Document:

Unassociated Document

 

Exhibit 10.1

 

EXECUTION COPY

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

Dated as of June 17, 2011

 

among

 

BLUEFLY, INC.,

 

as the Borrower

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

as Lender and L/C Issuer

 

  

  

  

 

TABLE OF CONTENTS

 

	
Section

	 	
Page

	  	 	  
	
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS

	 	
1

	  	  	 	  
	
1.01

	
Defined Terms

	 	
1

	
1.02

	
Other Interpretive Provisions

	 	
32

	
1.03

	
Accounting Terms

	 	
33

	
1.04

	
Times of Day

	 	
33

	
1.05

	
Letter of Credit Amounts

	 	
33

	  	 	  
	
ARTICLE II THE COMMITMENT AND CREDIT EXTENSIONS

	 	
33

	  	  	 	  
	
2.01

	
Committed Loans; Reserves

	 	
33

	
2.02

	
Borrowings, Conversions and Continuations of Committed Loans

	 	
33

	
2.03

	
Letters of Credit

	 	
35

	
2.04

	
Prepayments

	 	
41

	
2.05

	
Termination or Reduction of Commitments

	 	
41

	
2.06

	
Repayment of Loans

	 	
42

	
2.07

	
Interest

	 	
42

	
2.08

	
Fees

	 	
42

	
2.09

	
Computation of Interest and Fees

	 	
43

	
2.10

	
Evidence of Debt

	 	
43

	
2.11

	
Payments Generally

	 	
44

	
2.12

	
Increase in Commitments

	 	
44

	  	 	  
	ARTICLE III	
TAXES, YIELD PROTECTION AND ILLEGALITY; APPOINTMENT OF LEAD BORROWER

	 	
45

	  	  	 	  
	
3.01

	
Taxes

	 	
45

	
3.02

	
Illegality

	 	
46

	
3.03

	
Inability to Determine Rates

	 	
46

	
3.04

	
Increased Costs; Reserves on LIBO Rate Loans

	 	
47

	
3.05

	
Compensation for Losses

	 	
48

	
3.06

	
Mitigation Obligations

	 	
48

	
3.07

	
Survival

	 	
49

	  	 	  
	
ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

	 	
49

	  	  	 	  
	
4.01

	
Conditions to Effectiveness

	 	
49

	
4.02

	
Conditions to all Credit Extensions

	 	
51

	  	 	  
	
ARTICLE V REPRESENTATIONS AND WARRANTIES

	 	
52

	  	  	 	  
	
5.01

	
Existence, Qualification and Power

	 	
52

	
5.02

	
Authorization; No Contravention

	 	
52

	
5.03

	
Governmental Authorization; Other Consents

	 	
52

	
5.04

	
Binding Effect

	 	
52

	
5.05

	
Financial Statements; No Material Adverse Effect

	 	
53

	
5.06

	
Litigation

	 	
53

	
5.07

	
No Default

	 	
53

	
5.08

	
Ownership of Property; Liens

	 	
53

	
5.09

	
Environmental Compliance

	 	
54

	
5.10

	
Insurance

	 	
54

 

  

(i)

  

 

	
5.11

	
Taxes

	 	
55

	
5.12

	
ERISA Compliance

	 	
55

	
5.13

	
Subsidiaries; Equity Interests

	 	
55

	
5.14

	
Margin Regulations; Investment Company Act;

	 	
56

	
5.15

	
Disclosure

	 	
56

	
5.16

	
Compliance with Laws

	 	
56

	
5.17

	
Intellectual Property; Licenses, Etc.

	 	
56

	
5.18

	
Labor Matters

	 	
57

	
5.19

	
Security Documents

	 	
57

	
5.20

	
Solvency

	 	
58

	
5.21

	
Deposit Accounts; Credit Card Arrangements

	 	
58

	
5.22

	
Brokers

	 	
58

	
5.23

	
Customer and Trade Relations

	 	
58

	
5.24

	
Material Contracts

	 	
58

	
5.25

	
Casualty

	 	
58

	  	 	  
	
ARTICLE VI AFFIRMATIVE COVENANTS

	 	
58

	  	  	 	  
	
6.01

	
Financial Statements

	 	
59

	
6.02

	
Certificates; Other Information

	 	
59

	
6.03

	
Notices

	 	
61

	
6.04

	
Payment of Obligations

	 	
62

	
6.05

	
Preservation of Existence, Etc.

	 	
62

	
6.06

	
Maintenance of Properties

	 	
62

	
6.07

	
Maintenance of Insurance

	 	
62

	
6.08

	
Compliance with Laws

	 	
64

	
6.09

	
Books and Records; Accountants

	 	
64

	
6.10

	
Inspection Rights

	 	
64

	
6.11

	
Use of Proceeds

	 	
65

	
6.12

	
Additional Loan Parties

	 	
65

	
6.13

	
Cash Management

	 	
65

	
6.14

	
Information Regarding the Collateral

	 	
67

	
6.15

	
Cycle Counts

	 	
67

	
6.16

	
Environmental Laws

	 	
68

	
6.17

	
Further Assurances

	 	
68

	
6.18

	
Compliance with Terms of Leaseholds

	 	
68

	
6.19

	
Material Contracts

	 	
68

	  	 	  
	
ARTICLE VII NEGATIVE COVENANTS

	 	
69

	  	  	 	  
	
7.01

	
Liens

	 	
69

	
7.02

	
Investments

	 	
69

	
7.03

	
Indebtedness; Disqualified Stock

	 	
69

	
7.04

	
Fundamental Changes

	 	
69

	
7.05

	
Dispositions

	 	
69

	
7.06

	
Restricted Payments

	 	
69

	
7.07

	
Prepayments of Indebtedness

	 	
69

	
7.08

	
Change in Nature of Business

	 	
70

	
7.09

	
Transactions with Affiliates

	 	
70

	
7.10

	
Burdensome Agreements

	 	
70

	
7.11

	
Use of Proceeds

	 	
70

	
7.12

	
Amendment of Material Documents

	 	
70

	
7.13

	
Fiscal Year

	 	
71

  

(ii)

  

 

	
7.14

	
Deposit Accounts; Credit Card Processors

	 	
71

	  	 	  
	
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES

	 	
71

	  	  	 	  
	
8.01

	
Events of Default

	 	
71

	
8.02

	
Remedies Upon Event of Default

	 	
73

	
8.03

	
Application of Funds

	 	
74

	  	 	  
	
ARTICLE IX MISCELLANEOUS

	 	
75

	  	  	 	  
	
9.01

	
Amendments, Etc.

	 	
75

	
9.02

	
Notices; Effectiveness; Electronic Communications

	 	
75

	
9.03

	
No Waiver; Cumulative Remedies

	 	
76

	
9.04

	
Expenses; Indemnity; Damage Waiver

	 	
76

	
9.05

	
Payments Set Aside

	 	
78

	
9.06

	
Successors and Assigns

	 	
78

	
9.07

	
Treatment of Certain Information; Confidentiality

	 	
79

	
9.08

	
Right of Setoff

	 	
80

	
9.09

	
Interest Rate Limitation

	 	
80

	
9.10

	
Counterparts; Integration; Effectiveness

	 	
80

	
9.11

	
Survival

	 	
80

	
9.12

	
Severability

	 	
81

	
9.13

	
Governing Law; Jurisdiction; Etc.

	 	
81

	
9.14

	
Waiver of Jury Trial

	 	
82

	
9.15

	
No Advisory or Fiduciary Responsibility

	 	
82

	
9.16

	
USA PATRIOT Act Notice

	 	
83

	
9.17

	
Foreign Asset Control Regulations

	 	
83

	
9.18

	
Time of the Essence

	 	
83

	
9.19

	
Press Releases

	 	
83

	
9.20

	
Additional Waivers

	 	
83

	
9.21

	
No Strict Construction

	 	
84

	
9.22

	
Attachments

	 	
84

	
9.23

	
Amendment and Restatement

	 	
84

	  	 	  
	
SIGNATURES

	 	
S-1

 

  

(iii)

  

  

SCHEDULES

 

	
2.01

	
Commitment

	
2.03

	
Existing Letters of Credit

	
5.01

	
Borrower Organizational Information

	
5.08(b)(1)

	
Owned Real Estate

	
5.08(b)(2)

	
Leased Real Estate

	
5.09

	
Environmental Matters

	
5.10

	
Insurance

	
5.13

	
Subsidiaries; Other Equity Investments

	
5.17

	
Intellectual Property Matters

	
5.21(a)

	
DDAs

	
5.21(b)

	
Credit Card Arrangements

	
5.24

	
Material Contracts

	
6.02

	
Financial and Collateral Reporting

	
7.01

	
Existing Liens

	
7.02

	
Existing Investments

	
7.03

	
Existing Indebtedness

	
9.02

	
Lender’s Office; Certain Addresses for Notices

 

EXHIBITS

 

	 	Form of
	 	 
	
A

	
Committed Loan Notice

	
B

	
Note

	
C

	
Borrowing Base Certificate

	
D

	
Compliance Certificate

	
E

	
Credit Card Notification

	
F

	
DDA Notification

    

  

(iv)

  

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

This AMENDED AND RESTATED CREDIT AGREEMENT (“Agreement”) is entered into as of June 17, 2011, among

 

Bluefly, Inc., a Delaware corporation (the “Borrower”),

 

Wells Fargo Bank, National Association, in its capacity as Lender (the “Lender”), and

 

Wells Fargo Bank, National Association, in its capacity as L/C Issuer;

 

in consideration of the mutual covenants herein contained and benefits to be derived herefrom.

 

WITNESSETH:

 

WHEREAS, the Borrower and the Lender have entered into that certain Loan and Security Agreement dated as of July 26, 2005 between the Borrower and the Lender (as amended and in effect, the “Existing Credit Agreement”); and

 

WHEREAS, the Borrower and the Lender desire to modify certain of the terms of the Existing Credit Agreement as set forth herein; and

 

WHEREAS, the Borrower and the Lender desire to amend and restate the Existing Credit Agreement as provided herein and in the Security Agreement (as defined below).

 

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt of which is hereby acknowledged, the Lender and the Borrower hereby agree that the Existing Credit Agreement shall be amended and restated in its entirety to read as follows and as set forth in the Security Agreement:

 

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

 

1.01           Defined Terms.  As used in this Agreement, the following terms shall have the meanings set forth below:

 

“Accelerated Borrowing Base Delivery Event” means either (i) the occurrence and continuance of any Event of Default, or (ii) the failure of the Borrower to maintain Availability at least equal to forty percent (40%) of the Loan Cap at any time, or (iii) any Loans are outstanding. For purposes of this Agreement, the occurrence of an Accelerated Borrowing Base Delivery Event shall be deemed continuing at the Lender’s option (i) so long as such Event of Default has not been waived, and/or (ii) any Loans remain outstanding hereunder, and/or (ii) if the Accelerated Borrowing Base Delivery Event arises as a result of the Borrower’s failure to achieve Availability as required hereunder, until Availability has exceeded forty percent (40%) of the Loan Cap for sixty (60) consecutive calendar days, in which case an Accelerated Borrowing Base Delivery Event shall no longer be deemed to be continuing for purposes of this Agreement.  The termination of an Accelerated Borrowing Base Delivery Event as provided herein shall in no way limit, waive or delay the occurrence of a subsequent Accelerated Borrowing Base Delivery Event in the event that the conditions set forth in this definition again arise.

 

“ACH” means automated clearing house transfers.

 

  

-1-

  

 

“Account” means “accounts” as defined in the UCC, and also means a right to payment of a monetary obligation, whether or not earned by performance, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a policy of insurance issued or to be issued, (d) for a secondary obligation incurred or to be incurred, (e) for energy provided or to be provided, (f) for the use or hire of a vessel under a charter or other contract, (g) arising out of the use of a credit or charge card or information contained on or for use with the card, or (h) as winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or person licensed or authorized to operate the game by a state or governmental unit of a state.  The term “Account” includes health-care-insurance receivables.

 

“Acquisition” means, with respect to any Person (a) an investment in, or a purchase of, a Controlling interest in the Equity Interests of any other Person, (b) a purchase or other acquisition of all or substantially all of the assets or properties of, another Person or of any business unit of another Person, (c) any merger or consolidation of such Person with any other Person or other transaction or series of transactions resulting in the acquisition of all or substantially all of the assets, or a Controlling interest in the Equity Interests, of any Person, or (d) any acquisition of any store locations of any Person, in each case in any transaction or group of transactions which are part of a common plan.

 

“Act” shall have the meaning provided in Section 9.17.

 

“Adjusted LIBO Rate” means:

 

(a)           for any Interest Period with respect to any LIBO Borrowing, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of one percent) equal to (i) the LIBO Rate for such Interest Period multiplied by (ii) the Statutory Reserve Rate; and

 

(b)           for any interest rate calculation with respect to any Base Rate Loan, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of one percent) equal to (i) the LIBO Rate for an Interest Period commencing on the date of such calculation and ending on the date that is thirty (30) days thereafter multiplied by (ii) the Statutory Reserve Rate.

 

The Adjusted LIBO Rate will be adjusted automatically as of the effective date of any change in the Statutory Reserve Rate.

 

“Affiliate” means, with respect to any Person, (i) 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, (ii) any director, officer, managing member, partner, trustee, or beneficiary of that Person, (iii) any other Person directly or indirectly holding 10% or more of any class of the Equity Interests of that Person, and (iv) any other Person 10% or more of any class of whose Equity Interests is held directly or indirectly by that Person.

 

“Agreement” means this Credit Agreement, as the same may be amended from time to time.

 

“Applicable Margin” means the percentages set forth in the pricing grid below:

 

	
LIBOR

Margin

	 	
Base Rate

Margin

	 	 	
Commercial

Letter of Credit

Fee

	 	 	
Standby

Letter of

Credit Fee

	 
	
2.75%

	 	 	2.50	%	 	 	2.25	%	 	 	2.75	%

 

  

-2-

  

 

“Appraisal Percentage” means 85%.

 

“Appraised Value” means, with respect to Eligible Inventory, the appraised orderly liquidation value, net of costs and expenses to be incurred in connection with any such liquidation, which value is expressed as a percentage of Cost of Eligible Inventory as set forth in the inventory stock ledger of the Borrower, which value shall be determined from time to time by the most recent appraisal undertaken by an independent appraiser engaged by the Lender.

 

 “Approved Fund” means any Fund that is administered or managed by (a) the Lender, (b) an Affiliate of the Lender, (c) an entity or an Affiliate of an entity that administers or manages the Lender or (d) the same investment advisor or an advisor under common control with the Lender, Affiliate or advisor, as applicable.

 

“Assignment and Assumption” means an assignment and assumption entered into by the Lender and an Eligible Assignee, in a form approved by the Lender.

 

“Attributable Indebtedness” means, on any date, (a) in respect of any Capital Lease Obligation of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease or similar payments under the relevant lease or other applicable agreement or instrument that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease, agreement or instrument were accounted for as a capital lease.

 

“Audited Financial Statements” means the audited balance sheet of the Borrower for the fiscal year ended December 31, 2010, and the related statement of income or operations, Shareholders’ Equity and cash flows for such fiscal year of the Borrower, including the notes thereto.

 

“Auto-Extension Letter of Credit” shall have the meaning specified in Section 2.03(b)(iii).

 

“Availability” means, as of any date of determination thereof by the Lender, the result, if a positive number, of:

 

(a)           The Loan Cap

 

Minus

 

 (b)           The aggregate unpaid balance of Credit Extensions to, or for the account of, the Borrower.

 

In calculating Availability at any time and for any purpose under this Agreement, the Borrower shall certify to the Lender that all accounts payable and Taxes are being paid on a timely basis.

 

“Availability Block” means the greater of (i) $850,000 and (ii) ten (10%) percent of the then Commitment.

 

“Availability Period” means the period from and including the Effective Date to the earliest of (a) the Maturity Date, (b) the date of termination of the Commitment pursuant to Section 2.05, and (c) the date of termination of the commitment of the Lender to make Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.

 

  

-3-

  

 

“Availability Reserves” means, without duplication of any other Reserves or items to the extent such items are otherwise addressed or excluded through eligibility criteria, such reserves as the Lender from time to time determines in its reasonable discretion as being appropriate (a) to reflect the impediments to the Lender’s ability to realize upon the Collateral, (b) to reflect claims and liabilities that the Lender determines will need to be satisfied in connection with the realization upon the Collateral, (c) to reflect criteria, events, conditions, contingencies or risks which adversely affect any component of the Borrowing Base, or the assets, business, financial performance or financial condition of the Borrower, or (d) to reflect that a Default or an Event of Default then exists. Without limiting the generality of the foregoing, Availability Reserves may include, in the Lender’s discretion, (but are not limited to) reserves based on: (i) rent; (ii) customs duties, and other costs to release Inventory which is being imported into the United States; (iii) outstanding Taxes and other governmental charges, including, without limitation, ad valorem, real estate, personal property, sales, claims of the PBGC and other Taxes which may have priority over the interests of the Lender in the Collateral; (iv) salaries, wages and benefits due to employees of the Borrower, (v) Customer Credit Liabilities, (vi) Customer Deposits, (vii) reserves for reasonably anticipated changes in the Appraised Value of Eligible Inventory between appraisals, (viii) warehousemen’s or bailee’s charges and other Permitted Encumbrances which may have priority over the interests of the Lender in the Collateral, (ix) amounts due to vendors on account of consigned goods, (x) Cash Management Reserves, (xi) Bank Products Reserves and (xii) royalties payable in respect of licensed merchandise.

 

“Bank Products” means any services of facilities provided to the Borrower by the Lender or any of its Affiliates (but excluding Cash Management Services) including, without limitation, on account of (a) Swap Contracts, (b) merchant services constituting a line of credit, (c) leasing, (d) Factored Receivables, and (e) supply chain finance services including, without limitation, trade payable services and supplier accounts receivable purchases.

 

“Bank Product Reserves” means such reserves as the Lender from time to time determines in its discretion as being appropriate to reflect the liabilities and obligations of the Borrower with respect to Bank Products then provided or outstanding.

