaries to,

 

(a) Except in connection with Refinancing Indebtedness permitted by Section 6.1,

 

(i) optionally prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness of Borrower or its Subsidiaries, other than (A) the Obligations in accordance with this Agreement, (B) Permitted Intercompany Advances and (C) other Permitted Indebtedness (other than Subordinated Indebtedness) so long as (1) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (2) during the 1 day period immediately prior to such prepayment, redemption, defeasement, purchase or acquisition, Borrower has, and immediately after giving affect to such prepayment, redemption, defeasement, purchase or acquisition, Borrower is projected to have, Excess Availability of at least $12,500,000, (3) on a pro forma basis, Borrower and its Subsidiaries are projected to be in compliance with the financial covenants in Section 7 for the 12 month period ended one year after the proposed date of consummation of such proposed prepayment, redemption, defeasement, purchase or acquisition, and (4) if the amount of such proposed prepayment, redemption, defeasement, purchase or acquisition is greater than $250,000, Borrower has provided Agent with written notice containing (w) notice of its intent to make such prepayment, redemption, defeasement, purchase or acquisition, (x) the amount of such proposed prepayment, redemption, defeasement, purchase or acquisition, (y) a certification that each of the conditions contained in clauses (1), (2) and (3) above will be satisfied both before and after giving effect to such proposed prepayment, redemption, defeasement, purchase or acquisition, or

 

(ii) make any payment on account of Subordinated Indebtedness if such payment is not permitted at such time under the subordination terms and conditions, or

 

(b) Directly or indirectly, amend, modify, or change any of the terms or provisions of any Subordinated Indebtedness in a manner materially adverse to the interests of the Lenders or to the extent prohibited by any subordination agreement relating to such Indebtedness.

 

(i) the Governing Documents of any Loan Party or any of its Subsidiaries if the effect thereof could reasonably be expected to be materially adverse to the interests of the Lenders, or

 

(ii) any Material Contract except to the extent that such amendment, modification, or change could not reasonably be expected to be materially adverse to the interests of the Lenders.

 

6.7 Restricted Payments.  Borrower will not, and will not permit any of its Subsidiaries to, make any Restricted Payment; provided, that, so long as it is permitted by law, and so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom,

 

(a) Borrower may make distributions to former employees, officers, or directors of Borrower (or any spouses, ex-spouses, or estates of any of the foregoing) on account of redemptions of Equity Interests of Borrower held by such Persons, provided, that the aggregate amount of such redemptions made by Borrower during the term of this Agreement does not exceed $1,000,000 in the aggregate,

 

(b) Borrower may make distributions to former employees, officers, or directors of Borrower (or any spouses, ex-spouses, or estates of any of the foregoing), solely in the form of forgiveness of Indebtedness of such Persons owing to Borrower on account of repurchases of the Equity Interests of Borrower held by such Persons; provided that such Indebtedness was incurred by such Persons solely to acquire Equity Interests of Borrower,

 

(c) any Subsidiary of Borrower may make restricted payments to a Loan Party; and

 

  

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(d) Borrower and each Subsidiary may make any other Restricted Payments so long as (i) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (ii) during the 1 day period immediately prior to such Restricted Payment, Borrower has, and immediately after giving affect to such Restricted Payment, Borrower is projected to have, Excess Availability of at least $7,500,000, (iii) Borrower has provided Agent with written notice containing (A) notice of its intent to make such Restricted Payment, (B) the amount of such proposed Restricted Payment, (C) a certification that each of the conditions contained in clauses (i) and (ii) above will be satisfied both before and after giving effect to such proposed Restricted Payment and (D) a confirmation, supported by reasonably detailed calculations, that on a pro forma basis, Borrower and its Subsidiaries are projected to be in compliance with the financial covenants in Section 7 for the 12 month period ended one year after the proposed date of consummation of such proposed Restricted Payment, and (iv) the Delayed Draw Term Loan is either undrawn or repaid in full.

 

6.8 Accounting Methods.  Borrower will not, and will not permit any of its Subsidiaries to modify or change its fiscal year or its method of accounting (other than as may be required to conform to GAAP).

 

6.9 Investments.  Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, make or acquire any Investment or incur any liabilities (including contingent obligations) for or in connection with any Investment except for Permitted Investments.

 

6.10 Transactions with Affiliates.  Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction with any Affiliate of Borrower or any of its Subsidiaries except for:

 

(a) transactions (other than the payment of management, consulting, monitoring, or advisory fees) between Borrower or its Subsidiaries, on the one hand, and any Affiliate of Borrower or its Subsidiaries, on the other hand, so long as such transactions are no less favorable, taken as a whole, to Borrower or its Subsidiaries, as applicable, than would be obtained in an arm’s length transaction with a non-Affiliate,

 

(b) so long as it has been approved by Borrower’s or its applicable Subsidiary’s board of directors (or comparable governing body) in accordance with applicable law, any indemnity provided for the benefit of directors (or comparable managers) of Borrower or its applicable Subsidiary,

 

(c) the payment of compensation, severance, or benefit arrangements to officers and directors of Borrower and its Subsidiaries,

 

(d) transactions between Loan Parties; and

 

(e) transactions permitted by Section 6.3 or Section 6.7, or any Permitted Intercompany Advance.

 

6.11 Use of Proceeds.  Borrower will not, and will not permit any of its Subsidiaries to use the proceeds of any loan made hereunder for any purpose other than (a) on the Closing Date, (i) to repay, in full, the outstanding principal, accrued interest, and accrued fees and expenses owing under or in connection with the Existing Credit Facility, and (ii) to pay the fees, costs, and expenses incurred in connection with this Agreement, the other Loan Documents, and the transactions contemplated hereby and thereby, in each case, as set forth in the Funds Flow Agreement, and (b) thereafter, consistent with the terms and conditions hereof, to finance the working capital needs and general corporate purposes of the Loan Parties (including the making of Restricted Payments) and for their other lawful and permitted purposes (including that no part of the proceeds of the loans made to Borrower will be used to purchase or carry any such Margin Stock or to extend credit to others for the purpose of purchasing or carrying any such Margin Stock or for any purpose that violates the provisions of Regulation T, U or X of the Board of Governors).

 

6.12 Limitation on Issuance of Equity Interests.  Except for the issuance or sale of (i) Qualified Equity Interests by Borrower, (ii) Qualified Equity Interests by any Subsidiary of any Loan Party (other than Borrower) to a Loan Party or (iii) Qualified Equity Interests by any Subsidiary of any Loan Party that is not a Loan Party to a Subsidiary of any Loan Party that is not a Loan Party, Borrower will not, and will not permit any of its Subsidiaries to issue or sell or enter into any agreement or arrangement for the issuance or sale of any of its Equity Interests.

 

  

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6.13 Inventory with Bailees.  Borrower will not, and will not permit any of its Subsidiaries to store its Inventory or Equipment at any time with a bailee, warehouseman, or similar party, unless Borrower or such Subsidiary has used commercially reasonable efforts to deliver a Collateral Access Agreement duly executed by such bailee, warehouseman or similar party; provided that such requirement shall not be applicable with respect to sterilization facilities that temporarily store the Loan Parties’ Inventory.

 

6.14 Employee Benefits. To the extent that any of the events described in clauses (a) through (f) below, individually or in the aggregate, could have a Material Adverse Effect, Borrower will not, and will not permit any of its Subsidiaries to:

 

(a) terminate, or permit any ERISA Affiliate to terminate, any Pension Plan in a manner, or take any other action with respect to any Plan, which could reasonably be expected to result in any liability of any Loan Party or ERISA Affiliate to the PBGC;

 

(b) fail to make, or permit any ERISA Affiliate to fail to make, full payment when due of all amounts which, under the provisions of any Benefit Plan, agreement relating thereto or applicable Law, any Loan Party or ERISA Affiliate is required to pay;

 

(c) permit to exist, or allow any ERISA Affiliate to permit to exist, any funding deficiency within the meaning of section 302 of ERISA or section 412 of the Code, whether or not waived, with respect to any Plan or all Pension Plans in the aggregate;

 

(d) acquire, or permit any ERISA Affiliate to acquire, an interest in any Person that causes such Person to become an ERISA Affiliate with respect to a Loan Party or with respect to any ERISA Affiliate if such Person sponsors, maintains or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to, (i) any Pension or (ii) any Multiemployer Plan;

 

(e) contribute to, any Multiemployer Plan not set forth on Schedule 4.10; or

 

(f) amend, or permit any ERISA Affiliate to amend, a Pension Plan resulting in a material increase in current liability such that a Loan Party or ERISA Affiliate is required to provide security to such Plan under the IRC.

 

7. FINANCIAL COVENANTS.

 

(a) Minimum EBITDA.  Borrower covenants and agrees that during the period from the Closing Date until the date that financial statements have been (or were required to be) delivered pursuant to Section 5.1 for the month ending July 31, 2013, commencing on the date on which a Financial Covenant Period begins and measured as of the end of the fiscal month for which financial statements have been most recently delivered pursuant to Section 5.1 prior to such date (including, if applicable, in the case of the fiscal month in which the Closing Date occurs, financial statements most recently delivered on or before the Closing Date) and as of each fiscal month end thereafter during such Financial Covenant Period, Borrower will achieve EBITDA, measured on a month-end basis, of at least (i) for the one month period ending April 30, 2013, negative $800,000, (ii) for the two month period ending May 31, 2013, $700,000 and (iii) for the three month period ending June 30, 2013, $3,000,000.

 

(b) Fixed Charge Coverage Ratio.  Borrower covenants and agrees that after the date in which financial statements have been (or were required to be) delivered pursuant to Section 5.1 for the month ending July 31, 2013 until termination of all of the Commitments and payment in full of the Obligations (other than contingent indemnification obligations and expense reimbursement obligations for which no claim has been asserted), commencing on the date on which a Financial Covenant Period begins and measured as of the end of the fiscal month for which financial statements have been most recently delivered pursuant to Section 5.1 prior to such date and as of each fiscal month end thereafter during such Financial Covenant Period, Borrower will have a Fixed Charge Coverage Ratio, measured on a month-end basis, of at least 1.0:1.0.

 

  

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(c) Leverage Ratio.  Borrower covenants and agrees that, at any time that the Delayed Draw Term Loan 1 or Delayed Draw Term Loan 2 is outstanding, Borrower will have a Leverage Ratio, measured on a month-end basis, of not greater than the applicable ratio set forth in the following table for the applicable date set forth opposite thereto:

 

	
Applicable Ratio

	
Applicable Date

	
3.25:1.00

	
From the Closing Date until May 31, 2014

	
3.00:1.0

	
Thereafter

8. EVENTS OF DEFAULT.

 

Any one or more of the following events shall constitute an event of default (each, an “Event of Default”) under this Agreement:

 

8.1 Payments.  If Borrower fails to pay when due and payable, or when declared due and payable, (a) all or any portion of the Obligations consisting of interest, fees, or charges due the Lender Group, reimbursement of Lender Group Expenses, or other amounts (other than any portion thereof constituting principal) constituting Obligations (including any portion thereof that accrues after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), and such failure continues for a period of 3 Business Days, (b) all or any portion of the principal of the Loans, or (c) any amount payable to Issuing Bank in reimbursement of any drawing under a Letter of Credit;

 

8.2 Covenants.  If any Loan Party or any of its Subsidiaries:

 

(a) fails to perform or observe any covenant or other agreement contained in any of (i) Sections 3.6, 5.1, 5.2(a), 5.6, 5.7 (solely if Borrower refuses to allow Agent or its representatives or agents to visit Borrower’s properties, inspect its assets or books or records, examine and make copies of its books and records, or discuss Borrower’s affairs, finances, and accounts with officers and employees of Borrower), 5.10, 5.11, 5.13, 5.14, 5.15, 5.16 or 5.17 of this Agreement, (ii) Section 6 of this Agreement, (iii) Section 7 of this Agreement, or (iv) Section 7 of the Guaranty and Security Agreement;

 

(b) fails to perform or observe any covenant or other agreement contained in Section 5.5 of this Agreement and such failure continues for a period of 15 days after the earlier of (i) the date on which such failure shall first become known to any officer of Borrower or (ii) the date on which written notice thereof is given to Borrower by Agent; or

 

(c) fails to perform or observe any covenant or other agreement contained in this Agreement, or in any of the other Loan Documents, in each case, other than any such covenant or agreement that is the subject of another provision of this Section 8 (in which event such other provision of this Section 8 shall govern), and such failure continues for a period of 30 days after the earlier of (i) the date on which such failure shall first become known to any officer of Borrower or (ii) the date on which written notice thereof is given to Borrower by Agent;

 

8.3 Judgments.  If one or more judgments, orders, or awards for the payment of money in an aggregate amount of $2,500,000, or more (except to the extent fully covered (other than to the extent of customary deductibles) by insurance pursuant to which the insurer has not denied coverage) is entered or filed against a Loan Party or any of its Subsidiaries, or with respect to any of their respective assets, and either (a) there is a period of 45 consecutive days at any time after the entry of any such judgment, order, or award during which (1) the same is not discharged, satisfied, vacated, or bonded pending appeal, or (2) a stay of enforcement thereof is not in effect, or (b) enforcement proceedings are commenced upon such judgment, order, or award;

 

  

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8.4 Voluntary Bankruptcy, etc.  If an Insolvency Proceeding is commenced by a Loan Party or any of its Subsidiaries;

 

8.5 Involuntary Bankruptcy, etc.  If an Insolvency Proceeding is commenced against a Loan Party or any of its Subsidiaries and any of the following events occur: (a) such Loan Party or such Subsidiary consents to the institution of such Insolvency Proceeding against it, (b) the petition commencing the Insolvency Proceeding is not timely controverted, (c) the petition commencing the Insolvency Proceeding is not dismissed within 60 calendar days of the date of the filing thereof, (d) an interim trustee is appointed to take possession of all or any substantial portion of the properties or assets of, or to operate all or any substantial portion of the business of, such Loan Party or its Subsidiary, or (e) an order for relief shall have been issued or entered therein;

 

8.6 Default Under Other Agreements.  If there is (a) a default in one or more agreements to which a Loan Party or any of its Subsidiaries is a party with one or more third Persons governing or evidencing a Loan Party’s or any of its Subsidiaries’ Indebtedness involving an aggregate amount of $2,500,000 or more, and such default (i) occurs at the final maturity of the obligations thereunder, or (ii) results in a right by such third Person, irrespective of whether exercised, to accelerate the maturity of such Loan Party’s or its Subsidiary’s obligations thereunder;

 

8.7 Representations, etc.  If any warranty, representation, certificate, statement, or Record made herein or in any other Loan Document or delivered in writing to Agent or any Lender in connection with this Agreement or any other Loan Document proves to be untrue in any material respect (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of the date of issuance or making or deemed making thereof;

 

8.8 Guaranty.  If the obligation of any Guarantor under the guaranty contained in the Guaranty and Security Agreement is limited or terminated by operation of law or by such Guarantor (other than in accordance with the terms of this Agreement);

 

8.9 Security Documents.  If the Guaranty and Security Agreement or any other Loan Document that purports to create a Lien, shall, for any reason, fail or cease to create a valid and perfected and, except to the extent of Permitted Liens which are non-consensual Permitted Liens, permitted purchase money Liens or the interests of lessors under Capital Leases, first priority Lien on the Collateral covered thereby, except (a) as a result of a disposition of the applicable Collateral in a transaction permitted under this Agreement, (b) with respect to Collateral the aggregate value of which, for all such Collateral, does not exceed at any time, $2,500,000, or (c) as the result of an action or failure to act on the part of Agent;

 

8.10 Loan Documents.  The validity or enforceability of any Loan Document shall at any time for any reason  (other than solely as the result of an action or failure to act on the part of Agent) be declared to be null and void, or a proceeding shall be commenced by a Loan Party or its Subsidiaries, or by any Governmental Authority having jurisdiction over a Loan Party or its Subsidiaries, seeking to establish the invalidity or unenforceability thereof, or a Loan Party or its Subsidiaries shall deny that such Loan Party or its Subsidiaries has any liability or obligation purported to be created under any Loan Document;

 

8.11 Change of Control.  A Change of Control shall occur, whether directly or indirectly; or

 

8.12 ERISA.  The occurrence of any of the following events to the extent it could reasonably be expected to result in a Material Adverse Effect:  (a) any Loan Party or ERISA Affiliate fails to make full payment when due of all amounts which any Loan Party or ERISA Affiliate is required to pay as contributions, installments, or otherwise to or with respect to a Pension Plan or Multiemployer Plan, (b) an accumulated funding deficiency or funding shortfall occurs or exists, whether or not waived, with respect to any Pension Plan, (c) a Notification Event, or (d) any Loan Party or ERISA Affiliate completely or partially withdraws from one or more Multiemployer Plans and incurs Withdrawal Liability, or fails to make any Withdrawal Liability payment when due.

 

9. RIGHTS AND REMEDIES.

 

9.1 Rights and Remedies.  Upon the occurrence and during the continuation of an Event of Default, Agent may, and, at the instruction of the Required Lenders, shall (in each case under clauses (a) or (b) by written notice to 

 

  

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Borrower), in addition to any other rights or remedies provided for hereunder or under any other Loan Document or by applicable law, do any one or more of the following:

 

(a) (i) declare the principal of, and any and all accrued and unpaid interest and fees in respect of, the Loans and all other Obligations (other than the Bank Product Obligations), whether evidenced by this Agreement or by any of the other Loan Documents to be immediately due and payable, whereupon the same shall become and be immediately due and payable and Borrower shall be obligated to repay all of such Obligations in full, without presentment, demand, protest, or further notice or other requirements of any kind, all of which are hereby expressly waived by Borrower, and (ii) direct Borrower to provide (and Borrower agrees that upon receipt of such notice it will provide) Letter of Credit Collateralization to Agent to be held as security for Borrower’s reimbursement obligations for drawings that may subsequently occur under issued and outstanding Letters of Credit;

 

(b) declare the Commitments terminated, whereupon the Commitments shall immediately be terminated together with (i) any obligation of any Revolving Lender to make Revolving Loans or any Lender to make a Delayed Draw Term Loan, (ii) the obligation of Swing Lender to make Swing Loans, and (iii) the obligation of Issuing Bank to issue Letters of Credit; and

 

(c) exercise all other rights and remedies available to Agent or the Lenders under the Loan Documents, under applicable law, or in equity.

 

The foregoing to the contrary notwithstanding, upon the occurrence of any Event of Default described in Section 8.4 or Section 8.5, in addition to the remedies set forth above, without any notice to Borrower or any other Person or any act by the Lender Group, the Commitments shall automatically terminate and the Obligations (other than the Bank Product Obligations), inclusive of the principal of, and any and all accrued and unpaid interest and fees in respect of, the Loans and all other Obligations (other than the Bank Product Obligations), whether evidenced by this Agreement or by any of the other Loan Documents, shall automatically become and be immediately due and payable and Borrower shall automatically be obligated to repay all of such Obligations in full (including Borrower being obligated to provide (and Borrower agrees that it will provide) (1) Letter of Credit Collateralization to Agent to be held as security for Borrower’s reimbursement obligations in respect of drawings that may subsequently occur under issued and outstanding Letters of Credit and (2) Bank Product Collateralization to be held as security for Borrower’s or its Subsidiaries’ obligations in respect of outstanding Bank Products), without presentment, demand, protest, or notice or other requirements of any kind, all of which are expressly waived by Borrower.

 

9.2 Remedies Cumulative.  The rights and remedies of the Lender Group under this Agreement, the other Loan Documents, and all other agreements shall be cumulative.  The Lender Group shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity.  No exercise by the Lender Group of one right or remedy shall be deemed an election, and no waiver by the Lender Group of any Event of Default shall be deemed a continuing waiver.  No delay by the Lender Group shall constitute a waiver, election, or acquiescence by it.

 

10. WAIVERS; INDEMNIFICATION.

 

10.1 Demand; Protest; etc.  Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, nonpayment at maturity, release, compromise, settlement, extension, or renewal of documents, instruments, chattel paper, and guarantees at any time held by the Lender Group on which Borrower may in any way be liable.

 

10.2 The Lender Group’s Liability for Collateral.  Borrower hereby agrees that:  (a) so long as Agent complies with its obligations, if any, under the Code, the Lender Group shall not in any way or manner be liable or responsible for:  (i) the safekeeping of the Collateral, (ii) any loss or damage thereto occurring or arising in any manner or fashion from any cause, (iii) any diminution in the value thereof, or (iv) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of loss, damage, or destruction of the Collateral shall be borne by Borrower.  Any contrary provision of this Agreement or any other Loan Document notwithstanding, to the extent permitted by law, Agent shall be deemed to have exercised reasonable care in the custody and preservation of the 

 

  

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Collateral in its possession if such Collateral is accorded treatment substantially equal to that which Agent accords the property of other similarly situated borrowers.

 

10.3 Indemnification.  Borrower shall pay, indemnify, defend, and hold the Agent-Related Persons, the Lender-Related Persons, and each Participant (each, an “Indemnified Person”) harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, liabilities, fines, costs, penalties, and damages, and all reasonable fees and disbursements of attorneys (of one firm of counsel for all Indemnified Persons and, if reasonably necessary, a single local counsel in each appropriate jurisdiction (absent, in each case, a conflict of interest in which the Indemnified Parties may engage and be reimbursed for additional counsel)), experts, or consultants and all other costs and expenses actually incurred in connection therewith or in connection with the enforcement of this indemnification (as and when they are incurred and irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them (a) in connection with or as a result of or related to the execution and delivery (provided that Borrower shall not be liable for costs and expenses (including attorneys fees) of any Lender (other than Wells Fargo) incurred in advising, structuring, drafting, reviewing, administering or syndicating the Loan Documents), enforcement, performance, or administration (including any restructuring or workout with respect hereto) of this Agreement, any of the other Loan Documents, or the transactions contemplated hereby or thereby or the monitoring of Borrower’s and its Subsidiaries’ compliance with the terms of the Loan Documents (provided, that the indemnification in this clause (a) shall not extend to (i) disputes solely between or among the Lenders that do not involve any acts or omissions of any Loan Party, or (ii) disputes solely between or among the Lenders and their respective Affiliates that do not involve any acts or omissions of any Loan Party; it being understood and agreed that the indemnification in this clause (a) shall extend to Agent (but not the Lenders) relative to disputes between or among Agent on the one hand, and one or more Lenders, or one or more of their Affiliates, on the other hand, or (iii) any Taxes or any costs attributable to Taxes, which shall be governed by Section 16), (b) with respect to any actual or prospective investigation, litigation, or proceeding related to this Agreement, any other Loan Document, the making of any Loans or issuance of any Letters of Credit hereunder, or the use of the proceeds of the Loans or the Letters of Credit provided hereunder (irrespective of whether any Indemnified Person is a party thereto), or any act, omission, event, or circumstance in any manner related thereto, and (c) in connection with or arising out of any presence or release of Hazardous Materials at, on, under, to or from any assets or properties owned, leased or operated by Borrower or any of its Subsidiaries or any Environmental Actions, Environmental Liabilities or Remedial Actions related in any way to any such assets or properties of Borrower or any of its Subsidiaries (each and all of the foregoing, the “Indemnified Liabilities”).  The foregoing to the contrary notwithstanding, Borrower shall have no obligation to any Indemnified Person under this Section 10.3 with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the bad faith, gross negligence or willful misconduct of such Indemnified Person or its officers, directors, employees, attorneys, or agents.  This provision shall survive the termination of this Agreement and the repayment in full of the Obligations.  If any Indemnified Person makes any payment to any other Indemnified Person with respect to an Indemnified Liability as to which Borrower was required to indemnify the Indemnified Person receiving such payment, the Indemnified Person making such payment is entitled to be indemnified and reimbursed by Borrower with respect thereto.  WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION  OF SUCH INDEMNIFIED PERSON (OTHER THAN GROSS NEGLIGENCE OF SUCH INDEMNIFIED PERSON) OR OF ANY OTHER PERSON.

 

11. NOTICES.

 

Unless otherwise provided in this Agreement, all notices or demands relating to this Agreement or any other Loan Document shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested), overnight courier, electronic mail (at such email addresses as a party may designate in accordance herewith), or telefacsimile.  In the case of notices or demands to Borrower or Agent, as the case may be, they shall be sent to the respective address set forth below:

 

  

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If to Borrower:

	
Medical Action Industries Inc.

	 	  	
500 Expressway Drive South

	 	  	
Brentwood, New York 11717

	 	  	
Attn: John Sheffield

	 	  	
Fax No. 631-404-3875

	 	  	  
	 	
with copies to:

	
Vinson & Elkins LLP

	 	  	
666 Fifth Avenue, 26th Floor

	 	  	
New York, New York 10103-0040

	 	  	
Attn:  Brett Santoli, Esq.

	 	  	
Fax No.:  917-849-5304

	 	  	  
	 	
If to Agent:

	
WELLS FARGO BANK, NATIONAL ASSOCIATION

	 	  	
100 Park Avenue, 14th Floor

	 	  	
New York, New York 10017

	 	  	
Attn:  Portfolio Manager (Medical Action Industries)

	 	  	
Fax No.:  855-849-5961

	 	  	  
	 	
with copies to:

	
Riemer & Braunstein LLP

	 	  	
7 Times Square, 25th Floor

	 	  	
New York, New York

	 	  	
Attn:  Kevin Murtagh, Esq.

	 	  	
Fax No.:  212-717-0149

 

Any party hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other party.  All notices or demands sent in accordance with this Section 11, shall be deemed received on the earlier of the date of actual receipt or 3 Business Days after the deposit thereof in the mail; provided, that (a) notices sent by overnight courier service shall be deemed to have been given when received, (b) notices by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient) and (c) notices by electronic mail shall be deemed received upon the sender's receipt of an acknowledgment from the intended recipient (such as by the "return receipt requested" function, as available, return email or other written acknowledgment).

 

12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; JUDICIAL REFERENCE PROVISION.

 

(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO, AND ANY CLAIMS, CONTROVERSIES OR DISPUTES ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK; PROVIDED, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY 

 

  

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COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  BORROWER AND EACH MEMBER OF THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 12(b).

 

(c) TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS, IF ANY, TO A JURY TRIAL OF ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS (EACH A "CLAIM").  BORROWER AND EACH MEMBER OF THE LENDER GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

(d) BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK AND THE STATE OF NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT AGENT MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(e) NO CLAIM MAY BE MADE BY ANY LOAN PARTY AGAINST AGENT, SWING LENDER, ANY OTHER LENDER, ISSUING BANK, OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, COUNSEL, REPRESENTATIVE, AGENT, OR ATTORNEY-IN-FACT OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES OR LOSSES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION THEREWITH, AND EACH LOAN PARTY HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.

 

(f) IN THE EVENT ANY LEGAL PROCEEDING IS FILED IN A COURT OF THE STATE OF CALIFORNIA (THE "COURT") BY OR AGAINST ANY PARTY HERETO IN CONNECTION WITH ANY CLAIM AND THE WAIVER SET FORTH IN CLAUSE (C) ABOVE IS NOT ENFORCEABLE IN SUCH PROCEEDING, THE PARTIES HERETO AGREE AS FOLLOWS:

 

(i) WITH THE EXCEPTION OF THE MATTERS SPECIFIED IN SUBCLAUSE (ii) BELOW, ANY CLAIM SHALL BE DETERMINED BY A GENERAL REFERENCE PROCEEDING IN ACCORDANCE WITH THE PROVISIONS OF CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 638 THROUGH 645.1.  THE PARTIES INTEND THIS GENERAL 

 

  

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REFERENCE AGREEMENT TO BE SPECIFICALLY ENFORCEABLE.  VENUE FOR THE REFERENCE PROCEEDING SHALL BE IN THE COUNTY OF LOS ANGELES, CALIFORNIA.

 

(ii) THE FOLLOWING MATTERS SHALL NOT BE SUBJECT TO A GENERAL REFERENCE PROCEEDING: (A) NON-JUDICIAL FORECLOSURE OF ANY SECURITY INTERESTS IN REAL OR PERSONAL PROPERTY, (B) EXERCISE OF SELF-HELP REMEDIES (INCLUDING SET-OFF OR RECOUPMENT), (C) APPOINTMENT OF A RECEIVER, AND (D) TEMPORARY, PROVISIONAL, OR ANCILLARY REMEDIES (INCLUDING WRITS OF ATTACHMENT, WRITS OF POSSESSION, TEMPORARY RESTRAINING ORDERS, OR PRELIMINARY INJUNCTIONS).  THIS AGREEMENT DOES NOT LIMIT THE RIGHT OF ANY PARTY TO EXERCISE OR OPPOSE ANY OF THE RIGHTS AND REMEDIES DESCRIBED IN CLAUSES (A) - (D) AND ANY SUCH EXERCISE OR OPPOSITION DOES NOT WAIVE THE RIGHT OF ANY PARTY TO PARTICIPATE IN A REFERENCE PROCEEDING PURSUANT TO THIS AGREEMENT WITH RESPECT TO ANY OTHER MATTER.

 

(iii) UPON THE WRITTEN REQUEST OF ANY PARTY, THE PARTIES SHALL SELECT A SINGLE REFEREE, WHO SHALL BE A RETIRED JUDGE OR JUSTICE.  IF THE PARTIES DO NOT AGREE UPON A REFEREE WITHIN 10 DAYS OF SUCH WRITTEN REQUEST, THEN, ANY PARTY SHALL HAVE THE RIGHT TO REQUEST THE COURT TO APPOINT A REFEREE PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 640(B).  THE REFEREE SHALL BE APPOINTED TO SIT WITH ALL OF THE POWERS PROVIDED BY LAW.  PENDING APPOINTMENT OF THE REFEREE, THE COURT SHALL HAVE THE POWER TO ISSUE TEMPORARY OR PROVISIONAL REMEDIES.

 

(iv) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE REFEREE SHALL DETERMINE THE MANNER IN WHICH THE REFERENCE PROCEEDING IS CONDUCTED INCLUDING THE TIME AND PLACE OF HEARINGS, THE ORDER OF PRESENTATION OF EVIDENCE, AND ALL OTHER QUESTIONS THAT ARISE WITH RESPECT TO THE COURSE OF THE REFERENCE PROCEEDING.  ALL PROCEEDINGS AND HEARINGS CONDUCTED BEFORE THE REFEREE, EXCEPT FOR TRIAL, SHALL BE CONDUCTED WITHOUT A COURT REPORTER, EXCEPT WHEN ANY PARTY SO REQUESTS A COURT REPORTER AND A TRANSCRIPT IS ORDERED, A COURT REPORTER SHALL BE USED AND THE REFEREE SHALL BE PROVIDED A COURTESY COPY OF THE TRANSCRIPT.  THE PARTY MAKING SUCH REQUEST SHALL HAVE THE OBLIGATION TO ARRANGE FOR AND PAY THE COSTS OF THE COURT REPORTER, PROVIDED THAT SUCH COSTS, ALONG WITH THE REFEREE'S FEES, SHALL ULTIMATELY BE BORNE BY THE PARTY WHO DOES NOT PREVAIL, AS DETERMINED BY THE REFEREE.

 

(v) THE REFEREE MAY REQUIRE ONE OR MORE PREHEARING CONFERENCES.  THE PARTIES HERETO SHALL BE ENTITLED TO DISCOVERY, AND THE REFEREE SHALL OVERSEE DISCOVERY IN ACCORDANCE WITH THE RULES OF DISCOVERY, AND SHALL ENFORCE ALL DISCOVERY ORDERS IN THE SAME MANNER AS ANY TRIAL COURT JUDGE IN PROCEEDINGS AT LAW IN THE STATE OF CALIFORNIA.

 

(vi) THE REFEREE SHALL APPLY THE RULES OF EVIDENCE APPLICABLE TO PROCEEDINGS AT LAW IN THE STATE OF CALIFORNIA AND SHALL DETERMINE ALL ISSUES IN ACCORDANCE WITH CALIFORNIA SUBSTANTIVE AND PROCEDURAL LAW.  THE REFEREE SHALL BE EMPOWERED TO ENTER EQUITABLE AS WELL AS LEGAL RELIEF AND RULE ON ANY MOTION WHICH WOULD BE AUTHORIZED IN A TRIAL, INCLUDING MOTIONS FOR DEFAULT JUDGMENT OR SUMMARY JUDGMENT.  THE REFEREE SHALL REPORT HIS OR HER DECISION, WHICH REPORT SHALL ALSO INCLUDE FINDINGS OF FACT AND CONCLUSIONS OF LAW.  THE REFEREE SHALL ISSUE A DECISION AND PURSUANT TO CALIFORNIA CODE OF CIVIL PROCEDURE, SECTION 644, THE REFEREE'S DECISION SHALL BE ENTERED BY THE COURT AS A JUDGMENT IN THE SAME MANNER AS IF THE 

 

  

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ACTION HAD BEEN TRIED BY THE COURT.  THE FINAL JUDGMENT OR ORDER FROM ANY APPEALABLE DECISION OR ORDER ENTERED BY THE REFEREE SHALL BE FULLY APPEALABLE AS IF IT HAS BEEN ENTERED BY THE COURT.

 

(vii) THE PARTIES RECOGNIZE AND AGREE THAT ALL CLAIMS RESOLVED IN A GENERAL REFERENCE PROCEEDING PURSUANT HERETO WILL BE DECIDED BY A REFEREE AND NOT BY A JURY.  AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY HERETO KNOWINGLY AND VOLUNTARILY AND FOR THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCE PROVISION SHALL APPLY TO ANY DISPUTE BETWEEN THEM THAT ARISES OUT OF OR IS RELATED TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.

 

13. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.

 

13.1 Assignments and Participations.

 

(a) (i)  Subject to the conditions set forth in clause (a)(ii) below, any Lender may assign and delegate all or any portion of its rights and duties under the Loan Documents (including the Obligations owed to it and its Commitments) to one or more assignees (each, an “Assignee”), with the prior written consent (such consent not be unreasonably withheld or delayed) of:

 

(A)           Borrower; provided, that no consent of Borrower shall be required (1)  if an Event of Default has occurred and is continuing, or (2) in connection with an assignment to a Person that is a Lender or an Affiliate (other than natural persons) of a Lender; provided further, that Borrower shall be deemed to have consented to a proposed assignment unless it objects thereto by written notice to Agent within 30 days after having received notice thereof; and

 

(B)           Agent, Swing Lender, and Issuing Bank.

 

(ii)           Assignments shall be subject to the following additional conditions:

 

(A)           no assignment may be made to a natural person,

 

(B)           no assignment may be made to a Loan Party or an Affiliate of a Loan Party,

 

(C)           the amount of the Commitments and the other rights and obligations of the assigning Lender hereunder and under the other Loan Documents subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to Agent) shall be in a minimum amount (unless waived by Agent) of $5,000,000 (except such minimum amount shall not apply to (I) an assignment or delegation by any Lender to any other Lender, an Affiliate of any Lender, or a Related Fund of such Lender or (II) a group of new Lenders, each of which is an Affiliate of each other or a Related Fund of such new Lender to the extent that the aggregate amount to be assigned to all such new Lenders is at least $5,000,000),

 

(D)           each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement,

 

(E)           the parties to each assignment shall execute and deliver to Agent an Assignment and Acceptance; provided, that Borrower and Agent may continue to deal solely and directly with the assigning Lender in connection with the interest so assigned to an Assignee until written notice of such assignment, together with payment instructions, addresses, and related information with respect to the Assignee, have been given to Borrower and Agent by such Lender and the Assignee, the Assignment and Acceptance shall include a representation and warranty (which shall be expressly for the benefit of the Lender Group) that, as of the date of the assignment, it does not have any material non-public information with respect to Borrower or its Subsidiaries that (I) has not been disclosed to the Lenders (other than Lenders that do not wish to receive material non-public information with respect to Borrower or its Subsidiaries) prior to such time and (II) could not reasonably be 

 

  

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expected to have a material effect upon, or otherwise be material, (a) to a Lender’s decision to participate in any assignment pursuant to this Section 13.1 or (b) to the market price of the Term Loan, the Delayed Draw Term Loan 1 and the Delayed Draw Term Loan 2,

 

(F)           unless waived by Agent, the assigning Lender or Assignee has paid to Agent, for Agent’s separate account, a processing fee in the amount of $3,500, and

 

(G)           the assignee, if it is not a Lender, shall deliver to Agent an Administrative Questionnaire in a form approved by Agent (the “Administrative Questionnaire”).

 

(b) From and after the date that Agent receives the executed Assignment and Acceptance and, if applicable, payment of the required processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall be a “Lender” and shall have the rights and obligations of a Lender under the Loan Documents, and (ii) the assigning Lender shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except with respect to Section 10.3) and be released from any future obligations under this Agreement (and in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement and the other Loan Documents, such Lender shall cease to be a party hereto and thereto); provided, that nothing contained herein shall release any assigning Lender from obligations that survive the termination of this Agreement, including such assigning Lender’s obligations under Section 15 and Section 17.9(a).

 

(c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the 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, such 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 the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document furnished pursuant hereto, (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance or observance by Borrower of any of its obligations under this Agreement or any other Loan Document furnished pursuant hereto, (iii) such Assignee confirms that it has received a copy of this Agreement, together with such other documents and information as 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 Agent, such assigning Lender or any other Lender, 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, (v) such Assignee appoints and authorizes Agent to take such actions and to exercise such powers under this Agreement and the other Loan Documents 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 all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

 

(d) Immediately upon Agent’s receipt of the required processing fee, if applicable, and delivery of notice to the assigning Lender pursuant to Section 13.1(b), this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom.  The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Lender pro tanto.

 

(e) Any Lender may at any time sell to one or more commercial banks, financial institutions, or other Persons (a “Participant”) participating interests in all or any portion of its Obligations, its Commitments and the other rights and interests of that Lender (the “Originating Lender”) hereunder and under the other Loan Documents; provided, that (i) the Originating Lender shall remain a “Lender” for all purposes of this Agreement and the other Loan Documents and the Participant receiving the participating interest in the Obligations, the Commitments, and the other rights and interests of the Originating Lender hereunder shall not constitute a “Lender” hereunder or under the other Loan Documents and the Originating Lender’s obligations under this Agreement shall 

 

  

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remain unchanged, (ii) the Originating Lender shall remain solely responsible for the performance of such obligations, (iii) Borrower, Agent, and the Lenders shall continue to deal solely and directly with the Originating Lender in connection with the Originating Lender’s rights and obligations under this Agreement and the other Loan Documents, (iv) no Lender shall transfer or grant any participating interest under which the Participant has the right to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment to, or consent or waiver with respect to this Agreement or of any other Loan Document would (A) extend the final maturity date of the Obligations hereunder in which such Participant is participating, (B) reduce the interest rate applicable to the Obligations hereunder in which such Participant is participating, (C) release all or substantially all of the Collateral or guaranties (except to the extent expressly provided herein or in any of the Loan Documents) supporting the Obligations hereunder in which such Participant is participating, (D) postpone the payment of, or reduce the amount of, the interest or fees payable to such Participant through such Lender (other than a waiver of default interest), or (E) decreases the amount or postpones the due dates of scheduled principal repayments or prepayments or premiums payable to such Participant through such Lender, (v) no participation shall be sold to a natural person, (vi) no participation shall be sold to a Loan Party or an Affiliate of a Loan Party and (vii) all amounts payable by Borrower hereunder shall be determined as if such Lender had not sold such participation, except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement.  The rights of any Participant only shall be derivative through the Originating Lender with whom such Participant participates and no Participant shall have any rights under this Agreement or the other Loan Documents or any direct rights as to the other Lenders, Agent, Borrower, the Collateral, or otherwise in respect of the Obligations.  Borrower agrees that each Participant shall be entitled to the benefits of Section 16 (subject to the requirements and limitations therein, including the requirements under Section 16.2 (it being understood that the documentation required under Section 16.2 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 this Section 13; provided that, unless such participation is consented to by Borrower, such Participant shall not be entitled to receive any greater payment of Taxes and additional amounts under Section 16 with respect to any participation, than its participating Lender would have been entitled to receive had such participation not been sold by such Lender. No Participant shall have the right to participate directly in the making of decisions by the Lenders among themselves.

 

(f) In connection with any such assignment or participation or proposed assignment or participation or any grant of a security interest in, or pledge of, its rights under and interest in this Agreement, a Lender may, subject to the provisions of Section 17.9,  disclose all documents and information which it now or hereafter may have relating to Borrower and its Subsidiaries and their respective businesses.

 

(g) Any other provision in this Agreement notwithstanding, any Lender may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement in favor of any Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury Regulation 31 CFR §203.24, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law.

