Document:

ex10-1.htm

Exhibit 10.1

 

 

 

 

 

LOAN AND SECURITY AGREEMENT

 

Dated as of October 26, 2015

 

______________________________________________________________________________

 

NORTHWEST PIPE COMPANY

 

and 

 

PERMALOK CORPORATION

 

as Borrowers

______________________________________________________________________________

 

BANK OF AMERICA, N.A.,

 

as Agent

______________________________________________________________________________

 

BANK OF AMERICA, N.A.,

 

as Sole Lead Arranger and Sole Bookrunner

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

	 	 	Page
	 	 	 
	
Section 1.
	
DEFINITIONS; RULES OF CONSTRUCTION
	
1

	
1.1.
	
Definitions
	
1

	
1.2.
	
Accounting Terms
	
22

	
1.3.
	
Uniform Commercial Code
	
22

	
1.4.
	
Certain Matters of Construction
	
22

	
1.5.
	
Currency Equivalents
	
23

	
Section 2.
	
CREDIT FACILITIES
	
23

	
2.1.
	
Revolver Commitment
	
23

	
2.2.
	
[Intentionally Omitted].
	
25

	
2.3.
	
Letter of Credit Facility
	
25

	
Section 3.
	
INTEREST, FEES AND CHARGES
	
27

	
3.1.
	
Interest
	
27

	
3.2.
	
Fees
	
29

	
3.3.
	
Computation of Interest, Fees, Yield Protection
	
29

	
3.4.
	
Reimbursement Obligations
	
29

	
3.5.
	
Illegality
	
30

	
3.6.
	
Inability to Determine Rates
	
30

	
3.7.
	
Increased Costs; Capital Adequacy
	
30

	
3.8.
	
Mitigation
	
31

	
3.9.
	
Funding Losses
	
31

	
3.10.
	
Maximum Interest
	
31

	
Section 4.
	
LOAN ADMINISTRATION
	
32

	
4.1.
	
Manner of Borrowing and Funding Revolver Loans
	
32

	
4.2.
	
Defaulting Lender
	
33

	
4.3.
	
Number and Amount of LIBOR Loans; Determination of Rate
	
33

	
4.4.
	
Borrower Agent
	
34

	
4.5.
	
One Obligation
	
34

	
4.6.
	
Effect of Termination
	
34

	
Section 5.
	
PAYMENTS
	
34

	
5.1.
	
General Payment Provisions
	
34

	
5.2.
	
Repayment of Revolver Loans
	
34

	
5.3.
	
[Intentionally Omitted].
	
35

	
5.4.
	
Payment of Other Obligations
	
35

	
5.5.
	
Marshaling; Payments Set Aside
	
35

	
5.6.
	
Application and Allocation of Payments
	
35

	
5.7.
	
Dominion Account
	
36

	
5.8.
	
Account Stated
	
36

	
5.9.
	
Taxes
	
36

	
5.10.
	
Lender Tax Information
	
38

	
5.11.
	
Nature and Extent of Borrower's Liability
	
39

	
Section 6.
	
CONDITIONS PRECEDENT
	
41

	
6.1.
	
Conditions Precedent to Initial Loans
	
41

	
6.2.
	
Conditions Precedent to All Credit Extensions
	
43

	
Section 7.
	
COLLATERAL
	
43

	
7.1.
	
Grant of Security Interest
	
43

	
7.2.
	
Lien on Deposit Accounts; Cash Collateral
	
44

	
7.3.
	
Real Estate Collateral
	
44

	
7.4.
	
Other Collateral
	
44

 

 

 

 

 

 

	
7.5.
	
Limitations
	
45

	
7.6.
	
Further Assurances
	
45

	
7.7.
	
Foreign Subsidiary Stock
	
45

	
Section 8.
	
COLLATERAL ADMINISTRATION
	
45

	
8.1.
	
Borrowing Base Reports
	
45

	
8.2.
	
Accounts
	
45

	
8.3.
	
Inventory
	
46

	
8.4.
	
Equipment
	
47

	
8.5.
	
Deposit Accounts
	
47

	
8.6.
	
General Provisions
	
47

	
8.7.
	
Power of Attorney
	
49

	
Section 9.
	
REPRESENTATIONS AND WARRANTIES
	
49

	
9.1.
	
General Representations and Warranties
	
49

	
9.2.
	
Complete Disclosure
	
53

	
Section 10.
	
COVENANTS AND CONTINUING AGREEMENTS
	
54

	
10.1.
	
Affirmative Covenants
	
54

	
10.2.
	
Negative Covenants
	
56

	
10.3.
	
Financial Covenants
	
59

	
Section 11.
	
EVENTS OF DEFAULT; REMEDIES ON DEFAULT
	
59

	
11.1.
	
Events of Default
	
59

	
11.2.
	
Remedies upon Default
	
60

	
11.3.
	
License
	
61

	
11.4.
	
Setoff
	
61

	
11.5.
	
Remedies Cumulative; No Waiver
	
61

	
Section 12.
	
AGENT
	
62

	
12.1.
	
Appointment, Authority and Duties of Agent
	
62

	
12.2.
	
Agreements Regarding Collateral and Borrower Materials
	
63

	
12.3.
	
Reliance By Agent
	
63

	
12.4.
	
Action Upon Default
	
64

	
12.5.
	
Ratable Sharing
	
64

	
12.6.
	
Indemnification
	
64

	
12.7.
	
Limitation on Responsibilities of Agent
	
64

	
12.8.
	
Successor Agent and Co-Agents
	
65

	
12.9.
	
Due Diligence and Non-Reliance
	
65

	
12.10.
	
Remittance of Payments and Collections
	
65

	
12.11.
	
Individual Capacities
	
66

	
12.12.
	
Titles
	
66

	
12.13.
	
Bank Product Providers
	
66

	
12.14.
	
No Third Party Beneficiaries
	
66

	
Section 13.
	
BENEFIT OF AGREEMENT; ASSIGNMENTS
	
66

	
13.1.
	
Successors and Assigns
	
66

	
13.2.
	
Participations
	
67

	
13.3.
	
Assignments
	
67

	
13.4.
	
Replacement of Certain Lenders
	
68

	
Section 14.
	
MISCELLANEOUS
	
68

	
14.1.
	
Consents, Amendments and Waivers
	
68

	
14.2.
	
Indemnity
	
69

	
14.3.
	
Notices and Communications
	
69

	
14.4.
	
Performance of Borrower’s Obligations
	
70

	
14.5.
	
Credit Inquiries
	
71

	
14.6.
	
Severability
	
71

	
14.7.
	
Cumulative Effect; Conflict of Terms
	
71

 

 

 

(ii)

 

 

	
14.8.
	
Counterparts; Execution
	
71

	
14.9.
	
Entire Agreement
	
71

	
14.10.
	
Relationship with Lenders
	
71

	
14.11.
	
No Advisory or Fiduciary Responsibility
	
71

	
14.12.
	
Confidentiality
	
72

	
14.13.
	
[Intentionally Omitted].
	
72

	
14.14.
	
GOVERNING LAW
	
72

	
14.15.
	
Consent to Forum
	
72

	
14.16.
	
Waivers by Borrower
	
73

	
14.17.
	
Patriot Act Notice
	
73

	
14.18.
	
NO ORAL AGREEMENT
	
73

 

 

 LIST OF EXHIBITS AND SCHEDULES

 

	
Exhibit A
	
Assignment

	
Exhibit B
	
Assignment Notice

 

	Schedule 1.1	Commitments of Lenders
	Schedule 2.3.5	Existing Letters of Credit
	Schedule 8.5	Deposit Accounts
	Schedule 8.6.1	Business Locations
	Schedule 9.1.4	Names and Capital Structure
	Schedule 9.1.11	Patents, Trademarks, Copyrights and Licenses
	Schedule 9.1.14 	Environmental Matters
	Schedule 9.1.15	Restrictive Agreements
	Schedule 9.1.16	Litigation
	Schedule 9.1.18	Pension Plans
	Schedule 9.1.20	Labor Contracts
	Schedule 10.2.2	Existing Liens
	Schedule 10.2.17	Existing Affiliate Transactions

 

 

 

(iii)

 

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT is dated as of October 26, 2015, among NORTHWEST PIPE COMPANY, an Oregon corporation ("Borrower 1") and PERMALOK CORPORATION, a Missouri corporation ("Borrower 2" and together with Borrower 1, collectively "Borrowers"), the financial institutions party to this Agreement from time to time as Lenders, and BANK OF AMERICA, N.A., a national banking association, as agent for the Lenders ("Agent").

 

R E C I T A L S:

 

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

 

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

 

Section 1.     DEFINITIONS; RULES OF CONSTRUCTION

 

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

 

Account: as defined in the UCC, including all rights to payment for goods sold or leased, or for services rendered.

 

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

 

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

 

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

 

Adjusted EBITDA: EBITDA plus to the extent approved by Agent, non-recurring restructuring expenses incurred during the measuring period.

 

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

 

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

 

Agent Professionals: attorneys, accountants, appraisers, auditors, business valuation experts, environmental engineers or consultants, turnaround consultants, and other professionals and experts retained by Agent.

 

Agreement Currency: as defined in Section 1.5. 

 

Allocable Amount: as defined in Section 5.11.3.

 

Anti-Terrorism Law: any law relating to terrorism or money laundering, including the Patriot Act.

 

 

 

1

 

 

Applicable Law: all laws, rules, regulations and governmental guidelines applicable to the Person, conduct, transaction, agreement or matter in question, including all applicable statutory law, common law and equitable principles, and all provisions of constitutions, treaties, statutes, rules, regulations, orders and decrees of Governmental Authorities.

 

Applicable Margin: the margin set forth below, as determined by the average daily Availability for the last Fiscal Quarter:

 

	
Level
	
 

Average Daily

Availability

 
	
 

LIBOR 

Revolver Loans
	
 

Base Rate 

Revolver Loans

	
I
	
Less than 33 and 1/3% 
	
2.25%
	
1.25%

	
II
	
Greater than or equal to 33 and 1/3% but less than or equal to 66 and 2/3% 
	
2.00%
	
1.00%

	
III
	
Greater than 66 and 2/3%
	
1.75%
	
0.75%

Until six months following the Closing Date, margins shall be determined as if Level II were applicable. Thereafter, margins shall be subject to increase or decrease by Agent on the first day of the calendar month following each Fiscal Quarter end. If Agent is unable to calculate average daily Availability for a Fiscal Quarter due to Borrowers' failure to deliver any Borrowing Base Report when required hereunder, then, at the option of Agent or Required Lenders, margins shall be determined as if Level III were applicable until the first day of the calendar month following its receipt.

 

Approved Fund: any Person (other than a natural Person) engaged in making, purchasing, holding or otherwise investing in commercial loans in its ordinary course of activities.

 

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

 

Assignment: an assignment agreement between a Lender and Eligible Assignee, in the form of Exhibit A or otherwise satisfactory to Agent.

 

Availability: the Borrowing Base minus Revolver Usage.

 

Availability Block: $5,000,000; provided, however that so long as there is no Default or Event of Default hereunder, the Availability Block shall be reduced as follows: 

 

(a)      to $2,500,000, upon the earlier of (i) the closing of the sale of Borrower 1's Atchison, Kansas operations for net consideration of not less than $5,000,000 with such sale extinguishing any continuing liability by Borrowers with respect to the divested operations (the "Atchison Divestiture"), and (ii) the date Borrowers provides Agent with evidence acceptable to Agent that Borrowers have achieved a trailing twelve months Fixed Charge Coverage Ratio of 1.0 to 1.0; 

 

(b)     if the Atchison Divestiture occurs, but Borrowers have not then or previously provided Agent with evidence acceptable to Agent that Borrowers have achieved a trailing twelve months Fixed Charge Coverage Ratio of 1.0 to 1.0; then the Availability Block shall be reduced to $1,250,000 the date Borrowers provide Agent with evidence acceptable to Agent that Borrowers have achieved a trailing twelve months Fixed Charge Coverage Ratio of 1.0 to 1.0; and

 

 

 

2

 

 

(c)     to $0, the date Borrowers provide Agent with evidence acceptable to Agent of a second consecutive quarter of trailing twelve months Fixed Charge Coverage Ratio of 1.0 to 1.0. 

 

Availability Reserve: the sum (without duplication) of (a) the Inventory Reserve; (b) the Rent and Charges Reserve; (c) the Bank Product Reserve; (d) the aggregate amount of liabilities secured by Liens upon Collateral that are senior to Agent's Liens (but imposition of any such reserve shall not waive an Event of Default arising therefrom); (e) the Dilution Reserve; and (f) such additional reserves, in such amounts and with respect to such matters, as Agent in its discretion may elect to impose from time to time.

 

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

 

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

 

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

 

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

 

Bankruptcy Code: Title 11 of the United States Code.

 

Base Rate: for any day, a per annum rate equal to for any day, a per annum rate equal to the greater of (a) the Prime Rate for such day; (b) the Federal Funds Rate for such day, plus 0.50%; or (c) LIBOR for a 30 day interest period as of such day, plus 1%.

 

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

 

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

 

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

 

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

 

Borrower Agent: as defined in Section 4.4.

 

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

 

Borrowing: a group of Loans that are made or converted together on the same day and have the same interest option and, if applicable, Interest Period.

 

Borrowing Base: on any date of determination, an amount equal to the lesser of (a) the aggregate Revolver Commitments, minus the Availability Block; or (b) the sum of the Accounts Formula Amount, plus the Inventory Formula Amount plus the Equipment Formula Amounts, minus the Availability Reserve, minus the Availability Block.

 

 

 

3

 

 

Borrowing Base Report: a report of the Borrowing Base by Borrowers, in form and substance satisfactory to Agent. 

 

Business Day: any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, North Carolina and the State of Washington, and if such day relates to a LIBOR Loan, any such day on which dealings in Dollar deposits are conducted in the London interbank market.

 

Canadian Dollars:  the lawful currency of Canada, as in effect from time to time.

 

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

 

Capital Lease: any lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

 

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

 

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

 

Cash Collateralize: the delivery of cash to Agent, as security for the payment of Obligations, in an amount equal to (a) with respect to LC Obligations, 105% of the aggregate LC Obligations, and (b) with respect to any inchoate, contingent or other Obligations (including Secured Bank Product Obligations), Agent's good faith estimate of the amount due or to become due, including fees, expenses and indemnification hereunder. "Cash Collateralization" has a correlative meaning.

 

Cash Equivalents: (a) marketable obligations issued or unconditionally guaranteed by, and backed by the full faith and credit of, the U.S. government, maturing within 12 months of the date of acquisition; (b) certificates of deposit, time deposits and bankers' acceptances maturing within 12 months of the date of acquisition, and overnight bank deposits, in each case which are issued by Bank of America or a commercial bank organized under the laws of the United States or any state or district thereof, rated A-1 (or better) by S&P or P-1 (or better) by Moody's at the time of acquisition, and (unless issued by a Lender) not subject to offset rights; (c) repurchase obligations with a term of not more than 30 days for underlying investments of the types described in clauses (a) and (b) entered into with any bank described in clause (b); (d) commercial paper issued by Bank of America or rated A-1 (or better) by S&P or P-1 (or better) by Moody's, and maturing within nine months of the date of acquisition; and (e) shares of any money market fund that has substantially all of its assets invested continuously in the types of investments referred to above, has net assets of at least $500,000,000 and has the highest rating obtainable from either Moody's or S&P.

 

Cash Management Services: services relating to operating, collections, payroll, trust, or other depository or disbursement accounts, including automated clearinghouse, e-payable, electronic funds transfer, wire transfer, controlled disbursement, overdraft, depository, information reporting, lockbox and stop payment services.

 

 

 

4

 

 

CEEEB Inventory: Inventory consisting of cost and estimated earnings in excess of billing on uncompleted contracts.

 

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

 

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

 

Change of Control: (a) the current shareholders cease to own and control, beneficially and of record, at least 51% of the Equity Interests of a Borrower; (b) a change in the majority of directors of a Borrower during any 24 month period, unless approved by the majority of directors serving at the beginning of such period; or (c) the sale or transfer of all or substantially all assets of a Borrowers, except to another Borrower. 

 

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

 

Closing Date: as defined in Section 6.1.

 

Code: the Internal Revenue Code of 1986.

 

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

 

Commitment: for any Lender, the aggregate amount of such Lender's Revolver Commitment. "Commitments" means the aggregate amount of all Revolver Commitments.

 

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

 

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

 

Compliance Certificate: a certificate, in form and substance satisfactory to Agent, by which Borrowers certify compliance with Sections 10.2.3 and 10.3.

 

 

 

5

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Deposit Account Control Agreement: control agreement satisfactory to Agent executed by an institution maintaining a Deposit Account for an Obligor, to perfect Agent's Lien on such account.

 

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

 

 

 

6

 

 

Dilution Reserve: an amount, as established by Agent based on Borrower's bad debt write-downs or write-offs, discounts, returns, promotions, credits, credit memos and other dilutive items with respect to Accounts.

 

Distribution: any declaration or payment of a distribution, interest or dividend on any Equity Interest (other than payment-in-kind); distribution, advance or repayment of Debt to a holder of Equity Interests; or purchase, redemption, or other acquisition or retirement for value of any Equity Interest.

 

Dollars: lawful money of the United States.

 

Dominion Account: a special account established by Borrowers at Bank of America or another bank acceptable to Agent, over which Agent has exclusive control for withdrawal purposes.

 

EBITDA: determined on a consolidated basis for Borrowers and Subsidiaries, net income, calculated before interest expense, provision for income taxes, depreciation and amortization expense, gains or losses arising from the sale of capital assets (other than capital assets that are Accounts, CEEEB or Inventory), gains or losses arising from the write-up/write-down of assets (other than capital assets that are Accounts, CEEEB or Inventory), and any extraordinary gains/extraordinary losses (other than extraordinary gains/extraordinary losses respecting Accounts, CEEB or Inventory) (in each case, to the extent included in determining net income).

 

Eligible Account: an Account owing to a Borrower that arises in the Ordinary Course of Business from the sale of goods and/or provision of services, is payable in Dollars or Canadian Dollars and is deemed by Agent, in its discretion, to be an Eligible Account. Without limiting the foregoing, no Account shall be an Eligible Account if (a) it is unpaid for more than 60 days after the original due date, or more than 90 days after the original invoice date; (b) 50% or more of the Accounts owing by the Account Debtor are not Eligible Accounts under the foregoing clause; (c) when aggregated with other Accounts owing by the Account Debtor, it exceeds 15% of the aggregate Eligible Accounts (or such higher percentage as Agent may establish for the Account Debtor from time to time), to the extent of the obligations owing by such Account Debtor in excess of such percentage; (d) it does not conform with a covenant or representation herein; (e) it is owing by a creditor or supplier, or is otherwise subject to a potential offset, counterclaim, dispute, deduction, discount, recoupment, reserve, defense, chargeback, credit or allowance (but ineligibility shall be limited to the amount thereof); (f) an Insolvency Proceeding has been commenced by or against the Account Debtor; or the Account Debtor has failed, has suspended or ceased doing business, is liquidating, dissolving or winding up its affairs, is not Solvent, or is subject to any Sanction or on any specially designated nationals list maintained by OFAC; or the Borrower is not able to bring suit or enforce remedies against the Account Debtor through judicial process; (g) the Account Debtor is organized or has its principal offices or assets outside the United States or Canada, unless the Account is supported by a letter of credit (delivered to and directly drawable by Agent) or credit insurance satisfactory in all respects to Agent; (h) it is owing by a Governmental Authority, unless the Account Debtor is the United States or any department, agency or instrumentality thereof and the Account has been assigned to Agent in compliance with the federal Assignment of Claims Act; (i) it is not subject to a duly perfected, first priority Lien in favor of Agent, or is subject to any other Lien; (j) the goods giving rise to it have not been delivered to the Account Debtor, the services giving rise to it have not been accepted by the Account Debtor, or it otherwise does not represent a final sale; (k) it is evidenced by Chattel Paper or an Instrument of any kind, or has been reduced to judgment; (l) its payment has been extended or the Account Debtor has made a partial payment; (m) it arises from a sale to an Affiliate, from a sale on a cash-on-delivery, bill-and-hold, sale-or-return, sale-on-approval, consignment, or other repurchase or return basis, or from a sale for personal, family or household purposes; (n) it represents a progress billing or retainage, or relates to services for which a performance, surety or completion bond or similar assurance has been issued; (o) it includes a billing for interest, fees or late charges, but ineligibility shall be limited to the extent thereof; or (p) it is an Account generated by the Tubular Division. In calculating delinquent portions of Accounts under clauses (a) and (b), credit balances more than 90 days old will be excluded.

 

 

 

7

 

 

Eligible Assignee: a Person that is (a) a Lender, Affiliate of a Lender or Approved Fund; (b) an assignee approved by Borrower Agent (which approval shall not be unreasonably withheld or delayed, and shall be deemed given if no objection is made within two Business Days after notice of the proposed assignment) and Agent; and (c) during an Event of Default, any Person acceptable to Agent in its discretion.

 

Eligible CEEEB Inventory: the CEEEB Inventory of a Borrower which Agent, in its discretion, determines to be Eligible CEEEB Inventory but specifically excluding any CEEEB Inventory that would be excluded as Eligible Inventory other than by virtue of it being CEEEB Inventory. Notwithstanding the foregoing, if Borrowers have not provided Agent with reports and a reporting structure satisfactory to Agent within six (6) months following the Closing Date that support the CEEEB and that can be tested and validated by field exam, the Value of the CEEEB Inventory shall thereafter be deemed to equal such amount, or zero, as Agent in its discretion, from time to time, deems appropriate. 

 

Eligible Equipment: Equipment of a Borrower which Agent, in its discretion, determines to be Eligible Equipment and that is listed on an appraisal of Equipment acceptable to Agent completed during the 30 days prior to the Closing Date. Without limiting the discretion of the Lender to establish other criteria of ineligibility, Eligible Equipment shall not include any Equipment: (a) that is not legally owned by a Borrower; (b) that is not subject to the Lender's Liens, which are perfected as to such Inventory, or that are subject to any other Lien whatsoever other than Permitted Liens; (c) that is not in good working condition for its intended use or for sale; (d)  that is located outside the United States or at a location other than a place of business of a Borrower; or (e) that is located in a facility leased by a Borrower, if the lessor has not delivered to the Lender, if requested by the Lender, a landlord waiver in form and substance satisfactory to the Lender or if a Reserve for rents has not been established for Equipment at that location.  Borrowers, by including Equipment in any computation of the Borrowing Base, shall be deemed to represent and warrant to the Lender that such Equipment is not of the type described in any of (a) through (e) above, and if any Equipment at any time ceases to be Eligible Equipment, then such Equipment shall promptly be excluded from the calculation of Eligible Equipment. For avoidance of doubt, no Equipment acquired after the Closing Date or not reflected in an appraisal of Equipment acceptable to Agent completed during the 30 days prior to the Closing Date shall be treated as Eligible Equipment.

 

Eligible Inventory: Inventory owned by a Borrower that Agent, in its discretion, deems to be Eligible Inventory. Without limiting the foregoing, no Inventory shall be Eligible Inventory unless it (a) is finished goods or raw materials, and not work-in-process, packaging or shipping materials, labels, samples, display items, bags, replacement parts or manufacturing supplies; (b) is not held on consignment, nor subject to any deposit or down payment; (c) is in new and saleable condition and is not damaged, defective, shopworn or otherwise unfit for sale; (d) is not slow-moving, perishable, obsolete or unmerchantable, and does not constitute returned or repossessed goods; (e) meets all standards imposed by any Governmental Authority, has not been acquired from a Person subject to any Sanction or on any specially designated nationals list maintained by OFAC, and does not constitute hazardous materials under any Environmental Law; (f) conforms with the covenants and representations herein; (g) is subject to Agent's duly perfected, first priority Lien, and no other Lien; (h) is within the continental United States or Canada, is not in transit except between locations of a Borrower or the Borrowers, and is not consigned to any Person; (i) is not subject to any warehouse receipt or negotiable Document; (j) is not subject to any License or other arrangement that restricts such Borrower's or Agent's right to dispose of such Inventory, unless Agent has received an appropriate Lien Waiver; and (k) is not located on leased premises or in the possession of a warehouseman, processor, repairman, mechanic, shipper, freight forwarder or other Person, unless the lessor or such Person has delivered a Lien Waiver or an appropriate Rent and Charges Reserve has been established; (l) is reflected in the details of a current perpetual inventory report, (m) does not relate to services for which a performance, surety or completion bond or similar assurance has been issued and (n) is not Inventory generated by the Tubular Division. For avoidance of doubt, Eligible Inventory excludes CEEEB Inventory.

 

 

 

8

 

 

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

 

Environmental Laws: Applicable Laws (including programs, permits and guidance promulgated by regulators) relating to public health (other than occupational safety and health regulated by OSHA) or the protection or pollution of the environment, including CERCLA, RCRA and CWA.

 

Environmental Notice: a notice (whether written or oral) from any Governmental Authority or other Person of any possible noncompliance with, investigation of a possible violation of, litigation relating to, or potential fine or liability under any Environmental Law, or with respect to any Environmental Release, environmental pollution or hazardous materials, including any complaint, summons, citation, order, claim, demand or request for correction, remediation or otherwise.

 

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

 

Equipment: all of Borrowers' now owned and hereafter acquired machinery, equipment, furniture, furnishings, fixtures, and other tangible personal property (except Inventory), including embedded software, motor vehicles with respect to which a certificate of title has been issued, aircraft, dies, tools, jigs, molds and office equipment, as well as all of such types of property leased by Borrowers and all of Borrowers' rights and interests with respect thereto under such leases (including, without limitation, options to purchase); together with all present and future additions and accessions thereto, replacements therefor, component and auxiliary parts and supplies used or to be used in connection therewith, and all substitutes for any of the foregoing, and all manuals, drawings, instructions, warranties and rights with respect thereto; wherever any of the foregoing is located.

 

Equipment Formula Amount: the lesser of (a) $15,000,000; and (b) 85% of the NOLV Percentage of the Value of Eligible Equipment, in each case as reduced by the Value of Eligible Equipment sold, transferred or otherwise disposed of by Borrowers; provided, however, that the Value of Eligible Equipment shall be subject to quarterly step-downs starting on the first day of the first full calendar quarter following the Closing Date and on the 1st day of each calendar quarter thereafter based on a level 10-year straight line amortization schedule. 

 

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

 

Existing Credit Agreement: that certain Second Amended and Restated Credit agreement dated as of October 24, 2012, among Borrower 1, each lender from time to time party hereto, and Agent as agent, as amended through the date hereof. 

 

Existing Letters of Credit: as defined in Section 2.3.5.

 

ERISA: the Employee Retirement Income Security Act of 1974.

 

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

 

 

 

9

 

 

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

 

Event of Default: as defined in Section 11.

 

Excluded Swap Obligation: with respect to an Obligor, each Swap Obligation as to which, and only to the extent that, such Obligor's guaranty of or grant of a Lien as security for such Swap Obligation is or becomes illegal under the Commodity Exchange Act because the Obligor does not constitute an "eligible contract participant" as defined in the act (determined after giving effect to any keepwell, support or other agreement for the benefit of such Obligor and all guarantees of Swap Obligations by other Obligors) when such guaranty or grant of Lien becomes effective with respect to the Swap Obligation. If a Hedging Agreement governs more than one Swap Obligation, only the Swap Obligation(s) or portions thereof described in the foregoing sentence shall be Excluded Swap Obligation(s) for the applicable Obligor.

 

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

 

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

 

 

 

10

 

 

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

 

Federal Funds Rate: (a) the weighted average of interest rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on the applicable Business Day (or on the preceding Business Day, if the applicable day is not a Business Day), as published by the Federal Reserve Bank of New York on the next Business Day; or (b) if no such rate is published on the next Business Day, the average rate (rounded up, if necessary, to the nearest 1/8 of 1%) charged to Bank of America on the applicable day on such transactions, as determined by Agent.

 

Fiscal Quarter: each period of three months, commencing on the first day of a Fiscal Year.

 

Fiscal Year: the fiscal year of Borrowers and Subsidiaries for accounting and tax purposes, ending on December 31 of each year. 

 

Fixed Charge Coverage Ratio: the ratio, determined on a consolidated basis for Borrowers and Subsidiaries for the most recent 12 months, of (a) Adjusted EBITDA minus Capital Expenditures (except those financed with Borrowed Money other than Revolver Loans) and cash taxes paid, to (b) Fixed Charges.

 

Fixed Charges: the sum of interest expense (other than payment-in-kind), principal payments made on Borrowed Money, and Distributions made.

 

FLSA: the Fair Labor Standards Act of 1938.

 

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

 

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

 

Foreign Subsidiary: a Subsidiary that is a "controlled foreign corporation" under Section 957 of the Code, such that a guaranty by such Subsidiary of the Obligations or a Lien on the assets of such Subsidiary to secure the Obligations would result in material tax liability to Borrowers.

 

Fronting Exposure: a Defaulting Lender's interest in LC Obligations and Protective Advances, except to the extent Cash Collateralized by the Defaulting Lender or allocated to other Lenders hereunder.

 

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

 

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

 

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

 

 

 

11

 

 

Governmental Authority: any federal, state, local, foreign or other agency, authority, body, commission, court, instrumentality, political subdivision, central bank, or other entity or officer exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions for any governmental, judicial, investigative, regulatory or self-regulatory authority (including the Financial Conduct Authority, the Prudential Regulation Authority and any supra-national bodies such as the European Union or European Central Bank).

 

Guarantor Payment: as defined in Section 5.11.3.

 

Guarantors: Thompson Tank Holdings, Inc., an Oregon corporation and each other Person that guarantees payment or performance of Obligations. 

 

Guaranty: each guaranty agreement executed by a Guarantor in favor of Agent.

 

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

 

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

 

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

 

Insolvency Proceeding: any case or proceeding commenced by or against a Person under any state, federal or foreign law for, or any agreement of such Person to, (a) the entry of an order for relief under the Bankruptcy Code, or any other insolvency, debtor relief or debt adjustment law; (b) the appointment of a receiver, trustee, liquidator, administrator, conservator or other custodian for such Person or any part of its Property; or (c) an assignment or trust mortgage for the benefit of creditors.

 

Intellectual Property: all intellectual and similar Property of a Person, including inventions, designs, patents, copyrights, trademarks, service marks, trade names, trade secrets, confidential or proprietary information, customer lists, know-how, software and databases; all embodiments or fixations thereof and all related documentation, applications, registrations and franchises; all licenses or other rights to use any of the foregoing; and all books and records relating to the foregoing.

 

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

 

Interest Period: as defined in Section 3.1.3.

 

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

 

Inventory Formula Amount: the sum of (a) the lesser of (i) 65% of the Value of Eligible Inventory; or (ii) 85% of the NOLV Percentage of the Value of Eligible Inventory plus (b) the lesser of (i) $5,000,000; (ii) 65% of the Value of Eligible CEEEB Inventory; or (ii) 85% of the NOLV Percentage of the Value of Eligible CEEEB Inventory.

 

 

 

12

 

 

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

 

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

 

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

 

IRS: the United States Internal Revenue Service.

 

Issuing Bank: Bank of America (including any Lending Office of Bank of America), or any replacement issuer appointed pursuant to Section 2.3.4.

 

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

 

Judgment Currency: as defined in Section 1.5.

 

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

 

LC Conditions: the following conditions necessary for issuance of a Letter of Credit: (a) each of the conditions set forth in Section 6; (b) after giving effect to such issuance, total LC Obligations do not exceed the Letter of Credit Subline, no Overadvance exists and Revolver Usage does not exceed the Borrowing Base; (c) the Letter of Credit and payments thereunder are denominated in Dollars or other currency satisfactory to Agent and Issuing Bank; and (d) the purpose and form of the proposed Letter of Credit are satisfactory to Agent and Issuing Bank in their discretion.

 

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

 

LC Obligations: the sum of (a) all amounts owing by Borrowers for drawings under Letters of Credit; and (b) the Stated Amount of all outstanding Letters of Credit.

 

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

 

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

 

Lenders: lenders party to this Agreement and any Person who hereafter becomes a "Lender" pursuant to an Assignment, including any Lending Office of the foregoing.

 

Lending Office: the office (including any domestic or foreign Affiliate or branch) designated as such by a Lender or Issuing Bank by notice to Agent and Borrower Agent.

 

Letter of Credit: any standby or documentary letter of credit, foreign guaranty, documentary bankers acceptance or similar instrument issued by Issuing Bank for the account or benefit of a Borrower or Affiliate of a Borrower.

 

Letter of Credit Subline: $25,000,000.

 

 

 

13

 

 

LIBOR: the per annum rate of interest (rounded up to the nearest 1/100th of 1% and in no event less than zero) determined by Agent at or about 11:00 a.m. (London time) two Business Days prior to an Interest Period, for a term equivalent to such period, equal to the London Interbank Offered Rate, or comparable or successor rate approved by Agent, as published on the applicable Reuters screen page (or other commercially available source designated by Agent from time to time); provided, that any comparable or successor rate shall be applied by Agent, if administratively feasible, in a manner consistent with market practice.

 

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

 

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

 

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

 

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

 

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

 

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

 

Loan: a Revolver Loan.

 

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

 

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

 

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

 

Material Adverse Effect: the effect of any event or circumstance that, taken alone or in conjunction with other events or circumstances, (a) has or could be reasonably expected to have a material adverse effect on the business, operations, Properties, or condition (financial or otherwise) of the Obligors (taken as a whole), on the value of any material Collateral, on the enforceability of any Loan Documents, or on the validity or priority of Agent's Liens on any Collateral; (b) impairs the ability of the Obligor (taken as a whole) to perform its obligations under the Loan Documents, including repayment of any Obligations; or (c) otherwise impairs the ability of Agent or any Lender to enforce or collect any Obligations or to realize upon any Collateral.

 

 

 

14

 

 

Material Contract: any agreement or arrangement to which a Borrower or Subsidiary is party (other than the Loan Documents) (a) that is deemed to be a material contract under any securities law applicable to such Person, including the Securities Act of 1933; (b) for which breach, termination, nonperformance or failure to renew could reasonably be expected to have a Material Adverse Effect; or (c) that relates to Subordinated Debt, or to Debt in an aggregate amount of $2,000,000 or more.

 

Material Obligor: (i) each Borrower and (ii) any other Obligor to the extent such other Obligor has a tangible net worth in excess of $5,000,000. 

 

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

 

Mortgage: a mortgage or deed of trust in which an Obligor grants a Lien on its Real Estate to Agent, as security for its Obligations.

 

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

 

Multiple Employer Plan: a Plan that has two or more contributing sponsors, including an Obligor or ERISA Affiliate, at least two of whom are not under common control, as described in Section 4064 of ERISA.

 

Net Proceeds: with respect to an Asset Disposition, proceeds (including, when received, any deferred or escrowed payments) received by a Borrower or Subsidiary in cash from such disposition, net of (a) reasonable and customary costs and expenses actually incurred in connection therewith, including legal fees and sales commissions; (b) amounts applied to repayment of Debt secured by a Permitted Lien senior to Agent's Liens on Collateral sold; (c) transfer or similar taxes; and (d) reserves for indemnities, until such reserves are no longer needed.

 

NOLV Percentage: the net orderly liquidation value of Inventory (including without limitation CEEEB Inventory) and Equipment, expressed as a percentage, expected to be realized at an orderly, negotiated sale held within a reasonable period of time, net of all liquidation expenses, as determined from the most recent appraisal of Borrowers' Inventory or Equipment, as applicable, performed by an appraiser and on terms satisfactory to Agent.

 

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

 

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

 

Obligations: all (a) principal of and premium, if any, on the Loans, (b) LC Obligations and other obligations of Obligors with respect to Letters of Credit, (c) interest, expenses, fees, indemnification obligations, Extraordinary Expenses and other amounts payable by Obligors under Loan Documents, (d) Secured Bank Product Obligations, and (e) other Debts, obligations and liabilities of any kind owing by Obligors pursuant to the Loan Documents, whether now existing or hereafter arising, whether evidenced by a note or other writing, whether allowed in any Insolvency Proceeding, whether arising from an extension of credit, issuance of a letter of credit, acceptance, loan, guaranty, indemnification or otherwise, and whether direct or indirect, absolute or contingent, due or to become due, primary or secondary, or joint or several; provided, that Obligations of an Obligor shall not include its Excluded Swap Obligations.

 

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

 

 

 

15

 

 

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

 

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

 

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

 

OSHA: the Occupational Safety and Hazard Act of 1970.

 

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

 

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

 

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

 

Overadvance: as defined in Section 2.1.5.

 

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

 

Participant: as defined in Section 13.2.

 

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

 

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

 

PBGC: the Pension Benefit Guaranty Corporation.

 

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

 

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

 

 

 

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Permitted Acquisition: any Acquisition as long as (a) no Default or Event of Default exists or is caused thereby; (b) the Acquisition is consensual; (c) the assets, business or Person being acquired is useful or engaged in the business of Borrowers and Subsidiaries, is located or organized within the United States, and had positive Adjusted EBITDA for the 12 month period most recently ended; (d) no Debt or Liens are assumed or incurred, except as permitted by Sections 10.2.1(f), 10.2.1(i) and 10.2.2(j); (e) upon giving pro forma effect thereto, (A) for the 30 days preceding and as of the Acquisition and projected for 30 days following the Acquisition, Availability is at least 20% of the aggregate Revolver Commitments or (B) for the 30 days preceding and as of the Acquisition and projected for 30 days following the Acquisition, (1) Availability is at least 15% of the aggregate Revolver Commitments and (2) Borrowers maintains a Fixed Charge Coverage Ratio of not less than 1.0 to 1.0 and (f) Borrowers deliver to Agent, at least 10 Business Days prior to the Acquisition, the current drafts (with final executed versions to be delivered promptly after execution thereof) of all material agreements relating thereto and a certificate, in form and substance satisfactory to Agent, stating that the Acquisition is a "Permitted Acquisition" and demonstrating compliance with the foregoing requirements. 

 

Permitted Asset Disposition: as long as no Default or Event of Default exists or is caused thereby and all Net Proceeds are remitted to Agent, an Asset Disposition that is (a) a sale of Inventory in the Ordinary Course of Business; (b) a disposition of Equipment that, in the aggregate during any 12 month period, has a fair market or book value (whichever is more) of $1,000,000 or less; (c) a disposition of Inventory that is obsolete, unmerchantable or otherwise unsalable in the Ordinary Course of Business; (d) termination of a lease of real or personal Property that is not necessary for the Ordinary Course of Business, could not reasonably be expected to have a Material Adverse Effect and does not result from an Obligor's default; or (e) approved in writing by Agent and Required Lenders or (f) any Asset Disposition consisting solely of a disposition of the Tubular Division and/or the related Real Estate utilized to the Tubular Division located in Houston, Texas.

 

Permitted Contingent Obligations: Contingent Obligations (a) arising from endorsements of Payment Items for collection or deposit in the Ordinary Course of Business; (b) arising from Hedging Agreements permitted hereunder; (c) existing on the Closing Date, and any extension or renewal thereof that does not increase the amount of such Contingent Obligation when extended or renewed; (d) incurred in the Ordinary Course of Business with respect to surety, appeal or performance bonds, or other similar obligations; (e) arising from customary indemnification obligations in favor of purchasers in connection with dispositions of Equipment permitted hereunder; (f) arising under the Loan Documents; or (g) in an aggregate amount of $2,000,000 or less at any time.

 

Permitted Distribution: any Distribution so long as (a) no Default or Event of Default exists or is caused thereby and (b) upon giving pro forma effect thereto, (i) for the 30 days preceding and as of the Distribution and projected for 30 days following the Distribution, Availability is at least 25% of the aggregate Revolver Commitments or (ii) for the 30 days preceding and as of the Distribution and projected for 30 days following the Distribution, (A) Availability is at least 15% of the aggregate Revolver Commitments and (B) Borrowers maintains a Fixed Charge Coverage Ratio of not less than 1.0 to 1.0. 

 

Permitted Lien: as defined in Section 10.2.2.

 

Permitted Purchase Money Debt: Purchase Money Debt of Borrowers and Subsidiaries that is unsecured or secured only by a Purchase Money Lien, as long as the aggregate amount does not exceed $2,000,000 at any time and its incurrence does not violate Section 10.2.3.

 

 

 

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

 

Plan: an employee benefit plan (as defined in Section 3(3) of ERISA) maintained for employees of an Obligor or ERISA Affiliate, or to which an Obligor or ERISA Affiliate is required to contribute on behalf of its employees.

 

Platform: as defined in Section 14.3.3.

 

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

 

Pro Rata: with respect to any Lender, a percentage (rounded to the ninth decimal place) determined (a) by dividing the amount of such Lender's Revolver Commitment by the aggregate outstanding Revolver Commitments; or (b) following termination of the Revolver Commitments, by dividing the amount of such Lender's Loans and LC Obligations by the aggregate outstanding Loans and LC Obligations or, if all Loans and LC Obligations have been paid in full and/or Cash Collateralized, by dividing such Lender's and its Affiliates' remaining Obligations by the aggregate remaining Obligations.

 

Properly Contested: with respect to any obligation of an Obligor, (a) the obligation is subject to a bona fide dispute regarding amount or the Obligor's liability to pay; (b) the obligation is being properly contested in good faith by appropriate proceedings promptly instituted and diligently pursued; (c) appropriate reserves have been established in accordance with GAAP; (d) non-payment could not have a Material Adverse Effect, nor result in forfeiture or sale of any assets of the Obligor; (e) no Lien is imposed on assets of the Obligor, unless bonded and stayed to the satisfaction of Agent; and (f) if the obligation results from entry of a judgment or other order, such judgment or order is stayed pending appeal or other judicial review.

 

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

 

Protective Advances: as defined in Section 2.1.6.

 

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

 

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

 

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

 

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

 

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

 

 

 

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

 

Refinancing Conditions: the following conditions for Refinancing Debt: (a) it is in an aggregate principal amount that does not exceed the principal amount of the Debt being extended, renewed or refinanced; (b) it has a final maturity no sooner than, a weighted average life no less than, and an interest rate no greater than, the Debt being extended, renewed or refinanced; (c) it is subordinated to the Obligations at least to the same extent as the Debt being extended, renewed or refinanced; (d) the representations, covenants and defaults applicable to it are no less favorable to Borrowers than those applicable to the Debt being extended, renewed or refinanced; (e) no additional Lien is granted to secure it; (f) no additional Person is obligated on such Debt; and (g) upon giving effect to it, no Default or Event of Default exists.

 

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

 

Reimbursement Date: as defined in Section 2.3.2.

 

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

 

Report: as defined in Section 12.2.3.

 

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

 

Required Lenders: two or more unaffiliated Secured Parties holding more than 50% of (a) the aggregate outstanding Revolver Commitments; or (b) following termination of the Revolver Commitments, the aggregate outstanding Loans and LC Obligations or, if all Loans and LC Obligations have been Paid in Full, the aggregate remaining Obligations; provided, however, that Commitments, Loans and other Obligations held by a Defaulting Lender and its Affiliates shall be disregarded in making such calculation, but any related Fronting Exposure shall be deemed held as a Loan or LC Obligation by the Secured Party that funded the applicable Loan or issued the applicable Letter of Credit.

 

Restricted Investment: any Investment by a Borrower or Subsidiary, other than (a) Investments in Subsidiaries to the extent existing on the Closing Date; (b) Cash Equivalents that are subject to Agent's Lien and control, pursuant to documentation in form and substance satisfactory to Agent; (c) loans and advances permitted under Section 10.2.7; and (d) Permitted Acquisitions.

 

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

 

Revolver Commitment: for any Lender, its obligation to make Revolver Loans and to participate in LC Obligations up to the maximum principal amount shown on Schedule 1.1, as hereafter modified pursuant to Section 2.1.7 or an Assignment to which it is a party. "Revolver Commitments" means the aggregate amount of such commitments of all Lenders.

 

Revolver Loan: a loan made pursuant to Section 2.1, and any Overadvance Loan or Protective Advance.

 

 

 

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Revolver Termination Date: October 25, 2018.

 

Revolver Usage: (a) the aggregate amount of outstanding Revolver Loans; plus (b) the aggregate Stated Amount of outstanding Letters of Credit, except to the extent Cash Collateralized by Borrowers.