 

“Base Rate”  means, for any day, a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%), (b) the Adjusted LIBO Rate plus one percent (1.00%), or (c) the rate of interest in effect for such day as publicly announced from time to time by Wells Fargo as its “prime rate.”  The “prime rate” is a rate set by Wells Fargo based upon various factors including Wells Fargo’s 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 announced rate.  Any change in such rate announced by Wells Fargo shall take effect at the opening of business on the day specified in the public announcement of such change.

 

“Base Rate Loan” means a Loan that bears interest based on the Base Rate.

 

“Blocked Account” has the meaning provided in Section 6.13(a)(ii).

 

“Blocked Account Agreement” means with respect to an account established by the Borrower, an agreement, in form and substance satisfactory to the Lender, establishing control (as defined in the UCC) of such account by the Lender and whereby the bank maintaining such account agrees, upon the occurrence and during the continuance of a Cash Dominion Event, to comply only with the instructions originated by the Lender without the further consent of the Borrower.

 

  

-4-

  

 

“Blocked Account Bank” means each bank with whom deposit accounts are maintained in which any funds of the Borrower from one or more DDAs are concentrated and with whom a Blocked Account Agreement has been, or is required to be, executed in accordance with the terms hereof.

 

“Borrower” has the meaning specified in the introductory paragraph hereto.

 

“Borrowing Base” means, at any time of calculation, an amount equal to:

 

(a)           the face amount of Eligible Credit Card Receivables multiplied by the Credit Card Advance Rate;

 

plus

 

(b)           the Cost of Eligible Inventory, net of Inventory Reserves, multiplied by the product of the Appraisal Percentage multiplied by the Appraised Value of Eligible Inventory;

 

minus

 

(c)           the Availability Block;

 

minus

 

(d)           the then amount of all Availability Reserves.

 

“Borrowing Base Certificate” means a certificate substantially in the form of Exhibit C hereto (with such changes therein as may be required by the Lender to reflect the components of and reserves against the Borrowing Base as provided for hereunder from time to time), executed and certified as accurate and complete by a Responsible Officer of the Borrower which shall include appropriate exhibits, schedules, supporting documentation, and additional reports as reasonably requested by the Lender.

 

“Business Day” means 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, the state where the Lender’s Office is located and, if such day relates to any LIBO Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank market.

 

 “Capital Expenditures” means (a) all expenditures made (whether made in the form of cash or other property) or costs incurred for the acquisition or improvement of fixed or capital assets of the Borrower (excluding normal replacements and maintenance which are properly charged to current operations), in each case that are (or should be) set forth as capital expenditures in a statement of cash flows of the Borrower for such period, in each case prepared in accordance with GAAP, and (b) Capital Lease Obligations incurred by the Borrower during such period.

 

“Capital Lease Obligations” means the obligations of the Borrower to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as liabilities on a balance sheet of the Borrower under GAAP and the amount of which obligations shall be the capitalized amount thereof determined in accordance with GAAP; provided that all leases that would be treated as operating leases for purposes of GAAP on the Effective Date shall continue to be accounted for as operating leases for purposes of all calculations hereunder regardless of any change to GAAP following the Effective Date that would otherwise require such leases to be treated as Capital Lease Obligations.

 

  

-5-

  

 

“Cash Collateralize” has the meaning specified in Section 2.03(f).  Derivatives of such term have corresponding meanings.

 

“Cash Dominion Activation Fee” has the meaning set forth in Section 2.08(e).

 

“Cash Dominion Event” means either (i) the occurrence and continuance of any Event of Default, or (ii) the failure of the Borrower to maintain (x) Availability plus (y) Qualified Cash in an amount at least equal to the greater of (a) thirty percent (30%) of the Borrowing Base, or (b) $2,000,000 for ten (10) consecutive days or $1,500,000 at any time.

 

“Cash Management Reserves ” means such reserves as the Lender, from time to time, determines in its discretion as being appropriate to reflect the reasonably anticipated liabilities and obligations of the Borrower with respect to Cash Management Services then provided or outstanding.

 

“Cash Management Services” means any cash management services or facilities provided to the Borrower by the Lender or any of its Affiliates, including, without limitation: (a) ACH transactions, (b) controlled disbursement services, treasury, depository, overdraft, and electronic funds transfer services, (c) credit or debit cards, (d) credit card processing services, and (e) purchase cards.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq.

 

“CERCLIS” means the Comprehensive Environmental Response, Compensation, and Liability Information System maintained by the United States Environmental Protection Agency.

 

“CFC” means a Person that is a controlled foreign corporation under Section 957 of the Code.

 

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect 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 by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided, however, for purposes of this Agreement, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, guidelines or directives in connection therewith are deemed to have gone into effect and been adopted after the Effective Date.

 

“Change of Control” means an event or series of events by which:

 

(a)           any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than Rho Ventures VI, L.P., Soros Fund Management, LLC, Maverick Capital, Ltd. or Prentice Capital Management, L.P. and/or their respective Affiliates, becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, directly or indirectly, of 35% or more of the Equity Interests of the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower on a fully-diluted basis and thereby becomes the largest stockholder of the Borrower; or

 

(b)          during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was 

 

 

  

-6-

  

 

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

 

“Code” means the Internal Revenue Code of 1986, and the regulations promulgated thereunder, as amended and in effect.

 

“Collateral” means any and all “Collateral” or “Mortgaged Property” as defined in any applicable Security Document and all other property that is or is intended under the terms of the Security Documents to be subject to Liens in favor of the Lender.

 

“Collateral Access Agreement” means an agreement reasonably satisfactory in form and substance to the Lender executed by (a) a bailee or other Person in possession of Collateral, and (b) any landlord of Real Estate leased by the Borrower, pursuant to which such Person (i) acknowledges the Lender’s Lien on the Collateral, (ii) releases such Person’s Liens in the Collateral held by such Person or located on such Real Estate, (iii) provides the Lender with access to the Collateral held by such bailee or other Person or located in or on such Real Estate, (iv) as to any landlord, provides the Lender with a reasonable time to sell and dispose of the Collateral from such Real Estate, and (v) makes such other agreements with the Lender as the Lender may reasonably require.

 

“Commercial Letter of Credit” means any Letter of Credit issued for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by the Borrower in the ordinary course of business of the Borrower.

 

“Commercial Letter of Credit Agreement” means the Commercial Letter of Credit Agreement relating to the issuance of a Commercial Letter of Credit in the form from time to time in use by the L/C Issuer.

 

“Commitment” means the obligation of the Lender to make Committed Loans to the Borrower pursuant to Section 2.01, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite the Lender’s name on Schedule 2.01, as such amount may be adjusted from time to time in accordance with this Agreement.

 

“Commitment Increase” has the meaning specified in Section 2.12(a).

 

“Committed Borrowing” means a borrowing consisting of simultaneous Committed Loans of the same Type and, in the case of LIBO Rate Loans, having the same Interest Period made by the Lender pursuant to Section 2.01.

 

“Committed Loan” has the meaning specified in Section 2.01.

 

“Committed Loan Notice” means a notice of (a) a Committed Borrowing, (b) a conversion of Committed Loans from one Type to the other, or (c) a continuation of LIBO Rate Loans, pursuant to 2.01(a), which, if in writing, shall be substantially in the form of Exhibit A.

 

  

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“Compliance Certificate” means a certificate substantially in the form of Exhibit D.

 

“Concentration Account” has the meaning provided in Section 6.13(b).

 

“Contractual Obligation” means, as to any Person, any provision of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

 

“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 meanings correlative thereto.

 

“Cost” means the lower of cost or market value of Inventory, based upon the Borrower’s accounting practices, known to the Lender, which practices are in effect on the Effective Date as such calculated cost is determined from invoices received by the Borrower, the Borrower’s purchase journals or the Borrower’s stock ledger.  “Cost” does not include inventory capitalization costs or other non-purchase price charges (such as freight) used in the Borrower’s calculation of cost of goods sold.

 

“Credit Card Advance Rate” means 85%.

 

“Credit Card Issuer” shall mean any person (other than the Borrower) who issues or whose members issue credit cards, including, without limitation, MasterCard or VISA bank credit or debit cards or other bank credit or debit cards issued through MasterCard International, Inc., Visa, U.S.A., Inc. or Visa International and American Express, Discover, Diners Club, Carte Blanche and other non-bank credit or debit cards, including, without limitation, credit or debit cards issued by or through American Express Travel Related Services Company, Inc.,  and Novus Services, Inc. and other issuers approved by the Lender.

 

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

 

“Credit Card Notifications” has the meaning provided in Section 6.13(a)(i).

 

“Credit Card Receivables” means each “Account” (as defined in the UCC) together with all income, payments and proceeds thereof, owed by a Credit Card Issuer or Credit Card Processor to the Borrower resulting from charges by a customer of the Borrower on credit or debit cards issued by such issuer in connection with the sale of goods by the Borrower, or services performed by the Borrower, in each case in the ordinary course of its business.

 

“Credit Extensions” mean each of the following: (a) a Committed Borrowing and (b) an L/C Credit Extension.

 

“Credit Party” or “Credit Parties” means (a) individually, (i) the Lender and its Affiliates, (ii) the L/C Issuer, (iii) each beneficiary of each indemnification obligation undertaken by the Borrower under any Loan Document, (iv) any other Person to whom Obligations under this Agreement and other Loan Documents are owing, and (v) the successors and assigns of each of the foregoing, and (b) collectively, all of the foregoing.

 

“Credit Party Expenses” means, without limitation, (a) all reasonable out-of-pocket expenses incurred by the Lender and its Affiliates, in connection with this Agreement and the other Loan 

 

  

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Documents, including without limitation (i) the reasonable fees, charges and disbursements of (A) counsel for the Lender, (B) outside consultants for the Lender, (C) appraisers, (D) commercial finance examinations, and (E) all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the Obligations, (ii) in connection with (A) the preparation, negotiation, administration, management, execution and delivery of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (B) the enforcement or protection of its rights in connection with this Agreement or the Loan Documents or efforts to preserve, protect, collect, or enforce the Collateral, or (C) any workout, restructuring or negotiations in respect of any Obligations, and (b) with respect to the L/C Issuer, and its Affiliates, all reasonable out-of-pocket expenses incurred in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, and (c) all customary fees and charges (as adjusted from time to time) of the Lender with respect to the disbursement of funds (or the receipt of funds) to or for the account of the Borrower (whether by wire transfer or otherwise), together with any out-of-pocket costs and expenses incurred in connection therewith.

 

“Customer Credit Liabilities” means at any time, the aggregate remaining value at such time of (a) outstanding gift certificates and gift cards of the Borrower entitling the holder thereof to use all or a portion of the certificate or gift card to pay all or a portion of the purchase price for any Inventory, (b) outstanding merchandise credits of the Borrower, and (c) liabilities in connection with frequent shopping programs of the Borrower.

 

“Customer Deposits” means at any time, the aggregate amount at such time of (a) deposits made by customers with respect to the purchase of goods or the performance of services and (b) layaway obligations of the Borrower.

 

“Customs Broker/Carrier Agreement” means an agreement in form and substance satisfactory to the Lender among the Borrower, a customs broker, freight forwarder, consolidator or carrier, and the Lender, in which the customs broker, freight forwarder, consolidator or carrier acknowledges that it has control over and holds the documents evidencing ownership of the subject Inventory for the benefit of the Lender and agrees, upon notice from the Lender, to hold and dispose of the subject Inventory solely as directed by the Lender.

 

“DDA” means each checking, savings or other demand deposit account maintained by the Borrower.  All funds in each DDA shall be conclusively presumed to be Collateral and proceeds of Collateral and the Lender shall have no duty to inquire as to the source of the amounts on deposit in any DDA.

 

“DDA Notification” has the meaning provided therefor in Section 6.13(b).

 

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

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

 

“Default Rate” means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Margin, if any, applicable to Base Rate Loans, plus (iii) 2% per annum; provided, however, that with respect to a LIBO Rate Loan, the Default

 

 

  

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Rate shall be an interest rate equal to the interest rate (including any Applicable Margin) otherwise applicable to such Loan plus 2% per annum, and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Margin for Standby Letters of Credit or Commercial Letters of Credit, as applicable, plus 2% per annum.

 

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction and any sale, transfer, license or other disposition of (whether in one transaction or in a series of transactions) of any property (including, without limitation, any Equity Interests other than Equity Interests of the Borrower) by any Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.  For greater clarity, it is expressly acknowledged and agreed that a sale of Equity Interests in the Borrower shall not be deemed a Disposition.

 

“Disqualified Stock” means any Equity Interest that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Loans mature.  The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Agreement will be the maximum amount that the Borrower may become obligated to pay upon maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock or portion thereof, plus accrued dividends.

 

“Dollars” and “$” mean lawful money of the United States.

 

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of the United States of America, any State thereof or the District of Columbia (excluding, for the avoidance of doubt, any Subsidiary organized under the laws of Puerto Rico or any other territory).

 

“Early Termination Fee” has the meaning set forth in Section 2.08(b).

 

“Effective Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 9.01.

 

“Eligible Assignee” means (a) a Credit Party or any of its Affiliates; (b) a bank, insurance company, or company engaged in the business of making commercial loans, which Person, together with its Affiliates, has a combined capital and surplus in excess of $250,000,000; (c) an Approved Fund; (d) any Person to whom a Credit Party assigns its rights and obligations under this Agreement as part of an assignment and transfer of such Credit Party’s rights in and to a material portion of such Credit Party’s portfolio of asset based credit facilities, and (e) any other Person (other than a natural person) approved by (i) the Lender and the L/C Issuer; provided that notwithstanding the foregoing, “Eligible Assignee” shall not include the Borrower or any of its Affiliates or Subsidiaries.

 

“Eligible Credit Card Receivables” means at the time of any determination thereof, each Credit Card Receivable that satisfies the following criteria at the time of creation and continues to meet the same at the time of such determination: such Credit Card Receivable (i) has been earned by performance and represents the bona fide amounts due to the Borrower from a Credit Card Issuer or Credit Card Processor, and in each case originated in the ordinary course of business of the Borrower, and (ii) in each case is acceptable to the Lender in its reasonable discretion, and is not ineligible for inclusion in the calculation of the Borrowing Base pursuant to any of clauses (a) through (k) below.  Without limiting the foregoing, to qualify as an Eligible Credit Card Receivable, an Account shall indicate no Person other than the 

 

 

  

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Borrower as payee or remittance party.  In determining the amount to be so included, the face amount of an Account shall be reduced by, without duplication, to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, promotional program allowances, price adjustments, finance charges or other allowances (including any amount that the Borrower may be obligated to rebate to a customer, a Credit Card Issuer or Credit Card Processor pursuant to the terms of any agreement or understanding (written or oral)) and (ii) the aggregate amount of all cash received in respect of such Account but not yet applied by the Borrower to reduce the amount of such Credit Card Receivable.  Except as otherwise agreed by the Lender, any Credit Card Receivable included within any of the following categories shall not constitute an Eligible Credit Card Receivable:

 

(a)           Credit Card Receivable which do not constitute an “Account” (as defined in the UCC);

 

(b)          Credit Card Receivables that have been outstanding for more than five (5) Business Days from the date of sale;

 

(c)           Credit Card Receivables (i) that are not subject to a perfected first-priority security interest in favor of the Lender, or (ii) with respect to which the Borrower does not have good, valid and marketable title thereto, free and clear of any Lien (other than Liens granted to the Lender pursuant to the Security Documents);

 

(d)           Credit Card Receivables which are disputed, are with recourse, or with respect to which a claim, counterclaim, offset or chargeback has been asserted (to the extent of such claim, counterclaim, offset or chargeback);

 

(e)           Credit Card Receivables as to which the Credit Card Issuer or Credit Card Processor has the right under certain circumstances to require the Borrower to repurchase the Accounts from such Credit Card Issuer or Credit Card Processor;

 

(f)           Credit Card Receivables due from a Credit Card Issuer or Credit Card Processor of the applicable credit card which is the subject of any bankruptcy or insolvency proceedings;

 

(g)          Credit Card Receivables which are not a valid, legally enforceable obligation of the applicable issuer with respect thereto;

 

(h)          Credit Card Receivables which do not conform to all representations, warranties or other provisions in the Loan Documents relating to Credit Card Receivables; or

 

(i)           Credit Card Receivables which are evidenced by “chattel paper” or an “instrument” of any kind unless such “chattel paper” or “instrument” is in the possession of the Lender, and to the extent necessary or appropriate, endorsed to the Lender.

