Document:

Exhibit 10.1_SVB Third Amended and Restated Agreement

Execution Version

THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of June 29, 2018 (the “Effective Date”) by and among SILICON VALLEY BANK, a California corporation (“Bank”), AVIAT NETWORKS, INC., a Delaware corporation (“Parent”), AVIAT U.S., INC., a Delaware corporation (“Opco”, together with Parent, the “US Borrowers” and each a “Borrower”), and AVIAT NETWORKS (S) PTE. LTD., a private company limited by shares formed under the laws of the Republic of Singapore (“Aviat Singapore” or “Singapore Borrower”, and together with the US Borrowers, the “Borrowers”), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank.  This Agreement amends and restates in its entirety, but is not a novation of, that certain Second Amended and Restated Loan and Security Agreement dated as of March 28, 2014 (as amended, the “Original Agreement”). The parties agree as follows:

1.ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement shall be construed following GAAP. Calculations and determinations must be made following GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated shall have the meaning provided by the Code to the extent such terms are defined therein.
2.    LOAN AND TERMS OF PAYMENT
2.1    Promise to Pay.    US Borrowers hereby unconditionally promise to pay Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in accordance with this Agreement.  Singapore Borrower hereby unconditionally promises to pay Bank the outstanding principal amount of all Singapore Utilization and accrued and unpaid interest thereon as and when due in accordance with this Agreement
2.2    Revolving Line.
(a)Availability.  Subject to the terms and conditions of this Agreement and to deduction of Reserves, Bank shall make (i) Advances in Dollars to a US Borrower (“US Advances”) not exceeding the Availability Amount and (ii) Advances in Dollars to Singapore Borrower (“Singapore Advances”) not exceeding the Singapore Availability Amount.  Amounts borrowed under the Revolving Line may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein.  No Singapore Advances shall be drawn until satisfaction of the Singapore Conditions Precedent.

(b)Termination; Repayment.  The Revolving Line terminates on the Revolving Line Maturity Date, when the principal amount of all Advances, the unpaid interest thereon, and all other Obligations relating to the Revolving Line shall be immediately due and payable.

(c)Early Termination.  The Revolving Line may be terminated at the election of US Borrowers, by not less than thirty days’ irrevocable written notice to the Bank specifying the termination date (the “Termination Date”). Following the giving of such notice, no further Credit Extensions may be requested and Bank shall have no obligation to make Credit Extensions. On the Termination Date the principal amount of all Advances, the unpaid interest thereon, and all other Obligations relating to the Revolving Line shall be immediately due and payable.

2.3    Letters of Credit Sublimit.
(a)    As part of the Revolving Line, Bank shall issue or have issued Letters of Credit denominated in Dollars or a Foreign Currency for Borrower’s account.  The aggregate Dollar Equivalent amount utilized for the issuance of Letters of Credit shall at all times reduce the amount otherwise available for Advances under the Revolving Line. The aggregate Dollar Equivalent of the face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve) may not exceed (i) in the case of US Borrowers, the lesser of (A) the Letter of Credit Sublimit, (B) the Borrowing Base, minus the sum of all outstanding principal amounts of any Advances (including the aggregate Dollar Equivalent of the face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve) or (C) the Revolving Line minus the sum of all outstanding principal amounts of any Advances (including the aggregate Dollar Equivalent of the face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve); or (ii) in the case of the Singapore Borrower, the lesser of (A) the Letter of Credit Sublimit, (B) Singapore Availability Amount minus the sum of all outstanding principal amounts of any Singapore Advances (including the aggregate Dollar Equivalent of the face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve) or (C) the Revolving Line minus the sum of all outstanding principal amounts of any Advances (including the aggregate Dollar Equivalent of the face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve).  For the avoidance of doubt, the Existing Letters of Credit shall constitute Letters of Credit hereunder.

(b)    If, on the Revolving Line Maturity Date (or the effective date of any termination of this Agreement), there are any outstanding Letters of Credit, then on such date the applicable Borrower shall provide to Bank cash collateral in an amount equal to at least one hundred five percent (105.0%) for Letters of Credit denominated in Dollars or at least one hundred ten percent (110.0%) for Letters of Credit denominated in a Foreign Currency, in each case of the aggregate Dollar Equivalent of the face amount of all such Letters of Credit plus all interest, fees, and costs due or estimated by Bank to become due in connection therewith, to secure all of the Obligations relating to such Letters of Credit.  All Letters of Credit shall be in form and substance acceptable to Bank in its sole discretion and shall be subject to the terms and conditions of Bank’s standard Application and Letter of Credit Agreement (the “Letter of Credit Application”).  Each Borrower agrees to execute any further documentation in connection with the Letters of Credit as Bank may reasonably request.  Each Borrower further agrees to be bound by the regulations and interpretations of the issuer of any Letters of Credit guarantied by Bank and opened for such Borrower’s account or by Bank’s interpretations of any Letter of Credit issued by Bank for such Borrower’s account, and each Borrower understands and agrees that Bank shall not be liable for any error, negligence, or mistake, whether of omission or commission, in following any Borrower’s instructions or those contained in the Letters of Credit or any modifications, amendments, or supplements thereto.

(c)    The obligation of each Borrower to immediately reimburse Bank for drawings made under Letters of Credit shall be absolute, unconditional, and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, such Letters of Credit, and the Letter of Credit Application; provided that the Singapore Borrower’s reimbursement obligations shall be limited to drawings made under Letters of Credit issued by Bank for Singapore Borrower’s account.

(d)    Any Borrower may request that Bank issue a Letter of Credit payable in a Foreign Currency.  If a demand for payment is made under any such Letter of Credit, Bank shall treat such demand as an Advance to such Borrower of the Dollar Equivalent of the amount thereof (plus fees and charges in connection therewith such as wire, cable, SWIFT or similar charges).

(e)    To guard against fluctuations in currency exchange rates, upon the issuance of any Letter of Credit payable in a Foreign Currency, Bank shall create a reserve (the “Letter of Credit Reserve”) under the Revolving Line in an amount equal to a percentage (which percentage shall be determined by Bank in its sole discretion) of the face amount of such Letter of Credit.  The amount of the Letter of Credit Reserve may be adjusted by Bank from time to time to account for fluctuations in the exchange rate.  The availability of funds under the Revolving Line shall be reduced by the amount of such Letter of Credit Reserve for as long as such Letter of Credit remains outstanding.

(f)    If, on the Revolving Line Maturity Date (or the effective date of any termination of this Agreement) the Borrower’s Adjusted Quick Ratio is less than 1.10:1.00, then with respect to any Letters of Credit that Bank issues or renews on or after such date, Borrower shall promptly provide to Bank cash collateral in an amount equal to (x) if such Letters of Credit are denominated in Dollars, then at least one hundred percent (100%); and (y) if such Letters of Credit are denominated in a Foreign Currency, then at least one hundred ten percent (110%), of the Dollar Equivalent of the face amount of all such Letters of Credit plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its reasonable business judgment), to secure all of the Obligations relating to such Letters of Credit.  Notwithstanding anything to the contrary in this Section 2.3(f), Singapore Borrower’s obligations to provide cash collateral to secure Obligations with respect to any Letters of Credit shall only be for any Letters of Credit issued for Singapore Borrower’s account.

2.4    Overadvances.  If, at any time, (a) the Revolving Line Utilization exceeds the lesser of (i) the Revolving Line or (ii) the Borrowing Base, or (b) the Singapore Utilization exceeds the lesser of (i)(1) the Revolving Line minus (2) the outstanding aggregate amount of US Advances, or (2) the Singapore Sublimit, then Borrowers shall immediately pay to Bank in cash the amount of such excess (such excess, the “Overadvance”). Without limiting Borrowers’ obligation to repay Bank any Overadvance, Borrowers agree to pay Bank interest on the outstanding amount of any Overadvance, on demand, at a per annum rate equal to the rate that is otherwise applicable to Advances plus five percent (5.0%).  Notwithstanding anything to the contrary in this Section 2.4, Singapore Borrower’s obligations to repay any Overadvance (and any accrued interest thereon) shall only be for any Advances related to the Singapore Utilization.
2.5    Availability of Optional Currencies.
(a)    Optional Currencies.  Borrowers may request in the relevant Notice of Borrowing under Section 3.4 that an Advance be denominated in an Optional Currency, in which event the Advance shall, subject to the following provisions, be denominated in such Optional Currency (each such Advance, an “Optional Currency Advance”).  Borrower shall not be permitted to alter such request without the written consent of Bank.  All other Advances shall be denominated in Dollars (each such other Advance, a “Dollar Advance”).

(b)    Non-availability of Optional Currencies.  If a Borrower requests an Optional Currency Advance, and (i) Bank notifies such Borrower that it does not agree to such request; or (ii) Bank is not satisfied that all necessary governmental and other approvals, authorizations and consents have been obtained; or (iii) Bank determines that it is not feasible for an Advance to be denominated in such Optional Currency, then unless Bank otherwise agrees, that Advance shall be a Dollar Advance.

(c)    Currency of Repayment.  Each Advance shall remain, and shall be paid or repaid (as the case may be) in the Currency in which it was made, but this shall not restrict the right of Bank to apply the proceeds of Collateral denominated in one Currency against Obligations denominated in another Currency, and to effect any necessary Currency conversion for such purpose pursuant to Section 12.3(b).

(d)Currency Margin.  If at any time Bank certifies that an Advance or the aggregate of all outstanding Advances, as the case may be, together with all accrued but unpaid interest, exceeds (or, in the case of any Advance denominated in an Optional Currency, would exceed if converted into Dollars at Bank’s spot rate of exchange for the purchase of Dollars on that day) one hundred ten percent (110.0%) of the Availability Amount, Borrowers shall promptly prepay the Advance or Advances in whole or in part sufficient to reduce such amount (or aggregate amount), or its Dollar-equivalent converted as mentioned above, to one hundred percent (100.0%) of the Availability Amount, and if Borrowers fail to do so, Bank may, without prior notice, convert any Advance to Dollars at its spot rate of exchange.  Notwithstanding anything to the contrary in this Section 2.5, Singapore Borrower’s obligations to prepay any Advance shall only be for any Advances related to the Singapore Utilization.

2.6    Payment of Interest on the Credit Extensions.
(a)    Interest; Payment.  Each Advance shall, at Borrower’s option, in accordance with the terms of this Agreement, be either in the form of a Prime Rate Advance or a LIBOR Advance.  Each Advance shall bear interest on the outstanding principal amount thereof from the date when made, continued or converted until paid in full at a rate per annum equal to (i) for Prime Rate Advances, the Prime Rate plus the applicable Prime Rate Margin, and (ii) for LIBOR Advances, the LIBOR Rate plus the applicable LIBOR Rate Margin.  On and after the expiration of any Interest Period applicable to any LIBOR Advance outstanding on the date of occurrence of an Event of Default or acceleration of the Obligations, the amount of such LIBOR Advance shall, during the continuance of such Event of Default or after acceleration, bear interest at a rate per annum equal to the Prime Rate plus five percent (5.0%).  Pursuant to the terms hereof, interest on each Advance shall be paid in arrears on each Interest Payment Date.  Interest shall also be paid on the date of any prepayment of any Advance pursuant to this Agreement for the portion of any Advance so prepaid and upon payment (including prepayment) in full thereof.  All accrued but unpaid interest on the Advances shall be due and payable on the Revolving Line Maturity Date.

(b)    Prime Rate Advances.  Each change in the interest rate of the Prime Rate Advances based on changes in the Prime Rate shall be effective on the effective date of such change and to the extent of such change.

(c)    LIBOR Advances.  The interest rate applicable to each LIBOR Advance shall be determined in accordance with Section 3.6(a) hereunder.  Subject to Sections 3.5 and 3.6, such rate shall apply during the entire Interest Period applicable to such LIBOR Advance, and interest calculated thereon shall be payable on the Interest Payment Date applicable to such LIBOR Advance.

(d)    Computation of Interest.  Any interest hereunder will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days in the case of any Credit Extension outstanding in any Currency other than Pounds Sterling, and a year of 365 days in respect of any Credit Extension outstanding in Pounds Sterling.  In computing interest on any Credit Extension, the date of the making of such Credit Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension.

(e)Default Rate.  Upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is five percent (5.0%) above the rate that would otherwise be applicable thereto (the “Default Rate”).  Payment or acceptance of the increased interest provided in this Section 2.6(e) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.

2.7    Fees.  Borrower shall pay to Bank:
(a)Amendment Fee.  A fully earned, non-refundable amendment fee of Twenty-Five Thousand Dollars ($25,000) on the Effective Date;

(b)Letter of Credit Fee.  Bank’s customary fees and expenses for the issuance or renewal of Letters of Credit, including, without limitation, a letter of credit fee of one percent (1.00%) per annum of the Dollar Equivalent of the face amount of each Letter of Credit issued, upon the issuance of such Letter of Credit, each anniversary of the issuance during the term of such Letter of Credit, and upon the renewal of such Letter of Credit by Bank;

(c)Unused Revolving Line Facility Fee.  A fee (the “Unused Revolving Line Facility Fee”), payable quarterly, in arrears, on a calendar year basis, in an amount equal to such applicable percentage of the average quarterly unused portion of the Revolving Line (with the value of Letters of Credit measured at month end for purposes of calculating the fee under this provision) as set forth below based on Borrowers’ consolidated financial statements as of the most recent fiscal quarter end:

	
			
	Level
	Borrowers’ Adjusted 
Quick Ratio
	Unused Revolving Line
Facility Fee

	I
	Greater than or equal to 
1.10:1.00
	0.25% per annum

	II
	Less than
1.10:1.00
	0.35% per annum

For purposes of calculating the Unused Revolving Line Facility Fee, the unused portion of the Revolving Line shall equal the Revolving Line minus the Revolving Line Utilization; and
(d)Bank Expenses.  All Bank Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due (or, if no stated due date, upon demand by Bank).

(e)Fees Fully Earned.  Unless otherwise provided in this Agreement or in a separate writing by Bank, no Borrower shall be entitled to any credit, rebate, or repayment of any fees earned by Bank pursuant to this Agreement notwithstanding any termination of this Agreement or the suspension or termination of Bank’s obligation to make loans and advances hereunder.  Bank may deduct amounts owing by any Borrower under the clauses of this Section 2.7 pursuant to the terms of Section 2.8(c).  Bank shall provide Borrower written notice of deductions made from the Designated Deposit Account pursuant to the terms of the clauses of this Section 2.7.

2.8    Payments; Application of Payments; Debit of Accounts.  

(a)    All payments to be made by Borrowers under any Loan Document shall be made in immediately available funds in Dollars, without setoff or counterclaim, before 12:00 p.m. Pacific time on the date when due.  Payments of principal and/or interest received after 12:00 p.m. Pacific time are considered received at the opening of business on the next Business Day.  When a payment is due on a day that is not 

a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable, shall continue to accrue until paid.

(b)    Bank has the exclusive right to determine the order and manner in which all payments with respect to the Obligations may be applied; provided, however, that that Bank shall apply the funds of Singapore Borrower to the Singapore Obligations, exclusively.  Borrowers shall have no right to specify the order or the accounts to which Bank shall allocate or apply any payments required to be made by Borrowers to Bank or otherwise received by Bank under this Agreement when any such allocation or application is not specified elsewhere in this Agreement.  Notwithstanding Bank’s exclusive right to determine the order and manner in which all payments are applied, pursuant to this Section 2.8(b), Bank intends to apply such payments as follows: (i) all principal and interest payments received by Bank, and all proceeds of Collateral received by Bank, shall be applied (A) first to reduce the balance of principal and interest of the Revolving Line outstanding, and (B) in the case of payments received from Singapore Borrower, first to reduce the balance of principal and interest of the Singapore Obligations; provided that so long as no Event of Default has occurred and is continuing, any Borrower may specify that any payment made by such Borrower to Bank shall be for the payment of specific Obligations then due and payable under any provision of this Agreement or any other Loan Document.  For the avoidance of doubt, in no event shall Bank apply any payments received by Singapore Borrower to, nor shall any payment by Singapore Borrower be construed to be for, any Obligation owing by any US Borrower.

(c)    Bank may debit any Borrower’s deposit accounts, including the Designated Deposit Account, for principal and interest payments or any other amounts such Borrower owes Bank when due.  Notwithstanding anything herein, Bank shall only debit the deposit accounts of Singapore Borrower for amounts owing under the Singapore Obligations.  These debits shall not constitute a set-off.

2.9    Withholding.  Payments received by Bank from Borrowers under this Agreement will be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority (including any interest, additions to tax or penalties applicable thereto).  Specifically, however, if at any time any Governmental Authority, applicable law, regulation or international agreement requires any Borrower to make any withholding or deduction from any such payment or other sum payable hereunder to Bank, such Borrower hereby covenants and agrees that the amount due from such Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, Bank receives a net sum equal to the sum which it would have received had no withholding or deduction been required, and such Borrower shall pay the full amount withheld or deducted to the relevant Governmental Authority.  Each Borrower will, upon request, furnish Bank with proof reasonably satisfactory to Bank indicating that such Borrower has made such withholding payment; provided, however, that no Borrower need make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by such Borrower.  The agreements and obligations of each Borrower contained in this Section 2.9 shall survive the termination of this Agreement.

3    CONDITIONS OF LOANS
3.1    Conditions Precedent to Initial Credit Extension.  Bank’s obligation to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate, including, without limitation:

(a)    duly executed original signatures to the Loan Documents;
(b)    duly executed original signatures to the Perfection Certificates for each Borrower;
(c)    each US Borrower’s Operating Documents and a good standing certificate of each US Borrower certified by the Secretary of State of the State of Delaware as of a date no earlier than thirty (30) days prior to the Effective Date;
(d)    duly executed original signatures to the completed Borrowing Resolutions for each Borrower;
(e)    Singapore Borrower’s Operating Documents;
(f)    certified copies, dated as of a recent date, of financing statement searches, as Bank shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements constitute Permitted Liens;
(g)    evidence satisfactory to Bank that the insurance policies required by Section 6.7 hereof are in full force and effect, together with appropriate evidence showing loss payable and/or additional insured clauses in favor of Bank; and
(h)    payment of the fees and Bank Expenses then due as specified in Section 2.7 hereof.
3.2    Conditions Precedent to all Credit Extensions.  Bank’s obligation to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:

(a)Timely receipt of the Credit Extension request and any materials and documents required by Section 3.4;

(b)the representations and warranties in this Agreement shall be true, accurate, and complete in all material respects on the date of the proposed Credit Extension and on the Funding Date of each Credit Extension; provided, however, 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; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension.  Each Credit Extension is Borrowers’ representation and warranty on that date that the representations and warranties in this Agreement remain true, accurate, and complete in all material respects; provided, however, 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; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; and

(c)Bank determines to its satisfaction that there has not been a Material Adverse Change.

3.3    Covenant to Deliver.  Borrowers agree to deliver to Bank each item required to be delivered to Bank under this Agreement as a condition precedent to any Credit Extension.  Borrowers expressly agree that a Credit Extension made prior to the receipt by Bank of any such item shall not constitute a waiver by Bank of Borrowers’ obligation to deliver such item, and the making of any Credit Extension in the absence of a required item shall be in Bank’s sole discretion.

3.4    Procedures for Borrowing.

(a)    Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set forth in this Agreement, an Advance shall be made upon Administrative Borrower’s or Singapore Borrower’s (in each case, via an individual duly authorized by an Administrator) irrevocable written notice delivered to Bank in the form of a Notice of Borrowing or without instructions if any Advance is necessary to meet Obligations which have become due.  The Notice of Borrowing shall be made by Borrower through Bank’s online banking program, provided, however, if Borrower is not utilizing Bank’s online banking program, then such Notice of Borrowing shall be in the form attached hereto as Exhibit C and shall be executed by an Authorized Signer.  Bank shall have received satisfactory evidence that the Board has approved that such Authorized Signer may provide such notices and request Advances.  The Notice of Borrowing must be received by Bank prior to 12:00 p.m. Pacific time, (i) at least three (3) Business Days prior to the requested Funding Date, in the case of any LIBOR Advance, and (ii) on the requested Funding Date, in the case of a Prime Rate Advance, specifying: (1) the amount of the Advance; (2) the Currency in which such Advance shall be denominated; (3) the requested Funding Date; (4) whether the Advance is to be comprised of LIBOR Advances or Prime Rate Advances; and (5) the duration of the Interest Period applicable to any such LIBOR Advances included in such notice; provided that if the Notice of Borrowing shall fail to specify the duration of the Interest Period for any Advance comprised of LIBOR Advances, such Interest Period shall be one (1) month.  Notwithstanding any terms in this Agreement to the contrary, each LIBOR Advance shall not be less than One Million Dollars ($1,000,000.00) (or one million (1,000,000.00) of the applicable units for a LIBOR Advance to be made in an Optional Currency) and shall be in a multiple of One Hundred Thousand Dollars ($100,000.00) (or one hundred thousand (100,000.00) of the applicable units for a LIBOR Advance to be made in an Optional Currency).  In addition to such Notice of Borrowing, either Administrative Borrower or Singapore Borrower, as applicable, must promptly deliver to Bank by electronic mail or through Bank’s online banking program such reports and information, including without limitation, sales journals, cash receipts journals, accounts receivable aging reports, as Bank may request in its sole discretion (including an updated Borrowing Base Certificate signed by a Responsible Officer if the most recent Borrowing Base Certificate delivered pursuant to Section 6.2(e) is dated 30 days or more prior to the date of the Notice of Borrowing).
(b)    On the Funding Date, Bank shall credit proceeds of an Advance to the Designated Deposit Account denominated in the same Currency as the Currency requested with respect to the Advance and, subsequently, shall transfer such proceeds by wire transfer to such other account as the applicable Borrower may instruct in the Notice of Borrowing.  Except for protective payments pursuant to Section 9.3, no Advances shall be deemed made to any Borrower, and no interest shall accrue on any such Advance, until the related funds have been deposited in the applicable Designated Deposit Account.
3.5    Conversion and Continuation Elections.

(a)    So long as (i) no Event of Default exists; (ii) Borrowers shall not have sent any notice of termination of this Agreement; and (iii) Borrowers shall have complied with such customary procedures as Bank has established from time to time for Borrower’s requests for LIBOR Advances, either Administrative Borrower or Singapore Borrower, as applicable, may, upon irrevocable written notice to Bank:
(1)elect to convert on any Business Day, Prime Rate Advances into LIBOR Advances;

(2)elect to continue on any Interest Payment Date any LIBOR Advances maturing on such Interest Payment Date; or

(3)elect to convert on any Interest Payment Date any LIBOR Advances maturing on such Interest Payment Date into Prime Rate Advances.

(b)    Either Administrative Borrower or Singapore Borrower, as applicable, shall deliver a Notice of Conversion/Continuation by electronic mail via Bank’s online banking program to be received by Bank prior to 12:00 p.m. Pacific time (i) at least three (3) Business Days in advance of the Conversion Date or Continuation Date, if any Advances are to be converted into or continued as LIBOR Advances; and (ii) on the Conversion Date, if any Advances are to be converted into Prime Rate Advances, in each case specifying the:

(1)    proposed Conversion Date or Continuation Date;

(2)    aggregate amount of the Advances to be converted or continued;

(3)    nature of the proposed conversion or continuation; and

(4)    if the resulting Advance is to be a LIBOR Advance, the duration of the requested Interest Period.

(c)    If upon the expiration of any Interest Period applicable to any LIBOR Advances, the applicable Borrower shall have timely failed to select a new Interest Period to be applicable to such LIBOR Advances or request to convert a LIBOR Advance into a Prime Rate Advance, Borrower shall be deemed to have elected (i) for any such Dollar Advances, to convert such LIBOR Advances into Prime Rate Advances, and (ii) for any such Optional Currency Advances, to, at Bank’s option, (A) renew such Optional Currency Advance as a one (1) month LIBOR Advance or (B) repay such Optional Currency Advance.

(d)Any LIBOR Advances shall, at Bank’s option, convert into Prime Rate Advances in the event that (i) an Event of Default exists, or (ii) the aggregate principal amount of the Prime Rate Advances which have been previously converted to LIBOR Advances, or the aggregate principal amount of existing LIBOR Advances continued, as the case may be, at the beginning of an Interest Period shall at any time during such Interest Period exceeds the lesser of the Revolving Line or the Borrowing Base.  Borrowers agree to pay Bank, upon demand by Bank (or Bank may, at its option, debit the Designated Deposit Account or any other account Borrowers maintain with Bank) any amounts required to compensate Bank for any loss (including loss of anticipated profits), cost, or expense incurred by Bank, as a result of the conversion of LIBOR Advances to Prime Rate Advances pursuant to this Section 3.5(d); provided that any payment made by Singapore Borrower pursuant to this Section 3.5(d) shall only be for any loss, cost or expense incurred by Bank related to the Singapore Utilization.

(e)Notwithstanding anything to the contrary contained herein, Bank shall not be required to purchase Dollar deposits in the London interbank market or other applicable LIBOR market to fund any LIBOR Advances, but the provisions hereof shall be deemed to apply as if Bank had purchased such deposits to fund the LIBOR Advances.

3.6    Special Provisions Governing LIBOR Advances.   Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to LIBOR Advances as to the matters covered:

(a)    Determination of Applicable Interest Rate.  As soon as practicable on each Interest Rate Determination Date, Bank shall determine (which determination shall, absent manifest error in calculation, be final, conclusive and binding upon all parties) the interest rate that shall apply to the LIBOR Advances for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Borrowers.

(b)    Inability to Determine Applicable Interest Rate.  In the event that Bank shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any LIBOR Advance, that by reason of circumstances affecting the London interbank market adequate and fair means do not exist for ascertaining the interest rate applicable to such LIBOR Advance on the basis provided for in the definition of LIBOR, Bank shall on such date give notice (by facsimile or by telephone confirmed in writing) to the applicable Borrower of such determination, whereupon (i) no Advances may be made as, or converted to, LIBOR Advances until such time as Bank notifies the applicable Borrower that the circumstances giving rise to such notice no longer exist, and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by the applicable Borrowers with respect to LIBOR Advances in respect of which such determination was made shall be deemed to be rescinded by such Borrower.

(c)    Compensation for Breakage or Non-Commencement of Interest Periods.  If (i) for any reason, other than a default by Bank or any failure of Bank to fund LIBOR Advances due to impracticability or illegality under Sections 3.7(c) and 3.7(d) of this Agreement, a borrowing or a conversion to or continuation of any LIBOR Advance does not occur on a date specified in a Notice of Borrowing or a Notice of Conversion/Continuation, as the case may be, or (ii) any complete or partial principal payment or reduction of a LIBOR Advance, or any conversion of any LIBOR Advance, occurs on a date prior to the last day of an Interest Period applicable to that LIBOR Advance, including due to voluntary or mandatory prepayment or acceleration, then, in each case, the applicable Borrower shall compensate Bank, upon written request by Bank, for all losses and expenses incurred by Bank in an amount equal to the excess, if any, of:

(A)    the amount of interest that would have accrued on the amount (1) not borrowed, converted or continued as provided in clause (i) above, or (2) paid, reduced or converted as provided in clause (ii) above, for the period from (y) the date of such failure to borrow, convert or continue as provided in clause (i) above, or the date of such payment, reduction or conversion as provided in clause (ii) above, as the case may be, to (z) in the case of a failure to borrow, convert or continue as provided in clause (i) above, the last day of the Interest Period that would have commenced on the date of such borrowing, conversion or continuing but for such failure, and in the case of a payment, reduction or conversion prior to the last day of an Interest Period applicable to a LIBOR Advance as provided in clause (ii) above, the last day of such Interest Period, in each case at the applicable rate of interest or other return for such LIBOR Advance(s) provided for herein (excluding, however, the LIBOR Rate Margin included therein, if any), over 
(B)    the interest which would have accrued to Bank on the applicable amount provided in clause (A) above through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to the definition of LIBOR Rate on the date of such failure to borrow, convert or continue as provided in clause (i) above, or the date of such payment, reduction or conversion as provided in clause (ii) above, as the case may be, for a period equal to the remaining period of such applicable Interest Period provided in clause (A) above.  

Bank’s request shall set forth the manner and method of computing such compensation and such determination as to such compensation shall be conclusive absent manifest error.  Notwithstanding anything herein to the contrary, any payments made by Singapore Borrower pursuant to this Section 3.6(c) shall be limited to amounts specified in subclauses (A) and (B) above incurred by Bank related to the Singapore Utilization.
(d)    Assumptions Concerning Funding of LIBOR Advances.  Calculation of all amounts payable to Bank under this Section 3.6 and under Section 3.7 shall be made as though Bank had actually funded each relevant LIBOR Advance through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to the definition of LIBOR Rate in an amount equal to the amount of such LIBOR Advance and having a maturity comparable to the relevant Interest Period; provided, however, that Bank may fund each of its LIBOR Advances in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section 3.6 and under Section 3.7.

(e)    LIBOR Advances After an Event of Default.  After the occurrence and during the continuance of an Event of Default, (i) Borrowers may not elect to have an Advance be made or continued as, or converted to, a LIBOR Advance after the expiration of any Interest Period then in effect for such Advance and (ii) subject to the provisions of Section 3.6(c), any Notice of Conversion/Continuation given by a Borrower with respect to a requested conversion/continuation that has not yet occurred shall, at Bank’s option, be deemed to be rescinded by such Borrower and be deemed a request to convert or continue Advances referred to therein as Prime Rate Advances.

3.7    Additional Requirements/Provisions Regarding LIBOR Advances.

(a)    Borrowers shall pay Bank, upon demand by Bank, from time to time such amounts as Bank may determine to be necessary to compensate it for any costs incurred by Bank that Bank determines are attributable to its making or maintaining of any amount receivable by Bank hereunder in respect of any LIBOR Advances relating thereto (such increases in costs and reductions in amounts receivable being herein called “Additional Costs”), in each case resulting from any Regulatory Change which:

(i)changes the basis of taxation of any amounts payable to Bank under this Agreement in respect of any LIBOR Advances (other than changes which affect taxes measured by or imposed on the overall net income of Bank by the jurisdiction in which Bank has its principal office);

(ii)imposes or modifies any reserve, special deposit or similar requirements relating to any extensions of credit or other assets of, or any deposits with, or other liabilities of Bank (including any LIBOR Advances or any deposits referred to in the definition of LIBOR); or

(iii)imposes any other condition affecting this Agreement (or any of such extensions of credit or liabilities);

(iv)

provided that any payments made by Singapore Borrower pursuant to this Section 3.7(a) shall only be for any Additional Costs incurred by Bank related to the Singapore Utilization.
Bank will notify Borrowers of any event occurring after the Effective Date which will entitle Bank to compensation pursuant to this Section 3.7(a) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation.  Bank will furnish Borrowers with a statement setting forth the basis and amount of each request by Bank for compensation under this Section 3.7(a).  Determinations and allocations by Bank for purposes of this Section 3.7(a) of the effect of any Regulatory 

Change on its costs of maintaining its obligations to make LIBOR Advances, of making or maintaining LIBOR Advances, or on amounts receivable by it in respect of LIBOR Advances, and of the additional amounts required to compensate Bank in respect of any Additional Costs, shall be conclusive absent manifest error.
(b)    If Bank shall determine that the adoption or implementation of any applicable law, rule, regulation, or treaty regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by Bank (or its applicable lending office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank, or comparable agency, has or would have the effect of reducing the rate of return on capital of Bank or any person or entity controlling Bank (a “Bank Parent”) as a consequence of its obligations hereunder to a level below that which Bank (or its Bank Parent) could have achieved but for such adoption, change, or compliance (taking into consideration policies with respect to capital adequacy) by an amount deemed by Bank to be material, then from time to time, within five (5) days after demand by Bank, Borrowers shall pay to Bank such additional amount or amounts as will compensate Bank for such reduction.  A statement of Bank claiming compensation under this Section 3.7(b) and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive absent manifest error.

Notwithstanding anything to the contrary in this Section 3.7, Borrower shall not be required to compensate Bank pursuant to this Section 3.7(b) for any amounts incurred more than nine (9) months prior to the date that Bank notifies Borrower of Bank’s intention to claim compensation therefor; provided that if the circumstances giving rise to such claim have a retroactive effect, then such nine-month period shall be extended to include the period of such retroactive effect.  The obligations of Borrower arising pursuant to this Section 3.7(b) shall survive the Revolving Line Maturity Date, the termination of this Agreement and the repayment of all Obligations; provided, however, that any payments made by Singapore Borrower pursuant to this Section 3.7(b) shall only be for any amount demanded by Bank related to the Singapore Utilization.
(c)    If, at any time, Bank, in its sole and absolute discretion, determines that (i) the amount of LIBOR Advances for periods equal to the corresponding Interest Periods are not available to Bank in the offshore currency interbank markets, or (ii) LIBOR does not accurately reflect the cost to Bank of lending the LIBOR Advances, then Bank shall promptly give notice thereof to Borrowers.  Upon the giving of such notice, Bank’s obligation to make the LIBOR Advances shall terminate; provided, however, LIBOR Advances shall not terminate if Bank and Borrowers agree in writing to a different interest rate applicable to LIBOR Advances.
 
(d)    If it shall become unlawful for Bank to continue to fund or maintain any LIBOR Advances, or to perform its obligations hereunder, upon demand by Bank, Borrowers shall prepay the LIBOR Advances in full with accrued interest thereon and all other amounts payable by Borrowers hereunder (including, without limitation, any amount payable in connection with such prepayment pursuant to Section 3.7(c)(ii)); provided that any payments made by Singapore Borrower pursuant to this Section 3.7(d) shall only be for any demand by Bank related to the Singapore Utilization.  Notwithstanding the foregoing, to the extent a determination by Bank as described above relates to a LIBOR Advance then being requested by Borrowers pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, Borrowers shall have the option, subject to the provisions of Section 3.7(c)(ii), to (i) rescind such Notice of Borrowing or Notice of Conversion/Continuation by giving notice (by facsimile or by telephone confirmed in writing) to Bank of such rescission on the date on which Bank gives notice of its determination as described above, or (ii) modify such Notice of Borrowing or Notice of Conversion/Continuation to obtain a Prime Rate Advance or 

to have outstanding Advances converted into or continued as Prime Rate Advances by giving notice (by facsimile or by telephone confirmed in writing) to Bank of such modification on the date on which Bank gives notice of its determination as described above.

4    CREATION OF SECURITY INTEREST

4.1    Grant of Security Interest.
  
(a)    US Borrowers.  Each US Borrower hereby grants Bank, to secure the prompt payment and performance in full of all of the Obligations of Borrowers, a continuing security interest in, and pledges to Bank, the US Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.  Notwithstanding the foregoing, at all times the Collateral shall include all proceeds of all Intellectual Property of each US Borrower (whether acquired upon the sale, lease, license, exchange or other disposition of such Intellectual Property) and all other rights arising out of such Intellectual Property.

(b)    Singapore Borrower. Singapore Borrower hereby grants Bank, to secure the prompt payment and performance in full of all of the Singapore Obligations, a continuing security interest in, and pledges to Bank, the Singapore Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.  Notwithstanding the foregoing, at all times the Singapore Collateral shall include all proceeds of all Intellectual Property of Singapore Borrower (whether acquired upon the sale, lease, license, exchange or other disposition of such Intellectual Property) and all other rights arising out of such Intellectual Property.

(c)    Bank Services Agreements.  Each Borrower acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank.  Regardless of the terms of any Bank Services Agreement, each Borrower agrees that any amounts Borrowers owe Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of each Borrower and Bank to have (i) all such Obligations secured by the first priority perfected security interest in the US Collateral and (ii) all such Singapore Obligations also secured by the Singapore Collateral granted herein (in each case, subject only to Permitted Liens that are permitted pursuant to the terms of this Agreement to have superior priority to Bank’s Lien in this Agreement).  If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash.  Upon payment in full in cash of the Obligations (other than inchoate indemnity obligations) and at such time as Bank’s obligation to make Credit Extensions has terminated, Bank shall, at the sole cost and expense of Borrower, release its Liens in the Collateral and all rights therein shall revert to Borrower.  In the event (x) all Obligations (other than inchoate indemnity obligations), except for Bank Services, are satisfied in full, and (y) this Agreement is terminated, Bank shall terminate the security interest granted herein upon Borrower providing cash collateral acceptable to Bank in its good faith business judgment for Bank Services, if any.  In the event such Bank Services consist of outstanding Letters of Credit, Borrower shall provide to Bank cash collateral in an amount equal to (x) if such Letters of Credit are denominated in Dollars, then at least one hundred five percent (105.0%); and (y) if such Letters of Credit are denominated in a Foreign Currency, then at least one hundred ten percent (110.0%), of the Dollar Equivalent of the face amount of all such Letters of Credit plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its business judgment), to secure all of the Obligations relating  to such  Letters of Credit.

4.2    Priority of Security Interest.  Each Borrower represents, warrants, and covenants that, except in the case of deposit accounts not requiring a Control Agreement pursuant to Section 6.8, the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the 

Collateral (subject only to Permitted Liens that are permitted pursuant to the terms of this Agreement to have superior priority to Bank’s Lien under this Agreement) and subject to completion of the following, at Bank’s sole discretion: (a) in the case of all Collateral in which a security interest may be perfected by filing a financing statement under the Code, upon completion of such filings, (b)  with respect to any Collateral Account, Bank having control (as defined in the Code) of such Collateral Account, (c) in the case of Collateral covered by a certificate of title, the security interest of Bank is indicated on such certificate of title if required by applicable law, (d) in the case of the Singapore Collateral, the security interest of Bank is perfected pursuant to applicable law, and (e) in the case of all other Collateral, as required by the Code or applicable law.  If any Borrower shall acquire a commercial tort claim, such Borrower shall promptly notify Bank in a writing signed by such Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.

4.3    Authorization to File Financing Statements.  Each Borrower hereby authorizes Bank to file financing statements and register the particulars of the security interest created in respect of the Singapore Collateral with any regulatory authority, without notice to any Borrower, with all appropriate jurisdictions to perfect or protect Bank’s interest or rights hereunder, including a notice that any disposition of the Collateral not otherwise permitted under Section 7.1, by any Borrower or any other Person, shall be deemed to violate the rights of Bank under the Code.  Such financing statements may indicate the Collateral as “all assets of the Debtor” or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Bank’s discretion.

5    REPRESENTATIONS AND WARRANTIES

Each Borrower represents and warrants as follows: 
5.1    Due Organization, Authorization; Power and Authority.  Each Borrower is duly existing and in good standing in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to cause a Material Adverse Change in such Borrower’s business.  In connection with this Agreement, Borrowers have delivered to Bank completed certificates signed by each Borrower entitled “Perfection Certificate.”  Each Borrower represents and warrants to Bank that (a) such Borrower’s exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) such Borrower is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth such Borrower’s organizational identification number or accurately states that such Borrower has none; (d) the Perfection Certificate accurately sets forth such Borrower’s place of business, or, if more than one, its chief executive office as well as such Borrower’s mailing address (if different than its chief executive office); (e) such Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to such Borrower and each of its Subsidiaries is accurate and complete (it being understood and agreed that such Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent permitted by one or more specific provisions in this Agreement).  If any Borrower is not now a Registered Organization but later becomes one, such Borrower shall promptly notify Bank of such occurrence and provide Bank with such Borrower’s organizational identification number. The execution, delivery and performance by each Borrower of the Loan Documents to which it is a party have been duly authorized, and do not, in any material respect, (i) conflict with any of such Borrower’s organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate 

any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which such Borrower or any of its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect) or (v) conflict with, contravene, constitute an event of default or breach under, or would result in or permit the termination or acceleration of, any material agreement by which such Borrower is bound.  Each Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Change in such Borrower’s business.
  
5.2    Collateral.  Each Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens.  No Borrower has any Collateral Accounts at or with any bank or financial institution other than Bank or Bank’s Affiliates except for the Collateral Accounts described in the Perfection Certificates delivered to Bank in connection herewith and which the applicable Borrower has taken such actions as are necessary to give Bank a perfected security interest therein, pursuant to the terms of Section 6.8(b).  The Accounts are bona fide, existing obligations of the Account Debtors.

The Collateral is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate.  None of the components of the Collateral shall be maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2.
Except for obsolete goods or excess material related to Inventory that will not be marketed for sale, all Inventory is in all material respects of good and marketable quality, free from material defects.
Each Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to its customers in the ordinary course of business, (b) over-the-counter software that is commercially available to the public, and (c) material Intellectual Property licensed to such Borrower.  Each Patent which it owns or purports to own and which is material to such Borrower’s business is valid and enforceable, and no part of the Intellectual Property which such Borrower owns or purports to own and which is material to such Borrower’s business has been judged invalid or unenforceable, in whole or in part.  To the best of each Borrower’s knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party except to the extent such claim would not reasonably be expected to cause a Material Adverse Change in any Borrower’s business.
5.3    Accounts Receivable; Inventory.
  
(a)    For each Account with respect to which Advances are requested, on the date each Advance is requested and made, such Account shall be an Eligible Account.

(b)    All statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing the Eligible Accounts are and shall be true and correct and all such invoices, instruments and other documents, and all of Borrowers’ Books are genuine and in all respects what they purport to be.  All sales and other transactions underlying or giving rise to each Eligible Account shall comply in all material respects with all applicable laws and governmental rules and regulations.  No Borrower has any knowledge of any actual or imminent Insolvency Proceeding of any Account Debtor whose accounts are Eligible Accounts in any Borrowing Base Report.  To the best of each Borrower’s knowledge, all signatures and endorsements on all documents, instruments, and agreements relating to all Eligible Accounts are 

genuine, and all such documents, instruments and agreements are legally enforceable in accordance with their terms

(c)    For any item of Inventory, such Inventory is maintained in the manner as described by each Borrower in the Perfection Certificates (or at any location permitted under Section 7.2). 
 
5.4    Litigation.  Other than as set forth in the Perfection Certificates, there are no actions or proceedings pending or, to the knowledge of any Responsible Officer, threatened in writing by or against any Borrower or any of its Subsidiaries, that, if determined adversely, could reasonably be expected to cause a Material Adverse Change.

5.5    Financial Statements; Financial Condition.  All consolidated financial statements for Borrowers and any of their Subsidiaries delivered to Bank fairly present in all material respects Borrowers’ consolidated financial condition and Borrowers’ consolidated results of operations.  There has not been any material deterioration in Borrowers’ consolidated financial condition since the date of the most recent financial statements submitted to Bank.

5.6    Solvency.  The fair salable value of Borrowers’ consolidated assets (including goodwill minus disposition costs) exceeds the fair value of Borrowers’ liabilities; no Borrower is left with unreasonably small capital after the transactions in this Agreement; and each Borrower is able to pay its debts (including trade debts) as they mature.

5.7    Regulatory Compliance.  No Borrower is an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended.  No Borrower is engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors).  Each Borrower (a) has complied with all Requirements of Law, and (b) has not violated any Requirements of Law the violation of which could reasonably be expected to cause a Material Adverse Change.  None of any Borrower’s or any of its Subsidiaries’ properties or assets has been used by such Borrower or any Subsidiary or, to the best of such Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than in accordance with any Requirements of Law.  Each Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.

5.8    Subsidiaries; Investments.  No Borrower owns any stock, partnership, or other ownership interest or other equity securities except for Permitted Investments.
  
5.9    Tax Returns and Payments; Pension Contributions.  Each Borrower has timely filed all income tax and other material required tax returns and reports, and each Borrower has timely paid all income tax and other material foreign, federal, state and local taxes, assessments, deposits and contributions owed by such Borrower except to the extent such taxes are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor.
  
To the extent any Borrower defers payment of any contested taxes, such Borrower shall (i) notify Bank in writing of the commencement of, and any material development in, the proceedings, and (ii) post bonds or take any other steps required to prevent the Governmental Authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien.”  Except as 

disclosed in the Perfection Certificates, no Borrower is aware of any claims or adjustments proposed for any of such Borrower’s prior tax years which could result in additional taxes becoming due and payable by such Borrower.  Each Borrower has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and no Borrower has withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of such Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
5.10    Use of Proceeds.  Borrower shall use the proceeds of the Credit Extensions solely as working capital and to fund its general business requirements and not for personal, family, household or agricultural purposes.

5.11    Patriot Act.  To the extent applicable, each Borrower 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.

5.12    Full Disclosure.  No written representation, warranty or other statement of Borrowers in any certificate or written statement given to Bank, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Bank, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrowers in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).

5.13    Definition of “Knowledge.”  For purposes of the Loan Documents, whenever a representation or warranty is made to any Borrower’s knowledge or awareness, to the “best of” any Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of any Responsible Officer.

6    AFFIRMATIVE COVENANTS

Each Borrower shall, and shall cause its Subsidiaries to, do all of the following:
6.1    Government Compliance.
  
(a)    Maintain its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to cause a Material Adverse Change.  Each Borrower shall comply, and have each Subsidiary comply, in all material respects, with all laws, ordinances and regulations to which it is subject.

(b)    Obtain all of the Governmental Approvals necessary for the performance by such Borrower of its obligations under the Loan Documents to which it is a party and the grant of a security interest to Bank in all of its property, except to the extent that failure to obtain such Governmental Approvals could not, in the aggregate, reasonably be expected to cause a Material Adverse Change.  Upon request of Bank, Borrower shall promptly provide copies of any such obtained Governmental Approvals to Bank.

6.2    Financial Statements, Reports, Certificates.  Provide Bank with the following:

(a)a Borrowing Base Report (and any schedules related thereto and including any other information requested by Bank with respect to Borrowers’ Accounts) (i) with each request for an Advance, (ii) no later than Friday of each week when a Streamline Period is not in effect, and (iii) within thirty (30) days after the end of each month when a Streamline Period is in effect;

(b)as soon as available, and within five (5) days of filing with the SEC, but no later than forty-five (45) days after the last day of each of the first three quarters of Parent’s fiscal year, company prepared consolidated financial statements for such quarter prepared under GAAP (or IFRS, if applicable), consistently applied, certified by a Responsible Officer and in a form acceptable to Bank;

(c)as soon as available, and within five (5) days of filing with the SEC, but no later than ninety (90) days after the last day of Parent’s fiscal year, audited consolidated financial statements prepared under GAAP (or IFRS, if applicable), consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Bank in its reasonable discretion;

(d)included with any Borrowing Base Report required pursuant to Section 6.2(a) (i) weekly or monthly, as applicable, Domestic accounts receivable agings, aged by invoice date, (ii) weekly or monthly, as applicable, accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, and (iii) weekly or monthly, as applicable, reconciliations of accounts receivable agings (aged by invoice date), transaction reports, Deferred Revenue report and unbilled accounts report;

(e)within thirty (30) days after the last day of each month and together with the Borrowing Base Reports, a duly completed Borrowing Base Certificate signed by a Responsible Officer;

(f)within thirty (30) days after the last day of each month, a cash holdings report;

(g)as soon as available, but no later than thirty (30) days after the last day of each month, together with a company prepared consolidated balance sheet covering Borrowers’ and each of their Subsidiary’s operations for such month in a form acceptable to Bank (the “Monthly Financial Statements”), a duly completed Compliance Certificate signed by a Responsible Officer, (i) certifying as of the end of such month (A) calculations showing compliance with the financial covenant set forth in Section 6.9(a) and (B) that Borrowers were in full compliance with all of the terms and conditions of this Agreement; provided that, with respect to the financial covenants set forth in this Agreement, Borrowers shall only be required to certify compliance with the financial covenant set forth in Section 6.9(a), and (ii) setting forth and such other information as Bank may reasonably request;
 
(h)within thirty (30) days after the last day of each fiscal quarter, a duly completed Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such fiscal quarter, Borrowers were in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other 

information as Bank may reasonably request, including, without limitation, a statement that at the end of such fiscal quarter there were no held checks;

(i)within the earlier to occur of (A) forty-five (45) days after the end of each fiscal year of Parent or (B) 10 days after approval by Parent’s Board of Directors, annual operating budgets for the upcoming fiscal year of Parent (including income statements, balance sheets, cash flow statements and other annual financial projections, by fiscal quarter), together with any related business forecasts used in the preparation of such annual operating budgets;

(j)prompt report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, One Million Dollars ($1,000,000) or more; 

(k)prompt written notice of any changes to the beneficial ownership information set out in Exhibit I.  Borrower understands and acknowledges that Bank relies on such true, accurate and up-to-date beneficial ownership information to meet Bank’s regulatory obligations to obtain, verify and record information about the beneficial owners of its legal entity customers; and

(l)other financial information reasonably requested by Bank.

Documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrowers’ website on the Internet at Borrowers’ website address.
6.3    Accounts Receivable.

(a)    Schedules and Documents Relating to Accounts.  Borrowers shall deliver to Bank transaction reports and schedules of collections, as provided in Section 6.2, on Bank’s standard forms; provided, however, that Borrowers’ failure to execute and deliver the same shall not affect or limit Bank’s Lien and other rights in all of Borrowers’ Accounts, nor shall Bank’s failure to advance or lend against a specific Account affect or limit Bank’s Lien and other rights therein.  If requested by Bank, Borrowers shall furnish Bank with copies (or, at Bank’s request, originals) of all contracts, orders, invoices, and other similar documents, and all shipping instructions, delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or disposition of which gave rise to such Accounts.  In addition, Borrowers shall deliver to Bank, on its request, the originals of all instruments, chattel paper, security agreements, guarantees and other documents and property evidencing or securing any Accounts, in the same form as received, with all necessary indorsements, and copies of all credit memos.
 
(b)    Disputes.  Borrowers shall promptly notify Bank of all material disputes or claims relating to Accounts.  Borrowers may forgive (completely or partially), compromise, or settle any Account for less than payment in full, or agree to do any of the foregoing so long as (i) Borrowers do so in good faith, in a commercially reasonable manner, in the ordinary course of business, in arm’s-length transactions, and reports the same to Bank in the regular reports provided to Bank; (ii) no Event of Default has occurred and is continuing; and (iii) after taking into account all such discounts, settlements and forgiveness, the total outstanding Advances will not exceed the lesser of the Revolving Line or the Borrowing Base.
 
(c)    Collection of Accounts.  Each Borrower shall direct its respective Account Debtors to deliver or transmit all proceeds of Accounts into a lockbox account, or via electronic deposit capture into 

a “blocked account” as specified by Bank (either such account, the “Cash Collateral Account”), pursuant to a blocked account agreement in form and substance satisfactory to Bank.  Whether or not an Event of Default has occurred and is continuing, each Borrower shall immediately deliver all payments on and proceeds of Accounts to the applicable Cash Collateral Account.  Subject to Bank’s right to maintain a reserve pursuant to Section 6.3(d), all amounts received in the applicable Cash Collateral Account shall be (i) when a Streamline Period is not in effect, applied to immediately reduce the Obligations under the Revolving Line (unless Bank, in its sole discretion, at times when an Event of Default exists, elects not to so apply such amounts), or (ii) when a Streamline Period is in effect, transferred on a daily basis to the applicable Borrower’s operating account with Bank.  Each Borrower hereby authorizes Bank to transfer to the Cash Collateral Account any amounts that Bank reasonably determines are proceeds of the Accounts (provided that Bank is under no obligation to do so and this allowance shall in no event relieve any Borrower of its obligations hereunder).

(d)    Reserves.  Notwithstanding any terms in this Agreement to the contrary, at times when an Event of Default exists, Bank may hold any proceeds of the Accounts and any amounts in the Cash Collateral Account that are not applied to the Obligations pursuant to Section 6.3(c) above (including amounts otherwise required to be transferred to any Borrower’s operating account with Bank when a Streamline Period is in effect) as a reserve to be applied to any Obligations regardless of whether such Obligations are then due and payable.

(e)    Returns.  Provided no Event of Default has occurred and is continuing, if any Account Debtor returns any Inventory to Borrowers, Borrowers shall promptly (i) determine the reason for such return, (ii) issue a credit memorandum to the Account Debtor in the appropriate amount, and (iii) provide a copy of such credit memorandum to Bank, upon request from Bank.  In the event any attempted return occurs after the occurrence and during the continuance of any Event of Default, Borrowers shall hold the returned Inventory in trust for Bank, and immediately notify Bank of the return of the Inventory.
  
(f)Verifications; Confirmations; Credit Quality; Notifications.  Bank may, from time to time, (i) verify and confirm directly with the respective Account Debtors the validity, amount and other matters relating to the Accounts, either in the name of Borrowers or Bank or such other name as Bank may choose, and notify any Account Debtor of Bank’s security interest in such Account and/or (ii) conduct a credit check of any Account Debtor to approve any such Account Debtor’s credit.
  
(g)No Liability.  Bank shall not be responsible or liable for any shortage or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of which gives rise to an Account, or for any error, act, omission, or delay of any kind occurring in the settlement, failure to settle, collection or failure to collect any Account, or for settling any Account in good faith for less than the full amount thereof, nor shall Bank be deemed to be responsible for any of Borrowers’ obligations under any contract or agreement giving rise to an Account.  Nothing herein shall, however, relieve Bank from liability for its own gross negligence or willful misconduct.

6.4    Remittance of Proceeds.  Except as otherwise provided in Section 6.3(c), deliver, in kind, all proceeds arising from the disposition of any Collateral to Bank in the original form in which received by Borrowers not later than the following Business Day after receipt by Borrowers, to be applied to the Obligations (a) prior to an Event of Default, pursuant to the terms of Section 6.3(c) hereof, and (b) after the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4 hereof; provided that, if no Event of Default has occurred and is continuing, Borrowers shall not be obligated to remit to Bank the proceeds of the sale of worn out or obsolete Equipment and non-core Intellectual Property disposed of by Borrowers in good faith in an arm’s length transaction for an aggregate purchase price of One Hundred Fifty Thousand Dollars ($150,000.00) or less (for all such transactions in any fiscal year).  

Each Borrower agrees that it will not commingle proceeds of Collateral with any of Borrower’s other funds or property that are not Collateral, but will hold such proceeds separate and apart from such other funds and property and in an express trust for Bank.  Nothing in this Section 6.4 limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.

6.5    Taxes; Pensions.  Timely file, and require each of its Subsidiaries to timely file, all income tax and other material required tax returns and reports and timely pay, and require each of its Subsidiaries to timely pay, all income tax and other material foreign, federal, state and local taxes, assessments, deposits and contributions owed by each Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms.

6.6    Access to Collateral; Books and Records.  At reasonable times, on one (1) Business Day’s notice (provided no notice is required if an Event of Default has occurred and is continuing), Bank, or its agents, shall have the right to inspect the Collateral and the right to audit and copy Borrower’s Books.  The foregoing inspections and audits shall be conducted at Borrower’s expense and no more often than once every twelve (12) months unless an Event of Default has occurred and is continuing in which case such inspections and audits shall occur as often as Bank shall determine is necessary.  The foregoing inspections and audits shall be conducted at Borrowers’ expense and the charge therefor shall be One Thousand Dollars ($1,000.00) per person per day (or such higher amount as shall represent Bank’s then-current standard charge for the same), plus reasonable out-of-pocket expenses.  In the event any Borrower and Bank schedule an audit more than eight (8) days in advance, and such Borrower cancels or seeks to or reschedules the audit with less than eight (8) days written notice to Bank, then (without limiting any of Bank’s rights or remedies) such Borrower shall pay Bank a fee of Two Thousand Dollars ($2,000.00) plus any out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated costs and expenses of the cancellation or rescheduling.
  
6.7    Insurance.
  
(a)    Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrower’s industry and location and as Bank may reasonably request.  Insurance policies shall be in a form, with financially sound and reputable insurance companies that are not Affiliates of Borrower, and in amounts that are satisfactory to Bank.  All property policies shall have a lender’s loss payable endorsement showing Bank as the sole lender loss payee.  All liability policies shall show, or have endorsements showing, Bank as an additional insured.  Bank shall be named as lender loss payee and/or additional insured with respect to any such insurance providing coverage in respect of any Collateral.

(b)    Ensure that proceeds payable under any property policy are, at Bank’s option, payable to Bank on account of the Obligations.  Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to Two Hundred Fifty Thousand Dollars ($250,000.00) with respect to any loss, but not exceeding Five Hundred Thousand Dollars ($500,000.00) in the aggregate for all losses under all casualty policies in any one year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Bank has been granted a first priority security interest (subject to Permitted Liens that are permitted pursuant to this Agreement to have priority to Bank’s Lien in this Agreement), and (b) after the occurrence and during the continuance of an Event of Default, all proceeds 

payable under such casualty policy shall, at the option of Bank, be payable to Bank on account of the Obligations. 

(c)    At Bank’s request, Borrowers shall deliver certified copies of insurance policies and evidence of all premium payments.  Each provider of any such insurance required under this Section 6.7 shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to Bank, that it will give Bank thirty (30) days prior written notice before any such policy or policies shall be materially altered or canceled.  If Borrowers fail to obtain insurance as required under this Section 6.7 or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part of such payment or obtain such insurance policies required in this Section 6.7, and take any action under the policies Bank deems prudent.

6.8    Accounts.

(a)    Maintain its and all of its Subsidiaries’ primary Domestic operating and other deposit accounts, with Bank or Bank’s Affiliates.

(b)    In addition to and without limiting the restrictions in (a), Borrower shall provide Bank five (5) days prior written notice before establishing any Collateral Account at or with any Domestic bank or financial institution other than Bank or Bank’s Affiliates. For each Domestic Collateral Account that Borrowers at any time maintain, Borrowers shall cause the applicable bank or financial institution (other than Bank) at or with which any Domestic Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Domestic Collateral Account to perfect Bank’s Lien in such Domestic Collateral Account in accordance with the terms hereunder which Control Agreement may not be terminated without the prior written consent of Bank.  The provisions of the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes, and other employee wage and benefit payments to or for the benefit of Borrowers’ employees and identified to Bank by Borrowers as such.

6.9    Financial Covenants.

Maintain as of the last day of each fiscal quarter, unless otherwise noted, on a consolidated basis with respect to Parent and its Subsidiaries:
(a)    Adjusted Quick Ratio.  An Adjusted Quick Ratio of at least 1.05 to 1.00, as of the last day of each month.

(b)    EBITDA.  Maintain, measured as of the end of each fiscal quarter during the following periods, EBITDA of at least the following:
	
		
	Period
	Minimum EBITDA

	Each fiscal quarter after December 30, 2016*
*measured on a trailing two fiscal quarter basis
	$1.00

6.10    Protection of Intellectual Property Rights.
  

(a)    (i) Protect, defend and maintain the validity and enforceability of its material Intellectual Property; (ii) promptly advise Bank in writing of material infringements or any other event that could reasonably be expected to materially and adversely affect the value of its Intellectual Property; and (iii) not allow any Intellectual Property material to any Borrower’s business to be abandoned, forfeited or dedicated to the public without Bank’s written consent.

(b)    Provide written notice to Bank within ten (10) days of entering or becoming bound by any Restricted License (other than over-the-counter software that is commercially available to the public).

6.11    Litigation Cooperation.  From the date hereof and continuing through the termination of this Agreement, make available to Bank, without expense to Bank, each Borrower and its officers, employees and agents and Borrowers’ books and records, to the extent that Bank may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank with respect to any Collateral or relating to Borrower.

6.12    Online Banking.
  
              (a)    Utilize Bank’s online banking platform for all matters requested by Bank which shall include, without limitation (and without request by Bank for the following matters), requesting Credit Extensions and uploading financial statements and other reports required to be delivered by this Agreement (including, without limitation, those described in Section 6.2 of this Agreement).
               (b)    Comply with the terms of Bank’s Online Banking Agreement as in effect from time to time and ensure that all persons utilizing Bank’s online banking platform are duly authorized to do so by an Administrator.  Bank shall be entitled to assume the authenticity, accuracy and completeness on any information, instruction or request for a Credit Extension submitted via Bank’s online banking platform and to further assume that any submissions or requests made via Bank’s online banking platform have been duly authorized by an Administrator.
6.13    Formation or Acquisition of Subsidiaries.  Notwithstanding and without limiting the negative covenants contained in Sections 7.3 and 7.7 hereof, at the time that any Borrower or any Guarantor forms any direct or indirect Material Subsidiary or acquires any direct or indirect Material Subsidiary after the Effective Date, such Borrower and such Guarantor shall (a) cause such new Material Subsidiary to provide to Bank a joinder to the this Agreement, or a Guaranty, as applicable, to cause such Material Subsidiary to become a co-borrower hereunder, or Guarantor, as applicable, together with such appropriate financing statements and/or Control Agreements, all in form and substance satisfactory to Bank (including being sufficient to grant Bank a first priority Lien (subject to Permitted Liens that are permitted pursuant to this Agreement to have priority to Bank’s Lien in this Agreement) in and to the assets of such newly formed or acquired Material Subsidiary), (b) provide to Bank appropriate certificates and powers and financing statements, pledging all of the direct or beneficial ownership interest in such new Material Subsidiary, in form and substance satisfactory to Bank, and (c) provide to Bank all other documentation, in form and substance satisfactory to Bank, which in its opinion is appropriate with respect to the execution and delivery of the applicable documentation referred to above.  Any document, agreement, or instrument executed or issued pursuant to this Section 6.13 shall be a Loan Document.

6.14    Further Assurances.  Execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral or to effect the purposes of this Agreement.  Deliver to Bank, within five (5) days after the same are sent or received, copies of all correspondence, reports, documents and other filings with any Governmental Authority regarding 

compliance with or maintenance of Governmental Approvals or Requirements of Law or that could reasonably be expected to have a material adverse effect on any of the Governmental Approvals or otherwise on the operations of each Borrower or any of its Subsidiaries.  Promptly deliver to Bank, any revised Aviat Investment Policy.

7    NEGATIVE COVENANTS

No Borrower shall, nor shall any Borrower permit any of its Subsidiaries to, do any of the following without Bank’s prior written consent:
7.1    Dispositions.  Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) in the ordinary course of business for reasonably equivalent consideration; (b) to any Borrower or any of its Subsidiaries from any other Borrower or any of its Subsidiaries, (c) of property to the extent such property is exchanged for credit against, or proceeds are promptly applied to, the purchase price of other property used or useful in the business of Borrowers or their Subsidiaries (d) sales or discounting of delinquent accounts in the ordinary course of business, (e) of worn-out or obsolete Equipment that is, in the reasonable judgment of such Borrower, no longer economically practicable to maintain or useful in the ordinary course of business of Borrower; (f) consisting of discounting of customer letters of credit on a non-recourse basis, (g) in connection with an acquisition permitted hereunder of a portion of a Person’s assets or rights acquired for reasonably equivalent consideration that otherwise complies with Section 7.3, (h) consisting of Permitted Liens and Permitted Investments; (i) of any non-core Intellectual Property for fair market value that (i) is not material to the business of the Borrowers and their Subsidiaries as currently operated and (ii) will not result in a material adverse effect; provided that Borrower shall provide Bank at least thirty (30) days prior written notice (or such other notice acceptable to Bank, in its sole discretion) of any such transfer; (j) of non-exclusive licenses for the use of the property of any Borrower or its Subsidiaries in the ordinary course of business and licenses that could not result in a legal transfer of title of the licensed property but that may be exclusive in respects other than territory and that may be exclusive as to territory only as to discreet geographical areas outside of the United States; (k) by any Borrower and its Subsidiaries not otherwise permitted under this Section 7.1; provided that (i) at the time of such Transfer, no Event of Default has occurred or is continuing or would result from such Transfer and (ii) the aggregate book value of all property Transferred in reliance on this clause (k) during the period beginning on the Effective Date and ending on the Revolving Line Maturity Date shall not exceed One Million Dollars ($1,000,000) and (l) Permitted Distributions.

