Document:

EX-10.3

   

  EXHIBIT 10.3

   

   

  SIXTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT

   

   

   

  dated as of July 6, 2022

   

   

   

  between

   

   

   

  STAR GROUP, L.P.,

   

   

   

  PETROLEUM HEAT AND POWER CO., INC.,

   

   

   

  and certain of their Subsidiaries, 
as Grantors,

   

   

   

  and

   

   

   

  JPMORGAN CHASE BANK, N.A.,
as Collateral Agent 

   

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  Table of Contents

  Page

  		
	ARTICLE I DEFINITIONS
	1

	1.1.	Terms Defined in Credit Agreement
	1

	1.2.	Terms Defined in UCC
	1

	1.3.	Definitions of Certain Terms Used Herein
	1

	ARTICLE II GRANT OF SECURITY INTEREST
	5

	ARTICLE III REPRESENTATIONS AND WARRANTIES
	6

	3.1.	Title, Perfection and Priority
	6

	3.2.	Type and Jurisdiction of Organization, Organizational and Identification Numbers
	6

	3.3.	Principal Location
	7

	3.4.	Collateral Locations
	7

	3.5.	Deposit Accounts
	7

	3.6.	Exact Names
	7

	3.7.	Letter-of-Credit Rights and Chattel Paper
	7

	3.8.	Accounts and Chattel Paper
	7

	3.9.	Inventory
	8

	3.10.	Intellectual Property
	8

	3.11.	Filing Requirements
	8

	3.12.	No Financing Statements, Security Agreements
	9

	3.13.	Pledged Collateral
	9

	ARTICLE IV COVENANTS
	9

	4.1.	General
	10

	4.2.	Receivables
	11

	4.3.	Inventory and Equipment
	11

	4.4.	Delivery of Instruments, Securities, Chattel Paper and Documents
	12

   

  		 

  

   

  		
	4.5.	Uncertificated Pledged Collateral
	12

	4.6.	Pledged Collateral
	12

	4.7.	Intellectual Property
	14

	4.8.	Commercial Tort Claims
	14

	4.9.	Letter-of-Credit Rights
	14

	4.10.	Federal, State or Municipal Claims
	15

	4.11.	No Interference
	15

	ARTICLE V DEFAULTS AND REMEDIES
	15

	5.1.	Defaults
	15

	5.2.	Remedies
	15

	5.3.	Grantor’s Obligations Upon Default
	17

	5.4.	Grant of Intellectual Property License
	18

	ARTICLE VI ACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY
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	6.1.	Account Verification
	18

	6.2.	Authorization for Secured Party to Take Certain Action
	18

	6.3.	Proxy
	19

	6.4.	Nature of Appointment; Limitation of Duty
	19

	ARTICLE VII COLLECTION AND APPLICATION OF COLLATERAL PROCEEDS; DEPOSIT ACCOUNTS
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	7.1.	Collection of Receivables.
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	7.2.	Covenant Regarding New Deposit Accounts; Blocked Accounts; Lockboxes
	21

	7.3.	Application of Proceeds; Deficiency
	21

	ARTICLE VIII GENERAL PROVISIONS
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	8.1.	Waivers
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	8.2.	Limitation on Collateral Agent’s and Secured Parties’ Duty with Respect to the Collateral
	22

	8.3.	Compromises and Collection of Collateral
	23

   

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	8.4.	Secured Party Performance of Debtor Obligations
	23

	8.5.	Specific Performance of Certain Covenants
	23

	8.6.	Use and Possession of Certain Premises
	23

	8.7.	Dispositions Not Authorized
	23

	8.8.	No Waiver; Amendments; Cumulative Remedies
	23

	8.9.	Limitation by Law; Severability of Provisions
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	8.10.	Reinstatement
	24

	8.11.	Benefit of Agreement
	24

	8.12.	Survival of Representations
	24

	8.13.	Taxes and Expenses
	24

	8.14.	Headings
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	8.15.	Termination
	25

	8.16.	Entire Agreement
	25

	8.17.	CHOICE OF LAW
	25

	8.18.	CONSENT TO JURISDICTION
	25

	8.19.	WAIVER OF JURY TRIAL
	25

	8.20.	Indemnity
	26

	8.21.	Counterparts
	26

	8.22.	Section Titles
	26

	ARTICLE IX NOTICES
	26

	9.1.	Sending Notices
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	9.2.	Change in Address for Notices
	26

	ARTICLE X THE AGENT
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  EXHIBITS

  A	Notice Address for All Grantors; Information and Collateral Locations of Each Grantor

  B	Deposit Accounts; Blocked Accounts; Lockboxes

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  C	Letter-of-Credit Rights; Chattel Paper

  D	Intellectual Property Rights

  E	Title Documents 

  F	Fixtures

  G	Pledged Collateral, Securities and Other Investment Property

  H	Offices in which Financing Statements were Filed

  I	Form of Amendment 

  J	Commercial Tort Claims

   

   

   

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  SIXTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT

  This SIXTH AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (as it may be amended or modified from time to time, this “Security Agreement”) is entered into as of July 6, 2022 by and between Star Group, L.P., a Delaware limited partnership (the “Parent”), Petroleum Heat and Power Co., Inc., a Minnesota corporation (“Petro” or the “Borrower”), and each other direct or indirect subsidiary of the Parent from time to time party to this Security Agreement (each of the Parent, Petro and each other such Subsidiary of the Parent, a “Grantor”, and collectively, the “Grantors”), and JPMorgan Chase Bank, N.A., a national banking association, in its capacity as collateral agent (the “Collateral Agent”) for the Secured Parties (as defined below) party to the Credit Agreement referred to below.

  PRELIMINARY STATEMENT

  Petro, the other loan parties named therein, JPMorgan Chase Bank, N.A., as agent, and the lenders thereto entered into that certain Fifth Amended and Restated Credit Agreement dated as of December 4, 2019 (as amended prior to the date hereof, the “Existing Credit Agreement”). 	

  Pursuant to the Existing Credit Agreement, Petro, the other loan parties thereto and JPMorgan Chase Bank, N.A., for the benefit of the lenders thereto, entered into that certain Fifth Amended and Restated Pledge and Security Agreement dated as of December 4, 2019 (the “Existing Security Agreement”) in order to induce the secured parties thereto to enter into and extend credit to Petro under the Existing Credit Agreement and to secure the obligations that it agreed to guarantee pursuant to Article XV of the Existing Credit Agreement.

  Petro, the other Loan Parties named therein, JPMorgan Chase Bank, N.A., as Agent and an LC Issuer, and the Lenders are entering into a Sixth Amended and Restated Credit Agreement, dated as of the date hereof (as it may be amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).

  Each Grantor is entering into this Security Agreement in order to induce the Secured Parties to enter into and extend credit to Petro under the Credit Agreement and to secure the Secured Obligations that it has agreed to guarantee pursuant to Article XV of the Credit Agreement. 

  ACCORDINGLY, the Grantors and the Collateral Agent, on behalf of the Secured Parties, agree that the Existing Security Agreement is hereby amended and restated as of the Effective Date to read in its entirety as follows:

  ARTICLE I
DEFINITIONS

  1.1.	Terms Defined in Credit Agreement.  All capitalized terms used herein and not otherwise defined herein or in the UCC shall have the meanings assigned to such terms in the Credit Agreement.

  1.2.	Terms Defined in UCC.  Terms defined in the UCC which are not otherwise defined in this Security Agreement are used herein as defined in the UCC.

  1.3.	Definitions of Certain Terms Used Herein.

  As used in this Security Agreement, in addition to the terms defined in the preamble and the Preliminary Statement, the following terms shall have the following meanings:

  		 

  

   

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

  “Article” means a numbered article of this Security Agreement, unless another document is specifically referenced.

  “Blocked Accounts” shall have the meaning set forth in Section 7.1(a).

  “Blocked Account Agreements” shall have the meaning set forth in Section 7.1(a).

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

  “Collateral” shall have the meaning set forth in Article II.

  “Collateral Deposit Account” shall have the meaning set forth in Section 7.1(a).

  “Collateral Report” means any certificate (including any Borrowing Base Certificate), report or other document delivered by any Grantor to the Collateral Agent or any Lender with respect to the Collateral pursuant to any Loan Document.

  “Collection Account” shall have the meaning set forth in Section 7.1(b).

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

  “Copyrights” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following:  (a) all copyrights, rights and interests in copyrights, works protectable by copyright, copyright registrations, and copyright applications; (b) all renewals of any of the foregoing; (c) all income, royalties, damages, and payments now or hereafter due and/or payable under any of the foregoing, including, without limitation, damages or payments for past or future infringements for any of the foregoing; (d) the right to sue for past, present, and future infringements of any of the foregoing; and (e) all rights corresponding to any of the foregoing throughout the world.

  “Default” means an event described in Section 5.1.

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

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

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

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

  “Exhibit” refers to a specific exhibit to this Security Agreement, unless another document is specifically referenced.

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

  “General Intangibles” means all “general intangibles” as such term is defined in Article 9 of the UCC including, without limitation, with respect to any Grantor, all contracts, agreements, instruments and indentures in any form, and portions thereof, to which such Grantor is a party or under which such Grantor has any right, title or interest or to which such Grantor or any property 

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  of such Grantor is subject, as the same may from time to time be amended, supplemented or otherwise modified, including, without limitation (but limited as aforesaid), (i) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (ii) all rights of such Grantor to damages arising thereunder, (iii) all equity that constitutes “general intangibles” and (iv) all rights of such Grantor to perform and to exercise all remedies thereunder.  

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

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

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

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

  “Lenders” means the lenders party to the Credit Agreement and their successors and assigns.

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

  “Licenses” means, with respect to any Person, all of such Person’s right, title, and interest in and to (a) any and all licensing agreements or similar arrangements in and to its Patents, Copyrights, or Trademarks, (b) all income, royalties, damages, claims, and payments now or hereafter due or payable under and with respect thereto, including, without limitation, damages and payments for past and future breaches thereof, and (c) all rights to sue for past, present, and future breaches thereof.

  “Lockboxes” shall have the meaning set forth in Section 7.1(a).

  “Lock Box Agreements” shall have the meaning set forth in Section 7.1(a).

  “Patents” means, with respect to any Person, all of such Person’s right, title, and interest in and to: (a) any and all patents and patent applications; (b) all inventions and improvements described and claimed therein; (c) all reissues, divisions, continuations, renewals, extensions, and continuations-in-part thereof; (d) all income, royalties, damages, claims, and payments now or hereafter due or payable under and with respect thereto, including, without limitation, damages and payments for past and future infringements thereof; (e) all rights to sue for past, present, and future infringements thereof; and (f) all rights corresponding to any of the foregoing throughout the world.

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

  “Pledged Collateral” means all Instruments, Securities and other Investment Property of the Grantors included as Collateral, whether or not physically delivered to the Collateral Agent pursuant to this Security Agreement.

  “Proceeds” shall mean (a) all “proceeds,” as defined in Article 9 of the UCC, with respect to the Collateral (including Stock Rights and insurance proceeds), and (b) whatever is recoverable or recovered when any Collateral is sold, exchanged, collected, or disposed of, whether voluntarily or involuntarily.

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

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  “Receivables” means the Accounts, Chattel Paper, Documents, Investment Property, Instruments and any other rights or claims to receive money which are General Intangibles or which are otherwise included as Collateral.

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

  “Remittance Processor” means Remitco LLC, a Delaware limited liability company.

  “Remittance Processing Agreement” means the Remittance Processing Services Agreement, between the Remittance Processor and PHI and signed by PHI on August 22, 2003, as amended on June 30, 2008 and in effect as of the Effective Date.

  “Required Secured Parties” means (a) prior to an acceleration of the obligations under the Credit Agreement, the Required Lenders, and (b) after an acceleration of the obligations under the Credit Agreement but prior to the date upon which the Credit Agreement has terminated by its terms and all of the obligations thereunder have been paid in full, Lenders holding in the aggregate at least a majority of the total of the Aggregate Credit Exposure, and (c) after the Credit Agreement has terminated by its terms and all of the obligations thereunder have been paid in full (whether or not the obligations under the Credit Agreement were ever accelerated), Secured Parties holding in the aggregate at least a majority of the aggregate net early termination payments and all other amounts then due and unpaid from any Grantor to the Secured Parties (i) under Commodity Hedging Agreements and (ii) to the extent permitted under applicable debt agreements, with respect to any (x) Banking Services and (y) Rate Management Transactions (other than Commodity Hedging Agreements), as determined by the Collateral Agent in its reasonable discretion.

  “Section” means a numbered section of this Security Agreement, unless another document is specifically referenced.

  “Secured Parties” means, collectively, the Lenders and the Agent, any other holder from time to time of any of the Secured Obligations and, in each case, their respective successors and assigns.

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

  “Security Entitlement” has the meaning set forth in Article 8 of the UCC.

  “Stock Rights” means all dividends, instruments or other distributions and any other right or property which the Grantors shall receive or shall become entitled to receive for any reason whatsoever with respect to, in substitution for or in exchange for any Capital Stock constituting Collateral, any right to receive Capital Stock and any right to receive earnings, in which the Grantors now have or hereafter acquire any right, issued by an issuer of such Capital Stock. 

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

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

  “Trademarks” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following:  (a) all trademarks (including service marks), trade names, trade dress, and trade styles and the registrations and applications for registration thereof and the goodwill of the business symbolized by the foregoing; (b) all licenses of the foregoing, whether 

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  as licensee or licensor; (c) all renewals of the foregoing; (d) all income, royalties, damages, and payments now or hereafter due or payable with respect thereto, including, without limitation, damages, claims, and payments for past and future infringements thereof; (e) all rights to sue for past, present, and future infringements of the foregoing, including the right to settle suits involving claims and demands for royalties owing; and (f) all rights corresponding to any of the foregoing throughout the world.

  “UCC” means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; provided that to the extent that the Uniform Commercial Code is used to define any term in any security document and such term is defined differently in differing Articles of the Uniform Commercial Code, the definition of such term contained in Article 9 shall govern; provided, further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, publication or priority of, or remedies with respect to, Liens of any Party is governed by the Uniform Commercial Code or foreign personal property security laws as enacted and in effect in a jurisdiction other than the State of New York, the term "Uniform Commercial Code" will mean the Uniform Commercial Code or such foreign personal property security laws 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 related to such provisions.

  “Unmatured Default” means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default hereunder.

  The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms.

  ARTICLE II
GRANT OF SECURITY INTEREST

  Each Grantor hereby pledges, assigns and grants to the Collateral Agent, on behalf of and for the benefit of the Secured Parties, a security interest in all of its right, title and interest in, to and under all personal property and other assets, whether now owned by or owing to, or hereafter acquired by or arising in favor of such Grantor (including under any trade name or derivations thereof), and whether owned or consigned by or to, or leased from or to, such Grantor, and regardless of where located (all of which will be collectively referred to as the “Collateral”), including:

  (i)	all Accounts and Receivables; 

  (ii)	all Chattel Paper (including Tangible Chattel Paper and Electronic Chattel Paper); 

  (iii)	all Documents; 

  (iv)	all Equipment; 

  (v)	all Fixtures; 

  (vi)	all General Intangibles; 

  (vii)	all Goods;

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  (viii)	all Instruments (including, without limitation, Promissory Notes); 

  (ix)	all Inventory;

  (x)	all Investment Property; 

  (xi)	all cash or cash equivalents; 

  (xii)	all letters of credit, Letter-of-Credit Rights and Supporting Obligations;

  (xiii)	(x) all Deposit Accounts with any bank or other financial institution and all cash, checks, other negotiable instruments, funds and other evidences of payments held therein and (y) all Securities and Security Entitlements, and securities accounts, in each case, to the extent constituting cash or cash equivalents or representing a claim to cash equivalents;

  (xiv)	all Intellectual Property Rights;

  (xv)	all Capital Stock;

  (xvi)	all Rate Management Transactions (including Commodity Hedging Agreements); and

  (xvii)	and all accessions to, substitutions for and replacements, Proceeds and products of the foregoing, together with all books and Records, customer lists, credit files, computer files, programs, printouts and other computer materials and records related thereto and any General Intangibles at any time evidencing or relating to any of the foregoing,

  to secure the prompt and complete payment and performance of the Secured Obligations; provided that, notwithstanding anything herein or in the Credit Agreement to the contrary, the Secured Obligations shall not include any Obligations with respect to the Term Commitments, Term Loans or Term Lenders until the Credit Extension Date with respect to the Term Loans occurs pursuant to Section 2.1.5 of the Credit Agreement.

  ARTICLE III
REPRESENTATIONS AND WARRANTIES

  Each Grantor represents and warrants to the Collateral Agent and the Secured Parties that:

  3.1.	Title, Perfection and Priority.  Such Grantor has good and valid rights in or the power to transfer the Collateral and title to the Collateral with respect to which it has purported to grant a security interest hereunder, free and clear of all Liens except for Liens permitted under Section 4.1(e), and has full power and authority to grant to the Collateral Agent the security interest in such Collateral pursuant hereto.  When financing statements have been filed in the appropriate offices against such Grantor in the locations listed on Exhibit H, the Collateral Agent will have a fully perfected first priority security interest in that Collateral of the Grantor in which a security interest may be perfected by filing, subject only to Liens permitted under Section 4.1(e).

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  3.2.	Type and Jurisdiction of Organization, Organizational and Identification Numbers.  The type of entity of such Grantor, its state of organization, the organizational number issued to it by its state of organization and its federal employer identification number are set forth on Exhibit A.

  3.3.	Principal Location.  Such Grantor’s mailing address and the location of its place of business (if it has only one) or its chief executive office (if it has more than one place of business), is disclosed in Exhibit A; such Grantor has no other places of business except those set forth in Exhibit A.

  3.4.	Collateral Locations.  All of such Grantor’s locations where Collateral is located are listed on Exhibit A.  All of said locations are owned by such Grantor except for locations (i) which are leased by the Grantor as lessee and designated in Part VII(b) of Exhibit A and (ii) at which Inventory is held in a public warehouse or is otherwise held by a bailee or on consignment as designated in Part VII(c) of Exhibit A.