 

(h) Agent (as a non-fiduciary agent on behalf of Borrower) shall maintain, or cause to be maintained, a register (the “Register”) on which it enters the name and address of each Lender as the registered owner of the Term Loan, the Delayed Draw Term Loan 1, the Delayed Draw Term Loan 2 and any other Loan (and, in each case, the principal amount thereof and stated interest thereon) held by such Lender (each, a “Registered Loan”).  Other than in connection with an assignment by a Lender of all or any portion of its portion of the Term Loan, Delayed Draw Term Loan 1, Delayed Draw Term Loan 2 or any other Loan to an Affiliate of such Lender or a Related Fund of such Lender (i) a Registered Loan (and the registered note, if any, evidencing the same) may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register (and each registered note shall expressly so provide) and (ii) any assignment or sale of all or part of such Registered Loan (and the registered note, if any, evidencing the same) may be effected only by registration of such assignment or sale on the Register, together with the surrender of the registered note, if any, evidencing the same duly endorsed 

 

  

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by (or accompanied by a written instrument of assignment or sale duly executed by) the holder of such registered note, whereupon, at the request of the designated assignee(s) or transferee(s), one or more new registered notes in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s).  Prior to the registration of assignment or sale of any Registered Loan (and the registered note, if any evidencing the same), Borrower shall treat the Person in whose name such Registered Loan (and the registered note, if any, evidencing the same) is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding notice to the contrary.  In the case of any assignment by a Lender of all or any portion of its Term Loan, Delayed Draw Term Loan 1, Delayed Draw Term Loan 2 or any other Loan to an Affiliate of such Lender or a Related Fund of such Lender, and which assignment is not recorded in the Register, the assigning Lender, on behalf of Borrower, shall maintain a register comparable to the Register.

 

(i) In the event that a Lender sells participations in the Registered Loan, such Lender, as a non-fiduciary agent on behalf of Borrower, shall maintain (or cause to be maintained) a register on which it enters the name of all participants in the Registered Loans held by it (and the principal amount (and stated interest thereon) of the portion of such Registered Loans that is subject to such participations) (the “Participant Register”).  A Registered Loan (and the Registered Note, if any, evidencing the same) may be participated in whole or in part only by registration of such participation on the Participant Register (and each registered note shall expressly so provide).  Any participation of such Registered Loan (and the registered note, if any, evidencing the same) may be effected only by the registration of such participation on the Participant Register.

 

(j) Agent shall make a copy of the Register (and each Lender shall make a copy of its Participant Register in the extent it has one) available for review by Borrower from time to time as Borrower may reasonably request.

 

13.2 Successors.  This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, that Borrower may not assign this Agreement or any rights or duties hereunder without the Lenders’ prior written consent and any prohibited assignment shall be absolutely void ab initio.  No consent to assignment by the Lenders shall release Borrower from its Obligations.  A Lender may assign this Agreement and the other Loan Documents and its rights and duties hereunder and thereunder pursuant to Section 13.1 and, except as expressly required pursuant to Section 13.1, no consent or approval by Borrower is required in connection with any such assignment.

 

14. AMENDMENTS; WAIVERS.

 

14.1 Amendments and Waivers.

 

(a) No amendment, waiver or other modification of any provision of this Agreement or any other Loan Document (other than Bank Product Agreements or the Fee Letter), and no consent with respect to any departure by Borrower therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by Agent at the written request of the Required Lenders) and the Loan Parties that are party thereto and then any such waiver or consent shall be effective, but only in the specific instance and for the specific purpose for which given; provided, that no such waiver, amendment, or consent shall, unless in writing and signed by all of the Lenders directly affected thereby and all of the Loan Parties that are party thereto, do any of the following:

 

(i) increase the amount of or extend the expiration date of any Commitment of any Lender or amend, modify, or eliminate the last sentence of (A) Section 2.4(c)(i) or (B) 2.4(c)(iii),

 

(ii) postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees, or other amounts due hereunder or under any other Loan Document,

 

(iii) reduce the principal of, or the rate of interest on, any loan or other extension of credit hereunder, or reduce any fees or other amounts payable hereunder or under any other Loan Document (except in connection with the waiver of applicability of Section 2.6(c) (which waiver shall be effective with the written consent of the Required Lenders),

 

  

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(iv) amend, modify, or eliminate this Section or any provision of this Agreement providing for consent or other action by all Lenders,

 

(v) amend, modify, or eliminate Section 3.1 or 3.2,

 

(vi) amend, modify, or eliminate Section 15.11,

 

(vii) other than as permitted by Section 15.11, release Agent’s Lien in and to any of the Collateral,

 

(viii) amend, modify, or eliminate the definitions of “Required Lenders” or “Pro Rata Share”,

 

(ix) contractually subordinate any of Agent’s Liens,

 

(x) other than in connection with a merger, liquidation, dissolution or sale of such Person expressly permitted by the terms hereof or the other Loan Documents, release Borrower or any Guarantor from any obligation for the payment of money or consent to the assignment or transfer by Borrower or any Guarantor of any of its rights or duties under this Agreement or the other Loan Documents, or

 

(xi) amend, modify, or eliminate any of the provisions of Section 2.4(b)(i) or (ii).

 

(b) No amendment, waiver, modification, or consent shall amend, modify, waive, or eliminate,

 

(i) the definition of, or any of the terms or provisions of, the Fee Letter, without the written consent of Agent and Borrower (and shall not require the written consent of any of the Lenders),

 

(ii) any provision of Section 15 pertaining to Agent, or any other rights or duties of Agent under this Agreement or the other Loan Documents, without the written consent of Agent, Borrower, and the Required Lenders;

 

(c) No amendment, waiver, modification, elimination, or consent shall amend, without written consent of Agent, Borrower and the Supermajority Lenders, modify, or eliminate the definition of Term Loan Amount or any of the defined terms used in such definition to the extent that any such change results in more credit being available to Borrower based upon the Term Loan Amount, but not otherwise, Borrowing Base or any of the defined terms (including the definitions of Eligible Accounts, Eligible Finished Goods Inventory, Eligible In-Transit Inventory, Eligible Raw Material Inventory, Eligible Work-in-Process Inventory and Eligible Inventory) that are used in such definition to the extent that any such change results in more credit being made available to Borrower based upon the Borrowing Base, but not otherwise, or the definition of Maximum Revolver Amount;

 

(d) No amendment, waiver, modification, elimination, or consent shall amend, modify, or waive any provision of this Agreement or the other Loan Documents pertaining to Issuing Bank, or any other rights or duties of Issuing Bank under this Agreement or the other Loan Documents, without the written consent of Issuing Bank, Agent, Borrower, and the Required Lenders;

 

(e) No amendment, waiver, modification, elimination, or consent shall amend, modify, or waive any provision of this Agreement or the other Loan Documents pertaining to Swing Lender, or any other rights or duties of Swing Lender under this Agreement or the other Loan Documents, without the written consent of Swing Lender, Agent, Borrower, and the Required Lenders; and

 

(f) Anything in this Section 14.1 to the contrary notwithstanding, (i) any amendment, modification, elimination, waiver, consent, termination, or release of, or with respect to, any provision of this Agreement or any other Loan Document that relates only to the relationship of the Lender Group among themselves, and that does not affect the rights or obligations of Borrower, shall not require consent by or the agreement of any Loan Party, and (ii) any amendment, waiver, modification, elimination, or consent of or with 

 

  

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respect to any provision of this Agreement or any other Loan Document may be entered into without the consent of, or over the objection of, any Defaulting Lender other than any of the matters governed by Section 14.1(a)(i) through (iii) that affect such Lender.

 

14.2 Replacement of Certain Lenders.

 

(a) If (i) any action to be taken by the Lender Group or Agent hereunder requires the consent, authorization, or agreement of all Lenders or all Lenders affected thereby and if such action has received the consent, authorization, or agreement of the Required Lenders but not of all Lenders or all Lenders affected thereby, or (ii) any Lender makes a claim for compensation under Section 16, then Borrower or Agent, upon at least 5 Business Days prior irrevocable notice, may permanently replace any Lender that failed to give its consent, authorization, or agreement (a “Non-Consenting Lender”) or any Lender that made a claim for compensation (a “Tax Lender”) with one or more Replacement Lenders, and the Non-Consenting Lender or Tax Lender, as applicable, shall have no right to refuse to be replaced hereunder.  Such notice to replace the Non-Consenting Lender or Tax Lender, as applicable, shall specify an effective date for such replacement, which date shall not be later than 15 Business Days after the date such notice is given.

 

(b) Prior to the effective date of such replacement, the Non-Consenting Lender or Tax Lender, as applicable, and each Replacement Lender shall execute and deliver an Assignment and Acceptance, subject only to the Non-Consenting Lender or Tax Lender, as applicable, being repaid in full its share of the outstanding Obligations (without any premium or penalty of any kind whatsoever, but including (i) all interest, fees and other amounts that may be due in payable in respect thereof, and (ii) an assumption of its Pro Rata Share of participations in the Letters of Credit).  If the Non-Consenting Lender or Tax Lender, as applicable, shall refuse or fail to execute and deliver any such Assignment and Acceptance prior to the effective date of such replacement, Agent may, but shall not be required to, execute and deliver such Assignment and Acceptance in the name or and on behalf of the Non-Consenting Lender or Tax Lender, as applicable, and irrespective of whether Agent executes and delivers such Assignment and Acceptance, the Non-Consenting Lender or Tax Lender, as applicable, shall be deemed to have executed and delivered such Assignment and Acceptance.  The replacement of any Non-Consenting Lender or Tax Lender, as applicable, shall be made in accordance with the terms of Section 13.1.  Until such time as one or more Replacement Lenders shall have acquired all of the Obligations, the Commitments, and the other rights and obligations of the Non-Consenting Lender or Tax Lender, as applicable, hereunder and under the other Loan Documents, the Non-Consenting Lender or Tax Lender, as applicable, shall remain obligated to make the Non-Consenting Lender’s or Tax Lender’s, as applicable, Pro Rata Share of Revolving Loans and to purchase a participation in each Letter of Credit, in an amount equal to its Pro Rata Share of participations in such Letters of Credit.

 

14.3 No Waivers; Cumulative Remedies.  No failure by Agent or any Lender to exercise any right, remedy, or option under this Agreement or any other Loan Document, or delay by Agent or any Lender in exercising the same, will operate as a waiver thereof.  No waiver by Agent or any Lender will be effective unless it is in writing, and then only to the extent specifically stated.  No waiver by Agent or any Lender on any occasion shall affect or diminish Agent’s and each Lender’s rights thereafter to require strict performance by Borrower of any provision of this Agreement.  Agent’s and each Lender’s rights under this Agreement and the other Loan Documents will be cumulative and not exclusive of any other right or remedy that Agent or any Lender may have.

 

15. AGENT; THE LENDER GROUP.

 

15.1 Appointment and Authorization of Agent.  Each Lender hereby designates and appoints Wells Fargo as its agent under this Agreement and the other Loan Documents and each Lender hereby irrevocably authorizes (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to designate, appoint, and authorize) Agent to execute and deliver each of the other Loan Documents on its behalf and to take such other action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to Agent by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto.  Agent agrees to act as agent for and on behalf of the Lenders (and the Bank Product Providers) on the conditions contained in this Section 15.  Any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent shall not have any duties or 

 

  

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responsibilities, except those expressly set forth herein or in the other Loan Documents, nor shall Agent have or be deemed to have any fiduciary relationship with any Lender (or Bank Product Provider), and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against Agent.  Without limiting the generality of the foregoing, the use of the term “agent” in this Agreement or the other Loan Documents with reference to Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law.  Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only a representative relationship between independent contracting parties.  Each Lender hereby further authorizes (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to authorize) Agent to act as the secured party under each of the Loan Documents that create a Lien on any item of Collateral.  Except as expressly otherwise provided in this Agreement, Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions that Agent expressly is entitled to take or assert under or pursuant to this Agreement and the other Loan Documents.  Without limiting the generality of the foregoing, or of any other provision of the Loan Documents that provides rights or powers to Agent, Lenders agree that Agent shall have the right to exercise the following powers as long as this Agreement remains in effect:  (a) maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the Obligations, the Collateral, payments and proceeds of Collateral, and related matters, (b) execute or file any and all financing or similar statements or notices, amendments, renewals, supplements, documents, instruments, proofs of claim, notices and other written agreements with respect to the Loan Documents, (c) make Revolving Loans, for itself or on behalf of Lenders, as provided in the Loan Documents, (d) exclusively receive, apply, and distribute payments and proceeds of the Collateral as provided in the Loan Documents, (e) open and maintain such bank accounts and cash management arrangements as Agent deems necessary and appropriate in accordance with the Loan Documents for the foregoing purposes, (f) perform, exercise, and enforce any and all other rights and remedies of the Lender Group with respect to Borrower or its Subsidiaries, the Obligations, the Collateral, or otherwise related to any of same as provided in the Loan Documents, and (g) incur and pay such Lender Group Expenses as Agent may deem necessary or appropriate for the performance and fulfillment of its functions and powers pursuant to the Loan Documents.

 

15.2 Delegation of Duties.  Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys in fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  Agent shall not be responsible for the negligence or misconduct of any agent or attorney in fact that it selects as long as such selection was made without gross negligence or willful misconduct.

 

15.3 Liability of Agent.  None of the Agent-Related Persons shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (b) be responsible in any manner to any of the Lenders (or Bank Product Providers) for any recital, statement, representation or warranty made by Borrower or any of its Subsidiaries or Affiliates, or any officer or director thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of Borrower or its Subsidiaries or any other party to any Loan Document to perform its obligations hereunder or thereunder.  No Agent-Related Person shall be under any obligation to any Lenders (or Bank Product Providers) to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the books and records or properties of Borrower or its Subsidiaries.

 

15.4 Reliance by Agent.  Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, telefacsimile or other electronic method of transmission, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent, or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Borrower or counsel to any Lender), independent accountants and other experts selected by Agent.  Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless Agent shall first receive such advice or concurrence of the Lenders as it deems appropriate and until such instructions are received, Agent shall act, or refrain from acting, as it deems advisable.  If Agent so requests, it shall first be indemnified to its reasonable satisfaction by the Lenders (and, if it so elects, the Bank Product Providers) against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action.  Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan 

 

  

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Document in accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders (and Bank Product Providers).

 

15.5 Notice of Default or Event of Default.  Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest, fees, and expenses required to be paid to Agent for the account of the Lenders and, except with respect to Events of Default of which Agent has actual knowledge, unless Agent shall have received written notice from a Lender or Borrower referring to this Agreement, describing such Default or Event of Default, and stating that such notice is a “notice of default.”  Agent promptly will notify the Lenders of its receipt of any such notice or of any Event of Default of which Agent has actual knowledge.  If any Lender obtains actual knowledge of any Event of Default, such Lender promptly shall notify the other Lenders and Agent of such Event of Default.  Each Lender shall be solely responsible for giving any notices to its Participants, if any.  Subject to Section 15.4, Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Section 9; provided, that unless and until Agent has received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable.

 

15.6 Credit Decision.  Each Lender (and Bank Product Provider) acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by Agent hereinafter taken, including any review of the affairs of Borrower and its Subsidiaries or Affiliates, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender (or Bank Product Provider).  Each Lender represents (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to represent) to Agent that it has, independently and without reliance upon any Agent-Related Person and based on such due diligence, documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower or any other Person party to a Loan Document, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Borrower.  Each Lender also represents (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to represent) that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower or any other Person party to a Loan Document.  Except for notices, reports, and other documents expressly herein required to be furnished to the Lenders by Agent, Agent shall not have any duty or responsibility to provide any Lender (or Bank Product Provider) with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of Borrower or any other Person party to a Loan Document that may come into the possession of any of the Agent-Related Persons.  Each Lender acknowledges (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to acknowledge) that Agent does not have any duty or responsibility, either initially or on a continuing basis (except to the extent, if any, that is expressly specified herein) to provide such Lender (or Bank Product Provider) with any credit or other information with respect to Borrower, its Affiliates or any of their respective business, legal, financial or other affairs, and irrespective of whether such information came into Agent's or its Affiliates’ or representatives’ possession before or after the date on which such Lender became a party to this Agreement (or such Bank Product Provider entered into a Bank Product Agreement).

 

15.7 Costs and Expenses; Indemnification.  Agent may incur and pay Lender Group Expenses to the extent Agent reasonably deems necessary or appropriate for the performance and fulfillment of its functions, powers, and obligations pursuant to the Loan Documents, including court costs, attorneys fees and expenses, fees and expenses of financial accountants, advisors, consultants, and appraisers, costs of collection by outside collection agencies, auctioneer fees and expenses, and costs of security guards or insurance premiums paid to maintain the Collateral, whether or not Borrower is obligated to reimburse Agent or Lenders for such expenses pursuant to this Agreement or otherwise.  Agent is authorized and directed to deduct and retain sufficient amounts from payments or proceeds of the Collateral received by Agent to reimburse Agent for such out-of-pocket costs and expenses prior to the distribution of any amounts to Lenders (or Bank Product Providers).  In the event Agent is not reimbursed for such costs and expenses by Borrower or its Subsidiaries, each Lender hereby agrees that it is and shall be obligated to pay to Agent such Lender’s ratable thereof.  Whether or not the transactions contemplated hereby are consummated, each of the Lenders, on a ratable basis, shall indemnify and defend the Agent-Related Persons (to the extent not reimbursed by or on behalf of Borrower and without limiting the obligation of Borrower to do so) from and against any and all Indemnified Liabilities; provided, that no 

 

  

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Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities resulting solely from such Person’s gross negligence or willful misconduct nor shall any Lender be liable for the obligations of any Defaulting Lender in failing to make a Revolving Loan or other extension of credit hereunder.  Without limitation of the foregoing, each Lender shall reimburse Agent upon demand for such Lender’s ratable share of any costs or out of pocket expenses (including attorneys, accountants, advisors, and consultants fees and expenses) incurred by Agent in connection with the preparation, execution, delivery, administration, modification, amendment, or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement or any other Loan Document to the extent that Agent is not reimbursed for such expenses by or on behalf of Borrower.  The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of Agent.

 

15.8 Agent in Individual Capacity.  Wells Fargo and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, provide Bank Products to, acquire Equity Interests in, and generally engage in any kind of banking, trust, financial advisory, underwriting, or other business with Borrower and its Subsidiaries and Affiliates and any other Person party to any Loan Document as though Wells Fargo were not Agent hereunder, and, in each case, without notice to or consent of the other members of the Lender Group.  The other members of the Lender Group acknowledge (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to acknowledge) that, pursuant to such activities, Wells Fargo or its Affiliates may receive information regarding Borrower or its Affiliates or any other Person party to any Loan Documents that is subject to confidentiality obligations in favor of Borrower or such other Person and that prohibit the disclosure of such information to the Lenders (or Bank Product Providers), and the Lenders acknowledge (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to acknowledge) that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver Agent will use its reasonable best efforts to obtain), Agent shall not be under any obligation to provide such information to them.  The terms “Lender” and “Lenders” include Wells Fargo in its individual capacity.

 

15.9 Successor Agent.  Agent may resign as Agent upon 30 days (10 days if an Event of Default has occurred and is continuing) prior written notice to the Lenders (unless such notice is waived by the Required Lenders) and Borrower (unless such notice is waived by Borrower) and without any notice to the Bank Product Providers.  If Agent resigns under this Agreement, the Required Lenders shall be entitled, with (so long as no Event of Default has occurred and is continuing) the consent of Borrower (such consent not to be unreasonably withheld, delayed, or conditioned), appoint a successor Agent for the Lenders (and the Bank Product Providers).  If, at the time that Agent’s resignation is effective, it is acting as Issuing Bank or Swing Lender, such resignation shall also operate to effectuate its resignation as Issuing Bank or Swing Lender, as applicable, and it shall automatically be relieved of any further obligation to issue Letters of Credit, or to make Swing Loans.  If no successor Agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with the Lenders and Borrower, a successor Agent.  If Agent has materially breached or failed to perform any material provision of this Agreement or of applicable law, the Required Lenders may agree in writing to remove and replace Agent with a successor Agent from among the Lenders with (so long as no Event of Default has occurred and is continuing) the consent of Borrower (such consent not to be unreasonably withheld, delayed, or conditioned).  In any such event, upon the acceptance of its appointment as successor Agent hereunder, such successor Agent shall succeed to all the rights, powers, and duties of the retiring Agent and the term “Agent” 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 15 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.  If no successor Agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Lenders appoint a successor Agent as provided for above.

 

15.10 Lender in Individual Capacity.  Any Lender and its respective Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, provide Bank Products to, acquire Equity Interests in and generally engage in any kind of banking, trust, financial advisory, underwriting, or other business with Borrower and its Subsidiaries and Affiliates and any other Person party to any Loan Documents as though such Lender were not a Lender hereunder without notice to or consent of the other members of the Lender Group (or the Bank Product Providers).  The other members of the Lender Group acknowledge (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to acknowledge) that, pursuant to such activities, such Lender and its respective Affiliates may receive information regarding Borrower or its Affiliates or any other Person party to any Loan Documents that is subject to confidentiality obligations in favor of Borrower or such other Person and that prohibit the disclosure of such 

 

  

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information to the Lenders, and the Lenders acknowledge (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to acknowledge) that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver such Lender will use its reasonable best efforts to obtain), such Lender shall not be under any obligation to provide such information to them.

 

15.11 Collateral Matters.

 

(a) The Lenders hereby irrevocably authorize (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to authorize) Agent to release any Lien on any Collateral (i) upon the termination of the Commitments and payment and satisfaction in full by Borrower of all of the Obligations, (ii) constituting property being sold or disposed of if a release is required or desirable in connection therewith and if Borrower certifies to Agent that the sale or disposition is permitted under Section 6.4 (and Agent may rely conclusively on any such certificate, without further inquiry), (iii) constituting property in which Borrower or its Subsidiaries owned no interest at the time Agent’s Lien was granted nor at any time thereafter, (iv) constituting property leased or licensed to Borrower or its Subsidiaries under a lease or license that has expired or is terminated in a transaction permitted under this Agreement, or (v) in connection with a credit bid or purchase authorized under this Section 15.11.  The Loan Parties and the Lenders hereby irrevocably authorize (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to authorize) Agent, based upon the instruction of the Required Lenders, to (a) consent to, credit bid or purchase (either directly or indirectly through one or more entities) all or any portion of the Collateral at any sale thereof conducted under the provisions of the Bankruptcy Code, including Section 363 of the Bankruptcy Code, (b) credit bid or purchase (either directly or indirectly through one or more entities) all or any portion of the Collateral at any sale or other disposition thereof conducted under the provisions of the Code, including pursuant to Sections 9-610 or 9-620 of the Code, or (c) credit bid or purchase (either directly or indirectly through one or more entities) all or any portion of the Collateral at any other sale or foreclosure conducted or consented to by Agent in accordance with applicable law in any judicial action or proceeding or by the exercise of any legal or equitable remedy.  In connection with any such credit bid or purchase, (i) the Obligations owed to the Lenders and the Bank Product Providers shall be entitled to be, and shall be, credit bid on a ratable basis (with Obligations with respect to contingent or unliquidated claims being estimated for such purpose if the fixing or liquidation thereof would not impair or unduly delay the ability of Agent to credit bid or purchase at such sale or other disposition of the Collateral and, if such contingent or unliquidated claims cannot be estimated without impairing or unduly delaying the ability of Agent to credit bid at such sale or other disposition, then such claims shall be disregarded, not credit bid, and not entitled to any interest in the Collateral that is the subject of such credit bid or purchase) and the Lenders and the Bank Product Providers whose Obligations are credit bid shall be entitled to receive interests (ratably based upon the proportion of their Obligations credit bid in relation to the aggregate amount of Obligations so credit bid) in the Collateral that is the subject of such credit bid or purchase (or in the Equity Interests of the any entities that are used to consummate such credit bid or purchase), and (ii) Agent, based upon the instruction of the Required Lenders, may accept non-cash consideration, including debt and equity securities issued by any entities used to consummate such credit bid or purchase and in connection therewith Agent may reduce the Obligations owed to the Lenders and the Bank Product Providers (ratably based upon the proportion of their Obligations credit bid in relation to the aggregate amount of Obligations so credit bid) based upon the value of such non-cash consideration.  Except as provided above, Agent will not execute and deliver a release of any Lien on any Collateral without the prior written authorization of (y) if the release is of all or substantially all of the Collateral, all of the Lenders (without requiring the authorization of the Bank Product Providers), or (z) otherwise, the Required Lenders (without requiring the authorization of the Bank Product Providers).  Upon request by Agent or Borrower at any time, the Lenders will (and if so requested, the Bank Product Providers will) confirm in writing Agent’s authority to release any such Liens on particular types or items of Collateral pursuant to this Section 15.11; provided, that (1) anything to the contrary contained in any of the Loan Documents notwithstanding, Agent shall not be required to execute any document or take any action necessary to evidence such release on terms that, in Agent’s opinion, could expose Agent to liability or create any obligation or entail any consequence other than the release of such Lien without recourse, representation, or warranty, and (2) such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly released) upon (or obligations of Borrower in respect of) any and all interests retained by Borrower, including, the proceeds of any sale, all of which shall continue to constitute part of the Collateral.  Each Lender further hereby irrevocably authorize (and by entering into a Bank Product 

 

  

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Agreement, each Bank Product Provider shall be deemed to irrevocably authorize) Agent, at its option and in its sole discretion, to subordinate any Lien granted to or held by Agent under any Loan Document to the holder of any Permitted Lien on such property if such Permitted Lien secures Permitted Purchase Money Indebtedness.

 

(b) Agent shall have no obligation whatsoever to any of the Lenders (or the Bank Product Providers) (i) to verify or assure that the Collateral exists or is owned by Borrower or its Subsidiaries or is cared for, protected, or insured or has been encumbered, (ii) to verify or assure that Agent’s Liens have been properly or sufficiently or lawfully created, perfected, protected, or enforced or are entitled to any particular priority, (iii) to verify or assure that any particular items of Collateral meet the eligibility criteria applicable in respect thereof, (iv) to impose, maintain, increase, reduce, implement, or eliminate any particular reserve hereunder or to determine whether the amount of any reserve is appropriate or not, or (v) 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 pursuant to any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, subject to the terms and conditions contained herein, Agent may act in any manner it may deem appropriate, in its sole discretion given Agent’s own interest in the Collateral in its capacity as one of the Lenders and that Agent shall have no other duty or liability whatsoever to any Lender (or Bank Product Provider) as to any of the foregoing, except as otherwise expressly provided herein.

 

15.12 Restrictions on Actions by Lenders; Sharing of Payments.

 

(a) Each of the Lenders agrees that it shall not, without the express written consent of Agent, and that it shall, to the extent it is lawfully entitled to do so, upon the written request of Agent, set off against the Obligations, any amounts owing by such Lender to Borrower or its Subsidiaries or any deposit accounts of Borrower or its Subsidiaries now or hereafter maintained with such Lender.  Each of the Lenders further agrees that it shall not, unless specifically requested to do so in writing by Agent, take or cause to be taken any action, including, the commencement of any legal or equitable proceedings to enforce any Loan Document against Borrower or any Guarantor or to foreclose any Lien on, or otherwise enforce any security interest in, any of the Collateral.

 

(b) If, at any time or times any Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments with respect to the Obligations, except for any such proceeds or payments received by such Lender from Agent pursuant to the terms of this Agreement, or (ii) payments from Agent in excess of such Lender’s Pro Rata Share of all such distributions by Agent, such Lender promptly shall (A) turn the same over to Agent, in kind, and with such endorsements as may be required to negotiate the same to Agent, or in immediately available funds, as applicable, for the account of all of the Lenders and for application to the Obligations in accordance with the applicable provisions of this Agreement, or (B) purchase, without recourse or warranty, an undivided interest and participation in the Obligations owed to the other Lenders so that such excess payment received shall be applied ratably as among the Lenders in accordance with their Pro Rata Shares; provided, that to the extent that such excess payment received by the purchasing party is thereafter recovered from it, those purchases of participations shall be rescinded in whole or in part, as applicable, and the applicable portion of the purchase price paid therefor shall be returned to such purchasing party, but without interest except to the extent that such purchasing party is required to pay interest in connection with the recovery of the excess payment.

 

15.13 Agency for Perfection.  Agent hereby appoints each other Lender (and each Bank Product Provider) as its agent (and each Lender hereby accepts (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to accept) such appointment) for the purpose of perfecting Agent’s Liens in assets which, in accordance with Article 8 or Article 9, as applicable, of the Code can be perfected by possession or control.  Should any Lender obtain possession or control of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent’s request therefor shall deliver possession or control of such Collateral to Agent or in accordance with Agent’s instructions.

 

15.14 Payments by Agent to the Lenders.  All payments to be made by Agent to the Lenders (or Bank Product Providers) shall be made by bank wire transfer of immediately available funds pursuant to such wire transfer instructions as each party may designate for itself by written notice to Agent.  Concurrently with each such payment, Agent shall identify whether such payment (or any portion thereof) represents principal, premium, fees, or interest of the Obligations.

 

  

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15.15 Concerning the Collateral and Related Loan Documents.  Each member of the Lender Group authorizes and directs Agent to enter into this Agreement and the other Loan Documents.  Each member of the Lender Group agrees (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to agree) that any action taken by Agent in accordance with the terms of this Agreement or the other Loan Documents relating to the Collateral and the exercise by Agent of its powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders (and such Bank Product Provider).

 

15.16 Field Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information.  By becoming a party to this Agreement, each Lender:

 

(a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a copy of each field examination report respecting Borrower or its Subsidiaries (each, a “Report”) prepared by or at the request of Agent, and Agent shall so furnish each Lender with such Reports,

 

(b) expressly agrees and acknowledges that Agent does not (i) make any representation or warranty as to the accuracy of any Report, and (ii) shall not be liable for any information contained in any Report,

 

(c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agent or other party performing any field examination will inspect only specific information regarding Borrower and its Subsidiaries and will rely significantly upon Borrower’s and its Subsidiaries’ books and records, as well as on representations of Borrower’s personnel,

 

(d) agrees to keep all Reports and other material, non-public information regarding Borrower and its Subsidiaries and their operations, assets, and existing and contemplated business plans in a confidential manner in accordance with Section 17.9, and

 

(e) without limiting the generality of any other indemnification provision contained in this Agreement, agrees:  (i) to hold Agent and any other Lender preparing a Report harmless from any action the indemnifying Lender may take or fail to take or any conclusion the indemnifying Lender may reach or draw from any Report in connection with any loans or other credit accommodations that the indemnifying Lender has made or may make to Borrower, or the indemnifying Lender’s participation in, or the indemnifying Lender’s purchase of, a loan or loans of Borrower, and (ii) to pay and protect, and indemnify, defend and hold Agent, and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including, attorneys fees and costs) incurred by Agent and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.

 

(f) In addition to the foregoing,  (x) any Lender may from time to time request of Agent in writing that Agent provide to such Lender a copy of any report or document provided by Borrower or its Subsidiaries to Agent that has not been contemporaneously provided by Borrower or such Subsidiary to such Lender, and, upon receipt of such request, Agent promptly shall provide a copy of same to such Lender, (y) to the extent that Agent is entitled, under any provision of the Loan Documents, to request additional reports or information from Borrower or its Subsidiaries, any Lender may, from time to time, reasonably request Agent to exercise such right as specified in such Lender’s notice to Agent, whereupon Agent promptly shall request of Borrower the additional reports or information reasonably specified by such Lender, and, upon receipt thereof from Borrower or such Subsidiary, Agent promptly shall provide a copy of same to such Lender, and (z) any time that Agent renders to Borrower a statement regarding the Loan Account, Agent shall send a copy of such statement to each Lender.

 

15.17 Several Obligations; No Liability.  Notwithstanding that certain of the Loan Documents now or hereafter may have been or will be executed only by or in favor of Agent in its capacity as such, and not by or in favor of the Lenders, any and all obligations on the part of Agent (if any) to make any credit available hereunder shall constitute the several (and not joint) obligations of the respective Lenders on a ratable basis, according to their respective Commitments, to make an amount of such credit not to exceed, in principal amount, at any one time outstanding, the amount of their respective Commitments.  Nothing contained herein shall confer upon any Lender any interest in, or 

 

  

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subject any Lender to any liability for, or in respect of, the business, assets, profits, losses, or liabilities of any other Lender.  Each Lender shall be solely responsible for notifying its Participants of any matters relating to the Loan Documents to the extent any such notice may be required, and no Lender shall have any obligation, duty, or liability to any Participant of any other Lender.  Except as provided in Section 15.7, no member of the Lender Group shall have any liability for the acts of any other member of the Lender Group.  No Lender shall be responsible to Borrower or any other Person for any failure by any other Lender (or Bank Product Provider) to fulfill its obligations to make credit available hereunder, nor to advance for such Lender (or Bank Product Provider) or on its behalf, nor to take any other action on behalf of such Lender (or Bank Product Provider) hereunder or in connection with the financing contemplated herein.

 

16. WITHHOLDING TAXES.

 

16.1 Payments. All payments made by Borrower hereunder or under any note or other Loan Document will be made without setoff, counterclaim, or other defense.  In addition, all such payments will be made free and clear of, and without deduction or withholding for, any present or future Indemnified Taxes, and in the event any deduction or withholding of Indemnified Taxes is required, Borrower shall comply with the next sentence of this Section 16.1.  If any Indemnified Taxes are so deducted or withheld, Borrower agrees to pay the full amount of such Indemnified Taxes and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement, any note, or Loan Document, including any amount paid pursuant to this Section 16.1 after withholding or deduction for or on account of any Indemnified Taxes, will not be less than the amount provided for herein.  Borrower will furnish to Agent as promptly as possible after the date the payment of any Indemnified Tax is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by Borrower or other evidence of payment reasonably satisfactory to Agent.  Borrower agrees to pay any present or future stamp, value added or documentary taxes or any other excise or property taxes, charges, or similar levies that arise from any payment made hereunder or from the execution, delivery, performance, recordation, or filing of, or otherwise with respect to this Agreement or any other Loan Document.

 

16.2 Exemptions.

 

(a) If a Lender is entitled to claim an exemption or reduction from United States withholding tax, such Lender agrees to deliver to Agent one of the following before receiving its first payment under this Agreement:

 

(i) if such Lender is entitled to claim an exemption from United States withholding tax pursuant to the portfolio interest exception, (A) a statement of the Lender, signed under penalty of perjury and reasonably acceptable to Borrower and Agent that it is not a (I) a “bank” as described in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder of Borrower (within the meaning of Section 871(h)(3)(B) of the IRC), or (III) a controlled foreign corporation related to Borrower within the meaning of Section 864(d)(4) of the IRC, and (B) a properly completed and executed IRS Form W-8BEN or Form W-8IMY (with proper attachments);

 

(ii) if such Lender is entitled to claim an exemption from, or a reduction of, withholding tax under a United States tax treaty, a properly completed and executed copy of IRS Form W-8BEN;

 

(iii) if such Lender is entitled  to claim that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender, a properly completed and executed copy of IRS Form W-8ECI; or

 

(iv) if such Lender or Participant is entitled to claim that interest paid under this Agreement is exempt from United States withholding tax because such Lender serves as an intermediary, a properly completed and executed copy of IRS Form W-8IMY (with proper attachments).

 

In addition, each Lender shall deliver a completed and executed copies of any other form or forms, including IRS Form W-9, as may be required under the IRC or other laws of the United States as a condition to exemption from, or reduction of, United States withholding or backup withholding tax.

 

(b) Each Lender shall provide new forms (or successor forms) upon the expiration or obsolescence of any previously delivered forms and to promptly notify Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

 

  

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(c) If a Lender claims an exemption from withholding tax in a jurisdiction other than the United States, such Lender agrees with and in favor of Agent and Borrower, to deliver to Agent any such form or forms, as may be required under the laws of such jurisdiction as a condition to exemption from, or reduction of, foreign withholding or backup withholding tax before receiving its first payment under this Agreement, but only if such Lender is legally able to deliver such forms, provided, that nothing in this Section 16.2(c) shall require a Lender to disclose any information that it deems to be confidential (including without limitation, its tax returns).  Each Lender shall provide new forms (or successor forms) upon the expiration or obsolescence of any previously delivered forms and to promptly notify Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

 

(d) If a Lender claims exemption from, or reduction of, withholding tax and such Lender sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of Borrower to such Lender, such Lender agrees to notify Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of Borrower to such Lender, and Agent and Lender shall comply with the requirements of Section 3.1(h) or Section 3.1(i), as applicable.  To the extent of such percentage amount, Agent will treat such Lender’s documentation provided pursuant to Section 16.2(a) or 16.2(c) as no longer valid.  With respect to such percentage amount, such Assignee may provide new documentation, pursuant to Section 16.2(a) or 16.2(c), if applicable. Borrower agrees that each Participant shall be entitled to the benefits of this Section 16 (subject to the limitations set forth in Section 13.1(e)) with respect to its participation in any portion of the Commitments and the Obligations so long as such Participant complies with the obligations set forth in this Section 16 with respect thereto.

 

(e) If a payment made to a Recipient under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Recipient 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 Recipient, as applicable, shall deliver to Borrower and Agent at the time or times prescribed by law and at such time or times reasonably requested by Borrower or 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 Borrower or Agent as may be necessary for Borrower and Agent to comply with their obligations under FATCA and to determine that such Recipient has complied with such Recipient’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this Section 16.2(e), “FATCA” shall include any amendments made to FATCA after the date of this Agreement, any intergovernmental agreements, any agreements entered into pursuant to Section 1471(b)(1) of the IRC, and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreements entered into in connection with Sections 1471 through 1474 of the IRC.

 

16.3 Reductions.

 

(a) If a Lender is subject to an applicable withholding tax, Agent may withhold from any payment to such Lender an amount equivalent to the applicable withholding tax.  If the forms or other documentation required by Section 16.2(a) or 16.2(c) are not delivered to Agent, then Agent may withhold from any payment to such Lender not providing such forms or other documentation an amount equivalent to the applicable withholding tax.

 

(b) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that Agent did not properly withhold tax from amounts paid to or for the account of any Lender due to a failure on the part of the Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify and hold Agent harmless for all amounts paid, directly or indirectly, by Agent, as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to Agent under this Section 16, together with all costs and expenses (including attorneys’ fees and expenses).  The obligation of the Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of Agent.

 

  

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16.4 Refunds.  If Agent or a Lender determines, in its sole discretion, that it has received a refund of any Indemnified Taxes to which Borrower has paid additional amounts pursuant to this Section 16, so long as no Default or Event of Default has occurred and is continuing, it shall pay over such refund to Borrower (but only to the extent of payments made, or additional amounts paid, by Borrower under this Section 16 with respect to Indemnified Taxes giving rise to such a refund), net of all out-of-pocket expenses of Agent or such Lender and without interest (other than any interest paid by the applicable Governmental Authority with respect to such a refund); provided, that Borrower, upon the request of Agent or such Lender, agrees to repay the amount paid over to Borrower (plus any penalties, interest or other charges, imposed by the applicable Governmental Authority, other than such penalties, interest or other charges imposed as a result of the willful misconduct or gross negligence of Agent hereunder) to Agent or such Lender in the event Agent or such Lender is required to repay such refund to such Governmental Authority.  Notwithstanding anything in this Agreement to the contrary, this Section 16 shall not be construed to require Agent or any Lender to make available its tax returns (or any other information which it deems confidential) to Borrower or any other Person.

 

17. GENERAL PROVISIONS.

 

17.1 Effectiveness.  This Agreement shall be binding and deemed effective when executed by Borrower, Agent, and each Lender whose signature is provided for on the signature pages hereof.

 

17.2 Section Headings.  Headings and numbers have been set forth herein for convenience only.  Unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Agreement.

 

17.3 Interpretation.  Neither this Agreement nor any uncertainty or ambiguity herein shall be construed against the Lender Group or Borrower, whether under any rule of construction or otherwise.  On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to accomplish fairly the purposes and intentions of all parties hereto.