 

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

 

S&P: Standard & Poor's Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc., and any successor thereto.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Solvent: as to any Person, such Person (a) owns Property whose fair salable value is greater than the amount required to pay all of its debts (including contingent, subordinated, unmatured and unliquidated liabilities); (b) owns Property whose present fair salable value (as defined below) is greater than the probable total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of such Person as they become absolute and matured; (c) is able to pay all of its debts as they mature; (d) has capital that is not unreasonably small for its business and is sufficient to carry on its business and transactions and all business and transactions in which it is about to engage; (e) is not "insolvent" within the meaning of Section 101(32) of the Bankruptcy Code; and (f) has not incurred (by way of assumption or otherwise) any obligations or liabilities (contingent or otherwise) under any Loan Documents, or made any conveyance in connection therewith, with actual intent to hinder, delay or defraud either present or future creditors of such Person or any of its Affiliates. "Fair salable value" means the amount that could be obtained for assets within a reasonable time, either through collection or through sale under ordinary selling conditions by a capable and diligent seller to an interested buyer who is willing (but under no compulsion) to purchase.

 

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Trigger Period: the period (a) commencing on the day that an Event of Default occurs, or Availability is less than the greater of (i) $12,000,000; or (ii) 15% of the Borrowing Base at any time; and (b) continuing until, during each of the preceding 60 consecutive days, no Event of Default has existed and Availability has been equal to or greater than the greater of (i) $12,000,000; or (ii) 15% of the Borrowing Base.

 

Tubular Division: Borrower 1's tubular products group operated at Borrower 1's Atchison, Kansas facility. Borrower 1's tubular products group operates an electric resistance weld mill with diameters ranging from 4.5-inches through 16-inches. The tubular products group serves a wide-range of markets and its certified pipe and tube products are utilized for applications including: oil and gas, structural, industrial, fire protection and low pressure uses.

 

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

 

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

 

Unused Line Fee Rate: a per annum rate equal to (a) 0.25%, if average daily Availability is more than 50% of the aggregate Revolver Commitments during the preceding calendar quarter, or (b) 0.375%, if average daily Availability is 50% or less of the aggregate Revolver Commitments during the preceding calendar quarter; provided, however that, until six months following the Closing Date, the Unused Line Fee Rate shall be 0.375%.

 

 

 

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

 

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

 

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

 

Value: (a) for Inventory, its value (i) for raw materials, determined on the basis of the lower of cost or market calculated on average costing, (ii) for finished goods, calculated on a first-in, first-out basis, and (iii) for CEEEB Inventory, calculated using cost-to-cost percentage of completion method; in each case excluding any portion of cost attributable to intercompany profit among Borrowers and their Affiliates; and (b) for an Account, its face amount, net of any returns, rebates, discounts (calculated on the shortest terms), credits, allowances or Taxes (including sales, excise or other taxes) that have been or could be claimed by the Account Debtor or any other Person.

 

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

 

1.3.        Uniform Commercial Code. As used herein, the following terms are defined in accordance with the UCC in effect in the State of Oregon from time to time: "Chattel Paper," "Commercial Tort Claim," "Deposit Account," "Document," "Equipment," "General Intangibles," "Goods," "Instrument," "Investment Property," "Letter-of-Credit Right" and "Supporting Obligation."

 

1.4.        Certain Matters of Construction. The terms "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. In the computation of periods of time from a specified date to a later specified date, "from" means "from and including," and "to" and "until" each mean "to but excluding." The terms "including" and "include" shall mean "including, without limitation" and, for purposes of each Loan Document, the parties agree that the rule of ejusdem generis shall not be applicable to limit any provision. Section titles appear as a matter of convenience only and shall not affect the interpretation of any Loan Document. All references to (a) laws include all related regulations, interpretations, supplements, amendments and successor provisions; (b) any document, instrument or agreement include any amendments, waivers and other modifications, extensions or renewals (to the extent permitted by the Loan Documents); (c) any section mean, unless the context otherwise requires, a section of this Agreement; (d) any exhibits or schedules mean, unless the context otherwise requires, exhibits and schedules attached hereto, which are hereby incorporated by reference; (e) any Person include successors and assigns; (f) time of day means time of day in the Pacific time zone; or (g) discretion of Agent, Issuing Bank or any Lender mean the sole and absolute discretion of such Person. All determinations (including calculations of Borrowing Base and financial covenants) made from time to time under the Loan Documents shall be made in light of the circumstances existing at such time. Borrowing Base calculations shall be consistent with historical methods of valuation and calculation, and otherwise satisfactory to Agent (and not necessarily calculated in accordance with GAAP). Borrowers shall have the burden of establishing any alleged negligence, misconduct or lack of good faith by Agent, Issuing Bank or any Lender under any Loan Documents. No provision of any Loan Documents shall be construed against any party by reason of such party having, or being deemed to have, drafted the provision. Reference to a Borrower's "knowledge" or similar concept means actual knowledge of a Senior Officer, or knowledge that a Senior Officer would have obtained if he or she had engaged in good faith and diligent performance of his or her duties, including reasonably specific inquiries of employees or agents and a good faith attempt to ascertain the matter.

 

 

 

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1.5.         Currency Equivalents.

 

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

 

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

 

Section 2.     CREDIT FACILITIES

 

2.1.        Revolver Commitment.

 

2.1.1.         Revolver Loans. Each Lender agrees, severally on a Pro Rata basis up to its Revolver Commitment, on the terms set forth herein, to make Revolver Loans to Borrowers from time to time through the Commitment Termination Date. The Revolver Loans may be repaid and reborrowed as provided herein; provided, however, that all payment of Revolver Loans shall be made in Dollars. In no event shall Lenders have any obligation to honor a request for a Revolver Loan if Revolver Usage at such time plus the requested Loan would exceed the Borrowing Base.

 

2.1.2.          Notes. Loans and interest accruing thereon shall be evidenced by the records of Agent and the applicable Lender. At the request of a Lender, Borrowers shall deliver promissory note(s) to such Lender, evidencing its Loan(s).

 

2.1.3.         Use of Proceeds. The proceeds of Revolver Loans shall be used by Borrowers solely (a) to satisfy existing Debt; (b) to pay fees and transaction expenses associated with the closing of this credit facility; (c) to pay Obligations in accordance with this Agreement; and (d) for lawful corporate purposes of Borrowers, including working capital. Borrowers shall not, directly or indirectly, use any Letter of Credit or Loan proceeds, nor use, lend, contribute or otherwise make available any Letter of Credit or Loan proceeds to any Subsidiary, joint venture partner or other Person, (i) to fund any activities of or business with any Person, or in any Designated Jurisdiction, that, at the time of issuance of the Letter of Credit or funding of the Loan, is the subject of any Sanction; (ii) in any manner that would result in a violation of a Sanction by any Person (including any Secured Party or other individual or entity participating in a transaction); or (iii) for any purpose that would breach the U.S. Foreign Corrupt Practices Act of 1977, UK Bribery Act 2010 or similar law in any jurisdiction. 

 

 

 

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2.1.4.       Voluntary Reduction or Termination of Revolver Commitments.

 

(a)     The Revolver Commitments shall terminate on the Revolver Termination Date, unless sooner terminated in accordance with this Agreement. Upon at least 10 Business Days prior written notice to Agent at any time after the first Loan Year, Borrowers may, at their option, terminate the Revolver Commitments and this credit facility. Any notice of termination given by Borrowers shall be irrevocable. On the termination date, Borrowers shall make Full Payment of all Obligations.

 

(b)     Borrowers may permanently reduce the Revolver Commitments, on a ratable basis for all Lenders, upon at least 10 Business Days prior written notice to Agent delivered at any time after the First Loan Year, which notice shall specify the amount of the reduction and shall be irrevocable once given. Each reduction shall be in a minimum amount of $5,000,000, or an increment of $1,000,000 in excess thereof.

 

(c)     [Intentionally omitted].

 

2.1.6.      Overadvances. If Revolver Usage exceeds the Borrowing Base ("Overadvance") at any time, the excess amount shall be payable by Borrowers on demand by Agent, but all such Revolver Loans shall nevertheless constitute Obligations secured by the Collateral and entitled to all benefits of the Loan Documents. Agent may require Lenders to honor requests for Overadvance Loans and to forbear from requiring Borrowers to cure an Overadvance, (a) when no other Event of Default is known to Agent, as long as (i) the Overadvance does not continue for more than 30 consecutive days (and no Overadvance may exist for at least five consecutive days thereafter before further Overadvance Loans are required), and (ii) the Overadvance is not known by Agent to exceed 10% of the Borrowing Base; and (b) regardless of whether an Event of Default exists, if Agent discovers an Overadvance not previously known by it to exist, as long as from the date of such discovery the Overadvance is not increased by more than 10% of the Borrowing Base and does not continue for more than 30 consecutive days. In no event shall Overadvance Loans be required that would cause Revolver Usage to exceed the aggregate Revolver Commitments. Any funding of an Overadvance Loan or sufferance of an Overadvance shall not constitute a waiver by Agent or Lenders of the Event of Default caused thereby. In no event shall any Borrower or other Obligor be deemed a beneficiary of this Section nor authorized to enforce any of its terms.

 

2.1.6.     Protective Advances. Agent shall be authorized, in its discretion, at any time that any conditions in Section 6 are not satisfied, to make Base Rate Revolver Loans ("Protective Advances") (a) up to an aggregate amount of 10% of the Borrowing Base outstanding at any time, if Agent deems such Loans necessary or desirable to preserve or protect Collateral, or to enhance the collectability or repayment of Obligations, as long as such Loans do not cause Revolver Usage to exceed the aggregate Revolver Commitments; or (b) to pay any other amounts chargeable to Obligors under any Loan Documents, including interest, costs, fees and expenses. Lenders shall participate on a Pro Rata basis in Protective Advances outstanding from time to time. Required Lenders may at any time revoke Agent's authority to make further Protective Advances under clause (a) by written notice to Agent. Absent such revocation, Agent's determination that funding of a Protective Advance is appropriate shall be conclusive.

 

 

 

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2.1.7.      Increase in Revolver Commitments. Borrowers may request an increase in Revolver Commitments from time to time upon notice to Agent, as long as (a) the requested increase is in a minimum amount of $5,000,000 and is offered on the same terms as existing Revolver Commitments, except for a closing fee specified by Borrowers, (b) increases under this Section do not exceed $40,000,000 in the aggregate and no more than three increases are made, (c) no reduction in Commitments pursuant to Section 2.1.4 has occurred prior to the requested increase, and (d) the requested increase does not cause the Commitments to exceed 90% of any applicable cap under any Subordinated Debt agreement. Agent shall promptly notify Lenders of the requested increase and, within 10 Business Days thereafter, each Lender shall notify Agent if and to what extent such Lender commits to increase its Revolver Commitment. Any Lender not responding within such period shall be deemed to have declined an increase. If Lenders fail to commit to the full requested increase, Eligible Assignees may issue additional Revolver Commitments and become Lenders hereunder. Agent may allocate, in its discretion, the increased Revolver Commitments among committing Lenders and, if necessary, Eligible Assignees. Provided the conditions set forth in Section 6.2 are satisfied, total Revolver Commitments shall be increased by the requested amount (or such lesser amount committed by Lenders and Eligible Assignees) on a date agreed upon by Agent and Borrower Agent, but no later than 45 days following Borrowers' increase request. Agent, Borrowers, and new and existing Lenders shall execute and deliver such documents and agreements as Agent deems appropriate to evidence the increase in and allocations of Revolver Commitments. On the effective date of an increase, the Revolver Usage and other exposures under the Revolver Commitments shall be reallocated among Lenders, and settled by Agent if necessary, in accordance with Lenders' adjusted shares of such Commitments.

 

2.2.     [Intentionally Omitted].

 

2.3.     Letter of Credit Facility.

 

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

 

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

 

(b)     Letters of Credit may be requested by a Borrower to support obligations incurred in the Ordinary Course of Business, or as otherwise approved by Agent. Increase, renewal or extension of a Letter of Credit shall be treated as issuance of a new Letter of Credit, except that Issuing Bank may require a new LC Application in its discretion.

 

(c)     Borrowers assume all risks of the acts, omissions or misuses of any Letter of Credit by the beneficiary. In connection with issuance of any Letter of Credit, none of Agent, Issuing Bank or any Lender shall be responsible for the existence, character, quality, quantity, condition, packing, value or delivery of any goods purported to be represented by any Documents; any differences or variation in the character, quality, quantity, condition, packing, value or delivery of any goods from that expressed in any Documents; the form, validity, sufficiency, accuracy, genuineness or legal effect of any Documents or of any endorsements thereon; the time, place, manner or order in which shipment of goods is made; partial or incomplete shipment of, or failure to ship, any goods referred to in a Letter of Credit or Documents; any deviation from instructions, delay, default or fraud by any shipper or other Person in connection with any goods, shipment or delivery; any breach of contract between a shipper or vendor and a Borrower; errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, telecopy, e-mail, telephone or otherwise; errors in interpretation of technical terms; the misapplication by a beneficiary of any Letter of Credit or the proceeds thereof; or any consequences arising from causes beyond the control of Issuing Bank, Agent or any Lender, including any act or omission of a Governmental Authority. The rights and remedies of Issuing Bank under the Loan Documents shall be cumulative. Issuing Bank shall be fully subrogated to the rights and remedies of each beneficiary whose claims against Borrowers are discharged with proceeds of any Letter of Credit.

 

 

 

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

 

2.3.2.     Reimbursement; Participations.

 

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

 

(b)     Each Lender hereby irrevocably and unconditionally purchases from Issuing Bank, without recourse or warranty, an undivided Pro Rata participation in all LC Obligations outstanding from time to time. Issuing Bank is issuing Letters of Credit in reliance upon this participation. If Borrowers do not make a payment to Issuing Bank when due hereunder, Agent shall promptly notify Lenders and each Lender shall within one Business Day after such notice pay to Agent, for the benefit of Issuing Bank, the Lender's Pro Rata share of such payment. Upon request by a Lender, Issuing Bank shall provide copies of Letters of Credit and LC Documents in its possession at such time.

 

(c)     The obligation of each Lender to make payments to Agent for the account of Issuing Bank in connection with Issuing Bank's payment under a Letter of Credit shall be absolute, unconditional and irrevocable, not subject to any counterclaim, setoff, qualification or exception whatsoever, and shall be made in accordance with this Agreement under all circumstances, irrespective of any lack of validity or unenforceability of any Loan Documents; any draft, certificate or other document presented under a Letter of Credit having been determined to be forged, fraudulent, noncompliant, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; any waiver by Issuing Bank of a requirement that exists for its protection (and not a Borrower's protection) or that does not materially prejudice a Borrower; any honor of an electronic demand for payment even if a draft is required; any payment of an item presented after a Letter of Credit's expiration date if authorized by the UCC or applicable customs or practices; or any setoff or defense that an Obligor may have with respect to any Obligations. Issuing Bank does not assume any responsibility for any failure or delay in performance or any breach by any Borrower or other Person of any obligations under any LC Documents. Issuing Bank does not make to Lenders any express or implied warranty, representation or guaranty with respect to any Letter of Credit, Collateral, LC Document or Obligor. Issuing Bank shall not be responsible to any Lender for any recitals, statements, information, representations or warranties contained in, or for the execution, validity, genuineness, effectiveness or enforceability of any LC Documents; the validity, genuineness, enforceability, collectability, value or sufficiency of any Collateral or the perfection of any Lien therein; or the assets, liabilities, financial condition, results of operations, business, creditworthiness or legal status of any Obligor.

 

 

 

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

 

2.3.3.      Cash Collateral. Subject to Section 2.1.5, if at any time (a) an Event of Default exists, (b) the Commitment Termination Date has occurred, or (c) the Revolver Termination Date is scheduled to occur within 10 Business Days, then Borrowers shall, at Issuing Bank's or Agent's request, Cash Collateralize all outstanding Letters of Credit. Borrowers shall, at Issuing Bank's or Agent's request at any time, Cash Collateralize the Fronting Exposure of any Defaulting Lender. If Borrowers fail to provide any Cash Collateral as required hereunder, Lenders may (and shall upon direction of Agent) advance, as Revolver Loans, the amount of Cash Collateral required (whether or not the Commitments have terminated, an Overadvance exists or the conditions in Section 6 are satisfied).

 

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

 

2.3.5.     Existing Letters of Credit. Schedule 2.3.5 sets forth a list of certain letters of credit issued prior to the Closing Date for the account of a Borrower under the Existing Credit Agreement (the “Existing Letters of Credit”). On the Closing Date, (a) the Existing Letters of Credit shall be deemed to be Letters of Credit issued pursuant to this Section 2 and shall be subject to all of the provisions applicable to Letters of Credit under this Credit Agreement and (b) all liabilities of any Borrower with respect to the Existing Letters of Credit shall constitute Obligations of Borrowers with respect to Letters of Credit in accordance with this Credit Agreement and the Loan Documents as though Borrowers had delivered a Letter of Credit Application under this Credit Agreement. On the Closing Date, any letter of credit fees owing with respect to the Existing Letters of Credit under the Existing Credit Agreement shall be calculated and paid in full. From and after the Closing Date, Borrowers shall pay Letter of Credit Fees and such other fees as provided in Section 3.2.2, in each case when due pursuant to Section 3.2.2, with respect to each of the Existing Letters of Credit.

 

Section 3.     INTEREST, FEES AND CHARGES

 

3.1.         Interest.

 

3.1.1.     Rates and Payment of Interest.

 

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

 

 

 

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

 

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

 

3.1.2.     Application of LIBOR to Outstanding Loans.

 

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

 

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

 

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

 

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

 

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

 

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

 

3.1.4.        Interest Rate Not Ascertainable. If, due to any circumstance affecting the London interbank market, Agent determines that adequate and fair means do not exist for ascertaining LIBOR on any applicable date or that any Interest Period is not available on the basis provided herein, then Agent shall immediately notify Borrowers of such determination. Until Agent notifies Borrowers that such circumstance no longer exists, the obligation of Lenders to make affected LIBOR Loans shall be suspended and no further Loans may be converted into or continued as such LIBOR Loans.

 

 

 

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3.2.         Fees.

 

3.2.1.        Unused Line Fee. Borrowers shall pay to Agent, for the Pro Rata benefit of Lenders, a fee equal to the Unused Line Fee Rate times the amount by which the Revolver Commitments exceed the average daily Revolver Usage during any month. Such fee shall be payable in arrears, on the first day of each month and on the Commitment Termination Date.

 

3.2.2.        LC Facility Fees. Borrowers shall pay (a) to Agent, for the Pro Rata benefit of Lenders, a fee equal to the Applicable Margin in effect for LIBOR Revolver Loans times the average daily Stated Amount of Letters of Credit, which fee shall be payable monthly in arrears, on the first day of each month; (b) to Agent, for its own account, a fronting fee equal to 0.125% per annum on the Stated Amount of each Letter of Credit, which fee shall be payable monthly in arrears, on the first day of each month; and (c) to Issuing Bank, for its own account, all customary charges associated with the issuance, amending, negotiating, payment, processing, transfer and administration of Letters of Credit, which charges shall be paid as and when incurred. During an Event of Default, the fee payable under clause (a) shall be increased by 2% per annum.

 

3.2.3.        Fee Letters. Borrowers shall pay all fees set forth in any fee letter executed in connection with this Agreement, including without limitation a closing fee and any agency fee.

 

3.3.        Computation of Interest, Fees, Yield Protection. All interest, as well as fees and other charges calculated on a per annum basis, shall be computed for the actual days elapsed, based on a year of 360 days. Each determination by Agent of any interest, fees or interest rate hereunder shall be final, conclusive and binding for all purposes, absent manifest error. All fees shall be fully earned when due and shall not be subject to rebate, refund or proration. All fees payable under Section 3.2 are compensation for services and are not, and shall not be deemed to be, interest or any other charge for the use, forbearance or detention of money. A certificate as to amounts payable by Borrowers under Section 3.4, 3.6, 3.7, 3.9 or 5.9, submitted to Borrower Agent by Agent or the affected Lender shall be final, conclusive and binding for all purposes, absent manifest error, and Borrowers shall pay such amounts to the appropriate party within 10 days following receipt of the certificate.

 

3.4.        Reimbursement Obligations. Borrowers shall pay all Extraordinary Expenses promptly upon request. Borrowers shall also reimburse Agent for all legal, accounting, appraisal, consulting, and other fees, costs and expenses incurred by it in connection with (a) negotiation and preparation of any Loan Documents, including any amendment or other modification thereof; (b) administration of and actions relating to any Collateral, Loan Documents and transactions contemplated thereby, including any actions taken to perfect or maintain priority of Agent's Liens on any Collateral, to maintain any insurance required hereunder or to verify Collateral; and (c) subject to the limits of Section 10.1.1(b), each inspection, audit or appraisal with respect to any Obligor or Collateral, whether prepared by Agent's personnel or a third party. All legal, accounting and consulting fees shall be charged to Borrowers by Agent's professionals at their full hourly rates, regardless of any alternative fee arrangements that Agent, any Lender or any of their Affiliates may have with such professionals that otherwise might apply to this or any other transaction. Borrowers acknowledge that counsel may provide Agent with a benefit (such as a discount, credit or accommodation for other matters) based on counsel's overall relationship with Agent, including fees paid hereunder. If, for any reason (including inaccurate reporting in any Borrower Materials), it is determined that a higher Applicable Margin should have applied to a period than was actually applied, then the proper margin shall be applied retroactively and Borrowers shall immediately pay to Agent, for the ratable benefit of Lenders, an amount equal to the difference between the amount of interest and fees that would have accrued using the proper margin and the amount actually paid. All amounts payable by Borrowers under this Section shall be due on demand.

 

 

 

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

 

3.6.         Inability to Determine Rates. Agent will promptly notify Borrower Agent and Lenders if, in connection with any Loan or request for a Loan, (a) Agent determines that (i) Dollar deposits are not being offered to banks in the London interbank Eurodollar market for the applicable Loan amount or Interest Period, or (ii) adequate and reasonable means do not exist for determining LIBOR for the Interest Period; or (b) Agent or Required Lenders determine for any reason that LIBOR for the Interest Period does not adequately and fairly reflect the cost to Lenders of funding the Loan. Thereafter, Lenders' obligations to make or maintain affected LIBOR Loans and utilization of the LIBOR component (if affected) in determining Base Rate shall be suspended until Agent (upon instruction by Required Lenders) withdraws the notice. Upon receipt of such notice, Borrower Agent may revoke any pending request for a LIBOR Loan or, failing that, will be deemed to have requested a Base Rate Loan.

 

3.7.         Increased Costs; Capital Adequacy.

 

3.7.1.        Increased Costs Generally. If any Change in Law shall:

 

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

 

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

 

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

 

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

 

 

 

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

 

3.7.3.         LIBOR Loan Reserves. Without duplication of any amounts payable pursuant to Section 3.7.1, if any Lender is required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits, Borrowers shall pay additional interest to such Lender on each LIBOR Loan equal to the costs of such reserves allocated to the Loan by the Lender (as determined by it in good faith, which determination shall be conclusive). The additional interest shall be due and payable on each interest payment date for the Loan; provided, however, that if the Lender notifies Borrowers (with a copy to Agent) of the additional interest less than 10 days prior to the interest payment date, then such interest shall be payable 10 days after Borrowers' receipt of the notice.

 

3.7.4.          Compensation. Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of its right to demand such compensation, but Borrowers shall not be required to compensate a Lender or Issuing Bank for any increased costs or reductions suffered more than 180 days(plus any period of retroactivity of the Change in Law giving rise to the demand) prior to the date that the Lender or Issuing Bank notifies Borrower Agent of the applicable Change in Law and of such Lender's or Issuing Bank's intention to claim compensation therefor.

 

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

 

3.9.        Funding Losses. If for any reason (a) any Borrowing, conversion or continuation of a LIBOR Loan does not occur on the date specified therefor in a Notice of Borrowing or Notice of Conversion/Continuation (whether or not withdrawn), (b) any repayment or conversion of a LIBOR Loan occurs on a day other than the end of its Interest Period, (c) Borrowers fail to repay a LIBOR Loan when required hereunder, or (d) a Lender (other than a Defaulting Lender) is required to assign a LIBOR Loan prior to the end of its Interest Period pursuant to Section 13.4, then Borrowers shall pay to Agent its customary administrative charge and to each Lender all losses, expenses and fees arising from redeployment of funds or termination of match funding. For purposes of calculating amounts payable under this Section, a Lender shall be deemed to have funded a LIBOR Loan by a matching deposit or other borrowing in the London interbank market for a comparable amount and period, whether or not the Loan was in fact so funded.

 

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

 

Section 4.     LOAN ADMINISTRATION

 

4.1.        Manner of Borrowing and Funding Revolver Loans.

 

4.1.1.     Notice of Borrowing.

 

(a)     Whenever Borrowers desire funding of Revolver Loans, Borrower Agent shall give Agent a Notice of Borrowing. Such notice must be received by Agent by 11:00 a.m. (i) on the requested funding date, in the case of Base Rate Loans, and (ii) at least two Business Days prior to the requested funding date, in the case of LIBOR Loans. Notices received after such time shall be deemed received on the next Business Day. Each Notice of Borrowing shall be irrevocable and shall specify (A) the amount of the Borrowing, (B) the requested funding date (which must be a Business Day), (C) whether the Borrowing is to be made as a Base Rate Loan or LIBOR Loan, and (D) in the case of a LIBOR Loan, the applicable Interest Period (which shall be deemed to be 30 days if not specified).

 

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

 

(c)     If a Borrower maintains a disbursement account with Agent or any of its Affiliates, then presentation for payment in the account of a Payment Item when there are insufficient funds to cover it shall be deemed to be a request for a Base Rate Revolver Loan on the presentation date, in the amount of the Payment Item. Proceeds of the Loan may be disbursed directly to the account.

 

4.1.2.       Fundings by Lenders. Agent shall endeavor to notify Lenders of each Notice of Borrowing (or deemed request for a Borrowing) by 3:00 p.m. at least two Business Days before a proposed funding of a LIBOR Loan. Each Lender shall fund its Pro Rata share of a Borrowing in immediately available funds not later than 3:00 p.m. on the requested funding date, unless Agent's notice is received after the times provided above, in which case Lender shall fund by 11:00 a.m. on the next Business Day. Subject to its receipt of such amounts from Lenders, Agent shall disburse the Borrowing proceeds as directed by Borrower Agent. Unless Agent shall have received (in sufficient time to act) written notice from a Lender that it does not intend to fund its share of a Borrowing, Agent may assume that such Lender has deposited or promptly will deposit its share with Agent, and Agent may disburse a corresponding amount to Borrowers. If a Lender's share of a Borrowing or of a settlement under Section 4.1.3(b) is not received by Agent, then Borrowers agree to repay to Agent on demand the amount of such share, together with interest thereon from the date disbursed until repaid, at the rate applicable to the Borrowing. A Lender or Issuing Bank may fulfill its obligations under Loan Documents through one or more Lending Offices, and this shall not affect any obligation of Obligors under the Loan Documents or with respect to any Obligations.

 

4.1.3.     Settlement.

 

(a)     [Intentionally omitted].

 

 

 

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(b)     Settlement of Loans among Lenders and Agent shall take place on a date determined from time to time by Agent (but at least weekly, unless the settlement amount is de minimis), on a Pro Rata basis in accordance with the Settlement Report delivered by Agent to Lenders. Lenders' obligations to make settlements and to fund participations are absolute, irrevocable and unconditional, without offset, counterclaim or other defense, and whether or not the Commitments have terminated, an Overadvance exists or the conditions in Section 6 are satisfied.

 

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

 

4.2.        Defaulting Lender. Notwithstanding anything herein to the contrary:

 

4.2.1.      Reallocation of Pro Rata Share; Amendments. For purposes of determining Lenders' obligations or rights to fund, participate in or receive collections with respect to Loans and Letters of Credit (including existing Protective Advances and LC Obligations), Agent may in its discretion reallocate Pro Rata shares by excluding a Defaulting Lender's Commitments and Loans from the calculation of shares. A Defaulting Lender shall have no right to vote on any amendment, waiver or other modification of a Loan Document, except as provided in Section 14.1.1(c). 

 

4.2.2.      Payments; Fees.   Agent may, in its discretion, receive and retain any amounts payable to a Defaulting Lender under the Loan Documents, and a Defaulting Lender shall be deemed to have assigned to Agent such amounts until all Obligations owing to Agent, non-Defaulting Lenders and other Secured Parties have been paid in full. Agent may use such amounts to cover the Defaulting Lender's defaulted obligations, to Cash Collateralize such Lender's Fronting Exposure, to readvance the amounts to Borrowers or to repay Obligations. A Lender shall not be entitled to receive any fees accruing hereunder while it is a Defaulting Lender and its unfunded Commitment shall be disregarded for purposes of calculating the unused line fee under Section 3.2.1. If any LC Obligations owing to a Defaulted Lender are reallocated to other Lenders, fees attributable to such LC Obligations under Section 3.2.2 shall be paid to such Lenders. Agent shall be paid all fees attributable to LC Obligations that are not reallocated.

 

4.2.3.       Status; Cure.   Agent may determine in its discretion that a Lender constitutes a Defaulting Lender and the effective date of such status shall be conclusive and binding on all parties, absent manifest error. Borrowers, Agent and Issuing Bank may agree in writing that a Lender has ceased to be a Defaulting Lender, whereupon Pro Rata shares shall be reallocated without exclusion of the reinstated Lender's Commitments and Loans, and the Revolver Usage and other exposures under the Revolver Commitments shall be reallocated among Lenders and settled by Agent (with appropriate payments by the reinstated Lender, including payment of any breakage costs for reallocated LIBOR Loans) in accordance with the readjusted Pro Rata shares. Unless expressly agreed by Borrowers, Agent and Issuing Bank, no reinstatement of a Defaulting Lender shall constitute a waiver or release of claims against such Lender. The failure of any Lender to fund a Loan, to make a payment in respect of LC Obligations or otherwise to perform obligations hereunder shall not relieve any other Lender of its obligations under any Loan Document. No Lender shall be responsible for default by another Lender.

 

4.3.        Number and Amount of LIBOR Loans; Determination of Rate. Each Borrowing of LIBOR Loans when made shall be in a minimum amount of $2,500,000, plus an increment of $100,000 in excess thereof. No more than six Borrowings of LIBOR Loans may be outstanding at any time, and all LIBOR Loans having the same length and beginning date of their Interest Periods shall be aggregated together and considered one Borrowing for this purpose. Upon determining LIBOR for any Interest Period requested by Borrowers, Agent shall promptly notify Borrowers thereof by telephone or electronically and, if requested by Borrowers, shall confirm any telephonic notice in writing.

 

 

 

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

 

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

 

4.6.        Effect of Termination. On the effective date of the termination of all Commitments, the Obligations shall be immediately due and payable, and each Secured Bank Product Provider may terminate its Bank Products. Until Full Payment of the Obligations, all undertakings of Borrowers contained in the Loan Documents shall continue, and Agent shall retain its Liens in the Collateral and all of its rights and remedies under the Loan Documents. Agent shall not be required to terminate its Liens unless it receives Cash Collateral or a written agreement, in each case reasonably satisfactory to it, protecting Agent and Lenders from dishonor or return of any Payment Item previously applied to the Obligations. Sections 2.3, 3.4, 3.6, 3.7, 3.9, 5.5, 5.9, 5.10, 12, 14.2, this Section, and each indemnity or waiver given by an Obligor or Lender in any Loan Document, shall survive Full Payment of the Obligations.

 

Section 5.     PAYMENTS

 

5.1.        General Payment Provisions. All payments of Obligations shall be made in Dollars, without offset, counterclaim or defense of any kind, free and clear of (and without deduction for) any Taxes (except as permitted by Section 5.9.1(a)), and in immediately available funds, not later than 12:00 noon on the due date. Any payment after such time shall be deemed made on the next Business Day. Any payment of a LIBOR Loan prior to the end of its Interest Period shall be accompanied by all amounts due under Section 3.9. Except as set forth in Section 5.6, Borrowers agrees that Agent shall have the continuing, exclusive right to apply and reapply payments and proceeds of Collateral against the Obligations, in such manner as Agent deems advisable.

 

5.2.       Repayment of Revolver Loans. Revolver Loans shall be due and payable in full on the Revolver Termination Date, unless payment is sooner required hereunder. Revolver Loans may be prepaid from time to time, without penalty or premium. Subject to Section 2.1.5, if an Overadvance exists at any time, Borrowers shall, on the sooner of Agent's demand or the first Business Day after any Borrower has knowledge thereof, repay Revolver Loans in an amount sufficient to reduce Revolver Usage to the Borrowing Base. If any Asset Disposition includes the disposition of Accounts or Inventory and results in an Overadvance, Borrowers shall apply (i) so long as there is no Event of Default, Net Proceeds to repay Revolver Loans in an amount sufficient to eliminate such Overadvance and (ii) during the continuance of an Event of Default, Net Proceeds to repay Revolver Loansequal to the greater of (a) the net book value of such Accounts and Inventory, or (b) the reduction in Borrowing Base resulting from the disposition.

 

 

 

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5.3.       Mandatory Prepayments.

 

5.3.1.     Insurance Proceeds; Condemnation Awards. Concurrently with the receipt of any proceeds of insurance or condemnation awards paid in respect of any Inventory or Equipment and if an Overadvance then exists, Borrowers shall repay Revolving Loans in an amount equal to the greater of (a) the amount of such Overadvance and (b) such proceeds, subject to Section 8.6.2.

 

5.4.       Payment of Other Obligations. Obligations other than Loans, including LC Obligations and Extraordinary Expenses, shall be paid by Borrowers as provided in the Loan Documents or, if no payment date is specified, on demand.

 

5.5.       Marshaling; Payments Set Aside. None of Agent or Lenders shall be under any obligation to marshal any assets in favor of any Obligor or against any Obligations. If any payment by or on behalf of Borrowers is made to Agent, Issuing Bank or any Lender, or if Agent, Issuing Bank or any Lender exercises a right of setoff, and any of such payment or setoff is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by Agent, Issuing Bank or a Lender in its discretion) to be repaid to a trustee, receiver or any other Person, then the Obligation originally intended to be satisfied, and all Liens, rights and remedies relating thereto, shall be revived and continued in full force and effect as if such payment or setoff had not occurred.

 

5.6.        Application and Allocation of Payments.

 

5.6.1.     Application. Payments made by Borrowers hereunder shall be applied (a) first, as specifically required hereby; (b) second, to Obligations then due and owing; (b) third, to other Obligations specified by Borrowers; and (c) fourth, as determined by Agent in its discretion.

 

5.6.2.    Post-Default Allocation. Notwithstanding anything in any Loan Document to the contrary, during an Event of Default, monies to be applied to the Obligations, whether arising from payments by Obligors, realization on Collateral, setoff or otherwise, shall be allocated as follows:

 

(a)     first, to all fees, indemnification, costs and expenses, including Extraordinary Expenses, owing to Agent;

 

(b)     second, to all amounts owing to Agent on Protective Advances, and Loans and participations that a Defaulting Lender has failed to settle or fund;

 

(c)     third, to all amounts owing to Issuing Bank;

 

(d)     fourth, to all Obligations (other than Secured Bank Product Obligations) constituting fees, indemnification, costs or expenses owing to Lenders;

 

(e)     fifth, to all Obligations (other than Secured Bank Product Obligations) constituting interest;

 

(f)     sixth, to Cash Collateralize all LC Obligations;

 

(g)     seventh, to all Loans, and to Secured Bank Product Obligations arising under Hedge Agreements (including Cash Collateralization thereof) up to the amount of Reserves existing therefor;

 

 

 

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(h)     eighth, to all other Secured Bank Product Obligations; and

 

(i)     last, to all remaining Obligations.

 

Amounts shall be applied to payment of each category of Obligations only after Full Payment of amounts payable from time to time under all preceding categories. If amounts are insufficient to satisfy a category, they shall be paid ratably among outstanding Obligations in the category. Monies and proceeds obtained from an Obligor shall not be applied to its Excluded Swap Obligations, but appropriate adjustments shall be made with respect to amounts obtained from other Obligors to preserve the allocations in any applicable category. Agent shall have no obligation to calculate the amount of any Secured Bank Product Obligation and may request a reasonably detailed calculation thereof from a Secured Bank Product Provider. If the provider fails to deliver the calculation within five days following request, Agent may assume the amount is zero. The allocations set forth in this Section are solely to determine the rights and priorities among Secured Parties, and may be changed by agreement of the affected Secured Parties, without the consent of any Obligor. This Section 5.6.2 is not for the benefit of or enforceable by any Obligor, and each Borrower irrevocably waives the right to direct the application of any payments or Collateral proceeds subject to this Section 5.6.2.

 

5.6.3.      Erroneous Application. Agent shall not be liable for any application of amounts made by it in good faith and, if any such application is subsequently determined to have been made in error, the sole recourse of any Lender or other Person to which such amount should have been made shall be to recover the amount from the Person that actually received it (and, if such amount was received by a Secured Party, the Secured Party agrees to return it).

 

5.7.        Dominion Account. The ledger balance in the main Dominion Account as of the end of a Business Day shall be applied to the Obligations at the beginning of the next Business Day, during any Trigger Period. If a credit balance results from such application, it shall not accrue interest in favor of Borrowers and shall be made available to Borrowers as long as no Default or Event of Default exists.

 

5.8.        Account Stated. Agent shall maintain, in accordance with its customary practices, loan account(s) evidencing the Debt of Borrowers hereunder. Any failure of Agent to record anything in a loan account, or any error in doing so, shall not limit or otherwise affect the obligation of Borrowers to pay any amount owing hereunder. Entries made in a loan account shall constitute presumptive evidence of the information contained therein. If any information contained in a loan account is provided to or inspected by any Person, the information shall be conclusive and binding on such Person for all purposes absent manifest error, except to the extent such Person notifies Agent in writing within 30 days after receipt or inspection that specific information is subject to dispute.

 

5.9.        Taxes

 

5.9.1.       Payments Free of Taxes; Obligation to Withhold; Tax Payment.

 

(a)     All payments of Obligations by Obligors shall be made without deduction or withholding for any Taxes, except as required by Applicable Law. If Applicable Law (as determined by Agent in its discretion) requires the deduction or withholding of any Tax from any such payment by Agent or an Obligor, then Agent or such Obligor shall be entitled to make such deduction or withholding based on information and documentation provided pursuant to Section 5.10.

 

(b)     If Agent or any Obligor is required by the Code to withhold or deduct Taxes, including backup withholding and withholding taxes, from any payment, then (i) Agent shall pay the full amount that it determines is to be withheld or deducted to the relevant Governmental Authority pursuant to the Code, and (ii) to the extent the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Obligor shall be increased as necessary so that the Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made.

 

 

 

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(c)     If Agent or any Obligor is required by any Applicable Law other than the Code to withhold or deduct Taxes from any payment, then (i) Agent or such Obligor, to the extent required by Applicable Law, shall timely pay the full amount to be withheld or deducted to the relevant Governmental Authority, and (ii) to the extent the withholding or deduction is made on account of Indemnified Taxes, the sum payable by the applicable Obligor shall be increased as necessary so that the Recipient receives an amount equal to the sum it would have received had no such withholding or deduction been made. 

 

5.9.2.        Payment of Other Taxes.   Without limiting the foregoing, Borrowers shall timely pay to the relevant Governmental Authority in accordance with Applicable Law, or at Agent's option, timely reimburse Agent for payment of, any Other Taxes. 

 

5.9.3.        Tax Indemnification.

 

(a)     Each Borrower shall indemnify and hold harmless, on a joint and several basis, each Recipient against any Indemnified Taxes (including those imposed or asserted on or attributable to amounts payable under this Section) payable or paid by a Recipient or required to be withheld or deducted from a payment to a Recipient, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. Each Borrower shall indemnify and hold harmless Agent against any amount that a Lender or Issuing Bank fails for any reason to pay indefeasibly to Agent as required pursuant to this Section. Each Borrower shall make payment within 10 days after demand for any amount or liability payable under this Section. A certificate as to the amount of such payment or liability delivered to Borrowers by a Lender or Issuing Bank (with a copy to Agent), or by Agent on its own behalf or on behalf of any Recipient, shall be conclusive absent manifest error. 

 

(b)     Each Lender and Issuing Bank shall indemnify and hold harmless, on a several basis, (i) Agent against any Indemnified Taxes attributable to such Lender or Issuing Bank (but only to the extent Borrowers have not already paid or reimbursed Agent therefor and without limiting Borrowers' obligation to do so), (ii) Agent and Obligors, as applicable, against any Taxes attributable to such Lender's failure to maintain a Participant register as required hereunder, and (iii) Agent and Obligors, as applicable, against any Excluded Taxes attributable to such Lender or Issuing Bank, in each case, that are payable or paid by Agent or an Obligor in connection with any Obligations, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. Each Lender and Issuing Bank shall make payment within 10 days after demand for any amount or liability payable under this Section. A certificate as to the amount of such payment or liability delivered to any Lender or Issuing Bank by Agent shall be conclusive absent manifest error.

 

5.9.4.         Evidence of Payments.   If Agent or an Obligor pays any Taxes pursuant to this Section, then upon request, Agent shall deliver to Borrower Agent or Borrower Agent shall deliver to Agent, respectively, a copy of a receipt issued by the appropriate Governmental Authority evidencing the payment, a copy of any return required by Applicable Law to report the payment, or other evidence of payment reasonably satisfactory to Agent or Borrower Agent, as applicable.

 

5.9.5.         Treatment of Certain Refunds. Unless required by Applicable Law, at no time shall Agent have any obligation to file for or otherwise pursue on behalf of a Lender or Issuing Bank, nor have any obligation to pay to any Lender or Issuing Bank, any refund of Taxes withheld or deducted from funds paid for the account of a Lender or Issuing Bank. If a Recipient determines in its discretion that it has received a refund of any Taxes as to which it has been indemnified by a Borrower or with respect to which a Borrower has paid additional amounts pursuant to this Section, it shall pay Borrowers an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by Borrowers with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) incurred by such Recipient, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that Borrowers agree, upon request by the Recipient, to repay the amount paid over to Borrowers (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Recipient if the Recipient is required to repay such refund to the Governmental Authority. Notwithstanding anything herein to the contrary, no Recipient shall be required to pay any amount to Borrowers if such payment would place the Recipient in a less favorable net after-Tax position than it would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. In no event shall Agent or any Recipient be required to make its tax returns (or any other information relating to its taxes that it deems confidential) available to any Obligor or other Person.

 

 

 

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5.9.6.       Survival. Each party's obligations under Sections 5.9 and 5.10 shall survive the resignation or replacement of Agent or any assignment of rights by or replacement of a Lender or Issuing Bank, the termination of the Commitments, and the repayment, satisfaction, discharge or Full Payment of any Obligations.

 

5.10.       Lender Tax Information.

 

5.10.1.        Status of Lenders. Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments of Obligations shall deliver to Borrowers and Agent properly completed and executed documentation reasonably requested by Borrowers or Agent as will permit such payments to be made without or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by Borrowers or Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by Borrowers or Agent to enable them to determine whether such Lender is subject to backup withholding or information reporting requirements. Notwithstanding the foregoing, such documentation (other than documentation described in Sections 5.10.2(a), (b) and (d)) shall not be required if a Lender reasonably believes delivery of the documentation would subject it to any material unreimbursed cost or expense or would materially prejudice its legal or commercial position.

 

5.10.2.       Documentation. Without limiting the foregoing, if any Borrower is a U.S. Person,

 

(a)     Any Lender that is a U.S. Person shall deliver to Borrowers and Agent on or prior to the date on which such Lender becomes a Lender hereunder (and from time to time thereafter upon reasonable request of Borrowers or Agent), executed originals of IRS Form W-9, certifying that such Lender is exempt from U.S. federal backup withholding Tax;

 

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

 

(i)     in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party, (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN-E establishing an exemption from or reduction of U.S. federal withholding Tax pursuant to the "interest" article of such tax treaty, and (y) with respect to other payments under the Loan Documents, IRS Form W-8BEN-E establishing an exemption from or reduction of U.S. federal withholding Tax pursuant to the "business profits" or "other income" article of such tax treaty;

 

 

 

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(ii)     executed originals of IRS Form W-8ECI;

 

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

 

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

 

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

 

(d)     if payment of an Obligation to a Lender would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code), such Lender shall deliver to Borrowers and Agent at the time(s) prescribed by law and otherwise as reasonably requested by Borrowers or Agent such documentation prescribed by Applicable Law (including Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrowers or Agent as may be necessary for them to comply with their obligations under FATCA and to determine that such Lender has complied with its obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (d), "FATCA" shall include any amendments made to FATCA after the date hereof.

 

5.10.3.      Redelivery of Documentation. If any form or certification previously delivered by a Lender pursuant to this Section expires or becomes obsolete or inaccurate in any respect, such Lender shall promptly update the form or certification or notify Borrowers and Agent in writing of its inability to do so.