 

“Eligible Inventory” means, as of the date of determination thereof, items of Inventory of the Borrower that are finished goods, merchantable and readily saleable to the public in the ordinary course of the Borrower’s business deemed by the Lender in its reasonable discretion to be eligible for inclusion in the calculation of the Borrowing Base, in each case that, except as otherwise agreed by the Lender, (A) comply with each of the representations and warranties respecting Inventory made by the Borrower in the Loan Documents, and (B) are not excluded as ineligible by virtue of one or more of the criteria set forth below.  Except as otherwise agreed by the Lender, in its discretion, the following items of Inventory shall not be included in Eligible Inventory:

 

  

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(a)           Inventory that is not solely owned by the Borrower or the Borrower does not have good and valid title thereto;

 

(b)           Inventory that is leased by or is on consignment to the Borrower, or which is consigned by the Borrower to another Person;

 

(c)           Inventory that is not located in the United States of America (excluding territories or possessions of the United States);

 

(d)           Inventory that is not located at a location that is owned or leased by the Borrower, except (i) Inventory in transit between such owned or leased locations or locations which meet the criteria set forth in clause (ii) below, or (ii) to the extent that the Borrower has furnished the Lender with (A) any UCC financing statements or other documents that the Lender may determine to be necessary to perfect its security interest in such Inventory at such location, and (B) a Collateral Access Agreement executed by the Person owning and/or operating any such location on terms reasonably acceptable to the Lender (provided that the Lender acknowledges and agrees that the Collateral Access Agreements in place as of the Effective Date are reasonably acceptable to the Lender for purposes of the locations covered thereby);

 

(e)           Inventory that is located in a distribution center leased by a Borrower or a bailee of the Borrower unless the applicable lessor and/or bailee has delivered to the Lender a Collateral Access Agreement;

 

(f)           Inventory that is comprised of goods which (i) are damaged, defective, “seconds,” or otherwise unmerchantable, (ii) are to be returned to the vendor, (iii) are obsolete or slow moving, or custom items, work-in-process, raw materials, or that constitute samples, spare parts, promotional, marketing, labels, bags and other packaging and shipping materials or supplies used or consumed in the Borrower’s business, (iv) are not in compliance with all standards imposed by any Governmental Authority having regulatory authority over such Inventory, its use or sale, or (v) are bill and hold goods;

 

(g)           Inventory that is not subject to a perfected first-priority security interest in favor of the Lender;

 

(h)           Inventory that is not insured in compliance with the provisions of Section 5.10 hereof;

 

(i)            Inventory that has been sold but not yet delivered or as to which the Borrower has accepted a deposit;

 

(j)            Inventory that is subject to any licensing, patent, royalty, trademark, trade name or copyright agreement between the Borrower and any third party from which the Borrower has received notice of a dispute in respect of any such agreement; or

 

(k)           Inventory which is not of the type usually sold in the ordinary course of the Borrower’s business, unless and until the Lender has completed or received (A) an appraisal of such Inventory from appraisers satisfactory to the Lender and establishes an advance rate and Inventory Reserves (if applicable) therefor, and otherwise agrees that such Inventory shall be deemed Eligible Inventory, and (B) such other due diligence as the Lender may require, all of the results of the foregoing to be reasonably satisfactory to the Lender.

 

  

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“Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

 

“Environmental Liability” means any liability, obligation, damage, loss, claim, action, suit, judgment, order, fine, penalty, fee, expense, or cost, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal or presence of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

“Equipment” has the meaning set forth in the UCC.

 

“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time.

 

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

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.

 

“Event of Default” has the meaning specified in Section 8.01.  An Event of Default shall be deemed to be continuing unless and until that Event of Default has been duly waived as provided in Section 9.03 hereof.

 

  

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“Exchange Act” means the Securities Exchange Act of 1934, as the same may be amended from time to time.

 

“Excluded Subsidiary” means Eyefly.

 

“Excluded Taxes” means, with respect to the Lender, the L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located, (b) any branch profits taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which the Borrower is located, (c) any U.S. federal, state or local backup withholding tax, and (d) any U.S. federal withholding tax imposed under FATCA.

 

“Executive Order” has the meaning set forth in Section 9.17.

 

“Existing Credit Agreement” has the meaning set forth in the Recitals hereto.

 

“Existing Letters of Credit” means the Letters of Credit described on Schedule 2.03 hereto issued under the Existing Credit Agreement.

 

“Extraordinary Receipt” means any cash received by or paid to or for the account of any Person not in the ordinary course of business, including tax refunds, pension plan reversions, proceeds of insurance (other than proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings), condemnation awards (and payments in lieu thereof), indemnity payments and any purchase price adjustments.  For the avoidance of doubt, the Borrower and the Lender acknowledge and agree that any funds received in connection with the Disposition of Equity Interests in the Borrower shall not be considered Extraordinary Receipts.

 

“Eyefly” means Eyefly, LLC a Delaware limited liability company.

 

“Eyefly Operating Agreement” means that certain Operating Agreement of Eyefly, LLC dated as of January 4, 2011, as the same may be amended from time to time.

 

“FATCA” means current Section 1471 through 1474 of the Code or any amended version or successor provision that is substantively similar and, in each case, any regulations promulgated thereunder and any interpretation and other guidance issued in connection therewith.

 

“Factored Receivables” means any Accounts of the Borrower which have been factored or sold by an account debtor of the Borrower to Wells Fargo or any of its Affiliates pursuant to a factoring arrangement or otherwise.

 

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Wells Fargo on such day on such transactions as determined by the Lender.

 

  

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“Filltek Agreement” means that certain Services Agreement dated as of April 11, 2007 by and between the Borrower and Fulfillment Technologies, LLC.

 

“Fiscal Month” means any fiscal month of any Fiscal Year, which month shall generally end on the last day of each calendar month in accordance with the fiscal accounting calendar of the Borrower.

 

“Fiscal Quarter” means any fiscal quarter of any Fiscal Year, which quarters shall generally end on the last day of each March, June, September and December of such Fiscal Year in accordance with the fiscal accounting calendar of the Borrower.

 

“Fiscal Year” means any period of twelve consecutive months ending on December 31 of any calendar year.

 

“Foreign Asset Control Regulations” has the meaning set forth in Section 9.17.

 

“FRB” means the Board of Governors of the Federal Reserve System of the United States.

 

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

 

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied.

 

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

 

“Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien).  The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum 

 

 

  

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reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a corresponding meaning.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

 

“Honor Date” has the meaning specified in Section 2.03(c)(i).

 

“Increase Effective Date” shall have the meaning provided therefor in Section 2.12(c).

 

“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

 

(a)           all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

 

(b)          the maximum amount of all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments;

 

(c)           net obligations of such Person under any Swap Contract;

 

(d)          all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business and, in each case, not past due for more than 60 days after the date on which such trade account payable was created);

 

(e)           indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

 

(f)           All Attributable Indebtedness of such Person;

 

(g)          all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person (including, without limitation, Disqualified Stock), or any warrant, right or option to acquire such Equity Interest, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and

 

(h)          all Guarantees of such Person in respect of any of the foregoing.

 

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person.  The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

  

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“Indemnitees” has the meaning specified in Section 9.04(b).

 

“Information” has the meaning specified in Section 9.07.

 

“Intellectual Property” means all present and future:  trade secrets, know-how and other proprietary information; trademarks, trademark applications, internet domain names, service marks, trade dress, trade names, business names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of the foregoing) indicia and other source and/or business identifiers, and all registrations or applications for registrations which have heretofore been or may hereafter be issued thereon throughout the world; copyrights and copyright applications; (including copyrights for computer programs) and all tangible and intangible property embodying the copyrights, unpatented inventions (whether or not patentable); patents and patent applications; industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom; books, records, writings, computer tapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; all other intellectual property; and all common law and other rights throughout the world in and to all of the foregoing.

 

“Interest Payment Date” means, (a) as to any LIBO Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; and (b) as to any Base Rate Loan, the first day after the end of each month and the Maturity Date.

 

“Interest Period” means, as to each LIBO Rate Loan, the period commencing on the date such LIBO Rate Loan is disbursed or converted to or continued as a LIBO Rate Loan and ending on the date one, two or three months thereafter, as selected by the Borrower in its Committed Loan Notice; provided that:

 

(i)           any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

 

(ii)          any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period;

 

(iii)          no Interest Period shall extend beyond the Maturity Date; and

 

(iv)          notwithstanding the provisions of clause (iii), no Interest Period shall have a duration of less than one (1) month, and if any Interest Period applicable to a LIBO Borrowing would be for a shorter period, such Interest Period shall not be available hereunder.

 

For purposes hereof, the date of a Committed Borrowing initially shall be the date on which such Committed Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Committed Borrowing.

 

“Internal Control Event” means a material weakness in, or fraud that involves management or other employees who have a significant role in, the Borrower’s internal controls over financial reporting, in each case as described in the Securities Laws.

 

  

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“Inventory” has the meaning given that term in the UCC, and shall also include, without limitation, all: (a) goods which (i) are leased by a Person as lessor, (ii) are held by a Person for sale or lease or to be furnished under a contract of service, (iii) are furnished by a Person under a contract of service, or (iv) consist of raw materials, work in process, or materials used or consumed in a business; (b) goods of said description in transit; (c) goods of said description which are returned, repossessed or rejected; and (d) packaging, advertising, and shipping materials related to any of the foregoing.

 

“Inventory Reserves” means such reserves as may be established from time to time by the Lender in its reasonable discretion with respect to the determination of the saleability, at retail, of the Eligible Inventory, which reflect such other factors as affect the market value of the Eligible Inventory or which reflect claims and liabilities that the Lender determines will need to be satisfied in connection with the realization upon the Inventory. Without limiting the generality of the foregoing, Inventory Reserves may, in the Lender’s discretion, include (but are not limited to) reserves based on:

 

(a)           Obsolescence;

 

(b)           Seasonality;

 

(c)           Shrink;

 

(d)           Imbalance;

 

(e)           Change in Inventory character;

 

(f)           Change in Inventory composition;

 

(g)           Change in Inventory mix;

 

(h)           Markdowns (both permanent and point of sale);

 

(i)            Retail markons and markups inconsistent with prior period practice and performance, industry standards, current business plans or advertising calendar and planned advertising events; and

 

(j)            Out-of-date and/or expired Inventory.

 

“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or interest in, another Person, or (c) any Acquisition, or (d) any other investment of money or capital in order to obtain a profitable return.  For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

 

“IRS” means the United States Internal Revenue Service.

 

“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).

 

  

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“Issuer Documents” means with respect to any Letter of Credit, the Letter Credit Application, the Standby Letter of Credit Agreement or Commercial Letter of Credit Agreement, as applicable, and any other document, agreement and instrument entered into by the L/C Issuer and the Borrower or in favor of the L/C Issuer and relating to any such Letter of Credit.

 

“Joinder” means an agreement, in form satisfactory to the Lender pursuant to which, among other things, a Person becomes a party to, and bound by the terms of, this Agreement and/or the other Loan Documents.

 

 “Landlord Lien State” means such state(s) in which a landlord’s claim for rent may have priority over the Lien of the Lender in any of the Collateral.

 

“Laws” means each international, foreign, Federal, state and local statute, treaty, rule, guideline, regulation, ordinance, code and administrative or judicial precedent or authority, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and each applicable administrative order, directed duty, request, license, authorization and permit of, and agreement with, any Governmental Authority, in each case whether or not having the force of law.

 

“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

 

“L/C Issuer” means Wells Fargo in its capacity as issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit hereunder.  The L/C Issuer may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of the L/C Issuer and/or for such Affiliate to act as an advising, transferring, confirming and/or nominated bank in connection with the issuance or administration of any such Letter of Credit, in which case the term “L/C Issuer” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

 

“L/C Obligations” means, as at any date of determination, the aggregate undrawn amount available to be drawn under all outstanding Letters of Credit.  For purposes of computing the amounts available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.05.  For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of any Rule under the ISP or any article of UCP 600, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.

 

“Lease” means any agreement, whether written or oral, no matter how styled or structured, pursuant to which the Borrower is entitled to the use or occupancy of any space in a structure, land, improvements or premises for any period of time.

 

“Lender” has the meaning specified in the introductory paragraph hereto.

 

“Lender’s Office” means the Lender’s address and, as appropriate, account as set forth on Schedule 9.02, or such other address or account as the Lender may from time to time notify the Borrower.

 

“Letter of Credit” means each Standby Letter of Credit and each Commercial Letter of Credit issued hereunder and shall include the Existing Letters of Credit.

 

“Letter of Credit Application” means an application for the issuance or amendment of a Letter of Credit in the form from time to time in use by the L/C Issuer.

 

  

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“Letter of Credit Expiration Date” means the day that is seven days prior to the Maturity Date then in effect (or, if such day is not a Business Day, the next preceding Business Day).

 

“Letter of Credit Fee” has the meaning specified in Section 2.03(h).

 

“Letter of Credit Sublimit” means an amount equal to $5,000,000.  The Letter of Credit Sublimit is part of, and not in addition to, the Commitment.  A permanent reduction of the Commitment shall not require a corresponding pro rata reduction in the Letter of Credit Sublimit; provided, however, that if the Commitment is reduced to an amount less than the Letter of Credit Sublimit, then the Letter of Credit Sublimit shall be reduced to an amount equal to (or, at Borrower’s option, less than) the Commitment.  The Borrower may, in connection with any increase to the Commitment under Section 2.12 hereof, request a corresponding pro rata increase in the Letter of Credit Sublimit.

 

“LIBO Borrowing” means a Committed Borrowing comprised of LIBO Loans.

 

“LIBO Rate” means for any Interest Period with respect to a LIBO Rate Loan, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Lender from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period.  If such rate is not available at such time for any reason, then the “LIBO Rate” for such Interest Period shall be the rate per annum determined by the Lender to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBO Rate Loan being made, continued or converted by Wells Fargo and with a term equivalent to such Interest Period would be offered to Wells Fargo by major banks in the London interbank eurodollar market in which Wells Fargo participates at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period.

 

“LIBO Rate Loan” means a Committed Loan that bears interest at a rate based on the Adjusted LIBO Rate.

 

“Lien” means (a) any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale, Capital Lease Obligation, Synthetic Lease Obligation, or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing) and (b) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

 

“Loan” means an extension of credit by the Lender to the Borrower under Article II in the form of a Committed Loan.

 

“Loan Account” has the meaning assigned to such term in Section 2.10.

 

“Loan Cap” means, at any time of determination, the lesser of (a) the Commitment or (b) the Borrowing Base.

 

“Loan Documents” means this Agreement, the Note, each Issuer Document, all Borrowing Base Certificates, the Blocked Account Agreements, the DDA Notifications, the Credit Card Notifications, the Security Documents, and any other instrument or agreement now or hereafter executed and delivered in connection herewith, or in connection with any transaction arising out of any Cash Management Services 

 

 

  

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and Bank Products provided by the Lender or any of its Affiliates, each as amended and in effect from time to time.

 

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent) or condition (financial or otherwise) of the Borrower; (b) a material impairment of the ability of the Borrower to perform its obligations under any Loan Document; or (c) a material impairment of the rights and remedies of the Lender under any Loan Document or a material adverse effect upon the legality, validity, binding effect or enforceability against the Borrower of any Loan Document.  In determining whether any individual event would result in a Material Adverse Effect, notwithstanding that such event in and of itself does not have such effect, a Material Adverse Effect shall be deemed to have occurred if the cumulative effect of such event and all other then existing events would result in a Material Adverse Effect.

 

“Material Contract” means, with respect to the Borrower, (i) the Filltek Agreement (or any replacement thereof reasonably acceptable to the Lender) and (ii) any other agreement that the Borrower is required to file with the SEC as a material agreement; provided that no employment agreements or shareholder agreements of the Borrower shall be deemed “Material Contracts” for purposes of this Agreement.

 

“Material Indebtedness” means Indebtedness (other than the Obligations) of the Borrower in an aggregate principal amount exceeding $250,000.   For purposes of determining the amount of Material Indebtedness at any time, (a) the amount of the obligations in respect of any Swap Contract at such time shall be calculated at the Swap Termination Value thereof, (b) undrawn committed or available amounts shall be included, and (c) all amounts owing to all creditors under any combined or syndicated credit arrangement shall be included.

 

“Maturity Date” means  June 17, 2014.

 

 “Maximum Rate” has the meaning provided therefor in Section 9.09.

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

 

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

 

“Net Proceeds” means (a) with respect to any Disposition by the Borrower, or any Extraordinary Receipt received or paid to the account of the Borrower, the excess, if any, of (i) the sum of cash and cash equivalents received in connection with such transaction (including any cash or cash equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A) the principal amount of any Indebtedness that is secured by the applicable asset by a Lien permitted hereunder which is senior to the Lender’s Lien on such asset and that is required to be repaid (or to establish an escrow for the future repayment thereof) in connection with such transaction (other than Indebtedness under the Loan Documents), plus (B) the reasonable and customary out-of-pocket expenses incurred by the Borrower in connection with such transaction (including, without limitation, appraisals, and brokerage, legal, title and recording or transfer tax expenses and commissions) paid by the Borrower to third parties (other than Affiliates)); and

 

(b)           with respect to the sale or issuance of any Equity Interest by the Borrower, or the incurrence or issuance of any Indebtedness by the Borrower, the excess of (i) the sum of the cash and cash

 

 

  

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equivalents received in connection with such transaction over (ii) the underwriting discounts and commissions, and other reasonable and customary out-of-pocket expenses, incurred by the Borrower in connection therewith.

 

“Non-Extension Notice Date” has the meaning specified in Section 2.03(b)(iii).

 

 “Note” means a promissory note made by the Borrower in favor of the Lender evidencing Committed Loans made by the Lender, substantially in the form of Exhibit B.

 

 “NPL” means the National Priorities List under CERCLA.

 

“Obligations” means (a) all advances to, and debts (including principal, interest, fees, costs, and expenses), liabilities, obligations, covenants, indemnities, and duties of, the Borrower arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit (including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral therefor), whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest, fees, costs, expenses and indemnities that accrue after the commencement by or against the Borrower or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest, fees, costs, expenses and indemnities are allowed claims in such proceeding, and (b) any Other Liabilities.

 

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

 

“Other Liabilities” means (a) any obligation on account of (i) any Cash Management Services furnished to the Borrower and/or (ii) any transaction with the Lender or its Affiliates, which arises out of any Bank Product entered into with the Borrower and any such Person, as each may be amended from time to time.

 

“Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

 

“Outstanding Amount” means (i) with respect to Committed Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Committed Loans occurring on such date; and (ii) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date.

 

“Overadvance” means a Credit Extension to the extent that, immediately after its having been made, Availability is less than zero.

 

  

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“Participant” has the meaning specified in Section 9.06(b).

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“PCAOB” means the Public Company Accounting Oversight Board.

 

“Pension Plan” means any “employee pension benefit plan” (as such term is 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 the Borrower or any ERISA Affiliate or to which the Borrower or any 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 immediately preceding five plan years.

 

“Permitted Disposition” means any of the following:

 

(a)           dispositions of inventory in the ordinary course of business;

 

(b)          bulk sales of other dispositions of the Inventory of the Borrower not in the ordinary course of business at arm’s length, provided, that such Inventory dispositions shall not exceed (i) $100,000 in any Fiscal Year of the Borrower with respect to dispositions of Eligible Inventory, or (ii) $750,000 in any Fiscal Year of the Borrower with respect to dispositions of Inventory which is not Eligible Inventory, provided,  further that all bulk sales of Inventory shall be in accordance with liquidation agreements and with professional liquidators reasonably acceptable to the Lender; provided, further that all Net Proceeds received in connection therewith are applied to the Obligations if then required in accordance with Section 2.04 hereof;

 

(c)           non-exclusive licenses of Intellectual Property of the Borrower in the ordinary course of business; and

 

(d)          dispositions of Equipment in the ordinary course of business that is substantially worn, damaged, obsolete or, in the judgment of the Borrower, no longer useful or necessary in its business and is replaced with similar property having at least equivalent value.