 

17.4 Severability of Provisions.  Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

 

17.5 Bank Product Providers.  Each Bank Product Provider in its capacity as such shall be deemed a third party beneficiary hereof and of the provisions of the other Loan Documents for purposes of any reference in a Loan Document to the parties for whom Agent is acting.  Agent hereby agrees to act as agent for such Bank Product Providers and, by virtue of entering into a Bank Product Agreement, the applicable Bank Product Provider shall be automatically deemed to have appointed Agent as its agent and to have accepted the benefits of the Loan Documents.  It is understood and agreed that the rights and benefits of each Bank Product Provider under the Loan Documents consist exclusively of such Bank Product Provider’s being a beneficiary of the Liens and security interests (and, if applicable, guarantees) granted to Agent and the right to share in payments and collections out of the Collateral as more fully set forth herein. In addition, each Bank Product Provider, by virtue of entering into a Bank Product Agreement, shall be automatically deemed to have agreed that Agent shall have the right, but shall have no obligation, to establish, maintain, relax, or release reserves in respect of the Bank Product Obligations and that if reserves are established there is no obligation on the part of Agent to determine or insure whether the amount of any such reserve is appropriate or not.  In connection with any such distribution of payments or proceeds of Collateral, Agent shall be entitled to assume no amounts are due or owing to any Bank Product Provider unless such Bank Product Provider has provided a written certification (setting forth a reasonably detailed calculation) to Agent as to the amounts that are due and owing to it and such written certification is received by Agent a reasonable period of time prior to the making of such distribution.  Agent shall have no obligation to calculate the amount due and payable with respect to any Bank Products, but may rely upon the written certification of the amount due and payable from the applicable Bank Product Provider.  In the absence of an updated certification, Agent shall be entitled to assume that the amount due and payable to the applicable Bank Product Provider is the amount last certified to Agent by such Bank Product Provider as being due and payable (less any distributions made to such Bank Product Provider on account thereof).  Borrower may obtain Bank Products from any Bank Product Provider, although Borrower is not required to do so.  Borrower acknowledges and agrees that no Bank Product Provider has committed to provide any Bank Products and that the providing of Bank Products by any Bank Product Provider is in the sole and absolute discretion of such Bank Product Provider.  Notwithstanding anything to the contrary in this Agreement or any other Loan Document, no provider or holder of any Bank Product shall have any voting or approval rights hereunder (or be deemed a Lender) solely by virtue of its status as the provider or holder of such agreements or products or the Obligations owing thereunder, nor shall the consent of any such provider or holder be required (other than in their capacities as Lenders, to the extent 

 

  

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applicable) for any matter hereunder or under any of the other Loan Documents, including as to any matter relating to the Collateral or the release of Collateral or Guarantors. 

 

17.6 Debtor-Creditor Relationship.  The relationship between the Lenders and Agent, on the one hand, and the Loan Parties, on the other hand, is solely that of creditor and debtor.  No member of the Lender Group has (or shall be deemed to have) any fiduciary relationship or duty to any Loan Party arising out of or in connection with the Loan Documents or the transactions contemplated thereby, and there is no agency or joint venture relationship between the members of the Lender Group, on the one hand, and the Loan Parties, on the other hand, by virtue of any Loan Document or any transaction contemplated therein.

 

17.7 Counterparts; Electronic Execution.  This Agreement 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 Agreement.  Delivery of an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Agreement.  Any party delivering an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement.  The foregoing shall apply to each other Loan Document mutatis mutandis.

 

17.8 Revival and Reinstatement of Obligations; Certain Waivers.  If any member of the Lender Group or any Bank Product Provider repays, refunds, restores, or returns in whole or in part, any payment or property (including any proceeds of Collateral) previously paid or transferred to such member of the Lender Group or such Bank Product Provider in full or partial satisfaction of any Obligation or on account of any other obligation of any Loan Party under any Loan Document or any Bank Product Agreement, because the payment, transfer, or the incurrence of the obligation so satisfied is asserted or declared to be void, voidable, or otherwise recoverable under any law relating to creditors’ rights, including provisions of the Bankruptcy Code relating to fraudulent transfers, preferences, or other voidable or recoverable obligations or transfers (each, a “Voidable Transfer”), or because such member of the Lender Group or Bank Product Provider elects to do so on the reasonable advice of its counsel in connection with a claim that the payment, transfer, or incurrence is or may be a Voidable Transfer, then, as to any such Voidable Transfer, or the amount thereof that such member of the Lender Group or Bank Product Provider elects to repay, restore, or return (including pursuant to a settlement of any claim in respect thereof), and as to all reasonable costs, expenses, and attorneys fees of such member of the Lender Group or Bank Product Provider related thereto, (i) the liability of the Loan Parties with respect to the amount or property paid, refunded, restored, or returned will automatically and immediately be revived, reinstated, and restored and will exist and (ii) Agent's Liens securing such liability shall be effective, revived, and remain in full force and effect, in each case, as fully as if such Voidable Transfer had never been made.  If, prior to any of the foregoing, (A) Agent's Liens shall have been released or terminated or (B) any provision of this Agreement shall have been terminated or cancelled, Agent's Liens, or such provision of this Agreement, shall be reinstated in full force and effect and such prior release, termination, cancellation or surrender shall not diminish, release, discharge, impair or otherwise affect the obligation of any Loan Party in respect of such liability or any Collateral securing such liability. 

 

17.9 Confidentiality.

 

(a) Agent and Lenders each individually (and not jointly or jointly and severally) agree that material, non-public information regarding Borrower and its Subsidiaries, their operations, assets, and existing and contemplated business plans (“Confidential Information”) shall be treated by Agent and the Lenders in a confidential manner, and shall not be disclosed by Agent and the Lenders to Persons who are not parties to this Agreement, except:  (i) to attorneys for and other advisors, accountants, auditors, and consultants to any member of the Lender Group  and to employees, directors and officers of any member of the Lender Group (the Persons in this clause (i), “Lender Group Representatives”) on a “need to know” basis in connection with this Agreement and the transactions contemplated hereby and on a confidential basis, (ii) to Subsidiaries and Affiliates of any member of the Lender Group (including the Bank Product Providers), provided that any such Subsidiary or Affiliate shall have agreed to receive such information hereunder subject to the terms of this Section 17.9, (iii) as may be required by regulatory authorities so long as such authorities are informed of the confidential nature of such information, (iv) as may be required by statute, decision, or judicial or administrative order, rule, or regulation; provided that (x) prior to any disclosure under this clause (iv), the disclosing party agrees to provide Borrower with prior notice thereof, to 

 

  

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the extent that it is practicable to do so and to the extent that the disclosing party is permitted to provide such prior notice to Borrower pursuant to the terms of the applicable statute, decision, or judicial or administrative order, rule, or regulation and (y) any disclosure under this clause (iv) shall be limited to the portion of the Confidential Information as may be required by such statute, decision, or judicial or administrative order, rule, or regulation, (v) as may be agreed to in advance in writing by Borrower, (vi) as requested or required by any Governmental Authority pursuant to any subpoena or other legal process, provided, that, (x) prior to any disclosure under this clause (vi) the disclosing party agrees to provide Borrower with prior written notice thereof, to the extent that it is practicable to do so and to the extent that the disclosing party is permitted to provide such prior written notice to Borrower pursuant to the terms of the subpoena or other legal process and (y) any disclosure under this clause (vi) shall be limited to the portion of the Confidential Information as may be required by such Governmental Authority pursuant to such subpoena or other legal process, (vii) as to any such information that is or becomes generally available to the public (other than as a result of prohibited disclosure by Agent or the Lenders or the Lender Group Representatives), (viii) in connection with any assignment, participation  or pledge of any Lender’s interest under this Agreement, provided that prior to receipt of Confidential Information any such assignee, participant, or pledgee shall have agreed in writing to receive such Confidential Information either subject to the terms of this Section 17.9 or pursuant to confidentiality requirements substantially similar to those contained in this Section 17.9 (and such Person may disclose such Confidential Information to Persons employed or engaged by them as described in clause (i) above), (ix) in connection with any litigation or other adversary proceeding involving parties hereto which such litigation or adversary proceeding involves claims related to the rights or duties of such parties under this Agreement or the other Loan Documents; provided, that, prior to any disclosure to any Person (other than any Loan Party, Agent, any Lender, any of their respective Affiliates, or their respective counsel) under this clause (ix) with respect to litigation involving any Person (other than Borrower, Agent, any Lender, any of their respective Affiliates, or their respective counsel), the disclosing party agrees to provide Borrower with prior written notice thereof, and (x) in connection with, and to the extent reasonably necessary for, the exercise of any secured creditor remedy under this Agreement or under any other Loan Document.

 

(b) Anything in this Agreement to the contrary notwithstanding, Agent may disclose information concerning the terms and conditions of this Agreement and the other Loan Documents to loan syndication and pricing reporting services or in its marketing or promotional materials, with such information to consist of deal terms and other information customarily found in such publications or marketing or promotional materials and may otherwise use the name, logos, and other insignia of Borrower or the other Loan Parties and the Commitments provided hereunder in any “tombstone” or other advertisements, on its website or in other marketing materials of Agent.

 

(c) The Loan Parties hereby acknowledge that Agent or its Affiliates may make available to the Lenders materials or information provided by or on behalf of Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks, SyndTrak or another similar electronic system (the “Platform”) and certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Loan Parties or their securities) (each, a “Public Lender”).  The Loan Parties shall be deemed to have authorized Agent and its Affiliates and the Lenders to treat Borrower Materials marked “PUBLIC” or otherwise at any time filed with the SEC as not containing any material non-public information with respect to the Loan Parties or their securities for purposes of United States federal and state securities laws.  All Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated as “Public Investor” (or another similar term).  Agent and its Affiliates and the Lenders shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” or that are not at any time filed with the SEC as being suitable only for posting on a portion of the Platform not marked as “Public Investor” (or such other similar term).

 

17.10 Survival.  All representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instru­ments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that Agent, Issuing Bank, or any Lender may have had notice or knowledge of any Default or Event of Default or incorrect representation or warranty at the time 

 

  

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any credit is extended hereunder, and shall continue in full force and effect as long as the principal of, or any accrued interest on, any Loan or any fee or any other amount payable under this Agreement is outstand­ing or unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or been terminated.

 

17.11 Patriot Act.  Each Lender that is subject to the requirements of the Patriot Act hereby notifies Borrower that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow such Lender to identify Borrower in accordance with the Patriot Act.  In addition, if Agent is required by law or regulation or internal policies to do so, it shall have the right to periodically conduct (a) Patriot Act searches, OFAC/PEP searches, and customary individual background checks for the Loan Parties and (b) OFAC/PEP searches and customary individual  background checks for the Loan Parties’ senior management and key principals, and Borrower agrees to cooperate in respect of the conduct of such searches and further agrees that the reasonable costs and charges for such searches shall constitute Lender Group Expenses hereunder and be for the account of Borrower.

 

17.12 Integration.  This Agreement, together with the other Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof.  The foregoing to the contrary notwithstanding, all Bank Product Agreements, if any, are independent agreements governed by the written provisions of such Bank Product Agreements, which will remain in full force and effect, unaffected by any repayment, prepayments, acceleration, reduction, increase, or change in the terms of any credit extended hereunder, except as otherwise expressly provided in such Bank Product Agreement.

 

[Signature pages to follow.]

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written.

 

	
BORROWER:

	
MEDICAL ACTION INDUSTRIES INC.,

a Delaware corporation

	  	  
	  	  
	  	
By:

	
/s/ John Sheffield

	  	
Name:

	
John Sheffield

	  	
Title:

	
Chief Financial Officer

	  	  
	  	  
	  	
WELLS FARGO BANK, NATIONAL ASSOCIATION,

a national banking association, as Agent and as a Lender

	  	  
	  	  
	  	
By:

	
/s/ Thomas Blackman

	  	
Name:

	
Thomas Blackman

	  	  	
Its Authorized Signatory

	  	  	  

  

Signature Page to Credit Agreement

  

Schedule A-1

Agent’s Account

 

An account at a bank designated by Agent from time to time as the account into which Borrower shall make all payments to Agent for the benefit of the Lender Group and into which the Lender Group shall make all payments to Agent under this Agreement and the other Loan Documents; unless and until Agent notifies Borrower and the Lender Group to the contrary, Agent’s Account shall be that certain deposit account bearing account number 4124923723, reference Medical Actions Industries Inc., and maintained by Agent with Wells Fargo Bank, N.A., 420 Montgomery Street, San Francisco, CA, ABA  #121-000-248.

 

 

 

 

 

 

  

 

  

Schedule A-2

Authorized Persons

 

Paul D. Meringolo

 

John Sheffield

 

Brian Baker

 

Victor Bacchioni

 

 

 

 

  

  

  

Schedule C-1

 

Commitments

 

	
Lender

	
Revolver

Commitment

	
Term Loan

Commitment

	
Delayed Draw

Term Loan

Commitment

	
 

Total Commitment

	
Wells Fargo Bank, National Association

	
$65,00,000 minus the outstanding principal amount of the Term Loan and the Delayed Draw Term Loan Exposure of all Lenders

	
$11,505,000

	
$5,000,000

	
$65,000,000

	
All Lenders

	
$65,000,000

	
$11,505,000

	
$5,000,000

	
$65,000,000

 

 

 

 

  

 

  

Schedule D-1

Designated Account and Designated Account Bank

 

Deposit Account # 958171191 at JPMorgan Chase Bank, N.A. (ABA: 021000021)

 

  

  

  

 

Schedule P-1

Permitted Investments

 

None.

 

  

  

  

 

Schedule P-2

Permitted Liens

 

	
Debtor

 

	
Secured Party

	
Filing Date

	
Jurisdiction

	
Medical Action Industries Inc.

 

	
CIT Technology Financing Services, Inc.

	
12/30/08

	
Delaware

	
Medical Action Industries Inc.

 

	
Raymond Leasing Corporation

	
02/04/09

	
Delaware

	
Medical Action Industries Inc.

 

	
Image Solutions LLC

	
03/25/10

	
Delaware

	
Medical Action Industries Inc.

 

	
U.S. Bancorp Business Equipment Finance Group

	
01/25/11

	
Delaware

	
Medegen Medical Products, LLC

 

	
UBE Machinery Inc.

	
08/22/08

	
Delaware

 

  

  

  

 

Schedule R-1

Real Property Collateral

	
1.  

	
Medical Action Industries Inc., 25 Heywood Rd., Arden, NC, Buncombe County.

	
2.  

	
Medical Action Industries Inc., Life Science Industrial Park, 10 Columbia Blvd., Clarksburg, WV, Harrison County.

	
3.  

	
500 Expressway Drive South LLC, 500 Expressway Drive S., Brentwood, NY 11717, Suffolk County.

  

  

  

 

Schedule 1.1

 

As used in the Agreement, the following terms shall have the following definitions:

 

“Accelerated Borrowing Base Delivery Event” means either (a) the occurrence and continuance of any Event of Default, or (ii) the failure of Borrower to maintain Excess Availability of at least (x) $10,000,000 for more than 3 consecutive days or (y) 7,500,000 at any time.  For purposes of the Agreement, the occurrence of an Accelerated Borrowing Base Delivery Event shall be deemed continuing (i) so long as such Event of Default has not been waived, and/or (b) if the Accelerated Borrowing Base Delivery Event arises as a result of Borrower’s failure to achieve Excess Availability as required hereunder, until Excess Availability is at least either (i) $10,000,000 for 30 consecutive calendar days or (ii) $15,000,000 for 14 consecutive calendar days, in which case an Accelerated Borrowing Base Delivery Event shall no longer be deemed to be continuing for purposes of the Agreement. The termination of an Accelerated Borrowing Base Delivery Event as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Accelerated Borrowing Base Delivery Event in the event that the conditions set forth in this definition again arise.

 

“Account” means an account (as that term is defined in the Code).

 

“Account Debtor” means any Person who is obligated on an Account, chattel paper, or a general intangible.

 

“Accounting Changes” means changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or successor thereto or any agency with similar functions).

 

“Acquired Indebtedness” means Indebtedness of a Person whose assets or Equity Interests are acquired by Borrower or any of its Subsidiaries in a Permitted Acquisition; provided, that such Indebtedness (a) is either purchase money Indebtedness or a Capital Lease with respect to Equipment or mortgage financing with respect to Real Property, (b) was in existence prior to the date of such Permitted Acquisition, and (c) was not incurred in connection with, or in contemplation of, such Permitted Acquisition.

 

 “Acquisition” means (a) the purchase or other acquisition by a Person or its Subsidiaries of all or substantially all of the assets of (or any division or business line of) any other Person, or (b) the purchase or other acquisition (whether by means of a merger, consolidation, or otherwise) by a Person or its Subsidiaries of all or substantially all of the Equity Interests of any other Person.

 

 “Additional Documents” has the meaning specified therefor in Section 5.12 of the Agreement.

 

 “Administrative Questionnaire” has the meaning specified therefor in Section 13.1(a) of the Agreement.

 

“Affected Lender” has the meaning specified therefor in Section 2.13(b) of the Agreement.

 

  

 

  

“Affiliate” means, as applied to any Person, any other Person who controls, is controlled by, or is under common control with, such Person.  For purposes of this definition, “control” means the possession, directly or indirectly through one or more intermediaries, of the power to direct the management and policies of a Person, whether through the ownership of Equity Interests, by contract, or otherwise; provided, that, for purposes of the definition of Eligible Accounts and Section 6.10 of the Agreement: (a) any Person which owns directly or indirectly 10% or more of the Equity Interests having ordinary voting power for the election of directors or other members of the governing body of a Person or 10% or more of the partnership or other ownership interests of a Person (other than as a limited partner of such Person) shall be deemed an Affiliate of such Person, (b) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of such Person, and (c) each partnership in which a Person is a general partner shall be deemed an Affiliate of such Person.

 

“Agent” has the meaning specified therefor in the preamble to the Agreement.

 

“Agent-Related Persons” means Agent, together with its Affiliates, officers, directors, employees, attorneys, and agents.

 

“Agent’s Account” means the Deposit Account of Agent identified on Schedule A-1 to the Agreement (or such other Deposit Account of Agent that has been designated as such, in writing, by Agent to Borrower and the Lenders).

 

“Agent’s Liens” means the Liens granted by Borrower or its Subsidiaries to Agent under the Loan Documents and securing the Obligations.

 

“Agreement” means the Credit Agreement to which this Schedule 1.1 is attached.

 

 “Applicable Margin” means, as of any date of determination and with respect to Base Rate Loans or LIBOR Rate Loans, as applicable, the applicable margin set forth in the following table that corresponds to the Average Excess Availability of Borrower for the most recently completed fiscal quarter; provided, that for the period from the Closing Date through and including September 30, 2013, the Applicable Margin shall be set at the margin in the row styled “Level II”; provided further, that any time an Event of Default has occurred and is continuing, the Applicable Margin shall be set at the margin in the row styled “Level III”:

 

	
Level

	
Average

Excess

Availability

	
Applicable

Margin

Relative to

Revolving

Loans that

are Base

Rate Loans

	
Applicable

Margin

Relative to

Revolving

Loans that

are  LIBOR

Rate Loans

	
Applicable

Margin

Relative to

Term

Loans that 

are Base

Rate

Loans

	
Applicable

Margin

Relative to

Term

Loans that

are 

LIBOR

Rate

Loans

	
Applicable

Margin

Relative to

Delayed

Draw

Term

Loans that

are Base

Rate

Loans

	
Applicable

Margin

Relative to

Delayed

Draw

Term

Loans that

are

LIBOR

Rate

Loans

	
I

	
> $13,000,000

	
1.00%

	
2.00%

	
1.50%

	
2.50%

	
3.25%

	
4.25%

	
II

	
< $13,000,000 and > $6,500,000

	
1.25%

	
2.25%

	
1.75%

	
2.75%

	
3.50%

	
4.50%

	
III

	
< $6,500,000

	
1.50%

	
2.50%

	
2.00%

	
3.00%

	
3.75%

	
4.75%

  

- 5 -

  

The Applicable Margin shall be re-determined, consistently with the table set forth above, as of the first day of each fiscal quarter of Borrower.

 

“Applicable Unused Line Fee Percentage” means, as of any date of determination, the applicable percentage set forth in the following table that corresponds to the Average Revolver Usage of Borrower for the most recently completed fiscal quarter as determined by Agent in its Permitted Discretion; provided, that for the period from the Closing Date through and including September 30, 2013, the Applicable Unused Line Fee Percentage shall be set at the rate in the row styled “Level I”; provided further, that any time an Event of Default has occurred and is continuing, the Applicable Unused Line Fee Percentage shall be set at the margin in the row styled “Level II”:

 

	
Level

	
Average Revolver Usage

	
Applicable Unused Line Fee Percentage

	
I

	
> 50% of the Maximum Revolver Amount

	
0.375%

	
II

	
< 50% of the Maximum Revolver Amount

	
0.50%

The Applicable Unused Line Fee Percentage shall be re-determined on the first date of each fiscal quarter by Agent.

 

“Application Event” means the occurrence of (a) a failure by Borrower to repay all of the Obligations in full on the Maturity Date, or (b) an Event of Default and the election by Agent or the Required Lenders to require that payments and proceeds of Collateral be applied pursuant to Section 2.4(b)(ii) of the Agreement.

 

“Assignee” has the meaning specified therefor in Section 13.1(a) of the Agreement.

 

“Assignment and Acceptance” means an Assignment and Acceptance Agreement substantially in the form of Exhibit A-1 to the Agreement.

 

“Authorized Person” means any one of the individuals identified on Schedule A-2 to the Agreement, as such schedule is updated from time to time by written notice from Borrower to Agent.

 

“Availability” means, as of any date of determination, the amount that Borrower is entitled to borrow as Revolving Loans under Section 2.1 of the Agreement (after giving effect to the then outstanding Revolver Usage).

 

“Available Increase Amount” means, as of any date of determination, an amount equal to the result of (a) $25,000,000 minus (b) the aggregate principal amount of Increases to the Revolver Commitments previously made pursuant to Section 2.14 of the Agreement.

 

 “Average Availability” means, with respect to any period, the sum of the aggregate amount of Availability for each Business Day in such period (calculated as of the end of each respective Business Day) divided by the number of Business Days in such period.

 

  

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“Average Excess Availability” means, with respect to any period, the sum of the aggregate amount of Excess Availability for each Business Day in such period (calculated as of the end of each respective Business Day) divided by the number of Business Days in such period.

 

“Average Revolver Usage” means, with respect to any period, the sum of the aggregate amount of Revolver Usage for each Business Day in such period (calculated as of the end of each respective Business Day) divided by the number of Business Days in such period.

 

“Bank Product” means any one or more of the following financial products or accommodations extended to Borrower or its Subsidiaries by a Bank Product Provider:  (a) credit cards (including commercial cards (including so-called “purchase cards”, “procurement cards” or “p-cards”)), (b) credit card processing services, (c) debit cards, (d) stored value cards, (e) Cash Management Services, or (f) transactions under Hedge Agreements.

 

“Bank Product Agreements” means those agreements entered into from time to time by Borrower or its Subsidiaries with a Bank Product Provider in connection with the obtaining of any of the Bank Products.

 

“Bank Product Collateralization” means providing cash collateral (pursuant to documentation reasonably satisfactory to Agent) to be held by Agent for the benefit of the Bank Product Providers (other than the Hedge Providers) in an amount determined by Agent as sufficient to satisfy the reasonably estimated credit exposure with respect to the then existing Bank Product Obligations (other than Hedge Obligations).

 

“Bank Product Obligations” means (a) all obligations, liabilities, reimbursement obligations, fees, or expenses owing by Borrower or its Subsidiaries to any Bank Product Provider pursuant to or evidenced by a Bank Product Agreement and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, (b) all Hedge Obligations, and (c) all amounts that Agent or any Lender is obligated to pay to a Bank Product Provider as a result of Agent or such Lender purchasing participations from, or executing guarantees or indemnities or reimbursement obligations to, a Bank Product Provider with respect to the Bank Products provided by such Bank Product Provider to Borrower or its Subsidiaries.

 

“Bank Product Provider” means Wells Fargo or any of its Affiliates, including each of the foregoing in its capacity, if applicable, as a Hedge Provider.

 

 “Bank Product Provider Agreement” means an agreement in substantially the form attached hereto as Exhibit B-2 to the Agreement, in form and substance satisfactory to Agent, duly executed by the applicable Bank Product Provider, Borrower, and Agent.

 

“Bank Product Reserves” means, as of any date of determination, those reserves that Agent deems necessary or appropriate to establish (based upon the Bank Product Providers’ determination of the liabilities and obligations of Borrower and its Subsidiaries in respect of Bank Product Obligations) in respect of Bank Products then provided or outstanding.

 

“Bankruptcy Code” means title 11 of the United States Code, as in effect from time to time.

 

  

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“Base Rate” means the greatest of (a) the Federal Funds Rate plus 1⁄2%, (b) the LIBOR Rate (which rate shall be calculated based upon an Interest Period of 1 month and shall be determined on a daily basis), plus 1 percentage point, and (c) the rate of interest announced, from time to time, within Wells Fargo at its principal office in San Francisco as its “prime rate”, with the understanding that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publications as Wells Fargo may designate.

 

“Base Rate Loan” means each portion of the Revolving Loans, the Term Loan, the Delayed Draw Term Loan 1 or the Delayed Draw Term Loan 2 that bears interest at a rate determined by reference to the Base Rate.

 

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

 

“Board of Directors” means, as to any Person, the board of directors (or comparable managers) of such Person, or any committee thereof duly authorized to act on behalf of the board of directors (or comparable managers).

 

“Board of Governors” means the Board of Governors of the Federal Reserve System of the United States (or any successor).

 

“Borrower” has the meaning specified therefor in the preamble to the Agreement.

 

“Borrower Materials” has the meaning specified therefor in Section 17.9(c) of the Agreement.

 

“Borrowing” means a borrowing consisting of Revolving Loans made on the same day by the Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing Loan, or by Agent in the case of an Extraordinary Advance.

 

“Borrowing Base” means, as of any date of determination, the result of:

 

(a)           85% of the amount of Eligible Accounts, less the amount, if any, of the Dilution Reserve, plus

 

(b)           the sum of:

 

(i) the lesser of (A) the product of 65% multiplied by the value (calculated at the lower of cost or market on a basis consistent with Borrower’s historical accounting practices) of Eligible Finished Goods Inventory at such time, and (B) the product of 85% multiplied by the Net Recovery Percentage identified in the most recent Inventory appraisal ordered and obtained by Agent multiplied by the value (calculated at the lower of cost or market on a basis consistent with Borrower’s historical accounting practices) of Eligible Finished Goods Inventory (such determination may be made as to different categories of Eligible Finished Goods Inventory based upon the Net Recovery Percentage applicable to such categories) at such time, plus

 

  

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(ii) the least of (A) $5,000,000 minus the amount of Eligible In-Transit Inventory consisting of raw materials included in the borrowing base pursuant to clause (c) below, (B) 65% of the value (calculated at the lower of cost or market on a basis consistent with Borrower’s historical accounting practices) of Eligible In-Transit Inventory consisting of finished goods, and (C) the product of 85% multiplied by the Net Recovery Percentage identified in the most recent Inventory appraisal ordered and obtained by Agent multiplied by the value (calculated at the lower of cost or market on a basis consistent with Borrower’s historical accounting practices) of Eligible In-Transit Inventory consisting of finished goods (such determination may be made as to different categories of finished goods Inventory based upon the Net Recovery Percentage applicable to such categories) at such time, plus

 

(c)           the sum of:

 

(i) the lesser of (A) the product of 50% multiplied by the value (calculated at the lower of cost or market on a basis consistent with Borrower’s historical accounting practices) of Eligible Raw Materials Inventory at such time, and (B) the product of 85% multiplied by the Net Recovery Percentage identified in the most recent Inventory appraisal ordered and obtained by Agent multiplied by the value (calculated at the lower of cost or market on a basis consistent with  Borrower’s historical accounting practices) of Eligible Raw Materials Inventory (such determination may be made as to different categories of Eligible Raw Materials Inventory based upon the Net Recovery Percentage applicable to such categories) at such time, plus

 

(ii) the least of (A) $5,000,000 minus the amount of Eligible In-Transit Inventory consisting of finished goods included in the borrowing base pursuant to clause (b) above, (B) 50% of the value (calculated at the lower of cost or market on a basis consistent with Borrower’s historical accounting practices) of Eligible In-Transit Inventory consisting of raw materials, and (C) the product of 85% multiplied by the Net Recovery Percentage identified in the most recent inventory appraisal ordered and obtained by Agent multiplied by the value (calculated at the lower of cost or market on a basis consistent with Borrower’s historical accounting practices) of Eligible In-Transit Inventory consisting of raw materials (such determination may be made as to different categories of raw material Inventory based upon the Net Recovery Percentage applicable to such categories) at such time, plus

 

(d)           the least of (1) $2,500,000, (ii) 50% of the value (calculated at the lower of cost or market on a basis consistent with Borrower’s historical accounting practices) of Eligible Work-in-Process Inventory, and (iii) the product of 85% multiplied by the Net Recovery Percentage identified in the most recent Inventory appraisal ordered and obtained by Agent multiplied by the value (calculated at the lower of cost or market on a basis consistent with Borrower’s historical accounting practices) of Eligible Work-in-Process Inventory (such determination may be made as to different categories of work-in-process Inventory based upon the Net Recovery Percentage applicable to such categories) at such time, minus

 

 (e)           the aggregate amount of Reserves, if any, established by Agent under Section 2.1(c) of the Agreement.

 

  

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“Borrowing Base Certificate” means a certificate substantially in the form of Exhibit B-1.

 

“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks are authorized or required to close in the state of New York, except that, if a determination of a Business Day shall relate to a LIBOR Rate Loan, the term “Business Day” also shall exclude any day on which banks are closed for dealings in Dollar deposits in the London interbank market.

 

“Capital Expenditures” means, with respect to any Person for any period, the amount of all expenditures by such Person and its Subsidiaries during such period that are capital expenditures as determined in accordance with GAAP, whether such expenditures are paid in cash or financed, but excluding, without duplication (a) expenditures made during such period in connection with the replacement, substitution, or restoration of assets or properties pursuant to Section 2.4(e)(ii) of the Agreement, (b) with respect to the purchase price of assets that are purchased substantially contemporaneously with the trade-in of existing assets during such period, the amount that the gross amount of such purchase price is reduced by the credit granted by the seller of such assets for the assets being traded in at such time, (c) expenditures made during such period to consummate one or more Permitted Acquisitions, (d) capitalized software development costs to the extent such costs are deducted from net earnings under the definition of EBITDA for such period, (e) expenditures during such period that, pursuant to a written agreement, are reimbursed by a third Person (excluding Borrower or any of its Affiliates) and (f) expenditures made to replace assets subject to a casualty or condemnation event with the proceeds of insurance or condemnation proceeds.

 

“Capitalized Lease Obligation” means that portion of the obligations under a Capital Lease that is required to be capitalized in accordance with GAAP.

 

“Capital Lease” means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

 

“Cash Equivalents” means (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within 1 year from the date of acquisition thereof, (b) marketable direct obligations issued or fully guaranteed by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within 1 year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor’s Rating Group (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”), (c) commercial paper maturing no more than 270 days from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody’s, (d) certificates of deposit, time deposits, overnight bank deposits or bankers’ acceptances maturing within 1 year from the date of acquisition thereof issued by any bank organized under the laws of the United States or any state thereof or the District of Columbia or any United States branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $1,000,000,000, (e) Deposit Accounts maintained with (i) any bank that satisfies the criteria described in clause (d) above, or (ii) any other bank organized under the laws of the United States or any state thereof so long as the full amount maintained with any such other bank is insured by the Federal Deposit Insurance Corporation, (f) repurchase obligations of any commercial bank satisfying the requirements of clause (d) of this definition or recognized securities dealer having combined capital and surplus of not less than $1,000,000,000, having a term of not more than seven days, with respect to securities satisfying the criteria in clauses (a) or (d) above, (g) debt securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the criteria described in clause (d) above, and (h) Investments in money market funds substantially all of whose assets are invested in the types of assets described in clauses (a) through (g) above.

 

  

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“Cash Management Services” means any cash management or related services including treasury, depository, return items, overdraft, controlled disbursement,  merchant store value cards, e-payables services, electronic funds transfer, interstate depository network, automatic clearing house transfer (including the Automated Clearing House processing of electronic funds transfers through the direct Federal Reserve Fedline system) and other cash management arrangements.

 

“CFC” means a controlled foreign corporation (as that term is defined in the IRC).

 

“Change of Control” means that:

 

(a)   any Person or two or more Persons acting in concert, shall have acquired beneficial ownership, directly or indirectly, of Equity Interests of Borrower (or other securities convertible into such Equity Interests) representing 35% or more of the combined voting power of all Equity Interests of Borrower entitled (without regard to the occurrence of any contingency) to vote for the election of members of the Board of Directors of Borrower;

 

(c)  any Person or two or more Persons acting in concert, shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of Borrower or control over the Equity Interests of such Person entitled to vote for members of the Board of Directors of Borrower on a fully-diluted basis (and taking into account all such Equity Interests that such Person or group has the right to acquire pursuant to any option right) representing 35% or more of the combined voting power of such Equity Interests; or

 

(d)  during any period of 12 consecutive months commencing on or after the Closing Date, the occurrence of a change in the composition of the Board of Directors of Borrower such that a majority of the members of such Board of Directors are not Continuing Directors; or

 

(e)  Borrower fails to own and control, directly or indirectly, 100% of the Equity Interests of each other Loan Party.

 

“Change in Law” means the occurrence after the date of the Agreement of:  (a) the adoption or effectiveness of any law, rule, regulation, judicial ruling, judgment or treaty, (b) any change in any law, rule, regulation, judicial ruling, judgment or treaty or in the administration, interpretation, implementation or application by any Governmental Authority of any law, rule, regulation, guideline or treaty, or (c) the making or issuance by any Governmental Authority of any request, rule, guideline or directive, whether or not having the force of law; provided that notwithstanding anything in the Agreement to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives concerning capital adequacy 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,” regardless of the date enacted, adopted or issued.

 

“Closing Date” means the date of the making of the initial extension of credit under the Agreement.

 

“Code” means New York Uniform Commercial Code, as in effect from time to time; provided, however, that, at any time, if by reason of mandatory provisions of any law, any or all of the perfection or priority of Agent’s security interest in any item or portion of Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term “Code” 

 

  

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shall mean the Uniform Commercial Code as in effect, at such time, in such other jurisdiction for purposes of the provisions in any Loan Document relating to such perfection or priority and for purposes of definitions relating to such provisions.

 

“Collateral” means all assets and interests in assets and proceeds thereof now owned or hereafter acquired by Borrower or its Subsidiaries in or upon which a Lien is granted by such Person in favor of Agent or the Lenders under any of the Loan Documents.

 

“Collateral Access Agreement” means a landlord waiver, bailee letter, or acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in Borrower’s or its Subsidiaries’ books and records, Equipment, or Inventory, in each case, in form and substance reasonably satisfactory to Agent.

 

 “Commitment” means, with respect to each Lender, its Revolver Commitment, its Term Loan Commitment or its Delayed Draw Term Loan Commitment, as the context requires, and, with respect to all Lenders, their Revolver Commitments, their Term Loan Commitments or their Delayed Draw Term Loan Commitments, as the context requires, in each case as such Dollar amounts are set forth beside such Lender’s name under the applicable heading on Schedule C-1 to the Agreement or in the Assignment and Acceptance pursuant to which such Lender became a Lender under the Agreement, as such amounts may be reduced or increased from time to time pursuant to assignments made in accordance with the provisions of Section 13.1 of the Agreement.

 

 “Compliance Certificate” means a certificate substantially in the form of Exhibit C-1 to the Agreement delivered by the chief financial officer of Borrower to Agent.

 

“Confidential Information” has the meaning specified therefor in Section 17.9(a) of the Agreement.

 

“Continuing Director” means (a) any member of the Board of Directors who was a director (or comparable manager) of Borrower on the Closing Date, and (b) any individual who becomes a member of the Board of Directors after the Closing Date if such individual was approved, appointed or nominated for election to the Board of Directors by a majority of the Continuing Directors, but excluding any such individual originally proposed for election in opposition to the Board of Directors in office at the Closing Date in an actual or threatened election contest relating to the election of the directors (or comparable managers) of Borrower and whose initial assumption of office resulted from such contest or the settlement thereof.

 

“Control Agreement” means a control agreement, in form and substance reasonably satisfactory to Agent, executed and delivered by Borrower or one of its Subsidiaries, Agent, and the applicable securities intermediary (with respect to a Securities Account) or bank (with respect to a Deposit Account).

 

“Copyright Security Agreement” has the meaning specified therefor in the Guaranty and Security Agreement.

 

“Default” means an event, condition, or default that, with the giving of notice, the passage of time, or both, would be an Event of Default.

 

“Defaulting Lender” means any Lender that (a) has failed to fund any amounts required to be funded by it under the Agreement within 1 Business Day of the date that it is required to do so under 

 

  

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the Agreement (including the failure to make available to Agent amounts required pursuant to a Settlement or to make a required payment in connection with a Letter of Credit Disbursement), (b) notified Borrower, Agent, or any Lender in writing that it does not intend to comply with all or any portion of its funding obligations under the Agreement, (c) has made a public statement to the effect that it does not intend to comply with its funding obligations under the Agreement or under other agreements generally (as reasonably determined by Agent) under which it has committed to extend credit, (d) failed, within 1 Business Day after written request by Agent, to confirm that it will comply with the terms of the Agreement relating to its obligations to fund any amounts required to be funded by it under the Agreement, (e) otherwise failed to pay over to Agent or any other Lender any other amount required to be paid by it under the Agreement within 1 Business Day of the date that it is required to do so under the Agreement, unless the subject of a good faith dispute, or (f) (i) becomes or is insolvent or has a parent company that has become or is insolvent or (ii) becomes 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.

 

“Defaulting Lender Rate” means (a) for the first 3 days from and after the date the relevant payment is due, the Base Rate, and (b) thereafter, the interest rate then applicable to Revolving Loans that are Base Rate Loans (inclusive of the Applicable Margin applicable thereto).

 

“Delayed Draw Term Loan” has the meaning specified therefor in Section 2.2(b) of the Agreement.

 

“Delayed Draw Term Loan 1” has the meaning specified therefor in Section 2.2(b) of the Agreement.

 

“Delayed Draw Term Loan 1 Amount” means an amount not to exceed $5,000,000, which shall be reduced by $208,333.33 on the first day of each calendar month after the Closing Date, commencing on June 1, 2013.

 

“Delayed Draw Term Loan Commitment” means, with respect to each Lender, its Delayed Draw Term Loan Commitment, and with respect to all Lenders, their Delayed Draw Term Loan Commitments, in each case, as such dollar amount is set forth besides such Lender’s name under the applicable heading on Schedule C-1 or in the Assignment and Acceptance pursuant to which such Lender became a Lender hereunder, as such amounts may be reduced or increased from time pursuant to assignments in accordance with the provisions of Section 13.1 of the Agreement.  The Delayed Draw Term Loan Commitment shall be reduced by (a) $208,333.33 on the first day of each calendar month after the Closing Date, commencing on June 1, 2013 and, in addition, (b) upon making the Delayed Draw Term Loan 1, the amount of the Delayed Draw Term Loan 1.

 

“Delayed Draw Term Loan Exposure” means, with respect to any Lender that has a Delayed Draw Term Loan Commitment or that has a portion of any Delayed Draw Term Loan, as of any date of determination, the sum of (a) the amount of such Lender’s Delayed Draw Term Loan Commitment, and (b) the outstanding principal amount of the Delayed Draw Term Loans held by such Lender.

 

“Delayed Draw Term Loan 2” has the meaning specified therefor in Section 2.2(b) of the Agreement.

 

  

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“Delayed Draw Term Loan 2 Amount” means an amount not to exceed the Delayed Draw Term Loan Commitments remaining on the date of the making of the Delayed Draw Term Loan 2.

 

“Deposit Account” means any deposit account (as that term is defined in the Code).

 

“Designated Account” means the Deposit Account of Borrower identified on Schedule D-1 to the Agreement (or such other Deposit Account of Borrower located at Designated Account Bank that has been designated as such, in writing, by Borrower to Agent).

 

“Designated Account Bank” has the meaning specified therefor in Schedule D-1 to the Agreement (or such other bank that is located within the United States that has been designated as such, in writing, by Borrower to Agent).

 

“Dilution” means, as of any date of determination, a percentage, based upon the experience of the immediately prior 3 months (or such longer period as Agent deems appropriate in its Permitted Discretion), that is the result of dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising allowances, credits, or other dilutive items with respect to Borrower's Accounts during such period, by (b) Borrower’s billings with respect to Accounts during such period.

 

“Dilution Reserve” means, as of any date of determination, an amount sufficient to reduce the advance rate against Eligible Accounts by 1 percentage point for each percentage point by which Dilution is in excess of 5%.

 

“Disqualified Equity Interests” shall mean any Equity Interest that, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments), (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (c) provides for the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is 91 days after the Maturity Date, provided, however, that (i) only the portion of such Equity Interests which so matures or is mandatorily redeemable (as set forth in the foregoing clause (a)), is so optionally redeemable (as set forth in the foregoing clause (b)) or is so convertible or exchangeable (as set forth in the foregoing clause (d)), shall be deemed to be Disqualified Equity Interests; and (ii) with respect to any Equity Interests issued to any officer or employee or to any plan for the benefit of officers or employees of Borrower and its Subsidiaries or by any such plan to such officers or employees, such Equity Interests shall not constitute Disqualified Equity Interests solely because they may be required to be repurchased by Borrower or any applicable Subsidiary in order to satisfy applicable statutory or regulatory obligations or as a result of such officer’s or employee’s termination, resignation, death or disability and if any class of Equity Interests of such Person that by its terms authorizes such Person to satisfy its obligations thereunder by delivery of Equity Interests that are not Disqualified Equity Interests, such Equity Interests shall not be deemed to be Disqualified Equity Interests.