 

5.11.       Nature and Extent of Borrowers' Liability.

 

5.11.1.      Joint and Several Liability. Each Borrower agrees that together with Guarantors, it is jointly and severally liable for, and absolutely and unconditionally guarantees to Agent and Lenders the prompt payment and performance of, all Obligations, except its Excluded Swap Obligations. Each Borrower agrees that its guaranty obligations hereunder constitute a continuing guaranty of payment and not of collection, that such obligations shall not be discharged until Full Payment of the Obligations, and that such obligations are absolute and unconditional, irrespective of (a) the genuineness, validity, regularity, enforceability, subordination or any future modification of, or change in, any Obligations or Loan Document, or any other document, instrument or agreement to which any Obligor is or may become a party or be bound; (b) the absence of any action to enforce this Agreement (including this Section) or any other Loan Document, or any waiver, consent or indulgence of any kind by Agent or any Lender with respect thereto; (c) the existence, value or condition of, or failure to perfect a Lien or to preserve rights against, any security or guaranty for any Obligations or any action, or the absence of any action, by Agent or any Lender in respect thereof (including the release of any security or guaranty); (d) the insolvency of any Obligor; (e) any election by Agent or any Lender in an Insolvency Proceeding for the application of Section 1111(b)(2) of the Bankruptcy Code; (f) any borrowing or grant of a Lien by any other Borrower, as debtor-in-possession under Section 364 of the Bankruptcy Code or otherwise; (g) the disallowance of any claims of Agent or any Lender against any Obligor for the repayment of any Obligations under Section 502 of the Bankruptcy Code or otherwise; or (h) any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, except Full Payment of the Obligations.

 

 

 

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5.11.2.      Waivers.

 

(a)     Each Borrower expressly waives all rights that it may have now or in the future under any statute, at common law, in equity or otherwise, to compel Agent or Lenders to marshal assets or to proceed against any Obligor, other Person or security for the payment or performance of any Obligations before, or as a condition to, proceeding against such Borrower. Each Borrower waives all defenses available to a surety, guarantor or accommodation co-obligor other than Full Payment of Obligations and waives, to the maximum extent permitted by law, any right to revoke any guaranty of Obligations as long as it is a Borrower. It is agreed among each Borrower, Agent and Lenders that the provisions of this Section 5.11 are of the essence of the transaction contemplated by the Loan Documents and that, but for such provisions, Agent and Lenders would decline to make Loans and issue Letters of Credit. Each Borrower acknowledges that its guaranty pursuant to this Section is necessary to the conduct and promotion of its business, and can be expected to benefit such business.

 

(b)     Agent and Lenders may, in their discretion, pursue such rights and remedies as they deem appropriate, including realization upon Collateral or any Real Estate by judicial foreclosure or nonjudicial sale or enforcement, without affecting any rights and remedies under this Section 5.11. If, in taking any action in connection with the exercise of any rights or remedies, Agent or any Lender shall forfeit any other rights or remedies, including the right to enter a deficiency judgment against any Borrower or other Person, whether because of any Applicable Laws pertaining to "election of remedies" or otherwise, each Borrower consents to such action and waives any claim based upon it, even if the action may result in loss of any rights of subrogation that any Borrower might otherwise have had. Any election of remedies that results in denial or impairment of the right of Agent or any Lender to seek a deficiency judgment against any Borrower shall not impair any other Borrower's obligation to pay the full amount of the Obligations. Each Borrower waives all rights and defenses arising out of an election of remedies, such as nonjudicial foreclosure with respect to any security for Obligations, even though that election of remedies destroys such Borrower's rights of subrogation against any other Person. Agent may bid Obligations, in whole or part, at any foreclosure, trustee or other sale, including any private sale, and the amount of such bid need not be paid by Agent but shall be credited against the Obligations. The amount of the successful bid at any such sale, whether Agent or any other Person is the successful bidder, shall be conclusively deemed to be the fair market value of the Collateral, and the difference between such bid amount and the remaining balance of the Obligations shall be conclusively deemed to be the amount of the Obligations guaranteed under this Section 5.11, notwithstanding that any present or future law or court decision may have the effect of reducing the amount of any deficiency claim to which Agent or any Lender might otherwise be entitled but for such bidding at any such sale.

 

5.11.3.      Extent of Liability; Contribution.

 

(a)     Notwithstanding anything herein to the contrary, each Borrower's liability under this Section 5.11 shall not exceed the greater of (i) all amounts for which such Borrower is primarily liable, as described in clause (c) below, and (ii) such Borrower's Allocable Amount.

 

 

 

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(b)     If any Borrower makes a payment under this Section 5.11 of any Obligations (other than amounts for which such Borrower is primarily liable) (a "Guarantor Payment") that, taking into account all other Guarantor Payments previously or concurrently made by any other Borrower, exceeds the amount that such Borrower would otherwise have paid if each Borrower had paid the aggregate Obligations satisfied by such Guarantor Payments in the same proportion that such Borrower's Allocable Amount bore to the total Allocable Amounts of all Borrowers, then such Borrower shall be entitled to receive contribution and indemnification payments from, and to be reimbursed by, each other Borrower for the amount of such excess, ratably based on their respective Allocable Amounts in effect immediately prior to such Guarantor Payment. The "Allocable Amount" for any Borrower shall be the maximum amount that could then be recovered from such Borrower under this Section 5.11 without rendering such payment voidable under Section 548 of the Bankruptcy Code or under any applicable state fraudulent transfer or conveyance act, or similar statute or common law.

 

(c)     Section 5.11.3(a) shall not limit the liability of any Borrower to pay or guarantee Loans made directly or indirectly to it (including Loans advanced hereunder to any other Person and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower), LC Obligations relating to Letters of Credit issued to support its business, Secured Bank Product Obligations incurred to support its business, and all accrued interest, fees, expenses and other related Obligations with respect thereto, for which such Borrower shall be primarily liable for all purposes hereunder. Agent and Lenders shall have the right, at any time in their discretion, to condition Loans and Letters of Credit upon a separate calculation of borrowing availability for each Borrower and to restrict the disbursement and use of Loans and Letters of Credit to a Borrower based on that calculation.

 

(d)     Each Obligor that is a Qualified ECP when its guaranty of or grant of Lien as security for a Swap Obligation becomes effective hereby jointly and severally, absolutely, unconditionally and irrevocably undertakes to provide funds or other support to each Specified Obligor with respect to such Swap Obligation as may be needed by such Specified Obligor from time to time to honor all of its obligations under the Loan Documents in respect of such Swap Obligation (but, in each case, only up to the maximum amount of such liability that can be hereby incurred without rendering such Qualified ECP's obligations and undertakings under this Section 5.11 voidable under any applicable fraudulent transfer or conveyance act). The obligations and undertakings of each Qualified ECP under this Section shall remain in full force and effect until Full Payment of all Obligations. Each Obligor intends this Section to constitute, and this Section shall be deemed to constitute, a guarantee of the obligations of, and a "keepwell, support or other agreement" for the benefit of, each Obligor for all purposes of the Commodity Exchange Act.

 

5.11.4.        Joint Enterprise. Each Borrower has requested that Agent and Lenders make this credit facility available to Borrowers on a combined basis, in order to finance Borrowers' business most efficiently and economically. Borrowers' business is a mutual and collective enterprise, and the successful operation of each Borrower is dependent upon the successful performance of the integrated group. Borrowers believe that consolidation of their credit facility will enhance the borrowing power of each Borrower and ease administration of the facility, all to their mutual advantage. Borrowers acknowledge that Agent's and Lenders' willingness to extend credit and to administer the Collateral on a combined basis hereunder is done solely as an accommodation to Borrowers and at Borrowers' request.

 

5.11.5.      Subordination. Each Borrower hereby subordinates any claims, including any rights at law or in equity to payment, subrogation, reimbursement, exoneration, contribution, indemnification or set off, that it may have at any time against any other Obligor, howsoever arising, to the Full Payment of its Obligations.

 

Section 6.     CONDITIONS PRECEDENT

 

6.1.        Conditions Precedent to Initial Loans. In addition to the conditions set forth in Section 6.2, Lenders shall not be required to fund any requested Loan, issue any Letter of Credit, or otherwise extend credit to Borrowers hereunder, until the date ("Closing Date") that each of the following conditions has been satisfied:

 

 

 

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(a)     Each Loan Document shall have been duly executed and delivered to Agent by each of the signatories thereto, and each Obligor shall be in compliance with all terms thereof.

 

(b)     Agent shall have received acknowledgments of all filings or recordations necessary to perfect its Liens in the Collateral, as well as UCC and Lien searches and other evidence satisfactory to Agent that such Liens are the only Liens upon the Collateral, except Permitted Liens.

 

(c)     [Intentionally omitted].

 

(d)     Agent shall have received duly executed agreements establishing each Dominion Account and related lockbox, in form and substance, and with financial institutions, satisfactory to Agent.

 

(e)     Agent shall have received certificates, in form and substance satisfactory to it, from a knowledgeable Senior Officer of Borrower 1 certifying that, after giving effect to the initial Loans and transactions hereunder, (i) each Borrower is Solvent; (ii) no Default or Event of Default exists; (iii) the representations and warranties set forth in Section 9 are true and correct; and (iv) each Borrower has complied with all agreements and conditions to be satisfied by it under the Loan Documents.

 

(f)     Agent shall have received a certificate of a duly authorized officer of each Obligor, certifying (i) that attached copies of such Obligor's Organic Documents are true and complete, and in full force and effect, without amendment except as shown; (ii) that an attached copy of resolutions authorizing execution and delivery of the Loan Documents is true and complete, and that such resolutions are in full force and effect, were duly adopted, have not been amended, modified or revoked, and constitute all resolutions adopted with respect to this credit facility; and (iii) to the title, name and signature of each Person authorized to sign the Loan Documents. Agent may conclusively rely on this certificate until it is otherwise notified by the applicable Obligor in writing.

 

(g)     Agent shall have received a written opinion of Perkins Coie, as well as any local counsel to Borrowers or Agent, in form and substance satisfactory to Agent.

 

(h)     Agent shall have received copies of the charter documents of each Obligor, certified by the Secretary of State or other appropriate official of such Obligor's jurisdiction of organization. Agent shall have received good standing certificates for each Obligor, issued by the Secretary of State or other appropriate official of such Obligor's jurisdiction of organization and each jurisdiction where such Obligor's conduct of business or ownership of Property necessitates qualification.

 

(i)     Agent shall have received copies of policies or certificates of insurance for the insurance policies carried by Borrowers, all in compliance with the Loan Documents.

 

(j)     Agent shall have completed its business, financial and legal due diligence of Obligors, including a roll-forward of its previous field examination, with results satisfactory to Agent. No material adverse change in the financial condition of any Obligor or in the quality, quantity or value of any Collateral shall have occurred since December 31, 2014.

 

(k)      Agent shall have received interim financials for Borrowers since the last audited financials in December 31, 2014 through August 31, 2015.

 

(l)     Borrowers shall have paid all fees and expenses to be paid to Agent and Lenders on the Closing Date.

 

 

 

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(m)     Agent shall have received a Borrowing Base Report as of September 30, 2015. Upon giving effect to the initial funding of Loans and issuance of Letters of Credit, and the payment by Borrowers of all fees and expenses incurred in connection herewith as well as any payables stretched beyond their customary payment practices, Availability shall be at least $20,000,000.

 

6.2.        Conditions Precedent to All Credit Extensions. Agent, Issuing Bank and Lenders shall not be required to fund any Loans, arrange for issuance of any Letters of Credit or grant any other accommodation to or for the benefit of Borrowers, unless the following conditions are satisfied:

 

(a)     No Default or Event of Default shall exist at the time of, or result from, such funding, issuance or grant;

 

(b)     The representations and warranties of each Obligor in the Loan Documents shall be true and correct on the date of, and upon giving effect to, such funding, issuance or grant (except for representations and warranties that expressly relate to an earlier date);

 

(c)     All conditions precedent in any other Loan Document shall be satisfied;

 

(d)     No event shall have occurred or circumstance exist that has or could reasonably be expected to have a Material Adverse Effect; and

 

(e)     With respect to issuance of a Letter of Credit, the LC Conditions shall be satisfied.

 

Each request (or deemed request) by Borrowers for funding of a Loan, issuance of a Letter of Credit or grant of an accommodation shall constitute a representation by Borrowers that the foregoing conditions are satisfied on the date of such request and on the date of such funding, issuance or grant. As an additional condition to any funding, issuance or grant, Agent shall have received such other information, documents, instruments and agreements as it deems appropriate in connection therewith.

 

Section 7.     COLLATERAL

 

7.1.         Grant of Security Interest. To secure the prompt payment and performance of its Obligations, each Borrower hereby grants to Agent, for the benefit of Secured Parties, a continuing security interest in and Lien upon all Property of such Borrower, including all of the following Property, whether now owned or hereafter acquired, and wherever located:

 

(a)     all Accounts;

 

(b)     all Chattel Paper, including electronic chattel paper;

 

(c)     all Commercial Tort Claims, including those shown on Schedule 9.1.16;

 

(d)     all Deposit Accounts;

 

(e)     all Documents;

 

(f)     all General Intangibles, including Intellectual Property;

 

(g)     all Goods, including Inventory, Equipment and fixtures;

 

(h)     all Instruments;

 

(i)     all Investment Property;

 

 

 

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(j)     all Letter-of-Credit Rights;

 

(k)     all Supporting Obligations;

 

(l)     all monies, whether or not in the possession or under the control of Agent, a Lender, or a bailee or Affiliate of Agent or a Lender, including any Cash Collateral;

 

(m)     all accessions to, substitutions for, and all replacements, products, and cash and non-cash proceeds of the foregoing, including proceeds of and unearned premiums with respect to insurance policies, and claims against any Person for loss, damage or destruction of any Collateral; and

 

(n)     all books and records (including customer lists, files, correspondence, tapes, computer programs, print-outs and computer records) pertaining to the foregoing.

 

7.2.        Lien on Deposit Accounts; Cash Collateral.

 

7.2.1.          Deposit Accounts. To further secure the prompt payment and performance of its Obligations, each Borrower hereby grants to Agent a continuing security interest in and Lien upon all amounts credited to any Deposit Account of such Borrower, including sums in any blocked, lockbox, sweep or collection account. Each Borrower hereby authorizes and directs each bank or other depository to deliver to Agent, upon request, all balances in any Deposit Account maintained for such Borrower, without inquiry into the authority or right of Agent to make such request.

 

7.2.2.          Cash Collateral. Cash Collateral may be invested, at Agent's discretion (and with the consent of Borrowers, as long as no Event of Default exists), but Agent shall have no duty to do so, regardless of any agreement or course of dealing with any Borrower, and shall have no responsibility for any investment or loss. As security for its Obligations, each Borrower hereby grants to Agent a security interest in and Lien upon all Cash Collateral held from time to time and all proceeds thereof, whether held in a Cash Collateral Account or otherwise. Agent may apply Cash Collateral to the payment of such Obligations as they become due, in such order as Agent may elect. Each Cash Collateral Account and all Cash Collateral shall be under the sole dominion and control of Agent, and no Borrower or other Person shall have any right to any Cash Collateral, until Full Payment of the Obligations.

 

7.3.        Real Estate Collateral.

 

7.2.3.           Collateral Assignment of Leases. To further secure the prompt payment and performance of its Obligations, each Borrowers hereby transfers and assigns to Agent all of scuh Borrower's right, title and interest in, to and under all now or hereafter existing leases of real Property to which such Borrower is a party, whether as lessor or lessee, and all extensions, renewals, modifications and proceeds thereof, except to the extent that any such assignment or transfer would constitute a default by such Borrower of its obligations as lessee under any such lease.

 

7.4.        Other Collateral.

 

7.4.1.          Commercial Tort Claims. Borrowers shall promptly notify Agent in writing if any Borrower has a Commercial Tort Claim (other than, as long as no Default or Event of Default exists, a Commercial Tort Claim for less than $100,000), shall promptly amend Schedule 9.1.16 to include such claim, and shall take such actions as Agent deems appropriate to subject such claim to a duly perfected, first priority Lien in favor of Agent.

 

7.4.2.          Certain After-Acquired Collateral. Borrowers shall promptly notify Agent in writing if, after the Closing Date, any Borrower obtains any interest in any Collateral consisting of Deposit Accounts, Chattel Paper, Documents, Instruments, Intellectual Property, Investment Property or Letter-of-Credit Rights, in each instance, having a value in excess of $1,000,000, and, upon Agent's request, shall promptly take such actions as Agent deems appropriate to effect Agent's duly perfected, first priority Lien upon such Collateral, including obtaining any appropriate possession, control agreement or Lien Waiver. If any Collateral is in the possession of a third party, at Agent's request, Borrowers shall exercise commercially reasonable efforts to obtain an acknowledgment that such third party holds the Collateral for the benefit of Agent.

 

 

 

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7.5.         Limitations. The Lien on Collateral granted hereunder is given as security only and shall not subject Agent or any Lender to, or in any way modify, any obligation or liability of Borrowers relating to any Collateral. In no event shall the grant of any Lien under any Loan Document secure an Excluded Swap Obligation of the granting Obligor.

 

7.6.        Further Assurances. All Liens granted to Agent under the Loan Documents are for the benefit of Secured Parties. Promptly upon request, Borrowers shall deliver such instruments and agreements, and shall take such actions, as Agent deems appropriate under Applicable Law to evidence or perfect its Lien on any Collateral, or otherwise to give effect to the intent of this Agreement. Each Borrower authorizes Agent to file any financing statement that describes the Collateral as "all assets" or "all personal property" of such Borrower, or words to similar effect, and ratifies any action taken by Agent before the Closing Date to effect or perfect its Lien on any Collateral.

 

7.7.        Foreign Subsidiary Stock. Notwithstanding Section 7.1, the Collateral shall include only 65% of the voting stock of any Foreign Subsidiary.

 

Section 8.     COLLATERAL ADMINISTRATION

 

8.1.        Borrowing Base Reports. 

 

8.1.1.     Weekly Reporting. During a Trigger Period, by Wednesday of each week, Borrowers shall deliver to Agent (and Agent shall promptly deliver same to Lenders) a Borrowing Base Report as of the close of business of the previous week, and at such other times as Agent may request. All information (including calculation of Availability) in a Borrowing Base Report shall be certified by Borrowers. Agent may from time to time adjust any such report (a) to reflect Agent's reasonable estimate of declines in value of Collateral, due to collections received in the Dominion Account or otherwise; (b) to adjust advance rates to reflect changes in dilution, quality, mix and other factors affecting Collateral; and (c) to the extent any information or calculation does not comply with this Agreement.

 

8.1.2.     Monthly Reporting. During any period other than a Trigger Period, by the 20th day of each month, Borrowers shall deliver to Agent (and Agent shall promptly deliver same to Lenders) a Borrowing Base Report as of the close of business of the previous month, and at such other times as Agent may request. All information (including calculation of Availability) in a Borrowing Base Report shall be certified by Borrowers. Agent may from time to time adjust any such report (a) to reflect Agent's reasonable estimate of declines in value of Collateral, due to collections received in the Dominion Account or otherwise; (b) to adjust advance rates to reflect changes in dilution, quality, mix and other factors affecting Collateral; and (c) to the extent any information or calculation does not comply with this Agreement.

 

8.2.         Accounts.

 

8.2.1.     Records and Schedules of Accounts. Each Borrower shall keep accurate and complete records of its Accounts, including all payments and collections thereon, and shall submit to Agent sales, collection, reconciliation and other reports in form reasonably satisfactory to Agent, on such periodic basis as Agent may request. Each Borrower shall also provide to Agent, on or before the 20th day of each month, a detailed aged trial balance of all Accounts as of the end of the preceding month, specifying each Account's Account Debtor name and address, amount, invoice date and due date, showing any discount, allowance, credit, authorized return or dispute, and including such proof of delivery, copies of invoices and invoice registers, copies of related documents, repayment histories, status reports and other information as Agent may reasonably request. If Accounts in an aggregate face amount of $1,000,000 or more cease to be Eligible Accounts, Borrowers shall notify Agent of such occurrence promptly (and in any event within one Business Day) after any Borrower has knowledge thereof.

 

 

 

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8.2.2.     Taxes. If an Account of any Borrower includes a charge for any Taxes, Agent is authorized, in its discretion during the continuance of an Event of Default, to pay the amount thereof to the proper taxing authority for the account of such Borrower and to charge Borrowers therefor; provided, however, that neither Agent nor Lenders shall be liable for any Taxes that may be due from Borrowers or with respect to any Collateral.

 

8.2.3.      Account Verification. Whether or not a Default or Event of Default exists, Agent shall have the right at any time, in the name of Agent, any designee of Agent or any Borrower, to verify the validity, amount or any other matter relating to any Accounts of Borrowers by mail, telephone or otherwise. Borrowers shall cooperate fully with Agent in an effort to facilitate and promptly conclude any such verification process.

 

8.2.4.      Maintenance of Dominion Account. Borrowers shall maintain Dominion Accounts pursuant to lockbox or other arrangements acceptable to Agent. Borrowers shall obtain an agreement (in form and substance satisfactory to Agent) from each lockbox servicer and Dominion Account bank, establishing Agent's control over and Lien in the lockbox or Dominion Account, which may be exercised by Agent during any Trigger Period, requiring immediate deposit of all remittances received in the lockbox to a Dominion Account, and waiving offset rights of such servicer or bank, except for customary administrative charges. If a Dominion Account is not maintained with Bank of America, Agent may, during any Trigger Period, require immediate transfer of all funds in such account to a Dominion Account maintained with Bank of America. Agent and Lenders assume no responsibility to Borrowers for any lockbox arrangement or Dominion Account, including any claim of accord and satisfaction or release with respect to any Payment Items accepted by any bank.

 

8.2.5.       Proceeds of Collateral. Borrowers shall request in writing and otherwise take all necessary steps to ensure that all payments on Accounts (other than, so long as no Trigger Period is then in effect, Accounts paid in Canadian Dollars) or otherwise relating to Collateral are made directly to a Dominion Account (or a lockbox relating to a Dominion Account). So long as no Trigger Period is in effect and solely with respect to Accounts paid in Canadian Dollars, Borrowers shall have additional time to deposit or cause to be deposited payments on such Accounts into a Dominion Account (or a lockbox relating to a Dominion Account) so long as such payments are delivered to and held by Agent’s foreign exchange group within not more than one (1) Business Day following receipt, but, in any event, such payments must be made into a Dominion Account (or a lockbox relating to a Dominion Account) no more than five (5) Business Days after receipt thereof. If any Borrower or Subsidiary receives cash or Payment Items with respect to any Collateral, it shall hold same in trust for Agent and deposit same into a Dominion Account not later than: (i) the next Business Day with respect to (A) all Accounts during a Trigger Period and (B) all Accounts other than Accounts Paid in Canadian Dollars so long as no Trigger Period is in effect or (ii) so long as such receipts are delivered to and held by Agent’s foreign exchange group within not more than one (1) Business Day following receipt, five (5) Business Days after receipt for Accounts Paid in Canadian Dollars so long as no Trigger Period is in effect).

 

8.3.        Inventory.

 

8.3.1.      Records and Reports of Inventory. Each Borrower shall keep accurate and complete records of its Inventory, including costs and daily withdrawals and additions, and shall submit to Agent inventory and reconciliation reports in form reasonably satisfactory to Agent, on such periodic basis as Agent may request. Each Borrower shall conduct a physical inventory at least once per calendar year (and on a more frequent basis if requested by Agent when an Event of Default exists) and periodic cycle counts consistent with historical practices, and shall provide to Agent a report based on each such inventory and count promptly upon completion thereof, together with such supporting information as Agent may request. Agent may participate in and observe each physical count.

 

 

 

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8.3.2.       Returns of Inventory. No Borrower shall return any Inventory to a supplier, vendor or other Person, whether for cash, credit or otherwise, unless (a) such return is in the Ordinary Course of Business; (b) no Default, Event of Default or Overadvance exists or would result therefrom; (c) Agent is promptly notified if the aggregate Value of all Inventory returned in any month exceeds $1,000,000; and (d) any payment received by a Borrower for a return is promptly remitted to Agent for application to the Obligations.

 

8.3.3.       Acquisition, Sale and Maintenance. No Borrower shall acquire or accept any Inventory on consignment or approval, and shall take all steps to assure that all Inventory is produced in accordance with Applicable Law, including the FLSA. No Borrower shall sell any Inventory on consignment or approval or any other basis under which the customer may return or require a Borrower to repurchase such Inventory. Borrowers shall use, store and maintain all Inventory with reasonable care and caution, in accordance with applicable standards of any insurance and in conformity with all Applicable Law, and shall make current rent payments (within applicable grace periods provided for in leases) at all locations where any Collateral is located.

 

8.4.       Equipment.

 

8.4.1.       Records and Schedules of Equipment. Each Borrower shall keep accurate and complete records of its Equipment, including kind, quality, quantity, cost, acquisitions and dispositions thereof, and shall submit to Agent, on such periodic basis as Agent may request, a current schedule thereof, in form satisfactory to Agent. Promptly upon request, Borrowers shall deliver to Agent evidence of their ownership or interests in any Equipment.

 

8.4.2.       Dispositions of Equipment. No Borrower shall sell, lease or otherwise dispose of any Equipment, without the prior written consent of Agent, other than (a) a Permitted Asset Disposition; and (b) replacement of Equipment that is worn, damaged or obsolete with Equipment of like function and value, if the replacement Equipment (if any is needed) is acquired substantially contemporaneously with such disposition and is free of Liens.

 

8.4.3.       Condition of Equipment. The Equipment is in good operating condition and repair, and all necessary replacements and repairs have been made so that the value and operating efficiency of the Equipment is preserved at all times, reasonable wear and tear excepted. Each Borrower shall ensure that the Equipment is mechanically and structurally sound, and capable of performing the functions for which it was designed, in accordance with manufacturer specifications. No Borrower shall permit any Equipment to become affixed to real Property unless any landlord or mortgagee delivers a Lien Waiver.

 

8.5.       Deposit Accounts. Schedule 8.5 sets forth all Deposit Accounts maintained by Borrowers, including all Dominion Accounts. Each Borrower shall take all actions necessary to establish Agent's control of each such Deposit Account (other than an account exclusively used for payroll, payroll taxes or employee benefits, or an account containing not more than $10,000 at any time). Each Borrower shall be the sole account holder of each Deposit Account and shall not allow any other Person (other than Agent) to have control over a Deposit Account or any Property deposited therein. Each Borrower shall promptly notify Agent of any opening or closing of a Deposit Account and, with the consent of Agent, will amend Schedule 8.5 to reflect same.

 

 

 

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8.6.        General Provisions.

 

8.6.1.     Location of Collateral. All tangible items of Collateral, other than Inventory in transit, shall at all times be kept by Borrowers at the business locations set forth in Schedule 8.6.1, except that Borrowers may (a) make sales or other dispositions of Collateral in accordance with Section 10.2.6; and (b) move Collateral to another location in the United States, upon 30 Business Days prior written notice to Agent.

 

8.6.2.     Insurance of Collateral; Condemnation Proceeds.

 

(a)     Each Borrower shall maintain insurance with respect to the Collateral, covering casualty, hazard, theft, malicious mischief, flood and other risks, in amounts, with endorsements and with insurers (with a Best rating of at least A+, unless otherwise approved by Agent in its discretion) satisfactory to Agent. All proceeds under each policy shall be payable to Agent. From time to time upon request, Borrowers shall deliver to Agent the originals or certified copies of its insurance policies and updated flood plain searches. Unless Agent shall agree otherwise, each policy shall include satisfactory endorsements (i) showing Agent as loss payee; (ii) requiring 30 days prior written notice to Agent in the event of cancellation of the policy for any reason whatsoever; and (iii) specifying that the interest of Agent shall not be impaired or invalidated by any act or neglect of any Borrower or the owner of the Property, nor by the occupation of the premises for purposes more hazardous than are permitted by the policy. If any Borrower fails to provide and pay for any insurance, Agent may, at its option, but shall not be required to, procure the insurance and charge Borrowers therefor. Each Borrower agrees to deliver to Agent, promptly as rendered, copies of all reports made to insurance companies. While no Event of Default exists, Borrowers may settle, adjust or compromise any insurance claim, as long as the proceeds are delivered to Agent. If an Event of Default exists, only Agent shall be authorized to settle, adjust and compromise such claims.

 

(b)     Any proceeds of insurance (other than proceeds from workers' compensation or D&O insurance) paid or payable in connection with any damage or casualty to any of Borrower's property and any awards arising from condemnation of any Collateral shall be paid to Agent. Any such proceeds or awards that relate to Inventory shall be applied to payment of the Revolver Loans, and then to other Obligations. Subject to clause (c) below, any proceeds or awards that relate to Equipment or Real Estate shall be applied first to Revolver Loans and then to other Obligations.

 

(c)     If requested by Borrowers in writing within 30 days after Agent's receipt of any insurance proceeds or condemnation awards relating to any loss or destruction of Equipment or Real Estate, Borrowers may use such proceeds or awards to repair or replace such Equipment or Real Estate (and until so used, the proceeds shall be held by Agent as Cash Collateral) as long as (i) no Default or Event of Default exists; (ii) such repair or replacement is promptly undertaken and concluded, in accordance with plans reasonably satisfactory to Agent; (iii) replacement buildings are constructed on the sites of the original casualties and are of comparable size, quality and utility to the destroyed buildings; (iv) the repaired or replaced Property is free of Liens, other than Permitted Liens that are not Purchase Money Liens except to the extent the repaired or replaced Property exceeds the value of the original Property and then only to the extent of such excess; (v) Borrowers comply with disbursement procedures for such repair or replacement as Agent may reasonably require; and (vi) the aggregate amount of such proceeds or awards from any single casualty or condemnation does not exceed $5,000,000.

 

8.6.3.     Protection of Collateral. All expenses of protecting, storing, warehousing, insuring, handling, maintaining and shipping any Collateral, all Taxes payable with respect to any Collateral (including any sale thereof), and all other payments required to be made by Agent to any Person to realize upon any Collateral, shall be borne and paid by Borrowers. Agent shall not be liable or responsible in any way for the safekeeping of any Collateral, for any loss or damage thereto (except for reasonable care in its custody while Collateral is in Agent's actual possession), for any diminution in the value thereof, or for any act or default of any warehouseman, carrier, forwarding agency or other Person whatsoever, but the same shall be at Borrowers' sole risk.

 

 

 

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8.6.4.       Defense of Title. Each Borrower shall defend its title to Collateral and Agent's Liens therein against all Persons, claims and demands, except Permitted Liens.

 

Power of Attorney. Each Borrower hereby irrevocably constitutes and appoints Agent (and all Persons designated by Agent) as such Borrower's true and lawful attorney (and agent-in-fact) for the purposes provided in this Section. Agent, or Agent's designee, may, without notice and in either its or a Borrower's name, but at the cost and expense of Borrowers:

 

(a)     Endorse a Borrower's name on any Payment Item or other proceeds of Collateral (including proceeds of insurance) that come into Agent's possession or control; and

 

(b)     During an Event of Default, (i) notify any Account Debtors of the assignment of their Accounts, demand and enforce payment of Accounts by legal proceedings or otherwise, and generally exercise any rights and remedies with respect to Accounts; (ii) settle, adjust, modify, compromise, discharge or release any Accounts or other Collateral, or any legal proceedings brought to collect Accounts or Collateral; (iii) sell or assign any Accounts and other Collateral upon such terms, for such amounts and at such times as Agent deems advisable; (iv) collect, liquidate and receive balances in Deposit Accounts or investment accounts, and take control, in any manner, of proceeds of Collateral; (v) prepare, file and sign a Borrower's name to a proof of claim or other document in a bankruptcy of an Account Debtor, or to any notice, assignment or satisfaction of Lien or similar document; (vi) receive and open mail addressed to a Borrower, and notify postal authorities to deliver any such mail to an address designated by Agent; (vii) endorse any Chattel Paper, Document, Instrument, bill of lading, or other document or agreement relating to any Accounts, Inventory or other Collateral; (viii) use a Borrower's stationery and sign its name to verifications of Accounts and notices to Account Debtors; (ix) use information contained in any data processing, electronic or information systems relating to Collateral; (x) make and adjust claims under insurance policies; (xi) take any action as may be necessary or appropriate to obtain payment under any letter of credit, banker's acceptance or other instrument for which a Borrower is a beneficiary; and (xii) take all other actions as Agent deems appropriate to fulfill any Borrower's obligations under the Loan Documents.

 

Section 9.     REPRESENTATIONS AND WARRANTIES

 

9.1.        General Representations and Warranties. To induce Agent and Lenders to enter into this Agreement and to make available the Commitments, Loans and Letters of Credit, each Borrower represents and warrants that:

 

9.1.1.     Organization and Qualification. Each Borrower and Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Each Borrower and Subsidiary is duly qualified, authorized to do business and in good standing as a foreign corporation in each jurisdiction where failure to be so qualified could reasonably be expected to have a Material Adverse Effect.

 

9.1.2.    Power and Authority. Each Obligor is duly authorized to execute, deliver and perform its Loan Documents. The execution, delivery and performance of the Loan Documents have been duly authorized by all necessary action, and do not (a) require any consent or approval of any holders of Equity Interests of any Obligor, except those already obtained; (b) contravene the Organic Documents of any Obligor; (c) violate or cause a default under any Applicable Law or Material Contract; or (d) result in or require imposition of a Lien (other than Permitted Liens) on any Obligor's Property.

 

9.1.3.     Enforceability. Each Loan Document is a legal, valid and binding obligation of each Obligor party thereto, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally.

 

 

 

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9.1.4.     Capital Structure. Schedule 9.1.4 shows, for each Borrower and Subsidiary, its name, jurisdiction of organization, authorized and issued Equity Interests, each holders that owns at least five percent (5%) of its Equity Interests, and agreements binding on such holders with respect to such Equity Interests. Except as disclosed on Schedule 9.1.4, in the five years preceding the Closing Date, no Borrower or Subsidiary has acquired any substantial assets from any other Person nor been the surviving entity in a merger or combination. Each Borrower has good title to its Equity Interests in its Subsidiaries, subject only to Agent's Lien, and all such Equity Interests are duly issued, fully paid and non-assessable. There are no outstanding purchase options, warrants, subscription rights, agreements to issue or sell, convertible interests, phantom rights or powers of attorney relating to Equity Interests of any Borrower or Subsidiary.

 

9.1.5.     Title to Properties; Priority of Liens. Each Borrower and Subsidiary has good and marketable title to (or valid leasehold interests in) all of its Real Estate, and good title to all of its personal Property, including all Property reflected in any financial statements delivered to Agent or Lenders, in each case free of Liens except Permitted Liens. Each Borrower and Subsidiary has paid and discharged all lawful claims that, if unpaid, could become a Lien on its Properties, other than Permitted Liens. All Liens of Agent in the Collateral are duly perfected, first priority Liens, subject only to the filing of financing statements, the filing of the Trademark Security Agreement, , in each case, in the appropriate filing offices, the establishment of control over any Deposit Accounts, the termination of existing Liens being paid by the initial Borrowing hereunder and Permitted Liens that are expressly allowed to have priority over Agent's Liens.

 

9.1.6.     Accounts. Agent may rely, in determining which Accounts are Eligible Accounts, on all statements and representations made by Borrowers with respect thereto. Borrowers warrant, with respect to each Account shown as an Eligible Account in a Borrowing Base Report, that:

 

(a)     it is genuine and in all respects what it purports to be;

 

(b)     it arises out of a completed, bona fide sale and delivery of goods or provision of services in the Ordinary Course of Business, and substantially in accordance with any purchase order, contract or other document relating thereto;

 

(c)     it is for a sum certain, maturing as stated in the applicable invoice, a copy of which has been furnished or is available to Agent on request;

 

(d)     it is not subject to any offset, Lien (other than Agent's Lien), deduction, defense, dispute, counterclaim or other adverse condition except as arising in the Ordinary Course of Business and disclosed to Agent; and it is absolutely owing by the Account Debtor, without contingency in any respect;

 

(e)     no purchase order, agreement, document or Applicable Law restricts assignment of the Account to Agent (regardless of whether, under the UCC, the restriction is ineffective), and the applicable Borrower is the sole payee or remittance party shown on the invoice;

 

(f)     no extension, compromise, settlement, modification, credit, deduction or return has been authorized or is in process with respect to the Account, except discounts or allowances granted in the Ordinary Course of Business for prompt payment that are reflected on the face of the invoice related thereto and in the reports submitted to Agent hereunder; and

 

(g)     to the best of Borrowers' knowledge, (i) there are no facts or circumstances that are reasonably likely to impair the enforceability or collectability of such Account; (ii) the Account Debtor had the capacity to contract when the Account arose, continues to meet the applicable Borrower's customary credit standards, is Solvent, is not contemplating or subject to an Insolvency Proceeding, and has not failed, or suspended or ceased doing business; and (iii) there are no proceedings or actions threatened or pending against any Account Debtor that could reasonably be expected to have a material adverse effect on the Account Debtor's financial condition.

 

 

 

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9.1.7.     Financial Statements. The consolidated and consolidating balance sheets, and related statements of income, cash flow and shareholders equity, of Borrowers and Subsidiaries that have been and are hereafter delivered to Agent and Lenders, are prepared in accordance with GAAP, and fairly present the financial positions and results of operations of Borrowers and Subsidiaries at the dates and for the periods indicated, subject to normal year-end adjustments and the absence of footnotes. All projections delivered from time to time to Agent and Lenders have been prepared in good faith, based on reasonable assumptions in light of the circumstances at such time. Since December 31, 2014, there has been no change in the condition, financial or otherwise, of any Borrower or Subsidiary that could reasonably be expected to have a Material Adverse Effect, except with respect to the financial performance of the Tubular Division as disclosed in financial statements delivered to Agent for periods after 2014. Each Borrower and Subsidiary is Solvent.

 

9.1.8.     Surety Obligations. No Borrower or Subsidiary is obligated as surety or indemnitor under any bond or other contract that assures payment or performance of any obligation of any Person, except as permitted hereunder.

 

9.1.9.     Taxes. Each Borrower and Subsidiary has filed all federal, state and local tax returns and other reports that it is required by law to file, and has paid, or made provision for the payment of, all Taxes upon it, its income and its Properties that are due and payable, except to the extent being Properly Contested. The provision for Taxes on the books of each Borrower and Subsidiary is adequate for all years not closed by applicable statutes, and for its current Fiscal Year.

 

9.1.10.    Brokers. There are no brokerage commissions, finder's fees or investment banking fees payable in connection with any transactions contemplated by the Loan Documents.

 

9.1.11.     Intellectual Property. Each Borrower and Subsidiary owns or has the lawful right to use all Intellectual Property necessary for the conduct of its business, without conflict with any rights of others. There is no pending or, to any Borrower's knowledge, threatened Intellectual Property Claim with respect to any Borrower, any Subsidiary or any of their Property (including any Intellectual Property). Except as disclosed on Schedule 9.1.11, no Borrower or Subsidiary pays or owes any Royalty or other compensation to any Person with respect to any Intellectual Property. All Intellectual Property owned, used or licensed by, or otherwise subject to any interests of, any Borrower or Subsidiary is shown on Schedule 9.1.11.

 

9.1.12.     Governmental Approvals. Each Borrower and Subsidiary has, is in compliance with, and is in good standing with respect to, all Governmental Approvals necessary to conduct its business and to own, lease and operate its Properties. All necessary import, export or other licenses, permits or certificates for the import or handling of any goods or other Collateral have been procured and are in effect, and Borrowers and Subsidiaries have complied with all foreign and domestic laws with respect to the shipment and importation of any goods or Collateral, except where noncompliance could not reasonably be expected to have a Material Adverse Effect.

 

9.1.13.     Compliance with Laws. Each Borrower and Subsidiary has duly complied, and its Properties and business operations are in compliance, in all material respects with all Applicable Laws, except where noncompliance could not reasonably be expected to have a Material Adverse Effect. There have been no citations, notices or orders of material noncompliance issued to any Borrower or Subsidiary under any Applicable Law. No Inventory has been produced in violation of the FLSA.

 

9.1.14.     Compliance with Environmental Laws. Except as disclosed on Schedule 9.1.14, no Borrower's or Subsidiary's past or present operations, Real Estate or other Properties are subject to any federal, state or local investigation to determine whether any remedial action is needed to address any environmental pollution, hazardous material or environmental clean-up. No Borrower or Subsidiary has received any Environmental Notice. No Borrower or Subsidiary has any contingent liability with respect to any Environmental Release, environmental pollution or hazardous material on any Real Estate now or previously owned, leased or operated by it. 

 

 

 

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9.1.15.     Burdensome Contracts. No Borrower or Subsidiary is a party or subject to any contract, agreement or charter restriction that could reasonably be expected to have a Material Adverse Effect. No Borrower or Subsidiary is party or subject to any Restrictive Agreement, except as shown on Schedule 9.1.15. No such Restrictive Agreement prohibits the execution, delivery or performance of any Loan Document by an Obligor.

 

9.1.16.      Litigation. Except as shown on Schedule 9.1.16, there are no proceedings or investigations pending or, to any Borrower's knowledge, threatened against any Borrower or Subsidiary, or any of their businesses, operations, Properties, prospects or conditions, that (a) relate to any Loan Documents or transactions contemplated thereby; or (b) could reasonably be expected to have a Material Adverse Effect if determined adversely to any Borrower or Subsidiary. Except as shown on such Schedule, no Obligor has a Commercial Tort Claim (other than, as long as no Default or Event of Default exists, a Commercial Tort Claim for less than $100,000). No Borrower or Subsidiary is in default with respect to any order, injunction or judgment of any Governmental Authority.

 

9.1.17.     No Defaults. No event or circumstance has occurred or exists that constitutes a Default or Event of Default. No Borrower or Subsidiary is in default, and no event or circumstance has occurred or exists that with the passage of time or giving of notice would constitute a default, under any Material Contract or in the payment of any Borrowed Money. There is no basis upon which any party (other than a Borrower or Subsidiary) could terminate a Material Contract prior to its scheduled termination date.

 

9.1.18.     ERISA. Except as disclosed on Schedule 9.1.18:

 

(a)     Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code, and other federal and state laws. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the knowledge of Borrowers, nothing has occurred which would prevent, or cause the loss of, such qualification. Each Obligor and ERISA Affiliate has met all applicable requirements under the Code, ERISA and the Pension Protection Act of 2006, and no application for a waiver of the minimum funding standards or an extension of any amortization period has been made with respect to any Plan.

 

(b)     There are no pending or, to the knowledge of Borrowers, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted in or could reasonably be expected to have a Material Adverse Effect.

 

(c)     (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) as of the most recent valuation date for any Pension Plan, the funding target attainment percentage (as defined in Section 430(d)(2) of the Code) is at least 60%, and no Obligor or ERISA Affiliate knows of any reason that the funding target attainment percentage could reasonably be expected to drop below 60%; (iii) no Obligor or ERISA Affiliate has incurred any liability to the PBGC except for the payment of premiums, and no premium payments are due and unpaid; (iv) no Obligor or ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA; and (v) no Pension Plan has been terminated by its plan administrator or the PBGC, and no fact or circumstance exists that could reasonably be expected to cause the PBGC to institute proceedings to terminate a Pension Plan.

 

 

 

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(d)     With respect to any Foreign Plan, (i) all employer and employee contributions required by law or by the terms of the Foreign Plan have been made, or, if applicable, accrued, in accordance with normal accounting practices; (ii) the fair market value of the assets of each funded Foreign Plan, the liability of each insurer for any Foreign Plan funded through insurance, or the book reserve established for any Foreign Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations with respect to all current and former participants in such Foreign Plan according to the actuarial assumptions and valuations most recently used to account for such obligations in accordance with applicable generally accepted accounting principles; and (iii) it has been registered as required and has been maintained in good standing with applicable regulatory authorities.

 

9.1.19.     Trade Relations. There exists no actual or threatened termination, limitation or modification of any business relationship between any Borrower or Subsidiary and any customer or supplier, or any group of customers or suppliers, who individually or in the aggregate are material to the business of Borrower or Subsidiary. There exists no condition or circumstance that could reasonably be expected to impair the ability of any Borrower or Subsidiary to conduct its business at any time hereafter in substantially the same manner as conducted on the Closing Date.

 

9.1.20.     Labor Relations. Except as described on Schedule 9.1.20, no Borrower or Subsidiary is party to or bound by any collective bargaining agreement, management agreement or consulting agreement. There are no material grievances, disputes or controversies with any union or other organization of any Borrower's or Subsidiary's employees, or, to any Borrower's knowledge, any asserted or threatened strikes, work stoppages or demands for collective bargaining.

 

9.1.21.     Payable Practices. No Borrower or Subsidiary has made any material change in its historical accounts payable practices from those in effect on the Closing Date.

 

9.1.22.     Not a Regulated Entity. No Obligor is (a) an "investment company" or a "person directly or indirectly controlled by or acting on behalf of an investment company" within the meaning of the Investment Company Act of 1940; or (b) subject to regulation under the Federal Power Act, the Interstate Commerce Act, any public utilities code or any other Applicable Law regarding its authority to incur Debt.