 

“Permitted Encumbrances” means:

 

(a)           Liens imposed by law for Taxes that are not yet due or are being contested in compliance with Section 6.04;

 

(b)          Carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by applicable Law, arising in the ordinary course of business and securing obligations that are not overdue or are being contested in compliance with Section 6.04;

 

(c)           Pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations, other than any Lien imposed by ERISA;

 

(d)          Deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

 

  

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(e)          Liens in respect of judgments that would not constitute an Event of Default hereunder;

 

(f)           Easements, covenants, conditions, restrictions, building code laws, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of the Borrower and such other minor title defects or survey matters that are disclosed by current surveys that, in each case, do not materially interfere with the current use of the real property;

 

(g)          Liens existing on the Effective Date and listed on Schedule 7.01 and any Permitted Refinancings thereof;

 

(h)          Liens on fixed or capital assets acquired by the Borrower which are permitted under clause (c) of the definition of Permitted Indebtedness so long as (i) such Liens and the Indebtedness secured thereby are incurred prior to or within ninety (90) days after such acquisition, (ii) the Indebtedness secured thereby does not exceed the cost of acquisition of such fixed or capital assets and (iii) such Liens shall not extend to any other property or assets of the Borrower;

 

(i)            Liens in favor of the Lender;

 

(j)            Statutory Liens of landlords and lessors in respect of rent not in default;

 

(k)           Possessory Liens in favor of brokers and dealers arising in connection with the acquisition or disposition of Investments owned as of the Effective Date and Permitted Investments, provided that such liens (a) attach only to such Investments and (b) secure only obligations incurred in the ordinary course and arising in connection with the acquisition or disposition of such Investments and not any obligation in connection with margin financing;

 

(l)           Liens arising solely by virtue of any statutory or common law provisions relating to banker’s liens, liens in favor of securities intermediaries, rights of setoff or similar rights and remedies as to deposit accounts or securities accounts or other funds maintained with depository institutions or securities intermediaries;

 

(m)          Liens in favor of Credit Card Issuers and Credit Card Processors arising in the ordinary course of business securing the obligation to pay customary fees and expenses in connection with credit card arrangements;

 

(n)          Liens arising from precautionary UCC filings regarding “true” operating leases or, to the extent permitted under the Loan Documents, the consignment of goods to the Borrower; and

 

(o)          Liens in favor of customs and revenues authorities imposed by applicable Law arising in the ordinary course of business in connection with the importation of goods and securing obligations that are being contested in good faith by appropriate proceedings, (B) the Borrower has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (C) such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation.

 

  

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 “Permitted Indebtedness” means each of the following as long as no Default or Event of Default would arise from the incurrence thereof:

 

(a)           Indebtedness outstanding on the Effective Date and listed on Schedule 7.03 and any Permitted Refinancing thereof;

 

(b)          Purchase money Indebtedness of the Borrower to finance the acquisition of any personal property consisting solely of fixed or capital assets, including Capital Lease Obligations, and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and Permitted Refinancings thereof, provided, however, that the aggregate principal amount of Indebtedness permitted by this clause (b) shall not exceed $500,000 at any time outstanding and further provided that, if requested by the Lender, the Borrower shall use commercially reasonable efforts to cause the holders of such Indebtedness to enter into a use agreement with respect to the assets secured by a Lien granted to the holder of such Indebtedness on terms reasonably satisfactory to the Lender;

 

(c)           obligations (contingent or otherwise) of the Borrower existing or arising under any Swap Contract entered into with Lender;

 

(d)          the Obligations; and

 

(e)           unsecured Indebtedness not otherwise specifically described herein in an aggregate principal amount not to exceed $100,000 at any time outstanding.

 

“Permitted Investments” means each of the following as long as no Default or Event of Default exists at the time such Investment is made or would arise from the making of such Investment:

 

(a)           readily marketable obligations issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof having maturities of not more than 360 days from the date of acquisition thereof; provided that the full faith and credit of the United States of America is pledged in support thereof;

 

(b)          commercial paper issued by any Person organized under the laws of any state of the United States of America and rated at least “Prime-1” (or the then equivalent grade) by Moody’s or at least “A-1” (or the then equivalent grade) by S&P, in each case with maturities of not more than 180 days from the date of acquisition thereof;

 

(c)           time deposits with, or insured certificates of deposit or bankers’ acceptances of, any commercial bank that (i) (A) is the Lender or (B) is organized under the laws of the United States of America, any state thereof or the District of Columbia or is the principal banking subsidiary of a bank holding company organized under the laws of the United States of America, any state thereof or the District of Columbia, and is a member of the Federal Reserve System, (ii) issues (or the parent of which issues) commercial paper rated as described in clause (c) of this definition and (iii) has combined capital and surplus of at least $1,000,000,000, in each case with maturities of not more than 180 days from the date of acquisition thereof;

 

(d)          Fully collateralized repurchase agreements with a term of not more than thirty (30) days for securities described in clause (a) above (without regard to the limitation on maturity contained in such clause) and entered into with a financial institution satisfying the criteria described in clause (c) above or with any primary dealer and having a market value at the time 

 

  

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that such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such counterparty entity with whom such repurchase agreement has been entered into;

 

(e)           Investments, classified in accordance with GAAP as current assets of the Borrower, in any money market fund, mutual fund, or other investment companies that are registered under the Investment Company Act of 1940, as amended, which are administered by financial institutions that have the highest rating obtainable from either Moody’s or S&P, and which invest solely in one or more of the types of securities described in clauses (a) through (d) above;

 

(f)           Investments existing on the Effective Date, and set forth on Schedule 7.02, but not any increase in the amount thereof or any other modification of the terms thereof;

 

(g)           (i) Investments by the Borrower in Eyefly outstanding on the Effective Date, and (ii) the Subsequent Eyefly Investment;

 

(h)          Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;

 

(i)            Guarantees constituting Permitted Indebtedness;

 

(j)           Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

 

(k)           advances to officers, directors and employees of the Borrower in the ordinary course of business in an amount not to exceed $250,000 to any individual at any time or in an aggregate amount not to exceed $50,000 at any time outstanding;

 

(l)            Investments in Subsidiaries that have become parties to this Agreement pursuant to Section 6.12; and

 

(l)            Other Investments not otherwise specifically described herein and not exceeding $100,000 in the aggregate at any time outstanding.

 

provided, however, that notwithstanding the foregoing, after the occurrence and during the continuance of a Cash Dominion Event, no such Investments specified in clauses (a) through (e) and clause (l) shall be permitted unless (i) either (A) no Loans, or, if then required to be Cash Collateralized, Letters of Credit are then outstanding, or (B) the Investment is a temporary Investment pending expiration of an Interest Period for a LIBO Rate Loan, the proceeds of which Investment will be applied to the Obligations after the expiration of such Interest Period,  and (ii) such Investments shall be pledged to the Lender as additional collateral for the Obligations pursuant to such agreements as may be reasonably required by the Lender.

 

“Permitted Refinancing” means, with respect to any Person, any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to “Refinance”), the Indebtedness being Refinanced (or previous refinancings thereof constituting a Permitted Refinancing); provided, that (a) the principal 

 

 

  

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amount (or accreted value, if applicable) of such Permitted Refinancing does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus unpaid accrued interest and premiums thereon and underwriting discounts, defeasance costs, fees, commissions and expenses), (b) the weighted average life to maturity of such Permitted Refinancing is greater than or equal to the weighted average life to maturity of the Indebtedness being Refinanced (c) such Permitted Refinancing shall not require any scheduled principal payments due prior to the Maturity Date, (d) if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations under this Agreement, such Permitted Refinancing shall be subordinated in right of payment to such Obligations on terms at least as favorable to the Credit Parties as those contained in the documentation governing the Indebtedness being Refinanced (e) no Permitted Refinancing shall have greater guarantees or security from the Borrower, than the Indebtedness being Refinanced, (f) the interest rate applicable to any such Permitted Refinancing shall not exceed the then applicable market interest rate, and (g) at the time thereof, no Default or Event of Default shall have occurred and be continuing.

 

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, limited partnership, Governmental Authority or other entity.

 

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

 

“Prepayment Event” means:

 

(a)           Any Disposition (including pursuant to a sale and leaseback transaction) of any property or asset of the Borrower, other than a Permitted Disposition under clauses (a) and (c) of the definition thereof; provided that any Disposition in an amount not to exceed $100,000 prior to the occurrence of a Cash Dominion Event shall not be deemed a Prepayment Event;

 

(b)           Any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of (and payments in lieu thereof), any property or asset of the Borrower, unless (i) the proceeds therefrom are required to be paid to the holder of a Lien on such property or asset having priority over the Lien of the Lender or (ii) prior to the occurrence of a Cash Dominion Event, the proceeds therefrom are deposited into a segregated account and utilized for purposes of replacing or repairing the assets in respect of which such proceeds, awards or payments were received within 180 days of the occurrence of the damage to or loss of the assets being repaired or replaced;

 

(c)           The issuance by the Borrower of any Equity Interests (other than (i) any such issuance of Equity Interests as a compensatory issuance to any employee, director, consultant or investor (including under any option plan) or (ii) any such issuance of Equity Interests upon the exercise or conversion of other outstanding Equity Interests); provided that any such issuance by the Borrower of Equity Interest shall not be deemed a Prepayment Event so long as no Loans are outstanding hereunder;

 

(d)           The incurrence by the Borrower of any Indebtedness for borrowed money (other than Permitted Indebtedness); or

 

(e)           The receipt by the Borrower of any Extraordinary Receipts.

 

  

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“Qualified Cash” means, as of any date of determination, the amount of unrestricted cash of the Borrower (as reflected in the Borrowing Base Certificate delivered by the Borrower pursuant to Section 6.02(c) of this Agreement), net of the amount of all outstanding checks, which cash is subject to a perfected first priority security interest in favor of the Lender and is not subject to any other Liens.

 

“Real Estate” means all Leases and all land, together with the buildings, structures, parking areas, and other improvements thereon, now or hereafter owned by the Borrower, including all easements, rights-of-way, and similar rights relating thereto and all leases, tenancies, and occupancies thereof.

 

“Registered Public Accounting Firm” has the meaning specified by the Securities Laws and shall be independent of the Borrower as prescribed by the Securities Laws.

 

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Person’s Affiliates.

 

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

 

“Request for Credit Extension” means (a) with respect to a Committed Borrowing, conversion or continuation of Committed Loans, a Committed Loan Notice, and (b) with respect to an L/C Credit Extension, a Letter of Credit Application and, if required by the L/C Issuer, a Standby Letter of Credit Agreement or Commercial Letter of Credit Agreement, as applicable.

 

“Reserves” means all Inventory Reserves and Availability Reserves.

 

“Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer or assistant treasurer of the Borrower or any of the other individuals designated in writing to the Lender by an existing Responsible Officer of the Borrower as an authorized signatory of any certificate or other document to be delivered hereunder.  Any document delivered hereunder that is signed by a Responsible Officer of the Borrower shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of the Borrower and such Responsible Officer shall be conclusively presumed to have acted on behalf of the Borrower.

 

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of any Person or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to such Person’s stockholders, partners or members (or the equivalent of any thereof), or any option, warrant or other right to acquire any such dividend or other distribution or payment.  Without limiting the foregoing, “Restricted Payments” with respect to any Person shall also include all payments made by such Person with any proceeds of a dissolution or liquidation of such Person.

 

 “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. and any successor thereto.

 

“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

 

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

 

  

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“Securities Laws” means the Securities Act of 1933, the Securities Exchange Act of 1934, Sarbanes-Oxley, and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the PCAOB.

 

“Security Agreement” means the Amended and Restated Security Agreement dated as of the Effective Date between the Borrower and the Lender, as the same now exists or may hereafter be amended, modified, supplemented, renewed, restated or replaced.

 

“Security Documents” means the Security Agreement, the Blocked Account Agreements, the DDA Notifications, the Credit Card Notifications, and each other security agreement or other instrument or document executed and delivered to the Lender pursuant to this Agreement or any other Loan Document granting a Lien to secure any of the Obligations.

 

“Servicing Fee” has the meaning set forth in Section 2.08(d).

 

“Shareholders’ Equity” means, as of any date of determination, consolidated shareholders’ equity of the Borrower as of that date determined in accordance with GAAP.

 

“Shrink” means Inventory which has been lost, misplaced, stolen, or is otherwise unaccounted for.

 

“Shrink Reserve” means an amount reasonably estimated by the Lender to be equal to that amount which is required in order that the Shrink reflected in Borrower’s stock ledger would be reasonably equivalent to the Shrink calculated as part of the Borrower’s most recent physical inventory.

 

“Solvent” and “Solvency” means, with respect to any Person on a particular date, that on such date (a) at fair valuation, all of the properties and assets of such Person are greater than the sum of the debts, including contingent liabilities, of such Person, (b) the present fair saleable value of the properties and assets of such Person is not less than the amount that would be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person is able to realize upon its properties and assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts beyond such Person’s ability to pay as such debts mature, and (e) such Person is not engaged in a business or a transaction, and is not about to engage in a business or transaction, for which such Person’s properties and assets would constitute unreasonably small capital after giving due consideration to the prevailing practices in the industry in which such Person is engaged.  The amount of all guarantees at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, can reasonably be expected to become an actual or matured liability.

 

 “Standby Letter of Credit” means any Letter of Credit that is not a Commercial Letter of Credit and that (a) is used in lieu or in support of performance guaranties or performance, surety or similar bonds (excluding appeal bonds) arising in the ordinary course of business, (b) is used in lieu or in support of stay or appeal bonds, (c) supports the payment of insurance premiums for reasonably necessary casualty insurance carried by the Borrower, or (d) supports payment or performance for identified purchases or exchanges of products or services in the ordinary course of business.

 

“Standby Letter of Credit Agreement” means the Standby Letter of Credit Agreement relating to the issuance of a Standby Letter of Credit in the form from time to time in use by the L/C Issuer.

 

“Stated Amount” means at any time the maximum amount for which a Letter of Credit may be honored.

 

  

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“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the FRB to which the Lender is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D.  LIBO Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to the Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

 

“Subsequent Eyefly Investment” means capital contributions made by the Borrower to Eyefly after the Effective Date in accordance with the Eyefly Operating Agreement, in an amount not to exceed $312,000 in the aggregate.  The parties acknowledge and agree that the Subsequent Eyefly Investment may be made in one or more tranches, provided that the aggregate amount of such tranches does not exceed $312,000.

 

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the Equity Interests having ordinary voting power for the election of directors or other governing body are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower other than the Excluded Subsidiary.

 

“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

 

“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include the Lender or any Affiliate of the Lender).

 

“Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property (including sale and leaseback transactions), in each case, creating obligations that do not appear

 

 

  

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on the balance sheet of such Person but which, upon the application of any Debtor Relief Laws to such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

 

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“Termination Date” means the earliest to occur of (i) the Maturity Date,  (ii) the date on which the maturity of the Obligations is accelerated (or deemed accelerated) and the Commitment is irrevocably terminated (or deemed terminated) in accordance with Article VII, or (iii) the termination of the Commitment in accordance with the provisions of Section 2.05(a) hereof.

 

“Total Outstandings” means the aggregate Outstanding Amount of all Loans and all L/C Obligations.

 

“Trading with the Enemy Act” has the meaning set forth in Section 9.17.

 

“Type” means, with respect to a Committed Loan, its character as a Base Rate Loan or a LIBO Rate Loan.

 

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in the Commonwealth of Massachusetts; provided, however, that if a term is defined in Article 9 of the Uniform Commercial Code differently than in another Article thereof, the term shall have the meaning set forth in Article 9; provided further that, if by reason of mandatory provisions of law, perfection, or the effect of perfection or non-perfection, of a security interest in any Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the Commonwealth of Massachusetts, “Uniform Commercial Code” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy, as the case may be.

 

“UCP 600” means the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce and in effect as of July 1, 2007 (or such later version thereof as may be in effect at the time of issuance).

 

“Unfunded Pension Liability” means 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 Section 412 of the Code for the applicable plan year.

 

“Unintentional Overadvance” means an Overadvance which, to the Lender’s knowledge, did not constitute an Overadvance when made but which has become an Overadvance resulting from changed circumstances beyond the control of the Credit Parties, including, without limitation, a reduction in the Appraised Value of property or assets included in the Borrowing Base or misrepresentation by the Borrower.

 

“United States” and “U.S.” mean the United States of America.

 

“Wells Fargo” means Wells Fargo Bank, National Association and its successors.

 

  

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1.02        Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

 

(a)           The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

 

(b)           In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

 

(c)           Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

 

(d)           Any reference herein or in any other Loan Document to the satisfaction, repayment, or payment in full of the Obligations shall mean the repayment in Dollars in full in cash or immediately available funds (or, in the case of contingent reimbursement obligations with respect to Letters of Credit and Bank Products (other than Swap Contracts), providing Cash Collateralization) of all of the Obligations (including the payment of any termination amount then applicable (or which would or could become applicable as a result of the repayment of the other Obligations) under Swap Contracts) other than (i) unasserted contingent indemnification Obligations, (ii) any Obligations relating to Bank Products (other than Swap Contracts) that, at such time, are allowed by the applicable Bank Product provider to remain outstanding without being required to be repaid or Cash Collateralized, and (iii) any Obligations relating to Swap Contracts that, at such time, are allowed by the applicable provider of such Swap Contracts to remain outstanding without being required to be repaid.

 

1.03        Accounting Terms

 

All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) 

 

 

  

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required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

 

1.04        Times of Day.  Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

 

1.05        Letter of Credit Amounts.  Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to be the Stated Amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms of any Issuer Documents related thereto, provides for one or more automatic increases in the Stated Amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum Stated Amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum Stated Amount is in effect at such time.