  3.5.	Deposit Accounts.  All of such Grantor’s Deposit Accounts are listed on Exhibit B.

  3.6.	Exact Names.  Such Grantor’s name in which it has executed this Security Agreement is the exact name as it appears in such Grantor’s organizational documents, as amended, as filed with such Grantor’s jurisdiction of organization.

  3.7.	Letter-of-Credit Rights and Chattel Paper.  Exhibit C lists all Letter-of-Credit Rights and Chattel Paper of such Grantor.  All action by such Grantor necessary or desirable to protect and perfect the Collateral Agent’s Lien on each item listed on Exhibit C (including the delivery of all originals and the placement of a legend on all Chattel Paper as required hereunder) has been duly taken. The Collateral Agent will have a fully perfected first priority security interest in the Collateral listed on Exhibit C, subject only to Liens permitted under Section 4.1(e).

  3.8.	Accounts and Chattel Paper.

  (a)	The names of the obligors, amounts owing, due dates and other information with respect to its Accounts and Chattel Paper are and will be correctly stated in all records of the Grantor relating thereto and in all invoices and Collateral Reports with respect thereto furnished to the Collateral Agent by such Grantor from time to time.  As of the time when each Account or each item of Chattel Paper arises, such Grantor shall be deemed to have represented and warranted that such Account or Chattel Paper, as the case may be, and all records relating thereto, are genuine and in all respects what they purport to be. 

  (b)	With respect to its Accounts, except as specifically disclosed on the most recent Collateral Report, (i) all Accounts are Eligible Accounts; (ii) all Accounts represent bona fide sales of Inventory or rendering of services to Account Debtors in the ordinary course of such Grantor’s business and are not evidenced by a judgment, Instrument or Chattel Paper; (iii) there are no setoffs, claims or disputes existing or asserted with respect thereto and such Grantor has not made any agreement with any Account Debtor for any extension of time for the payment thereof, any compromise or settlement for less than the full amount thereof, any release of any Account Debtor from liability therefor, or any deduction therefrom except a discount or allowance allowed by such Grantor in the ordinary course of its business for prompt payment or as are generally offered in the industry by competitors of such Grantor in the applicable markets and in each case as disclosed to the Collateral Agent; (iv) to such Grantor’s knowledge, there are no facts, events or occurrences which in any way impair the validity or enforceability thereof or could reasonably be expected to reduce the amount payable thereunder as shown on such Grantor’s books and records and any invoices, statements and Collateral Reports with respect thereto; (v) such Grantor has not received any notice of proceedings or actions which are threatened or 

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  pending against any Account Debtor which might result in any adverse change in such Account Debtor’s financial condition; and (vi) such Grantor has no knowledge that any Account Debtor is unable generally to pay its debts as they become due.  

  (c)	In addition, with respect to all of its Accounts, (i) the amounts shown on all invoices, statements and Collateral Reports with respect thereto are actually and absolutely owing to such Grantor as indicated thereon and are not in any way contingent; (ii) no payments have been or shall be made thereon except payments immediately delivered to a Blocked Account, Lockbox or a Collateral Deposit Account as required pursuant to Section 7.1; and (iii) to such Grantor’s knowledge, all Account Debtors have the capacity to contract.

  3.9.	Inventory.  With respect to any of its Inventory scheduled or listed on the most recent Collateral Report, (a) such Inventory (other than Inventory in transit) is located at one of such Grantor’s locations set forth on Exhibit A, (b) no Inventory (other than Inventory in transit) is now, or shall at any time or times hereafter be stored at any other location except as permitted by Section 4.1(g), (c) such Grantor has good, indefeasible and merchantable title to such Inventory and such Inventory is not subject to any Lien or security interest or document whatsoever except for the Lien granted to the Collateral Agent, for the benefit of the Collateral Agent and Secured Parties, and except for Permitted Liens, (d) except as specifically disclosed in the most recent Collateral Report, such Inventory is Eligible Heating Oil and Other Fuel Inventory or Other Eligible Inventory, in each case of good and merchantable quality, free from any defects, (e) such Inventory is not subject to any licensing, patent, royalty, trademark, trade name or copyright agreements with any third parties which would require any consent of any third party upon sale or disposition of that Inventory or the payment of any monies to any third party upon such sale or other disposition, and (f) the completion of sale or other disposition of such Inventory by the Collateral Agent following a Default shall not require the consent of any Person and shall not constitute a breach or default under any contract or agreement to which such Grantor is a party or to which such property is subject.

  3.10.	Intellectual Property.  Exhibit D includes all material Patents, Trademarks or Copyrights owned by such Grantor in its own name on the date hereof.  To the best of such Grantor's knowledge, each of its material Patents, Trademarks and Copyrights owned or held by such Grantor is, on the date hereof, valid, subsisting, unexpired, enforceable and has not been abandoned.  None of such Patents, Trademarks and Copyrights is, on the date hereof, the subject of any licensing or franchise agreement.  No action or proceeding is pending on the date hereof seeking to limit, cancel or question the validity, or otherwise materially affect the value of any Patent, Trademark or Copyright.  This Security Agreement is effective to create a valid and continuing Lien and, upon filing of appropriate financing statements in the offices listed on Exhibit H and this Security Agreement with the United States Copyright Office and the United States Patent and Trademark Office, fully perfected first priority security interests in favor of the Collateral Agent on such Grantor’s Patents, Trademarks and Copyrights, such perfected security interests are enforceable as such as against any and all creditors of and purchasers from the Grantor; and all action necessary or desirable to protect and perfect the Collateral Agent’s Lien on such Grantor’s Patents, Trademarks or Copyrights shall have been duly taken.

  3.11.	Filing Requirements.  None of its Equipment is covered by any certificate of title, except for the vehicles described in Part I of Exhibit E.  None of the Collateral owned by it is of a type for which security interests or liens may be perfected by filing under any federal statute except for (a) the vehicles described in Part II of Exhibit E and (b) Patents, Trademarks and Copyrights held by such Grantor and described in Exhibit D.  The legal description, county and street address of each property on which any Fixtures are located is set forth in Exhibit F together with the name and address of the record owner of each such property.

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  3.12.	No Financing Statements, Security Agreements.  No financing statement or security agreement describing all or any portion of the Collateral which has not lapsed or been terminated naming such Grantor as debtor has been filed or is of record in any jurisdiction except (a) for financing statements or security agreements naming the Collateral Agent on behalf of the Secured Parties as the secured party, and (b) as permitted by Section 4.1(e). 

  3.13.	Pledged Collateral.

  (a)	Exhibit G sets forth a complete and accurate list of all Pledged Collateral owned by such Grantor.  Such Grantor is the direct, sole beneficial owner and sole holder of record of the Pledged Collateral listed on Exhibit G as being owned by it, free and clear of any Liens, except for Liens permitted under Section 4.1(e).  Such Grantor further represents and warrants that (i) all Pledged Collateral owned by it constituting Capital Stock has been (to the extent such concepts are relevant with respect to such Pledged Collateral) duly authorized, validly issued, are fully paid and non‐assessable, (ii) with respect to any certificates representing any Pledged Collateral constituting Capital Stock, either such certificates are Securities as defined in Article 8 of the UCC as a result of actions by the issuer or otherwise, or, if such certificates are not Securities, such Grantor has so informed the Collateral Agent so that the Collateral Agent may take steps to perfect its security interest therein as a General Intangible, (iii) all such Pledged Collateral held by a securities intermediary is covered by a control agreement among such Grantor, the securities intermediary and the Collateral Agent pursuant to which the Collateral Agent has Control and (iv) all Pledged Collateral which represents Indebtedness owed to such Grantor has been duly authorized, authenticated or issued and delivered by the issuer of such Indebtedness, is the legal, valid and binding obligation of such issuer and such issuer is not in default thereunder.  

  (b)	In addition, (i) none of the Pledged Collateral owned by it has been issued or transferred in violation of the securities registration, securities disclosure or similar laws of any jurisdiction to which such issuance or transfer may be subject, (ii) there are existing no options, warrants, calls or commitments of any character whatsoever relating to such Pledged Collateral or which obligate the issuer of any Capital Stock included in the Pledged Collateral to issue additional Capital Stock, and (iii) no consent, approval, authorization, or other action by, and no giving of notice, filing with, any governmental authority or any other Person is required for the pledge by such Grantor of such Pledged Collateral pursuant to this Security Agreement or for the execution, delivery and performance of this Security Agreement by such Grantor, or for the exercise by the Collateral Agent of the voting or other rights provided for in this Security Agreement or for the remedies in respect of the Pledged Collateral pursuant to this Security Agreement, except as may be required in connection with such disposition by laws affecting the offering and sale of securities generally.  

  (c)	Except as set forth in Exhibit G, such Grantor or Grantors collectively own 100% of the issued and outstanding Capital Stock which constitutes Pledged Collateral and none of the Pledged Collateral which represents Indebtedness owed to such Grantor is subordinated in right of payment to other Indebtedness or subject to the terms of an indenture. 

  ARTICLE IV
COVENANTS

  From the date of this Security Agreement, and thereafter until this Security Agreement is terminated, each Grantor agrees that:

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  4.1.	General.

  (a)	Collateral Records.  Such Grantor will maintain complete and accurate books and records with respect to the Collateral owned by it, and furnish to the Collateral Agent, with sufficient copies for each of the Secured Parties, such reports relating to such Collateral as the Collateral Agent shall from time to time request. 

  (b)	Authorization to File Financing Statements; Ratification.  Such Grantor hereby authorizes the Collateral Agent to file, and if requested will deliver to the Collateral Agent, all financing statements and other documents and take such other actions as may from time to time be requested by the Collateral Agent in order to maintain a first priority perfected security interest in and, if applicable, Control of, the Collateral owned by such Grantor.  Any financing statement filed by the Collateral Agent may be filed in any filing office in any UCC jurisdiction and may (i) indicate such Grantor’s Collateral (1) as all assets of the Grantor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC or such jurisdiction, or (2) by any other description which reasonably approximates the description contained in this Security Agreement, and (ii) contain any other information required by part 5 of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (A) whether such Grantor is an organization, the type of organization and any organization identification number issued to such Grantor, and (B) in the case of a financing statement filed as a fixture filing or indicating such Grantor’s Collateral as as-extracted collateral or timber to be cut, a sufficient description of real Property to which the Collateral relates.  Such Grantor also agrees to furnish any such information to the Collateral Agent promptly upon request.  Such Grantor also ratifies its authorization for the Collateral Agent to have filed in any UCC jurisdiction any initial financing statements or amendments thereto if filed prior to the date hereof. 

  (c)	Further Assurances.  Such Grantor will, if so requested by the Collateral Agent, furnish to the Collateral Agent, as often as the Collateral Agent requests, statements and schedules further identifying and describing the Collateral owned by it (including amended exhibits to this Security Agreement) and such other reports and information in connection with its Collateral as the Collateral Agent may reasonably request, all in such detail as the Collateral Agent may specify.  Such Grantor also agrees to take any and all actions necessary to defend title to the Collateral owned by it against all persons and to defend the security interest of the Collateral Agent in its Collateral and the priority thereof against any Lien not expressly permitted hereunder.

  (d)	Disposition of Collateral.  Such Grantor will not sell, lease or otherwise dispose of the Collateral owned by it except for dispositions specifically permitted pursuant to Section 6.19 of the Credit Agreement. 

  (e)	Liens.  Such Grantor will not create, incur, or suffer to exist any Lien on the Collateral owned by it except (i) the security interest created by this Security Agreement, and (ii) other Permitted Liens.

  (f)	Other Financing Statements.  Such Grantor will not authorize the filing of any financing statement naming it as debtor covering all or any portion of the Collateral owned by it, except as permitted by Section 4.1(e).  Such Grantor acknowledges that it is not authorized to file any financing statement or amendment or termination statement with respect to any financing statement without the prior written consent of the Collateral Agent, subject to such Grantor’s rights under Section 9-509(d)(2) of the UCC.

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  (g)	Locations. Such Grantor will not (i) maintain any Collateral owned by it at any location other than those locations listed on Exhibit A, (ii) otherwise change, or add to, such locations without the Collateral Agent’s prior written consent as required by the Credit Agreement (and if the Collateral Agent gives such consent, the Grantor will concurrently therewith obtain a Collateral Access Agreement for each such location to the extent required by the Credit Agreement), or (iii) change its principal place of business or chief executive office from the location identified on Exhibit A, other than as permitted by the Credit Agreement.

  (h)	Compliance with Terms.  Such Grantor will perform and comply with all obligations in respect of the Collateral owned by it and all agreements to which it is a party or by which it is bound relating to such Collateral.

  4.2.	Receivables.

  (a)	Certain Agreements on Receivables.  Such Grantor will not make or agree to make any discount, credit, rebate or other reduction in the original amount owing on a Receivable or accept in satisfaction of a Receivable less than the original amount thereof, except that, prior to the occurrence of a Default, such Grantor may reduce the amount of Accounts arising from the sale of Inventory in accordance with its present policies and in the ordinary course of business.

  (b)	Collection of Receivables.  Except as otherwise provided in this Security Agreement, such Grantor will collect and enforce, at such Grantor’s sole expense, all amounts due or hereafter due to such Grantor under the Receivables owned by it.

  (c)	Delivery of Invoices.  Such Grantor will deliver to the Collateral Agent immediately upon its request duplicate invoices with respect to each Account owned by it bearing such language of assignment as the Collateral Agent shall specify.

  (d)	Disclosure of Counterclaims on Receivables.  If (i) any discount, credit or agreement to make a rebate or to otherwise reduce the amount owing on any Receivable owned by such Grantor exists or (ii) if, to the knowledge of such Grantor, any dispute, setoff, claim, counterclaim or defense exists or has been asserted or threatened with respect to any such Receivable, such Grantor will promptly disclose such fact to the Collateral Agent in writing.  Such Grantor shall send the Collateral Agent a copy of each credit memorandum in excess of $1,000 as soon as issued, and such Grantor shall promptly report each credit memo and each of the facts required to be disclosed to the Collateral Agent in accordance with this Section 4.2(d) on the Borrowing Base Certificates submitted by it.

  (e)	Electronic Chattel Paper.  Such Grantor shall take all steps necessary to grant the Collateral Agent Control of all electronic chattel paper in accordance with the UCC and all “transferable records” as defined in each of the Uniform Electronic Transactions Act and the Electronic Signatures in Global and National Commerce Act.

  4.3.	Inventory and Equipment.

  (a)	Maintenance of Goods.  Such Grantor will do all things necessary to maintain, preserve, protect and keep its Inventory and the Equipment in good repair and working and saleable condition, except for damaged or defective goods arising in the ordinary course of such Grantor’s business and except for ordinary wear and tear in respect of the Equipment.

  (b)	[Reserved]

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  (c)	Inventory Count; Perpetual Inventory System.  Such Grantor will conduct a physical count of its Inventory at least once per Fiscal Year, and after and during the continuation of a Default, at such other times as the Collateral Agent requests. Such Grantor, at its own expense, shall deliver to the Collateral Agent the results of each physical verification, which such Grantor has made, or has caused any other Person to make on its behalf, of all or any portion of its Inventory. Such Grantor will maintain a perpetual inventory reporting system at all times. 

  (d)	Equipment.  Such Grantor shall inform the Collateral Agent of any additions to or deletions from its Equipment within 30 days of such addition or deletion.  Such Grantor shall not permit any Equipment to become a fixture with respect to real property or to become an accession with respect to other personal property with respect to which real or personal property the Collateral Agent does not have a Lien.  Such Grantor will not, without the Collateral Agent’s prior written consent, alter or remove any identifying symbol or number on any of such Grantor’s Equipment constituting Collateral.

  (e)	Titled Vehicles.  Such Grantor will give the Collateral Agent notice of its acquisition of any vehicle covered by a certificate of title and deliver to the Collateral Agent, upon request, the original of any vehicle title certificate and provide and/or file all other documents or instruments necessary to have the Lien of the Collateral Agent noted on any such certificate or with the appropriate state office.

  4.4.	Delivery of Instruments, Securities, Chattel Paper and Documents.  Such Grantor will (a) deliver to the Collateral Agent immediately upon execution of this Security Agreement the originals of all Chattel Paper, Securities and Instruments constituting Collateral owned by it (if any then exist), (b) hold in trust for the Collateral Agent upon receipt and immediately thereafter deliver to the Collateral Agent any such Chattel Paper, Securities and Instruments constituting Collateral, (c) upon the Collateral Agent’s request, deliver to the Collateral Agent (and thereafter hold in trust for the Collateral Agent upon receipt and immediately deliver to the Collateral Agent) any Document evidencing or constituting Collateral and (d) upon the Collateral Agent’s request, deliver to the Collateral Agent a duly executed amendment to this Security Agreement, in the form of Exhibit I hereto (the “Amendment”), pursuant to which such Grantor will pledge such additional Collateral.  Such Grantor hereby authorizes the Collateral Agent to attach each Amendment to this Security Agreement and agrees that all additional Collateral owned by it set forth in such Amendments shall be considered to be part of the Collateral.

  4.5.	Uncertificated Pledged Collateral.  Such Grantor will permit the Collateral Agent from time to time to cause the appropriate issuers (and, if held with a securities intermediary, such securities intermediary) of uncertificated securities or other types of Pledged Collateral owned by it not represented by certificates to mark their books and records with the numbers and face amounts of all such uncertificated securities or other types of Pledged Collateral not represented by certificates and all rollovers and replacements therefor to reflect the Lien of the Collateral Agent granted pursuant to this Security Agreement.  With respect to any Pledged Collateral owned by it, such Grantor will take any actions necessary to cause (a) the issuers of uncertificated securities which are Pledged Collateral and (b) any securities intermediary which is the holder of any such Pledged Collateral, to cause the Collateral Agent to have and retain Control over such Pledged Collateral.  Without limiting the foregoing, such Grantor will, with respect to any such Pledged Collateral held with a securities intermediary, cause such securities intermediary to enter into a control agreement with the Collateral Agent, in form and substance satisfactory to the Collateral Agent, giving the Collateral Agent Control.