 

9.1.23.     Margin Stock. No Borrower or Subsidiary is engaged, principally or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. No Loan proceeds or Letters of Credit will be used by Borrowers to purchase or carry, or to reduce or refinance any Debt incurred to purchase or carry, any Margin Stock or for any related purpose governed by Regulations T, U or X of the Board of Governors.

 

9.1.24.     OFAC. No Borrower, Subsidiary or any director, officer, employee, agent, affiliate or representative thereof, is or is owned or controlled by any individual or entity that is currently the subject or target of any Sanction or is located, organized or resident in a Designated Jurisdiction.

 

9.1.25.     Anti-Corruption Laws. Each Borrower and Subsidiary has conducted its business in accordance with applicable anti-corruption laws and has instituted and maintained policies and procedures designed to promote and achieve compliance with such laws. 

 

9.2.        Complete Disclosure. No Loan Document contains any untrue statement of a material fact, nor fails to disclose any material fact necessary to make the statements contained therein not materially misleading. There is no fact or circumstance that any Obligor has failed to disclose to Agent in writing that could reasonably be expected to have a Material Adverse Effect.

 

 

 

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Section 10.     COVENANTS AND CONTINUING AGREEMENTS

 

10.1.        Affirmative Covenants. As long as any Commitments or Obligations are outstanding, each Borrower shall, and shall cause each Subsidiary to:

 

10.1.1.      Inspections; Appraisals.

 

(a)     Permit Agent from time to time, subject (except when a Default or Event of Default exists) to reasonable notice and normal business hours, to visit and inspect the Properties of any Borrower or Subsidiary, inspect, audit and make extracts from any Borrower's or Subsidiary's books and records, and discuss with its officers, employees, agents, advisors and independent accountants Borrower's or Subsidiary's business, financial condition, assets, prospects and results of operations. Lenders may participate in any such visit or inspection, at their own expense. Neither Agent nor any Lender shall have any duty to any Borrower to make any inspection, nor to share any results of any inspection, appraisal or report with any Borrower. Borrowers acknowledge that all inspections, appraisals and reports are prepared by Agent and Lenders for their purposes, and Borrowers shall not be entitled to rely upon them.

 

(b)     Reimburse Agent for all charges, costs and expenses of Agent in connection with (i) examinations of any Obligor's books and records or any other financial or Collateral matters as Agent deems appropriate, once per Loan Year unless Availability is at any time less than 25% of the aggregate Revolver Commitments then twice per Loan Year; and (ii) appraisals of Inventory, including without limitation CEEEB Inventory, at such frequency as Agent deems appropriate, but not more frequently than twice per Loan Year; provided, however, that if an examination or appraisal is initiated during a Default or Event of Default, there shall be no limitation on frequency and all charges, costs and expenses relating thereto shall be reimbursed by Borrowers without regard to such limits. Borrowers agree to pay Agent's then standard charges for examination activities, including charges for Agent's internal examination and appraisal groups, as well as the charges of any third party used for such purposes. No Borrowing Base calculation shall include Collateral acquired in a Permitted Acquisition or otherwise outside the Ordinary Course of Business until completion of applicable field examinations and appraisals (which shall not be included in the limits provided above) satisfactory to Agent.

 

10.1.2.     Financial and Other Information. Keep adequate records and books of account with respect to its business activities, in which proper entries are made in accordance with GAAP reflecting all financial transactions; and furnish to Agent and Lenders:

 

(a)     as soon as available, and in any event within 90 days after the close of each Fiscal Year, balance sheets as of the end of such Fiscal Year and the related statements of income, cash flow and shareholders equity for such Fiscal Year, on consolidated and consolidating bases for Borrowers and Subsidiaries, which consolidated statements shall be audited and certified (without qualification) by a firm of independent certified public accountants of recognized standing selected by Borrowers and acceptable to Agent, and shall set forth in comparative form corresponding figures for the preceding Fiscal Year and other information acceptable to Agent;

 

(b)     as soon as available, and in any event within 30 days after the end of each month (but within 45 days after the last month in any Fiscal Quarter), unaudited balance sheets as of the end of such month and the related statements of income and cash flow for such month and for the portion of the Fiscal Year then elapsed, on consolidated and consolidating bases for Borrowers and Subsidiaries, setting forth in comparative form corresponding figures for the preceding Fiscal Year and certified by a Senior Officer of Borrower Agent in his/her official capacity and not as an individual as prepared in accordance with GAAP and fairly presenting the financial position and results of operations for such month and period, subject to normal year-end adjustments and the absence of footnotes;

 

 

 

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(c)     concurrently with delivery of financial statements under clauses (a) and (b) above, or more frequently if requested by Agent while a Default or Event of Default exists, a Compliance Certificate executed by a Senior Officer of Borrower Agent in his/her official capacity and not as an individual;

 

(d)     concurrently with delivery of financial statements under clause (a) above, copies of all management letters and other material reports submitted to Borrowers by their accountants in connection with such financial statements;

 

(e)     not later than 30 days after the end of each Fiscal Year, projections of Borrowers' consolidated balance sheets, results of operations, cash flow and Availability for the next Fiscal Year, month by month, and for the next three Fiscal Years, year by year;

 

(f)     at Agent's request, but not more frequently than monthly in the absence of an Event of Default, a listing of each Borrower's trade payables, specifying the trade creditor and balance due, and a detailed trade payable aging, all in form reasonably satisfactory to Agent;

 

(g)     promptly after the sending or filing thereof, copies of any proxy statements, financial statements or reports that any Borrower has made generally available to its shareholders; copies of any regular, periodic and special reports or registration statements or prospectuses that any Borrower files with the Securities and Exchange Commission or any other Governmental Authority, or any securities exchange; and copies of any press releases or other statements made available by a Borrower to the public concerning material changes to or developments in the business of such Borrower;

 

(h)     promptly after the sending or filing thereof, copies of any annual report to be filed in connection with each Plan or Foreign Plan; and

 

(i)     such other reports and information (financial or otherwise) as Agent may request from time to time in connection with any Collateral or any Borrower's, Subsidiary's or other Obligor's financial condition or business.

 

10.1.3.      Notices. Notify Agent and Lenders in writing, promptly after a Borrower's obtaining knowledge thereof, of any of the following that affects an Obligor: (a) the threat or commencement of any proceeding or investigation, whether or not covered by insurance, if an adverse determination could have a Material Adverse Effect; (b) any pending or threatened labor dispute, strike or walkout, or the expiration of any material labor contract; (c) any default under or termination of a Material Contract; (d) the existence of any Default or Event of Default; (e) any judgment in an amount exceeding $1,000,000; (f) the assertion of any Intellectual Property Claim, if an adverse resolution could reasonably be expected to have a Material Adverse Effect; (g) any violation or asserted violation of any Applicable Law (including ERISA, OSHA, FLSA, or any Environmental Laws), if an adverse resolution could have a Material Adverse Effect; (h) any Environmental Release by an Obligor or on any Property owned, leased or occupied by an Obligor; or receipt of any Environmental Notice; (i) the occurrence of any ERISA Event; (j) the discharge of or any withdrawal or resignation by Borrowers' independent accountants; or (k) any opening of a new office or place of business, at least 30 days prior to such opening.

 

10.1.4.     Landlord and Storage Agreements. Upon request, provide Agent with copies of all existing agreements, and promptly after execution thereof provide Agent with copies of all future agreements, between an Obligor and any landlord, warehouseman, processor, shipper, bailee or other Person that owns any premises at which any Collateral may be kept or that otherwise may possess or handle any Collateral.

 

10.1.5.      Compliance with Laws. Comply with all Applicable Laws, including ERISA, Environmental Laws, FLSA, OSHA, Anti-Terrorism Laws, and laws regarding collection and payment of Taxes, and maintain all Governmental Approvals necessary to the ownership of its Properties or conduct of its business, unless failure to comply (other than failure to comply with Anti-Terrorism Laws) or maintain could not reasonably be expected to have a Material Adverse Effect. Without limiting the generality of the foregoing, if any Environmental Release occurs at or on any Properties of any Borrower or Subsidiary, it shall act promptly and diligently to investigate and report to Agent and all appropriate Governmental Authorities the extent of, and to make appropriate remedial action to eliminate, such Environmental Release, whether or not directed to do so by any Governmental Authority.

 

 

 

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10.1.6.      Taxes. Pay and discharge all Taxes prior to the date on which they become delinquent or penalties attach, unless such Taxes are being Properly Contested.

 

10.1.7.      Insurance. In addition to the insurance required hereunder with respect to Collateral, maintain insurance with insurers (with a Best rating of at least A+, unless otherwise approved by Agent in its discretion) satisfactory to Agent, (a) with respect to the Properties and business of Borrowers and Subsidiaries of such type (including product liability, workers' compensation, larceny, embezzlement, or other criminal misappropriation insurance), in such amounts, and with such coverages and deductibles as are customary for companies similarly situated; and (b) business interruption insurance in an amount not less than $5,000,000, with deductibles and subject to an Insurance Assignment satisfactory to Agent.

 

10.1.8.      Licenses. Keep each License affecting any Collateral (including the manufacture, distribution or disposition of Inventory) in any material respect or any other material Property of Borrowers and Subsidiaries in full force and effect; promptly notify Agent of any proposed modification to any such License, or entry into any new License, in each case at least 30 days prior to its effective date; pay all Royalties when due; and notify Agent of any default or breach asserted by any Person to have occurred under any License.

 

10.1.9.       Future Subsidiaries. Promptly notify Agent upon any Person becoming a Subsidiary and, if such Person is not a Foreign Subsidiary, cause it to guaranty the Obligations in a manner satisfactory to Agent, and to execute and deliver such documents, instruments and agreements and to take such other actions as Agent shall require to evidence and perfect a Lien in favor of Agent on all assets of such Person, including delivery of such legal opinions, in form and substance satisfactory to Agent, as it shall deem appropriate.

 

10.1.10.     Anti-Corruption Laws. Conduct its business in compliance with applicable anti-corruption laws and maintain policies and procedures designed to promote and achieve compliance with such laws. 

 

10.2.      Negative Covenants. As long as any Commitments or Obligations are outstanding, each Borrower shall not, and shall cause each Subsidiary not to:

 

10.2.1.     Permitted Debt. Create, incur, guarantee or suffer to exist any Debt, except:

 

(a)     the Obligations;

 

(b)     Subordinated Debt;

 

(c)     Permitted Purchase Money Debt;

 

(d)     Borrowed Money (other than the Obligations, Subordinated Debt and Permitted Purchase Money Debt), but only to the extent outstanding on the Closing Date and not satisfied with proceeds of the initial Loans;

 

 

 

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(e)     Debt with respect to Bank Products incurred in the Ordinary Course of Business;

 

(f)     Debt that is in existence when a Person becomes a Subsidiary or that is secured by an asset when acquired by a Borrower or Subsidiary, as long as such Debt was not incurred in contemplation of such Person becoming a Subsidiary or such acquisition, and does not exceed $2,000,000 in the aggregate at any time;

 

(g)     Permitted Contingent Obligations;

 

(h)     Refinancing Debt as long as each Refinancing Condition is satisfied; and

 

(i)     Debt that is not included in any of the preceding clauses of this Section, is not secured by a Lien and does not exceed $2,000,000 in the aggregate at any time.

 

Permitted Liens. Create or suffer to exist any Lien upon any of its Property (including without limitation its Real Estate), except the following (collectively, "Permitted Liens"):

 

(a)     Liens in favor of Agent;

 

(b)     Purchase Money Liens securing Permitted Purchase Money Debt;

 

(c)     Liens for Taxes not yet due or being Properly Contested;

 

(d)     statutory Liens (other than Liens for Taxes or imposed under ERISA) arising in the Ordinary Course of Business, but only if (i) payment of the obligations secured thereby is not yet due or is being Properly Contested, and (ii) such Liens do not materially impair the value or use of the Property or materially impair operation of the business of any Borrower or Subsidiary;

 

(e)     Liens incurred or deposits made in the Ordinary Course of Business to secure the performance of government tenders, bids, contracts, statutory obligations and other similar obligations, as long as such Liens are at all times junior to Agent's Liens and are required or provided by law;

 

(f)     Liens arising in the Ordinary Course of Business that are subject to Lien Waivers;

 

(g)     Liens arising by virtue of a judgment or judicial order against any Borrower or Subsidiary, or any Property of a Borrower or Subsidiary, as long as such Liens are (i) in existence for less than 20 consecutive days or being Properly Contested, and (ii) at all times junior to Agent's Liens;

 

(h)     easements, rights-of-way, restrictions, covenants or other agreements of record, and other similar charges or encumbrances on Real Estate, that do not secure any monetary obligation and do not interfere with the Ordinary Course of Business;

 

(i)     normal and customary rights of setoff upon deposits in favor of depository institutions, and Liens of a collecting bank on Payment Items in the course of collection;

 

(j)     Liens on assets (other than Accounts and Inventory) acquired in a Permitted Acquisition, securing Debt permitted by Section 10.2.1(f); and

 

(k)     existing Liens shown on Schedule 10.2.2.

 

10.2.3.     [Intentionally omitted]. 

 

10.2.4.     Distributions; Upstream Payments. Declare or make any Distributions, except Upstream Payments and Permitted Distributions; or create or suffer to exist any encumbrance or restriction on the ability of a Subsidiary to make any Upstream Payment, except for restrictions under the Loan Documents, under Applicable Law or in effect on the Closing Date as shown on Schedule 9.1.15.

 

 

 

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10.2.5.     Restricted Investments. Make any Restricted Investment.

 

10.2.6.     Disposition of Assets. Make any Asset Disposition, except a Permitted Asset Disposition, a disposition of Equipment under Section 8.4.2, or a transfer of Property by a Subsidiary or Obligor to a Borrower.

 

10.2.7.     Loans. Make any loans or other advances of money to any Person, except (a) advances to an officer or employee for salary, travel expenses, commissions and similar items in the Ordinary Course of Business; (b) prepaid expenses and extensions of trade credit made in the Ordinary Course of Business; (c) deposits with financial institutions permitted hereunder; and (d) as long as no Default or Event of Default exists, intercompany loans by a Borrower to another Borrower.

 

10.2.8.     Restrictions on Payment of Certain Debt. Make any payments (whether voluntary or mandatory, or a prepayment, redemption, retirement, defeasance or acquisition) with respect to any (a) Subordinated Debt, except regularly scheduled payments of principal, interest and fees, but only to the extent permitted under any subordination agreement relating to such Debt (and a Senior Officer of Borrower Agent shall certify to Agent, not less than five Business Days prior to the date of payment, that all conditions under such agreement have been satisfied); or (b) Borrowed Money (other than the Obligations) prior to its due date under the agreements evidencing such Debt as in effect on the Closing Date (or as amended thereafter with the consent of Agent); provided, however, that so long as Borrowers maintain a Fixed Charge Coverage Ratio of at least 1.0 to 1.0 both before and after effect to giving any payment thereof, Borrowers shall have the right to prepay any Capital Lease on which a Borrower is personally obligated. 

 

10.2.9.     Fundamental Changes. Change its name or conduct business under any fictitious name; change its tax, charter or other organizational identification number; change its form or state of organization; liquidate, wind up its affairs or dissolve itself; or merge, combine or consolidate with any Person, whether in a single transaction or in a series of related transactions, except for (a) mergers or consolidations of a wholly-owned Subsidiary with another wholly-owned Subsidiary or into a Borrower; or (b) Permitted Acquisitions.

 

10.2.10.     Subsidiaries. Form or acquire any Subsidiary after the Closing Date, except in accordance with Sections 10.1.9, 10.2.5 and 10.2.9; or permit any existing Subsidiary to issue any additional Equity Interests except directors' qualifying shares.

 

10.2.11.     Organic Documents. Amend, modify or otherwise change any of its Organic Documents, except in connection with a transaction permitted under Section 10.2.9.

 

10.2.12.     Tax Consolidation. File or consent to the filing of any consolidated income tax return with any Person other than Borrowers and Subsidiaries.

 

10.2.13.     Accounting Changes. Make any material change in accounting treatment or reporting practices, except as required by GAAP and in accordance with Section 1.2; or change its Fiscal Year.

 

10.2.14.     Restrictive Agreements. Become a party to any Restrictive Agreement, except a Restrictive Agreement (a) in effect on the Closing Date; (b) relating to secured Debt permitted hereunder, as long as the restrictions apply only to collateral for such Debt; or (c) constituting customary restrictions on assignment in leases and other contracts.

 

 

 

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10.2.15.     Hedging Agreements. Enter into any Hedging Agreement, except to hedge risks arising in the Ordinary Course of Business and not for speculative purposes.

 

10.2.16.     Conduct of Business. Engage in any business, other than its business as conducted on the Closing Date and any activities incidental thereto.

 

10.2.17.     Affiliate Transactions. Enter into or be party to any transaction with an Affiliate, except (a) transactions expressly permitted by the Loan Documents; (b) payment of reasonable compensation to officers and employees for services actually rendered, and payment of customary directors' fees and indemnities; (c) transactions solely among Obligors; (d) transactions with Affiliates consummated prior to the Closing Date, as shown on Schedule 10.2.17; and (e) transactions with Affiliates in the Ordinary Course of Business, upon fair and reasonable terms fully disclosed to Agent and no less favorable than would be obtained in a comparable arm's-length transaction with a non-Affiliate.

 

10.2.18.      Plans. Become party to any Multiemployer Plan or Foreign Plan, other than any in existence on the Closing Date.

 

10.2.19.      Negative Pledge on Real Estate. Permit any Real Estate owned by such party to be pledged or otherwise encumbered in favor of any party as collateral for borrowed money. 

 

10.3.      Financial Covenants. As long as any Commitments or Obligations are outstanding, Borrowers shall:

 

Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage Ratio for each 12 month period of at least 1.0 to 1.0 while a Trigger Period is in effect, measured monthly for the most recent period for which financial statements were delivered hereunder pursuant to Section 10.1.2(b) prior to the Trigger Period and each monthly period ending thereafter until the Trigger Period is no longer in effect.

 

Section 11.     EVENTS OF DEFAULT; REMEDIES ON DEFAULT

 

11.1.     Events of Default. Each of the following shall be an "Event of Default" if it occurs for any reason whatsoever, whether voluntary or involuntary, by operation of law or otherwise:

 

(a)     Any Borrower fails to pay its Obligations when due (whether at stated maturity, on demand, upon acceleration or otherwise);

 

(b)     Any representation, warranty or other written statement of an Obligor made in connection with any Loan Documents or transactions contemplated thereby is incorrect or misleading in any material respect when given;

 

(c)     A Borrower breaches or fail to perform any covenant contained in Section 7.2, 7.4, 7.6, 8.1, 8.2.4, 8.2.5, 8.6.2, 10.1.1, 10.1.2, 10.2 or 10.3;

 

(d)     An Obligor breaches or fails to perform any other covenant contained in any Loan Documents, and such breach or failure is not cured within 15 days after a Senior Officer of such Obligor has knowledge thereof or receives notice thereof from Agent, whichever is sooner; provided, however, that such notice and opportunity to cure shall not apply if the breach or failure to perform is not capable of being cured within such period or is a willful breach by an Obligor;

 

(e)     A Guarantor repudiates, revokes or attempts to revoke its Guaranty; an Obligor or third party denies or contests the validity or enforceability of any Loan Documents or Obligations, or the perfection or priority of any Lien granted to Agent; or any Loan Document ceases to be in full force or effect for any reason (other than a waiver or release by Agent and Lenders);

 

 

 

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(f)     Any breach or default of an Obligor occurs under (i) any Hedging Agreement; or (ii) any instrument or agreement to which it is a party or by which it or any of its Properties is bound, relating to any Debt (other than the Obligations) in excess of $2,000,000, if the maturity of or any payment with respect to such Debt may be accelerated or demanded due to such breach;

 

(g)     Any judgment or order for the payment of money is entered against an Obligor in an amount that exceeds, individually or cumulatively with all unsatisfied judgments or orders against all Obligors, $2,000,000 (net of insurance coverage therefor that has not been denied by the insurer), unless a stay of enforcement of such judgment or order is in effect;

 

(h)     A loss, theft, damage or destruction occurs with respect to any Collateral if the amount not covered by insurance exceeds $2,000,000;

 

(i)     A Material Obligor is enjoined, restrained or in any way prevented by any Governmental Authority from conducting any material part of its business; a Material Obligor suffers the loss, revocation or termination of any material license, permit, lease or agreement necessary to its business; there is a cessation of any material part of a Material Obligor's business for a material period of time; any material Collateral or Property of a Material Obligor is taken or impaired through condemnation; a Material Obligor agrees to or commences any liquidation, dissolution or winding up of its affairs; or a Material Obligor is not Solvent;

 

(j)     An Insolvency Proceeding is commenced by an Obligor; an Obligor makes an offer of settlement, extension or composition to its unsecured creditors generally; a trustee is appointed to take possession of any substantial Property of or to operate any of the business of an Obligor; or an Insolvency Proceeding is commenced against an Obligor and: the Obligor consents to institution of the proceeding, the petition commencing the proceeding is not timely contested by the Obligor, the petition is not dismissed within 30 days after filing, or an order for relief is entered in the proceeding;

 

(k)     An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan that has resulted or could reasonably be expected to result in liability of an Obligor to a Pension Plan, Multiemployer Plan or PBGC, or that constitutes grounds for appointment of a trustee for or termination by the PBGC of any Pension Plan or Multiemployer Plan; an Obligor or ERISA Affiliate fails to pay when due any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan; or any event similar to the foregoing occurs or exists with respect to a Foreign Plan;

 

(l)     An Obligor or any of its Senior Officers is criminally indicted or convicted for (i) a felony committed in the conduct of the Obligor's business, or (ii) violating any state or federal law (including the Controlled Substances Act, Money Laundering Control Act of 1986 and Illegal Exportation of War Materials Act) that could lead to forfeiture of any material Property or any Collateral; or

 

(m)     A Change of Control occurs; or any event occurs or condition exists that has a Material Adverse Effect. 

 

11.2.      Remedies upon Default. If an Event of Default described in Section 11.1(j) occurs with respect to any Borrower, then to the extent permitted by Applicable Law, all Obligations (other than Secured Bank Product Obligations) shall become automatically due and payable and all Commitments shall terminate, without any action by Agent or notice of any kind. In addition, or if any other Event of Default exists, Agent may in its discretion (and shall upon written direction of Required Lenders) do any one or more of the following from time to time:

 

(a)     declare any Obligations (other than Secured Bank Product Obligations) immediately due and payable, whereupon they shall be due and payable without diligence, presentment, demand, protest or notice of any kind, all of which are hereby waived by Borrowers to the fullest extent permitted by law;

 

 

 

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(b)     terminate, reduce or condition any Commitment, or make any adjustment to the Borrowing Base;

 

(c)     require Obligors to Cash Collateralize their LC Obligations, Secured Bank Product Obligations and other Obligations that are contingent or not yet due and payable, and if Obligors fail to deposit such Cash Collateral, Agent may (and shall upon the direction of Required Lenders) advance the required Cash Collateral as Revolver Loans (whether or not an Overadvance exists or is created thereby, or the conditions in Section 6 are satisfied); and

 

(d)     exercise any other rights or remedies afforded under any agreement, by law, at equity or otherwise, including the rights and remedies of a secured party under the UCC. Such rights and remedies include the rights to (i) take possession of any Collateral; (ii) require Borrowers to assemble Collateral, at Borrowers' expense, and make it available to Agent at a place designated by Agent; (iii) enter any premises where Collateral is located and store Collateral on such premises until sold (and if the premises are owned or leased by a Borrower, Borrowers agree not to charge for such storage); and (iv) sell or otherwise dispose of any Collateral in its then condition, or after any further manufacturing or processing thereof, at public or private sale, with such notice as may be required by Applicable Law, in lots or in bulk, at such locations, all as Agent, in its discretion, deems advisable. Each Borrower agrees that 10 days notice of any proposed sale or other disposition of Collateral by Agent shall be reasonable, and that any sale conducted on the internet or to a licensor of Intellectual Property shall be commercially reasonable. Agent may conduct sales on any Obligor's premises, without charge, and any sale may be adjourned from time to time in accordance with Applicable Law. Agent shall have the right to sell, lease or otherwise dispose of any Collateral for cash, credit or any combination thereof, and Agent may purchase any Collateral at public or, if permitted by law, private sale and, in lieu of actual payment of the purchase price, may credit bid and set off the amount of such price against the Obligations.

 

11.3.     License. Agent is hereby granted an irrevocable, non-exclusive license or other right to use, license or sub-license (without payment of royalty or other compensation to any Person) during the continuance of an Event of Default any or all Intellectual Property of Borrowers, computer hardware and software, trade secrets, brochures, customer lists, promotional and advertising materials, labels, packaging materials and other Property, in advertising for sale, marketing, selling, collecting, completing manufacture of, or otherwise exercising any rights or remedies with respect to, any Collateral. Each Borrower's rights and interests under Intellectual Property shall inure to Agent's benefit.

 

11.4.     Setoff. At any time during an Event of Default, Agent, Issuing Bank, Lenders, and any of their Affiliates are authorized, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by Agent, Issuing Bank, such Lender or such Affiliate to or for the credit or the account of an Obligor against its Obligations, whether or not Agent, Issuing Bank, such Lender or such Affiliate shall have made any demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or are owed to a branch or office of Agent, Issuing Bank, such Lender or such Affiliate different from the branch or office holding such deposit or obligated on such indebtedness. The rights of Agent, Issuing Bank, each Lender and each such Affiliate under this Section are in addition to other rights and remedies (including other rights of setoff) that such Person may have.

 

11.5.      Remedies Cumulative; No Waiver.

 

11.5.1.     Cumulative Rights. All agreements, warranties, guaranties, indemnities and other undertakings of Obligors under the Loan Documents are cumulative and not in derogation of each other. The rights and remedies of Agent and Lenders under the Loan Documents are cumulative, may be exercised at any time and from time to time, concurrently or in any order, and are not exclusive of any other rights or remedies available by agreement, by law, at equity or otherwise. All such rights and remedies shall continue in full force and effect until Full Payment of all Obligations.

 

 

 

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11.5.2.     Waivers. No waiver or course of dealing shall be established by (a) the failure or delay of Agent or any Lender to require strict performance by any Obligor under any Loan Document, or to exercise any rights or remedies with respect to Collateral or otherwise; (b) the making of any Loan or issuance of any Letter of Credit during a Default, Event of Default or other failure to satisfy any conditions precedent; or (c) acceptance by Agent or any Lender of any payment or performance by an Obligor under any Loan Documents in a manner other than that specified therein. Any failure to satisfy a financial covenant on a measurement date shall not be cured or remedied by satisfaction of such covenant on a subsequent date.

 

Section 12.     AGENT

 

12.1.     Appointment, Authority and Duties of Agent.

 

12.1.1.     Appointment and Authority. Each Secured Party appoints and designates Bank of America as Agent under all Loan Documents. Agent may, and each Secured Party authorizes Agent to, enter into all Loan Documents to which Agent is intended to be a party and accept all Security Documents. Any action taken by Agent in accordance with the provisions of the Loan Documents, and the exercise by Agent of any rights or remedies set forth therein, together with all other powers reasonably incidental thereto, shall be authorized by and binding upon all Secured Parties. Without limiting the generality of the foregoing, Agent shall have the sole and exclusive authority to (a) act as the disbursing and collecting agent for Lenders with respect to all payments and collections arising in connection with the Loan Documents; (b) execute and deliver as Agent each Loan Document, including any intercreditor or subordination agreement, and accept delivery of each Loan Document; (c) act as collateral agent for Secured Parties for purposes of perfecting and administering Liens under the Loan Documents, and for all other purposes stated therein; (d) manage, supervise or otherwise deal with Collateral; and (e) take any Enforcement Action or otherwise exercise any rights or remedies with respect to any Collateral or under any Loan Documents, Applicable Law or otherwise. Agent alone shall be authorized to determine eligibility and applicable advance rates under the Borrowing Base, whether to impose or release any reserve, or whether any conditions to funding or issuance of a Letter of Credit have been satisfied, which determinations and judgments, if exercised in good faith, shall exonerate Agent from liability to any Secured Party or other Person for any error in judgment.

 

12.1.2.     Duties. The title of "Agent" is used solely as a matter of market custom and the duties of Agent are administrative in nature only. Agent has no duties except those expressly set forth in the Loan Documents, and in no event does Agent have any agency, fiduciary or implied duty to or relationship with any Secured Party or other Person by reason of any Loan Document or related transaction. The conferral upon Agent of any right shall not imply a duty to exercise such right, unless instructed to do so by Lenders in accordance with this Agreement.

 

12.1.3.     Agent Professionals. Agent may perform its duties through agents and employees. Agent may consult with and employ Agent Professionals, and shall be entitled to act upon, and shall be fully protected in any action taken in good faith reliance upon, any advice given by an Agent Professional. Agent shall not be responsible for the negligence or misconduct of any agents, employees or Agent Professionals selected by it with reasonable care.

 

12.1.4.     Instructions of Required Lenders. The rights and remedies conferred upon Agent under the Loan Documents may be exercised without the necessity of joining any other party, unless required by Applicable Law. In determining compliance with a condition for any action hereunder, including satisfaction of any condition in Section 6, Agent may presume that the condition is satisfactory to a Secured Party unless Agent has received notice to the contrary from such Secured Party before Agent takes the action. Agent may request instructions from Required Lenders or other Secured Parties with respect to any act (including the failure to act) in connection with any Loan Documents or Collateral, and may seek assurances to its satisfaction from Secured Parties of their indemnification obligations against Claims that could be incurred by Agent. Agent may refrain from any act until it has received such instructions or assurances, and shall not incur liability to any Person by reason of so refraining. Instructions of Required Lenders shall be binding upon all Secured Parties, and no Secured Party shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting pursuant to instructions of Required Lenders. Notwithstanding the foregoing, instructions by and consent of specific parties shall be required to the extent provided in Section 14.1.1. In no event shall Agent be required to take any action that it determines in its discretion is contrary to Applicable Law or any Loan Documents or could subject any Agent Indemnitee to liability.

 

 

 

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12.2.     Agreements Regarding Collateral and Borrower Materials.

 

12.2.1.     Lien Releases; Care of Collateral. Secured Parties authorize Agent to release any Lien with respect to any Collateral (a) upon Full Payment of the Obligations; (b) that is the subject of a disposition or Lien that Borrowers certify in writing is a Permitted Asset Disposition or a Permitted Lien entitled to priority over Agent's Liens (and Agent may rely conclusively on any such certificate without further inquiry); (c) that does not constitute a material part of the Collateral; or (d) subject to Section 14.1, with the consent of Required Lenders. Secured Parties authorize Agent to subordinate its Liens to any Purchase Money Lien or other Lien entitled to priority hereunder. Agent has no obligation to assure that any Collateral exists or is owned by an Obligor, or is cared for, protected or insured, nor to assure that Agent's Liens have been properly created, perfected or enforced, or are entitled to any particular priority, nor to exercise any duty of care with respect to any Collateral.

 

12.2.2.     Possession of Collateral. Agent and Secured Parties appoint each Lender as agent (for the benefit of Secured Parties) for the purpose of perfecting Liens in any Collateral held or controlled by such Lender, to the extent such Liens are perfected by possession or control. If any Lender obtains possession or control of any Collateral, it shall notify Agent thereof and, promptly upon Agent's request, deliver such Collateral to Agent or otherwise deal with it in accordance with Agent's instructions.

 

12.2.3.     Reports. Agent shall promptly provide to Lenders, when complete, any field examination, audit or appraisal report prepared for Agent with respect to any Obligor or Collateral ("Report"). Reports and other Borrower Materials may be made available to Lenders by providing access to them on the Platform, but Agent shall not be responsible for system failures or access issues that may occur from time to time. Each Lender agrees (a) that Reports are not intended to be comprehensive audits or examinations, and that Agent or any other Person performing an audit or examination will inspect only limited information and will rely significantly upon Borrowers' books, records and representations; (b) that Agent makes no representation or warranty as to the accuracy or completeness of any Borrower Materials and shall not be liable for any information contained in or omitted from any Borrower Materials, including any Report; and (c) to keep all Borrower Materials confidential and strictly for such Lender's internal use, not to distribute any Report or other Borrower Materials (or the contents thereof) to any Person (except to such Lender's Participants, attorneys and accountants), and to use all Borrower Materials solely for administration of the Obligations. Each Lender shall indemnify and hold harmless Agent and any other Person preparing a Report from any action such Lender may take as a result of or any conclusion it may draw from any Borrower Materials, as well as from any Claims arising as a direct or indirect result of Agent furnishing same to such Lender, via the Platform or otherwise.

 

12.3.     Reliance By Agent. Agent shall be entitled to rely, and shall be fully protected in relying, upon any certification, notice or other communication (including those by telephone, telex, telegram, telecopy or e-mail) believed by it to be genuine and correct and to have been signed, sent or made by the proper Person. Agent shall have a reasonable and practicable amount of time to act upon any instruction, notice or other communication under any Loan Document, and shall not be liable for any delay in acting.

 

12.4.      Action Upon Default. Agent shall not be deemed to have knowledge of any Default or Event of Default, or of any failure to satisfy any conditions in Section 6, unless it has received written notice from a Borrower or Required Lenders specifying the occurrence and nature thereof. If any Lender acquires knowledge of a Default, Event of Default or failure of such conditions, it shall promptly notify Agent and the other Lenders thereof in writing. Each Secured Party agrees that, except as otherwise provided in any Loan Documents or with the written consent of Agent and Required Lenders, it will not take any Enforcement Action, accelerate Obligations (other than Secured Bank Product Obligations) or assert any rights relating to any Collateral.

 

12.5.      Ratable Sharing. If any Lender obtains any payment or reduction of any Obligation, whether through set-off or otherwise, in excess of its ratable share of such Obligation, such Lender shall forthwith purchase from Secured Parties participations in the affected Obligation as are necessary to share the excess payment or reduction on a Pro Rata basis or in accordance with Section 5.6.2, as applicable. If any of such payment or reduction is thereafter recovered from the purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Notwithstanding the foregoing, if a Defaulting Lender obtains a payment or reduction of any Obligation, it shall immediately turn over the full amount thereof to Agent for application under Section 4.2.2 and it shall provide a written statement to Agent describing the Obligation affected by such payment or reduction. No Lender shall set off against a Dominion Account without Agent's prior consent.

 

12.6.      Indemnification. EACH SECURED PARTY SHALL INDEMNIFY AND HOLD HARMLESS AGENT INDEMNITEES AND ISSUING BANK INDEMNITEES, TO THE EXTENT NOT REIMBURSED BY OBLIGORS, ON A PRO RATA BASIS, AGAINST ALL CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY SUCH INDEMNITEE, PROVIDED THAT ANY CLAIM AGAINST AN AGENT INDEMNITEE RELATES TO OR ARISES FROM ITS ACTING AS OR FOR AGENT (IN THE CAPACITY OF AGENT). In Agent's discretion, it may reserve for any Claims made against an Agent Indemnitee or Issuing Bank Indemnitee, and may satisfy any judgment, order or settlement relating thereto, from proceeds of Collateral prior to making any distribution of Collateral proceeds to Secured Parties. If Agent is sued by any receiver, trustee or other Person for any alleged preference or fraudulent transfer, then any monies paid by Agent in settlement or satisfaction of such proceeding, together with all interest, costs and expenses (including attorneys' fees) incurred in the defense of same, shall be promptly reimbursed to Agent by each Secured Party to the extent of its Pro Rata share.

 

12.7.     Limitation on Responsibilities of Agent. Agent shall not be liable to any Secured Party for any action taken or omitted to be taken under the Loan Documents, except for losses directly and solely caused by Agent's gross negligence or willful misconduct. Agent does not assume any responsibility for any failure or delay in performance or any breach by any Obligor, Lender or other Secured Party of any obligations under the Loan Documents. Agent does not make any express or implied representation, warranty or guarantee to Secured Parties with respect to any Obligations, Collateral, Liens, Loan Documents or Obligor. No Agent Indemnitee shall be responsible to Secured Parties for any recitals, statements, information, representations or warranties contained in any Loan Documents or Borrower Materials; the execution, validity, genuineness, effectiveness or enforceability of any Loan Documents; the genuineness, enforceability, collectability, value, sufficiency, location or existence of any Collateral, or the validity, extent, perfection or priority of any Lien therein; the validity, enforceability or collectability of any Obligations; or the assets, liabilities, financial condition, results of operations, business, creditworthiness or legal status of any Obligor or Account Debtor. No Agent Indemnitee shall have any obligation to any Secured Party to ascertain or inquire into the existence of any Default or Event of Default, the observance by any Obligor of any terms of the Loan Documents, or the satisfaction of any conditions precedent contained in any Loan Documents.

 

 

 

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12.8.      Successor Agent and Co-Agents.

 

12.8.1.     Resignation; Successor Agent. Agent may resign at any time by giving at least 30 days written notice thereof to Lenders and Borrowers. Required Lenders may appoint a successor to replace the resigning Agent, which successor shall be (a) a Lender or an Affiliate of a Lender; or (b) a financial institution reasonably acceptable to Required Lenders and (provided no Default or Event of Default exists) Borrowers. If no successor agent is appointed prior to the effective date of Agent's resignation, then Agent may appoint a successor agent that is a financial institution acceptable to it (which shall be a Lender unless no Lender accepts the role) or in the absence of such appointment, Required Lenders shall on such date assume all rights and duties of Agent hereunder. Upon acceptance by any successor Agent of its appointment hereunder, such successor Agent shall thereupon succeed to and become vested with all the powers and duties of the retiring Agent without further act. On the effective date of its resignation, the retiring Agent shall be discharged from its duties and obligations hereunder but shall continue to have all rights and protections under the Loan Documents with respect to actions taken or omitted to be taken by it while Agent, including the indemnification set forth in Sections 12.6 and 14.2, and all rights and protections under this Section 12. Any successor to Bank of America by merger or acquisition of stock or this loan shall continue to be Agent hereunder without further act on the part of any Secured Party or Obligor.

 

12.8.2.     Co-Collateral Agent. If appropriate under Applicable Law, Agent may appoint a Person to serve as a co-collateral agent or separate collateral agent under any Loan Document. Each right, remedy and protection intended to be available to Agent under the Loan Documents shall also be vested in such agent. Secured Parties shall execute and deliver any instrument or agreement that Agent may request to effect such appointment. If any such agent shall die, dissolve, become incapable of acting, resign or be removed, then all the rights and remedies of the agent, to the extent permitted by Applicable Law, shall vest in and be exercised by Agent until appointment of a new agent.

 

12.9.      Due Diligence and Non-Reliance. Each Lender acknowledges and agrees that it has, independently and without reliance upon Agent or any other Lenders, and based upon such documents, information and analyses as it has deemed appropriate, made its own credit analysis of each Obligor and its own decision to enter into this Agreement and to fund Loans and participate in LC Obligations hereunder. Each Secured Party has made such inquiries as it feels necessary concerning the Loan Documents, Collateral and Obligors. Each Secured Party acknowledges and agrees that the other Secured Parties have made no representations or warranties concerning any Obligor, any Collateral or the legality, validity, sufficiency or enforceability of any Loan Documents or Obligations. Each Secured Party will, independently and without reliance upon any other Secured Party, and based upon such financial statements, documents and information as it deems appropriate at the time, continue to make and rely upon its own credit decisions in making Loans and participating in LC Obligations, and in taking or refraining from any action under any Loan Documents. Except for notices, reports and other information expressly requested by a Lender, Agent shall have no duty or responsibility to provide any Secured Party with any notices, reports or certificates furnished to Agent by any Obligor or any credit or other information concerning the affairs, financial condition, business or Properties of any Obligor (or any of its Affiliates) which may come into possession of Agent or its Affiliates.

 

12.10.    Remittance of Payments and Collections.

 

12.10.1.     Remittances Generally. All payments by any Lender to Agent shall be made by the time and on the day set forth in this Agreement, in immediately available funds. If no time for payment is specified or if payment is due on demand by Agent and request for payment is made by Agent by 1:00 p.m. on a Business Day, payment shall be made by Lender not later than 3:00 p.m. on such day, and if request is made after 1:00 p.m., then payment shall be made by 11:00 a.m. on the next Business Day. Payment by Agent to any Secured Party shall be made by wire transfer, in the type of funds received by Agent. Any such payment shall be subject to Agent's right of offset for any amounts due from such payee under the Loan Documents.

 

 

 

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12.10.2.     Failure to Pay. If any Secured Party fails to pay any amount when due by it to Agent pursuant to the terms hereof, such amount shall bear interest, from the due date until paid in full, at the greater of the Federal Funds Rate or the rate determined by Agent as customary for interbank compensation for two Business Days and thereafter at the Default Rate for Base Rate Revolver Loans. In no event shall Borrowers be entitled to credit for any interest paid by a Secured Party to Agent, nor shall a Defaulting Lender be entitled to interest on amounts held by Agent pursuant to Section 4.2.

 

12.10.3.     Recovery of Payments. If Agent pays an amount to a Secured Party in the expectation that a related payment will be received by Agent from an Obligor and such related payment is not received, then Agent may recover such amount from the Secured Party. If Agent determines that an amount received by it must be returned or paid to an Obligor or other Person pursuant to Applicable Law or otherwise, then Agent shall not be required to distribute such amount to any Secured Party. If any amounts received and applied by Agent to Obligations held by a Secured Party are later required to be returned by Agent pursuant to Applicable Law, such Secured Party shall pay to Agent, on demand, its share of the amounts required to be returned.

 

12.1.     Individual Capacities. As a Lender, Bank of America shall have the same rights and remedies under the Loan Documents as any other Lender, and the terms "Lenders," "Required Lenders" or any similar term shall include Bank of America in its capacity as a Lender. Agent, Lenders and their Affiliates may accept deposits from, lend money to, provide Bank Products to, act as financial or other advisor to, and generally engage in any kind of business with, Obligors and their Affiliates, as if they were not Agent or Lenders hereunder, without any duty to account therefor to any Secured Party. In their individual capacities, Agent, Lenders and their Affiliates may receive information regarding Obligors, their Affiliates and their Account Debtors (including information subject to confidentiality obligations), and shall have no obligation to provide such information to any Secured Party.

 

12.2.     Titles. Each Lender, other than Bank of America, that is designated in connection with this credit facility as an "Arranger," "Bookrunner" or "Agent" of any kind shall have no right or duty under any Loan Documents other than those applicable to all Lenders, and shall in no event have any fiduciary duty to any Secured Party.

 

12.3.     Bank Product Providers. Each Secured Bank Product Provider, by delivery of a notice to Agent of a Bank Product, agrees to be bound by the Loan Documents, including Sections 5.6, 14.3.3 and 12. Each Secured Bank Product Provider shall indemnify and hold harmless Agent Indemnitees, to the extent not reimbursed by Obligors, against all Claims that may be incurred by or asserted against any Agent Indemnitee in connection with such provider's Secured Bank Product Obligations.

 

12.4.      No Third Party Beneficiaries. This Section 12 is an agreement solely among Secured Parties and Agent, and shall survive Full Payment of the Obligations. This Section 12 does not confer any rights or benefits upon Borrowers or any other Person. As between Borrowers and Agent, any action that Agent may take under any Loan Documents or with respect to any Obligations shall be conclusively presumed to have been authorized and directed by Secured Parties.

 

Section 13.     BENEFIT OF AGREEMENT; ASSIGNMENTS

 

13.1.     Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Borrowers, Agent, Lenders, Secured Parties, and their respective successors and assigns, except that (a) no Borrower shall have the right to assign its rights or delegate its obligations under any Loan Documents; and (b) any assignment by a Lender must be made in compliance with Section 13.3. Agent may treat the Person which made any Loan as the owner thereof for all purposes until such Person makes an assignment in accordance with Section 13.3. Any authorization or consent of a Lender shall be conclusive and binding on any subsequent transferee or assignee of such Lender.

 

 

 

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13.2.      Participations.

 

13.2.1.     Permitted Participants; Effect. Subject to Section 13.3.3, any Lender may sell to a financial institution ("Participant") a participating interest in the rights and obligations of such Lender under any Loan Documents. Despite any sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, it shall remain solely responsible to the other parties hereto for performance of such obligations, it shall remain the holder of its Loans and Commitments for all purposes, all amounts payable by Borrowers shall be determined as if it had not sold such participating interests, and Borrowers and Agent shall continue to deal solely and directly with such Lender in connection with the Loan Documents. Each Lender shall be solely responsible for notifying its Participants of any matters under the Loan Documents, and Agent and the other Lenders shall not have any obligation or liability to any such Participant. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 5.9 unless Borrowers agree otherwise in writing.