 

“Dollars” or “$” means United States dollars.

 

“Drawing Document” means any Letter of Credit or other document presented for purposes of drawing under any Letter of Credit.

 

  

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“Earn-Outs” shall mean unsecured liabilities of a Loan Party arising under an agreement to make any deferred payment as a part of the Purchase Price for a Permitted Acquisition, including performance bonuses or consulting payments in any related services, employment or similar agreement, in an amount that is subject to or contingent upon the revenues, income, cash flow or profits (or the like) of the target of such Permitted Acquisition.

 

“EBITDA” means, with respect to any fiscal period,

 

(a) Borrower’s consolidated net earnings (or loss) determined in accordance with GAAP,

 

minus

 

	
(b)  

	
 without duplication, the sum of the following amounts of Borrower for such period to the extent included in determining consolidated net earnings (or loss) for such period:

 

	
(i)  

	
extraordinary, non-recurring or unusual gains,

 

	
(ii)  

	
interest income,

 

	
(iii)  

	
any gains attributable to the sales or other disposition of (A) capital assets or (B) other assets, in the case of this clause (B), outside of the ordinary course of business,

 

	
(iv)  

	
all cash payments made during such period on account of non-cash charges added to consolidated net earnings pursuant to clause (c)(v) below in a previous period, and

 

	
(v)  

	
management bonus accrual reversals other than any reversals that occurred prior to then current twelve month period,

 

plus

 

	
  

	
(c)

	
without duplication, the sum of the following amounts of Borrower for such period to the extent included in determining consolidated net earnings (or loss) for such period:

 

	
(i)  

	
non-cash extraordinary, non-recurring or unusual losses,

 

	
(ii)  

	
extraordinary, non-recurring or unusual losses in an amount not to exceed $500,000 in any twelve month period,

 

	
(iii)  

	
Interest Expense,

 

	
(iv)  

	
income taxes,

 

	
(v)  

	
depreciation and amortization for such period, in each case, determined on a consolidated basis in accordance with GAAP,

 

	
(vi)  

	
all other non-cash charges for such period (excluding write-downs of current assets and any non-cash charge that results in an accrual of a reserve for cash charges in any future period),

 

  

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(vii)  

	
all fees, costs and expenses in respect of appraisals and field examinations in respect of the Collateral,

 

	
(viii)  

	
all fees, costs and expenses incurred or reimbursable in such fiscal period in connection with this Agreement including all fees, costs and expenses in respect of legal counsel to the extent paid on or prior to the Closing Date and $100,000 in any twelve month period thereafter,

 

	
(ix)  

	
business optimization expenses and restructuring charges and reserves (which, for the avoidance of doubt, shall include retention, severance, systems establishment costs, all fees, costs and expenses of (A) legal counsel in connection thereto, and (B) financial advisors in connection with this Agreement and excess pension charges, contract termination costs (including future lease commitments) and costs to consolidate facilities and relocate employees) in an aggregate amount for clauses (A) and (B) not to exceed $2,000,000 during the first twelve months following the Closing Date and $500,000 in any twelve month period thereafter, and

 

	
(x)  

	
any non-cash compensation expense recorded from grants of Equity Interests or similar rights, stock options, restricted stock or other rights to officers, directors or employees.

 

For the purposes of calculating EBITDA for any period of 12 consecutive fiscal months (each, a “Reference Period”), if at any time during such Reference Period (and after the Closing Date), Borrower or any of its Subsidiaries shall have made a Permitted Acquisition or a Permitted Disposition, EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto (including pro forma adjustments arising out of events which are directly attributable to such Permitted Acquisition or Permitted Disposition, as applicable, are factually supportable, and are expected to have a continuing impact, in each case determined on a basis consistent with Article 11 of Regulation S-X promulgated under the Securities Act and as interpreted by the staff of the SEC) or in such other manner acceptable to Agent as if any such Permitted Acquisition or Permitted Disposition, as applicable, or adjustment occurred on the first day of such Reference Period.

 

“Eligible Accounts” means those Accounts created by a Loan Party in the ordinary course of its business, that arise out of such Loan Party’s sale of goods or rendition of services, that comply with each of the representations and warranties respecting Eligible Accounts made in the Loan Documents, and that are not excluded as ineligible by virtue of one or more of the excluding criteria set forth below; provided, that such criteria may be revised from time to time by Agent in Agent’s Permitted Discretion to address the results of any field examination performed by (or on behalf of) Agent from time to time after the Closing Date.  In determining the amount to be included, Eligible Accounts shall be calculated net of customer deposits, unapplied cash, taxes, discounts, credits, allowances, and rebates.  Eligible Accounts shall not include the following:

 

(a)  Accounts that the Account Debtor has failed to pay within 90 days of original invoice date,

 

(b)  Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of all Accounts owed by that Account Debtor (or its Affiliates) are deemed ineligible under clause (a) above,

 

  

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(c)  Accounts with respect to which the Account Debtor is an Affiliate of a Loan Party or an employee or agent of a Loan Party or any Affiliate of a Loan Party provided, Custom Healthcare Systems, Inc. shall not be deemed to be an Affiliate of any Loan Party or any employee, officer or director of any Loan Party or any of its Affiliates solely for purposes of this clause (c),

 

(d)  Accounts arising in a transaction wherein goods are placed on consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and hold, or any other terms by reason of which the payment by the Account Debtor may be conditional,

 

(e)  Accounts that are not payable in Dollars,

 

(f)  Accounts with respect to which the Account Debtor either (i) does not maintain its chief executive office in the United States or Canada (excluding the Province of Quebec), or (ii) is not organized under the laws of the United States or any state of the United States, Canada or any province of Canada (excluding the Province of Quebec), or (iii) is the government of any foreign country or sovereign state, or of any state, province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof, unless (A) the Account is supported by an irrevocable letter of credit reasonably satisfactory to Agent (as to form, substance, and issuer or domestic confirming bank) that has been delivered to Agent and is directly drawable by Agent, or (B) the Account is covered by credit insurance in form, substance, and amount, and by an insurer, reasonably satisfactory to Agent,

 

(g)  Accounts with respect to which the Account Debtor is either (i) the United States or any department, agency, or instrumentality of the United States (exclusive, however, of Accounts with respect to which Borrower has complied, to the reasonable satisfaction of Agent, with the Assignment of Claims Act, 31 USC §3727), or (ii) any state of the United States,

 

(h)  Accounts with respect to which the Account Debtor is a creditor of a Loan Party, has or has asserted a right of recoupment or setoff, or has disputed its obligation to pay all or any portion of the Account, to the extent of such claim, right of recoupment or setoff, or dispute,

 

(i)  Accounts with respect to an Account Debtor whose total obligations owing to Borrower exceed 10% (or in the case of  Accounts owing by either Cardinal Health, Inc. and its Affiliates or Owens & Minor, Inc. and its Affiliates, 45%) of all Eligible Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage; provided, that in each case, the amount of Eligible Accounts that are excluded because they exceed the foregoing percentage shall be determined by Agent based on all of the otherwise Eligible Accounts prior to giving effect to any eliminations based upon the foregoing concentration limit,

 

(j)  Accounts with respect to which the Account Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone out of business, or as to which Borrower has received notice of an imminent Insolvency Proceeding,

 

(k)  Accounts, the collection of which, Agent, in its Permitted Discretion, believes to be doubtful, including by reason of the Account Debtor’s financial condition,

 

(l)  Accounts that are not subject to a valid and perfected first priority Agent’s Lien,

 

(m)  Accounts with respect to which (i) the goods giving rise to such Account have not been shipped and billed to the Account Debtor, or (ii) the services giving rise to such Account have not been performed and billed to the Account Debtor,

 

  

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(n)  Accounts with respect to which the Account Debtor is a Sanctioned Person or Sanctioned Entity,

 

(o)  Accounts that represent the right to receive progress payments or other advance billings that are due prior to the completion of performance by a Loan Party of the subject contract for goods or services, or

 

(p)  Accounts owned by a target acquired in connection with a Permitted Acquisition, until the completion of an appraisal and field examination with respect to such target, in each case, reasonably satisfactory to Agent (which appraisal and field examination may be conducted prior to the closing of such Permitted Acquisition).

 

“Eligible Equipment” means Equipment of each Loan Party designated by Agent as eligible from time to time in its Permitted Discretion, but excluding Equipment having any of the following characteristics:

 

(a)           Equipment that is subject to any Lien other than in favor of Lender or Permitted Liens;

 

(b)           Equipment that has not been delivered to and installed at such Loan Party’s premises;

 

(c)           Equipment that is located on real property leased by a Loan Party, unless (i)(A) it is subject to a Collateral Access Agreement executed by the lessor, or other third party, as the case may be, or (B) Agent has instituted a reserve equal to the rental costs under the applicable lease or warehouse agreement with respect to such location for a 3-month period, and (ii) it is segregated or otherwise separately identifiable from goods of others, if any, stored on the premises,

 

(d)           Equipment in which Agent does not hold a first priority security interest;

 

(e)           Equipment that is obsolete or not currently saleable or has been removed from service;

 

(f)           Equipment that is not covered by standard “all risk” hazard insurance for an amount equal to its replacement cost;

 

(g)           Equipment that requires proprietary software in order to operate in the manner in which it is intended when such software is not freely assignable to Agent or any potential purchaser of such Equipment;

 

(h)           Equipment consisting of office computer hardware, software, tooling, or molds;

(i)           Equipment that is located on any property that is not owned by such Loan Party, unless Agent has received a Collateral Access Agreement in respect thereof; or

(j)           Equipment otherwise deemed unacceptable by Lender in its Permitted Discretion.

 

Any Equipment which is not Eligible Equipment shall nonetheless constitute Collateral.

 

“Eligible Finished Goods Inventory” shall mean Inventory that qualifies as Eligible Inventory and consists of first quality finished goods held for sale in the ordinary course of the Loan Parties’ business.

 

  

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“Eligible In-Transit Inventory” means those items of Inventory that do not qualify as Eligible Inventory solely because they are not in a location set forth on Schedule 4.24 or in transit among such locations and a Loan Party does not have actual and exclusive possession thereof, but as to which,

 

(a) such Inventory currently is in transit (whether by vessel, air, or land) from a location outside of the continental United States to a location set forth on Schedule 4.24 in the United States,

 

(b) title to such Inventory has passed to a Loan Party,

 

(c) such Inventory is insured against types of loss, damage, hazards, and risks, and in amounts, satisfactory to Agent in its Permitted Discretion, and

 

(d) such Inventory either

 

(1) is the subject of a bill of lading governed by the laws of a state within the United States (x) that is consigned to a Loan Party (or if requested by Agent, is consigned to Agent or one of its agents (either directly or by means of endorsements)), (y) that was issued by the carrier respecting the subject Inventory, and (z) that either is (I) in the possession of Agent or a customs broker (in each case in the continental United States), or (II) the subject of a telefacsimile copy that Agent has received from Issuing Bank which issued the applicable Letter of Credit and as to which Agent also has received a confirmation from such Issuing Bank that such document is in-transit by air-courier to Agent or a customs broker (in each case, in the continental United States), or

 

(2) is the subject of a negotiable cargo receipt governed by the laws of a state within the United States and is not the subject of a bill of lading (other than a negotiable bill of lading consigned to, and in the possession of, a consolidator or Agent, or their respective agents) and such negotiable cargo receipt is (x) consigned to Agent or one of its agents (either directly or by means of endorsements), (y) that was issued by a consolidator respecting the subject Inventory, (z) that  either is (I) in the possession of Agent or a customs broker (in each case in the continental United States), or (II) the subject of a telefacsimile copy that Agent has received from Issuing Bank which issued the applicable Letter of Credit and as to which Agent also has received a confirmation from such Issuing Bank that such document is in-transit by air-courier to Agent or a customs broker (in each case, in the continental United States),

 

provided that Agent may, in its discretion, exclude any particular Inventory from the definition of “Eligible In-Transit Inventory” in the event Agent determines that such Inventory is subject to any Person’s right of reclamation, repudiation, stoppage in transit or any event has occurred or is reasonably anticipated by Agent to arise which may otherwise adversely impact the value of such Inventory or the ability of Agent to realize upon such Inventory.

 

 “Eligible Inventory” means Inventory of a Loan Party that complies with each of the representations and warranties respecting Eligible Inventory made in the Loan Documents, 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 from time to time by Agent in Agent’s Permitted Discretion to address the results of any field examination or appraisal performed by Agent from time to time after the Closing Date.  In determining the amount to be so included, Inventory shall be valued at the lower of cost or market on a basis consistent with the Loan Parties’ historical accounting practices.  An item of Inventory shall not be included in Eligible Inventory if:

 

(a)  a Loan Party does not have good, valid, and marketable title thereto,

 

  

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(b)  a Loan Party does not have actual and exclusive possession thereof (either directly or through a bailee or agent of a Loan Party),

 

(c)  it is not located at one of the locations in the continental United States set forth on Schedule E-1 to the Agreement (or in-transit from one such location to another such location),

 

(d)  it is in-transit to or from a location of a Loan Party (other than in-transit from one location set forth on Schedule E-1 to the Agreement to another location set forth on Schedule E-1 to the Agreement),

 

(e)  it is located on real property leased by a Loan Party or in a contract warehouse, in each case, unless it is subject to a Collateral Access Agreement executed by the lessor or warehouseman, as the case may be, and unless it is segregated or otherwise separately identifiable from goods of others, if any, stored on the premises,

 

(f)  it is the subject of a bill of lading or other document of title,

 

(g)  it is not subject to a valid and perfected first priority Agent’s Lien,

 

(h)  it consists of goods returned or rejected by a Loan Party’s customers,

 

(i)  it consists of goods that are obsolete or slow moving, restrictive or custom items, work-in-process, raw materials, or goods that constitute spare parts, packaging and shipping materials, supplies used or consumed in the Loan Parties’ business, bill and hold goods, defective goods, “seconds,” or Inventory acquired on consignment,

 

(j)  it is subject to third party trademark, licensing or other proprietary rights, unless Agent is reasonably satisfied that such Inventory can be freely sold by Agent on and after the occurrence of an Event of a Default despite such third party rights, or

 

(k)  it was acquired in connection with a Permitted Acquisition, until the completion of an appraisal and field examination of such Inventory, in each case, reasonably satisfactory to Agent (which appraisal and field examination may be conducted prior to the closing of such Permitted Acquisition).

 

“Eligible Raw Material Inventory” shall mean Inventory that qualifies as Eligible Inventory (but for the fact it consists of raw materials) and consists of goods that are first quality raw materials.  Eligible Raw Materials Inventory shall not include raw materials that have been identified as work-in-process Inventory on the Loan Parties’ stock ledger in accordance with past practice as of the Closing Date.

 

“Eligible Work-in-Process Inventory” shall mean Inventory that qualifies as Eligible Inventory (but for the fact that it is work-in-process) and consists of goods that are first quality work-in-process and raw materials that have been identified as work-in-process Inventory on the Loan Parties’ stock ledger in accordance with past practice as of the Closing Date; provided that, anything to the contrary contained herein notwithstanding, the value of such Inventory shall not include the value of any labor or other services rendered to produce such Inventory.

 

“Employee Benefit Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA, whether or not subject to ERISA, (a) that is or within the preceding six (6) years has been sponsored, maintained or contributed to by any Loan Party or ERISA Affiliate or (b) to which 

 

  

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any Loan Party or ERISA Affiliate has, or has had at any time within the preceding six (6) years, any liability, contingent or otherwise.

 

“Environmental Action” means any written complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter, or other written communication from any Governmental Authority, or any third party asserting or alleging violations of Environmental Laws or releases of Hazardous Materials (a) on or from any assets, properties, or businesses of any Borrower, any Subsidiary of a Borrower, or any of their predecessors in interest, (b) from adjoining properties or businesses, or (c) from or onto any facilities which received Hazardous Materials generated by any Borrower, any Subsidiary of a Borrower, or any of their predecessors in interest.

 

“Environmental Law” means any applicable federal, state, provincial, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy, or rule of common law now or hereafter in effect and in each case as amended, or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, in each case, to the extent binding on Borrower or its Subsidiaries, relating to the environment, the effect of the environment on employee health, or Hazardous Materials, in each case as amended from time to time.

 

“Environmental Liabilities” means all liabilities, monetary obligations, losses, damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts, or consultants, and costs of investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a result of any claim or demand, or Remedial Action required, by any Governmental Authority or any third party, and which relate to any Environmental Action.

 

“Environmental Lien” means any Lien in favor of any Governmental Authority for Environmental Liabilities.

 

“Equipment” means equipment (as that term is defined in the Code).

 

“Equity Interest” means, with respect to a Person, all of the shares, options, warrants, equity interests, participations, or other equivalents (regardless of how designated) of or in such Person, whether voting or nonvoting, including capital stock (or other ownership or profit interests or units), preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).

 

 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statutes, and all regulations and guidance promulgated thereunder.  Any reference to a specific section of ERISA shall be deemed to be a reference to such section of ERISA and any successor statutes, and all regulations and guidance promulgated thereunder.

 

“ERISA Affiliate” means each entity, trade or business (whether or not incorporated) that together with a Loan Party or a Subsidiary would be (or has been) treated as a “single employer” within the meaning of section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414 of the IRC.

 

“Event of Default” has the meaning specified therefor in Section 8 of the Agreement.

 

“Excess” has the meaning specified therefor in Section 2.14 of the Agreement.

 

  

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“Excess Availability” means, as of any date of determination, the amount equal to Availability minus the aggregate amount, if any, of all trade payables of Borrower and its Subsidiaries (other than trade payables among Borrower and its Subsidiaries (except trade payables owing from a Subsidiary of Borrower that is not a Loan Party to a Loan Party) aged in excess of 60 days with respect thereto and all book overdrafts of Borrower and its Subsidiaries in excess of 60 days with respect thereto.

 

“Exchange Act” means the Securities Exchange Act of 1934, as in effect from time to time.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient, or required to be deducted or withheld from a payment to a Recipient (i) any Tax imposed on or measured by net income or net profits (however denominated), franchise Taxes and branch profits Taxes, in each case imposed by the jurisdiction (or by any political subdivision or taxing authority thereof) in which such Recipient is organized or its principal office, or in the case of a Lender, its applicable lending office, is located, (ii) any Tax imposed as a result of a present or former connection between such Recipient and the jurisdiction (or by any political subdivision thereof) or taxing authority imposing the Tax (other than any such connection arising solely from such Recipient having executed, delivered or performed its obligations or received payment under, or enforced its rights or remedies under the Agreement or any other Loan Document); (iii) Taxes resulting from a Recipient’s failure to comply with the requirements of Section 16.2 of the Agreement, (iv) in the case of an interest in a Loan or Commitment, any United States federal withholding Taxes that would be imposed on amounts payable to a Foreign Lender based upon the applicable withholding rate in effect at the time such Foreign Lender acquired such interest in the Loan or Commitment (or designates a new lending office), except to the extent of (A) any amount that such Foreign Lender (or its assignor, if any) was previously entitled to receive pursuant to Section 16.1 of the Agreement, if any, with respect to such withholding Tax at the time such Foreign Lender acquired such interest in such Loan or Commitment (or designates a new lending office), and (B) additional United States federal withholding Taxes that may be imposed after the time such Foreign Lender acquired such interest in such Loan or Commitment (or designates a new lending office), as a result of a change in law, rule, regulation, order or other decision with respect to any of the foregoing by any Governmental Authority, and (iv) any United States federal withholding Taxes imposed under FATCA.

 

“Existing Credit Facility” means that certain Second Amendment and Restated Credit Agreement, dated as of June 7, 2012 (as amended, restated, supplemented or otherwise modified prior to the Closing Date), by and among Borrower, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent.

 

“Extraordinary Advances” has the meaning specified therefor in Section 2.3(d)(iii) of the Agreement.

 

“Extraordinary Receipts” means (a) so long as no Event of Default has occurred and is continuing, proceeds of judgments, proceeds of settlements, or other consideration of any kind received in connection with any cause of action or claim, and (b) if an Event of Default has occurred and is continuing, any payments received by Borrower or any of its Subsidiaries not in the ordinary course of business (and not consisting of proceeds described in Section 2.4(e)(ii) of the Agreement) consisting of (i) proceeds of judgments, proceeds of settlements, or other consideration of any kind received in connection with any cause of action or claim, (ii) indemnity payments (other than to the extent such indemnity payments are payable within 90 days of receipt thereof to a Person that is not an Affiliate of Borrower or any of its Subsidiaries), and (iii) any purchase price adjustment received in connection with any purchase agreement.

 

  

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“FATCA” means Sections 1471 through 1474 of the IRC, as of the date of the 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 intergovernmental agreements and any agreements entered into pursuant to the implementation of Section 1471(b)(1) of the IRC.

 

“Fee Letter” means that certain fee letter, dated as of even date with the Agreement, between Borrower and Agent.

 

“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal to, for each day during such period, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published 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 which is a Business Day, the average of the quotations for such day on such transactions received by Agent from three Federal funds brokers of recognized standing selected by it.

 

“Financial Covenant Period” means any time that Excess Availability is less than $7,500,000.  For purposes hereof, the occurrence of a Financial Covenant Period shall be deemed continuing (i) so long as such Event of Default has not been waived, and/or (ii) if the Financial Covenant Period arises as a result of Borrower’s failure to achieve Excess Availability as required hereunder, until Excess Availability has exceeded $7,500,000 for 60 consecutive days, in which case a Financial Covenant Period shall no longer be deemed to be continuing for purposes of the Agreement; provided that a Financial Covenant Period shall be deemed continuing (even if an Event of Default is no longer continuing and/or Excess Availability exceeds the required amount for 60 consecutive days) at all times after a Financial Covenant Period has occurred and been discontinued more than three times in any 12-month period. The termination of a Financial Covenant Period as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Financial Covenant Period in the event that the conditions set forth in this definition again arise.

 

“Fixed Charge Coverage Ratio” means, with respect to any 12 month fiscal period and with respect to Borrower determined on a consolidated basis in accordance with GAAP, the ratio of (a) EBITDA for such period minus unfinanced Capital Expenditures made (to the extent not already incurred in a prior period) or incurred during such period, to (b) Fixed Charges for such period.

 

“Fixed Charges” means, with respect to any fiscal period and with respect to Borrower determined on a consolidated basis in accordance with GAAP, the sum, without duplication, of (a) Interest Expense accrued (other than interest paid-in-kind, amortization of financing fees, and other non-cash Interest Expense) during such period, (b) principal payments (other than (x) voluntary prepayments and (y) mandatory prepayments of Capitalized Lease Obligations or purchase money Indebtedness as a result of a Permitted Disposition of the asset subject to such financing) in respect of Indebtedness that are required to be paid during such period, and (c) all federal, state, and local income taxes accrued during such period, and (d) all Restricted Payments paid (whether in cash or other property, other than common Equity Interests) during such period.

 

“Flow of Funds Agreement” means a flow of funds agreement, dated as of even date herewith, in form and substance reasonably satisfactory to Agent, executed and delivered by each Loan Party and Agent.

 

 “Foreign Lender” means any Lender or Participant that is not a United States person within the meaning of IRC section 7701(a)(30).

 

  

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“Funding Date” means the date on which a Borrowing occurs.

 

“Funding Losses” has the meaning specified therefor in Section 2.12(b)(ii) of the Agreement.

 

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

 

“Governing Documents” means, with respect to any Person, the certificate or articles of incorporation, by-laws, or other organizational documents of such Person.

 

“Governmental Authority” means the government of any nation or any political subdivision thereof, whether at the national, state, territorial, provincial, municipal or any other level, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of, or pertaining to, government (including any supra-national bodies such as the European Union or the European Central Bank).

 

“Guarantor” means (a) each Subsidiary of Borrower and (b) each other Person that becomes a guarantor after the Closing Date pursuant to Section 5.11 of the Agreement.

 

“Guaranty and Security Agreement” means the Guaranty and Security Agreement, dated as of even date with the Agreement, executed and delivered by Borrower and each of the Guarantors to Agent.

 

“Hazardous Materials” means (a) substances that are defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations as “hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal resources, (c) any flammable substances or explosives or any radioactive materials, and (d) asbestos in any form or electrical equipment that contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of 50 parts per million.

 

“Hedge Agreement” means (a) a “swap agreement” as that term is defined in Section 101(53B)(A) of the Bankruptcy Code and (b) any agreement with respect to any swap, forward (including forward purchase contracts for resin), future or derivative transaction (including floors, caps and collars) or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; 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 Borrower or its Subsidiaries shall be a Hedge Agreement.

 

“Hedge Obligations” means any and all obligations or liabilities, whether absolute or contingent, due or to become due, now existing or hereafter arising, of Borrower or its Subsidiaries arising under, owing pursuant to, or existing in respect of Hedge Agreements entered into with one or more of the Hedge Providers.

 

  

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“Hedge Provider” means Wells Fargo or any of its Affiliates.

 

 “Increase” has the meaning specified therefor in Section 2.14 of the Agreement.

 

“Increase Date” has the meaning specified therefor in Section 2.14 of the Agreement.

 

“Increase Joinder” has the meaning specified therefor in Section 2.14 of the Agreement.

 

“Indebtedness” means, as to any Person without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products, (c) all obligations of such Person as a lessee under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, (e) all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices and, for the avoidance of doubt, other than royalty payments payable in the ordinary course of business in respect of non-exclusive licenses), (f) all net monetary obligations of such Person owing under Hedge Agreements or foreign currency exchange agreements (which amount shall be calculated based on the amount that would be payable by such Person if the Hedge Agreement or foreign currency exchange agreement were terminated on the date of determination), (g) all obligations of such Person to make payments in respect of any Disqualified Equity Interests of such Person, and (h) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through (g) above.  For purposes of this definition, (i) the amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness which is limited or is non-recourse to a Person or for which recourse is limited to an identified asset shall be valued at the lesser of (A) if applicable, the limited amount of such obligations, and (B) if applicable, the fair market value of such assets securing such obligation.

 

“Indemnified Liabilities” has the meaning specified therefor in Section 10.3 of the Agreement.

 

“Indemnified Person” has the meaning specified therefor in Section 10.3 of the Agreement.

 

“Indemnified Taxes” means, any Taxes other than Excluded Taxes.

 

 “Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

 

“Intercompany Subordination Agreement” means an intercompany subordination agreement, dated as of even date with the Agreement, executed and delivered by Borrower, each of its Subsidiaries, and Agent, the form and substance of which is reasonably satisfactory to Agent.

 

“Interest Expense” means, for any period, the aggregate of the interest expense of Borrower for such period, determined on a consolidated basis in accordance with GAAP.

 

  

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“Interest Period” means, with respect to each LIBOR Rate Loan, a period commencing on the date of the making of such LIBOR Rate Loan (or the continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan to a LIBOR Rate Loan) and ending 1, 2, 3, or 6 months thereafter; provided, that (a) interest shall accrue at the applicable rate based upon the LIBOR Rate from and including the first day of each Interest Period to, but excluding, the day on which any Interest Period expires, (b) any Interest Period that would end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day, (c) with respect to an Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period), the Interest Period shall end on the last Business Day of the calendar month that is 1, 2, 3, or 6 months after the date on which the Interest Period began, as applicable, and (d) Borrower may not elect an Interest Period which will end after the Maturity Date.

 

“Inventory” means inventory (as that term is defined in the Code).

 

“Inventory Reserves” means, as of any date of determination, (a) Landlord Reserves, (b) those reserves that Agent deems necessary or appropriate, in its Permitted Discretion and subject to Section 2.1(c) of the Agreement, to establish and maintain (including reserves for slow moving Inventory) with respect to Eligible Inventory or the Maximum Revolver Amount, (c) with respect to Eligible In-Transit Inventory, those reserves that Agent deems necessary or appropriate, in its Permitted Discretion and subject to Section 2.1(c) of the Agreement, to establish and maintain with respect to Eligible In-Transit Inventory or the Maximum Revolver Amount (i) for the estimated costs relating to unpaid freight charges, warehousing or storage charges, taxes, duties, and other similar unpaid costs associated with the acquisition of such Eligible In-Transit Inventory, plus (ii) for the estimated reclamation claims of unpaid sellers of such Eligible In-Transit Inventory, (d) reserves for fees or payments necessary to access or take possession of the Inventory, including payments to providers of sterilization facilities that temporarily store Inventory, and (e) those reserves that Agent deems necessary or appropriate, in its Permitted Discretion, to reconcile any differences between the field exam and Inventory Appraisal.

 

“Investment” means, with respect to any Person, any investment by such Person in any other Person (including Affiliates) in the form of loans, guarantees, advances, capital contributions (excluding (a) commission, travel, and similar advances to officers and employees of such Person made in the ordinary course of business, and (b) bona fide accounts receivable arising in the ordinary course of business), or acquisitions of Indebtedness, Equity Interests, or all or substantially all of the assets of such other Person (or of any division or business line of such other Person), and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP.  The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustment for increases or decreases in value, or write-ups, write-downs, or write-offs with respect to such Investment.

 

“IRC” means the Internal Revenue Code of 1986, as amended, and any successor statutes, and all regulations and guidance promulgated thereunder.  Any reference to a specific section of the IRC shall be deemed to be a reference to such section of the IRC and any successor statutes, and all regulations and guidance promulgated thereunder.

 

“ISP” means, with respect to any Letter of Credit, the International Standby Practices 1998 (International Chamber of Commerce Publication No. 590) and any subsequent revision thereof adopted by the International Chamber of Commerce on the date such Letter of Credit is issued.

 

  

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“Issuer Document” means, with respect to any Letter of Credit, a letter of credit application, a letter of credit agreement, or any other document, agreement or instrument entered into (or to be entered into) by Borrower in favor of Issuing Bank and relating to such Letter of Credit.

 

“Issuing Bank” means Wells Fargo or any other Lender that, at the request of Borrower and with the consent of Agent (such consent not to be unreasonably withheld, conditioned or delayed), agrees, in such Lender’s sole discretion, to become an Issuing Bank for the purpose of issuing Letters of Credit pursuant to Section 2.11 of the Agreement, and Issuing Bank shall be a Lender.

 

“Landlord Reserve” means, as to each location at which Borrower has Inventory, Equipment or books and records located and as to which a Collateral Access Agreement has not been received by Agent, a reserve in an amount equal to the greater of (a) the number of months rent for which the landlord will have, under applicable law, a Lien in the Inventory of Borrower to secure the payment of rent or other amounts under the lease relative to such location, or (b) 3 months rent under the lease relative to such location.

 

 “Lender” has the meaning set forth in the preamble to the Agreement, shall include Issuing Bank and Swing Lender, and shall also include any other Person made a party to the Agreement pursuant to the provisions of Section 13.1 of the Agreement and “Lenders” means each of the Lenders or any one or more of them.

 

“Lender Group” means each of the Lenders (including Issuing Bank and Swing Lender) and Agent, or any one or more of them.

 

“Lender Group Expenses” means all (a) costs or expenses (including taxes and insurance premiums) required to be paid by Borrower or its Subsidiaries under any of the Loan Documents that are paid, advanced, or incurred by the Lender Group, (b) reasonable documented out-of-pocket fees or charges paid or incurred by Agent in connection with the Lender Group’s transactions with Borrower or its Subsidiaries under any of the Loan Documents, including, photocopying, notarization, couriers and messengers, telecommunication, public record searches, filing fees, recording fees, publication, real estate surveys, real estate title policies and endorsements, and environmental audits, (c) Agent’s customary fees and charges imposed or incurred in connection with any background checks or OFAC/PEP searches related to Borrower or its Subsidiaries, (d) Agent's documented customary fees and charges (as adjusted from time to time) with respect to the disbursement of funds (or the receipt of funds) to or for the account of Borrower (whether by wire transfer or otherwise), together with any reasonable documented out-of-pocket costs and expenses incurred in connection therewith, (e) customary charges imposed or incurred by Agent resulting from the dishonor of checks payable by or to any Loan Party, (f) reasonable documented out-of-pocket costs and expenses paid or incurred by the Lender Group to enforce any provision of the Loan Documents, or during the continuance of an Event of Default, in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated, (g) documented field examination, appraisal, and valuation fees and expenses of Agent related to any field examinations, appraisals, or valuation to the extent of the fees and charges (and up to the amount of any limitation) provided in Section 2.10 of the Agreement, (h) Agent’s reasonable documented out-of-pocket costs and expenses (including reasonable documented attorney’s fees and expenses of one firm of counsel for all members of the Lender Group and, if reasonably necessary, a single local counsel in each appropriate jurisdiction (absent, in each case, a conflict of interest in which the Lender Group may engage and be reimbursed for additional counsel)) relative to third party claims or any other lawsuit or adverse proceeding paid or incurred, whether in enforcing or defending the Loan Documents or otherwise in connection with the transactions contemplated by the Loan Documents, Agent’s Liens in and to the Collateral, or the Lender Group’s relationship with Borrower or any of its Subsidiaries, in each case to the extent Agent is entitled to 

 

  

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indemnification therefor under the Agreement or any other Loan Document, (i) Agent’s reasonable documented out-of-pocket costs and expenses (including reasonable documented attorney’s fees and expenses of one firm of counsel for all members of the Lender Group and, if reasonably necessary, a single local counsel in each appropriate jurisdiction (absent, in each case, a conflict of interest in which the Lender Group may engage and be reimbursed for additional counsel) and due diligence expenses) incurred in advising, structuring, drafting, reviewing, administering (including travel, meals, and lodging), syndicating (including reasonable costs and expenses relative to the rating of the Term Loan, the Delayed Draw Term Loan 1 and the Delayed Draw Term Loan 2, CUSIP, DXSyndicateTM, SyndTrak or other communication costs incurred in connection with a syndication of the loan facilities), or amending, waiving, or modifying the Loan Documents, and (j) Agent’s and each Lender’s reasonable documented out-of-pocket costs and expenses (including reasonable documented attorneys, accountants, consultants, and other advisors fees and expenses) incurred in terminating, enforcing (including attorneys, accountants, consultants, and other advisors fees and expenses incurred in connection with a “workout,” a “restructuring,” or an Insolvency Proceeding concerning Borrower or any of its Subsidiaries or in exercising rights or remedies under the Loan Documents), or defending the Loan Documents, irrespective of whether a lawsuit or other adverse proceeding is brought, or in taking any enforcement action or any Remedial Action with respect to the Collateral.

 

“Lender Group Representatives” has the meaning specified therefor in Section 17.9 of the Agreement.

 

“Lender-Related Person” means, with respect to any Lender, such Lender, together with such Lender’s Affiliates, officers, directors, employees, attorneys, and agents.

 

“Letter of Credit” means a letter of credit (as that term is defined in the Code) issued by Issuing Bank.

 

“Letter of Credit Collateralization” means either (a) providing cash collateral (pursuant to documentation reasonably satisfactory to Agent, including provisions that specify that the Letter of Credit Fees and all commissions, fees, charges and expenses provided for in Section 2.11(k) of the Agreement (including any fronting fees) will continue to accrue while the Letters of Credit are outstanding) to be held by Agent for the benefit of the Revolving Lenders in an amount equal to 105% of the then existing Letter of Credit Usage, (b) delivering to Agent documentation executed by all beneficiaries under the Letters of Credit, in form and substance reasonably satisfactory to Agent and Issuing Bank, terminating all of such beneficiaries’ rights under the Letters of Credit, or (c) providing Agent with a standby letter of credit, in form and substance reasonably satisfactory to Agent, from a commercial bank reasonably acceptable to Agent in an amount equal to 105% of the then existing Letter of Credit Usage (it being understood that the Letter of Credit Fee and all fronting fees set forth in the Agreement will continue to accrue while the Letters of Credit are outstanding and that any such fees that accrue must be an amount that can be drawn under any such standby letter of credit).

 

“Letter of Credit Disbursement” means a payment made by Issuing Bank pursuant to a Letter of Credit.

 

“Letter of Credit Exposure” means, as of any date of determination with respect to any Lender, such Lender’s Pro Rata Share of the Letter of Credit Usage on such date.

 

“Letter of Credit Fee” has the meaning specified therefor in Section 2.6(b) of the Agreement.

 

  

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“Letter of Credit Indemnified Costs” has the meaning specified therefor in Section 2.11(f) of the Agreement.

 

“Letter of Credit Related Person” has the meaning specified therefor in Section 2.11(f) of the Agreement.

 

“Letter of Credit Usage” means, as of any date of determination, the aggregate undrawn amount of all outstanding Letters of Credit.

 

“Leverage Ratio” means, as of any date of determination the result of (a) the amount of Borrower’s Indebtedness (pursuant to clause (a) of the definition thereof) in respect of the Obligations as of such date, to (b) Borrower’s EBITDA for the 12 month period ended as of such date.

 

“LIBOR Deadline” has the meaning specified therefor in Section 2.12(b)(i) of the Agreement.

 

“LIBOR Notice” means a written notice substantially in the form of Exhibit L-1 to the Agreement.

 

“LIBOR Option” has the meaning specified therefor in Section 2.12(a) of the Agreement.

 

“LIBOR Rate” means the per annum rate appearing on Macro*World’s (https://capitalmarkets.mworld.com; the “Service”) Page BBA LIBOR - USD (or on any successor or substitute page of such Service, or any successor to or substitute for such Service) 2 Business Days prior to the commencement of the requested Interest Period, for a term, and in an amount, comparable to the Interest Period and the amount of the LIBOR Rate Loan requested (whether as an initial LIBOR Rate Loan or as a continuation of a LIBOR Rate Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by Borrower in accordance with the Agreement (and, if any such rate is below zero, the LIBOR Rate shall be deemed to be zero), which determination shall be made by Agent and shall be conclusive in the absence of manifest error.

 

 “LIBOR Rate Loan” means each portion of a Revolving Loan, the Term Loan, the Delayed Draw Term Loan 1 or the Delayed Draw Term Loan 2 that bears interest at a rate determined by reference to the LIBOR Rate.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, easement, lien (statutory or other), security interest, or other security arrangement and any other preference, priority, or preferential arrangement of any kind or nature whatsoever, including any conditional sale contract or other title retention agreement, the interest of a lessor under a Capital Lease and any synthetic or other financing lease having substantially the same economic effect as any of the foregoing.

 

“Loan” shall mean any Revolving Loan, Swing Loan, Extraordinary Advance, Term Loan, Delayed Draw Term Loan 1 or Delayed Draw Term Loan 2.

 

“Loan Account” has the meaning specified therefor in Section 2.9 of the Agreement.

 

“Loan Documents” means the Agreement, the Control Agreements, the Copyright Security Agreement, any Borrowing Base Certificate, the Fee Letter, the Guaranty and Security Agreement, the Intercompany Subordination Agreement, any Issuer Documents, the Letters of Credit, the Mortgages, the Patent Security Agreement, the Trademark Security Agreement, any note or notes 

 

  

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executed by Borrower in connection with the Agreement and payable to any member of the Lender Group, and any other instrument or agreement entered into, now or in the future, by Borrower or any of its Subsidiaries and any member of the Lender Group in connection with the Agreement.

 

“Loan Party” means Borrower or any Guarantor.

 

“Margin Stock” as defined in Regulation U of the Board of Governors as in effect from time to time.

 

“Material Adverse Effect” means (a) a material adverse effect in the business, operations, results of operations, assets, liabilities or financial condition of Borrower and its Subsidiaries, taken as a whole, (b) a material impairment of Borrower’s and its Subsidiaries ability to perform their obligations under the Loan Documents to which they are parties or of the Lender Group’s ability to enforce the Obligations or realize upon the Collateral (other than as a result of as a result of an action taken or not taken that is solely in the control of Agent), or (c) a material impairment of the enforceability or priority of Agent’s Liens with respect to all or a material portion of the Collateral.

 

“Material Contract” means (a) each contract, instrument or agreement other than forward purchase contracts for resin to which Borrower or any Subsidiary thereof is a party and under which the total revenues of Borrower or the applicable Subsidiary for the most recently completed twelve month period exceed 10.0% of the total aggregate revenues of Borrower and its Subsidiaries under all of their contracts, instruments or agreements (other than forward purchase contracts for resin), for such twelve month period, and (b) all other contracts or agreements, the loss of which could reasonably be expected to result in a Material Adverse Effect.

 

“Maturity Date” means May 17, 2018.

 

“Maximum Revolver Amount” means, as of any date of determination, $65,000,000 minus the outstanding principal amount of the Term Loan and the Delayed Draw Term Loan Exposure of all Lenders, as such amount may be decreased by the amount of reductions in the Revolver Commitments made in accordance with Section 2.4(c) of the Agreement.