 

ARTICLE II

THE COMMITMENT AND CREDIT EXTENSIONS

 

2.01        Committed Loans; Reserves.  (a) Subject to the terms and conditions set forth herein, the Lender agrees to make loans (each such loan, a “Committed Loan”) to the Borrower from time to time, on any Business Day during the Availability Period, in an aggregate amount not to exceed at any time outstanding the lesser of (x) the Commitment, or (y) the Borrowing Base; subject in each case to the following limitations:

 

(i)           after giving effect to any Committed Borrowing, the Total Outstandings shall not exceed the Loan Cap, and

 

(ii)           The Outstanding Amount of all L/C Obligations shall not at any time exceed the Letter of Credit Sublimit.

 

Within the limits of the Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01, prepay under Section 2.04, and reborrow under this Section 2.01.  Committed Loans may be Base Rate Loans or LIBO Rate Loans, as further provided herein.

 

(b)           The Inventory Reserves and Availability Reserves as of the Effective Date are set forth in the Borrowing Base Certificate delivered pursuant to Section 4.01(c) hereof.

 

(c)           The Lender shall have the right, at any time and from time to time after the Effective Date in its reasonable discretion to establish, modify or eliminate Reserves.

 

2.02        Borrowings, Conversions and Continuations of Committed Loans.

 

(a)     Committed Loans shall be either Base Rate Loans or LIBO Rate Loans as the Borrower may request subject to and in accordance with this Section 2.02.  Subject to the other provisions of this Section 2.02, Committed Borrowings of more than one Type may be incurred at the same time.

 

(b)          Each Committed Borrowing, each conversion of Committed Loans from one Type to the other, and each continuation of LIBO Rate Loans shall be made upon the Borrower’s irrevocable notice to the Lender, which may be given by telephone.  Each such notice must be received by 

 

  

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the Lender not later than 11:00 a.m. fifteen (15) Business Days prior to the requested date of (i) any Committed Borrowing of, conversion to or continuation of LIBO Rate Loans, (ii) any conversion of LIBO Rate Loans to Base Rate Loans, and (iii) any Committed Borrowing of Base Rate Loans.  Each telephonic notice by the Borrower pursuant to this Section 2.02(b) must be confirmed promptly by delivery to the Lender of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower.  Each Committed Borrowing of, conversion to or continuation of LIBO Rate Loans shall be in a principal amount of $250,000 or a whole multiple of $50,000 in excess thereof.  Each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $10,000.  Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Committed Borrowing, a conversion of Committed Loans from one Type to the other, or a continuation of LIBO Rate Loans, (ii) the requested date of the Committed Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Committed Loans to be borrowed, converted or continued, (iv) the Type of Committed Loans to be borrowed or to which existing Committed Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto.  If the Borrower fails to specify a Type of Committed Loan in a Committed Loan Notice or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Committed Loans shall be made as, or converted to, Base Rate Loans.  Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable LIBO Rate Loans.  If the Lead Borrower requests a Committed Borrowing of, conversion to, or continuation of LIBO Rate Loans in any such Committed Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.

 

(c)          Upon satisfaction of the applicable conditions set forth in Section 4.02, the Lender shall make funds available to the Borrower by no later than 4:00 p.m. on the day of such requested Committed Borrowing either by (i) crediting the account of the Borrower on the books of Wells Fargo with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Lender by the Borrower.

 

(d)          The Lender, without the request of the Borrower, may advance any interest, fee, service charge (including direct wire fees), Credit Party Expenses, or other payment to which any Credit Party is entitled from the Borrower pursuant hereto or any other Loan Document and may charge the same to the Loan Account notwithstanding that an Overadvance may result thereby.  The Lender shall advise the Borrower of any such advance or charge promptly after the making thereof.  Such action on the part of the Lender shall not constitute a waiver of the Lender’s rights and the Borrower’s obligations under Section 2.04(b).  Any amount which is added to the principal balance of the Loan Account as provided in this Section 2.02(d) shall bear interest at the interest rate then and thereafter applicable to Base Rate Loans.

 

(e)          Except as otherwise provided herein, a LIBO Rate Loan may be continued or converted only on the last day of an Interest Period for such LIBO Rate Loan.  During the existence of a Default or an Event of Default, no Loans may be requested as, converted to or continued as LIBO Rate Loans unless the Lender otherwise consents.

 

(f)     The Lender shall promptly notify the Borrower of the interest rate applicable to any Interest Period for LIBO Rate Loans upon determination of such interest rate.  At any time that Base Rate Loans are outstanding, the Lender shall notify the Borrower of any change in Wells Fargo’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

 

(g)          After giving effect to all Committed Borrowings, all conversions of Committed Loans from one Type to the other, and all continuations of Committed Loans as the same Type, there shall not be more than three (3) Interest Periods in effect with respect to LIBO Rate Loans.

 

  

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(h)     The Lender and the L/C Issuer shall have no obligation to make any Loan or to provide any Letter of Credit if an Overadvance would result.  The Lender may, in its discretion, make Overadvances without the consent of the Borrower and the L/C Issuer and the Borrower and L/C Issuer shall be bound thereby.  Any Overadvance is for the account of the Borrower and shall constitute a Base Rate Loan and an Obligation and shall be repaid by the Borrower in accordance with the provisions of Section 2.04(b).  The making of any such Overadvance on any one occasion shall not obligate the Lender to make or permit any Overadvance on any other occasion or to permit such Overadvances to remain outstanding. The Lender shall have no liability for, and neither the Borrower nor any Credit Party shall have the right to, or shall, bring any claim of any kind whatsoever against the Lender with respect to Unintentional Overadvances regardless of the amount of any such Overadvance(s).

 

2.03        Letters of Credit.

 

(a)     The Letter of Credit Commitment.

 

(i)           Subject to the terms and conditions set forth herein, the L/C Issuer agrees (1) from time to time on any Business Day during the period from the Effective Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrower, and to amend or extend Letters of Credit previously issued by it, in accordance with Section 2.03(b) below, and (2) to honor drawings under the Letters of Credit; provided that after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (x) the Total Outstandings shall not exceed Loan Cap, (y) the aggregate Outstanding Amount of the Committed Loans, plus the Outstanding Amount of all L/C Obligations, shall not exceed the Lender’s Commitment, and (z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit.  Each request by the Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrower that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence.  Within the foregoing limits, and subject to the terms and conditions hereof, the Borrower’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.  All Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Effective Date shall be subject to and governed by the terms and conditions hereof.

 

(ii)           No Letter of Credit shall be issued if:

 

(A)           subject to Section 2.03(b)(iii), the expiry date of such requested Standby Letter of Credit would occur more than twelve months after the date of issuance or last extension, unless the Lender has approved such expiry date; or

 

(B)           subject to Section 2.03(b)(iii), the expiry date of such requested Commercial Letter of Credit would occur more than 60 days after the date of issuance or last extension, unless the Lender has approved such expiry date; or

 

(C)            the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless either such Letter of Credit is Cash Collateralized on or prior to the date of issuance of such Letter of Credit (or such later date as to which the Lender may agree) or the Lender has approved such expiry date.

 

(iii)          No Letter of Credit shall be issued without the prior consent of the Lender if:

 

  

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(A)           any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of Credit, or any Law applicable to the L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the L/C Issuer is not otherwise compensated hereunder) not in effect on the Effective Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Effective Date and which the L/C Issuer in good faith deems material to it;

 

(B)            the issuance of such Letter of Credit would violate one or more policies of the L/C Issuer applicable to letters of credit generally;

 

(C)            such Letter of Credit is to be denominated in a currency other than Dollars; or

 

(D)           such Letter of Credit contains any provisions for automatic reinstatement of the Stated Amount after any drawing thereunder.

 

(iv)          The L/C Issuer shall not amend any Letter of Credit if (A) the L/C Issuer would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

 

(b)          Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit.

 

(i)            Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the L/C Issuer (with a copy to the Lender) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower.  Such Letter of Credit Application must be received by the L/C Issuer and the Lender not later than 11:00 a.m. at least three (3) Business Days (or such other date and time as the Lender and the L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be.  In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the Lender and the L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as the Lender or L/C Issuer may require.  In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the Lender and the L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as the Lender or the L/C Issuer may require.  Additionally, the Borrower shall furnish to the L/C Issuer and the Lender such other documents and information pertaining to such requested Letter of Credit issuance or amendment, and any Issuer Documents (including, if requested by the L/C Issuer, a Standby Letter of Credit Agreement or Commercial Letter of Credit Agreement, as applicable), as the L/C Issuer or the Lender may require.

 

  

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(ii)           Promptly after receipt of any Letter of Credit Application, the L/C Issuer will confirm with the Lender (by telephone or in writing) that the Lender has received a copy of such Letter of Credit Application from the Borrower and, if not, the L/C Issuer will provide the Lender with a copy thereof.  Unless the L/C Issuer has received written notice from the Lender or the Borrower, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article IV shall not then be satisfied or unless the L/C Issuer would not be permitted, or would have no obligation, at such time to issue such Letter of Credit under the terms hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a) or otherwise), then, subject to the terms and conditions hereof, the L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with the L/C Issuer's usual and customary business practices.

 

(iii)           If the Borrower so requests in any applicable Letter of Credit Application, the L/C Issuer may, in its sole and absolute discretion, agree to issue a Standby Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit the L/C Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Standby Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Standby Letter of Credit is issued.  Unless otherwise directed by the Lender or the L/C Issuer, the Borrower shall not be required to make a specific request to the Lender or the L/C Issuer for any such extension.  Once an Auto-Extension Letter of Credit has been issued, the Lender shall be deemed to have authorized (but may not require) the L/C Issuer to permit the extension of such Standby Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the Lender shall instruct the L/C Issuer not to permit any such extension if (A) the L/C Issuer has determined that it would not be permitted, or would have no obligation, at such time to issue such Standby Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a) or otherwise), or (B) the L/C Issuer has received notice (which may be by telephone or in writing) on or before the day that is five Business Days before the Non-Extension Notice Date (1) from the Lender that it has elected not to permit such extension or (2) from the Lender or the Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied, and in each such case directing the L/C Issuer not to permit such extension.

 

(iv)           Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the L/C Issuer will also deliver to the Borrower and the Lender a true and complete copy of such Letter of Credit or amendment.

 

(c)          Drawings and Reimbursements.

 

(i)            Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the Borrower and the Lender thereof not less than two (2) Business Days prior to the Honor Date (as defined below; provided, however, that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the L/C Issuer and the Lender with respect to any such payment.  On the date of any payment by the L/C Issuer under a Letter of Credit (each such date, an “Honor Date”), the Borrower shall be deemed to have requested a Committed Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the amount of such payment, without regard to the minimum and multiples specified in Section 2.02(b) for the principal amount of Base Rate Loans, and without regard to whether the conditions set forth in Section 4.02 have been met. Any notice given by the L/C Issuer or the Lender pursuant to this 

 

 

  

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Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

 

(ii)           The Lender’s obligation to make Committed Loans to reimburse the L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which the Lender may have against the L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default or Event of Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing, and without regard to whether the conditions set forth in Section 4.02 have been met.

 

(d)     Obligations Absolute.  The obligation of the Borrower to reimburse the L/C Issuer for each drawing under each Letter of Credit shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

 

(i)            any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;

 

(ii)            the existence of any claim, counterclaim, setoff, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

 

(iii)           any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

 

(iv)          any payment by the L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law;

 

(v)           any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower; or

 

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

 

The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity, the Borrower will immediately notify the Lender and the L/C Issuer.  The Borrower shall be conclusively deemed to have waived any such claim against the L/C Issuer and its correspondents unless such notice is given as aforesaid.

 

  

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(e)           Role of L/C Issuer.  The Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.  None of the L/C Issuer, the Lender, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable to the Borrower or any other Person for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lender; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; (iii) any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit or any error in interpretation of technical terms; or (iv) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer Document.  The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement.  None of the L/C Issuer, the Lender, any of their respective Related Parties nor any correspondent, participant or assignee of the L/C Issuer shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.03(d) or for any action, neglect or omission under or in connection with any Letter of Credit or Issuer Documents, including, without limitation, the issuance or any amendment of any Letter of Credit, the failure to issue or amend any Letter of Credit, or the honoring or dishonoring of any demand under any Letter of Credit, and such action or neglect or omission will bind the Borrower; provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the L/C Issuer, and the L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential, exemplary or punitive damages suffered by the Borrower which the Borrower proves were caused by the L/C Issuer's willful misconduct or gross negligence or the L/C Issuer's willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit; provided further, however, that any claim against the L/C Issuer by the Borrower for any loss suffered or incurred by the Borrower shall be reduced by an amount equal to the sum of (i) the amount (if any) saved by the Borrower as a result of the breach or other wrongful conduct that allegedly caused such loss, and (ii) the amount (if any) of the loss that would have been avoided had the Borrower taken all reasonable steps to mitigate such loss, including, without limitation, by enforcing their rights against any beneficiary and, in case of a claim of wrongful dishonor, by specifically and timely authorizing the L/C Issuer to cure such dishonor.  In furtherance and not in limitation of the foregoing, the L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary (or the L/C Issuer may refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit and may disregard any requirement in a Letter of Credit that notice of dishonor be given in a particular manner and any requirement that presentation be made at a particular place or by a particular time of day), and the L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.  The L/C Issuer shall not be responsible for the wording of any Letter of Credit (including, without limitation, any drawing conditions or any terms or conditions that are ineffective, ambiguous, inconsistent, unduly complicated or reasonably impossible to satisfy), notwithstanding any assistance the L/C Issuer may provide to the Borrower with drafting or recommending text for any Letter of Credit Application or with the structuring of any transaction related to any Letter of Credit, and the Borrower hereby acknowledges and agrees that any such assistance will not constitute legal or other advice by the L/C Issuer or any representation or warranty by the L/C Issuer that any such wording or such Letter of Credit will be effective.  Without limiting the foregoing, the L/C Issuer may, as it deems 

 

 

  

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appropriate, modify or alter and use in any Letter of Credit the terminology contained on the Letter of Credit Application for such Letter of Credit.

 

(f)           Cash Collateral.  Upon the request of the Lender, (i) if the L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Obligation that remains outstanding, or (ii) if, as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, the Borrower shall, in each case, immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations.  Sections 2.04 and 8.02(c) set forth certain additional requirements to deliver Cash Collateral hereunder.  For purposes of this Section 2.03, Section 2.04 and Section 8.02(c), “Cash Collateralize” means to pledge and deposit with or deliver to the Lender, for the benefit of itself and the L/C Issuer, as collateral for the L/C Obligations, cash or deposit account balances in an amount equal to 103% of the Outstanding Amount of all L/C Obligations, pursuant to documentation in form and substance satisfactory to the Lender and the L/C Issuer.  The Borrower hereby grants to the Lender a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing.  Cash Collateral shall be maintained in blocked, non-interest bearing deposit accounts at Wells Fargo.  If at any time the Lender determines that any funds held as Cash Collateral are subject to any right or claim of any Person other than the Lender or that the total amount of such funds is less than the aggregate Outstanding Amount of all L/C Obligations, the Borrower will, forthwith upon demand by the Lender, pay to the Lender, as additional funds to be deposited as Cash Collateral, an amount equal to the excess of (x) such aggregate Outstanding Amount over (y) the total amount of funds, if any, then held as Cash Collateral that the Lender determines to be free and clear of any such right and claim.  Upon the drawing of any Letter of Credit for which funds are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under applicable Laws, to reimburse the L/C Issuer and, to the extent not so applied, shall thereafter be applied to satisfy other Obligations.

 

(g)     Applicability of ISP and UCP 600.  Unless otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of Credit is issued (including any such agreement applicable to an Existing Letter of Credit), (i) the rules of the ISP and the UCP 600 shall apply to each Standby Letter of Credit, and (ii) the rules of the UCP 600 shall apply to each Commercial Letter of Credit.

 

(h)          Letter of Credit Fees.  The Borrower shall pay to the Lender a Letter of Credit fee (the “Letter of Credit Fee”) for each Letter of Credit equal to the Applicable Margin times the daily Stated Amount under each such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit).  For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of the Letter of Credit shall be determined in accordance with Section 1.05.  Letter of Credit Fees shall be (i) due and payable on the first day after the end of each month commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand, and (ii) computed on a monthly basis in arrears.  Notwithstanding anything to the contrary contained herein, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate as provided in Section 2.07(b) hereof.

 

(i)            Documentary and Processing Charges Payable to L/C Issuer.  For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of the Letter of Credit shall be determined in accordance with Section 1.05.  In addition, the Borrower shall pay directly to the L/C Issuer, for its own account, the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the L/C Issuer relating to letters of credit as from time to time in effect.  Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

 

(j)            Conflict with Issuer Documents.  In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.

 

  

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2.04        Prepayments.

 

(a)           The Borrower may, upon irrevocable notice from the Borrower to the Lender, at any time or from time to time voluntarily prepay Committed Loans in whole or in part without premium or penalty except as otherwise expressly provided herein; provided that (i) such notice must be received by the Lender not later than 11:00 a.m. (A) three Business Days prior to any date of prepayment of LIBO Rate Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of LIBO Rate Loans pursuant to this Section 2.04(a) shall be in a principal amount of $250,000 or a whole multiple of $50,000 in excess thereof; and (iii) any prepayment of Base Rate Loans pursuant to this Section 2.04(a) shall be in a principal amount of $10,000 or, in each case, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid and, if LIBO Rate Loans, the Interest Period(s) of such Loans.  If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.  Any prepayment of a LIBO Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05.

 

(b)          If for any reason the Total Outstandings at any time exceed the Loan Cap as then in effect, the Borrower shall immediately prepay Loans and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided, however, that the Borrower shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.04(b) unless after the prepayment in full of the Loans the Total Outstandings exceed the Loan Cap as then in effect.

 

(c)     The Borrower shall prepay the Loans and Cash Collateralize the L/C Obligations with the proceeds and collections received pursuant to the provisions of Section 6.13 hereof.