 

13.2.2.     Voting Rights. Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, waiver or other modification of a Loan Document other than that which forgives principal, interest or fees, reduces the stated interest rate or fees payable with respect to any Loan or Commitment in which such Participant has an interest, postpones the Commitment Termination Date or any date fixed for any regularly scheduled payment of principal, interest or fees on such Loan or Commitment, or releases any Borrower, Guarantor or substantially all Collateral.

 

13.2.3.     Participant Register. Each Lender that sells a participation shall, acting as a non-fiduciary agent of Borrowers (solely for tax purposes), maintain a register in which it enters the Participant's name, address and interest in Commitments, Loans (and stated interest) and LC Obligations. Entries in the register shall be conclusive, absent manifest error, and such Lender shall treat each Person recorded in the register as the owner of the participation for all purposes, notwithstanding any notice to the contrary. No Lender shall have an obligation to disclose any information in such register except to the extent necessary to establish that a Participant's interest is in registered form under the Code.

 

13.2.4.     Benefit of Setoff. Borrowers agree that each Participant shall have a right of set-off in respect of its participating interest to the same extent as if such interest were owing directly to a Lender, and each Lender shall also retain the right of set-off with respect to any participating interests sold by it. By exercising any right of set-off, a Participant agrees to share with Lenders all amounts received through its set-off, in accordance with Section 12.5 as if such Participant were a Lender.

 

13.3.      Assignments.

 

13.3.1.     Permitted Assignments. A Lender may assign to an Eligible Assignee any of its rights and obligations under the Loan Documents, as long as (a) each assignment is of a constant, and not a varying, percentage of the transferor Lender's rights and obligations under the Loan Documents and, in the case of a partial assignment, is in a minimum principal amount of $15,000,000 (unless otherwise agreed by Agent in its discretion) and integral multiples of $1,000,000 in excess of that amount; (b) except in the case of an assignment in whole of a Lender's rights and obligations, the aggregate amount of the Commitments retained by the transferor Lender is at least $10,000,000 (unless otherwise agreed by Agent in its discretion); and (c) the parties to each such assignment shall execute and deliver an Assignment to Agent for acceptance and recording. Nothing herein shall limit the right of a Lender to pledge or assign any rights under the Loan Documents to secure obligations of such Lender, including a pledge or assignment to a Federal Reserve Bank; provided, however, that no such pledge or assignment shall release the Lender from its obligations hereunder nor substitute the pledge or assignee for such Lender as a party hereto.

 

 

 

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13.3.2.     Effect; Effective Date. Upon delivery to Agent of an assignment notice in the form of Exhibit B and a processing fee of $3,500 (unless otherwise agreed by Agent in its discretion), the assignment shall become effective as specified in the notice, if it complies with this Section 13.3. From such effective date, the Eligible Assignee shall for all purposes be a Lender under the Loan Documents, and shall have all rights and obligations of a Lender thereunder. Upon consummation of an assignment, the transferor Lender, Agent and Borrowers shall make appropriate arrangements for issuance of replacement and/or new notes, if applicable. The transferee Lender shall comply with Section 5.10 and deliver, upon request, an administrative questionnaire satisfactory to Agent.

 

13.3.3.     Certain Assignees. No assignment or participation may be made to a Borrower, Affiliate of a Borrower, Defaulting Lender or natural person. Agent have no obligation to determine whether any assignee is permitted under the Loan Documents. Assignment by a Defaulting Lender shall be effective only if there is concurrent satisfaction of all outstanding obligations of the Defaulting Lender under the Loan Documents in a manner satisfactory to Agent, including payment by the Eligible Assignee or Defaulting Lender to Agent of an aggregate amount sufficient upon distribution (through direct payment, purchases of participations or other methods acceptable to Agent) to satisfy all funding and payment liabilities of the Defaulting Lender. If assignment by a Defaulting Lender occurs (by operation of law or otherwise) without compliance with the foregoing sentence, the assignee shall be deemed a Defaulting Lender for all purposes until compliance occurs.

 

13.3.4.     Register. Agent, acting as a non-fiduciary agent of Borrowers (solely for tax purposes), shall maintain (a) a copy (or electronic equivalent) of each Assignment and Acceptance delivered to it, and (b) a register for recordation of the names, addresses and Commitments of, and the Loans, interest and LC Obligations owing to, each Lender. Entries in the register shall be conclusive, absent manifest error, and Borrowers, Agent and Lenders shall treat each Person recorded in such register as a Lender for all purposes under the Loan Documents, notwithstanding any notice to the contrary. Agent may choose to show only one Borrower as the borrower in the register, without any effect on the liability of any Obligor with respect to the Obligations. The register shall be available for inspection by Borrowers or any Lender, from time to time upon reasonable notice.

 

13.4.      Replacement of Certain Lenders. If a Lender (a) within the last 120 days failed to give its consent to any amendment, waiver or action for which consent of all Lenders was required and Required Lenders consented, (b) is a Defaulting Lender, or (c) within the last 120 days gave a notice under Section 3.5 or requested payment or compensation under Section 3.7 or 5.9 (and has not designated a different Lending Office pursuant to Section 3.8), then Agent or Borrower Agent may, upon 10 days notice to such Lender, require it to assign its rights and obligations under the Loan Documents to Eligible Assignee(s), pursuant to appropriate Assignment(s), within 20 days after the notice. Agent is irrevocably appointed as attorney-in-fact to execute any such Assignment if the Lender fails to execute it. Such Lender shall be entitled to receive, in cash, concurrently with such assignment, all amounts owed to it under the Loan Documents through the date of assignment.

 

Section 14.     MISCELLANEOUS

 

14.1.      Consents, Amendments and Waivers.

 

14.1.1.     Amendment. No modification of any Loan Document, including any extension or amendment of a Loan Document or any waiver of a Default or Event of Default, shall be effective without the prior written agreement of Agent (with the consent of Required Lenders) and each Obligor party to such Loan Document; provided, however, that 

 

(a)     without the prior written consent of Agent, no modification shall alter any provision in a Loan Document that relates to any rights, duties or discretion of Agent;

 

 

 

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(b)     without the prior written consent of Issuing Bank, no modification shall alter Section 2.3 or any other provision in a Loan Document that relates to Letters of Credit or any rights, duties or discretion of Issuing Bank;

 

(c)     without the prior written consent of each affected Lender, including a Defaulting Lender, no modification shall (i) increase the Commitment of such Lender; (ii) reduce the amount of, or waive or delay payment of, any principal, interest or fees payable to such Lender (except as provided in Section 4.2); (iii) extend the Revolver Termination Date applicable to such Lender's Obligations; or (iv) amend this clause (c);

 

(d)     without the prior written consent of all Lenders (except any Defaulting Lender), no modification shall (i) alter Section 5.6.2, 7.1 (except to add Collateral) or 14.1.1; (ii) amend the definition of Borrowing Base, Availability Block, Accounts Formula Amount or Inventory Formula Amount (or any defined term used in such definitions) if the effect of such amendment is to increase borrowing availability, Pro Rata or Required Lenders; (iii) decrease the Availability Block; (iv) release all or substantially all Collateral; or (v) except in connection with a merger, disposition or similar transaction expressly permitted hereby, release any Obligor from liability for any Obligations; and

 

(e)     without the prior written consent of a Secured Bank Product Provider, no modification shall affect its relative payment priority under Section 5.6.2.

 

14.1.2.     Limitations. The agreement of Borrowers shall not be required for any modification of a Loan Document that deals solely with the rights and duties of Lenders, Agent and/or Issuing Bank as among themselves. Only the consent of the parties to any agreement relating to fees or a Bank Product shall be required for modification of such agreement, and no Bank Product provider (in such capacity) shall have any right to consent to modification of any Loan Document other than its Bank Product agreement. Any waiver or consent granted by Agent or Lenders hereunder shall be effective only if in writing and only for the matter specified.

 

14.1.3.     Payment for Consents. No Borrower will, directly or indirectly, pay any remuneration or other thing of value, whether by way of additional interest, fee or otherwise, to any Lender (in its capacity as a Lender hereunder) as consideration for agreement by such Lender with any modification of any Loan Documents, unless such remuneration or value is concurrently paid, on the same terms, on a Pro Rata basis to all Lenders providing their consent.

 

14.2.      Indemnity. EACH BORROWER SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES AGAINST ANY CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE, INCLUDING CLAIMS ASSERTED BY ANY OBLIGOR OR OTHER PERSON OR ARISING FROM THE NEGLIGENCE OF AN INDEMNITEE. In no event shall any party to a Loan Document have any obligation thereunder to indemnify or hold harmless an Indemnitee with respect to a Claim that is determined in a final, non-appealable judgment by a court of competent jurisdiction to result from the gross negligence or willful misconduct of such Indemnitee.

 

14.3.     Notices and Communications.

 

14.3.1.     Notice Address. Subject to Section 4.1.4, all notices and other communications by or to a party hereto shall be in writing and shall be given to any Borrower, at Borrower Agent's address shown on the signature pages hereof, and to any other Person at its address shown on the signature pages hereof (or, in the case of a Person who becomes a Lender after the Closing Date, at the address shown on its Assignment), or at such other address as a party may hereafter specify by notice in accordance with this Section 14.3. Each communication shall be effective only (a) if given by facsimile transmission, when transmitted to the applicable facsimile number, if confirmation of receipt is received; (b) if given by mail, three Business Days after deposit in the U.S. mail, with first-class postage pre-paid, addressed to the applicable address; or (c) if given by personal delivery, when duly delivered to the notice address with receipt acknowledged. Notwithstanding the foregoing, no notice to Agent pursuant to Section 2.1.4, 2.3, 3.1.2, 4.1.1 or 5.3.3 shall be effective until actually received by the individual to whose attention at Agent such notice is required to be sent. Any written communication that is not sent in conformity with the foregoing provisions shall nevertheless be effective on the date actually received by the noticed party. Any notice received by Borrower Agent shall be deemed received by all Borrowers.

 

 

 

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14.3.2.     Communications. Electronic communications (including e-mail, messaging and websites) may be used only in a manner acceptable to Agent and only for routine communications, such as delivery of Borrower Materials, administrative matters, distribution of Loan Documents and matters permitted under Section 4.1.4. Secured Parties make no assurance as to the privacy or security of electronic communications. E-mail and voice mail shall not be effective notices under the Loan Documents.

 

14.3.3.     Platform. Borrower Materials shall be delivered pursuant to procedures approved by Agent, including electronic delivery (if possible) upon request by Agent to an electronic system maintained by Agent ("Platform"). Borrowers shall notify Agent of each posting of Borrower Materials on the Platform and the materials shall be deemed received by Agent only upon its receipt of such notice. Borrower Materials and other information relating to this credit facility may be made available to Secured Parties on the Platform. The Platform is provided "as is" and "as available." Agent does not warrant the accuracy or completeness of any information on the Platform nor the adequacy or functioning of the Platform, and expressly disclaims liability for any errors or omissions in the Borrower Materials or any issues involving the Platform. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS, OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY AGENT WITH RESPECT TO BORROWER MATERIALS OR THE PLATFORM. No Agent Indemnitee shall have any liability to Borrowers, Secured Parties or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) relating to use by any Person of the Platform, including any unintended recipient, nor for delivery of Borrower Materials and other information via the Platform, internet, e-mail, or any other electronic platform or messaging system.

 

14.3.4.     Public Information. Obligors and Secured Parties acknowledge that "public" information may not be segregated from material non-public information on the Platform. Secured Parties acknowledge that Borrower Materials may include Obligors' material non-public information, and should not be made available to personnel who do not wish to receive such information or may be engaged in investment or other market-related activities with respect to an Obligor's securities.

 

14.3.5.     Non-Conforming Communications. Agent and Lenders may rely upon any communications purportedly given by or on behalf of any Borrower even if they were not made in a manner specified herein, were incomplete or were not confirmed, or if the terms thereof, as understood by the recipient, varied from a later confirmation. Each Borrower shall indemnify and hold harmless each Indemnitee from any liabilities, losses, costs and expenses arising from any electronic or telephonic communication purportedly given by or on behalf of a Borrower.

 

14.4      Performance of Borrowers' Obligations. Agent may, in its discretion at any time and from time to time, at Borrowers' expense, pay any amount or do any act required of a Borrower under any Loan Documents or otherwise lawfully requested by Agent to (a) enforce any Loan Documents or collect any Obligations; (b) protect, insure, maintain or realize upon any Collateral; or (c) defend or maintain the validity or priority of Agent's Liens in any Collateral, including any payment of a judgment, insurance premium, warehouse charge, finishing or processing charge, or landlord claim, or any discharge of a Lien. All payments, costs and expenses (including Extraordinary Expenses) of Agent under this Section shall be reimbursed to Agent by Borrowers, on demand, with interest from the date incurred until paid in full, at the Default Rate applicable to Base Rate Revolver Loans. Any payment made or action taken by Agent under this Section shall be without prejudice to any right to assert an Event of Default or to exercise any other rights or remedies under the Loan Documents.

 

 

 

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14.5.     Credit Inquiries. Agent and Lenders may (but shall have no obligation) to respond to usual and customary credit inquiries from third parties concerning any Obligor or Subsidiary.

 

14.6.     Severability. Wherever possible, each provision of the Loan Documents shall be interpreted in such manner as to be valid under Applicable Law. If any provision is found to be invalid under Applicable Law, it shall be ineffective only to the extent of such invalidity and the remaining provisions of the Loan Documents shall remain in full force and effect.

 

14.7.     Cumulative Effect; Conflict of Terms. The provisions of the Loan Documents are cumulative. The parties acknowledge that the Loan Documents may use several limitations or measurements to regulate similar matters, and they agree that these are cumulative and that each must be performed as provided. Except as otherwise provided in another Loan Document (by specific reference to the applicable provision of this Agreement), if any provision contained herein is in direct conflict with any provision in another Loan Document, the provision herein shall govern and control.

 

14.8.      Counterparts; Execution. Any Loan Document may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement shall become effective when Agent has received counterparts bearing the signatures of all parties hereto. Agent may (but shall have no obligation to) accept any signature, contract formation or record-keeping through electronic means, which shall have the same legal validity and enforceability as manual or paper-based methods, to the fullest extent permitted by Applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any similar state law based on the Uniform Electronic Transactions Act.

 

14.9.     Entire Agreement. Time is of the essence with respect to all Loan Documents and Obligations. The Loan Documents constitute the entire agreement, and supersede all prior understandings and agreements, among the parties relating to the subject matter thereof.

 

14.10.    Relationship with Lenders. The obligations of each Lender hereunder are several, and no Lender shall be responsible for the obligations or Commitments of any other Lender. Amounts payable hereunder to each Lender shall be a separate and independent debt. It shall not be necessary for Agent or any other Lender to be joined as an additional party in any proceeding for such purposes. Nothing in this Agreement and no action of Agent, Lenders or any other Secured Party pursuant to the Loan Documents or otherwise shall be deemed to constitute Agent and any Secured Party to be a partnership, joint venture or similar arrangement, nor to constitute control of any Obligor.

 

14.11.   No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated by any Loan Document, Borrowers acknowledge and agree that (a)(i) this credit facility and any arranging or other services by Agent, any Lender, any of their Affiliates or any arranger are arm's-length commercial transactions between Borrowers and their Affiliates, on one hand, and Agent, any Lender, any of their Affiliates or any arranger, on the other hand; (ii) Borrowers have consulted their own legal, accounting, regulatory and tax advisors to the extent they have deemed appropriate; and (iii) Borrowers are capable of evaluating, and understand and accept, the terms, risks and conditions of the transactions contemplated by the Loan Documents; (b) each of Agent, Lenders, their Affiliates and any arranger is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for Borrowers, their Affiliates or any other Person, and has no obligation with respect to the transactions contemplated by the Loan Documents except as expressly set forth therein; and (c) Agent, Lenders, their Affiliates and any arranger may be engaged in a broad range of transactions that involve interests that differ from those of Borrowers and their Affiliates, and have no obligation to disclose any of such interests to Borrowers or their Affiliates. To the fullest extent permitted by Applicable Law, each Borrower hereby waives and releases any claims that it may have against Agent, Lenders, their Affiliates and any arranger with respect to any breach of agency or fiduciary duty in connection with any transaction contemplated by a Loan Document.

 

 

 

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14.12.    Confidentiality. Each of Agent, Lenders and Issuing Bank shall maintain the confidentiality of all Information (as defined below), except that Information may be disclosed (a) to its Affiliates, and to its and their partners, directors, officers, employees, agents, advisors and representatives (provided they are informed of the confidential nature of the Information and instructed to keep it confidential); (b) to the extent requested by any governmental, regulatory or self-regulatory authority purporting to have jurisdiction over it or its Affiliates; (c) to the extent required by Applicable Law or by any subpoena or other legal process; (d) to any other party hereto; (e) in connection with any action or proceeding relating to any Loan Documents or Obligations; (f) subject to an agreement containing provisions substantially the same as this Section, to any Transferee or any actual or prospective party (or its advisors) to any Bank Product or to any swap, derivative or other transaction under which payments are to be made by reference to an Obligor or Obligor's obligations; (g) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) is available to Agent, any Lender, Issuing Bank or any of their Affiliates on a nonconfidential basis from a source other than Borrowers; (h) on a confidential basis to a provider of a Platform; or (i) with the consent of Borrower Agent. Notwithstanding the foregoing, Agent and Lenders may publish or disseminate general information concerning this credit facility for league table, tombstone and advertising purposes, and may use Borrowers' logos, trademarks or product photographs in advertising materials. As used herein, "Information" means information received from an Obligor or Subsidiary relating to it or its business except information that is identified as non-confidential when delivered. A Person required to maintain the confidentiality of Information pursuant to this Section shall be deemed to have complied if it exercises a degree of care similar to that accorded its own confidential information. Each of Agent, Lenders and Issuing Bank acknowledges that (i) Information may include material non-public information; (ii) it has developed compliance procedures regarding the use of such information; and (iii) it will handle the material non-public information in accordance with Applicable Law.

 

14.13.     [Intentionally Omitted].

 

14.14.    GOVERNING LAW. UNLESS EXPRESSLY PROVIDED IN ANY LOAN DOCUMENT, THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL CLAIMS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES EXCEPT FEDERAL LAWS RELATING TO NATIONAL BANKS.

 

14.15.   Consent to Forum.

 

14.15.1.      Forum. EACH BORROWER HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE COURT SITTING IN NEW YORK COUNTY, NEW YORK OR THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, IN ANY DISPUTE, ACTION, LITIGATION OR OTHER PROCEEDING RELATING IN ANY WAY TO ANY LOAN DOCUMENTS, AND AGREES THAT ANY DISPUTE, ACTION, LITIGATION OR OTHER PROCEEDING SHALL BE BROUGHT BY IT SOLELY IN ANY SUCH COURT. EACH BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES ALL CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING ANY SUCH COURT'S PERSONAL OR SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 14.3.1. A final judgment in any proceeding of any such court shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or any other manner provided by Applicable Law.

 

 

 

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14.15.2.      Other Jurisdictions. Nothing herein shall limit the right of Agent or any Lender to bring proceedings against any Obligor in any other court, nor limit the right of any party to serve process in any other manner permitted by Applicable Law. Nothing in this Agreement shall be deemed to preclude enforcement by Agent of any judgment or order obtained in any forum or jurisdiction.

 

14.16    Waivers by Borrowers. To the fullest extent permitted by Applicable Law, each Borrower waives (a) the right to trial by jury (which Agent and each Lender hereby also waives) in any proceeding or dispute of any kind relating in any way to any Loan Documents, Obligations or Collateral; (b) presentment, demand, protest, notice of presentment, default, non-payment, maturity, release, compromise, settlement, extension or renewal of any commercial paper, accounts, documents, instruments, chattel paper and guaranties at any time held by Agent on which a Borrower may in any way be liable, and hereby ratifies anything Agent may do in this regard; (c) notice prior to taking possession or control of any Collateral; (d) any bond or security that might be required by a court prior to allowing Agent to exercise any rights or remedies; (e) the benefit of all valuation, appraisement and exemption laws; (f) any claim against Agent, Issuing Bank or any Lender, on any theory of liability, for special, indirect, consequential, exemplary or punitive damages (as opposed to direct or actual damages) in any way relating to any Enforcement Action, Obligations, Loan Documents or transactions relating thereto; and (g) notice of acceptance hereof. Each Borrower acknowledges that the foregoing waivers are a material inducement to Agent, Issuing Bank and Lenders entering into this Agreement and that they are relying upon the foregoing in their dealings with Borrowers. Each Borrower has reviewed the foregoing waivers with its legal counsel and has knowingly and voluntarily waived its jury trial and other rights following consultation with legal counsel. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

 

14.17.   Patriot Act Notice. Agent and Lenders hereby notify Borrowers that pursuant to the Patriot Act, Agent and Lenders are required to obtain, verify and record information that identifies each Borrower, including its legal name, address, tax ID number and other information that will allow Agent and Lenders to identify it in accordance with the Patriot Act. Agent and Lenders will also require information regarding each personal guarantor, if any, and may require information regarding Borrowers' management and owners, such as legal name, address, social security number and date of birth. Borrowers shall, promptly upon request, provide all documentation and other information as Agent, Issuing Bank or any Lender may request from time to time in order to comply with any obligations under any "know your customer," anti-money laundering or other requirements of Applicable Law.

 

14.18     NO ORAL AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.

 

[Remainder of page intentionally left blank; signatures begin on following page]

 

 

 

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IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date set forth above.

 

	  	
BORROWERS:

 

NORTHWEST PIPE COMPANY,

an Oregon corporation

 

 

By: ____________________________
Printed Name: Robin Gantt
Title: Chief Financial Officer 

Address:

5721 SE Columbia Way

Suite 200

Vancouver, WA 98661-5991

Attn: Robin Gantt, Chief Financial Officer 

Facsimile: (360) 397-6257

	  	  
	  	  
	 	
PERMALOK CORPORATION,

a Missouri corporation

 

 

By:                                                                 
Printed Name: Scott Montross 
Title: President 

 

Address:

                  5721 SE Columbia Way
                  Suite 200
                  Vancouver, WA 98661-5991

                  Attn: Scott Montross, President 
                  Facsimile: (360) 397-6257

 

 

72

 

 

 

	  	
AGENT AND LENDERS:

 

BANK OF AMERICA, N.A.,

as Agent and Lender

 

 

By:  _______________________________
        Gregory A. Jones

        Senior Vice President 

Address:

400 4th Street

Mailcode: OR1-110-01-15

Lake Oswego, OR 97034

Attn: Gregory A. Jones

Facsimile: (503) 303-6076

 

	  	  
	  	  

 

 

 

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ExhibIT A

to

Loan and Security Agreement

 

 

ASSIGNMENT AND ACCEPTANCE

 

Reference is made to the Loan and Security Agreement dated as of October 26, 2015, as amended ("Loan Agreement"), among NORTHWEST PIPE COMPANY, an Oregon corporation ("Borrower 1") and PERMALOK CORPORATION, a Missouri corporation ("Borrower 2" and together with Borrower 1, collectively "Borrowers"), BANK OF AMERICA, N.A., as agent ("Agent") for the financial institutions from time to time party to the Loan Agreement ("Lenders"), and such Lenders. Terms are used herein as defined in the Loan Agreement.

 

______________________________________ ("Assignor") and _________________________ _____________ ("Assignee") agree as follows:

 

1.     Assignor hereby assigns to Assignee and Assignee hereby purchases and assumes from Assignor (a) a principal amount of $________ of Assignor's outstanding Revolver Loans and $___________ of Assignor's participations in LC Obligations, and (b) the amount of $__________ of Assignor's Revolver Commitment (which represents ____% of the total Revolver Commitments) (the foregoing items being, collectively, "Assigned Interest"), together with an interest in the Loan Documents corresponding to the Assigned Interest. This Agreement shall be effective as of the date ("Effective Date") indicated in the corresponding Assignment Notice delivered to Agent, provided such Assignment Notice is executed by Assignor, Assignee, Agent and Borrower Agent, if applicable. From and after the Effective Date, Assignee hereby expressly assumes, and undertakes to perform, all of Assignor's obligations in respect of the Assigned Interest, and all principal, interest, fees and other amounts which would otherwise be payable to or for Assignor's account in respect of the Assigned Interest shall be payable to or for Assignee's account, to the extent such amounts accrue on or after the Effective Date.

 

2.     Assignor (a) represents that as of the date hereof, prior to giving effect to this assignment, its Revolver Commitment is $__________, and the outstanding balance of its Revolver Loans and participations in LC Obligations is $__________; (b) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement or any other instrument or document furnished pursuant thereto, other than that Assignor is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; and (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrowers or the performance by Borrowers of their obligations under the Loan Documents. [Assignor is attaching the promissory note[s] held by it and requests that Agent exchange such note[s] for new promissory notes payable to Assignee [and Assignor].]

 

3.     Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment; (b) confirms that it has received copies of the Loan Agreement and such other Loan Documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment; (c) agrees that it shall, independently and without reliance upon Assignor and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents; (d) confirms that it is an Eligible Assignee; (e) appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under the Loan Agreement as are delegated to Agent by the terms thereof, together with such powers as are incidental thereto; (f) agrees that it will observe and perform all obligations that are required to be performed by it as a "Lender" under the Loan Documents; and (g) represents and warrants that the assignment evidenced hereby will not result in a non-exempt "prohibited transaction" under Section 406 of ERISA.

 

 

 

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4.     This Agreement shall be governed by the laws of the State of ______________. If any provision is found to be invalid under Applicable Law, it shall be ineffective only to the extent of such invalidity and the remaining provisions of this Agreement shall remain in full force and effect.

 

5.     Each notice or other communication hereunder shall be in writing, shall be sent by messenger, by telecopy or facsimile transmission, or by first-class mail, shall be deemed given when sent and shall be sent as follows:

 

	 	
(a)
	
If to Assignee, to the following address (or to such other address as Assignee may designate from time to time):

 

__________________________

__________________________

__________________________

 

	 	
(b)
	
If to Assignor, to the following address (or to such other address as Assignor may designate from time to time):

__________________________

__________________________

__________________________

__________________________

 

Payments hereunder shall be made by wire transfer of immediately available Dollars as follows:

 

If to Assignee, to the following account (or to such other account as Assignee may designate from time to time):

 

______________________________

______________________________

ABA No._______________________

______________________________

Account No.____________________

Reference: _____________________

 

If to Assignor, to the following account (or to such other account as Assignor may designate from time to time):

 

______________________________

______________________________

ABA No._______________________

______________________________

Account No.____________________

Reference: _____________________

 

 

 

75

 

 

IN WITNESS WHEREOF, this Assignment and Acceptance is executed as of _____________.

 

_____________________________________

("Assignee")

 

 

By___________________________________

     Title:

 

_____________________________________

("Assignor")

 

 

By___________________________________

     Title:

 

 

 

 

76

 

 

ExhibIT B

to

Loan and Security Agreement

 

 

ASSIGNMENT NOTICE

 

Reference is made to (1) the Loan and Security Agreement dated as of October 26, 2015, as amended ("Loan Agreement"), among NORTHWEST PIPE COMPANY, an Oregon corporation ("Borrower 1") and PERMALOK CORPORATION, a Missouri corporation ("Borrower 2" and together with Borrower 1, collectively "Borrowers"), BANK OF AMERICA, N.A., as agent ("Agent") for the financial institutions from time to time party to the Loan Agreement ("Lenders"), and such Lenders; and (2) the Assignment and Acceptance dated as of ____________, 20__ ("Assignment"), between __________________ ("Assignor") and ____________________ ("Assignee"). Terms are used herein as defined in the Loan Agreement.

 

Assignor hereby notifies Borrowers and Agent of Assignor's intent to assign to Assignee pursuant to the Assignment (a) a principal amount of $________ of Assignor's outstanding Revolver Loans and $___________ of Assignor's participations in LC Obligations, and (b) the amount of $__________ of Assignor's Revolver Commitment (which represents ____% of the total Revolver Commitments) (the foregoing items being, collectively, the "Assigned Interest"), together with an interest in the Loan Documents corresponding to the Assigned Interest. This Agreement shall be effective as of the date ("Effective Date") indicated below, provided this Assignment Notice is executed by Assignor, Assignee, Agent and Borrower Agent, if applicable. Pursuant to the Assignment, Assignee has expressly assumed all of Assignor's obligations under the Loan Agreement to the extent of the Assigned Interest, as of the Effective Date.

 

For purposes of the Loan Agreement, Agent shall deem Assignor's Revolver Commitment to be reduced by $_________, and Assignee's Revolver Commitment to be increased by $_________.

 

The address of Assignee to which notices and information are to be sent under the terms of the Loan Agreement is:

 

________________________

________________________

________________________

________________________

 

The address of Assignee to which payments are to be sent under the terms of the Loan Agreement is shown in the Assignment.

 

This Notice is being delivered to Borrowers and Agent pursuant to Section 13.3 of the Loan Agreement. Please acknowledge your acceptance of this Notice by executing and returning to Assignee and Assignor a copy of this Notice.

 

 

IN WITNESS WHEREOF, this Assignment Notice is executed as of _____________.

 

_____________________________________

("Assignee")

 

 

By___________________________________

     Title:

 

_____________________________________

("Assignor")

 

 

By___________________________________

     Title:

 

ACKNOWLEDGED AND AGREED,

AS OF THE DATE SET FORTH ABOVE:

 

BORROWER AGENT:*

 

_________________________________

 

 

By_______________________________

     Title:

 

* No signature required if Assignee is a Lender, Affiliate of a Lender or Approved Fund, or if an Event of Default exists.

 

BANK OF AMERICA, N.A.,

as Agent

 

 

By_______________________________

     Title:

 

 

 

77

 

 

 SCHEDULE 1.1

to

Loan and Security Agreement

 

 

COMMITMENTS OF LENDERS

 

 

	
 

Lender
	
 

Revolver Commitment

	
Bank of America, N.A.
	
$60,000,000Exhibit

	
	
	EXECUTION VERSION

	 

	

SHARE PURCHASE AND TRANSFER AGREEMENT

	DATED OCTOBER 23, 2015

	

between

Global ASIC GmbH,

ELBER GmbH,

Freistaat Sachsen,

and

Integrated Device Technology Bermuda Ltd.

and

Integrated Device Technology, Inc.

regarding

all Shares in

Zentrum Mikroelektronik Dresden AG

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CONTENTS 
[NOT FORMAL PART OF THE NOTARIZATION]
	
			
	Clause
	 
	Page

	1.
	Definitions and Interpretation
	6

	2.
	Sale and Transfer of the Shares
	14

	3
	Purchase Price
	16

	4.
	Rules for Payment
	20

	5.
	Closing Condition
	21

	6.
	Closing
	23

	7.
	Sellers’ Guarantees
	24

	8.
	Remedies and Limitations of Liability
	40

	9.
	Tax
	45

	10.
	Purchaser's and Purchaser’s Guarantor’s Guarantees
	52

	11.
	Sellers’ Covenants and Indemnities
	54

	12.
	No Assignment
	59

	13.
	Public Announcements and Confidentiality
	59

	14.
	Costs
	60

	15.
	Notices
	60

	16.
	Miscellaneous
	62

	 
	 
	 

	Schedules
	Page

	Schedule (B)– Share Register
	6

	Schedule (D) – Subsidiaries
	6

	Schedule (E) – Seller 1 Upstream Loans
	6

	Schedule 1.1(a) – Beneficiaries
	7

	Schedule 1.1(b) – Joint Instruction Letter
	8

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	Schedule 1.1(c) – Incentive Agreements
	9

	Schedule 2.7(a) – Shareholders’ Resolution Seller 1
	16

	Schedule 2.7(b) – Shareholders’ Resolution Seller 2
	16

	Schedule 3.2 – Escrow Agreement
	17

	Schedule 7.3(b) – Corporate Documents
	25

	Schedule 7.6(a) – Accounts
	28

	Schedule 7.9 – Litigation
	30

	Schedule 7.10(c) – Grants and Subsidies
	31

	Schedule 7.11(a) – Real Estate
	31

	Schedule 7.12(c) – Company Registered IP Rights
	34

	Schedule 7.12(d) – IP Licenses
	34

	Schedule 7.12(g) – IP Licenses Granted
	35

	Schedule 7.12(h) – Open Source Materials
	36

	Schedule 7.14(a) – List of Employees
	36

	Schedule 7.14(b) – Collective Agreements
	36

	Schedule 7.14(c) – Pension Schemes
	37

	Schedule 7.15 – Insurance Policies and Claims
	37

	Schedule 7.17(a) – Material Contracts
	39

	Schedule 7.18(a) – Assets not Free of Liens
	48

	Schedule 9.2(b)(v) – Tax Provisions and Liabilities
	56

	Schedule 11.3(a) – Amendment, Assumption and Release Agreement
	57

	Schedule 11.4(b) – Law Suit
	59

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THIS AGREEMENT is made between:
		
	(1)
	Global ASIC GmbH, a limited liability company under German law (Gesellschaft mit beschränkter Haftung – GmbH) registered with the commercial register of the local court (Amtsgericht) of Dresden under registration number HRB 19543, with business address at Grenzstraße 28, 01109 Dresden, Germany (the Seller 1); 

		
	(2)
	ELBER GmbH, a limited liability company under German law registered with the commercial register of the local court of Regensburg under registration number HRB 12769, with business address at Im Gewerbepark C 25, 93059 Regensburg, Germany (the Seller 2);

		
	(3)
	Freistaat Sachsen, represented by the Saxon State Ministry of Finance, Carolaplatz 1, 01097 Dresden, Germany (the Seller 3);

on the one hand (Seller 1, Seller 2 and Seller 3 each a Seller and collectively the Sellers), and
		
	(4)
	Integrated Device Technology Bermuda Ltd., a company under the laws of Bermuda with its business address at Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda (the Purchaser);

		
	(5)
	Integrated Device Technology, Inc., a corporation under the laws of Delaware with its business address at 6024 Silver Creek Valley Road, San Jose, CA 95138 USA (the Purchaser’s Guarantor);

on the other hand (each of the Sellers, and the Purchaser and the Purchaser's Guarantor are hereinafter also collectively referred to as the Parties and each of them as a Party).
BACKGROUND:
		
	(A)
	Zentrum Mikroelektronik Dresden AG (the Company) is a German stock corporation (Aktiengesellschaft) with its legal seat in Dresden and registered with the commercial register of the local court (Amtsgericht) of Dresden under the registration number HRB 19166. The registered share capital (Grundkapital) of the Company amounts to EUR 15,750,000.00 and consists of 15,750,000 registered no-par-value shares (auf den Namen lautende Stückaktien) with a pro-rata amount in the entire registered share capital of each share (auf die einzelne Aktie entfallender anteiliger Betrag des Grundkapitals) of EUR 1. The shares in the Company are represented by a single global share certificate (the Share Certificate).

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	(B)
	The Sellers are the sole shareholders in the Company and each Seller holds the number of issued no-par-value shares in the Company set forth in the table below:

	
				
	Seller
	Number 
of Shares
	Definition
	Sum of
nominal value
of Shares in EUR

	Seller 1
	9,929,834
	Seller 1 Shares
	9,929,834.00

	Seller 2
	4,153,038
	Seller 2 Shares
	4,153,038.00

	Seller 3
	1,667,128
	Seller 3 Shares
	1,667,128.00

	in total:
	15,750,000.00

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The Seller 1 Shares, the Seller 2 Shares and the Seller 3 Shares are hereinafter referred to, collectively, as the Shares, whereas the Shares shall comprise any and all shares held by the Sellers in the Company, regardless of whether or not the number and pro-rata amount of such shares in the entire registered share capital and the aggregate amount of the registered share capital of the Company correspond to the details as outlined in this lit. (B). A copy of the current share register (Aktienregister) of the Company is attached hereto as Schedule (B) .
		
	(C)
	Seller 1 has granted to the Secured Bank a pledge over the Seller 1 Shares and assigned to the Secured Bank the dividend rights attached to the Seller 1 Shares as a collateral for Seller 1's payment obligations under a loan agreement (the Seller 1 Bank Loan) in an amount (including interest accrued thereon until October 20, 2015) of EUR 4,669,884.60 (in words: EUR four million sixhundredsixtynine thousand eighthundredeightyfour 60/100). The Seller 1 Bank Loan including any accrued interest (together the Seller 1 Bank Loan Amount) shall, subject to the terms and conditions of this Agreement, be repaid by Seller 1 to the Secured Bank and the Secured Bank shall release the pledge over the Seller 1 Shares and waive any and all rights under the advance assignment of dividend rights attached to the Seller 1 Shares upon Closing. The Seller 2 Shares and the Seller 3 Shares are not encumbered.

		
	(D)
	The Company is the direct or indirect shareholder of the entities listed (in each case with percentage and the number and nominal amount, if any, of such shareholding) in Schedule (D)  (the Subsidiaries and each of them a Subsidiary). The Company and the Subsidiaries are hereinafter collectively referred to as the Group Companies and each of them as a Group Company.

		
	(E)
	The Company has granted to Seller 1 the loans listed in Schedule (E)  (the Seller 1 Upstream Loans). The Seller 1 Upstream Loans shall, subject to the terms and conditions of this Agreement, be abrogated and the outstanding loan amounts including any accrued interest (together the Seller 1 Upstream Loan Amount) be repaid by Seller 1 to the Company upon Closing.

		
	(F)
	Each Seller wishes to sell and transfer its respective Shares to the Purchaser and the Purchaser wishes to purchase and acquire from each Seller the respective Seller’s Shares under the terms and conditions of this share purchase and transfer agreement (this Agreement). 

		
	(G)
	The Purchaser's Guarantor wishes to ensure (sicherstellen) the full and punctual fulfilment of all obligations of the Purchaser arising out of or in connection with this Agreement.

IT IS AGREED as follows:
		
	1.
	DEFINITIONS AND INTERPRETATION

		
	1.1
	Definitions:

Accounts has the meaning set out in Clause 7.6(a).

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Affiliate means any affiliated company (verbundenes Unternehmen) in the meaning of Sections 15 et seqq. AktG, provided that, unless expressly provided otherwise, for the purpose of this Agreement, the Group Companies shall neither be deemed to be Affiliates of the Sellers nor of the Purchaser.
Agreement has the meaning set out in the Background under lit. (F).
AktG means the German Stock Corporation Act (Aktiengesetz). 
Amendment, Assumption and Release Agreement has the meaning set out in Clause 11.3(a).
Assumed Change of Control Payments means the one-time payments (plus the employer’s share (Arbeitgeberanteil) of social security contributions (Sozialversicherungsbeiträge) or similar public security contributions under the laws of any jurisdiction thereon) to which the Beneficiaries will become entitled to under the Amendment, Assumption and Release Agreements including any Wage Taxes relating to such payments; such payment amount to be calculated on the basis of the EUR/USD exchange rate published by the German Central Bank as of one day prior to Signing Date (8:00 pm). For purposes of payment of the Total Purchase Price, the Assumed Change of Control Payments shall be calculated as described in the preceding sentence plus 5 % of the calculated amount and be notified by the Company to the Purchaser pursuant to Clause 3.3(a)(i)(B).
Beneficiaries means the employees and/or officers and directors (Mitglieder des Vorstands und Geschäftsführer) of the Group Companies listed in Schedule 1.1(a)  that would have rights against the Company under the Incentive Agreements in the event of a consummation of the Closing.
BGB means the German Civil Code (Bürgerliches Gesetzbuch). 
Business Day means any day on which banks are generally open for business to the public (Bankarbeitstage) in Frankfurt am Main, Germany.
Closing has the meaning set out in Clause 6.1.
CoCP Agent has the meaning set out in Clause 3.3(a)(iii).
CoCP Agent Account has the meaning set out in Clause 3.3(a)(iii).
CoCP Wage Taxes shall mean with regard to any Assumed Change of Control Payment and Non-Assumed Change of Control Payments to or for the benefit of the individual Beneficiaries, Wage Tax on such payment, including Wage Tax on third party wage payments (von einem Dritten gewährter Arbeitslohn). For purposes of payment of the Total Purchase Price, the aggregate amount of CoCP Wage Taxes determined pursuant to the preceding sentence shall be increased by 5 % of such amount and be notified by the Company to the Purchaser pursuant to Clause 3.3(a)(i)(C).
Closing Actions has the meaning set out in Clause 6.2(a).
Closing Condition has the meaning set out in Clause 5.1(a). 

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Closing Date has the meaning set out in Clause 6.1.
Company has the meaning set out in the Background under lit. (A). 
Company Account has the meaning set out in Clause 3.3(a)(i)(A).
Company IP Rights has the meaning set out in Clause 7.12(a).
Company Products means all products or services produced, marketed, licensed, sold, distributed or performed by or on behalf of any Group Company and all products or services under development by any Group Company.
Company Registered IP Rights has the meaning set out in Clause 7.12(c).
Confidential Information has the meaning set out in Clause 13.2(a).
Corporate Documents has the meaning set out in Clause 7.3(b).
Data Room DVD has the meaning set out in the definition of Electronic Data Room.
De Minimis Amount has the meaning set out in Clause 8.7(a).
Effective Date has the meaning set out in Clause 2.2.
Electronic Data Room means any documentation and information provided in the electronic data room by astiga GmbH, Breitscheidstr. 65, 70176 Stuttgart, Germany until and including October 20, 2015, 4.00 pm (CET). The Electronic Data Room has been saved by astiga GmbH on three identical DVDs (each a Data Room DVD), (i) one of which has been handed over to the Purchaser, (ii) one of which has been handed over to Seller 1 and (iii) one of which will be set aside and stored with the acting notary for purposes of providing evidence for a period of five (5) years after the Closing Date in accordance with a joint instruction letter from the Parties (the Joint Instruction Letter) substantially in the form as attached as Schedule 1.1(b) .
Escrow Account has the meaning as set out in Clause 3.2.
Escrow Agent has the meaning set out in Clause 3.2.
Escrow Agreement has the meaning as set out in Clause 3.2.
Escrow Amount has the meaning set out in Clause 3.3(b)(v).
Exempt Claims has the meaning set out in Clause 8.8(a).
Failing Party has the meaning set out in Clause 9.6(a)
Fairly Disclosed means disclosed to the Purchaser or its ultimate parent company Integrated Device Technology, Inc. (i) in writing within this Agreement (including the Schedules thereto) or (ii) in the Electronic Data Room, each in a conspicuous way that would enable a reasonable professional purchaser given the nature and context of the disclosure to become aware of the nature of the possible implications of such disclosure on the Company. 

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Governmental Entity means any supranational, national, state, municipal, local or foreign government, any court, tribunal, arbitrator, administrative agency, commission or other governmental official, authority or instrumentality, in each case whether domestic or foreign, any stock exchange or any quasi-governmental or private body exercising any regulatory, Taxing or other governmental authority.
Group Company has the meaning set out in the Background under lit. (D).
HGB means the German Commercial Code (Handelsgesetzbuch).
IFRS means International Financial Reporting Standards as issued by the International Accounting Standards Board.
Incentive Agreements means the agreements entered into by the Company and the Beneficiaries with respect to the stock option programs, exit participation program and comparable incentive schemes of the Company listed in Schedule 1.1(c) .
Initial Shareholder Amount has the meaning set out in Clause 3.3(b)(vi).
Initial Purchase Price has the meaning set out in Clause 3.3(b)(vi).
Initial Seller 1 Purchase Price has the meaning set out in Clause 3.3(b)(vi).
Initial Seller 2 Purchase Price has the meaning set out in Clause 3.3(b)(vi).
Initial Seller 3 Purchase Price has the meaning set out in Clause 3.3(b)(vi).
Information Technology has the meaning set out in Clause 7.13.
Interim Period has the meaning set out in Clause 11.1.
IP Rights has the meaning set out in Clause 7.12(a).
Joint Instruction Letter has the meaning set out in the definition of Electronic Data Room.
Leakage has the meaning set out in Clause 7.5.
Legal Requirements means any federal, state, foreign, local, municipal or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Entity having the force of law.
Liability Cap has the meaning set out in Clause 8.8(a).
Liability Cap Tax has the meaning set out in Clause 9.6(d).
Material Adverse Effect means any specific, or series of related, events, matters or circumstances, which have had or with the lapse of time will reasonably be expected to have in the near future an enduring and material adverse effect (taking into account any claims for compensation or indemnification against third parties (including the Sellers) if and to the extent such claims have already been settled) 

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on the assets or the revenue and profitability of the Group Companies taken as a whole and which, to the extent curable, had not been cured until the earlier of (i) the Targeted Closing Date or (ii) within twenty (20) Business Days upon receipt of a written notice of the Purchaser by the Sellers of the occurrence of a Material Adverse Effect, describing the facts and circumstances resulting in or constituting the Material Adverse Effect in reasonable detail, provided, however, that any of the following events, matters, circumstances or conditions or effects thereof shall not be deemed to constitute, and shall not be taken into account in determining whether there has been, a material adverse effect: 
		
	(i)
	any event that results from conditions or any matter or circumstance affecting the global semiconductor industry generally; 

		
	(ii)
	any event that results from conditions or any matter or circumstance affecting general worldwide or regional, political, social, economic, business, financing and/or capital market conditions (including, for the avoidance of doubt, currency change rates);

		
	(iii)
	the announcement of the Transaction or measures or actions taken, or failures to take action, by or with the approval of the Purchaser pursuant to Clause 11 or otherwise expressly agreed by the Purchaser in writing; or

		
	(iv)
	actions of the customers or suppliers of the Group Companies as a result of the Transaction; or

		
	(v)
	any event, matter or circumstance the basis of which is attributable to the Purchaser; or

		
	(vi)
	any event, matter or circumstance the basis of which has been Fairly Disclosed prior to the Signing Date. 