 

“Moody’s” has the meaning specified therefor in the definition of Cash Equivalents.

 

“Mortgages” means, individually and collectively, one or more mortgages, deeds of trust, assignments of leases and rents, assignments of or deeds to secure debt, executed and delivered by Borrower or its Subsidiaries (and, in the case of the real property of the Loan Parties located in Brentwood, New York, the Town of Islip Industrial Development Agency) in favor of Agent, in form and substance reasonably satisfactory to Agent, that encumber the Real Property Collateral.

 

“Multiemployer Plan” means any multiemployer plan within the meaning of Section 3(37) or 4001(a)(3) of ERISA with respect to which any Loan Party or ERISA Affiliate has an obligation to contribute or has any liability, contingent or otherwise or could be assessed withdrawal liability assuming a complete withdrawal from any such multiemployer plan.

 

“Net Cash Proceeds” means:

 

(a)  with respect to any sale or disposition by Borrower or any of its Subsidiaries of assets or any Extraordinary Receipt received or paid to the account of Borrower or any of its Subsidiaries, the amount of cash proceeds received (directly or indirectly) from time to time (in the case of a disposition, whether as initial consideration or through the payment of deferred consideration) by or on behalf of 

 

  

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Borrower or its Subsidiaries, in connection therewith after deducting therefrom only (i) the amount of any Indebtedness secured by any Permitted Lien on any asset (other than (A) Indebtedness owing to Agent or any Lender under the Agreement or the other Loan Documents and (B) Indebtedness assumed by the purchaser of such asset) which is required to be, and is, repaid in connection with such transaction, (ii) reasonable fees, commissions, and expenses related thereto and required to be paid by Borrower or such Subsidiary in connection with such transaction, (iii) taxes paid or payable to any taxing authorities by Borrower or such Subsidiary in connection with such transaction, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person that is not an Affiliate of Borrower or any of its Subsidiaries, and are properly attributable to such transaction; and (iv) all amounts that are set aside as a reserve (A) for adjustments in respect of the purchase price of such assets, (B) for any liabilities associated with such transaction, to the extent such reserve is required by GAAP, and (C) for the payment of unassumed liabilities relating to such transaction at the time of, or within 30 days after, the date of such transaction, to the extent that in each case the funds described above in this clause (iv) are (x) deposited into escrow with a third party escrow agent or set aside in a separate Deposit Account that is subject to a Control Agreement in favor of Agent and (y) paid to Agent as a prepayment of the applicable Obligations in accordance with Section 2.4 of the Agreement at such time when such amounts are no longer required to be set aside as such a reserve; and

 

(b)  with respect to the issuance or incurrence of any Indebtedness by Borrower or any of its Subsidiaries, or the issuance by Borrower or any of its Subsidiaries of any Equity Interests, the aggregate amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment or disposition of deferred consideration) by or on behalf of Borrower or such Subsidiary in connection with such issuance or incurrence, after deducting therefrom only (i) reasonable fees, commissions, and expenses related thereto and required to be paid by Borrower or such Subsidiary in connection with such issuance or incurrence, (ii) taxes paid or payable to any taxing authorities by Borrower or such Subsidiary in connection with such issuance or incurrence, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person that is not an Affiliate of Borrower or any of its Subsidiaries, and are properly attributable to such transaction.

 

“Net Orderly Liquidation Value” means a professional opinion of an appraiser selected or approved by Agent of the probable Net Cash Proceeds that could be realized at a properly advertised and professionally conducted liquidation sale, conducted under orderly sale conditions for an extended period of time (as determined by such appraiser and approved by Lender), under the economic trends currently existing at the time of the appraisal, which appraisal shall be in form, scope and methodology acceptable to Agent.

 

“Net Recovery Percentage” means, as of any date of determination, the percentage of the book value of Borrower’s Inventory that is estimated to be recoverable in an orderly liquidation of such Inventory net of all associated costs and expenses of such liquidation, such percentage to be determined as to each category of Inventory and to be as specified in the most recent appraisal received by Agent from an appraisal company selected by Agent.

 

“Non-Consenting Lender” has the meaning specified therefor in Section 14.2(a) of the Agreement.

 

“Non-Defaulting Lender” means each Lender other than a Defaulting Lender.

 

“Obligations” means (a) all loans (including the Term Loan, the Delayed Draw Term Loan 1, the Delayed Draw Term Loan 2 and the Revolving Loans (inclusive of Extraordinary Advances and Swing Loans)), debts, principal, interest (including any interest that accrues after the commencement 

 

  

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of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), reimbursement or indemnification obligations with respect to Letters of Credit (irrespective of whether contingent), premiums, liabilities (including all amounts charged to the Loan Account pursuant to the Agreement), obligations (including indemnification obligations), fees (including the fees provided for in the Fee Letter), Lender Group Expenses (including any fees or expenses that accrue after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), guaranties, and all covenants and obligations of any other kind and description owing by any Loan Party arising out of, under, pursuant to or evidenced by the Agreement or any of the other Loan Documents and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all interest not paid when due and all other expenses or other amounts that Borrower is required to pay or reimburse by the Loan Documents or by law or otherwise in connection with the Loan Documents, and (b) all Bank Product Obligations.  Without limiting the generality of the foregoing, the Obligations of Borrower under the Loan Documents include the obligation to pay (i) the principal of the Revolving Loans, the Term Loan and the Delayed Draw Term Loans, (ii) interest accrued on the Revolving Loans, the Term Loan and the Delayed Draw Term Loans, (iii) the amount necessary to reimburse Issuing Bank for amounts paid or payable pursuant to Letters of Credit, (iv) Letter of Credit commissions, fees (including fronting fees) and charges, (v) Lender Group Expenses, (vi) fees payable under the Agreement or any of the other Loan Documents, and (vii) indemnities and other amounts payable by any Loan Party under any Loan Document.  Any reference in the Agreement or in the Loan Documents to the Obligations shall include all or any portion thereof and any extensions, modifications, renewals, or alterations thereof, both prior and subsequent to any Insolvency Proceeding.

 

“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the Treasury.

 

“Originating Lender” has the meaning specified therefor in Section 13.1(e) of the Agreement.

 

“Overadvance” means, as of any date of determination, that the Revolver Usage is greater than any of the limitations set forth in Section 2.1 of the Agreement or Section 2.11 of the Agreement.

 

“Participant” has the meaning specified therefor in Section 13.1(e) of the Agreement.

 

“Participant Register” has the meaning set forth in Section 13.1(i) of the Agreement.

 

“Patent Security Agreement” has the meaning specified therefor in the Guaranty and Security Agreement.

 

“Patriot Act” has the meaning specified therefor in Section 4.13 of the Agreement.

 

“PBGC” means the Pension Benefit Guaranty Corporation or any successor agency.

 

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to the provisions of Title IV or Section 302 of ERISA or Sections 412 or 430 of the Code sponsored, maintained, or contributed to by any Loan Party or ERISA Affiliate or to which any Loan Party or ERISA Affiliate has any liability, contingent or otherwise. “Notification Event” means (a) the occurrence of a “reportable event” described in Section 4043 of ERISA for which the 30-day notice requirement has not been waived by applicable regulations issued by the PBGC, (b) the withdrawal of any Loan Party or ERISA Affiliate from a Pension Plan during a plan year in which it was a “substantial 

 

  

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employer” as defined in Section 4001(a)(2) of ERISA, (c) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination, under Section 4041 of ERISA, if the plan assets are not sufficient to pay all plan liabilities, (d) the institution of proceedings to terminate, or the appointment of a trustee with respect to, any Pension Plan by the PBGC or any Pension Plan or Multiemployer Plan administrator, (e) any other event or condition that would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan, (f) the imposition of a Lien pursuant to the IRC or ERISA in connection with any Employee Benefit Plan or the existence of any facts or circumstances that could reasonably be expected to result in the imposition of a Lien, (g) the partial or complete withdrawal of any Loan Party or ERISA Affiliate from a Multiemployer Plan (other than any withdrawal that would not constitute an Event of Default under Section 8.12), (h) any event or condition that results in the reorganization or insolvency of a Multiemployer Plan under Sections of ERISA, (i) any event or condition that results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC of proceedings to terminate or to appoint a trustee to administer a Multiemployer Plan under ERISA, (j) any Pension Plan being in “at risk status” within the meaning of IRC Section 430(i), (k) any Multiemployer Plan being in “endangered status” or “critical status” within the meaning of IRC Section 432(b) or the determination that any Multiemployer Plan is or is expected to be insolvent or in reorganization within the meaning of Title IV of ERISA, (l) with respect to any Pension Plan, any Loan Party or ERISA Affiliate incurring a substantial cessation of operations within the meaning of ERISA Section 4062(e), (m) a “funding deficiency” within the meaning of the IRC or ERISA (including Section 412 of the IRC or Section 302 of ERISA) or the failure of any Pension Plan or Multiemployer Plan to meet the minimum funding standards within the meaning of the IRC or ERISA (including Section 412 of the IRC or Section 302 of ERISA), in each case, whether or not waived, (n) the filing of an application for a waiver of the minimum funding standards within the meaning of the IRC or ERISA (including Section 412 of the IRC or Section 302 of ERISA) with respect to any Pension Plan or Multiemployer Plan, (o) the failure to make by its due date a required payment or contribution with respect to any Pension Plan or Multiemployer Plan, (p) any event that results in or could reasonably be expected to result in a liability by a Loan Party pursuant to Title I of ERISA or the excise tax provisions of the IRC relating to Employee Benefit Plans or any event that results in or could reasonably be expected to result in a liability to any Loan Party or ERISA Affiliate pursuant to Title IV of ERISA or Section 401(a)(29) of the IRC, or (q) any of the foregoing is reasonably likely to occur in the following 30 days.

 

“Perfection Certificate” means a certificate substantially in the form of Exhibit P-1 to the Agreement.

 

“Permitted Acquisition” means any Acquisition (including any Acquisition made with proceeds of the issuance of Qualified Equity Interests of Borrower) so long as:

 

(a)  no Default or Event of Default shall have occurred and be continuing or would result from the consummation of the proposed Acquisition and the proposed Acquisition is consensual,

 

(b)  no Indebtedness will be incurred, assumed, or would exist with respect to Borrower or its Subsidiaries as a result of such Acquisition, other than Permitted Indebtedness and no Liens will be incurred, assumed, or would exist with respect to the assets of Borrower or its Subsidiaries as a result of such Acquisition other than Permitted Liens,

 

(c)  Borrower has provided Agent with written confirmation, supported by reasonably detailed calculations, that on a pro forma basis (including pro forma adjustments arising out of events which are directly attributable to such proposed Acquisition, are factually supportable, and are expected to have a continuing impact, in each case, determined as if the combination had been accomplished at the beginning of the relevant period; such eliminations and inclusions determined on a basis consistent with 

 

  

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Article 11 of Regulation S-X promulgated under the Securities Act and as interpreted by the staff of the SEC) created by adding the historical combined financial statements of Borrower (including the combined financial statements of any other Person or assets that were the subject of a prior Permitted Acquisition during the relevant period) to the historical consolidated financial statements of the Person to be acquired (or the historical financial statements related to the assets to be acquired) pursuant to the proposed Acquisition, Borrower and its Subsidiaries (i) would have been in compliance with the financial covenants in Section 7 of the Agreement for the 4 fiscal quarter period ended immediately prior to the proposed date of consummation of such proposed Acquisition, and (ii) are projected to be in compliance with the financial covenants in Section 7 of the Agreement for the 4 fiscal quarter period ended one year after the proposed date of consummation of such proposed Acquisition,

 

(d)  If the purchase consideration payable in respect of the proposed Acquisition is greater than $15,000,000, Borrower has provided Agent with its due diligence package in respect of the proposed Acquisition, including forecasted balance sheets, profit and loss statements, and cash flow statements of the Person or assets to be acquired, all prepared on a basis consistent with such Person’s (or assets’) historical financial statements, together with appropriate supporting details and a statement of underlying assumptions for the 1 year period following the date of the proposed Acquisition, on a quarter by quarter basis), in form and substance (including as to scope and underlying assumptions) reasonably satisfactory to Agent,

 

(e)  Borrower shall have Excess Availability in an amount equal to or greater than $7,500,000 immediately after giving effect to the consummation of the proposed Acquisition; provided that if the assets being acquired or the Person whose Equity Interests are being acquired had negative EBITDA during the 12 consecutive month period most recently concluded prior to the date of the proposed Acquisition, Borrower shall have Excess Availability in an amount equal to or greater than $12,500,000 immediately after giving effect to the consummation of the proposed Acquisition,

 

(f)  If the purchase consideration payable in respect of the proposed Acquisition is greater than $15,000,000, the assets being acquired or the Person whose Equity Interests are being acquired did not have negative EBITDA during the 12 consecutive month period most recently concluded prior to the date of the proposed Acquisition,

 

(g)  Borrower has provided Agent with written notice of the proposed Acquisition at least 10 Business Days prior to the anticipated closing date of the proposed Acquisition and, not later than 5 Business Days prior to the anticipated closing date of the proposed Acquisition, copies of the acquisition agreement and other material documents relative to the proposed Acquisition,

 

(h)  the assets being acquired taken as a whole, or the Person whose Equity Interests are being acquired, are useful in or engaged in, as applicable, the business of Borrower and its Subsidiaries or a business reasonably related thereto,

 

(i)  the assets being acquired (other than a de minimis amount of assets in relation to the assets being acquired) are located within the United States or the Person whose Equity Interests are being acquired is organized in a jurisdiction located within the United States, and

 

(j)  the subject assets or Equity Interests, as applicable, are being acquired directly by a Borrower or one of its Subsidiaries that is a Loan Party, and, in connection therewith, Borrower or the applicable Loan Party shall have complied with Section 5.11 or 5.12 of the Agreement, as applicable, of the Agreement and, in the case of an acquisition of Equity Interests, Borrower or the applicable Loan Party shall have demonstrated to Agent that the new Loan Parties have received consideration sufficient to make the joinder documents binding and enforceable against such new Loan Parties.

 

  

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

 

“Permitted Dispositions” means:

 

(a) sales, abandonment, or other dispositions of Equipment that is worn, damaged, or obsolete or no longer used or useful in the ordinary course of business and leases or subleases of Real Property not useful in the conduct of the business of Borrower and its Subsidiaries,

 

(b) sales of Inventory to buyers in the ordinary course of business,

 

(c) the use or transfer of money or Cash Equivalents in a manner that is not prohibited by the terms of the Agreement or the other Loan Documents,

 

(d) the licensing, on a non-exclusive basis, of patents, trademarks, copyrights, and other intellectual property rights in the ordinary course of business,

 

(e) the granting of Permitted Liens,

 

(f) the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof,

 

(g) any involuntary loss, damage or destruction of property,

 

(h) any involuntary condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, or confiscation or requisition of use of any property,

 

(i) the leasing or subleasing of assets of Borrower or its Subsidiaries in the ordinary course of business,

 

(j) the sale or issuance of Equity Interests (other than Disqualified Equity Interests) of Borrower and the issuance of Equity Interests (other than Disqualified Equity Interests) by one Loan Party to another Loan Party,

 

(k) (i) the lapse of registered patents, trademarks, copyrights and other intellectual property of Borrower and its Subsidiaries to the extent not economically desirable in the conduct of their business or (ii) the abandonment of patents, trademarks, copyrights, or other intellectual property rights in the ordinary course of business so long as (in each case under clauses (i) and (ii)), (A) with respect to copyrights, such copyrights are not material revenue generating copyrights, and (B) such lapse is not materially adverse to the interests of the Lender Group,

 

(l)  the making of Restricted Payments that are expressly permitted to be made pursuant to the Agreement,

 

(m)  the making of Permitted Investments,

 

(n) transfers of assets (i) from Borrower or any of its Subsidiaries to a Loan Party, and (ii) from any Subsidiary of Borrower that is not a Loan Party to any other Subsidiary of Borrower,

 

(o) dispositions of assets acquired by Borrower and its Subsidiaries pursuant to a Permitted Acquisition consummated within 12 months of the date of the proposed disposition so long as (i) the consideration received for the assets to be so disposed is at least equal to the fair market value of 

 

  

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such assets (as determined in good faith by Borrower), (ii) the assets to be so disposed are not necessary or economically desirable in connection with the business of Borrower and its Subsidiaries, and (iii) the assets to be so disposed are readily identifiable as assets acquired pursuant to the subject Permitted Acquisition,

 

(p)  sales or dispositions of assets (other than Accounts, Inventory, Equity Interests of Subsidiaries of Borrower) not otherwise permitted in clauses (a) through (o) above so long as made at fair market value (as determined in good faith by Borrower) and the aggregate fair market value of all assets disposed of in any fiscal year (including the proposed disposition) would not exceed $250,000; and

 

(q)           the cancellation of Indebtedness owing between Loan Parties.

 

“Permitted Indebtedness” means:

 

(a) Indebtedness evidenced by the Agreement or the other Loan Documents,

 

(b) Indebtedness set forth on Schedule 4.14 to the Agreement and any Refinancing Indebtedness in respect of such Indebtedness,

 

(c) Permitted Purchase Money Indebtedness and any Refinancing Indebtedness in respect of such Indebtedness,

 

(d) endorsement of instruments or other payment items for deposit,

 

(e) Indebtedness consisting of (i) unsecured guarantees incurred in the ordinary course of business with respect to surety and appeal bonds, performance bonds, bid bonds, appeal bonds, completion guarantee and similar obligations; (ii) unsecured guarantees arising with respect to customary indemnification obligations to purchasers in connection with Permitted Dispositions; and (iii) unsecured guarantees with respect to Indebtedness of Borrower or one of its Subsidiaries, to the extent that the Person that is obligated under such guaranty could have incurred such underlying Indebtedness,

 

(f) unsecured Indebtedness of Borrower that is incurred on the date of the consummation of a Permitted Acquisition solely for the purpose of consummating such Permitted Acquisition so long as (i) no Event of Default has occurred and is continuing or would result therefrom, (ii) such unsecured Indebtedness is not incurred for working capital purposes, (iii) such unsecured Indebtedness does not mature prior to the date that is 6 months after the Maturity Date, (iv) such unsecured Indebtedness does not amortize until 6 months after the Maturity Date, (v) such unsecured Indebtedness does not provide for the payment of interest thereon in cash or Cash Equivalents prior to the date that is 6 months after the Maturity Date, and (vi) such Indebtedness is subordinated in right of payment to the Obligations on terms and conditions reasonably satisfactory to Agent,

 

(g) Acquired Indebtedness in an amount not to exceed $10,000,000 outstanding at any one time,

 

(h) Indebtedness incurred in the ordinary course of business under performance, surety, statutory, or appeal bonds,

 

(i) Indebtedness owed to any Person providing property, casualty, liability, or other insurance to Borrower or any of its Subsidiaries, so long as the amount of such Indebtedness is not in excess of the amount of the unpaid cost of such insurance,

 

  

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(j) the incurrence by Borrower or its Subsidiaries of Indebtedness under Hedge Agreements that are incurred for the bona fide purpose of hedging the interest rate, commodity, or foreign currency risks associated with Borrower’s and its Subsidiaries’ operations and not for speculative purposes,

 

(k) Indebtedness incurred in the ordinary course of business in respect of credit cards, credit card processing services, debit cards, stored value cards, commercial cards (including so-called “purchase cards”, “procurement cards” or “p-cards”), or Cash Management Services,

 

(l) unsecured Indebtedness of Borrower owing to former employees, officers, or directors (or any spouses, ex-spouses, or estates of any of the foregoing) incurred in connection with the repurchase by Borrower of the Equity Interests of Borrower that has been issued to such Persons, so long as (i) no Default or Event of Default has occurred and is continuing or would result from the incurrence of such Indebtedness, (ii) the aggregate amount of all such Indebtedness outstanding at any one time does not exceed $250,000, and (iii) such Indebtedness is subordinated to the Obligations on terms and conditions reasonably acceptable to Agent,

 

(m)  unsecured Indebtedness owing to sellers of assets or Equity Interests to a Loan Party that is incurred by the applicable Loan Party in connection with the consummation of one or more Permitted Acquisitions so long as (i) the aggregate principal amount for all such unsecured Indebtedness does not exceed $1,000,000 at any one time outstanding, (ii) is subordinated to the Obligations on terms and conditions reasonably acceptable to Agent, and (iii) is otherwise on terms and conditions (including all economic terms and the absence of covenants) reasonably acceptable to Agent,

 

(n)  contingent liabilities in respect of any indemnification obligation, adjustment of purchase price, non-compete, or similar obligation of Borrower or the applicable Loan Party incurred in connection with the consummation of one or more Permitted Acquisitions,

 

(o)  Indebtedness composing Permitted Investments,

 

(p)  unsecured Indebtedness incurred in respect of netting services, overdraft protection, and other like services, in each case, incurred in the ordinary course of business,

 

(q)  unsecured Indebtedness of Borrower owing to employees, former employees, officers, former officers, directors, or former directors (or any spouses, ex-spouses, or estates of any of the foregoing) incurred in connection with the redemption by Borrower of the Equity Interests of Borrower that has been issued to such Persons, so long as (i) no Default or Event of Default has occurred and is continuing or would result therefrom, (ii) the aggregate amount of all such Indebtedness outstanding at any one time does not exceed $250,000, and (iii) such Indebtedness is subordinated in right of payment to the Obligations on terms and conditions reasonably acceptable to Agent,

 

(r)  unsecured Indebtedness of Borrower or its Subsidiaries in respect of Earn-Outs owing to sellers of assets or Equity Interests to Borrower or its Subsidiaries that is incurred in connection with the consummation of one or more Permitted Acquisitions so long as such unsecured Indebtedness is on terms and conditions reasonably acceptable to Agent,

 

(s)  accrual of interest, accretion or amortization of original issue discount, or the payment of interest in kind, in each case, on Indebtedness that otherwise constitutes Permitted Indebtedness,

 

  

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(t)  Subordinated Indebtedness and Refinancing Indebtedness in respect of such Subordinated Indebtedness in an aggregate outstanding amount not to exceed $10,000,000 at any one time; provided, however, that no Default or Event of Default shall have occurred and be continuing or would occur after giving effect to the incurrence of such Subordinated Indebtedness, and

 

(u) any other unsecured Indebtedness incurred by Borrower or any of its Subsidiaries in an aggregate outstanding amount not to exceed $7,500,000 at any one time.

 

“Permitted Intercompany Advances” means loans made by (a) a Loan Party to another Loan Party, (b) a Subsidiary of Borrower that is not a Loan Party to another Subsidiary of Borrower that is not a Loan Party, and (c) a Subsidiary of Borrower that is not a Loan Party to a Loan Party, so long as the parties thereto are party to the Intercompany Subordination Agreement.

 

“Permitted Investments” means:

 

(a) Investments in cash and Cash Equivalents,

 

(b) Investments in negotiable instruments deposited or to be deposited for collection in the ordinary course of business,

 

(c) accounts receivable or notes receivable arising or trade credit granted or advances made in connection with purchases of goods or services in the ordinary course of business,

 

(d) Investments received in settlement of amounts due to any Loan Party or any of its Subsidiaries effected in the ordinary course of business or owing to any Loan Party or any of its Subsidiaries as a result of Insolvency Proceedings involving an account debtor or upon the foreclosure or enforcement of any Lien in favor of a Loan Party or its Subsidiaries,

 

(e) Investments owned by any Loan Party or any of its Subsidiaries on the Closing Date and set forth on Schedule P-1 to the Agreement,

 

(f) guarantees permitted under the definition of Permitted Indebtedness,

 

(g) Permitted Intercompany Advances,

 

(h) Equity Interests or other securities acquired in connection with the satisfaction or enforcement of Indebtedness or claims due or owing to a Loan Party or its Subsidiaries (in bankruptcy of customers or suppliers or otherwise outside the ordinary course of business) or as security for any such Indebtedness or claims,

 

(i) deposits of cash made in the ordinary course of business to secure performance of operating leases,

 

(j) (i) non-cash loans and advances to employees, officers, and directors of Borrower or any of its Subsidiaries for the purpose of purchasing Equity Interests in Borrower so long as the proceeds of such loans are used in their entirety to purchase such Equity Interests in Borrower, and (ii) loans and advances to employees and officers of Borrower or any of its Subsidiaries in the ordinary course of business for any other business purpose and in an aggregate amount not to exceed $500,000 at any one time,

 

(k) Permitted Acquisitions,

 

  

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(l) Investments in the form of capital contributions and the acquisition of Equity Interests made by any Loan Party in any other Loan Party (other than capital contributions to or the acquisition of Equity Interests of Borrower),

 

(m) Investments resulting from entering into (i) Bank Product Agreements, or (ii) agreements relative to Indebtedness that is permitted under clause (j) of the definition of Permitted Indebtedness,

 

(n) equity Investments by any Loan Party in any Subsidiary of such Loan Party which is required by law to maintain a minimum net capital requirement or as may be otherwise required by applicable law,

 

(o) Investments held by a Person acquired in a Permitted Acquisition to the extent that such Investments were not made in contemplation of or in connection with such Permitted Acquisition and were in existence on the date of such Permitted Acquisition,

 

(p) Investments in the form of Hedge Agreements permitted hereunder,

 

(q) Investments made with the proceeds of the issuance of Qualified Equity Interests of Borrower, and

 

(r) so long as no Event of Default has occurred and is continuing or would result therefrom, any other Investments in an aggregate amount not to exceed $1,000,000 during the term of the Agreement.

 

“Permitted Liens” means

 

(a) Liens granted to, or for the benefit of, Agent to secure the Obligations,

 

(b) Liens for unpaid taxes, assessments, or other governmental charges or levies that either (i) are not yet delinquent, or (ii) do not have priority over Agent’s Liens and the underlying taxes, assessments, or charges or levies are the subject of Permitted Protests,

 

(c) judgment Liens arising solely as a result of the existence of judgments, orders, or awards that do not constitute an Event of Default under Section 8.3 of the Agreement,

 

(d) Liens set forth on Schedule P-2 to the Agreement; provided, that to qualify as a Permitted Lien, any such Lien described on Schedule P-2 to the Agreement shall only secure the Indebtedness that it secures on the Closing Date and any Refinancing Indebtedness in respect thereof,

 

(e) the interests of lessors under operating leases and non-exclusive licensors under license agreements,

 

(f) purchase money Liens or the interests of lessors under Capital Leases to the extent that such Liens or interests secure Permitted Purchase Money Indebtedness and so long as (i) such Lien attaches only to the asset purchased or acquired and the proceeds thereof, and (ii) such Lien only secures the Indebtedness that was incurred to acquire the asset purchased or acquired or any Refinancing Indebtedness in respect thereof,

 

(g) Liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of business and not in 

 

  

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connection with the borrowing of money, and which Liens either (i) are for sums not yet overdue for a period of more than 30 days, or (ii) are the subject of Permitted Protests,

 

(h) Liens on amounts deposited to secure Borrower’s and its Subsidiaries obligations in connection with worker’s compensation or other unemployment insurance,

 

(i) Liens on amounts deposited to secure Borrower’s and its Subsidiaries obligations in connection with the making or entering into of bids, tenders, or leases in the ordinary course of business and not in connection with the borrowing of money,

 

(j) Liens on amounts deposited to secure Borrower’s and its Subsidiaries reimbursement obligations with respect to surety or appeal bonds obtained in the ordinary course of business,

 

(k) (i) with respect to any Real Property, easements, restrictions, rights of way, set-backs, zoning restrictions, outstanding mineral rights and reservations, mineral leases, encroachments, and minor defects or irregularities in title, that do not materially interfere with or materially impair the use or operation thereof, and (ii) with respect to the Real Property of the Loan Parties located in Brentwood, New York, the terms and provisions of the Lease Agreement dated as of May 1, 2008 with the Town of Islip Industrial Development Agency,

 

(l) non-exclusive licenses of patents, trademarks, copyrights, and other intellectual property rights in the ordinary course of business,

 

(m) Liens that are replacements of Permitted Liens to the extent that the original Indebtedness is the subject of permitted Refinancing Indebtedness and so long as the replacement Liens only encumber those assets that secured the original Indebtedness,

 

(n) rights of setoff or bankers’ liens upon deposits of funds in favor of banks or other depository institutions, solely to the extent incurred in connection with the maintenance of such Deposit Accounts in the ordinary course of business,

 

(o) Liens granted in the ordinary course of business on the unearned portion of insurance premiums securing the financing of insurance premiums to the extent the financing is permitted under the definition of Permitted Indebtedness,

 

(p) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods,

 

(q) Liens solely on any cash earnest money deposits made by Borrower or any of its Subsidiaries in connection with any letter of intent or purchase agreement with respect to a Permitted Acquisition,

 

(r) Liens assumed by Borrower or its Subsidiaries in connection with a Permitted Acquisition that secure Acquired Indebtedness,

 

(s) Liens on deposit to secure obligations under Hedge Agreements incurred in the ordinary course of business consisting of Permitted Indebtedness and in an aggregate amount outstanding at any time not to exceed $1,500,000, and

 

(t) other Liens which do not secure Indebtedness for borrowed money or letters of credit and as to which the aggregate amount of the obligations secured thereby does not exceed $1,000,000.

 

  

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“Permitted Protest” means the right of Borrower or any of its Subsidiaries to protest any Lien (other than any Lien that secures the Obligations), taxes (other than payroll taxes or taxes that are the subject of a United States federal tax lien), or rental payment, provided that (a) a reserve with respect to such obligation is established on Borrower’s or its Subsidiaries’ books and records in such amount as is required under GAAP, (b) any such protest is instituted promptly and prosecuted diligently by Borrower or its Subsidiary, as applicable, in good faith, and (c) Agent is reasonably satisfied that, while any such protest is pending, there will be no impairment of the enforceability, validity, or priority of any of Agent’s Liens.

 

“Permitted Purchase Money Indebtedness” means, as of any date of determination, Indebtedness (other than the Obligations, but including Capitalized Lease Obligations), incurred after the Closing Date and at the time of, or within 120 days after, the acquisition of any fixed assets for the purpose of financing all or any part of the acquisition cost thereof, in an aggregate principal amount outstanding at any one time not in excess of $10,000,000.

 

“Person” means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.

 

“Platform” has the meaning specified therefor in Section 17.9(c) of the Agreement.

 

“Post-Increase Revolver Lenders” has the meaning specified therefor in Section 2.14 of the Agreement.

 

“Pre-Increase Revolver Lenders” has the meaning specified therefor in Section 2.14 of the Agreement.

 

 “Projections” means Borrower’s forecasted (a) balance sheets, (b) profit and loss statements, and (c) cash flow statements, all prepared on a basis consistent with Borrower’s historical financial statements, together with appropriate supporting details and a statement of underlying assumptions.

 

“Pro Rata Share” means, as of any date of determination:

 

(a)  with respect to a Lender’s obligation to make all or a portion of the Revolving Loans, with respect to such Lender’s right to receive payments of interest, fees, and principal with respect to the Revolving Loans, and with respect to all other computations and other matters related to the Revolver Commitments or the Revolving Loans, the percentage obtained by dividing (i) the Revolving Loan Exposure of such Lender by (ii) the aggregate Revolving Loan Exposure of all Lenders,

 

(b)  with respect to a Lender’s obligation to participate in the Letters of Credit, with respect to such Lender’s obligation to reimburse Issuing Bank, and with respect to such Lender’s right to receive payments of Letter of Credit Fees, and with respect to all other computations and other matters related to the Letters of Credit, the percentage obtained by dividing (i) the Revolving Loan Exposure of such Lender by (ii) the aggregate Revolving Loan Exposure of all Lenders; provided, that if all of the Revolving Loans have been repaid in full and all Revolver Commitments have been terminated, but Letters of Credit remain outstanding, Pro Rata Share under this clause shall be determined as if the Revolver Commitments had not been terminated and based upon the Revolver Commitments as they existed immediately prior to their termination,

 

  

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(c)   with respect to a Lender’s obligation to make all or a portion of the Term Loan, with respect to such Lender’s right to receive payments of interest, fees, and principal with respect to the Term Loan, and with respect to all other computations and other matters related to the Term Loan Commitments or the Term Loan, the percentage obtained by dividing (i) the Term Loan Exposure of such Lender by (ii) the aggregate Term Loan Exposure of all Lenders,

 

(d)   with respect to a Lender’s obligation to make all or a portion of the Delayed Draw Term Loan 1 or Delayed Draw Term Loan 2, with respect to such Lender’s right to receive payments of interest, fees, and principal with respect to the Delayed Draw Term Loan 1 and the Delayed Draw Term Loan 2, and with respect to all other computations and other matters related to the Delayed Draw Term Loan Commitments,  the Delayed Draw Term Loan 1 or the Delayed Draw Term Loan 2, the percentage obtained by dividing (i) the Delayed Draw Term Loan Exposure of such Lender by (ii) the aggregate Delayed Draw Term Loan Exposure of all Lenders, and

 

(e)  with respect to all other matters and for all other matters as to a particular Lender (including the indemnification obligations arising under Section 15.7 of the Agreement), the percentage obtained by dividing (i) the sum of the Term Loan Exposure of such Lender plus the Delayed Draw Term Loan Exposure of such Lender plus the Revolving Loan Exposure of such Lender by (ii) the sum of the aggregate Term Loan Exposure of all Lenders plus the aggregate Delayed Draw Term Loan Exposure of all Lenders plus the aggregate Revolving Loan Exposure of all Lenders, in any such case as the applicable percentage may be adjusted by assignments permitted pursuant to Section 13.1 of the Agreement; provided, that if all of the Loans have been repaid in full, all Letters of Credit have been made the subject of Letter of Credit Collateralization, and all Commitments have been terminated, Pro Rata Share under this clause shall be determined as if the Revolving Loan Exposures, the Term Loan Exposures and the Delayed Draw Term Loan Exposures had not been repaid, collateralized, or terminated and shall be based upon the Revolving Loan Exposures, Term Loan Exposures and Delayed Draw Term Loan Exposures as they existed immediately prior to their repayment, collateralization, or termination.

 

“Protective Advances” has the meaning specified therefor in Section 2.3(d)(i) of the Agreement.

 

“Public Lender” has the meaning specified therefor in Section 17.9(c) of the Agreement.

 

“Purchase Price” means, with respect to any Acquisition, an amount equal to the aggregate consideration, whether cash, property or securities (including the fair market value of any Equity Interests of Borrower issued in connection with such Acquisition and including the maximum amount of Earn-Outs), paid or delivered by Borrower or one of its Subsidiaries in connection with such Acquisition (whether paid at the closing thereof or payable thereafter and whether fixed or contingent), but excluding therefrom (a) any cash of the seller and its Affiliates used to fund any portion of such consideration and (b) any cash or Cash Equivalents acquired in connection with such Acquisition.

 

“Qualified Equity Interest” means and refers to any Equity Interests issued by Borrower (and not by one or more of its Subsidiaries) that is not a Disqualified Equity Interest.

 

“Real Property” means any estates or interests in real property now owned or hereafter acquired by Borrower or its Subsidiaries and the improvements thereto.

 

“Real Property Collateral” means (a) all of Borrower’s Real Property identified on Schedule R-1 to the Agreement other than Borrower’s Real Property located in Gallaway, Tennessee  and (b) any Real Property hereafter acquired by Borrower or its Subsidiaries having a fair market value in excess of $1,000,000.

 

  

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“Receivable Reserves” means, as of any date of determination, those reserves that Agent deems necessary or appropriate, in its Permitted Discretion and subject to Section 2.1(c) of the Agreement, to establish and maintain (including reserves for rebates, discounts, warranty claims, and returns) with respect to the Eligible Accounts or the Maximum Revolver Amount.

 

“Recipient” means (a) any Lender, or (b) Agent, as applicable.

 

“Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

 

“Reference Period” has the meaning set forth in the definition of EBITDA.

 

“Refinancing Indebtedness” means refinancings, renewals, or extensions of Indebtedness so long as:

 

(a) such refinancings, renewals, or extensions do not result in an increase in the principal amount of the Indebtedness so refinanced, renewed, or extended, other than by the amount of premiums paid thereon and the fees and expenses incurred in connection therewith and by the amount of unfunded commitments with respect thereto,

 

 (b) such refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity (measured as of the refinancing, renewal, or extension) of the Indebtedness so refinanced, renewed, or extended, nor are they on terms or conditions that, taken as a whole, are or could reasonably be expected to be materially less favorable to the interests of the Lenders than those contained in the documentation governing the Indebtedness being refinanced, renewed or extended,

 

(c) if the Indebtedness that is refinanced, renewed, or extended was subordinated in right of payment to the Obligations, then the terms and conditions of the refinancing, renewal, or extension must include subordination terms and conditions that are at least as favorable to the Lender Group as those that were applicable to the refinanced, renewed, or extended Indebtedness, and

 

(d) the Indebtedness that is refinanced, renewed, or extended is not recourse to any Person that is liable on account of the Obligations other than those Persons which were obligated with respect to the Indebtedness that was refinanced, renewed, or extended.

 

“Register” has the meaning set forth in Section 13.1(h) of the Agreement.

 

“Registered Loan” has the meaning set forth in Section 13.1(h) of the Agreement.

 

“Related Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course and that is administered, advised or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers, advises or manages a Lender.

 

“Remedial Action” means all actions taken to (a) clean up, remove, remediate, contain, treat, monitor, assess, evaluate, or in any way address Hazardous Materials in the indoor or outdoor environment, (b) prevent or minimize a release or threatened release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (c) restore or reclaim natural resources or the environment, (d) perform any pre-remedial studies, investigations, or post-remedial operation and maintenance activities, or (e) conduct any other actions with respect to Hazardous Materials required by Environmental Laws.

 

  

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“Replacement Lender” has the meaning specified therefor in Section 2.13(b) of the Agreement.

 

“Report” has the meaning specified therefor in Section 15.16 of the Agreement.

 

“Required Availability” means that Excess Availability exceeds $7,500,000.

 

“Required Lenders” means, at any time, Lenders having or holding more than 50% of the sum of (a) the aggregate Revolving Loan Exposure of all Lenders, plus (b) the aggregate Term Loan Exposure of all Lenders, plus (c) the aggregate Delayed Draw Term Loan Exposure of all Lenders; provided, that (i) the Revolving Loan Exposure, Term Loan Exposure and Delayed Draw Term Loan Exposure  of any Defaulting Lender shall be disregarded in the determination of the Required Lenders, and (ii) at any time there are 2 or more Lenders (who are not Affiliates of one another), “Required Lenders” must include at least 2 Lenders (who are not Affiliates of one another).

 

“Reserves” means, as of any date of determination, those reserves (other than Receivable Reserves, Bank Product Reserves, and Inventory Reserves) that Agent deems necessary or appropriate, in its Permitted Discretion and subject to Section 2.1(c) of the Agreement, to establish and maintain (including reserves with respect to (a) sums that Borrower or its Subsidiaries are required to pay under any Section of the Agreement or any other Loan Document (such as taxes, assessments, insurance premiums, or, in the case of leased assets, rents or other amounts payable under such leases) and has failed to pay, and (b) amounts owing by Borrower or its Subsidiaries to any Person to the extent secured by a Lien on, or trust over, any of the Collateral (other than a Permitted Lien), which Lien or trust, in the Permitted Discretion of Agent likely would have a priority superior to the Agent’s Liens (such as Liens or trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes where given priority under applicable law) in and to such item of the Collateral) with respect to the Borrowing Base or the Maximum Revolver Amount.

 

“Restricted Payment” means to (a) declare or pay any dividend or make any other payment or distribution, directly or indirectly, on account of Equity Interests issued by Borrower (including any payment in connection with any merger or consolidation involving Borrower) or to the direct or indirect holders of Equity Interests issued by Borrower in their capacity as such (other than dividends or distributions payable in Qualified Equity Interests issued by Borrower), (b) purchase, redeem, make any sinking fund or similar payment, or otherwise acquire or retire for value (including in connection with any merger or consolidation involving Borrower) any Equity Interests issued by Borrower, and (c) make any payment to retire, or to obtain the surrender of, any outstanding warrants, options, or other rights to acquire Equity Interests of Borrower now or hereafter outstanding.

 

“Revolver Commitment” means, with respect to each Revolving Lender, its Revolver Commitment, and, with respect to all Revolving Lenders, their Revolver Commitments, in each case as such Dollar amounts are set forth beside such Revolving Lender’s name under the applicable heading on Schedule C-1 to the Agreement or in the Assignment and Acceptance pursuant to which such Revolving Lender became a Revolving Lender under the Agreement, as such amounts may be reduced or increased from time to time pursuant to assignments made in accordance with the provisions of Section 13.1 of the Agreement.