  4.6.	Pledged Collateral.

  (a)	Changes in Capital Structure of Issuers. Such Grantor will not (i) permit or suffer any issuer of Capital Stock constituting Pledged Collateral owned by it to dissolve, merge, liquidate, 

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  retire any of its Capital Stock or other Instruments or Securities evidencing ownership, reduce its capital, sell or encumber all or substantially all of its assets (except for Permitted Liens and sales of assets permitted pursuant to Section 4.1(d)) or merge or consolidate with any other entity, or (ii) vote any such Pledged Collateral in favor of any of the foregoing.

  (b)	Issuance of Additional Securities.  Such Grantor will not permit or suffer the issuer of Capital Stock constituting Pledged Collateral owned by it to issue additional Capital Stock, any right to receive the same or any right to receive earnings, except to such Grantor.

  (c)	Registration of Pledged Collateral.  Such Grantor will permit any registerable Pledged Collateral owned by it to be registered in the name of the Collateral Agent or its nominee at any time at the option of the Required Secured Parties.

  (d)	Exercise of Rights in Pledged Collateral.  

  (i)	Without in any way limiting the foregoing and subject to clause (ii) below, such Grantor shall have the right to exercise all voting rights or other rights relating to the Pledged Collateral owned by it for all purposes not inconsistent with this Security Agreement, the Credit Agreement or any other Loan Document; provided however, that no vote or other right shall be exercised or action taken which would have the effect of impairing the rights of the Collateral Agent in respect of such Pledged Collateral.

  (ii)	Such Grantor will permit the Collateral Agent or its nominee at any time after the occurrence of a Default, without notice, to exercise all voting rights or other rights relating to the Pledged Collateral owned by it, including, without limitation, exchange, subscription or any other rights, privileges, or options pertaining to any Capital Stock or Investment Property constituting such Pledged Collateral as if it were the absolute owner thereof.

  (iii)	Such Grantor shall be entitled to collect and receive for its own use all cash dividends and interest paid in respect of the Pledged Collateral owned by it to the extent not in violation of the Credit Agreement other than any of the following distributions and payments (collectively referred to as the “Excluded Payments”): (A) dividends and interest paid or payable other than in cash in respect of such Pledged Collateral, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, such Pledged Collateral;  (B) dividends and other distributions paid or payable in cash in respect of such Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in capital of an issuer; and (C) cash paid, payable or otherwise distributed, in respect of principal of, or in redemption of, or in exchange for, such Pledged Collateral; provided, however, that until actually paid, all rights to such distributions shall remain subject to the Lien created by this Security Agreement; and

  (iv)	All Excluded Payments and all other distributions in respect of any of the Pledged Collateral owned by such Grantor, whenever paid or made, shall be delivered to the Collateral Agent to hold as Pledged Collateral and shall, if received by such Grantor, be received in trust for the benefit of the Collateral Agent, be segregated from the other property or funds of such Grantor, and be forthwith delivered to the Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsement).

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  4.7.	Intellectual Property.

  (a)	Such Grantor will use its best efforts to secure all consents and approvals necessary or appropriate for the assignment to or benefit of the Collateral Agent of any License held by such Grantor and to enforce the security interests granted hereunder.

  (b)	Such Grantor shall notify the Collateral Agent immediately if it knows or has reason to know that any application or registration relating to any Patent, Trademark or Copyright (now or hereafter existing) may become abandoned, invalidated, dedicated or otherwise impaired, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court) regarding such Grantor’s ownership of any Patent, Trademark or Copyright, its right to register the same, or to keep and maintain the same.

  (c)	In no event shall such Grantor, either directly or through any agent, employee, licensee or designee, file an application for the registration of any Patent, Trademark or Copyright with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency without giving the Collateral Agent prior written notice thereof, and, upon request of the Collateral Agent, such Grantor shall execute and deliver any and all agreements, instruments, documents, papers and/or security agreements as the Collateral Agent may request to evidence the Collateral Agent’s first priority security interest on such Patent, Trademark or Copyright, and the General Intangibles of such Grantor relating thereto or represented thereby.

  (d)	Such Grantor shall take all actions necessary or requested by the Collateral Agent to maintain and pursue each application, to obtain the relevant registration and to maintain the registration of each of its Patents, Trademarks and Copyrights (now or hereafter existing), including the filing of applications for renewal, affidavits of use, affidavits of noncontestability and opposition and interference and cancellation proceedings .

  (e)	Such Grantor shall, unless it shall reasonably determine that such Patent, Trademark or Copyright is in no way material to the conduct of its business or operations, promptly sue for infringement, misappropriation or dilution and to recover any and all damages for such infringement, misappropriation or dilution, and shall take such other actions as the Collateral Agent shall deem appropriate under the circumstances to protect such Patent, Trademark or Copyright.  In the event that such Grantor institutes suit because any of its Patents, Trademarks or Copyrights constituting Collateral is infringed upon, or misappropriated or diluted by a third party, such Grantor shall comply with Section 4.8.  Such Grantor shall not do any act that knowingly uses a Patent, Trademark or Copyright that infringes the intellectual property rights of any third party.

  4.8.	Commercial Tort Claims.  Such Grantor shall promptly, and in any event within two Business Days after the same is acquired by it, notify the Collateral Agent of any commercial tort claim (as defined in the UCC) in excess of $50,000 acquired by it and, unless the Collateral Agent otherwise consents, such Grantor shall enter into an amendment to this Security Agreement, in the form of Exhibit J hereto, granting to Collateral Agent a first priority security interest in such commercial tort claim.

  4.9.	Letter-of-Credit Rights.  If such Grantor is or becomes the beneficiary of a letter of credit in excess of $50,000, it shall promptly, and in any event within two Business Days after becoming a beneficiary, notify the Collateral Agent thereof and cause the issuer and/or confirmation bank to (i) consent to the assignment of any Letter-of-Credit Rights to the Collateral Agent and (ii) agree to direct all payments thereunder to a Deposit Account at the Collateral Agent or subject to a Deposit Account 

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  Control Agreement for application to the Secured Obligations, in accordance with Section 2.18 of the Credit Agreement, all in form and substance reasonably satisfactory to the Collateral Agent.

  4.10.	Federal, State or Municipal Claims.  Such Grantor will promptly notify the Collateral Agent of any Collateral which constitutes a claim against the United States government or any state or local government or any instrumentality or agency thereof, the assignment of which claim is restricted by federal, state or municipal law.

  4.11.	No Interference.  Such Grantor agrees that it will not interfere with any right, power and remedy of the Collateral Agent provided for in this Security Agreement or now or hereafter existing at law or in equity or by statute or otherwise, or the exercise or beginning of the exercise by the Collateral Agent of any one or more of such rights, powers or remedies.

  ARTICLE V
DEFAULTS AND REMEDIES

  5.1.	Defaults.  The occurrence of any one or more of the following events shall constitute a Default hereunder:

  (a)	Any representation or warranty made by or on behalf of any Grantor under or in connection with this Security Agreement shall be materially false as of the date on which made.

   

  (b)	The breach by any Grantor of any of the terms or provisions of Article IV or Article VII.

   

  (c)	The breach by any Grantor (other than a breach which constitutes a Default under any other Section of this Article V) of any of the terms or provisions of this Security Agreement which is not remedied within ten days after such breach.

   

  (d)	The occurrence of any “Default” under, and as defined in, the Credit Agreement.

   

  (e)	Any Capital Stock which is included within the Collateral shall at any time constitute a Security or the issuer of any such Capital Stock shall take any action to have such interests treated as a Security unless (i) all certificates or other documents constituting such Security have been delivered to the Collateral Agent and such Security is properly defined as such under Article 8 of the UCC of the applicable jurisdiction, whether as a result of actions by the issuer thereof or otherwise, or (ii) the Collateral Agent has entered into a control agreement with the issuer of such Security or with a securities intermediary relating to such Security and such Security is defined as such under Article 8 of the UCC of the applicable jurisdiction, whether as a result of actions by the issuer thereof or otherwise.

  5.2.	Remedies.

  (a)	Upon the occurrence of a Default and during the continuation thereof, the Collateral Agent may exercise any or all of the following rights and remedies:

  (i)	those rights and remedies provided in this Security Agreement, the Credit Agreement, or any other Loan Document; provided that, this Section 5.2(a) shall not be understood to limit any rights or remedies available to the Collateral Agent and the Secured Parties prior to a Default;

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  (ii)	those rights and remedies available to a secured party under the UCC (whether or not the UCC applies to the affected Collateral) or under any other applicable law (including, without limitation, any law governing the exercise of a bank’s right of setoff or bankers’ lien) when a debtor is in default under a security agreement;

  (iii)	give notice of sole control or any other instruction under any Deposit Account Control Agreement and other control agreement with any securities intermediary and take any action therein with respect to such Collateral;

  (iv)	without notice (except as specifically provided in Section 8.1 or elsewhere herein), demand or advertisement of any kind to any Grantor or any other Person, enter the premises of any Grantor where any Collateral is located (through self-help and without judicial process) to collect, receive, assemble, process, appropriate, sell, lease, assign, grant an option or options to purchase or otherwise dispose of, deliver, or realize upon, the Collateral or any part thereof in one or more parcels at public or private sale or sales (which sales may be adjourned or continued from time to time with or without notice and may take place at any Grantor’s premises or elsewhere), for cash, on credit or for future delivery without assumption of any credit risk, and upon such other terms as the Collateral Agent may deem commercially reasonable; and

  (v)	concurrently with written notice to the applicable Grantor, transfer and register in its name or in the name of its nominee the whole or any part of the Pledged Collateral, to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations, to exercise the voting and all other rights as a holder with respect thereto, to collect and receive all cash dividends, interest, principal and other distributions made thereon and to otherwise act with respect to the Pledged Collateral as though the Collateral Agent was the outright owner thereof.

  (b)	The Collateral Agent, on behalf of the Secured Parties, may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

  (c)	The Collateral Agent shall have the right upon any such public sale or sales and, to the extent permitted by law, upon any such private sale or sales, to purchase for the benefit of the Collateral Agent and the Secured Parties, the whole or any part of the Collateral so sold, free of any right of equity redemption, which equity redemption each Grantor hereby expressly releases.

  (d)	Until the Collateral Agent is able to effect a sale, lease, or other disposition of Collateral, the Collateral Agent shall have the right to hold or use Collateral, or any part thereof, to the extent that it deems appropriate for the purpose of preserving Collateral or its value or for any other purpose deemed appropriate by the Collateral Agent.  The Collateral Agent may, if it so elects, seek the appointment of a receiver or keeper to take possession of Collateral and to enforce any of the Collateral Agent’s remedies (for the benefit of the Collateral Agent and the Secured Parties), with respect to such appointment without prior notice or hearing as to such appointment.

  (e)	If, after the Credit Agreement has terminated by its terms and all of the Obligations have been paid in full, there remain obligations of any Grantor in respect of any Rate Management Transaction (including Commodity Hedging Agreements) or Banking Services, the Required Secured Parties may exercise the remedies provided in this Section 5.2 upon the occurrence of any event which 

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  would allow or require the termination or acceleration of such obligations in respect of such Rate Management Transactions (including Commodity Hedging Agreements) or Banking Services.

  (f)	Notwithstanding the foregoing, neither the Collateral Agent nor the Secured Parties shall be required to (i) make any demand upon, or pursue or exhaust any of their rights or remedies against, any Grantor, any other obligor, guarantor, pledgor or any other Person with respect to the payment of the Secured Obligations or to pursue or exhaust any of their rights or remedies with respect to any Collateral therefor or any direct or indirect guarantee thereof, (ii) marshal the Collateral or any guarantee of the Secured Obligations or to resort to the Collateral or any such guarantee in any particular order, or (iii) effect a public sale of any Collateral.

  (g)	Each Grantor recognizes that the Collateral Agent may be unable to effect a public sale of any or all the Pledged Collateral and may be compelled to resort to one or more private sales thereof in accordance with clause (a) above.  Each Grantor also acknowledges that any private sale may result in prices and other terms less favorable to the seller than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall not be deemed to have been made in a commercially unreasonable manner solely by virtue of such sale being private.  The Collateral Agent shall be under no obligation to delay a sale of any of the Pledged Collateral for the period of time necessary to permit any Grantor or the issuer of the Pledged Collateral to register such securities for public sale under the Securities Act of 1933, as amended, or under applicable state securities laws, even if the applicable Grantor and the issuer would agree to do so.

  5.3.	Grantor’s Obligations Upon Default.  Upon the request of the Collateral Agent after the occurrence of a Default, each Grantor will:

  (a)	assemble and make available to the Collateral Agent the Collateral and all books and records relating thereto at any place or places specified by the Collateral Agent, whether at a Grantor’s premises or elsewhere;

  (b)	permit the Collateral Agent, by the Collateral Agent’s representatives and agents, to enter any premises where all or any part of the Collateral, or the books and records relating thereto, or both, are located, to take possession of all or any part of the Collateral or the books and records relating thereto, or both, to remove all or any part of the Collateral or the books and records relating thereto, or both, and to conduct sales of the Collateral; 

  (c)	prepare and file, or cause an issuer of Pledged Collateral to prepare and file, with the Securities and Exchange Commission or any other applicable government agency, registration statements, a prospectus and such other documentation in connection with the Pledged Collateral as the Collateral Agent may request, all in form and substance satisfactory to the Collateral Agent, and furnish to the Collateral Agent, or cause an issuer of Pledged Collateral to furnish to the Collateral Agent, any information regarding the Pledged Collateral in such detail as the Collateral Agent may specify; 

  (d)	take, or cause an issuer of Pledged Collateral to take, any and all actions necessary to register or qualify the Pledged Collateral to enable the Collateral Agent to consummate a public sale or other disposition of the Pledged Collateral; and 

  (e)	at its own expense, cause the independent certified public accountants then engaged by each Grantor to prepare and deliver to the Collateral Agent and each Lender, at any time, and from time to time, promptly upon the Collateral Agent’s request, the following reports with respect to the applicable Grantor: (i) a reconciliation of all Accounts; (ii) an aging of all Accounts; (iii) trial balances; and (iv) a test verification of such Accounts. 

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  5.4.	Grant of Intellectual Property License.  For the purpose of enabling the Collateral Agent to exercise the rights and remedies under this Article V at such time as the Collateral Agent shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby (a) grants to the Collateral Agent, for the benefit of the Collateral Agent and the Secured Parties, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to any Grantor) to use, license or sublicense any Intellectual Property Rights now owned or hereafter acquired by such Grantor, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof and (b) irrevocably agrees that the Collateral Agent may sell any of such Grantor’s Inventory directly to any person, including without limitation persons who have previously purchased the Grantor’s Inventory from such Grantor and in connection with any such sale or other enforcement of the Collateral Agent’s rights under this Security Agreement, may sell Inventory which bears any Trademark owned by or licensed to such Grantor and any Inventory that is covered by any Copyright owned by or licensed to such Grantor and the Agent may finish any work in process and affix any Trademark owned by or licensed to such Grantor and sell such Inventory as provided herein.

  ARTICLE VI
ACCOUNT VERIFICATION; ATTORNEY IN FACT; PROXY

  6.1.	Account Verification.  The Collateral Agent may at any time, in the Collateral Agent’s own name, in the name of a nominee of the Collateral Agent, or in the name of any Grantor communicate (by mail, telephone, facsimile or otherwise) with the Account Debtors of any such Grantor, parties to contracts with any such Grantor and obligors in respect of Instruments of any such Grantor to verify with such Persons, to the Collateral Agent’s satisfaction, the existence, amount, terms of, and any other matter relating to, Accounts, Instruments, Chattel Paper, payment intangibles and/or other Receivables.

  6.2.	Authorization for Secured Party to Take Certain Action.

  (a)	Each Grantor irrevocably authorizes the Collateral Agent at any time and from time to time in the sole discretion of the Collateral Agent and appoints the Collateral Agent as its attorney in fact (i) to execute on behalf of such Grantor as debtor and to file financing statements necessary or desirable in the Collateral Agent’s sole discretion to perfect and to maintain the perfection and priority of the Collateral Agent’s security interest in the Collateral, (ii) to endorse and collect any cash Proceeds of the Collateral, (iii) to file a carbon, photographic or other reproduction of this Security Agreement or any financing statement with respect to the Collateral as a financing statement and to file any other financing statement or amendment of a financing statement (which does not add new collateral or add a debtor) in such offices as the Collateral Agent in its sole discretion deems necessary or desirable to perfect and to maintain the perfection and priority of the Collateral Agent’s security interest in the Collateral, (iv) to contact and enter into one or more agreements with the issuers of uncertificated securities which are Pledged Collateral or with securities intermediaries holding Pledged Collateral as may be necessary or advisable to give the Collateral Agent Control over such Pledged Collateral, (v) to apply the Proceeds of any Collateral received by the Collateral Agent to the Secured Obligations as provided in Section 7.3, (vi) to discharge past due taxes, assessments, charges, fees or Liens on the Collateral (except for such Liens as are specifically permitted hereunder), (vii) to contact Account Debtors for any reason, (viii) to demand payment or enforce payment of the Receivables in the name of the Collateral Agent or such Grantor and to endorse any and all checks, drafts, and other instruments for the payment of money relating to the Receivables, (ix) to sign such Grantor’s name on any invoice or bill of lading relating to the Receivables, drafts against any Account Debtor of such Grantor, assignments and verifications of Receivables, (x) to exercise all of such Grantor’s rights and remedies with respect to the collection of the Receivables and any other Collateral, (xi) to settle, adjust, compromise, extend or renew the Receivables, (xii) to settle, 

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  adjust or compromise any legal proceedings brought to collect Receivables, (xiii) to prepare, file and sign such Grantor’s name on a proof of claim in bankruptcy or similar document against any Account Debtor of such Grantor, (xiv) to prepare, file and sign such Grantor’s name on any notice of Lien, assignment or satisfaction of Lien or similar document in connection with the Receivables, (xv) to change the address for delivery of mail addressed to such Grantor to such address as the Collateral Agent may designate and to receive, open and dispose of all mail addressed to such Grantor, and (xvi) to do all other acts and things necessary to carry out this Security Agreement; and such Grantor agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent in connection with any of the foregoing; provided that, this authorization shall not relieve such Grantor of any of its obligations under this Security Agreement or under the Credit Agreement. 