7.2    Changes in Business, Management, Control, or Business Locations.  (a) Engage in or permit any of its Subsidiaries to engage in any material lines of business other than the businesses currently engaged in by such Borrower and such Subsidiary, as applicable, or reasonably related, complementary or incidental thereto or reasonable extensions thereof other than as a result of a Permitted Acquisition; (b) liquidate or dissolve; or (c) permit or suffer any Change in Control.
  
Borrower shall not, without at least thirty (30) days prior written notice to Bank: (1) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than an aggregate amount of Five Hundred Thousand Dollars ($500,000) in Borrowers’ assets or property) or deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Five Hundred Thousand Dollars ($500,000) to a bailee at a location other than to a bailee and at a location already disclosed in the Perfection Certificate, (2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change any organizational number (if any) assigned by its jurisdiction of organization.  If Borrowers intends to deliver any portion of the Collateral valued, individually or in the 

aggregate, in excess of Five Hundred Thousand Dollars ($500,000) to a Domestic bailee, and Bank and such bailee are not already parties to a bailee agreement governing both the Collateral and the Domestic location to which Borrowers intends to deliver the Collateral, then Borrowers will first receive the written consent of Bank and shall use commercially reasonable efforts to cause such bailee to execute and deliver a bailee agreement in form and substance reasonably satisfactory to Bank.
7.3    Mergers or Acquisitions.  Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person (including, without limitation, by the formation of any Subsidiary), except where no Event of Default has occurred and is continuing or would result from such action during the term of this Agreement:

(a)    any Subsidiary may merge or consolidate with (i) any Borrower; provided that such Borrower is the surviving entity, and (ii) one or more other Subsidiaries;

(b)    any Borrower or any Subsidiary may acquire, all or substantially all of the capital stock or property of another Subsidiary;

(c)    Permitted Acquisitions; or

(d)    such merger, consolidation or acquisition is a Transfer otherwise permitted pursuant to Section 7.1.

7.4    Indebtedness.  Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.

7.5    Encumbrance.  Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein (subject to Liens that are permitted to have superior priority to Bank’s Lien under this Agreement), or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting any Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of the Collateral or any of such Borrower’s or any Subsidiary’s Intellectual Property, except (i) as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Liens” herein and (ii) agreements including such restrictive covenants, provided that such covenants do not prohibit or restrict any Borrower or Subsidiary from granting Bank a first priority security interest in any of the Collateral or any of such Borrower’s or any Subsidiary’s Intellectual Property, and provided further that the counter-parties to such covenants are not permitted to receive a security interest in, or any other right to, any of the Collateral or any of such Borrower’s or any Subsidiary’s Intellectual Property.

7.6    Maintenance of Collateral Accounts.  Maintain any Collateral Account except pursuant to the terms of Section 6.8(b) hereof.

7.7    Distributions; Investments.  Except as permitted under Section 7.3, (a) pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock other than Permitted Distributions; or (b) directly or indirectly acquire or own any Person or make any Investment in any Person (including, without limitation, by the formation of any Subsidiary) other than Permitted Investments, or permit any of its Subsidiaries to do so.

7.8    Transactions with Affiliates.  Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of any Borrower, except for transactions that are in the ordinary course of such Borrower’s business, upon fair and reasonable terms (when viewed in the context of any series of transactions of which it may be a part, if applicable) and that are (a) no less favorable to such Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person; or (b) among any Borrower and its Subsidiaries and among Borrowers’ Subsidiaries so long as no Event of Default exists or could result therefrom.

7.9    Subordinated Debt.  (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt unless such Subordinated Debt remains subordinated in right of payment to this Agreement and any Liens securing such Subordinated Debt remain subordinate in priority to Bank’s Lien hereunder to the same extent as originally contemplated by Bank

7.10    Compliance.  Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on any Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of any Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

8    EVENTS OF DEFAULT

Any one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:
8.1    Payment Default.  Borrower fails to (a) make any payment of principal or interest on any Credit Extension when due, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day cure period shall not apply to payments due on the Revolving Line Maturity Date).  During the cure period, the failure to make or pay any payment specified under clause (b) hereunder is not an Event of Default (but no Credit Extension will be made during the cure period);

8.2    Covenant Default.  (a) Any Borrower fails or neglects to perform any obligation in Sections 6.2, 6.3, 6.5, 6.7, 6.8, 6.9, 6.10(b) or 6.12, or violates any covenant in Section 7; or

(b) Any Borrower fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any other Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) Business Days after the occurrence 

thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) Business Day period or cannot after diligent attempts by Borrowers be cured within such ten (10) Business Day period, and such default is likely to be cured within a reasonable time, then Borrowers shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period).  Cure periods provided under this section shall not apply, among other things, to financial covenants or any other covenants set forth in clause (a) above;
8.3    Material Adverse Change.  A Material Adverse Change occurs;

8.4    Attachment; Levy; Restraint on Business.
  
(a)    (i) The service of process seeking to attach, by trustee or similar process, any funds of any Borrower or of any entity under the control of any Borrower (including a Subsidiary), or (ii) a notice of lien or levy is filed against any of Borrowers’ assets by any Governmental Authority, and the same under subclauses (i) and (ii) hereof are not, within thirty (30) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any thirty (30) day cure period; or
 
(b)    (i) any material portion of any Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents such Borrower from conducting all or any material part of its business;

8.5    Insolvency.  (a) Any Borrower is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) any Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against any Borrower or any of its Subsidiaries and is not dismissed or stayed within thirty (30) days (but no Credit Extensions shall be made while any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);

8.6    Other Agreements.  There is, under any agreement to which any Borrower or any Guarantor is a party with a third party or parties, (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of One Million Dollars ($1,000,000.00); or (b) any breach or default by any Borrower or Guarantor, the result of which could have a material adverse effect on such Borrower’s or any Guarantor’s business;
 
8.7    Judgments; Penalties.  One or more fines, penalties or final judgments, orders or decrees for the payment of money in an amount, individually or in the aggregate, of at least Five Million Dollars ($5,000,000.00) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against any Borrower by any Governmental Authority, and the same are not, within thirty (30) days after the entry, assessment or issuance thereof, discharged, satisfied, or paid, or after execution thereof, stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay (provided that no Credit Extensions will be made prior to the satisfaction, payment, discharge, stay, or bonding of such fine, penalty, judgment, order or decree);

8.8    Misrepresentations.  Any Borrower or any Person acting for such Borrower makes any representation, warranty, or other statement now or later in this Agreement, any other Loan Document or in any writing delivered to Bank or to induce Bank to enter this Agreement or any other Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;

8.9    Subordinated Debt.  Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement or any applicable subordination or intercreditor agreement;

8.10    Guaranty.  (a) Any guaranty of any Obligations terminates or ceases for any reason to be in full force and effect; (b) any Guarantor does not perform any obligation or covenant under any guaranty of the Obligations; (c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8 of this Agreement occurs with respect to any Guarantor, (d) the death, liquidation, winding up, or termination of existence of any Guarantor; or (e) (i) a material impairment in the perfection or priority of Bank’s Lien in the collateral provided by Guarantor or in the value of such collateral or (ii) a material adverse change in the general affairs, management, results of operation, condition (financial or otherwise) or the prospect of repayment of the Obligations occurs with respect to any Guarantor; or

8.11    Governmental Approvals.  Any Governmental Approval shall have been (a) revoked, rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a full term or (b) subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any of such Governmental Approval or that could result in the Governmental Authority taking any of the actions described in clause (a) above, and such decision or such revocation, rescission, suspension, modification or non-renewal (i) causes, or could reasonably be expected to cause, a Material Adverse Change, or (ii) adversely affects the legal qualifications of any Borrower or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction and such revocation, rescission, suspension, modification or non-renewal could reasonably be expected to affect the status of or legal qualifications of Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction

8.12    Declared Company.  Any Borrower is declared to be a company to which Part IX of the Singapore Companies Act applies.

9    BANK’S RIGHTS AND REMEDIES

9.1    Rights and Remedies.  Upon the occurrence and during the continuance of an Event of Default, Bank may, without notice or demand, do any or all of the following:

(a)    declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);

(b)    stop advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Bank;

(c)    (i) demand that US Borrowers (A) deposit cash with Bank in an amount equal to (x) 105% (or such other amount Bank deems appropriate in its sole discretion and Bank shall provide Borrowers notice of such amount) of the face amount for all Letters of Credit denominated in Dollars and remaining undrawn and (y) 110% (or such other amount Bank deems appropriate in its sole discretion and Bank shall provide Borrowers notice of such amount) of the Dollar Equivalent of the face amount of all Letters of Credit denominated in a Foreign Currency and remaining undrawn, in each case, plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business 

judgment), to secure all of the Obligations relating to such Letters of Credit, as collateral security for the repayment of any future drawings under such Letters of Credit, and US Borrowers shall forthwith deposit and pay such amounts, and (B) pay in advance all letter of credit fees scheduled to be paid or payable over the remaining term of any Letters of Credit; and (ii) demand that Singapore Borrower (A) deposit cash with Bank in an amount equal to (x) 105% (or such other amount Bank deems appropriate in its sole discretion and Bank shall provide Borrowers notice of such amount) of the face amount for all Letters of Credit issued on behalf of Singapore Borrower, denominated in Dollars and remaining undrawn and (y) 110% (or such other amount Bank deems appropriate in its sole discretion and Bank shall provide Borrowers notice of such amount) of the Dollar Equivalent of the face amount of all Letters of Credit issued on behalf of Singapore Borrower, denominated in a Foreign Currency and remaining undrawn, in each case, plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of Singapore Obligations relating to such Letters of Credit, as collateral security for the repayment of any future drawings under such Letters of Credit, and Singapore Borrower shall forthwith deposit and pay such amounts, and (B) pay in advance all letter of credit fees scheduled to be paid or payable over the remaining term of any of Singapore Borrower’s Letters of Credit;

(d)    terminate any FX Contracts;

(e)    verify the amount of, demand payment of and performance under, and collect any Accounts and General Intangibles, settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Bank considers advisable, and notify any Person owing the applicable Borrower money of Bank’s security interest in such funds.  Borrower shall collect all payments in trust for Bank and, if requested by Bank, immediately deliver the payments to Bank in the form received from the Account Debtor, with proper endorsements for deposit;

(f)    make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral.  Borrowers shall assemble the Collateral if Bank requests and make it available as Bank designates.  Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrowers grant Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies;

(g)    (i) apply to the Singapore Obligations (A) any balances and deposits any Borrower holds, or (B) any amount held by Bank owing to or for the credit or the account of any Borrower, and (ii) apply to Obligations other than the Singapore Obligations (A) any balance and deposits any US Borrower holds, or (B) any amount held by Bank owing to or for the credit or the account of any US Borrower;

(h)ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral.  Bank is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrowers’ labels, Patents, Copyrights, mask works, rights of use of any name, trade secrets, trade names, Trademarks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section 9.1, Borrowers’ rights under all licenses and all franchise agreements inure to Bank’s benefit;

(i)place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;

(j)demand and receive possession of Borrowers’ Books; and

(k)exercise all rights and remedies available to Bank under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).

9.2    Power of Attorney.  Each Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact, exercisable upon the occurrence of and during the continuance of an Event of Default, to: (a) endorse such Borrower’s name on any checks, payment instruments, or other forms of payment or security; (b) sign such Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) demand, collect, sue, and give releases to any Account Debtor for monies due, settle and adjust disputes and claims about the Accounts directly with Account Debtors, and compromise, prosecute, or defend any action, claim, case, or proceeding about any Collateral (including filing a claim or voting a claim in any bankruptcy case in Bank’s or any Borrower’s name, as Bank chooses); (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, or other claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Bank or a third party as the Code permits.  Each Borrower hereby appoints Bank as its lawful attorney-in-fact to sign such Borrower’s name on any documents necessary to perfect or continue the perfection of Bank’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full and the Loan Documents have been terminated.  Bank’s foregoing appointment as each Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and the Loan Documents have been terminated.

9.3    Protective Payments.  If any Borrower fails to obtain the insurance called for by Section 6.7 or fails to pay any premium thereon or fails to pay any other amount which such Borrower is obligated to pay under this Agreement or any other Loan Document or which may be required to preserve the Collateral, Bank may obtain such insurance or make such payment, and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then highest rate applicable to the Obligations, and secured by the Collateral.  Bank will make reasonable efforts to provide Borrowers with notice of Bank obtaining such insurance at the time it is obtained or within a reasonable time thereafter.  No payments by Bank are deemed an agreement to make similar payments in the future or Bank’s waiver of any Event of Default.

9.4    Application of Payments and Proceeds.  If an Event of Default has occurred and is continuing, Bank shall have the right to apply in any order any funds in its possession, whether from any Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations; provided that Bank shall not apply any funds of Singapore Borrower to any Obligation of a US Borrower.  Bank shall pay any surplus to the applicable Borrower by credit to the Designated Deposit Account or to other Persons legally entitled thereto; Borrowers shall remain liable to Bank for any deficiency.  If Bank, in its good faith business judgment, directly or indirectly, enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor.

9.5    Bank’s Liability for Collateral.  So long as Bank complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Bank, Bank 

shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person.  Borrowers bears all risk of loss, damage or destruction of the Collateral.

9.6    No Waiver; Remedies Cumulative.  Bank’s failure, at any time or times, to require strict performance by Borrowers of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance herewith or therewith.  No waiver hereunder shall be effective unless signed by the party granting the waiver and then is only effective for the specific instance and purpose for which it is given.  Bank’s rights and remedies under this Agreement and the other Loan Documents are cumulative.  Bank has all rights and remedies provided under the Code, by law, or in equity.  Bank’s exercise of one right or remedy is not an election and shall not preclude Bank from exercising any other remedy under this Agreement or other remedy available at law or in equity, and Bank’s waiver of any Event of Default is not a continuing waiver.  Bank’s delay in exercising any remedy is not a waiver, election, or acquiescence.
  
9.7    Demand Waiver.  Each Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which each Borrower is liable.

9.8    Agent for the US Borrowers.  Each US Borrower hereby irrevocably appoints Parent as the borrowing agent and attorney-in-fact for all the US Borrowers (the “Administrative Borrower”) which appointment shall remain in full force and effect unless and until Bank shall have received prior written notice signed by each US Borrower that such appointment has been revoked and that another US Borrower has been appointed Administrative Borrower.  Each US Borrower hereby irrevocably appoints and authorizes the Administrative Borrower (a) to provide Bank with all notices with respect to Credit Extensions obtained for the benefit of any Borrower and all other notices and instructions under this Agreement and (b) to take such action as the Administrative Borrower deems appropriate on its behalf to obtain Credit Extensions and to exercise such other powers as are reasonably incidental thereto to carry out the purposes of this Agreement.  To induce Bank to do so, and in consideration thereof, each US Borrower hereby jointly and severally agrees to indemnify Bank and hold Bank harmless against any and all liability, expense, loss or claim of damage or injury, made against Bank by any US Borrower or by any third party whosoever, arising from or incurred by reason of Bank’s relying on any instructions of the Administrative Borrower.

9.9    Borrower Liability.  Each Borrower hereunder shall be jointly and severally obligated to repay all Singapore Advances made hereunder, regardless of which Borrower actually receives said Advance, as if each Borrower hereunder directly received all Singapore Advances.  Each US Borrower hereunder shall be jointly and severally obligated to repay all Advances made hereunder, regardless of which Borrower actually receives said Advance, as if each US Borrower hereunder directly received all Advances.  Each Borrower waives (a) any suretyship defenses available to it under the Code or any other applicable law, including, without limitation, the benefit of California Civil Code Section 2815 permitting revocation as to future transactions and the benefit of California Civil Code Sections 1432, 2809, 2810, 2819, 2839, 2845, 2847, 2848, 2849, 2850, and 2899 and 3433, and (b) any right to require Bank to: (i) proceed against any Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy.  Bank may exercise or not exercise any right or remedy it has against any Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrower’s liability.  Notwithstanding any other provision of this Agreement or other related document, each Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating such 

Borrower to the rights of Bank under this Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by such Borrower with respect to the Obligations in connection with this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by such Borrower with respect to the Obligations in connection with this Agreement or otherwise.  Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section 9.9 shall be null and void.  If any payment is made to a Borrower in contravention of this Section 9.9, such Borrower shall hold such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether matured or unmatured.  Notwithstanding anything to the contrary set forth herein or in any other Loan Document, in no event shall Singapore Borrower be deemed to be a guarantor of, surety in respect of, or otherwise, directly or indirectly, liable for the payment of any Obligations of the US Borrowers.

10    NOTICES

All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below.  Bank or the Borrowers may change their mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10. 
If to any Borrower:    Aviat Networks, Inc.
860 N. McCarthy Blvd., Suite 200
Milpitas, CA 95035
Attn:  Kevin Holwell
Email:  Kevin.holwell@aviatnet.com

If to Bank:        Silicon Valley Bank 
505 Howard Street, 3rd Floor
San Francisco, CA 94105
Attn:  Kyle Larrabee
Email:  klarrabee@svb.com

with a copy to:        Sidley Austin LLP
1001 Page Mill Road, Building 1
Palo Alto, CA  94304
Attn:  Pamela J. Martinson
Fax:  (650) 565-7044

    

11    CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE

California law governs the Loan Documents without regard to principles of conflicts of law.  Each Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank.  Each Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and each Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniences and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court.  Each Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to such Borrower at the address set forth in, or subsequently provided by Borrowers in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrowers’ actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court.  The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure Sections 638 through 645.1, inclusive.  The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers.  All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed.  If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief.  The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings.  The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings.  The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge.  The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure Section 644(a).  Nothing in this paragraph 

shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies.  The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
This Section 11 shall survive the termination of this Agreement.
12    GENERAL PROVISIONS

12.1    Termination Prior to Revolving Line Maturity Date; Survival.  All covenants, representations and warranties made in this Agreement shall continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than (i) inchoate indemnification obligations, (ii) other obligations which, by their terms, are to survive the termination of this Agreement, and (iii) any Obligations under Bank Services Agreements that are cash collateralized in accordance with Section 4.1) have been satisfied.  So long as Borrowers have satisfied the Obligations (other than inchoate indemnity obligations, and any other obligations which, by their terms, are to survive the termination of this Agreement, and any Obligations under Bank Services Agreements that are cash collateralized in accordance with Section 4.1 of this Agreement), this Agreement may be terminated prior to the Revolving Line Maturity Date by Borrowers, effective three (3) Business Days after written notice of termination is given to Bank.  Those obligations that are expressly specified in this Agreement as surviving this Agreement’s termination shall continue to survive notwithstanding this Agreement’s termination.
 
12.2    Successors and Assigns.  This Agreement binds and is for the benefit of the successors and permitted assigns of each party.  Borrowers may not assign this Agreement or any rights or obligations under it without Bank’s prior written consent (which may be granted or withheld in Bank’s discretion).  Bank has the right, without the consent of or notice to Borrowers, to sell, transfer, assign, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights, and benefits under this Agreement and the other Loan Documents; provided, however, that Bank, acting solely for this purpose as a non-fiduciary agent of Borrowers, shall maintain a copy of each assignment, transfer or participation document and a register or similar list (the “Register”) for the recordation of the names and addresses of the assignees, transferees or participants and the principal amounts (and stated interest) of the Credit Extension owing to the assignees, transferees or participants pursuant to the terms hereof from time to time.  The entries in the Register shall be conclusive, in the absence of manifest error and Borrowers and Bank shall treat each Person whose name is recorded in the Register as the lender of such Credit Extension or the owner of such participation for all purposes of this Agreement.  The Register shall be available for inspection by Borrower at any reasonable time and from time to time upon reasonable prior notice.
 
12.3    Indemnification.
 
(a)    General Indemnification.  Each Borrower agrees to indemnify, defend and hold Bank and its directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank (each, an “Indemnified Person”) harmless against:  (i) all obligations, demands, claims, and liabilities (collectively, “Claims”) claimed or asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (ii) all losses or expenses (including Bank Expenses) in any way suffered, incurred, or paid by such Indemnified Person as a result of, following from, consequential to, or arising from transactions between Bank and Borrower (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct.

(b)    Judgment Currency; Currency Indemnification.  If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures Bank could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given.  The obligation of Borrowers with respect to any such sum due from it to Bank hereunder or under any other Loan Document shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the “Agreement Currency”), be discharged only to the extent that on the Business Day following receipt by Bank of any sum adjudged to be so due in the Judgment Currency, Bank may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency.  If the amount of the Agreement Currency so purchased is less than the sum originally due to Bank from Borrower in the Agreement Currency, Borrowers agree, as a separate obligation and notwithstanding any such judgment, to indemnify Bank against such loss; provided that any obligation of Singapore Borrower pursuant to this Section 12.3(b) shall only be for any loss incurred by Bank related to the Singapore Utilization.  If the amount of the Agreement Currency so purchased is greater than the sum originally due to Bank in such currency, Bank agrees to return the amount of any excess to the applicable Borrower (or to any other Person who may be entitled thereto under applicable law).

This Section 12.3 shall survive until all statutes of limitation with respect to the Claims, losses, and expenses for which indemnity is given shall have run.
12.4    Time of Essence.  Time is of the essence for the performance of all Obligations in this Agreement.

12.5    Severability of Provisions.  Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

12.6    Correction of Loan Documents.  Bank may correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement of the parties.

12.7    Amendments in Writing; Waiver; Integration.  No purported amendment or modification of any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought.  Without limiting the generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document.  Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver.  The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.  All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of the Loan Documents merge into the Loan Documents.

12.8    Counterparts.  This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.

12.9    Confidentiality.  In handling any confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be 

made: (a) to Bank’s Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with Bank, collectively, “Bank Entities”); (b) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, that Bank shall use its best efforts to obtain any prospective transferee’s or purchaser’s agreement to the terms of this provision); (c) as required by law, regulation, subpoena, or other order; (d) to Bank’s regulators or as otherwise required in connection with Bank’s examination or audit; (e) as Bank considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such service providers have executed a confidentiality agreement with Bank with terms no less restrictive than those contained herein.  Confidential information does not include information that is either: (i) in the public domain or in Bank’s possession when disclosed to Bank, or becomes part of the public domain (other than as a result of its disclosure by Bank in violation of this Agreement) after disclosure to Bank; or (ii) disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information.

Bank Entities may use anonymous forms of confidential information for aggregate datasets, for analyses or reporting, and for any other uses not expressly prohibited in writing by Borrower.  The provisions of the immediately preceding sentence shall survive the termination of this Agreement.
12.10    Attorneys’ Fees, Costs and Expenses.  In any action or proceeding between Borrowers and Bank arising out of or relating to the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled.

12.11    Electronic Execution of Documents.  The words “execution,” “signed,” “signature” and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.

12.12    Right of Setoff.   Each Borrower hereby grants to Bank a Lien and a right of setoff as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Bank (including a subsidiary of Bank) or in transit to any of them.  At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may setoff the same or any part thereof and apply the same to any liability or Obligation of Borrowers even though unmatured and regardless of the adequacy of any other collateral securing the Obligations.  ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWERS, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

12.13    Captions.  The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

12.14    Construction of Agreement.  The parties mutually acknowledge that they and their attorneys have participated in the preparation and negotiation of this Agreement.  In cases of uncertainty this Agreement shall be construed without regard to which of the parties caused the uncertainty to exist.

12.15    Relationship.  The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement.  The parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties or incidents different from those of parties to an arm’s-length contract.

12.16    Third Parties.  Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or remedies under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted successors and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to this Agreement; or (c) give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.

12.17    No Novation; Ratification.  Nothing contained herein shall in any way impair the Original Agreement and other Loan Documents now held for the Obligations, nor affect or impair any rights, powers, or remedies under the Original Agreement or any Loan Document, it being the intent of the parties hereto that this Agreement shall not constitute a novation of the Original Agreement or an accord and satisfaction of the Obligations.  Each of the Borrowers and each Guarantor hereby ratifies and reaffirms all existing Loan Documents to which it is a party and confirms that they remain in full force and effect, and ratifies and reaffirms the validity and enforceability of all of the liens and security interests heretofore granted pursuant to the Loan Documents, as collateral security for the Obligations, and acknowledges that all of such liens and security interests, and all Collateral heretofore pledged as security for the Obligations, continues to be and remains Collateral for the Obligations from and after the date hereof.

13    DEFINITIONS

13.1    Definitions.  As used in the Loan Documents, the word “shall” is mandatory, the word “may” is permissive, the word “or” is not exclusive, the words “includes” and “including” are not limiting, the singular includes the plural, and numbers denoting amounts that are set off in brackets are negative.  As used in this Agreement, the following capitalized terms have the following meanings:

“Account” is, as to any Person, any “account” of such Person as “account” is defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to such Person.
“Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.
“Additional Costs” is defined in Section 3.8(a).
“Adjusted Quick Ratio” is a ratio of (i) Quick Assets to (ii) Current Liabilities (less the current portion of Deferred Revenue) plus, without duplication, Consolidated Funded Indebtedness.
“Administrative Borrower” is defined in Section 9.8.
“Administrator” is an individual that is named:
(a)     as an “Administrator” in the “SVB Online Services” form completed by Borrower with the authority to determine who will be authorized to use SVB Online Services (as defined in Bank’s Online Banking Agreement as in effect from time to time) on behalf of Borrower; and 
(b)     as an Authorized Signer of Borrower in an approval by the Board.

“Advance” or “Advances” means a revolving credit loan (or revolving credit loans) under the Revolving Line in the form of one (or more) US Advance(s) or Singapore Advance(s).
“Affiliate” is, with respect to any Person, each other Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.  For purposes of the definition of Eligible Accounts, Affiliate shall include a Specified Affiliate.
“Agreement” is defined in the preamble hereof.
“Agreement Currency” is defined in Section 12.3(b).
“Authorized Signer” is, in relation to any Borrower, any individual listed in such Borrower’s Borrowing Resolution who is authorized to execute the Loan Documents, including any Notice of Borrowing making (and executing if applicable) any Credit Extension request, on behalf of Borrower.
“Availability Amount” is (a) the lesser of (i) the Revolving Line or (ii) the amount available under the Borrowing Base minus (b) the Dollar Equivalent of the outstanding principal balance of all Advances minus (c) the aggregate Dollar Equivalent amount of all outstanding Existing Letters of Credit and Letters of Credit (including drawn but unreimbursed Letters of Credit but excluding any expired Letters of Credit) minus (d) the Reserves plus (e) an amount equal to the Letter of Credit Reserve.
“Aviat Investment Policy” is that certain Investment Policy dated January 19, 2009, as revised on March 4, 2010, and approved by Parent’s Board of Directors, as such policy is revised from time to time and approved by Parent’s Board of Directors and delivered to Bank.
“Bank” is defined in the preamble hereof.
“Bank Entities” is defined in Section 12.9. 
“Bank Expenses” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower or any Guarantor.
“Bank Parent” is defined in Section 3.8(b).
“Bank Services”  are any products, credit services, and/or financial accommodations previously, now, or hereafter provided to Borrower or any of its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange services as any such products or services may be identified in Bank’s various agreements related thereto (each, a “Bank Services Agreement”).
“Bank Services Agreement” is defined in the definition of Bank Services.
“Board” is Borrower’s board of directors.
“Borrower” and “Borrowers” are defined in the preamble hereof.

“Borrower’s Books” are all Borrower’s books and records including ledgers, federal and state tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.
“Borrowing Base” is (a) 80% of Eligible Accounts (other than Singapore Borrower Eligible Accounts) as determined by Bank from Borrower’s most recent Borrowing Base Certificate, plus (b) 50% of all Domestic unbilled accounts (in the case of clause (b) above, up to a maximum amount of (i) Seven Million Dollars ($7,000,000) when a Streamline Period is in effect and (ii) Three Million Five Hundred Thousand Dollars ($3,500,000) when a Streamline Period is not in effect), plus (c) (i) the Singapore Borrower Eligible Account Advance Rate multiplied by (ii) the Singapore Borrower Eligible Accounts; provided, however, that Bank has the right to decrease the foregoing amount and percentage in its good faith business judgment to mitigate the impact of events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect the Collateral or its value.
“Borrowing Base Certificate” is that certain certificate in the form attached hereto as Exhibit H.
“Borrowing Base Report” is that certain report of the value of Collateral in the form specified by Bank to Borrower from time to time.
“Borrowing Resolutions” are, with respect to any Person, those resolutions adopted by such Person’s board of directors (and, if required under the terms of such Person’s Operating Documents, stockholders) and delivered by such Person to Bank approving the Loan Documents to which such Person is a party and the transactions contemplated thereby, together with a certificate in the form attached hereto as Exhibit E (except for the Singapore Borrower, in the form attached hereto as Exhibit F) executed by its secretary on behalf of such Person certifying (a) such Person has the authority to execute, deliver, and perform its obligations under each of the Loan Documents to which it is a party, (b) that set forth as a part of or attached as an exhibit to such certificate is a true, correct, and complete copy of the resolutions then in full force and effect authorizing and ratifying the execution, delivery, and performance by such Person of the Loan Documents to which it is a party, (c) the name(s) of the Person(s) authorized to execute the Loan Documents, including making (and executing if applicable) any Credit Extension request, on behalf of such Person, together with a sample of the true signature(s) of such Person(s), and (d) that Bank may conclusively rely on such certificate unless and until such Person shall have delivered to Bank a further certificate canceling or amending such prior certificate.
“Business Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed.
“Cash Collateral Account” is defined in Section 6.3(c).
“Cash Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit issued maturing no more than one (1) year after issue; and (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition.
“Change in Control” is any event, transaction, or occurrence as a result of which (a) any “person” (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of Borrowers, is or becomes a beneficial owner (within the meaning Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities 

of Parent, representing twenty-five percent (25%) or more of the combined voting power of Parent’s then outstanding securities; (b) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the Board of Directors of Parent (together with any new directors whose election by the Board of Directors of such Borrower was approved by a vote of not less than two-thirds of the directors then still in office who either were directors at the beginning of such period  or whose election or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office; (c) Opco ceases to be wholly-owned by Parent; provided that Opco and Parent will be permitted to merge so long as Parent or Opco is the surviving entity of such merger; or (d) Singapore Borrower ceases to be wholly-owned by either Opco or Parent.
“Claims” is defined in Section 12.3.
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.
“Collateral” is the Singapore Collateral and the US Collateral.
“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.
“Commodity Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.
“Commodity Exchange Act” is the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
“Compliance Certificate” is that certain certificate in the form attached hereto as Exhibit B.
“Consolidated Funded Indebtedness” is, as of any date of determination, for Parent and its Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal amount of all obligations, whether current or long-term, for borrowed money (including borrowings hereunder, but excluding undrawn Letters of Credit) and all debt obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments, (b) all purchase money Indebtedness, (c) all direct, non-contingent obligations arising under drawn letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments, (d) all obligations in respect of the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business), (e) attributable Indebtedness in respect of capital leases and synthetic lease obligations, and (f) all Indebtedness of the types referred to in clauses (a) through (e) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which any Borrower or any Subsidiary is a general partner or joint venturer, unless such Indebtedness is expressly made non-recourse to such Borrower or such Subsidiary; provided that the amount of Indebtedness included under this clause (f) shall be restricted to the amount of Indebtedness attributable to such Borrower or such Subsidiary as a general partner or joint venturer; in each case minus any cash collateral posted for any of the foregoing.

“Consolidated Interest Charges” is for any period, for Parent and its Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments, debt discount, fees, charges and related expenses of Parent and its Subsidiaries in connection with borrowed money (including capitalized interest) or in connection with the deferred price of assets, in each case to the extent treated as interest in accordance with GAAP, and (b) the portion of rent expense of the Parent and its Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP.
“Consolidated Net Income” is, for any period, for Parent and its Subsidiaries on a consolidated basis, the net income of Parent and its Subsidiaries (excluding extraordinary gains and extraordinary losses) for that period.
“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation, in each case, directly or indirectly guaranteed, endorsed, co made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations under any Swap Agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business.  The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.
“Continuation Date” means any date on which the Administrative Borrower and/or the Singapore Borrower elects to continue a LIBOR Advance into another Interest Period.
“Control Agreement” is any control agreement in form and substance satisfactory to Bank entered into among the depository institution at which any Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which any Borrower maintains a Securities Account or a Commodity Account, such Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit Account, Securities Account, or Commodity Account.
“Conversion Date” means any date on which the Administrative Borrower and/or the Singapore Borrower elects to convert a Prime Rate Advance to a LIBOR Advance or a LIBOR Advance to a Prime Rate Advance.
“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.
“Credit Extension” is any Advance, any Overadvance, Letter of Credit, FX Contract, amount utilized for cash management services, or any other extension of credit by Bank for any Borrower’s benefit.
“Currency” is coined money and such other banknotes or other paper money as are authorized by law and circulate as a medium of exchange.
“Current Assets” are amounts that under GAAP should be included on that date as current assets on Parent’s consolidated balance sheet.

“Current Liabilities” are all obligations and liabilities of Borrowers to Bank, plus, without duplication, the aggregate amount of Borrowers’ Total Liabilities that mature within one (1) year.
“Default Rate” is defined in Section 2.6(e).
“Deferred Revenue” is all amounts received or invoiced in advance of performance under contracts and not yet recognized as revenue.
“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.
“Designated Deposit Account” is, with respect to the US Borrowers, the account number ending 009, and with respect to the Singapore Borrower, account number ending 390, in each case maintained by Borrowers with Bank.
“Dollars,” “dollars” or use of the sign “$” means only lawful money of the United States and not any other currency, regardless of whether that currency uses the “$” sign to denote its currency or may be readily converted into lawful money of the United States.
“Dollar Advance” is defined in Section 2.5(a).
“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency.
“Domestic” is within the United States or any state or territory thereof or the District of Columbia.
“Domestic Subsidiary” is (a) a Subsidiary organized under the laws of the United States or any state or territory thereof or the District of Columbia and (b) a Subsidiary that is treated as a disregarded entity under Treasury Regulations Section 301.7701-3 of a Subsidiary described in clause (a).
“EBITDA” is, for any period, for Parent and its Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such periods plus (a) the following to the extent deducted in calculating such Consolidated Net Income; (i) Consolidated Interest Charges for such period, (ii) the provision for federal, state, local and foreign income taxes payable by Parent and its Subsidiaries for such period, (iii) depreciation and amortization expense, (iv) to the extent agreed by Bank in its sole discretion in writing, restructuring charges incurred in connection with impairment of real estate, (v) non-cash stock-based compensation expense, (vi) non-cash charges for customer inventory due to downward revaluation, (vii) non-cash charges related to discontinued operations occurring prior to the Effective Date, (viii) other non-recurring expenses of Parent and its Subsidiaries reducing such Consolidated Net Income which do not represent a cash item in such period or any future period and (ix) Foreign Currency losses incurred during the fiscal quarter ended July 1, 2016 as a result of fluctuations in the Nigerian Naira, and minus (b) the following to the extent included in calculating such Consolidated Net Income; (i) federal, state, local and foreign income tax credits of Parent and its Subsidiaries for such period and (ii) all non-cash items increasing Consolidated Net Income for such period.
“Effective Date” is defined in the preamble hereof.

“Eligible Accounts” means Accounts owing to any Borrower which arise in the ordinary course of any Borrower’s business that meet all such Borrower’s representations and warranties in Section 5.3, that have been, at the option of Bank, confirmed in accordance with Section 6.3(f) of this Agreement, and are due and owing from Account Debtors deemed creditworthy by Bank in its good faith business judgment (acting in a commercially reasonable manner).  Bank reserves the right at any time after the Effective Date to adjust any of the criteria set forth below and to establish new criteria in its good faith business judgment.  Unless Bank otherwise agrees in writing, Eligible Accounts shall not include:
(a)    Accounts (i) for which the Account Debtor is Borrower’s Affiliate, officer, employee, investor, or agent, or (ii) that are intercompany Accounts;

(b)    Accounts that the Account Debtor has not paid within (i) ninety (90) days of invoice date or (ii) one hundred and twenty (120) days from the invoice date if approved by Bank in its sole discretion, but not to exceed in the aggregate 10% of all Accounts owing to Borrowers, in each case, regardless of invoice payment period terms;

(c)    Accounts with credit balances over ninety (90) days from invoice date;

(d)    Accounts owing from an Account Debtor if fifty percent (50%) or more of the Accounts owing from such Account Debtor have not been paid within ninety (90) days of invoice date;

(e)    Accounts billed from and/or payable to Borrowers outside of the United States or Singapore (sometimes called foreign invoiced accounts);

(f)    Accounts in which Bank does not have a first priority, perfected security interest under all applicable laws;

(g)    Accounts billed and/or payable in a Currency other than Dollars or an Optional Currency; 

(h)    Accounts owing from an Account Debtor to the extent that Borrower is indebted or obligated in any manner to the Account Debtor (as creditor, lessor, supplier or otherwise - sometimes called “contra” accounts, accounts payable, customer deposits or credit accounts);
 
(i)    Accounts with or in respect of accruals for marketing allowances, incentive rebates, price protection, cooperative advertising and other similar marketing credits, unless otherwise approved by Bank in writing;

(j)    Accounts owing from an Account Debtor which is a United States government entity or any department, agency, or instrumentality thereof unless Borrower has assigned its payment rights to Bank and the assignment has been acknowledged under the Federal Assignment of Claims Act of 1940, as amended;

(k)    Accounts with customer deposits and/or with respect to which Borrower has received an upfront payment, to the extent of such customer deposit and/or upfront payment;

(l)    Accounts for demonstration or promotional equipment, or in which goods are consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on approval”, or other terms if Account Debtor’s payment may be conditional;

(m)    Accounts owing from an Account Debtor where goods or services have not yet been rendered to the Account Debtor (sometimes called memo billings or pre-billings);

(n)    Accounts owing from an Account Debtor the amount of which may be subject to withholding based on the Account Debtor’s satisfaction of Borrower’s complete performance (but only to the extent of the amount withheld; sometimes called retainage billings);

(o)    Accounts subject to trust provisions, subrogation rights of a bonding company, or a statutory trust;

(p)    Accounts owing from an Account Debtor that has been invoiced for goods that have not been shipped to the Account Debtor unless Bank, Borrower, and the Account Debtor have entered into an agreement acceptable to Bank wherein the Account Debtor acknowledges that (i) it has title to and has ownership of the goods wherever located, (ii) a bona fide sale of the goods has occurred, and (iii) it owes payment for such goods in accordance with invoices from Borrower (sometimes called “bill and hold” accounts);

(q)    Accounts for which the Account Debtor has not been invoiced;

(r)    Accounts that represent non-trade receivables or that are derived by means other than in the ordinary course of Borrower’s business;

(s)    Accounts for which Borrower has permitted Account Debtor’s payment to extend beyond one hundred twenty days (120) days (including Accounts with a due date that is more than one hundred twenty (120) days from invoice date);

(t)    Accounts arising from chargebacks, debit memos or other payment deductions taken by an Account Debtor;

(u)    Accounts arising from product returns and/or exchanges (sometimes called “warranty” or “RMA” accounts);

(v)    Accounts in which the Account Debtor disputes liability or makes any claim (but only up to the disputed or claimed amount), or if the Account Debtor is subject to an Insolvency Proceeding (whether voluntary or involuntary), or becomes insolvent, or goes out of business;

(w)    Accounts owing from an Account Debtor, whose total obligations to Borrower exceed twenty-five percent (25.0%) of all Accounts, for the amounts that exceed that percentage, unless Bank approves in writing; and

(x)    Accounts for which Bank in its good faith business judgment determines collection to be doubtful, including, without limitation, accounts represented by “refreshed” or “recycled” invoices.

 “Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.
“ERISA” is the Employee Retirement Income Security Act of 1974, and its regulations.

“Euros,” “euros” and “€” each mean the official currency of the European Union, as adopted by the European Council at its meeting in Madrid, Spain on December 15 and 16, 1995.
“Event of Default” is defined in Section 8.
“Exchange Act” is the Securities Exchange Act of 1934, as amended.
“Excluded Swap Obligation” is, with respect to any Borrower or Guarantor, any obligation to pay or perform under any Swap Agreement, if and to the extent that all or a portion of the Guarantee of such Borrower or Guarantor of, or the grant by such Borrower or Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Grantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guarantee of such Borrower or Guarantor or the grant of such security interest becomes effective with respect to such Swap Obligation or such Guaranty.  If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guarantee or security interest is or becomes illegal.
“Existing Letters of Credit” are the following of outstanding letters of credit:
	
								
	Reference Number
	 
	Issue Date
	Expiry Date
	Currency
	Amount in Currency
	Amount in USD

	SVBSF005793
	HARRIS STRATEX NETWORKS OPERATING
	4/15/2009
	2/1/2019
	USD
	135,000.00
	

	$135,000.00

	SVBSF010995
	AVIAT US INC
	5/27/2016
	5/27/2019
	EUR
	20,000.00
	

	$23,386.00

	SVBSP001152
	AVIAT US INC
	12/18/2015
	11/30/2018
	USD
	88,000.00
	

	$88,000.00

	SVBSP001161
	AVIAT US INC
	1/18/2017
	12/18/2018
	USD
	450,000.00
	

	$450,000.00

	SVBSP001322
	AVIAT US INC
	5/26/2017
	8/27/2018
	USD
	18,018.83
	

	$18,018.83

	SVBSP001491
	AVIAT US INC
	1/9/2018
	8/15/2018
	USD
	105,300.00
	

	$105,300.00

	SVBSP001492
	AVIAT US INC
	1/9/2018
	8/15/2018
	USD
	17,600.00
	

	$17,600.00

	SVBSP001498
	AVIAT US INC
	12/11/2017
	6/30/2018
	USD
	35,000.00
	

	$35,000.00

	SVBSP001524
	AVIAT US INC
	3/14/2018
	10/23/2019
	USD
	8,730.00
	

	$8,730.00

“Foreign Currency” means lawful money of a country other than the United States.
“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.
“Funding Date” is any date on which a Credit Extension is made to or for the account of Borrower which shall be a Business Day.
“FX Contract” is any foreign exchange contract by and between Borrower and Bank under which Borrower commits to purchase from or sell to Bank a specific amount of Foreign Currency on a specified date.

 “GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.
“General Intangibles” is all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and other tax refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.
“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
“Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
“Guarantor” is any Person providing a Guaranty in favor of Bank.
“Guaranty” is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwise supplemented.
“IFRS” are the International Financial Reporting Standards, a collection of guidelines and rules set by the International Accounting Standards Board (www.iasb.org) which are applicable to the circumstances as of the date of determination.
“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.
“Indemnified Person” is defined in Section 12.3.
“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
“Intellectual Property” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following:
(a)    its Copyrights, Trademarks and Patents;

(b)    any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how and operating manuals;

(c)    any and all source code;

(d)    any and all design rights which may be available to such Person;

(e)    any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and

(f)    all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.

“Interest Expense” means for any fiscal period, interest expense (whether cash or non-cash) determined in accordance with GAAP for the relevant period ending on such date, including, in any event, interest expense with respect to any Credit Extension and other Indebtedness of each Borrower and its Subsidiaries, including, without limitation or duplication, all commissions, discounts, or related amortization and other fees and charges with respect to letters of credit and bankers’ acceptance financing and the net costs associated with interest rate swap, cap, and similar arrangements, and the interest portion of any deferred payment obligation (including leases of all types).
“Interest Payment Date” means, with respect to any LIBOR Advance, the last day of each Interest Period applicable to such LIBOR Advance (but in any event, no later than ninety (90) days from the beginning of any such Interest Period and each successive payment thereafter) and, with respect to Prime Rate Advances, the last day of each month (or, if that day of the month does not fall on a Business Day, then on the first Business Day following such date), and each date a Prime Rate Advance is converted into a LIBOR Advance to the extent of the amount converted to a LIBOR Advance.
“Interest Period” means, as to any LIBOR Advance, the period commencing on the date of such LIBOR Advance, or on the conversion/continuation date on which the LIBOR Advance is converted into or continued as a LIBOR Advance, and ending on the date that is one (1), two (2) or three (3) months thereafter, in each case as either Administrative Borrower or Singapore Borrower, as applicable, may elect in the applicable Notice of Borrowing or Notice of Conversion/Continuation; provided, however, that (a) no Interest Period with respect to any LIBOR Advance shall end later than the Revolving Line Maturity Date, (b) the last day of an Interest Period shall be determined in accordance with the practices of the LIBOR interbank market as from time to time in effect, (c) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of a LIBOR Advance, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day, (d) any Interest Period pertaining to a LIBOR Advance 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) shall end on the last Business Day of the calendar month at the end of such Interest Period, and (e) interest shall accrue from and include the first Business Day of an Interest Period but exclude the last Business Day of such Interest Period.
“Interest Rate Determination Date” means each date for calculating the LIBOR for purposes of determining the interest rate in respect of an Interest Period.  The Interest Rate Determination Date shall be the second Business Day prior to the first day of the related Interest Period for a LIBOR Advance.

“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.
“Investment” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any Person.
“IRC” is the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder.
“Judgment Currency” is defined in Section 12.3.
“Letter of Credit” means a standby letter of credit issued by Bank or another institution based upon an application, guarantee, indemnity or similar agreement on the part of Bank as set forth in Section 2.3.
“Letter of Credit Application” is defined in Section 2.3(b).
“Letter of Credit Reserve” is defined in Section 2.3(e).
“Letter of Credit Sublimit” is Fifteen Million Dollars ($15,000,000).
“LIBOR” means, for any Interest Rate Determination Date with respect to an Interest Period for any Advance to be made, continued as or converted into a LIBOR Advance, the rate of interest per annum determined by Bank to be the per annum rate of interest at which deposits in Dollars are offered to Bank in the London interbank market (rounded upward, if necessary, to the nearest 0.00001%) in which Bank customarily participates at 11:00 a.m. (local time in such interbank market) two (2) Business Days prior to the first day of such Interest Period for a period approximately equal to such Interest Period and in an amount approximately equal to the amount of such Advance; provided that, in the event such rate of interest is less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“LIBOR Advance” means an Advance that bears interest based at the LIBOR Rate.
“LIBOR Rate” means, for each Interest Period in respect of LIBOR Advances comprising part of the same Advances, an interest rate per annum (rounded upward, if necessary, to the nearest 0.00001%) equal to LIBOR for such Interest Period divided by one (1) minus the Reserve Requirement for such Interest Period.
“LIBOR Rate Margin” is, from time to time, the following percentages per annum, based upon the Borrowers’ Adjusted Quick Ratio as determined from Borrower’s consolidated financial statements as of the most recent fiscal quarter end, as set forth below:
	
			
	Level
	Borrowers’ Adjusted Quick Ratio
	LIBOR Rate Margin

	I
	Greater than or equal to 1.10:1.00
	2.75%*

	II
	Less than 1.10:1.00
	LIBOR Advances are not available at Level II

*Any outstanding Singapore Advances shall bear interest at an additional 2.00% above the applicable LIBOR Rate Margin.

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.
“Loan Documents” are, collectively, this Agreement and any schedules, exhibits, certificates, notices, and any other documents related to this Agreement, the Perfection Certificates, the Control Agreements, any Letter of Credit, any Letter of Credit Application, the Singapore Debenture any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties executed by any Borrower or any Guarantor, and any other present or future agreement by any Borrower and/or any Guarantor with or for the benefit of Bank, all as amended, restated, or otherwise modified.
“Material Adverse Change” is (a) a material impairment in the perfection or priority of Bank’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; or (c) a material impairment of the prospect of repayment of any portion of the Obligations.
“Material Subsidiary” is any Domestic Subsidiary, other than a US Foreign Subsidiary Holding Company, having at any time on a stand-alone basis (a) assets in excess of ten percent (10%) of Parent’s consolidated assets or (b) gross revenues in excess of ten percent (10%) of Parent’s consolidated gross revenues.
“Monthly Financial Statements” is defined in Section 6.2(g).
“Net Income” means, as calculated on a consolidated basis for Borrowers and their Subsidiaries for any period as at any date of determination, the net profit (or loss), after provision for taxes, of each Borrower and its Subsidiaries for such period taken as a single accounting period.
“Notice of Borrowing” means a notice given by Borrower to Bank in accordance with Section 3.4(a), substantially in the form of Exhibit C, with appropriate insertions.
“Notice of Conversion/Continuation” means a notice given by Borrower to Bank in accordance with Section 3.5, substantially in the form of Exhibit D, with appropriate insertions.
“Obligations” are Borrowers’ obligations to pay when due any debts, principal, interest, fees, Bank Expenses, and other amounts Borrowers owe Bank now or later, whether under this Agreement, the other Loan Documents, or otherwise, including, without limitation, the Singapore Obligations, all obligations relating to letters of credit (including reimbursement obligations for drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrowers assigned to Bank, and to perform Borrowers’ duties under the Loan Documents; provided, however, that the “Obligations” shall not include any Excluded Swap Obligations.
“Opco” is defined in the preamble.
“Operating Documents” are, for any Person, such Person’s formation documents, as certified by the Secretary of State (or equivalent agency) of such Person’s jurisdiction of organization or, in relation to the Singapore Borrower, a director or company secretary on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws or memorandum and articles of association in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.

“Optional Currency” means Pounds Sterling or Euros.
“Optional Currency Advance” is defined in Section 2.5(a).
“Overadvance” is defined in Section 2.4.
“Parent” is defined in the preamble.
“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
“Perfection Certificate” is defined in Section 5.1.
“Permitted Acquisition” is defined in the definition of Permitted Investment.

“Permitted Distributions” are:

(a)    purchases of capital stock from former employees, consultants and directors pursuant to repurchase agreements or other similar agreements in an aggregate amount not to exceed One Million Dollars ($1,000,000) in any fiscal year provided that at the time of such purchase no Event of Default has occurred and is continuing or would result therefrom;
 
(b)    purchases of capital stock in cash in an aggregate amount not to exceed Seven Million Five Hundred Thousand Dollars ($7,500,000);

(c)    distributions or dividends consisting solely of any Borrower’s capital stock;
 
(d)    purchases for value of any rights distributed in connection with any stockholder rights plan;
 
(e)    purchases of capital stock or options to acquire such capital stock with the proceeds received from a substantially concurrent issuance of capital stock or convertible securities;

(f)    purchases of capital stock pledged as collateral for loans to employees;

(g)    purchases of capital stock in connection with the exercise of stock options or stock appreciation rights by way of cashless exercise or in connection with the satisfaction of withholding tax obligations;

(h)    purchases of fractional shares of capital stock arising out of stock dividends, splits or combinations or business combinations;
 
(i)    payments of cash in lieu of issuing fractional shares upon conversion or exercise of convertible securities;

(j)    distributions from (i) any Borrower to any other Borrower and (ii) from any Subsidiary (not also a Borrower) of a Borrower to any Borrower or any other Subsidiary (not also a Borrower); and

(k)    other distributions, dividends or purchases of any Borrower’s capital stock in cash, with Bank’s prior consent.

  
“Permitted Indebtedness” is:
(a)    Borrowers’ Indebtedness to Bank under this Agreement and the other Loan Documents;

(b)    Subordinated Debt;

(c)    unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
 
(d)    guaranties of Permitted Indebtedness;

(e)    Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;

(f)    Indebtedness under Swap Agreements or consisting of interest rate, currency, or commodity swap agreements, interest rate cap or collar agreements or arrangements entered into in the ordinary course of business and designated to protect Borrowers or their Subsidiaries against fluctuations in interest rates, currency exchange rates, or commodity prices;

(g)    contingent obligations of Borrowers or any Subsidiary in respect of (i) any performance bond or surety bond issued in the ordinary course of business for the purpose of guaranteeing the performance of Borrowers and its Subsidiaries under tenders and contracts related to the sale of equipment and services to customers and (ii) any of the following type of bond issued in the ordinary course of business:  (A) customs bond, (B) contractors license bond, (C) value added tax bond, (D) miscellaneous tax bond or (E) bond issued to support employee benefit plan;
 
(h)    Indebtedness among the Borrowers and their Subsidiaries that is permitted in clause (d) of Permitted Investments;

(i)    Indebtedness with respect to reimbursement obligations of Borrowers in connection with the Existing Letters of Credit issued on Borrowers' behalf; 
 
(j)    earn-out obligations in connection with any Permitted Acquisition;

(k)    capitalized leases and purchase money Indebtedness not to exceed Two Million Five Hundred Thousand Dollars ($2,500,000) in the aggregate in any fiscal year secured by Liens permitted under clause (c) of the definition of "Permitted Liens";

(l)    Indebtedness of entities acquired in any permitted merger or acquisition transaction;
 
(m)    extensions, renewals and refinancings of Permitted Indebtedness, provided that the amount of such Indebtedness is not increased except by an amount equal to a reasonable premium or other reasonable amount paid in connection with such refinancing and by an amount equal to any existing, but unutilized, commitment thereunder; and
 
(n)    other unsecured Indebtedness of any Borrower and its Subsidiaries not otherwise permitted in clauses (a) through (n); provided that the aggregate amount of such Indebtedness shall not exceed Two Million Five Hundred Thousand Dollars ($2,500,000) at any time.

“Permitted Investments” are:

(a)    Investments (including, without limitation, Subsidiaries) existing on the Effective Date;

(b)    Investments consisting of cash and Cash Equivalents;
 
(c)    Investments pursuant to the Aviat Investment Policy;
 
(d)    Investments (i) by a Borrower in any other Borrower, (ii) by a Borrower in Subsidiaries that are not a Borrower not to exceed Five Million Dollars ($5,000,000) in the aggregate in any fiscal year and (iii) by a Subsidiary (not also a Borrower) in a Borrower or any other Subsidiary;

(e)    Investments consisting of Collateral Accounts in the name of any Borrower or any Subsidiary so long as Bank has a first priority, perfected security interest in such Collateral Accounts to the extent required pursuant to Section 6.8;

(f)    Investments consisting of extensions of credit to any Borrower’s or its Subsidiaries' customers in the nature of accounts receivable, prepaid royalties or notes receivable in the ordinary course of business arising from the sale or lease of goods, provision of services or licensing activities of any Borrower;

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

h)    Investments consisting of interest rate, currency, or commodity swap agreements, interest rate cap or collar agreements or arrangements entered into in the ordinary course of business and designated to protect a Person against fluctuations in interest rates, currency exchange rates, or commodity prices;
 
i)    Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees relating to the purchase of equity securities of any Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by such Borrower's Board of in an aggregate amount outstanding at any time not to exceed One Million Five Hundred Thousand Dollars ($1,500,000);
 
(j)    purchases or acquisitions by any Borrower or Subsidiary of (i) the capital stock in a Person that, upon the consummation thereof, will be a wholly-owned Subsidiary of such Borrower or Subsidiary (including as a result of a merger or consolidation) or (ii) all or substantially all of the assets of, or assets constituting one or more business units of, any Person (including the formation of any Subsidiary for the purposes of effectuating such purchase or acquisition and the capitalization of such Subsidiary whether by capital contribution or intercompany loans) (each, a "Permitted Acquisition"), provided that with respect to each such purchase or acquisition:

(i)the newly-created or acquired Subsidiary (or assets acquired) shall be (x) in the same or a related line of business as that conducted by the Borrower on the date hereof, or (y) in a business that is ancillary to and in furtherance of the line of business as that conducted by the Borrowers or their Subsidiaries on the date hereof;

(ii)all transactions related to such purchase or acquisition shall be consummated in all material respects in accordance with applicable law;

(iii)at the time of and after giving effect to any such purchase or acquisition, no Event of Default shall have occurred and be continuing; and

(iv)the total cash consideration for all such purchases or acquisitions shall not exceed Ten Million Dollars ($10,000,000) in the aggregate in any fiscal year.

(k)    Investments permitted by Section 7.3; and

(l)    other Investments not exceeding Two Million Five Hundred Thousand Dollars ($2,500,000) in the aggregate in any fiscal year of the Borrowers.

“Permitted Liens” are:
(a)    (i) Liens securing Indebtedness under clause (h) of the definition of “Permitted Indebtedness” hereunder, and (ii) Liens arising under this Agreement and the other Loan Documents;
 
(b)    Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for which Borrowers maintain adequate reserves on their Books, provided that no notice of any such Lien has been filed or recorded under the IRC;

(c)    Liens (including with respect to capital leases) (i) on property (including accessions, additions, parts, replacements, fixtures, improvements and attachments thereto, and the proceeds thereof) acquired or held by any Borrower or its Subsidiaries incurred for financing such property (including accessions, additions, parts, replacements, fixtures, improvements and attachments thereto, and the proceeds thereof) other than Accounts and Inventory, or (ii) existing on property (and accessions, additions, parts, replacements, fixtures, improvements and attachments thereto, and the proceeds thereof) when acquired other than Accounts and Inventory, if the Lien is confined to such property (including accessions, additions, parts, replacements, fixtures, improvements and attachments thereto, and the proceeds thereof);

(d)    Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness it secures may not increase;

(e)    Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed One Million Dollars ($1,000,000) and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;
 
(f)    Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);

(g)    leases or subleases of real property granted in the ordinary course of Borrowers’ business (or, if referring to another Person, in the ordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of Borrowers’ business (or, if referring to another Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest therein;

(h)    non-exclusive licenses of Intellectual Property granted to third parties in the ordinary course of business;
 
(i)    Liens in favor of custom and revenue authorities arising as a matter of law to secure the payment of custom duties in connection with the importation of goods;

(j)    Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.4 and 8.7;
 
(k)    Liens in favor of financial institutions arising in connection with deposit or securities accounts held at such institutions to secure standard fees and expenses associated with the maintenance of such accounts; and
 
deposits to secure the performance of bids, trade contracts (other than for borrowed money), contracts for the purchase of property, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case, incurred in the ordinary course of business and not representing an obligation for borrowed money.
 “Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.
“Pound Sterling” and the sign “£” each mean the lawful currency for the time being of the United Kingdom.
“Prime Rate” is the rate of interest per annum from time to time published in the money rates section of The Wall Street Journal or any successor publication thereto as the “prime rate” then in effect; provided that, in the event such rate of interest is less than zero, such rate shall be deemed to be zero for purposes of this Agreement; and provided further that if such rate of interest, as set forth from time to time in the money rates section of The Wall Street Journal, becomes unavailable for any reason as determined by Bank, the “Prime Rate” shall mean the rate of interest per annum announced by Bank as its prime rate in effect at its principal office in the State of California (such Bank announced Prime Rate not being intended to be the lowest rate of interest charged by Bank in connection with extensions of credit to debtors); provided that, in the event such rate of interest is less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Prime Rate Advance” means an Advance that bears interest based at the Prime Rate.
“Prime Rate Margin” is, from time to time, the following percentages per annum, based upon the Borrowers’ Adjusted Quick Ratio based as determined from Borrower’s consolidated financial statements as of the most recent fiscal quarter end, as set forth below:
	
			
	Level
	Borrowers’ Adjusted Quick Ratio
	Prime Rate Margin

	I
	Greater than or equal to 1.10:1.00
	0.50%*

	II
	Less than 1.10:1.00
	1.50%

*Any outstanding Singapore Advances shall bear interest at an additional 2.00% above the applicable Prime Rate Margin.

“Quick Assets” is, on any date, Borrowers’ consolidated, unrestricted cash and Cash Equivalents, net billed accounts receivable and investments with Bank with maturities of fewer than twelve (12) months determined according to GAAP. 
“Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.
“Regulatory Change” means, with respect to Bank, any change on or after the date of this Agreement in United States federal, state, or foreign laws or regulations, including Regulation D, or the adoption or making on or after such date of any interpretations, directives, or requests applying to a class of lenders including Bank, of or under any United States federal or state, or any foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof.
“Reportable Event” is any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. § 4043.
“Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Reserve Requirement” means, for any Interest Period, the average maximum rate at which reserves (including any marginal, supplemental, or emergency reserves) are required to be maintained during such Interest Period under Regulation D against “Eurocurrency liabilities” (as such term is used in Regulation D) by member banks of the Federal Reserve System.  Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by Bank by reason of any Regulatory Change against (a) any category of liabilities which includes deposits by reference to which the LIBOR Rate is to be determined as provided in the definition of LIBOR or (b) any category of extensions of credit or other assets which include Advances.
“Reserves” means, as of any date of determination, such amounts as Bank may from time to time establish and revise in its good faith business judgment, reducing the amount of Advances and other financial accommodations which would otherwise be available to Borrower (a) to reflect events, conditions, contingencies or risks which, as determined by Bank in its good faith business judgment, do or may adversely affect (i) the Collateral or any other property which is security for the Obligations or its value (including without limitation any increase in delinquencies of Accounts), (ii) the assets, business or prospects of Borrower or any Guarantor, or (iii) the security interests and other rights of Bank in the Collateral (including the enforceability, perfection and priority thereof); or (b) to reflect Bank's reasonable belief that any collateral report or financial information furnished by or on behalf of Borrower or any Guarantor to Bank is or may have been incomplete, inaccurate or misleading in any material respect; or (c) in respect of any state of facts which Bank determines constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default.
“Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial Officer, Controller, Treasurer and Assistant Treasurer of any Borrower.
“Restricted License” is any material license or other agreement with respect to which a Borrower is the licensee (a) that prohibits or otherwise restricts a Borrower from granting a security interest in such 

Borrower’s interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with Bank’s right to sell any Collateral.
“Revolving Line” is an aggregate principal amount equal to Thirty Million Dollars ($30,000,000).
“Revolving Line Maturity Date” is June 29, 2019.
“Revolving Line Utilization” is, at any time, the sum of (a) the outstanding principal amount of any Advances plus (b) the Dollar Equivalent face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) and any Letter of Credit Reserve.
“SEC” shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority.
“Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.
“Singapore Advances” is defined in Section 2.2(a).  
“Singapore Availability Amount” is (a) the lesser of (i) the Singapore Sublimit or (ii) the Borrowing Base, minus (b) the Singapore Utilization, minus (c) the Reserves.
“Singapore Borrower” is defined in the preamble.
“Singapore Borrower Eligible Account Advance Rate” is 30%; provided, however, that Bank may decrease the foregoing percentage in its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect Collateral.
“Singapore Borrower Eligible Accounts” is any Eligible Account of the Singapore Borrower, as determined by Bank from Borrower’s most recent Borrowing Base Certificate.
“Singapore Collateral” is any and all properties, rights and assets of Singapore Borrower described on Exhibit A.
“Singapore Companies Act” is the Singapore Companies Act (Chapter 50).
“Singapore Debenture” is that certain debenture dated November 29, 2010, by and between Singapore Borrower and Bank.
“Singapore Obligations” are Singapore Borrower’s obligations to pay when due any principal and interest arising out of Singapore Utilization, Bank Expenses and other amounts Singapore Borrower owes Bank now or later, whether under this Agreement, the Loan Documents, or otherwise, including, without limitation, all obligations relating to letters of credit (including reimbursement obligations for drawn and undrawn letters of credit), and under Bank Services Agreements, if any, and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Singapore Borrower assigned to Bank, and to perform any Singapore Borrower’s duties under the Loan Documents.
“Singapore Sublimit” is Thirty Million Dollars ($30,000,000).