Material Contract has the meaning set out in Clause 7.17(a).
Non-Assumed Change of Control Payments means the one-time payments (plus the employer’s share (Arbeitgeberanteil) of social security contributions (Sozialversicherungsbeiträge) or similar public security contributions under the laws of any jurisdiction thereon) under the Incentive Agreements to which those Beneficiaries are entitled who have not entered into an Amendment, Assumption and Release Agreement; such payment amount to be calculated on the basis of the EUR/USD exchange rates as provided for in Clause 3.1(a). For purposes of payment of the Total Purchase Price, the Non-Assumed Change of Control Payments shall be calculated as described in the preceding sentence plus 5 % of the calculated amount and be notified by the Company to the Purchaser pursuant to Clause 3.3(a)(i)(B).
Notice has the meaning set out in Clause 15.1.
Open Source Materials has the meaning set out in Clause 7.12(h).
Party or Parties has the meaning set out in the parties section of this Agreement.
Pension Schemes has the meaning set out in Clause 7.14(c).

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Permits has the meaning set out in Clause 7.10(a).
Permitted Pre-Signing Leakage has the meaning set out in Clause 7.5(c).
Pre-Effective Date Taxes has the meaning set out in Clause 9.2(a).
Pro Rata Share means, with respect to a particular Seller, the number of Shares held by such Seller relative to the total number of Shares.
Purchaser has the meaning set out in the parties section of this Agreement.
Purchaser’s Guarantor has the meaning set out in the parties section of this Agreement.
Real Estate has the meaning set out in Clause 7.11(a)
Related Party shall mean each Seller and persons related to the respective Seller (einem Verkäufer nahestehende Personen) within the meaning of Section 138 German Insolvency Code (Insolvenzordnung).
Related Party Agreements has the meaning set out in Clause 7.8(a).
Relevant Tax Proceedings has the meaning set out in Clause 9.5(a)
Secured Bank means WGZ Bank AG, Düsseldorf.
Secured Bank’s Account has the meaning set out in Clause 3.3(a)(ii).
Seller or Sellers has the meaning set out in the parties section of this Agreement.
Sellers’ Accounts has the meaning set out in Clause 4.3.
Sellers’ Breach has the meaning set out in Clause 8.2.
Sellers’ Guarantees has the meaning set out in Clause 7.1.
Sellers’ Knowledge means
(i)    the actual knowledge (positive Kenntnis) of the Sellers;
		
	(ii)
	the actual knowledge (positive Kenntnis) of Mr. Thilo von Selchow and Mr. Steffen Wollek; and

		
	(iii)
	the knowledge Mr. Thilo von Selchow and Mr. Steffen Wollek could have reasonably had after due inquiry prior to the date relevant for the respective Sellers’ Guarantee of Gordon Seidel (head of IT of the Group Companies), Annegret Weidauer (head of Legal of the Group Companies), Clemens Wasewitz (head of Accounting of the Group Companies), Daniel Aitken (head of Marketing of the Group Companies), Margrit Heinig (head of HR of the Group Companies); such due inquiry to be conducted applying the level of care of a prudent business person.

Sellers’ Period has the meaning set out in Clause 9.2(a).

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Seller 1 has the meaning set out in the parties section of this Agreement.
Seller 1 Account has the meaning set out in Clause 4.3(a).
Seller 1 Bank Loan has the meaning set out in the Background under lit. (C).
Seller 1 Bank Loan Amount has the meaning set out in the Background under lit. (C).
Seller 1 Upstream Loan Amount has the meaning as set out in the Background under lit. (E).
Seller 1 Upstream Loans has the meaning as set out in the Background under lit. (E).
Seller 1 Shares has the meaning set out in the Background under lit. (B).
Seller 2 has the meaning set out in the parties section of this Agreement.
Seller 2 Account has the meaning set out in Clause 4.3(b).
Seller 2 Shares has the meaning set out in the Background under lit. (B).
Seller 3 has the meaning set out in the parties section of this Agreement.
Seller 3 Account has the meaning set out in Clause 4.3(c).
Seller 3 Shares has the meaning set out in the Background under lit. (B).
Share Certificate has the meaning set out in the Background under lit. (A).
Shares has the meaning set out in the Background under lit. (B).
Signing Date means the date on which this Agreement is signed by all Parties.
Straddle Period has the meaning set out in Clause 9.2(a).
Subsidiary or Subsidiaries has the meaning set out in the Background under lit. (D).
Targeted Closing Date has the meaning set out in Clause 6.1.
Tax means any (i) tax (Steuern) within the meaning of Section 3 of the German Tax Code (Abgabenordnung – AO) or equivalent taxes under the laws of any other jurisdiction, (ii) social security contributions (Sozialversicherungsbeiträge) or similar public social security contributions under the laws of any jurisdiction, customs duties (Zölle) and any other public fees and charges (sonstige Gebühren und Abgaben), (iii) any taxes to be withheld or paid for the account of a third party (Steuerabzugsbeträge), such as (in particular, but not limited to) capital withholding or wage tax (Kapitalertrag- und Lohnsteuer) and any taxes imposed as a secondary liability (Steuerhaftungsbeträge), as well as (iv) any penalties or administrative fines for non-adequate and/or non-proper documentation of intra-group transactions and transfer prices, in each case (A) together with any ancillary charges (steuerliche Nebenleistungen) in the meaning of Section 3 para. 4 of the German Tax Code 

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(Abgabenordnung – AO) (including any penalties and fines e.g. due to late or inadequate filing of a Tax Return, interest, late payment fees, costs or additions thereto) or equivalent ancillary charges under the laws of any other jurisdiction, and (B) irrespective whether imposed under the laws of Germany or any other jurisdiction by a Tax Authority, in any aforementioned case imposed by any Tax Authority or payable under any contractual arrangement, but excluding, in any aforementioned case, for the avoidance of doubt, deferred taxes and notional losses (such as reductions of loss carry forwards or future depreciation).
Tax Authority means any competent governmental authority or public body which charges, administers or collects Taxes.
Tax Benefit has the meaning set out in Clause 9.2(b)(vii).
Tax Guarantees has the meaning set out in Clause 9.1.
Tax Indemnification Claim has the meaning set out in Clause 9.2(a).
Tax Refund has the meaning set out in Clause 9.3(a).
Tax Return(s) means any return, declaration, report or notice in written form, relating to any Tax to be filed, including in each case any schedule or attachment thereto, and any amendment thereto.
Termination Agreement has the meaning set out in Clause 11.3(b)
Third-party Claim has the meaning set out in Clause 8.3(a).
Threshold has the meaning set out in Clause 8.7(a).
Total Purchase Price has the meaning set out in Clause 3.1(a).
Transaction(s) means all transactions contemplated by this Agreement. 
Transaction Expenses means all third party fees and expenses in connection with this Agreement and the Transaction (including any fees and expenses of legal counsel and accountants, fees and expenses payable to financial advisors, investment bankers, consultants, brokers and other advisors of the Company, but excluding any employment related expenses), in each case including any applicable VAT, which have been incurred by a Group Company based on services ordered until and including the Closing Date.
UStG means the German Value Added Tax Act (Umsatzsteuergesetz).
VAT means value added tax (Umsatzsteuer).
Wage Tax shall mean any Tax, including the employer’s and the employee’s share (Arbeitgeber- und Arbeitnehmeranteil) of social security contributions (Sozialversicherungsbeiträge) or similar public security contributions under the laws of any jurisdiction, in each case on wages or other employment income or otherwise in connection with any employment.

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	1.2
	The definitions set out in Clause 1.1 apply throughout this Agreement, unless the contrary intention appears. Terms defined in the singular shall have the comparable meaning when used in the plural, and vice versa.

		
	1.3
	If there is any conflict or inconsistency between a term in the body of this Agreement and a term in any of the Schedules or any other document referred to or otherwise incorporated into this Agreement, the term in the body of this Agreement shall take precedence, unless the relevant Schedule or other document which is referred to or otherwise incorporated into this Agreement expressly provides that the term in it is to take precedence over the term in the body of this Agreement.

		
	1.4
	In this Agreement, unless the contrary intention appears, a reference to a Clause or Schedule is a reference to a Clause or Schedule of or to this Agreement. The Schedules form part of this Agreement.

		
	1.5
	The headings in this Agreement do not affect its interpretation.

		
	1.6
	In this Agreement, unless otherwise indicated:

		
	(a)
	words importing any gender include the other gender; references to statutes or regulations are to be construed as including all statutory or regulatory provisions consolidating, amending or replacing the statute or regulation referred to;

		
	(b)
	any reference to a time of day is to Frankfurt am Main, German time; and

		
	(c)
	the words including, includes and include shall be deemed to be followed by the words "without limitation".

		
	(d)
	Where a German translation has been added in parenthesis after an English word or phrase, only such German translation shall be decisive for the interpretation of the relevant English word or phrase. 

		
	(e)
	References to any German legal term or concept shall, in relation to any jurisdiction other than Germany, be construed as references to the term or concept which most nearly corresponds to it in that jurisdiction.

		
	2.
	SALE AND TRANSFER OF THE SHARES 

		
	2.1
	Sale of the Shares

		
	(a)
	Seller 1 hereby sells and the Purchaser purchases, subject to the terms and conditions of this Agreement, the Seller 1 Shares.

		
	(b)
	Seller 2 hereby sells and the Purchaser purchases, subject to the terms and conditions of this Agreement, the Seller 2 Shares.

		
	(c)
	Seller 3 hereby sells and the Purchaser purchases, subject to the terms and conditions of this Agreement, the Seller 3 Shares.

		
	2.2
	Effective Date, Ancillary Rights

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The Shares are sold to the Purchaser with economic effect (mit wirtschaftlicher Wirkung) as of 1 January 2015, 0:00 hrs. (the Effective Date) with all rights and obligations pertaining thereto, including the right to receive all profits relating to the time after the Effective Date and all non-distributed profits relating to the time prior to the Effective Date. 
		
	2.3
	Transfer and Assignment of the Shares and Share Certificate

Subject to satisfaction of the conditions precedent set forth in Clause 2.5 below
		
	(a)
	Seller 1 hereby transfers (übereignet) and assigns (tritt ab) with effect in rem the Seller 1 Shares, all membership rights and other rights pertaining to the Seller 1 Shares and ownership of Seller 1’s co-ownership share (Miteigentumsanteil) in the Share Certificate to the Purchaser who accepts such transfers and assignments;

		
	(b)
	Seller 2 hereby transfers and assigns with effect in rem the Seller 2 Shares, all membership rights and other rights pertaining to the Seller 2 Shares and ownership of Seller 2’s co-ownership share in the Share Certificate to the Purchaser who accepts such transfers and assignments; and

		
	(c)
	Seller 3 hereby transfers and assigns with effect in rem the Seller 3 Shares, all membership rights and other rights pertaining to the Seller 3 Shares and ownership of Seller 3’s co-ownership share in the Share Certificate to the Purchaser who accepts such transfers and assignments.

		
	2.4
	Safe Keeping and Delivery of Share Certificate

		
	(a)
	Subject to satisfaction of the conditions precedent set forth in Clause 2.5 below, the Sellers and the Purchaser hereby enter into a custody agreement pursuant to Section 688 BGB, according to which the Sellers take into custody (Verwahrung) the Share Certificate for the Purchaser without consideration.

		
	(b)
	The Sellers and the Purchaser agree that the aforementioned custody agreement constitutes a constructive possession relationship (Besitzmittlungsverhältnis) as defined in Sections 930 and 868 BGB, according to which the Sellers hold constructive possession for the Purchaser (it being understood that the Purchaser shall have indirect possession (mittelbarer Besitz) of the Share Certificate).

		
	(c)
	On the Closing Date, the Sellers shall, subject to satisfaction of the condition precedent set forth in Clause 2.5 below, deliver the Share Certificate, duly endorsed (indossiert), to the Purchaser pursuant to Clause 6.2(a)(v).

		
	(d)
	The custody agreement according to Clause 2.4(a) shall end upon the earlier of physical delivery of the Share Certificate to the Purchaser or the effective termination of this Agreement.

		
	2.5
	Condition Precedent

The transfers and assignments pursuant to Clause 2.3 are subject only to the conditions precedent (aufschiebende Bedingungen) of

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	(f)
	the aggregate amount of the Assumed Change of Control Payments (less the aggregate amount of related CoCP Wage Taxes) having been credited onto the CoCP Agent Account as set forth in Clause 3.3(b)(i);

		
	(g)
	the aggregate amount of the Non-Assumed Change of Control Payments (less the aggregate amount of related CoCP Wage Taxes) having been credited onto the Company Account as set forth in Clause 3.3(b)(ii);

		
	(h)
	the aggregate amount of CoCP Wage Taxes having been credited onto the Company Account as set forth in Clause 3.3(b)(iii);

		
	(i)
	the Transaction Expenses having been credited onto the Company Account as set forth in Clause 3.3(b)(iv);

		
	(j)
	the Escrow Amount having been credited onto the Escrow Account as set forth in Clause 3.3(b)(v);

		
	(k)
	the Initial Purchase Price having been credited onto the Sellers’ Accounts as set forth in Clause 3.3(b)(vi);

		
	(l)
	the Seller 1 Upstream Loan Amount having been credited onto the Company Account as set forth in Clause 3.3(b)(vii); and

		
	(m)
	the Seller 1 Bank Loan Amount having been credited onto the Secured Bank’s Account as set forth in Clause 3.3(b)(viii).

		
	2.6
	Share Register

Each of the Sellers hereby undertakes to cooperate with a view to the proper registration of the transfer of title in the Shares to the Purchaser in the Company’s share register pursuant to Clause 6.2(a)(vi).
		
	2.7
	Shareholder’s Consents

		
	(a)
	By notarized shareholders' resolution dated October 22, 2015, a copy of which is attached as Schedule 2.7(a), the shareholders' meeting of Seller 1 gave its consent to the sale and transfer of the Seller 1 Shares under this Agreement. 

		
	(b)
	By written shareholders' resolution dated October 21, 2015, a copy of which is attached as Schedule 2.7(b), the shareholders' meeting of Seller 2 gave its consent to the sale and transfer of the Seller 2 Shares under this Agreement.

		
	3.
	PURCHASE PRICE

		
	3.1
	Total Purchase Price

		
	(a)
	The aggregate purchase price to be paid by the Purchaser to the Sellers for the Shares shall amount to the Euro amount equivalent to the amount of USD 310,000,000.00 (in words: US Dollar three hundredandten million) of which an amount of USD 60,000,000.00 (in words: US Dollar sixty million) has been converted into EUR 53,036,329.89 (in words: Euro fiftythree million thirtysixthousand three hundred twentynine and eightynine Cents) at the EUR/USD exchange rate published 

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by the European Central Bank as of one day prior to the Signing Date (8:00 pm), and a remaining amount of USD 250,000,000.00 shall be converted at the EUR/USD exchange rate published by the European Central Bank as of one day prior to the Closing Date (8:00 pm) (such aggregate USD and Euro amount together the Total Purchase Price).
		
	(b)
	The Total Purchase Price shall be attributable (zugeordnet) to the Sellers according to each Seller’s Pro Rata Share and be paid by the Purchaser as set forth in Clause 3.3(b) below.

		
	3.2
	Escrow

Prior to the Targeted Closing Date, the Sellers and the Purchaser shall open with the acting notary (the Escrow Agent) an escrow account for the benefit of the Sellers and the Purchaser (the Escrow Account) into which the Purchaser shall pay the Escrow Amount as set forth in Clause 3.3(b)(v). The Escrow Amount shall serve as collateral for Purchaser with respect to claims of the Purchaser against the Sellers arising out of or in connection with this Agreement and in accordance with Clause 8.9 within a period of 24 months as from Closing Date. The terms and conditions regarding the Escrow Account shall be set forth in an agreement to be executed between the Sellers, the Purchaser and the Escrow Agent prior to the Targeted Closing Date substantially in the form as attached hereto as Schedule 3.2 (the Escrow Agreement).
		
	3.3
	Payment of Purchase Price

		
	(e)
	Five (5) Business Days prior to the Targeted Closing Date,

		
	(i)
	the Sellers shall procure that the Company with the consent of all Sellers notifies the Purchaser in writing of (in each case including the underlying calculations in detail)

		
	(A)
	the amount of the Seller 1 Upstream Loan Amount and the account details of the Company’s bank account into which the Seller 1 Upstream Loan Amount shall be paid (the Company Account);

		
	(B)
	the aggregate amount of the Assumed Change of Control Payments and the aggregate amount of the Non-Assumed Change of Control Payments;

		
	(C)
	the aggregate amount of Wage Taxes relating to (i) the aggregate amount of the Assumed Change of Control Payments and (ii) the aggregate amount of the Non-Assumed Change of Control Payments; and

		
	(D)
	the amount of the Transaction Expenses; and

		
	(ii)
	the Seller 1 shall procure that the Secured Bank notifies the Purchaser in writing of the amount of the Seller 1 Bank Loan Amount and the account details of the bank account into which the Seller 1 Bank Loan Amount shall be paid (the Secured Bank’s Account);

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	(iii)
	the Sellers shall notify the Purchaser in writing of the lawyer trust account (Rechtsanwalts-Anderkonto) of Anwaltskanzlei Lambsdorff Rechtsanwälte PartGmbB (local court (Amtsgericht) of Charlottenburg, register number PR 805 B) (the CoCP Agent) into which the Assumed Change of Control Payments notified by the Company pursuant to Clause 3.3(a)(i)(B) less the aggregate amount of the related CoCP Wage Taxes shall be paid (the CoCP Agent Account).

		
	(f)
	The Total Purchase Price shall become due and payable on the Targeted Closing Date. On the Targeted Closing Date the Purchaser shall pay

		
	(i)
	the aggregate amount of the Assumed Change of Control Payments notified by the Company pursuant to Clause 3.3(a)(i)(B) less the aggregate amount of the related CoCP Wage Taxes pursuant to Clause 3.3(b)(iii) to the CoCP Agent Account;

		
	(ii)
	on behalf of the Sellers and in discharge (in Erfüllung) of the Sellers' obligations to indemnify and hold harmless the Group Companies in accordance with Clause 11.4(a), the aggregate amount of the Non-Assumed Change of Control Payments notified by the Company pursuant to Clause 3.3(a)(i)(B) less the aggregate amount of the related CoCP Wage Taxes pursuant to Clause 3.3(b)(iii) to the Company Account;

		
	(iii)
	the aggregate amount of CoCP Wage Taxes, with respect to the portion attributable to the Non-Assumed Change of Control Payments on behalf of the Sellers and in discharge (in Erfüllung) of the Sellers’ obligations to indemnify and hold harmless the Group Companies in accordance with Clause 11.4(a) and with respect to the portion attributable to the Assumed Change of Control Payments on behalf of the Sellers and (a) in discharge (in Erfüllung) of the Sellers’ obligations to make payments with respect to Wage Taxes on behalf of the respective Beneficiaries to the Company under the respective Amendment, Assumption and Release Agreements respectively (b) as advance payment with respect to potential obligations of the Sellers to indemnify and hold harmless the Group Companies in accordance with Clause 11.4(a), to the Company Account;

		
	(iv)
	on behalf of the Sellers and in discharge (in Erfüllung) of the Sellers obligations to indemnify and hold harmless the Group Companies from any costs and expenses incurred as a result of the Transaction in accordance with Clause 11.4(c), the amount of the Transaction Expenses notified by the Company pursuant to Clause 3.3(a)(i)(D) (if any) into the Company Account;

		
	(v)
	an amount of EUR 17,678,776.63 (in words: Euro seventeen million sixhundredseventyeightthousand sevenhundred seventysix and sixtythree Cents) (USD 20,000,000.00 converted at the EUR/USD exchange rate published by the European Central Bank as of one day prior to the Signing Date (8:00 pm) into Euro) (such Euro amount the Escrow Amount) into the Escrow Account; 

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	(vi)
	the balance between the Total Purchase Price and the items listed in no. (i) through (v) above (such balance the Initial Shareholder Amount) to the Sellers as follows:

	
			
	To Seller 1 and into the Seller 1 Account an amount equal to

	 
	the Initial Shareholder Amount

	multiplied with
	9,929,834

	divided by
	15,750,000

	minus
	the Seller 1 Upstream Loan Amount notified by the Company pursuant to Clause 3.3(a)(i)(A)

	minus
	the Seller 1 Bank Loan Amount notified by the Secured Bank pursuant to Clause 3.3(a)(ii)

	(such amount the Initial Seller 1 Purchase Price);

	To Seller 2 and into the Seller 2 Account an amount equal to

	 
	the Initial Shareholder Amount

	 
	multiplied with
	4,153,038

	 
	divided by
	15,750,000

	 
	(such amount the Initial Seller 2 Purchase Price);

	To Seller 3 and into the Seller 3 Account an amount equal to

	 
	the Initial Shareholder Amount

	 
	multiplied with
	1,667,128

	 
	divided by
	15,750,000

	 
	(such amount the Initial Seller 3 Purchase Price).

The Initial Seller 1 Purchase Price, the Initial Seller 2 Purchase Price and the Initial Seller 3 Purchase Price are hereinafter referred to, collectively, as the Initial Purchase Price.
		
	(vii)
	on behalf of Seller 1 and in discharge (in Erfüllung) of Seller 1’s obligations under the Seller 1 Upstream Loans, the Seller 1 Upstream Loan Amount notified by the Company pursuant to Clause 3.3(a)(i)(A) into the Company Account; and

		
	(viii)
	on behalf of Seller 1 and in discharge (in Erfüllung) of Seller 1’s obligations under the Seller 1 Bank Loan, the Seller 1 Bank Loan Amount notified by the Secured Bank pursuant to Clause 3.3(a)(ii) into the Secured Bank’s Account.

		
	(g)
	If and to the extent it is ultimately determined that the CoCP Wage Taxes and/or the Non-Assumed Change of Control Payments have been overpaid by the Purchaser into Company, the Purchaser shall procure that the Company (i) informs the Sellers about such overpayment and the respective underlying calculations and (ii) pays out 

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the overpaid amount to the Sellers (on a pro rata basis) and/or Beneficiaries, as the case may be, each as soon as reasonably practicable.
		
	(h)
	The Parties agree that the payments made by the Purchaser in accordance with Clause 3.3(b) shall fully discharge the Purchaser from its obligation to pay the Total Purchase Price and that neither the Purchaser nor any Group Company shall bear any responsibility with respect to the distribution of the Assumed Change of Control Payments to the individual Beneficiaries.

		
	3.4
	VAT

It is the Parties’ understanding that the sale and transfer of the Shares is either not subject to VAT (nicht steuerbar) or is exempt from VAT (umsatzsteuerfrei) and the Sellers declare that they will not waive any applicable VAT exemption, in particular pursuant to Section 9 para. 1 UStG. In case a Seller waives any applicable tax exemption (in particular, but not limited to pursuant to Section 9 para. 1 UStG) the applicable amount of VAT will not increase the Total Purchase Price, and the respective Seller will bear the finally assessed German VAT on the pro rata Total Purchase Price for the respective Seller's Shares.
		
	4.
	RULES FOR PAYMENT

		
	4.1
	Modes of Payment

Any payments shall be made by irrevocable wire transfer of immediately available funds, free of bank and other charges. Any such payment shall be deemed made only upon the irrevocable and unconditional crediting of the amount payable (without deduction of any costs or charges) to the relevant bank account.
		
	4.2
	Default

Any payments under this Agreement shall, if and to the extent not paid when due, bear interest from (and including) the due date, at a rate of eight hundred (800) basis points above the base interest rate (Basiszinssatz) according to Section 247 BGB. 
		
	4.3
	Sellers’ Accounts

All payments owed by the Purchaser to the Sellers under this Agreement shall be paid into the following bank accounts (the Sellers’ Accounts) (or any other account nominated by the respective Seller to the Purchaser in writing at least three (3) Business Days prior to due date of such payment):
		
	(n)
	Payments owed to Seller 1 into the Seller 1 Account:

	
		
	Account Holder:
	Global ASIC GmbH

	Bank:
	Volksbank Dresden

	SWIFT:
	GENODEF1DRS

	IBAN:
	DE 43 8509 0000 3245 4210 00

		
	(o)
	Payments owed to Seller 2 into the Seller 2 Account:

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	Account Holder:
	ELBER GmbH

	Bank:
	Donner & Reuschel AG

	SWIFT:
	CH DB DE HH XXX

	IBAN:
	DE 38 2003 0300 0059 9190 01

		
	(p)
	Payments owed to Seller 3 into the Seller 3 Account:

	
		
	Account Holder:
	Freistaat Sachsen

	Bank:
	Bundesbank Leipzig

	SWIFT:
	MARKDEF1860

	IBAN:
	DE 17 8600 0000 0086 0015 15

		
	4.4
	No Set-Off; No Right of Retention

Any rights of the Parties to set-off and/or to withhold any payments due under this Agreement is hereby expressly waived and excluded except for claims which are undisputed or res iudicatae (rechtskräftig festgestellt).
		
	4.5
	Calculation of Interest

Interest for any amounts due under or in connection with this Agreement shall be calculated on the basis of actual days elapsed and a calendar year with 360 days.
		
	5.
	CLOSING CONDITION

		
	5.1
	Closing Condition

		
	(i)
	The obligations of the Sellers and the Purchaser to perform the Closing Actions shall be subject to the satisfaction of the following condition (Bedingungen) (the Closing Condition):

The Secured Bank has irrevocably released its pledge over the Seller 1 Shares and waived any and all rights under the assignment of the dividend rights attached to the Seller 1 Shares by executing a letter addressed to the Seller 1 and the Purchaser and declared to deliver to the Purchaser on the Closing Date the original of the power of attorney granted to the Secured Bank by Seller 1, subject only to the condition precedent of receipt of the full Seller 1 Bank Loan Amount as set forth in Clause 3.3(b)(viii).
		
	(j)
	The Purchaser and the Sellers may, to the extent legally possible, jointly waive the Closing Condition.

		
	5.2
	Obligations with respect to Closing Condition

		
	(q)
	Seller 1 shall use reasonable best efforts to cause the Closing Condition to be satisfied as soon as possible.

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	(r)
	Seller 1 shall notify the others Sellers and the Purchaser in writing of the satisfaction of the Closing Condition or of the impossibility to satisfy the Closing Condition. 

		
	(s)
	The Closing Condition is deemed satisfied once it has (i) occurred and such occurrence has been notified in writing by the Seller 1 to the other Sellers and the Purchaser or (ii) has been waived in accordance with Clause 5.1(b) or (iii) the Total Purchase Price has been paid by Purchaser in accordance with the provisions of this Agreement.

		
	5.3
	Consequences of Non-Satisfaction of Closing Condition

		
	(a)
	In the event that the Closing Condition is not satisfied or waived in accordance with this Agreement, within three (3) months after the Signing Date, the Purchaser may terminate this Agreement (zurücktreten) by giving written notice thereof to the Sellers, provided that the right of the Purchaser to terminate this Agreement pursuant to this Clause 5.3(a) shall cease (verfallen) upon the Closing Condition being satisfied. For the avoidance of doubt, the right of the Purchaser to seek, instead of exercising the termination right provided for hereunder, specific performance with respect to the satisfaction of the Closing Condition by the Sellers shall remain unaffected. 

		
	(b)
	In the event of a termination of this Agreement (Rücktritt) in accordance with this Clause 5.3, the Parties shall have no claims and liability against each other except that

		
	(i)
	any liability of any Party for damages for breaches of any obligations under this Agreement committed prior to or on the date of termination or for damages for willful breach of any obligations under this Agreement shall remain unaffected;

		
	(ii)
	Clauses 11.4(c), 13, 14, 15 and 16 of this Agreement shall survive and remain in full force and effect also after such termination (Rücktritt).

		
	5.4
	Purchaser’s Additional Termination Rights, Break-Fee

		
	(c)
	The Purchaser may terminate this Agreement (zurücktreten) with immediate effect by giving written notice thereof to the Sellers prior to or on the Closing Date in the event that between the Signing Date and the Closing Date a Material Adverse Effect occurs. 

		
	(d)
	In the event that after the Signing Date and before Closing Date (i) any Seller should enter into a legally binding agreement with one or more third parties regarding the sale and/or transfer of any Shares or a merger of the Company into a third party or any other transaction with comparable economic effect or (ii) the Company should enter into a legally binding Agreement with one or more third parties regarding the sale and or transfer of all (or substantially all) assets of the Company or any other transaction with comparable economic effect, the Purchaser may terminate this Agreement (zurücktreten) in whole or, at the choice of the Purchaser, in part with immediate effect by giving written notice thereof to the Sellers prior to or on the Closing Date. Each Seller violating the aforementioned obligation shall pay to the Purchaser, within five (5) Business Days after such termination (Rücktritt), 

		
	(i)
	a break-up fee in the amount of 13% of his respective Pro Rata Share of the Total Purchase Price as a lump-sum compensation (pauschalierter 

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Schadenersatz), which shall be credited against the Purchaser’s damage claims pursuant to Section 5.4(b)(ii), if any; and
		
	(ii)
	remain liable, regardless of any fault (verschuldensunabhängig), to Purchaser for any damages (within the meaning of Sections 249 et seqq. BGB) incurred by the Purchaser as a result of the non-occurrence of the Closing.

For the avoidance of doubt, a violation of the aforementioned obligation by a Seller shall in no event constitute a joint liability of the Sellers, but an individual liability only (Einzelschuldnerschaft).
		
	6.
	CLOSING

		
	6.1
	Closing Place and Date

The performance of the Closing Actions (the Closing) shall take place at the offices of Lambsdorff Rechtsanwälte, Oranienburger Straße 3, 10178 Berlin, Germany, at 11 am CET (i) on December 7, 2015, or (ii) at such other location, time or date as may be agreed between the Sellers and the Purchaser (the Targeted Closing Date). The day on which the Closing actually occurs shall hereinafter be referred to as the Closing Date.
		
	6.2
	Closing Actions

		
	(c)
	On the Targeted Closing Date, the Sellers (each to the extent a Closing Action relates to such Seller) and the Purchaser (as the case may be) shall take, or cause to be taken, the following actions concurrently (Zug um Zug) and in the following order (collectively the Closing Actions and each a Closing Action):

		
	(i)
	The Sellers shall deliver to the Purchaser duly executed Amendment, Assumption and Release Agreements to the extent available (reference is made to Clause 11.3(a));

		
	(ii)
	The Seller 1 shall deliver to the Purchaser the duly executed Termination Agreement;

		
	(iii)
	The Sellers shall deliver to the Purchaser duly executed resignation declarations of the members of the supervisory board (Aufsichtsrat) of the Company with effect as of the Closing Date;

		
	(iv)
	The Purchaser shall make the payments set forth in Clause 3.3(b);

		
	(v)
	The Sellers shall deliver to the Purchaser the properly endorsed (indossiert) Share Certificate;

		
	(vi)
	The Sellers shall deliver a copy of the updated share register of the Company stating that the Purchaser owns all Shares.

		
	(d)
	By way of signing a closing protocol in the form to be agreed among the Parties, the Sellers and the Purchaser shall confirm to each other that the Closing Condition has 

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been fulfilled or waived, the Closing Actions have been performed in accordance with this Agreement and that the Closing has occurred. 
		
	6.3
	Consequences of Non-Satisfaction of Closing Actions

		
	(e)
	In the event that the Closing Actions are not all satisfied or waived in accordance with this Agreement latest on the tenth (10th) Business Day after the Targeted Closing Date,

		
	(i)
	the Sellers jointly may terminate this Agreement (zurücktreten) with immediate effect by giving written notice thereof to the Purchaser, if the Purchaser does not perform the obligations concerning the Closing Actions under Clause 6.2(a)(iv); and

		
	(ii)
	the Purchaser may terminate this Agreement (zurücktreten) with immediate effect by giving written notice thereof to the Sellers, if a Seller does not perform its obligations concerning the Closing Actions under Clauses 6.2(a)(i) through 6.2(a)(iii), 6.2(a)(v), 6.2(a)(vi),

provided that any right of a Party to terminate this Agreement pursuant to this Clause 6.3(a) shall cease (verfallen) upon the earlier of (i) the respective Closing Action(s), the non-satisfaction of which entitles the Party to such termination, being satisfied or duly waived, and (ii) the occurrence of the Closing. For the avoidance of doubt, the right of either Party to seek, instead of exercising the termination right provided for hereunder, specific performance with respect to the obligations to be satisfied by the other Party with respect to the relevant Closing Action shall remain unaffected.
		
	(f)
	In the event of a termination of this Agreement (Rücktritt) in accordance with this Clause, the provisions of Clause 5.3(b) shall apply mutatis mutandis.

		
	7.
	SELLERS’ GUARANTEES

		
	7.1
	Sellers’ Guarantees

Each Seller as an individual obligor (Teilschuldner) in accordance with Clause 16.2 hereby represents and warrants to the Purchaser limited to each Seller’s Pro Rata Share in the form of an independent guarantee in accordance with Section 311 BGB (selbstständiges Garantieversprechen) that the statements set forth in Clauses 7.2 through 7.19 (the Sellers’ Guarantees) are true and complete as of the Signing Date, unless any other date is explicitly provided for in this Agreement or the respective disclosure schedule; provided, however, that:
		
	(e)
	each of the Sellers' Guarantees set forth in Clauses 7.2 through 7.4 shall also be true and complete immediately prior to the Closing;

		
	(f)
	with regard to Clause 7.2 and Clause 7.3(g) each Seller only gives a guarantee in relation to itself, but not in relation to the respective other Sellers (Einzelschuldner) (cf. Clause 16.2);

		
	(g)
	with regard to Clause 7.4(b) through 7.4(d) each Seller only gives a guarantee in relation to the Shares held by such Seller itself (i.e. the Seller 1 only with respect to the Seller 1 Shares, the Seller 2 only with respect to the Seller 2 

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Shares and the Seller 3 only with respect to the Seller 3 Shares) (Einzelschuldner) (cf. Clause 16.2);
		
	(h)
	the Sellers’ Guarantee under Clause 7.5 is only given by Seller 1 and Seller 2; Seller 1 is liable on a pro rata share of 70.51 % and Seller 2 is liable on a pro rata share of 29.49 % (Teilschuldnerschaft);

		
	(i)
	any requirements and limitations set out in this Agreement and any provisions of this Agreement relating to the consequences of a breach of a Sellers' Guarantee, including the provisions and limitations set forth in Clauses 8.1 through 8.10, constitute an integral part of the Sellers’ Guarantees (Inhalt des Schuldverhältnisses/Bestandteil der Garantieerklärung) and they are solely provided on the basis of these requirements, limitations, and provisions; and

		
	(j)
	the Parties agree that no Sellers’ Guarantee shall be construed as a guarantee (Garantieerklärung) within the meaning of Sections 443 or 444 BGB and that the circumstances set out below are not quality features (Beschaffenheitsmerkmale) within the meaning of Section 443 para. 1 BGB. Therefore, should one or more of the statements set out below be incorrect, the remedies set forth in Clause 8 shall apply exclusively.

		
	7.2
	Capacity and Authorisation of the respective Seller

		
	(g)
	The respective Seller is duly organised and validly existing under the laws of Germany and has all requisite legal power to sell and transfer its respective Shares.

		
	(h)
	There is no lawsuit or official proceeding pending (rechtshängig) or, to the actual knowledge of the respective Seller, threatened in writing against the respective Seller before any court, arbitrator or governmental authority or other regulatory body which in any manner challenges or seeks to prevent, alter or materially delay the Transaction.

		
	(i)
	The statements made in Clause 7.3(f) with respect to the Company and the Subsidiaries apply mutatis mutandis to each Seller.

		
	7.3
	Legal Organisation of the Company and the Subsidiaries

		
	(a)
	The statements in the Background under lit. (A) regarding the Company are complete and correct. The Company has been duly incorporated and is validly existing under the laws of Germany.

		
	(b)
	Schedule 7.3(b) contains true and complete copies of the current articles of association as well as all shareholder, joint venture, consortium agreements or similar agreements, respectively, of, or with respect to, the Company or any of the Subsidiaries (the documents required to be disclosed in Schedule 7.3(b) the Corporate Documents). The Corporate Documents have not been amended by shareholder resolutions or otherwise and no side agreements thereto exist. There are no pending applications for registration (and no resolutions or other actions requiring such registration) in the commercial 

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register or with any other competent authority in respect of the Company or any of the Subsidiaries that have not yet been registered.
		
	(c)
	The statements in the Background under lit. (D) regarding the Subsidiaries are complete and correct. The Subsidiaries have the legal forms indicated in Schedule (D) and are validly existing under the laws of their jurisdiction of incorporation. 

		
	(d)
	At Closing and other than under the Incentive Agreements which have not been assumend by the Sellers at Closing pursuant to Amendment, Assumption and Release Agreements, no parties other than the Purchaser holds direct or indirect participations or interests of whatever kind in (or options, warrants or other convertible securities with respect to) the Company or any Subsidiary, and there are no claims of third parties with respect to such participations or interests. The Company or any Subsidiary are not a party to any agreement that grants any third party (including any of the Sellers) any rights similar to shareholder rights or with respect to the profits (or a portion thereof), including enterprise agreements (Unternehmensverträge) within the meaning of Sections 291 et seq. of the German Stock Corporation Act (AktG), silent partnership agreements (stille Beteiligungsverträge), loans with profit participation (partiarische Darlehen), participation rights (Genussrechte) or any other rights which grant a participation in the profits or liquidation proceeds (Liquidationserlös) of the Company and similar agreements except for those within the scope of Clause 7.14(a).

		
	(e)
	The Company does not hold directly or indirectly any interest or sub-participation in any business, company, partnership or other entity other than in the Subsidiaries except for those disclosed in Schedule 7.17(a).

		
	(f)
	No insolvency or similar proceedings have been opened (eröffnet durch das zuständige Gericht) and to the Sellers' Knowledge no application for the commencement of insolvency, reorganization, liquidation or similar proceedings (whether mandatory or voluntary) over the assets of the Company or any Subsidiary has been filed. Such filing is not required, nor are such proceedings pending or have been rejected on account of a lack of assets. The Company or any of the Subsidiaries did not enter into any moratorium agreement or similar agreement with its creditors. Neither the Company nor any of the Subsidiaries has stopped or suspended payment of its debts (Zahlungen eingestellt) or become unable to pay its debts (zahlungsunfähig) or has become insolvent (überschuldet) in Germany or in any other jurisdiction and no financial over-indebtedness (rechnerische Überschuldung) exists on a going concern basis. No assets of the Company or any Subsidiary have been seized or confiscated by or on behalf of any third party nor are any foreclosure, forfeiture, execution or enforcement proceedings pending with respect to the Company, a Subsidiary or its assets. To the Sellers' Knowledge there are no facts or events which may reasonably be expected to result in any proceedings, events or circumstances as referred to in this Clause.

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	(g)
	As of the Closing Date neither any Seller (as an individual obligor (Einzelschuldner)) nor any Related Party holds any claims against the Company or a Subsidiary resulting from loan or other credit facilities.

		
	7.4
	Ownership of the respective Shares and Capital Structure

		
	(a)
	The Shares constitute the entire issued share capital of the Company.

		
	(b)
	As of the Closing, the respective Seller is the sole owner of the respective Shares allocated to it pursuant to the table under Background lit. (B) (i.e. Seller 1 with respect to the Seller 1 Shares, Seller 2 with respect to the Seller 2 Shares and Seller 3 with respect to the Seller 3 Shares). The respective Shares are duly authorized, validly issued and the contributions thereon (Einlagen) are fully paid up. There are no obligations to make further contributions (keine Nachschusspflichten) on the Shares. All non-cash contributions (if any) have been made at values not exceeding the fair market value of such contribution.

		
	(c)
	With the performance of the Closing Actions the respective Seller’s Shares will not be pledged (verpfändet), attached (gepfändet) or otherwise encumbered (belastet) with any rights of third parties, and there are no pre-emptive rights, rights of first refusal, convertible, options (other than under the Incentive Agreements which have not been assumend by the Sellers at Closing pusuant to Amendment, Assumption and Release Agreements), or other rights of any third party to purchase, acquire or receive the respective Seller’s Shares or additional shares (in particular with respect to the authorised capital).

		
	(d)
	No Seller is bound by any agreement, including voting trust agreements (Stimmbindungsverträge) or sub-participation agreements (Unterbeteiligungsverträge), or any restriction or obligation relating to the exercise of any rights under the Shares.

		
	7.5
	No Leakage

		
	(a)
	Since the Effective Date through the Signing Date, no Leakage, other than Permitted Pre-Signing Leakage has occurred with respect to a Group Company. For purposes of this Agreement Leakage means 

		
	(iii)
	the payment, resolution or declaration of any dividend or similar distributions by a Group Company or any form of hidden profit distribution by a Group Company to any Seller, Related Party or third party, including any withdrawals (Entnahmen);

		
	(iv)
	a reduction of the share capital or a redemption of the shares of a Group Company; 

		
	(v)
	any transaction with or for the benefit of, or payment to or for the benefit of, any Related Party (including the grant of loans);

		
	(vi)
	any assumption or fulfillment by a Group Company of liabilities of any Related Party; 

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	(vii)
	any waiver by a Group Company of a claim against any Related Party; 

		
	(viii)
	the payment of any expenses in connection with the transactions contemplated by this Agreement for the benefit of any Related Party (except for the Transaction Expenses); 

		
	(ix)
	any commitments for any of the items under (i) through (vi); and / or

		
	(x)
	any Tax becoming payable by any Group Company as a consequence of any of the matters referred to in lit. (i) through (vii) above and that would not have been payable if the respective matter had not occured.

		
	(b)
	For the avoidance of doubt, any payments to or transactions for the benefit of Seller 3 acting not in its function as shareholder but as governmental authority and/or state, including but not limited to payments and transactions under public law, shall not be treated as Leakage.

		
	(c)
	For purposes of this Agreement Permitted Pre-Signing Leakage shall mean 

		
	(i)
	any transactions required of the Company or foreseen by this Agreement; 

		
	(ii)
	the distribution to the Sellers of the Company ́s 2014 profits in the amount of EUR 1,300,000; for the avoidance of doubt, such amount shall be a gross amount including any applicable withholding taxes to be withheld by the Company;

		
	(iii)
	any payment of Transaction Expenses;

		
	(iv)
	any payments, transaction and any agreement by the Group Companies within the ordinary course of business and at arm’s length (but not including any such payments, transaction and any agreement with Related Parties; except with Related Parties of Seller 3, if and to the extent made within the ordinary course of business and at arm’s length); and

in each case by or for the account of any Group Company.
		
	7.6
	Accounts

		
	(a)
	The Company has delivered to the Purchaser true and complete copies of the audited individual financial statements of the Company and the audited consolidated financial statements of the Group Companies (to the extent included and consolidated) for the fiscal year ending on December 31, 2014 (consisting of a balance sheet, a profit and loss statement, the attachment (Anhang) as well as the management report (Lagebericht)) (collectively, the Accounts), which are included as Schedule 7.6(a). The Accounts have been (i) prepared in accordance with HGB (individual financial statements) and IFRS (consolidated financial statements) consistent with past accounting practices of the Company, (ii) audited by the auditor, Deloitte & Touche GmbH Wirtschaftsprüfungsgesellschaft pursuant to Section 317 HGB in accordance with the German principles on proper auditing established by the German Institute of Public Auditors (Deutsches Institut der Wirtschaftsprüfer – IDW), and (iii) issued with an unqualified auditor's opinion (uneingeschränkter 

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Bestätigungsvermerk). The Accounts comply with the statutory requirements (entsprechen den gesetzlichen Vorschriften) and present a true and fair view of the assets and liabilities (Vermögenslage), financial position (Finanzlage) and earnings positions (Ertragslage) of the Company and the Subsidiaries (to the extent included and consolidated) pursuant to Section 264 para. 2 HGB (ein den tatsächlichen Verhältnissen entsprechendes Bild der Vermögens-, Finanz- und Ertragslage) as of December 31, 2014. To the Sellers' Knowledge there are, as of the Signing Date, no facts that were already in existence at the time when the Accounts were prepared which would require a change of the Accounts if such facts had been known to the same extent at the time when the Accounts were prepared (wertaufhellende Tatsachen).
		