  (b)	All acts of said attorney or designee are hereby ratified and approved. The powers conferred on the Collateral Agent, for the benefit of the Collateral Agent and Secured Parties, under this Section 6.2 are solely to protect the Collateral Agent’s interests in the Collateral and shall not impose any duty upon the Collateral Agent or any Lender to exercise any such powers.  

  6.3.	Proxy. EACH GRANTOR HEREBY IRREVOCABLY CONSTITUTES AND APPOINTS THE COLLATERAL AGENT AS ITS PROXY AND ATTORNEY‐IN‐FACT (AS SET FORTH IN SECTION 6.2 ABOVE) WITH RESPECT TO ITS PLEDGED COLLATERAL, INCLUDING THE RIGHT TO VOTE SUCH PLEDGED COLLATERAL, WITH FULL POWER OF SUBSTITUTION TO DO SO.  IN ADDITION TO THE RIGHT TO VOTE ANY SUCH PLEDGED COLLATERAL, THE APPOINTMENT OF THE COLLATERAL AGENT AS PROXY AND ATTORNEY-IN-FACT SHALL INCLUDE THE RIGHT TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF SUCH PLEDGED COLLATERAL WOULD BE ENTITLED (INCLUDING GIVING OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, CALLING SPECIAL MEETINGS OF SHAREHOLDERS AND VOTING AT SUCH MEETINGS).  SUCH PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF ANY SUCH PLEDGED COLLATERAL ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY PERSON (INCLUDING THE ISSUER OF SUCH PLEDGED COLLATERAL OR ANY OFFICER OR THE AGENT THEREOF), UPON THE OCCURRENCE OF A DEFAULT.

  6.4.	Nature of Appointment; Limitation of Duty.  THE APPOINTMENT OF THE COLLATERAL AGENT AS PROXY AND ATTORNEY-IN-FACT IN THIS ARTICLE VI IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL THE DATE ON WHICH THIS SECURITY AGREEMENT IS TERMINATED IN ACCORDANCE WITH SECTION 8.15. NOTWITHSTANDING ANYTHING CONTAINED HEREIN, NEITHER THE COLLATERAL AGENT, NOR ANY LENDER, NOR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL HAVE ANY DUTY TO EXERCISE ANY RIGHT OR POWER GRANTED HEREUNDER OR OTHERWISE OR TO PRESERVE THE SAME AND SHALL NOT BE LIABLE FOR ANY FAILURE TO DO SO OR FOR ANY DELAY IN DOING SO, EXCEPT IN RESPECT OF DAMAGES ATTRIBUTABLE SOLELY TO THEIR OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS FINALLY DETERMINED BY A COURT OF COMPETENT JURISDICTION; PROVIDED THAT, IN NO EVENT SHALL THEY BE LIABLE FOR ANY PUNITIVE, EXEMPLARY, INDIRECT OR CONSEQUENTIAL DAMAGES.

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  ARTICLE VII

COLLECTION AND APPLICATION OF COLLATERAL PROCEEDS; DEPOSIT ACCOUNTS

  7.1.	Collection of Receivables.

  (a)	Each Grantor has (i) executed and delivered to the Collateral Agent Deposit Account Control Agreements for each Deposit Account maintained by such Grantor into which all cash, checks or other similar payments relating to or constituting payments made in respect of Receivables will be deposited (a “Collateral Deposit Account”), which Collateral Deposit Accounts are identified as such on Exhibit B, (ii) established blocked account service (the “Blocked Accounts”) with the bank(s) set forth in Exhibit B, which blocked accounts are subject to irrevocable blocked account agreements in the form provided by or otherwise acceptable to the Collateral Agent and have been accompanied by an acknowledgment by the bank where the Blocked Account is located of the Lien of the Collateral Agent granted hereunder and of irrevocable instructions to wire all amounts collected therein to the Collection Account (a “Blocked Account Agreement”) and (iii) established lockbox service (the “Lock Boxes”) with the bank(s) and Persons set forth in Exhibit B, which lockboxes are subject to irrevocable lockbox agreements in the form provided by or otherwise acceptable to the Collateral Agent and have been accompanied by an acknowledgment by such Person where the Lockbox is located of the Lien of the Collateral Agent granted hereunder and of irrevocable instructions to wire all amounts collected therein to the Collection Account (a “Lockbox Agreement”).   Each of the agreements referred to in this Section 7.1 (a) remains in effect as of the Effective Date and any references therein to the Existing Credit Agreement or Existing Security Agreement, as applicable, include such agreements as amended.  After the Effective Date, each Grantor will comply with the terms of Section 7.2.

  (b)	Each Grantor shall direct all of its Account Debtors to forward all cash, checks or other similar payments relating to or constituting payments made in respect of Receivables directly to Blocked Accounts subject to Blocked Account Agreements or Lockboxes subject to Lockbox Agreements; provided that, with respect to PHI and any Subsidiary thereof, all of such payments shall, unless otherwise consented to by the Collateral Agent, continue to be paid through the Remittance Processor pursuant to the Remittance Processing Agreement.  Neither PHI nor any Subsidiary thereof shall amend or terminate the Remittance Processing Agreement or instruct any of its Account Debtors to make payments to any Person other than as set forth in the preceding sentence, without the prior written consent of the Collateral Agent.  The Collateral Agent shall have sole access to the Blocked Accounts and the Lockboxes at all times and each Grantor shall take all actions necessary to grant the Collateral Agent such sole access.  At no time shall any Grantor remove any item from a Blocked Account, Lockbox or from a Collateral Deposit Account without the Collateral Agent’s prior written consent.  If any Grantor should refuse or neglect to notify any Account Debtor to forward payments directly to a Blocked Account subject to a Blocked Account Agreement or a Lockbox subject to a Lockbox Agreement after notice from the Collateral Agent, the Collateral Agent shall be entitled to make such notification directly to Account Debtor.  If notwithstanding the foregoing instructions, any Grantor receives any Proceeds of any Receivables, such Grantor shall receive such payments as the Collateral Agent’s trustee, and shall immediately deposit all cash, checks or other similar payments related to or constituting payments made in respect of Receivables received by it to a Collateral Deposit Account.  All funds deposited into any Blocked Account subject to a Blocked Account Agreement, a Lockbox subject to a Lockbox Agreement or a Collateral Deposit Account will be swept on a daily basis into a collection account maintained by Petro with the Collateral Agent (the “Collection Account”).  The Collateral Agent shall hold and apply funds received into the Collection Account as provided by the terms of Section 7.3. 

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  7.2.	Covenant Regarding New Deposit Accounts; Blocked Accounts; Lockboxes.  Upon opening or replacing any Collateral Deposit Account, other Deposit Account, or establishing a new Blocked Account or Lockbox, each Grantor shall (a) notify the Collateral Agent within ten (10) days of  the opening of such Deposit Account, Blocked Account or Lockbox, and (b) cause each bank, financial institution or any Person in which it seeks to open (i) a Deposit Account, to enter into a Deposit Account Control Agreement with the Collateral Agent within 60 days of opening such Deposit Account in order to give the Collateral Agent Control of such Deposit Account, (ii) a Blocked Account, to enter into a Blocked Account Agreement with the Collateral Agent within 60 days of opening such Blocked Account in order to give the Collateral Agent Control of the Blocked Account or (iii) a Lockbox, to enter into a Lockbox Agreement with the Collateral Agent within 60 days of opening such Lockox in order to give the Collateral Agent Control of the Lockbox.  In the case of Deposit Accounts, Blocked Accounts or Lockboxes maintained with Secured Parties, the terms of such letter shall be subject to the provisions of the Credit Agreement regarding setoffs.

  7.3.	Application of Proceeds; Deficiency.

  (a)	All amounts deposited in the Collection Account shall, so long as no Default has occurred and is continuing, be deposited into the Borrower’s Funding Account; provided that if Availability is less than 15% of the Aggregate Commitment for any three consecutive days, and until the later of the date which is 90 days after such three-day period or the date on which the average monthly Availability for the 12-month period ending on such date is greater than 20% of the Aggregate Commitment (the “Deficiency Termination Date”), all amounts deposited in the Collection Account shall be deemed received by the Collateral Agent in accordance with Section 2.17 of the Credit Agreement and shall, after having been credited in immediately available funds to the Collection Account, be applied (and allocated) by the Collateral Agent in accordance with Section 2.18 of the Credit Agreement.  In no event shall any amount be so applied unless and until such amount shall have been credited in immediately available funds to the Collection Account.  Commencing on the Deficiency Termination Date, so long as no Default has occurred and is continuing and subject to the proviso above of this Section 7.3(a), all amounts deposited in the Collection Account shall again be deposited into the Borrower’s Funding Account.  Notwithstanding the foregoing, the effect of the proviso above of this Section 7.3(a) may not be discontinued more than twice in any 12-month period as a result of the occurrence of a Deficiency Termination Date.

  (b)	The Collateral Agent shall require all other cash proceeds of the Collateral, which are not required to be applied to the Obligations pursuant to Section 2.15 of the Credit Agreement, to be deposited in a cash collateral account with the Collateral Agent and held there as security for the Secured Obligations (it being understood that amounts deposited and remaining in such account shall be included in the Borrowing Base).  No Grantor shall have any control whatsoever over said cash collateral account.  Any such Proceeds of the Collateral shall be applied in the order set forth in Section 2.18 of the Credit Agreement unless a court of competent jurisdiction shall otherwise direct.  Until so applied, such Proceeds shall continue to be held as security for the Secured Obligations and shall not constitute payment thereof.

  (c)	Notwithstanding anything herein to the contrary, upon the occurrence of a Default, the Collateral Agent may apply all or any part of Proceeds constituting Collateral, whether or not held in a collateral account, in payment of the Secured Obligations in accordance with Section 2.18 of the Credit Agreement.  The Grantors shall remain liable for any deficiency if the Proceeds of any sale or disposition of the Collateral are insufficient to pay all Secured Obligations, including any attorneys’ fees and other expenses incurred by Collateral Agent or any Lender to collect such deficiency.

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  ARTICLE VIII
GENERAL PROVISIONS

  8.1.	Waivers.  Each Grantor hereby waives notice of the time and place of any public sale or the time after which any private sale or other disposition of all or any part of the Collateral may be made.  To the extent such notice may not be waived under applicable law, any notice made shall be deemed reasonable if sent to the Grantors, addressed as set forth in Article IX, at least ten days prior to (i) the date of any such public sale or (ii) the time after which any such private sale or other disposition may be made.  To the maximum extent permitted by applicable law, each Grantor waives all claims, damages, and demands against the Collateral Agent or any Lender arising out of the repossession, retention or sale of the Collateral, except such as arise solely out of the gross negligence or willful misconduct of the Collateral Agent or such Lender as finally determined by a court of competent jurisdiction. To the extent it may lawfully do so, each Grantor absolutely and irrevocably waives and relinquishes the benefit and advantage of, and covenants not to assert against the Collateral Agent or any Lender, any valuation, stay, appraisal, extension, moratorium, redemption or similar laws and any and all rights or defenses it may have as a surety now or hereafter existing which, but for this provision, might be applicable to the sale of any Collateral made under the judgment, order or decree of any court, or privately under the power of sale conferred by this Security Agreement, or otherwise.  Except as otherwise specifically provided herein, each Grantor hereby waives presentment, demand, protest or any notice (to the maximum extent permitted by applicable law) of any kind in connection with this Security Agreement or any Collateral.

  8.2.	Limitation on Collateral Agent’s and Secured Parties’ Duty with Respect to the Collateral.  The Collateral Agent shall have no obligation to clean-up or otherwise prepare the Collateral for sale.  The Collateral Agent and each Lender shall use reasonable care with respect to the Collateral in its possession or under its control.  Neither the Collateral Agent nor any Lender shall have any other duty as to any Collateral in its possession or control or in the possession or control of any agent or nominee of the Collateral Agent or such Lender, or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto.  To the extent that applicable law imposes duties on the Collateral Agent to exercise remedies in a commercially reasonable manner, each Grantor acknowledges and agrees that it is commercially reasonable for the Collateral Agent (i) to fail to incur expenses deemed significant by the Collateral Agent to prepare Collateral for disposition or otherwise to transform raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or to obtain or, if not required by other law, to fail to obtain governmental or third party consents for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against Account Debtors or other Persons obligated on Collateral or to remove Liens on or any adverse claims against Collateral, (iv) to exercise collection remedies against Account Debtors and other Persons obligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other Persons, whether or not in the same business as such Grantor, for expressions of interest in acquiring all or any portion of such Collateral, (vii) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not the Collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capacity of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi) to purchase insurance or credit enhancements to insure the Collateral Agent against risks of loss, collection or disposition of Collateral or to provide to the Collateral Agent a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by the Collateral Agent, to obtain the services of other brokers, investment bankers, consultants and other professionals to assist the Collateral 

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  Agent in the collection or disposition of any of the Collateral.  Each Grantor acknowledges that the purpose of this Section 8.2 is to provide non-exhaustive indications of what actions or omissions by the Collateral Agent would be commercially reasonable in the Collateral Agent’s exercise of remedies against the Collateral and that other actions or omissions by the Collateral Agent shall not be deemed commercially unreasonable solely on account of not being indicated in this Section 8.2.  Without limitation upon the foregoing, nothing contained in this Section 8.2 shall be construed to grant any rights to any Grantor or to impose any duties on the Collateral Agent that would not have been granted or imposed by this Security Agreement or by applicable law in the absence of this Section 8.2.

  8.3.	Compromises and Collection of Collateral.  The Grantors and the Collateral Agent recognize that setoffs, counterclaims, defenses and other claims may be asserted by obligors with respect to certain of the Receivables, that certain of the Receivables may be or become uncollectible in whole or in part and that the expense and probability of success in litigating a disputed Receivable may exceed the amount that reasonably may be expected to be recovered with respect to a Receivable.  In view of the foregoing, each Grantor agrees that the Collateral Agent may at any time and from time to time, if a Default has occurred and is continuing, compromise with the obligor on any Receivable, accept in full payment of any Receivable such amount as the Collateral Agent in its Permitted Discretion shall determine or abandon any Receivable, and any such action by the Collateral Agent shall be commercially reasonable so long as the Collateral Agent acts in good faith based on information known to it at the time it takes any such action.

  8.4.	Secured Party Performance of Debtor Obligations.  Without having any obligation to do so, the Collateral Agent may perform or pay any obligation which any Grantor has agreed to perform or pay in this Security Agreement and the Grantors shall reimburse the Collateral Agent for any amounts paid by the Collateral Agent pursuant to this Section 8.4.  The Grantors’ obligation to reimburse the Collateral Agent pursuant to the preceding sentence shall be a Secured Obligation payable on demand.

  8.5.	Specific Performance of Certain Covenants.  Each Grantor acknowledges and agrees that a breach of any of the covenants contained in Sections 4.1(d), 4.1(e), 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 4.10, 4.12, 5.3, or 8.7 or in Article VII will cause irreparable injury to the Collateral Agent and the Secured Parties, that the Collateral Agent and Secured Parties have no adequate remedy at law in respect of such breaches and therefore agrees, without limiting the right of the Collateral Agent or the Lenders to seek and obtain specific performance of other obligations of the Grantors contained in this Security Agreement, that the covenants of the Grantors contained in the Sections referred to in this Section 8.5 shall be specifically enforceable against the Grantors.

  8.6.	Use and Possession of Certain Premises.  Upon the occurrence of a Default, the Collateral Agent shall be entitled to occupy and use any premises owned or leased by any Grantor where any of the Collateral or any records relating to the Collateral are located until the Secured Obligations are paid or the Collateral is removed therefrom, whichever first occurs, without any obligation to pay any Grantor for such use and occupancy.

  8.7.	Dispositions Not Authorized.  No Grantor is authorized to sell or otherwise dispose of the Collateral except as set forth in Section 4.1(d) and notwithstanding any course of dealing between any Grantor and the Collateral Agent or other conduct of the Collateral Agent, no authorization to sell or otherwise dispose of the Collateral (except as set forth in Section 4.1(d)) shall be binding upon the Collateral Agent or the Secured Parties unless such authorization is in writing signed by the Collateral Agent with the consent or at the direction of the Required Secured Parties.

  8.8.	No Waiver; Amendments; Cumulative Remedies.  No delay or omission of the Collateral Agent or any Lender to exercise any right or remedy granted under this Security Agreement shall impair 

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  such right or remedy or be construed to be a waiver of any Default or an acquiescence therein, and any single or partial exercise of any such right or remedy shall not preclude any other or further exercise thereof or the exercise of any other right or remedy. No waiver, amendment or other variation of the terms, conditions or provisions of this Security Agreement whatsoever shall be valid unless in writing signed by the Collateral Agent with the concurrence or at the direction of the Secured Parties required under Section 8.3 of the Credit Agreement and then only to the extent in such writing specifically set forth.  All rights and remedies contained in this Security Agreement or by law afforded shall be cumulative and all shall be available to the Collateral Agent and the Secured Parties until the Secured Obligations have been paid in full.

  8.9.	Limitation by Law; Severability of Provisions.  All rights, remedies and powers provided in this Security Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Security Agreement are intended to be subject to all applicable mandatory provisions of law that may be controlling and to be limited to the extent necessary so that they shall not render this Security Agreement invalid, unenforceable or not entitled to be recorded or registered, in whole or in part.  Any provision in any this Security Agreement that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of this Security Agreement are declared to be severable.