“Singapore Utilization” is the sum of (i) the outstanding principal amount of any Singapore Advances, plus (ii) the Dollar Equivalent face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit), minus any Letter of Credit Reserve issued for Singapore Borrower’s account.
“Specified Affiliate” is any Person (a) more than ten percent (10.0%) of whose aggregate issued and outstanding equity or ownership securities or interests, voting, non-voting or both, are owned or held directly or indirectly,  beneficially or of record, by a Borrower, and/or (b) whose equity or ownership securities or interests representing more than ten percent (10.0%) of such Person’s total outstanding combined voting power are owned or held directly or indirectly, beneficially or of record, by a Borrower.
“Streamline Period” is any period of time, on and after the Effective Date, where Borrower has maintained a Adjusted Quick Ratio greater than 1.10 to 1.00 at all times during the prior calendar month and provided further that upon the occurrence of an Event of Default any Streamline Period then in effect shall immediately terminate and Borrower shall be required to maintain the foregoing financial ratio for two (2) consecutive months thereafter before a new Streamline Period begins.
“Subordinated Debt” is indebtedness incurred by any Borrower subordinated to all of such Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.
“Subsidiary” is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.  Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of any Borrower or Guarantor.
“Swap Agreement” is any agreement with respect to any swap, hedge, forward, future or derivative transaction 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 the Borrower and its Subsidiaries shall be deemed to be a “Swap Agreement.”
“Total Liabilities” is on any day, obligations that should, under GAAP, be classified as liabilities on Borrowers’ consolidated balance sheet, including all Indebtedness but excluding all Subordinated Debt.
“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.
“Transfer” is defined in Section 7.1. 
“Unused Revolving Line Facility Fee” is defined in Section 2.7(c).
“US Advances” is defined in Section 2.2(a).  

“US Borrowers” is defined in the preamble.
“US Collateral” is any and all properties, rights and assets of US Borrowers described on Exhibit A.
“US Foreign Subsidiary Holding Company” is (a) any Domestic Subsidiary, substantially all the assets of which (including the assets of any entity that is disregarded as an entity separate from such Subsidiary for U.S. federal income tax purposes) consist of capital stock of one or more Foreign Subsidiaries that are “controlled foreign corporations” within the meaning of Section 957 of the IRC and with respect to which any US Borrower or such Domestic Subsidiary is a “United States shareholder,” within the meaning of Section 951(b) of the IRC and (b) any such disregarded entity described in clause (a) if substantially all of the assets of such disregarded entity consist of capital stock of one or more Foreign Subsidiaries that are “controlled foreign corporations” within the meaning of Section 957 of the IRC and with respect to which any US Borrower or such Domestic Subsidiary that is the sole owner of such disregarded entity is a “United States shareholder,” within the meaning of Section 951(b) of the IRC.
 [Signature page follows.]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.
BORROWERS:
AVIAT NETWORKS, INC.
By    /s/ Eric Chang        
Name: Eric Chang    
Title:   Principal Accounting Officer

AVIAT U.S., INC.
By   /s/ Eric Chang        
Name: Eric Chang    
Title:   Principal Accounting Officer

AVIAT NETWORKS (S) PTE. LTD.
By    /s/ Kevin Holwell        
Name: Kevin Holwell    
Title:   Vice President Finance    

BANK:
SILICON VALLEY BANK
By    /s/ Kyle Larrabee        
Name: Kyle Larrabee
Title:   Vice President

EXHIBIT A

COLLATERAL

The US Collateral consists of all of US Borrowers’ right title and interest in and to the following personal property and the Singapore Collateral consists of all of Singapore Borrower’s right, title and interest in and to the following personal property, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof:

All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles, commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and

All Borrowers’ Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

Notwithstanding the foregoing, (a) the US Collateral does not include any of the following, whether now owned or hereafter acquired by any US Borrower: (i) any copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same trademarks, service marks and, to the extent permitted under applicable law, any applications therefore, whether registered or not, and the goodwill of the business of US Borrowers connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented inventions, source code, design rights and any claims for damage by way of any past, present, or future infringement of any of the foregoing; provided, however, the US Collateral shall include all Accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the foregoing; (ii) more than 65% of the total outstanding voting capital stock of any US Foreign Subsidiary Holding Company or Foreign Subsidiary held directly by such US Borrower (or by a Subsidiary other than a US Foreign Subsidiary Holding Company, that is treated as a disregarded entity of such US Borrower), (b) the Singapore Collateral does not include any of the following, whether now owned or hereafter acquired by Singapore Borrower: any copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, service marks and, to the extent permitted under applicable law, any applications therefore, whether registered or not, and the goodwill of the business of Singapore Borrower connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented inventions, source code, design rights and any claims for damage by way of any past, present, or future infringement of any of the foregoing; provided, however, the Singapore Collateral shall include all Accounts, license and royalty fees and other revenues, proceeds, or income arising out of or relating to any of the foregoing and (c) the US Collateral and Singapore Collateral do not include (i) any property to the extent that such grant of a  security interest or Lien is prohibited by any Requirement of Law of a Governmental Authority or constitutes a breach or default under or results in the termination of or requires any consent not obtained under, any contract, license, agreement, instrument or other document, including any capital lease, 

evidencing, governing or giving rise to such property, except to the extent that such Requirement of Law or the term in such contract, license, agreement, instrument or other document providing for such prohibition, breach, default or termination or requiring such consent is ineffective under Section 9-406, 9-407, 9-408 or 9-409 of the Code (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law (including Title 11 of the United States Bankruptcy Code) or principle of equity; provided, however, that such security interest or Lien shall attach immediately at such time as such Requirement of Law is not effective or applicable, or such prohibition, breach, default or termination is no longer applicable or is waived, and to the extent severable, shall attach immediately to any portion of the Collateral that does not result in such consequences.

Pursuant to the terms of a certain negative pledge arrangement with Bank, Borrowers have agreed, subject to certain exceptions, not to encumber any of their copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues, extensions, and continuations-in-part of the same, trademarks, service marks and, to the extent permitted under applicable law, any applications therefore, whether registered or not, and the goodwill of the business of Borrowers connected with and symbolized thereby, know-how, operating manuals, trade secret rights, rights to unpatented inventions, source code, design rights and any claims for damage by way of any past, present, or future infringement of any of the foregoing, without Bank’s prior written consent.

EXHIBIT B

FORM OF COMPLIANCE CERTIFICATE

TO:    SILICON VALLEY BANK                Date:                
FROM:    AVIAT NETWORKS, INC.

The undersigned authorized officer of Aviat Networks, Inc. (“Administrative Borrower”) certifies that under the terms and conditions of the Third Amended and Restated Loan and Security Agreement dated as of June 29, 2018 (as amended, modified, supplemented or restated from time to time, the “Loan Agreement”), by and among Administrative Borrower, Aviat U.S., Inc. (“Opco”), Aviat Networks (S) Pte. Ltd. (“Singapore Borrower” and together with the Administrative Borrower and Opco, each a “Borrower” and collectively, “Borrowers”) and Silicon Valley Bank (“Bank”): 
(1) Each Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below; (2) there are no Events of Default in existence; (3) all representations and warranties in the Loan Agreement are true and correct in all material respects on this date except as noted below; provided, however, 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; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; (4) each Borrower, and each of its Subsidiaries, has timely filed all material tax returns and reports that are required to be filed, and each Borrower has timely paid all material foreign, federal, state and local taxes, assessments, deposits and contributions owed by each Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Loan Agreement; (5) (a)there are no collective bargaining agreements covering the employees of any Borrower or any of their domestic Subsidiaries, (b) there is not pending, nor (to the knowledge of any Borrower) is there threatened, any strike, walkout, slowdown or work stoppage, or any unfair labor practice complaint or grievance or arbitration proceeding arising out of or under any collective bargaining agreement covering the employees of any Borrower or any of their Subsidiaries that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Change, and (c) the hours worked and payments made to employees of Borrowers and their domestic Subsidiaries have not been in violation in any material respect of the Fair Labor Standards Act or any other applicable law dealing with such matters; and (6) Borrowers are in compliance with Sections 6.1(b) and 6.8 and of the Loan Agreement.  

Attached are the required documents supporting the certification.  The undersigned certifies that the attached financial statements are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes and except, in the case of unaudited financial statements, for the absence of footnotes and subject to year-end adjustments.  The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Loan Agreement, and that compliance is determined not just at the date this certificate is delivered.  Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Loan Agreement.

	
			
	Please indicate compliance status by circling Yes/No under “Complies” column.

	 

	Reporting Covenant
	Required
	Complies

	Borrowing Base Report (in connection with Advance)
	With each request for an Advance
	Yes   No

	Monthly Borrowing Base Report
	Within 30 days of month end when Streamline Period is in effect
	Yes   No

	Weekly Borrowing Base Report
	No later than Friday each week when Streamline Period is not in effect
	Yes   No

	Cash holdings report
	Within 30 days of month end
	Yes   No

	Quarterly financial statements with Compliance Certificate
	Within 5 days of filing with the SEC,
but no later than 45 days after fiscal 
quarter end
	Yes   No

	Monthly financial statements with Compliance Certificate
	Within 30 days of month end
	Yes   No

	Monthly Borrowing Base Reports
	Within 30 days of month end when
Streamline Period is in effect
	Yes   No

	Weekly Borrowing Base Reports
	No later than Friday each week when Streamline Period is not in effect
	Yes   No

	Annual financial statement (CPA Audited) + Compliance Certificate
	Within 5 days of filings with the SEC but no later than 90 days after FYE 
	Yes   No

	10‐Q, 10‐K and 8-K
	Within 5 days after filing with SEC
	Yes   No

	Annual operating budgets for upcoming fiscal year and board approval of such annual operating budgets
	Within the earlier to occur of 45 days after FYE or 10 days after approval by Parent’s Board of Directors 
	Yes   No

	Report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, $1,000,000 or more
	Promptly
	Yes   No

	
					
	Financial Covenant
	Required
	Actual
	Complies

	Adjusted Quick Ratio
	1.05:1.00
	____:1.00
	Yes   No

	Maintain on a Quarterly Basis:
	 
	 
	 

	EBITDA
	Fiscal Quarter End
	EBITDA
	 
	Yes   No

	Each quarter after December 30, 2016*
	$1.00

	 
	 

	 
	 

*Measured on a trailing two fiscal quarter basis
The following financial covenant analys[is][es] and information set forth in Schedule 1 attached hereto are true and accurate as of the date this Certificate is delivered to Bank as set forth in the first line of this Certificate.

The following are the exceptions with respect to the certification above:  (If no exceptions exist, state “No exceptions to note.”)
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

	
		
	ADMINISTRATIVE BORROWER:

AVIAT NETWORKS, INC.

By:  _____________________
Name:  _____________________
Title:    _____________________

	BANK USE ONLY

Received by: _____________________
AUTHORIZED SIGNER
Date: _________________________

Verified: ________________________
AUTHORIZED SIGNER
Date: _________________________
Compliance Status:Yes     No

Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.

Dated:    ____________________

I.    Adjusted Quick Ratio (Section 6.9(a))

Required:    1.05:1.00

Actual:    

	
			
	A.1.
	Unrestricted cash and Cash Equivalents of Borrowers, net billed accounts receivable  and investments with Bank with maturities of fewer than 12 months determined according to GAAP
	$

	B.1.
	All obligation and liabilities of Borrowers to Bank
	$

	B.2.
	Aggregate amount of Borrowers’ Total Liabilities maturing within 1 year (without duplication)
	$

	B.3.
	Current Liabilities (B.1. plus B.2.)
	$

	C.1.
	Deferred Revenue
	$

	D.1.
	Consolidated Funded Indebtedness (without duplication)
	$

	E.1.
	Current Liabilities (less Deferred Revenue) plus, without duplication, Consolidated Funded Indebtedness (B.3. minus C.1. plus D.1)
	$

	F.
	Adjusted Quick Ratio (ratio of A.1. to E.1)
	1.___:1.00

Is line F at least 1.05? 

  No, not in compliance                      Yes, in compliance

II.    EBITDA (Section 6.9(b))
Required:
	
		
	Fiscal Quarter End
	EBITDA

	Each quarter after December 30, 2016*
	$1.00

*measured on a trailing two fiscal quarter basis

Actual:
	
			
	A.
	Consolidated Net Income
	$

	 
	To the extent deducted in the calculation of Net Income (Line A):
	 

	 
	(i)Consolidated Interest Charges
	$

	 
	(ii)Income tax expense 
	$

	 
	(iii)Depreciation and amortization expense 
	$

	 
	(iv)Restructuring charges incurred in connection with impairment of real estate (to the extent agreed to by Bank in writing)
	$

	 
	(v)Non-cash stock-based compensation expense
	$______________

	 
	(vi)Non-cash charges for customer inventory due to downward revaluation
	$

	 
	(vii)Non-cash charges related to discontinued operations occurring prior to the Effective Date
	$

	 
	(viii)Other non-recurring non-cash expenses 
	$

	B.
	Sum of (i) through (viii)
	$

	 
	To the extent included in calculating Consolidated Net Income (Line A):
	 

	 
	(i)Income tax credits 
	$

	 
	(ii)Other non-cash items increasing Consolidated Net Income 
	$

	C.
	Sum of Line (i) through (ii)
	$

	D.
	EBITDA (A. plus B. minus C.)
	$

Is Line D at least the amount required (see chart above)? 
     No, not in compliance    _____  Yes, in compliance

EXHIBIT C

FORM OF NOTICE OF BORROWING

AVIAT NETWORKS, INC.
AVIAT NETWORKS (S) PTE. LTD.

Date:  ______________
		
	To:
	Silicon Valley Bank

505 Howard Street, 3rd Floor
San Francisco, CA 94105
Attention:  Kyle Larrabee
		
	Re:
	Third Amended and Restated Loan and Security Agreement dated as of June 29, 2018 (as amended, modified, supplemented or restated from time to time, the “Loan Agreement”), by and among AVIAT NETWORKS, INC. (the “Administrative Borrower”), AVIAT U.S., INC. (“Opco”), AVIAT NETWORKS (S) PTE. LTD. (“Singapore Borrower” and together with the Administrative Borrower and Opco, each a “Borrower” and collectively, “Borrowers”) and SILICON VALLEY BANK (“Bank”).  

Ladies and Gentlemen:
The undersigned refers to the Loan Agreement, the terms defined therein and used herein as so defined, and hereby gives you notice irrevocably, pursuant to Section 3.5 of the Loan Agreement, of its request for an Advance.
1.    The Funding Date, which shall be a Business Day, of the requested Advance is _______________.

2.    The aggregate amount of the requested Advance is $_____________.

3.    The requested Advance shall consist of $___________ of Prime Rate Advance and $______ of LIBOR Advance.

4.    The duration of the Interest Period for the LIBOR Advance included in the requested Advance shall be ______ months.

5.    The requested Advance is:
 ̈ a US Advance to AVIAT NETWORKS, INC.
 ̈ a Singapore Advance to AVIAT NETWORKS (S) PTE. LTD.
6.    The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Advance before and after giving effect thereto, and to the application of the proceeds therefrom, as applicable:

(a)no Default or Event of Default has occurred and is continuing, or would result from such proposed Advance; and

(b)the requested Advance will not cause the Revolving Line Utilization to exceed the Availability Amount and will not cause the Singapore Utilization to exceed the lesser of (i) the Availability Amount, or (ii) the Singapore Sublimit.

[remainder of page intentionally blank]

ADMINISTRATIVE BORROWER:

AVIAT NETWORKS, INC.

By:        
Name:        
Title:        

SINGAPORE BORROWER:

AVIAT NETWORKS (S) PTE. LTD.

By:        
Name:        
Title:        

For internal Bank use only
	
				
	LIBOR Pricing Date
	LIBOR
	LIBOR Variance
	Maturity Date

	 
	 
	____%
	 

 

EXHIBIT D

FORM OF NOTICE OF CONVERSION/CONTINUATION

AVIAT NETWORKS, INC.
AVIAT NETWORKS (S) PTE. LTD.

Date:                             
		
	To:
	Silicon Valley Bank

505 Howard Street, 3rd Floor
San Francisco, CA 94105
Attention:  Kyle Larrabee

		
	Re:
	Third Amended and Restated Loan and Security Agreement dated as of June 29, 2018 (as amended, modified, supplemented or restated from time to time, the “Loan Agreement”), by and among AVIAT NETWORKS, INC. (the “Administrative Borrower”), AVIAT U.S., INC. (“Opco”), AVIAT NETWORKS (S) PTE. LTD. (“Singapore Borrower” and together with the Administrative Borrower and Opco, each a “Borrower” and collectively, “Borrowers”) and SILICON VALLEY BANK (“Bank”).  

Ladies and Gentlemen:
The undersigned refer to the Loan Agreement, the terms defined therein being used herein as therein defined, and hereby give you notice irrevocably, pursuant to Section 3.6 of the Loan Agreement, of the [conversion] [continuation] of the Advances specified herein, that:
1.    The date of the [conversion] [continuation] is                                            , 20___.

2.    The aggregate amount of the proposed Advances to be [converted] is $                             or [continued] is $                                  .

3.    The Advances are to be [converted into] [continued as] [LIBOR] [Prime Rate] Advances.

4.    The duration of the Interest Period for the LIBOR Advances included in the [conversion] [continuation] shall be            months.

5.    The Advances to be [converted] [continued] are:
  ̈ US Advances 
  ̈ Singapore Advances 
6.    The undersigned, on behalf of each Borrower, hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed [conversion] [continuation], before and after giving effect thereto and to the application of the proceeds therefrom:

(a)    no Default or Event of Default shall have occurred as of or on such date or after giving effect to the [conversion] [continuation] requested to be made on such date.
[signature page follows]

 
ADMINISTRATIVE BORROWER:

AVIAT NETWORKS, INC.

By:                
Name:            
Title:            

SINGAPORE BORROWER:

AVIAT NETWORKS (S) PTE. LTD.

By:                
Name:                
Title:                

For internal Bank use only
	
				
	LIBOR Pricing Date
	LIBOR
	LIBOR Variance
	Maturity Date

	 
	 
	____%
	 

 

EXHIBIT E

FORM OF CORPORATE BORROWING CERTIFICATE

Date:              
Borrowers:    Aviat Networks, Inc. (“Parent”) and Aviat U.S., Inc. (“Opco”)
Bank:    Silicon Valley Bank

I hereby certify as follows, as of the date set forth above:
		
	1.
	I am the Secretary, Assistant Secretary or other officer of each of Parent and Opco.  My title is as set forth below.

		
	2.
	Each of Parent’s and Opco’s exact legal name is set forth above.  Parent and Opco each are corporations existing under the laws of the State of Delaware.  

		
	3.
	Attached hereto as Exhibits A-1 and A-2 are true, correct and complete copies of the Certificate of Incorporation (including amendments) of each of Parent and Opco, as filed with the Secretary of State of the state in which each of Parent and Opco is incorporated as set forth in paragraph 2 above.  Each Certificate of Incorporation has not been amended, annulled, rescinded, revoked or supplemented, and remain in full force and effect as of the date hereof.  

		
	4.
	Attached hereto as Exhibits B-1 and B-2 are true, correct and complete copies of the by-laws (including amendments) of each of Parent and Opco.  Each set of by-laws has not been amended, annulled, rescinded, revoked or supplemented, and remain in full force and effect as of the date hereof.

		
	5.
	The resolutions attached hereto as Exhibits C-1 and C-2 were duly and validly adopted by the Board of Directors of each of Parent and Opco each at a duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action).  Such resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and Bank may rely on them until Bank receives written notice of revocation from Borrower.

		
	6.
	Attached hereto as Exhibits D-1 and D-2 are copies of a certificate of status of each of Parent and Opco, each dated within 30 days of the Effective Date, issued by the Secretary of State of the state of Delaware which indicates that each of Parent and Opco are in good standing in such jurisdiction.  

		
	7.
	As of the date hereof, each of the following officers or employees of Parent, whose names, titles and signatures are below, may act on behalf of Parent and any one of the persons designated below with a checked box beside his or her name may, from time to time, add or remove any individuals to and from the above list of persons authorized to act on behalf of Parent:

	
				
	Name
	Title
	Signature
	Authorized to Add or Remove Signatories

	Michael Pangia
	President and CEO
	 
	□

	Eric Chang
	Vice President, Corporate Controller and Principal Accounting Officer
	 
	□

	Kevin Holwell
	Vice President, Finance
	 
	□

		
	8.
	As of the date hereof, each of the following officers or employees of Opco, whose names, titles and signatures are below, may act on behalf of Opco and any one of the persons designated below with a checked box beside his or her name may, from time to time, add or remove any individuals to and from the above list of persons authorized to act on behalf of Opco:

	
				
	Name
	Title
	Signature
	Authorized to Add or Remove Signatories

	Michael Pangia
	President and CEO
	 
	□

	Eric Chang
	Vice President, Corporate Controller and Principal Accounting Officer
	 
	□

	Kevin Holwell
	Vice President, Finance
	 
	□

IN WITNESS WHEREOF, I have hereunto set my hand as of the date first written above.

By:                          
Name:                      
Title:                      

*** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set forth in paragraph 7 or 8 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or director of Parent and Opco.

I______________________, the __________________________ of each of Parent and Opco, hereby in the name and on behalf of each of Parent and Opco, that __________________________ is the duly elected (or appointed) and qualified [Secretary/Assistant Secretary] of each of Parent and Opco and that the signature appearing above is [his/her] genuine signature.

By:                          
Name:                      
Title:                      

 

EXHIBIT F

FORM OF CORPORATE BORROWING CERTIFICATE
FOR SINGAPORE BORROWER

Date:              
Borrowers:  Aviat Networks (S) Pte. Ltd. (“Singapore Borrower”)
Bank:           Silicon Valley Bank

I hereby certify as follows, as of the date set forth above:
		
	1.
	I am a Director, or other officer of Singapore Borrower and am authorized by Singapore Borrower to deliver this certificate.  My title is as set forth below.

		
	2.
	Singapore Borrower’s exact legal name is set forth above.  Singapore Borrower is a private company limited by shares incorporated under the laws of the Republic of Singapore.

		
	3.
	Attached in Exhibit A hereto are true, correct and complete copies of Singapore Borrower’s Certificate of Incorporation and Memorandum and Articles of Association (including amendments), as filed with the Accounting and Corporate Regulatory Authority in Singapore.  Such Certificate of Incorporation and Memorandum and Articles of Association have not been amended, annulled, rescinded, revoked or supplemented, and remain in full force and effect as of the date hereof.  

		
	4.
	Attached in Exhibit B hereto is a true, correct and complete copy of the resolutions duly adopted by the board of directors of Singapore Borrower authorizing the execution, delivery and performance of the Loan Documents (and any agreement relating thereto) to which it is a party.  Such resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and Bank may rely on them until Bank receives written notice of revocation from Singapore Borrower.

		
	5.
	The following persons are now duly elected and qualified Directors of Singapore Borrower holding the offices indicated next to their respective names below, and the signatures appearing opposite their respective names below are the true and genuine signatures of such Directors. Each of such Directors is duly authorized to execute and deliver on behalf of Singapore Borrower each Loan Document to which it is a party and any certificate or other document to be delivered by the Borrower pursuant to such Loan Document:

	
			
	Name
	Title
	Signature

	Eric Chang
	Director
	

	Heinz Helmut Stumpe
	Director
	

	Kevin Daniel Holwell
	Director
	

	Raj Kumar
	Director
	

IN WITNESS WHEREOF, I have hereunto set my hand as of the date first written above.

By:                          
Name:                      
Title:                      

*** If the Director or other certifying officer executing above is designated by the resolutions set forth in paragraph 5 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or Director of Singapore Borrower.

I______________________, the __________________________ of Singapore Borrower, hereby in the name and on behalf of Singapore Borrower, that __________________________ is the duly elected (or appointed) and qualified [Secretary/Assistant Secretary] of Singapore Borrower and that the signature appearing above is [his/her] genuine signature.

By:                          
Name:                      
Title:                      

EXHIBIT G
[Reserved]

 
EXHIBIT H

FORM OF BORROWING BASE CERTIFICATE

(Excel Worksheet To be Attached)

EXHIBIT I

BENEFICIAL OWNERSHIP INFORMATION

a.    Does any individual, directly or indirectly (for example, if applicable, through such individual’s equity interests in the Company’s parent entity), through any contract, arrangement, understanding, relationship or otherwise, own 25% or more of the equity interests of the Company:
Yes      ̈      No     ̈
If yes, complete the following information:
	
							
	 
	Name
	Date of birth
	Residential address
	For US Persons, Social Security Number:
(non-US persons should provide SSN if available)
	For Non-US Persons: Type of ID, ID number, country of issuance, expiration date
	Percentage of ownership
(if indirect ownership, explain structure)

	1
	 
	 
	 
	 
	 
	 

	2
	 
	 
	 
	 
	 
	 

	3
	 
	 
	 
	 
	 
	 

	4
	 
	 
	 
	 
	 
	 

b.    Identify one individual with significant responsibility for managing the Company, i.e., an executive officer or senior manager (e.g., Chief Executive Officer, President, Vice President, Chief Financial Officer, Treasurer, Chief Operating Officer, Managing Member or General Partner) or any other individual who regularly performs similar functions.

	
						
	 
	Name
	Date of birth
	Residential address
	For US Persons, Social Security Number:
(non-US persons should provide SSN if available)
	For Non-US Persons: Type of ID, ID number, country of issuance, expiration date

	1
	 
	 
	 
	 
	 

The undersigned hereby certifies, to the best of his or her knowledge, that the information set out in this form is true, complete and correct.
Date:                          

By:                    
Name:                    
Title:                    
Email:                    
Phone:EXHIBIT 10.1

 

CONFIDENTIAL TREATMENT REQUESTED

Certain portions of this document have been omitted pursuant to a request for Confidential Treatment and, where applicable, have been marked with “[***]” to indicate where omissions have been made.

The confidential material has been filed separately with the Securities and Exchange Commission.

 

Execution Copy

 

SUMMER INFANT, INC., and

 

SUMMER INFANT (USA), INC.,

 

as Borrowers, and

 

THE GUARANTORS FROM TIME TO TIME PARTY HERETO

 

 

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Dated as of June 28, 2018

 

 

CERTAIN FINANCIAL INSTITUTIONS,

 

as Lenders

 

and

 

BANK OF AMERICA, N.A.,

 

as Agent

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
SECTION 1.   DEFINITIONS; RULES OF CONSTRUCTION 
    	
1
    
	
 
    
	
1.1.
    	
DEFINITIONS
    	
1
    
	
1.2.
    	
ACCOUNTING TERMS
    	
35
    
	
1.3.
    	
UNIFORM COMMERCIAL   CODE AND PPSA
    	
35
    
	
1.4.
    	
CERTAIN MATTERS OF   CONSTRUCTION
    	
35
    
	
1.5.
    	
CURRENCY EQUIVALENTS
    	
36
    
	
 
    	
 
    
	
SECTION 2.   CREDIT FACILITIES
    	
37
    
	
 
    	
 
    
	
2.1.
    	
REVOLVER COMMITMENTS
    	
37
    
	
2.2.
    	
[RESERVED.]
    	
38
    
	
2.3.
    	
LETTER OF CREDIT   FACILITY
    	
38
    
	
 
    	
 
    
	
SECTION 3.   INTEREST, FEES AND CHARGES
    	
40
    
	
 
    	
 
    	
 
    
	
3.1.
    	
INTEREST
    	
40
    
	
3.2.
    	
FEES
    	
42
    
	
3.3.
    	
COMPUTATION OF   INTEREST, FEES, YIELD PROTECTION
    	
42
    
	
3.4.
    	
REIMBURSEMENT   OBLIGATIONS
    	
42
    
	
3.5.
    	
ILLEGALITY
    	
43
    
	
3.6.
    	
INABILITY TO DETERMINE   RATES
    	
43
    
	
3.7.
    	
INCREASED COSTS;   CAPITAL ADEQUACY
    	
44
    
	
3.8.
    	
MITIGATION
    	
45
    
	
3.9.
    	
FUNDING LOSSES
    	
45
    
	
3.10.
    	
MAXIMUM INTEREST
    	
45
    
	
 
    	
 
    
	
SECTION 4.   LOAN ADMINISTRATION
    	
46
    
	
 
    	
 
    
	
4.1.
    	
MANNER OF BORROWING AND   FUNDING OF REVOLVER LOANS
    	
46
    
	
4.2.
    	
DEFAULTING LENDER
    	
47
    
	
4.3.
    	
NUMBER AND AMOUNT OF   LIBOR LOANS; DETERMINATION OF RATE
    	
48
    
	
4.4.
    	
BORROWER AGENT
    	
48
    
	
4.5.
    	
ONE OBLIGATION
    	
48
    
	
4.6.
    	
EFFECT OF TERMINATION
    	
48
    
	
 
    	
 
    
	
SECTION 5.   PAYMENTS
    	
49
    
	
 
    	
 
    
	
5.1.
    	
GENERAL PAYMENT   PROVISIONS
    	
49
    
	
5.2.
    	
REPAYMENT OF REVOLVER   LOANS
    	
49
    
	
5.3.
    	
[RESERVED.]
    	
49
    
	
5.4.
    	
PAYMENT OF OTHER   OBLIGATIONS
    	
49
    
	
5.5.
    	
MARSHALING; PAYMENTS   SET ASIDE
    	
49
    
	
5.6.
    	
APPLICATION AND   ALLOCATION OF PAYMENTS
    	
49
    

 

i

 

	
5.7.
    	
DOMINION ACCOUNTS
    	
50
    
	
5.8.
    	
ACCOUNT STATED
    	
51
    
	
5.9.
    	
TAXES
    	
51
    
	
5.10.
    	
LENDER TAX INFORMATION
    	
53
    
	
5.11.
    	
NATURE AND EXTENT OF   EACH BORROWER’S LIABILITY
    	
54
    
	
 
    	
 
    
	
SECTION 6.   CONDITIONS PRECEDENT
    	
56
    
	
 
    	
 
    
	
6.1.
    	
CONDITIONS PRECEDENT TO   INITIAL LOANS
    	
56
    
	
6.2.
    	
CONDITIONS PRECEDENT TO   ALL CREDIT EXTENSIONS
    	
59
    
	
 
    	
 
    
	
SECTION 7.   COLLATERAL
    	
59
    
	
 
    	
 
    
	
7.1.
    	
GRANT OF SECURITY   INTEREST
    	
59
    
	
7.2.
    	
LIEN ON DEPOSIT   ACCOUNTS; CASH COLLATERAL
    	
61
    
	
7.3.
    	
[RESERVED]
    	
61
    
	
7.4.
    	
OTHER COLLATERAL
    	
61
    
	
7.5.
    	
NO ASSUMPTION OF   LIABILITY
    	
61
    
	
7.6.
    	
FURTHER ASSURANCES
    	
61
    
	
 
    	
 
    
	
SECTION 8.   COLLATERAL ADMINISTRATION
    	
62
    
	
 
    	
 
    
	
8.1.
    	
BORROWING BASE   CERTIFICATES
    	
62
    
	
8.2.
    	
ADMINISTRATION OF   ACCOUNTS
    	
62
    
	
8.3.
    	
ADMINISTRATION OF   INVENTORY
    	
63
    
	
8.4.
    	
ADMINISTRATION OF   EQUIPMENT
    	
63
    
	
8.5.
    	
ADMINISTRATION OF   DEPOSIT ACCOUNTS
    	
64
    
	
8.6.
    	
GENERAL PROVISIONS
    	
64
    
	
8.7.
    	
POWER OF ATTORNEY
    	
65
    
	
 
    	
 
    
	
SECTION 9.   REPRESENTATIONS AND WARRANTIES
    	
66
    
	
 
    	
 
    
	
9.1.
    	
GENERAL REPRESENTATIONS   AND WARRANTIES
    	
66
    
	
9.2.
    	
COMPLETE DISCLOSURE
    	
72
    
	
 
    	
 
    
	
SECTION 10.   COVENANTS AND CONTINUING AGREEMENTS
    	
72
    
	
 
    	
 
    
	
10.1.
    	
AFFIRMATIVE COVENANTS
    	
72
    
	
10.2.
    	
NEGATIVE COVENANTS
    	
76
    
	
10.3.
    	
FINANCIAL COVENANTS
    	
82
    
	
10.4.
    	
RESTRICTIONS ON ACTIVITIES   OF COMPANY
    	
82
    
	
10.5.
    	
RESTRICTIONS ON   ACTIVITIES OF FOREIGN SUBSIDIARIES
    	
82
    
	
 
    	
 
    
	
SECTION 11.   EVENTS OF DEFAULT; REMEDIES ON DEFAULT
    	
82
    
	
 
    	
 
    
	
11.1.
    	
EVENTS OF DEFAULT
    	
82
    
	
11.2.
    	
REMEDIES UPON DEFAULT
    	
85
    
	
11.3.
    	
LICENSE
    	
85
    
	
11.4.
    	
SETOFF
    	
86
    
	
11.5.
    	
REMEDIES CUMULATIVE; NO   WAIVER
    	
86
    

 

ii

 

	
SECTION 12.   AGENT
    	
86
    
	
 
    	
 
    
	
12.1.
    	
APPOINTMENT, AUTHORITY   AND DUTIES OF AGENT
    	
86
    
	
12.2.
    	
AGREEMENTS REGARDING   COLLATERAL AND BORROWER MATERIALS
    	
87
    
	
12.3.
    	
RELIANCE BY AGENT
    	
88
    
	
12.4.
    	
ACTION UPON DEFAULT
    	
88
    
	
12.5.
    	
RATABLE SHARING
    	
88
    
	
12.6.
    	
INDEMNIFICATION
    	
88
    
	
12.7.
    	
LIMITATION ON   RESPONSIBILITIES OF AGENT
    	
89
    
	
12.8.
    	
SUCCESSOR AGENT AND   CO-AGENTS
    	
89
    
	
12.9.
    	
DUE DILIGENCE AND NON-RELIANCE
    	
90
    
	
12.10.
    	
REMITTANCE OF PAYMENTS   AND COLLECTIONS
    	
90
    
	
12.11.
    	
INDIVIDUAL CAPACITIES
    	
91
    
	
12.12.
    	
TITLES
    	
91
    
	
12.13.
    	
BANK PRODUCT PROVIDERS
    	
91
    
	
12.14.
    	
NO THIRD PARTY   BENEFICIARIES
    	
91
    
	
 
    	
 
    
	
SECTION 13.   BENEFIT OF AGREEMENT; ASSIGNMENTS
    	
91
    
	
 
    	
 
    
	
13.1.
    	
SUCCESSORS AND ASSIGNS
    	
91
    
	
13.2.
    	
PARTICIPATIONS
    	
91
    
	
13.3.
    	
ASSIGNMENTS
    	
92
    
	
13.4.
    	
REPLACEMENT OF CERTAIN   LENDERS
    	
93
    
	
 
    	
 
    
	
SECTION 14.   THE GUARANTEE
    	
93
    
	
 
    	
 
    
	
14.1.
    	
GUARANTEE
    	
93
    
	
14.2.
    	
OBLIGATIONS   UNCONDITIONAL
    	
93
    
	
14.3.
    	
REINSTATEMENT
    	
94
    
	
14.4.
    	
SUBROGATION
    	
94
    
	
14.5.
    	
REMEDIES
    	
94
    
	
14.6.
    	
INSTRUMENT FOR THE   PAYMENT OF MONEY
    	
95
    
	
14.7.
    	
CONTINUING GUARANTEE
    	
95
    
	
14.8.
    	
GENERAL LIMITATION ON   AMOUNT OF OBLIGATIONS GUARANTEED
    	
95
    
	
14.9.
    	
JOINT ENTERPRISE
    	
95
    
	
14.10.
    	
SUBORDINATION
    	
95
    
	
14.11.
    	
CONFLICTS WITH CANADIAN   GUARANTY OR UK GUARANTY
    	
95
    
	
 
    	
 
    
	
SECTION 15.   MISCELLANEOUS
    	
95
    
	
 
    	
 
    
	
15.1.
    	
CONSENTS, AMENDMENTS   AND WAIVERS
    	
95
    
	
15.2.
    	
INDEMNITY
    	
96
    
	
15.3.
    	
NOTICES AND   COMMUNICATIONS
    	
97
    
	
15.4.
    	
PERFORMANCE OF   OBLIGORS’ OBLIGATIONS
    	
97
    
	
15.5.
    	
CREDIT INQUIRIES
    	
98
    

 

iii

 

	
15.6.
    	
SEVERABILITY
    	
98
    
	
15.7.
    	
CUMULATIVE EFFECT;   CONFLICT OF TERMS
    	
98
    
	
15.8.
    	
COUNTERPARTS
    	
98
    
	
15.9.
    	
ENTIRE AGREEMENT
    	
98
    
	
15.10.
    	
RELATIONSHIP WITH   LENDERS
    	
98
    
	
15.11.
    	
NO ADVISORY OR   FIDUCIARY RESPONSIBILITY
    	
98
    
	
15.12.
    	
CONFIDENTIALITY
    	
99
    
	
15.13.
    	
GOVERNING LAW
    	
99
    
	
15.14.
    	
CONSENT TO FORUM
    	
99
    
	
15.15.
    	
WAIVERS BY OBLIGORS
    	
100
    
	
15.16.
    	
PATRIOT ACT NOTICE
    	
100
    
	
15.17.
    	
CANADIAN ANTI-MONEY LAUNDERING   LEGISLATION
    	
100
    
	
15.18.
    	
CONTINUED   EFFECTIVENESS; NO NOVATION
    	
101
    
	
15.19.
    	
ACKNOWLEDGEMENT AND   CONSENT TO BAIL-IN OF EEA FINANCIAL INSTITUTIONS
    	
101
    
	
15.20.
    	
INTERCREDITOR AGREEMENT
    	
102
    

 

iv

 

LIST OF EXHIBITS AND SCHEDULES

 

	
Exhibit A
    	
 
    	
Assignment and Acceptance
    
	
Exhibit B
    	
 
    	
Assignment Notice
    
	
 
    	
 
    	
 
    
	
Schedule 1.1(a)
    	
 
    	
Commitments of Lenders
    
	
Schedule 1.1(b)
    	
 
    	
Accruals
    
	
Schedule 1.1(c)
    	
 
    	
Existing Letters of Credit
    
	
Schedule 8.5
    	
 
    	
Deposit Accounts
    
	
Schedule 8.6.1
    	
 
    	
Business Locations
    
	
Schedule 9.1.4
    	
 
    	
Names and Capital Structure
    
	
Schedule 9.1.5
    	
 
    	
Title to Properties; Liens
    
	
Schedule 9.1.8
    	
 
    	
Surety Obligations
    
	
Schedule 9.1.10
    	
 
    	
Brokers
    
	
Schedule 9.1.11
    	
 
    	
Patents, Trademarks, Copyrights and Licenses
    
	
Schedule 9.1.13
    	
 
    	
Compliance with Laws
    
	
Schedule 9.1.14
    	
 
    	
Environmental Matters
    
	
Schedule 9.1.15
    	
 
    	
Restrictive Agreements
    
	
Schedule 9.1.16
    	
 
    	
Litigation
    
	
Schedule 9.1.18
    	
 
    	
Pension Plans
    
	
Schedule 9.1.20
    	
 
    	
Labor Contracts
    
	
Schedule 10.2.1
    	
 
    	
Existing Debt
    
	
Schedule 10.2.2
    	
 
    	
Permitted Liens
    
	
Schedule 10.2.17
    	
 
    	
Existing Affiliate Transactions
    

 

v

 

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated as of June 28, 2018 (this “Agreement”), among SUMMER INFANT, INC., a Delaware corporation (the “Company”), SUMMER INFANT (USA), INC., a Rhode Island corporation (“SI USA”, and together with Company, collectively, “Borrowers”), THE GUARANTORS FROM TIME TO TIME PARTY HERETO, the financial institutions from time to time party to this Agreement from time to time as lenders (collectively, “Lenders”) and BANK OF AMERICA, N.A., a national banking association, as agent for the Lenders (“Agent”) amends and restates in its entirety that certain Amended and Restated Loan and Security Agreement dated as of April 21, 2015 (as amended prior to the date hereof, the “Existing Credit Agreement”) among the Borrowers, the guarantors party thereto, the lenders party thereto, Bank of America, N.A. as agent and Merrill Lynch, Pierce, Fenner & Smith Incorporated as sole lead arranger and sole bookrunner.

 

R E C I T A L S:

 

Borrowers have requested that Lenders provide a credit facility to Borrowers to finance their mutual and collective business enterprise of the Borrowers and the other Obligors.  Lenders are willing to provide the credit facility on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE, for valuable consideration hereby acknowledged, the parties agree as follows:

 

SECTION 1.                                           DEFINITIONS; RULES OF CONSTRUCTION

 

1.1.                            Definitions.  As used herein, the following terms have the meanings set forth below:

 

ABL Priority Collateral:  has the meaning assigned to such term in the Intercreditor Agreement.

 

Account: as defined in the UCC (or, with respect to any account receivable of any Canadian Guarantor to which the PPSA is applicable, as defined in the PPSA or, with respect to any UK Guarantor, Book Debts), including all rights to payment for goods sold or leased, or for services rendered.

 

Account Debtor: a Person obligated under an Account, Chattel Paper, General Intangible or Intangible.

 

Accounts Formula Amount: 85% of the Value of Eligible Accounts.

 

Acquisition: a transaction or series of transactions resulting in (a) acquisition of a business, division, or substantially all assets of a Person; (b) record or beneficial ownership of 50% or more of the Equity Interests of a Person; or (c) merger, consolidation or combination of a Borrower or Subsidiary with another Person.

 

Affiliate: with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.  “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have correlative meanings.

 

Agent Indemnitees: Agent and its officers, directors, employees, Affiliates, agents and attorneys.

 

Agent Professionals: attorneys, accountants, appraisers, auditors, business valuation experts, environmental engineers or consultants, field examiners, turnaround consultants, and other professionals

 

 

and experts retained by Agent.

 

Agreement Currency: as defined in Section 1.5.

 

Allocable Amount: as defined in Section 5.11.3.

 

Amazon Companies:  collectively, Amazon.com, Inc. and its Affiliates.

 

Anti-Corruption Laws: means laws relating to anti-bribery or anti-corruption (governmental or commercial) which apply to any Obligor, including laws that prohibit the corrupt payment, offer, promise, or authorization of the payment or transfer of anything of value (including gifts or entertainment), directly or indirectly, to any foreign government official, foreign government employee or commercial entity to obtain a business advantage; including the FCPA, and all national and international laws enacted to implement the OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions.

 

Anti-Terrorism Law: any law relating to terrorism or money laundering, including the Patriot Act, the Canadian Anti-Money Laundering & Anti-Terrorism Legislation and the UK Anti-Terrorism Laws.

 

Applicable Law: all laws, rules, regulations and governmental guidelines applicable to the Person, conduct, transaction, agreement or matter in question, including all applicable statutory law, common law and equitable principles, and all provisions of constitutions, treaties, statutes, rules, regulations, orders and decrees of Governmental Authorities, and including, without limitation, the CPSC Regulations.

 

Applicable Margin or Applicable Unused Line Fee Rate: with respect to any Type of Loan, the margin set forth below, or with respect to the unused line fees payable under Section 3.2.1, the rate per annum set forth below, in each case, as determined for the most recently ended Fiscal Quarter:

 

	
Level
    	
 
    	
Average Quarterly
   Availability
    	
 
    	
Base Rate
   Revolver
   Loans
    	
 
    	
LIBOR
   Revolver
   Loans
    	
 
    	
Applicable
   Unused Line
   Fee Rate
    
	
I
    	
 
    	
> $30,000,000
    	
 
    	
0.75%
    	
 
    	
1.75%
    	
 
    	
0.35%
    
	
II
    	
 
    	
<   $30,000,000
    	
 
    	
1.00%
    	
 
    	
2.00%
    	
 
    	
0.25%
    

 

Until December 29, 2018, the Applicable Margin and the Applicable Unused Line Fee Rate shall be determined as if Level II were applicable.  Thereafter, the Applicable Margin and the Applicable Unused Line Fee Rate shall be determined based upon Average Quarterly Availability for each Fiscal Quarter as determined by Agent based upon the Revolver Borrowing Base Certificates delivered pursuant to Section 8.1 for each week during such Fiscal Quarter, which determination shall be effective on the first day of the calendar month after receipt by Agent of the Revolver Borrowing Base Certificate for the last week in such Fiscal Quarter.  If any financial statement, Revolver Borrowing Base Certificate, Term Loan Borrowing Base Certificate or Compliance Certificate due in the preceding month has not been received, then, at the option of Agent or Required Lenders, the Applicable Margin and the Applicable Unused Line Fee Rate shall be determined as if Level II were applicable, from such day until the first day of the calendar month following actual receipt.

 

Notwithstanding the foregoing, (i) in the event that the Fixed Charge Coverage Ratio is at any time (regardless of whether a Financial Covenant Testing Period is in effect) less than 1.00 to 1.00, the Applicable Margin for Base Rate Revolver Loans and LIBOR Revolver Loans shall each be increased by 25 basis points from the amounts set forth in the table above; and (ii) in the event that the Leverage Ratio 

 

2

 

is at any time less than 3.75 to 1.00, the Applicable Margin for Base Rate Revolver Loans and LIBOR Revolver Loans shall each be reduced by 25 basis points from the amounts set forth in the table above; provided, that (x) the reductions described in clause (ii) of this sentence shall automatically cease to be in effect if any Event of Default has occurred and is continuing and (y) if any calculation of Leverage Ratio or Fixed Charge Coverage Ratio is at any time restated or otherwise revised or if the information set forth in any Compliance Certificate otherwise proves to be false or incorrect such that the Applicable Margin would have been higher than was otherwise in effect during any period, without constituting a waiver of any Default or Event of Default arising as a result thereof, interest due under this Agreement shall be immediately recalculated at such higher rate for any such applicable periods and shall be due and payable on demand.

 

Applicable Percentage:  with respect to any Lender, with respect to Revolver Loans, LC Obligations, Revolver Overadvance Loans, Protective Advances or Swingline Loans, a percentage equal to a fraction the numerator of which is such Lender’s Revolver Commitment and the denominator of which is the aggregate Revolver Commitments (provided, that if the Revolver Commitments have terminated or expired, each Lender’s Applicable Percentage shall be determined based upon such Lender’s share of the aggregate Revolver Exposure at such time).

 

Approved Fund: any Person (other than a natural person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in its ordinary course of activities, and is administered or managed by a Lender, an entity that administers or manages a Lender, or an Affiliate of either.

 

Approved Processors:  collectively, Port Erie Plastics, Inc., TNT Plastic Molding, Inc., AMA Plastics, Norco Plastics, Inc., and such other processors as Agent shall approve from time to time in its Permitted Discretion.

 

Asset Disposition: a sale, lease, license, consignment, transfer or other disposition of Property of an Obligor, including a disposition of Property in connection with a sale-leaseback transaction or synthetic lease.

 

Assignment and Acceptance: an assignment agreement between a Lender and Eligible Assignee, in the form of Exhibit A.

 

Availability: at any time, (a) the lesser of (i) the aggregate Revolver Commitments at such time and (ii) the Revolver Borrowing Base, at such time minus (b) the Revolver Exposure at such time.

 

Availability Reserve: the sum (without duplication) of (a) the Inventory Reserve; (b) the Rent and Charges Reserve; (c) reserves for accrued and unpaid Royalties, whether or not then due and payable; (d) the Bank Product Reserve; (e) the Canadian Priority Payables Reserve; (f) the UK Priority Payables Reserve; (g) the Dilution Reserve; (h) reserves for amounts owed by any Obligor to any processor (including, without limitation, the Approved Processors); (i) the aggregate amount of liabilities secured by Liens upon Collateral that are senior to Agent’s Liens (but imposition of any such reserve shall not waive an Event of Default arising therefrom); and (j) such additional reserves, in such amounts and with respect to such matters, as Agent in its Permitted Discretion may elect to impose from time to time.

 

Average Availability: the average daily Availability for an applicable period.

 

Average Quarterly Availability: the average daily Availability for the applicable Fiscal Quarter.

 

Bail-In Action:  the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

 

3

 

Bail-In Legislation:  with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

 

Bank of America: Bank of America, N.A., a national banking association, and its successors and assigns.

 

Bank of America Indemnitees: Bank of America and its officers, directors, employees, Affiliates, agents and attorneys.

 

Bank Product: any of the following products, services or facilities extended to any Borrower or Subsidiary by a Lender or any of its Affiliates: (a) Cash Management Services; (b) foreign exchange products or services; (c) products under Hedging Agreements; (d) commercial credit card and merchant card services; and (e) other banking products or services as may be requested by any Borrower or Subsidiary, other than Letters of Credit.

 

Bank Product Reserve: the aggregate amount of reserves established by Agent from time to time in its Permitted Discretion in respect of Secured Bank Product Obligations.

 

Bankruptcy Code: Title 11 of the United States Code.

 

Base Rate: for any day, a per annum rate equal to the greater of (a) the Prime Rate for such day; (b) the Federal Funds Rate for such day, plus 0.50%; or (c) LIBOR for a 30 day interest period as determined on such day, plus 1.5%.

 

Base Rate Loan: any Loan that bears interest based on the Base Rate.

 

Base Rate Revolver Loan: a Revolver Loan that bears interest based on the Base Rate.

 

Beneficial Ownership Certification: a certification regarding beneficial ownership required by the Beneficial Ownership Regulation.

 

Beneficial Ownership Regulation:  31 C.F.R. §1010.230.

 

Blocked Person: means any Person: (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224; (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224; (c) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224; or (e) a Person that is named on the most current OFAC Lists.

 

Board of Governors: the Board of Governors of the Federal Reserve System.

 

Book Debts:  as defined in the UK Security Agreements.

 

Borrowed Money: with respect to any Obligor, without duplication, its (a) Debt that (i) arises from the lending of money by any Person to such Obligor, (ii) is evidenced by notes, drafts, bonds, debentures, credit documents or similar instruments, (iii) accrues interest or is a type upon which interest charges are customarily paid (excluding trade payables owing in the Ordinary Course of Business), or (iv) was issued or assumed as full or partial payment for Property; (b) Capital Leases; (c) unreimbursed reimbursement obligations with respect to letters of credit; and (d) guaranties of any Debt of the foregoing types owing by another Person.

 

4

 

Borrower Agent: as defined in Section 4.4.

 

Borrower Materials: Revolver Borrowing Base and Term Loan Borrowing Base information, reports, financial statements and other materials delivered by Borrowers hereunder, as well as other Reports and information provided by Agent to Lenders.

 

Borrowing: a group of Loans of one Type that are made on the same day or are converted into Loans of one Type on the same day.

 

Business Day: any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, North Carolina and New York, and (i) if such day relates to a LIBOR Loan, any such day on which dealings in Dollar deposits are conducted between banks in the London interbank Eurodollar market or (ii) if the term “Business Day” has a different meaning in the Canadian Security Agreements or the UK Security Agreements, the definition in such other document shall control as to issues covered in both this Agreement and such other document.

 

Canadian Anti-Money Laundering & Anti-Terrorism Legislation: the Criminal Code, R.S.C. 1985, c. C-46, the Proceeds of Crime Act and the United Nations Act, R.S.C. 1985, c. U-2 or any similar Canadian legislation, together with all rules, regulations and interpretations thereunder or related thereto including, without limitation, the Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism and the United Nations Al-Qaida and Taliban Regulations promulgated under the United Nations Act.

 

Canadian Defined Benefit Pension Plan:  a Canadian Pension Plan with a “defined benefit provision” as such term is defined in the Income Tax Act (Canada).

 

Canadian Dollars:  lawful money of Canada.

 

Canadian Guarantor: each Canadian Subsidiary that guarantees payment or performance of the Obligations, including, without limitation, SI Canada.  The definition of “Canadian Guarantors” means all of such entities collectively.

 

Canadian Guaranty: that certain Guarantee and Indemnity Agreement dated as of the Original Closing Date made by the Canadian Guarantor, as may be amended,  restated, replaced, confirmed, supplemented or otherwise modified from time to time.

 

Canadian MEPP:  any “multi-employer pension plan” as such term is defined in the PBA to which any Obligor or its Subsidiaries has any liability, contingent or otherwise.

 

Canadian Pension Plan:  a pension plan that is required to be registered as a pension plan under the PBA or the Income Tax Act (Canada) under which any Obligor or its Subsidiaries has any liability, contingent or otherwise, but excludes a Canadian MEPP.

 

Canadian Priority Payables Reserve: on any date of determination, reserves established by Agent in its Permitted Discretion for amounts payable by Canadian Guarantors and secured by any Liens, choate or inchoate, which rank or which would reasonably be expected to rank in priority to or pari passu with Agent’s Liens on Collateral in the Revolver Borrowing Base, amounts deemed to be held in trust, or held in trust, pursuant to Applicable Law and/or for amounts which represent costs in connection with the preservation, protection, collection or realization of the Collateral, including, without limitation, any such amounts due and not paid for wages, vacation pay, amounts (including severance pay) payable under the Wage Earner Protection Program Act (Canada) or under the Bankruptcy and Insolvency Act (Canada), amounts due and not paid under any legislation relating to workers’ compensation or to employment insurance, all amounts deducted or withheld and not paid and remitted when due under the Income Tax 

 

5

 

Act (Canada), sales tax, goods and services tax, value added tax, harmonized tax, excise tax, tax payable pursuant to Part IX of the Excise Tax Act (Canada) or similar applicable provincial legislation, government royalties, amounts currently or past due and not paid for realty, municipal or similar taxes and all solvency deficiencies or wind-up deficiencies under the PBA and all amounts currently or past due and not contributed, remitted or paid to any Canadian Pension Plan or under the Canada Pension Plan or any similar statutory or other claims that would have or would reasonably be expected to have priority over or pari passu with any Liens granted to Agent in the future (“Priority Payables”).

 

Canadian Security Agreements:  (a) the General Security Agreement dated as of the Original Closing Date, in form and substance reasonably acceptable to Agent, executed by the Canadian Guarantors in favor of Agent, as the same may be amended, restated, confirmed, supplemented or otherwise modified from time to time, and (b) any other Canadian security agreement required to be executed by any Obligor in favor of Agent after the Original Closing Date, in each case, as the same may be amended, restated, confirmed, supplemented, replaced or otherwise modified from time to time.

 

Canadian Subsidiary:  any Subsidiary of Company that is organized under the federal laws of Canada or any province or territory thereof.

 

Capital Expenditures: all liabilities incurred or expenditures made by a Borrower or Subsidiary for the acquisition of fixed assets, or any improvements, replacements, substitutions or additions thereto with a useful life of more than one year.

 

Capital Lease: any lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, provided, however, notwithstanding anything to the contrary in the financial statements of the Obligors, the Lease dated March 24, 2009 between Faith Realty II, LLC and SI USA shall not constitute a “Capital Lease” for purposes of this Agreement.

 

Cash Collateral: cash, and any interest or other income earned thereon, that is delivered to Agent to Cash Collateralize any Obligations.

 

Cash Collateral Account: a demand deposit, money market or other account established by Agent at such financial institution as Agent may select in its discretion, which account shall be subject to a Lien in favor of Agent.

 

Cash Collateralize: the delivery of cash to Agent, as security for the payment of Obligations, in an amount equal to (a) with respect to LC Obligations, 103% of the aggregate LC Obligations, and (b) with respect to any inchoate, contingent or other Obligations (including Secured Bank Product Obligations), Agent’s good faith estimate of the amount that is due or could become due, including all fees and other amounts relating to such Obligations.  “Cash Collateralization” has a correlative meaning.

 

Cash Dominion Period: the period (a) commencing on the day that an Event of Default occurs, or Availability is less than the Cash Dominion Trigger Amount; and (b) continuing until (x) no Event of Default shall have occurred and be continuing and (y) during the preceding 30 consecutive days, Availability shall have been greater than the Cash Dominion Trigger Amount at all times.

 

Cash Dominion Trigger Amount:  at any time, an amount equal to the greater of (a) $5,000,000 and (b) 10% of the lesser of (i) the aggregate Revolver Commitments at such time and (ii) the Revolver Borrowing Base (calculated without giving effect to the Term Loan Push Down Reserve) at such time.

 

Cash Equivalents: (a) marketable obligations issued or unconditionally guaranteed by, and backed by the full faith and credit of, the United States, Canadian, the United Kingdom or English government, maturing within 12 months of the date of acquisition; (b) certificates of deposit, time deposits and bankers’ acceptances maturing within 12 months of the date of acquisition, and overnight bank deposits, 

 

6

 

in each case which are issued by Bank of America or a commercial bank organized under the laws of the United States, Canada, the United Kingdom or England or any state, province or district thereof, rated A-1 (or better) by S&P or P-1 (or better) by Moody’s at the time of acquisition, and (unless issued by a Lender) not subject to offset rights; (c) repurchase obligations with a term of not more than 30 days for underlying investments of the types described in clauses (a) and (b) entered into with any bank described in clause (b); (d) commercial paper issued by Bank of America or rated A-1 (or better) by S&P or P-1 (or better) by Moody’s, and maturing within nine months of the date of acquisition; and (e) shares of any money market fund that has substantially all of its assets invested continuously in the types of investments referred to above, has net assets of at least $500,000,000 and has the highest rating obtainable from either Moody’s or S&P.

 

Cash Management Services: any services provided from time to time by a Lender or any of its affiliates to any Borrower or Subsidiary in connection with operating, collections, payroll, trust, or other depository or disbursement accounts, including automated clearinghouse, e-payable, electronic funds transfer, wire transfer, controlled disbursement, overdraft, depository, information reporting, lockbox and stop payment services.

 

Casualty Event: means casualty or other insured damage to, or any taking under power of eminent domain or by condemnation, expropriation or similar proceeding of (and payments in lieu thereof), any property or asset of an Obligor.

 

CERCLA: the Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C. § 9601 et seq.).

 

Change in Law: the occurrence, after the date hereof, of (a) the adoption, taking effect or phasing in of any law, rule, regulation or treaty; (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof; or (c) the making, issuance or application of any request, guideline, requirement or directive (whether or not having the force of law) by any Governmental Authority; provided, however, that “Change in Law” shall include, regardless of the date enacted, adopted or issued, all requests, guidelines, requirements or directives (i) under or relating to the Dodd-Frank Wall Street Reform and Consumer Protection Act, or (ii) promulgated pursuant to Basel III by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any similar authority) or any other Governmental Authority including CRD IV.

 

Change of Control: an event or series of events by which:

 

(a)                                 any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of 45% or more of the Equity Interests of a Borrower entitled to vote for members of the board of directors or equivalent governing body of such 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);

 

(b)                                 during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of a Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or

 

7

 

nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (excluding, in the case of both clause (ii) and clause (iii), any individual whose initial nomination for, or assumption of office as, a member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors);

 

(c)                                  Company ceases to own, directly or indirectly, 100% of the Equity Interests of any Subsidiary (other than Subsidiaries that are joint ventures permitted under this Agreement);

 

(d)                                 a Borrower ceases to own, directly or indirectly 100% of the Equity Interests of any Guarantor or other Subsidiary (other than Subsidiaries that are joint ventures permitted under this Agreement);

 

(e)                                  any “Change of Control” or similar event, as defined in the Term Loan Agreement or any other Term Loan Document shall have occurred; or

 

(f)                                   the sale or transfer of all or substantially all of an Obligor’s assets except to another Obligor.

 

Claims: all claims, liabilities, obligations, losses, damages, penalties, judgments, proceedings, interest, costs and expenses of any kind (including remedial response costs, reasonable attorneys’ fees and Extraordinary Expenses) at any time (including after Full Payment of the Obligations or replacement of Agent or any Lender) incurred by any Indemnitee or asserted against any Indemnitee by any Obligor or other Person, in any way relating to (a) any Loans, Letters of Credit, Loan Documents, Borrower Materials, or the use thereof or transactions relating thereto, (b) any action taken or omitted in connection with any Loan Documents, (c) the existence or perfection of any Liens, or realization upon any Collateral, (d) exercise of any rights or remedies under any Loan Documents or Applicable Law, or (e) failure by any Obligor to perform or observe any terms of any Loan Document, in each case including all costs and expenses relating to any investigation, litigation, arbitration or other proceeding (including an Insolvency Proceeding or appellate proceedings), whether or not the applicable Indemnitee is a party thereto.

 

Code: the Internal Revenue Code of 1986, as amended.

 

Collateral: all Property described in Section 7.1, all Property described in any Security Documents as security for any Obligations, and all other Property that now or hereafter secures (or is intended to secure) any Obligations.

 

Commitment: for any Lender, the aggregate amount of such Lender’s Revolver Commitment.  “Commitments” means the aggregate amount of all Revolver Commitments.

 

Commodity Exchange Act: the Commodity Exchange Act (7 U.S.C. § 1 et seq.).

 

Company:  as defined in the Preamble hereto.

 

Competitor:  on any date, (a) any competitor (as reasonably determined by Borrowers) of SI Holdings and its Subsidiaries (other than bona fide fixed income investors or debt funds) that are identified to Agent by Borrower Agent in writing on or prior to the Restatement Date; (b) any other Person (other than any bona fide fixed income investor or debt funds) that is a competitor (as reasonably determined by Borrowers) of SI Holdings and its Subsidiaries, which Person has been designated as a 

 

8

 

“Competitor” by written notice from Borrower Agent to Agent not less than two (2) Business Days prior to such date; and (c) any Affiliate of a “Competitor described in clause (a) or (b) of this definition, which Affiliate has been designated as a “ Competitor” by written notice from Borrower Agent to Agent not less than two (2) Business Days prior to such date; provided, that “Competitors shall exclude any Person that Borrower Agent has designated as no longer being a “Competitor” by written notice to Agent from time to time.  For the avoidance of doubt, to the extent that Persons are identified as Competitors in writing by Borrower Agent after the Restatement Date, the inclusion of such Persons as Competitors shall not retroactively apply to prior assignments or participations in respect of any Loan or Revolver Commitment under this Agreement.

 

Compliance Certificate: a certificate, in form and substance satisfactory to Agent, containing a detailed calculation of the Fixed Charge Coverage Ratio as of the Fiscal Month most recently ended, and, if a Financial Covenant Testing Period shall be in effect, certifying compliance with Section 10.3.1.

 

Connection Income Taxes: Other Connection Taxes that are imposed on or measured by net income (however denominated), or are franchise, capital, or branch profits Taxes.

 

Consolidated EBITDA: shall have the same meaning as “EBITDA”, as such term is defined herein.

 

Consolidated Total Assets:  shall mean, as of any date, the total assets of the Borrowers and their Subsidiaries determined in accordance with GAAP, as of the last day of the Fiscal Quarter ended immediately prior to the date of such determination for which financial statements are required to have been delivered pursuant to Sections 10.1.2(a) or (b).