 

(d)     The Borrower shall prepay the Loans and, if an Event of Default has occurred and is continuing, Cash Collateralize the L/C Obligations, in an amount equal to the Net Cash Proceeds received by the Borrower on account of a Prepayment Event, irrespective of whether a Cash Dominion Event then exists and is continuing.

 

(e)           Prepayments made pursuant to Section 2.04(b), (c) and (d) above, first, shall be applied to the outstanding Committed Loans, second, shall be used to Cash Collateralize the remaining L/C Obligations; and, third, the amount remaining, if any, after the prepayment in full of all Committed Loans outstanding at such time and the Cash Collateralization of the remaining L/C Obligations in full may be retained by the Borrower for use in the ordinary course of its business.  Upon the drawing of any Letter of Credit that has been Cash Collateralized, the funds held as Cash Collateral shall be applied (without any further action by or notice to or from the Borrower) to reimburse the L/C Issuer or the Lender, as applicable.

 

2.05        Termination or Reduction of Commitments

 

(a)     The Borrower may, upon irrevocable notice from the Borrower to the Lender, terminate the Commitment or the Letter of Credit Sublimit or from time to time permanently reduce the Commitment or the Letter of Credit Sublimit; provided that (i) any such notice shall be received by the Lender not later than 11:00 a.m. five Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $500,000 or any whole multiple of $100,000 in excess thereof, (iii) the Borrower shall not terminate or reduce (A) the Commitment if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Outstandings would exceed the Commitment, or (B) the Letter of Credit Sublimit if, after giving effect thereto, the Outstanding Amount of L/C Obligations not fully Cash Collateralized hereunder would exceed the Letter of Credit Sublimit.

 

  

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(b)          If, after giving effect to any reduction of the Commitment, the Letter of Credit Sublimit exceeds the amount of the Commitment, such Letter of Credit Sublimit shall be automatically reduced by the amount of such excess.

 

(c)           All fees (including, without limitation, commitment fees, Early Termination Fees, and Letter of Credit Fees) and interest in respect of the Commitment accrued until the effective date of any termination of the Commitment shall be paid on the effective date of such termination.

 

2.06        Repayment of Loans.

 

The Borrower shall repay to the Lender on the Termination Date the aggregate principal amount of Committed Loans outstanding on such date.

 

2.07        Interest.

 

(a)           Subject to the provisions of Section 2.07(b) below, (i) each LIBO Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Adjusted LIBO Rate for such Interest Period plus the Applicable Margin; and (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Margin.

 

(b)          (i)              If any amount payable under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

 

(ii)            If any other Event of Default exists, then the Lender may notify the Borrower that all outstanding Obligations shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate and thereafter such Obligations shall bear interest at the Default Rate to the fullest extent permitted by applicable Laws.

 

(iii)           Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

 

(c)     Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

 

2.08        Fees.  In addition to certain fees described in subsections (h) and (i) of Section 2.03:

 

(a)     Commitment Fee.  The Borrower shall pay to the Lender a commitment fee equal to 0.75% per annum times the actual daily amount by which the Commitment exceeds the Total Outstandings.  The commitment fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable monthly in arrears on the first day after the end of each month, commencing with the first such date to occur after the Effective Date, and on the last day of the Availability Period.  The commitment fee shall be calculated monthly in arrears.

 

(b)          Early Termination Fee.  In the event that the Termination Date occurs, for any reason, prior to the second anniversary of the Effective Date, or in the event that the Borrower reduces 

 

  

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(but does not terminate) the Commitment prior to the second anniversary of the Effective Date, the Borrower shall pay to the Lender a fee (the “Early Termination Fee”) in respect of amounts which are or become payable by reason thereof equal to one percent (1.0%) of the Commitment then in effect (without regard to any termination thereof) or of the amount of any reduction in the Commitment, as applicable.  All parties to this Agreement agree and acknowledge that the Lender will have suffered damages on account of the early termination of this Agreement or any portion of the Commitment and that, in view of the difficulty in ascertaining the amount of such damages, the Early Termination Fee constitutes reasonable compensation and liquidated damages to compensate the Lender on account thereof.

 

(c)          Closing Fee.  The Borrower shall pay to the Lender a closing fee on the Effective Date equal to $40,000.  Such closing fee shall be fully earned when paid and shall not be refundable for any reason whatsoever.

 

(d)          Servicing Fee.  In addition to any other fee to be paid by the Borrower hereunder, the Borrower shall pay the Lender an annual fee in the amount of $40,000 per annum (the “Servicing Fee”).  The Servicing Fee shall be fully earned on the Effective Date and each anniversary thereof and shall not be refundable for any reason whatsoever, and shall be paid in monthly installments equal to $3,333.33 on the first day of each calendar month.

 

(e)          Cash Dominion Activation Fee.  In addition to any other fee to be paid by the Borrower hereunder, the Borrower shall pay the Lender a fee in the amount of $35,000 (the “Cash Dominion Activation Fee”), which shall be earned and payable in full immediately upon the occurrence of a Cash Dominion Event and shall not be refundable for any reason whatsoever.

 

2.09        Computation of Interest and Fees.  All computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed.  Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.07(a), bear interest for one day, and further provided that for purposes of calculating interest, all principal payments made by or on account of the Borrowers shall be deemed to have been applied to the Loans one (1) Business Day after receipt.  Each determination by the Lender of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

 

2.10        Evidence of Debt.

 

The Credit Extensions made by the Lender shall be evidenced by one or more accounts or records maintained by the Lender (the “Loan Account”) in the ordinary course of business.  The accounts or records maintained by the Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lender to the Borrower and the interest and payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations.  The Borrower shall execute and deliver to the Lender a Note, which shall evidence the Lender’s Loans in addition to such accounts or records.  The Lender may attach schedules to the Note and endorse thereon the date, Type (if applicable), amount and maturity of the Loans and payments with respect thereto.  Upon receipt of an affidavit of the Lender as to the loss, theft, destruction or mutilation of the Note and upon cancellation of the Note, the Borrower will issue, in lieu thereof, a replacement Note in favor of the Lender, in the same principal amount thereof and otherwise of like tenor.

 

2.11        Payments Generally.

 

  

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(a)     General.  All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Lender at the Lender’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein.  All payments received by the Lender after 2:00 p.m., at the option of the Lender, shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.  If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

 

(b)          Presumptions by Lender.  Unless the Lender shall have received notice from the Borrower prior to the time at which any payment is due to the Lender or the L/C Issuer hereunder that the Borrower will not make such payment, the Lender may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the L/C Issuer the amount due to the L/C Issuer.  In such event, if the Borrower has not in fact made such payment, then the L/C Issuer agrees to repay to the Lender forthwith on demand the amount so distributed to the L/C Issuer, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Lender, at the greater of the Federal Funds Rate and a rate determined by the Lender in accordance with banking industry rules on interbank compensation.  A notice of the Lender to the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.

 

(c)     Funding Source.  Nothing herein shall be deemed to obligate the Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by the Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner. 

 

2.12        Increase in Commitments.

 

(a)           Request for Increase.  Provided no Default or Event of Default then exists or would arise therefrom, upon notice to the Lender, the Borrower may from time to time request an increase in the Commitment by an amount (for all such requests) not exceeding $5,000,000 (collectively, the “Commitment Increases”); provided that (i) any such request for an increase shall be in a minimum amount of $1,000,000 and (ii) the Borrower may make a maximum of three such requests.  At the time of sending such notice, the Borrower shall specify the date of such increase (which shall in no event be less than ten Business Days from the date of delivery of such notice to the Lender).

 

(b)           Lender Election to Increase.  The Lender shall notify the Borrower within such time period whether or not it agrees to increase its Commitment and, if so, whether by an amount equal to or less than the amount of such requested increase.

 

(c)           Effective Date.  If the Commitment is increased in accordance with this Section, the Lender, in consultation with the Borrower, shall determine the effective date (the “Increase Effective Date”).  The Lender shall promptly notify the Borrower of the Increase Effective Date and on the Increase Effective Date (i) the Commitment under, and for all purposes of, this Agreement shall be increased by the aggregate amount of such Commitment Increases, and (ii) Schedule 2.01 shall be deemed modified, without further action, to reflect the revised Commitment.

 

  

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(d)           Conditions to Effectiveness of Commitment Increase.  As a condition precedent to such Commitment Increase, (i) the Borrower shall deliver to the Lender a certificate dated as of the Increase Effective Date signed by a Responsible Officer of the Borrower (A) certifying and attaching the resolutions adopted by the Borrower approving or consenting to such Commitment Increase, and (B) certifying that, before and after giving effect to such Commitment Increase, (1) the representations and warranties contained in Article V and the other Loan Documents are true and correct on and as of the Increase Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, and except that for purposes of this Section 2.12, the representations and warranties contained in subsection (a) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a), (b) and (c), respectively, of Section 6.01, and (2) no Default or Event of Default exists or would arise therefrom, (ii) if requested by the Lender, the Borrower shall deliver to the Lender an opinion or opinions, in form and substance reasonably satisfactory to the Lender, from counsel to the Borrower reasonably satisfactory to the Lender and dated such date; (iii) the Borrower shall have delivered such other instruments, documents and agreements as the Lender may reasonably have requested; and (iv) no Default or Event of Default exists.

 

ARTICLE III

TAXES, YIELD PROTECTION AND ILLEGALITY;

APPOINTMENT OF LEAD BORROWER

 

3.01        Taxes.

 

(a)          Payments Free of Taxes.  Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the Borrower shall be required by applicable law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Lender or L/C Issuer, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

 

(b)          Payment of Other Taxes by the Borrower.  Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

 

(c)          Indemnification by the Borrower.  The Borrower shall indemnify the Lender and the L/C Issuer, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Lender or the L/C Issuer, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to the Borrower by the Lender or the L/C Issuer (with a copy to the Lender), or by the Lender on its own behalf or on behalf of the L/C Issuer, shall be conclusive absent manifest error.

 

(d)     Evidence of Payments.  As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the 

 

 

  

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Lender the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Lender.

 

(e)     Treatment of Certain Refunds.  If the Lender or the L/C Issuer determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Lender or the L/C Issuer, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Lender or the L/C Issuer, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Lender or the L/C Issuer in the event the Lender or the L/C Issuer is required to repay such refund to such Governmental Authority.  This subsection shall not be construed to require the Lender or the L/C Issuer to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.

 

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

 

3.03        Inability to Determine Rates.  If the Lender determines that for any reason in connection with any request for a LIBO Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank market for the applicable amount and Interest Period of such LIBO Rate Loan, (b) adequate and reasonable means do not exist for determining the LIBO Rate for any requested Interest Period with respect to a proposed LIBO Rate Loan, or (c) the LIBO Rate for any requested Interest Period with respect to a proposed LIBO Rate Loan does not adequately and fairly reflect the cost to the Lender of funding such Loan, then thereafter, the obligation of the Lender to make or maintain LIBO Rate Loans shall be suspended until the Lender revokes such notice.  Upon receipt of such notice, the Borrower may revoke any pending request for a Committed Borrowing of, conversion to or continuation of LIBO Rate Loans or, failing that, will be deemed to have converted such request into a request for a Committed Borrowing of Base Rate Loans in the amount specified therein.

 

3.04        Increased Costs; Reserves on LIBO Rate Loans.

 

(a)           Increased Costs Generally.  If any Change in Law shall:

 

  

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(i)             impose, modify or deem applicable any reserve, 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, the Lender (except any reserve requirement reflected in the LIBO Rate) or the L/C Issuer;

 

(ii)            subject the Lender or the L/C Issuer to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any LIBO Rate Loan made by it, or change the basis of taxation of payments to the Lender or the L/C Issuer in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax payable by the Lender or the L/C Issuer); or

 

(iii)           impose on the Lender or the L/C Issuer or the London interbank market any other condition, cost or expense affecting this Agreement or LIBO Loans made by the Lender or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to the Lender of making or maintaining any LIBO Rate Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to the Lender or the L/C Issuer 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 the Lender or the L/C Issuer hereunder (whether of principal, interest or any other amount) then, upon request of the Lender or the L/C Issuer, the Borrower will pay to the Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate the Lender or the L/C Issuer, as the case may be, for such additional costs incurred or reduction suffered.

 

(b)          Capital Requirements.  If the Lender or the L/C Issuer determines that any Change in Law affecting the Lender or the L/C Issuer or the Lender’s or the L/C Issuer’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on the Lender’s or the L/C Issuer’s capital or on the capital of the Lender’s or the L/C Issuer’s holding company, if any, as a consequence of this Agreement, the Commitment of the Lender or the Loans made by, or participations in Letters of Credit held by, the Lender, or the Letters of Credit issued by the L/C Issuer, to a level below that which the Lender or the L/C Issuer or the Lender’s or the L/C Issuer’s holding company could have achieved but for such Change in Law (taking into consideration the Lender’s or the L/C Issuer’s policies and the policies of the Lender’s or the L/C Issuer’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to the Lender or the L/C Issuer, as the case may be, such additional amount or amounts as will compensate the Lender or the L/C Issuer or the Lender’s or the L/C Issuer’s holding company for any such reduction suffered.

 

(c)     Certificates for Reimbursement.  A certificate of the Lender or the L/C Issuer setting forth the amount or amounts necessary to compensate the Lender or the L/C Issuer or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent manifest error.  The Borrower shall pay the Lender or the L/C Issuer, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

 

(d)          Delay in Requests.  Failure or delay on the part of the Lender or the L/C Issuer to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of the Lender’s or the L/C Issuer’s right to demand such compensation, provided that the Borrower shall not be required to compensate the Lender or the L/C Issuer pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than nine months prior to the date 

 

  

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that the Lender or the L/C Issuer, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of the Lender’s or the L/C Issuer’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

 

(e)          Reserves on LIBO Rate Loans.  The Borrower shall pay to the Lender, as long as the Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as "Eurocurrency liabilities"), additional interest on the unpaid principal amount of each LIBO Rate Loan equal to the actual costs of such reserves allocated to such Loan by the Lender (as determined by the Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Loan, provided the Borrower shall have received at least 10 days’ prior notice of such additional interest from the Lender.  If the Lender fails to give notice 10 days prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10 days from receipt of such notice.

 

3.05        Compensation for Losses.  Upon demand of the Lender from time to time, the Borrower shall promptly compensate the Lender for and hold the Lender harmless from any loss, cost or expense incurred by it as a result of:

 

(a)          any continuation, conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or

 

(b)          any failure by the Borrower (for a reason other than the failure of the Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower;

 

including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained.  The Borrower shall also pay any customary administrative fees charged by the Lender in connection with the foregoing.

 

For purposes of calculating amounts payable by the Borrower to the Lender under this Section 3.05, the Lender shall be deemed to have funded each LIBO Rate Loan made by it at the LIBO Rate for such Loan by a matching deposit or other borrowing in the London interbank market for a comparable amount and for a comparable period, whether or not such LIBO Rate Loan was in fact so funded.

 

3.06        Mitigation Obligations.

 

If the Lender requests compensation under Section 3.04, or the Borrower is required to pay any additional amount to the Lender or any Governmental Authority for the account of the Lender pursuant to Section 3.01, or if the Lender gives a notice pursuant to Section 3.02, then the Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of the Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject the Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to the Lender.  The Borrower hereby agrees to pay all reasonable 

 

 

  

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costs and expenses incurred by the Lender in connection with any such designation or assignment.

 

3.07        Survival.  All of the Borrower’s obligations under this Article III shall survive termination of the Commitment and repayment of all other Obligations hereunder.

 

ARTICLE IV

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

4.01        Conditions to Effectiveness.  The effectiveness of this Agreement is subject to satisfaction of the following conditions precedent:

 

(a)           The Lender’s receipt of the following, each of which shall be originals, telecopies or other electronic image scan transmission (e.g., “pdf” or “tif ” via e-mail) (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the Borrower, each dated the Effective Date (or, in the case of certificates of governmental officials, a recent date before the Effective Date) and each in form and substance satisfactory to the Lender:

 

(i)             executed counterparts of this Agreement sufficient in number for distribution to the Lender and the Borrower;

 

(ii)            a Note executed by the Borrowers in favor of the Lender;

 

(iii)           such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of the Borrower as the Lender may require evidencing (A) the authority of the Borrower to enter into this Agreement and the other Loan Documents and (B) the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents;

 

(iv)           copies of the Borrower’s Organization Documents and such other documents and certifications as the Lender may reasonably require to evidence that the Borrower is duly organized or formed, and that the Borrower is validly existing, in good standing and qualified to engage in business in each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, except to the extent that failure to so qualify in such jurisdiction could not reasonably be expected to have a Material Adverse Effect;

 

(v)           a certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in Sections 4.02(a) and (b) have been satisfied, (B) that there has been no event or circumstance since the date of the Audited Financial Statements that has had or could be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect, (C) to the Solvency of the Borrower as of the Effective Date after giving effect to the transactions contemplated hereby, and (D) either that (1) no consents, licenses or approvals are required in connection with the execution, delivery and performance by the Borrower and the validity against the Borrower of the Loan Documents, or (2) that all such consents, licenses and approvals have been obtained and are in full force and effect;

 

  

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(vi)           evidence that all insurance required to be maintained pursuant to the Loan Documents and all endorsements in favor of the Lender required under the Loan Documents have been obtained and are in effect;

 

(vii)          the Security Documents and certificates evidencing any stock being pledged thereunder, together with undated stock powers executed in blank, each duly executed by the Borrower;

 

(viii)         all other Loan Documents, each duly executed by the Borrower;

 

(ix)           results of searches or other evidence reasonably satisfactory to the Lender (in each case dated as of a date reasonably satisfactory to the Lender) indicating the absence of Liens on the assets of the Borrower, except for Permitted Encumbrances and Liens for which termination statements and releases, satisfactions and discharges of any mortgages, and releases  or subordination agreements satisfactory to the Lender are being tendered concurrently with such extension of credit or other arrangements satisfactory to the Lender for the delivery of such termination statements and releases, satisfactions and discharges have been made;

 

(x)            (A)           all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Lender to be filed, registered or recorded to create or perfect the first priority Liens intended to be created under the Loan Documents and all such documents and instruments shall have been so filed, registered or recorded to the satisfaction of the Lender, (B) the Credit Card Notifications, and Blocked Account Agreements required pursuant to Section 6.13 hereof, (C) control agreements with respect to the Borrower’s securities and investment accounts, and (D) Collateral Access Agreements as required by the Lender; and

 

(xi)           such other assurances, certificates, documents, consents or opinions as the Lender reasonably may require.