  8.10.	Reinstatement.  This Security Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against any Grantor for liquidation or reorganization, should any Grantor become insolvent or make an assignment for the benefit of any creditor or creditors or should a receiver or trustee be appointed for all or any significant part of any Grantor’s assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Secured Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee of the Secured Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment or performance had not been made.  In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Secured Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

  8.11.	Benefit of Agreement.  The terms and provisions of this Security Agreement shall be binding upon and inure to the benefit of the Grantors, the Collateral Agent and the Secured Parties and their respective successors and assigns (including all persons who become bound as a debtor to this Security Agreement), except that no Grantor shall have the right to assign its rights or delegate its obligations under this Security Agreement or any interest herein, without the prior written consent of the Collateral Agent.  No sales of participations, assignments, transfers, or other dispositions of any agreement governing the Secured Obligations or any portion thereof or interest therein shall in any manner impair the Lien granted to the Collateral Agent, for the benefit of the Collateral Agent and the Secured Parties, hereunder.

  8.12.	Survival of Representations.  All representations and warranties of the Grantors contained in this Security Agreement shall survive the execution and delivery of this Security Agreement.

  8.13.	Taxes and Expenses.  Any taxes (including income taxes) payable or ruled payable by Federal or State authority in respect of this Security Agreement shall be paid by the Grantors, together with interest and penalties, if any.  The Grantors shall reimburse the Collateral Agent for any and all out‐of‐pocket expenses and internal charges (including reasonable attorneys’, auditors’ and accountants’ fees and reasonable time charges of attorneys, paralegals, auditors and accountants who may be 

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  employees of the Collateral Agent) paid or incurred by the Collateral Agent in connection with the preparation, execution, delivery, administration, collection and enforcement of this Security Agreement and in the audit, analysis, administration, collection, preservation or sale of the Collateral (including the expenses and charges associated with any periodic or special audit of the Collateral).  Any and all costs and expenses incurred by the Grantors in the performance of actions required pursuant to the terms hereof shall be borne solely by the Grantors.

  8.14.	Headings.  The title of and section headings in this Security Agreement are for convenience of reference only, and shall not govern the interpretation of any of the terms and provisions of this Security Agreement.

  8.15.	Termination.  This Security Agreement shall continue in effect (notwithstanding the fact that from time to time there may be no Secured Obligations outstanding) until (i) the Credit Agreement has terminated pursuant to its express terms and (ii) all of the Secured Obligations have been indefeasibly paid and performed in full (or with respect to any outstanding Facility LCs, a cash deposit or Supporting Letter of Credit has been delivered to the Collateral Agent as required by the Credit Agreement) and no commitments of the Collateral Agent or the Secured Parties which would give rise to any Secured Obligations are outstanding.

  8.16.	Entire Agreement.  This Security Agreement embodies the entire agreement and understanding between the Grantors and the Collateral Agent relating to the Collateral and supersedes all prior agreements and understandings between the Grantors and the Collateral Agent relating to the Collateral.

  8.17.	CHOICE OF LAW.  THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

  8.18.	CONSENT TO JURISDICTION.  EACH GRANTOR HEREBY IRREVOCABLY SUBMITS TO THE NON‐EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT AND EACH GRANTOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION.  ANY JUDICIAL PROCEEDING BY ANY GRANTOR AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN THE STATE OF NEW YORK.

  8.19.	WAIVER OF JURY TRIAL. EACH GRANTOR, THE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS 

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  SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

  8.20.	Indemnity.  Each Grantor hereby agrees to indemnify the Collateral Agent and the Secured Parties, and their respective successors, assigns, agents and employees (each an “Indemnified Party”), from and against any and all liabilities, damages, penalties, suits, costs, and expenses of any kind and nature (including, without limitation, all expenses of litigation or preparation therefor whether or not the Collateral Agent or any Lender is a party thereto) imposed on, incurred by or asserted against any Indemnified Party, in any way relating to or arising out of this Security Agreement, or the manufacture, purchase, acceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of any Collateral (including, without limitation, latent and other defects, whether or not discoverable by the Collateral Agent or the Secured Parties or any Grantor, and any claim for Patent, Trademark or Copyright infringement) except to the extent that such liabilities, damages, penalties, suits, costs, and expenses are determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of the Indemnified Party.

  8.21.	Counterparts.  This Security Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Security Agreement by signing any such counterpart. 

  8.22.	Section Titles.  The Section titles contained in this Security Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not part of the agreement between the parties hereto.

  ARTICLE IX
NOTICES

  9.1.	Sending Notices.  Any notice required or permitted to be given under this Security Agreement shall be sent by United States mail, telecopier, personal delivery or nationally established overnight courier service, and shall be deemed received (a) when received, if sent by hand or overnight courier service, or mailed by certified or registered mail notices or (b) when sent, if sent by telecopier (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient), in each case addressed to the Grantors at the notice address set forth on Exhibit A, and to the Collateral Agent and the Secured Parties at the addresses set forth in the Credit Agreement.

  9.2.	Change in Address for Notices.  Each of the Grantors, the Collateral Agent and the Secured Parties may change the address for service of notice upon it by a notice in writing to the other parties. 

  ARTICLE X
THE AGENT

  JPMorgan Chase Bank, N.A. has been appointed Collateral Agent for the Secured Parties hereunder pursuant to Article X of the Credit Agreement.  It is expressly understood and agreed by the parties to this Security Agreement that any authority conferred upon the Collateral Agent hereunder is subject to the terms of the delegation of authority made by the Secured Parties to the Collateral Agent pursuant to the Credit Agreement, and that the Collateral Agent has agreed to act (and any successor Collateral Agent shall act) as such hereunder only on the express conditions contained in such Article X.  

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  Any successor Collateral Agent appointed pursuant to Article X of the Credit Agreement shall be entitled to all the rights, interests and benefits of the Collateral Agent hereunder.

  ARTICLE XI
EFFECT OF AMENDMENT AND RESTATEMENT OF EXISTING SECURITY AGREEMENT

  On the Effective Date, the Existing Security Agreement shall be amended, restated and superseded in its entirety.  The parties hereto acknowledge and agree that (a) this Security Agreement and the other Loan Documents, whether executed and delivered in connection herewith or otherwise, do not constitute a novation, payment and reborrowing, or termination of the “Obligations” (as defined in the Existing Credit Agreement) under the Existing Security Agreement and Existing Credit Agreement as in effect prior to the Effective Date and (b) such “Obligations” are in all respects continuing (as amended and restated hereby) with only the terms thereof being modified as provided in this Security Agreement.

  [Signature PageS Follow]

   

  27

  	 

  

   

  IN WITNESS WHEREOF, the Grantors and the Collateral Agent have executed this Security Agreement as of the date first above written.

  GRANTORS:

   

  A.P. WOODSON COMPANY

  Champion Energy LLC

  COLUMBIA PETROLEUM TRANSPORTATION, LLC

  GRIFFITH ENERGY SERVICES, INC.

  GRIFFITH-ALLIED TRUCKING, LLC

  Hoffman Fuel Company of Danbury

  MEENAN HOLDINGS LLC

  MEENAN OIL LLC

  MILRO GROUP LLC

  MINNWHALE LLC

  ORTEP OF PENNSYLVANIA, INC.

  PETRO HOLDINGS, INC.

  PETRO PLUMBING CORPORATION

  PETRO, INC.

  REGIONOIL PLUMBING, HEATING AND COOLING CO., INC.

  RICHLAND PARTNERS, LLC

  Rye Fuel Company

  STAR ACQUISITIONS, INC.

   

   

  By: /s/ Richard F. Ambury		

   

  Name: Richard F. Ambury			

   

  Title: Chief Financial Officer			

   

   

  

   

  STAR GROUP, L.P.

   

  By:  KESTREL HEAT, LLC, its General Partner

   

  By: /s/ Richard F. Ambury		

   

  Name: Richard F. Ambury			

   

  Title: Chief Financial Officer			

   

   

  MEENAN OIL CO., L.P.

   

  By:  MEENAN OIL LLC, its General Partner

   

  By: /s/ Richard F. Ambury		

   

  Name: Richard F. Ambury			

   

  Title: Chief Financial Officer			

   

   

  CFS LLC
By: Richland Partners, LLC, its Sole Member  

  By: /s/ Richard F. Ambury	
 Richard F. Ambury 
 Chief Financial Officer, Executive Vice President, Treasurer and Secretary

   

   

  

   

  JPMORGAN CHASE BANK, N.A., as Collateral Agent

   

  By: /s/ Bam Fakorede

   

  Name: Bam Fakorede

   

  Title: Vice Presidentex_392014.htm

 

Exhibit 10.2

 

Confidential Treatment by Educational Development Corporation

 

DISTRIBUTION AGREEMENT

 

THIS AGREEMENT is made 16 May 2022

 

 

PARTIES

 

	 	
			(1)

				
			USBORNE PUBLISHING LIMITED of 83-85 Saffron Hill, London EC1N 8RT, England (Usborne); and

			

 

	 	
			(2)

				
			EDUCATIONAL DEVELOPMENT CORPORATION a Delaware Corporation with its principal place of business at 5402 S 122ND East Ave Tulsa, OK, 74146-6007 United States (Distributor).

			

 

BACKGROUND

 

	 	
			A.

				
			Usborne is involved in publishing books and other publications.

			

 

	 	
			B.

				
			The Distributor is involved in the marketing, sale, warehousing and distribution of books to consumers through its multi-level marketing sales channels.

			

 

	 	
			C.

				
			The parties entered into an agreement for the distribution of Usborne books on 25th November 1988 as amended and restated pursuant to certain variation agreements including Amendment Agreement dated 1 November 1990, Amendment Agreement dated 1 January 1992, Letter dated 5 September 1994, Letter dated 6 May 1999, Letter dated 12 November 2002, Letter dated 8 October 2009, Letter dated 16 October 2013 and Letter dated 10 September 2018 (the “Previous Distribution Agreement”).

			

 

	 	
			D.

				
			The parties also entered into an agreement for the sale of Products through book-selling parties on 1 November 1990 as amended and restated pursuant to certain variation agreements including Letter dated 15 February 1995, Letter dated 6 May 1999, Name Change Amendment dated 24 July 2009, Letter dated 16 October 2013 and Letter dated 10 September 2018 (the “Previous Party Plan Agreement”).

			

 

	 	
			E.

				
			The parties also entered into a License Agreement dated 26 May 1999 under which Usborne granted the Distributor the right to create certain interactive Licensed Products (as defined in the License Agreement) based on Usborne books using CD ROMs and a Trademark License Agreement dated 8 December 1993 under which Usborne granted the Distributor the right to use the trade mark “Usborne” in connection with Kid Kits (as defined in the Trademark License Agreement) containing Usborne books distributed by EDC (together the “Previous License Agreements”).

			

 

	 	
			F.

				
			The parties now wish to terminate the Previous Distribution Agreement, the Previous Party Plan Agreement and the Previous License Agreements and wish to enter into this agreement for the marketing, sale, warehousing and distribution of the Products (as defined below and supplied to Distributor by Usborne on a firm sale basis only) to consumers through the Distributor’s EDC MLM Channels (as defined below) in the Territory on the terms set out below.

			

 

	 	
			G.

				
			For the avoidance of doubt, this Agreement supersedes and extinguishes the Previous Distribution Agreement, the Previous Party Plan Agreement, the Previous License Agreements and any other agreement between the parties entered into at any time prior to the date of this Agreement.

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

AGREED TERMS

 

Definitions

 

Affiliate: means any entity directly or indirectly controlling, controlled by or under common control with a party to this Agreement.

 

Commencement Date: means the date of signature of this Agreement.

 

EDC MLM Channels: the Distributor’s MLM Channels limited to sales direct to private individual end consumers by the Distributor using its network of such consultants either through the EDC Website, Distributor-provided consultants’ replicated microsites forming part of the EDC Website book selling parties, internet sales events (being online party plan events or held via such consultants’ social media channels) and for the avoidance of doubt excluding all distribution and or sales made pursuant to exercise of any of the Reserved Rights set out in Clause 1.4.

 

EDC Website: myubam.com (until the end of the Rebranding Period) and then such replacement site as the Distributor shall notify to Usborne.

 

Existing Stock: has the meaning set out in Clause 5.18.

 

Fiscal Year: means, (i) initially, the period from 1st February 2022 until 31st January 2023 and, (ii) thereafter, each successive period of 12 months commencing on 1st February 2023 and ending on the 31st January in the next following calendar year.

 

Initial [***]

 

Licensed Languages: means English.

 

MLM Channels: multi-level marketing channels used to sell books and related products direct to private individual end consumers using a network of independent sales consultants.

 

Price: has the meaning set out in Clause 6.1.

 

Prior Agreements: means the Previous Distribution Agreement and the Previous Party Plan Agreement.

 

Products: means Usborne books and other related products (including toys games and jigsaws) published in the Licensed Languages under Usborne's name, which Usborne has in print or distributes as of the date of this Agreement or distributes, publishes or reissues after the date of this Agreement and which Usborne notifies the Distributor are available for sale to private individual end consumers via the EDC MLM Channels in the Territory from time to time and which are the subject of orders placed by the Distributor in accordance with Clause 5.2. Electronic books, audio and e-book versions of Usborne books are excluded from this definition of Products.

 

Rebranding Period: has the meaning set out in Clause 4.1.

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

Reserved Rights: has the meaning given in Clause 1.4.

 

Restricted Brand Names: “Usborne Books & More”, “Usborne Books and More” and “UBAM”.

 

Territory: the United States of America, its territories and possessions.

 

Trade Mark and Brand Guidelines: the guidelines relating to use of the Trade Marks attached to this Agreement at Schedule 2 as may be amended and replaced by Usborne from time to time.

 

Trade Marks: means the name "USBORNE" and the "Balloon" device as depicted in Schedule 1 together with any other trade marks expressly notified in writing as being included in Schedule 1 by Usborne to the Distributor from time to time (which, for the avoidance of doubt shall include “That’s Not My”).

 

Transition Period: has the meaning given in Clause 13.1. The following rules of interpretation will apply:

	 	
			(a)

				
			references to Clauses and Schedules are to the clauses and schedules of this Agreement;

			

 

	 	
			(b)

				
			a person includes a natural person, corporate or unincorporated body (whether or not having separate legal personality) and that person's personal representatives, successors and permitted assigns.

			

 

	 	
			(c)

				
			a reference to a statute or statutory provision is a reference to it as amended, extended or re-enacted from time to time;

			

 

	 	
			(d)

				
			use of the word including (or any similar expression) is illustrative and does not limit the meaning of the words which precede it;

			

 

	 	
			(e)

				
			a reference to writing or written includes email; and

			

 

	 	
			(f)

				
			if a party agrees not to do something, that includes not allowing the thing to be done.

			

 

	 	
			1.

				
			Appointment of the Distributor

			

 

	 	
			1.1.

				
			The parties acknowledge and agree that the Previous Distribution Agreement, the Previous Party Plan Agreement and the License Agreements together with any other agreements entered into between the parties before the date of this Agreement shall all be superseded and extinguished by this Agreement with effect from the Commencement Date save for such accrued rights (including, without limitation, for payment of any products supplied by Usborne to the Distributor pursuant to such other agreements) as shall exist pursuant to such agreements as of the date of this Agreement. For the avoidance of doubt, this shall not include any rights set out in the “Effects of Termination” provisions set out in clause 16 in the Previous Distribution Agreement and/or clause 12 of the Previous Party Plan Agreement which provisions shall be of no force or effect from and after the date of this Agreement. [***].

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			1.2.

				
			Subject to and in accordance with the provisions hereof, Usborne hereby appoints the Distributor as the exclusive distributor to market, promote and resell Products through the EDC MLM Channels in the Territory for the term of this Agreement. The Reserved Rights (as set out in Clause 1.4 below) are specifically excluded from the scope of this Appointment.

			

 

	 	
			1.3.

				
			Subject to the Distributor’s compliance with the terms of this Agreement, Usborne agrees, for the duration of this Agreement, not to appoint any other distributor nor itself to sell or distribute the Products through MLM Channels in the Territory.

			

 

	 	
			1.4.

				
			Notwithstanding Clauses 1.2 and 1.3, Usborne reserves all rights, other than those expressly granted to the Distributor under Clause 1.2 of this Agreement, to sell its Products either itself or through other distribution channels including without limitation:

			

 

	 	
			(i)

				
			the right to sell all Products to retail outlets and wholesalers of retail outlets in the Territory, including all and any online sales (including, without limitation, sales through any online retailer) other than sales direct to private individual end consumers through the EDC Website as permitted under Clause 1.2;

			

 

	 	
			(ii)

				
			to engage other distributors to sell the Products within the Territory;

			

 

	 	
			(iii)

				
			to supply Products itself or via third parties to schools, book fairs and libraries in the Territory; provided always that sales by one of EDC’s independent MLM sales consultants to private individual end consumers (always excluding all and any school boards, school districts, school and/or home school suppliers, wholesalers and/or libraries) via a book fair held by any such consultant in a school and/or library setting and/or pursuant to Distributor’s 'Reach for the Stars!! program' shall (a) be permitted by Usborne on the terms of this Agreement, (b) not be deemed to breach Usborne’s rights, and (c) not be deemed to be part of the EDC MLM Channels nor subject to the exclusivity rights set out in Clause 1.2 above;

			

 

	 	
			(iv)

				
			to sell Products to any other distributors or retailers outside the Territory without restriction whatsoever; and

			

 

	 	
			(v)

				
			to sell to freelance or commissioned sales representatives selling to trade channels and toy and gift retailers,

			

 

(the “Reserved Rights”).

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			1.5.

				
			Usborne additionally grants the Distributor the non-exclusive right during the Initial [***] only to sell Existing Stock (on a firm sale basis only and without any obligation for Usborne, its agents or partners in the Territory to accept returns) to certain trade customers subject to the following provisions:

			

 

	 	
			(i)

				
			The Distributor may sell Existing Stock to such existing trade customers as are listed in Part 1 of Schedule 6, to whom the Distributor undertakes it has been actively selling Usborne titles during the last 12 months under the Previous Distribution Agreement.