 

Contingent Obligation: any obligation of a Person arising from a guaranty, indemnity or other assurance of payment or performance of any Debt, lease, dividend or other obligation (“primary obligations”) of another obligor (“primary obligor”) in any manner, whether directly or indirectly, including any obligation of such Person under any (a) guaranty, endorsement, co-making or sale with recourse of an obligation of a primary obligor; (b) obligation to make take-or-pay or similar payments regardless of nonperformance by any other party to an agreement; and (c) arrangement (i) to purchase any primary obligation or security therefor, (ii) to supply funds for the purchase or payment of any primary obligation, (iii) to maintain or assure working capital, equity capital, net worth or solvency of the primary obligor, (iv) to purchase Property or services for the purpose of assuring the ability of the primary obligor to perform a primary obligation, or (v) otherwise to assure or hold harmless the holder of any primary obligation against loss in respect thereof.  The amount of any Contingent Obligation shall be deemed to be the stated or determinable amount of the primary obligation (or, if less, the maximum amount for which such Person may be liable under the instrument evidencing the Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with respect thereto.

 

CPSC: means the U.S. Consumer Products Safety Commission.

 

CPSC Regulations: means all laws and regulations enforced by the CPSC.

 

CRD IV: (a) Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms; and (b) Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms.

 

Current Asset Collateral:  that portion of the Collateral comprised of Accounts, Chattel Paper, Commercial Tort Claims, Documents, Instruments, Inventory, Investment Property, Letters of Credit (which for the purpose of this definition only, shall have the meaning given to such term in the UCC), Letter-of-Credit Rights, Supporting Obligations and General Intangibles (to the extent such General 

 

9

 

Intangibles arise or relate to any of the foregoing, but excluding Intellectual Property), and all products and proceed thereof (including, without limitation, cash proceeds, Cash Collateral, cash held in Deposit Accounts (other than cash held in Deposit Accounts which is clearly identifiable as proceeds of Equipment, Real Estate, fixtures or Intellectual Property), and proceeds of insurance with respect to any of the foregoing).

 

CWA: the Clean Water Act (33 U.S.C. §§ 1251 et seq.).

 

Debt: as applied to any Person, without duplication, (a) all items that would be included as liabilities on a balance sheet in accordance with GAAP, including Capital Leases, but excluding trade payables incurred and being paid in the Ordinary Course of Business; (b) all Contingent Obligations; (c) all reimbursement obligations in connection with letters of credit issued for the account of such Person; and (d) in the case of any Obligor, the Obligations.  The Debt of a Person shall include any recourse Debt of any partnership in which such Person is a general partner or joint venturer.

 

Default: an event or condition that, with the lapse of time or giving of notice, would constitute an Event of Default.

 

Default Rate: for any Obligation (including, to the extent permitted by law, interest not paid when due), 2% plus the interest rate otherwise applicable thereto.

 

Defaulting Lender: any Lender that, as determined by Agent, (a) has failed to perform any funding obligations hereunder, and such failure is not cured within three Business Days; (b) has notified Agent or any Borrower that such Lender does not intend to comply with its funding obligations hereunder or has made a public statement to the effect that it does not intend to comply with its funding obligations hereunder or under any other credit facility; (c) has failed, within three Business Days following request by Agent, to confirm in a manner satisfactory to Agent that such Lender will comply with its funding obligations hereunder; or (d) has, or has a direct or indirect parent company that has, become the subject of an Insolvency Proceeding or taken any action in furtherance thereof (including reorganization, liquidation, or appointment of a receiver, custodian, administrator or similar Person by the Federal Deposit Insurance Corporation or any other regulatory authority); provided, however, that a Lender shall not be a Defaulting Lender solely by virtue of a Governmental Authority’s ownership of an equity interest in such Lender or parent company unless the ownership provides immunity for such Lender from jurisdiction of courts within the United States or from enforcement of judgments or writs of attachment on its assets, or permits such Lender or Governmental Authority to repudiate or otherwise to reject such Lender’s agreements.

 

Deposit Account: all “deposit accounts” as such term is defined in the UCC and/or with respect to any Deposit Account located in Canada, any account with a deposit function.

 

Deposit Account Control Agreements: the Deposit Account control or blocked account agreements to be executed by each institution maintaining a Deposit Account for an Obligor, in favor of Agent, as security for the Obligations.

 

Designated Jurisdiction: a country or territory that is the subject of a Sanction.

 

Dilution Reserve: a reserve in an initial amount as of the Restatement Date equal to $1,000,000 established by the Company and reflected on the balance sheet of the Company and its Subsidiaries in respect of the accruals described on Schedule 1.1(b) attached hereto, as the same may be adjusted from time to time by Agent in its Permitted Discretion based upon the most recent field examination conducted by Agent.

 

Distribution: any declaration or payment of a distribution, interest or dividend on any Equity

 

10

 

Interest (other than a rights distribution and/or payment-in-kind by the Company); any distribution, advance or repayment of Debt to a holder of Equity Interests; or any purchase, redemption, or other acquisition or retirement for value of any Equity Interest.

 

Documents: means all “documents” as such term is defined in the UCC and/or with respect to any Documents of an Obligor domiciled in Canada, a ‘document of title’ as defined in the PPSA.

 

Dollars: lawful money of the United States.

 

Dominion Account: a collection or similar account established by an Obligor at Bank of America over which Agent has exclusive control for withdrawal purposes.

 

EBITDA: determined on a consolidated basis for Company and Subsidiaries, for each period of twelve consecutive months, equal to the aggregate of (a) net income for such period, calculated before (i) interest expense, (ii) provision for income taxes and (iii) depreciation and amortization expense; plus (b) the sum (without duplication) of the following: (i) expenses, fees and charges incurred in connection with the closing of the transactions contemplated by this Agreement; (ii) non-cash charges resulting from the write-down of goodwill, furniture, fixtures, equipment and software; (iii) non-cash charges associated with the issuance and periodic re-measurement of Equity Interests in the Company; (iv) non-cash losses attributable to deferred financing costs; (v) non-cash losses attributable to fluctuations in currency values; (vi) non-cash charges attributable to the issuance and/or exercise of employee non-cash stock compensation to the extent permitted by this Agreement; (vii) non-cash losses or charges resulting from the impact of purchase accounting adjustments in connection with any Permitted Acquisition; (viii) other non-cash losses or charges deducted in determining net income (including, without limitation, non-cash losses or charges resulting from the application of Statement of Financial Accounting Standards No. 142, Goodwill and other Intangible Assets (FAS-142) and FAS-144, Accounting for Impairment of Long-Lived Assets); (ix) losses attributable to the early retirement of Indebtedness (other than the Obligations); (x) transaction related fees and expenses incurred in connection with any Permitted Asset Disposition or any Permitted Acquisition, all as approved by Agent in its Permitted Discretion; (xi) indemnification payments made by the Obligors and for which the Obligors have received reimbursement from third parties; (xii) fees and expenses of advisors and independent consultants retained by Obligors and approved by Agent in its Permitted Discretion, provided, that the aggregate amount of such fees and expenses added back to EBITDA pursuant to this clause (b)(xii) shall not exceed $250,000 during any Fiscal Quarter; (xiii) fees and expenses paid to members of the Board of Directors of the Company in an aggregate amount not to exceed $500,000 during any twelve-month period; (xiv) restructuring charges; (xv) earn-out payments and severance payments; provided, that, for any period of twelve consecutive months, the sum of the aggregate amounts added back pursuant to clauses (b)(xii), (b)(xiii), (b)(xiv) and (b)(xv) shall not exceed $1,000,000 in the aggregate; and (xvi) losses arising from the sale of fixed or capital assets; minus the sum (without duplication) of the following: (i) non-cash income or gains resulting from the write-up of goodwill, furniture, fixtures, equipment and software; (ii) non-cash income or gains attributable to fluctuations in currency values; (iii) any other non-cash income or gains; (iv) income or gains arising from the sale of fixed or capital assets; (v) income or gains attributable to the early retirement of Indebtedness (other than the Obligations); and (vi) any other non-recurring or extraordinary gains (in each case, to the extent included in determining net income).

 

EBITDA for Company and Subsidiaries for each of the months set forth below shall be deemed to be the amount set forth below opposite such month:

 

	
Monthly Period
    	
 
    	
EBITDA
    
	
 
    	
 
    	
 
    
	
April 2017
    	
 
    	
$
    	
[***]
    
	
May 2017
    	
 
    	
$
    	
[***]
    
	
June 2017
    	
 
    	
$
    	
[***]
    

 

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

11

 

	
July 2017
    	
 
    	
$
    	
[***]
    
	
August 2017
    	
 
    	
$
    	
[***]
    
	
September 2017
    	
 
    	
$
    	
[***]
    
	
October 2017
    	
 
    	
$
    	
[***]
    
	
November 2017
    	
 
    	
$
    	
[***]
    
	
December 2017
    	
 
    	
$
    	
[***]
    
	
January 2018
    	
 
    	
$
    	
[***]
    
	
February 2018
    	
 
    	
$
    	
[***]
    
	
March 2018
    	
 
    	
$
    	
[***]
    
	
April 2018
    	
 
    	
$
    	
[***]
    

 

EEA Financial Institution: (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a Subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

 

EEA Member Country: any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

 

EEA Resolution Authority: any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

Eligible Account: an Account owing to an Obligor that arises in the Ordinary Course of Business from the sale of goods, is payable in Dollars, Canadian Dollars or GBP and is deemed by Agent, in its Permitted Discretion, to be an Eligible Account.  Without limiting the foregoing, no Account shall be an Eligible Account if (a) it is unpaid for more than 60 days after the original due date, or more than 120 days after the original invoice date; (b) 50% or more of the Accounts owing by the Account Debtor are not Eligible Accounts as a result of the application of the foregoing clause (a); (c) when aggregated with other Accounts owing by the Account Debtor and its Affiliates, it exceeds 15% of the aggregate Eligible Accounts (or such higher percentage as Agent may establish for the Account Debtor from time to time) (provided that, only the amount of Accounts in excess of the percentage set forth in this clause (c) (or such higher percentage as Agent may establish with respect to any Account Debtor in accordance with this clause (c)) shall be deemed ineligible under this clause (c)), provided, further, that this clause (c) shall not apply to the following Account Debtors: (i) the Amazon Companies, (ii) the Wal-Mart Companies, or (iii) the Target Companies; (d) with respect to any Account owing from the Amazon Companies, when aggregated with other Accounts owing from the Amazon Companies, it exceeds 45% of the aggregate Eligible Accounts, provided, however, that if, at any time, the corporate credit rating of Amazon.com, Inc. falls below “BBB-” (by S&P or Fitch) or “Baa3” (by Moody’s), the Agent shall have the right, in its sole discretion to decrease such maximum percentage (provided further, that only the amount of Accounts in excess of the percentage set forth in this clause (d) (or such lower percentage as shall be specified by Agent in accordance with the foregoing proviso) shall be deemed ineligible under this clause (d)); (e) with respect to any Account owing from the Wal-Mart Companies, when aggregated with other Accounts owing from the Wal-Mart Companies, it exceeds 35% of the aggregate Eligible Accounts, (provided, that only the amount of Accounts in excess of the percentage set forth in this clause (e) shall be deemed ineligible under this clause (e)); (f) with respect to any Account owing by the Target Companies, when aggregated with other Accounts owing by the Target Companies, it exceeds 25% of the aggregate Eligible Accounts (provided, that only the amount of Accounts in excess of the percentage set forth in this clause (f) shall be deemed ineligible under this clause (f)); (g) it does not conform with a covenant or representation herein in all material respects, except (A) to the extent that such representations and

 

[***] Confidential treatment has been requested for the bracketed portions. The confidential redacted portion has been omitted and filed separately with the Securities and Exchange Commission.

 

12

 

warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and (B) in the case of any representation and warranty qualified by “materiality”, “Material Adverse Effect”, or similar language, they shall be true and correct in all respects; (h) it is owing by a creditor or supplier, or is otherwise subject to a potential offset, counterclaim, dispute, deduction, discount, recoupment, reserve, defense, chargeback, credit or allowance (but ineligibility shall be limited to the amount thereof); (i) an Insolvency Proceeding has been commenced by or against the Account Debtor or the Account Debtor has failed, has suspended or ceased doing business, is liquidating, dissolving or winding up its affairs, is not Solvent, or is subject to any Sanction or on any specially designated nationals list maintained by OFAC; or the Borrower is not able to bring suit or enforce remedies against the Account Debtor through judicial process; (j) the Account Debtor is organized or has its principal offices or assets outside the United States, Canada or the United Kingdom, unless the Account is (i) supported by a letter of credit (delivered to and directly drawable by Agent) satisfactory in all respects to Agent; or (ii) is a Mexican subsidiary of Target Corporation or Wal-Mart Stores, Inc. and the aggregate amount of all Accounts deemed eligible by this clause (j)(ii) does not exceed $1,000,000 at any time; (k) it is owing by a Governmental Authority, unless the Account Debtor is the United States, Canada or any province or territory thereof or the United Kingdom or any department, agency or instrumentality thereof and the Account has been assigned to Agent in compliance with the federal Assignment of Claims Act or other Applicable Law (including the Financial Administration Act (Canada)); (l) it is not subject to a duly perfected, first priority Lien in favor of Agent, or is subject to any other Lien, other than Liens permitted under clauses (b), (d), and (h) of Section 10.2 and any other Lien with respect thereto permitted under this Agreement that are subject to an intercreditor agreement in form and substance reasonably satisfactory to Agent between the holder of such Lien and the Agent; (m) the goods giving rise to it have not been delivered to the Account Debtor, or it otherwise does not represent a final sale; (n) it is evidenced by Chattel Paper or an Instrument of any kind unless such Chattel Paper or Instrument is in the possession of the Agent, and to the extent necessary or appropriate, endorsed to Agent, or has been reduced to judgment; (o) its payment has been extended or the Account Debtor has made a partial payment, provided, that, with respect to any Account for which partial payment has been made, only the Account for which a partial payment has been made (and not any other Account owing from the same Account Debtor) shall be deemed ineligible under this clause (o); (p) it arises from a sale to an Affiliate, from a sale on a cash-on-delivery, bill-and-hold, sale-or-return, sale-on-approval, consignment, or other repurchase or return basis, or from a sale for personal, family or household purposes; (q) it represents a progress billing or retainage, or relates to services for which a performance, surety or completion bond or similar assurance has been issued; or (r) it includes a billing for interest, fees or late charges, but ineligibility shall be limited to the extent thereof.  In calculating delinquent portions of Accounts under clauses (a) and (b), credit balances more than 120 days old will be excluded.

 

Eligible Assignee: a Person that is (a) a Lender, Affiliate of a Lender or Approved Fund; (b) any other financial institution approved by Borrower Agent (which approval shall not be unreasonably withheld or delayed, and shall be deemed given if no objection is made within two Business Days after notice of the proposed assignment) and Agent, which extends revolving credit facilities of this type in its ordinary course of business; and (c) during any Event of Default, any Person acceptable to Agent in its discretion; provided, that, in no event shall the term “Eligible Assignee” include any Competitor.

 

Eligible In-Transit Inventory: Inventory owned by a Borrower or Guarantor that would be Eligible Inventory if it were not subject to a Document and in transit from a foreign location to a location of the applicable Borrower or Guarantor within the United States, Canada or the United Kingdom, and that Agent, in its Permitted Discretion, deems to be Eligible In-Transit Inventory.  Without limiting the foregoing, no Inventory shall be Eligible In-Transit Inventory unless it (a) is subject to a negotiable Document showing Agent (or, with the consent of Agent, the applicable Borrower or Guarantor) as consignee, which Document is in the possession of Agent or such other Person as Agent shall approve; (b) is fully insured by marine cargo or other similar insurance, in such amounts, with such insurance companies and subject to such deductibles as are reasonably satisfactory to Agent and in respect of which Agent has been named as loss payee; (c) is not sold by a vendor that has a right to reclaim, divert 

13

 

shipment of, repossess, stop delivery, claim any reservation of title or otherwise assert Lien rights against the Inventory, or with respect to whom any Borrower or Guarantor is in default of any obligations; (d) is evidenced by a full set of clean, original negotiable bills of lading consigned to the order of Agent and such original bills of lading are in the possession of Agent or a customs broker from whom Agent has received an executed Customs Broker Agreement with respect to such inventory and title has passed to the applicable Borrower or Guarantor at the time such inventory is delivered to the common carrier; (e) is shipped by a common carrier that is not affiliated with the vendor and is not subject to any Sanction or on any specially designated nationals list maintained by OFAC; and (f) is being handled by a customs broker, freight-forwarder or other handler that has delivered a Lien Waiver.

 

Eligible Inventory: Inventory owned by a Borrower or Guarantor that Agent, in its Permitted Discretion, deems to be Eligible Inventory.  Without limiting the foregoing, no Inventory shall be Eligible Inventory unless it (a) is finished goods or raw materials, and not work-in-process, packaging or shipping materials, labels, samples, display items, bags, replacement parts or manufacturing supplies, provided that component parts and replacement parts shall not be deemed ineligible under this clause (a) to the extent the most recent inventory appraisal delivered to Agent ascribes a value to such component parts and/or replacement parts; (b) is not held on consignment, nor subject to any deposit or down payment; (c) is in saleable condition and is not damaged, defective, shopworn or otherwise unfit for sale; (d) is not slow-moving, perishable, obsolete or unmerchantable, and does not constitute returned or repossessed goods, provided that slow-moving or obsolete inventory shall not be deemed ineligible under this clause (d) to the extent the most recent inventory appraisal delivered to Agent ascribes a value to such slow-moving or obsolete inventory; (e) meets all standards imposed by any Governmental Authority, has not been acquired from a Person subject to any Sanction or on any specially designated nationals list maintained by OFAC, and does not constitute hazardous materials under any Environmental Law; (f) conforms with the covenants and representations herein; (g) is subject to Agent’s duly perfected, first priority Lien, and no other Lien; (h) is within the continental United States, New Brunswick or Ontario, Canada, or the United Kingdom, is not in transit except between locations of Borrowers or Guarantors, unless such inventory constitutes Eligible In-Transit Inventory and is not consigned to any Person; (i) is not subject to any warehouse receipt or negotiable Document (other than Eligible In-Transit Inventory subject to a Lien Waiver); (j) is not subject to any License or other property or property right or other arrangement that restricts such Borrower’s or Agent’s right to dispose of such Inventory, unless Agent has received an appropriate Lien Waiver or is otherwise satisfied that it could sell such inventory without infringing on the rights of such licensor following an Event of Default; (k) is not located on leased premises or in the possession of a warehouseman, processor, repairman, mechanic, shipper, freight forwarder or other Person, unless the lessor or such Person is an Approved Processor and (i) has delivered a Lien Waiver or (ii) an appropriate Rent and Charges Reserve has been established for such location; and (l) is reflected in the details of a current perpetual inventory report.

 

Enforcement Action: any action to enforce any Obligations (other than Secured Bank Product Obligations) or Loan Documents or to exercise any rights or remedies relating to any Collateral (whether by judicial action, self-help, notification of Account Debtors, exercise of setoff or recoupment, exercise of any right to act in an Obligor’s Insolvency Proceeding or to credit bid Obligations, or otherwise).

 

Environmental Laws: all Applicable Laws and agreements with Governmental Authorities (including all programs, permits and guidance promulgated by regulatory agencies), relating to public health and safety matters or conditions (but excluding occupational safety and health, to the extent regulated by OSHA) or the protection or pollution of the environment, including but not limited to CERCLA, RCRA and CWA.

 

Environmental Notice: a notice (whether written or oral) from any Governmental Authority or other Person of any possible noncompliance with, investigation of a possible violation of, litigation relating to, or potential fine or liability under any Environmental Law, or with respect to any Environmental Release, environmental pollution or hazardous materials, including any complaint, 

 

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summons, citation, order, claim, demand or request for correction, remediation or otherwise.

 

Environmental Release: a release as defined in CERCLA or under any other Environmental Law.

 

Equity Interest: the interest of any (a) shareholder in a corporation; (b) partner in a partnership (whether general, limited, limited liability or joint venture); (c) member in a limited liability company; or (d) other Person having any other form of equity security or ownership interest.

 

ERISA: the Employee Retirement Income Security Act of 1974.

 

ERISA Affiliate: any trade or business (whether or not incorporated) under common control with an Obligor within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

 

ERISA Event: (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Obligor or ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Obligor or ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan; (e) the determination that any Pension Plan is considered an at risk plan or a plan in critical or endangered status under the Code, ERISA or the Pension Protection Act of 2006; (f) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (g) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Obligor or ERISA Affiliate; or (h) failure by an Obligor or ERISA Affiliate to meet all applicable requirements under the Pension Funding Rules in respect of a Pension Plan, whether or not waived, or to make a required contribution to a Multiemployer Plan.

 

EU Bail-In Legislation Schedule:  means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

 

Event of Default: as defined in Section 11.

 

Excluded Deposit Account: a Deposit Account maintained by any Obligor (a) which has been established and is used exclusively for the sole purpose of making payroll and withholding tax payments related thereto and other employee wage and benefit payments to or for the benefit of such Obligor’s employees and accrued and unpaid employee compensation (including salaries, wages, benefits and expense reimbursements), (b) which is a zero balance operational disbursement or similar account, (c) has been established and is used exclusively for the sole purpose of making and remitting sales and use taxes, VAT and/or such Canadian sales and use tax equivalents or (d) which is used for petty cash or similar purposes so long as the amount on deposit (i) in each such individual Deposit Account described in this clause (d) does not exceed $10,000 during any period of seventy-two consecutive hours and (ii) in all Deposit Accounts referred to in this clause (d) does not exceed $50,000 in the aggregate during any period of seventy-two consecutive hours.

 

Excluded Swap Obligation: with respect to an Obligor, each Swap Obligation as to which, and only to the extent that, such Obligor’s guaranty of or grant of a Lien as security for such Swap Obligation is or becomes illegal under the Commodity Exchange Act because the Obligor does not constitute an “eligible contract participant” as defined in the act (determined after giving effect to any keepwell, support or other agreement for the benefit of such Obligor and all guarantees of Swap Obligations by other Obligors) when such guaranty or grant of Lien becomes effective with respect to the Swap 

 

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Obligation.  If a Hedging Agreement governs more than one Swap Obligation, only the Swap Obligation(s) or portions thereof described in the foregoing sentence shall be Excluded Swap Obligation(s) for the applicable Obligor

 

Excluded Taxes: (a) Taxes imposed on or measured by a Recipient’s net income (however denominated), franchise Taxes and branch profits Taxes (i) as a result of such Recipient being organized under the laws of, or having its principal office or applicable Lending Office located in, the jurisdiction imposing such Tax, or (ii) constituting Other Connection Taxes; (b) U.S. federal and Canadian federal withholding Taxes imposed on amounts payable to or for the account of a Lender with respect to its interest in a Loan or Commitment pursuant to a law in effect when the Lender acquires such interest (except pursuant to an assignment request by Borrower Agent under Section 13.4) or changes its Lending Office, unless the Taxes were payable to its assignor immediately prior to such assignment or to the Lender immediately prior to its change in Lending Office; (c) Taxes attributable to a Recipient’s failure to comply with Section 5.10; and (d) U.S. federal withholding Taxes imposed pursuant to FATCA.  In no event shall “Excluded Taxes” include any U.S. withholding Tax imposed on amounts paid by or on behalf of a foreign Obligor to a Recipient that has complied with Section 5.10.2.

 

Existing Credit Agreement: as defined in the preamble to this Agreement.

 

Existing Letter of Credit:  any letter of credit that (a) was issued by the Issuing Bank under the Existing Credit Agreement, (b) is outstanding on the Restatement Date, and (c) is listed on Schedule 1.1(c).

 

Extraordinary Expenses: all costs, expenses or advances that Agent, Issuing Bank or Lenders may incur during a Default or Event of Default, or during the pendency of an Insolvency Proceeding of an Obligor, including those relating to: (a) any audit, inspection, repossession, storage, repair, appraisal, insurance, manufacture, preparation or advertising for sale, sale, collection, or other preservation of or realization upon any Collateral; (b) any action, arbitration or other proceeding (whether instituted by or against Agent, any Lender, any Obligor, any representative of creditors of an Obligor or any other Person) in any way relating to any Collateral (including the validity, perfection, priority or avoidability of Agent’s Liens with respect to any Collateral), Loan Documents, Letters of Credit or Obligations, including any lender liability or other Claims; (c) the exercise, protection or enforcement of any rights or remedies of Agent in, or the monitoring of, any Insolvency Proceeding; (d) settlement or satisfaction of any taxes, charges or Liens with respect to any Collateral; (e) any Enforcement Action; (f) negotiation and documentation of any modification, waiver, workout, restructuring or forbearance with respect to any Loan Documents or Obligations; and (g) Protective Advances.  “Extraordinary Expenses” shall include transfer fees, Other Taxes, storage fees, insurance costs, permit fees, utility reservation and standby fees, legal fees, appraisal fees, brokers’ fees and commissions, auctioneers’ fees and commissions, accountants’ fees, environmental study fees, wages and salaries paid to employees of any Obligor or independent contractors in liquidating any Collateral, and travel expenses.

 

Fair Salable Value: the amount that could be obtained for assets within a reasonable time, either through collection or through sale under ordinary selling conditions by a capable and diligent seller to an interested buyer who is willing (but under no compulsion) to purchase.

 

FATCA: Sections 1471 through 1474 of the Code (including any amended or successor version if substantively comparable and not materially more onerous to comply with), and any agreements entered into pursuant to Section 1471(b)(1) of the Code.

 

Federal Funds Rate: (a) the weighted average of interest rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on the applicable Business Day (or on the preceding Business Day, if the applicable day is not a Business Day), as published by the Federal Reserve Bank of New York on the next Business Day; or (b) if no such rate is 

 

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published on the next Business Day, the average rate (rounded up, if necessary, to the nearest 1/8 of 1%) charged to Bank of America on the applicable day on such transactions, as determined by Agent.

 

Fee Letter: that certain amended and restated fee letter dated as of the Restatement Date among Agent and Company as amended from time to time.

 

Financial Covenant Testing Period:  with respect to the occurrence of any Financial Covenant Trigger Date, the period (a) commencing on the last day of the Fiscal Month for which financial statements have been (or are required to have been) delivered to Agent immediately prior to such Financial Covenant Trigger Date, and (b) continuing thereafter until Availability for sixty (60) consecutive days shall have exceeded the Financial Covenant Trigger Amount.

 

Financial Covenant Trigger Amount:  at any time of determination, an amount equal to the greater of (a) 10% of the lesser of (i) the aggregate Revolver Commitment as of such date and (ii) the Revolver Borrowing Base (calculated without giving effect to the Term Loan Push Down Reserve) as of such date and (b) $5,000,000

 

Financial Covenant Trigger Date:  any date on which Availability falls below the Financial Covenant Trigger Amount.

 

Fiscal Month:  any fiscal month of any Fiscal Year, which fiscal month shall consist of either four or five weeks and generally end on the Saturday closest to the last day of each calendar month in accordance with the fiscal accounting calendar of the Company and its Subsidiaries.

 

Fiscal Quarter: any fiscal quarter of any Fiscal Year, which fiscal quarter shall consist of thirteen weeks divided into three Fiscal Months of four, four and five weeks, which fiscal quarters shall generally end on the Saturday closest to the last day of March, June, September and December of each Fiscal Year in accordance with the fiscal accounting calendar of the Company and its Subsidiaries.

 

Fiscal Year: the fiscal year of Company and its Subsidiaries for accounting and tax purposes, generally ending on the Saturday closest to the last day of December of each year.

 

Fixed Charge Coverage Ratio: the ratio, determined on a consolidated basis for Company and its Subsidiaries for the most recent period of twelve consecutive months, of (a) EBITDA minus Capital Expenditures (except those financed with (i) Borrowed Money other than Revolver Loans or (ii) proceeds of Casualty Events or the issuance of Equity Interests to the extent such Capital Expenditures are made substantially contemporaneously with the receipt of such proceeds) and cash taxes paid for such period, to (b) Fixed Charges paid in cash during such period.

 

Fixed Charges: the sum of cash interest expense (other than payment-in-kind), principal payments made on Borrowed Money (including, without limitation, the Term Debt, but excluding the Revolver Loans unless such principal payment of the Revolver Loans is accompanied by a permanent reduction in the Revolver Commitments), and Distributions made.  Notwithstanding the foregoing, any principal payments made in respect of any loans under the Existing Credit Agreement prior to, or on, the Restatement Date shall not constitute “Fixed Charges” for purposes hereof.

 

FLSA: the Fair Labor Standards Act of 1938.

 

Foreign Lender: any Lender that is not a U.S. Person.

 

Foreign Plan: any employee benefit plan or arrangement (a) maintained or contributed to by any Obligor or Subsidiary that is not subject to the laws of the United States or Canada; or (b) mandated by a government other than the United States, Canada or the United Kingdom for employees of any Obligor or Subsidiary.

 

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Foreign Subsidiary: a Subsidiary that is a “controlled foreign corporation” under Section 957 of the Code, such that a guaranty by such Subsidiary of the Obligations or a Lien on the assets of such Subsidiary to secure the Obligations would result in material tax liability to Borrowers, provided, however, that SI Canada and SI UK shall be deemed to not be Foreign Subsidiaries.

 

Fronting Exposure: a Defaulting Lender’s Applicable Percentage of LC Obligations or Swingline Loans, as applicable, except to the extent allocated to other Lenders under Section 4.2.

 

Full Payment: with respect to any Obligations, (a) the full cash payment thereof, including any interest, fees and other charges accruing during an Insolvency Proceeding (whether or not allowed in the proceeding); and (b) if such Obligations are LC Obligations or inchoate or contingent in nature, Cash Collateralization thereof (or delivery of a standby letter of credit acceptable to Agent in its reasonable discretion, in the amount of required Cash Collateral).  No Loans shall be deemed to have been paid in full until all Commitments related to such Loans have expired or been terminated.

 

GAAP: generally accepted accounting principles in effect in the United States from time to time.

 

GBP: means the lawful currency of the United Kingdom of Great Britain and Northern Ireland.

 

Governmental Approvals: all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and required reports to, all Governmental Authorities.

 

Governmental Authority: any federal, state, provincial, territorial, municipal, local, foreign or other agency, authority, body, commission, court, instrumentality, political subdivision, or other entity or officer exercising executive, legislative, judicial, regulatory or administrative functions for any governmental, judicial, investigative, regulatory or self-regulatory authority, in each case whether associated with the United States, a state, district or territory thereof, Canada, a province or territory thereof, the United Kingdom or a country thereof or any other foreign entity or government (including the Financial Conduct Authority, the Prudential Regulation Authority and any supra-national bodies such as the European Union or the European Central Bank).

 

Guarantor Payment: as defined in Section 5.11.3.

 

Guarantors:  SI Canada, SI UK and each other Person who guarantees payment or performance of any Obligations.

 

Guaranty: Section 14 of this Agreement and each guaranty agreement executed by a Guarantor in favor of Agent, including, without limitation, the Canadian Guaranty and the UK Guaranty.

 

Hedging Agreement: any “swap agreement” as defined in Section 101(53B)(A) of the Bankruptcy Code.

 

Immaterial Foreign Subsidiary: shall mean, at any date of determination after the Restatement Date, any Foreign Subsidiary of a Borrower  (a) the total assets of which, in the aggregate with all other Immaterial Foreign Subsidiaries, determined as of the Fiscal Quarter most recently ended, were less than 2.0% of the Consolidated Total Assets of the Borrowers and their Subsidiaries as of such date of determination, and (b) the Consolidated EBITDA attributable to such Foreign Subsidiary for the period of four (4) consecutive Fiscal Quarters ending on such date does not exceed, in the aggregate with all other Immaterial Foreign Subsidiaries, 2.0% of the Consolidated EBITDA of the Borrowers and their Subsidiaries for such period, in each case determined in accordance with GAAP; provided, that (i) Borrowers shall not designate any additional Foreign Subsidiary as an Immaterial Foreign Subsidiary if such designation would result in a failure to comply with the provisions set forth in clause (a) or (b) immediately above and (ii) no Foreign Subsidiary that owns any other Foreign Subsidiary that fails to comply with clause (a) or (b) above shall be deemed to be an Immaterial Foreign Subsidiary; and 

 

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provided, further, if the total assets and/or gross revenues of all Foreign Subsidiaries so designated by the Borrowers as “Immaterial Foreign Subsidiaries” shall at any time exceed the limits set forth in either clause (a) or (b) immediately above, then the Borrowers shall promptly re-designate one or more of such Foreign Subsidiaries as not constituting Immaterial Foreign Subsidiaries, in each case in a written notice to Agent, so that, as result of such re-designation, the total assets and gross revenues of all Foreign Subsidiaries still designated as “Immaterial Foreign Subsidiaries” do not exceed such limits; provided, further, that if the total gross revenues of Born Free Holdings Ltd. Shall at any time exceed $250,000, then the Borrowers shall promptly re-designate such Foreign Subsidiary as not constituting an Immaterial Foreign Subsidiary by written notice to Agent and following such re-designation, the provisions of Sections 7 and 10.1.9 shall thereafter be applicable to such Foreign Subsidiary.

 

Increased Field Exam/Appraisal Period:  with respect to the occurrence of any Increased Field Exam/Appraisal Trigger Date, the period (a) commencing on the Increased Field Exam/Appraisal Trigger Date and (b) continuing until Availability for thirty (30) consecutive days shall have exceeded 20% of the lesser of (i) the aggregate Revolver Commitment and (ii) the Revolver Borrowing Base (calculated without giving effect to the Term Loan Push Down Reserve).

 

Increased Field Exam/Appraisal Trigger Date:  any date on which Availability for thirty (30) consecutive days shall have been less than 20% of the lesser of (a) the aggregate Revolver Commitment and (b) the Revolver Borrowing Base (calculated without giving effect to the Term Loan Push Down Reserve) as of such date.

 

Indebtedness: shall have the same meaning as “Debt”, as such term is defined herein.

 

Indemnified Taxes: (a) Taxes other than Excluded Taxes, imposed on or relating to any payment of an Obligation; and (b) to the extent not otherwise described in clause (a), Other Taxes.

 

Indemnitees: Agent Indemnitees, Lender Indemnitees, Issuing Bank Indemnitees and Bank of America Indemnitees.

 

Insolvency Law: collectively, the Bankruptcy Code, or any other insolvency, debtor relief, debt adjustment, arrangement, receivership, or similar law (whether state, provincial, territorial, federal or foreign), including, without limitation, the Bankruptcy and Insolvency Act (Canada), the Companies Creditors Arrangement Act (Canada), the Winding Up and Restructuring Act, any applicable governing corporate statutes providing for arrangements, and the Insolvency Act 1986 (UK).

 

Insolvency Proceeding: any case or proceeding commenced by or against a Person under any state, provincial, territorial, federal or foreign law for, or any agreement of such Person to, (a) the seeking or any entry of an order for relief under any Insolvency Law; (b) the appointment of a receiver, interim receiver, monitor, reviewer and manager, trustee, liquidator, administrator, conservator or other custodian for such Person or any part of its Property; or (c) an assignment or trust mortgage for the benefit of creditors.

 

Intellectual Property: all present and future: trade secrets, know-how and other proprietary information; trademarks, trademark applications, internet domain names, service marks, trade dress, trade names, business names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of the foregoing) indicia and other source and/or business identifiers, and all registrations or applications for registrations which have heretofore been or may hereafter be issued thereon throughout the world and including the goodwill associated therewith; copyrights, copyrightable works (registered or unregistered) and copyright applications (including copyrights for computer programs) and all tangible and intangible property embodying the copyrights, unpatented inventions (whether or not patentable); patents and patent applications and patent disclosures; industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom; books, 

 

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records, writings, computer tapes or disks, flow diagrams, specification sheets, all rights in computer software including source codes, object codes, and executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; all other intellectual property and any proceeds and products thereof; and all common law and other rights throughout the world in and to all of the foregoing.

 

Intellectual Property Claim: any claim or assertion (whether in writing or by suit) that a Borrower’s or Subsidiary’s ownership, use, marketing, sale or distribution of any Inventory, Equipment, Intellectual Property or other Property violates another Person’s Intellectual Property.

 

Intercreditor Agreement: the Intercreditor Agreement dated as of the Restatement Date between Agent and the Term Loan Agent, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

Interest Period: as defined in Section 3.1.3.

 

Inventory: as defined in the UCC (or, with respect to any inventory of any Canadian Guarantor to which the PPSA is applicable, as defined in the PPSA), including all goods intended for sale, lease, display or demonstration; all work in process; and all raw materials, and other materials and supplies of any kind that are or could be used in connection with the manufacture, printing, packing, shipping, advertising, sale, lease or furnishing of such goods, or otherwise used or consumed in a Borrower’s or Guarantor’s business (but excluding Equipment).

 

Inventory Formula Amount: the lesser of (i) 70% of the Value of Eligible Inventory; or (ii) 85% of the NOLV Percentage of the Value of Eligible Inventory.

 

Inventory Reserve: reserves established by Agent to reflect factors that may negatively impact the Value of Inventory, including change in salability, obsolescence, seasonality, theft, shrinkage, imbalance, change in composition or mix, markdowns and vendor chargebacks.

 

Investment: an Acquisition; an acquisition of record or beneficial ownership of any Equity Interests of a Person; or an advance or capital contribution to or other investment in a Person.

 

IP Assignment: a collateral assignment or security agreement pursuant to which an Obligor grants a Lien on its Intellectual Property to Agent, as security for its Obligations.

 

IRS: the United States Internal Revenue Service.

 

Issuing Bank: Bank of America or any Affiliate of Bank of America, or any replacement issuer appointed pursuant to Section 2.3.4.

 

Issuing Bank Indemnitees: Issuing Bank and its officers, directors, employees, Affiliates, agents and attorneys.

 

Judgment Currency: as defined in Section 1.5.

 

LC Application: an application by Borrower Agent to Issuing Bank for issuance of a Letter of Credit, in form and substance satisfactory to Issuing Bank.

 

LC Conditions: the following conditions necessary for issuance of a Letter of Credit: (a) each of the conditions set forth in Section 6; (b) after giving effect to such issuance, total LC Obligations do not exceed the Letter of Credit Subline, no Revolver Overadvance exists and, if no Revolver Loans are outstanding, the LC Obligations do not exceed the Revolver Borrowing Base (without giving effect to the LC Reserve for purposes of this calculation); (c) the expiration date of such Letter of Credit is (i) no more

 

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than 365 days from issuance, in the case of standby Letters of Credit, and (ii) no more than 120 days from issuance, in the case of documentary Letters of Credit; (d) the Letter of Credit and payments thereunder are denominated in Dollars; and (e) the purpose and form of the proposed Letter of Credit is satisfactory to Agent and Issuing Bank in their discretion.

 

LC Documents: all documents, instruments and agreements (including LC Requests and LC Applications) delivered by Borrowers or any other Person to Issuing Bank or Agent in connection with any Letter of Credit.

 

LC Obligations: the sum (without duplication) of (a) all amounts owing by Borrowers for any drawings under Letters of Credit; and (b) the Stated Amount of all outstanding Letters of Credit.

 

LC Request: a request for issuance of a Letter of Credit, to be provided by Borrower Agent to Issuing Bank, in form satisfactory to Agent and Issuing Bank.

 

LC Reserve: the aggregate of all LC Obligations, other than those that have been Cash Collateralized by Borrowers.

 

Lender Indemnitees: Lenders and Secured Bank Product Providers and their officers, directors, employees, Affiliates, agents and attorneys.

 

Lenders: as defined in the preamble to this Agreement, including Agent in its capacity as a provider of Swingline Loans and any other Person who hereafter becomes a “Lender” pursuant to an Assignment and Acceptance, including any Lending Office of the foregoing.

 

Lending Office: the office designated as such by the applicable Lender at the time it becomes party to this Agreement or thereafter by notice to Agent and Borrower Agent.

 

Letter of Credit: any standby or documentary letter of credit (including any Existing Letter of Credit) issued by Issuing Bank for the account of an Obligor, or any indemnity, guarantee, exposure transmittal memorandum or similar form of credit support issued by Agent or Issuing Bank for the benefit of an Obligor.

 

Letter of Credit Subline: $5,000,000.

 

Leverage Ratio: the ratio, determined as of the end of any Fiscal Quarter, of (a) Borrowed Money as of the last day of such quarter to (b) EBITDA for the four Fiscal Quarters then ending.

 

LIBOR: the per annum rate of interest (rounded up to the nearest 1/8th of 1% and in no event less than zero) determined by Agent at or about 11:00 a.m. (London time) two Business Days prior to an interest period, for a term equivalent to such period, equal to the London Interbank Offered Rate, or comparable or successor rate approved by Agent, as published on the applicable Reuters screen page (or other commercially available source designated by Agent from time to time); provided, that any comparable or successor rate shall be applied by Agent, if administratively feasible, in a manner consistent with market practice.

 

LIBOR Loan: each set of LIBOR Revolver Loans having a common length and commencement of Interest Period.

 

LIBOR Revolver Loan: a Revolver Loan that bears interest based on LIBOR.

 

LIBOR Screen Rate: the LIBOR quote on the applicable screen page Agent designates to determine LIBOR (or such other commercially available source providing such quotations as may be designated by Agent from time to time).

 

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LIBOR Successor Rate: as defined in Section 3.6(b).

 

LIBOR Successor Rate Conforming Changes:  with respect to any proposed LIBOR Successor Rate, any conforming changes to the definition of Base Rate, Interest Period, timing and frequency of determining rates and making payments of interest and other administrative matters as may be appropriate, in the discretion of Agent, to reflect the adoption of such LIBOR Successor Rate and to permit the administration thereof by Agent in a manner substantially consistent with market practice (or, if Agent determines that adoption of any portion of such market practice is not administratively feasible or that no market practice for the administration of such LIBOR Successor Rate exists, in such other manner of administration as Agent determines in consultation with Borrower Agent).

 

License: any license or agreement under which an Obligor is authorized to use Intellectual Property in connection with any manufacture, marketing, distribution or disposition of Collateral, any use of Property or any other conduct of its business.

 

Licensor: any Person from whom an Obligor obtains the right to use any Intellectual Property.

 

Lien: any Person’s interest in Property securing an obligation owed to, or a claim by, such Person, including any lien, security interest, pledge, hypothecation, trust, reservation, encroachment, easement, right-of-way, covenant, condition, restriction, leases, or other title exception, adverse right/ claim or interest or deemed trust, or encumbrance.

 

Lien Waiver: an agreement, in form and substance reasonably satisfactory to Agent, by which (a) for any material Collateral located on leased premises, the lessor waives or subordinates any Lien it may have on the Collateral, and agrees to permit Agent to enter upon the premises and remove the Collateral or to use the premises to store or dispose of the Collateral; (b) for any Collateral held by a warehouseman, processor, shipper, customs broker or freight forwarder, such Person waives or subordinates any Lien it may have on the Collateral, agrees to hold any Documents in its possession relating to the Collateral as agent for Agent, and agrees to deliver the Collateral to Agent upon request; (c) for any Collateral held by a repairman, mechanic or bailee, such Person acknowledges Agent’s Lien, waives or subordinates any Lien it may have on the Collateral, and agrees to deliver the Collateral to Agent upon request; and (d) for any Collateral subject to a Licensor’s Intellectual Property rights, the Licensor grants to Agent the right, vis-à-vis such Licensor, to enforce Agent’s Liens with respect to the Collateral, including the right to dispose of it with the benefit of the Intellectual Property, whether or not a default exists under any applicable License.

 

Loan: a Revolver Loan.

 

Loan Documents: this Agreement, Other Agreements and Security Documents.

 

Loan Year: each 12 month period commencing on the Restatement Date and on each anniversary of the Restatement Date.

 

Margin Stock: as defined in Regulation U of the Board of Governors.

 

Material Adverse Effect: the effect of any event, fact, circumstance or change that, taken alone or in conjunction with other events or circumstances, (a) has a material adverse effect on the business, assets, Properties, liabilities, operations, or financial condition of the Obligors, taken as a whole, on the value of any material Collateral, on the enforceability of any Loan Document, or on the validity or priority of Agent’s Liens on any material portion of the Collateral; (b) that could materially impair the ability of the Obligors, taken as a whole, to perform their obligations under the Loan Documents, including repayment of any Obligations; (c) that could reasonably be expected to materially and adversely affect the Loans or the transactions contemplated by this Agreement and the Loan Documents; or (d) otherwise materially impairs the ability of Agent or any Lender to enforce or collect any Obligations or 

 

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realize upon any material portion of the Collateral.  In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event in and of itself does not have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then-existing events would result in a Material Adverse Effect.

 

Material Contract: any agreement or arrangement to which an Obligor is party (other than the Loan Documents) (a) that is deemed to be a material contract under any securities law applicable to such Person, including the Securities Act of 1933; or (b) that relates to Subordinated Debt, or to Debt in an aggregate amount of $3,000,000 or more.

 

Moody’s: Moody’s Investors Service, Inc., and its successors.

 

Multiemployer Plan: any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which any Obligor or ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

 

Net Proceeds: with respect to an Asset Disposition, proceeds (including, when received, any deferred or escrowed payments) received by a Borrower or Subsidiary in cash from such disposition, net of (a) reasonable and customary costs and expenses actually incurred in connection therewith, including legal fees and sales commissions; (b) amounts applied to repayment of Debt secured by a Permitted Lien senior to Agent’s Liens on Collateral sold; (c) transfer or similar taxes(including any reasonable estimate of taxes to be paid within one (1) year of the date of the relevant transaction as a result of any gain recognized in connection therewith; provided that any such estimated taxes not actually due or payable by the end of such one year period shall constitute Net Proceeds upon the earlier of the date that such taxes are determined by the Borrower or any Subsidiary, as applicable not to be actually payable and the end of such one year period, and (d) reasonable reserves in accordance with GAAP for any liabilities or indemnification payments (fixed or contingent) attributable to seller’s indemnities and representations and warranties to purchasers and other retained liabilities in respect of such Asset Disposition undertaken by Borrower or any Subsidiary in connection with such Asset Disposition; provided that to the extent that any such amount ceases to be so reserved (other than any reduction in such reserve to make a payment in respect of such liability or indemnification obligations), the amount thereof shall be deemed to be Net Proceeds of such Asset Disposition at such time.

 

NOLV Percentage: the net orderly liquidation value of Inventory of any Borrower or Guarantor, expressed as a percentage, expected to be realized at an orderly, negotiated sale held within a reasonable period of time, net of all liquidation expenses, as determined from the most recent appraisal of such Borrower’s and/or Guarantor’s Inventory performed by an appraiser and on terms satisfactory to Agent.

 

Notice of Borrowing: a Notice of Borrowing to be provided by Borrower Agent to request a Borrowing of Revolver Loans, in form satisfactory to Agent.

 

Notice of Conversion/Continuation: a Notice of Conversion/Continuation to be provided by Borrower Agent to request a conversion or continuation of any Loans as LIBOR Loans, in form satisfactory to Agent.

 

Obligations: all (a) principal of and premium, if any, on the Loans, (b) LC Obligations and other obligations of Obligors with respect to Letters of Credit, (c) interest, expenses, fees, indemnification obligations, Extraordinary Expenses and other amounts payable by Obligors under the Loan Documents, (d) Secured Bank Product Obligations, and (e) other Debts, obligations and liabilities of any kind owing by Obligors pursuant to the Loan Documents, whether now existing or hereafter arising, whether evidenced by a note or other writing, whether allowed in any Insolvency Proceeding, whether arising from an extension of credit, issuance of a letter of credit, acceptance, loan, guaranty, indemnification or otherwise, and whether direct or indirect, absolute or contingent, due or to become due, primary or 

 

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secondary, or joint or several; provided, that Obligations of an Obligor shall not include its Excluded Swap Obligations.

 

Obligor: each Borrower, Guarantor, or other Person that is liable for payment of any Obligations or that has granted a Lien in favor of Agent on its assets to secure any Obligations.

 

OFAC: Office of Foreign Assets Control of the U.S. Treasury Department.

 

OFAC Lists: means, collectively, the SDN List and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable executive orders.

 

Ordinary Course of Business: the ordinary course of business of any Borrower or Subsidiary, consistent with past practices and undertaken in good faith.

 

Organic Documents: with respect to any Person, its charter, certificate or articles of incorporation, bylaws, articles of organization, articles of amalgamation, limited partnership agreement, limited liability agreement, operating agreement, members agreement, shareholders agreement, partnership agreement, certificate of partnership, certificate of formation, voting trust agreement, or similar agreement or instrument governing the formation or operation of such Person.

 

Original Closing Date: February 28, 2013, the effective date of that certain Loan and Security Agreement, dated as of the February 28, 2013 by and among Obligors, Agent and the lenders party thereto.

 

OSHA: the Occupational Safety and Hazard Act of 1970.

 

Other Agreement: each LC Document, fee letter, Lien Waiver, Revolver Borrowing Base Certificate, Term Loan Borrowing Base Certificate, Intercreditor Agreement, Compliance Certificate, Borrower Materials, or other note, document, instrument or agreement (other than this Agreement or a Security Document) now or hereafter delivered by an Obligor or other Person to Agent or a Lender in connection with any transactions relating hereto.

 

Other Collateral:  that portion of the Collateral not comprised of Current Asset Collateral.  The Other Collateral shall include, among other things, Equipment, Real Estate, fixtures and Intellectual Property.

 

Other Connection Taxes: Taxes imposed on a Recipient due to a present or former connection between it and the taxing jurisdiction (other than connections arising from the Recipient having executed, delivered, become party to, performed obligations or received payments under, received or perfected a Lien or engaged in any other transaction pursuant to, enforced, or sold or assigned an interest in, any Loan or Loan Document).

 

Other Taxes: all present or future stamp, court, documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a Lien under, or otherwise with respect to, any Loan Document, except Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 13.4(c)).

 

Participant: as defined in Section 13.2.

 

Patriot Act: the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001).

 

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Payment Item: each check, draft or other item of payment payable to a Borrower, including those constituting proceeds of any Collateral.

 

PBA: the Pension Benefits Act (Ontario) or any other Canadian federal or provincial pension benefits standards legislation under which any Canadian Pension Plan or Canadian MEPP is registered, as amended.

 

PBGC: the Pension Benefit Guaranty Corporation.

 

Pension Funding Rules: Code and ERISA rules regarding minimum required contributions (including installment payments) to Pension Plans set forth in, for plan years ending prior to the Pension Protection Act of 2006 effective date, Section 412 of the Code and Section 302 of ERISA, both as in effect prior to such act, and thereafter, Sections 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.

 

Pension Plan: any employee pension benefit plan (as defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Obligor or ERISA Affiliate or to which the Obligor or ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the preceding five plan years, but for greater certainty, excludes a Canadian Pension Plan and a Canadian MEPP.

 

Permitted Acquisition: any Acquisition (i) consented to by the Required Lenders, (ii) for which total consideration is paid entirely in an amount not greater than $1,000,000; or (iii) as long as (a) no Event of Default exists or is caused thereby; (b) the Acquisition is consensual; (c) the assets, business or Person being acquired is useful or engaged in same or similar the business of Borrowers and Subsidiaries, is located and organized within the United States or Canada as applicable (or such other jurisdiction as Agent shall approve in its Permitted Discretion) and had positive EBITDA for the 12 month period most recently ended; (d) no Debt or Liens are incurred, assumed or result from the Acquisition, except Debt permitted under Section 10.2.1(f) or (i); (e) the Person to be acquired (or its board of directors or equivalent governing body) has not (i) announced it will oppose such Acquisition or (ii) commenced any action which alleges that such Acquisition violates, or will violate, any Applicable Law; (f) upon giving pro forma effect thereto, either (i) Availability (calculated without giving effect to the assets acquired in the Acquisition unless Agent has completed its diligence (including a field exam) with respect to such assets) is at least equal to 20% of the aggregate Revolver Commitments for the 30 days preceding and as of the Acquisition and the Fixed Charge Coverage Ratio, determined on a pro forma basis giving effect to the Acquisition, is not less than 1.00 to 1:00 at any time or (ii) Availability (calculated without giving effect to the assets acquired in the Acquisition unless agent has completed its diligence (including a field examination) with respect to such assets) is at least equal to 25% of the aggregate Revolver Commitments for the 30 days preceding and as of the date of the Acquisition; (g) in the case of any Acquisition where the consideration to be paid for such Acquisition equals or exceeds $2,000,000, the Borrower Agent shall have furnished the Agent with thirty (30) days’ prior written notice of such intended Acquisition and shall have furnished the Agent with a current draft of the Acquisition documents (and final copies thereof as and when executed), a summary of any due diligence undertaken by the Obligors in connection with such Acquisition, appropriate financial statements of the Person which is the subject of such Acquisition, pro forma projected financial statements for the twelve (12) month period following such Acquisition after giving effect to such Acquisition (including balance sheets, cash flows and income statements by month for the acquired Person, individually, and on a consolidated basis with all Obligors), and such other information as the Agent may reasonably require, all of which shall be reasonably satisfactory to the Agent; (h) after giving effect to the Acquisition, if the Acquisition is an Acquisition of the Equity Interests, a Borrower shall acquire and own, directly or indirectly, a majority of the Equity Interests in the Person being acquired and shall control a majority of any voting interests or shall otherwise control the governance of the Person being acquired or formed; (i) either (1) the legal structure of the Acquisition 

 

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shall be acceptable to the Agent in its Permitted Discretion, or (2) the Borrowers shall have provided the Agent with a favorable solvency opinion from an unaffiliated third party valuation firm reasonably satisfactory to the Agent; (j) if the Person which is the subject of such Acquisition will be maintained as a Subsidiary of a Borrower, or if the assets acquired in an acquisition will be transferred to a Subsidiary which is to be an Obligor, such Subsidiary shall have been joined as a “Borrower” hereunder or as a Guarantor, as the Agent shall determine in its Permitted Discretion, and the Agent shall have received a first priority security and/or mortgage interest (except for those Permitted Liens that have priority in such Collateral by operation of law and, subject to the Intercreditor Agreement, the Term Priority Collateral) in such Subsidiary’s property of the same nature as constitutes Collateral under the Security Documents; provided, that in the event such Subsidiary is joined as a “Borrower” the assets of such Person will only be eligible for inclusion in the Revolver Borrowing Base and Term Loan Borrowing Base, as the case may be, after a satisfactory field examination, appraisals and legal diligence is conducted by Agent in its Permitted Discretion; (k) the purchase price payable in respect of (i) any single Acquisition or series of related Acquisitions shall not exceed $2,500,000 in the aggregate and (ii) all Acquisitions (including the proposed Acquisition) shall not exceed $5,000,000 in the aggregate during the term of this Agreement.

 

Permitted Asset Disposition: as long as no Event of Default exists and at any time a Cash Dominion Period exists, all Net Proceeds are remitted to Agent or Term Loan Agent pursuant to the terms of the Intercreditor Agreement, an Asset Disposition that is (i) a sale of Inventory in the Ordinary Course of Business; (ii) a disposition of Equipment that, in the aggregate during any 12 month period, has a fair market or net book value (whichever is more) of $750,000 or less; provided, that any such disposition of Equipment is not prohibited by the Term Loan Agreement; (iii) a disposition of Inventory that is obsolete, surplus, unmerchantable or otherwise unsalable in the Ordinary Course of Business; (iv) [reserved]; (v) termination of a lease of real or personal Property that is not necessary for the Ordinary Course of Business, could not reasonably be expected to have a Material Adverse Effect and does not result from an Obligor’s default; (vi) the disposition of accounts receivable in connection with the collection or compromise thereof; (vii) non-exclusive licenses, sublicenses, leases or subleases of Intellectual Property granted to others in the Ordinary Course of Business or not interfering in any material respect with the business of the Borrower or any Subsidiary; (viii) the sale or disposition of Cash Equivalents for fair market value in the ordinary course of business; (ix) the abandonment or other disposition of Intellectual Property, whether now or hereafter owned or leased or acquired, that is, in the reasonable business judgment of the Borrower, no longer economically practicable or commercially desirable to maintain or used or useful in the business of the Borrower and the Subsidiaries; (x) solely to the extent not otherwise permitted hereunder, sales, transfers and other dispositions permitted by Section 10.2.9; (xi) sales, transfers or other dispositions of Investments to the extent not a Restricted Investment in joint ventures to the extent required by, or made pursuant to customary buy/sell arrangements between, the parties set forth in joint venture arrangements and similar binding agreements; or (xii) approved in writing by Agent and Required Lenders.

 

Permitted Contingent Obligations: Contingent Obligations (a) arising from endorsements of Payment Items for collection or deposit in the Ordinary Course of Business; (b) arising from Hedging Agreements permitted hereunder; (c) existing on the Restatement Date, and any extension or renewal thereof that does not increase the amount of such Contingent Obligation when extended or renewed; (d) incurred in the Ordinary Course of Business with respect to surety, appeal or performance bonds, or other similar obligations; (e) arising from customary indemnification obligations in favor of purchasers in connection with dispositions of Equipment permitted hereunder or Acquisitions permitted hereunder; (f) arising under the Loan Documents; or (g) in an aggregate amount of $3,000,000 or less at any time.

 

Permitted Discretion:  a determination made by Agent, in good faith, in the exercise of reasonable business judgment (from the perspective of a secured, asset-based lender), based upon Agent’s consideration of factors that in the exercise of such reasonable business judgment Agent believes: (a) could be expected to materially and adversely affect the quantity, quality, mix or value of Collateral (including any Applicable Law that may inhibit collection of an Account), the enforceability or priority of 

 

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Agent’s Liens, or the amount that Agent and Lenders could receive in liquidation of any Collateral; (b) that any collateral report or financial information delivered by any Obligor is incomplete, inaccurate or misleading in any material respect; (c) could materially increase the likelihood of any Insolvency Proceeding involving an Obligor; (d) could increase the credit risk of lending to Borrowers on the security of the Collateral; or (e) could reasonably be expected to result in a Default or Event of Default.

 

Permitted Lien: as defined in Section 10.2.2.

 

Permitted Purchase Money Debt: Purchase Money Debt of Borrowers and Subsidiaries that is unsecured or secured only by a Purchase Money Lien, as long as the aggregate amount does not exceed $2,500,000 at any time when combined with Capital Lease obligations permitted under Section 10.2.1(c).

 

Permitted Restricted Payments: (a) Upstream Payments and (b) other Distributions made by any Obligor or Subsidiary following the third (3rd) anniversary of the Restatement Date; provided, that (i) at the time such Distribution is made and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing, (ii) on a pro forma basis immediately after giving effect to such Distribution, the financing thereof and the payment of reasonable costs and expenses related thereto (including, without limitation, the funding of any Revolver Loans or incurrence of other Debt to finance such Distribution or the payment of such costs and expenses), either (A) both (1) Availability, calculated as of the day such Distribution is made and for the period of 30 consecutive days ending on the day such Distribution is made, shall equal or exceed 25% of the aggregate Revolver Commitments as of such date and (2) the Fixed Charge Coverage Ratio, determined as if such Distribution has been made, and all Debt related to such Distribution (including, without limitation, any Revolver Loans made or other Debt incurred to finance such Distribution) had been incurred, on the first day of the twelve consecutive month period most recently ended prior to the date such Distribution is made for which financial statements have been (or are required to have been) delivered to Agent pursuant to Section 10.1.2(a) or (b), shall equal or exceed 1.00 to 1.00, or (B) Availability, calculated as of the day such Distribution is made and for the period of 30 consecutive days ending on the day such Distribution is made, shall equal or exceed 30% of the aggregate Revolver Commitments as of such date, and (iii) Agent shall have received a certificate of a Senior Officer of Borrower Representative in form and substance reasonably satisfactory to Agent, dated as of the date of such Distribution, certifying that the conditions set forth in the foregoing clauses (b)(i) and (b)(ii) have been satisfied.

 

Person: any individual, corporation, limited liability company, unlimited liability company, partnership, joint venture, association, trust, unincorporated organization, Governmental Authority or other entity.

 

Plan: any employee benefit plan (as defined in Section 3(3) of ERISA) established by an Obligor or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, an ERISA Affiliate.

 

Platform: as defined in Section 14.3.3.

 

PPSA:  the Personal Property Security Act (Ontario) and/or the Personal Property Security Act (New Brunswick), as applicable, and the regulations thereunder; provided, that, if validity, perfection and effect of perfection and non-perfection of Agent’s security interest in any Collateral of any Canadian Guarantor or any other Obligor are governed by the personal property security laws of any jurisdiction other than Ontario or New Brunswick, PPSA shall mean those personal property security laws and regulations thereunder (including the Civil Code of Quebec in the case of the Province of Quebec) in such other jurisdiction for the purposes of the provisions hereof relating to such validity, perfection, and effect of perfection and non-perfection and for the definitions related to such provisions, as from time to time in effect.

 

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Prime Rate: the rate of interest announced by Bank of America from time to time as its prime rate.  Such rate is set by Bank of America on the basis of various factors, including its costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such rate.  Any change in such rate publicly announced by Bank of America shall take effect at the opening of business on the day specified in the announcement.

 

Proceeds of Crime Act: means the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada).

 

Properly Contested: with respect to any obligation of an Obligor, (a) the obligation is subject to a bona fide dispute regarding amount or the Obligor’s liability to pay; (b) the obligation is being properly contested in good faith by appropriate proceedings promptly instituted and diligently pursued; (c) appropriate reserves have been established in accordance with GAAP and included in the calculation of the Revolver Borrowing Base and properly reflected in any Revolver Borrowing Base Certificate (including, without limitation, Priority Payables owing by any Canadian Guarantor); (d) non-payment could not have a Material Adverse Effect, nor result in forfeiture or sale of any material assets of the Obligor; (e) no Lien is imposed on assets of the Obligor, unless (i) bonded and stayed to the satisfaction of Agent or (ii) if such assets constitute Collateral, the fair market value of such Collateral does not exceed $2,000,000; and (f) if the obligation results from entry of a judgment or other order, such judgment or order is stayed pending appeal or other judicial review.

 

Property: any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

 

Protective Advances: as defined in Section 2.1.5(b).

 

Purchase Money Debt: (a) Debt (other than the Obligations) for payment of any of the purchase price of fixed assets; (b) Debt (other than the Obligations) incurred within 10 days before or after acquisition of any fixed assets, for the purpose of financing any of the purchase price thereof; and (c) any renewals, extensions or refinancings (but not increases) thereof.

 

Purchase Money Lien: a Lien that secures Purchase Money Debt, encumbering only the fixed assets acquired with such Debt and constituting a Capital Lease or a purchase money security interest under the UCC or the PPSA.

 

Qualified ECP: an Obligor with total assets exceeding $10,000,000, or that constitutes an “eligible contract participant” under the Commodity Exchange Act and can cause another Person to qualify as an “eligible contract participant” under Section 1a(18)(A)(v)(II) of such act.

 

RCRA: the Resource Conservation and Recovery Act (42 U.S.C. §§ 6991-6991i).

 

Real Estate: all right, title and interest (whether as owner, lessor or lessee) in any real Property or any buildings, structures, parking areas or other improvements thereon.

 

Recipient: Agent, Issuing Bank, any Lender or any other recipient of a payment to be made by an Obligor under a Loan Document or on account of an Obligation.

 

Refinancing Conditions: the following conditions for Refinancing Debt:  (i) it is in an aggregate principal amount that does not exceed the principal amount of the Debt being extended, renewed or refinanced; (ii) it has a final maturity no sooner than, a weighted average life no less than, and an interest rate no greater than, the Debt being extended, renewed or refinanced; (iii) it is subordinated to the Obligations at least to the same extent as the Debt being extended, renewed or refinanced; (iv) the representations, covenants and defaults applicable to it are no less favorable to Borrowers than those applicable to the Debt being extended, renewed or refinanced; (v) no additional Lien is granted to secure 

 

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it; (vi) no additional Person is obligated on such Debt; and (v) upon giving effect to it, no Default or Event of Default exists.