 

“Revolver Usage” means, as of any date of determination, the sum of (a) the amount of outstanding Revolving Loans (inclusive of Swing Loans and Protective Advances), plus (b) the amount of the Letter of Credit Usage.

 

  

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“Revolving Lender” means a Lender that has a Revolver Commitment or that has an outstanding Revolving Loan.

 

“Revolving Loan Exposure” means, with respect to any Revolving Lender, as of any date of determination (a) prior to the termination of the Revolver Commitments, the amount of such Lender’s Revolver Commitment, and (b) after the termination of the Revolver Commitments, the aggregate outstanding principal amount of the Revolving Loans of such Lender.

 

“Revolving Loans” has the meaning specified therefor in Section 2.1(a) of the Agreement.

 

“Sanctioned Entity” means (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, (d) a Person resident in or determined to be resident in a country, in each case, that is subject to a country sanctions program administered and enforced by OFAC.

 

“Sanctioned Person” means a person named on the list of Specially Designated Nationals maintained by OFAC.

 

“S&P” has the meaning specified therefor in the definition of Cash Equivalents.

 

“SEC” means the United States Securities and Exchange Commission and any successor thereto.

 

“Securities Account” means a securities account (as that term is defined in the Code).

 

“Securities Act” means the Securities Act of 1933, as amended from time to time, and any successor statute.

 

“Settlement” has the meaning specified therefor in Section 2.3(e)(i) of the Agreement.

 

“Settlement Date” has the meaning specified therefor in Section 2.3(e)(i) of the Agreement.

 

“Solvent” means, with respect to any Person as of any date of determination, that (a) at fair valuations, the sum of such Person’s debts (including contingent liabilities) is less than all of such Person’s assets, (b) such Person is not engaged or about to engage in a business or transaction for which the remaining assets of such Person are unreasonably small in relation to the business or transaction or for which the property remaining with such Person is an unreasonably small capital, and (c) such Person has not incurred and does not intend to incur, or reasonably believe that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise), and (d) such Person is not “insolvent”, as applicable within the meaning given to such term under the Bankruptcy Code.  For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).

 

“Specified Real Property Collateral”  means the Real Property Collateral identified as items 1 through 3 on Schedule R-1.

 

  

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“Standard Letter of Credit Practice” means, for Issuing Bank, any domestic or foreign law or letter of credit practices applicable in the city in which Issuing Bank issued the applicable Letter of Credit or, for its branch or correspondent, such laws and practices applicable in the city in which it has advised, confirmed or negotiated such Letter of Credit, as the case may be, in each case, (a) which letter of credit practices are of banks that regularly issue letters of credit in the particular city, and (b) which laws or letter of credit practices are required or permitted under ISP or UCP, as chosen in the applicable Letter of Credit.

 

“Subordinated Indebtedness” means any unsecured Indebtedness of Borrower or its Subsidiaries incurred from time to time that is subordinated in right of payment to the Obligations and (a) that is only guaranteed by the Guarantors, (b) that is not subject to scheduled amortization, redemption, sinking fund or similar payment and does not have a final maturity, in each case, on or before the date that is six months after the Maturity Date, (c) that does not include any financial covenants or any covenant or agreement that is more restrictive or onerous on any Loan Party in any material respect than any comparable covenant in the Agreement and is otherwise on terms and conditions reasonably acceptable to Agent, (d) shall be limited to cross-payment default and cross-acceleration to designated “senior debt” (including the Obligations”), and (e) the terms and conditions of the subordination are reasonably acceptable to Agent.

 

 “Subsidiary” of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the Equity Interests having ordinary voting power to elect a majority of the Board of Directors of such corporation, partnership, limited liability company, or other entity.

 

“Supermajority Lenders” means, at any time, Lenders having or holding more than 66 2/3% of the sum of (a) the aggregate Revolving Loan Exposure of all Lenders, plus (b) the aggregate Term Loan Exposure of all Lenders, plus (c) the aggregate Delayed Draw Term Loan Exposure of all Lenders; provided, that (i) the Revolving Loan Exposure, Term Loan Exposure and Delayed Draw Term Loan Exposure of any Defaulting Lender shall be disregarded in the determination of the Supermajority Lenders, and (ii) at any time there are 2 or more Lenders (who are not Affiliates of one another), “Supermajority Lenders” must include at least 2 Lenders (who are not Affiliates of one another).

 

“Swing Lender” means Agent.

 

“Swing Loan” has the meaning specified therefor in Section 2.3(b) of the Agreement.

 

“Swing Loan Exposure” means, as of any date of determination with respect to any Lender, such Lender’s Pro Rata Share of the Swing Loans on such date.

 

“Taxes” means any taxes, withholdings (including backup withholding), levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein, and all interest, penalties or similar liabilities with respect thereto.

 

“Tax Lender” has the meaning specified therefor in Section 14.2(a) of the Agreement.

 

“Term Loan” has the meaning specified therefor in Section 2.2 of the Agreement.

 

“Term Loan Amount” means the lesser of (a) $12,500,000 and (b) the sum of (i) 65% of the most recently determined fair market value of the Specified Real Property Collateral pursuant to any 

 

  

- 46 -

  

appraisal of the Specified Real Property Collateral, plus (ii) 85% of the most recently determined Net Orderly Liquidation Value of the Eligible Equipment.

 

“Term Loan Commitment” means, with respect to each Lender, its Term Loan Commitment, and, with respect to all Lenders, their Term Loan Commitments, in each case as such Dollar amounts are set forth beside such Lender’s name under the applicable heading on Schedule C-1 to the Agreement or in the Assignment and Acceptance pursuant to which such Lender became a Lender under the Agreement, as such amounts may be reduced or increased from time to time pursuant to assignments made in accordance with the provisions of Section 13.1 of the Agreement.

 

“Term Loan Exposure” means, with respect to any Lender that has a Term Loan Commitment or that has a portion of the Term Loan, as of any date of determination (a) prior to the funding of the Term Loan, the amount of such Lender’s Term Loan Commitment, and (b) after the funding of the Term Loan, the outstanding principal amount of the Term Loan held by such Lender.

 

“Trademark Security Agreement” has the meaning specified therefor in the Guaranty and Security Agreement.

 

“UCP” means, with respect to any Letter of Credit, the Uniform Customs and Practice for Documentary Credits 2007 Revision, International Chamber of Commerce Publication No. 600 and any subsequent revision thereof adopted by the International Chamber of Commerce on the date such Letter of Credit is issued.

 

“United States” means the United States of America.

 

“Unused Line Fee” has the meaning specified therefor in Section 2.10(b) of the Agreement.

 

“Voidable Transfer” has the meaning specified therefor in Section 17.8 of the Agreement.

 

“Wells Fargo” means Wells Fargo Bank, National Association, a national banking association.

 

“Withdrawal Liability” means liability with respect to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

 

 

  

- 47 -

  

Schedule 3.1

 

The obligation of each Lender to make its initial extension of credit provided for in the Agreement is subject to the fulfillment, to the satisfaction of each Lender (the making of such initial extension of credit by any Lender being conclusively deemed to be its satisfaction or waiver of the following), of each of the following conditions precedent:

 

(a) the Closing Date shall occur on or before May 17, 2013;

 

(b) Agent shall have received a letter duly executed by each Loan Party authorizing Agent to file appropriate financing statements in such office or offices as may be necessary or, in the opinion of Agent, desirable to perfect the security interests to be created by the Loan Documents;

 

(c) Agent shall have received evidence that appropriate financing statements have been duly filed in such office or offices as may be necessary or, in the opinion of Agent, desirable to perfect the Agent’s Liens in and to the Collateral, and Agent shall have received searches reflecting the filing of all such financing statements;

 

(d) Agent shall have received each of the following documents, in form and substance reasonably satisfactory to Agent, duly executed and delivered, and each such document shall be in full force and effect:

 

(i) the Copyright Security Agreement,

 

(ii) the Fee Letter,

 

(iii) the Flow of Funds Agreement,

 

(iv) the Guaranty and Security Agreement,

 

(v) the Intercompany Subordination Agreement,

 

(vi) the Mortgages (other than the Mortgage in respect of the Loan Parties’ Real Property Collateral located in Brentwood, New York),

 

(vii) a Perfection Certificate,

 

(viii) the Patent Security Agreement,

 

(ix) the Trademark Security Agreement, and

 

(x) a letter, in form and substance reasonably satisfactory to Agent, from JPMorgan Chase Bank, N.A., in its capacity as administrative agent under the Existing Credit Facility (“Existing Agent”) to Agent (or to Borrower, provided that Agent is expressly permitted to rely on such letter) respecting the amount necessary to repay in full all of the obligations of Borrower and its Subsidiaries owing under the Existing Credit Facility and obtain a release of all of the Liens existing in favor of Existing Agent in and to the assets of Borrower and its Subsidiaries, together with termination statements and other documentation evidencing the termination by Existing Agent of its Liens in and to the properties and assets of Borrower and its Subsidiaries.

 

(e) Agent shall have received a certificate from the Secretary of each Loan Party (i) attesting to the resolutions of such Loan Party’s board of directors authorizing its execution, delivery, and 

 

  

 

  

performance of the Loan Documents to which it is a party, (ii) authorizing specific officers of such Loan Party to execute the same, and (iii) attesting to the incumbency and signatures of such specific officers of such Loan Party;

 

(f) Agent shall have received copies of each Loan Party’s Governing Documents, as amended, modified, or supplemented to the Closing Date, which Governing Documents shall be (i) certified by the Secretary of such Loan Party, and (ii) with respect to Governing Documents that are charter documents, certified as of a recent date (not more than 30 days prior to the Closing Date) by the appropriate governmental official;

 

(g) Agent shall have received a certificate of status with respect to each Loan Party, dated within 10 days of the Closing Date, such certificate to be issued by the appropriate officer of the jurisdiction of organization of such Loan Party, which certificate shall indicate that such Loan Party is in good standing in such jurisdiction;

 

(h) Agent shall have received certificates of status with respect to each Loan Party, each dated within 30 days of the Closing Date, such certificates to be issued by the appropriate officer of the jurisdictions (other than the jurisdiction of organization of such Loan Party) in which its failure to be duly qualified or licensed would constitute a Material Adverse Effect, which certificates shall indicate that such Loan Party is in good standing in such jurisdictions;

 

(i) Agent shall have received a certificate of insurance, together with the endorsements thereto, as are required by Section 5.6 of the Agreement, the form and substance of which shall be reasonably satisfactory to Agent;

 

(j) Agent shall have received an opinion of each of the following counsel to the Loan Parties in form and substance reasonably satisfactory to Agent:

 

(i) Vinson & Elkins LLP, New York counsel to the Loan Parties;

 

(ii)  Womble Carlyle Sandridge & Rice, LLP, North Carolina real estate counsel to the Loan Parties; and

 

(iii)  Huddleston Bolen LLP, West Virginia real estate counsel to the Loan Parties;

 

(k) Borrower shall have the Required Availability after giving effect to the initial extensions of credit under the Agreement and the payment of all fees and expenses required to be paid by Borrower on the Closing Date under the Agreement or the other Loan Documents;

 

(l) Agent shall have completed its business, legal, and collateral due diligence;

 

(m) Agent shall have completed (i) Patriot Act searches, OFAC/PEP searches and customary individual background checks for each Loan Party, and (ii) OFAC/PEP searches and customary individual background searches for each Loan Party’s senior management and key principals,  the results of which shall be reasonably satisfactory to Agent;

 

(n) Agent shall have received an appraisal of the Net Liquidation Percentage applicable to Borrower’s and its Subsidiaries’ Inventory and the New Orderly Liquidation Value of Borrower’s and its Subsidiaries’ Equipment, the results of which, in each case, shall be reasonably satisfactory to Agent;

 

  

 

  

(o) Agent shall have received a set of Projections of Borrower for the 3 year period following the Closing Date (on a year by year basis, and for the 1 year period following the Closing Date, on a month by month basis), in form and substance (including as to scope and underlying assumptions) reasonably satisfactory to Agent;

 

(p) Borrower shall have paid all Lender Group Expenses incurred in connection with the transactions evidenced by the Agreement and the other Loan Documents;

 

(q) Agent shall have received (i) electronic copies of the appraisal reports listed on Annex 1 to this Schedule 3.1 in respect of the Real Property Collateral, and (ii) mortgagee title insurance policies (or marked commitments to issue the same) for the Real Property Collateral issued by a title insurance company reasonably satisfactory to Agent (each a “Mortgage Policy” and, collectively, the “Mortgage Policies”) in amounts reasonably satisfactory to Agent assuring Agent that the Mortgages on such Real Property Collateral are valid and enforceable first priority mortgage Liens on such Real Property Collateral free and clear of all defects and encumbrances except Permitted Liens (provided that the acceptance of a Mortgagee Policy by Agent shall be acceptance of the matters disclosed on Schedule B thereof as “Permitted Liens” and the same shall be deemed to be Permitted Liens for all purposes under this Agreement thereafter), and the Mortgage Policies otherwise shall be in form and substance reasonably satisfactory to Agent, including such affirmative coverage and endorsements as Agent may reasonably deem necessary or desirable, provided that such affirmative coverage and endorsements are available in the applicable jurisdiction at commercially reasonable rates;

 

(r) Agent shall have received either (i) a real estate survey with respect to each parcel composing the Real Property Collateral, the surveyors retained for such surveys, the scope of surveys, and the results thereof shall be reasonably acceptable to Agent; or (ii) such affidavits, certificates, information, and/or instruments of indemnification as may be required by Agent or by the title insurance underwriter issuing the Mortgage Policies in order to issue the applicable Mortgage Policy free of any “blanket” or general exception for matters that would be revealed by a survey and to issue the endorsements and affirmative insurance referenced above in paragraph (s) of this Schedule 3.1 for which a survey would otherwise be required;

 

(s) Agent shall have received a completed Standard Flood Hazard Determination Form issued by the Department of Homeland Security Federal Emergency Management Agency with respect to each parcel of Real Property Collateral indicating whether or not such parcel is located in a special flood hazard zone, together with a flood insurance policy, if such Real Property Collateral is situated in a special flood hazard zone, sufficient to comply with applicable flood insurance laws;

 

(t) Agent shall have received copies of each Material Contract of the Loan Parties;

 

(u) Agent shall have received a solvency certificate, in form and substance reasonably satisfactory to it, certifying as to the solvency of the Loan Parties taken as a whole after giving effect to the consummation of the transactions contemplated by the Agreement;

 

(v) Borrower and each of its Subsidiaries shall have received all licenses, approvals or evidence of other actions required by any Governmental Authority in connection with the execution and delivery by Borrower or its Subsidiaries of the Loan Documents or with the consummation of the transactions contemplated thereby; and

 

(w) all other documents and legal matters in connection with the transactions contemplated by the Agreement shall have been delivered, executed, or recorded and shall be in form and substance reasonably satisfactory to Agent

 

  

 

  

ANNEX 1 TO SCHEDULE 3.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

  

Schedule 3.6

 

Borrower agrees that, in addition to all other terms, conditions and provisions set forth in the Agreement and the other Loan Documents, including those conditions set forth in Sections 3.1 and 3.2, Borrower shall satisfy each of the following conditions subsequent on or before the date applicable thereto (or, in each case, such longer period as Agent may agree in its reasonable discretion):

 

(a) within 4 Business Days after the Closing date, Agent shall have received original  share certificates representing 100% of the Equity Interests of Avid Medical, Inc. and MAI Acquisition Corp., together with stock powers duly endorsed in blank;

 

(b) within 60 days after the Closing Date, Agent shall have received a Mortgage with respect to the Real Property Collateral located in Brentwood, New York;

 

(c) concurrently with or prior to the delivery of the Mortgage referred to in clause (b) above, Agent shall have received, with respect to the Real Property Collateral located in Brentwood, New York, an Estoppel and Intercreditor Agreement, duly executed by Borrower and the Town of Islip Industrial Development Agency, in form and substance reasonably satisfactory to Agent, provided that such agreement shall not be required if Agent is satisfied, in its Permitted Discretion, that such agreement will not be obtained after the Loan Parties have used commercially reasonable efforts to do so;

 

(d) concurrently with or prior to the delivery of the Mortgage referred to in clause (b) above, Agent shall have received an opinion of Garfunkel Wild, P.C., New York real estate counsel to the Loan Parties; in form and substance reasonably satisfactory to Agent;

 

(e) concurrently with or prior to the delivery of the Mortgage referred to in clause (b) above, Agent shall have received a mortgagee title insurance policy (or marked commitments to issue the same) for the Real Property Collateral located in Brentwood, New York, issued by a title insurance company reasonably satisfactory to Agent (the “Brentwood Mortgage Policy”) in an amount reasonably satisfactory to Agent assuring Agent that the Mortgage on such Real Property Collateral is a valid and enforceable first priority mortgage Lien on such Real Property Collateral free and clear of all defects and encumbrances except Permitted Liens (provided that the acceptance of such Mortgagee Policy by Agent shall be acceptance of the matters disclosed on Schedule B thereof as “Permitted Liens” and the same shall be deemed to be Permitted Liens for all purposes under this Agreement thereafter), and the Brentwood Mortgage Policy otherwise shall be in form and substance reasonably satisfactory to Agent, including such affirmative coverage and endorsements as Agent may reasonably deem necessary or desirable, provided that such affirmative coverage and endorsements are available in the applicable jurisdiction at commercially reasonable rates;

 

(f) concurrently with or prior to the delivery of the Mortgage referred to in clause (b) above, Agent shall have received either (i) a real estate survey with respect to the Real Property Collateral located in Brentwood, New York, the surveyor retained for such survey, the scope of survey, and the results thereof shall be reasonably acceptable to Agent; or (ii) such affidavits, certificates, information, and/or instruments of indemnification as may be required by Agent or by the title insurance underwriter issuing the Mortgage Policies in order to issue the applicable Mortgage Policy free of any “blanket” or general exception for matters that would be revealed by a survey and to issue the Brentwood Mortgage Policy referred to above;

 

(g) concurrently with or prior to the delivery of the Mortgage referred to in clause (b) above, Agent shall have received two (2) duly executed original Tax Law Section 255 affidavits signed 

 

  

 

  

by an officer of 500 Expressway Drive South LLC for the recordation of such Mortgage without the imposition of New York State mortgage recording taxes;

 

(h) concurrently with or prior to the delivery of the Mortgage referred to in clause (b) above, Agent shall have received a completed Standard Flood Hazard Determination Form issued by the Department of Homeland Security Federal Emergency Management Agency with respect to the Real Property Collateral located in Brentwood, New York indicating whether or not such parcel is located in a special flood hazard zone, together with a flood insurance policy, if such Real Property Collateral is situated in a special flood hazard zone, sufficient to comply with applicable flood insurance laws;

 

(i) concurrently with or prior to the delivery of the Mortgage referred to in clause (b) above, a Subordination Agreement, among Agent, 500 Expressway Drive South LLC and Borrower with respect to the Lease, dated as of May 1, 2008, pursuant to which Borrower subleases the Real Property Collateral located in Brentwood, New York, in form and substance reasonably satisfactory to Agent;

 

(j) within 30 days after the Closing Date, Agent shall have received carrier, freight forwarder and customs broker agreements in the form attached hereto as Exhibit 3.6 (or such other form that is in form and substance reasonably satisfactory to Agent) from each carrier, freight forwarder and customs broker used by the Loan Parties with respect to in-transit Inventory; provided that such agreements shall not be required if Agent is satisfied, in its Permitted Discretion, that such agreements will not be obtained after the Loan Parties have used commercially reasonable efforts to do so (it being understood and agreed that in the event the Loan Parties are unable to obtain such agreements after such 30 day period, Agent shall exclude such in-transit Inventory from the Borrowing Base; it being agreed that in-transit Inventory shall not be excluded from the Borrowing Base during such 30 day period solely as a result of the failure of the Loan Parties to furnish such agreements);

 

(k) within 60 days after the Closing Date, Agent shall have received Collateral Access Agreements with respect to each location where a Loan Party maintains Eligible Equipment or Eligible Inventory; provided that Collateral Access Agreements with respect to locations described above shall not be required if Agent is satisfied, in its Permitted Discretion, that such Collateral Access Agreements will not be obtained after the Loan Parties have used commercially reasonable efforts to do so (it being understood and agreed that in the event the Loan Parties are unable to obtain such Collateral Access Agreements after such 60 day period, Agent may, in its Permitted Discretion, establish Landlord Reserves as it deems necessary with respect to such locations);

 

(l) within 60 days after the Closing Date, Borrower shall have used commercially reasonable efforts to pledge any letter of credit or other collateral supporting the environmental remediation obligations of the prior owner of the Loan Parties’ Real Property located in Gallaway, Tennessee, in each case, pursuant to documentation in form and substance reasonably satisfactory to Agent;

 

(m) within 30 days after the Closing Date, Agent shall have received Control Agreements with respect to the Deposit Accounts of the Loan Parties maintained at JPMorgan Chase Base, N.A. and Bank of America, N.A. (other than, in each case, those expressly excluded from such requirement under the Guaranty and Security Agreement); provided that if the Loan Parties are unable to obtain such Control Agreements within 30 days after the Closing Date, they shall close the applicable Deposit Accounts within such time period; and

 

(n) within 30 days after the Closing Date and at any time thereafter, upon request of Agent, Borrower shall provide evidence satisfactory to Agent that title to any Eligible In-Transit Inventory included in the Borrowing Base has passed to a Loan Party; provided that until Borrower has 

 

  

 

  

complied with this clause (n), the maximum amount of Eligible In-Transit Inventory included in the Borrowing Base shall not exceed $3,000,000.

 

 

 

 

 

 

 

 

 

 

  

 

  

Schedule 4.1(b)

Capitalization of the Borrower

As of the Closing Date, Medical Action Industries Inc. has authorized: (i) 40,000,000 shares of common stock, $.001 par value, of which 16,390,628 shares are issued and outstanding; and (ii) 5,000,000 shares of preferred stock, $.001 par value, none of which are issued and outstanding.

  

  

  

Schedule 4.1(c)

Capitalization of the Borrower’s Subsidiaries

 

Subsidiaries of Loan Parties

 

	
·  

	
Avid Medical, Inc. (a 100% owned subsidiary of Medical Action Industries Inc.)

 

	
·  

	
500 Expressway Drive South LLC (a 100% owned subsidiary of Medical Action Industries Inc.)

 

	
·  

	
MAI Acquisition Corp. (a 100% owned subsidiary of Medical Action Industries Inc.)

 

	
·  

	
Medegen Newco, LLC (a 100% owned subsidiary of MAI Acquisition Corp.)

 

	
·  

	
Medegen Medical Products, LLC (a 100% owned subsidiary of Medegen Newco, LLC)

 

 

	
 

Loan Party

 

	
 

Record Owner

	
 

Certificate No.

	
 

No. of 

Authorized/Issued 

Shares

	
 

Percent Owned 

by Record 

Owner

 

	
Avid Medical, Inc.

	
Medical Action Industries Inc.

	
1

	
Authorized: 1 share of common stock, par value $.01.

 

Issued: 1 share of common stock.

	
100%

	
500 Expressway Drive South LLC

	
Medical Action Industries Inc.

	
N/A

	
N/A

	
100%

	
MAI Acquisition Corp.

	
Medical Action Industries Inc.

	
2

	
Authorized: 200 shares of common stock without par value.

 

Issued: 10 shares of common stock.

	
100%

	
Medegen Medical Products, LLC

	
Medegen Newco, LLC

	
N/A

	
N/A

	
100%

	
Medegen Newco, LLC

	
MAI Acquisition Corp.

	
N/A

	
N/A

	
100%

 

  

  

  

Schedule 4.6

 

Litigation

 

None.

 

  

  

  

Schedule 4.10

Employee Benefits Plans

A defined benefit pension plan (the “Plan”) covers certain employees of Medegen Medical Products, LLC who are members of the Service Employees International Union.  The benefit accruals for the Plan were frozen as of December 31, 1999.  The Borrower’s funding policy is to make the minimum annual contributions required by applicable regulations.

 

 

 

  

  

  

Schedule 4.11

Environmental Matters

None.

  

  

  

Schedule 4.14

Permitted Indebtedness

Capital Lease between Avid Medical, Inc., as lessee, and Avid Realty, L.L.C., an affiliate of Micpar Realty, LLC, as lessor, in respect of real property located at 9000 Westmont Drive, Toano, Virginia.  Approximate total present value of minimum lease payments: $13,651,000.

 

  

  

  

Schedule 4.20

Material Contracts

	
1.  

	
Master Distribution Agreement, dated as of January 1, 2012, by and among Owens & Minor Medical, Inc. and Medical Action Industries Inc. (including Avid Medical).

	
2.  

	
Distribution Agreement, dated January 1, 2010, by and among Medical Action Industries Inc. and the Healthcare Supply Chain Services-Medical business unit (including Presource) of Cardinal Health 200, LLC.

  

  

  

Schedule 4.24

Location of Inventory and Equipment

Inventory/Equipment Stored at Locations Owned or Leased by Loan Parties:

	
1.  

	
500 Expressway Drive S., Brentwood, NY 11717

	
2.  

	
25 Heywood Rd., Arden, NC 28704

	
3.  

	
209 Medegen Drive, Gallaway, TN 38036

	
4.  

	
10 Columbia Blvd., Clarksburg, WV 26301

	
5.  

	
9000 Westmont Dr.,  Toano, VA 23168

Inventory/Equipment Stored with Bailees/Warehousemen and Sterilization Facilities:

	
1.  

	
Fresenius Medical Care North America, (corporate address for notices and Collateral Access Agreements: 920 Winter Street, Waltham, MA 02451-1457, warehouse located at 1110 Northpoint Drive, Suite 100, Coppell, TX 75019)

	
2.  

	
Meixin Medical Suzhou Co., Ltd., Tuncun Industrial Zone, Tongli Town, Wujiang City, Jiangsu Province, China 215216

	
3.  

	
Riverside Logistics, 5666 Eastport Blvd, Richmond, VA 23231

	
4.  

	
M Realty, 535 Cane Creek Industrial Park, Fletcher, NC 28732

	
5.  

	
M Realty, 4600 Hendersonville Road, Fletcher, NC  28732

	
6.  

	
Oakland, TN, Continental Awards & Trophies Inc., 760 Murrell Street, Oakland, TN 38060

	
7.  

	
Isomedix/Steris, 2072 Southport Road, Spartanburg, South Carolina (Sterilization Facility)

	
8.  

	
Sterilization Services, 5674 Eastport Blvd, Richmond, VA 23231 (Sterilization Facility)

	
9.  

	
Sterigenics/Ion Beam Application, 10811 Withers Cove Pk. Dr., Charlotte, NC (Sterilization Facility)

	
10.  

	
Century Plastics, 849 Neely Ferry Road, Simpsonville, SC 29680

	
11.  

	
Premium Molding Inc., 59 Bay Hill Drive, Latrobe, Pennsylvania 15650

 

  

  

  

 

Schedule 5.1

 

Deliver to Agent (and if so requested by Agent, with copies for each Lender) each of the financial statements, reports, or other items set forth below at the following times in form satisfactory to Agent:

	
 

As soon as available, but in any event within 30 days (45 days in the case of a month that is the last month of one of Borrower’s fiscal quarters) after the end of each month during each of Borrower’s fiscal years,

 

	
 

(a) an unaudited consolidated balance sheet, interim income statement, statement of cash flow, and statement of shareholder’s equity covering Borrower’s and its Subsidiaries’ operations during such period and compared to the corresponding period in the prior fiscal year and plan, together with a corresponding discussion and analysis of results from management,

 

(b) a Compliance Certificate along with the underlying calculations, including the calculations to arrive at EBITDA to the extent applicable, and

 

(c) contemporaneously with the delivery of each Compliance Certificate copies of (i) each Material Contract entered into since the delivery of the previous Compliance Certificate, and (ii) each material amendment or modification of any Material Contract entered into since the delivery of the previous Compliance Certificate.

 

	
 

As soon as available, but in any event within 90 days after the end of each of Borrower’s fiscal years,

 

	
 

(d) consolidated financial statements of Borrower and its Subsidiaries for each such fiscal year, audited by independent certified public accountants reasonably acceptable to Agent and certified, without any qualifications (including any (A) “going concern” or like qualification or exception, (B) qualification or exception as to the scope of such audit, or (C) qualification which relates to the treatment or classification of any item and which, as a condition to the removal of such qualification, would require an adjustment to such item, the effect of which would be to cause any noncompliance with the provisions of Section 7 of the Agreement), by such accountants to have been prepared in accordance with GAAP (such audited financial statements to include a balance sheet, income statement, statement of cash flow, and statement of shareholder’s equity, and, if prepared, such accountants’ letter to management),

 

(e) a Compliance Certificate along with the underlying calculations, including the calculations to arrive at EBITDA to the extent applicable, and

 

(f) contemporaneously with the delivery of each Compliance Certificate copies of (i) each Material Contract entered into since the delivery of the previous Compliance Certificate, and (ii) each material amendment or modification of any Material Contract entered into since the delivery of the previous Compliance Certificate.

 

	
 

As soon as available, but in any event within 30 days prior to the start of each of Borrower’s fiscal years,

	
 

(g) copies of Borrower’s Projections, in form and substance (including as to scope and underlying assumptions) reasonably satisfactory to Agent, in its Permitted Discretion, for the forthcoming fiscal year, month by month, certified by the chief financial officer of Borrower as being such officer’s good faith estimate of the financial performance of Borrower during the period covered thereby.

 

 

  

  

  

 

	
 

If and when filed by Borrower,

	
 

(h) Form 10-Q quarterly reports, Form 10-K annual reports, and Form 8-K current reports,

 

(i) any other filings made by Borrower with the SEC, and

 

(j) any other information that is provided by Borrower to its shareholders generally.

 

	
 

Promptly, but in any event within 5 days after Borrower has knowledge of any event or condition that constitutes a Default or an Event of Default,

 

	
 

(k) notice of such event or condition and a statement of the curative action that Borrower proposes to take with respect thereto.

 

	
 

Promptly after the commencement thereof, but in any event within 5 days after the service of process with respect thereto on Borrower or any of its Subsidiaries,

 

	
 

(l) notice of all actions, suits, or proceedings brought by or against Borrower or any of its Subsidiaries before any Governmental Authority which reasonably could be expected to result in a Material Adverse Effect.

 

	
 

Upon the request of Agent,

 

	
 

(m) any other information reasonably requested relating to the financial condition of Borrower or its Subsidiaries.

 

  

 

  

Schedule 5.2

 

Provide Agent (and if so requested by Agent, with copies for each Lender) with each of the documents set forth below at the following times in form satisfactory to Agent:

	
Monthly; provided that if an Accelerated Borrowing Base Delivery Event has occurred and is continuing, such reports shall be required to be delivered weekly or more frequently as Agent may reasonably request

	
(a) an Account roll-forward with supporting details supplied from sales journals, collection journals, credit registers and any other records,

 

(b) notice of all claims, offsets, or disputes asserted by Account Debtors with respect to Borrower's and its Subsidiaries' Accounts,

 

(c) to the extent requested by Agent, copies of invoices together with corresponding shipping and delivery documents, and credit memos together with corresponding supporting documentation, with respect to invoices and credit memos in excess of an amount determined in the sole discretion of Agent, from time to time, and

 

(d) Inventory system/perpetual reports specifying the cost and the wholesale market value of Borrower's and its Subsidiaries' Inventory, by category (delivered electronically in an acceptable format, if Borrower has implemented electronic reporting).

 

	
Monthly (no later than the 15th day of each month); provided that if an Accelerated Borrowing Base Delivery Event has occurred and is continuing, such reports shall be required to be delivered weekly

	
(e) an executed Borrowing Base Certificate,

 

(f) a detailed aging, by total, of the Loan Parties’ Accounts, together with a reconciliation and supporting documentation for any reconciling items noted (delivered electronically in a reasonably acceptable format, if Borrower has implemented electronic reporting),

 

(g) a detailed calculation of those Accounts that are not eligible for the Borrowing Base, if Borrower has not implemented electronic reporting,

 

(h) a detailed Inventory system/perpetual report together with a reconciliation to the Loan Parties’ general ledger accounts (delivered electronically in a reasonably acceptable format, if Borrower has implemented electronic reporting),

 

(i) a detailed calculation of Inventory categories that are not eligible for the Borrowing Base, if Borrower has not implemented electronic reporting,

 

(j) a summary aging, by vendor, of Borrower’s and its Subsidiaries' accounts payable and any book overdraft  (delivered electronically in an acceptable format, if Borrower has implemented electronic reporting) and an aging, by vendor, of any held checks,

 

(k) a detailed report regarding Borrower’s and its Subsidiaries' cash and Cash Equivalents, and

 

(l) a monthly (or weekly, if applicable) Account roll-forward, in a format acceptable to Agent in its discretion, tied to the beginning and ending account receivable balances of the Loan Parties’ general ledger.

 

 

 

  

  

  

 

	
No later than March 15 of each year

	
(m) proof that each Loan Party submitted a request for a Withdrawal Liability estimate to each Multiemployer Plan no later than February 15 of each year during the term of the Agreement.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

	
Monthly (no later than the 30th day of each month)

	
(n) a reconciliation of Accounts, trade accounts payable, and Inventory of the Loan Parties’ general ledger accounts to its monthly financial statements including any book reserves related to each category.

 

	
Quarterly

	
(o) a report regarding Borrower’s and its Subsidiaries’ accrued, but unpaid, ad valorem taxes.

 

	
On or prior to January 1 of each year,

	
(p) a Perfection Certificate or a supplement to the Perfection Certificate.

 

	
Promptly upon request by Agent but not more frequently than annually,

	
(q) a detailed list of Borrower’s and its Subsidiaries’ customers, with address and contact information.

 

	
Promptly

	
(r) after the filing thereof with the United States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of each annual and other report with respect to each Pension Plan or any trust created thereunder,

 

(s) promptly upon becoming aware of the occurrence of any Notification Event or of any “prohibited transaction,” as described in section 406 of ERISA or in section 4975 of the IRC in connection with any Pension Plan or any trust created thereunder, a written notice signed by a chief financial officer of Borrower, specifying the nature thereof, what action the Loan Parties propose to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service, the Department of Labor or the PBGC with 

 

 

  

  

  

 

	 	 respect thereto, 

 

(t) promptly upon receipt thereof, copies of any notice of the PBGC’s intention to terminate or to have a trustee appointed to administer any Pension Plan, and

 

(u) promptly upon its receipt thereof, a copy of each estimate of Withdrawal Liability received by any Loan Party or ERISA Affiliate from a Multiemployer Plan.

	
Upon request by Agent

	
(v) copies of purchase orders and invoices for Inventory and Equipment acquired by Borrower or its Subsidiaries, and

 

(w) such other reports as to the Collateral or the financial condition of Borrower and its Subsidiaries, as Agent may reasonably request.

 

 

 

  

  

  

EXHIBIT A-1

 

 

FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

 

This ASSIGNMENT AND ACCEPTANCE AGREEMENT (“Assignment Agreement”) is entered into as of _____________ between  _____________ (“Assignor”) and  _____________ (“Assignee”).  Reference is made to the Agreement described in Annex I hereto (the “Credit Agreement”).  Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Credit Agreement.

 

1.   In accordance with the terms and conditions of Section 13 of the Credit Agreement, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to the Assignor's rights and obligations under the Loan Documents as of the date hereof with respect to the Obligations owing to the Assignor, and Assignor’s portion of the Commitments, all to the extent specified on Annex I.

 

2.   The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim and (ii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment Agreement and to consummate the transactions contemplated hereby; (b) makes no representation or warranty and assumes no responsibility with respect to (i) any statements, representations or warranties made in or in connection with the Loan Documents, or (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any other instrument or document furnished pursuant thereto; (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or any Guarantor or the performance or observance by Borrower or any Guarantor of any of their respective obligations under the Loan Documents or any other instrument or document furnished pursuant thereto; and (d) represents and warrants that the amount set forth as the Purchase Price on Annex I represents the amount owed by Borrower to Assignor with respect to Assignor’s share of the Term Loan, Delayed Draw Term Loan and the Revolving Loans assigned hereunder, as reflected on Assignor’s books and records.

 

3.   The Assignee (a) confirms that it has received copies of the Credit Agreement and the other Loan Documents, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement; (b) agrees that it will, independently and without reliance upon Agent, Assignor, or any other Lender, based upon such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under the Loan Documents; (c) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (d) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender; [and (e) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty.]

 

4.   Following the execution of this Assignment Agreement by the Assignor and Assignee, the Assignor will deliver this Assignment Agreement to the Agent for recording by the Agent.  The effective date of this Assignment (the “Settlement Date”) shall be the latest to occur of (a) the date of 

  

  

  

the execution and delivery hereof by the Assignor and the Assignee, (b) the receipt by Agent for its sole and separate account a processing fee in the amount of $3,500 (if required by the Credit Agreement), (c) the receipt of any required consent of the Agent, Issuing Bank, Swing Lender and/or Borrower, and (d) the date specified in Annex I.

 

5.   As of the Settlement Date (a) the Assignee shall be a party to the Credit Agreement and, to the extent of the interest assigned pursuant to this Assignment Agreement, have the rights and obligations of a Lender thereunder and under the other Loan Documents, and (b) the Assignor shall, to the extent of the interest assigned pursuant to this Assignment Agreement, relinquish its rights and be released from its obligations under the Credit Agreement and the other Loan Documents, provided, however, that nothing contained herein shall release any assigning Lender from obligations that survive the termination of this Agreement, including such assigning Lender’s obligations under Article 15 and Section 17.9(a) of the Credit Agreement.

 

6.   Upon the Settlement Date, Assignee shall pay to Assignor the Purchase Price (as set forth in Annex I).  From and after the Settlement Date, Agent shall make all payments that are due and payable to the holder of the interest assigned hereunder (including payments of principal, interest, fees and other amounts) to Assignor for amounts which have accrued up to but excluding the Settlement Date and to Assignee for amounts which have accrued from and after the Settlement Date.  On the Settlement Date, Assignor shall pay to Assignee an amount equal to the portion of any interest, fee, or any other charge that was paid to Assignor prior to the Settlement Date on account of the interest assigned hereunder and that are due and payable to Assignee with respect thereto, to the extent that such interest, fee or other charge relates to the period of time from and after the Settlement Date.

 

7.   This Assignment Agreement may be executed in counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  This Assignment Agreement may be executed and delivered by telecopier or other facsimile transmission all with the same force and effect as if the same were a fully executed and delivered original manual counterpart.

 

8.   THIS ASSIGNMENT AGREEMENT SHALL BE SUBJECT TO THE PROVISIONS REGARDING CHOICE OF LAW AND VENUE, JURY TRIAL WAIVER, AND JUDICIAL REFERENCE SET FORTH IN SECTION 12 OF THE CREDIT AGREEMENT, AND SUCH PROVISIONS ARE INCORPORATED HEREIN BY THIS REFERENCE, MUTATIS MUTANDIS.

 

 

  

  

  

IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement and Annex I hereto to be executed by their respective officers, as of the first date written above.

 

	  	
[NAME OF ASSIGNOR]

	  	  	  
	  	
as Assignor

	  	  	  
	  	  	  
	  	
By

	
 

	  	  	
Name:

	  	  	
Title:

	  	  	  
	  	  	  
	  	
[NAME OF ASSIGNEE]

	  	  	  
	  	
as Assignee

	  	  	  
	  	  	  
	  	
By

	
 

	  	  	
Name:

	  	  	
Title:

 

 

[ACCEPTED THIS ____ DAY OF

_______________

	
WELLS FARGO BANK, NATIONAL

ASSOCIATION, a national banking 

association, as Agent, Issuing Bank and

Swing Lender

	  	  	  
	  	  	  
	
By

	 	  
	  	
Name:

	  
	  	
Title:

	  
	  	  	  
	  	  	  
	
MEDICAL ACTION INDUSTRIES INC., a Delaware

corporation, as Borrower

	  	  	  
	
By

	  	  
	  	
Name:

	  
	  	
Title: ]

	  

 

 

  

  

  

ANNEX FOR ASSIGNMENT AND ACCEPTANCE

 

 

ANNEX I

	
1.

	
Borrower:  Medical Action Industries Inc.

	  	 	 
	 	 	 	 	 
	
2.

	
Name and Date of Credit Agreement:

	  	 	 
	  	  	
Credit Agreement dated as of May 17, 2013 (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”) by and among Borrower, the lenders party thereto as “Lenders”, and Wells Fargo Bank, National Association, a national banking association (“Wells Fargo”), as administrative agent for each member of the Lender Group and the Bank Product Providers.

	  	  	  	  	 	 
	
3.

	
Date of Assignment Agreement:

	 	 	 
	  	  	  	  	 	 
	
4.

	
Amounts:

	  	 	 
	  	  	  	  	 	 
	  	
a.