 

(b)           The Lender shall have received a Borrowing Base Certificate dated the Effective Date, relating to the month ended on April 30, 2011, and executed by a Responsible Officer of the Borrower.

 

(c)           The Lender shall be reasonably satisfied that any financial statements delivered to it fairly present the business and financial condition of the Borrower and that there has been no Material Adverse Effect since the date of the Audited Financial Statements.

 

(d)           The Lender shall have received and be satisfied with (i) a detailed forecast for the period commencing on the Effective Date and ending with the end of the then next Fiscal Year, which shall include an Availability model, Consolidated income statement, balance sheet, and statement of cash flow, by month, each prepared in conformity with GAAP and consistent with the Borrower’s then current practices and (b) such other information (financial or otherwise) reasonably requested by the Lender.

 

(e)           There shall not be pending any litigation or other proceeding, the result of which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

  

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(f)           There shall not have occurred any default of any Material Contract of the Borrower that could reasonably be expected to have a Material Adverse Effect or result in the termination of such Material Contract.

 

(g)           The consummation of the transactions contemplated hereby shall not violate any applicable Law or any Organization Document.

 

(h)           All fees required to be paid to the Lender on or before the Effective Date shall have been paid in full.

 

(i)            The Borrower shall have paid all fees, charges and disbursements of counsel to the Lender to the extent invoiced prior to or on the Effective Date, plus such additional amounts of such fees, charges and disbursements as shall constitute its reasonable estimate of such fees, charges and disbursements incurred or to be incurred by it through the Effective Date (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Lender), provided that the total amount to be paid under this Section 4.01(i) shall not exceed $50,000.

 

(j)           The Lender shall have received all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the USA PATRIOT Act.

 

(k)           No material changes in governmental regulations or policies affecting the Borrower or any Credit Party shall have occurred prior to the Effective Date.

 

4.02        Conditions to all Credit Extensions.  The obligation of the Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type, or a continuation of LIBO Rate Loans) and the L/C Issuer to issue each Letter of Credit is subject to the following conditions precedent:

 

(a)           The representations and warranties of the Borrower contained in Article V or in any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects on and as of the date of such Credit Extension, except (i) to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, (ii) in the case of any representation and warranty qualified by materiality, they shall be true and correct in all respects, and (iii) for purposes of this Section 4.02, the representations and warranties contained in subsection (a) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a), (b) and (c), respectively, of Section 6.01.

 

(b)           No Default or Event of Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds thereof.

 

(c)           The Lender and, if applicable, the L/C Issuer shall have received a Request for Credit Extension in accordance with the requirements hereof.

 

(d)           No event or circumstance which could reasonably be expected to result in a Material Adverse Effect shall have occurred.

 

(e)           No Overadvance shall result from such Credit Extension.

 

  

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Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type or a continuation of LIBO Rate Loans) submitted by the Borrower shall be deemed to be a representation and warranty by the Borrower that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES

 

To induce the Credit Parties to enter into this Agreement and to make Loans and to issue Letters of Credit hereunder, the Borrower represents and warrants to the Lender and the other Credit Parties that:

 

5.01        Existence, Qualification and Power.  The Borrower (a) is a corporation, duly incorporated, validly existing and, where applicable, in good standing under the Laws of the jurisdiction of its incorporation, (b) has all requisite power and authority and all requisite governmental licenses, permits, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents, and (c) is duly qualified and is licensed and, where applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (b)(i) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.  Schedule 5.01 annexed hereto sets forth, as of the Effective Date, the Borrower’s name as it appears in official filings in its state of incorporation or organization, its state of incorporation or organization, organization type, organization number, if any, issued by its state of incorporation or organization, and its federal employer identification number.

 

5.02        Authorization; No Contravention.  The execution, delivery and performance by the Borrower of each Loan Document has been duly authorized by all necessary corporate action, and does not and will not (a) contravene the terms of the Borrower's Organization Documents; (b) conflict with or result in any breach, termination, or contravention of, or constitute a default under, or require any payment to be made under (i) any Material Contract or any Material Indebtedness to which the Borrower is a party or affecting the Borrower or the properties of the Borrower or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which the Borrower or its property is subject; (c) result in or require the creation of any Lien upon any asset of the Borrower (other than Liens in favor of the Lender under the Security Documents); or (d) violate any Law, other than any such violation that could not reasonably be have a Material Adverse Effect.

 

5.03        Governmental Authorization; Other Consents.  No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Borrower of this Agreement or any other Loan Document, except for (a) the perfection or maintenance of the Liens created under the Security Documents (including the first priority nature thereof), (b) such as have been obtained or made and are in full force and effect or (c) such as the failure to so obtain could not reasonably be expected to have a Material Adverse Effect.

 

5.04        Binding Effect.  This Agreement has been, and each other Loan Document, when delivered, will have been, duly executed and delivered by the Borrower.  This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

  

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5.05        Financial Statements; No Material Adverse Effect.

 

(a)           The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Borrower as of the date thereof and its results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all Material Indebtedness and other liabilities, direct or contingent, of the Borrower as of the date thereof, including liabilities for taxes, material commitments and Indebtedness.

 

(b)          Since the date of the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

 

(c)     To the best knowledge of the Borrower, no Internal Control Event exists or has occurred since the date of the Audited Financial Statements that has resulted in or could reasonably be expected to result in a misstatement in any material respect, (i) in any financial information delivered or to be delivered to the Lender, (ii) of the Borrowing Base, or (iii) of the assets, liabilities, financial condition or results of operations of the Borrower.

 

(d)           The forecasted balance sheet and statements of income and cash flows of the Borrower delivered pursuant to Section 6.01(d) were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, the Borrower’s best estimate of its future financial performance.

 

5.06        Litigation.  There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Borrower after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Borrower or against any of its properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) either individually or in the aggregate, if determined adversely, could reasonably be expected to have a Material Adverse Effect.

 

5.07        No Default.  The Borrower is not, as of the Effective Date, in default under or with respect to, any Material Contract or any Material Indebtedness.  No Default or Event of Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

 

5.08        Ownership of Property; Liens

 

(a)     The Borrower has good record and marketable title in fee simple to or valid leasehold interests in, all Real Estate necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  The Borrower has good and marketable title to, valid leasehold interests in, or valid licenses to use all personal property and assets material to the ordinary conduct of its business.

 

(b)     Schedule 5.08(b)(1) sets forth the address (including street address, county and state) of all Real Estate that is owned by the Borrower, together with a list of the holders of any mortgage or other Lien thereon as of the Effective Date.  The Borrower has good, marketable and insurable fee simple title to the Real Estate owned by the Borrower, free and clear of all Liens, other than Permitted Encumbrances.  Schedule 5.08(b)(2) sets forth the address (including street address, county and state) of 

 

 

  

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all Leases of the Borrower, together with a list of the lessor and its contact information with respect to each such Lease as of the Effective Date.  Each of such Leases is in full force and effect and the Borrower is not in default of the terms thereof.

 

(c)     Schedule 7.01 sets forth a complete and accurate list of all Liens on the property or assets of the Borrower as of the Effective Date, showing the lienholder thereof, the principal amount of the obligations secured thereby and the property or assets of the Borrower subject thereto.  The property of the Borrower is subject to no Liens, other than Permitted Encumbrances.

 

(d)          Schedule 7.02 sets forth a complete and accurate list of all Investments held by the Borrower on the Effective Date, showing as of the Effective Date the amount, obligor or issuer and maturity, if any, thereof.

 

(e)           Schedule 7.03 sets forth a complete and accurate list of all Indebtedness of the Borrower on the Effective Date, showing as of the Effective Date the amount, obligor or issuer and maturity thereof.

 

5.09        Environmental Compliance

 

(a)          The Borrower (i) has not failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has not become subject to any Environmental Liability, (iii) has not received notice of any claim with respect to any Environmental Liability or (iv) does not know of any basis for any Environmental Liability, except, in each case, as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(b)          Except as otherwise set forth in Schedule 5.09, none of the properties currently or formerly owned or operated by the Borrower is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property; there are no and never have been any underground or above-ground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned or operated by the Borrower or, to the best of the knowledge of the Borrower, on any property formerly owned or operated by the Borrower; there is no asbestos or asbestos-containing material on any property currently owned or operated by the Borrower; and Hazardous Materials have not been released, discharged or disposed of on any property currently or formerly owned or operated by the Borrower.

 

(c)     Except as otherwise set forth on Schedule 5.09, the Borrower is not undertaking and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law; and all Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, any property currently or formerly owned or operated by the Borrower have been disposed of in a manner not reasonably expected to result in material liability to the Borrower.

 

5.10        Insurance.  The properties of the Borrower are insured with financially sound and reputable insurance companies which are not Affiliates of the Borrower, in such amounts, with such deductibles and covering such risks (including, without limitation, workmen’s compensation, public liability, business interruption and property damage insurance) as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower operates.  

 

 

  

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Schedule 5.10 sets forth a description of all insurance maintained by or on behalf of the Borrower as of the Effective Date. As of the Effective Date, each insurance policy listed on Schedule 5.10 is in full force and effect and all premiums in respect thereof that are due and payable have been paid.

 

5.11        Taxes.  The Borrower has filed all Federal, state and other material tax returns and reports required to be filed, and have paid all Federal, state and other material taxes, assessments, fees and other governmental charges levied or imposed upon it or its properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings being diligently conducted, for which adequate reserves have been provided in accordance with GAAP, as to which Taxes no Lien has been filed and which contest effectively suspends the collection of the contested obligation and the enforcement of any Lien securing such obligation.  There is no proposed tax assessment against any the Borrower that would, if made, have a Material Adverse Effect.  The Borrower is not a party to any tax sharing agreement.

 

5.12        ERISA Compliance.

 

(a)          Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or 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 best knowledge of the Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification.  The Borrower and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan.  No Lien imposed under the Code or ERISA exists or is likely to arise on account of any Plan.

 

(b)     There are no pending or, to the best knowledge of the Borrower, 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 or could reasonably be expected to result in a Material Adverse Effect.

 

(c)           (i)            No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA.

 

5.13        Subsidiaries; Equity Interests.

 

As of the Effective Date, the Borrower has no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, which Schedule sets forth the legal name, jurisdiction of incorporation or formation and authorized Equity Interests of each such Subsidiary.  All of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by the Borrower in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens except for those created under the Security Documents.  Except as set forth in Schedule 5.13, as of the Effective Date, there are no outstanding rights to purchase any Equity Interests in any Subsidiary.  As of the Effective 

 

 

  

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Date, the Borrower has no equity investments in any other corporation or entity other than those specifically disclosed in Part(b) of Schedule 5.13.  The copies of the Organization Documents of the Borrower and each amendment thereto provided pursuant to Section 4.01 are true and correct copies of each such document, each of which is valid and in full force and effect.

 

5.14        Margin Regulations; Investment Company Act;

 

(a)           The Borrower is not engaged nor will be engaged, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock.  None of the proceeds of the Credit Extensions shall be used directly or indirectly for the purpose of purchasing or carrying any margin stock, for the purpose of reducing or retiring any Indebtedness that was originally incurred to purchase or carry any margin stock or for any other purpose that might cause any of the Credit Extensions to be considered a “purpose credit” within the meaning of Regulations T, U, or X issued by the FRB.

 

(b)          None of the Borrower, any Person Controlling the Borower, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

 

5.15        Disclosure.  The Borrower has disclosed to the Lender all agreements, instruments and corporate or other restrictions to which it is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.  No report, financial statement, certificate or other information furnished (whether in writing or orally) by or on behalf of the Borrower to the Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

 

5.16        Compliance with Laws.  The Borrower is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

5.17        Intellectual Property; Licenses, Etc. The Borrower owns, or possesses the right to use, all of the Intellectual Property, licenses, permits and other authorizations that are reasonably necessary for the operation of its business, without conflict with the rights of any other Person.  To the best knowledge of the Borrower, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Borrower infringes upon any rights held by any other Person, except any such infringement that could not reasonably be expected to have a Material Adverse Effect.  Except as specifically disclosed in Schedule 5.17, as of the Effective Date, no claim or litigation regarding any of the foregoing is pending or, to the best knowledge of the Borrower, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

5.18        Labor Matters.

 

  

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As of the Effective Date, there are no strikes, lockouts, slowdowns or other material labor disputes against the Borrower pending or, to the knowledge of the Borrower, threatened. The hours worked by and payments made to employees of the Borrower comply with the Fair Labor Standards Act and any other applicable federal, state, local or foreign Law dealing with such matters except to the extent that any such violation could not reasonably be expected to have a Material Adverse Effect. The Borrower has not incurred any liability or obligation under the Worker Adjustment and Retraining Act or similar state Law.  All material payments due from the Borrower, or for which any claim may be made against the Borrower, on account of wages and employee health and welfare insurance and other benefits, have been paid or properly accrued in accordance with GAAP as a liability on the books of the Borrower. As of the Effective Date, the Borrower is not a party to or bound by any collective bargaining agreement.  There are no representation proceedings pending or, to the Borrower’s knowledge, threatened to be filed with the National Labor Relations Board, and no labor organization or group of employees of the Borrower has made a pending demand for recognition. There are no complaints, unfair labor practice charges, grievances, arbitrations, unfair employment practices charges or any other claims or complaints against the Borrower pending or, to the knowledge of the Borrower, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment of any employee of the Borrower. The consummation of the transactions contemplated by the Loan Documents will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which the Borrower is bound.

 

5.19        Security Documents.

 

(a)           The Security Agreement creates in favor of the Lender, for the benefit of the Credit Parties, a legal, valid, continuing and enforceable security interest in the Collateral (as defined in the Security Agreement), the enforceability of which is subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.  The financing statements, releases and other filings are in appropriate form for filing.  Upon the filing of such documents in the offices specified in Schedule II of the Security Agreement and/or the obtaining of “control,” (as defined in the UCC) the Lender will have a perfected Lien on, and security interest in, to and under all right, title and interest of the grantors thereunder in all Collateral that may be perfected by filing, recording or registering a financing statement or analogous document (including without limitation the proceeds of such Collateral subject to the limitations relating to such proceeds in the UCC) or by obtaining control, under the UCC (in effect on the date this representation is made) in each case prior and superior in right to any other Person.

 

(b)     When the Security Agreement (or a short form thereof) is filed in the United States Patent and Trademark Office and the United States Copyright Office and when financing statements, releases and other filings in appropriate form are filed in the offices specified in Schedule II of the Security Agreement, the Lender shall have a fully perfected Lien on, and security interest in, all right, title and interest of the Borrower in the Intellectual Property (as defined in the Security Agreement) in which a security interest may be perfected by filing, recording or registering a security agreement, financing statement or analogous document in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, in each case prior and superior in right to any other Person (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks, trademark applications and copyrights acquired by the Borrower after the Effective Date).

 

5.20        Solvency

 

 

  

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After giving effect to the transactions contemplated by this Agreement, and before and after giving effect to each Credit Extension, the Borrower is Solvent. No transfer of property has been or will be made by the Borrower and no obligation has been or will be incurred by the Borrower in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of the Borrower.

 

5.21        Deposit Accounts; Credit Card Arrangements.

 

(a)           Annexed hereto as Schedule 5.21(a) is a list of all DDAs maintained by the Borrower as of the Effective Date, which Schedule includes, with respect to each DDA (i) the name and address of the depository; (ii) the account number(s) maintained with such depository; (iii) a contact person at such depository, and (iv) the identification of each Blocked Account Bank.

 

(b)          Annexed hereto as Schedule 5.21(b) is a list describing all arrangements as of the Effective Date to which the Borrower is a party with respect to the processing and/or payment to the Borrower of the proceeds of any credit card charges and debit card charges for sales made by the Borrower.

 

5.22        Brokers.  No broker or finder brought about the obtaining, making or closing of the Loans or transactions contemplated by the Loan Documents, and no Borrower or Affiliate thereof has any obligation to any Person in respect of any finder’s or brokerage fees in connection therewith.

 

5.23        Customer and Trade Relations.  As of the Effective Date, there exists no actual or, to the knowledge of the Borrower, threatened, termination or cancellation of, or any material adverse modification or change in the business relationship of the Borrower with any supplier material to its operations.

 

5.24        Material Contracts.  All Material Contracts to which the Borrower is a party or is bound as of the Effective Date have been filed with the SEC.  The Borrower has delivered true, correct and complete copies of such Material Contracts to the Lender on or before the Effective Date.  As of the Effective Date, the Borrower is not in breach or in default in any material respect of or under any Material Contract and has not received any notice of the intention of any other party thereto to terminate any Material Contract.