 

Refinancing Debt: Borrowed Money that is the result of an extension, renewal or refinancing of Debt permitted under Section 10.2.1(b), (d) or (f).

 

Reimbursement Date: as defined in Section 2.3.2.

 

Rent and Charges Reserve: the aggregate of (a) all past due rent and other amounts owing by an Obligor to any landlord, warehouseman, processor, repairman, mechanic, shipper, freight forwarder, broker or other Person who possesses any Collateral or could assert a Lien on any Collateral; and (b) a reserve at least equal to three months’ rent and other charges that could be payable to any such Person, unless it has executed a Lien Waiver.

 

Report: as defined in Section 12.2.3.

 

Reportable Event: any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

 

Reporting Frequency Increase Trigger Amount:  an amount equal to 12.5% of the lesser of (A) the aggregate Revolver Commitments and (B) the Revolver Borrowing Base (calculated without giving effect to the Term Loan Push Down Reserve).

 

Required Lenders: Lenders (subject to Section 4.2) having (a) Revolver Commitments in excess of 662/3% of the aggregate Revolver Commitments; and (b) if the Revolver Commitments have terminated, Loans in excess of 662/3% of all outstanding Loans; provided, however, that (i) if at any time there shall be two or more Lenders, “Required Lenders” shall mean at least two Lenders (subject to Section 4.2) having Revolver Commitments in excess of 662/3% of the aggregate Revolver Commitments (or, if the Revolver Commitments have terminated, having Loans in excess of 662/3% of all outstanding Loans), and (ii) the Revolver Commitments and Loans of any Defaulting Lender shall be excluded from such calculation.

 

Reserve Percentage: the reserve percentage (expressed as a decimal, rounded up to the nearest 1/8th of 1%) applicable to member banks under regulations issued by the Board of Governors for determining the maximum reserve requirement for Eurocurrency liabilities.

 

Restatement Date: as defined in Section 6.1.

 

Restricted Investment: any Investment by a Borrower or Subsidiary, other than (a) Investments in Subsidiaries to the extent existing on the Restatement Date; (b) Cash Equivalents that are subject to Agent’s Lien and control, pursuant to documentation in form and substance satisfactory to Agent; (c) loans and advances permitted under Section 10.2.7; (d) Permitted Acquisitions, (e) subject to the restrictions on intercompany loans set forth in Section 10.2.7(d), Investments in Obligors, (f) Investments in joint ventures not to exceed $1,000,000, and (g) investments in (x) Foreign Subsidiaries (other than SI Asia) in an aggregate amount not to exceed $500,000 per Fiscal Year and (y) SI Asia in an aggregate amount not to exceed $2,000,000 per Fiscal Year.

 

Restrictive Agreement: an agreement (other than a Loan Document) that conditions or restricts the right of any Borrower, Subsidiary or other Obligor to incur or repay Borrowed Money, to grant Liens on any assets, to declare or make Distributions, to modify, extend or renew any agreement evidencing Borrowed Money, or to repay any intercompany Debt.

 

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Revolver Borrowing Base: on any date of determination, an amount equal to the sum of (a) the Accounts Formula Amount, plus (b) the Inventory Formula Amount, minus (c) the Term Loan Push Down Reserve, minus (d) the Availability Reserve established by Agent in its Permitted Discretion; provided, however, that (i) Eligible In-Transit Inventory shall in no event contribute more than $7,000,000 (after giving effect to the Inventory Formula Amount) to the Revolver Borrowing Base at any time and (ii) Eligible Accounts owing to and Eligible Inventory held by the UK Guarantors shall not contribute more than an aggregate of $6,000,000 (after giving effect to the Account Formula Amount and Inventory Formula Amount, respectively) to the Revolver Borrowing Base at any time.  If any amount in this definition is stated in a currency other than Dollars on any date, then such amount on such date shall be equal to the Dollar Equivalent of such amount in such other currency.

 

Revolver Borrowing Base Certificate: a certificate, in form and substance reasonably satisfactory to Agent, by which Borrowers certify calculation of the Revolver Borrowing Base.

 

Revolver Commitment: for any Lender, its obligation to make Revolver Loans and to participate in LC Obligations up to the maximum principal amount shown on Schedule 1.1(a), as hereafter modified pursuant to an Assignment and Acceptance to which it is a party.

 

Revolver Commitments: the aggregate Revolver Commitments of all Lenders.

 

Revolver Exposure:  at any time, the sum of (i) the outstanding principal amount of Revolver Loans at such time plus (ii) the aggregate Stated Amount of LC Obligations at such time.

 

Revolver Loan: a loan made pursuant to Section 2.1.1(b)(ii), and any Swingline Loan, Revolver Overadvance Loan or Protective Advance.

 

Revolver Overadvance: as defined in Section 2.1.5(a).

 

Revolver Overadvance Loan: a Base Rate Revolver Loan made when a Revolver Overadvance exists or is caused by the funding thereof.

 

Revolver Termination Date: the earliest to occur of (a) June 28, 2023; (b) the date on which Borrowers terminate the Revolver Commitments pursuant to Section 2.1.4; or (c) the date on which the Revolver Commitments are terminated pursuant to Section 11.2.

 

Royalties: all royalties, fees, expense reimbursement and other amounts payable by an Obligor under a License.

 

S&P: Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, and its successors.

 

Sanction: any sanction administered or enforced by the U.S. Government (including OFAC), the Canadian Government, United Nations Security Council, European Union, Her Majesty’s Treasury or other sanctions authority

 

Scheduled Unavailability Date: as defined in Section 3.6(b).

 

SDN List: means the list of the Specially Designated Nationals and Blocked Persons.

 

Secured Bank Product Obligations: Debt, obligations and other liabilities with respect to Bank Products owing by a Borrower or an Affiliate of a Borrower to a Secured Bank Product Provider; provided, that Secured Bank Product Obligations of an Obligor shall not include its Excluded Swap Obligations.

 

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Secured Bank Product Provider: (a) Bank of America or any of its Affiliates; and (b) any other Lender or Affiliate of a Lender that is providing a Bank Product, provided such provider delivers written notice to Agent, in form and substance satisfactory to Agent, within 10 days following the later of the Restatement Date or creation of the Bank Product, (i) describing the Bank Product and setting forth the maximum amount to be secured by the Collateral and the methodology to be used in calculating such amount, and (ii) agreeing to be bound by Section 12.13.

 

Secured Parties: Agent, Issuing Bank, Lenders and Secured Bank Product Providers.

 

Security Documents: the Guaranties, IP Assignments, Deposit Account Control Agreements, the Canadian Security Agreements, the UK Security Agreements and all other documents, instruments and agreements now or hereafter securing (or given with the intent to secure) any Obligations.

 

Senior Officer: the chairman of the board, president, chief executive officer or chief financial officer of a Borrower or, if the context requires, an Obligor.

 

Settlement Report: a report summarizing Revolver Loans and participations in LC Obligations outstanding as of a given settlement date, allocated to Lenders in accordance with their Applicable Percentages of the Revolver Commitments.

 

SI Asia: means Summer Infant Asia, Ltd., a Hong Kong Private Limited Company.

 

SI Canada: means Summer Infant Canada, Limited, a corporation formed under the laws of the Province of New Brunswick.

 

SI UK: means Summer Infant Europe Limited, a private company with limited liability incorporated in and registered under the laws of England and Wales with company number 4322137.

 

Solvent: as to any Person, such Person (a) owns Property whose Fair Salable Value is greater than the amount required to pay all of its debts (including contingent, subordinated, unmatured and unliquidated liabilities); (b) owns Property whose present Fair Salable Value is greater than the probable total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of such Person as they become absolute and matured; (c) is able to pay all of its debts as they mature; (d) has capital that is not unreasonably small for its business and is sufficient to carry on its business and transactions and all business and transactions in which it is about to engage; (e) is not “insolvent” within the meaning of Section 101(32) of the Bankruptcy Code (for SI UK this subsection (e) shall not be applicable); (f) is not an “insolvent person” within the meaning of the Bankruptcy and Insolvency Act (Canada); and (g) has not incurred (by way of assumption or otherwise) any obligations or liabilities (contingent or otherwise) under any Loan Documents, or made any conveyance in connection therewith, with actual intent to hinder, delay or defraud either present or future creditors of such Person or any of its Affiliates.

 

Specified Obligor: an Obligor that is not then an “eligible contract participant” under the Commodity Exchange Act (determined prior to giving effect to Section 5.11).

 

Spot Rate: the exchange rate, as determined by Agent, that is applicable to conversion of one currency into another currency, which is (a) the exchange rate reported by Bloomberg (or other commercially available source designated by Agent) as of the end of the preceding business day in the financial market for the first currency; or (b) if such report is unavailable for any reason, the spot rate for the purchase of the first currency with the second currency as in effect during the preceding business day in Agent’s principal foreign exchange trading office for the first currency.

 

Stated Amount: the outstanding amount of a Letter of Credit, including any automatic increase or tolerance (whether or not then in effect) provided by the Letter of Credit or related LC Documents

 

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Subordinated Debt: Debt incurred by a Borrower that is expressly subordinate and junior in right of payment to Full Payment of all Obligations, and is on terms (including maturity, interest, fees, repayment, covenants and subordination) satisfactory to Agent in its exclusive discretion.

 

Subsidiary: any entity at least 50% of whose voting securities or Equity Interests is owned by a Borrower or any combination of Borrowers (including indirect ownership by a Borrower through other entities in which the Borrower directly or indirectly owns 50% of the voting securities or Equity Interests).

 

Swap Obligations: with respect to an Obligor, its obligations under a Hedging Agreement that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act

 

Swingline Loan: any Borrowing of Base Rate Revolver Loans funded with Agent’s funds, until such Borrowing is settled among Lenders or repaid by Borrowers.

 

Target Companies: collectively, Target Corporation and its Affiliates.

 

Taxes: all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

Termination Event:  (a) the whole or partial termination of a Canadian Defined Benefit Pension Plan; or (b) the filing of a notice of intent to terminate in whole or in part a Canadian Defined Benefit Pension Plan; or (c) the institution of proceedings by any Governmental Authority to terminate in whole or in part or have a trustee appointed to administer a Canadian Defined Benefit Pension Plan; or (d) any other event or condition provided for in, or prescribed pursuant to, the PBA that would entitle any Governmental Authority to require the termination or winding up or partial termination or winding up of any Canadian Defined Benefit Pension Plan.

 

Term Debt:  Debt of the Borrowers in an aggregate principal amount not in excess of $17,500,000 incurred on or after the Restatement Date pursuant to the Term Debt Documents (and any Refinancing Debt replacing or refinancing such Debt); provided that (a) the stated maturity date of any such Refinancing Debt shall not be earlier than the Revolver Termination Date, (b) the amortization of such Refinancing Debt is not more frequent, and does not result in higher annual payments, than the amortization of the refinanced Debt, (c) any Liens securing such Refinancing Debt shall be subject to the terms of the Intercreditor Agreement, (d) such Refinancing Debt shall not be secured by any assets not constituting Collateral, (e) such Refinancing Debt shall not be guaranteed by any Person that does not provide a Guaranty and (f) the holders of such Refinancing Debt shall have entered into an intercreditor agreement substantially similar to the Intercreditor Agreement.

 

Term Debt Documents:  collectively, the Term Loan Agreement and all other agreements, instruments, documents and certificates executed and delivered to, or in favor of, the Term Loan Agent and including, without limitation, all other agreements whether heretofore, now or hereafter executed by or on behalf of any Obligor, or any employee of any Obligor, and delivered to the Term Loan Agent pursuant to the Term Loan Agreement.  Any reference to the Term Loan Agreement or any other Term Debt Document shall include all appendices, exhibits and schedules thereto, and all amendments, restatements, replacements, refinancings, supplements or other modifications thereto to the extent permitted hereby.

 

Term Debt Repayments:  (a) regularly scheduled payments of principal and interest in respect of the Term Debt in the amounts and on the dates set forth in the Term Loan Agreement, (b) mandatory prepayments of Term Debt to the extent required under the Term Loan Agreement (including the payment of any accrued interest, premium, penalty or other fee in connection with such payment or prepayment), 

 

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and (c) voluntary prepayments in respect of the Term Debt (including the payment of any accrued interest, premium, penalty or other fee in connection with such payment or prepayment, collectively with any such payment or prepayment, a “Voluntary Term Debt Prepayment”), provided, that, (i) at the time such Voluntary Term Debt Prepayment is made and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing, (ii) on a pro forma basis immediately after giving effect to such Voluntary Term Debt Prepayment, the financing thereof and the payment of reasonable costs and expenses related thereto (including, without limitation, the funding of any Revolver Loans or incurrence of other Debt to finance such Voluntary Term Debt Prepayment or the payment of such costs and expenses), either (A) both (1) Availability, calculated as of the day such Voluntary Term Debt Prepayment is made and for the period of 30 consecutive days ending on the day such Voluntary Term Debt Prepayment is made, shall equal or exceed 25% of the aggregate Revolver Commitments as of such date and (2) the Fixed Charge Coverage Ratio, determined as if such Voluntary Term Debt Prepayment has been made, and all Debt related to such Voluntary Term Debt Prepayment (including, without limitation, any Revolver Loans made or other Debt incurred to finance such Voluntary Term Debt Prepayment) had been incurred, on the first day of the twelve consecutive month period most recently ended prior to the date such Voluntary Term Debt Prepayment is made for which financial statements have been (or are required to have been) delivered to Agent pursuant to Section 10.1.2(a) or (b), shall equal or exceed 1.00 to 1.00, or (B) Availability, calculated as of the day such Voluntary Term Debt Prepayment is made and for the period of 30 consecutive days ending on the day such Voluntary Term Debt Prepayment is made, shall equal or exceed 30% of the aggregate Revolver Commitments as of such date, and (iii) Agent shall have received a certificate of a Senior Officer of Borrower Representative in form and substance satisfactory to Agent, dated as of the date of such Voluntary Term Debt Prepayment, certifying that the conditions set forth in the foregoing clauses (b)(i) and (b)(ii) have been satisfied.

 

Term Loan Agent:  Pathlight Capital LLC, as administrative agent for the lenders party to the Term Loan Agreement, together with its successors and assigns.

 

Term Loan Agreement:  that certain Term Loan and Security Agreement dated as of the Restatement Date by and among the Borrowers, the guarantors named therein and from time to time party thereto, the lenders named therein and from time to time party thereto and the Term Loan Agent, as the same may be amended, restated, replaced, refinanced, refunded, supplemented or otherwise modified from time to time in accordance with the terms of the Intercreditor Agreement.

 

Term Loan Borrowing Base: the “Term Loan Borrowing Base” as such term is defined in the Term Loan Agreement or any equivalent term used to describe the obligations arising thereunder and in connection therewith.

 

Term Loan Borrowing Base Certificate:  a certificate, in form and substance satisfactory to Agent, by which Borrowers certify the calculation of the Term Loan Borrowing Base.

 

Term Loan Push Down Reserve: a reserve against the Revolver Borrowing Base in an amount equal to the amount by which, if any, (a) the aggregate outstanding principal amount of the Term Debt exceeds (b) the Term Loan Borrowing Base.  For purposes of the Term Loan Push Down Reserve, Agent will be entitled to rely solely on the calculation made by Borrowers unless the Agent is notified by Term Loan Agent that such calculation is inaccurate.  In such event, the Agent shall be entitled to rely solely on the calculation of the Term Loan Push Down Reserve by the Term Loan Agent.

 

Term Loans: the “Term Loans” under and as defined in the Term Loan Agreement.

 

Term Priority Collateral:  has the meaning assigned to such term in the Intercreditor Agreement.

 

Transferee: any actual or potential Eligible Assignee, Participant or other Person acquiring an interest in any Obligations.

 

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Type: any type of a Loan (i.e., Base Rate Loan or LIBOR Loan) that has the same interest option and, in the case of LIBOR Loans, the same Interest Period.

 

UCC: the Uniform Commercial Code as in effect in the State of New York or, when the laws of any other jurisdiction govern the perfection or enforcement of any Lien, the Uniform Commercial Code of such jurisdiction.

 

UK Anti-Terrorism Laws: the Criminal Justice (Terrorism and Conspiracy) Act 1998, the Terrorism Act 2000, the Anti-Terrorism, Crime and Security Act 2001, the Prevention of Terrorism Act 2005, the Terrorism Act 2006, the Money Laundering Regulations 2007 and the Counter-Terrorism Act 2008.

 

UK Guarantor: collectively, SI UK and each other UK Subsidiary that guarantees payment or performance of the Obligations.  The definition of “UK Guarantors” means all of such entities collectively.

 

UK Guaranty: that certain Guarantee dated as of April 21, 2015 made by the UK Guarantor, as may be amended, restated or otherwise modified from time to time.

 

UK Pension Scheme:  any pension, retirement benefits or employee benefit scheme established by any UK Guarantor.

 

UK Priority Payables Reserve:  means (a) the prescribed part of the UK Guarantors’ net property that would be made available for the satisfaction of its unsecured debts pursuant to section 176A of the Insolvency Act 1986 together with the UK Guarantors’ liabilities which constitute preferential debts pursuant to section 386 of the Insolvency Act 1986 and any sums payable as administration or liquidation expenses pursuant to rules 2.67(1) and 4.218(1) of the Insolvency Rules 1986 plus (b) third party claims against the assets of the UK Guarantors ranking or which may rank equal or prior to the claims of Agent (including by way of retention of title); provided that such amounts shall be adjusted from time to time hereafter upon delivery to the Agent of an acceptable waiver.

 

UK Security Agreements:  (a) the Debenture dated as of April 21, 2015 executed by the UK Guarantors in favor of Agent, as the same may be amended, restated or supplemented from time to time, and (b) any other UK security agreement required to be executed by any Obligor in favor of Agent on, around or after April 21, 2015, in each case, as the same may be amended, restated or supplemented from time to time.

 

UK Subsidiaries: any Subsidiary of Company that is organized under the laws of England and Wales.

 

UK ST Law: the Law of Property Act 1925.

 

Unfunded Pension Liability: the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to the Code, ERISA or the Pension Protection Act of 2006 for the applicable plan year; (specifically excluding SI UK from this definition).

 

U.S. Person: “United States Person” as defined in Section 7701(a)(30) of the Code.

 

U.S. Tax Compliance Certificate: as defined in Section 5.10.2(b)(iii).

 

Upstream Payment: a Distribution by a Subsidiary of a Borrower to such Borrower.

 

Value: (a) for Inventory, its value determined on the basis of the lower of cost or market, 

 

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calculated on a first-in, first-out basis, and excluding any portion of cost attributable to intercompany profit among Obligors and their Affiliates; and (b) for an Account, its face amount, net of any returns, rebates, discounts (calculated on the shortest terms), credits, allowances or Taxes (including sales, excise or other taxes) that have been or could be claimed by the Account Debtor or any other Person.

 

Wal-Mart Companies: collectively, Wal-Mart Stores, Inc. and its Affiliates.

 

Write-Down and Conversion Powers: with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule

 

1.2.                            Accounting Terms.  Under the Loan Documents (except as otherwise specified herein), all accounting terms shall be interpreted, all accounting determinations shall be made, and all financial statements shall be prepared, in accordance with GAAP applied on a basis consistent with the most recent audited financial statements of Borrowers delivered to Agent before the Restatement Date and using the same inventory valuation method as used in such financial statements, except for any change required or permitted by GAAP if Borrowers’ certified public accountants concur in such change, the change is disclosed to Agent, and Section 10.3 is amended in a manner satisfactory to Required Lenders to take into account the effects of the change.

 

1.3.                            Uniform Commercial Code and PPSA.  As used herein, the following terms are defined in accordance with the UCC in effect in the State of New York from time to time (or, with respect to any such property of Canadian Guarantor to which the PPSA is applicable, in accordance with the PPSA in effect in the Province of Ontario from time to time if defined therein or, if applicable, with respect to any such property of the UK Guarantor to which the UK Security Agreements are applicable, in accordance with the UK Security Agreements):  “Chattel Paper,” “Commercial Tort Claim,” “Commodities Accounts,” “Commodities Contracts,” “Electronic Chattel Paper,” “Equipment,” “Financial Assets,” “Fixtures,” “General Intangibles,” “Goods,” “Instruments,” “Intangibles,” “Investment Property,” “Letter-of-Credit Right,” “Payment Intangibles,” “Proceeds,” “Promissory Notes,” “Records,” “Securities Accounts,” “Security,” “Security Entitlements,” “Supporting Obligations,” and “Tangible Chattel Paper.”

 

1.4.                            Certain Matters of Construction.  The terms “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision.  Any pronoun used shall be deemed to cover all genders.  In the computation of periods of time from a specified date to a later specified date, “from” means “from and including,” and “to” and “until” each mean “to but excluding.”  The terms “including” and “include” shall mean “including, without limitation” and, for purposes of each Loan Document, the parties agree that the rule of ejusdem generis shall not be applicable to limit any provision.  Section titles appear as a matter of convenience only and shall not affect the interpretation of any Loan Document.  All references to (a) laws or statutes include all related rules, regulations, interpretations, amendments and successor provisions; (b) any document, instrument or agreement include any amendments, waivers and other modifications, extensions or renewals (to the extent permitted by the Loan Documents); (c) any section mean, unless the context otherwise requires, a section of this Agreement; (d) any exhibits or schedules mean, unless the context otherwise requires, exhibits and schedules attached hereto, which are hereby incorporated by reference; (e) any Person include successors and assigns; (f) time of day mean time of day at Agent’s notice address under Section 14.3.1; or (g) discretion of Agent, Issuing Bank or any Lender mean the sole and absolute discretion of such Person.  All determinations (including calculations of the Revolver Borrowing Base, Term Loan Borrowing Base and financial covenants) made from time to time under the Loan Documents

 

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shall be made in light of the circumstances existing at such time.  Revolver Borrowing Base and Term Loan Borrowing Base calculations shall be consistent with historical methods of valuation and calculation, and otherwise satisfactory to Agent (and not necessarily calculated in accordance with GAAP).  Borrowers shall have the burden of establishing any alleged negligence, misconduct or lack of good faith by Agent, Issuing Bank or any Lender under any Loan Documents.  No provision of any Loan Documents shall be construed against any party by reason of such party having, or being deemed to have, drafted the provision.  A reference to Borrowers’ “knowledge” or similar concept means actual knowledge of a Senior Officer, or knowledge that a Senior Officer would have obtained if he or she had engaged in good faith and diligent performance of his or her duties, including reasonably specific inquiries of employees or agents and a good faith attempt to ascertain the matter.  To the extent the definition of any category or type of collateral is expanded by any amendment, modification or revision to the Uniform Commercial Code or the PPSA, such expanded definition will apply automatically as of the date of such amendment, modification or revision.

 

Notwithstanding the foregoing, and where the context so requires, (i) any term defined in this Agreement by reference to the “Uniform Commercial Code” shall also have any extended, alternative or analogous meaning given to such term in applicable Canadian personal property security and other laws (including, without limitation, the Personal Property Security Act of Ontario and New Brunswick, the Bills of Exchange Act (Canada) and the Depository Bills and Notes Act (Canada)), in all cases for the extension, preservation or betterment of the security and rights of the Collateral, (ii) all references in this Agreement to “Article 7”, “Article 8” or “Article 9” shall be deemed to refer also to applicable Canadian securities transfer laws, (iii) all references in this Agreement to a financing statement, continuation statement, amendment or termination statement shall be deemed to refer also to the analogous documents used under applicable Canadian personal property security laws, including, without limitation, where applicable, financing change statements, (iv) all references to the United States, or to any subdivision, department, agency or instrumentality thereof shall be deemed to refer also to Canada, or to any subdivision, department, agency or instrumentality thereof, and (v) all references to federal or state securities law of the United States shall be deemed to refer also to analogous federal and provincial securities laws in Canada.

 

1.5.                            Currency Equivalents.

 

1.5.1.                  Calculations.  All references in the Loan Documents to Loans, Letters of Credit, Obligations, Revolver Borrowing Base components, Term Loan Borrowing Base components and other amounts shall be denominated in Dollars, unless expressly provided otherwise.  The “Dollar Equivalent” of any amounts denominated or reported under a Loan Document in a currency other than Dollars shall be determined by Agent on a daily basis, based on the current Spot Rate.  Borrowers shall report Value and other Revolver Borrowing Base and Term Loan Borrowing Base components to Agent in the currency invoiced by Borrowers or shown in Borrowers’ financial records, and unless expressly provided otherwise, shall deliver financial statements and calculate financial covenants in Dollars.  Notwithstanding anything herein to the contrary, if any Obligation is funded and expressly denominated in a currency other than Dollars, Borrowers shall repay such Obligation in such other currency.

 

1.5.2.                  Judgments.  If, for purposes of obtaining judgment in any court, it is necessary to convert a sum from the currency provided under a Loan Document (“Agreement Currency”) into another currency, the Spot Rate shall be used as the rate of exchange.  Notwithstanding any judgment in a currency (“Judgment Currency”) other than the Agreement Currency, a Borrower shall discharge its obligation in respect of any sum due under a Loan Document only if, on the Business Day following receipt by Agent of payment in the Judgment Currency, Agent can use the amount paid to purchase the sum originally due in the Agreement Currency.  If the purchased amount is less than the sum originally due, such Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify Agent and Lenders against such loss.  If the purchased amount is greater than the sum originally due, Agent shall return the excess amount to such Borrower (or to the Person legally entitled thereto).

 

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SECTION 2.                                           CREDIT FACILITIES

 

2.1.                            Revolver Commitments.

 

2.1.1.                  Loans Outstanding Under Existing Credit Agreement; Revolver Loans.

 

(a)                                 A portion of the Loans made and outstanding under (and as defined in) the Existing Credit Agreement as of the Restatement Date equal to the lesser of (x) the aggregate Revolver Commitments and (y) the Revolver Borrowing Base, shall remain outstanding on the Restatement Date and shall be automatically, and without any action on the part of any Person, deemed to be converted into and constitute “Revolver Loans” hereunder and the Lenders shall automatically, and without the requirement for additional documentation on the Restatement Date, acquire such “Revolver Loans” in accordance with their Applicable Percentages of the aggregate Revolver Commitments.

 

(b)                                 Each Lender agrees severally, up to its Revolver Commitment and on the terms set forth herein, to make Revolver Loans to Borrowers from time to time from the Restatement Date to but not including the Revolver Termination Date.  Revolver Loans may be repaid and reborrowed as provided herein.  In no event shall Lenders have any obligation to honor a request for a Revolver Loan if (x) the sum of (A) the Revolver Exposure plus (B) the requested Revolver Loan would exceed (y) the lesser of (A) the Revolver Borrowing Base and (B) the aggregate Revolver Commitments at such time.

 

2.1.2.                  Revolver Notes.  The Revolver Loans made by each Lender and interest accruing thereon shall be evidenced by the records of Agent and such Lender.  At the request of any Lender, Borrowers shall deliver to such Lender a promissory note evidencing such Lender’s Revolver Loans.

 

2.1.3.                  Use of Proceeds.  The proceeds of the Revolver Loans shall be used by Borrowers solely (a) to satisfy existing Debt; (b) to pay fees and transaction expenses associated with the closing of this credit facility; (c) to pay Obligations in accordance with this Agreement; and (d) for lawful corporate purposes of Borrowers, including working capital.  Borrowers shall not, directly or indirectly, use any Letter of Credit or Loan proceeds, nor use, lend, contribute or otherwise make available any Letter of Credit or Loan proceeds to any Subsidiary, joint venture partner or other Person, (i) to fund any activities of or business with any Person, or in any Designated Jurisdiction, that, at the time of issuance of the Letter of Credit or funding of the Loan, is the subject of any Sanction; or (ii) in any manner that would result in a violation of a Sanction by any Person (including any Secured Party or other individual or entity participating in a transaction).

 

2.1.4.                  Termination and Reduction of Revolver Commitments.

 

(a)                                 The Revolver Commitments shall terminate on the Revolver Termination Date, unless sooner terminated in accordance with this Agreement.  Upon at least 5 Business Days prior written notice to Agent at any time after the first Loan Year, Borrowers may, at their option, terminate the Revolver Commitments and this credit facility.  Any notice of termination given by Borrowers shall be irrevocable; provided, that a notice of termination of the credit facilities (including a termination of the Revolver Commitments) delivered by Borrowers may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by Borrowers (by notice to Agent on or prior to the specified effective date of such termination) if such condition is not satisfied.  On the termination date, Borrowers shall make Full Payment of all Obligations.

 

(b)                                 Borrowers may permanently reduce the aggregate Revolver Commitments, in accordance with each Lender’s Applicable Percentage of the Revolver Commitments, upon at least 5 Business Days prior written notice to Agent, which notice shall specify the amount of the reduction and shall be irrevocable once given.  Each reduction shall be in a minimum amount of $5,000,000, or an increment of $1,000,000 in excess thereof.

 

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2.1.5.                  Revolver Overadvances; Protective Advances.

 

(a)                                 If the aggregate Revolver Loans exceed the Revolver Borrowing Base (a “Revolver Overadvance”) at any time, the excess amount shall be payable by Borrowers on demand by Agent, but all such Revolver Loans shall nevertheless constitute Obligations secured by the Collateral and entitled to all benefits of the Loan Documents.

 

(b)                                 Agent shall be authorized, in its discretion, notwithstanding that (i) a Revolver Overadvance exists or thereby would be created, (ii) a Default or Event of Default has occurred and is continuing, and/or (iii) any conditions in Section 6 are not satisfied, to knowingly and intentionally, continue to make Base Rate Revolver Loans if Agent, in its Permitted Discretion, deems such Base Rate Revolver Loans necessary or desirable (x) to preserve or protect Collateral, (y) to enhance the collectability or repayment of the Obligations, or (z) to pay costs, fees and expenses then owing to Agent or any other amount (other than principal) chargeable to Borrowers in respect of the Obligations (such Loans, “Protective Advances”), so long as (A) after giving effect to such Protective Advances, the Revolver Exposure does not exceed the Revolver Borrowing Base by more than ten percent (10%), and (B) after giving effect to such Protective Advances, the Revolver Exposure does not exceed the aggregate Revolver Commitments.  Each Lender shall participate in each Protective Advance in accordance with such Lender’s Applicable Percentage of the Revolver Commitments.  Required Lenders may at any time revoke Agent’s authority to make further Protective Advances under this clause (b) by written notice to Agent.  Absent such revocation, Agent’s determination that funding of a Protective Advance is appropriate shall be conclusive.

 

2.2.                            [Reserved.].

 

2.3.                            Letter of Credit Facility.

 

2.3.1.                  Issuance of Letters of Credit.  Issuing Bank shall issue Letters of Credit from time to time until 30 days prior to the Revolver Termination Date (or until the Revolver Termination Date, if earlier), on the terms set forth herein, including the following:

 

(a)                                 Each Borrower acknowledges that Issuing Bank’s issuance of any Letter of Credit is conditioned upon Issuing Bank’s receipt of a LC Application with respect to the requested Letter of Credit, as well as such other instruments and agreements as Issuing Bank may customarily require for issuance of a letter of credit of similar type and amount.  Issuing Bank shall have no obligation to issue any Letter of Credit unless (i) Issuing Bank receives a LC Request and LC Application at least three Business Days prior to the requested date of issuance; (ii) each LC Condition is satisfied; and (iii) if a Defaulting Lender exists, such Lender or Borrowers have entered into arrangements satisfactory to Agent and Issuing Bank to eliminate any Fronting Exposure associated with such Lender.  If, in sufficient time to act, Issuing Bank receives written notice from Required Lenders that a LC Condition has not been satisfied, Issuing Bank shall not issue the requested Letter of Credit.  Prior to receipt of any such notice, Issuing Bank shall not be deemed to have knowledge of any failure of LC Conditions.

 

(b)                                 Letters of Credit may be requested by Borrower Agent, on behalf of an Obligor, to support obligations incurred in the Ordinary Course of Business, or as otherwise approved by Agent.  The renewal or extension of any Letter of Credit shall be treated as the issuance of a new Letter of Credit, except that delivery of a new LC Application shall be required at the discretion of Issuing Bank.

 

(c)                                  Obligors assume all risks of the acts, omissions or misuses of any Letter of Credit by the beneficiary.  In connection with issuance of any Letter of Credit, none of Agent, Issuing Bank or any Lender shall be responsible for the existence, character, quality, quantity, condition, packing, value or delivery of any goods purported to be represented by any Documents; any differences or variation in the character, quality, quantity, condition, packing, value or delivery of any goods from that expressed in any Documents; the form, validity, sufficiency, accuracy, genuineness or legal effect of any Documents or of any endorsements thereon; the time, place, manner or order in which shipment of goods is made; partial 

 

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or incomplete shipment of, or failure to ship, any goods referred to in a Letter of Credit or Documents; any deviation from instructions, delay, default or fraud by any shipper or other Person in connection with any goods, shipment or delivery; any breach of contract between a shipper or vendor and a Borrower; errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, telecopy, e-mail, telephone or otherwise; errors in interpretation of technical terms; the misapplication by a beneficiary of any Letter of Credit or the proceeds thereof; or any consequences arising from causes beyond the control of Issuing Bank, Agent or any Lender, including any act or omission of a Governmental Authority.  The rights and remedies of Issuing Bank under the Loan Documents shall be cumulative.  Issuing Bank shall be fully subrogated to the rights and remedies of each beneficiary whose claims against Borrowers are discharged with proceeds of any Letter of Credit.

 

(d)                                 In connection with its administration of and enforcement of rights or remedies under any Letters of Credit or LC Documents, Issuing Bank shall be entitled to act, and shall be fully protected in acting, upon any certification, documentation or communication in whatever form believed by Issuing Bank, in good faith, to be genuine and correct and to have been signed, sent or made by a proper Person.  Issuing Bank may consult with and employ legal counsel, accountants and other experts to advise it concerning its obligations, rights and remedies, and shall be entitled to act upon, and shall be fully protected in any action taken in good faith reliance upon, any advice given by such experts.  Issuing Bank may employ agents and attorneys-in-fact in connection with any matter relating to Letters of Credit or LC Documents, and shall not be liable for the negligence or misconduct of agents and attorneys-in-fact selected with reasonable care.

 

2.3.2.                  Reimbursement; Participations.

 

(a)                                 If Issuing Bank honors any request for payment under a Letter of Credit, Borrowers shall pay to Issuing Bank, on the same day (“Reimbursement Date”), the amount paid by Issuing Bank under such Letter of Credit, together with interest at the interest rate for Base Rate Revolver Loans from the Reimbursement Date until payment by Borrowers.  The obligation of Borrowers to reimburse Issuing Bank for any payment made under a Letter of Credit shall be absolute, unconditional, irrevocable, and joint and several, and shall be paid without regard to any lack of validity or enforceability of any Letter of Credit or the existence of any claim, setoff, defense or other right that Borrowers may have at any time against the beneficiary.  Whether or not Borrower Agent submits a Notice of Borrowing, Borrowers shall be deemed to have requested a Borrowing of Base Rate Revolver Loans in an amount necessary to pay all amounts due Issuing Bank on any Reimbursement Date and each Lender agrees to fund its Applicable Percentage of such Borrowing whether or not the Revolver Commitments have terminated, a Revolver Overadvance exists or is created thereby, or the conditions in Section 6 are satisfied.

 

(b)                                 Upon issuance of a Letter of Credit, each Lender shall be deemed to have irrevocably and unconditionally purchased from Issuing Bank, without recourse or warranty, an undivided interest and participation in all LC Obligations relating to the Letter of Credit, in accordance with such Lender’s Applicable Percentage.  If Issuing Bank makes any payment under a Letter of Credit and Borrowers do not reimburse such payment on the Reimbursement Date, Agent shall promptly notify Lenders and each Lender shall promptly (within one Business Day) and unconditionally pay to Agent, for the benefit of Issuing Bank, the Lender’s pro rata share of such payment.  Upon request by a Lender, Issuing Bank shall furnish copies of any Letters of Credit and LC Documents in its possession at such time.

 

(c)                                  The obligation of each Lender to make payments to Agent for the account of Issuing Bank in connection with Issuing Bank’s payment under a Letter of Credit shall be absolute, unconditional and irrevocable, not subject to any counterclaim, setoff, qualification or exception whatsoever, and shall be made in accordance with this Agreement under all circumstances, irrespective of any lack of validity or unenforceability of any Loan Documents; any draft, certificate or other document 

 

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presented under a Letter of Credit having been determined to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or the existence of any setoff or defense that any Obligor may have with respect to any Obligations.  Issuing Bank does not assume any responsibility for any failure or delay in performance or any breach by any Borrower or other Person of any obligations under any LC Documents.  Issuing Bank does not make to Lenders any express or implied warranty, representation or guaranty with respect to the Collateral, LC Documents or any Obligor.  Issuing Bank shall not be responsible to any Lender for any recitals, statements, information, representations or warranties contained in, or for the execution, validity, genuineness, effectiveness or enforceability of any LC Documents; the validity, genuineness, enforceability, collectibility, value or sufficiency of any Collateral or the perfection of any Lien therein; or the assets, liabilities, financial condition, results of operations, business, creditworthiness or legal status of any Obligor.

 

(d)                                 No Issuing Bank Indemnitee shall be liable to any Lender or other Person for any action taken or omitted to be taken in connection with any Letter of Credit or LC Document except as a result of its gross negligence or willful misconduct.  Issuing Bank may refrain from taking any action with respect to a Letter of Credit until it receives written instructions from Required Lenders.

 

2.3.3.                  Cash Collateral.  If any LC Obligations, whether or not then due or payable, shall for any reason be outstanding at any time (a) that an Event of Default exists, (b) that Availability is less than zero, or (c) within 10 Business Days prior to the Revolver Termination Date, then Borrowers shall, at Issuing Bank’s or Agent’s request, Cash Collateralize the stated amount of all outstanding Letters of Credit and pay to Issuing Bank the amount of all other LC Obligations.  Borrowers shall, on demand by Issuing Bank or Agent from time to time, Cash Collateralize the Fronting Exposure of any Defaulting Lender.  If Borrowers fail to provide any Cash Collateral as required hereunder, Lenders may (and shall upon direction of Agent) advance, as Revolver Loans, the amount of the Cash Collateral required (whether or not the Revolver Commitments have terminated, a Revolver Overadvance exists or the conditions in Section 6 are satisfied).

 

2.3.4.                  Resignation of Issuing Bank.  Issuing Bank may resign at any time upon notice to Agent and Borrowers.  On and after the effective date of such resignation, Issuing Bank shall have no obligation to issue, amend, renew, extend or otherwise modify any Letter of Credit, but shall continue to have all rights and other obligations of an Issuing Bank hereunder relating to any Letter of Credit issued by it prior to such date.  Agent shall promptly appoint a replacement Issuing Bank, which, as long as no Default or Event of Default exists, shall be reasonably acceptable to Borrowers.

 

SECTION 3.                                           INTEREST, FEES AND CHARGES

 

3.1.                            Interest.

 

3.1.1.                  Rates and Payment of Interest.

 

(a)                                 The Obligations shall bear interest (i) if a Base Rate Loan, at the Base Rate in effect from time to time, plus the Applicable Margin; (ii) if a LIBOR Loan, at LIBOR for the applicable Interest Period, plus the Applicable Margin; and (iii) if any other Obligation (including, to the extent permitted by law, interest not paid when due), at the Base Rate in effect from time to time, plus the Applicable Margin for Base Rate Revolver Loans.

 

(b)                                 During an Insolvency Proceeding with respect to any Obligor, or during any other Event of Default if Agent or Required Lenders in their discretion so elect, Obligations shall bear interest at the Default Rate (whether before or after any judgment).  Each Obligor acknowledges that the cost and expense to Agent and Lenders due to an Event of Default are difficult to ascertain and that the Default Rate is fair and reasonable compensation for this.

 

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(c)                                  Interest shall accrue from the date a Loan is advanced or Obligation is incurred or payable, until paid in full by Borrowers.  If a Loan is repaid on the same day made, one day’s interest shall accrue.  Interest accrued on the Loans shall be due and payable in arrears, (i) on the first day of each month; (ii) on any date of prepayment, with respect to the principal amount of Loans being prepaid; and (iii) on the Revolver Termination Date.  Interest accrued on any other Obligations shall be due and payable as provided in the Loan Documents and, if no payment date is specified, shall be due and payable on demand.  Notwithstanding the foregoing, interest accrued at the Default Rate shall be due and payable on demand.

 

3.1.2.                  Application of LIBOR to Outstanding Loans.

 

(a)                                 Borrowers may on any Business Day, subject to delivery of a Notice of Conversion/Continuation, elect to convert any portion of the Base Rate Loans to, or to continue any LIBOR Loan at the end of its Interest Period as, a LIBOR Loan.  During any Default or Event of Default, Agent may (and shall at the direction of Required Lenders) declare that no Loan may be made, converted or continued as a LIBOR Loan.

 

(b)                                 Whenever Borrowers desire to convert or continue Loans as LIBOR Loans, Borrower Agent shall give Agent a Notice of Conversion/Continuation, no later than 11:00 a.m. at least three Business Days before the requested conversion or continuation date.  Promptly after receiving any such notice, Agent shall notify each Lender thereof.  Each Notice of Conversion/Continuation shall be irrevocable, and shall specify the amount of Loans to be converted or continued, the conversion or continuation date (which shall be a Business Day), and the duration of the Interest Period (which shall be deemed to be 30 days if not specified).  If, upon the expiration of any Interest Period in respect of any LIBOR Loans, Borrowers shall have failed to deliver a Notice of Conversion/Continuation, they shall be deemed to have elected to convert such Loans into Base Rate Loans.  Agent does not warrant or accept responsibility for, nor shall it have any liability with respect to, administration, submission or any other matter related to any rate described in the definition of LIBOR.

 

3.1.3.                  Interest Periods.  In connection with the making, conversion or continuation of any LIBOR Loans, Borrowers shall select an interest period (“Interest Period”) to apply, which interest period shall be 30, 60 or 90 days; provided, however, that:

 

(a)                                 the Interest Period shall begin on the date the Loan is made or continued as, or converted into, a LIBOR Loan, and shall expire on the numerically corresponding day in the calendar month at its end;

 

(b)                                 if any Interest Period begins on a day for which there is no corresponding day in the calendar month at its end or if such corresponding day falls after the last Business Day of such month, then the Interest Period shall expire on the last Business Day of such month; and if any Interest Period would otherwise expire on a day that is not a Business Day, the period shall expire on the next Business Day; and

 

(c)                                  no Interest Period shall extend beyond the Revolver Termination Date.

 

3.1.4.                  Interest Rate Not Ascertainable.  If Agent shall determine that on any date for determining LIBOR, due to any circumstance affecting the London interbank market, adequate and fair means do not exist for ascertaining such rate on the basis provided herein, then Agent shall immediately notify Borrowers of such determination.  Until Agent notifies Borrowers that such circumstance no longer

 

exists, the obligation of Lenders to make LIBOR Loans shall be suspended, and no further Loans may be converted into or continued as LIBOR Loans.

 

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3.2.                            Fees.

 

3.2.1.                  Unused Line Fee.  Borrowers shall pay to Agent, for the pro rata benefit of Lenders (based upon each Lender’s Applicable Percentage of the aggregate Revolver Commitments), a fee equal to the Applicable Unused Line Fee Rate times the amount by which the aggregate Revolver Commitments exceed the average daily balance of Revolver Loans and stated amount of Letters of Credit during any month.  Such fee shall be payable in arrears, on the first day of each month and on the Revolver Termination Date.

 

3.2.2.                  LC Facility Fees.  Obligors shall pay (a) to Agent, for the pro rata benefit of Lenders (based upon each Lender’s Applicable Percentage of the aggregate Revolver Commitments), a fee equal to the Applicable Margin in effect for LIBOR Revolver Loans times the average daily Stated Amount of Letters of Credit, which fee shall be payable monthly in arrears, on the first day of each month; (b) to Agent, for its own account, a fronting fee as set forth in the Fee Letter on the Stated Amount of each Letter of Credit, which fee shall be payable monthly in arrears, on the first day of each month; and (c) to Issuing Bank, for its own account, all customary charges associated with the issuance, amending, negotiating, payment, processing, transfer and administration of Letters of Credit, which charges shall be paid as and when incurred.  During an Event of Default, the fee payable under clause (a) shall be increased by 2% per annum.

 

3.2.3.                  Fee Letters  Borrowers shall pay all fees set forth in any fee letter executed in connection with this Agreement, including the Fee Letter.

 

3.3.                            Computation of Interest, Fees, Yield Protection.  All interest, as well as fees and other charges calculated on a per annum basis, shall be computed for the actual days elapsed, based on a year of 365 days with respect to amounts denominated in GBP and 360 days with respect to all other amounts.  For purposes of the Interest Act (Canada), if applicable, (i) whenever any interest or fee under this Agreement is calculated using a rate based on a year of 360 days, the rate determined pursuant to such calculation, when expressed as an annual rate, is equivalent to (x) the applicable rate based on a year of 360 days, multiplied by (y) the actual number of days in the calendar year in which the period for which such interest or fee is payable (or compounded) ends, and divided by (z) 360, (ii) the principle of deemed reinvestment of interest does not apply to any interest calculation under this Agreement, and (iii) the rates of interest stipulated in this Agreement are intended to be nominal rates and not effective rates or yields.  Each Obligor confirms that it understands and is able to calculate the rate of interest applicable to advances based on the methodology for calculating per annum rates provided for herein.  Each Obligor irrevocably agrees not to plead or assert, whether by way of defence or otherwise, in any proceeding relating to this Agreement or any Loan Documents, that the interest payable hereunder and the calculation thereof has not been adequately disclosed to the Obligors as required pursuant to Section 4 of the Interest Act (Canada).  Each determination by Agent of any interest, fees or interest rate hereunder shall be final, conclusive and binding for all purposes, absent manifest error.  All fees shall be fully earned when due and shall not be subject to rebate, refund or proration.  All fees payable under Section 3.2 are compensation for services and are not, and shall not be deemed to be, interest or any other charge for the use, forbearance or detention of money.  A certificate as to amounts payable by Borrowers under Section 3.4, 3.6, 3.7, 3.9 or 5.9, submitted to Borrower Agent by Agent or the affected Lender, as applicable, shall be final, conclusive and binding for all purposes, absent manifest error, and Borrowers shall pay such amounts to the appropriate party within 10 days following receipt of the certificate.

 

3.4.                            Reimbursement Obligations.  Borrowers shall reimburse Agent, Issuing Bank and Lenders for all Extraordinary Expenses.  Borrowers shall also reimburse Agent for all reasonable and documented legal, accounting, appraisal, consulting, and other fees, costs and expenses incurred by it in connection with (a) negotiation and preparation of any Loan Documents, including any amendment or other modification thereof; (b) administration of and actions relating to any Collateral, Loan Documents and transactions contemplated thereby, including any actions taken to perfect or maintain priority of Agent’s Liens on any Collateral, to maintain any insurance required hereunder or to verify Collateral; and (c) subject to the limits of Section 10.1.1(b), each inspection, audit or appraisal with respect to any 

 

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Obligor or Collateral, whether prepared by Agent’s personnel or a third party.  If, for any reason (including inaccurate reporting on financial statements or a Compliance Certificate), it is determined that a higher Applicable Margin should have applied to a period than was actually applied, then the proper margin shall be applied retroactively and Borrowers shall promptly pay to Agent, for the pro rata benefit of Lenders, an amount equal to the difference between the amount of interest and fees that would have accrued using the proper margin and the amount actually paid.  All amounts payable by Borrowers under this Section shall be due on demand.

 

3.5.                            Illegality.  If any Lender determines that any Applicable Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund LIBOR Loans, or to determine or charge interest rates based upon LIBOR, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to Agent, any obligation of such Lender to make or continue LIBOR Loans or to convert Base Rate Loans to LIBOR Loans shall be suspended until such Lender notifies Agent that the circumstances giving rise to such determination no longer exist.  Upon delivery of such notice, Borrowers shall prepay or, if applicable, convert all LIBOR Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such LIBOR Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such LIBOR Loans.  Upon any such prepayment or conversion, Borrowers shall also pay accrued interest on the amount so prepaid or converted.

 

3.6.                            Inability to Determine Rates. (a)            If Agent determines (which determination shall be conclusive absent manifest error), or Borrower Agent or Required Lenders notify Agent (with, in the case of the Required Lenders, a copy to Borrower Agent) that Borrower Agent or Required Lenders (as applicable) have determined, that for any reason in connection with a request for a Borrowing of, or conversion to or continuation of, a LIBOR Loan that (a) Dollar deposits are not being offered to banks in the London interbank Eurodollar market for the applicable amount and Interest Period of such Loan, (b) adequate and reasonable means do not exist for determining LIBOR for the requested Interest Period, or (c) LIBOR for the requested Interest Period does not adequately and fairly reflect the cost to such Lenders of funding such Loan, then Agent will promptly so notify Borrower Agent and each Lender.  Thereafter, the obligation of Lenders to make or maintain LIBOR Loans shall be suspended until Agent (upon instruction by Required Lenders) revokes such notice.  Upon receipt of such notice, Borrower Agent may revoke any pending request for a Borrowing of, conversion to or continuation of a LIBOR Loan or, failing that, will be deemed to have submitted a request for a Base Rate Loan.

 

(b)                                 Notwithstanding anything to the contrary in this Agreement or any other Loan Documents, if Agent determines (which determination shall be conclusive absent manifest error), or Borrower Agent or Required Lenders notify Agent (with, in the case of the Required Lenders, a copy to Borrower Agent) that Borrower Agent or Required Lenders (as applicable) have determined, that:

 

(i)                                     adequate and reasonable means do not exist for ascertaining LIBOR for any requested Interest Period, including, without limitation, because the LIBOR Screen Rate is not available or published on a current basis and such circumstances are unlikely to be temporary; or

 

(ii)                                  the administrator of the LIBOR Screen Rate or a Governmental Authority having jurisdiction over Agent has made a public statement identifying a specific date after which LIBOR or the LIBOR Screen Rate shall no longer be made available, or used for determining the interest rate of loans (such specific date, the “Scheduled Unavailability Date”), or

 

(iii)                               syndicated loans currently being executed, or that include language similar to that contained in this Section, are being executed or amended (as applicable) to incorporate or adopt a new benchmark interest rate to replace LIBOR,

 

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then, reasonably promptly after such determination by the Agent or receipt by Agent of such notice , as applicable, Agent and the Borrowers may amend this Agreement to replace LIBOR with an alternate benchmark rate (including any mathematical or other adjustments to the benchmark (if any) incorporated therein), giving due consideration to any evolving or then existing convention for similar U.S. dollar denominated syndicated credit facilities for such alternative benchmarks (any such proposed rate, a “LIBOR Successor Rate”), together with any proposed LIBOR Successor Rate Conforming Changes (as defined below) and any such amendment shall become effective at 5:00 p.m. (New York time) on the fifth Business Day after Agent shall have posted such proposed amendment to all Lenders and Borrower Agent unless, prior to such time, Lenders comprising the Required Lenders have delivered to Agent written notice that such Required Lenders do not accept such amendment.

 

If no LIBOR Successor Rate has been determined and the circumstances under clause (b)(i) above exist or the Scheduled Unavailability Date has occurred (as applicable), Agent will promptly so notify Borrower Agent and each Lender.  Thereafter, (x) the obligation of Lenders to make or maintain LIBOR Loans shall be suspended, (to the extent of the affected LIBOR Loans or Interest Periods), and (y) the LIBOR component shall no longer be utilized in determining the Base Rate.  Upon receipt of such notice, Borrower Agent may revoke any pending request for a Borrowing of, conversion to or continuation of LIBOR Loans (to the extent of the affected LIBOR Loans or Interest Periods) or, failing that, will be deemed to have converted such request into a request for a committed Borrowing of Base Rate Loans (subject to the foregoing clause (y)) in the amount specified therein.

 

Notwithstanding anything to the contrary in this Agreement, any definition of LIBOR Successor Rate shall provide that in no event shall such LIBOR Successor Rate be less than zero for purposes of this Agreement.  For the avoidance of doubt, implementation of a LIBOR Successor Rate shall not include a reduction of the Applicable Margin.

 

3.7.                            Increased Costs; Capital Adequacy.

 

3.7.1.                  Change in Law.  If any Change in Law shall:

 

(c)                                  impose, modify or deem applicable any reserve, liquidity, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement reflected in LIBOR) or Issuing Bank;

 

(d)                                 subject any Recipient to Taxes (other than (i) Indemnified Taxes, (ii) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes, and (iii) Connection Income Taxes) with respect to any Loan, Letter of Credit, Commitment or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

 

(e)                                  impose on any Lender, Issuing Bank or interbank market any other condition, cost or expense affecting any Loan, Loan Document, Letter of Credit, participation in LC Obligations, or Commitment;

 

and the result thereof shall be to increase the cost to such Lender of making or maintaining any Loan or Commitment, or to increase the cost to such Lender or Issuing Bank of participating in, issuing or maintaining any Letter of Credit, or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank hereunder (whether of principal, interest or any other amount) then, upon request of such Lender or Issuing Bank, Borrowers will pay to such Lender or Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or Issuing Bank, as applicable, for such additional costs incurred or reduction suffered.

 

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3.7.2.                  Capital Adequacy.  If any Lender or Issuing Bank determines that any Change in Law affecting such Lender or Issuing Bank or any Lending Office of such Lender or such Lender’s or Issuing Bank’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s, Issuing Bank’s or holding company’s capital as a consequence of this Agreement, or such Lender’s or Issuing Bank’s Commitments, Loans, Letters of Credit or participations in LC Obligations, to a level below that which such Lender, Issuing Bank or holding company could have achieved but for such Change in Law (taking into consideration such Lender’s, Issuing Bank’s and holding company’s policies with respect to capital adequacy), then from time to time Borrowers will pay to such Lender or Issuing Bank, as the case may be, such additional amount or amounts as will compensate it or its holding company for any such reduction suffered.

 

3.7.3.                  LIBOR Loan Reserves.  If any Lender is required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits, Borrowers shall pay additional interest to such Lender on each LIBOR Loan equal to the costs of such reserves allocated to the Loan by the Lender (as determined by it in good faith, which determination shall be conclusive).  The additional interest shall be due and payable on each interest payment date for the Loan; provided, however, that if the Lender notifies Borrowers (with a copy to Agent) of the additional interest less than 10 days prior to the interest payment date, then such interest shall be payable 10 days after Borrowers’ receipt of the notice.

 

3.7.4.                  Compensation.  Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of its right to demand such compensation, but Borrowers shall not be required to compensate a Lender or Issuing Bank for any increased costs incurred or reductions suffered more than nine months prior to the date that the Lender or Issuing Bank notifies Borrower Agent of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or Issuing Bank’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

 

3.8.                            Mitigation.  If any Lender gives a notice under Section 3.5 or requests compensation under Section 3.7, or if Borrowers are required to pay any Indemnified Taxes or additional amounts with respect to a Lender under Section 5.9, then such Lender shall use reasonable efforts to designate a different Lending Office or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the judgment of such Lender, such designation or assignment (a) would eliminate the need for such notice or reduce amounts payable or to be withheld in the future, as applicable; and (b) would not subject the Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to it or unlawful.  Borrowers shall pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

3.9.                            Funding Losses.  If for any reason (other than default by a Lender) (a) any Borrowing of, or conversion to or continuation of, a LIBOR Loan does not occur on the date specified therefor in a Notice of Borrowing or Notice of Conversion/Continuation (whether or not withdrawn), (b) any repayment or conversion of a LIBOR Loan occurs on a day other than the end of its Interest Period, (c) Borrowers fail to repay a LIBOR Loan when required hereunder, or (d) a Lender (other than a Defaulting Lender) is required to assign a LIBOR Loan prior to the end of its Interest Period pursuant to Section 13.4, then Borrowers shall pay to Agent its customary administrative charge and to each Lender all resulting losses and expenses, including loss of anticipated profits and any loss or expense arising from liquidation or redeployment of funds or from fees payable to terminate deposits of matching funds.  Lenders shall not be required to purchase Dollar deposits in any interbank or offshore Dollar market to fund any LIBOR Loan, but this Section shall apply as if each Lender had purchased such deposits.

 

3.10.                     Maximum Interest.  Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the 

 

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maximum rate of non-usurious interest permitted by Applicable Law (“maximum rate”).  If Agent or any Lender shall receive interest in an amount that exceeds the maximum rate, the excess interest shall be applied to the principal of the Obligations or, if it exceeds such unpaid principal, refunded to Borrowers.  In determining whether the interest contracted for, charged or received by Agent or a Lender exceeds the maximum rate, such Person may, to the extent permitted by Applicable Law, (a) characterize any payment that is not principal as an expense, fee or premium rather than interest; (b) exclude voluntary prepayments and the effects thereof; and (c) amortize, prorate, allocate and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

 

SECTION 4.                                           LOAN ADMINISTRATION

 

4.1.                            Manner of Borrowing and Funding of Revolver Loans.

 

4.1.1.                  Notice of Borrowing.

 

(a)                                 Whenever Borrowers desire funding of a Borrowing of Revolver Loans Borrower Agent shall give Agent a Notice of Borrowing.  Such notice must be received by Agent no later than 11:00 a.m. (i) on the Business Day of the requested funding date, in the case of Base Rate Loans, and (ii) at least three Business Days prior to the requested funding date, in the case of LIBOR Loans.  Notices received after 11:00 a.m. shall be deemed received on the next Business Day.  Each Notice of Borrowing shall be irrevocable and shall specify (A) the amount of the Borrowing, (B) the requested funding date (which must be a Business Day), (C) whether the Borrowing is to be made as Base Rate Loans or LIBOR Loans, and (D) in the case of LIBOR Loans, the duration of the applicable Interest Period (which shall be deemed to be 30 days if not specified).

 

(b)                                 Unless payment is otherwise timely made by Borrowers, the becoming due of any Obligations (whether principal, interest, fees or other charges, including Extraordinary Expenses, LC Obligations, Cash Collateral and Secured Bank Product Obligations) shall be deemed to be a request for Base Rate Revolver Loans; on the due date, in the amount of such Obligations.  The proceeds of such Revolver Loans shall be disbursed as direct payment of the relevant Obligation.  In addition, Agent may, at its option, charge such Obligations against any operating, investment or other account of a Borrower maintained with Agent or any of its Affiliates.

 

(c)                                  If Borrowers maintain any disbursement account with Agent or any Affiliate of Agent, then presentation for payment of any Payment Item when there are insufficient funds to cover it shall be deemed to be a request for a Base Rate Revolver Loan in the date of such presentation, in the amount of the Payment Item.  The proceeds of such Revolver Loan may be disbursed directly to the disbursement account.

 

4.1.2.                  Fundings by Lenders.  Each Lender shall timely honor its Commitments by funding its Applicable Percentage of each Borrowing that is properly requested hereunder.  Except for Borrowings to be made as Swingline Loans, Agent shall endeavor to notify Lenders of each Notice of Borrowing (or deemed request for a Borrowing) by 12:00 noon on the proposed funding date for Base Rate Loans or by 3:00 p.m. at least two Business Days before any proposed funding of LIBOR Loans.  Each Lender shall fund to Agent such Lender’s Applicable Percentage of the Borrowing to the account specified by Agent in immediately available funds not later than 2:00 p.m. on the requested funding date, unless Agent’s notice is received after the times provided above, in which case Lender shall fund its Applicable Percentage by 11:00 a.m. on the next Business Day.  Subject to its receipt of such amounts from Lenders, Agent shall disburse the proceeds of each Borrowing as directed by Borrower Agent.  Unless Agent shall have received (in sufficient time to act) written notice from a Lender that it does not intend to fund its Applicable Percentage of a Borrowing, Agent may assume that such Lender has deposited or promptly will deposit its share with Agent, and Agent may disburse a corresponding amount to Borrowers.  If a Lender’s share of any Borrowing or of any settlement pursuant to Section 4.1.3(b) is 

 

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not received by Agent, then Borrowers agree to repay to Agent on demand the amount of such share, together with interest thereon from the date disbursed until repaid, at the rate applicable to the Borrowing.  A Lender or Issuing Bank may fulfill its obligations under Loan Documents through one or more Lending Offices, and this shall not affect any obligation of Obligors under the Loan Documents or with respect to any Obligations.

 

4.1.3.                  Swingline Loans; Settlement.

 

(a)                                 Agent may, but shall not be obligated to, advance Swingline Loans to Borrowers, up to an aggregate outstanding amount of $6,000,000, unless the funding is specifically required to be made by all Lenders hereunder.  Each Swingline Loan shall constitute a Revolver Loan for all purposes, except that payments thereon shall be made to Agent for its own account.  The obligation of Borrowers to repay Swingline Loans shall be evidenced by the records of Agent and need not be evidenced by any promissory note.

 

(b)                                 Settlement of Swingline Loans and other Revolver Loans among Lenders and Agent shall take place on a date determined from time to time by Agent (but at least weekly),  in accordance with the Settlement Report delivered by Agent to Lenders.  Between settlement dates, Agent may in its discretion apply payments on Revolver Loans to Swingline Loans, regardless of any designation by Borrower or any provision herein to the contrary.  Each Lender’s obligation to make settlements with Agent is absolute and unconditional, without offset, counterclaim or other defense, and whether or not the Revolver Commitments have terminated, a Revolver Overadvance exists or the conditions in Section 6 are satisfied.  If, due to an Insolvency Proceeding with respect to a Borrower or otherwise, any Swingline Loan may not be settled among Lenders hereunder, then each Lender shall be deemed to have purchased from Agent a participation in such Loan (based upon such Lender’s Applicable Percentage thereof) and shall transfer the amount of such participation to Agent, in immediately available funds, within one Business Day after Agent’s request therefor.

 

4.1.4.                  Notices.  Borrowers may request, convert or continue Loans, select interest rates and transfer funds based on telephonic or e-mailed instructions to Agent.  Borrowers shall confirm each such request by prompt delivery to Agent of a Notice of Borrowing or Notice of Conversion/Continuation, if applicable, but if it differs materially from the action taken by Agent or Lenders, the records of Agent and Lenders shall govern.  Neither Agent nor any Lender shall have any liability for any loss suffered by a Borrower as a result of Agent or any Lender acting upon its understanding of telephonic or e-mailed instructions from a person believed in good faith by Agent or any Lender to be a person authorized to give such instructions on a Borrower’s behalf.

 

4.2.                            Defaulting Lender.

 

4.2.1.                  Reallocation of Applicable Percentage; Amendments.  For purposes of determining Lenders’ obligations to fund or participate in Loans or Letters of Credit, Agent may exclude the Revolver Commitments and Loans of any Defaulting Lender(s) from the calculation of Applicable Percentages.  A Defaulting Lender shall have no right to vote on any amendment, waiver or other modification of a Loan Document, except as provided in Section 14.1.1(c).