	(b)
	All books and records (including, without limitation, accounting and tax records) of the Company and the Subsidiaries have in all material respects been kept in accordance with applicable law and accurately reflect all material transactions that are required to be reflected therein pursuant to any applicable law and accounting principles. Such books and records are in the unrestricted possession of the Company respectively the relevant Subsidiary.

		
	(c)
	To the Sellers’ Knowledge, the Company and any Subsidiary has no liability (whether known or unknown, absolute or contingent), other than (i) liabilities reflected in the Accounts (including, for the avoidance of doubt, any liabilities reserved against in the Accounts), (ii) liabilities that are required to be disclosed in this Agreement under any other provision hereof and that are so disclosed.

		
	7.7
	Absence of Certain Changes

Since the Effective Date, the Company and each Subsidiary has conducted its business only in the ordinary course consistent with past practice and as a going concern and with the care of a prudent business man. In particular:
		
	(a)
	neither the Company nor any Subsidiary has made or entered into any contract or letter of intent with respect to any acquisition, sale or transfer of any asset of the Company or any Subsidiary (other than the sale or license of Company Products to its customers in the ordinary course of business consistent with past practices), and neither the Company nor any Subsidiary has made or entered into any contract or letter of intent to acquire, sell or transfer any asset having an individual value in excess of EUR 250,000 or assets having an aggregate value in excess of EUR 500,000;

		
	(b)
	neither the Company nor any Subsidiary has made any borrowings or incurred any other financial indebtedness in excess of EUR 500,000;

		
	(c)
	neither the Company nor any Subsidiary has made any payment to third parties, whether through the grant of loans or otherwise, that has been made outside the ordinary course of business consistent with past practice;

		
	(d)
	neither the Company nor any Subsidiary has delayed or otherwise deferred payments to its suppliers for goods and services purchased in deviation of past practice;

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	(e)
	neither the Company nor any Subsidiary has delayed or otherwise deferred any capital expenditures in deviation of past practice;

		
	(f)
	neither the Company nor any Subsidiary has increased or committed to increase the remuneration of any of its directors and officers (Mitglieder des Vorstands / Geschäftsführer) or employees outside the ordinary course of business or in excess of an amount of 5% of the respective gross salary and no other employment terms of any (including by any change in any severance agreement) of its directors and officers (Mitglieder des Vorstands / Geschäftsführer) or employees of the Company or any Subsidiary have been varied (either by way of amendment or the exercise of any discretion) in connection with or with a view to this Agreement or the transactions contemplated hereby or otherwise outside of the ordinary course of business, or not consistent with past practice;

		
	(g)
	neither the Company nor any Subsidiary have suffered any property damage, destruction or other casualty loss (whether or not covered by insurance) exceeding EUR 100,000 (individually or in the aggregate); and

		
	(h)
	there has been no material change in how the Company has maintained and prosecuted any Company Registered IP Rights.

The Company’s capital expenditure and working capital have been maintained on a normal level, consistent with the requirements of the business and no events have occurred or been revealed which have constituted, or may reasonably be expected to have constituted, individually or in the aggregate, a Material Adverse Effect.
		
	7.8
	Related Party Agreements

		
	(a)
	Except for the existing employment agreement of Mr. Thilo von Selchow with the Company dated 13 July 2010, to be replaced by the employment agreement dated 26/27 May 2015, and the existing employment agreement of Mr. Thilo von Selchow with ZMD America, Inc. dated 13 July 2010, to be replaced by the employment agreement dated 26/27 May 2015, Schedule (E) contains a true and complete list of all written and non-written agreements, arrangements and other legal relationships (i) between a Group Company and a Related Party, and/or (ii) to which a Group Company is a party and which are for the benefit of a Related Party (as third party beneficiary or otherwise), and/or (iii) to which any Related Party is a party and which are for the benefit of a Group Company (as third party beneficiary or otherwise) (the agreements, arrangements and legal relationships required to be disclosed under (i) through (iii) the Related Party Agreements). 

		
	(b)
	True and complete copies of all written Related Party Agreements have been delivered to the Purchaser prior to the Signing Date and there are no non-written Related Party Agreements. 

		
	7.9
	Litigation

There are no law suits, court actions, civil, criminal or administrative action, suit, investigation or other legal proceedings before a court, arbitration panel or 

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administrative authority, in each individual case pending (rechtshängig), or threatened in writing against the Company or any Subsidiary involving an amount in dispute (Streitwert) exceeding EUR 100,000 except as disclosed in Schedule 7.9 and to the Sellers’ Knowledge, there are no facts which are likely to result in such proceedings.
		
	7.10
	Compliance and Subsidies

		
	(a)
	Except where the incorrectness of the following statement would not be reasonably expected to result in aggregate losses in excess of EUR 50,000 the Company and each Subsidiary hold all public and other consents, licenses, authorizations and permits required for its business as currently conducted (the Permits). The Permits are valid and have not been cancelled, revoked or restricted in any manner as of the Closing Date and, to the Sellers' Knowledge, there are no circumstances that may reasonably be expected to result in a cancellation, revocation or restriction of any Permit. 

		
	(b)
	The business of the Company and each Subsidiary has been conducted in compliance in all material respects with all applicable laws, regulations, directives, binding guidelines or rules or orders of Governmental Authority, applicable in any jurisdiction and relating to any matter whatsoever and all Permits. The Company or any Subsidiary has in the last three years preceding the Signing Date not received a notice from any Governmental Authority of a violation of any applicable laws which has not been complied with.

		
	(c)
	Neither the Company nor any Subsidiary has applied for, been granted, received or used any public grants or subsidies during a period of five years prior to the Signing Date other as set forth in Schedule 7.10(c) or has in the last five years preceding the Signing Date received a notice concerning or otherwise learned about a (potential) violation of any terms or conditions of the public grants and subsidies.

		
	7.11
	Real Estate

		
	(a)
	Schedule 7.11(a) exclusively contains a list of all real estate leased by the Company and/or any Subsidiary (collectively, the Real Estate), listing all rent security deposits (Mietsicherheiten), name of the landlords, rental areas (Mietflächen), terms (Laufzeiten), extension options, amount of monthly net rent payments and rent reviews (Mietanpassungen). Either the Company or any Subsidiary, as applicable, has in the last 12 months prior to the Signing Date paid the rent and observed and performed all material covenants on the part of the tenant and the material conditions contained in the lease agreements related to any Real Estate leased by any such person. On the Signing Date there are no outstanding rent payments, service charges, rights of retention (Zurückbehaltungsrechte) or rights to set off (Aufrechnungen) regarding the Real Estate. As of the Signing Date the lease agreements regarding the Real Estate are neither subject to any notice of termination (written or otherwise) nor has such termination been threatened and to the Sellers' Knowledge there are no reasons which would justify a termination. The Real Estate leased by the Company and/or a Subsidiary is in a condition in accordance with the respective lease agreements and is suited for the Company and/or any Subsidiary to carry out their business. To the Sellers’ 

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Knowledge, the Real Estate does not have any material defects which may adversely affect the business of the Company or any Subsidiary in the future.
		
	(b)
	Neither the Company, nor any of its Subsidiaries holds any real property on the basis of freehold ownership (Eigentum) or other ownership rights in rem (dingliche Rechte) such as hereditary building rights (Erbbaurechte) or separate or condomininum ownership (Teil- oder Wohnungseigentum) and neither the Company, nor any of its Subsidiaries is beneficiary to any rights in rem in relation to real property whether registered or not and neither the Company, nor any of its Subsidiaries have committed to acquire real property or have, to the Sellers' Knowledge, incurred any environmental liability, including any obligation to remove, clear, or correct any environmental pollution, contamination or other environmental damage, or to compensate or pay fines for environmental pollution, contamination or other environmental damage.

		
	7.12
	Intellectual Property

		
	(a)
	IP Rights includes (i) intellectual property rights (including patents, utility models, registered and unregistered trademarks, business designations, copyrights, designs), (ii) applications for registration, and rights to apply for registration, of any of the foregoing rights and (iii) similar rights of protection (including software, data base rights, domain names, rights to inventions, trade secrets, know-how, manufacturing processes and techniques, formulae, research and development information and technology) existing anywhere in the world. 

Company IP Rights are all IP Rights that are used in the course of the business of the Company or the Subsidiaries, including but not limited to employee inventions (Arbeitnehmererfindungen) and employee copyright exploitation rights (urheberrechtliche Nutzungsrechte von Arbeitnehmern) and semiconductor property rights (Halbleiterschutzrechte), as conducted on the Signing Date and the Closing Date, and all patents related to or derived in the course of the following funded projects:
		
	(i)
	State of Saxony - Digital Power Mgt IC (€1,767,462), Expected Completion: Jul 30, 2011;

		
	(ii)
	State of Saxony - Intelligent Battery Sensor (€1,473,718), Expected Completion: Jan 31, 2012;

		
	(iii)
	State of Saxony - High-Res Low-Power DAC (€1,049,726), Expected Completion: Apr 30, 2013;

		
	(iv)
	State of Saxony - Analog Topology Library -ILIAS (€765,734), Expected Completion: Jul 31, 2013;

		
	(v)
	State of Saxony - Environmental Sensors (€970,465) Expected Completion: Oct 31, 2014;

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	(vi)
	German Federal Ministry for Education and Research (Bundesministerium für Bildung und Forschung) - Continuous diagnosis capability in semi-conductor elements and superior systems for the analysis of permanent and sporadical electronic failures in the complete system automotive (Durchgängige DIagnosefähigkeit in Halbleiterbauelementen und übergeordneten Systemen zur ANAlyse von permanenten und sporadischen Elektronikausfällen im GEsamtsystem Automobil) (DIANA)

		
	(vii)
	German Federal Ministry for Education and Research (Bundesministerium für Bildung und Forschung) - technologies for energy efficient computing platforms (Technologien für Energieeffiziente Computing-Plattformen – CoolEnergy – )

		
	(viii)
	German Federal Ministry for Economics and Technology (Bundesministerium für Wirtschaft und Technologie) - Adaptive Sense – Adaptive controlling of decentral information and control technology systems (Adaptive Sense – Adaptive Steuerung verteilter IKT-Systeme)

		
	(ix)
	German Federal Ministry for Education and Research (Bundesministerium für Bildung und Forschung) - cable-less sensors for structure monitoring (Kabellose Sensoren für die Strukturüberwachung) (CoolSensornet) Project part (Teilvorhaben): cable-less low-power sensor-RF-ICs for integration in energy self-sufficient applications (Kabellose low-power Sensor-RF-ICs zur Integration in energieautarken Anwendungen)

		
	(x)
	German Federal Ministry for Education and Research (Bundesministerium für Bildung und Forschung) - OptiNum-Grid – optimization of technical systems and scientific methods by means of numerical simulations in the grid (OptiNum-Grid: Optimierung technischer Systeme und naturwissenschaftlicher Modelle mit Hilfe numerischer Simulationen im Grid)

		
	(xi)
	German Federal Ministry for Education and Research (Bundesministerium für Bildung und Forschung) - synthesis supported design of analogue circuits (Syntheseunterstützter Entwurf analoger Schaltungen (SYENA)

		
	(xii)
	German Federal Ministry for Education and Research (Bundesministerium für Bildung und Forschung) - Design of electronic automotive systems from tolerance affected assemblies (Entwurf von elektronischen Automobil-Systemen aus toleranzbehafteten Baugruppen)

		
	(xiii)
	German Federal Ministry for Education and Research (Bundesministerium für Bildung und Forschung) - Continual measuring and analysis system for vital parameters – KONMEVIT (Kontinuierliches Mess- und Auswertesystem für Vitalparameter - KONMEVIT)

		
	(xiv)
	German Federal Ministry for Education and Research (Bundesministerium für Bildung und Forschung) - fast-realtime; TP9: Standard-Low-Noise-Sensor-Interface and design of a communication network for low-latent transmission technology with high signal technological security (fast-realtime; TP9: Standard-Low-Noise-Sensor-Interface sowie Entwurf eines 

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Kommunikationsnetzwerks für niedriglatente Funktechnologie mit hoher signaltechnischer Sicherheit)
		
	(b)
	All Company IP Rights are either legally and beneficially owned by the Company or a Subsidiary or lawfully used with the consent of the owner under a licence. To the extent that the Company or any Subsidiary was or is obliged to pay any remuneration for the assignment of any IP Rights or the grants of any rights of use in such IP Rights such payments have been duly effected and no payment obligations are currently outstanding.

		
	(c)
	Schedule 7.12(c)  lists all Company IP Rights owned (fully or partially) by the Company or a Subsidiary which are registered or the subject of application for registration, including the relevant jurisdiction (the Company Registered IP Rights). All maintenance, renewal and other fees which are due and steps which are required for the maintenance and protection of the Company Registered IP Rights have been paid and taken.

		
	(d)
	Schedule 7.12(d)  lists all contracts granting licenses for the lawful use by the Company and its Subsidiaries of Company IP Rights (except for off-the-shelf software) owned by a third party, which Company IP Rights are incorporated into or used for the Company’s or its Subsidiaries’ products or services. There is no material breach of any such Contract by the Company or any Subsidiary and none of these Contracts has been terminated nor are there, to the Sellers' Knowledge, any circumstances which would make any such breach or termination reasonably likely in the future, in particular, the consummation of the transactions contemplated under this Agreement will not constitute a breach, give either party a right of termination, modify the scope of license, result in additional payments or consideration, or otherwise materially alter the terms of such Contract.

		
	(e)
	All Company IP Rights are legally free and clear from encumbrances (Belastungen) (excluding restrictions contained in the applicable license agreements for Company IP Rights licensed from third parties) and there are no circumstances, in particular not the consummation of the transactions contemplated under this Agreement, which are likely to result in any encumbrance. To the Sellers’ Knowledge, none of the Company IP Rights has been challenged, infringed or misused by any third party.

		
	(f)
	Neither the Company nor or a Subsidiary have received any written notice of any infringement by the Company or a Subsidiary of any third party IP Rights, and neither the Company nor a Subsidiary are involved in any ongoing infringement proceedings relating to IP Rights, and, to the Sellers’ Knowledge, there are no circumstances which would constitute an infringement by the Company or a Subsidiary of any third party IP Rights, be it by the Company’s or its Subsidiaries’ products or services or by the Company’s or a Subsidiary’s acts or behaviour.

		
	(g)
	Schedule 7.12(g)  lists all licences and sub-licenses which have been granted by the Company or a Subsidiary for the Company IP Rights, including whether such licenses are exclusive or sub-licensable. There is no breach of such 

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licences by the Company or a Subsidiary or, to the Sellers’ Knowledge, by a third party. 
		
	(h)
	Schedule 7.12(h)  lists all software or other material that is distributed as “free software”, “open source software” or under similar licensing or distribution terms (including the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the Artistic License, the Netscape Public License, the Sun Community Source License (SCSL) the Sun Industry Standards License (SISL) and the Apache License) (the Open Source Materials) necessary to continue the business of the Company or any Subsidiary as currently conducted. Neither the Company nor any Subsidiary has used Open Source Materials in a manner that creates any material encumbrance (Belastung) or material restriction on the Company’s use of other Company-Owned IP Rights, including any obligation to disclose material parts of Company software in source code form or make material parts of Company software available at no charge.

		
	(i)
	The Company IP Rights owned by any of the Group Companies are not subject to judgments, orders or decrees or any pending proceedings for opposition, cancellation, revocation or rectification.

		
	(j)
	To the Sellers' Knowledge, neither any of the Sellers nor the Company or a Subsidiary have disclosed any Company software source code (customary source code escrow agreements are excepted) or confidential manufacturing specifications or designs to a third party. The Company and its Subsidiaries have no obligations to do so (except for obligations under customary source code escrow agreements).

		
	(k)
	Each Group Company has taken appropriate measures to protect its know-how (including through confidentiality obligations in the employment agreements). To the Sellers ́ Knowledge no know-how and Company IP Rights (where the value of such Company IP Right is contingent upon maintaining the confidentiality thereof) relating to and of importance for the business of any of the Group Companies has been disclosed or permitted to be disclosed to any third party (except in the ordinary course of business under a binding confidentiality agreement), and to the Sellers ́ Knowledge no Group Company has undertaken to disclose to any third party any such know-how or such Company IP Right. No such confidentiality agreement has been breached to the Sellers' Knowledge by the other party thereto.

		
	7.13
	Information Technology

To the Sellers ́ Knowledge any computer hardware, software, firmware, networks and other information technology used to carry on any of the business operations of the Company and of the Subsidiaries (the Information Technology) is either owned or validly leased or licensed to the respective Company or Subsidiary for a period of at least twelve (12) months starting on the Signing Date. To the Sellers ́ Knowledge, in the last twelve (12) months prior to the Signing Date there have been no interruptions, outages or data loss in the respective business of the Company and of the Subsidiaries which have had not only an insignificant adverse effect on such business, and to the 

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Seller's Knowledge there are no defects in the Information Technology which are likely to have such effect.
		
	7.14
	Employee Matters

		
	(a)
	Schedule 7.14(a)  sets forth a true, correct, complete and anonymous list of all employees, (Arbeitnehmer) freelancers and consultants employed as well as members of the management board (Vorstand / Geschäftsführung) and employees that are subject to special protection against dismissal such as employees on parental leave, handicapped employees etc. of the Company and each Subsidiary. Such list correctly states for each employee and member of a management board (as applicable) the department, function/position, date of birth, start of employment, fixed monthly gross salary and other material entitlement, unless and to the extent it is legally prohibited to disclose such data under applicable mandatory data protection law. As of Signing Date, unless otherwise disclosed in Schedule 7.14(a), no notice of termination of the employment of any employee has been given nor does any Group Company or, to Sellers’ Knowledge, any employee intend to terminate such employment. Neither any Group Company nor, to Sellers’ Knowledge, any employee is in material breach of the terms of employment. 

		
	(b)
	Schedule 7.14(b)  sets forth a correct and complete list of all agreements with unions, workers councils, other employee representatives or standard practices (betriebliche Übung) (including, without limitation, collective bargaining agreements (Tarifverträge), shop agreements (Betriebsvereinbarungen), social plans (Sozialpläne), conciliations of interests (Interessenausgleich)) and similar collective agreements by which any Group Company is bound. All these agreements have been duly disclosed to the Purchaser. 

		
	(c)
	Except as set forth in Schedule 7.14(c)  as of the Signing Date, no pension commitments (whether vested or non-vested) or schemes of any kind (including retirement and early-retirement payments, disablement pensions, pensions for surviving dependents to any current or former directors, officers or employees) exist for former or existing directors, officers or employees of any Group Company or their respective dependents (the Pension Schemes). All Pension Schemes comply with applicable law in all material respects and have in all material respects been operated in accordance with their terms, and all contributions and other payments due under the Pension Schemes have been timely paid. 

		
	(d)
	At the Closing Date, with the exception of the Incentive Agreements existing on the Signing Date, no profit sharing schemes (including share options, phantom stocks, profit participating schemes or similar schemes of any kind) or loans granted exist for former or existing directors, officers or employees of any of the Group Companies. True and complete copies of the Incentive Agreement are available at the Company as of the Closing Date.

		
	(e)
	At the latest as from the completion of the transfer of the Shares to the Purchaser no Group Company has granted or promised to any director, officer or employee of the Group Companies any payment or benefit which will 

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become payable or arise as a result of the Transactions. No employment terms of any employee of any of the Group Companies have been varied (either by way of amendment or the exercise of any discretion) in connection with or with a view to the Transactions otherwise outside of the ordinary course of business, consistent with past practice.
		
	(f)
	Unless otherwise provided in Clause 7.9 there is at the Signing Date, and since at least January 1, 2013 has been, no court proceeding with any labor union, works council or other collective employee representative body.

		
	7.15
	Insurance and Insurance Reporting Requirements

The Company and the Subsidiaries have taken out for their own benefit policies of insurance as set forth in Schedule 7.15, which contains a true and complete list of all insurance policies relating to the assets, business or operations of the Group Companies, indicating the contract parties, the insured risk, the insurance coverage and whether or not the insurance policy will terminate or may be terminated by the insurer as a result of the Transactions. Each of the Group Companies has all insurance coverage in place that is required under any contracts to which a Group Company is a party. True and complete copies of the insurance policies required to be listed in Schedule 7.15 have been made available to Purchaser prior to the Signing Date. All insurance policies required to be listed in Schedule 7.15 are in full force and effect. All insurance premiums due thereon have been paid in full when due and, to the Sellers ́ Knowledge, each of the Group Companies is in compliance with all terms and conditions of such insurance policies. No notice of cancellation or termination of any insurance policy has been received by any Group Company or to the Sellers' Knowledge issued. With the exception of the cases listed in Schedule 7.15 since 1 January 2013 there has been no insurance claim (Versicherungsfall) made by any of the Group Companies. There are (or were during such period) no claims by any Group Company pending under any of such policies as to which coverage has been questioned, denied or disputed by the underwriters of such policies. No Group Company has received any written notice from any insurer that the insurance premiums under any policy will be substantially increased (other than normal increases in the ordinary course) or the insurance coverage be materially modified.
		
	7.16
	Finders' Fees

No Group Company has any obligation or liability to pay any fees or commissions to any broker, finder or agent with respect to this Agreement and the consummation of Transactions.
		
	7.17
	Material Contracts

		
	(a)
	Except for the contracts specifically identified in Schedule 7.17(a), neither the Company nor any Subsidiary is a party to or bound by any of the following written contracts, other than contracts which have already been fully performed (vollständig erfüllt) in relation to the main obligations (Hauptleistungspflichten) by all parties thereto (each, a Material Contract):

		
	(i)
	agreements relating to the acquisition or sale of interests in other companies, businesses or real estate;

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	(ii)
	any distributor, original equipment manufacturer, reseller, sales, advertising, agency or manufacturer’s representative contract involving in the case of any such contract a minimum annual payment obligation of the Company or any Subsidiary in excess of EUR 100,000;

		
	(iii)
	agreements that require shareholder or supervisory board approval under applicable law or the rules of procedure of any Group Company;

		
	(iv)
	any contract for the purchase, sale or license of materials, supplies, equipment, services, software, IP Rights or other assets involving in the case of any such contract a consideration of more than EUR 100,000 over the life of the contract;

		
	(v)
	any mortgage, promissory note, factoring agreement, loan agreement or other contract for the borrowing of money, any currency exchange, commodities or other hedging arrangement or any leasing transaction of the type required to be capitalized in accordance with IFRS and all other agreements for the incurrence of any long term or short term financial indebtedness and obligations (and incurrence of any obligation to that effect);

		
	(vi)
	rental- or lease agreements relating to fixed or current assets and real property and any contract pursuant to which the Company or any Subsidiary is a lessor or lessee of any machinery, equipment, motor vehicles, office furniture, fixtures or other personal property involving in the case of any such contract a minimum annual payment obligation or claim of the respective Group Company in excess of EUR 100,000;

		
	(vii)
	agreements providing for the purchase or sale of fixed assets with a value of EUR 100,000 or more;

		
	(viii)
	any guarantees, suretyships (Bürgschaften), letters of comfort (Patronatserklärungen), indemnification obligations (Freistellungsverpflichtungen), assumption of debt (Schuldübernahme), or any similar commitment with respect to, the liabilities or indebtedness of another Group Company or any third party; 

		
	(ix)
	(A) any joint venture contract, partnership- or shareholder agreement, (B) any contract that involves a sharing of revenues, profits, cash flows, expenses or losses with another Group Company or any third party or (C) any contract that involves the payment of royalties to another Group Company or any third party in excess of EUR 100,000 per annum;

		
	(x)
	agreements that limit or purport to limit the freedom of any Group Company to compete in any line of business, with any third party, in any geographic area or during any period of time;

		
	(xi)
	agreements which provide for any of the following in connection with any change of control of any Group Company: (a) any consent requirement, (b) the termination or modification of the agreement or a right of the other party to terminate, modify or renegotiate the agreement, (c) any option or similar 

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right of the other party or (d) any other disadvantage for any Group Company, including any acceleration of any payment to, or right of, any third party;
		
	(xii)
	any in-license agreement or out-license agreements with third parties;

		
	(xiii)
	agreements with sales representatives (Handelsvertreter), distributors (Eigenhändler), commission agents (Kommissionäre) and other sales representatives or consultancy agreements;

		
	(xiv)
	agreements or commitments not made in the ordinary course of business; and

		
	(xv)
	any other agreements providing for a minimum annual payment obligation or claim of the respective Group Company in excess of EUR 100,000.

		
	(b)
	True and complete copies of all Material Contracts have been delivered to the Purchaser prior to the Signing Date. All Material Contracts are in full force and effect (and to the Sellers' Knowledge comply with applicable law and regulation and all conditions precedent provided for their effectiveness have been satisfied). No notice of termination has been received by any Group Company with respect to any Material Contract, and, except as disclosed in Schedule 7.17(a), none of the other parties to any Material Agreement has indicated to a Seller or any Group Company that it intends to terminate a Material Contract or terminate or reduce its business dealings with any Group Company. Neither any Group Company nor, to Sellers’ Knowledge, any other party to any Material Contract is in default or breach under any such agreement. Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will constitute a breach or default under, or result in the termination or modification of, any Material Contract.

		
	7.18
	Assets

		
	(a)
	Each Group Company is the beneficial owner of all (fixed and current) assets which are reflected in the Accounts (except for assets which have been disposed of in the ordinary course of business since the relevant balance sheet date). Except (i) for customary retentions of title and (ii) as set forth in Schedule 7.18(a) such assets are free and clear of any liens, encumbrances or rights of third parties.

		
	(b)
	Except for customary retentions of title, the Group Companies have good title to, or valid leasehold interests or licenses in, and have fully available, all assets (whether real, personal, tangible or intangible) required by them in order to carry on their businesses as currently conducted.

		
	(c)
	All trade accounts receivable of the Group Companies reflected in the Accounts have arisen from sales or services made in the ordinary course of business, consistent with past practice.  

		
	7.19
	Disclosure

No document or other information provided by the Sellers or any Group Company to the Purchaser (in the Electronic Data Room or otherwise) is misleading and no 

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document or other information has been omitted to be provided in the Electronic Data Room which a prudent businessman could have reasonably expected to be provided in view of the Transaction.
		
	7.20
	Due Inquiry

The Purchaser acknowledges that the Seller 2 and Seller 3 have not independently examined or verified the underlying facts, matters, circumstances or statements made in such Sellers' Guarantees, except to the extent they relate to such respective Seller, and that nothing in this Agreement shall imply a duty of Seller 2 and Seller 3 to make specific or other inquiries or searches of whatever nature, and that the lack of such examinations or verifications of Seller 2 and Seller 3 shall, as such, in no event be regarded as acting in a fraudulent manner (keine Arglist aufgrund Angaben ins Blaue hinein aufgrund unterbliebener Untersuchungen oder Überprüfungen der Verkäufer).
		
	8.
	REMEDIES AND LIMITATIONS OF LIABILITY

		
	8.1
	Exhaustive Provisions

Except for mandatory law requiring otherwise, in particular Sections 123 and 276 para. 3 BGB, and except as otherwise expressly provided in this Agreement: (a) the provisions set forth in this Clause 8 shall apply instead and to the exclusion of any and all remedies that would otherwise be available to the Purchaser under statutory law in the event of any breach of the Sellers’ Guarantees or, if explicitly referred thereto, any breach or non-fulfilment of any other obligation, covenant or undertaking of the Sellers arising from or relating to this Agreement; and (b) any further liability of the Sellers, their Affiliates and their representatives, employees, directors, agents, officers or advisers and any differing or further rights or claims of the Purchaser other than explicitly provided for in this Agreement, irrespective of their nature or legal basis, are hereby expressly excluded and waived, including any right to rescind (anfechten) or to withdraw (zurücktreten) from this Agreement or to require on whatever legal basis the winding up of the Transactions (Rückabwicklung des Vertrages gleich auf welcher Rechtsgrundlage, z.B. aufgrund großen Schadensersatzes/Schadensersatzes statt der Leistung), to claim remediation (Nacherfüllung), to reduce (mindern) the Purchase Price payable under this Agreement and/or to claim damages (Schadensersatz) or reimbursement of frustrated expenditure (Ersatz vergeblicher Aufwendungen). The foregoing shall apply in particular, without limitation, to any rights and claims arising from or in connection with (i) defects in quality or title (Sach- oder Rechtsmängel) pursuant to Sections 437 to 441 BGB, (ii) incorrectness of any of the Sellers’ Guarantees or other guarantees, warranties, indemnities or similar undertakings, (iii) breach of any contractual or pre-contractual obligation (culpa in contrahendo), including claims pursuant to Sections 241 para. 2, 311 para. 2 and para. 3 BGB or ancillary obligations (Nebenpflichten) including claims pursuant to Section 280 BGB, (iv) tort, (v) interference with the contractual basis pursuant to Section 313 BGB (Störung der Geschäftsgrundlage). Reference is made to Clause 8.8(b).
		
	8.2
	Scope of Remedies

In the event of any breach or non-fulfilment by any Seller of a Sellers’ Guarantee pursuant to Clause 7 or a breach or non-fulfilment of any other obligation, covenant 

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or undertaking of the Sellers arising from or in connection with this Agreement other than those set forth in Clause 9 (Tax) for which the provisions contained in Clause 9 (Tax) shall apply (each a Sellers’ Breach), the Sellers shall put the Purchaser or, at the Purchaser’s election, the relevant Group Company, into the position it would have been in had the Sellers' Breach not occurred (Naturalrestitution). If and to the extent such remediation in kind (Naturalrestitution) (a) has not been effected by the Sellers within a period of thirty (30) Business Days after the receipt of a Breach Notice, (b) is impossible, or (c) is refused in writing by the Sellers, then the Purchaser shall be entitled to request from the Sellers compensation in cash (Schadenersatz in Geld) for any losses incurred by the Purchaser or any Group Company, provided, however, that such losses shall be determined by using the legal principles of calculation of damages, mitigation of damages and off-setting of losses by advantages (Schadensberechnung, Schadensminderung, Vorteilsausgleich) pursuant to Sections 249 et seq. BGB. Losses shall, however, not include any internal administration and overhead costs. Notwithstanding anything to the contrary in this Agreement, Sellers shall not be liable for a failure of the Company to achieve future profits or other financial figures anticipated by Purchaser when entering into this Transaction, and any arguments that the Total Purchase Price was calculated upon incorrect assumptions shall be explicitly excluded, except in the case of fraud (Arglist) or intentional misrepresentation.
		
	8.3
	Notification of Sellers; Third-party Claim Procedure

		
	(e)
	In the event of an actual or potential breach of a Sellers' Guarantee, the Purchaser shall, as soon as reasonably possible and in no event later than twenty (20) Business Days following the discovery of such facts and circumstances, notify the Sellers of such alleged breach in writing, describing the potential claim in reasonable detail and, to the extent practical, state the estimated amount of such claim and give the Seller the opportunity to remedy the breach within the period of time indicated in Clause 8.2. In the event that in connection with an actual or alleged breach of a Sellers' Guarantee any claim or demand of a third party, including the threatening of measures by authorities is asserted against the Purchaser or a Group Company (each a Third-party Claim), the Purchaser shall 

		
	(i)
	make available to the Sellers a copy of the Third-party Claim or demand and of all time-sensitive documents and provide all information reasonably required to investigate it, and 

		
	(ii)
	give the respective Seller reasonable opportunity to comment or discuss with the Purchaser any measures which the respective Seller proposes to take or omit against such claim. The Purchaser shall have the right to defend the claim by all appropriate proceedings, but must not admit any liability without the prior consent of the respective Seller (not to be unreasonably withheld). 

In particular, the Purchaser shall be entitled to
		
	(iii)
	lead all negotiations and correspondence with the third party, 

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	(iv)
	appoint and instruct legal counsel to act for and on behalf of the Company or any of the Subsidiaries, 

provided that Purchaser shall consult with the respective Seller in good faith about any such measures, and any decision about litigating or settling the claim, or about mitigating the damage occurring shall be preceded by good faith discussions with the respective Seller, with the Purchaser having due regard to the concerns of the respective Seller.
		
	(f)
	The Purchaser undertakes not to, and to cause any of the Group Companies not to settle a claim or permit any such acknowledgement or settlement without the respective Seller’s prior written consent (such consent not to be unreasonably withheld) to the extent that such claims may result in a liability of the respective Seller under this Agreement. The Purchaser undertakes to, and to cause, if applicable, any of the Group Companies to reasonably cooperate with the respective Seller in the defence of any third party claim, provide the respective Seller and its representatives (including, for the avoidance of doubt, its advisors) during normal business hours and after reasonable advance notice with access to all relevant business records and documents of the Group Companies. To the extent it turns out that a Seller is in breach of a Sellers’ Guaranty, all costs and expenses incurred by the respective Seller in defending such claim shall be borne by the Sellers. If it turns out that the Seller was not in breach, any external costs and expenses reasonably incurred by such Seller in connection with the defence (e.g. advisors’ fees) shall be borne by the Purchaser. 

		
	(g)
	The failure of the Purchaser to fully comply with its obligations under this Clause 8.3 shall release the respective Seller from its respective obligations under Clause 7 and Clause 8 but only to the extent the Sellers’ liability increased as a result of such failure (cf. Clause 8.4(a)).

		
	8.4
	Exclusion of Remedies

The Sellers shall not be liable, and the Purchaser shall not be entitled to bring any respective claim under or in connection with this Agreement, if and to the extent that 
		
	(d)
	the claim results from a failure of the Purchaser, its Affiliates or (after Closing) of the Group Companies to mitigate damages pursuant to Section 254 para. 1 and para. 2 BGB; or 

		
	(e)
	with respect to a breach of a Sellers’ Gurantee, the underlying facts or circumstances on which the liability or the claim is based were positively known by the Purchaser or its Affiliates as of the Signing Date, whereby such knowledge shall include – by definition but without limitation – any facts Fairly Disclosed; or

		
	(f)
	the matter to which the claim relates has specifically been taken into account by way of a liability (Verbindlichkeit), reserve (Rückstellung), or depreciation (Abschreibung), or exceptional depreciation (außerplanmäßige Abschreibung), or depreciation to reflect lower market values (Abschreibung auf den niedrigsten beizulegenden Wert) in the Accounts; or 

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	(g)
	the amount of such claim is recovered from third parties (including under existing insurance policies); or 

		
	(h)
	the matter to which the claim relates resulted from an action carried out (i) with the prior written consent of the Purchaser, or (ii) by any of the Group Companies following the Closing.

		
	8.5
	Tax Reductions

To the extent any circumstances triggering an obligation or liability of any of the Sellers under or in connection with this Agreement should lead to a reduced Tax burden of any of the Group Companies in the period beginning on the Effective Date, 00:00 hours or the Purchaser, any such obligation or liability of the Sellers shall be reduced by an amount equal to such reduction provided that the payment of any of the Sellers in fulfillment of their obligations or liabilities does not trigger Taxes.
		
	8.6
	No Double Indemnification

To the extent any amount has actually been recovered from a Seller under any Section of this Agreement or under statutory provisions, or to the extent that a Seller has established a situation that would exist had a breach of the Sellers’ Guaranties under Clause 7 not occurred, any other claim with respect to the same matter under any provision of this Agreement or any rule of law shall be excluded. The same shall apply in respect of circumstances and amounts which led to a reduction of the Purchase Price.
		
	8.7
	De Minimis, Threshold

		
	(c)
	The Purchaser shall only be entitled to any claims for a breach of Sellers’ Guaranties under Clause 7 if and to the extent (i) each individual claim against the respective Seller exceeds an amount of EUR 176,787.77 (in words: Euro onehundred seventysixthousand sevenhundred eightyseven and seventyseven Cents) (USD 200,000 converted at the EUR/USD exchange rate published by the European Central Bank as of one day prior to the Signing Date (8:00 pm) into Euro) (the De Minimis Amount, provided that claims resulting from Sellers' Breaches of the same or a similar source (Serienschäden) shall be aggregated in order to determine whether the De Minimis Amount is reached)) and (ii) the aggregate amount of all individual claims of the Purchaser against the respective Seller which exceed the De Minimis Amount exceeds an amount of EUR 883,938.83 (in words: Euro eighthundred eightythreethousand ninehundred thirtyeight and eightythree Cents) (USD 1,000,000 converted at the EUR/USD exchange rate published by the European Central Bank as of one day prior to the Signing Date (8:00 pm) into Euro) (the Threshold). In case the De Minimis Amount and the Threshold are exceeded, the Purchaser can claim the entire amount, not only the excess amount exceeding the Threshold (Freigrenze).

		
	(d)
	The De Minimis Amount and the Threshold shall not apply to the Exempt Claims.

		
	8.8
	Liability Cap, Exempt Claims

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	(a)
	The Sellers’ aggregate liability for breaches of the Sellers' Guarantees shall be limited to an amount of EUR 17,678,776.63 (in words: Euro seventeen million sixhundredseventyeightthousand sevenhundred seventysix and sixtythree Cents) (USD 20,000,000 converted at the EUR/USD exchange rate published by the European Central Bank as of one day prior to the Signing Date (8:00 pm) into Euro) (the Liability Cap). The Liability Cap does not apply to liability for breaches of the Sellers' Guarantees set forth in Clause 7.2, 7.3, 7.4 and 7.5. For the avoidance of doubt the Liability Cap neither applies to other Purchaser claims, including (i) any specific performance claims for transfer of title to the Sold Shares (Erfüllungsansprüche), (ii) any and all claims under Clause 9 and Clause 11 (except for Clause 11.3(f)) and (iii) claims arising pursuant to lit. (b) (all claims to which the Liability Cap does not apply collectively, the Exempt Claims); provided, however, that the aggregate liability of the Sellers for any and all claims under this Agreement including, for the avoidance of doubt, distributions from the Escrow Account, shall in no event exceed the amount of the Total Purchase Price. 

		
	(b)
	In the event of willful deceit (arglistige Täuschung) or other willful actions (Vorsatz) of a Seller, the limitations on liability contained in Clauses 8.7 and 8.8(a) and the benefit of pro rata liability (Teilschuldnerschaft) shall not apply to such Seller. For the avoidance of doubt, a willful deceit (arglistige Täuschung) or other willful actions (Vorsatz) of a Seller, shall not be imputed to the other Sellers. Willful deceit (arglistige Täuschung) or other willful actions (Vorsatz) of persons assisting a Seller in the performance of its contractual obligations (Erfüllungsgehilfen) pursuant to Section 278 BGB or of an advisor shall only be imputed to that Seller who actually involved such assisting person or advisor, but not generally to other or all Sellers, except where such assisting person or advisor was involved for several or all Sellers (e.g. an advisor who represented several or all Sellers).

		
	8.9
	Conduct of Purchaser’s Claims

		
	(d)
	If the Sellers are individually liable towards the Purchaser (Einzelschuldner) as provided in Clause 16.2, the Purchaser shall not assert such claim against the Escrow Account.

		
	(e)
	If the Sellers are liable towards the Purchaser on a pro rata basis (Teilschuldner), the Purchaser is entitled to, at Purchaser’s choice, assert such claim against the Escrow Account and/or the Sellers; provided, however, that the Purchaser shall assert any such claim that is subject to the Liability Cap against the Escrow Account to the extent the Escrow Account is still funded, notwithstanding the Purchaser’s right to claim the remaining difference from the Sellers. If such claim against the Escrow Account is not timely satisfied, the Purchaser shall remain entitled to claim the full amount from the Sellers. 

		
	(f)
	For the avoidance of doubt, if and to the extent an Exempt Claim for which the Sellers are liable on a pro rata basis (Teilschuldner) is asserted by the Purchaser against the Escrow Account, any payment from the Escrow Account to the Purchaser in performance of such claim shall not reduce the Liability Cap.

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	8.10
	Time Limitation

Any claims of the Purchaser under and in connection with this Agreement shall become time-barred (verjährt) as follows:
		
	(c)
	any claims under Clause 9 are exclusively governed by Clause 9.6(b);

		
	(d)
	any other Exempt Claims shall become time-barred 60 months after the Closing Date; 

		
	(e)
	any other claims shall become time-barred 24 months after the Closing Date; and

		
	(f)
	any claims arising as a result of intentional breaches (Vorsatz) within the meaning of Section 202 BGB or fraud (Arglist) shall become time-barred upon expiry of the statutory time limitation period.

Section 203 BGB shall apply.
		
	9.
	TAX

		
	9.1
	Tax Warranties

Each Seller as an individual obligor (Teilschuldner) hereby guarantees to the Purchaser on a pro rata basis pursuant to each Seller’s Pro Rata Share in accordance with Clause 16.2, subject to the disclosures in this Agreement, in the form of an independent guarantee in accordance with Section 311 BGB (selbstständiges Garantieversprechen) that the statements set forth in Clause 9.1(a) through 9.1(i) (the Tax Guarantees) are true as of the Signing Date or such other dates as explicitly provided for therein; Clauses 7.1(f) and 8.4 apply mutatis mutandis to this Clause 9.1. For the avoidance of doubt, the Purchaser cannot claim for damages under this Clause 9.1 with respect to Taxes that would have become payable in case the Tax Guarantee had been true.
		
	(h)
	As of the Signing Date, the Group Companies have timely and duly (formell ordnungsgemäß) submitted all Tax Returns that are due to be filed and all other legally necessary declarations to the Tax Authorities in accordance with all statutes and directives, fully and truthfully completed;

		
	(i)
	As of the Signing Date the Group Companies have in each case paid, or withheld and paid over all Taxes that are due;

		
	(j)
	No Group Company is involved in any Tax audit or investigation and no Group Company has received any written notification that any Tax Authority intends to conduct a Tax audit or investigation of the respective Group Company;

		
	(k)
	No Group Company is a party to a Tax court proceeding, and no Tax court proceeding with regard to a Group Company has been formally announced;

		
	(l)
	No claim has ever been made in writing by an authority in a jurisdiction where a Group Company does not file Tax Returns that it is or may be subject to Tax in that jurisdiction; 

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	(m)
	As of the Signing Date, all Tax related documents (including electronically stored data), which are under any Tax law required to be available at a company, including but not limited to all transfer pricing and related parties’ transaction documentation, such as documentation pursuant to Section 90 (3) of the German Tax Code (Abgabenordnung) or similar foreign law provisions, are or will be available at all Group Companies in a manner as required under, and in full compliance with, the applicable Tax laws; for the avoidance of doubt, transfer pricing and related parties’ transaction documentation that is to be prepared on request of the Tax Authorities has been prepared only if and to the extent the competent Tax Authority has actually requested the preparation thereof;

		
	(n)
	None of the Group Companies has received or applied for in writing any written ruling from any Tax Authority (including a binding ruling (verbindliche Auskunft) under German law or a similar ruling under any other applicable law) for Taxes relating to periods after the Effective Date or has entered into any written and legally binding agreement relating to Tax with any Tax Authority with effect for periods starting after the Effective Date;

		
	(o)
	None of the Group Companies has been involved in any scheme, arrangement, transaction or series of transactions that would have been aimed from the perspective of the respective Group Company for the evasion of Tax as main purpose;

		
	(p)
	Between the Effective Date and (including) the Closing Date, none of the Group Companies (i) has made or will make any hidden profit distribution (verdeckte Gewinnausschüttung) and (ii) has performed or refrained from any act prior to and including the Closing Date which or the omission of which triggers a hidden profit distribution to or for the benefit of the Sellers for the period following the Closing Date. Deviating from Clause 9.1 first sentence, Clause 9.2(a) last sentence shall apply mutatis mutandis.

		
	9.2
	Tax Indemnification 

		
	(h)
	Each Seller as an individual obligor (Teilschuldner) in accordance with Clause 16.2 shall pay to the Purchaser or, upon request of the Purchaser, the relevant Group Company, on a pro rata basis pursuant to each Seller's Pro Rata Share an amount equal to any Pre-Effective Date Taxes (the Tax Indemnification Claim). Pre-Effective Date Taxes shall mean (i) any Taxes which are imposed on any of the Group Companies by any Tax Authority relating to the Sellers’ Periods. Sellers’ Period shall mean the taxable periods (Veranlagungs- bzw. Erhebungszeiträume) ending on or before the day preceding the Effective Date, 24:00 hours and (ii) with respect to a taxable period beginning before and ending after the day preceding the Effective Date, 24:00 hours (the Straddle Period), that portion of such taxable period ending on the day preceding the Effective Date, 24:00 hours. 