	
Assigned Amount of Revolver Commitment

	$	 	 
	 	 	 	 	 	 
	  	
b.

	
Assigned Amount of Revolving Loans

	
$

	 	 
	 	 	 	 	 	 
	  	
c.

	
Assigned Amount of Term Loan

	
$

	 	 
	 	 	 	 	 	 
	  	
d.

	
Assigned Amount of Delayed Draw Term Loan Commitment

	
$

	 	 
	 	 	 	 	 	 
	  	
e.

	
Assigned Amount of Delayed Draw Term Loan 1

	$	 	 
	 	 	 	 	 	 
	  	
f.

	
Assigned Amount of Delayed Draw Term Loan 2

	
$

	 	 
	 	 	 	 	 	 
	
5.

	
Settlement Date:

	$	 	 
	  	  	  	  	 	 
	
6.

	
Purchase Price

	 $	 	 
	  	  	  	  	 	 
	
7.

	
Notice and Payment Instructions, etc.

	  	 	 

 

	 	
Assignee:

	 	
Assignor:

	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 

 

  

  

  

		  	  	  	  	  	  	  	  	  	  	  	  	  
	
Summary Page Borrowing Base Certificate

	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Date

	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Name

	
  

	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	
A/R As of:

	  	  	  	  	  	  	  
	 	 	 	 	 	 	 	
Inventory As of:

	 	 	 	 	 	 	 
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
The undersigned, of behalf of Medical Action Industries Inc. (“Borrower”), pursuant to that certain Credit Agreement dated as of May 17, 2013 (as amended, restated, modified, supplemented, refinanced, renewed, or extended from time to time, the “Credit Agreement”), entered into among Borrower, the lenders signatory thereto from time to time and Wells Fargo Bank, N.A., a Delaware limited liability company as the arranger and administrative agent (in such capacity, together with its successors and assigns, if any, in such capacity, “Agent”), hereby certifies to Agent that the following items, calculated in accordance with the terms and definitions set forth in the Credit Agreement for such items are true and correct, and that Borrower is in compliance with and, after giving effect to any currently requested Advances, will be in compliance with, the terms, conditions, and provisions of the Credit Agreement.

	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Accounts Receivable

	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Accounts Receivable Balance  per Aging Report Assigned To Wells Fargo Capital Finance

	 	 	 	 	 	 	 
	  	
Less Ineligibles (detailed on page 2)

	  	  	  	  	  	  	  	  	  	  
	
Eligible Accounts Receivable

	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Accounts Receivable Availability before Sublimit(s)

	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Net Available Accounts Receivable after Sublimit(s)

	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Inventory

	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Inventory  Balance Assigned To Wells Fargo Capital Finance

	  	  	  	  	  	  	  
	  	
Less Ineligibles (detailed on page 3)

	  	  	  	  	  	  	  	  	  	  
	
Eligible Inventory

	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Inventory Availability before Sublimit(s)

	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Available Inventory after Sublimit(s)

	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
INV to AR Ratio

	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Net Available Inventory after INV to AR Ratio Cap

	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Summary & Other Assets

	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Cap EX Purchase Price Assigned to Wells Fargo Capital Finance

	  	  	  	  	  	  	  
	
Cap Ex Line Advance Rate

	  	  	  	  	  	  	  	  	  	  	  	  
	
Availability from Cap EX Line of Credit

	  	  	  	  	  	  	  	  	  	  
	
Cap EX Line of Credit Sub-Limit

	  	  	  	  	  	  	  	  	  	  	  
	
Eligible Cap Ex Line of Credit

	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Reserves

	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Total Reserves Calculated before the Credit Line

	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Total Collateral Availability

	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	 	Suppressed Availability       	
 

	  	  	  	  
	
Availability before Reserves

	
Total Credit Line

	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Reserves

	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Total Reserves Calculated after the Credit Line

	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Total Availability after Reserves before Loan Balance and LCs

	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Letter of Credit Balance

	  	  	  	
As of:

	  	  	  	  	  	  	  	  
	
Loan Ledger Balance

	  	  	  	
As of:

	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Net Availability

	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	
Additionally, the undersigned hereby certifies and represents and warrants to the Lender Group on behalf of Borrower that (i) as of the date hereof, each representation or warranty contained in or pursuant to any Loan Document, any agreement, instrument, certificate, document or other writing furnished at any time under or in connection with any Loan Document, and as of the effective date of any advance, continuation or conversion requested above is true and correct in all material respects (except to the extent any representation or warranty expressly related to an earlier date), (ii) each of the covenants and agreements contained in any Loan Document have been performed (to the extent required to be performed on or before the date hereof or each such effective date), (iii) no Default or Event of Default has occurred and is continuing on the date hereof, nor will any thereof occur after giving effect to the request above, and (iv) all of the foregoing is true and correct as of the effective date of the calculations set forth above and that such calculations have been made in accordance with the requirements of the Credit Agreement.

	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	
List of attachments with this Borrowing Base Certificate:

	
Authorized Signer

	  	  	  	  	
Page 2 - Accounts Receivable Availability Detail

	  
	  	  	  	  	  	  	  	
Page 2b - Accounts Receivable Concentrations

	  
	  	  	  	  	  	  	  	
Page 2c - Accounts Receivable Dilution

	  	  	  
	  	  	  	  	  	  	  	
Page 3 - Inventory Availability Detail

	  	  	  	  

 

  

  

  

EXHIBIT C-1

FORM OF COMPLIANCE CERTIFICATE

[on Borrower’s letterhead]

 

	To:	
Wells Fargo Bank, National Association

100 Park Avenue, 14th Floor

New York, New York 10017

 

 

Re:           Compliance Certificate dated ____________  __, 201_

 

Ladies and Gentlemen:

 

Reference is made to that certain Credit Agreement dated as of May 17, 2013 (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”) by and among Medical Action Industries Inc., as borrower (“Borrower”), the lenders party thereto as “Lenders” (each of such Lenders, together with its successors and permitted assigns, is referred to hereinafter as a “Lender”), and Wells Fargo Bank, National Association, a national banking association (“Wells Fargo”), as administrative agent for each member of the Lender Group and the Bank Product Providers (in such capacity, together with its successors and assigns in such capacity, the “Agent”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.

 

Pursuant to Section 5.1 of the Credit Agreement, the undersigned officer of Borrower hereby certifies as of the date hereof that:

 

1.           The financial information of Borrower and its Subsidiaries furnished in Schedule 1 attached hereto, has been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for year-end audit adjustments and the lack of footnotes), and fairly presents in all material respects the financial condition of Borrower and its Subsidiaries as of the date set forth therein.

 

2.           Such officer has reviewed the terms of the Credit Agreement and has made, or caused to be made under his/her supervision, a review in reasonable detail of the transactions and financial condition of Borrower and its Subsidiaries during the accounting period covered by the financial statements delivered pursuant to Section 5.1 of the Credit Agreement.

 

3.           Such review has not disclosed the existence on and as of the date hereof, and the undersigned does not have knowledge of the existence as of the date hereof, of any event or condition that constitutes a Default or Event of Default, except for such conditions or events listed on Schedule 2 attached hereto, in each case specifying the nature and period of existence thereof and what action Borrower and/or its Subsidiaries have taken, are taking, or propose to take with respect thereto.1

 

_______________________

1 Please note that pursuant to Section 7(g)(iv) of the Security Agreement, the company must provide a written report of all new Intellectual Property, as of the previously delivered Compliance Certificate.

 

  

  

  

4.           As of the date hereof, Borrower and its Subsidiaries are in compliance with the applicable covenants contained in Section 7 of the Credit Agreement as demonstrated on Schedule 3 hereof.

 

 

 

[Signature page follows.]

 

  

  

  

 

IN WITNESS WHEREOF, this Compliance Certificate is executed by the undersigned this ____ day of _______________, 201__.

 

 

	  	
MEDICAL ACTION INDUSTRIES INC.,

a Delaware corporation, as Borrower

 

By: ________________________________________

Name: ______________________________________

Title: _______________________________________

  

  

  

SCHEDULE 1

Financial Information

 

 

  

  

  

SCHEDULE 2

Default or Event of Default

 

 

 

  

  

  

SCHEDULE 3

Financial Covenants

 

1.           [Fixed Charge Coverage Ratio.

 

Borrower’s and its Subsidiaries’ Fixed Charge Coverage Ratio, measured on a month-end basis, for the 12 month period ending  ____________ ___, 201__, is ___:1.0, which ratio [is/is not] greater than or equal to the ratio set forth in Section 7(a) of the Credit Agreement for the corresponding period.]2

 

3.           [Leverage Ratio.

 

Borrower’s and its Subsidiaries’ Leverage Ratio, measured on a month-end basis, as of the last day of the month ending ____________ ___, 20___, is ___:1.0, which [is/is not] less than or equal to the ratio set forth in Section 7(b) of the Credit Agreement for the corresponding date.]3

 

_______________________

2 Applicable to the extent Borrower is in a Financial Covenant Period.

3 Applicable at all times that a Delayed Draw Term Loan is outstanding.

 

 

 

 

  

  

  

EXHIBIT L-1

FORM OF LIBOR NOTICE

 

Wells Fargo Bank, N.A., as Agent

under the below referenced Credit Agreement

100 Park Avenue, 14th Floor

New York, New York 10017

 

Ladies and Gentlemen:

 

Reference hereby is made to that certain Credit Agreement dated as of May 17, 2013 (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”) by and among Medical Action Industries Inc., a Delaware corporation, as borrower (“Borrower”), the lenders party thereto, as “Lenders”, and Wells Fargo Bank, National Association, a national banking association (“Wells Fargo”), as administrative agent for each member of the Lender Group and the Bank Product Providers (in such capacity, together with its successors and assigns in such capacity, the “Agent”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.

 

This LIBOR Notice represents Borrower’s request to elect the LIBOR Option with respect to [outstanding Revolving Loans] [the Term Loan] [the Delayed Draw Term Loan] in the amount of $[________] (the “LIBOR Rate Advance”)[, and is a written confirmation of the telephonic notice of such election given to Agent].

 

The LIBOR Rate Advance will have an Interest Period of [1, 2, 3, 6] month(s) commencing on ____________.

 

This LIBOR Notice further confirms Borrower’s acceptance, for purposes of determining the rate of interest based on the LIBOR Rate under the Credit Agreement, of the LIBOR Rate as determined pursuant to the Credit Agreement.

 

Borrower represents and warrants that (i) as of the date hereof, the representations and warranties of Borrower and its Subsidiaries contained in the Credit Agreement and in the other Loan Documents are 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 by materiality in the text thereof) on and as of the date hereof, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties 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 by materiality in the text thereof) as of such earlier date)), (ii) no Default or Event of Default has occurred and is continuing on the date hereof, nor will any thereof occur after giving effect to the 

  

  

  

Wells Fargo Bank, N.A., as Agent

Page 2

 

 

request above, and (iii) each of the other conditions precedent set forth in Section 3.11 and 3.2 of the Credit Agreement have been satisfied in full.

 

 

	  	  	  	
Dated:

	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	
MEDICAL ACTION INDUSTRIES INC., a 

Delaware corporation, as Borrower

	 	 	 	 
	  	  	  	  	  
	  	  	  	
By

	  
	  	  	  	
Name:

	  
	  	  	  	
Title:

	  
	  	  	  	  	  
	
Acknowledged by:

	  	  	  
	 	 	 	 
	
WELLS FARGO BANK, NATIONAL 

ASSOCIATION, a national banking

association, as Agent

	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	
By:

	  	  	  	  
	
Name:

	  	  	  	  
	
Title:

	  	  	  	  

 

_____________________

1 Applicable to initial extensions of credit only.

 

 

 

 

  

  

  

PERFECTION CERTIFICATE

 

May 17, 2013

 

Reference is hereby made to (a) that certain Credit Agreement dated as of May 17, 2013 (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”) by and among Medical Action Industries, Inc., as borrower (“Borrower”), the lenders party thereto as “Lenders” (each of such Lenders, together with its successors and permitted assigns, is referred to hereinafter as a “Lender”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (“Wells Fargo”), in its capacity as administrative agent for each member of the Lender Group and the Bank Product Providers (in such capacity, together with its successors and assigns in such capacity, “Agent”)  and (b) that certain Guaranty and Security Agreement dated as of May 17, 2013 (as amended, restated, supplemented, or otherwise modified from time to time, the “Guaranty and Security Agreement”) by and among Borrower, the Subsidiaries of Borrower parties thereto as “Grantors”, and Agent.

 

All initially capitalized terms used herein without definition shall have the meanings ascribed thereto in the Credit Agreement.  Any terms (whether capitalized or lower case) used in this Perfection Certificate that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein or in the Credit Agreement; provided that to the extent that the Code is used to define any term used herein and if such term is defined differently in different Articles of the Code, the definition of such term contained in Article 9 of the Code shall govern.  As used herein, the term “Loan Parties” shall mean the “Loan Parties” as that term is defined in the Credit Agreement and “Code” shall mean the “Code” as that term is defined in the Guaranty and Security Agreement.

 

The undersigned, the Chief Financial Officer of Borrower, hereby certifies (in my capacity as Chief Financial Officer and not in my individual capacity) to Agent and each of the other members of the Lender Group and the Bank Product Providers as follows as of May 17, 2013:

 

1. Names.

 

(a) The exact legal name of each Loan Party, as such name appears in its certified certificate of incorporation, articles of incorporation, certificate of formation, or any other organizational document, is set forth in Schedule 1(a).  Each Loan Party is (i) the type of entity disclosed next to its name in Schedule 1(a) and (ii) a registered organization except to the extent disclosed in Schedule 1(a).  Also set forth in Schedule 1(a) is the organizational identification number, if any, of each Loan Party that is a registered organization, the Federal Taxpayer Identification Number of each Loan Party and the jurisdiction of formation of each Loan Party.  Each Loan Party has qualified to do business in the states listed on Schedule 1(a).

 

(b) Set forth in Schedule 1(b) hereto is a list of any other legal names each Loan Party has had in the past five years, together with the date of the relevant name change.

 

(c) Set forth in Schedule 1(c) is a list of all other names used by each Loan Party in connection with any business or organization to which such Loan Party became the successor by merger, consolidation, acquisition, change in form, nature or jurisdiction of organization or otherwise or on any filings with the Internal Revenue Service, in each case, at any time in the past five years.  Except as set forth in Schedule 1(c), no Loan Party has changed its jurisdiction of organization at any time during the past four months.

  

  

  

2. Chief Executive Offices.  The chief executive office of each Loan Party is located at the address set forth in Schedule 2 hereto.

 

3. Real Property.

 

(a) Attached hereto as Schedule 3(a) is a list of all (i) Real Property (as defined in the Guaranty and Security Agreement) of each Loan Party, (ii) filing offices for any mortgages encumbering the Real Property or to encumber, the Real Property as of the Closing Date, (iii) common names, addresses and uses of each parcel of Real Property (stating improvements located thereon) and (iv) other information relating thereto required by such Schedule.  Except as described on Schedule 3(a) attached hereto:  (A) no Loan Party has entered into any leases, subleases, tenancies, franchise agreements, licenses or other occupancy arrangements as owner, lessor, sublessor, licensor, franchisor or grantor with respect to any of the real property described on Schedule 3(a) and (B) no Loan Party has any leases which require the consent of the landlord, tenant or other party thereto to the transactions contemplated by the Loan Documents.

 

(b) Schedule 3(b) sets forth all third parties (“Bailees”) with possession of any Collateral (including inventory and equipment) of the Loan Parties, including the name and address of such Bailee, a description of the inventory and equipment in such Bailee’s possession and the location of such inventory and equipment (if none please so state).

 

(c) Attached hereto as Schedule 3(c) is a list of all water rights owned or used by the Loan Parties in connection with the operation of any Mortgaged Property.

 

4. Extraordinary Transactions.  Except for those purchases, mergers, acquisitions, consolidations, and other transactions consummated in the past five years and described on Schedule 4 attached hereto, all of the Collateral has been originated by each Loan Party in the ordinary course of business or consists of goods which have been acquired by such Loan Party in the ordinary course of business from a person in the business of selling goods of that kind.

 

5. File Search Reports.  Attached hereto as Schedule 5 is a true and accurate summary of certified file search reports from (a) the Uniform Commercial Code filing offices (i) in each jurisdiction of formation identified in Section 1(a) and in each location identified Section 2 with respect to each legal name set forth in Section 1 and (ii) in each jurisdiction described in Schedule 1(c) or Schedule 3 relating to any of the transactions described in Schedule 1(c) or Schedule 4 with respect to each legal name of the person or entity from which each Loan Party purchased or otherwise acquired any assets and (b) each filing office in each real estate recording office identified on Schedule 3(a) for any Real Property Collateral.  A true copy of each financing statement, including judgment and tax liens, bankruptcy and pending lawsuits or other filing identified in such file search reports has been delivered to Agent.

 

6. UCC Filings.  The financing statements (duly authorized by each Loan Party constituting the debtor therein), including the indications of the collateral, attached as Schedule 6 relating to the Guaranty and Security Agreement or the Real Property, are in the appropriate forms for filing in the filing offices in the jurisdictions identified in Schedule 6 hereof.

 

7. Schedule of Filings.  Attached hereto as Schedule 7 is a schedule of (i) the appropriate filing offices for the financing statements attached hereto as Schedule 6 and (ii) the appropriate filing offices for the filings described in Schedule 11(c) and (iii) any other actions required to create, preserve, protect and perfect the security interests in the Collateral (as defined in the Guaranty and Security Agreement) granted, assigned or pledged to Agent pursuant to the Guaranty and Security Agreement or any other Loan Document.  No other filings or actions are required to create, preserve, 

  

  

  

protect and perfect the security interests in the Collateral granted, assigned or pledged to Agent pursuant to the Loan Documents.

 

8. Termination Statements.  Attached hereto as Schedule 8 are the duly authorized termination statements in the appropriate form for filing in each applicable jurisdiction identified in Schedule 8 hereto with respect to each Lien described therein.

 

9. Stock Ownership and Other Equity Interests.  Attached hereto as Schedule 9(a) is a true and correct list of each of all of the authorized, and the issued and outstanding, Equity Interests of each Loan Party and its Subsidiaries and the record and beneficial owners of such Equity Interests.  Also set forth on Schedule 9(a) is each equity investment of each Loan Party that represents 50% or less of the equity of the entity in which such investment was made.  Attached hereto as Schedule 9(b) is a true and correct organizational chart of Borrower and its Subsidiaries.

 

10. Instruments and Chattel Paper.  Attached hereto as Schedule 10 is a true and correct list of all promissory notes, instruments (other than checks to be deposited in the ordinary course of business), tangible chattel paper, electronic chattel paper and other evidence of Indebtedness held by each Loan Party as of May17, 2013 having an aggregate value or face amount in excess of $2,000,000, including all intercompany notes between or among any two or more Loan Parties or any of their Subsidiaries.

 

11. Intellectual Property.

 

(a) Schedule 11(a) provides a complete and correct list of all registered Copyrights (as defined in the Guaranty and Security Agreement) owned by any Loan Party, all applications for registration of Copyrights owned by any Loan Party, and all other Copyrights owned by any Loan Party and material to the conduct of the business of any Loan Party.  Schedule 11(a) provides a complete and correct list of all Patents (as defined in the Guaranty and Security Agreement) owned by any Loan Party and all applications for Patents  owned by any Loan Party.  Schedule 11(a) provides a complete and correct list of all registered Trademarks (as defined in the Guaranty and Security Agreement) owned by any Loan Party, all applications for registration of Trademarks owned by any Loan Party, and all other Trademarks owned by any Loan Party and material to the conduct of the business of any Loan Party.

 

(b) Schedule 11(b) provides a complete and correct list of all Intellectual Property Licenses (as defined in the Guaranty and Security Agreement) entered into by any Loan Party pursuant to which (i) any Loan Party has provided any license or other rights in Intellectual Property (as defined in the Guaranty and Security Agreement) owned or controlled by such Loan Party to any other Person (other than non-exclusive software licenses granted in the ordinary course of business) or (ii) any Person has granted to any Loan Party any license or other rights in Intellectual Property owned or controlled by such Person that is material to the business of such Loan Party, including any Intellectual Property that is incorporated in any Inventory, software, or other product marketed, sold, licensed, or distributed by such Loan Party;

 

(c) Attached hereto as Schedule 11(c) in proper form for filing with the United States Patent and Trademark Office and United States Copyright Office (as applicable) are the filings necessary to preserve, protect and perfect the security interests in the United States Trademarks, United Patents, United States Copyrights and Intellectual Property Licenses set forth on Schedule 11(a) and Schedule 11(b), including duly signed copies of each of the Patent Security Agreement, Trademark Security Agreement and the Copyright Security Agreement, as applicable.

  

  

  

12. Commercial Tort Claims.  Attached hereto as Schedule 12 is a true and correct list of all commercial tort claims that exceed $2,000,000 held by each Loan Party, including a brief description thereof.

 

13. Deposit Accounts and Securities Accounts.  Attached hereto as Schedule 13 is a true and complete list of all Deposit Accounts and Securities Accounts (each as defined in the Guaranty and Security Agreement) maintained by each Loan Party, including the name of each institution where each such account is held, the name of each such account and the name of each entity that holds each account.

 

14. Letter-of-Credit Rights.  Attached hereto as Schedule 14 is a true and correct list of all letters of credit issued in favor of any Loan Party, as beneficiary thereunder, having an aggregate value or face amount in excess of $2,000,000.

 

15. Motor Vehicles.  Attached hereto as Schedule 15 is a true and correct list of all motor vehicles and other goods (covered by certificates of title or ownership) having an aggregate fair market value in excess of $2,000,000 and owned by any Loan Party, and the owner and approximate fair market value of such motor vehicles.

 

16. Other Assets:  A Loan Party owns the following kinds of assets:

 

	 	
Aircraft:

	
Yes ____  

	 No X
	 	 	 	 
	 	
Vessels, boats or ships:

	
Yes ____  

	 No X
	 	 	 	 
	 	
Railroad rolling stock:

	
Yes ____  

	 No X

 

If the answer is yes to any of these other types of assets, please describe on Schedule 16.

 

 

[The Remainder of this Page has been intentionally left blank]

 

 

  

  

  

IN WITNESS WHEREOF, we have hereunto signed this Perfection Certificate as of the date first above written.

 

 

	  	
MEDICAL ACTION INDUSTRIES INC., as Borrower

	 	 
	 	 
	  	
By:

	  
	  	  	
Name:

	
John Sheffield

	  	  	
Title:

	
Chief Financial Officer

	 	 	 	 
	 	 	 	 
	  	
MEDEGEN NEWCO, LLC, as Guarantor

	 	 
	 	 
	  	
By:

	  
	  	  	
Name:

	
John Sheffield

	  	  	
Title:

	
Secretary

	 	 	 	 
	 	 	 	 
	  	
MAI ACQUISITION CORP., as Guarantor

	 	 
	 	 
	  	
By:

	  
	  	  	
Name:

	
John Sheffield

	  	  	
Title:

	
Chief Financial Officer

	 	 	 	 
	 	 	 	 
	  	
MEDEGEN MEDICAL PRODUCTS, LLC, as Guarantor

	 	 
	 	 
	  	
By:

	  
	  	  	
Name:

	
John Sheffield

	  	  	
Title:

	
Managing Member

	 	 	 	 
	 	 	 	 
	  	
500 EXPRESSWAY DRIVE SOUTH LLC, as Guarantor

	 	 
	 	 
	  	
By:

	  
	  	  	
Name:

	
John Sheffield

	  	  	
Title:

	
Chief Financial Officer

	 	 	 	 
	 	 	 	 

 

 

  

  

  

 

	  	
AVID MEDICAL, INC., as Guarantor

	 	 
	 	 
	  	
By:

	  
	  	  	
Name:

	
John Sheffield

	  	  	
Title:

	
Chief Financial Office

 

 

 

  

  

  

 

 

FORM OF SUPPLEMENT TO PERFECTION CERTIFICATE

Supplement (this “Supplement”), dated as of ____, 20__, to the Perfection Certificate, dated as of ________, 20__ (as amended, restated, supplemented or otherwise modified from time to time, the “Perfection Certificate”) by each of the parties listed on the signature pages thereto and those additional entities that thereafter become Loan Parties (collectively, jointly and severally, “Grantors” and each individually “Grantor”).

 

Reference is hereby made to (a) that certain Credit Agreement dated as of _____, 20__ (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”) by and among _________, as borrower (“Borrower”), the lenders party thereto as “Lenders” (each of such Lenders, together with its successors and permitted assigns, is referred to hereinafter as a “Lender”), [and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (“Wells Fargo”), in its capacity as administrative agent for each member of the Lender Group and the Bank Product Providers (in such capacity, together with its successors and assigns in such capacity, “Agent”)[, [and] Wells Fargo and ___________, as joint lead arrangers][, [and] Wells Fargo and ___________, as joint book runners][, [and] Wells Fargo and ___________, as co-syndication agents] [, [and] Wells Fargo and ___________, as co-documentation agents], and (b) that certain Guaranty and Security Agreement dated as of _________, 20__ (as amended, restated, supplemented, or otherwise modified from time to time, the “Guaranty and Security Agreement”) by and among Borrower, the Subsidiaries of Borrower parties thereto as “Grantors”, and Agent.

 

All initially capitalized terms used herein without definition shall have the meanings ascribed thereto in the Credit Agreement.  Any terms (whether capitalized or lower case) used in this Perfection Certificate that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein or in the Credit Agreement; provided that to the extent that the Code is used to define any term used herein and if such term is defined differently in different Articles of the Code, the definition of such term contained in Article 9 of the Code shall govern.  As used herein, the term “Code” shall mean the “Code” as that term is defined in the Guaranty and Security Agreement.

 

WHEREAS, pursuant to Section 5.2 of the Credit Agreement, the Loan Parties must execute and deliver a Perfection Certificate and the execution and delivery of the Perfection Certificate may be accomplished by the execution of this Supplement in favor of Agent, for the benefit of each member of the Lender Group and the Bank Product Providers;

 

In accordance with Section 5.2 of the Credit Agreement, the undersigned, the ________ of _________1, hereby certify (in my capacity as __________ and not in my individual capacity) to Agent and each of the other members of the Lender Group and the Bank Product Providers as follows as of _______, 20__:  [the information in the Perfection Certificate delivered on or prior to the Closing Date is true, correct, and complete on and as of the date hereof.] [Schedule 1(a), “Legal Names, Etc.”, Schedule 1(b), “Prior Names”, Schedule 1(c), “Changes in Corporate Identity; Other Names”, Schedule 2, “Chief Executive Offices”, Schedule 3(a), “Real Property”, [Schedule 3(b), “Bailees”,] [Schedule 3(c), “Water Rights”,] Schedule 4, “Transactions Other Than in the Ordinary Course of Business”,  Schedule 9(a), “Equity Interests”, Schedule 9(b), “Organizational Chart” Schedule 10, “Instruments and Chattel Paper”, Schedule 11(a), “Copyrights, Patents and Trademarks”, Schedule 11(b), “Intellectual Property Licenses”, Schedule 12, “Commercial Tort Claims”, Schedule 13, “Deposit Accounts and Securities Accounts”, 

 

_________________________

1           Insert appropriate officer(s), as applicable.

 

  

  

  

Schedule 14, “Letter-of-Credit Rights”, [Schedule 15, “Motor Vehicles”], and Schedule [16], “Other Assets” attached hereto supplement Schedule 1(a), Schedule (1(b), Schedule 1(c), Schedule 2, Schedule 3, Schedule 4, Schedule 9(a), Schedule 9(b),  Schedule 10, Schedule 11(a), Schedule 11(b), Schedule 12, Schedule 13, Schedule 14, [Schedule 15,] and Schedule [16] respectively, to the Perfection Certificate and shall be deemed a part thereof for all purposes of the Perfection Certificate.]

 

The undersigned officers of each of the Loan Parties hereby certify as of the date hereof on behalf of the Loan Parties in their capacity as officers of the Loan Parties and not in their individual capacities that no additional filings or actions are required to create, preserve or perfect the security interests in the Collateral granted, assigned or pledged to Agent pursuant to the Loan Documents.

 

           Except as expressly supplemented hereby, the Perfection Certificate shall remain in full force and effect.

 

IN WITNESS WHEREOF, we have hereunto signed this Supplement to Perfection Certificate as of this ____ day of ________________, 20__.

 

 

	  	
[BORROWER]

	 	 
	 	 
	  	
By:

	  
	  	  	
Name:

	 
	  	  	
Title:

	 

 

 

	  	

[Each of the Guarantors]

	 	 
	 	 
	  	
By:

	  
	  	  	
Name:

	 
	  	  	
Title:

	 

 

 

 

  

  

  

 

Schedule 1(a)

 

Legal Names, Etc.

 

	
Legal Name

	
Type of Entity

	
 

Registered 

Organization

(Yes/No)

 

	
Organizational 

Number1

 

	
Federal Taxpayer

Identification Number

	
Jurisdiction of Formation

	  	  	  	  	  	  
	 	 	 	 	 	 
	  	  	  	  	  	  

 

 

 

___________________________

2           If none, so state.

  

  

  

Schedule 1(b)

 

Prior Names

 

 

	
 

Loan Party/Subsidiary

 

	
Prior Name

 

	
Date of Change

 

	  	  	  
	  	  	  
	  	  	  
	  	  	  

 

 

  

  

  

Schedule 1(c)

 

Changes in Corporate Identity; Other Names

 

 

	
Loan 

Party/Subsidiary

	
Name of Entity

	
Action

	
Date of 

Action

	
State of 

Formation

	
List of All Other 

Names Used on Any 

Filings with the 

Internal Revenue 

Service During Past 

Five Years

	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  

[Add Information required by Section 1 to the extent required by Section 1(c) of the Perfection Certificate]

 

 

  

  

  

Schedule 2

 

Chief Executive Offices

 

 

	
 

Loan 

Party/Subsidiary

 

	
Address

	
County

	
State

	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  

 

 

 

  

  

  

Schedule 3(a)

 

Real Property

 

                                                                                                                                                                                                                           

	
Entity of 

Record

	
Common 

Name and 

Address

	
Owned, 

Leased or 

Other 

Interest

	
Landlord 

/ Owner 

if Leased 

or Other 

Interest

	
 

Descrip-

tion of 

Lease or 

Other 

Documents 

Evidencing 

Interest

 

	
Purpose/

Use

	
Improve-

ments

 Located on 

Real 

Property

	
Legal 

Description

	
Encumbered 

or to be 

Encumbered 

by Mortgage

	
Filing 

Office for 

Mortgage

	
Option to 

Purchase/Right

 of First Refusal

	
[ ]

	
[ ]

	
[ ]

	
[ ]

	
[ ]

	
[ ]

	
[ ]

	
[SEE 

EXHIBIT A-

[ ] 

ATTACHED HERETO]     

 

	
[YES/NO]

	
[ ]

	
[YES/NO]

	
  

 

	  	  	  	  	  	  	  	  	  	  

 

 

  

  

  

Schedule 3(a)

 

Real Property (cont.)

 

 

Required Consents; Loan Party Held Landlord/ Grantor Interests

 

I. Landlord’s / Tenant’s Consent Required

 

1.  [LIST EACH LEASE OR OTHER INSTRUMENT WHERE LANDLORD’S / TENANT’S CONSENT IS REQUIRED].

 

 

 

II. Leases, Subleases, Tenancies, Franchise Agreements, Licenses or Other Occupancy Agreements Pursuant to which any Loan Party holds Landlord’s / Grantor’s Interest

 

1.  [LIST EACH LEASE OR OTHER INSTRUMENT WHERE ANY LOAN PARTY HOLDS LANDLORD’S / GRANTOR’S INTEREST

 

 

  

  

  

Schedule 3(a)

 

Real Property (cont.)

 

 

Required Consents; Loan Party Held Landlord/ Grantor Interests

 

I. Landlord’s / Tenant’s Consent Required

 

1.  [LIST EACH LEASE OR OTHER INSTRUMENT WHERE LANDLORD’S / TENANT’S CONSENT IS REQUIRED].

 

 

 

II. Leases, Subleases, Tenancies, Franchise Agreements, Licenses or Other Occupancy Agreements Pursuant to which any Loan Party holds Landlord’s / Grantor’s Interest

 

1.  [LIST EACH LEASE OR OTHER INSTRUMENT WHERE ANY LOAN PARTY HOLDS LANDLORD’S / GRANTOR’S INTEREST]

 

 

  

  

  

 

[Schedule 3(b)

 

Bailees]

 

 

 

  

  

  

[Schedule 3(c)

 

Water Rights

 

 

Attached hereto is a true copy of the current Water Rights owned or used by any Loan Party in Connection with the operation of any Real Property Collateral.

 

[ ]  ]

 

 

 

  

  

  

Schedule 4

 

Transactions Other Than in the Ordinary Course of Business

 

 

	
Loan Party/Subsidiary

 

	
 

Description of Transaction Including Parties 

Thereto

 

	
Date of 

Transaction

 

	  	  	  
	  	  	  
	  	  	  

  

  

  

 Schedule 9(a)

 

(a)  Equity Interests of Loan Parties and Subsidiaries

 

	
Current Legal 

Entities Owned

	
Record Owner

	
Certificate No.

	
No. Shares/Interest

	
Percent 

Pledged

	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  

(b) Other Equity Interests

 

 

 

  

  

  

Schedule 9(b)

 

Organizational Chart

 

 

 

  

  

  

Schedule 10

 

Instruments and Chattel Paper

 

1.           Promissory Notes:

 

	
Entity

	
 

Principal 

Amount

 

	
Date of Issuance

	
Interest Rate

	
Maturity Date

	  	  	  	  	  
	  	  	  	  	  
	  	  	  	  	  

2.           Chattel Paper:

 

 

 

  

  

  

Schedule 11(a)

 

Copyrights, Patents and Trademarks

 

 

UNITED STATES COPYRIGHTS

 

Registrations:

	
OWNER

	
TITLE

	
REGISTRATION NUMBER

 

Applications:

 

	
OWNER

	
APPLICATION NUMBER

	 

OTHER COPYRIGHTS

 

Registrations:

	
OWNER

	
COUNTRY/STATE

	
TITLE

	
REGISTRATION NUMBER

 

Applications:

 

	
OWNER

	
COUNTRY/STATE

	
APPLICATION NUMBER

	 

 

 

  

  

  

 

Schedule 11(a)

 

Copyrights, Patents and Trademarks (cont.)

 

UNITED STATES PATENTS:

 

Registrations:

	

OWNER

	 	

REGISTRATION 

NUMBER

	 	

 

DESCRIPTION

	 	 	 

 

Applications:

 

	

 

OWNER

	 	

APPLICATION

NUMBER

	 	

 

DESCRIPTION

	 	 	 

 

OTHER PATENTS:

 

Registrations:

	

 

OWNER

	 	

REGISTRATION 

NUMBER

	 	

 

COUNTRY/STATE

	 	

 

DESCRIPTION

	 

 

Applications:

 

	

 

OWNER

	 	

APPLICATION

NUMBER

	 	

 

COUNTRY/STATE

	 	

 

DESCRIPTION

	 

 

  

  

  

Schedule 11(a)

 

Copyrights, Patents and Trademarks (cont.)

 

 

UNITED STATES TRADEMARKS:

 

Registrations:

 

	

OWNER

	 	

REGISTRATION 

NUMBER

	 	

 

TRADEMARK

	 	 	 

 

Applications:

 

	

 

OWNER

	 	

APPLICATION

NUMBER

	 	

TRADEMARK

	 	 	 

 

OTHER TRADEMARKS:

 

Registrations:

	

 

OWNER

	 	

REGISTRATION 

NUMBER

	 	

 

COUNTRY/STATE

	 	

 

TRADEMARK

	 

 

Applications:

 

	

 

OWNER

	 	

APPLICATION

NUMBER

	 	

 

COUNTRY/STATE

	 	

 

TRADEMARK

	 

 

  

  

  

Schedule 11(b)

 

Intellectual Property Licenses

 

	

 

LICENSEE

	 	

 

LICENSOR

	 	

 

COUNTRY/STATE

	 	

 

REGISTRATION/ 

APPLICATION 

NUMBER, IF 

ANY

	 	

 

DESCRIPTION

	  	 	  	 	  	 	  	 	  
	  	 	  	 	  	 	  	 	  
	  	 	  	 	  	 	  	 	  
	  	 	  	 	  	 	  	 	  
	  	 	  	 	  	 	  	 	  
	  	 	  	 	  	 	  	 	  

 

 

  

  

  

Schedule 12

 

Commercial Tort Claims

 

 

 

  

  

  

Schedule 13

 

Deposit Accounts and Securities Accounts

 

	
OWNER

	
TYPE OF ACCOUNT

	
BANK OR INTERMEDIARY

	
ACCOUNT NUMBERS

	  	  	  	  
	  	  	  	  
	  	  	  	  
	  	  	  	  

 

 

 

  

  

  

Schedule 14

 

Letter of Credit Rights

 

 

 

 

  

  

  

 

[Schedule 15

 

Motor Vehicles]

 

 

 

  

  

  

Schedule [16]

 

Other Assets

 

 

 

  

  

  

EXHIBIT 3.6

 

CUSTOMS BROKER/FREIGHT FORWARDER/CARRIER AGENCY AGREEMENT

 

Name and Address of Carrier:

_______________________________

_______________________________

_______________________________

Dear Sir/Madam:

[Insert name of applicable Loan Party] (the “Company”), together with certain of its affiliates (the “Affiliates”), have entered into a credit facility with Wells Fargo Bank, National Association, a national banking association with an address at 100 Park Avenue, 14th Floor, New York, New York 10017, as administrative agent (in such capacity, herein the “Agent”) for its own benefit and the benefit of certain other secured parties which are making loans or furnishing other financial accommodations to the Company or its Affiliates (the “Secured Parties”), pursuant to which credit facility, the Company, among others, has granted security interests to the Agent (for the ratable benefit of such agent and the Secured Parties) in and to, among other things, substantially all of the assets of the Company and such Affiliates, including, without limitation, all of the Company’s and such Affiliates’ inventory, goods, documents, bills of lading and other documents of title.

 

The Agent has requested that you in your role as [customs broker/freight forwarder/carrier] (together with any of your affiliates providing services to the Company or its Affiliates, the “[Customs Broker/Freight Forwarder/Carrier]”) act as its agent for the limited purpose of more fully perfecting and protecting the security interest of the Agent in such bills of lading, documents and other documents of title and in the goods and inventory for which such bills of lading, documents, or other documents of title have been issued, and, by acknowledging and executing this document, the [Customs Broker/Freight Forwarder/Carrier] has agreed to do so.  This letter shall set forth the terms of the [Customs Broker/Freight Forwarder/Carrier]’s engagement.

 

Section 1  Acknowledgment of Security Interest; Power of Attorney:  The [Customs Broker/Freight Forwarder/Carrier] acknowledges, consents, and agrees that the Company has assigned to the Agent, liens on and security interests in and to, all of the Company’s right, title, and interest in, to and under all goods constituting, evidencing, or relating to such inventory and any contracts or agreements with carriers, customs brokers, and/or freight forwarders for shipment or delivery of such goods.  The Company further advises the [Customs Broker/Freight Forwarder/Carrier], and the [Customs Broker/Freight Forwarder/Carrier] acknowledges, consents, and agrees, that the Company has irrevocably constituted and appointed the Agent as the Company’s true and lawful attorney, with full power of substitution to exercise all of such rights, title, and interest in accordance with the terms of the credit facility referred to above, which appointment has been coupled with an interest.  The [Customs Broker/Freight Forwarder/Carrier] further agrees that: (i) the Company holds title to all Title Documents (as defined herein) and Property (as defined herein) while in the custody or control of the [Customs Broker/Freight Forwarder/Carrier]; (ii) upon receipt of any Title Documents or Property, the [Customs Broker/Freight Forwarder/Carrier] shall promptly notify the Company that it is holding such Title Documents or Property on behalf of the Company; and (iii) the [Customs Broker/Freight Forwarder/Carrier] shall not deliver any Property to a third party for shipment and delivery unless any related Title Documents (1) reflect either (a) the Company as consignee (or, if so requested by it, the Agent, or (b) the [Customs Broker/Freight Forwarder/Carrier] as consignee and (2) contain an express waiver from the consignor/shipper of its right to alter the named consignee and its right of stoppage in transit.  To the extent [Customs Broker/Freight Forwarder/Carrier] is consignee, [Customs Broker/Freight Forwarder/Carrier] agrees it will not change the name of consignee or any Title Document without prior written consent of the Agent.