			

 

	 	
			(ii)

				
			The Distributor may not sell Existing Stock to any trade customers as are listed in Part 2 of Schedule 6 and the rights granted under this Clause 1.5 expressly exclude sales to those trade customers set out in Part 2 of Schedule 6.

			

 

	 	
			(iii)

				
			Usborne may at any time in its sole discretion and on immediate written notice (which may be by email) to the Distributor withdraw the rights granted under this Clause 1.5 in respect of any or all trade customers listed in Part 1 of Schedule 6 in which case such trade customer will be deemed to have been added to Part 2 of Schedule 6.

			

 

	 	
			(iv)

				
			The Distributor shall accept all and deal with all returns made by trade customers under sales made by the Distributor to such trade customers either under this Clause 1.5 or under the Previous Distribution Agreement. Any such returns will not be accepted by Usborne, its agents or partners in the Territory.

			

 

	 	
			(v)

				
			The Distributor shall, no later than 3 months before the end of the Initial [***], notify all trade customers listed in Part 1 of Schedule 6 in writing and using a form of letter approved by Usborne in writing that new trade distribution arrangements for Usborne’s products will be in place from the end of the Initial [***] and that all returns of products sold to such trade customers by the Distributor will need to be made to the Distributor and will not be accepted by Usborne.

			

 

	 	
			1.6.

				
			The Distributor shall not resell or distribute or otherwise make available Products to customers based outside the Territory and will promptly refer all such enquires for Products to Usborne.

			

 

	 	
			2.

				
			Distributor Obligations

			

 

	 	
			2.1.

				
			The Distributor undertakes by employing an adequate number of suitably qualified and trained staff and by use of its distribution system and EDC MLM Channels, to use its best endeavours to resell, promote and market the Products to all its existing and potential future customers through the EDC MLM Channels within the Territory. In this regard, the Distributor assumes all the following costs and responsibilities:

			

 

	 	
			(i)

				
			Creation of promotional materials and catalogues which feature the Products. The Distributor may include: (a) copies of the front covers, (b) finished page spreads (not to exceed a maximum of two (2) double‐page spreads (in relation to books consisting of 24 pages or more) or such lesser spread(s) as shall be reasonable pro rata to the size of the related book), (c) illustrations from books for use as catalogue page fillers and/or (d) external packaging only (including such Trade Marks as are visible) of all Products in its promotional materials; all of which items (a) to (d) must (i) remain unchanged, (ii) contain appropriate copyright notices (including as set out in the related Trade Mark guidelines and closely associated with the related title of the book and an artist credit each in a format large enough to be easily read) and (iii) be shown only for the purpose of selling the related book from which such material is extracted (and, therefore, in relation to items (b) and (c) be shown with the cover page of the related title); provided always, that in each case the proposed use of such materials (x) shall be submitted to Usborne for review a reasonable period prior to print and (y) is subject to Usborne’s prior written approval. The Distributor may not otherwise without Usborne’s express prior consent in writing use any of the Trade Marks or use in full or part any content, artwork or illustrations from any Products as part of its catalogues or promotional materials.

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			(ii)

				
			Regular independent consultant contacts by its internal and external sales and marketing staff throughout the sales area.

			

 

	 	
			(iii)

				
			Management of warehousing and despatch, paying sales and any other commissions, paying for marketing software, management of discounts, and all other relevant expenses.

			

 

	 	
			(iv)

				
			Inclusion of the Products in the Distributor's invoicing and despatch systems.

			

 

	 	
			(v)

				
			Inclusion of advance information of the Products and catalogue in the Distributor’s relevant distribution system, including handling and postage.

			

 

	 	
			(vi)

				
			Supplying Usborne on a quarterly basis with up to date market analysis based on the Distributor's classifications and any other market information reasonably requested by Usborne from time to time in relation to sales of Products via the EDC MLM Channels.

			

 

	 	
			(vii)

				
			Performance of all relevant bookkeeping associated with invoicing, including issuing warnings to debtors.

			

 

	 	
			(viii)

				
			Guarantee of complete transparency of all relevant distribution information and processes concerning sales of Products.

			

 

	 	
			(ix)

				
			Use of its customer base and its customer data bank to support sales of the Products.

			

 

	 	
			(x)

				
			Providing to Usborne on a monthly basis details of all sales of Products, stock, outstanding customer orders, outstanding orders placed by the Distributor with Usborne and any other information relating to the performance of its obligations that Usborne may reasonably request from time to time.

			

 

	 	
			(xi)

				
			Providing to Usborne direct access to the sales stock management system for the sole purpose of stock and sales analysis via a FTP portal or other equivalent means agreed between the parties (with sufficient support from Distributor to ensure that (x) the related information is presented in a readily usable format and (y) such access is available at such times as may be required by Usborne during its normal business hours); Usborne shall maintain the confidentiality of information provided pursuant to this subclause (xi) using the same means employed to protect its own commercially sensitive information.

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			(xii)

				
			Maintaining an inventory of Products at levels which are appropriate and adequate for the Distributor to meet all customer delivery requirements for the sales of Products in the Territory based on historic sales levels and its forecast for the then current Fiscal Year.

			

 

	 	
			(xiii)

				
			Keeping full and proper books of account and records showing clearly all enquiries, orders and transactions relating to the Products.

			

 

	 	
			(xiv)

				
			Allowing Usborne, on reasonable notice, access to its accounts and records relating to the Products for inspection in accordance with Clause 14.

			

 

	 	
			(xv)

				
			Keeping all stocks of Products in conditions appropriate for their storage and providing appropriate security for Products at its own cost.

			

 

	 	
			(xvi)

				
			Dealing with all sales, distribution and product-related queries after delivery of the Products.

			

 

	 	
			(xvii)

				
			Compilation and distribution of a catalogue and other independent listings of the Products Payment of duty on all imports and obtaining any import licences or permits necessary for the entry of the Products into the Territory.

			

 

	 	
			2.2.

				
			The Distributor shall ensure that it notifies its independent consultants that the Products are only supplied for re-sale within the Territory.

			

 

	 	
			2.3.

				
			The Distributor shall apply for and obtain all necessary licences, permits or other authorisations required by the laws of the Territory in relation to promotion, marketing and sale of the Products.

			

 

	 	
			2.4.

				
			The Distributor shall, at its own expense, comply with all laws and regulations relating to its activities under this Agreement, and with any conditions binding on it in any applicable licences, registrations, permits and approvals.

			

 

	 	
			2.5.

				
			The Distributor shall keep Usborne informed of all laws and regulations affecting the marketing and sale of Products under this Agreement that are in force in the Territory during the term of this Agreement and give Usborne as much advance notice as reasonably possible of any prospective changes which could negatively affect the parties’ operations within the Territory.

			

 

	 	
			2.6.

				
			The Distributor shall inform Usborne immediately of any changes in ownership or control of the Distributor or any change (other than a de minimis change) in its organisation or method of doing business. Notwithstanding any other term of this Agreement, upon receipt of such notice, Usborne reserves the right to terminate this Agreement on not less than 30 days’ written notice. Such termination does not remove Distributor’s rights to continue to sell its existing Usborne inventory in the Territory in accordance with 13.1 Termination.

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			3.

				
			Distributor Restrictions

			

 

	 	
			3.1.

				
			The Distributor shall not use, or license any person to use, any of the Products as premiums, or for advertising or endorsement purposes in connection with third party publications, products or services, without Usborne's prior written consent.

			

 

	 	
			3.2.

				
			During the term of this Agreement, the Distributor shall not and shall not allow its Affiliates and/or independent consultants to, directly or indirectly:

			

 

	 	
			(i)

				
			publish, distribute, sell or market anywhere in the world any books which are in any way copies or imitative of (including but not limited to attributes such as overall look and feel, layout, and style of illustration) or otherwise infringe any copyright in, any books published by or licensed for publication by Usborne anywhere in the world ("Usborne Publishing Books");

			

 

	 	
			(ii)

				
			enter into any strategic or contractual relationship with any third party anywhere in the world with respect to the publication or distribution of any books which are in any way copies or imitative of, Usborne Publishing Books.

			

 

	 	
			3.3.

				
			Any breach by the Distributor of Clauses 3.1-3.2 shall be deemed a material, irremediable breach of this Agreement which shall entitle Usborne to terminate this Agreement on immediate written notice in accordance with Clause 12.2.

			

 

	 	
			3.4.

				
			The Distributor shall not at any time:

			

 

	 	
			(i)

				
			represent itself as an agent of Usborne for any purpose;

			

 

	 	
			(ii)

				
			pledge Usborne's credit;

			

 

	 	
			(iii)

				
			give any condition or warranty on Usborne's behalf;

			

 

	 	
			(iv)

				
			make any representation on Usborne's behalf;

			

 

	 	
			(v)

				
			commit Usborne to any contracts; and/or

			

 

	 	
			(vi)

				
			otherwise incur any liability for or on behalf of Usborne.

			

 

	 	
			3.5.

				
			The Distributor may not, without Usborne’s prior written consent, remainder or otherwise sell Products otherwise than as expressly set out in this Agreement and/or on terms substantially different than those normally offered by the Distributor.

			

 

	 	
			4.

				
			Use of Restricted Brand Names

			

 

	 	
			4.1.

				
			The Distributor and its independent consultants selling via the EDC MLM Channels may, for a period starting on the Commencement Date and ending [***] (the “Rebranding Period”), continue to use the Restricted Brand Names in its catalogues, advertising materials including social media and on the EDC Website and on any Distributor-provided consultants’ replicated microsites forming part of the EDC Website to promote and market resale of the Products via the EDC MLM Channels in the Territory provided that the Distributor:

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			(i)

				
			within the initial Fiscal Year orders a sufficient volume of Products such that Usborne’s revenue from such orders is at least [***] all of which is invoiced in full during the initial Fiscal Year (and which volume shall include all orders placed pursuant to the Prior Agreements during the initial Fiscal Year as set out in Schedule 4 attached hereto);

			

 

	 	
			(ii)

				
			complies at all times with its payment obligations under Clause 6;

			

 

	 	
			(iii)

				
			phases out all use of the Restricted Brands during the Rebranding Period;

			

 

	 	
			(iv)

				
			ensures that any registration in Mexico of the Previous Distribution Agreement is removed; and

			

 

	 	
			(v)

				
			itself complies and ensures that its independent MLM sales consultants comply at all times with the Trade Mark and Brand Guidelines.

			

 

	 	
			4.2.

				
			After the end of the Rebranding Period, the Distributor undertakes, on behalf of itself and its independent consultants selling via the EDC MLM Channels:

			

 

	 	
			(i)

				
			to immediately cease using and transfer to Usborne all rights in the following domain names: (a) myubam.com; (b) usbornebooksandmore.com; (c) ubamlibrary.com; and

			

(d) veryfirstreading.com; and

 

	 	
			(ii)

				
			not to make itself or via its independent MLM sales consultants (and to prevent its independent consultants from making) any further use whatsoever of any of the Restricted Brand Names (including as part of their trading, business, online and/or social media account names) in the Territory.

			

 

	 	
			5.

				
			Orders, Delivery, Storage and Title Orders

			

 

	 	
			5.1.

				
			Usborne will give the Distributor access to a wide range of Usborne’s current titles for Distributor to select Products to be ordered. The Distributor will place all orders for Products with Usborne in writing. No order will be deemed to be accepted by Usborne until Usborne has confirmed acceptance in writing to the Distributor.

			

 

	 	
			5.2.

				
			Unless otherwise agreed between the parties in writing as part of an order and subject to Clause 5.3, the Distributor shall purchase Products from Usborne in the following minimum order quantities for each title:

			

 

	 	
			(i)

				[***] copies for each new title; and

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			(ii)

				[***] copies for re-prints for solo printing of US editions for the Distributor.

 

	 	
			5.3.

				
			Usborne may, at its sole discretion, agree a lower minimum order quantity for Products where the titles ordered can be co-printed together with editions to be resold in alternative channels (not reserved to the Distributor) in the Territory. Usborne may also, at its option from time to time, require higher minimum order quantities for Products with novelty formats (including, without limitation, “That’s not My” and “Sticker Dolly”). Any changes to the minimum order quantities set out in Clause 5.2 will be notified by Usborne to the Distributor in writing.

			

 

	 	
			5.4.

				
			Usborne reserves the right in its sole discretion to decline any order from the Distributor which Usborne determines in its sole discretion is not profitable.

			

 

	 	
			5.5.

				
			Usborne may at any time remove any title from the list of Products available for the Distributor to order. Usborne will give the Distributor notice of any titles which are due to be removed at least 90 days before the planned issue date of the Distributor’s next bi-yearly MLM catalogue (provided the Distributor has notified Usborne of the planned issue date for its catalogue more than 180 days in advance).

			

 

	 	
			5.6.

				
			The Distributor undertakes in each Fiscal Year to order and pay in full for a sufficient volume of Products such that Usborne’s revenue from such orders during the related Fiscal Year is no less than [***] (save in relation to the first Fiscal Year in relation to which such minimum revenue shall be no less than [***] and, in relation to the second Fiscal Year, in relation to which such minimum revenue shall be no less than [***]).

			

 

Delivery

 

	 	
			5.7.

				
			Usborne shall supply the Products to the Distributor in finished and saleable form, suitable for resale in the Territory. The “Usborne” name and logo will appear in the same position and style on Products sold by the Distributor as on the corresponding editions sold in the United Kingdom but will be supplied with different ISBN numbers; provided always that no such Product is to be registered by the Distributor at the Library of Congress. All Products will include the recommended retail price for sale in the Territory in US dollars which will be determined by Usborne in accordance with Clause 6.1.

			

 

	 	
			5.8.

				
			Usborne shall use reasonable endeavors to deliver the quantity of Products ordered by the Distributor. The Distributor shall accept a printing and binding tolerance of five percent of the quality ordered and delivered. If the quantity delivered is in excess of this tolerance, the Distributor shall not be obliged to accept the excess number of Products. If the quantity delivered is less than such tolerance, the Distributor shall accept the delivery provided that Usborne supplies the quantity ordered but not delivered at the same unit cost, within a reasonable period of time.

			

 

	 	
			5.9.

				
			Usborne shall deliver the Products CIF Port of Houston, Texas or such other US Port as may be agreed in writing by the parties from time to time.

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

Storage

 

	 	
			5.10.

				
			The Distributor shall keep all stocks of Products in conditions appropriate for their storage and provide appropriate security for Products, all at its own cost.

			

 

	 	
			5.11.

				
			The Distributor agrees to obtain and maintain at their own expense insurance cover on the Products to at least their replacement value from the time they are delivered to their designated distribution warehouse providing standard 'all risks' cover (including fire and flood) until such time as they are paid for in full.

			

 

	 	
			5.12.

				
			The Distributor shall provide Usborne with a copy of the insurance policy at any time on Usborne's request and shall not do or omit to do anything which (or the omission of which) may invalidate such insurance cover. Without limiting any liability of the Distributor pursuant to this Agreement, until title to the Products passes to the Distributor in accordance with Clause 5.13, the Distributor will be liable to Usborne for any loss, theft or damage to the Products.

			

 

Title

 

	 	
			5.13.

				
			Title to the Products shall not pass to the Distributor until the earlier of:

			

 

	 	
			(i)

				
			when Usborne receives payment in full (in cash or cleared funds) for the Products ordered, and any other goods that Usborne has supplied to the Distributor, in respect of which payment has become due, in which case title to the Products shall pass at the time of payment of all such sums; or

			

 

	 	
			(ii)

				
			when the Distributor resells the Products in which case title in the Products will pass to the Distributor immediately before the time at which resale by the Distributor occurs.

			

 

	 	
			5.14.

				
			Until title to the Products has passed to the Distributor, the Distributor shall:

			

 

	 	
			(i)

				
			store the Products separately from all other products held by the Distributor so that they remain readily identifiable as Usborne's property;

			

 

	 	
			(ii)

				
			not remove, deface or obscure any identifying mark or packaging on or relating to the Products; and

			

 

	 	
			(iii)

				
			maintain the Products in satisfactory condition.

			

 

	 	
			5.15.

				
			If at any time before the Distributor has paid for the Products in full the Distributor suffers or, in Usborne’s reasonable opinion, is likely to suffer an insolvency event or ceases to do business, then without limiting any other right or remedy Usborne may have, Usborne may at any time require the Distributor or its administrators to return all Products in its possession (being an aggregate of all Products which the Distributor has not paid for and/or Products with an equivalent value to any such Products which have been sold by the Distributor but which the Distributor has not paid for). If the Distributor fails to do so within such period of time required by Usborne, Usborne or its agents may enter any premises of the Distributor where the Products are stored in order to recover them.

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			5.16.

				
			The Distributor shall observe all applicable laws in the Territory in regard to the storage and distribution of the Products.

			

 

	 	
			5.17.

				
			The Distributor will regularly (and at a minimum every six months) notify Usborne in writing of any titles which have been purchased by the Distributor (either under the Previous Distribution Agreement or this Agreement) which have since gone out of print. The Distributor undertakes within 28 days of sending such notification to pulp all current stock of out of print titles.

			

 

Existing stock

 

	 	
			5.18.

				
			The parties acknowledge that, under the terms of the Previous Distribution Agreement and the Previous Party Plan Agreement, the Distributor has previously (a) ordered those products set out in Schedule 4 attached hereto during the initial Fiscal Year; (b) purchased significant stocks of Usborne books and associated products (including publications in the Spanish language) and (c) received on a consignment basis certain stocks of Usborne books and associated products (“Existing Stock”). Usborne hereby agrees that (subject to payment in full for all such Existing Stock being made when due) the Distributor may, for the duration of this Agreement and the Transition Period, (i) continue to sell all Existing Stock through the EDC MLM Channels under the terms of this Agreement and (ii) additionally, during the Initial [***] only and provided that the Distributor complies at all time with the provisions of Clause 6, continue to sell those Products specifically listed in Schedule 5 attached hereto through the EDC MLM Channels on an exclusive basis under the terms of this Agreement, following which Usborne may exercise all and any of the Reserved Rights in relation to such Products (in each case other than titles that the Distributor has notified Usborne as being out of print and which the Distributor is required to pulp in accordance with Clause 5.17). All references in this Agreement to Products shall, to the extent applicable, also apply to Existing Stock.