For purposes of this Clause 9, in the case of any Straddle Period, the amount of Taxes to be allocated to the Sellers’ Period shall be determined in accordance with the following “as-if assessment” and shall be equal to:
		
	(i)
	In case of Taxes that are assessed on an annual basis and are not based upon or related to income, such portion shall be deemed to be the amount of such Tax for the entire Tax assessment period multiplied by a fraction, the 

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numerator of which is the number of days in the Tax assessment period ending on the day preceding the Effective Date, 24:00 hours and denominator of which is the number of days in the entire Tax assessment period.
		
	(ii)
	In case of any Taxes based on or related to income or turnover such portion shall be deemed equal to the amount that would be payable if the relevant Tax period ended on the day preceding the Effective Date, 24:00 hours.

		
	(iii)
	In case of any other Taxes, the entire Tax, if and to the extent the matter of facts (Steuertatbestand) of the respective Tax has been completely fulfilled in the period ending on the day preceding the Effective Date, 24.00 hours, or nil, if not. 

Deviating from sentence 1 with respect to Taxes which can be credited in favor of any of the Sellers or any Related Party the Sellers shall be liable for the Tax Indemnification Claim in accordance with the ratio between the fractional amounts of the respective Tax each Seller or a Related Party of the respective Seller ís entitled to a Tax credit. 
		
	(i)
	The Purchaser shall not be entitled to a Tax Indemnification Claim if and to the extent that the Pre-Effective Date Taxes 

		
	(xv)
	have been paid prior to the Effective Date; or

		
	(xvi)
	a Group Company (x) has recovered the respective Pre-Effective Date Taxes from a third party (including any insurance policies) or (y) has a corresponding claim for repayment, reimbursement or indemnification with respect to any Pre-Effective Date Taxes from a third party (including any insurance policies) and has not used reasonable efforts to collect such claim from a third party. The recovered or recoverable amount pursuant to the preceding sentence shall be calculated as the gross amount recovered or recoverable from a third party less any Taxes and expenses actually incurred by the respective Group Company in connection with the recovered or recoverable amount; provided the Sellers have fully paid the amount of the respective indemnifiable Tax, the Purchaser will procure that the relevant Group Company will, upon request of the Sellers, assign any claims for recovery from any third party to the Sellers; or

		
	(xvii)
	arise from (i) any change in accounting and taxation principles or practice of the Purchaser or any of the Group Companies (including methods or preparing or submitting Tax Returns) for the period until the Effective Date introduced after the Closing Date, or (ii) any merger or similar reorganization having retroactive effect for the Sellers’ Period involving any Group Company and implemented after the Closing Date; sentence 1 of this Section (iii) shall not apply if and to the extent the relevant act (i) was legally required under mandatory law or its interpretation by the Tax Authorities, or (ii) has been taken at the request of the Sellers; or

		
	(xviii)
	result from or are increased by a breach by the Purchaser of its obligations under Clause 9.4 (Filing of Tax Returns) and Clause 9.5 (Cooperation in Tax Matters); or

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	(xix)
	have been taken into account in the Accounts as a liability (Verbindlichkeit) for Taxes or provision (Rückstellung) for Tax liabilities, even if part of other liabilities, or provisions, to the extent these liabilities for Taxes and provisions for Tax liabilities are listed in Schedule 9.2(b)(v); for the avoidance of doubt, a liability or provision pursuant to the preceding sentence shall not reduce a Tax Indemnification Claim if and to the extent the amount of any such liability or provision has been paid to the Sellers pursuant to Clause 9.3(d); or

		
	(xx)
	the Pre-Effective Date Taxes can or could have been avoided by offsetting taxable profits against Tax losses (in particular in form of Tax loss carrybacks or Tax loss carryforwards); for the avoidance of doubt, any consumption or reduction of a Tax loss directly or indirectly caused by the Purchaser or – after the Effective Date – by any of the Group Companies shall be disregarded for the purpose of the existence of such offsetting opportunity ("as if calculation"); or

		
	(xxi)
	the Purchaser or any of its Affiliates or any of the Group Companies obtains a benefit in respect of Taxes within five (5) years after the Effective Date (the Tax Benefit), including but not limited to benefits resulting from the lengthening of any amortisation or depreciation periods, higher depreciation allowances, a step-up in the Tax basis of assets or the non-recognition of liabilities or provisions (Phasenverschiebung) as the result of an adjustment or payment giving rise to a Tax Indemnification Claim. Tax Benefits arising after the Effective Date shall be accounted for at their net present value. The net present value is determined by applying a discount factor of four (4) % and the applicable tax rate at the moment of the Tax Benefit. 

Any Tax Indemnification Claim shall become due and payable on the later of (i) twenty (20) Business Days after the Purchaser has notified the Sellers in writing about the payment obligation (attaching a copy of the relevant Tax assessment notice or other payment notice of the Tax Authority, where applicable) and (ii) five (5) Business Days before such Taxes are due and payable to the relevant Tax Authority. The Sellers are entitled to make the indemnification payment directly to the bank account of the Tax Authority, if they inform the Purchaser thereof without undue delay. On request and at the expense of the Sellers the Purchaser shall procure that the respective Group Company makes its best efforts to achieve a deferred payment date, in particular but not limited to the application for a suspension of enforcement of tax payment obligation (Aussetzung der Vollziehung). If the Tax for which an indemnification payment has been made is subsequently reduced, the difference between the higher indemnification payment and the lower Tax amount shall be reimbursed by the Purchaser to the Sellers (on a pro rata basis pursuant to each Seller's Pro Rata Share), including all interests related thereto. Clauses 9.3(b) and 9.3(c) shall apply mutatis mutandis to the existence of any over-indemnification and the reimbursement obligation of the Purchaser.
		
	9.3
	Tax Refunds

		
	(i)
	After the Closing Date, the Purchaser undertakes to pay to the Sellers (on a pro rata basis pursuant to each Seller’s Pro Rata Share) any refund of Pre-Effective Date Taxes relating to the Group Companies and received by the Purchaser or any of the Group Companies after the Effective Date (including, for the avoidance of 

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doubt, resulting from a change of law after the Closing Date with retroactive effect for the Sellers’ Period) by receipt of cash payment, set-off or deduction but only if and to the extent that such refund of Taxes has not already been taken into account in the Accounts as an asset, except to the extent such refunds have reduced an otherwise payable indemnity amount or claim provided for under this Agreement (the Tax Refund).
		
	(j)
	The Purchaser shall, and shall procure (steht dafür ein) that the Group Companies will notify the Sellers within twelve (12) Business Days of any Tax Refund. The Sellers are entitled to appoint a certified accounting firm, tax advisory firm or law firm – at their own expense – to have the fulfilment of the Purchaser’s duties under this Clause 9.3 reviewed. Clause 9.5 shall apply mutatis mutandis to such review.

		
	(k)
	Any Tax Refund shall be payable to the Sellers (on a pro rata basis pursuant to each Seller’s Pro Rata Share) within five (5) Business Days after actual receipt of such Tax Refund (including by way of set-off or deduction).

		
	(l)
	The Purchaser undertakes to pay to the Sellers (on a pro rata basis pursuant to each Seller’s Pro Rata Share) any surplus of provisions for Taxes (Steuerrückstellungen) or liabilities for Taxes (sonstige Verbindlichkeiten aus Steuern) which are in each case recorded in the Accounts, to the extent the amount of liabilities for Pre-Effective Date Taxes falls short of the amount of the provisions for Taxes or the amount of the liabilities for Taxes which are recorded in the Accounts and to the extent these liabilities for Taxes and provisions for Tax liabilities are listed in Schedule 9.2(b)(v). Any amount to be paid by the Purchaser under this Clause 9.3(d) shall be due and payable within fifteen (15) Business Days after receipt of all Tax assessment notices for the Seller Period. The Purchaser shall notify the Seller in writing and without undue delay of any relevant decision by the Tax Authority resulting in a claim under this lit (d). If a payment has been made pursuant to this Clause 9.3(d) and the liabilities for Pre-Effective Date Taxes are subsequently increased, the difference shall be reimbursed by the Sellers (on a pro rata basis pursuant to each Seller's Pro Rata Share) to the Purchaser. For the avoidance of doubt, this Clause 9.3(d) shall not apply if and to the exent the liability or provision pursuant to the preceding sentence has reduced a Tax Indemnification Claim pursuant to Clause 9.2(b)(v). 

		
	9.4
	Filing of Tax Returns

		
	(d)
	Until the Closing Date, the Sellers shall procure (steht dafür ein) that (i) Tax Returns of the Group Companies shall be prepared and filed in a timely manner and in accordance with all applicable laws and past practice and (ii) all Taxes payable under such Tax Returns are paid in a timely manner.

		
	(e)
	After the Closing Date, the Purchaser shall procure (steht dafür ein) that the Group Companies prepare and file when due all Tax Returns in line with past practice provided (i) no changes are required in order to comply with applicable rules under mandatory law or its interpretation by the Tax Authorities and (ii) no changes have been taken at the request of the Seller or to correct past misbehavior. To the extent that a Tax Return relates in whole or in part to a Pre-Effective Date Tax or to a Tax for which the Sellers may become liable under Clause 7.5 or Clauses 11.4(a) to 11.4(d) the Purchaser shall submit a draft of such Tax Return to the Sellers for review no later than thirty (30) Business Days prior to the due date of such Tax Return. The 

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Purchaser shall procure (steht dafür ein) that the relevant Group Companies (i), if and to the extent permitted by law, make any such amendments requested by the Sellers and (ii) not submit any such Tax Return to any Tax Authority without the prior consent of the Sellers, such consent not to be unreasonably withheld. For the avoidance of doubt, this shall not prohibit the Purchaser and the Group Companies from paying any Taxes as they fall due under law or by order of the Tax Authorities. The Sellers shall be deemed to have given their consent to any such Tax Return timely submitted to them for their review if the Sellers did not provide any comment with respect to the relevant Tax Return to the Purchaser or the relevant Group Company until five (5) Business Days prior to the due date of the Tax Return.
		
	(f)
	After the Closing Date, the Purchaser shall procure (steht dafür ein) that the Group Companies do not amend any Tax Return that has been filed by the relevant Group Company prior to or on the Closing Date and which relates to a Pre-Effective Date Tax or to a Tax for which the Sellers may become liable under Clause 7.5 or Clauses 11.4(a) to 11.4(d) without the Seller’s prior written consent (not to be unreasonably withheld) unless (i) such amendments are required in order to comply with applicable rules under mandatory law, or its interpretation by the Tax Authorities, or (ii) such amendments have been taken at the request of the Seller or to correct past misbehavior.

		
	9.5
	Cooperation in Tax Matters

		
	(i)
	The Parties agree to fully cooperate with each other in connection with any Tax matter affecting the Group Companies and relating to the Sellers’ Period or a Tax for which the Sellers may become liable under Clause 7.5 or Clauses 11.4(a) to 11.4(d), including the preparation and filing of any Tax Return, conduct of any audit, investigation, dispute, appeal or similar proceeding or other communication with any Tax authority. Such cooperation shall include, without limitation, providing or making available all relevant books, records and documentation and the assistance of officers and employees. Unless required otherwise by law, the Purchaser shall notify in writing the Sellers without undue delay (unverzüglich), but at the latest six (6) Business Days after the Purchaser or any Group Company became aware of such event of any announcement and commencement of any administrative and judicial proceeding relating to the Sellers’ Period or a Tax for which the Sellers may become liable under Clause 7.5 or Clauses 11.4(a) to 11.4(d) (collectively the Relevant Tax Proceedings). The notification on the Relevant Tax Proceedings shall contain copies of all documents received from a Tax Authority related to the respective announcement or commencement of the Relevant Tax Proceedings. The Purchaser shall procure (steht dafür ein) that the Sellers or a Tax counsel appointed by it and bound to professional secrecy are given the opportunity to duly participate in any audits by the Tax Authorities relating to the Sellers’ Period, in their preparation and any scheduled audit meetings and written correspondence relating thereto, in each case at the Sellers’ own cost.

		
	(j)
	Purchaser shall procure that upon (i) request of at least one of the Sellers, objections are filed and legal proceedings are instituted and conducted against any assessment of Pre-Effective Date Taxes and that (ii) any such Tax proceedings are conducted in accordance with the Sellers reasonable directions, unless required otherwise by law, 

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in each case at the expense of the Sellers (including at the request of the Purchaser payments in advance required for such conduct).
		
	9.6
	Miscellaneous

		
	(e)
	If the Purchaser or the Sellers fail to comply in a material respect with any of their obligations under Clause 9.4 and 9.5 or deny fulfillment of such obligations (hereinafter the Failing Party), the respective other Party shall not be liable under this Clause 9, unless and to the extent that the Failing Party is able to demonstrate that the other party was not prejudiced in a material manner in avoiding the respective Taxes as a result of such non-compliance.

		
	(f)
	Claims of the Purchaser and the Sellers under this Clause 9 shall become time-barred (verjährt) for each claim 

		
	(i)
	in the case of claims relating to or depending on Taxes that are levied on the basis of an assessment, (x) six (6) months after the date of the final, non-appealable (formell und materiell bestandskräftig) assessment of the respective Tax, or, (y) in case of Taxes to which the concept of final, non-appealable (formell und materiell bestandskräftig) Taxes does not apply, six (6) months after the date as of which an assessment concerning the respective Taxes is time-barred; and

		
	(ii)
	in all other cases five (5) years after the Closing Date,

		
	(iii)
	but in case of claims of the Sellers with respect to which the Sellers are in need of certain information, e.g. Tax assessment notices of the Group Companies, being passed on to them by the Purchaser not earlier than six (6) months after the date on which the Sellers have received the relevant information from the Purchaser.

		
	(g)
	Any restrictions or limitations contained elsewhere in this Agreement (other than in this Clause 9) shall not apply to any claims of the Purchaser pursuant to this Clause 9 unless Clause 9 or the respective provision outside Clause 9 makes explicit reference to the claim of the Purchaser to be limited or restricted by mentioning Clause 9 and, where applicable, the respective subsection(s).

		
	(h)
	Each Seller's liability under this Clause 9 shall be limited to an amount equal to 100% of each Seller's Pro Rata Share of the difference of (i) the Total Purchase Price less (ii) the sum of the Assumed Change of Control Payments and the Non-Assumed Change of Control Payments (such resulting amount the Liability Cap Tax).

		
	(i)
	For the avoidance of doubt, the Sellers shall not be entitled to recharge any amounts payable to either Purchaser or at Purchaser’s choice to the respective Group Company under this Clause 9 to any of the Group Companies under any Tax sharing agreement (if any).

		
	(j)
	Any claims, rights and obligations which relate to the obligation to pay or to the actual payment of Taxes as well as Wage Taxes contained in Clause 11.4 shall be subject to the provisions set forth in Clauses 9.6(b), 9.6(c), 9.6(d) and 9.6(e) which shall apply mutatis mutandis.

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	9.7
	No double Recovery

		
	(c)
	In case of Taxes or damages with respect to which the Purchaser can raise a claim under this Clause 9 and a claim for a Sellers’ Breach or any other claim under this Agreement, the Purchaser shall have exclusively the claim under this Clause 9; Clause 8.6 applies mutatis mutandis to claims of the Purchaser under this Clause 9.

		
	(d)
	For the avoidance of doubt, in the event that a fact or circumstance results in a breach of any Tax Warranty listed in Clause 9.1 and simultaneously gives rise to a Tax Indemnification Claim, the damage caused can only be claimed once and the Tax Indemnification Claim shall prevail.

		
	10.
	PURCHASER'S AND PURCHASER’S GUARANTOR’S GUARANTEES

		
	10.1
	The Purchaser represents to the Sellers in the form of an independent guarantee in accordance with Section 311 BGB (selbstständiges Garantieversprechen) that the following statements are true as of the Signing Date and as of the Closing Date:

		
	(j)
	The Purchaser is duly organized and validly existing under the laws of Bermuda.

		
	(k)
	The execution and performance of this Agreement by the Purchaser is within the Purchaser's corporate powers, has been duly authorized by all necessary corporate action on the part of the Purchaser, requires no approval or consent by any governmental authority or other regulatory body and does not violate any applicable law or decision by any court or governmental authority or other regulatory body binding on the Purchaser and this Agreement constitutes a legal, valid and binding obligation upon the Purchaser.

		
	(l)
	There is no lawsuit, investigation or proceeding pending (rechtshängig) or threatened in writing against the Purchaser before any court, arbitrator or governmental authority or other regulatory body which in any manner challenges or seeks to prevent, alter or materially delay the Transaction.

		
	(m)
	No bankruptcy, insolvency or similar proceedings are pending and to the actual knowledge of the Purchaser have been applied for in respect of the Purchaser under any applicable law. To the actual knowledge of the Purchaser, no circumstances exist which would require an application for any bankruptcy, insolvency or similar proceedings nor do any circumstances exist according to any applicable bankruptcy or insolvency laws which would justify the avoidance of this Agreement.

		
	10.2
	The Purchaser’s Guarantor represents to the Sellers in the form of an independent guarantee in accordance with Section 311 BGB (selbstständiges Garantieversprechen) that the following statements are true as of the Signing Date and as of the Closing Date:

		
	(m)
	The Purchaser’s Guarantor is duly organized and validly existing under the laws of Delaware, United States of America.

		
	(n)
	The execution and performance of this Agreement by the Purchaser’s Guarantor is within the Purchaser’s Guarantor’s corporate powers, has been 

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duly authorized by all necessary corporate action on the part of the Purchaser’s Guarantor, requires no approval or consent by any governmental authority or other regulatory body and does not violate any applicable law or decision by any court or governmental authority or other regulatory body binding on the Purchaser’s Guarantor and this Agreement constitutes a legal, valid and binding obligation upon the Purchaser’s Guarantor.
		
	(o)
	There is no lawsuit, investigation or proceeding pending (rechtshängig) or threatened in writing against the Purchaser’s Guarantor before any court, arbitrator or governmental authority or other regulatory body which in any manner challenges or seeks to prevent, alter or materially delay the Transaction.

		
	(p)
	No bankruptcy, insolvency or similar proceedings are pending and to the actual knowledge of the Purchaser’s Guarantor have been applied for in respect of the Purchaser’s Guarantor under any applicable law. To the actual knowledge of the Purchaser’s Guarantor, no circumstances exist which would require an application for any bankruptcy, insolvency or similar proceedings nor do any circumstances exist according to any applicable bankruptcy or insolvency laws which would justify the avoidance of this Agreement.

		
	10.3
	If, after the Closing Date, the management board of the Company asserts a claim of the Company pursuant to Section 62 AktG against a Seller for repayment of amounts paid out by the Company to that Seller in violation of Section 57 AktG, the Purchaser shall hold such Seller harmless from such claim for repayment, including any interest accrued thereon. It is the joint understanding of the Parties that the sole purpose of this Clause 10.3 is to avoid “windfall profits” of the Purchaser. For the avoidance of doubt, this Clause 10.3 shall not apply to any claims asserted against a Seller by an insolvency administrator over the assets of the Company. The Purchaser’s claims under Clause 9 and Clause 11.4 of this Agreement shall remain unaffected and in cases of doubt prevail over this Clause 10.3. 

		
	10.4
	In the event of a breach of any guarantee, covenant or undertaking pursuant to Clause 10.1 or Clause 10.2, the Purchaser and Purchaser's Guarantor shall indemnify and hold harmless the Sellers from any damages incurred by the Sellers. All claims of the Sellers arising under Clause 10.1 shall be time-barred 24 months after the Closing Date. All claims of the Sellers arising under Clause 10.3 shall be time-barred six (6) months after the respective claim of the Company becoming time-barred, but at the latest five (5) years after the Closing Date.

		
	10.5
	The Purchaser's Guarantor hereby unconditionally and irrevocably guarantees to the Sellers by way of an independent and non-accessory guarantee pursuant to Section 311 BGB (i) the complete and punctual payment of the Total Purchase Price under this Agreement, and (ii) the full and punctual performance by the Purchaser of any and all other obligations and undertakings of the Purchaser under or in connection with this Agreement. The aggregate liability of the Purchaser and the Purchaser’s Guarantor for any and all claims under this Agreement shall in no event exceed the amount of the Total Purchase Price.

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	11.
	SELLERS’ COVENANTS AND INDEMNITIES

		
	11.1
	Conduct of Business prior to Closing

From the Signing Date until the occurrence of Closing (the Interim Period), each of the Sellers (Einzelschuldner) shall – to the extent legally possible and without a liability for a breach of this clause by any other Sellers - use best reasonable efforts to cause the Group Companies to carry on the business in the ordinary course consistent with past practice, including, for the avoidance of doubt, for Tax purposes, and to cause them to
		
	(q)
	use best reasonable efforts to preserve intact their business organizations and relationships with third parties and to keep available the services of their present directors, officers and employees, and

		
	(r)
	maintain their capital expenditure and working capital on a normal level, consistent with the requirements of its businesses, and

		
	(s)
	do not cause occurrence of events which may reasonably be expected to constitute, individually or in the aggregate, a Material Adverse Effect, and

		
	(t)
	refrain from any open or hidden profit distribution (verdeckte Gewinnausschüttungen).

		
	11.2
	Restricted Actions 

Except as expressly required by this Agreement, during the Interim Period, each of the Sellers (Einzelschuldner) shall – to the extent legally possible and without a liability for a breach of this clause by any other Sellers - use best reasonable efforts to cause the Group Companies to not take any of the following actions without the prior written consent of the Purchaser (which consent shall not be unreasonably withheld, delayed or conditioned) and unless required under this Agreement, any Legal Requirements or final court decision:
		
	(g)
	any shareholders’ resolutions regarding

		
	(xxii)
	the amendment of the articles of association of a Group Company;

		
	(xxiii)
	the payment of dividends or other distributions by a Group Company;

		
	(xxiv)
	the issuance of, authorization to issue, securities, including but not limited to convertible bonds (Wandelschuldverschreibungen), dividend bonds (Gewinnschuldverschreibungen), participation rights (Genussrechte) and warrants as well as the granting of stock options or other options or rights to acquire shares in any of the Group Companies;

		
	(xxv)
	the repurchase (Erwerb eigener Anteile) or redemption (Einziehung) of any shares;

		
	(xxvi)
	any transformation (Umwandlung) of the Company within the meaning of the German Reorganization Act (Umwandlungsgesetz);

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	(xxvii)
	the conclusion of any enterprise agreement (Unternehmensvertrag) within the meaning of Sections 291 and 292 AktG;

		
	(xxviii)
	the transfer of all, or essentially all, assets;

		
	(xxix)
	the liquidation, dissolution or wind-down of any Group Company;

		
	(h)
	any acquisition, sale or encumbrance of (i) real estate (irrespective of the value), (ii) any material intellectual property, (iii) or with a value in excess of EUR 100,000.00 (in words: Euro one hundred thousand) any other asset or (iv) of other businesses or enterprises or shareholdings, silent partnerships or other capital contributions or participations in such other businesses or enterprises;

		
	(i)
	any incurrence of long term or short term financial indebtedness and obligations (and incurrence of any obligation to that effect) of any sort outside the ordinary course of business consistent with past practice;

		
	(j)
	any sale, transfer or encumbrance (Belastung) of any shares;

		
	(k)
	any lay-off or other restructuring affecting a significant part of the workforce of the Company;

		
	(l)
	any capital expenditure in excess of (i) EUR 100,000.00 (in words: Euro one hundred thousand) in the individual case or (ii) of EUR 200,000.00 (in words: Euro two hundred thousand) in the aggregate for expenditures of a similar kind;

		
	(m)
	any change in any method of accounting or accounting practice or policy by the Group Company;

		
	(n)
	any entering into, termination of or amendment to any Material Contract (other than non-material amendments in the ordinary course of business, consistent with past practice), pension scheme, collective agreement, incentive scheme or Related Party Agreement by or affecting a Group Company;

		
	(o)
	any Leakage except actions permitted according to Clause 7.5(b) and 7.5(c)(iv);

		
	(p)
	any reduction or material change of the existing insurance coverage of the Group Companies and any omission to pay any premiums under the insurance policies when due;

		
	(q)
	any entering into agreements or other transactions whose terms are not at arm's length;

		
	(r)
	any action or omission of action that may give rise to an obligation of a Group Company to repay state subsidies (Fördermittel);

		
	(s)
	any omission of action required to maintain or prosecute any Company Registered IP Rights; and

		
	(t)
	entering into any agreement to take any of the actions set forth under Clause 11.2(a) through 11.2(m).

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	11.3
	Other Post-Signing Actions and Undertakings

		
	(k)
	Prior to Closing, the Company and the Sellers, acting as shareholders in the Company, shall use reasonable best efforts to enter into an amendment, assumption and release agreement with each Beneficiary regarding the respective Beneficiary’s Incentive Agreement substantially in the form as attached hereto as Schedule 11.3(a) (each an Amendment, Assumption and Release Agreement) according to which the Company, the Sellers, acting as Shareholders in the Company, and the respective Beneficiary agree subject to the condition subsequent that Closing does not occur that (i) the Incentive Agreements and any current and future obligations of the Company in connection therewith will be assumed by the Sellers with discharging effect (mit befreiender Wirkung) for the Company, (ii) the rights of the Beneficiaries under the assumed Incentive Agreements will be amended to the effect that the Beneficiaries will subject to the consummation of the Transaction only be entitled to claim from the Sellers the Assumed Change of Control Payments (less any Wage Taxes to be borne by the relevant Beneficiary), (iii) the Beneficiaries will waive any and all current and future claims out of and in connection with the Incentive Agreement against the Company and the Purchaser and (iv) the Company will, limited to the aggregate amount of CoCP Wage Taxes received from the Purchaser pursuant to Clause 3.3(b)(iii) (and the salary owed to the respective Beneficiary for the relevant period), pay the relevant Wage Taxes related to the Assumed Change of Control Payments to the competent public authorities; provided, however, that such reasonable best efforts shall not include the payment of any money to any Beneficiary in excess of such respective Beneficiary's claims under the relevant Incentive Agreements. The Parties are aware that prior to the Signing Date two amendment, assumption and release agreements were signed with a wording slightly different from, but with the same substance as the sample Amendment Assumption and Release Agreement attached as Schedule 11.3(a) hereto. The Parties hereby clarify that such signed amendment, assumption and release agreements shall be construed in the same way, and qualify as, the Amendment, Assumption and Release Agreement.

		
	(l)
	Prior to the Closing, Seller 1 shall enter into a termination agreement (the Termination Agreement) with the Company regarding the Seller 1 Upstream Loans, according to which the Company and Seller 1 agree subject only to receipt by the Company of the Seller 1 Upstream Loan Amount as set forth in Clause 3.3(b)(vii) that (i) the Seller 1 Upstream Loans will be abrogated and (ii) the Sellers will waive any and all current and future claims out of and in connection with the Seller 1 Upstream Loans against the Company and the Purchaser.

		
	(m)
	Each Seller (Einzelschuldner) shall, to the extent known to such Seller, inform and Seller 1 shall procure that the Company, to the extent known to the Company, informs the Purchaser without any undue delay about the occurrence of a Material Adverse Effect, describing the facts and circumstances resulting in or constituting the Material Adverse Effect in reasonable detail.

		
	(n)
	Each Seller (Einzelschuldner) shall inform the Purchaser without any undue delay about any event contemplated in Clause 5.4(b).

		
	(o)
	Each Seller (Einzelschuldner) shall, to the extent legally permissible, procure that the Purchaser has access to all employment and services agreements of any Group 

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Company and at Purchaser’s choice can participate in reasonable customer visits of the Company with the Company’s top five customers.
		
	(p)
	The Sellers shall provide the Purchaser with updated disclosure schedules to the extent such disclosure would be required if the Sellers’ Guarantee pursuant to Clause 7 were given as of the Closing Date. In the event of a breach of this Clause 11.3(f) the limitations pursuant to Clause 8.7 and Clause 8.8 shall apply.

		
	11.4
	Sellers’ Indemnities

		
	(k)
	The Sellers, acting as shareholders in the Company, shall (irrespective of knowledge of the Purchaser of potential claims but in accordance with Clause 16.2) indemnify and hold harmless (freistellen) (i) the Group Companies (by way of genuine contract for the benefit of a third party (echter Vertrag zugunsten Dritter) in terms of Section 328 BGB, such that each of the Group Companies shall have an immediate and direct claim for reimbursement pursuant to this Clause 11.4(a) against the Sellers) and (ii) the Purchaser (in each case of (i) and (ii) without, for the avoidance of doubt, any recourse of the Sellers against the Group Companies and Purchaser) from and against any and all disadvantages, obligations and liabilities, including, for the avoidance of doubt, with regard to Wage Taxes and other Taxes, resulting from and/or arising in connection with the Incentive Agreements, the Amendment, Assumption and Release Agreements, the Assumed Change of Control Payments as well as the Non-Assumed Change of Control Payments and the indemnity pursuant to this Clause 11.4(a). 

For the avoidance of doubt, the Parties clarify that
		
	(i)
	the mere payment by the Purchaser of the aggregate amount of the Assumed Change of Control Payments and of the aggregate amount of the Non-Assumed Change of Control Payments as set forth in Clause 3.3(b)(i) and Clause 3.3(b)(ii) is owed as part of the Total Purchase Price vis-à-vis the Sellers; 

		
	(ii)
	the payment by the Purchaser of the aggregate amount of the Non-Assumed Change of Control Payments (including, for the avoidance of doubt, the aggregate amount of related CoCP Wage Taxes) to the Company shall be made on behalf of the Sellers and in fulfilment of the Sellers' obligations under this Clause 11.4(a); and

		
	(iii)
	(A) the usage or forfeiture of Tax losses and/or Tax loss carryforwards and (B) Taxes which would have become payable in case the event triggering the indemnity under this Clause 11.4(a) had not occurred do not qualify as disadvantage, obligation or liability with regard to Taxes.

With respect to Taxes Clause 9.2(a) last sentence, Clause 9.2(b) second last sentence and last sentence (including the applicability of Clause 9.6(b)) and Clause 9.6(a) shall apply mutatis mutandis to claims under this Clause 11.4(a).
		
	(l)
	Seller 1 and Seller 2 shall jointly and severally (Gesamtschuldner), and Seller 3 shall on a pro rata basis (Teilschuldner), in each case acting as shareholders in the Company, (in each case irrespective of knowledge of the Purchaser of potential 

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claims) indemnify and hold harmless (freistellen) the Group Companies and the Purchaser from and against any and all disadvantages, obligations and liabilities, including, for the avoidance of doubt, with regard to Taxes, resulting from and/or arising in connection with the law suit listed in Schedule 11.4(b), if and to the extent such disadvantages, obligations and liabilities exceed an amount of USD 1,000,000 (in words: US Dollar one million). With respect to Taxes Clause 9.2(a) last sentence, Clause 9.2(b) second last sentence and last sentence (including the applicability of Clause 9.6(b)) and Clause 9.6(a) shall apply mutatis mutandis to claims under this Clause 11.4(b). For the avoidance of doubt, the Parties clarify that (A) the usage or forfeiture of Tax losses and/or Tax loss carryforwards and (B) Taxes which would have become payable in case the event triggering the indemnity under this Clause 11.4(b) had not occured do not qualify as disadvantage, obligation or liability with regard to Taxes.
		
	(m)
	The Sellers, acting as shareholders in the Company, shall (irrespective of knowledge of the Purchaser of potential claims but in accordance with Clause 16.2) indemnify and hold harmless (freistellen) (i) the Group Companies (by way of genuine contract for the benefit of a third party (echter Vertrag zugunsten Dritter) in terms of Section 328 BGB, such that each of the Group Companies shall have a direct claim for reimbursement pursuant to this Clause 11.4(c) against the Sellers) and (ii) the Purchaser (in each case of (i) and (ii) without, for the avoidance of doubt, any recourse of the Sellers against the Group Companies and Purchaser) from and against any and all disadvantages, obligations and liabilities, including, for the avoidance of doubt, with regard to Taxes, resulting from and/or arising in connection with any Transaction Expenses and the indemnity pursuant to this Clause 11.4(c). For the avoidance of doubt, the Parties clarify that the mere payment of the Transaction Expenses by the Purchaser as set forth in Clause  3.3(b)(iv) is owed as part of the Total Purchase Price vis-à-vis the Sellers. With respect to Taxes Clause 9.2(a) last sentence, Clause 9.2(b) second last sentence and last sentence (including the applicability of Clause 9.6(b)) and Clause 9.6(a) shall apply mutatis mutandis to claims under this Clause 11.4(c). For the avoidance of doubt, the Parties clarify that (A) the usage or forfeiture of Tax losses and/or Tax loss carryforwards and (B) Taxes which would have become payable in case the event triggering the indemnity under this Clause 11.4(c) had not occurred do not qualify as disadvantage, obligation or liability with regard to Taxes.

		
	(n)
	Seller 1, acting as shareholder in the Company, shall (irrespective of knowledge of the Purchaser of potential claims but in accordance with Clause 16.2) indemnify and hold harmless (freistellen) (i) the Group Companies (by way of genuine contract for the benefit of a third party (echter Vertrag zugunsten Dritter) in terms of Section 328 BGB, such that each of the Group Companies shall have a direct claim for reimbursement pursuant to this Clause 11.4(d) against the Sellers) and (ii) the Purchaser (in each case of (i) and (ii) without, for the avoidance of doubt, any recourse of the Sellers against the Group Companies and Purchaser) from and against any and all disadvantages, obligations and liabilities, including, for the avoidance of doubt, with regard to Taxes, resulting from and/or arising in connection with the Seller 1 Upstream Loans and the indemnity pursuant to this Clause 11.4(d). For the avoidance of doubt, the Parties clarify that the mere payment by the Purchaser of the Seller 1 Upstream Loan Amount as set forth in Clause 3.3(b)(vii) is owed as part of the Total Purchase Price vis-à-vis the Sellers. With respect to Taxes Clause 9.2(b) second last 

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sentence and last sentence (including the applicability of Clause 9.6(b)) and Clause 9.6(a) shall apply mutatis mutandis to claims under this Clause 11.4(d). For the avoidance of doubt, the Parties clarify that (A) the usage or forfeiture of Tax losses and/or Tax loss carryforwards and (B) Taxes which would have become payable in case the event triggering the indemnity under this Clause 11.4(d) had not occurred do not qualify as disadvantage, obligation or liability with regard to Taxes.
		
	12.
	NO ASSIGNMENT

Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise by any of the parties hereto without the prior written consent of the other Parties hereto, and any such assignment without such prior written consent shall be null and void. The Purchaser is, however, entitled to assign and pledge any rights under this Agreement without the prior consent of the Sellers to its Affiliates. 
		
	13.
	PUBLIC ANNOUNCEMENTS AND CONFIDENTIALITY

		
	13.1
	Announcements

The Sellers shall not, and shall cause the Company and each Subsidiary not to, directly or indirectly, issue any press release or other public statement relating to the terms of this Agreement or the Transactions or use the Purchaser’s or any of its Affiliates’ names or refer to any of them directly or indirectly in connection with the Purchaser’s relationship with the Company in any media interview, advertisement, news release, press release or professional or trade publication, or in any print media, whether or not in response to an inquiry, without the prior written approval of the Purchaser, unless required by Legal Requirements and/or stock exchange rules. 
		
	13.2
	Confidentiality

		
	(o)
	Each of the Parties shall, and shall ensure (sicherstellen) that its Affiliates do, treat as strictly confidential and not disclose or use any information received or obtained as a result of or in connection with the entering into this Agreement which relates to this Agreement, its existence or its provisions or to any agreement to be entered into pursuant to this Agreement, or to the negotiations relating to this Agreement (the Confidential Information).

		
	(p)
	This Agreement shall not prohibit disclosure or use of any Confidential Information if and to the extent that:

		
	(i)
	the disclosure or use is required by law (e.g. necessary information to works council of Company) or any governmental authority or other regulatory body;

		
	(ii)
	the Seller 3 is required to disclose such information by law, in particular towards the Saxon state parliament, committees of the state parliament, Court of Audit of the State of Saxony, tax or other authorities;

		
	(iii)
	the disclosure or use is required for the purpose of any judicial proceedings arising out of this Agreement or any other agreement entered into under or pursuant to this Agreement or the disclosure is made to a competent Tax Authority in connection with the Tax affairs of the disclosing Party;

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	(iv)
	the disclosure is made to professional advisers of a Party, who are subject to professional secrecy rules, on a need to know basis;

		
	(v)
	the disclosure is made to professional advisers, who are not subject to professional secrecy rules, of a Party on a need to know basis and on terms that such professional advisers undertake (also for the benefit of the other Parties) to comply with the confidentiality obligations set out in this Clause 13.2 in respect of such information as if they were a party to this Agreement;

		
	(vi)
	the information is or becomes publicly available (other than by breach of this Agreement or any other confidentiality agreement between the Parties or any of them);

		
	(vii)
	in case of a disclosure or use by the Purchaser or the Purchaser’s Guarantor, the Sellers have given prior written approval to the disclosure or use;

		
	(viii)
	in case of a disclosure or use by any of the Sellers, the Purchaser has given prior written approval to the disclosure or use; or

		
	(ix)
	the information is independently developed after Closing.

In case of the foregoing lit (i) through lit (iii), prior to such disclosure and to the extent legally possible, the Parties shall provide each other with prompt notice of such requirement and keep the other Party fully and promptly informed of any such disclosure and - except with regard to (ii) - all related matters and developments and provide the other Party and or any of the Group Companies if applicable the opportunity to seek protective measures against any such disclosure.
		
	14.
	COSTS

Unless set out otherwise in this Agreement, each Party shall bear its own costs and the costs and fees of its advisers in connection with the preparation, negotiation and execution of this Agreement. The Purchaser on the one hand side and the Sellers on the other hand side (the Sellers on a Pro Rata Share basis) each shall bear half of the fees of the acting notary for the notarization of this Agreement and the Escrow Account. 
		
	15.
	NOTICES

		
	15.1
	Form of Notice

Any notice or other communication in connection with this Agreement (each a No-tice) shall be shall be in the English language and made only (i) in writing (schrift-liche Form) solely within the meaning of Sec. 126 (1) and (2) of the German Civil Code (Bürgerliches Gesetzbuch), by facsimile or email unless notarization or any other specific form is required by mandatory law provided that both with respect to Notices send by facsimile or email, receipt by the sender of a confirmation regard-ing the receipt of such Notice by the addressee (e.g. receipt of a delivery confirma-tion generated by the sender's email program) shall be required for a proper Notice. Any Notice sent in accordance with this Clause shall be effective: (i) if mailed, seven (7) Business Days after mailing, (ii) if sent by messenger / courier, upon de-livery, and (iii) if sent via facsimile or email, one (1) Business Day following trans-mission 

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and confirmation of receipt (as set forth in the preceding sentence). How-ever, if any communication would otherwise become effective on a non-Business Day or after 6 p.m. local time at the address of the respective receiving Party on a Business Day, it shall instead become effective at 9 a.m. local time at the address of the respective receiving Party on the next Business Day.
		
	15.2
	Notices to the Sellers

The Sellers shall appoint a person or legal entity, which is on a non-exclusive basis authorized to accept with legally binding effect for the Sellers all declarations under this Agreement or in consummation thereof.
		
	(g)
	Any notice to be given to the Seller 1 and to the Seller 2 shall be addressed as follows:

Global ASIC GmbH
c/o Thilo von Selchow
Bockumer Straße 275
40489 Düsseldorf
Germany
Email: tvs@zmdi.com

with a copy to (for information purposes only):

Lambsdorff Rechtsanwälte Partnerschaftsgesellschaft mbB 
Attn: Konstantin Graf Lambsdorff
Oranienburger Strasse 3
10178 Berlin
Germany
Facsimile: +49 30 5770 200 99
Email: k.lambsdorff@lambsdorff.net
		
	(h)
	Any notice to be given to the Seller 3 shall be addressed as follows:

Freistaat Sachsen 
Saxon State Ministry of Finance
Attn.: Sybille Gedenk-Fleger
Carolaplatz 1 
01097 Dresden
Germany
Facsimile: +493515644440
Email: Sybille.gedenk-fleger@smf.sachsen.de

with a copy to (for information purpose only):

Noerr LLP
Attn.: Jens Gehlich
Paul-Schwarze-Straße 2
01097 Dresden
Germany
Facsimilie: +493518166081
Email: jens.gehlich@noerr.com

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	15.3
	Notices to the Purchaser and the Purchaser's Guarantor

Any notice to be given to the Purchaser and the Purchaser’s Guarantor shall be addressed as follows: 
Integrated Device Technology, Inc.
Attn.: Matthew Brandalise
6024 Silver Creek Valley Road
San Jose, CA 95138
USA
Facsimile: +1 408 284 8454
Email: Matthew.Brandalise@idt.com

with a copy to (for information purposes only):

Latham & Watkins LLP
Attn: Christoph W. G. Engeler
Warburgstrasse 50
20354 Hamburg
Germany
Facsimile: +49 4140 3130
Email: christoph.engeler@lw.com
		
	15.4
	Changes of Address 

The Parties shall notify without undue delay (unverzüglich) any change of their respective addresses set forth in this Agreement in writing to the other Parties of this Agreement. 
		
	15.5
	Notices to Advisers

The receipt of copies of Notices under this Clause by any of the Parties' advisers shall not constitute or substitute the receipt of such Notices by the Parties themselves, irrespective of whether the delivery of such copy was mandated by this Agreement.
		
	16.
	MISCELLANEOUS

		
	16.1
	No Third-Party Beneficiaries

Except has explicitly stated in this Agreement, this Agreement nor any provision set forth in this Agreement is intended to confer any rights or remedies upon any person or entity other than the Parties.
		
	16.2
	No Joint and Several Debtors 

Unless provided for otherwise in this Agreement (Clause 11.4(b)), the Sellers shall not be jointly and severally liable (gesamtschuldnerische Haftung) under or in connection with this Agreement. Each Seller is only liable on a pro rata basis pursuant to its respective Pro Rata Share (Teilschuldnerschaft), except, however, with respect to (i) any specific performance claims for transfer of title to the Sold Shares (Erfüllungsansprüche), (ii) the Sellers Guarantees under Clauses 7.2 and 7.4(b) 

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through 7.4(d), (iii) claims under Clause 5.4(b) and (iv) any claims under Clauses 11.1, 11.2, 11.3(c) through 11.3(e) concerning which only the respective Seller in breach shall be exclusively liable subject to the restrictions contained herein (Einzelschuldnerschaft). The Sellers shall not be joint and several creditors (Gesamtgläubiger) with regard to all and any claims they might have under this Agreement against Purchaser or the Purchaser’s Guarantor.
		
	16.3
	Form of Amendments

Changes or amendments to this Agreement shall be valid only if made by the Par-ties in writing (schriftliche Form) solely within the meaning of Sec. 126 (1) and (2) BGB, unless notarization or any other specific form is required by mandatory law. This shall also apply to any change of this Section 16.3.
		
	16.4
	Invalid Provisions

Should any provision of this Agreement be or held to be wholly or partly invalid, ineffective or unenforceable, this shall not affect the validity, effectiveness or enforceability of the remaining provisions. Any such invalid, ineffective or unenforceable provision shall, to the extent permitted by law, be deemed replaced, or to the extent this is not possible, shall be replaced through an agreement in the required form by the Parties, by such valid, effective and enforceable provision as comes closest to the economic intent and purpose of such invalid, ineffective or unenforceable provision. The aforesaid shall apply mutatis mutandis to any unintended omission in this Agreement. It is the express intent of the Parties that this Clause 16.4 shall not be construed as a mere reversal of burden of proof (Beweislastumkehr) but as a contractual exclusion of Section 139 BGB in its entirety.
		
	16.5
	Entire Agreement

This Agreement, including its Schedules, constitutes the entire agreement among and between the Parties with respect to the subject matter hereof and shall replace any negotiations and understandings, oral or written, heretofore made between the Parties or any of them with respect to the subject matter hereof. Side agreements to this Agreement do not exist.
		
	16.6
	Disputes

		
	(a)
	Any dispute arising from or in connection with this Agreement, its validity and its consummation shall be finally settled by three arbitrators in accordance with the arbitration rules of the German Institution of Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit e.V.) as applicable at the time when such proceedings are initiated without recourse to the ordinary courts of law. The venue of the arbitration shall be Frankfurt am Main, Germany. The language of the arbitral proceedings shall be English, provided however that the Parties shall be entitled to submit written evidence in the German language.

		
	(b)
	In the event that mandatory applicable law requires any matter arising from or in connection with this Agreement and its consummation to be decided upon by a court of law, the competent courts in and for Frankfurt am Main, Germany, shall have the exclusive jurisdiction thereupon.

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	16.7
	Governing Law

This Agreement shall be exclusively governed by, and be construed in accordance with, the laws of the Federal Republic of Germany, without regard to principles of conflicts of laws and without regard to the UN Convention on the Sale of Goods (CISG). 

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