 

  

  

  

Section 2  Appointment of [Customs Broker/Freight Forwarder/Carrier] as Agent of Agent:  The [Customs Broker/Freight Forwarder/Carrier] is hereby appointed as agent for the Agent to receive and retain possession of (i) all bills of lading, waybills, forwarder’s cargo receipts, documents, and any other documents of title or carriage constituting, evidencing, or relating to the Company’s inventory (collectively, the “Title Documents”) heretofore or at any time hereafter issued for any goods, inventory, or other property of the Company which are received by the [Customs Broker/Freight Forwarder/Carrier] for processing (collectively, the “Prop­erty”), and (ii) all Property, as applicable, such receipt and retention of possession of the Title Documents and Property being for the purpose of more fully perfecting and preserving the Agent’s security interests in the Title Documents and the Property.  The [Customs Broker/Freight Forwarder/Carrier] will maintain possession of the Title Documents and Property, as applicable, subject to the security interests of the Agent, and will note the security interests of the Agent on the [Customs Broker/Freight Forwarder/Carrier]’s books and records.  In the event that the Agent is designated as the consignor, co-consignor, consignee or co-consignee on any such Title Documents, subject to the terms and conditions hereof, the Agent hereby appoints the [Customs Broker/Freight Forwarder/Carrier] as its attorney-in-fact solely to execute and deliver any such Title Documents for and on behalf of the Agent pursuant to the terms of this Agreement.

 

Section 3  Delivery of Title Documents; Release of Goods:  Until the [Customs Broker/Freight Forwarder/Carrier] receives written notification from the Agent pursuant to Section 4 below to the contrary, the [Customs Broker/Freight Forwarder/Carrier] is authorized by the Agent to, and the [Customs Broker/Freight Forwarder/Carrier] may, deliver:

 

3.1 the Title Documents to the issuing carrier or to its agent (who shall act on the [Customs Broker/Freight Forwarder/Carrier]’s behalf as the [Customs Broker/Freight Forwarder/Carrier]’s sub-agent hereunder) for the purpose of permitting the Company to obtain possession or control of the Property subject to such Title Documents; and

 

3.2 the Property to the Company or as directed by the Company.

 

Section 4  Notice From Agent To Follow Agent’s Instructions: Upon the [Customs Broker/Freight Forwarder/Carrier]’s receipt of written notification from the Agent, the [Customs Broker/Freight Forwarder/Carrier] shall thereafter follow solely the instructions of the Agent concerning the disposition of the Title Documents and the Property and will not follow any instructions of the Company or any other person concerning the same.  The Company hereby directs the [Customs Broker/Freight Forwarder/Carrier] to comply with any such instructions from the Agent and releases the [Customs Broker/Freight Forwarder/Carrier] from any liability which might arise therefrom, except for any liability arising from the bad faith, gross negligence or willful misconduct of the [Customs Broker/Freight Forwarder/Carrier].

 

  

  

  

Section 5  Limited Authority:  The [Customs Broker/Freight Forwarder/Carrier]’s sole authority as the agent of the Agent is to receive and maintain possession of the Title Documents and the Property on behalf of the Agent and to follow the instructions of the Agent as provided herein.  Except as may be specifically authorized and instructed in writing by the Agent, the [Customs Broker/Freight Forwarder/Carrier] shall have no authority as the agent of the Agent to undertake any other action or to enter into any other commitments on behalf of the Agent.

 

Section 6  Expenses:  The [Customs Broker/Freight Forwarder/Carrier] acknowledges that, prior to the [Customs Broker/Freight Forwarder/Carrier]’s receipt of written notification from the Agent to follow solely the instructions of the Agent concerning the disposition of the Title Documents and the Property, the Company is solely responsible for payment of any compensation and charges which are to the Company’s account.  The Company is further responsible, prior to the [Customs Broker/Freight Forwarder/Carrier]’s receipt of written notification from the Agent to follow solely the instructions of the Agent concerning the disposition of the Title Documents and the Property, for paying any reasonable and documented out-of-pocket fees, expenses, customs duties, taxes, or other charges which are, or may, accrue, to the account of the Title Documents and the Property.  Upon the [Customs Broker/Freight Forwarder/Carrier]’s receipt of written notification from the Agent to follow solely the instructions of the Agent concerning the disposition of the Title Documents and the Property, the Agent shall be responsible for any such payments. The Agent, at the Agent’s option, may authorize the [Customs Broker/Freight Forwarder/Carrier] to perform specified services on behalf of the Agent at mutually agreed rates of compensation, which shall be charged to the Agent’s account and payable to the [Customs Broker/Freight Forwarder/Carrier] by the Agent. Notwithstanding anything herein to the contrary, any payments by the Agent to the [Customs Broker/Freight Forwarder/Carrier] shall not affect any obligation of the Company to reimburse the Agent for any such compensation or other costs or expenses incurred by the Agent pursuant to the terms of the credit facility referred to above.

 

Section 7  Term:

 

7.1 In the event that the [Customs Broker/Freight Forwarder/Carrier] desires to terminate this Agreement, the [Customs Broker/Freight Forwarder/Carrier] shall furnish the Agent and the Company with not less than sixty (60) days’ prior written notice of the [Customs Broker/Freight Forwarder/Carrier]’s intention to do so.  During such sixty (60) day period (which may be shortened by notice to the [Customs Broker/Freight Forwarder/Carrier] from the Agent), the [Customs Broker/Freight Forwarder/Carrier] shall continue to serve as agent hereunder.  The [Customs Broker/Freight Forwarder/Carrier] shall also cooperate with the Agent and execute all such documentation and undertake all such action as may be reasonably required by the Agent in connection with such termination.  Any written notice provided to any party hereto shall be delivered to such party at the following address (or to such other address, written notice of which is given by such party to the other parties hereto in writing with at least seven (7) days’ prior notice):

 

  

  

  

If to the Agent:

Wells Fargo Bank, National Association, as Agent

100 Park Avenue, 14th Floor

New York, New York 10017

Attention:  Portflio Manager (Medical Action Industries)

Facsimile: 855-849-5961

If to the [Customs Broker/Freight Forwarder/Carrier]:

[Customs Broker/Freight Forwarder/Carrier]

_____________________

_____________________

_____________________

Attention: _____________

If to the Company:

Medical Action Industries Inc.

500 Expressway Drive South

Brentwood, NY 11717

Attention:

Telecopy no:

7.2 Except as provided in Section 7.1, above, this Agreement shall remain in full force and effect until the [Customs Broker/Freight Forwarder/Carrier] receives written notification from the Agent of the termination of the [Customs Broker/Freight Forwarder/Carrier]’s responsibilities hereunder.  This Agreement may be amended only by notice in writing signed by the Company and an officer of the Agent, and may be terminated solely by written notice signed by an officer of the Agent.

 

Section 8  [Customs Broker/Freight Forwarder/Carrier]’s Lien:   The [Customs Broker/Freight Forwarder/Carrier] shall have a lien, to the extent provided by law, on any Property then in the possession of the [Customs Broker/Freight Forwarder/Carrier], which lien shall be to the extent of any out-of-pocket costs, fees, freight charges, storage charges, or other charges or out-of-pocket expenses incurred or paid by the [Customs Broker/Freight Forwarder/Carrier] with respect only to that Property then in the possession of the [Customs Broker/Freight Forwarder/Carrier], for which the [Customs Broker/Freight Forwarder/Carrier] has not received payment, but not for any amount owed on account of any other Property, item, or matter.

 

Section 9  Counterparts; Integration:  This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement constitutes the entire agreement among the [Customs Broker/Freight Forwarder/Carrier] and the Agent relating to the subject matter hereof and supersedes any and all contemporaneous or previous agreements and understandings, oral or written, relating to the subject matter hereof.   This Agreement shall become effective when it shall have been executed by the parties and when the Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic method shall be effective as delivery of a manually executed counterpart of this Agreement.

 

  

  

  

Section 10  Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

[SIGNATURE PAGE FOLLOWS]

 

 

 

 

 

 

 

 

 

 

  

  

  

If the foregoing correctly sets forth our understanding, please indicate the [Customs Broker/Freight Forwarder/Carrier]’s assent below, following which this Agreement will take effect as a sealed instrument.

 

Very truly yours,

COMPANY:

[______________]

By:      __________________________

Name: __________________________

Title:   __________________________

Acknowledged and agreed:

[CUSTOMS BROKER/FREIGHT FORWARDER/CARRIER]:

[_______________________________]

By:      __________________________

Name: __________________________

Title:   __________________________

AGENT:

WELLS FARGO BANK, NATIONAL ASSOCIATION

By:      __________________________

Name: __________________________

Title:   __________________________EX-4.2

 Exhibit 4.2 
 (Face of Security) 
 THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN
THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”),
TO BARCLAYS BANK PLC, OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 
 BY PURCHASING THIS SECURITY, THE HOLDER AGREES TO CHARACTERIZE THIS SECURITY FOR
ALL U.S. FEDERAL INCOME TAX PURPOSES AS PROVIDED IN SECTION 10 ON THE FACE OF THIS SECURITY. 

			
	CUSIP No. 06742C152	  	ISIN: US06742C1523

 BARCLAYS BANK PLC 
 GLOBAL MEDIUM-TERM NOTES, SERIES A 
  

 
 Barclays ETN+
FI Enhanced Global High Yield ETN 
 Linked to the MSCI World High Dividend Yield USD Gross Total Return Index

 due June 4, 2018 
 The following terms apply to this Security. Capitalized terms that are not defined the first time they are used in this Security shall have the meanings indicated elsewhere in this Security. 

 

 Face Amount: $[            ] equal to
[            ] Securities at $100 per Security. 
 Inception Date:
May 21, 2013 
 Original Issue Date: May 24, 2013 
 Principal Amount per Security: $100 
 Interest Rate: The principal of this Security
shall not bear interest. 
 Index: MSCI World High Dividend Yield USD Gross Total Return Index 

Index Sponsor: MSCI, Inc. 
 Payment
at Maturity: At maturity, the Holder will receive a cash payment per security in U.S. dollars equal to (a) the Closing Indicative Note Value of the Securities on the Final Valuation Date minus (b) the Settlement Charge on the
Final Valuation Date. 
 Closing Indicative Note Value: The Closing Indicative Note Value for each Security on the Initial Valuation Date
will equal $100. On any subsequent Valuation Date, the Closing Indicative Note Value per Security will equal (a) the Long

 
Index Amount on such Valuation Date minus (b) the Financing Level on such Valuation Date; provided that if such calculation results in a negative value, the Closing Indicative
Note Value will be $0. 
 Long Index Amount: On the Initial Valuation Date, the Long Index Amount for each Security will be equal to
$200, or two times the Principal Amount per Security. On any subsequent Valuation Date, the Long Index Amount for each Security will equal the product of (a) the Long Index Amount on the immediately preceding Valuation Date times
(b) the Index Performance Factor on such Valuation Date minus (c) the Rebalancing Amount (if any) on such Valuation Date. 

Initial Leverage Factor: 2. 

Leverage Factor: On any Valuation Date after the Initial Valuation Date, the Leverage Factor will equal (a) the Long Index
Amount on such Valuation Date divided by (b) the Closing Indicative Note Value on such Valuation Date.  
 Index
Performance Factor: On the Initial Valuation Date, the Index Performance Factor will equal 1. On any subsequent Valuation Date, the Index Performance Factor will equal (a) the closing level of the Index on such Valuation Date divided
by (b) the closing level of the Index on the immediately preceding Valuation Date. 

 

 

  
 (Face of
Security continued on next page) 

  
 –2–

 Financing Level: On the Initial Valuation Date, the Financing Level for each Security will equal
$100. On any subsequent Valuation Date, the Financing Level for each Security will equal (a) the Financing Level on the immediately preceding Valuation Date plus (b) the Daily Investor Fee on such Valuation Date plus
(c) the Rebalancing Fee (if any) on such Valuation Date minus (d) the Rebalancing Amount (if any) on such Valuation Date. 

Daily Investor Fee: On the Initial Valuation Date, the Daily Investor Fee for each Security will equal $0. On any subsequent Valuation Date, the
Daily Investor Fee for each Security will equal (a) the sum of (i) the product of (1) the Long Index Amount on the immediately preceding Valuation Date times (2) the Exposure Fee Rate plus (ii) 0.05%
times the Closing Indicative Note Value on the immediately preceding Valuation Date times (b) the number of calendar days from, but excluding, the immediately preceding Valuation Date to, and including, the current Valuation Date
divided by (c) 360. 
 Exposure Fee Rate: The sum of (a) 0.64% plus (b) the 3-month LIBOR rate
effective on the relevant Valuation Date.  
 Rebalancing Event: If, on any Valuation Date, between the hours of 9:30 a.m. and
4:00 p.m. New York City time, the Intraday Index Level is less than or equal to the Rebalancing Trigger calculated on the immediately preceding Valuation Date, a Rebalancing Event is deemed to have occurred on such Valuation Date. 

Intraday Index Level: The most recent intraday level of the Index reported by the Index Sponsor. 

 

 Rebalancing Trigger: On any Valuation Date, the Rebalancing Trigger will equal (a) 1.6
times (b) the Closing Level of the Index on such Valuation Date times (c) the Financing Level on such Valuation Date divided by (d) the Long Index Amount on such Valuation Date. 

Rebalancing Event Date: Any Valuation Date on which a Rebalancing Event occurs. 
 Rebalancing Date: The first Valuation Date immediately following a Rebalancing Event Date on which Index Exchanges comprising at least 99.5% of the notional weight of the Index are open for
trading. 
 Rebalancing Amount: On any Valuation Date that is not a Rebalancing Date, the Rebalancing Amount will be equal to zero. On
any Valuation Date that is a Rebalancing Date, the Rebalancing Amount for each Security will equal the product of (a) the Long Index Amount on the immediately preceding Valuation Date times (b) the Index Performance Factor on such
Valuation Date minus (c) the product of (i) the Initial Leverage Factor times (ii) the Closing Indicative Note Value on the immediately preceding Valuation Date. 
 Rebalancing Fee: On any Valuation Date that is not a Rebalancing Date, the Rebalancing Fee will be equal to zero. On any Valuation Date that is a Rebalancing Date, the Rebalancing Fee for each
Security will be equal to the product of (a) the Rebalancing Fee Rate multiplied by (b) the Rebalancing Amount on such Valuation Date. 
 Rebalancing Fee Rate: 0.05%. 

 

  
 (Face of
Security continued on next page) 

  
 –3–

 Holder Redemption: Subject to the notification requirements set forth in the Pricing Supplement
relating to the Securities, the Holder may redeem the Securities on any Holder Redemption Date during the term of the Securities. In such event, the Holder will receive a cash payment in U.S. dollars for each Security on the applicable Holder
Redemption Date in an amount equal to the Closing Indicative Note Value minus the Settlement Charge on the applicable Valuation Date. The Holder must redeem at least 10,000 of the Securities at one time in order to exercise the right to
redeem the Securities on any Holder Redemption Date. 
 Holder Redemption Date: The third Business Day following each Valuation Date
(other than the Final Valuation Date). The final Holder Redemption Date will be the third Business Day following the Valuation Date that is immediately prior to the Final Valuation Date. 
 Issuer Redemption: The Company may redeem the Securities (in whole but not in part) at its sole discretion on any Trading Day on or after the Inception Date until and including the Maturity Date.
To exercise its right to redeem the Securities, the Company must deliver notice to the Holders of the Securities not less than ten calendar days prior to the Issuer Redemption Date. If the Company redeems the Securities, the Holder will receive a
cash payment in U.S. dollars per Security in an amount equal to the applicable Closing Indicative Note Value on the Valuation Date that is three Trading Days prior to the Issuer Redemption Date specified in the notice. 

Issuer Redemption Date: The date specified by the Company in the issuer redemption notice, which will in no event be prior

 
to the tenth calendar day following the date on which the Company delivers such notice, but in any case not later than the Maturity Date. 
 Automatic Termination Event: The Company will automatically redeem the Securities (in whole only, but not in part) if, on any Index Business Day prior to or on the Final Valuation
Date, the Intraday Index Level is less than or equal to the Automatic Termination Trigger calculated on the Valuation Date immediately preceding the beginning of such Index Business Day. The Company will redeem the Securities on the Automatic
Redemption Date and will deliver a notice of redemption to the Depository Trust Company (“DTC”) that will specify such date. Upon such redemption, the Holder will receive a cash payment in U.S. dollars per Security in
an amount equal to the Automatic Redemption Value. If a Rebalancing Event has occurred and then an Automatic Termination Event occurs after the occurrence of the Rebalancing Event but prior to the end of the Trading Day on the corresponding
Rebalancing Date, then the Securities will be automatically redeemed pursuant to the Automatic Termination Event without giving regard to the Rebalancing Event.  
 Automatic Termination Trigger: On any Valuation Date, the Automatic Termination Trigger will equal (a) 1.4 times (b) the closing level of the Index on such Valuation Date
times (c) the Financing Level on such Valuation Date divided by (d) the Long Index Amount on such Valuation Date. 

Automatic Termination Date: Any Index Business Day on which an Automatic Termination Event occurs.

 

  
 (Face of
Security continued on next page) 

  
 –4–

 Automatic Redemption Date: The fifth Business Day following the Automatic Termination Date;
provided that if calculation of the Automatic Redemption Value is postponed as a result of a Market Disruption Event, the Automatic Redemption Date will be the fifth Business Day after the Automatic Redemption Value is calculated. 

Automatic Redemption Value: The Automatic Redemption Value will be determined by the Calculation Agent, in its sole discretion,
acting in good faith and in a commercially reasonable manner, using the latest publicly available quotations for the intraday prices of the relevant “Index Constituents” (as defined in any Prospectus Supplement
relating to the Securities) that are available as soon as practicable following the occurrence of an Automatic Termination Event.  

 

 Settlement Charge: The Settlement Charge is a charge imposed upon Holder Redemption
and the Payment at Maturity, and is equal to 0.05% times the Long Index Amount on the applicable Valuation Date. In addition, upon any Holder Redemption of more than 100,000 Securities at one time with a Holder Redemption Date on or prior to
the date that is 360 calendar days from the Inception Date, the Settlement Charge will include, in addition to the amount specified in the preceding sentence, an amount equal to (a) 0.05% times (b) the Long Index Amount on the
applicable Valuation Date times (c) (i) 360 minus the number of calendar days from, and including, the Inception Date to, and including, the applicable Valuation Date divided by (ii) 360.  

Defeasance: Neither full defeasance nor covenant defeasance applies to this Security.

 

  
 (Face of
Security continued on next page) 

  
 –5–

 OTHER TERMS: 
 All terms used in this Security that are not defined in this Security but are defined in the Indenture referred to on the reverse of this Security shall have the meanings assigned to them in the
Indenture. Section headings on the face of this Security are for convenience only and shall not affect the construction of this Security. 
 “3-month LIBOR rate” shall mean, for purposes of the Securities, the rate for deposits in U.S. dollars for a period of three months as of approximately 11:00 am London time on the
relevant Valuation Date which appears on Bloomberg screen “US0003M”. If a three month rate for deposits in U.S. dollars ceases to be published on Bloomberg screen “US0003M”, but the same or a comparable successor rate shall
otherwise be published by the British Bankers Association or another benchmark administrator authorized and regulated by the U.K. Financial Conduct Authority (a “successor rate”), then the 3-month LIBOR rate shall be such successor
rate. If no such successor rate is published, or the Calculation Agent determines, in its sole discretion, that the successor rate is not comparable to the 3-month LIBOR rate as in effect on the Inception Date, then the Calculation Agent shall
determine the 3-month LIBOR rate using the methodology provided for in relation to “USD – LIBOR – Reference Banks” in the Prospectus Supplement relating to the Securities. If, notwithstanding the foregoing, the 3-month LIBOR rate
is not available for the relevant Valuation Date, the most recent 3-month LIBOR rate available as of the immediately preceding Valuation Date shall be used. 
 “Business Day” means a Monday, Tuesday, Wednesday, Thursday or Friday that is neither a day on which banking institutions in New York City or London, as applicable, generally are
authorized or obligated by law, regulation, or executive order to close. 
 “Calculation Agent” means Barclays
Bank PLC or such other party as may be nominated as successor Calculation Agent with respect to the Securities by Barclays Bank PLC. 
 “Default Amount” means, on any day, an amount in U.S. dollars, as determined by the Calculation Agent , equal to the cost of having a Qualified Financial Institution (selected as provided
below) expressly assume the due and punctual payment of the principal of this Security, and the performance or observance of every covenant hereof and of the Indenture on the part of the Company to be performed or observed with respect to this
Security (or to undertake other obligations providing substantially equivalent economic value to the Holder of this Security as the Company’s obligations hereunder). Such cost will equal (i) the lowest amount that a Qualified Financial
Institution would charge to effect such assumption (or undertaking) plus (ii) the reasonable expenses (including reasonable attorneys’ fees) incurred by the Holder of this Security in preparing any documentation necessary for such
assumption (or undertaking). During the Default Quotation Period, each Holder of this Security and the Company may request a Qualified Financial Institution to provide a quotation of the amount it would charge to effect such assumption (or
undertaking) and notify the other in writing of such quotation. The amount referred to in clause (i) of this paragraph will equal the lowest (or, if there is only one, the only) quotation so obtained, and as to which notice is so given, during
the Default Quotation Period; provided that, with respect to any quotation, the party not obtaining such quotation may object, on reasonable and significant grounds, to the effectuation of such assumption (or undertaking) by the Qualified
Financial Institution providing such quotation and 

  
 –6–

 
notify the other party in writing of such grounds within two Business Days after the last day of the Default Quotation Period, in which case such quotation will be disregarded in determining the
Default Amount. The “Default Quotation Period” will be the period beginning on the day the Default Amount first becomes due and ending on the third Business Day after such due date, unless no such quotation is so obtained, or unless
every such quotation so obtained is objected to within five Business Days after such due date as provided above, in which case the Default Quotation Period will continue until the third Business Day after the first Business Day on which prompt
notice is given of such quotation as provided above, unless such quotation is objected to as provided above within five Business Days after such first Business Day, in which case the Default Quotation Period will continue as provided in this
sentence. Notwithstanding the foregoing, if the Default Quotation Period (and the subsequent two Business Day objection period) has not ended prior to the Final Valuation Date, then the Default Amount will equal the Face Amount. 

“Index Business Day” means each continuous period during which the Index Sponsor publishes an Intraday Index Level.

 “Index Exchanges” means each exchange on which any of the Index Constituents are traded. 

“Market Disruption Event” means, with respect to the Securities, the Calculation Agent has determined that any of the
following events has occurred or is continuing in respect of the Index and that such event was material: (i) a suspension, absence or limitation of trading in the Index Constituents constituting 20% or more, by weight, of the Index; (ii) a
suspension, absence or limitation of trading in futures or options contracts relating to the Index on their respective markets; (iii) any event that disrupts or impairs, as determined by the Calculation Agent, the ability of market participants
to (1) effect transactions in, or obtain market values for, Index Constituents constituting 20% or more, by weight, of the Index, or (2) effect transactions in, or obtain market values for, futures or options contracts relating to the
Index on their respective markets; (iv) the closure on any day of the primary market for futures or options contracts relating to the Index or Index Constituents constituting 20% or more, by weight, of the Index on a scheduled Trading Day prior
to the scheduled weekday closing time of that market (without regard to after hours or any other trading outside of the regular trading session hours) unless such earlier closing time is announced by the primary market at least one hour prior to the
earlier of (1) the actual closing time for the regular trading session on such primary market on such scheduled Trading Day for such primary market and (2) the submission deadline for orders to be entered into the relevant exchange system
for execution at the close of trading on such scheduled Trading Day for such primary market; (v) any scheduled Trading Day on which (1) the primary markets for Index Constituents constituting 20% or more, by weight, of the Index or
(2) the exchanges or quotation systems, if any, on which futures or options contracts on the Index are traded, fails to open for trading during its regular trading session; or (vi) any other event, if the Calculation Agent determines that
the event interferes with the ability of the Company or the ability of any of its affiliates to unwind all or a portion of a hedge with respect to the Securities that the Company or any of its affiliates have effected or may effect as described in
any Prospectus Supplement relating to the Securities. The following events will not be Market Disruption Events: (i) a limitation on the hours or number of days of trading on which any Index Constituent is traded, but only if the limitation
results from an announced change in the regular 

  
 –7–

 
business hours of the relevant market; or (ii) a decision to permanently discontinue trading in futures or options contracts relating to the Index. For purposes of determining whether a
Market Disruption Event has occurred, an “absence of trading” on an exchange or market will not include any time when the relevant exchange or market is itself closed for trading under ordinary circumstances. In contrast, a suspension or
limitation of trading in futures or options contracts related to the Index, if available, in the primary market for those contracts, by reason of any of: (i) a price change exceeding limits set by that market; (ii) an imbalance of orders
relating to those contracts, or (iii) a disparity in bid and ask quotes relating to those contracts, will constitute a suspension or material limitation of trading in futures or options contracts related to the Index in the primary market for
those contracts. In addition to the Market Disruption Events described above, a Market Disruption Event will also occur if the Index Sponsor does not publish the level of the Index on an Index Business Day or the Index is otherwise not available.

 “Maturity Date” means June 4, 2018, or, if such day is not a Business Day, the next succeeding Business
Day; provided, however, if the fifth Business Day before this day does not qualify as a Valuation Date, then the Maturity Date will be the fifth Business Day following the Final Valuation Date. 

“Qualified Financial Institution” means, at any time, a financial institution organized under the laws of any
jurisdiction in the United States of America or Europe that at such time has outstanding debt obligations with a stated maturity of one year or less from the date of issue and rated A-1 or higher by Standard & Poor’s Ratings Services
or any successor, or any other comparable rating then used by that rating agency, or P-1 or higher by Moody’s Investors Service or any successor, or any other comparable rating then used by that rating agency. 

“Trading Day” means with, respect to the Securities, a day on which (a) it is an Index Business Day,
(b) trading is generally conducted on the NYSE Arca stock exchange, and (c) it is a Business Day in New York City. 

“Valuation Date” each Trading Day from May 21, 2013 to May 30, 2018, subject to postponement as a result of
Market Disruption Events, such postponement not to exceed five Trading Days. May 21, 2013 is referred to herein as the “Initial Valuation Date” and May 30, 2018 as the “Final Valuation Date”. 

 
  

1. Promise to Pay at Maturity or Upon Early Redemption 
 Barclays Bank PLC, a public limited company duly organized and existing under the laws of England and Wales (herein called the “Company,” which term includes any successor Person under
the Indenture hereinafter referred to), for value received, hereby promises to pay (or cause to be paid) to Cede & Co., as nominee for DTC, or registered assigns, the amount as calculated and provided under (i) “Holder
Redemption” and elsewhere on the face this Security on the applicable Holder Redemption Date, in the case of any Securities in respect of which the Holder exercises such Holder’s right to require the Company to redeem such Holder’s
Securities prior to the Maturity Date, (ii) “Issuer Redemption” and elsewhere on the 

  
 –8–

 
face this Security on the applicable Issuer Redemption Date, in the case the Company exercises its right to redeem the Securities prior to the Maturity Date, (iii) “Automatic
Termination Event” and elsewhere on the face of this Security on the applicable Automatic Redemption Date, in the case of a Automatic Termination Event or (iv) “Payment at Maturity” and elsewhere on the face of this Security, on
the Maturity Date, if the Security has not been redeemed prior to or on the Maturity Date. 
 2. Payment of Interest

 The principal of this Security shall not bear interest. 

3. Discontinuance or Modification of the Index; Market Disruption Event 

If the Index Sponsor discontinues publication of the Index, and any other person or entity publishes an index that the Calculation Agent
determines is comparable to the discontinued Index and the Calculation Agent approves such index as a successor index, then the Calculation Agent will determine the level of the Index on the applicable Valuation Date and the amount payable on the
Maturity Date or any Holder Redemption Date, Issuer Redemption Date or Automatic Redemption Date by reference to such successor index. 
 If the Calculation Agent determines that the publication of the Index is discontinued and that there is no successor index, or that the closing level of the Index is not available for any reason, on the
date on which the level of the Index is required to be determined, the Calculation Agent will determine the amount payable by a computation methodology that the Calculation Agent determines will as closely as reasonably possible replicate the Index.

 If the Calculation Agent determines that the Index or the method of calculating the Index has been changed at any time in any
respect, and whether the change is made by the Index Sponsor under its existing policies or following a modification of those policies, is due to the publication of a successor index, or is due to any other reason – then the Calculation Agent
will be permitted (but not required) to make such adjustments to the Index or method of calculating the Index as it believes are appropriate to ensure that the level of the Index used to determine the amount payable on the Maturity Date is
equitable. 
 The Calculation Agent shall have the right to make all determinations and adjustments with respect to the Index in
its sole discretion. 
 If the Calculation Agent is prevented from determining the Automatic Redemption Value because a Market
Disruption Event occurs or is continuing following the occurrence of an Automatic Termination Event, the Calculation Agent may determine the Automatic Redemption Value when the Market Disruption Event has ceased to occur. However, if such Market
Disruption Event is continuing on the fifth Trading Day after the Automatic Termination Date, the Calculation Agent may make a good faith estimate in its sole discretion of the value of the Index and will determine the Automatic Redemption Value
prior to the close of trading on the fifth Trading Day after the Automatic Termination Date. 
 Valuation Dates with respect to
the Securities may be postponed and thus the determination of the level of the Index may be postponed if the Calculation Agent determines that, on the respective date, a Market Disruption Event has occurred or is continuing in respect of the Index.

  
 –9–

 4. Payment at Maturity, Upon Holder Redemption, Upon Issuer Redemption or Upon an
Automatic Termination Event 
 The payment of this Security that becomes due and payable on the Maturity Date, a Holder
Redemption Date, an Issuer Redemption Date or an Automatic Redemption Date, as the case may be, shall be the cash amount that must be paid to redeem this Security as provided above under “Payment at Maturity”, “Holder
Redemption”, “Issuer Redemption” and “Automatic Termination Event”, respectively. The payment of this Security that becomes due and payable upon acceleration of the Maturity Date hereof after an Event of Default has occurred
pursuant to the Indenture shall be the Default Amount. When the payment referred to in either of the two preceding sentences has been paid as provided herein (or such payment has been made available), the principal of this Security shall be deemed
to have been paid in full, whether or not this Security shall have been surrendered for payment or cancellation. References to the Payment at Maturity or upon early redemption of this Security on any day shall be deemed to mean the payment of cash
that is payable on such day as provided in this Security. Notwithstanding the foregoing, solely for the purpose of determining whether any consent, waiver, notice or other action to be given or taken by Holders of Securities pursuant to the
Indenture has been given or taken by Holders of Outstanding Securities in the requisite aggregate principal amount, the principal amount of this Security will be deemed to equal the Face Amount. This Security shall cease to be Outstanding as
provided in the definition of such term in the Indenture when the principal of this Security shall be deemed to have been paid in full as provided above. 
 5. Redemption Mechanics 
 (a) Holder Redemption. Subject to the minimum
redemption amount provided under “Holder Redemption”, the Holder may require the Company to redeem the Holder’s Securities on any Holder Redemption Date during the term of the Securities provided that such Holder (i) delivers a
notice of redemption to the Company via electronic mail by no later than 4:00 p.m. New York City time on the Business Day prior to the applicable Valuation Date; (ii) delivers a signed confirmation of redemption to the Company via facsimile by
no later than 5:00 p.m. New York City time on the same day; (iii) instructs the Holder’s DTC custodian to book a delivery versus payment trade with respect to the Holder’s Securities on the applicable Valuation Date at a price per
Security equal to the Closing Indicative Note Value on the applicable Valuation Date facing Barclays Capital DTC 5101; and (iv) causes the Holder’s DTC custodian to deliver the trade as booked for settlement via DTC at or prior to 10:00
a.m. New York City time on the applicable Holder Redemption Date, which shall be the third Business Day following the applicable Valuation Date (other than the Final Valuation Date). The final Holder Redemption Date shall be the third Business Day
following the Valuation Date that is immediately prior to the Final Valuation Date. Additionally, if an Automatic Termination Event occurs between the time at which the Holder delivers a notice of redemption to the Company and the close of business
on the applicable Valuation Date, the Holder’s notice of redemption will be deemed ineffective and the Securities will be automatically redeemed on the Automatic Redemption Date at an amount equal to the Automatic Redemption Value. 

  
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 (b) Issuer Redemption. If the Company elects to exercise its right to redeem the Securities
under “Issuer Redemption”, the Company will deliver written notice of such election to redeem to the Holder of such Securities not less than ten calendar days prior to the Issuer Redemption Date specified by the Company in such issuer
redemption notice. The Final Valuation Date will be deemed to be the third Trading Day prior to the Issuer Redemption Date (subject to postponement in the event of a Market Disruption Event), and the Securities will be redeemed on the Issuer
Redemption Date specified by the Company in such issuer redemption notice, but in no event prior to the tenth calendar day following the date on which the Company delivers such issuer redemption notice. 

(c) Automatic Termination Event. Upon the occurrence of an Automatic Termination Event, the Company will automatically redeem the
Securities on the Automatic Redemption Date and will deliver a notice of redemption to DTC in the form attached as Annex C to the Pricing Supplement relating to the Securities, specifying such date. Upon such redemption, the Holder will receive a
cash payment equal to the Automatic Redemption Value for each Security, which shall be specified in such notice. If a Market Disruption Event occurs and is continuing following the occurrence of an Automatic Termination Event and the Calculation
Agent is prevented from determining the Automatic Redemption Value, the Company will deliver a notice to DTC specifying the occurrence of an Automatic Termination Event and will deliver a separate notice to DTC to specify the Automatic Redemption
Date and the relevant Automatic Redemption Value following the resolution of the applicable Market Disruption Event. 
 6.
Role of Calculation Agent 
 Initially, the Company will serve as the Calculation Agent. The Company may change the
Calculation Agent after the Original Issue Date of the Securities without notice. The Calculation Agent will, in its sole discretion, make all determinations regarding the value of the Securities, including at maturity or upon Holder Redemption,
Issuer Redemption, or an Automatic Termination Event, Market Disruption Events, Valuation Dates, Business Days, Trading Days, Index Business Days, the Closing Indicative Note Value, the Long Index Amount, the Financing Level, the Daily Investor Fee,
the Leverage Factor, the Default Amount, the Maturity Date, the amount payable in respect of the Securities at maturity, upon Holder Redemption, Issuer Redemption and an Automatic Termination Event and any other calculations or determinations to be
made by the Calculation Agent as specified herein. The Calculation Agent shall make all such determinations and calculations in its sole discretion, and absent manifest error, all determinations of the Calculation Agent shall be final and binding on
the Company, the Holder and all other Persons having an interest in this Security, without liability on the part of the Calculation Agent. 
 The Calculation Agent reserves the right to make adjustments to correct errors contained in previously published information and to publish the corrected information, but is under no obligation to do so
and shall have no liability in respect of any errors or omissions contained in any subsequent publication. 

  
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 7. Payment 
 Payment of any amount payable on this Security in cash will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private
debts. Payment of any cash payable on this Security will be made to an account designated by the Holder (in writing to the Company and the Trustee on or before the Final Valuation Date) and approved by the Company or, if no such account is
designated and approved as aforesaid, at the office or agency of the Company maintained for that purpose in The City of New York (i.e., the office of the Trustee), provided, however, that Payment at Maturity and payment upon
Holder Redemption, Issuer Redemption or an Automatic Termination Event shall be made only upon surrender of this Security at such office or agency (unless the Company expressly waives surrender). Notwithstanding the foregoing, if this Security is a
Global Security, any payment may be made pursuant to the applicable procedures of DTC as permitted in said Indenture. 
 8.
Reverse of this Security 
 Reference is hereby made to the further provisions of this Security set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. 
 9. Certificate
of Authentication 
 Unless the certificate of authentication hereon has been executed by the Trustee referred to on the
reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. 
 10. Prospectus 
 Reference is made to (i) the Prospectus related to
the Securities, dated August 31, 2010, (ii) the Prospectus Supplement, dated May 27, 2011 and (iii) the Pricing Supplement, dated [            ], (together, the
“Prospectus”). The terms and conditions of this Security as fully set forth in the Prospectus are hereby incorporated by reference in their entirety into this Security and binding upon the parties hereto. In the event of a conflict
between the terms of the Prospectus and the terms of this Security, the Prospectus will control and if the Prospectus provides for a specific United States tax characterization, by purchasing a Security, you agree (in the absence of a change in law,
an administrative determination or a judicial ruling to the contrary) to be bound for United States federal income tax purposes to such tax characterization. Copies of the Prospectus are available from the Company or any underwriter or any dealer
participating in the offering by calling toll free, 1-888-227-2275 (extension 2-3430). 

  
 –12–

 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed. 

 

			
	BARCLAYS BANK PLC
		
	 By:
	 	
		 	Name:
		 	Title:
		
	By:	 	 
		 	Name:
		 	Title:

 This is one of the Securities of the series designated herein and referred to in the Indenture. 

Dated: 
  

			
	THE BANK OF NEW YORK MELLON
		
	 By:
	 	
		 	Name:
		 	Title:

  
 –13–

 (Reverse of Security) 
 This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”) issued and to be issued in one or more series under an Indenture, dated as of
September 16, 2004 (herein called the “Indenture,” which term shall have the meaning assigned to it in such instrument), between the Company and The Bank of New York Mellon, as Trustee (herein called the
“Trustee,” which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the
Company, the Trustee, the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. Insofar as the provisions of the Indenture may conflict with the provisions set forth on the face of this
Security, the latter shall control for purposes of this Security. 
 This Security is one of the series designated on the face
hereof. References herein to “this series” mean the series designated on the face hereof. 
 Payments under the Securities will
be made without deduction or withholding for, or on account of, any and all present or future income, stamp and other taxes, levies, imposts, duties, charges, fees, deductions or withholdings (“Taxes”) now or hereafter imposed,
levied, collected, withheld or assessed by or on behalf of the United Kingdom or any political subdivision or authority thereof or therein having the power to tax (each a “Taxing Jurisdiction”), unless such deduction or withholding
is required by law. If any such Taxes are at any time required by a Taxing Jurisdiction to be deducted or withheld, the Company will, subject to the exceptions and limitations set forth in Section 10.04 of the Indenture, pay such additional
amounts of the principal of such Security and any other amounts payable on such Security (“Additional Amounts”) as may be necessary in order that the net amounts paid to the Holder of any Security, after such deduction or
withholding, shall equal the amounts of the principal of such Security and any other amounts payable on such Security which would have been payable in respect of such Security had no such deduction or withholding been required. 

If at any time the Company determines that as a result of a change in or amendment to the laws or regulations of a Taxing Jurisdiction (including any
treaty to which such Taxing Jurisdiction is a party), or a change in an official application or interpretation of such laws or regulations (including a decision of any court or tribunal), either generally or in relation to any particular Securities,
which change, amendment, application or interpretation becomes effective on or after the Original Issue Date in making any payment of, or in respect of, the principal amount of the Securities, the Company would be required to pay any Additional
Amounts with respect thereto, then the Securities will be redeemable upon not less than 35 nor more than 60 days’ notice by mail, at any time thereafter, in whole but not in part, at the election of the Company as provided in the Indenture at a
redemption price equal to the principal amount thereof. 

  
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 The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the
modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in
principal amount of the Securities at the time Outstanding of all series to be affected (considered together as one class for this purpose). The Indenture also contains provisions (i) permitting the Holders of a majority in aggregate principal
amount of the Securities at the time Outstanding of all series to be affected under the Indenture (considered together as one class for this purpose), on behalf of the Holders of all Securities of such series, to waive compliance by the Company with
certain provisions of the Indenture and (ii) permitting the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding of any series to be affected under the Indenture (with each such series considered
separately for this purpose), on behalf of the Holders of all Securities of such series, to waive certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this
Security. 
 As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have any right to institute
any proceeding, judicial or otherwise, with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event
of Default with respect to the Securities of this series, the Holders of not less than 25% in aggregate principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings
in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request, and the Trustee shall not have received from the Holders of a
majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof on or after the respective due dates expressed herein. 

  
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 –15–

 No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or
impair the obligation of the Company, which is absolute and unconditional, to pay the principal of this Security as herein provided. 
 As
provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Senior Debt Security Register, upon surrender of this Security for registration of transfer at the office or agency
of the Company in any place where the principal of this Security is payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Senior Debt Security Registrar duly executed by, the Holder
hereof or his attorney duly authorized in writing. Thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or
transferees. 
 Any return on this Security that may be deemed to be interest will in no event be higher than the maximum rate permitted by New
York law, as it may be modified by U.S. law of general application 
 This Security, and any other Securities of this series and of like tenor,
are issuable only in registered form without coupons in denominations of any multiple of $100. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. 
 No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith. 
 Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice
to the contrary. 
 This Security and the Indenture shall be governed by and construed in accordance with the laws of the State of New York.

  
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 –16–

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