			

 

	 	
			5.19.

				
			To the extent that Existing Stock consists of titles held by the Distributor on a consignment basis:

			

 

	 	
			(i)

				
			title to such Existing Stock shall remain with Usborne until sold by the Distributor and the Distributor shall store such Existing Stock in accordance with the requirements of Clause 5.14; and

			

 

	 	
			(ii)

				
			the Distributor shall remit payment to Usborne within [***] days of the end of each calendar month for all sales of consigned titles during that month. The amount of payment due to Usborne each month shall be [***] of Usborne’s recommended retail price for the consigned titles sold, less credited returns.

			

 

	 	
			6.

				
			Payment

			

 

	 	
			6.1.

				
			Except as agreed otherwise in writing by Usborne in accordance with Clause 6.3, the price payable by the Distributor for Products and any products ordered pursuant to the Prior Agreements (“Price”) shall be [***] of the recommended retail price of the Products. The recommended retail price for sale of Products in the Territory will be determined by Usborne in its sole discretion.

			

 

	 	
			6.2.

				
			The Distributor shall pay [***] invoice which shall be the same date as the bill of lading for the related order and [***]. The Distributor shall pay the Price for products already ordered as of the date of this Agreement (and as listed in Schedule 4) within [***] days of the date of invoice, which invoice shall be the same date as the bill of lading for the related order. Time for payment and compliance by the Distributor with the other provisions of this Clause 6 shall be of the essence in relation to this contract.

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			6.3.

				
			Usborne may, in its sole discretion, make available to the Distributor from time to time special offers for Products with an alternative and more favourable basis for calculation of the Price and/or payment terms. The Price and payment terms for any special offer will be as notified by Usborne in writing and such terms will apply only to orders for those Products which Usborne has notified the Distributor in writing are included in and subject to such special offer.

			

 

	 	
			6.4.

				
			As security for the outstanding payment, the Distributor shall:

			

 

	 	
			(i)

				
			establish and maintain no later than 30 November 2022 at Distributor’s sole cost and expense a standby letter of credit in an amount no less than [***] and form acceptable to Usborne, upon which Usborne can draw down for unpaid invoices owed under or in relation to this Agreement; and

			

 

	 	
			(ii)

				
			[***]

			

 

	 	
			6.5.

				
			All monies shall be paid in US dollars and in cleared funds to a bank account nominated in writing by Usborne’s CEO or CFO from time to time.

			

 

	 	
			6.6.

				
			The Distributor shall make all payments hereunder net of all bank charges and without any set off or deduction other than any withholding tax which they are required by law to deduct. Should the Distributor be obliged by law to deduct withholding tax, the Distributor shall take all reasonable steps to reduce the amount required to be deducted and shall send corresponding withholding tax certificates stating each of the titles and the amount of tax deducted to Usborne within 90 days of making such a payment.

			

 

	 	
			6.7.

				
			If the Distributor fails to pay any invoice when due, without prejudice to any other remedy available to it, Usborne may (at its sole option):

			

 

	 	
			(i)

				
			apply interest to the overdue sum from the due date until payment of the overdue sum, whether before or after judgment. Interest under this Clause 6.7(i) will accrue each day at [***] a year above the Bank of England's base rate from time to time; and/or

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			(ii)

				
			decline future orders, withhold future deliveries (including to cease performance of any orders in progress at the time of the default) and/or require payment in cash upon future deliveries or payment secured in full by a letter of credit or by some other means of security acceptable to Usborne.

			

 

	 	
			7.

				
			Compensation claims of customers

			

 

	 	
			7.1.

				
			Usborne shall accept full responsibility for bona fide complaints to the Distributor from its customers about the quality of the Products supplied as a result of any actual faults or defects in the Products where Usborne is satisfied that the faults or defects reported occurred prior to shipping to the Distributor by Usborne.

			

 

	 	
			7.2.

				
			For the avoidance of doubt, Clause 7.1 shall not apply where any fault or defects in the Products is caused or contributed to by the Distributor or any other party once the Products are under the Distributor’s control.

			

 

	 	
			8.

				
			Warranties and Indemnity

			

 

	 	
			8.1.

				
			Each party hereby warrants, represents and covenants in favour of the other that it has and shall continue to have the full right, power and authority to enter into and perform its obligations under this Agreement.

			

 

	 	
			8.2.

				
			Usborne further warrants that it has and shall continue to have for the duration of this Agreement the right to publish each of the Products as contemplated, that to its knowledge the Products do not infringe any intellectual property rights of any other party, and that it has not received any communications alleging that they do so.

			

 

	 	
			8.3.

				
			Each party undertakes that it shall perform its obligations under this Agreement with all due skill, care and diligence and in a professional manner, and in compliance with all applicable laws, and shall at all times act towards the other party dutifully and in good faith.

			

 

	 	
			8.4.

				
			The Distributor undertakes that it shall immediately notify Usborne by email if:

			

 

	 	
			(i)

				
			The Distributor stops or suspends payment of any of its debts or is unable to, or admits its inability to, pay its debts as they fall due;

			

 

	 	
			(ii)

				
			The Distributor commences negotiations, or enters into any composition, compromise, assignment or arrangement, with one or more of its creditors (excluding Usborne) with a view to rescheduling any of its indebtedness (because of actual or anticipated financial difficulties).

			

 

	 	
			(iii)

				
			A moratorium is declared in respect of any indebtedness of the Distributor.

			

 

	 	
			(iv)

				
			Any action, filing, proceedings, procedure or step is taken in relation to:

			

 

	 	
			•

				
			the suspension of payments, a moratorium in respect of any indebtedness, winding up, dissolution, administration or reorganisation (using a voluntary arrangement, scheme of arrangement, proceedings under the US Bankruptcy Code or otherwise) of the Distributor; or

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			•

				
			a composition, compromise, assignment or arrangement with any creditor of the Distributor; or

			

 

	 	
			•

				
			the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of the Distributor or any of its assets.

			

 

	 	
			(v)

				
			The value of the Distributor's assets is less than its liabilities (taking into account contingent and prospective liabilities).

			

 

	 	
			(vi)

				
			Any event occurs in relation to the Distributor that is analogous to those set out in Clause 8.4(i) to Clause 8.4(v) (inclusive) in any jurisdiction (including, without limitation, in the USA under the US Bankruptcy Code).

			

 

	 	
			8.5.

				
			The Distributor shall indemnify and hold harmless Usborne and their respective officers, employees, agents, licensees, successors, agents, contractors and assignees (each hereinafter referred to as an "Indemnified Party") from and against any and all losses suffered, incurred or sustained by any Indemnified Party as a result of, or in connection with:

			

 

	 	
			(i)

				
			any breach by the Distributor of any provision of this Agreement;

			

 

	 	
			(ii)

				
			any exercise by the Distributor of any of the rights granted to it under this Agreement (except to the extent that such losses are due to any act or omission by Usborne); or

			

 

	 	
			(iii)

				
			any act or omission of the Distributor or any of its independent consultants selling via the EDC MLM Channels whether or not arising out of, or in connection with, any matter or thing approved by Usborne under this Agreement.

			

 

	 	
			8.6.

				
			The Distributor shall defend, compromise or settle any and all claims, proceedings, actions or demands (hereinafter referred to as the "Claim") that may fall within the scope of the indemnity by the Distributor in this Agreement, at the Distributor's expense, provided that any compromise or settlement of the Claim shall not include any admission of liability by Usborne without Usborne's prior written consent. Usborne may participate in the defence, compromise or settlement of the Claim, at its own expense, through counsel of its own choosing.

			

 

	 	
			9.

				
			Intellectual Property Rights

			

 

	 	
			9.1.

				
			Usborne grants to the Distributor a non-exclusive, non-transferable, limited licence during the Term to make reasonable and appropriate use of (i) the Trade Marks and (ii) the Restricted Brand Names (during the Rebranding Period only and subject always to the provisions of Clause 4), in accordance with the Trade Mark and Brand Guidelines and in accordance with the provisions of this Clause 9 for the purpose of the performance of its duties under this Agreement. The Distributor may, in its contracts with its independent MLM sales consultants, permit them to use the Trade Marks, the Restricted Brand Names and Usborne’s copyright materials, all solely to the extent set out in the Trade Mark and Brand Guidelines. Any use of the Trade Marks other than as specifically permitted under the Trade Mark and Brand Guidelines must be approved in advance in writing by Usborne. This licence shall automatically cease on termination of this Agreement for any reason. The Distributor shall, and shall ensure that its independent MLM sales consultants and any other parties under the Distributor’s control who derive their usage rights via the Distributor, comply at all times with the Trade Mark and Brand Guidelines. If the Distributor becomes aware of any breach of the Trade Mark and Brand Guidelines, it will immediately notify Usborne and take all such action at its sole cost as Usborne reasonably requires to ensure such breach is remedied as soon as possible.

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			9.2.

				
			The Distributor acknowledges and agrees that it, in accordance with Clauses 4.1 and 4.2, it shall not use and shall ensure that none of its independent MLM sales consultants selling via the EDC MLM Channels use any of the Restricted Brand Names or any other name which is confusingly similar to any of the Restricted Brand Names or includes the name “Usborne” (including as part of their social media account names) at any time after the end of the Rebranding Period.

			

 

	 	
			9.3.

				
			Subject to Clause 9.4, Usborne agrees not to conduct its business in the Territory using any of the Restricted Brand Names for the duration of this Agreement provided that this does not restrict Usborne in any way from using its name and Trade Mark “Usborne” or any of its logos in the Territory.

			

 

	 	
			9.4.

				
			Usborne is the owner of and reserves all of its rights in relation to the Trade Marks, the Restricted Brand Names and any other Usborne trade marks, brand names and logos its uses in any context. The parties acknowledge and agree that Usborne is and shall continue to be the exclusive owner and holder of any and all intellectual property rights (including but not limited to the copyright) in the Products and in any translations or any versions thereof of whatever nature and in whatever medium presently held or which may in the future be acquired by it, in the Restricted Brand Names and in the Trade Marks.

			

 

	 	
			9.5.

				
			The Distributor undertakes that it shall not:

			

 

	 	
			(i)

				
			remove, alter or otherwise tamper with any Trade Marks featured on the Products or any packaging or promotional materials which come into the Distributor's possession, custody or control, and shall not place any trade mark or trade name of its own on the Products or any packaging or promotional materials;

			

 

	 	
			(ii)

				
			use any part of the Trade Marks or any trade marks or trade names confusingly similar to the Trade Marks as part of any corporate or business name or style or domain name, on its website or as a twitter tag or other social media identification other indication of the Distributor, except in promotional material for the Products which have been supplied or approved by Usborne in writing;

			

 

	 	
			(iii)

				
			seek to use or allow anyone else to use the Trade Marks for any purpose other than as permitted under this Agreement;

			

 

	 	
			(iv)

				
			apply to register any of the Trade Marks, Restricted Brand Names or any trade marks, service marks, trade names, company names or domain names in English or in translation identical to or (in the sole opinion of Usborne) confusingly similar to any of the Trade Marks whether by themselves or as part of any other device or name;

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			(v)

				
			seek to copy or reproduce or allow anyone else to make copies of or reproduce any of the content of any Products or create similar or derivative works based on the content of any Products;

			

 

	 	
			(vi)

				
			do or omit to do anything which could invalidate or be inconsistent with Usborne's ownership of or the validity and enforceability of (a) Usborne's intellectual property rights in the Products or (b) the Trade Marks; or

			

 

	 	
			(vii)

				
			do or omit to do anything that is detrimental to the value or reputation of the Trade Marks or the goodwill or reputation of Usborne or its business.

			

 

	 	
			9.6.

				
			Any breach by the Distributor of Clauses 9.1, 9.2 or 9.5 shall be deemed a material and irremediable breach of this Agreement which is incapable of remedy and which will entitle Usborne to terminate the Agreement on written notice in accordance with Clause 12.2, claim damages for such breach in accordance with Clause 11 and take such other action as it considers necessary including pursuing any of the remedies referred to in Clause 11.4.

			

 

	 	
			9.7.

				
			Any goodwill derived from the use by the Distributor of the Trade Marks or the Restricted Brand Names under this Agreement will accrue to Usborne. Usborne may, at any time, require the Distributor to execute a document confirming the assignment of that goodwill and the Distributor shall immediately do so.

			

 

	 	
			9.8.

				
			The Distributor shall immediately notify Usborne if it becomes aware of:

			

 

	 	
			(i)

				
			any actual, suspected or threatened infringement in the Territory of the Trade Marks or the copyright in the Products;

			

 

	 	
			(ii)

				
			any proceedings in which the ownership, validity or registration of any of the Trade Marks or the copyright in the Products is called into question; or

			

 

	 	
			(iii)

				
			any claim by any third party that the import or sale of the Products into or in the Territory infringes any rights of any other person, in which case Usborne shall, in its absolute discretion, decide what action to take in respect of the matter (if any) and shall conduct and have sole control over any consequent action (including litigation or other legal proceedings) that it deems necessary to protect the intellectual property rights in the Products. The Distributor shall, on Usborne’s request, provide all such assistance and support with any action taken by Usborne under this Clause 9.8 as Usborne reasonably requires. Such assistance and support shall be at the cost of the Distributor if the infringement results from any action (or inaction) by the Distributor or any of its independent MLM sales consultants.

			

 

	 	
			9.9.

				
			The Distributor shall take comprehensive measures to protect Usborne’s Products against any form of piracy. If Usborne provides anti-counterfeit stickers to the Distributor, the Distributor shall affix such stickers to each copy of the Products before distribution or sale. The Distributor shall advise on and propose measures as well as support and co- operate with any anti- counterfeit or anti-piracy procedures or initiatives put in place by Usborne from time to time.

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			10.

				
			Publishing division

			

 

	 	
			10.1.

				
			For the avoidance of doubt, the Distributor (i) shall cease trade sales of any Products or titles in the Distributor’s stock and paid for in full through its publishing division with effect from the Commencement Date and (ii) undertakes that neither it nor any of its independent sales MLM sales consultants shall sell any Products or other titles held in the Distributor’s stock or supplied to such consultants save as expressly permitted hereunder in Clause 1.5.

			

 

	 	
			11.

				
			Liability for breach

			

 

	 	
			11.1.

				
			A breach of any provision of this Agreement by a Party shall constitute a breach of this Agreement by that Party, in which case, the breaching Party shall be liable for such breach to the non-breaching Party and shall compensate all direct economic losses suffered by the non- breaching Party in connection with such breach, including but not limited to direct economic losses and other reasonable expenses (including but not limited to attorney's fees, litigation and arbitration costs, etc.) incurred by the non-breaching Party due to such breach, provided however that no Party shall be liable for the other Party's special, incidental, punitive, exemplary, indirect or consequential damages.

			

 

	 	
			11.2.

				
			The total liability of Usborne to the Distributor in respect of all loss or damage arising under or in connection with this Agreement in any [***] period, whether in contract, tort (including negligence), breach of statutory duty, or otherwise, shall in no circumstances exceed the aggregate of the amounts paid by the Distributor to Usborne in the previous [***] period.

			

 

	 	
			11.3.

				
			For the avoidance of doubt, a delay of any payment due or failure to pay the amount in full when due by the Distributor under Clause 6 shall constitute a material breach by the Distributor.

			

 

	 	
			11.4.

				
			The Distributor acknowledges and agrees that a failure to strictly comply with or a breach of any provision of this Agreement may cause irreparable damage to Usborne. Usborne shall therefore be entitled to the remedies of injunctions, specific performance or other equitable relief for any threatened or actual breach of this Agreement.

			

 

	 	
			12.

				
			Term, and termination, of contract

			

 

	 	
			12.1.

				
			This Agreement shall come into force on the Commencement Date, and shall continue in force indefinitely unless terminated by either party by giving the other not less than [***] written notice.

			

 

	 	
			12.2.

				
			Either party may terminate this Agreement by written notice if the other commits a material breach of this Agreement which is irremediable or, if capable of being remedied, is not remedied within [***] after receipt of a written notice requiring it to be remedied, or if the other party becomes insolvent or ceases business. In these circumstances, this Agreement will terminate on the date given for termination by the notifying party in such notice which may be (i) with immediate effect on, or (ii) on any date falling within the period of [***] from and after, the date of receipt of such notice.

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			12.3.

				
			Usborne reserves the right to terminate this Agreement on not less than [***] written notice if:

			

 

	 	
			(i)

				
			in accordance with Clause 2.6, Usborne receives notice of a change in ownership or control of the Distributor, or any change (other than a de minimis change) in its organisation or method of doing business; or

			

 

	 	
			(ii)

				
			the Distributor acquires another entity which distributes Usborne’s books; or

			

 

	 	
			(iii)

				
			Usborne’s revenue from orders placed by the Distributor does not exceed the relevant minimum agreed revenue target of [***] in the first Fiscal Year, [***] in the second Fiscal Year and thereafter, [***] in any Fiscal Year in accordance with Clause 5.6.

			

 

	 	
			12.4.

				
			On termination of this Agreement for any reason the Distributor shall have no claim against Usborne for compensation for loss of distribution rights, loss of goodwill or any similar loss.

			

 

	 	
			13.

				
			Effect of termination

			

 

	 	
			13.1.

				
			On expiry or other termination of this Agreement the Distributor may continue to sell on a firm sale (and no returns) basis only any remaining Products in stock under the terms of this Agreement for a period of [***] from the date of termination or such earlier date as the parties may agree in writing (the “Transition Period”); provided that where this Agreement is terminated under Clauses 12.2 or 12.3 owing to the Distributor’s default, (i) the Distributor shall forthwith pay Usborne any payments due or owing to Usborne, (ii) although such Transition Period shall apply, it shall be for a duration of [***] from the date notice of termination is served and (iii) any proceeds of sale of Products made during the Transition Period must first be applied in satisfaction of any sums due or owing to Usborne.

			

 

	 	
			13.2.