 

4.2.2.                  Payments; Fees.   Agent may, in its discretion, receive and retain any amounts payable to a Defaulting Lender under the Loan Documents, and a Defaulting Lender shall be deemed to have assigned to Agent such amounts until all Obligations owing to Agent, non-Defaulting Lenders and other Secured Parties have been paid in full.  Agent may apply such amounts to the Defaulting Lender’s defaulted obligations, use the funds to Cash Collateralize such Lender’s Fronting Exposure, or readvance the amounts to Borrowers hereunder.  A Lender shall not be entitled to receive any fees accruing hereunder during the period in which it is a Defaulting Lender, and the unfunded portion of its Revolver Commitment shall be disregarded for purposes of calculating the unused line fee under Section 3.2.1.  If 

 

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any LC Obligations owing to a Defaulted Lender are reallocated to other Lenders, fees attributable to such LC Obligations under Section 3.2.2 shall be paid to such Lenders.  Agent shall be paid all fees attributable to LC Obligations that are not reallocated.

 

4.2.3.                  Cure.   Borrowers, Agent and Issuing Bank may agree in writing that a Lender is no longer a Defaulting Lender.  At such time, Applicable Percentages shall be reallocated without exclusion of such Lender’s Commitments and Loans, and all outstanding Revolver Loans, LC Obligations and other exposures under the Revolver Commitments shall be reallocated among Lenders and settled by Agent (with appropriate payments by the reinstated Lender) in accordance with the readjusted Applicable Percentages.  Unless expressly agreed by Borrowers, Agent and Issuing Bank, no reinstatement of a Defaulting Lender shall constitute a waiver or release of claims against such Lender.  The failure of any Lender to fund a Loan, to make a payment in respect of LC Obligations or otherwise to perform its obligations hereunder shall not relieve any other Lender of its obligations, and no Lender shall be responsible for default by another Lender.

 

4.3.                            Number and Amount of LIBOR Loans; Determination of Rate.  Each Borrowing of LIBOR Loans when made shall be in a minimum amount of $1,000,000, plus any increment of $500,000 in excess thereof.  No more than six (6) Borrowings of LIBOR Loans may be outstanding at any time, and all LIBOR Loans having the same length and beginning date of their Interest Periods shall be aggregated together and considered one Borrowing for this purpose.  Upon determining LIBOR for any Interest Period requested by Borrowers, Agent shall promptly notify Borrowers thereof by telephone or electronically and, if requested by Borrowers, shall confirm any telephonic notice in writing.

 

4.4.                            Borrower Agent.  Each Borrower and Obligor hereby designates SI USA (“Borrower Agent”) as its representative and agent for all purposes under the Loan Documents, including requests for Loans and Letters of Credit, designation of interest rates, delivery or receipt of communications, preparation and delivery of Revolver Borrowing Base Certificates, Term Loan Borrowing Base Certificates and financial reports, receipt and payment of Obligations, requests for waivers, amendments or other accommodations, actions under the Loan Documents (including in respect of compliance with covenants), and all other dealings with Agent, Issuing Bank or any Lender.  Borrower Agent hereby accepts such appointment.  Agent and Lenders shall be entitled to rely upon, and shall be fully protected in relying upon, any notice or communication (including any notice of borrowing) delivered by Borrower Agent on behalf of any Borrower or another Obligor.  Agent and Lenders may give any notice or communication with a Borrower or another Obligor hereunder to Borrower Agent on behalf of such Borrower or another Obligor.  Each of Agent, Issuing Bank and Lenders shall have the right, in its discretion, to deal exclusively with Borrower Agent for any or all purposes under the Loan Documents.  Each Borrower and Obligor agrees that any notice, election, communication, representation, agreement or undertaking made on its behalf by Borrower Agent shall be binding upon and enforceable against it.

 

4.5.                            One Obligation.  The Loans, LC Obligations and other Obligations constitute one general obligation of Borrowers and are secured by Agent’s Lien on all Collateral; provided, however, that Agent and each Lender shall be deemed to be a creditor of, and the holder of a separate claim against, each Borrower to the extent of any Obligations jointly or severally owed by such Borrower.

 

4.6.                            Effect of Termination.  On the effective date of the termination of all Commitments, the Obligations shall be immediately due and payable, and each Secured Bank Product Provider may terminate its and its Affiliates’ Bank Products (including, only with the consent of Agent, any Cash Management Services).  Until Full Payment of the Obligations, all undertakings of Borrowers contained in the Loan Documents shall continue, and Agent shall retain its Liens in the Collateral and all of its rights and remedies under the Loan Documents.  Agent shall not be required to terminate its Liens unless it receives Cash Collateral or a written agreement, in each case satisfactory to it, protecting Agent and Lenders from the dishonor or return of any Payment Items previously applied to the Obligations.

 

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Sections 2.3, 3.4, 3.6, 3.7, 3.9, 5.5, 5.9, 5.10, 12, 14.2, this Section, and each indemnity or waiver given by an Obligor or Lender in any Loan Document, shall survive Full Payment of the Obligations.

 

SECTION 5.                                           PAYMENTS

 

5.1.                            General Payment Provisions.  All payments of Obligations shall be made in Dollars, without offset, counterclaim or defense of any kind, free of (and without deduction for) any Taxes, except as required by Applicable Law, and in immediately available funds, not later than 12:00 noon on the due date.  Any payment after such time shall be deemed made on the next Business Day.  Any payment of a LIBOR Loan prior to the end of its Interest Period shall be accompanied by all amounts due under Section 3.9.  Borrowers agree that Agent shall have the continuing, exclusive right to apply and reapply payments and proceeds of Collateral against the Obligations, in such manner as Agent deems advisable, but whenever possible, any prepayment of Loans shall be applied first to Base Rate Loans and then to LIBOR Loans.

 

5.2.                            Repayment of Revolver Loans .  Revolver Loans shall be due and payable in full on the Revolver Termination Date, unless payment is sooner required hereunder.  Revolver Loans may be prepaid from time to time, without penalty or premium.  If any Asset Disposition includes the disposition of Accounts or Inventory, then the Net Proceeds of such Asset Disposition in an amount equal to the greater of (a) the net book value of such Accounts and Inventory, or (b) the reduction in the Revolver Borrowing Base upon giving effect to such disposition, shall be applied to the Revolver Loans.  Notwithstanding anything herein to the contrary, if a Revolver Overadvance exists, Borrowers shall, on the sooner of Agent’s demand or the first Business Day after any Borrower has knowledge thereof, repay the outstanding Revolver Loans in an amount sufficient to cause Availability to no longer be less than zero.

 

5.3.                            [Reserved.]

 

5.4.                            Payment of Other Obligations.  Obligations other than Loans, including LC Obligations and Extraordinary Expenses, shall be paid by Borrowers as provided in the Loan Documents or, if no payment date is specified, on demand.

 

5.5.                            Marshaling; Payments Set Aside.  None of Agent or Lenders shall be under any obligation to marshal any assets in favor of any Obligor or against any Obligations.  If any payment by or on behalf of Borrowers is made to Agent, Issuing Bank or any Lender, or Agent, Issuing Bank or any Lender exercises a right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by Agent, Issuing Bank or such Lender in its discretion) to be repaid to a trustee, receiver or any other Person, then to the extent of such recovery, the Obligation originally intended to be satisfied, and all Liens, rights and remedies relating thereto, shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred.

 

5.6.                            Application and Allocation of Payments.

 

5.6.1.                  Application.  Payments made by Borrowers hereunder shall be applied (a) first, as specifically required hereby; (b) second, to Obligations then due and owing; (b) third, to other Obligations specified by Borrowers; and (c) fourth, as determined by Agent in its discretion.

 

5.6.2.                  Post-Default Allocation.

 

(a)                                 Notwithstanding anything in any Loan Document to the contrary, during an Event of Default, monies to be applied to the Obligations, whether arising from payments by Obligors, realization on the Collateral, setoff or otherwise, shall be allocated as follows:

 

(i)                                     first, to all Extraordinary Expenses owing to Agent, Issuing Bank and Lenders, and to all other costs and expenses owing to Agent;

 

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(ii)                                  second, to all amounts owing to Agent on Swingline Loans;

 

(iii)                               third, to Issuing Bank in respect of amounts owing by Borrowers for (x) any unreimbursed drawings made under Letters of Credit and (y) fees, costs, expenses and indemnities owing to Issuing Bank in respect of Letters of Credit;

 

(iv)                              fourth, to all Obligations constituting fees owing or related to the Revolver Loans;

 

(v)                                 fifth, to all Obligations constituting interest in respect of the Revolver Loans;

 

(vi)                              sixth, to Cash Collateralization of LC Obligations;

 

(vii)                           seventh, to all Revolver Loans, and to Secured Bank Product Obligations arising under Hedge Agreements (including Cash Collateralization thereof) up to the amount of Reserves existing therefor;

 

(viii)                        eighth, to Secured Bank Product Obligations exceeding the amount of Reserves existing therefor; and

 

(ix)                              last, to all remaining Obligations.

 

(b)                                 Subject to the priorities set forth in clause (a) above, amounts shall be applied to payment of each category of Obligations only after Full Payment of amounts payable from time to time under all preceding categories.  If amounts are insufficient to satisfy a category, they shall be paid ratably among outstanding Obligations in the category.  Monies and proceeds obtained from an Obligor shall not be applied to its Excluded Swap Obligations, but appropriate adjustments shall be made with respect to amounts obtained from other Obligors to preserve the allocations in any applicable category.  Agent shall have no obligation to calculate the amount of any Secured Bank Product Obligation and may request a reasonably detailed calculation thereof from a Secured Bank Product Provider.  If the provider fails to deliver the calculation within five days following request, Agent may assume the amount is zero.  The allocations set forth in this Section 5.6.2 are solely to determine the rights and priorities among Secured Parties, and may be changed by agreement of the affected Secured Parties, without the consent of any Obligor.  This Section is not for the benefit of or enforceable by any Obligor, and each Borrower irrevocably waives the right to direct the application of any payments or Collateral proceeds subject to this Section 5.6.2.

 

(c)                                  Notwithstanding the order of application of proceeds of Collateral set forth in this Section 5.6.2, the Collateral shall secure all Obligations.

 

5.6.3.                  Erroneous Application.  Agent shall not be liable for any application of amounts made by it in good faith and, if any such application is subsequently determined to have been made in error, the sole recourse of any Lender or other Person to which such amount should have been made shall be to recover the amount from the Person that actually received it (and, if such amount was received by any Lender, such Lender hereby agrees to return it).

 

5.7.                            Dominion Accounts.  During any Cash Dominion Period, the ledger balances in the Dominion Accounts as of the end of each Business Day shall be applied to the Obligations at the beginning of the next Business Day; provided that, notwithstanding anything to contrary set forth herein, at all times (regardless of whether a Cash Dominion Period is in effect), the ledger balances in all Dominion Accounts maintained by the UK Guarantor shall be applied to the Obligations at the beginning of the next Business Day.  If, as a result of such application, a credit balance exists, the balance shall not accrue interest in favor of Borrowers and shall be made available to Borrowers as long as no Default or

 

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Event of Default exists.  If, at any time a Cash Dominion Period shall not be in effect, the aggregate balance of all cash held in all Deposit Accounts of Obligors (including all Dominion Accounts and all Excluded Deposit Accounts (other than Deposit Accounts described in clause (a) of the definition of “Excluded Deposit Accounts”), shall exceed $2,000,000 for more than five Business Days, the Obligors shall remit to Agent to be applied to the Obligations an amount sufficient to cause such aggregate balance in all Deposit Accounts to be less than $2,000,000.  For the avoidance of doubt, the Agent hereby agrees that a notice regarding the commencement of a Cash Dominion Period shall not be delivered to the applicable depository bank under a Deposit Account Control Agreement until such time as a Cash Dominion Period has occurred; provided that Deposit Accounts of the UK Guarantor shall be subject to the dominion and control of Agent at all times as set forth in Section 8.2.4.

 

5.8.                            Account Stated.  The Agent shall maintain in accordance with its usual and customary practices account(s) evidencing the Debt of Borrowers hereunder.  Any failure of Agent to record anything in a loan account, or any error in doing so, shall not limit or otherwise affect the obligation of Borrowers to pay any amount owing hereunder.  Entries made in a loan account shall constitute presumptive evidence of the information contained therein.  If any information contained in a loan account is provided to or inspected by any Person, the information shall be conclusive and binding on such Person for all purposes absent manifest error, except to the extent such Person notifies Agent in writing within 30 days after receipt or inspection that specific information is subject to dispute.

 

5.9.                            Taxes.

 

5.9.1.                  Payments Free of Taxes; Obligation to Withhold; Tax Payment.

 

(a)                                 All payments of Obligations by Obligors shall be made without deduction or withholding for any Taxes, except as required by Applicable Law.  If Applicable Law (as determined by Agent in its discretion) requires the deduction or withholding of any Tax from any such payment by Agent or an Obligor, then Agent or such Obligor shall be entitled to make such deduction or withholding.  The Agent or such Obligor, as applicable, may take into account any applicable information and documentation provided pursuant to Section 5.10.

 

(b)                                 If Agent or any Obligor is required by the Code or the Income Tax Act (Canada) to withhold or deduct Taxes, including backup withholding and withholding taxes, from any payment, then (i) Agent shall pay the full amount that it determines is to be withheld or deducted to the relevant Governmental Authority pursuant to the Code or the Income Tax Act (Canada), and (ii) to the extent the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Obligor shall be increased as necessary so that the Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

 

(c)                                  If Agent or any Obligor is required by any Applicable Law other than the Code or the Income Tax Act (Canada) to withhold or deduct Taxes from any payment, then (i) Agent or such Obligor, to the extent required by Applicable Law, shall timely pay the full amount to be withheld or deducted to the relevant Governmental Authority, and (ii) to the extent the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Obligor shall be increased as necessary so that the Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

 

5.9.2.                  Payment of Other Taxes.  Without limiting the foregoing, Borrowers shall timely pay to the relevant Governmental Authority in accordance with Applicable Law, or at Agent’s option, timely reimburse Agent for payment of, any Other Taxes.

 

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5.9.3.                  Tax Indemnification.

 

(a)                                 Each Borrower shall indemnify and hold harmless, on a joint and several basis, each Recipient against any Indemnified Taxes (including those imposed or asserted on or attributable to amounts payable under this Section) payable or paid by a Recipient or required to be withheld or deducted from a payment to a Recipient, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  Each Borrower shall indemnify and hold harmless Agent against any amount that a Lender or Issuing Bank fails for any reason to pay indefeasibly to Agent as required pursuant to this Section.  Each Borrower shall make payment within 10 days after demand for any amount or liability payable under this Section.  A certificate as to the amount of such payment or liability delivered to Borrowers by a Lender or Issuing Bank (with a copy to Agent), or by Agent on its own behalf or on behalf of any Recipient, shall be conclusive absent manifest error.

 

(b)                                 Each Lender and Issuing Bank shall indemnify and hold harmless, on a several basis, (i) Agent against any Indemnified Taxes attributable to such Lender or Issuing Bank (but only to the extent Borrowers have not already paid or reimbursed Agent therefor and without limiting Borrowers’ obligation to do so), (ii) Agent and Obligors, as applicable, against any Taxes attributable to such Lender’s failure to maintain a Participant register as required hereunder, and (iii) Agent and Obligors, as applicable, against any Excluded Taxes attributable to such Lender or Issuing Bank, in each case, that are payable or paid by Agent or an Obligor in connection with any Obligations, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  Each Lender and Issuing Bank shall make payment within 10 days after demand for any amount or liability payable under this Section.  A certificate as to the amount of such payment or liability delivered to any Lender or Issuing Bank by Agent shall be conclusive absent manifest error.

 

5.9.4.                  Evidence of Payments.  If Agent or an Obligor pays any Taxes pursuant to this Section, then upon request, Agent shall deliver to Borrower Agent or Borrower Agent shall deliver to Agent, respectively, a copy of a receipt issued by the appropriate Governmental Authority evidencing the payment, a copy of any return required by Applicable Law to report the payment, or other evidence of payment reasonably satisfactory to Agent or Borrower Agent, as applicable.

 

5.9.5.                  Treatment of Certain Refunds.  Unless required by Applicable Law, at no time shall Agent have any obligation to file for or otherwise pursue on behalf of a Lender or Issuing Bank, nor have any obligation to pay to any Lender or Issuing Bank, any refund of Taxes withheld or deducted from funds paid for the account of a Lender or Issuing Bank.  If a Recipient determines in its discretion that it has received a refund of any Taxes as to which it has been indemnified by Borrowers or with respect to which a Borrower has paid additional amounts pursuant to this Section, it shall pay Borrowers an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by Borrowers with respect to the Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses (including Taxes) incurred by such Recipient, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that Borrowers agree, upon request by the Recipient, to repay the amount paid over to Borrowers (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Recipient if the Recipient is required to repay such refund to the Governmental Authority.  Notwithstanding anything herein to the contrary, no Recipient shall be required to pay any amount to Borrowers if such payment would place the Recipient in a less favorable net after-Tax position than it would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.  In no event shall Agent or any Recipient be required to make its tax returns (or any other information relating to its taxes that it deems confidential) available to any Obligor or other Person.

 

5.9.6.                  Survival.  Each party’s obligations under Sections 5.9 and 5.10 shall survive the resignation or replacement of Agent or any assignment of rights by or replacement of a Lender or Issuing 

 

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Bank, the termination of the Commitments, and the repayment, satisfaction, discharge or Full Payment of any Obligations.

 

5.10.                     Lender Tax Information.

 

5.10.1.           Status of Lenders.  Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments of Obligations shall deliver to Borrowers and Agent properly completed and executed documentation reasonably requested by Borrowers or Agent as will permit such payments to be made without or at a reduced rate of withholding.  In addition, any Lender, if reasonably requested by Borrowers or Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by Borrowers or Agent to enable them to determine whether such Lender is subject to backup withholding or information reporting requirements.  Notwithstanding the foregoing, such documentation (other than documentation described in Sections 5.10.2(a), (b) and (d)) shall not be required if a Lender reasonably believes delivery of the documentation would subject it to any material unreimbursed cost or expense or would materially prejudice its legal or commercial position.

 

5.10.2.           Documentation.  Without limiting the foregoing, if any Borrower is a U.S. Person,

 

(a)                                 Any Lender that is a U.S. Person shall deliver to Borrowers and Agent on or prior to the date on which such Lender becomes a Lender hereunder (and from time to time thereafter upon reasonable request of Borrowers or Agent), executed originals of IRS Form W-0, certifying that such Lender is exempt from U.S. federal backup withholding Tax;

 

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

 

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

 

(ii)                                  executed originals of IRS Form W-8ECI;

 

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

 

(iv)                              to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate in form satisfactory to Agent, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are 

 

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claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate on behalf of each such direct and indirect partner;

 

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

 

(d)                                 if payment of an Obligation to a Lender would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code), such Lender shall deliver to Borrowers and Agent at the time(s) prescribed by law and otherwise as reasonably requested by Borrowers or Agent such documentation prescribed by Applicable Law (including Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrowers or Agent as may be necessary for them to comply with their obligations under FATCA and to determine that such Lender has complied with its obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this clause (d), “FATCA” shall include any amendments made to FATCA after the date hereof.

 

5.10.3.           Redelivery of Documentation.  If any form or certification previously delivered by a Lender pursuant to this Section expires or becomes obsolete or inaccurate in any respect, such Lender shall promptly update the form or certification or notify Borrowers and Agent in writing of its inability to do so.

 

5.11.                     Nature and Extent of Each Borrower’s Liability.

 

5.11.1.           Joint and Several Liability.  Each Borrower agrees that it is jointly and severally liable for, and absolutely and unconditionally guarantees to Agent and Lenders the prompt payment and performance of, all Obligations, except its Excluded Swap Obligations.  Each Borrower agrees that its guaranty obligations hereunder constitute a continuing guaranty of payment and not of collection, that such obligations shall not be discharged until Full Payment of the Obligations, and that such obligations are absolute and unconditional, irrespective of (a) the genuineness, validity, regularity, enforceability, subordination or any future modification of, or change in, any Obligations or Loan Document, or any other document, instrument or agreement to which any Obligor is or may become a party or be bound; (b) the absence of any action to enforce this Agreement (including this Section) or any other Loan Document, or any waiver, consent or indulgence of any kind by Agent or any Lender with respect thereto; (c) the existence, value or condition of, or failure to perfect a Lien or to preserve rights against, any security or guaranty for the Obligations or any action, or the absence of any action, by Agent or any Lender in respect thereof (including the release of any security or guaranty); (d) the insolvency of any Obligor; (e) any election by Agent or any Lender in an Insolvency Proceeding for the application of Section 1111(b)(2) of the Bankruptcy Code; (f) any borrowing or grant of a Lien by any other Obligor, as debtor-in-possession under Section 364 of the Bankruptcy Code or any other Insolvency Law or otherwise; (g) the disallowance of any claims of Agent or any Lender against any Obligor for the repayment of any Obligations under Section 502 of the Bankruptcy Code or any other Insolvency Law or otherwise; or (h) any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, except Full Payment of all Obligations.

 

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5.11.2.           Waivers.

 

(a)                                 Each Obligor expressly waives all rights that it may have now or in the future under any statute, at common law, in equity or otherwise, to compel Agent or Lenders to marshal assets or to proceed against any Obligor, other Person or security for the payment or performance of any Obligations before, or as a condition to, proceeding against such Obligor.  Each Obligor waives all defenses available to a surety, guarantor or accommodation co-obligor other than Full Payment of all Obligations and waives, to the maximum extent permitted by law, any right to revoke any guaranty of any Obligations as long as it is an Obligor.  It is agreed among each Obligor, Agent and Lenders that the provisions of this Section 5.11 are of the essence of the transaction contemplated by the Loan Documents and that, but for such provisions, Agent and Lenders would decline to make Loans and issue Letters of Credit.  Each Obligor acknowledges that its guaranty pursuant to this Section is necessary to the conduct and promotion of its business, and can be expected to benefit such business.

 

(b)                                 Agent and Lenders may, in their discretion, pursue such rights and remedies as they deem appropriate, including realization upon Collateral or any Real Estate by judicial foreclosure or nonjudicial sale or enforcement, without affecting any rights and remedies under this Section 5.11.  If, in taking any action in connection with the exercise of any rights or remedies, Agent or any Lender shall forfeit any other rights or remedies, including the right to enter a deficiency judgment against any Borrower or other Person, whether because of any Applicable Laws pertaining to “election of remedies” or otherwise, each Borrower consents to such action and waives any claim based upon it, even if the action may result in loss of any rights of subrogation that any Borrower might otherwise have had.  Any election of remedies that results in denial or impairment of the right of Agent or any Lender to seek a deficiency judgment against any Borrower shall not impair any other Borrower’s obligation to pay the full amount of the Obligations.  Each Borrower waives all rights and defenses arising out of an election of remedies, such as nonjudicial foreclosure with respect to any security for the Obligations, even though that election of remedies destroys such Borrower’s rights of subrogation against any other Person.  Agent may bid all or a portion of the Obligations at any foreclosure, trustee or other sale, including any private sale, and the amount of such bid need not be paid by Agent but shall be credited against the Obligations.  The amount of the successful bid at any such sale, whether Agent or any other Person is the successful bidder, shall be conclusively deemed to be the fair market value of the Collateral, and the difference between such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the Obligations guaranteed under this Section 5.11, notwithstanding that any present or future law or court decision may have the effect of reducing the amount of any deficiency claim to which Agent or any Lender might otherwise be entitled but for such bidding at any such sale.

 

5.11.3.           Extent of Liability; Contribution.

 

(a)                                 Notwithstanding anything herein to the contrary, each Borrower’s liability under this Section 5.11 shall be limited to the greater of (i) all amounts for which such Borrower is primarily liable, as described below, and (ii) such Borrower’s Allocable Amount.

 

(b)                                 If any Borrower makes a payment under this Section 5.11 of any Obligations (other than amounts for which such Borrower is primarily liable) (a “Guarantor Payment”) that, taking into account all other Guarantor Payments previously or concurrently made by any other Borrower, exceeds the amount that such Borrower would otherwise have paid if each Borrower had paid the aggregate Obligations satisfied by such Guarantor Payments in the same proportion that such Borrower’s Allocable Amount bore to the total Allocable Amounts of all Borrowers, then such Borrower shall be entitled to receive contribution and indemnification payments from, and to be reimbursed by, each other Borrower for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.  The “Allocable Amount” for any Borrower shall be the maximum amount that could then be recovered from such Borrower under this Section 5.11 without rendering such payment voidable under Section 548 of the Bankruptcy Code or under any applicable state fraudulent transfer or conveyance act, or similar statute or common law.

 

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(c)                                  Nothing contained in this Section 5.11 shall limit the liability of any Borrower to pay Loans made directly or indirectly to that Borrower (including Loans advanced to any other Borrower and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower), LC Obligations relating to Letters of Credit issued to support its business, Secured Bank Product Obligations incurred to supports its business, and all accrued interest, fees, expenses and other related Obligations with respect thereto, for which such Borrower shall be primarily liable for all purposes hereunder.  Agent and Lenders shall have the right, at any time in their discretion, to condition Loans and Letters of Credit upon a separate calculation of borrowing availability for each Borrower and to restrict the disbursement and use of such Loans and Letters of Credit to such Borrower.

 

(d)                                 Each Obligor that is a Qualified ECP when its guaranty of or grant of Lien as security for a Swap Obligation becomes effective hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide funds or other support to each Specified Obligor with respect to such Swap Obligation as may be needed by such Specified Obligor from time to time to honor all of its obligations under the Loan Documents in respect of such Swap Obligation (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP’s obligations and undertakings under this Section 5.11 voidable under any applicable fraudulent transfer or conveyance act).  The obligations and undertakings of each Qualified ECP under this Section shall remain in full force and effect until Full Payment of all Obligations.  Each Obligor intends this Section to constitute, and this Section shall be deemed to constitute, a guarantee of the obligations of, and a “keepwell, support or other agreement” for the benefit of, each Obligor for all purposes of the Commodity Exchange Act.

 

5.11.4.           Joint Enterprise.  Each Borrower has requested that Agent and Lenders make this credit facility available to Borrowers on a combined basis, in order to finance Borrowers’ business most efficiently and economically.  Borrowers’ business is a mutual and collective enterprise, and the successful operation of each Borrower is dependent upon the successful performance of the integrated group.  Borrowers believe that consolidation of their credit facility will enhance the borrowing power of each Borrower and ease administration of the facility, all to their mutual advantage.  Borrowers acknowledge that Agent’s and Lenders’ willingness to extend credit and to administer the Collateral on a combined basis hereunder is done solely as an accommodation to Borrowers and at Borrowers’ request.

 

5.11.5.           Subordination.  Each Obligor hereby subordinates any claims, including any rights at law or in equity to payment, subrogation, reimbursement, exoneration, contribution, indemnification or set off, that it may have at any time against any other Obligor, howsoever arising, to the Full Payment of all Obligations.

 

SECTION 6.                                           CONDITIONS PRECEDENT

 

6.1.                            Conditions Precedent to Initial Loans.  In addition to the conditions set forth in Section 6.2, Lenders shall not be required to fund any requested Loan, issue any Letter of Credit, or otherwise extend credit to Borrowers hereunder, until the date (“Restatement Date”) that each of the following conditions has been satisfied:

 

(a)                                 Each Loan Document shall have been duly executed and delivered to Agent by each of the signatories thereto, and each Obligor shall be in compliance with all terms thereof.

 

(b)                                 Agent shall have received acknowledgments of all filings or recordations necessary to perfect its Liens in the Collateral, as well as UCC, PPSA and Lien searches and other evidence satisfactory to Agent that such Liens are the only Liens upon the Collateral, except Permitted Liens.

 

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(c)                                  Agent shall have received certificates, in form and substance satisfactory to it, from a knowledgeable Senior Officer of each Borrower certifying that, after giving effect to the initial Loans and transactions hereunder, (i) the Company and its Subsidiaries, taken as a whole, are Solvent; (ii) no Default or Event of Default exists; (iii) the representations and warranties set forth in Section 9 are true and correct; and (iv) such Borrower has complied with all agreements and conditions to be satisfied by it under the Loan Documents.

 

(d)                                 Agent shall have received a certificate of a duly authorized officer of each Obligor, certifying (i) that attached copies of such Obligor’s Organic Documents are true and complete, and in full force and effect, without amendment except as shown; (ii) that an attached copy of resolutions authorizing execution and delivery of the Loan Documents is true and complete, and that such resolutions are in full force and effect, were duly adopted, have not been amended, modified or revoked, and constitute all resolutions adopted with respect to this credit facility; (iii) to the title, name and signature of each Person authorized to sign the Loan Documents.  Agent may conclusively rely on this certificate until it is otherwise notified by the applicable Obligor in writing;  (iv) with respect to any UK Guarantor, (A) that the Company and each of its Subsidiaries has complied within the relevant timeframe with any notice it has received pursuant to Part 21A of the Companies Act 2006 from that UK Guarantor; and no “warning notice” or “restrictions notice” (in each case as defined in Schedule 1B of the Companies Act 2006) has been issued in respect of shares in that UK Guarantor and (B) that the attached copy of its “PSC register” (within the meaning of section 790C(10) of the Companies Act 2006) is true and complete, and in full force and effect, without amendment except as shown, and (v) with respect to any UK Guarantor, the solvency of such UK Guarantor and the ability of such UK Guarantor to pay its debts as they fall due.

 

(e)                                  Agent shall have received a written opinion of (i) Greenberg Traurig LLP, US counsel to the Obligors, (ii) Stewart McKelvey, special New Brunswick counsel to the Canadian Guarantor, (iii) Stikeman Elliott LLP, special Ontario counsel to the Canadian Guarantor, and (iv) Norton Rose Fulbright LLP, special UK counsel to Agent, as well as any local counsel to Borrowers or Agent, in form and substance satisfactory to Agent.

 

(f)                                   Agent shall have received good standing certificates (or their equivalents) for each Obligor, issued by the Secretary of State or other appropriate official of such Obligor’s jurisdiction of organization and each jurisdiction where such Obligor’s conduct of business or ownership of Property necessitates qualification.

 

(g)                                  (i) Agent shall have received copies of all documents, instruments and agreements related to the Term Debt and shall be reasonably satisfied with all of the terms and conditions of the Term Debt, (ii) Agent shall have received evidence reasonably satisfactory to Agent that Borrower shall have received (or on the Restatement Date shall receive) cash proceeds of the Term Debt in an aggregate principal amount not less than $15,000,000, and (iii) Agent and the holders of the Term Debt shall have entered into the Intercreditor Agreement.

 

(h)                                 Agent shall have received copies of policies or certificates of insurance for the insurance policies carried by Obligors, together with loss payable endorsements naming Agent as loss payee and as additional insured (in the case of Canadian insurance policies, first mortgagee (with respect to the ABL Priority Collateral), and in the case of UK Insurance policies, first loss payee), all in compliance with the Loan Documents.

 

(i)                                     Agent shall have completed its business, financial and legal due diligence of Obligors.  No material adverse change, in the good faith opinion of Agent, in the business, assets, Properties, liabilities, operations, condition (financial or otherwise) of the Borrowers and the Guarantors, taken as a whole, financial condition of any Obligor or in the quality, quantity or value of any Collateral has occurred since March 31, 2018.

 

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(j)                                    Borrowers shall have paid all fees and expenses to be paid to Agent and Lenders on the Restatement Date.

 

(k)                                 Agent shall have received a Revolver Borrowing Base Certificate and a Term Loan Borrowing Base Certificate, each prepared as of June 23, 2018.  Upon giving effect to the initial funding of Loans and issuance of Letters of Credit, and the payment by Borrowers of all fees and expenses incurred in connection herewith as well as any payables stretched beyond their customary payment practices, Availability shall be at least $9,500,000.

 

(l)                                     Agent shall have received reasonably satisfactory evidence that all principal, interest, and other amounts owing in respect of all indebtedness for borrowed money of Obligors (other than indebtedness listed on Schedule 10.2.1 hereto) will be repaid in full on the Restatement Date with the proceeds of the initial Loans hereunder on the Restatement Date and the proceeds of the Term Debt funded on the Restatement Date and any and all Liens securing such indebtedness will be terminated and released on the Restatement Date.

 

(m)                             With respect to each leased property or warehouse of each Obligor, Agent shall have either (i) received a Lien Waiver with respect to such leased property or warehouse or (ii) established a Rent and Charges Reserve with respect to such leased property or warehouse.

 

(n)                                 Agent shall have received (i) audited financial statements of the Company and its Subsidiaries for the fiscal year ended December 30, 2017, (ii) the internally prepared monthly divisional financial statements of the Company and its Subsidiaries for the months ended January 31, 2018, February 28, 2018, March 31, 2018 and April 30, 2018, (iii) a pro forma balance sheet of the Company and its Subsidiaries dated as of the Restatement Date after giving pro forma effect to the funding of the Term Debt, the repayment in full of existing Debt and the funding of the initial Loans on the Restatement Date and (iv) projections of the consolidated balance sheets, results of operations, cash flow and Availability for the 2018 Fiscal Year on a Fiscal Month basis and for each other Fiscal Year ending prior to the Revolver Termination Date on a Fiscal Year basis.

 

(o)                                 No action, suit, investigation, litigation or proceeding shall be threatened or pending in any court or before any arbitrator or governmental instrumentality that in Agent’s judgment could reasonably be expected to have a Material Adverse Effect.

 

(p)                                 Agent shall have received satisfactory evidence that the Obligors have received all governmental and third party consents and approvals as may be appropriate in connection with the Loans and the transactions contemplated by this Agreement.

 

(q)                                 Agent shall have received fully executed Assignment and Assumptions between each of Citizens Business Capital and KeyBank National Association (each, an “Exiting Lender”), as “Assignor” and Bank of America, N.A., as “Assignee”, providing for the sale and assignment by each of the Exiting Lenders to Bank of America, N.A. of all rights and interests of each Exiting Lender in and to the loans and commitments of such Exiting Lender outstanding under the Existing Credit Agreement, which sale and assignment shall become effective immediately prior to the effectiveness of this Agreement.

 

(r)                                    KYC Information.

 

(i)                                     Upon the reasonable request of any Lender made at least ten (10) days prior to the Restatement Date, Borrowers shall have provided to such Lender, and such Lender shall be reasonably satisfied with, the documentation and other information so requested in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the PATRIOT Act and the Canadian Anti-Money 

 

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Laundering & Anti-Terrorism Legislation, in each case at least five (5) days prior to the Restatement Date.

 

(ii)                                  At least five (5) days prior to the Restatement Date, any Borrower that qualifies as a “legal entity customer” under the Beneficial Ownership Regulation shall deliver, to each Lender that so requests, a Beneficial Ownership Certification in relation to such Borrower.

 

6.2.                            Conditions Precedent to All Credit Extensions.  Agent, Issuing Bank and Lenders shall not be required to fund any Loans, arrange for issuance of any Letters of Credit or grant any other accommodation to or for the benefit of Borrowers, unless the following conditions are satisfied:

 

(a)                                 No Default or Event of Default shall exist at the time of, or result from, such funding, issuance or grant;

 

(b)                                 The representations and warranties of each Obligor in the Loan Documents shall be true and correct in all material respects (without duplication or any materiality provisions therein) on the date of, and upon giving effect to, such funding, issuance or grant (except for representations and warranties that expressly relate to an earlier date);

 

(c)                                  All conditions precedent in any other Loan Document shall be satisfied;

 

(d)                                 No event shall have occurred or circumstance exist that has or could reasonably be expected to have a Material Adverse Effect; and

 

(e)                                  With respect to issuance of a Letter of Credit, the LC Conditions shall be satisfied.

 

Each request (or deemed request) by Borrowers for funding of a Loan, issuance of a Letter of Credit or grant of an accommodation shall constitute a representation by Borrowers that the foregoing conditions are satisfied on the date of such request and on the date of such funding, issuance or grant.

 

SECTION 7.                                           COLLATERAL

 

7.1.                            Grant of Security Interest.  To secure the prompt payment and performance of all Obligations, each Obligor (other than any UK Guarantor) hereby grants to Agent, for the benefit of Secured Parties, a continuing security interest in and Lien upon all Property of such Obligor, including all of the following Property, whether now owned or hereafter acquired, and wherever located:

 

(a)                                 all Accounts;

 

(b)                                 all Chattel Paper, including all Tangible Chattel Paper and all Electronic Chattel Paper;

 

(c)                                  all Commercial Tort Claims, including those shown on Schedule 9.1.16;

 

(d)                                 all Deposit Accounts, Securities Accounts and Commodities Accounts (and all money, cash and Cash Equivalents, checks, other negotiable instruments, funds, evidences of payment, Commodities Contracts, Security Entitlements, Securities and other assets (including Financial Assets) contained in, or credited to, such Deposit Accounts, Securities Accounts and Commodities Accounts);

 

(e)                                  all Documents (including, if applicable, electronic documents);

 

(f)                                   all General Intangibles and Intangibles, including Intellectual Property, Payment Intangibles, intercompany Debt and customer lists;

 

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(g)                                  all Goods, including Inventory, Equipment and Fixtures;

 

(h)                                 all Instruments, including Promissory Notes;

 

(i)                                     all Investment Property (including all Securities and Equity Interests);

 

(j)                                    all Letters of Credit (which, for purposes of this clause (j) only, shall have the meaning given to such term in the UCC) and Letter-of-Credit Rights;

 

(k)                                 all Supporting Obligations;

 

(l)                                     all monies, cash and Cash Equivalents, whether or not in the possession or under the control of Agent, a Lender, or a bailee or Affiliate of Agent or a Lender, including any Cash Collateral;

 

(m)                             all books and records (including databases, customer lists, files, correspondence, tapes, and other records, whether tangible or electronic, computer programs, print-outs and computer records) pertaining to the foregoing clauses (a) through (l) above; and

 

(n)                                 to the extent not covered by clauses (a) through (m) above, (i) all other Property of such Obligor, whether tangible or intangible and (ii) all Proceeds, Supporting Obligations and products of each of the foregoing and all accessions to, substitutions  and replacements for, and rents, profits and products of, each of the foregoing, any and all insurance claims, proceeds of any insurance, indemnity, warranty or guaranty payable to such Obligor from time to time with respect to any of the foregoing and any other contract rights or rights to the payment of money or tort claims.

 

In no event shall the grant of the security interest in this Agreement or in any other Loan Document attach to, or the term “Collateral” be deemed to include, (a) any of the outstanding Equity Interests in (x) an Immaterial Foreign Subsidiary or (y) a Foreign Subsidiary (i) in excess of 65% of the voting power of all classes of equity interests of such Foreign Subsidiary entitled to vote in the election of directors or other similar body of such Foreign Subsidiary or (ii) to the extent that the pledge thereof is prohibited by the laws of the jurisdiction of such foreign subsidiary’s organization; (b) any equity interest in any Foreign Subsidiary that is not a first-tier subsidiary of an Borrower; (c) any lease, license, contract, property rights or agreement to which Debtor is a party or any of such Debtor’s rights or interests thereunder, if, and for so long as and to the extent that, the grant of the security interest would constitute or result in (i) the abandonment, invalidation or unenforceability of any material right, title or interest of such Debtor therein or (ii) a breach or termination pursuant to the terms of, or a default under, any such lease, license, contract, property rights or agreement (other than to the extent that any such breach, termination or default would be rendered ineffective pursuant to Section 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code of the applicable jurisdiction (or any successor provision or provisions), any other applicable law or principles of equity), provided, however, that the security interest (x) shall attach immediately when the condition causing such abandonment, invalidation or unenforceability is remedied, (y) shall attach immediately to any severable term of such lease, license, contract, property rights or agreement to the extent that such attachment does not result in any of the consequences specified in (i) or (ii) above and (z) shall attach immediately to any such lease, license, contract, property rights or agreement to which the account debtor or such Obligor’s counterparty has consented to such attachment; (d) any equity interest acquired after the date hereof that is an equity interest in an entity other than a subsidiary of an Obligor, if the terms of the organizational documents of the issuer of such equity interests do not permit the grant of the security interest in such equity interests by the owner thereof or Obligor; (e) any application to register any trademark or service mark prior to the filing under applicable law of a verified statement of use (or the equivalent) for such trademark or service mark to the extent the creation of a security interest therein or the grant of a mortgage thereon would void or invalidate such trademark or service mark; and (f) except as may be mutually agreed by the Borrowers and Agent, any fee-owned 

 

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Real Estate or leasehold interests in Real Estate (other than, for the avoidance of doubt, Fixtures) (collectively, the “Excluded Property”); provided, however, that any Collateral (or any portion thereof) that ceases to satisfy the criteria for Excluded Property (whether as a result of an Obligor obtaining any necessary consent, any change in any rule of law, statute or regulation or otherwise) shall no longer be Excluded Property and the security interest shall attach immediately to such Collateral (or portion thereof) at such time.

 

7.2.                            Lien on Deposit Accounts; Cash Collateral.

 

7.2.1.                  Deposit Accounts.  To further secure the prompt payment and performance of all Obligations, each Obligor (other than a UK Guarantor) hereby grants to Agent a continuing security interest in and Lien upon all amounts credited to any Deposit Account of such Obligor, including any sums in any lockbox or Dominion Account.

 

7.2.2.                  Cash Collateral.  Cash Collateral may be invested, at Agent’s discretion (and with the consent of Borrower Agent, as long as no Event of Default exists), but Agent shall have no duty to do so, regardless of any agreement or course of dealing with any Obligor, and shall have no responsibility for any investment or loss.  Each Obligor (other than a UK Guarantor) hereby grants to Agent, as security for the Obligations, a security interest in all Cash Collateral held from time to time and all proceeds thereof, whether held in a Cash Collateral Account or otherwise.  Agent may apply Cash Collateral to the payment of Obligations as they become due, in such order as Agent may elect.  Each Cash Collateral Account and all Cash Collateral shall be under the sole dominion and control of Agent, and no Obligor or other Person shall have any right to any Cash Collateral, until Full Payment of all Obligations.

 

7.3.                            [Reserved].

 

7.4.                            Other Collateral.

 

7.4.1.                  Commercial Tort Claims.  Obligors shall promptly notify Agent in writing if any Obligor has a Commercial Tort Claim (other than, as long as no Default or Event of Default exists, a Commercial Tort Claim for less than $100,000), shall promptly amend Schedule 9.1.16 to include such claim, and shall take such actions as Agent deems appropriate to subject such claim to a duly perfected, first priority Lien in favor of Agent.

 

7.4.2.                  Certain After-Acquired Collateral.  Obligors shall promptly notify Agent in writing if, after the Restatement Date, any Obligor obtains any interest in any Collateral consisting of Deposit Accounts, Chattel Paper, Documents, Instruments, Intellectual Property, Investment Property or Letter-of-Credit Rights and, upon Agent’s request, shall promptly take such actions as Agent deems appropriate to effect Agent’s duly perfected, first priority Lien (subject to Permitted Liens) upon such Collateral, including obtaining any appropriate possession, control agreement or Lien Waiver.  If any Collateral is in the possession of a third party, at Agent’s request, Obligors shall obtain an acknowledgment that such third party holds the Collateral for the benefit of Agent.

 

7.5.                            No Assumption of Liability.  The Lien on Collateral granted hereunder is given as security only and shall not subject Agent or any Lender to, or in any way modify, any obligation or liability of Obligors relating to any Collateral.  In no event shall the grant of any Lien under any Loan Document secure an Excluded Swap Obligation of the granting Obligor.

 

7.6.                            Further Assurances.  All Liens granted to Agent under the Loan Documents are for the benefit of Secured Parties.  Promptly upon reasonable request, Obligors shall deliver such instruments and agreements, and shall take such actions, as Agent reasonably deems necessary and appropriate under Applicable Law to evidence or perfect its Lien on any Collateral, or otherwise to give effect to the intent

 

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of this Agreement.  Each Obligor authorizes Agent to file any financing statement that describes the Collateral as “all assets” or “all personal property” of such Obligor, or words to similar effect, and ratifies any action taken by Agent before the Restatement Date to effect or perfect its Lien on any Collateral.

 

SECTION 8.                                           COLLATERAL ADMINISTRATION

 

8.1.                            Borrowing Base Certificates.  Obligors shall deliver to Agent (and Agent shall promptly deliver same to Lenders) (i) by the fifteenth (15th) day of each calendar month, and at such other times as Agent may request, a Revolver Borrowing Base Certificate and a Term Loan Borrowing Base Certificate setting forth the amounts of Accounts, Inventory, Eligible Accounts, Eligible Inventory, the Accounts Formula Amount, the Inventory Formula Amount, the status of Priority Payables, the Term Loan Push Down Reserve, the Availability Reserve, the Revolver Borrowing Base, the Term Loan Borrowing Base, the Revolver Exposure and Availability as of the most recently ended Fiscal Month, and (ii) at any time Availability falls below the Reporting Frequency Increase Trigger Amount, by Wednesday of each week, an updated Revolver Borrowing Base Certificate and Term Loan Borrowing Base Certificate (which updated Revolver Borrowing Base Certificate and Term Loan Borrowing Base Certificate shall include updated calculations of the Revolver Borrowing Base, Term Loan Borrowing Base, the Term Loan Push Down Reserve, Availability and the status of Priority Payables as of the end of the most recently ended week based solely upon sales, collections and Loan activity since the last day of the Fiscal Month for which a monthly Revolver Borrowing Base Certificate and a monthly Term Loan Borrowing Base shall have been prepared).  All calculations of Availability in any Revolver Borrowing Base Certificate and/or Term Loan Borrowing Base Certificate shall originally be made by Obligors and certified by a Senior Officer, provided that Agent may from time to time review and, in its Permitted Discretion, adjust any such calculation (a) to reflect its estimate of declines in value of any Collateral, due to collections received or otherwise; (b) to the extent Agent believes that the calculation was not made in accordance with this Agreement or does not accurately reflect the Availability Reserve; or (c) to the extent the Term Loan Agent has advised Agent that the calculation does not accurately reflect the Term Loan Push Down Reserve.

 

8.2.                            Administration of Accounts.

 

8.2.1.                  Records and Schedules of Accounts.  Each Obligor shall keep accurate and complete records of its Accounts, including all payments and collections thereon, and shall submit to Agent sales, collection, reconciliation and other reports in form satisfactory to Agent, on such periodic basis as Agent may request.  Each Obligor shall also provide to Agent, on or before the 15th day of each month, a detailed aged trial balance of all Accounts as of the end of the most recent Fiscal Month, specifying each Account’s Account Debtor name and address, amount, invoice date and due date, showing any discount, allowance, credit, authorized return or dispute, and including such proof of delivery, copies of invoices and invoice registers, copies of related documents, repayment histories, status reports and other information as Agent may reasonably request.  If Accounts in an aggregate face amount of $250,000 or more cease to be Eligible Accounts, Obligors shall notify Agent of such occurrence promptly (and in any event within one Business Day) after any Obligor has knowledge thereof.

 

8.2.2.                  Taxes.  If an Account of any Obligor includes a charge for any Taxes, Agent is authorized, in its discretion, to pay the amount thereof to the proper taxing authority for the account of such Obligor and to charge Obligors therefor; provided, however, that neither Agent nor Lenders shall be liable for any Taxes that may be due from Obligors or with respect to any Collateral.

 

8.2.3.                  Account Verification.  Whether or not a Default or Event of Default exists, Agent shall have the right at any time, in the name of Agent, any designee of Agent or any Obligor, to verify the validity, amount or any other matter relating to any Accounts of Obligors by mail, telephone or otherwise.  Obligors shall cooperate fully with Agent in an effort to facilitate and promptly conclude any such verification process.

 

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8.2.4.                  Maintenance of Dominion Accounts.  Obligors shall maintain Dominion Accounts pursuant to lockbox or other arrangements acceptable to Agent.  On or prior to the Restatement Date, Obligors shall have entered into agreements (in form and substance reasonably satisfactory to Agent) with Bank of America, in its capacity as lockbox servicer and Dominion Account bank, establishing Agent’s Lien on and dominion and control over all lockboxes and Dominion Accounts and which provide (i) in case of lockboxes and Dominion Accounts of the UK Guarantor, that Agent have exclusive dominion and control at all times (regardless of whether a Cash Dominion Period is in effect), and (ii) in the case of lockboxes and Dominion Accounts of any Obligor other than the UK Guarantor, that Agent may exercise dominion and control at any time during a Cash Dominion Period and that during a Cash Dominion Period all remittances received in a lockbox be immediately deposited to a Dominion Account.  Agent and Lenders assume no responsibility to Obligors for any lockbox arrangement or Dominion Account, including any claim of accord and satisfaction or release with respect to any Payment Items accepted by any bank.

 

8.2.5.                  Proceeds of Collateral.  Borrowers shall request in writing and otherwise take all necessary steps to ensure that at all times from and after the Restatement Date, all payments on Accounts or otherwise relating to Collateral are made directly to a Dominion Account (or a lockbox relating to a Dominion Account).  If any Obligor or Subsidiary receives cash or Payment Items with respect to any Collateral, it shall hold same in trust for Agent and promptly (not later than the next Business Day) deposit same into a Dominion Account (or a lockbox which is swept into a Dominion Account).

 

8.3.                            Administration of Inventory.

 

8.3.1.                  Records and Reports of Inventory.  Each Obligor shall keep accurate and complete records of its Inventory, including costs and daily withdrawals and additions, and, prior to the 15th day after the end of each month, shall submit to Agent inventory and reconciliation reports for the most recently ended Fiscal Month in form satisfactory to Agent.  Each Obligor shall conduct a physical inventory at least once per calendar year (and on a more frequent basis if requested by Agent when an Event of Default exists) and periodic cycle counts consistent with historical practices, and shall provide to Agent a report based on each such inventory and count promptly upon completion thereof, together with such supporting information as Agent may request.  Agent may participate in and observe each physical count.

 

8.3.2.                  Returns of Inventory.  No Obligor shall return any Inventory to a supplier, vendor or other Person, whether for cash, credit or otherwise, unless (a) such return is in the Ordinary Course of Business; (b) no Default, Event of Default or Revolver Overadvance exists or would result therefrom; (c) Agent is promptly notified if the aggregate Value of all Inventory returned in any month exceeds $375,000; and (d) any payment received by an Obligor for a return is promptly remitted to Agent for application to the Obligations.

 

8.3.3.                  Acquisition, Sale and Maintenance.  No Obligor shall acquire or accept any Inventory on consignment or approval, and shall take all steps to assure that all Inventory is produced in accordance with Applicable Law, including the FLSA.  No Obligor shall sell any Inventory on consignment or approval or any other basis under which the customer may return or require an Obligor to repurchase such Inventory.  Obligors shall use, store and maintain all Inventory with reasonable care and caution, in accordance with applicable standards of any insurance and in conformity with all Applicable Law, and shall make current rent payments (within applicable grace periods provided for in leases) at all locations where any Collateral is located.

 

8.4.                            Administration of Equipment.

 

8.4.1.                  Records and Schedules of Equipment.  Each Obligor shall keep accurate and complete records of its Equipment, including kind, quality, quantity, cost, acquisitions and dispositions 

 

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thereof, and shall submit to Agent, on such periodic basis as Agent may request, a current schedule thereof, in form satisfactory to Agent.  Promptly upon request, Obligors shall deliver to Agent evidence of their ownership or interests in any Equipment.

 

8.4.2.                  Dispositions of Equipment.  No Obligor shall sell, lease or otherwise dispose of any Equipment, without the prior written consent of Agent, other than (a) a Permitted Asset Disposition; and (b) replacement of Equipment that is worn, damaged or obsolete with Equipment of like function and value, if the replacement Equipment is acquired substantially contemporaneously with such disposition and is free of Liens (other than Permitted Liens).

 

8.4.3.                  Condition of Equipment.  The Equipment is in good operating condition and repair, and all necessary replacements and repairs have been made so that the value and operating efficiency of the Equipment is preserved at all times, reasonable wear and tear excepted.  Each Obligor shall ensure that the Equipment is mechanically and structurally sound, and capable of performing the functions for which it was designed, in accordance with manufacturer specifications.  No Obligor shall permit any Equipment to become affixed to real Property unless any landlord or mortgagee delivers a Lien Waiver.

 

8.5.                            Administration of Deposit Accounts.  Schedule 8.5 sets forth all Deposit Accounts maintained by Obligors, including all Dominion Accounts.  Each Obligor shall take all actions necessary to establish Agent’s control over each such Deposit Account (other than Excluded Deposit Accounts).  Each Obligor shall be the sole account holder of each Deposit Account and shall not allow any Person (other than Agent) to have control over a Deposit Account or any Property deposited therein.  Each Obligor shall promptly notify Agent of any opening or closing of a Deposit Account and, with the consent of Agent, will amend Schedule 8.5 to reflect same.

 

8.6.                            General Provisions.

 

8.6.1.                  Location of Collateral.  All tangible items of Collateral, other than Inventory in transit, shall at all times be kept by Obligors at the business locations set forth in Schedule 8.6.1, except that Obligors may (a) make sales or other dispositions of Collateral in accordance with Section 10.2.6; and (b) move Collateral to another location in the United States or Canada, as applicable, upon 30 Business Days prior written notice to Agent.

 

8.6.2.                  Insurance of Collateral; Condemnation Proceeds.

 

(a)                                 Each Obligor shall maintain insurance with respect to the Collateral, covering casualty, hazard, theft, malicious mischief, flood and other risks, in amounts, with endorsements and with insurers (with a Best’s Financial Strength Rating of at least A_, unless otherwise approved by Agent) satisfactory to Agent.  All proceeds under each policy shall be payable to Agent.  From time to time upon request, Obligors shall deliver to Agent the originals or certified copies of its insurance policies and updated flood plain searches.  Unless Agent shall agree otherwise, each policy shall include satisfactory endorsements (i) showing Agent as loss payee; (ii) requiring 30 days prior written notice to Agent in the event of cancellation of the policy for any reason whatsoever; and (iii) specifying that the interest of Agent shall not be impaired or invalidated by any act or neglect of any Obligor or the owner of the Property, nor by the occupation of the premises for purposes more hazardous than are permitted by the policy.  If any Obligor fails to provide and pay for any insurance, Agent may, at its option, but shall not be required to, procure the insurance and charge Obligors therefor.  Each Obligor agrees to deliver to Agent, promptly as rendered, copies of all reports made to insurance companies.  While no Event of Default exists, Obligors may settle, adjust or compromise any insurance claim, as long as the proceeds are delivered to Agent.  If an Event of Default exists, only Agent shall be authorized to settle, adjust and compromise such claims.

 

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(b)                                 Any proceeds of insurance (other than proceeds from workers’ compensation or D&O insurance) and any awards arising from condemnation of any Collateral shall be paid to Agent or to Term Loan Agent in accordance with the Intercreditor Agreement.

 

(c)                                  If requested by Obligors in writing within 15 days after Agent’s receipt of any insurance proceeds or condemnation awards relating to any loss or destruction of Term Priority Collateral (as such term is defined in the Intercreditor Agreement), Obligors may use such proceeds or awards to repair or replace such Term Priority Collateral (and until so used, the proceeds shall be held by Agent or Term Loan Agent as Cash Collateral) as long as (i) no Event of Default exists; (ii) such repair or replacement is undertaken and concluded within 180 days, in accordance with plans reasonably satisfactory to Agent; (iii) replacement buildings are constructed on the sites of the original casualties and are of comparable size, quality and utility to the destroyed buildings; (iv) the repaired or replaced Property is free of Liens, other than Permitted Liens that are not Purchase Money Liens; (v) Borrowers comply with disbursement procedures for such repair or replacement as Agent may reasonably require; and (vi) the aggregate amount of such proceeds or awards from any single Casualty Event or condemnation does not exceed $250,000.

 

8.6.3.                  Protection of Collateral.  All expenses of protecting, storing, warehousing, insuring, handling, maintaining and shipping any Collateral, all Priority Payables and Taxes payable with respect to any Collateral (including any sale thereof), and all other payments required to be made by Agent to any Person to realize upon any Collateral, shall be borne and paid by Obligors.  Agent shall not be liable or responsible in any way for the safekeeping of any Collateral, for any loss or damage thereto (except for reasonable care in its custody while Collateral is in Agent’s actual possession), for any diminution in the value thereof, or for any act or default of any warehouseman, carrier, forwarding agency or other Person whatsoever, but the same shall be at Obligors’ sole risk.

 

8.6.4.                  Defense of Title.  Each Obligor shall defend its title to Collateral and Agent’s Liens therein against all Persons, claims and demands, except Permitted Liens.

 

8.7.                            Power of Attorney.  Each Obligor hereby irrevocably constitutes and appoints Agent (and all Persons designated by Agent) as such Obligor’s true and lawful attorney (and agent-in-fact) for the purposes provided in this Section.  Agent, or Agent’s designee, may, without notice and in either its or an Obligor’s name, but at the cost and expense of Obligors:

 

(a)                                 Endorse an Obligor’s name on any Payment Item remitted to or deposited in any lockbox or Dominion Account; and

 

(b)                                 During an Event of Default, (i) notify any Account Debtors of the assignment of their Accounts, demand and enforce payment of Accounts by legal proceedings or otherwise, and generally exercise any rights and remedies with respect to Accounts; (ii) settle, adjust, modify, compromise, discharge or release any Accounts or other Collateral, or any legal proceedings brought to collect Accounts or Collateral; (iii) sell or assign any Accounts and other Collateral upon such terms, for such amounts and at such times as Agent deems advisable; (iv) collect, liquidate and receive balances in Deposit Accounts or investment accounts, and take control, in any manner, of proceeds of Collateral; (v) prepare, file and sign an Obligor’s name to a proof of claim or other document in a bankruptcy of an Account Debtor, or to any notice, assignment or satisfaction of Lien or similar document; (vi) receive, open and dispose of mail addressed to an Obligor, and notify postal authorities to deliver any such mail to an address designated by Agent; (vii) endorse any Chattel Paper, Document, Instrument, bill of lading, or other document or agreement relating to any Accounts, Inventory or other Collateral; (viii) use an Obligor’s stationery and sign its name to verifications of Accounts and notices to Account Debtors; (ix) use information contained in any data processing, electronic or information systems relating to Collateral; (x) make and adjust claims under insurance policies; (xi) take any action as may be necessary or appropriate to obtain payment under any letter of credit, banker’s acceptance or other instrument for 

 

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which an Obligor is a beneficiary; and (xii) take all other actions as Agent deems appropriate to fulfill any Borrower’s obligations under the Loan Documents.

 

SECTION 9.                                           REPRESENTATIONS AND WARRANTIES

 

9.1.                            General Representations and Warranties.  To induce Agent and Lenders to enter into this Agreement and to make available the Commitments, Loans and Letters of Credit, each Obligor represents and warrants that:

 

9.1.1.                  Organization and Qualification.  Each Obligor and Subsidiary (other than any Immaterial Foreign Subsidiary) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization or formation.  Each Obligor and Subsidiary is duly qualified, authorized to do business and in good standing as a foreign corporation in each jurisdiction where failure to be so qualified could reasonably be expected to have a Material Adverse Effect.

 

9.1.2.                  Power and Authority.  Each Obligor is duly authorized to execute, deliver and perform its obligations under the Loan Documents.  The execution, delivery and performance of the Loan Documents have been duly authorized by all necessary action, and do not (a) require any consent or approval of any holders of Equity Interests of any Obligor, except those already obtained; (b) contravene the Organic Documents of any Obligor; (c) violate or cause a default under any Applicable Law or Material Contract; or (d) result in or require the imposition of any Lien (other than Permitted Liens) on any Obligor’s Property.

 

9.1.3.                  Enforceability.  Each Loan Document is a legal, valid and binding obligation of each Obligor party thereto, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.

 

9.1.4.                  Capital Structure.  Schedule 9.1.4 shows (a) for each Obligor and Subsidiary, its name, jurisdiction of organization or formation and any agreement binding on the holders of its Equity Interests with respect to such Equity Interests, and (b) for each Subsidiary of the Company, its authorized and issued Equity Interests and the names of the holders of its Equity Interests.  Except as disclosed on Schedule 9.1.4, in the five years preceding the Restatement Date, no Obligor or Subsidiary has acquired any substantial assets from any other Person nor been the surviving entity in a merger or combination.  Each Obligor has good title to its Equity Interests in its Subsidiaries, subject only to Permitted Liens, and all such Equity Interests are duly issued, fully paid and non-assessable.  Except for the Equity Interests issued under the Company’s 2006 Performance Equity Plan, the Company’s 2012 Incentive Compensation Plan, and inducement grants to new employees approved by the Compensation Committee of the Company’s Board of Directors, there are no outstanding purchase options, warrants, subscription rights, agreements to issue or sell, convertible interests, phantom rights or powers of attorney relating to Equity Interests of any Obligor or Subsidiary.

 

9.1.5.                  Title to Properties; Priority of Liens.  Each Obligor and Subsidiary has good and marketable title to (or valid leasehold interests in) all of its Real Estate, and good title to all of its personal Property, including all Property reflected in any financial statements delivered to Agent or Lenders, in each case free of Liens except Permitted Liens.  Except as otherwise indicated on Schedule 9.1.5, each Obligor and Subsidiary has paid and discharged all lawful claims that, if unpaid, could become a Lien on its Properties, other than Permitted Liens.  The provisions of the Security Documents, together with such filings and other actions required to be taken hereby or by the applicable Security Documents  are effective to create in favor of the Agent, for the benefit of the Secured Parties referred to therein, a legal, valid and enforceable security interest in and first priority Lien (except for those Permitted Liens that have priority in such Collateral by operation of law and except as to the Term Priority Collateral, for the Liens of the Term Loan Agent to the extent provided in the Intercreditor Agreement) on all right title and interest of the respective Obligors in the Collateral described therein, subject to applicable bankruptcy, 

 

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insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law, except (a) as otherwise contemplated hereby or under any other Loan Documents, and (b) except as to specific items of Collateral as to which Agent may determine, in consultation with the Borrower Agent, not to perfect its security interest therein based on the value thereof relative to the costs of such perfection.

 

9.1.6.                  Accounts.  Agent may rely, in determining which Accounts are Eligible Accounts, on all statements and representations made by Obligors with respect thereto.  Obligors warrant, with respect to each Account at the time it is shown as an Eligible Account in a Revolver Borrowing Base Certificate or a Term Loan Borrowing Base Certificate, that:

 

(a)                                 it is genuine and in all respects what it purports to be, and is not evidenced by a judgment;

 

(b)                                 it arises out of a completed, bona fide sale and delivery of goods in the Ordinary Course of Business, and substantially in accordance with any purchase order, contract or other document relating thereto;

 

(c)                                  it is for a sum certain, maturing as stated in the invoice covering such sale, a copy of which has been furnished or is available to Agent on request;

 

(d)                                 it is not subject to any offset, Lien (other than Agent’s Lien), defense, dispute, counterclaim or other adverse condition except as arising in the Ordinary Course of Business and disclosed to Agent and is not subject to any discount or deduction except discounts and deductions arising in the Ordinary Course of Business consistent with past practices or otherwise disclosed in writing to Agent; and it is absolutely owing by the Account Debtor, without contingency in any respect;

 

(e)                                  no purchase order, agreement, document or Applicable Law restricts assignment of the Account to Agent (regardless of whether, under the UCC and/or PPSA, as applicable, the restriction is ineffective), and the applicable Obligor is the sole payee or remittance party shown on the invoice;

 

(f)                                   no extension, compromise, settlement, modification, credit, deduction or return has been authorized with respect to the Account, except discounts or allowances granted in the Ordinary Course of Business for prompt payment that are reflected on the face of the invoice related thereto and in the reports submitted to Agent hereunder; and

 

(g)                                  to the best of Obligors’ knowledge, (i) there are no facts or circumstances that are reasonably likely to impair the enforceability or collectibility of such Account; (ii) the Account Debtor had the capacity to contract when the Account arose, continues to meet the applicable Obligor’s customary credit standards, is Solvent, is not contemplating or subject to an Insolvency Proceeding, and has not failed, or suspended or ceased doing business; and (iii) there are no proceedings or actions threatened or pending against any Account Debtor that could reasonably be expected to have a material adverse effect on the Account Debtor’s financial condition.