				
			On termination of this Agreement (or expiry of the Transition Period where such period comes into effect), the Distributor undertakes:

			

 

	 	
			(i)

				
			to return or dispose of all Products in stock or subsequently returned by customers or consultants in accordance with Usborne's directions. The costs of such disposal or return shall be paid by the party terminating the Agreement unless termination is due to material breach in which case such costs will be paid by the party in breach. For the avoidance of doubt, Usborne shall not be obliged to repurchase or accept return of any of the Distributor’s remaining stock of Products upon termination of this Agreement, during or on expiry of the Transition Period;

			

 

	 	
			(ii)

				
			to return to Usborne all publicity material supplied and used in connection with the promotion of the Products;

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			(iii)

				
			forthwith to cease to use any intellectual property (including the Trade Marks) of Usborne (the Distributor’s licence to use being terminated) and to sign such confirmation of the cessation of use of the intellectual property as is required by Usborne; and

			

 

	 	
			(iv)

				
			subject as mentioned below in Clause 13.3, forthwith to cease carrying on the business of promoting and selling the Products.

			

 

	 	
			13.3.

				
			The expiry or termination of this Agreement shall be without prejudice to any rights, which already accrued to either of the parties under this Agreement.

			

 

	 	
			14.

				
			Usborne's right of inspection and audit

			

 

	 	
			14.1.

				
			Usborne shall have the right, on reasonable notice, to instruct its duly authorised representative to inspect and audit during normal working hours once in each twelve month period (or at any time should Usborne have good reason to believe there has been a material breach of the Agreement) during the term hereof the Distributor's stock of Products (wherever stored) and the books, accounts and all other documents and correspondence of the Distributor which relate to the distribution of and payment for the Products and to take copies thereof or extracts therefrom.

			

 

	 	
			15.

				
			Anti-Bribery

			

 

	 	
			15.1.

				
			The Distributor shall:

			

 

	 	
			(i)

				
			comply with all applicable provisions of the Bribery Act 2010 and all applicable laws, statutes, regulations, and codes relating to anti-bribery and anti-corruption in the jurisdiction of the Distributor (Anti-Bribery Laws);

			

 

	 	
			(ii)

				
			not do anything which, or omit to do anything the omission to do which, would or might lead to Usborne being in breach of any Anti-Bribery Laws;

			

 

	 	
			(iii)

				
			comply with Usborne's Anti-Bribery Policy, a copy of which as at the date hereof is attached to this Agreement as Schedule 3 (Anti-Bribery Policy);

			

 

	 	
			(iv)

				
			maintain in place throughout the term of this Agreement its own policies and procedures to ensure compliance with the Anti-Bribery Laws and the Anti-Bribery Policy, and take all necessary steps to enforce them where appropriate;

			

 

	 	
			(v)

				
			promptly report to Usborne any request or demand for any undue financial or other advantage of any kind received by the Distributor in connection with the performance of this Agreement;

			

 

	 	
			(vi)

				
			immediately notify Usborne (in writing) if a foreign public official becomes an officer or employee of the Distributor or acquires a direct or indirect interest in the Distributor (and the Distributor warrants that it has no foreign public officials as officers, employees or direct or indirect owners at the date of this Agreement);

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			(vii)

				
			within three months of the date of this Agreement, and annually thereafter, certify to Usborne in writing signed by an officer of the Distributor, compliance with this Clause 15.1 by the Distributor and all persons associated with it under Clause 15.1(viii)). The Distributor shall provide such supporting evidence of compliance as Usborne may reasonably request;

			

 

	 	
			(viii)

				
			ensure that any person associated with the Distributor (including all independent MLM sales consultants) who is performing services or providing goods in connection with this Agreement does so only on the basis of a written contract which imposes on and secures from such person terms equivalent to those imposed on the Distributor in this Clause 15 (Relevant Terms). The Distributor shall be responsible for the observance and performance by such persons of the Relevant Terms, and shall be directly liable to Usborne for any breach by such persons of any of the Relevant Terms.

			

 

	 	
			15.2.

				
			The Distributor acknowledges that breach of this Clause 15 shall be deemed a material, irremediable breach of this Agreement.

			

 

	 	
			16.

				
			Anti-Slavery

			

 

	 	
			16.1.

				
			In performing its obligations under the Agreement, the Distributor shall:

			

 

	 	
			(i)

				
			comply with all applicable anti-slavery and human trafficking laws, statutes, regulations and codes from time to time in force in the jurisdiction of the Distributor including the Modern Slavery Act 2015;

			

 

	 	
			(ii)

				
			not engage in any activity, practice or conduct that would constitute an offence under sections 1, 2 or 4, of the Modem Slavery Act 2015 if such activity, practice or conduct were carried out in the UK;

			

 

	 	
			(iii)

				
			include in contracts with its direct subcontractors and suppliers provisions which are at least as onerous as those set out in this Clause 16;

			

 

	 	
			(iv)

				
			notify Usborne as soon as it becomes aware of any actual or suspected slavery or human trafficking in a supply chain which has a connection with this Agreement; and

			

 

	 	
			(v)

				
			maintain a complete set of records to trace the supply chain of all services provided to the Distributor (including by independent MLM sales consultants) in connection with this Agreement; and permit Usborne and its third-party representatives to inspect the Distributor’s premises, records, and to meet the Distributor's personnel to audit the Distributor's compliance with its obligations under this Clause 16.

			

 

	 	
			16.2.

				
			The Distributor represents and warrants that it has not been convicted of any offence involving slavery and human trafficking; nor has it been the subject of any investigation, inquiry or enforcement proceedings regarding any offence or alleged offence of or in connection with slavery and human trafficking.

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			16.3.

				
			The Distributor acknowledges that any breach of this Clause 16 shall be deemed a material, irremediable breach of this Agreement.

			

 

	 	
			17.

				
			Confidentiality

			

 

	 	
			17.1.

				
			In this Clause, "Confidential Information" means all information of a confidential nature disclosed by one party to the other by any means and includes confidential information concerning the other party's business, pricing, affairs, finances, customers, suppliers, transactions, operations, plans, market opportunities, future publications or trade secrets.

			

 

	 	
			17.2.

				
			Each party undertakes that it shall not, either during or after the term of this Agreement, disclose to any person any Confidential Information of the other party except as provided in Clause 17.3.

			

 

	 	
			17.3.

				
			Each party may disclose the other party's Confidential Information to those of its employees, officers, representatives or advisers who need to know such information for the purpose of carrying out the party's obligations under this Agreement (and subject to such persons being under confidentiality obligations) or to the extent ordered to do so by law or a regulatory authority to which it is subject.

			

 

	 	
			17.4.

				
			Each party may only use such Confidential Information to the extent necessary to perform its obligations or exercise its rights under this Agreement.

			

 

	 	
			18.

				
			Other terms

			

 

	 	
			18.1.

				
			Neither party shall be liable to the other for any delay in performing or failure to perform its obligations under this Agreement to the extent that it is prevented from performing its obligations by circumstances beyond its reasonable control. In such circumstances the affected party shall be entitled to a reasonable extension of the time for performing such obligations. If the period of delay or non-performance continues for three months or more, the party not affected may terminate this agreement by giving 30 days' written notice to the affected party.

			

 

	 	
			18.2.

				
			This Agreement contains the entire agreement between the parties as to its subject matter and supersedes any prior agreement between the parties whether written or oral. Each party acknowledges that in entering into this Agreement it does not rely on any representation, warranty or other term except as expressly set out herein, but nothing in this Agreement affects the liability of either party for fraudulent misrepresentation.

			

 

	 	
			18.3.

				
			The Distributor shall not assign, transfer, mortgage, charge, subcontract, delegate, declare a trust over or deal in any other manner with any of its rights and obligations under this Agreement.

			

 

	 	
			18.4.

				
			No verbal variations of this contract shall be valid. Alterations shall only be valid if they are agreed in writing, and signed by both parties.

			

 

	 	
			18.5.

				
			If any provision or part-provision of this Agreement becomes invalid, illegal or unenforceable, it shall be deemed deleted, but that shall not affect the validity and enforceability of the rest of this Agreement. The parties shall negotiate in good faith to agree a replacement provision that best corresponds to the intention of the parties. Nothing in this Agreement shall make the parties partners or joint venturers or make the Distributor an agent of Usborne.

			

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			18.6.

				
			No extension of time or other indulgence which may be granted by either party to the other shall constitute a waiver of that party's rights under this Agreement. A waiver of any right or remedy is only effective if given in writing and shall not be deemed a waiver of any subsequent right or remedy.

			

 

	 	
			18.7.

				
			Each of the parties shall give notice to the other of change of any address, telephone or email address as soon as practicably possible and in any event within 48 hours of such change.

			

 

	 	
			18.8.

				
			Any notice required or authorised to be given by either party to the other shall be in writing and shall be sent by first class mail or email to the last known place of business of the other party and it shall operate and be deemed to have been delivered at the expiration of 6 working days from the time of being posted (if sent by first class post) or at the time of sending (if sent by email during the recipient’s normal business hours or otherwise deemed received at the start of normal business hours on the next working day)). This Clause does not apply to the service of any proceedings or other documents in any legal action.

			

 

	 	
			18.9.

				
			A person who is not a party to this Agreement shall not have any rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement.

			

 

	 	
			18.10.

				
			The Distributor shall forthwith at its own expense take all necessary steps to effect and maintain in force at all times all such registrations (other than the registration of the Trade Marks), approvals and consents as are required in the Territory in respect of this Agreement, including those required for the import of the Products and the payment of all sums due to Usborne pursuant to this Agreement.

			

 

	 	
			18.11.

				
			The laws of England and Wales shall apply to this Agreement, which shall be construed and interpreted in accordance with such law and each party agrees to submit to the exclusive jurisdiction of the courts of England and Wales.

			

 

This Agreement has been entered into on the date stated at the beginning of it.

 

 

	
			For and on behalf of

			 

			 /s/ Nicola Usborne                                             

			 

			USBORNE PUBLISHING LIMITED

				
			For and on behalf of

			 

			                  /s/ Craig White                                                                       

			 

			EDUCATIONAL DEVELOPMENT CORPORATION

			

 

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

SCHEDULE 1 TRADE MARKS

 

	 	Usborne Name: 	
			[***]

			 

			 

			
	 	 	 
	 	Usborne Balloon Device:	
			[***]

			
	 	 	 
	 	 	 
	 	Usborne Trade Mark:	[***]

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

SCHEDULE 2

 

Schedule 2

 

 

[***]

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

SCHEDULE 3

 

Anti-Bribery and Corruption Policy

 

	 	
			1.

				
			POLICY STATEMENT

			

 

Usborne Publishing Ltd ("we", "our" and "us") operates a zero tolerance approach to the making or receiving of bribes or corrupt payments, in any form. It is Usborne Publishing Ltd's policy to conduct business in an honest and ethical way, and without the use of corrupt practices or acts of bribery to obtain an unfair advantage. This type of conduct is absolutely prohibited whether committed by employees or anyone else acting on behalf of Usborne Publishing Ltd.

 

Usborne Publishing Ltd will uphold all laws relevant to countering bribery and corruption in all jurisdictions in which we conduct business. However, we remain bound by UK laws, including the Bribery Act 2010, in respect of our conduct both home and abroad.

 

	 	
			2.

				
			SCOPE

			

 

This Policy sets out the general rules and principles that Usborne Publishing Ltd requires all employees (whether permanent, fixed term or temporary), agents, consultants, volunteers, wholesalers, suppliers, distributors and joint venture partners to follow.

 

It is a criminal offence to offer, promise, give, request, or accept a bribe. Individuals found guilty can be punished by up to 10 years' imprisonment and/or a fine. As an employer if we fail to prevent bribery we can face an unlimited fine, exclusion from tendering for public contracts, and damage to our reputation. We therefore take our legal responsibilities very seriously.

 

The prevention, detection and reporting of any bribery in any form is the responsibility of all employees and entities over which Usborne Publishing Ltd has control. Any employee who breaches this Policy will face disciplinary action, which could result in dismissal for misconduct or gross misconduct. Any breach of this Policy by organisations working for us will be regarded as a serious matter and will result in termination of contracts/relationships and possible prosecution.

 

	 	
			3.

				
			WHAT ARE BRIBERY AND CORRUPTION?

			

 

Bribery is the offer or receipt of any gift, loan, payment, reward or other advantage to or from any person as an encouragement to do something which is improper in the conduct of Usborne Publishing Ltd's business. A person acts improperly where they act illegally, unethically, or contrary to an expectation of good faith or impartiality, or where they abuse a position of trust.

 

Corruption is the misuse of entrusted power for private gain. Examples of prohibited conduct under this Policy include:

 

	 	
			•

				
			Making unofficial payments to officials in order to obtain any permission, permit or stamp in connection with importing or exporting goods.

			

 

	 	
			•

				
			Appointing any third party or supplier to act on behalf of Usborne Publishing Ltd who you know or suspect to have been engaged in any corrupt or unlawful conduct.

			

 

	 	
			•

				
			Paying any third party for the purpose of being a "fixer" to open doors and make connections for Usborne Publishing Ltd.

			

 

	 	
			•

				
			Offering, paying, soliciting or accepting bribes in any form, including facilitation payments.

			

 

	 	
			4.

				
			GIFTS AND HOSPITALITY

			

 

Gifts, entertainment and hospitality including the receipt or offer of gifts, meals or tokens of appreciation and gratitude, or invitations to events, functions or other social gatherings in connection with matters related to Usborne Publishing Ltd's business are acceptable, provided they fall within reasonable bounds of value and occurrence and subject to the principles listed below, namely that any gift or hospitality:

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

	 	
			a)

				
			is not made with the intention of influencing a third party to obtain or retain business or a business advantage, or to reward the provision or retention of business or a business advantage, or in explicit or implicit exchange for favours or benefits;

			

 

	 	
			b)

				
			is given in the name of the organisation, not an individual's name;

			

 

	 	
			c)

				
			does not include cash or a cash equivalent (such as gift certificates or vouchers);

			

 

	 	
			d)

				
			is of an appropriate type and value, taking account of the reason for the gift and its timing. For example, in the UK, it is customary for small gifts to be given at Christmas;

			

 

	 	
			e)

				
			is given openly, not secretly; and

			

 

	 	
			f)

				
			complies with any applicable local law.

			

 

Additionally, no gift may be offered to or accepted from government officials or representatives, or politicians or political parties, without the prior approval in writing of the person named at the end of this Policy.

 

	 	
			5.

				
			DONATIONS

			

 

Usborne Publishing Ltd only makes charitable donations and provides sponsorship that are legal and ethical under local laws and practices and which are in accordance with our internal policies and procedures. We does not make contributions to political parties.

 

	 	
			6.

				
			RECORD-KEEPING

			

 

Usborne Publishing Ltd maintains financial records and has appropriate internal controls in place which evidence the business reason for making payments to third parties. You must declare and keep a written record of all hospitality or gifts given or received, which will be subject to managerial review. You must also submit all expenses claims relating to hospitality, gifts or payments to third parties in accordance with our expenses policy and record the reason for expenditure.

 

	 	
			7.

				
			YOUR RESPONSIBILITIES

			

 

You must ensure that you read, understand and comply with this Policy. The prevention, detection and reporting of bribery and other forms of corruption are the responsibility of all those working for or under the control of Usborne Publishing Ltd.

 

You should assess the vulnerability of any of your areas of responsibility to the risks of bribery and corruption and use due diligence to assess who you and Usborne Publishing Ltd are dealing with. This assessment process should be proportionate to the potential risk. Therefore you will need to ensure you do more to prevent bribery if Usborne Publishing Ltd is operating in an overseas market where bribery is known to be commonplace, compared to markets where bribery is not prevalent. Any due diligence must be completed before the contract is offered or renewed. You are required to avoid any activity that might lead to, or suggest, a breach of this Policy.

 

	 	
			8.

				
			RAISING CONCERNS

			

 

Usborne Publishing Ltd encourages you to raise concerns about any issue or suspicion of bribery or corruption at the earliest possible stage. You can notify your manager (if you are an employee), your primary contact at Usborne Publishing Ltd (if you are a third party organisation) or the person named at the end of this Policy. For example, if a client or potential client offers you something to gain a business advantage with us, or indicates to you that a gift or payment is required to secure their business. Even if you are unsure about whether a particular act constitutes bribery or corruption, you are encouraged to raise it anyway.

 

Usborne Publishing Ltd aims to encourage openness and will support anyone who raises genuine concerns in good faith under this Policy, even if they turn out to be mistaken. We are committed to ensuring no one suffers any detrimental treatment as a result of refusing to take part in bribery or corruption, or because of reporting in good faith their suspicion that an actual or potential bribery or other corruption offence has taken place, or may take place in the future.

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

You must not threaten or retaliate against another individual who has refused to commit a bribery offence or who has raised concerns under this Policy.

 

	 	
			9.

				
			TRAINING

			

 

Usborne Publishing Ltd provides training on this Policy for all individuals who work for us. Our zero- tolerance approach to bribery and corruption must be communicated to all suppliers, contractors and business partners at the outset of our business relationship with them and as appropriate thereafter.

 

	 	
			10.

				
			QUESTIONS

			

 

If you have any queries about this Policy or you are in doubt as to whether a potential act constitutes bribery or corruption, you should refer the matter to Andrea Parsons, Finance Director, Usborne Publishing Ltd.

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

SCHEDULE 4

 

Orders Placed pursuant to Prior Agreements

 

 

[***]

 

 

 

 

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

SCHEDULE 5

 

 

List of Products to be sold on an exclusive basis by EDC through the EDC MLM Channels during the Initial [***]

 

 

[***]

 

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

 

 

 

SCHEDULE 6

 

 

Part 1 – Approved Trade Customers

 

 

[***]

 

 

Part 2 – Excluded Trade Customers

 

 

[***]

 

 

Certain identified information has been excluded from this exhibit because it is not material, would likely cause competitive harm to the registrant if publicly disclosed and is the type that the registrant treats as confidential. [***] indicates where information has been redacted.

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