 

9.1.7.                  Financial Statements.  The consolidated and consolidating balance sheets, and related statements of income, cash flow and shareholder’s equity, of Company and Subsidiaries that have been and are hereafter delivered to Agent and Lenders, are prepared in accordance with GAAP, or in the case of the Canadian Guarantor, GAAP as in effect in Canada, as and to the extent applicable (in either case, except as otherwise noted therein and, in the case of unaudited financial statements, subject to the absence of footnotes and normal year-end adjustments), and fairly present the financial positions and results of operations of Company and Subsidiaries at the dates and for the periods indicated.  All projections delivered from time to time to Agent and Lenders have been prepared in good faith, based on 

 

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reasonable assumptions in light of the circumstances at such time provided, that, with respect to projected financial information, it being understood and agreed that (a) any financial or business projections furnished by the Borrowers are subject to significant uncertainties and contingencies, which may be beyond the control of the Borrowers, (b) no assurance is given by the Borrowers that the results of such projections will be realized and (c) the actual results may differ from the results of such projections and such differences may be material.  Except as otherwise disclosed by the Company in its filings with the Securities and Exchange Commission, or any similar applicable Governmental Authority in any other applicable jurisdiction, since December 30, 2017, there has been no change in the business, assets, Properties, liabilities, operations or financial condition of the Obligors, taken as a whole, that could reasonably be expected to have a Material Adverse Effect.  No financial statement delivered to Agent or Lenders at any time contains any untrue statement of a material fact, nor fails to disclose any material fact necessary to make such statement not materially misleading.  The Obligors, taken as a whole, are Solvent.

 

9.1.8.                  Surety Obligations.  Except as disclosed on Schedule 9.1.8, no Obligor or Subsidiary is obligated as surety or indemnitor under any bond or other Material Contract that assures payment or performance of any obligation of any Person, except as permitted hereunder.

 

9.1.9.                  Taxes.  Each Obligor and Subsidiary (other than any Immaterial Foreign Subsidiary) has filed all federal, state, provincial, territorial, and other material tax returns and other reports that it is required by law to file, and has paid, or made provision for the payment of, all material Taxes and Priority Payables upon it, its income and its Properties that are due and payable, except to the extent being Properly Contested.  The provision for Taxes on the books of each Obligor and Subsidiary is adequate for all years not closed by applicable statutes, and for its current Fiscal Year.

 

9.1.10.           Brokers.  Except as disclosed on Schedule 9.1.10, there are no brokerage commissions, finder’s fees or investment banking fees payable in connection with any transactions contemplated by the Loan Documents.

 

9.1.11.           Intellectual Property. Each Obligor and Subsidiary owns or has the lawful right to use all Intellectual Property, licenses, permits and other authorizations reasonably necessary for the conduct of its business as currently conducted, and does not infringe upon misuse, misappropriate or violate any rights held by any other Person except for such infringements, misuses, misappropriations or violations that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  Except as disclosed on Schedule 9.1.11, there is no pending or, to any Obligor’s or Subsidiary’s knowledge, threatened Intellectual Property Claim with respect to any Obligor, any Subsidiary or any of their Property (including any Intellectual Property) that, if adversely determined, could reasonably be expected to have a Material Adverse Effect.  Except as disclosed on Schedule 9.1.11, no Obligor or Subsidiary pays or owes any Royalty or other compensation to any Person with respect to any Intellectual Property.  All Intellectual Property owned, licensed by, or otherwise subject to any interests of, any Obligor or Subsidiary is shown on Schedule 9.1.11.

 

9.1.12.           Governmental Approvals.  Each Obligor and Subsidiary has, is in compliance with, and is in good standing with respect to, all Governmental Approvals necessary to conduct its business and to own, lease and operate its Properties, except where noncompliance could not reasonably be expected to have a Material Adverse Effect.  All necessary import, export or other licenses, permits or certificates for the import or handling of any goods or other Collateral have been procured and are in effect, and Obligors and Subsidiaries have complied with all foreign and domestic laws with respect to the shipment and importation of any goods or Collateral, except where noncompliance could not reasonably be expected to have a Material Adverse Effect.

 

9.1.13.           Compliance with Laws.(a)  Each Obligor and Subsidiary has duly complied, and its Properties and business operations are in compliance, in all material respects with all Applicable Law, except where noncompliance could not reasonably be expected to have a Material Adverse Effect.  There 

 

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have been (i) no citations, notices of noncompliance or requests for information issued to any Obligor by the CPSC within the immediately preceding three years other than those described on Schedule 9.1.13, and (ii) no notices or orders of material noncompliance issued to any Obligor by any other Governmental Authority under any Applicable Law.  To the best knowledge of the Obligors, no Inventory has been produced by Obligors in violation of the FLSA or in violation of any CPSC Regulations.  The Obligors have current and effective certificates of compliance for each children’s product and each children’s toy that the Obligors sell, manufacture or distribute.  The Obligors conduct current testing of all children’s products and children’s toys that the Obligors sell, manufacture or distribute in accordance with Applicable Law.  Except as described on Schedule 9.1.13, there are no pending or, to the knowledge of the Obligors, threatened (in writing), recalls, or regulatory actions or investigations by the CPSC with respect to the Obligors or any of the products or toys that the Obligors sell, manufacture or distribute.  To the best knowledge of the Obligors, none of the products or toys that the Obligors sell, manufacture or distribute contains a defect that could create a substantial product hazard or could create an unreasonable risk of serious injury or death.  The Obligors have complied in a timely manner with all reporting requirements under the CPSC Regulations.  To the best knowledge of the Obligors, the Obligors have not materially misrepresented in any report filed by the Obligors with the CPSC, the scope of the hazards posed by any toys or products that the Obligors sell, manufacture or distribute or the numbers of incidents or injuries that have been caused by or that have been alleged to have been caused by such toys and products.

 

(b)                                 Without limiting the foregoing, no Obligor or, to the knowledge of the Borrowers, any of their respective Affiliates (i) is in violation of any Anti-Terrorism Law, (ii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, any of the prohibitions set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person. No Obligor or, to the knowledge of the Borrowers, any of their respective Affiliates (x) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (y) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti- Terrorism Law.

 

(c)                                  No Obligor or, to the knowledge of the Borrowers, any of their respective Affiliates or any officer, director, or employee, or agent, representative, sales intermediary of such Person, in each case, acting on behalf of any Obligor or any of its Restricted Subsidiaries in violation of any applicable Anti-Corruption Law. None of the Obligors or any of their Affiliates has been convicted of violating any Anti-Corruption Laws or subjected to any investigation by a Governmental Authority for violation of any applicable Anti-Corruption Laws. There is no material suit, litigation, arbitration, claim, audit, action, proceeding or investigation pending or, to the knowledge of any executive officer of the Borrowers, threatened (in writing) against or affecting the Obligors or any of their Affiliates related to any applicable Anti-Corruption Law, before or by any Governmental Authority. None of the Obligors has conducted or initiated any internal investigation or made a voluntary, directed, or involuntary disclosure to any Governmental Authority with respect to any alleged act or omission arising under or relating to any noncompliance with any Anti-Corruption Law. In the three (3) years prior to the Closing Date, none of the Obligors has received any written notice, request or citation for any actual or potential noncompliance with any of the foregoing.

 

9.1.14.           Compliance with Environmental Laws.  Except with respect to any matters that, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect and disclosed on Schedule 9.1.14, no Obligor’s or Subsidiary’s past or present operations, Real Estate or other Properties are subject to any federal, state, provincial, municipal or local investigation to determine whether any remedial action is needed to address any environmental pollution, hazardous material or environmental clean-up.  No Obligor or Subsidiary has received any Environmental Notice.  No Obligor or Subsidiary has any contingent liability with respect to any Environmental Release, environmental pollution or hazardous material on any Real Estate now or previously owned, leased or 

 

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operated by it, except where such liability could not reasonably be expected to result in a Material Adverse Effect.

 

9.1.15.           Burdensome Contracts.  No Obligor or Subsidiary is party or subject to any Restrictive Agreement, except as shown on Schedule 9.1.15.  No such Restrictive Agreement prohibits the execution, delivery or performance of any Loan Document by an Obligor.

 

9.1.16.           Litigation.  Except as shown on Schedule 9.1.16, there are no proceedings or investigations pending or, to any Obligor’s knowledge, threatened in writing against any Obligor or Subsidiary, or any of their businesses, operations, Properties, prospects or conditions, that (a) relate to any Loan Documents or transactions contemplated thereby; or (b) could reasonably be expected to have a Material Adverse Effect if determined adversely to any Obligor or Subsidiary.  Except as shown on such Schedule, no Obligor has a Commercial Tort Claim (other than, as long as no Default or Event of Default exists, a Commercial Tort Claim for less than $100,000).  No Obligor or Subsidiary is in default with respect to any order, injunction or judgment of any Governmental Authority.

 

9.1.17.           No Defaults.  No event or circumstance has occurred or exists that constitutes a Default or Event of Default.  No Obligor or Subsidiary is in default, and, to the knowledge of the Obligors and each of their Subsidiaries, no event or circumstance has occurred or exists that with the passage of time or giving of notice would constitute a material default, under any Material Contract or in the payment of any Borrowed Money in excess of $500,000.  To the best knowledge of the Obligors, there is no basis upon which any party (other than an Obligor or Subsidiary) could terminate a Material Contract prior to its scheduled termination date.

 

9.1.18.           ERISA.  Except as disclosed on Schedule 9.1.18:

 

(a)                                 Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code, and other federal and state laws.  Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the knowledge of Borrowers, nothing has occurred which would prevent, or cause the loss of, such qualification.  Each Obligor and ERISA Affiliate has met all applicable requirements under the Code, ERISA and the Pension Protection Act of 2006, and no application for a waiver of the minimum funding standards or an extension of any amortization period has been made with respect to any Plan.

 

(b)                                 There are no pending or, to the knowledge of Borrowers, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect.  There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted in or could reasonably be expected to have a Material Adverse Effect.

 

(c)                                  (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) no Obligor or ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) no Obligor or ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; (v) no Obligor or ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA; and (vi) as of the most recent valuation date for any Pension Plan or Multiemployer Plan, the funding target attainment percentage (as defined in Section 430(d)(2) of the Code) is at least 60%, and no Obligor or ERISA Affiliate knows of any fact or circumstance that could reasonably be expected to cause the funding target attainment percentage for any such plan to drop below 60% as of such date.

 

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(d)                                 With respect to any Foreign Plan, (i) all employer and employee contributions required by law or by the terms of the Foreign Plan have been made, or, if applicable, accrued, in accordance with normal accounting practices; (ii) the fair market value of the assets of each funded Foreign Plan, the liability of each insurer for any Foreign Plan funded through insurance, or the book reserve established for any Foreign Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations with respect to all current and former participants in such Foreign Plan according to the actuarial assumptions and valuations most recently used to account for such obligations in accordance with applicable generally accepted accounting principles; and (iii) it has been registered as required and has been maintained in good standing with applicable regulatory authorities.

 

(e)                                  (i) each Obligor is in compliance with the requirements of the PBA and other Applicable Laws with respect to each Canadian Pension Plan, except where the failure to so comply would not have a Material Adverse Effect,  (ii) to the knowledge of the Obligors, no fact or situation exists that may reasonably be expected to adversely affect the registered status of any Canadian Pension Plan which could reasonably be expected to have a Material Adverse Effect, (iii) no Obligor maintains, sponsors or contributes to any Canadian Defined Benefit Pension Plan other than those consented to pursuant to Section 10.2.18 hereof, (iv) no Termination Event has occurred in respect of which a Canadian Priority Payables Reserve has not been taken,(v) no Lien has arisen in respect of Obligors or their property in connection with any Canadian Pension Plan (save for contribution amounts not yet due) which could reasonably be expected to have a Material Adverse Effect; and (vi) all required contributions of any Obligor to each Canadian Pension Plan have been made when due under Applicable Laws (except for contributions, the outstanding status of which cannot be reasonably expected to have a Material Adverse Effect).

 

(f)                                   Neither SI UK nor any of its Subsidiaries is or has at any time been (i) an employer (for the purposes of sections 38 to 51 of the Pensions Act 2004) of an occupational pension scheme which is not a money purchase scheme (both terms as defined in the Pensions Schemes Act 1993); or (ii) “connected” with or an “associate” of (as those terms are used in sections 38 and 43 of the Pensions Act 2004) such an employer.

 

9.1.19.           Trade Relations.  Except as set forth on the Company’s filings with the Securities and Exchange Commission, there exists no actual or threatened (in writing) termination, limitation or modification of any business relationship between any Obligor or Subsidiary and any customer or supplier, or any group of customers or suppliers, who individually or in the aggregate are material to the business of such Obligor or Subsidiary.  There exists no condition or circumstance that could reasonably be expected to materially impair the ability of any Obligor or Subsidiary to conduct its business at any time hereafter in substantially the same manner as conducted on the Restatement Date.

 

9.1.20.           Labor Relations.  Except as described on Schedule 9.1.20, no Obligor or Subsidiary is party to or bound by any collective bargaining agreement, management agreement or consulting agreement (other than design services consulting agreements and other consulting agreements that have been disclosed to Agent).  Except as would not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, there are no material grievances, disputes or controversies with any union or other organization of any Obligor’s or Subsidiary’s employees, or, to any Obligor’s knowledge, any asserted or threatened strikes, work stoppages or demands for collective bargaining.

 

9.1.21.           Payable Practices.  No Obligor or Subsidiary has made any material change in its historical accounts payable practices from those in effect on the Restatement Date.

 

9.1.22.           Not a Regulated Entity.  No Obligor is (a) an “investment company” or a “person directly or indirectly controlled by or acting on behalf of an investment company” within the meaning of the Investment Company Act of 1940; or (b) subject to regulation under the Federal Power Act, the

 

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Interstate Commerce Act, any public utilities code or any other Applicable Law regarding its authority to incur Debt.

 

9.1.23.           Margin Stock.  No Obligor or Subsidiary 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 Loan proceeds or Letters of Credit will be used by Obligors to purchase or carry, or to reduce or refinance any Debt incurred to purchase or carry, any Margin Stock or for any related purpose governed by Regulations T, U or X of the Board of Governors.

 

9.1.24.           OFAC.  None of (i) Borrower, Subsidiary or any director, officer, or employee, or (ii) to the knowledge of the Borrower, any agent, affiliate or representative thereof, is or is owned or controlled by any individual or entity that is currently the subject or target of any Sanction or is located, organized or resident in a Designated Jurisdiction.

 

9.1.25.           Beneficial Ownership Certification.  As of the Restatement Date, the information included in the Beneficial Ownership Certification, if applicable, is true and correct in all respects.

 

9.1.26.           Centre of Main Interests and Establishments.  For the purposes of regulation (EU) 2015/848 of 20 May 2015 on insolvency proceedings (recast) (the “Regulation”), each of the UK Guarantors’ centre of main interest (as that term is used in Article 3(l) of the Regulation) is situated in its jurisdiction of incorporation and none of them have an “establishment” (as that term is used in Article 2(10) of the Regulation) in any other jurisdiction.

 

9.1.27.           EEA Financial Institutions.  No Obligor is an EEA Financial Institution.

 

9.2.                            Complete Disclosure.  No Loan Document contains any untrue statement of a material fact, nor fails to disclose any material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not materially misleading.  There is no fact or circumstance that any Obligor has failed to disclose to Agent in writing that could reasonably be expected to have a Material Adverse Effect.

 

SECTION 10.                                    COVENANTS AND CONTINUING AGREEMENTS

 

10.1.                     Affirmative Covenants.  As long as any Commitments or Obligations are outstanding, each Obligor shall, and shall cause each Subsidiary to:

 

10.1.1.           Inspections; Appraisals.

 

(a)                                 Permit Agent from time to time, subject (except when an Event of Default exists) to reasonable notice and normal business hours, to visit and inspect the Properties of any Obligor or Subsidiary, inspect, audit and make extracts from any Obligor’s or Subsidiary’s books and records, and discuss with its officers, employees, agents, advisors and independent accountants such Obligor’s or Subsidiary’s business, financial condition, assets, prospects and results of operations.  Lenders may participate in any such visit or inspection, at their own expense.  Neither Agent nor any Lender shall have any duty to any Obligor to make any inspection, nor to share any results of any inspection, appraisal or report with any Obligor.  Obligors acknowledge that all inspections, appraisals and reports are prepared by Agent and Lenders for their purposes, and Obligors shall not be entitled to rely upon them.  This Section 10.1.1(a) shall not apply to Immaterial Foreign Subsidiaries unless an Event of Default has occurred and is continuing.

 

(b)                                 Reimburse Agent for all reasonable charges, costs and expenses of Agent in connection with (i) examinations of any Obligor’s books and records or any other financial or Collateral matters as Agent deems appropriate, once per Loan Year; and (ii) appraisals of Inventory, once per Loan

 

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Year; provided, however, that (i) during any Increased Field Exam/Appraisal Period, the Obligors shall reimburse Agent for up to two appraisals of Inventory and two field examinations per Loan Year, and (ii) if an examination or appraisal is initiated during an Event of Default, all charges, costs and expenses therefor shall be reimbursed by Borrowers without regard to any such limits.  Obligors agree to pay Agent’s then standard charges for examination activities, including the standard charges of Agent’s internal examination and appraisal groups, as well as the reasonable and documented charges of any third party used for such purposes.  No calculation of the Revolver Borrowing Base shall include Collateral acquired in a Permitted Acquisition or otherwise outside the Ordinary Course of Business until completion of applicable field examinations and appraisals reasonably satisfactory to Agent.

 

10.1.2.           Financial and Other Information.  Keep adequate records and books of account with respect to its business activities, in which proper entries are made in accordance with GAAP reflecting all financial transactions; and furnish to Agent and Lenders:

 

(a)                                 as soon as available, and in any event within 90 days after the close of each Fiscal Year, balance sheets as of the end of such Fiscal Year and the related statements of income, cash flow and shareholders’ equity for such Fiscal Year, on consolidated and consolidating bases for Obligors and Subsidiaries, which consolidated statements shall be audited and certified (without qualification except to the extent any qualification results solely from a current maturity of any Indebtedness) by a firm of independent certified public accountants of recognized standing selected by Borrowers and reasonably acceptable to Agent, it being agreed that RSM US, LLP is acceptable to Agent, and shall set forth in comparative form corresponding figures for the preceding Fiscal Year and other information reasonably acceptable to Agent;

 

(b)                                 as soon as available, and in any event within 45 days after the end of each Fiscal Quarter ending thereafter, unaudited balance sheets as of the end of such quarter and the related statements of income and cash flow for such Fiscal Quarter and for the portion of the Fiscal Year then elapsed, on consolidated and, to the extent applicable, consolidating bases for Obligors and Subsidiaries, setting forth in comparative form corresponding figures for the preceding Fiscal Year and certified by a Senior Officer of Obligors as prepared in accordance with GAAP and fairly presenting in all material respects the financial position and results of operations for such Fiscal Quarter and period, subject to normal year-end adjustments and the absence of footnotes;

 

(c)                                  as soon as available, and in any event within 30 days after the end of each month, unaudited balance sheets as of the end of the most recent Fiscal Month and the related statements of income and cash flow for such Fiscal Month and for the portion of the Fiscal Year then elapsed, on consolidated and, to the extent applicable, consolidating bases for Obligors and Subsidiaries, setting forth in comparative form corresponding figures for the preceding Fiscal Year and certified by the chief financial officer of Borrower Agent as prepared in accordance with GAAP and fairly presenting the financial position and results of operations for such month and period, subject only to normal year-end audit adjustments and the absence of footnotes;

 

(d)                                 concurrently with delivery of financial statements under clauses (a), (b) and (c) above, or more frequently if requested by Agent while a Default or Event of Default exists, a Compliance Certificate executed by the chief financial officer of Borrower Agent (for the avoidance of doubt, regardless of whether a Financial Covenant Testing Period shall be in effect, Obligors shall be required to deliver a Compliance Certificate concurrently with the delivery of all financial statements under clauses (a), (b) and (c) above, which Compliance Certificate shall contain a detailed calculation of the Fixed Charge Coverage Ratio as of the Fiscal Month most recently ended, which calculation shall be deemed to have been provided solely for informational purposes if a Financial Covenant Testing Period shall not be in effect at such time);

 

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(e)                                  concurrently with delivery of financial statements under clause (a) above, copies of all management letters and other material reports submitted to any Obligor(s) by their accountants in connection with such financial statements;

 

(f)                                   as soon as available, but in any event not later than thirty (30) days after the last day of each Fiscal Year, projections of Borrowers’ consolidated balance sheets, results of operations, cash flow and Availability for such Fiscal Year, on a Fiscal Month by Fiscal Month basis;

 

(g)                                  at Agent’s request, a listing of each Obligor’s trade payables, specifying the trade creditor and balance due, and a detailed trade payable aging, all in form reasonably satisfactory to Agent;

 

(h)                                 promptly after the sending or filing thereof, copies of any proxy statements, financial statements or reports that any Borrower has made generally available to its shareholders; copies of any regular, periodic and special reports or registration statements or prospectuses that any Borrower files with the Securities and Exchange Commission or any other Governmental Authority, or any securities exchange; and copies of any press releases or other statements made available by a Borrower to the public concerning material changes to or developments in the business of such Borrower;

 

(i)                                     (i) promptly after the sending or filing thereof, copies of any annual report to be filed in connection with each Plan and, on the request of the Agent, the most recently filed actuarial valuation report in respect of a Canadian Defined Benefit Pension Plan;

 

(j)                                    as soon as available an in any event with 30 days after the end of each month, a written report containing an analysis by management of the financial results of most recent Fiscal Month;

 

(k)                                 as soon as available, but in any event within thirty (30) days after the end of each Fiscal Year, a report summarizing the insurance coverage (specifying type, amount and carrier) in effect for each Obligor and containing such additional information as the Agent, or any Lender through the Agent, may reasonably specify;

 

(l)                                     promptly upon receipt, copies of any notices and documents received in connection with the Term Debt Documents; and

 

(m)                             such other reports and information (financial or otherwise) as Agent may reasonably request from time to time in connection with any Collateral or any Borrower’s, Subsidiary’s or other Obligor’s financial condition or business.

 

10.1.3.           Notices.  Notify Agent and Lenders in writing, promptly, and in any event within two Business Days, after an Obligor’s obtaining knowledge thereof, of any of the following that affects an Obligor:  (a) the threat in writing or commencement of any proceeding or investigation, whether or not covered by insurance, if an adverse determination could have a Material Adverse Effect; (b) any pending or threatened labor dispute, strike or walkout, or the expiration of any material labor contract; (c) any material default under or termination of a Material Contract; (d) the existence of any Default or Event of Default; (e) any judgment in an amount exceeding $1,000,000; (f) the assertion of any Intellectual Property Claim, if an adverse resolution could have a Material Adverse Effect; (g) any violation or asserted violation (in writing) of any Applicable Law (including ERISA, OSHA, FLSA or any Environmental Laws), if an adverse resolution could have a Material Adverse Effect; (h) any Environmental Release which could reasonably be expected to have a Material Adverse Effect, by an Obligor or on any Property owned, leased or occupied by an Obligor; or receipt of any Environmental Notice; (i) the occurrence of any ERISA Event or Termination Event; (j) the discharge of or any withdrawal or resignation by Borrowers’ independent accountants; (k) any opening of a new office or place of business, at least 30 days prior to such opening; (l) the threat (in writing) or commencement of any regulatory action or investigation by the CPSC with respect to any Obligor or with respect to any product or toy sold, manufactured or distributed by any Obligor; (m) the receipt by any Obligor of any Epidemiological Report, the posting of any notice on SaferProducts.gov, or request for information issued to any Obligor by the CPSC, all with respect to any 

 

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product or toy sold, manufactured or distributed by any Obligor; (n) the commencement of any voluntary or involuntary recall of any product or toy that the Obligors sell, manufacture or distribute; (o) simultaneously with delivery of such notice under the Term Loan Agreement, the existence of any default or event of default under the Term Loan Documents; (p) of any material change in accounting policies or financial reporting practices by any Obligor(s); (q) the filing and/or the enforcement against the Obligors of any Lien for unpaid Taxes or Priority Payables that in the aggregate for all such occurrences exceed $1,000,000; (r) any sale, disposition, or abandonment of any Intellectual Property and/or Equipment, including any such sale, disposition, or abandonment that constitutes a Permitted Asset Disposition hereunder; (s) any sale or transfer of Equity Interest that would constitute a Change of Control under clause (a), (c), (d) or (e) of the definition of Change of Control not less than thirty (30) days prior to the consummation of such sale or transfer, (t) any sale or transfer of a material portion of the assets of any Subsidiary that would constitute a Change of Control under clause (f) of the definition of Change of Control not less than thirty (30) days prior to the consummation of such sale or transfer, or (u) any loss, theft, damage or destruction of any ABL Priority Collateral in an amount greater than or equal to: (i) $50,000 with respect to any single occurrence or (ii) $200,000 in the aggregate from and after the Restatement Date.

 

Each notice pursuant to this Section 10.1.3 shall be accompanied by a statement of a Senior Officer of the Borrower Agent setting forth details of the occurrence referred to therein and stating what action the Borrower Agent has taken and proposes to take with respect thereto. Each notice pursuant to this Section 10.1.3 shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

 

10.1.4.           Landlord and Storage Agreements.  Upon request, provide Agent with copies of all existing agreements, and promptly after execution thereof provide Agent with copies of all future agreements, between an Obligor and any landlord, warehouseman, processor, shipper, bailee or other Person that owns any premises at which any Collateral may be kept or that otherwise may possess or handle any Collateral.

 

10.1.5.           Compliance with Laws.  Comply with all Applicable Laws, including ERISA, PBA, Environmental Laws, FLSA, OSHA, Anti-Terrorism Laws, CPSC Regulations and laws regarding collection and payment of Taxes, and maintain all Governmental Approvals necessary to the ownership of its Properties or conduct of its business, unless failure to comply (other than failure to comply with Anti-Terrorism Laws) or maintain could not reasonably be expected to have a Material Adverse Effect.  Without limiting the generality of the foregoing, if any Environmental Release, which could reasonably be expected to have a Material Adverse Effect, occurs at or on any Properties of any Obligor or Subsidiary, it shall act promptly and diligently to investigate and report to Agent and all appropriate Governmental Authorities the extent of, and to make appropriate remedial action to eliminate, such Environmental Release, whether or not directed to do so by any Governmental Authority.  Maintain adequate testing and other procedures to ensure the safety of all products and toys that the Obligors sell, manufacture or distribute.

 

10.1.6.           Taxes.  Pay and discharge all Taxes prior to the date on which they become delinquent or penalties attach, unless such Taxes are being Properly Contested.

 

10.1.7.           Insurance.  In addition to the insurance required hereunder with respect to Collateral, maintain insurance with insurers (with a Best Rating of at least A-, unless otherwise approved by Agent) reasonably satisfactory to Agent, (a) with respect to the Properties and business of Obligors and Subsidiaries (other than the Immaterial Foreign Subsidiaries) of such type (including product liability, workers’ compensation, larceny, embezzlement, or other criminal misappropriation insurance), in such amounts, and with such coverages and deductibles as are customary for companies similarly

 

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situated; and (b) business interruption insurance in an amount not less than $20,000,000, with deductibles and subject to an insurance assignment reasonably satisfactory to Agent, which shall provide for the proceeds of business interruption insurance to be payable to Agent for application to the Obligations.

 

10.1.8.           Licenses.  Keep each License which constitutes a Material Contract affecting any Collateral (including the manufacture, distribution or disposition of Inventory) or any other material Property of Obligors and Subsidiaries in full force and effect; promptly notify Agent of any proposed modification to any such License, or entry into any new License which constitutes a Material Contract, in each case at least 30 days prior to its effective date; pay all Royalties when due; and notify Agent of any material default or breach asserted in writing by any Person to have occurred under any License which constitutes a Material Contract.

 

10.1.9.           Future Subsidiaries.  Promptly (not later than 5 Business Days) notify Agent upon any Person becoming a Subsidiary and, if such Person is not a Foreign Subsidiary (other than a Foreign Subsidiary that is no longer designated an Immaterial Foreign Subsidiary), cause it to guaranty the Obligations in a manner satisfactory to Agent, and to execute and deliver such documents, instruments and agreements and to take such other actions as Agent shall require to evidence and perfect a Lien in favor of Agent on all assets of such Person, including delivery of such legal opinions, in form and substance reasonably satisfactory to Agent, as it shall deem appropriate.

 

10.1.10.    UK Pension Schemes.  Ensure that neither SI UK nor any of its Subsidiaries is or has been at any time an employer (for the purposes of sections 38 to 51 of the Pensions Act 2004) of an occupational pension scheme which is not a money purchase scheme (both terms as defined in the Pension Schemes Act 1993) or “connected” with or an “associate” of (as those terms are used in sections 38 or 43 of the Pensions Act 2004) such an employer.

 

10.1.11.    Ongoing Obligation. Promptly following any request therefor, provide information and documentation reasonably requested by the Administrative Agent or any Lender for purposes of compliance with applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the PATRIOT Act and the Beneficial Ownership Regulation.

 

10.1.12.    People with Significant Control regime.  The Company and its Subsidiaries shall (a) within the relevant timeframe, comply with any notice it receives pursuant to Part 21A of the Companies Act 2005 from any company incorporated in the United Kingdom whose shares are subject of a Lien in favor of the Agent, and (b) promptly (not later than 5 Business Days) provide the Agent with a copy of that notice.

 

10.1.13.    Centre of Main Interests.  Each UK Guarantor shall maintain its centre of main interests in England and Wales for the purposes of the Regulation.

 

10.2.                     Negative Covenants.  As long as any Commitments or Obligations are outstanding, each Obligor shall not and shall not permit any Subsidiary (other than Foreign Subsidiaries) to:

 

10.2.1.           Permitted Debt.  Create, incur, guarantee or suffer to exist any Debt, except:

 

(a)                                 the Obligations;

 

(b)                                 the Term Debt so long as the principal amount thereunder does not exceed the Term Loan Maximum Amount (as defined in the Intercreditor Agreement), subject to the limitations set forth in the Intercreditor Agreement;

 

(c)                                  Permitted Purchase Money Debt and obligations with respect to Capital Leases so long as the aggregate amount outstanding under this clause (c) does not exceed $2,500,000 at any time;

 

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(d)                                 Borrowed Money listed on Schedule 10.2.1 (other than the Obligations, Subordinated Debt and Permitted Purchase Money Debt), but only to the extent outstanding on the Restatement Date and not satisfied with proceeds of Loans funded on the Restatement Date;

 

(e)                                  Debt with respect to Bank Products incurred in the ordinary course of business;

 

(f)                                   Debt that is in existence when a Person becomes a Subsidiary or that is secured by an asset when acquired by a Borrower or Subsidiary, as long as such Debt was not incurred in contemplation of such Person becoming a Subsidiary or such acquisition, and does not exceed $1,000,000 in the aggregate at any time;

 

(g)                                  Permitted Contingent Obligations;

 

(h)                                 Refinancing Debt as long as each Refinancing Condition is satisfied;

 

(i)                                     Subordinated Debt;

 

(j)                                    Debt of the Obligors owing to any Subsidiary and of any Subsidiary owing to an Obligor or any other Subsidiary; provided, that any such Debt that is owed by a Subsidiary that is not an Obligor shall be subject to Sections 10.2.5 and 10.2.7;

 

(k)                                 Debt owed to any Person (including obligations in respect of letters of credit for the benefit of such Person) providing workers’ compensation, health, disability or other employee benefits or property, casualty, liability insurance, self-insurance, pursuant to reimbursement or indemnification obligations to such Person or to finance insurance premiums, in each case incurred in the Ordinary Course of Business;

 

(l)                                     Debt consisting of cash earnout obligations owed to the seller of any business or assets acquired in a Permitted Acquisition; provided that the aggregate amount of Debt outstanding at any one time permitted under this Section 10.2.1(l) shall not exceed $1,500,000; and

 

(m)                             Debt that is not included in any of the preceding clauses of this Section, is not secured by a Lien and does not exceed $1,000,000 in the aggregate at any time.

 

For purposes of determining compliance with this Section 10.2.1, in the event that an item of Debt (or any portion thereof, but excluding any Indebtedness incurred pursuant to Section 10.2.1(a) at any time meets the criteria of more than one of the categories described above in Section 10.2.1, the Borrower, in its sole discretion, may classify or reclassify (or later divide, classify or reclassify) such item of Debt (or any portion thereof) and shall only be required to include the amount and type of such Debt in one of the above clauses.  Accrual of interest or dividends, the accretion of accreted value, the accretion or amortization of original issue discount and the payment of interest, premium, fees or expenses, in the form of additional Debt (in each case so long as such additional Debt is in the same form and on the same terms as the Debt to which such payment relates) shall not be deemed to be an incurrence of Debt for purposes of this Section 10.2.1.

 

10.2.2.           Permitted Liens.  Create or suffer to exist any Lien upon any of its Property, except the following (collectively, “Permitted Liens”):

 

(a)                                 Liens in favor of Agent;

 

(b)                                 Liens in favor of the Term Loan Agent securing the Term Debt to the extent such Liens are subject to the Intercreditor Agreement;

 

(c)                                  Purchase Money Liens securing Permitted Purchase Money Debt;

 

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(d)                                 Liens for Taxes not yet overdue or being Properly Contested;

 

(e)                                  inchoate statutory Liens (other than Liens for Priority Payables, Liens for Taxes or Liens imposed under ERISA) arising in the Ordinary Course of Business, but only if (i) payment of the obligations secured thereby is not yet due or is being Properly Contested, and (ii) such Liens do not materially impair the value or use of the Property or materially impair operation of the business of any Borrower or Subsidiary;

 

(f)                                   Liens incurred or deposits made in the Ordinary Course of Business to secure the performance of tenders, bids, leases, contracts (except those relating to Borrowed Money), statutory obligations and other similar obligations, or arising as a result of progress payments under government contracts, as long as such Liens are at all times junior to Agent’s Liens;

 

(g)                                  Liens arising in the Ordinary Course of Business that are subject to Lien Waivers;

 

(h)                                 Liens arising by virtue of a judgment or judicial order against any Borrower or Subsidiary, or any Property of a Borrower or Subsidiary, as long as such Liens do not give rise to a Default or an Event of Default hereunder and are being Properly Contested;

 

(i)                                     easements, rights-of-way, restrictions, covenants or other agreements of record, and other similar charges or encumbrances on Real Estate, that do not secure any monetary obligation and do not interfere with the Ordinary Course of Business;

 

(j)                                    normal and customary rights of setoff upon deposits in favor of depository institutions, and Liens of a collecting bank on Payment Items in the course of collection;

 

(k)                                 Liens securing Debt permitted by Section 10.2.1(c) so long as such Lien does not cover more than the property subject to such Capital Lease;

 

(l)                                     with respect to any Collateral covered by the UK Security Agreements, any Security (as such term is defined in the UK Security Agreements) arising solely by operation of law or in the ordinary course of trading securing amounts not more than 30 days overdue and not arising as a result of any default or omission of an Obligor or its Subsidiaries;

 

(m)                             statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen and other Liens imposed by Applicable Law in the Ordinary Course of Business for amounts not yet due or which are being Properly Contested;

 

(n)                                 pledges and deposits made in the Ordinary Course of Business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations;

 

(o)                                 any Lien existing on any property or asset (other than Accounts or Inventory) prior to the acquisition thereof by the Borrower or any Subsidiary or existing on any property or asset of any Person that became or becomes a Subsidiary after the Restatement Date prior to the time such Person became or becomes a Subsidiary; provided that (i) such Lien is not created in contemplation of such acquisition or such Person becoming a Subsidiary as the case may be, (ii) such Lien shall not apply to any other property or asset of the Borrower or any Obligor (other than any replacements of such property or assets and additions and accessions thereto, after-acquired property subject to a Lien securing Debt and other obligations incurred prior to such time and which Debt and other obligations are permitted hereunder that require, pursuant to their terms at such time, a pledge of after-acquired property, and the proceeds and the products thereof and customary security deposits in respect thereof and in the case of multiple financings of equipment provided by any lender, other equipment financed by such lender), (iii) such Lien shall secure only those obligations and unused commitments (and to the extent such obligations

 

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and commitments constitute Debt, such Debt is permitted hereunder) that it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be, and extensions, renewals and replacements thereof so long as the principal amount of such extensions, renewals and replacements does not exceed the principal amount of the obligations being extended, renewed or replaced (plus any accrued but unpaid interest (including any portion thereof which is payable in kind in accordance with the terms of such extended, renewed or replaced Debt) and premium payable by the terms of such obligations thereon and fees and expenses associated therewith) and (iv) the Debt secured by such Lien is incurred pursuant to and in accordance with the terms of Section 10.2.1(f);

 

(p)                                 Liens representing (i) any interest or title of a licensor, lessor or sublicensor or sublessor under any lease or license permitted by this Agreement, (ii) any Lien or restriction that the interest or title of such lessor, licensor, sublessor or sublicensor may be subject to, or (iii) the interest of a licensee, lessee, sublicensee or sublessee arising by virtue of being granted a license or lease permitted by this Agreement, in each case not interfering in any material respect with the ordinary conduct of the business of the Borrowers and the Subsidiaries, taken as a whole;

 

(q)                                 any Lien in connection with debt permitted under Section 10.2.1(h);

 

(r)                                    Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into in the Ordinary Course of Business;

 

(s)                                   the filing of UCC financing statements solely as a precautionary measure or required notice in connection with operating leases or consignment of goods;

 

(t)                                    Liens not otherwise permitted by this Section10.2.2 to the extent that the aggregate outstanding amount of the obligations secured thereby at any time outstanding does not exceed $500,000;

 

(u)                                 Liens in favor of customs and revenue authorities to secure payment of customs duties in connection with the importation of goods;

 

(v)                                 Liens of bailees in the Ordinary Course of Business;

 

(w)                               utility and similar deposits in the Ordinary Course of Business;

 

(x)                                 non-exclusive licenses and sublicenses granted by a Borrower or any of its Subsidiaries and leases and subleases by a Borrower or any Subsidiary to third parties in the Ordinary Course of Business not interfering with the business of a Borrower or any of its Subsidiaries; and

 

(y)                                 existing Liens shown on Schedule 10.2.2.

 

For purposes of determining compliance with this Section 10.2.2, (x) a Lien need not be incurred solely by reference to one category of Liens described above but may be incurred under any combination of such categories (including in part under one such category and in part under any other such category) and (y) in the event that a Lien (or any portion thereof) meets the criteria of one or more of such categories of Liens described above, the Borrowers, in their sole discretion, may classify or may subsequently reclassify at any time such Lien (or any portion thereof) in any manner that complies with this covenant.

 

Notwithstanding anything to the contrary contained in this Agreement or any other Loan Document (including any provision for, reference to, or acknowledgement of, any Lien or Permitted Lien), nothing herein and no approval by the Agent or any Lender of any Lien or Permitted Lien (whether such approval is oral or in writing) shall be construed as or deemed to constitute a subordination by the Agent or such Lender of any security interest or other right, interest or Lien in or to the Collateral or any part thereof in favor of any Lien or Permitted Lien or any holder of any Lien or Permitted Lien.

 

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10.2.3.           [Intentionally Deleted].

 

10.2.4.           Distributions; Upstream Payments.  Declare or make, directly or indirectly, any Distribution (or enter into any agreement which obligates any Borrower or Subsidiary to make any Distribution unless such agreement is conditioned upon either obtaining the consent of Agent and Required Lenders to such transaction or the Full Payment of the Obligations upon the making of such Distribution), except Permitted Restricted Payments; or create or suffer to exist any encumbrance or restriction on the ability of a Subsidiary to make any Upstream Payment, except for restrictions under the Loan Documents, under Applicable Law or in effect on the Restatement Date as shown on Schedule 9.1.15.

 

10.2.5.           Restricted Investments.  Make any Restricted Investment.

 

10.2.6.           Disposition of Assets.  Make any Asset Disposition, except a Permitted Asset Disposition, a disposition of Equipment under Section 8.4.2, or a transfer of Property by a Subsidiary or Obligor to a Borrower.

 

10.2.7.           Loans.  Make any loans or advances, except (a) to officers, directors, partners and employees of the Obligors in the Ordinary Course of Business in an amount greater than $200,000 to any individual at any time or in an aggregate amount greater than $500,000 at any time outstanding, for travel, entertainment, relocation and analogous ordinary business purposes; (b) prepaid expenses and extensions of trade credit made in the Ordinary Course of Business; (c) deposits with financial institutions permitted hereunder; and (d) as long as no Default or Event of Default exists, intercompany loans by an Obligor to another Obligor, provided that intercompany loans from the US Borrowers (i) to the Canadian Guarantors shall not exceed $500,000 in the aggregate at any time and (ii) to the UK Guarantors shall not exceed $1,000,000 in the aggregate at any time.

 

10.2.8.           Restrictions on Payment of Certain Debt.  Except in connection with any Refinancing permitted under Section 10.2.1, make any payments (whether voluntary or mandatory, or a prepayment, redemption, retirement, defeasance or acquisition) with respect to any (a) Subordinated Debt, except regularly scheduled payments of principal, interest and fees, but only to the extent permitted under any subordination agreement relating to such Debt (and a Senior Officer of Borrower Agent shall certify to Agent, not less than five Business Days prior to the date of payment, that all conditions under such agreement have been satisfied); (b) Borrowed Money (other than the Obligations or the Term Debt, subject in all respects to the terms of the Intercreditor Agreement) prior to its due date under the agreements evidencing such Debt as in effect on the Original Closing Date (or as amended thereafter with the consent of Agent); or (c) Term Debt prior to the due date for such payments under the Term Debt Documents as in effect on the Restatement Date (or as amended, restated, refinanced, replaced, supplemented or otherwise modified thereafter in accordance with the Intercreditor Agreement), other than Term Debt Repayments.

 

10.2.9.           Fundamental Changes.  (a) Change its name or conduct business under any fictitious name; change its tax, charter or other organizational identification number; change its form or state of organization, without, in the case of any such change described in this clause (a), providing not less than ten (10) days prior written notice to Agent, (b) liquidate, wind up its affairs or dissolve itself; or (c) merge, combine or consolidate with any Person, whether in a single transaction or in a series of related transactions, except for (i) mergers or consolidations of a wholly-owned Subsidiary with another wholly-owned Subsidiary or into a Borrower; or (ii) Permitted Acquisitions.

 

10.2.10.    Subsidiaries.  Form or acquire any Subsidiary after the Restatement Date, except in accordance with Sections 10.1.9, 10.2.5 and 10.2.9; or permit any existing Subsidiary to issue any additional Equity Interests except director’s qualifying shares.

 

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10.2.11.    Organic Documents.  Amend, modify or otherwise change any of its Organic Documents in any manner adverse to the Lenders, except in connection with either a rights distribution by the Company or a transaction permitted under Section 10.2.9.

 

10.2.12.    Tax Consolidation.  File or consent to the filing of any consolidated income tax return with any Person other than Obligors and Subsidiaries.

 

10.2.13.    Accounting Changes.  Make any material change in accounting treatment or reporting practices, except as required by GAAP and in accordance with Section 1.2; or change its Fiscal Year.

 

10.2.14.    Restrictive Agreements.  Become a party to any Restrictive Agreement, except a Restrictive Agreement (a) in effect on the Restatement Date; and (b) following the Restatement Date, subject to Agent’s prior consent.

 

10.2.15.    Hedging Agreements.  Enter into any Hedging Agreement, except to hedge risks arising in the Ordinary Course of Business and not for speculative purposes.

 

10.2.16.    Conduct of Business.  Engage in any business, other than (i) the businesses conducted by the Obligors on the Restatement Date and activities incidental or supplemental thereto, and (ii) businesses similar to the business conducted by the Obligors on the Original Closing Date or other businesses approved by Agent in its Permitted Discretion.  This Section 10.2.16 shall not apply to Immaterial Foreign Subsidiaries.

 

10.2.17.    Affiliate Transactions.  Enter into or be party to any transaction with an Affiliate, except (a) transactions expressly permitted by the Loan Documents; (b) payment of reasonable compensation to officers and employees for services actually rendered, and payment of customary directors’ fees and indemnities; (c) transactions solely among Obligors; (d) transactions with Affiliates that were consummated prior to the Restatement Date, as shown on Schedule 10.2.17; (e) intercompany loans permitted under Section 10.2.7; and (f) subject to Agent’s prior consent (such consent not to be unreasonably withheld, denied, delayed or conditioned), transactions with Affiliates in the Ordinary Course of Business, upon fair and reasonable terms which are fully disclosed to Agent and no less favorable than would be obtained in a comparable arm’s-length transaction with a non-Affiliate.

 

10.2.18.    Plans.  Become party to (including by way of acquisition of any Person), without the consent of the Agent (acting reasonably), any Multiemployer Plan, Canadian Defined Benefit Pension Plan or Foreign Plan, other than any in existence on the Restatement Date.

 

10.2.19.    Amendments to Term Debt and Subordinated Debt.  (a) Amend, restate, supplement or otherwise modify the Term Loan Agreement (or any document or instrument executed in connection therewith) if such amendment, restatement, supplement or other modification would not be permitted under the Intercreditor Agreement or (b) amend, restate, supplement or otherwise modify any document, instrument or agreement relating to the Subordinated Debt, if such modification (i) increases the principal balance of such Debt, or increases any required payment of principal or interest; (ii) accelerates the date on which any installment of principal or any interest is due, or adds any additional redemption, put or prepayment provisions; (iii) shortens the final maturity date or otherwise accelerates amortization; (iv) increases the interest rate; (v) materially increases or adds any fees or charges; (vi) modifies any covenant in a manner or adds any representation, covenant or default that is more onerous or restrictive in any material respect for any Obligor or Subsidiary, or that is otherwise materially adverse to any Obligor, any Subsidiary or Lenders; or (vii) results in the Obligations not being fully benefited by the subordination provisions thereof.

 

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10.3.                     Financial Covenants.

 

10.3.1.           Fixed Charge Coverage Ratio.  If a Financial Covenant Testing Period shall be continuing, Obligors and their Subsidiaries shall maintain a Fixed Charge Coverage Ratio as of the last day of each Fiscal Month, commencing on the first day of such Financial Covenant Testing Period and continuing until such Financial Covenant Testing Period shall no longer be continuing, for each period of twelve consecutive Fiscal Months then most recently ended, of at least 1.00 to 1.00.

 

10.4.                     Restrictions on Activities of Company.  Obligors covenant and agree that Company shall not (i) hold any assets other than the Equity Interests of SI USA, SI UK or SI Asia and cash and Cash Equivalents, (ii) have any material liabilities other than liabilities under the Loan Documents, tax liabilities in the Ordinary Course of Business, liabilities under employment agreements and written employment arrangements, and corporate, administrative and operating expenses in the Ordinary Course of Business, or (iii) engage in any business other than owning the Equity Interests of SI USA and activities incidental to such ownership, acting as a co-borrower in respect of the Obligations hereunder, and granting to Agent for the benefit of Lenders, security interests in and Liens upon its assets pursuant to the Security Documents to which it is a party.

 

10.5.                     Restrictions on Activities of Foreign Subsidiaries.  Obligors covenant and agree that (a) no Obligor shall guaranty any liabilities or obligations of any Foreign Subsidiary; (b) no Obligor shall make any Investment in, or transfer any properties or assets to, any Foreign Subsidiary, other than as permitted under Sections 10.2.5 and 10.2.17; (c) no Foreign Subsidiary shall create or suffer to exist any encumbrance or restriction on the ability of a Subsidiary to make any Upstream Payment, except for restrictions under the Loan Documents, under Applicable Law or in effect on the Restatement Date as shown on Schedule 9.1.15 and (d) the aggregate outstanding Debt owed by Foreign Subsidiaries (excluding Debt owed to Obligors that is permitted under Section 10.2.7) shall not at any time exceed the foreign currency equivalent of $250,000.  Obligors further agree if the total gross revenues of Born Free Holdings Ltd. shall at any time exceed $250,000, then the Borrowers shall promptly re-designate such Foreign Subsidiary as no longer constituting an Immaterial Foreign Subsidiary by written notice to Agent (following such re-designation the provisions of Sections 7 and 10.1.9 shall thereafter be applicable to such Foreign Subsidiary)

 

SECTION 11.                                    EVENTS OF DEFAULT; REMEDIES ON DEFAULT

 

11.1.                     Events of Default.  Each of the following shall be an “Event of Default” if it occurs for any reason whatsoever, whether voluntary or involuntary, by operation of law or otherwise:

 

(a)                                 Any Obligor fails to pay (i) its Obligations under the Loan Documents constituting principal, interest, or any fees payable under Sections 3.2.1, 3.2.2 or 3.2.3 when due (whether at stated maturity, on demand, upon acceleration or otherwise) or (ii) solely with respect to any Obligations not constituting principal, interest, or any fees payable under Sections 3.2.1, 3.2.2 or 3.2.3;

 

(b)                                 Any representation, warranty or other written statement of an Obligor made in connection with any Loan Documents or transactions contemplated thereby is incorrect or misleading in any material respect when given;

 

(c)                                  An Obligor breaches or fail to perform any covenant contained in Section 7.4, 8.1, 8.2.4, 8.2.5, 8.5, 8.6.2, 10.1.1(a), 10.1.2, 10.1.3, 10.1.6, 10.2 or 10.3;

 

(d)                                 An Obligor breaches or fails to perform any other covenant contained in any Loan Documents, and such breach or failure is not cured within 20 days after a Senior Officer of such Obligor has knowledge thereof or receives notice thereof from Agent, whichever is sooner; provided, however, that such notice and opportunity to cure shall not apply if the breach or failure to perform is not capable of being cured within such period or is a willful breach by an Obligor;

 

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(e)                                  A Guarantor repudiates, revokes or attempts to revoke in writing its Guaranty; an Obligor or third party denies or contests the validity or enforceability of any Loan Documents or Obligations, or the perfection or priority of any Lien granted to Agent; or any Loan Document ceases to be in full force or effect for any reason (other than a waiver or release by Agent and Lenders);

 

(f)                                   Any (i) breach or default of an Obligor occurs under any Hedging Agreement, (ii) any “Event of Default” (as defined in the Term Loan Agreement) occurs under the Term Debt Documents, or (iii) any breach or default of an Obligor occurs under any instrument or agreement to which it is a party or by which it or any of its Properties is bound, relating to any Debt (other than the Obligations or the Term Debt) in excess of $2,000,000 (if, with respect to this clause (iii), the maturity of or any payment with respect to such Debt may be accelerated or demanded due to such breach); provided that so long as the Agent has not exercised any remedies under this Section 11, any Default or Event of Default under this Section 11.1(f) shall be immediately cured and no longer continuing (without any action on the part of the Agent, any Lender or otherwise) as and when any such failure (x) is remedied by the Borrowers or applicable Subsidiary or (y) is waived (including in the form of amendment) by the requisite holders of the applicable foregoing;

 

(g)                                  Any final non-appealable judgment or order for the payment of money is entered against an Obligor in an amount that exceeds, individually or cumulatively with all unsatisfied judgments or orders against all Obligors, $1,000,000 (net of insurance coverage therefor that has not been denied by the insurer) and has not been paid, satisfied, discharged, or vacated and there is a period of 30 calendar days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect;

 

(h)                                 A loss, theft, damage or destruction occurs with respect to any Collateral if the amount not covered by insurance exceeds $2,000,000;

 

(i)                                     An Obligor is enjoined, restrained or in any way prevented by any Governmental Authority from conducting any material part of its business; an Obligor suffers the loss, revocation or termination of any material license, permit, lease or agreement necessary to its business; there is a cessation of any material part of an Obligor’s business for a material period of time; any material Collateral or Property of an Obligor is taken or impaired through condemnation; an Obligor agrees to or commences any liquidation, dissolution or winding up of its affairs; or an Obligor is not Solvent;

 

(j)                                    An Insolvency Proceeding is commenced by an Obligor; an Obligor makes an offer of settlement, extension or composition to its unsecured creditors generally; any Obligor becomes unable or admits in writing its inability or fails generally to pay its debts as they become due in the Ordinary Course of Business; a trustee, a receiver, an interim receiver, monitor, liquidator or similar official is appointed to take possession of any substantial Property of or to operate any of the business of an Obligor; or an Insolvency Proceeding or proceeding applicable to bankruptcy or insolvency is commenced against an Obligor and:  the Obligor consents to institution of the proceeding, the petition or notice commencing the proceeding is not timely contested by the Obligor, the petition or notice is not, in respect of an Obligor (other than a UK Guarantor, dismissed within 45 days after filing, an order for relief is entered in the proceeding, or in respect of a UK Guarantor, the petition is a winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within 14 days of commencement;

 

(k)                                 (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan that has resulted or could reasonably be expected to result in liability of an Obligor to a Pension Plan, Multiemployer Plan or PBGC or that constitutes grounds for appointment of a trustee for or termination by the PBGC of any Pension Plan or Multiemployer Plan; an Obligor or ERISA Affiliate fails to pay when due any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan; (ii) a Termination Event  occurs with respect to a Canadian Defined Benefit Pension Plan in respect of which a Canadian Priority Payables Reserve has not been taken or any Lien

 

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arises in respect of Obligors (save for contribution amounts not yet due) in connection with any Canadian Pension Plan which Lien would reasonably be expected to result in a Material Adverse Effect; (iii) an event occurs which constitutes grounds for the termination of any UK Pension Scheme or for the appointment of a receiver, liquidator, administrator or trustee in bankruptcy of any UK Pension Scheme or if any Obligor is in default with respect to the terms of payment or the performance of its obligations under any UK Pension Scheme or any Lien arises in respect of any Obligor in connection with any UK Pension Scheme or (iv) any event similar to the foregoing occurs or exists with respect to a Foreign Plan;

 

(l)                                     An Obligor or any of its Senior Officers is criminally indicted or convicted for (i) a felony committed in the conduct of the Obligor’s business, or (ii) violating any state, provincial or federal law (including the Controlled Substances Act, Money Laundering Control Act of 1986, Proceeds of Crime Act and Illegal Exportation of War Materials Act) that could lead to forfeiture of any material Property or any Collateral;

 

(m)                             A Change of Control occurs, or a “Change of Control” or similar event occurs under the Term Loan Agreement;

 

(n)                                 [Reserved]; or

 

(o)                                 Any fine is issued against any Obligors by the CPSC in an amount that exceeds, individually or cumulatively with all other fines issued by the CPSC against the Obligors within the prior 12 months, $1,500,000;

 

(p)                                 Obligors institute a recall of products or toys constituting Inventory which: (i) is unsaleable or unable to be repaired and has an aggregate Value in excess of $2,000,000, (ii) results in, or could reasonably be expected to result in, the Obligors expending in excess of $2,000,000 in connection with the recall, repair, remediation or replacement of such Inventory, or (iii) results in, or could reasonably be expected to result in, the Obligors incurring claims, losses, liabilities or damages in excess of $5,000,000 in the aggregate (net of insurance coverage therefor that has not been denied by the insurer);

 

(q)                                 (i) the Intercreditor Agreement shall for any reason be revoked or invalidated, or otherwise cease to be in full force and effect, or any party to such Intercreditor Agreement shall contest in writing, the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Liens securing the Obligations, for any reason shall not have the priority contemplated by the Intercreditor Agreement; or (ii) the subordination provisions of any agreement or instrument relating to any Subordinated Debt shall for any reason be revoked or invalidated, or otherwise cease to be in full force and effect, or any Person party thereto (other than Agent, the Lenders or the Issuing Bank) shall contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations, for any reason shall not have the priority contemplated by this Agreement or such subordination provisions;

 

(r)                                    (i) Any provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Obligor or any other Person contests in any manner the validity or enforceability of any provision of any Loan Document; or any Obligor denies that it has any or further liability or obligation under any provision of any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document or seeks to avoid, limit or otherwise adversely affect any Lien purported to be created under any Security Document; or (ii) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party or any other Person not to be, a valid and perfected Lien on any Collateral, with the priority required by the applicable Security Document and/or the Intercreditor Agreement; or

 

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(s)                                   Except as otherwise expressly permitted hereunder, an Obligor shall take any action to either: (i) suspend the operation of all or a material portion of its business in the ordinary course, (ii) suspend the payment of any material obligations in the ordinary course or suspend the performance under Material Contracts in the ordinary course, (iii) solicit proposals for the liquidation of, or undertake to liquidate, all or a material portion of its assets, or (iv) solicit proposals for the employment of, or employ, an agent or other third party to conduct a program of liquidation sales of any material portion of its business, taken as a whole.

 

11.2.                     Remedies upon Default.  If an Event of Default described in Section 11.1(j) occurs with respect to any Borrower, then to the extent permitted by Applicable Law, all Obligations (other than Secured Bank Product Obligations) shall become automatically due and payable and all Commitments shall terminate, without any action by Agent or notice of any kind.  In addition, or if any other Event of Default exists, Agent may in its discretion (and shall upon written direction of Required Lenders) do any one or more of the following from time to time:

 

(a)                                 declare any Obligations (other than Secured Bank Product Obligations) immediately due and payable, whereupon they shall be due and payable without diligence, presentment, demand, protest or notice of any kind, all of which are hereby waived by Borrowers to the fullest extent permitted by law;

 

(b)                                 terminate, reduce or condition any Commitment, or make any adjustment to the Revolver Borrowing Base;

 

(c)                                  require Obligors to Cash Collateralize LC Obligations, Secured Bank Product Obligations and other Obligations that are contingent or not yet due and payable, and, if Obligors fail promptly to deposit such Cash Collateral, Agent may (and shall upon the direction of Required Lenders) advance the required Cash Collateral as Revolver Loans (whether or not a Revolver Overadvance exists or is created thereby, or the conditions in Section 6 are satisfied); and

 

(d)                                 exercise any other rights or remedies afforded under any agreement, by law, at equity or otherwise, including the rights and remedies of a secured party under the UCC, PPSA or UK ST Law.  Such rights and remedies include the rights to (i) take possession of any Collateral; (ii) require Obligors to assemble Collateral, at Obligors’ expense, and make it available to Agent at a place designated by Agent; (iii) enter any premises where Collateral is located and store Collateral on such premises until sold (and if the premises are owned or leased by an Obligor, Obligors agree not to charge for such storage); and (iv) sell or otherwise dispose of any Collateral in its then condition, or after any further manufacturing or processing thereof, at public or private sale, with such notice as may be required by Applicable Law, in lots or in bulk, at such locations, all as Agent, in its discretion, deems advisable.  Each Obligor agrees that 10 days’ notice of any proposed sale or other disposition of Collateral by Agent shall be reasonable, and that any sale conducted on the internet or to a licensor of Intellectual Property shall be commercially reasonable.  Agent may conduct sales on any Obligor’s premises, without charge, and any sale may be adjourned from time to time in accordance with Applicable Law.  Agent shall have the right to sell, lease or otherwise dispose of any Collateral for cash, credit or any combination thereof, and Agent may purchase any Collateral at public or, if permitted by law, private sale and, in lieu of actual payment of the purchase price, may credit bid and set off the amount of such price against the Obligations.

 

11.3.                     License.  Agent is hereby granted an irrevocable, non-exclusive license or other right to use, license or sub-license (without payment of royalty or other compensation to any Person) any or all Intellectual Property of Obligors, computer hardware and software, trade secrets, brochures, customer lists, promotional and advertising materials, labels, packaging materials and other Property, in advertising for sale, marketing, selling, collecting, completing manufacture of, or otherwise exercising any rights or

 

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remedies with respect to, any Collateral.  Each Obligor’s rights and interests under Intellectual Property shall inure to Agent’s benefit.

 

11.4.                     Setoff.  At any time during an Event of Default, Agent, Issuing Bank, Lenders, and any of their Affiliates are authorized, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by Agent, Issuing Bank, such Lender or such Affiliate to or for the credit or the account of an Obligor against any Obligations, irrespective of whether or not Agent, Issuing Bank, such Lender or such Affiliate shall have made any demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or are owed to a branch or office of Agent, Issuing Bank, such Lender or such Affiliate different from the branch or office holding such deposit or obligated on such indebtedness.  The rights of Agent, Issuing Bank, each Lender and each such Affiliate under this Section are in addition to other rights and remedies (including other rights of setoff) that such Person may have.

 

11.5.                     Remedies Cumulative; No Waiver.

 

11.5.1.           Cumulative Rights.  All agreements, warranties, guaranties, indemnities and other undertakings of Obligors under the Loan Documents are cumulative and not in derogation of each other.  The rights and remedies of Agent and Lenders are cumulative, may be exercised at any time and from time to time, concurrently or in any order, and are not exclusive of any other rights or remedies available by agreement, by law, at equity or otherwise.  All such rights and remedies shall continue in full force and effect until Full Payment of all Obligations.

 

11.5.2.           Waivers.  No waiver or course of dealing shall be established by (a) the failure or delay of Agent or any Lender to require strict performance by Obligors with any terms of the Loan Documents, or to exercise any rights or remedies with respect to Collateral or otherwise; (b) the making of any Loan or issuance of any Letter of Credit during a Default, Event of Default or other failure to satisfy any conditions precedent; or (c) acceptance by Agent or any Lender of any payment or performance by an Obligor under any Loan Documents in a manner other than that specified therein.  It is expressly acknowledged by Obligors that any failure to satisfy a financial covenant on a measurement date shall not be cured or remedied by satisfaction of such covenant on a subsequent date.

 

SECTION 12.                                    AGENT

 

12.1.                     Appointment, Authority and Duties of Agent.

 

12.1.1.           Appointment and Authority.  Each Secured Party appoints and designates Bank of America as Agent under all Loan Documents and to hold the security interests constituted by the UK Security Agreements on trust for the Secured Parties in accordance with their terms and the Agent accepts that appointment.  Agent may, and each Secured Party authorizes Agent to, enter into all Loan Documents to which Agent is intended to be a party and accept all Security Documents, for the benefit of Secured Parties.  Any action taken by Agent in accordance with the provisions of the Loan Documents, and the exercise by Agent of any rights or remedies set forth therein, together with all other powers reasonably incidental thereto, shall be authorized by and binding upon all Secured Parties.  Without limiting the generality of the foregoing, Agent shall have the sole and exclusive authority to (a) act as the disbursing and collecting agent for Lenders with respect to all payments and collections arising in connection with the Loan Documents; (b) execute and deliver as Agent each Loan Document, including any intercreditor or subordination agreement, and accept delivery of each Loan Document; (c) act as collateral agent for Secured Parties for purposes of perfecting and administering Liens under the Loan Documents, and for all other purposes stated therein; (d) manage, supervise or otherwise deal with Collateral; and (e) take any Enforcement Action or otherwise exercise any rights or remedies with respect to any Collateral or under any Loan Documents, Applicable Law or otherwise.  The duties of Agent are ministerial and

 

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administrative in nature only, and Agent shall not have a fiduciary relationship with any Secured Party, Participant or other Person, by reason of any Loan Document or any transaction relating thereto.  Agent alone shall be authorized to determine whether any Account or Inventory constitutes an Eligible Account, Eligible In-Transit Inventory or Eligible Inventory, whether to impose or release any reserve, or whether any conditions to funding or to issuance of a Letter of Credit have been satisfied, which determinations and judgments, if exercised in good faith, shall exonerate Agent from liability to any Secured Party or other Person for any error in judgment.

 

12.1.2.           Duties.  Agent shall not have any duties except those expressly set forth in the Loan Documents.  The conferral upon Agent of any right shall not imply a duty to exercise such right, unless instructed to do so by Lenders in accordance with this Agreement.

 

12.1.3.           Agent Professionals.  Agent may perform its duties through agents and employees.  Agent may consult with and employ Agent Professionals, and shall be entitled to act upon, and shall be fully protected in any action taken in good faith reliance upon, any advice given by an Agent Professional.  Agent shall not be responsible for the negligence or misconduct of any agents, employees or Agent Professionals selected by it with reasonable care.

 

12.1.4.           Instructions of Required Lenders.  The rights and remedies conferred upon Agent under the Loan Documents may be exercised without the necessity of joinder of any other party, unless required by Applicable Law. In determining compliance with a condition for any action hereunder, including satisfaction of any condition in Section 6, Agent may presume that the condition is satisfactory to a Secured Party unless Agent has received notice to the contrary from such Secured Party before Agent takes the action.  Agent may request instructions from Required Lenders or other Secured Parties with respect to any act (including the failure to act) in connection with any Loan Documents or Collateral, and may seek assurances to its satisfaction from Secured Parties of their indemnification obligations against Claims that could be incurred by Agent.  Agent may refrain from any act until it has received such instructions or assurances, and shall not incur liability to any Person by reason of so refraining.  Instructions of Required Lenders shall be binding upon all Secured Parties, and no Secured Party shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting pursuant to instructions of Required Lenders.  Notwithstanding the foregoing, instructions by and consent of specific parties shall be required to the extent provided in Section 14.1.1.  In no event shall Agent be required to take any action that, in its opinion, is contrary to Applicable Law or any Loan Documents or could subject any Agent Indemnitee to personal liability.

 

12.2.                     Agreements Regarding Collateral and Borrower Materials.

 

12.2.1.           Lien Releases; Care of Collateral.  Secured Parties authorize Agent to release any Lien with respect to any Collateral (a) upon Full Payment of the Obligations; (b) that is the subject of a disposition or Lien that Borrowers certify in writing is a Permitted Asset Disposition or a Permitted Lien entitled to priority over Agent’s Liens (and Agent may rely conclusively on any such certificate without further inquiry); (c) that does not constitute a material part of the Collateral; or (d) subject to Section 14.1, with the consent of Required Lenders.  Secured Parties authorize Agent to subordinate its Liens to any Purchase Money Lien or other Lien entitled to priority hereunder.  Agent shall have no obligation to assure that any Collateral exists or is owned by an Obligor, or is cared for, protected or insured, nor to assure that Agent’s Liens have been properly created, perfected or enforced, or are entitled to any particular priority, nor to exercise any duty of care with respect to any Collateral.

 

12.2.2.           Possession of Collateral.  Agent and Secured Parties appoint each Lender as agent (for the benefit of Secured Parties) for the purpose of perfecting Liens in any Collateral held or controlled by such Lender, to the extent such Liens are perfected by possession or control.  If any Lender obtains possession or control of any Collateral, it shall notify Agent thereof and, promptly upon Agent’s request, deliver such Collateral to Agent or otherwise deal with it in accordance with Agent’s instructions.

 

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12.2.3.           Reports.  Agent shall promptly provide to Lenders, when complete, any field audit, examination or appraisal report prepared for Agent with respect to any Obligor or Collateral (“Report”).  Reports and other Borrower Materials may be made available to Lenders by providing access to them on the Platform, but Agent shall not be responsible for system failures or access issues that may occur from time to time.  Each Lender agrees (a) that Reports are not intended to be comprehensive audits or examinations, and that Agent or any other Person performing an audit or examination will inspect only specific information regarding the Obligations or Collateral and will rely significantly upon Obligors’ books, records and representations; (b) that Agent makes no representation or warranty as to the accuracy or completeness of any Borrower Materials and shall not be liable for any information contained in or omitted from any Borrower Materials, including any Report; and (c) to keep all Borrower Materials confidential and strictly for such Lender’s internal use, not to distribute any Report or other Borrower Materials (or the contents thereof) to any Person (except to such Lender’s Participants, attorneys and accountants), and to use all Borrower Materials solely for administration of the Obligations.  Each Lender shall indemnify and hold harmless Agent and any other Person preparing a Report from any action such Lender may take as a result of or any conclusion it may draw from any Borrower Materials, as well as from any Claims arising as a direct or indirect result of Agent furnishing same to such Lender, via the Platform or otherwise.

 

12.3.                     Reliance By Agent.  Agent shall be entitled to rely, and shall be fully protected in relying, upon any certification, notice or other communication (including those by telephone, telex, telegram, telecopy or e-mail) believed by it to be genuine and correct and to have been signed, sent or made by the proper Person.  Agent shall have a reasonable and practicable amount of time to act upon any instruction, notice or other communication under any Loan Document, and shall not be liable for any delay in acting.

 

12.4.                     Action Upon Default.  Agent shall not be deemed to have knowledge of any Default or Event of Default, or of any failure to satisfy any conditions in Section 6, unless it has received written notice from a Borrower or Required Lenders specifying the occurrence and nature thereof.  If any Lender acquires knowledge of a Default, Event of Default or failure of such conditions, it shall promptly notify Agent and the other Lenders thereof in writing.  Each Secured Party agrees that, except as otherwise provided in any Loan Documents or with the written consent of Agent and Required Lenders, it will not take any Enforcement Action, accelerate Obligations (other than Secured Bank Product Obligations), or exercise any right that it might otherwise have under Applicable Law to credit bid at foreclosure sales, UCC sales or PPSA sales other dispositions of Collateral, or to assert any rights relating to any Collateral.

 

12.5.                     Ratable Sharing.  If any Lender obtains any payment or reduction of any Obligation, whether through set-off or otherwise, in excess of its share of such Obligation, determined in accordance with each Lender’s Applicable Percentage of such Obligation (or in accordance with Section 5.6.2, as applicable), such Lender shall forthwith purchase from Agent, Issuing Bank and the other Lenders such participations in the affected Obligation as are necessary to share the excess payment or reduction in accordance with each Lender’s Applicable Percentage thereof (or in accordance with Section 5.6.2, as applicable).  If any of such payment or reduction is thereafter recovered from the purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.  Notwithstanding the foregoing, if a Defaulting Lender obtains a payment or reduction of any Obligation, it shall immediately turn over the amount thereof to Agent for application under Section 4.2.2 and it shall provide a written statement to Agent describing the Obligation affected by such payment or reduction.  No Lender shall set off against any Dominion Account without Agent’s prior consent.

 

12.6.                     Indemnification.  EACH SECURED PARTY SHALL INDEMNIFY AND HOLD HARMLESS AGENT INDEMNITEES AND ISSUING BANK INDEMNITEES, TO THE EXTENT NOT REIMBURSED BY OBLIGORS, ON A PRO RATA BASIS, AGAINST ALL CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY SUCH INDEMNITEE, PROVIDED THAT ANY CLAIM AGAINST AN AGENT INDEMNITEE

 

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RELATES TO OR ARISES FROM ITS ACTING AS OR FOR AGENT (IN THE CAPACITY OF AGENT).  In Agent’s discretion, it may reserve for any Claims made against an Agent Indemnitee or Issuing Bank Indemnitee, and may satisfy any judgment, order or settlement relating thereto, from proceeds of Collateral prior to making any distribution of Collateral proceeds to Secured Parties.  If Agent is sued by any receiver, trustee or other Person for any alleged preference or fraudulent transfer, then any monies paid by Agent in settlement or satisfaction of such proceeding, together with all interest, costs and expenses (including attorneys’ fees) incurred in the defense of same, shall be promptly reimbursed to Agent by each Lender to the extent of its Applicable Percentage.  Notwithstanding anything to the contrary set forth herein, no Indemnitee shall be entitled to indemnification from any Lender for a claim that is directly and solely attributable to the gross negligence or willful misconduct of such Indemnitee.

 

12.7.                     Limitation on Responsibilities of Agent.  Agent shall not be liable to any Secured Party for any action taken or omitted to be taken under the Loan Documents, except for losses directly and solely caused by Agent’s gross negligence or willful misconduct.  Agent does not assume any responsibility for any failure or delay in performance or any breach by any Obligor, Lender or other Secured Party of any obligations under the Loan Documents.  Agent does not make any express or implied representation, warranty or guarantee to Secured Parties with respect to any Obligations, Collateral, Loan Documents or Obligor.  No Agent Indemnitee shall be responsible to Secured Parties for any recitals, statements, information, representations or warranties contained in any Loan Documents or Borrower Materials; the execution, validity, genuineness, effectiveness or enforceability of any Loan Documents; the genuineness, enforceability, collectibility, value, sufficiency, location or existence of any Collateral, or the validity, extent, perfection or priority of any Lien therein; the validity, enforceability or collectibility of any Obligations; or the assets, liabilities, financial condition, results of operations, business, creditworthiness or legal status of any Obligor or Account Debtor.  No Agent Indemnitee shall have any obligation to any Secured Party to ascertain or inquire into the existence of any Default or Event of Default, the observance by any Obligor of any terms of the Loan Documents, or the satisfaction of any conditions precedent contained in any Loan Documents.  Agent shall not be responsible or have any liability for, or have any duty to ascertain, inquire into, monitor the list or identities of, or enforce, compliance with the provisions hereof relating to Competitors.  Without limiting the generality of the foregoing, Agent shall not (x) be obligated to ascertain, monitor or inquire as to whether any Lender (other than a Lender which is an Affiliate of Agent) or Participant (other than a Participant which is an Affiliate of Agent) or prospective Lender or Participant (other than a prospective Lender or a Participant which is an Affiliate of Agent) is a Competitor or (y) have any liability with respect to or arising out of any assignment or participation of Loans, or disclosure of confidential information, to any Competitor.

 

12.8.                     Successor Agent and Co-Agents.

 

12.8.1.           Resignation; Successor Agent.  Subject to the appointment and acceptance of a successor Agent as provided below, Agent may resign at any time by giving at least 30 days written notice thereof to Lenders and Borrower Agent.  Upon receipt of such notice, Required Lenders shall have the right to appoint a successor Agent which shall be (a) a Lender or an Affiliate of a Lender; or (b) a financial institution reasonably acceptable to Required Lenders and (provided no Default or Event of Default exists) Borrower Agent.  If no successor agent is appointed prior to the effective date of Agent’s resignation, then Agent may appoint a successor agent that is a financial institution acceptable to it, which shall be a Lender unless no Lender accepts the role.  Upon acceptance by a successor Agent of its appointment hereunder, such successor Agent shall thereupon succeed to and become vested with all the powers and duties of the retiring Agent without further act, and the retiring Agent shall be discharged from its duties and obligations hereunder but shall continue to have the benefits of the indemnification set forth in Sections 12.6 and 14.2.  Notwithstanding any Agent’s resignation, the provisions of this Section 12 shall continue in effect for its benefit with respect to any actions taken or omitted to be taken by it while Agent.  Any successor to Bank of America by merger or acquisition of stock or this loan shall continue to be Agent hereunder without further act on the part of any Secured Party or Obligor.

 

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12.8.2.           Co-Collateral Agent.  If necessary or appropriate under Applicable Law, Agent may appoint a Person to serve as a co-collateral agent or separate collateral agent under any Loan Document.  Each right and remedy intended to be available to Agent under the Loan Document shall also be vested in such agent.  Secured Parties shall execute and deliver any instrument or agreement that Agent may request to effect such appointment.  If the agent shall die, dissolve, become incapable of acting, resign or be removed, then all the rights and remedies of such agent, to the extent permitted by Applicable Law, shall vest in and be exercised by Agent until appointment of a new agent.

 

12.9.                     Due Diligence and Non-Reliance.  Each Lender acknowledges and agrees that it has, independently and without reliance upon Agent or any other Lenders, and based upon such documents, information and analyses as it has deemed appropriate, made its own credit analysis of each Obligor and its own decision to enter into this Agreement and to fund Loans and participate in LC Obligations hereunder.  Each Secured Party has made such inquiries as it feels necessary concerning the Loan Documents, Collateral and Obligors.  Each Secured Party acknowledges and agrees that the other Secured Parties have made no representations or warranties concerning any Obligor, any Collateral or the legality, validity, sufficiency or enforceability of any Loan Documents or Obligations.  Each Secured Party will, independently and without reliance upon any other Secured Party, and based upon such financial statements, documents and information as it deems appropriate at the time, continue to make and rely upon its own credit decisions in making Loans and participating in LC Obligations, and in taking or refraining from any action under any Loan Documents.  Except for notices, reports and other information expressly requested by a Lender, Agent shall have no duty or responsibility to provide any Secured Party with any notices, reports or certificates furnished to Agent by any Obligor or any credit or other information concerning the affairs, financial condition, business or Properties of any Obligor (or any of its Affiliates) which may come into possession of Agent or its Affiliates.

 

12.10.              Remittance of Payments and Collections.

 

12.10.1.          Remittances Generally.  All payments by any Lender to Agent shall be made by the time and on the day set forth in this Agreement, in immediately available funds.  If no time for payment is specified or if payment is due on demand by Agent and request for payment is made by Agent by 11:00 a.m. on a Business Day, payment shall be made by Lender not later than 2:00 p.m. on such day, and if request is made after 11:00 a.m., then payment shall be made by 11:00 a.m. on the next Business Day.  Payment by Agent to any Secured Party shall be made by wire transfer, in the type of funds received by Agent.  Any such payment shall be subject to Agent’s right of offset for any amounts due from such payee under the Loan Documents.

 

12.10.2.          Failure to Pay.  If any Secured Party fails to pay any amount when due by it to Agent pursuant to the terms hereof, such amount shall bear interest, from the due date until paid in full, at the rate determined by Agent as customary for interbank compensation for two Business Days and thereafter at the Default Rate for Base Rate Loans.  In no event shall Borrowers be entitled to receive credit for any interest paid by a Secured Party to Agent, nor shall any Defaulting Lender be entitled to interest on any amounts held by Agent pursuant to Section 4.2.

 

12.10.3.          Recovery of Payments.  If Agent pays an amount to a Secured Party in the expectation that a related payment will be received by Agent from an Obligor and such related payment is not received, then Agent may recover such amount from the Secured Party.  If Agent determines that an amount received by it must be returned or paid to an Obligor or other Person pursuant to Applicable Law or otherwise, then, notwithstanding any other term of any Loan Document, Agent shall not be required to distribute such amount to any Secured Party.  If any amounts received and applied by Agent to any Obligations are later required to be returned by Agent pursuant to Applicable Law, each Lender shall pay to Agent, on demand, such Lender’s Applicable Percentage of the amounts required to be returned.

 

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12.11.              Individual Capacities.  As a Lender, Bank of America shall have the same rights and remedies under the Loan Documents as any other Lender, and the terms “Lenders,” “Required Lenders,” or any similar term shall include Bank of America in its capacity as a Lender.  Agent, Lenders and their Affiliates may accept deposits from, lend money to, provide Bank Products to, act as financial or other advisor to, and generally engage in any kind of business with, Obligors and their Affiliates, as if they were not Agent or Lenders hereunder, without any duty to account therefor to any Secured Party.  In their individual capacities, Agent, Lenders and their Affiliates may receive information regarding Obligors, their Affiliates and their Account Debtors (including information subject to confidentiality obligations), and shall have no obligation to provide such information to any Secured Party.

 

12.12.              Titles.  Each Lender, other than Bank of America, that is designated (on the cover page of this Agreement or otherwise) by Bank of America as an “Arranger,” “Bookrunner” or “Agent” of any type shall have no right, power or duty under any Loan Documents other than those applicable to all Lenders, and shall in no event have any fiduciary duty to any Secured Party.

 

12.13.              Bank Product Providers.  Each Secured Bank Product Provider, by delivery of a notice to Agent of a Bank Product, agrees to be bound by the Loan Documents, including Sections 5.6, 14.3.3 and 12.  Each Secured Bank Product Provider shall indemnify and hold harmless Agent Indemnitees, to the extent not reimbursed by Obligors, against all Claims that may be incurred by or asserted against any Agent Indemnitee in connection with such provider’s Secured Bank Product Obligations.

 

12.14.              No Third Party Beneficiaries.  This Section 12 is an agreement solely among Secured Parties and Agent, and shall survive Full Payment of the Obligations.  This Section 12 does not confer any rights or benefits upon Borrowers or any other Person.  As between Obligors and Agent, any action that Agent may take under any Loan Documents or with respect to any Obligations shall be conclusively presumed to have been authorized and directed by Secured Parties.

 

SECTION 13.                                    BENEFIT OF AGREEMENT; ASSIGNMENTS

 

13.1.                     Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of Obligors, Agent, Lenders, Secured Parties, and their respective successors and assigns, except that (a) no Obligor shall have the right to assign its rights or delegate its obligations under any Loan Documents; (b) any assignment by a Lender must be made in compliance with Section 13.3.  Agent may treat the Person which made any Loan as the owner thereof for all purposes until such Person makes an assignment in accordance with Section 13.3; and (c) no Lender may assign any Revolver Loans or any portion of its Revolver Commitments to any Competitor without the prior written consent of Borrower Agent.  Any authorization or consent of a Lender shall be conclusive and binding on any subsequent transferee or assignee of such Lender.

 

13.2.                     Participations.

 

13.2.1.           Permitted Participants; Effect.  Subject to Section 13.3.3, any Lender may sell to a financial institution (“Participant”) a participating interest in the rights and obligations of such Lender under any Loan Documents; provided, that no Lender shall sell any participating interest to any Competitor without the prior written consent of Borrower Agent.  Despite any sale by a Lender of participating interests to a Participant, such Lender’s obligations under the Loan Documents shall remain unchanged, it shall remain solely responsible to the other parties hereto for performance of such obligations, it shall remain the holder of its Loans and Commitments for all purposes, all amounts payable by Obligors shall be determined as if it had not sold such participating interests, and Obligors and Agent shall continue to deal solely and directly with such Lender in connection with the Loan Documents.  Each Lender shall be solely responsible for notifying its Participants of any matters under the Loan Documents, and Agent and the other Lenders shall not have any obligation or liability to any such Participant.  A Participant shall not be entitled to the benefits of Section 5.9 unless Borrower Agent agrees otherwise in

 

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writing and such Participant shall not be entitled to receive any greater payment under Section 5.9 than its participating Lender would have been entitled to receive.

 

13.2.2.           Voting Rights.  Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, waiver or other modification of a Loan Document other than that which forgives principal, interest or fees, reduces the stated interest rate or fees payable with respect to any Loan or Commitment in which such Participant has an interest, postpones the Revolver Termination Date or any date fixed for any regularly scheduled payment of principal, interest or fees on such Loan or Commitment, or releases any Borrower, Guarantor or substantially all Collateral.

 

13.2.3.           Participant Register.  Each Lender that sells a participation shall, acting as a non-fiduciary agent of Borrowers (solely for tax purposes), maintain a register in which it enters the Participant’s name, address and interest in Commitments, Loans (and stated interest) and LC Obligations.  Entries in the register shall be conclusive, absent manifest error, and such Lender shall treat each Person recorded in the register as the owner of the participation for all purposes, notwithstanding any notice to the contrary.  No Lender shall have an obligation to disclose any information in such register except to the extent necessary to establish that a Participant’s interest is in registered form under the Code.

 

13.2.4.           Benefit of Set-Off.  Obligors agree that each Participant shall have a right of set-off in respect of its participating interest to the same extent as if such interest were owing directly to a Lender, and each Lender shall also retain the right of set-off with respect to any participating interests sold by it.  By exercising any right of set-off, a Participant agrees to share with Lenders all amounts received through its set-off, in accordance with Section 12.5 as if such Participant were a Lender.

 

13.3.                     Assignments.

 

13.3.1.           Permitted Assignments.  A Lender may assign to an Eligible Assignee any of its rights and obligations under the Loan Documents, as long as (a) each assignment is of a constant, and not a varying, percentage of the transferor Lender’s rights and obligations under the Loan Documents and, in the case of a partial assignment, is in a minimum principal amount of $10,000,000 (unless otherwise agreed by Agent in its discretion) and integral multiples of $500,000 in excess of that amount; (b) except in the case of an assignment in whole of a Lender’s rights and obligations, the aggregate amount of the Commitments retained by the transferor Lender is at least $10,000,000 (unless otherwise agreed by Agent in its discretion); and (c) the parties to each such assignment shall execute and deliver to Agent, for its acceptance and recording, an Assignment and Acceptance.  Nothing herein shall limit the right of a Lender to pledge or assign any rights under the Loan Documents to secure obligations of such Lender, including a pledge or assignment to a Federal Reserve Bank; provided, however, that no such pledge or assignment shall release the Lender from its obligations hereunder nor substitute the pledge or assignee for such Lender as a party hereto.

 

13.3.2.           Effect; Effective Date.  Upon delivery to Agent of an assignment notice in the form of Exhibit B and a processing fee of $3,500 (unless otherwise agreed by Agent in its discretion), the assignment shall become effective as specified in the notice, if it complies with this Section 13.3.  From such effective date, the Eligible Assignee shall for all purposes be a Lender under the Loan Documents, and shall have all rights and obligations of a Lender thereunder.  Upon consummation of an assignment, the transferor Lender, Agent and Borrowers shall make appropriate arrangements for issuance of replacement and/or new notes, if applicable.  The transferee Lender shall comply with Section 5.10 and deliver, upon request, an administrative questionnaire satisfactory to Agent.

 

13.3.3.           Certain Assignees.  No assignment or participation may be made to an Obligor, Affiliate of an Obligor, Defaulting Lender or natural person. Agent shall have no obligation to determine whether any assignee is permitted under the Loan Documents.  Any assignment by a Defaulting Lender shall be effective only upon payment by the Eligible Assignee or Defaulting Lender to Agent of an

 

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aggregate amount sufficient, upon distribution (through direct payment, purchases of participations or other compensating actions as Agent deems appropriate), to satisfy all funding and payment liabilities then owing by the Defaulting Lender hereunder.  If an assignment by a Defaulting Lender shall become effective under Applicable Law for any reason without compliance with the foregoing sentence, then the assignee shall be deemed a Defaulting Lender for all purposes until such compliance occurs.

 

13.3.4.           Register.  Agent, acting as a non-fiduciary agent of Obligors (solely for tax purposes), shall maintain (a) a copy of each Assignment and Acceptance delivered to it, and (b) a register for recordation of the names, addresses and Commitments of, and the Loans, interest and LC Obligations owing to, each Lender.  Entries in the register shall be conclusive, absent manifest error, and Obligors, Agent and Lenders shall treat each lender recorded in such register as a Lender for all purposes under the Loan Documents, notwithstanding any notice to the contrary.  Agent may choose to show only one Borrower as the borrower in the register, without any effect on the liability of any Obligor with respect to the Obligations.  The register shall be available for inspection by Obligors or any Lender, from time to time upon reasonable notice.

 

13.4.                     Replacement of Certain Lenders.  If a Lender (a) fails to give its consent to any amendment, waiver or action for which consent of all Lenders was required and Required Lenders consented, or (b) is a Defaulting Lender, then, in addition to any other rights and remedies that any Person may have, Agent or Borrower Agent may, by notice to such Lender within 120 days after such event, require such Lender to assign all of its rights and obligations under the Loan Documents to Eligible Assignee(s), pursuant to appropriate Assignment and Acceptance(s), within 20 days after the notice.  Agent is irrevocably appointed as attorney-in-fact to execute any such Assignment and Acceptance if the Lender fails to execute it.  Such Lender shall be entitled to receive, in cash, concurrently with such assignment, all amounts owed to it under the Loan Documents through the date of assignment.

 

SECTION 14.                                    THE GUARANTEE

 

14.1.                     Guarantee.  The Guarantors hereby guarantee to each Lender, the Issuing Bank and Agent and their respective successors and permitted assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Obligations.  The Guarantors hereby further agree that if the Borrowers shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the obligations, the Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal.

 

14.2.                     Obligations Unconditional.  The obligations of the Guarantors under Section 14.1 are absolute and unconditional irrespective of the value, genuineness, validity, regularity or enforceability of this Agreement, the other Loan Documents or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 14.2 that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances.  Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder, which shall remain absolute and unconditional as described above:

 

(I)                                   AT ANY TIME OR FROM TIME TO TIME, WITHOUT NOTICE TO SUCH GUARANTORS, THE TIME FOR ANY PERFORMANCE OF OR COMPLIANCE WITH ANY OF THE OBLIGATIONS SHALL BE EXTENDED, OR SUCH PERFORMANCE OR COMPLIANCE SHALL BE WAIVED;

 

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(II)                              ANY OF THE ACTS MENTIONED IN ANY OF THE PROVISIONS HEREOF OR OF THE OTHER LOAN DOCUMENTS OR ANY OTHER AGREEMENT OR INSTRUMENT REFERRED TO HEREIN OR THEREIN SHALL BE DONE OR OMITTED;

 

(III)                         THE MATURITY OF ANY OF THE OBLIGATIONS SHALL BE ACCELERATED, OR ANY OF THE OBLIGATIONS SHALL BE MODIFIED, SUPPLEMENTED OR AMENDED IN ANY RESPECT, OR ANY RIGHT HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS OR ANY OTHER AGREEMENT OR INSTRUMENT REFERRED TO HEREIN OR THEREIN SHALL BE WAIVED OR ANY OTHER GUARANTEE OF ANY OF THE OBLIGATIONS OR ANY SECURITY THEREFOR SHALL BE RELEASED OR EXCHANGED IN WHOLE OR IN PART OR OTHERWISE DEALT WITH; OR

 

(IV)                          ANY LIEN OR SECURITY INTEREST GRANTED TO, OR IN FAVOR OF, AGENT, THE ISSUING BANK OR ANY LENDER OR LENDERS AS SECURITY FOR ANY OF THE OBLIGATIONS SHALL FAIL TO BE PERFECTED.

 

EACH GUARANTOR HEREBY EXPRESSLY WAIVES DILIGENCE, PRESENTMENT, DEMAND OF PAYMENT, PROTEST AND ALL NOTICES WHATSOEVER, AND ANY REQUIREMENT THAT AGENT, THE ISSUING BANK OR ANY LENDER EXHAUST ANY RIGHT, POWER OR REMEDY OR PROCEED AGAINST BORROWERS OR ANY OTHER GUARANTOR HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS OR ANY OTHER AGREEMENT OR INSTRUMENT REFERRED TO HEREIN OR THEREIN, OR AGAINST ANY OTHER PERSON UNDER ANY OTHER GUARANTEE OF, OR SECURITY FOR, ANY OF THE OBLIGATIONS, AND HEREBY WAIVE THE BENEFITS OF DIVISION AND DISCUSSION.

 

14.3.                     Reinstatement.  The obligations of the Guarantors under this Section 14 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Borrower in respect of the Obligations is rescinded or must be otherwise restored by any holder of any of the Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify Agent, the Issuing Bank and each Lender on demand for all reasonable costs and expenses (including fees and expenses of counsel) incurred by Agent, any Lender or the Issuing Bank in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.

 

14.4.                     Subrogation.  Until Full Payment of the Obligations, each of the Guarantors hereby waives all rights of subrogation or contribution, whether arising by contract or operation of law (including, without limitation, any such right arising under the bankruptcy code, as amended) or otherwise by reason of any payment by it pursuant to the provisions of this Section 14 and further agrees with each Borrower for the benefit of each creditor of such Borrower (including Agent, the Issuing Bank and each Lender) that any such payment by it shall constitute a contribution of capital by such Guarantor to such Borrower.

 

14.5.                     Remedies.  The Guarantors agree that, as between the Guarantors and the Lenders, the Obligations of Borrowers hereunder may be declared to be forthwith due and payable as provided in Section 11.2 (and shall be deemed to have become automatically due and payable in the circumstances provided in Section 11.2) for purposes of Section 14.1 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against Borrowers and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such Obligations (whether or not due and

 

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payable by Borrowers) shall forthwith become due and payable by the Guarantor for purposes of, and, in the case of the Canadian Guarantors, subject to the limitations set forth in, Section 14.1.

 

14.6.                     Instrument for the Payment of Money.  Each of the Guarantors hereby acknowledges that the guarantee in this Section 14 constitutes an instrument for the payment of money only, and consents and agrees that Agent, the Issuing Bank, or any Lender, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to summary judgment or such other expedited procedure as may be available for a suit on a note or other instrument for the payment of money only.

 

14.7.                     Continuing Guarantee.  The guarantee in this Section 14 is a continuing guarantee and shall apply to all Obligations whenever arising.

 

14.8.                     General Limitation on Amount of Obligations Guaranteed.   In any action or proceeding involving any state or non-U.S. corporate law, or any state or federal or non-U.S. bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of the Guarantors under Section 14.1 would otherwise be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 14.1, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by the Guarantors, any Lender, Agent or other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.

 

14.9.                     Joint Enterprise.  Each Guarantor acknowledges that (a) the Obligors’ business is a mutual and collective enterprise, and the successful operation of each Obligor is dependent upon the successful performance of the integrated group and (b) such Guarantor shall derive direct and indirect economic and other benefits from the establishment by the Secured Parties of the credit facility under this Agreement in favor of Borrowers.

 

14.10.              Subordination.  Each Borrower and each Guarantor hereby subordinates any claims, including any right of payment, subrogation, contribution and indemnity that it may have at any time against any other Obligor, howsoever arising, to the Full Payment of the Obligations.

 

14.11.              Conflicts with Canadian Guaranty or UK Guaranty.  In the event that any of the terms of this Section 14 conflict with (i) the Canadian Guaranty as they relate to the Canadian Guarantors and/or (ii) the UK Guaranty as they relate to the UK Guarantors, the terms of the Canadian Guaranty and/or the UK Guaranty (as applicable) shall control.

 

SECTION 15.                                    MISCELLANEOUS

 

15.1.                     Consents, Amendments and Waivers.

 

15.1.1.           Amendment.  No modification of any Loan Document, including any extension or amendment of a Loan Document or any waiver of a Default or Event of Default, shall be effective without the prior written agreement of Agent (with the consent of Required Lenders) and each Obligor party to such Loan Document; provided, however, that

 

(a)                                 without the prior written consent of Agent, no modification shall be effective with respect to any provision in a Loan Document that relates to any rights, duties or discretion of Agent;

 

(b)                                 without the prior written consent of Issuing Bank, no modification shall be effective with respect to any LC Obligations, Section 2.3 or any other provision in a Loan Document that relates to any rights, duties or discretion of Issuing Bank;

 

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(c)                                  without the prior written consent of each affected Lender, including a Defaulting Lender, no modification shall be effective that would (i) increase the Commitment of such Lender; (ii) reduce the amount of, or waive or delay payment of, any principal, interest or fees payable to such Lender (except as provided in Section 4.2); (iii) extend the Revolver Termination Date applicable to such Lender’s Obligations; or (iv) amend this clause (c);

 

(d)                                 without the prior written consent of all Lenders having Revolver Commitments (or if the Revolver Commitments have terminated, all Lenders having outstanding Revolver Loans), amend the definition of the term “Revolver Borrowing Base” (or any defined term used in the definition of “Revolver Borrowing Base”, provided that the Agent may in its Permitted Discretion, without the necessity of obtaining the consent of any Lender, increase or decrease the amount of the Availability Reserve, or increase, decrease, add or eliminate any of the components thereof, or reduce the percentages used in the definitions of Accounts Formula Amount and Inventory Formula Amount);

 

(e)                                  [Reserved];

 

(f)                                   without the prior written consent of all Lenders (except any Defaulting Lender), no modification shall be effective that would (i) alter Sections 5.6.2, 7.1 (except to add Collateral) or 15.1.1; (ii) amend the definitions of the terms “Applicable Percentage” or “Required Lenders”; (iii) release all or substantially all of the Collateral; (iv) subordinate the Liens in favor of Agent securing the Obligations to Liens in favor of any other Person (other than (x) Purchase Money Liens securing Permitted Purchase Money Debt, and (y) Liens securing obligations with respect to Capital Leases permitted by Section 10.2.1(b), which Liens do not cover more than the property subject to the applicable Capital Leases);  or (v) except in connection with a merger, disposition or similar transaction expressly permitted hereby, release any Obligor from liability for any Obligations; and

 

(g)                                  without the prior written consent of a Secured Bank Product Provider, no modification shall be effective that affects its relative payment priority under Section 5.6.2.

 

15.1.2.           Limitations.  The agreement of Obligors shall not be necessary to the effectiveness of any modification of a Loan Document that deals solely with the rights and duties of Lenders, Agent and/or Issuing Bank as among themselves.  Only the consent of the parties to any agreement relating to fees or a Bank Product shall be required for modification of such agreement, and no Bank Product provider (in such capacity) shall have any right to consent to modification of any Loan Document other than its Bank Product agreement.  Any waiver or consent granted by Agent or Lenders hereunder shall be effective only if in writing and only for the matter specified.

 

15.1.3.           Payment for Consents.  No Obligor will, directly or indirectly, pay any remuneration or other thing of value, whether by way of additional interest, fee or otherwise, to any Lender (in its capacity as a Lender hereunder) as consideration for agreement by such Lender with any modification of any Loan Documents, unless such remuneration or value is concurrently paid, on the same terms, to all Lenders providing their consent, in accordance with each such Lender’s Applicable Percentage.

 

15.2.                     Indemnity.  EACH OBLIGOR SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES AGAINST ANY CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE, INCLUDING CLAIMS ASSERTED BY ANY OTHER OBLIGOR OR OTHER PERSON OR ARISING FROM THE NEGLIGENCE OF AN INDEMNITEE.  In no event shall any party to a Loan Document have any obligation thereunder to indemnify or hold harmless an Indemnitee with respect to a Claim that is determined in a final, non-appealable judgment by a court of competent jurisdiction to result from the gross negligence or willful misconduct of such Indemnitee.

 

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15.3.                     Notices and Communications.

 

(a)                                 Notice Address.  Subject to Section 4.1.4, all notices and other communications by or to a party hereto shall be in writing and shall be given to any Obligor, at Borrower Agent’s address shown on the signature pages hereof, and to any other Person at its address shown on the signature pages hereof (or, in the case of a Person who becomes a Lender after the Restatement Date, at the address shown on its Assignment and Acceptance), or at such other address as a party may hereafter specify by notice in accordance with this Section 14.3.  Each communication shall be effective only (a) if given by facsimile transmission, when transmitted to the applicable facsimile number, if confirmation of receipt is received; (b) if given by mail, three Business Days after deposit in the U.S. mail, with first-class postage pre-paid, addressed to the applicable address; or (c) if given by personal delivery, when duly delivered to the notice address with receipt acknowledged.  Notwithstanding the foregoing, no notice to Agent pursuant to Section 2.1.4, 2.3, 3.1.2, 4.1.1 or 5.3.3 shall be effective until actually received by the individual to whose attention at Agent such notice is required to be sent.  Any written communication that is not sent in conformity with the foregoing provisions shall nevertheless be effective on the date actually received by the noticed party.  Any notice received by Borrower Agent shall be deemed received by all Obligors.

 

(b)                                 Electronic Communications; Voice Mail.  Electronic mail and internet websites may be used only for routine communications, such as delivery of Borrower Materials, administrative matters, distribution of Loan Documents, and matters permitted under Section 4.1.4.  Agent and Lenders make no assurances as to the privacy and security of electronic communications.  Electronic and voice mail may not be used as effective notice under the Loan Documents.

 

(c)                                  Platform.  Borrower Materials shall be delivered pursuant to procedures approved by Agent, including electronic delivery (if possible) upon request by Agent to an electronic system maintained by Agent (“Platform”).  Borrowers shall notify Agent of each posting of Borrower Materials on the Platform and the materials shall be deemed received by Agent only upon its receipt of such notice.  Borrower Materials and other information relating to this credit facility may be made available to Secured Parties on the Platform.  The Platform is provided “as is” and “as available.”  Agent does not warrant the accuracy or completeness of any information on the Platform nor the adequacy or functioning of the Platform, and expressly disclaims liability for any errors or omissions in the Borrower Materials or any issues involving the Platform.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS, OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY AGENT WITH RESPECT TO BORROWER MATERIALS OR THE PLATFORM.  Lenders acknowledge that Borrower Materials may include material non-public information of Obligors and should not be made available to any personnel who do not wish to receive such information or who may be engaged in investment or other market-related activities with respect to any Obligor’s securities.  No Agent Indemnitee shall have any liability to Borrowers, Secured Parties or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) relating to use by any Person of the Platform or delivery of Borrower Materials and other information through the Platform.

 

(d)                                 Non-Conforming Communications.  Agent and Lenders may rely upon any communications purportedly given by or on behalf of any Obligor even if they were not made in a manner specified herein, were incomplete or were not confirmed, or if the terms thereof, as understood by the recipient, varied from a later confirmation.  Each Obligor shall indemnify and hold harmless each Indemnitee from any liabilities, losses, costs and expenses arising from any electronic or telephonic communication purportedly given by or on behalf of an Obligor.

 

15.4.                     Performance of Obligors’ Obligations.  Agent may, in its discretion at any time and from time to time, at Obligors’ expense, pay any amount or do any act required of an Obligor under any

 

97

 

Loan Documents or otherwise lawfully requested by Agent to (a) enforce any Loan Documents or collect any Obligations; (b) protect, insure, maintain or realize upon any Collateral; or (c) defend or maintain the validity or priority of Agent’s Liens in any Collateral, including any payment of a judgment, insurance premium, warehouse charge, finishing or processing charge, or landlord claim, or any discharge of a Lien.  All payments, costs and expenses (including Extraordinary Expenses) of Agent under this Section shall be reimbursed to Agent by Borrowers, on demand, with interest from the date incurred until paid in full, at the Default Rate applicable to Base Rate Loans.  Any payment made or action taken by Agent under this Section shall be without prejudice to any right to assert an Event of Default or to exercise any other rights or remedies under the Loan Documents.

 

15.5.                     Credit Inquiries.  Agent and Lenders may (but shall have no obligation) to respond to usual and customary credit inquiries from third parties concerning any Obligor or Subsidiary.

 

15.6.                     Severability.  Wherever possible, each provision of the Loan Documents shall be interpreted in such manner as to be valid under Applicable Law.  If any provision is found to be invalid under Applicable Law, it shall be ineffective only to the extent of such invalidity and the remaining provisions of the Loan Documents shall remain in full force and effect.

 

15.7.                     Cumulative Effect; Conflict of Terms.  The provisions of the Loan Documents are cumulative.  The parties acknowledge that the Loan Documents may use several limitations or measurements to regulate similar matters, and they agree that these are cumulative and that each must be performed as provided.  Except as otherwise provided in another Loan Document (by specific reference to the applicable provision of this Agreement), if any provision contained herein is in direct conflict with any provision in another Loan Document, the provision herein shall govern and control.

 

15.8.                     Counterparts.  Any Loan Document may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement shall become effective when Agent has received counterparts bearing the signatures of all parties hereto.  Agent may (but shall have no obligation to) accept any signature, contract formation or record-keeping through electronic means, which shall have the same legal validity and enforceability as manual or paper-based methods, to the fullest extent permitted by Applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any similar state law based on the Uniform Electronic Transactions Act.

 

15.9.                     Entire Agreement.  Time is of the essence with respect to all Loan Documents and Obligations.  The Loan Documents constitute the entire agreement, and supersede all prior understandings and agreements, among the parties relating to the subject matter thereof.

 

15.10.              Relationship with Lenders.  The obligations of each Lender hereunder are several, and no Lender shall be responsible for the obligations or Commitments of any other Lender.  Amounts payable hereunder to each Lender shall be a separate and independent debt.  It shall not be necessary for Agent or any other Lender to be joined as an additional party in any proceeding for such purposes.  Nothing in this Agreement and no action of Agent, Lenders or any other Secured Party pursuant to the Loan Documents or otherwise shall be deemed to constitute Agent and any Secured Party to be a partnership, joint venture or similar arrangement, nor to constitute control of any Obligor.

 

15.11.              No Advisory or Fiduciary Responsibility.  In connection with all aspects of each transaction contemplated by any Loan Document, Obligors acknowledge and agree that (a)(i) this credit facility and any related arranging or other services by Agent, any Lender, any of their Affiliates or any arranger are arm’s-length commercial transactions between Obligors and such Person; (ii) Obligors have consulted their own legal, accounting, regulatory and tax advisors to the extent they have deemed appropriate; and (iii) Obligors are capable of evaluating, and understand and accept, the terms, risks and conditions of the transactions contemplated by the Loan Documents; (b) each of Agent, Lenders, their

 

98

 

Affiliates and any arranger is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for Obligors, any of their Affiliates or any other Person, and has no obligation with respect to the transactions contemplated by the Loan Documents except as expressly set forth therein; and (c) Agent, Lenders, their Affiliates and any arranger may be engaged in a broad range of transactions that involve interests that differ from those of Obligors and their Affiliates, and have no obligation to disclose any of such interests to Obligors or their Affiliates.  To the fullest extent permitted by Applicable Law, each Obligor hereby waives and releases any claims that it may have against Agent, Lenders, their Affiliates and any arranger with respect to any breach of agency or fiduciary duty in connection with any transaction contemplated by a Loan Document.

 

15.12.              Confidentiality.  Each of Agent, Lenders and Issuing Bank shall maintain the confidentiality of all Information (as defined below), except that Information may be disclosed (a) to its Affiliates, and to its and their partners, directors, officers, employees, agents, advisors and representatives (provided such Persons are informed of the confidential nature of the Information and instructed to keep it confidential); (b) to the extent requested by any governmental, regulatory or self-regulatory authority purporting to have jurisdiction over it or its Affiliates; (c) to the extent required by Applicable Law or by any subpoena or other legal process; (d) to any other party hereto; (e) in connection with any action or proceeding relating to any Loan Documents or Obligations; (f) subject to an agreement containing provisions substantially the same as this Section, to any Transferee or any actual or prospective party (or its advisors) to any Bank Product or to any swap, derivative or other transaction under which payments are to be made by reference to an Obligor or Obligor’s obligations; (g) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) is available to Agent, any Lender, Issuing Bank or any of their Affiliates on a nonconfidential basis from a source other than Borrowers; (h) on a confidential basis to a provider of a Platform; or (i) with the consent of Borrower Agent. Notwithstanding the foregoing, Agent and Lenders may publish or disseminate general information concerning this credit facility for league table, tombstone and advertising purposes, and may use Obligors’ logos, trademarks or product photographs in advertising materials.  As used herein, “Information” means all information received from an Obligor or Subsidiary relating to it or its business that is identified as confidential when delivered.  Any Person required to maintain the confidentiality of Information pursuant to this Section shall be deemed to have complied with this Section if such Person exercises a degree of care similar to that which such Person accords its own confidential information.  Each of Agent, Lenders and Issuing Bank acknowledges that (i) Information may include material non-public information; (ii) it has developed compliance procedures regarding the use of material non-public information; and (iii) it will handle such material non-public information in accordance with Applicable Law.

 

15.13.              GOVERNING LAW.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, UNLESS OTHERWISE SPECIFIED, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES (BUT GIVING EFFECT TO FEDERAL LAWS RELATING TO NATIONAL BANKS).

 

15.14.              Consent to Forum.                                        EACH OBLIGOR HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT SITTING IN OR WITH JURISDICTION OVER NEW YORK, IN ANY PROCEEDING OR DISPUTE RELATING IN ANY WAY TO ANY LOAN DOCUMENTS, AND AGREES THAT ANY SUCH PROCEEDING SHALL BE BROUGHT BY IT SOLELY IN ANY SUCH COURT.  EACH OBLIGOR IRREVOCABLY WAIVES ALL CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING SUCH COURT’S PERSONAL OR SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 14.3.1.  Nothing herein shall limit the right of Agent or any Lender to bring proceedings against any Obligor in any other court, nor limit the right of 

 

99

 

any party to serve process in any other manner permitted by Applicable Law.  Nothing in this Agreement shall be deemed to preclude enforcement by Agent of any judgment or order obtained in any forum or jurisdiction.

 

15.15.              Waivers by Obligors.  To the fullest extent permitted by Applicable Law, each Obligor waives (a) the right to trial by jury (which Agent and each Lender hereby also waives) in any proceeding or dispute of any kind relating in any way to any Loan Documents, Obligations or Collateral; (b) presentment, demand, protest, notice of presentment, default, non-payment, maturity, release, compromise, settlement, extension or renewal of any commercial paper, accounts, documents, instruments, chattel paper and guaranties at any time held by Agent on which an Obligor may in any way be liable, and hereby ratifies anything Agent may do in this regard; (c) notice prior to taking possession or control of any Collateral; (d) any bond or security that might be required by a court prior to allowing Agent to exercise any rights or remedies; (e) the benefit of all valuation, appraisement and exemption laws; (f) any claim against Agent, Issuing Bank or any Lender, on any theory of liability, for special, indirect, consequential, exemplary or punitive damages (as opposed to direct or actual damages) in any way relating to any Enforcement Action, Obligations, Loan Documents or transactions relating thereto; and (g) notice of acceptance hereof.  Each Obligor acknowledges that the foregoing waivers are a material inducement to Agent, Issuing Bank and Lenders entering into this Agreement and that they are relying upon the foregoing in their dealings with Obligors.  Each Obligor has reviewed the foregoing waivers with its legal counsel and has knowingly and voluntarily waived its jury trial and other rights following consultation with legal counsel.  In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

 

15.16.              Patriot Act Notice.  Agent and Lenders hereby notify Obligors that pursuant to the Patriot Act, Agent and Lenders are required to obtain, verify and record information that identifies each Obligor, including its legal name, address, tax ID number and other information that will allow Agent and Lenders to identify it in accordance with the Patriot Act.  Agent and Lenders will also require information regarding each personal guarantor, if any, and may require information regarding Obligors’ management and owners, such as legal name, address, social security number and date of birth.  Borrowers shall, promptly upon request, provide all documentation and other information as Agent, Issuing Bank or any Lender may request from time to time in order to comply with any obligations under any “know your customer,” anti-money laundering or other requirements of Applicable Law.

 

15.17.              Canadian Anti-Money Laundering Legislation.

 

(a)                                 Each Obligor acknowledges that, pursuant to the Proceeds of Crime Act and other applicable anti-money laundering, anti-terrorist financing, government sanction and “know your client” laws (collectively, including any guidelines or orders thereunder, “AML Legislation”), the Lenders may be required to obtain, verify and record information regarding the Obligors and their respective directors, authorized signing officers, direct or indirect shareholders or other Persons in control of the Obligors, and the transactions contemplated hereby. Each Obligor shall promptly provide all such information, including supporting documentation and other evidence, as may be reasonably requested by any Lender or any prospective assignee or participant of a Lender, any Issuing Bank or any Agent, in order to comply with any applicable AML Legislation, whether now or hereafter in existence.

 

(b)                                 If the Agent has ascertained the identity of any Obligor or any authorized signatories of the Obligors for the purposes of applicable AML Legislation, then the Agent:

 

(i)                                     shall be deemed to have done so as an agent for each Lender, and this Agreement shall constitute a “written agreement” in such regard between each Lender and the Agent within the meaning of the applicable AML Legislation; and

 

100

 

(ii)           shall provide to each Lender copies of all information obtained in such regard without any representation or warranty as to its accuracy or completeness.

 

Notwithstanding the preceding sentence and except as may otherwise be agreed in writing, each of the Lenders agrees that neither the Agent nor any other Agent has any obligation to ascertain the identity of the Obligors or any authorized signatories of the Obligors on behalf of any Lender, or to confirm the completeness or accuracy of any information it obtains from any Obligor or any such authorized signatory in doing so.

 

15.18.     Continued Effectiveness; No Novation.  Notwithstanding anything contained herein, the terms of this Agreement are not intended to and do not serve to effect a novation of the obligations, liabilities or indebtedness of Obligors under the Existing Credit Agreement.  Instead, it is the express intention of the parties hereto to reaffirm, amend and restate the obligations, liabilities and indebtedness of Obligors created under or otherwise evidenced by the Existing Credit Agreement.  All revolver loans outstanding under, the Existing Credit Agreement as of the Restatement Date shall automatically be deemed to constitute Revolver Loans under this Agreement (as more fully described in Section 2.1.1).  Obligors acknowledge and confirm that the liens and security interests granted by Obligors to Agent and Lenders under the Existing Credit Agreement remain in full force and effect and continue to secure all obligations, liabilities and indebtedness of Obligors under this Agreement.  The term “Obligations” used in this Agreement and in the other Loan Documents (or any other term used herein or therein to describe or refer to the obligations, liabilities and indebtedness of the Obligors) describes and refers to all obligations, liabilities and indebtedness of Obligors under this Agreement and under the Existing Credit Agreement, as amended and restated hereby, as the same had been previously amended, modified, supplemented or restated prior to the date hereof and as the same may be further amended, modified, supplemented or restated from time to time.  The Loan Documents and all agreements, documents and instruments executed and delivered in connection with any of the foregoing shall each be deemed to be amended to the extent necessary to give effect to the provisions of this Agreement.  Cross-references in the Loan Documents to particular section or subsection numbers in the Existing Credit Agreement shall be deemed to be cross-references to the corresponding sections or subsections, as applicable, of this Agreement.

 

15.19.     Acknowledgement and Consent to Bail-In of EEA Financial Institutions.  Notwithstanding any provision to the contrary set forth in this Agreement, in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Lender that is an EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

 

(a)           the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any Lender that is an EEA Financial Institution; and

 

(b)           the effects of any Bail-in Action on any such liability, including, if applicable:

 

(i)            a reduction in full or in part or cancellation of any such liability;

 

(ii)           a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document.

 

101

 

15.20.     Intercreditor Agreement.

 

(a)           Each Lender party hereto (i) understands, acknowledges and agrees that it (and each of its successors and assigns) and each other Lender (and each of their successors and assigns) shall be bound by the Intercreditor Agreement, (ii) authorizes and directs Agent to enter into the Intercreditor Agreement on its behalf, and (iii) agrees that any action taken by Agent pursuant to the Intercreditor Agreement shall be binding upon such Lender.

 

(b)           The provisions of this Section 15.20 are not intended to summarize or fully describe the provisions of the Intercreditor Agreement.  Reference must be made to the Intercreditor Agreement itself to understand all terms and conditions thereof.  Each Lender is responsible for making its own analysis and review of the Intercreditor Agreement and the terms and provisions thereof, and neither Agent nor any of its Affiliates makes any representation to any Lender as to the sufficiency or advisability of the provisions contained in the Intercreditor Agreement. A copy of the Intercreditor Agreement may be obtained from Agent.

 

(c)           The Intercreditor Agreement is an agreement solely amongst the Secured Parties (as defined in the Intercreditor Agreement) and their respective agents (including their successors and assigns) and is acknowledged and agreed to by the Obligors as party thereto.  As more fully provided therein, the Intercreditor Agreement can only be amended by the parties thereto in accordance with the provisions thereof.

 

(d)           In the event of any conflict between this Agreement and the Intercreditor Agreement, the Intercreditor Agreement shall govern.

 

[Remainder of page intentionally left blank; signatures begin on following page]

 

102

 

IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date set forth above.

 

	
 
    	
BORROWERS:
    
	
 
    	
 
    
	
 
    	
SUMMER INFANT, INC.
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ William E.   Mote, Jr.
    
	
 
    	
Name:
    	
William E.   Mote, Jr.
    
	
 
    	
Title:
    	
Chief Financial Officer
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
1275 Park East Drive
    
	
 
    	
 
    	
Woonsocket, Rhode   Island 02895
    
	
 
    	
 
    	
Attn: William E.   Mote, Jr.
    
	
 
    	
 
    	
Telephone: 401-671-6550
    
	
 
    	
 
    	
Email:   wmote@summerinfant.com
    
	
 
    	
 
    	
 
    
	
 
    	
SUMMER INFANT (USA), INC.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ William E.   Mote, Jr.
    
	
 
    	
Name:
    	
William E.   Mote, Jr.
    
	
 
    	
Title:
    	
Chief Financial Officer
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
1275 Park East Drive
    
	
 
    	
 
    	
Woonsocket, Rhode   Island 02895
    
	
 
    	
 
    	
Attn: William E.   Mote, Jr.
    
	
 
    	
 
    	
Telephone: 401-671-6550
    
	
 
    	
 
    	
Email:   wmote@summerinfant.com
    

 

[Signature Page to Second Amended and Restated Loan and Security Agreement]

 

 

	
 
    	
GUARANTORS:
    
	
 
    	
 
    
	
 
    	
SUMMER INFANT CANADA, LIMITED
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ William E.   Mote, Jr.
    
	
 
    	
Name:
    	
William E.   Mote, Jr.
    
	
 
    	
Title:
    	
Chief Financial Officer
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
1275 Park East Drive
    
	
 
    	
 
    	
Woonsocket, Rhode   Island 02895
    
	
 
    	
 
    	
Attn: William E.   Mote, Jr.
    
	
 
    	
 
    	
Telephone: 401-671-6550
    
	
 
    	
 
    	
Email:   wmote@summerinfant.com
    
	
 
    	
 
    	
 
    
	
 
    	
SUMMER INFANT EUROPE LIMITED
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ William E.   Mote, Jr.
    
	
 
    	
Name:
    	
William E.   Mote, Jr.
    
	
 
    	
Title:
    	
Chief Financial Officer
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
1275 Park East Drive
    
	
 
    	
 
    	
Woonsocket, Rhode   Island 02895
    
	
 
    	
 
    	
Attn: William E.   Mote, Jr.
    
	
 
    	
 
    	
Telephone: 401-671-6550
    
	
 
    	
 
    	
Email:   wmote@summerinfant.com
    

 

[Signature Page to Second Amended and Restated Loan and Security Agreement]

 

 

	
 
    	
AGENT:
    
	
 
    	
 
    
	
 
    	
BANK   OF AMERICA, N.A., as Agent
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Cynthia G. Stannard
    
	
 
    	
Name:
    	
Cynthia G. Stannard
    
	
 
    	
Title:
    	
Senior Vice President
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
Bank of America, N.A.
    
	
 
    	
 
    	
Mail Code: CT2-500-35-02
    
	
 
    	
 
    	
Cityplace 1, 185 Asylum   Street
    
	
 
    	
 
    	
Hartford, CT 06103
    
	
 
    	
 
    	
Attn: Cynthia Stannard,   SVP
    
	
 
    	
 
    	
Telecopy: 860-952-6830
    
	
 
    	
 
    	
Telephone: 860-952-6827
    
	
 
    	
 
    	
Email:   cynthia.stannard@baml.com
    
	
 
    	
 
    	
 
    
	
 
    	
LENDER:
    
	
 
    	
 
    	
 
    
	
 
    	
BANK   OF AMERICA, N.A., as Lender
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Cynthia G. Stannard
    
	
 
    	
Name:
    	
Cynthia G. Stannard
    
	
 
    	
Title:
    	
Senior Vice President
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
Bank of America, N.A.
    
	
 
    	
 
    	
Mail Code:   CT2-500-35-02
    
	
 
    	
 
    	
Cityplace 1, 185 Asylum   Street
    
	
 
    	
 
    	
Hartford, CT 06103
    
	
 
    	
 
    	
Attn: Cynthia Stannard,   SVP
    
	
 
    	
 
    	
Telecopy: 860-952-6830
    
	
 
    	
 
    	
Telephone: 860-952-6827
    
	
 
    	
 
    	
email:   Cynthia.stannard@baml.com
    

 

[Signature Page to Second Amended and Restated Loan and Security Agreement]

 

 

Exhibit A

to

Second Amended and Restated Loan and Security Agreement

 

ASSIGNMENT AND ACCEPTANCE

 

Reference is made to the Second Amended and Restated Loan and Security Agreement dated as of June   , 2018, as amended (“Loan Agreement”), among SUMMER INFANT, INC., and SUMMER INFANT (USA), INC. (collectively, “Borrowers”), the Guarantors party thereto from time to time, BANK OF AMERICA, N.A., as agent (“Agent”) for the financial institutions from time to time party to the Loan Agreement (“Lenders”), and such Lenders.  Terms are used herein as defined in the Loan Agreement.

 

(“Assignor”) and                                         (“Assignee”) agree as follows:

 

1.             Assignor hereby assigns to Assignee and Assignee hereby purchases and assumes from Assignor (a) a principal amount of $         of Assignor’s outstanding Revolver Loans and $            of Assignor’s participations in LC Obligations, and (b) the amount of $           of Assignor’s Revolver Commitment (which represents     % of the total Revolver Commitments) (the foregoing items being, collectively, the “Assigned Interest”), together with an interest in the Loan Documents corresponding to the Assigned Interest.  This Agreement shall be effective as of the date (“Effective Date”) indicated in the corresponding Assignment Notice delivered to Agent, provided such Assignment Notice is executed by Assignor, Assignee, Agent and Borrower Agent, if applicable.  From and after the Effective Date, Assignee hereby expressly assumes, and undertakes to perform, all of Assignor’s obligations in respect of the Assigned Interest, and all principal, interest, fees and other amounts which would otherwise be payable to or for Assignor’s account in respect of the Assigned Interest shall be payable to or for Assignee’s account, to the extent such amounts accrue on or after the Effective Date.

 

2.             Assignor (a) represents that as of the date hereof, prior to giving effect to this assignment, its Revolver Commitment is $           and the outstanding balance of its Revolver Loans and participations in LC Obligations is $          ; (b) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement or any other instrument or document furnished pursuant thereto, other than that Assignor 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 (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrowers or the performance by Borrowers of their obligations under the Loan Documents.  [Assignor is attaching the Note[s] held by it and requests that Agent exchange such Note[s] for new Notes payable to Assignee [and Assignor].]

 

3.             Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that it has received copies of the Loan Agreement and such other Loan Documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it shall, independently and without reliance upon Assignor 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 the Loan Documents; (d) confirms that it is an Eligible Assignee; (e) appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under the Loan Agreement as are delegated to Agent by the terms thereof, together with such powers as are incidental thereto; (f) agrees that it will observe and perform all obligations that are required to be performed by it as a “Lender” under the Loan Documents; 

 

A-1

 

and (g) represents and warrants that the assignment evidenced hereby will not result in a non-exempt “prohibited transaction” under Section 406 of ERISA.

 

4.             This Agreement shall be governed by the laws of the State of New York.  If any provision is found to be invalid under Applicable Law, it shall be ineffective only to the extent of such invalidity and the remaining provisions of this Agreement shall remain in full force and effect.

 

5.             Each notice or other communication hereunder shall be in writing, shall be sent by messenger, by telecopy or facsimile transmission, or by first-class mail, shall be deemed given when sent and shall be sent as follows:

 

(a)                                 If to Assignee, to the following address (or to such other address as Assignee may designate from time to time):

 

 

 

 

(b)                                 If to Assignor, to the following address (or to such other address as Assignor may designate from time to time):

 

 

 

 

Payments hereunder shall be made by wire transfer of immediately available Dollars as follows:

 

If to Assignee, to the following account (or to such other account as Assignee may designate from time to time):

 

 

 

ABA No.

 

Account No.

Reference:

 

If to Assignor, to the following account (or to such other account as Assignor may designate from time to time):

 

 

 

ABA No.

 

Account No.

Reference:

 

A-2

 

IN WITNESS WHEREOF, this Assignment and Acceptance is executed as of              .

 

	
 
    	
 
    
	
 
    	
(“Assignee”)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(“Assignor”)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    

 

A-3

 

EXHIBIT B

to

Second Amended and Restated Loan and Security Agreement

 

ASSIGNMENT NOTICE

 

Reference is made to (1) the Second Amended and Restated Loan and Security Agreement dated as of June   , 2018, as amended (“Loan Agreement”), among SUMMER INFANT, INC., and SUMMER INFANT (USA), INC. (collectively, “Borrowers”), the Guarantors party thereto from time to time, BANK OF AMERICA, N.A., as agent (“Agent”) for the financial institutions from time to time party to the Loan Agreement (“Lenders”), and such Lenders; and (2) the Assignment and Acceptance dated as of             , 20   (“Assignment Agreement”), between                    (“Assignor”) and                      (“Assignee”).  Terms are used herein as defined in the Loan Agreement.

 

Assignor hereby notifies Borrowers and Agent of Assignor’s intent to assign to Assignee pursuant to the Assignment Agreement (a) a principal amount of $         of Assignor’s outstanding Revolver Loans and $            of Assignor’s participations in LC Obligations and (b) the amount of $           of Assignor’s Revolver Commitment (which represents     % of the total Revolver Commitments) (the foregoing items being, collectively, the “Assigned Interest”), together with an interest in the Loan Documents corresponding to the Assigned Interest.  This Agreement shall be effective as of the date (“Effective Date”) indicated below, provided this Assignment Notice is executed by Assignor, Assignee, Agent and Borrower Agent, if applicable.  Pursuant to the Assignment Agreement, Assignee has expressly assumed all of Assignor’s obligations under the Loan Agreement to the extent of the Assigned Interest, as of the Effective Date.

 

For purposes of the Loan Agreement, Agent shall deem Assignor’s Revolver Commitment to be reduced by $         , and Assignee’s Revolver Commitment to be increased by $         .

 

The address of Assignee to which notices and information are to be sent under the terms of the Loan Agreement is:

 

 

The address of Assignee to which payments are to be sent under the terms of the Loan Agreement is shown in the Assignment and Acceptance.

 

This Notice is being delivered to Borrowers and Agent pursuant to Section 13.3 of the Loan Agreement.  Please acknowledge your acceptance of this Notice by executing and returning to Assignee and Assignor a copy of this Notice.

 

B-1

 

IN WITNESS WHEREOF, this Assignment Notice is executed as of              .

 

	
 
    	
 
    
	
 
    	
(“Assignee”)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(“Assignor”)
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    

 

ACKNOWLEDGED AND AGREED,

AS OF THE DATE SET FORTH ABOVE:

 

BORROWER AGENT:*

 

SUMMER INFANT (USA), INC.

 

	
By
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    

 

* No signature required if Assignee is a Lender, U.S.-based Affiliate of a Lender or Approved Fund, or if an Event of Default exists.

 

BANK OF AMERICA, N.A.,

as Agent

 

	
By
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    

 

B-2

 

SCHEDULE 1.1

to

Second Amended and Restated Loan and Security Agreement

 

COMMITMENTS OF LENDERS

 

	
Lender
    	
 
    	
Revolver 
   Commitment
    	
 
    	
Applicable 
   Percentage
    	
 
    
	
Bank of America,   N.A.
    	
 
    	
$
    	
60,000,000
    	
 
    	
100
    	
%
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
TOTALS:
    	
 
    	
$
    	
60,000,000
    	
 
    	
100
    	
%

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