 

5.25        Casualty.  Neither the businesses nor the properties of the Borrower are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

ARTICLE VI

AFFIRMATIVE COVENANTS

 

So long as the Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than contingent indemnification obligations for which a claim has not been asserted), or any Letter of Credit shall remain outstanding, the Borrower shall:

 

6.01        Financial Statements.  Deliver to the Lender, in form and detail satisfactory to the Lender:

 

(a)           as soon as available, but in any event within 105 days after the end of each Fiscal Year of the Borrower, a balance sheet of the Borrower as at the end of such Fiscal Year, and the 

 

  

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related statement of income or operations, Shareholders’ Equity and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by (i) a report and unqualified opinion of a Registered Public Accounting Firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit;

 

(b)          as soon as available, but in any event within 45 days after the end of each of the Fiscal Quarters of each Fiscal Year of the Borrower, a balance sheet of the Borrower as at the end of such Fiscal Quarter, and the related statement of income or operations, Shareholders’ Equity and cash flows for such Fiscal Quarter and for the portion of the Borrower’s Fiscal Year then ended, setting forth in each case in comparative form the figures for (A) such period set forth in the projections delivered pursuant to Section 6.01(d) hereof, (B) the corresponding Fiscal Quarter of the previous Fiscal Year and (C) the corresponding portion of the previous Fiscal Year, all in reasonable detail, certified by a Responsible Officer of the Borrower as fairly presenting the financial condition, results of operations, Shareholders’ Equity and cash flows of the Borrower as of the end of such Fiscal Quarter in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

 

(c)           as soon as available, but in any event within 30 days after the end of each of the Fiscal Months of each Fiscal Year of the Borrower, a balance sheet of the Borrower as at the end of such Fiscal Month, and the related statement of income or operations, Shareholders’ Equity and cash flows for such Fiscal Month, and for the portion of the Borrower’s Fiscal Year then ended, setting forth in each case in comparative form the figures for (A) such period set forth in the projections delivered pursuant to Section 6.01(d) hereof, (B) the corresponding Fiscal Month of the previous Fiscal Year and (C) the corresponding portion of the previous Fiscal Year, all in reasonable detail, certified by a Responsible Officer of the Borrower as fairly presenting the financial condition, results of operations, Shareholders’ Equity and cash flows of the Borrower as of the end of such Fiscal Month in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

 

(d)           as soon as available, but in any event no more than 30 days after the end of each Fiscal Year of the Borrower, forecasts prepared by management of the Borrower, in form satisfactory to the Lender, of a balance sheet and statement of income or operations and cash flows of the Borrower on a monthly basis for the immediately following Fiscal Year (including the fiscal year in which the Maturity Date occurs), and as soon as available, any significant revisions to such forecast with respect to such Fiscal Year.

 

6.02        Certificates; Other Information.  Deliver to the Lender, in form and detail satisfactory to the Lender:

 

(a)           intentionally omitted;

 

(b)          concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower, and in the event of any change in generally accepted accounting principles used in the preparation of such financial statements, the Borrower shall also provide a statement of reconciliation conforming such financial statements to GAAP and (ii) a copy of management’s discussion and analysis with respect to such financial statements;

 

  

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(c)           on the third (3rd) day of each Fiscal Month or, if such day is not a Business Day, the next succeeding Business Day (or such later date reasonably agreed to by Lender so long as prior notice (which may be provided via telephone or electronic mail) is provided by the Borrower), a Borrowing Base Certificate showing the Borrowing Base as of the close of business as of the last day of the immediately preceding Fiscal Month (provided that the Appraised Value percentage applied to the Eligible Inventory set forth in each Borrowing Base Certificate shall be the percentage set forth in the most recent appraisal obtained by the Lender pursuant to Section 6.10 hereof for the applicable month in which such Borrowing Base Certificate is delivered), each Borrowing Base Certificate to be certified as complete and correct by a Responsible Officer of the Borrower; provided that at any time that an Accelerated Borrowing Base Delivery Event has occurred and is continuing, such Borrowing Base Certificate shall be delivered on Wednesday of each week (or, if Wednesday is not a Business Day, on the next succeeding Business Day), as of the close of business on the immediately preceding Saturday;

 

(d)           promptly upon receipt, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of the Borrower by its Registered Public Accounting Firm in connection with the accounts or books of the Borrower, or any audit of the Borrower, including, without limitation, specifying any Internal Control Event;

 

(e)           promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Borrower, and copies of all annual, regular, periodic and special reports and registration statements which the Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934 or with any national securities exchange, and in any case not otherwise required to be delivered to the Lender pursuant hereto;

 

(f)            the financial and collateral reports described on Schedule 6.02 hereto, at the times set forth in such Schedule;

 

(g)           within 30 days after the Lender’s request therefor, a report summarizing the insurance coverage (specifying type, amount and carrier) in effect for the Borrower and containing such additional information as the Lender may reasonably specify;

 

(h)           promptly after the Lender’s request therefor, copies of all Material Contracts and documents evidencing Material Indebtedness;

 

(i)            promptly, and in any event within five Business Days after receipt thereof by the Borrower, copies of each notice or other correspondence received from any Governmental Authority (including, without limitation, the SEC (or comparable agency in any applicable non-U.S. jurisdiction)) concerning any proceeding with, or investigation or possible investigation or other inquiry by such Governmental Authority regarding financial or other operational results of the Borrower or any other matter which, if adversely determined, could reasonably expected to have a Material Adverse Effect; and

 

(j)            promptly, such additional information regarding the business affairs, financial condition or operations of the Borrower, or compliance with the terms of the Loan Documents, as the Lender may from time to time reasonably request.

 

Documents required to be delivered pursuant to Section 6.01(a) or (b) or Sections 6.02(d) and 6.02(e) (to the extent any such documents are included in materials otherwise filed with the SEC) 

 

  

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may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 9.02; or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which the Lender has access (whether a commercial, third-party website or whether sponsored by the Lender); provided that: (i) the Borrower shall deliver paper copies of such documents to the Lender if the Lender so requests and (ii) the Borrower shall notify the Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Lender by electronic mail electronic versions (i.e., soft copies) of such documents.  Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(b) to the Lender.

 

6.03        Notices.  Promptly notify the Lender:

 

(a)           of the occurrence of any Default or Event of Default;

 

(b)           of any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect;

 

(c)           of any breach or non-performance of, or any default under, a Material Contract that could reasonably be expected to have a Material Adverse Effect or with respect to Material Indebtedness of the Borrower;

 

(d)           of any dispute, litigation, investigation, proceeding or suspension between the Borrower and any Governmental Authority or the commencement of, or any material development in, any litigation or proceeding affecting the Borrower, including pursuant to any applicable Environmental Laws;

 

(e)           of the occurrence of any ERISA Event;

 

(f)           of any material change in accounting policies or financial reporting practices by the Borrower;

 

(g)           of any change in any of the Borrower’s chief executive officer, chief operating officer or chief financial officer;

 

(h)           of the discharge by the Borrower of its present Registered Public Accounting Firm or any withdrawal or resignation by such Registered Public Accounting Firm;

 

(i)           of any collective bargaining agreement or other labor contract to which the Borrower becomes a party, or the application for the certification of a collective bargaining agent;

 

(j)           of the filing of any Lien for unpaid Taxes against the Borrower;

 

(k)           of any casualty or other insured damage to any material portion of the Collateral or the commencement of any action or proceeding for the taking of any interest in a material portion of the Collateral under power of eminent domain or by condemnation or similar proceeding or if any material portion of the Collateral is damaged or destroyed;

 

(l)           of any transaction prohibited by ARTICLE VII hereof; and

 

  

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(m)         of any failure by the Borrower to pay rent at any of its locations if such failure continues for more than ten (10) days following the day on which such rent first came due and such failure would be reasonably likely to result in a Material Adverse Effect.

 

Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.  Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

 

6.04        Payment of Obligations.  Pay and discharge as the same shall become due and payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, (b) all lawful claims (including, without limitation, claims of landlords, warehousemen, customs brokers, freight forwarders, consolidators and carriers) which, if unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness, except, in each case, where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower has set aside on its books adequate reserves with respect thereto in accordance with GAAP, (c) such contest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation, (d) no Lien has been filed with respect thereto and (e) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. Nothing contained herein shall be deemed to limit the rights of the Lender with respect to determining Reserves pursuant to this Agreement.

 

6.05        Preservation of Existence, Etc.

 

(a)  Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization or formation except in a transaction permitted by Section 7.04 or 7.05; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its Intellectual Property, except to the extent such Intellectual Property is no longer used or useful in the conduct of the business of the Borrower or to the extent that the failure to so preserve or renew could not reasonably be expected to have a Material Adverse Effect.

 

6.06        Maintenance of Properties

 

(a)  Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted; and (b) make all necessary repairs thereto and renewals and replacements thereof except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

6.07        Maintenance of Insurance.

 

(a)          Maintain with financially sound and reputable insurance companies having an A.M. Best Rating of at least A- or otherwise reasonably acceptable to the Lender and not Affiliates of the Borrower, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business and operating in the same or similar locations or as is required by applicable Law, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons and as are reasonably acceptable to the Lender.

 

  

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(b)          Cause fire and extended coverage policies maintained with respect to any Collateral to be endorsed or otherwise amended to include (i) a non-contributing mortgage clause (regarding improvements to Real Estate) and lenders’ loss payable clause (regarding personal property), in form and substance satisfactory to the Lender, which endorsements or amendments shall provide that the insurer shall pay all proceeds otherwise payable to the Borrower under the policies directly to the Lender, (ii) a provision to the effect that none of the Borrower, Credit Parties or any other Person shall be a co-insurer and (iii) such other provisions as the Lender may reasonably require from time to time to protect the interests of the Credit Parties.

 

(c)           Cause commercial general liability policies to be endorsed to name the Lender as an additional insured.

 

(d)          Cause business interruption policies to name the Lender as a loss payee and to be endorsed or amended to include (i) a provision that, from and after the Effective Date, the insurer shall pay all proceeds otherwise payable to the Borrower under the policies directly to the Lender, (ii) a provision to the effect that none of the Borrower, the Credit Parties or any other party shall be a co-insurer and (iii) such other provisions as the Lender may reasonably require from time to time to protect the interests of the Credit Parties.

 

(e)          Cause each such policy referred to in this Section 6.07 to also provide that it shall not be canceled, modified or not renewed (i) by reason of nonpayment of premium except upon not less than ten (10) days’ prior written notice thereof by the insurer to the Lender (giving the Lender the right to cure defaults in the payment of premiums) or (ii) for any other reason except upon not less than thirty (30) days’ prior written notice thereof by the insurer to the Lender.

 

(f)           Deliver to the Lender, prior to the cancellation, modification or non-renewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Lender, including an insurance binder) together with evidence satisfactory to the Lender of payment of the premium therefor.

 

(g)          Maintain a Directors and Officers insurance policy with a responsible company in such amounts as are customarily carried by business entities engaged in similar businesses similarly situated, and will upon request by the Lender furnish the Lender certificates evidencing renewal of each such policy.

 

(h)          Permit any representatives that are designated by the Lender to inspect the insurance policies maintained by or on behalf of the Borrower and to inspect books and records related thereto and any properties covered thereby.

 

None of the Credit Parties, or their agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 6.07.  The Borrower shall look solely to its insurance companies or any other parties other than the Credit Parties for the recovery of such loss or damage and such insurance companies shall have no rights of subrogation against any Credit Party or its agents or employees.  If, however, the insurance policies do not provide waiver of subrogation rights against such parties, as required above, then the Borrower hereby agrees, to the extent permitted by law, to waive its right of recovery, if any, against the Credit Parties and their agents and employees.  The designation of any form, type or amount of insurance coverage by any Credit Party under this Section 6.07 shall in no event be deemed a representation, warranty or advice by such Credit Party that such insurance is adequate for the purposes of the business of the Borrower or the protection of its properties.

 

  

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6.08        Compliance with Laws.  Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been set aside and maintained by the Borrower in accordance with GAAP; (b) such contest effectively suspends enforcement of the contested Laws, and (c) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

 

6.09        Books and Records; Accountants

 

(a)          Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Borrower; and (ii) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over the Borrower.

 

(b)          at all times retain a Registered Public Accounting Firm and instruct such Registered Public Accounting Firm to cooperate with, and be available to, the Lender or its representatives to discuss the Borrower’s financial performance, financial condition, operating results, controls, and such other matters, within the scope of the retention of such Registered Public Accounting Firm, as may be raised by the Lender.

 

6.10        Inspection Rights

 

(a)          Permit representatives and independent contractors of the Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and Registered Public Accounting Firm, and permit the Lender or professionals (including investment bankers, consultants, accountants, and lawyers) retained by the Lender to conduct evaluations of the Borrower’s business plan, forecasts and cash flows, all at the expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, that when a Default or Event of Default exists the Lender (or any of its representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice.

 

(b)          Upon the request of the Lender after reasonable prior notice, permit the Lender or professionals (including investment bankers, consultants, accountants, and lawyers) retained by the Lender to conduct commercial finance examinations and other evaluations, including, without limitation, of (i) the Borrower’s practices in the computation of the Borrowing Base and (ii) the assets included in the Borrowing Base and related financial information such as, but not limited to, sales, gross margins, payables, accruals and reserves.  The Borrower shall pay the fees and expenses of the Lender and such professionals with respect to such examinations and evaluations.  Without limiting the foregoing, the Borrower acknowledges that the Lender contemplates conducting (i) up to two (2) commercial finance examinations each Fiscal Year at the Borrower’s expense so long as no Loans are outstanding and (ii) up to three (3) commercial finance examinations each Fiscal Year at the Borrower’s expense if any Loans are outstanding.  Notwithstanding the foregoing, the Lender may cause additional commercial finance examinations to be undertaken as it in its discretion deems necessary or appropriate, or if required by Law or if a Default or Event of Default shall have occurred and be continuing, all at the expense of the Borrower.

 

  

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(c)          Upon the request of the Lender after reasonable prior notice, permit the Lender or professionals (including appraisers) retained by the Lender to conduct appraisals of the Collateral, including, without limitation, the assets included in the Borrowing Base.  The Borrower shall pay the fees and expenses of the Lender and such professionals with respect to such appraisals.  Without limiting the foregoing, the Borrower acknowledges that the Lender contemplates conducting (i) up to two (2) appraisals each Fiscal Year at the Borrower’s expense so long as no Loans are outstanding and (ii) up to three (3) appraisals each Fiscal Year at the Borrower’s expense if any Loans are outstanding.  Notwithstanding the foregoing, the Lender may cause additional appraisals to be undertaken as it in its discretion deems necessary or appropriate, or if required by Law or if a Default or Event of Default shall have occurred and be continuing, all at the expense of the Borrower.

 

6.11       Use of Proceeds.  Use the proceeds of the Credit Extensions (a) to finance the acquisition of working capital assets of the Borrower, including the purchase of inventory and equipment, in each case in the ordinary course of business, (b) to finance Capital Expenditures of the Borrower, and (c) for general corporate purposes of the Borrower, in each case to the extent expressly permitted under applicable Law and the Loan Documents.

 

6.12       Additional Loan Parties.  Notify the Lender at the time that any Person becomes a wholly-owned Subsidiary, and in each case promptly thereafter (and in any event within fifteen (15) days), (a) cause any such Person which is not a CFC, to (i) become a Borrower by executing and delivering to the Lender a Joinder to this Agreement and such other documents as the Lender shall deem appropriate for such purpose, (ii) grant a Lien to the Lender on such Person’s assets of the same type that constitute Collateral to secure the Obligations, and (iii) deliver to the Lender documents of the types referred to in clauses (iii) and (iv) of Section 4.01(a) and, if requested by the Lender, favorable opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to in clause (a)), and (b) pledge the Equity Interests of such Subsidiary owned by Borrower and promissory notes evidencing any Indebtedness of such Subsidiary held by the Borrower (except that, if such Subsidiary is a CFC, the Equity Interests of such Subsidiary to be pledged may be limited to 65% of the outstanding voting Equity Interests of such Subsidiary and 100% of the non-voting Equity Interests of such Subsidiary and such time period may be extended based on local law or practice), in each case in form, content and scope reasonably satisfactory to the Lender.  In no event shall compliance with this Section 6.12 waive or be deemed a waiver or consent to any transaction giving rise to the need to comply with this Section 6.12 if such transaction was not otherwise expressly permitted by this Agreement or constitute or be deemed to constitute, with respect to any Subsidiary, an approval of such Person as a Borrower or permit the inclusion of any acquired assets in the computation of the Borrowing Base.

 

6.13       Cash Management.

 

(a)     On or prior to the Effective Date:

 

(i)            deliver to the Lender copies of notifications (each, a “Credit Card Notification”) substantially in the form attached hereto as Exhibit E which have been executed on behalf of the Borrower and delivered to the Borrower’s Credit Card Issuers and Credit Card Processors listed on Schedule 5.21(b); and

 

(ii)            enter into a Blocked Account Agreement satisfactory in form and substance to the Lender with each Blocked Account Bank (collectively, the “Blocked Accounts”).

 

(b)          At the request of the Lender, the Borrower shall deliver to the Lender copies of notifications (each, a “DDA Notification”) substantially in the form attached hereto as Exhibit F which 

 

 

  

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have been executed on behalf of the Borrower and delivered to each depository institution listed on Schedule 5.21(a).

 

(c)          The Borrower shall ACH or wire transfer no less frequently than daily (and whether or not there are then any outstanding Obligations) to a Blocked Account all amounts on deposit in each DDA and all payments due from Credit Card Issuers and Credit Card Processors.

 

(d)          Each Blocked Account Agreement shall require upon notice from Lender, which notice shall be delivered only after the occurrence and during the continuance of a Cash Dominion Event, the ACH or wire transfer no less frequently than daily (and whether or not there are then any outstanding Obligations) to the concentration account maintained by the Lender at Wells Fargo (the “Concentration Account”), of all cash receipts and collections received by the Borrower from all sources, including, without limitation, the following:

 

(i)             all available cash receipts from the sale of Inventory and other assets (whether or not constituting Collateral);

 

(ii)            all proceeds of collections of Accounts;

 

(iii)           all Net Proceeds, and all other cash payments received by the Borrower from any Person or from any source or on account of any Disposition or other transaction or event, including, without limitation, any Prepayment Event;

 

(iv)           the then contents of each DDA (net of any minimum balance, not to exceed $2,500.00, as may be required to be kept in the subject DDA by the depository institution at which such DDA is maintained);

 

(v)            the then entire ledger balance of each Blocked Account (net of any minimum balance, not to exceed $2,500.00, as may be required to be kept in the subject Blocked Account by the Blocked Account Bank); and

 

(vi)           the proceeds of all credit card charges.

 

(e)           The Concentration Account shall at all times be under the sole dominion and control of the Lender.  The Borrower hereby acknowledges and agrees that (i) the Borrower has no right of withdrawal from the Concentration Account, (ii) the funds on deposit in the Concentration Account shall at all times be collateral security for all of the Obligations and (iii) the funds on deposit in the Concentration Account shall be applied to the Obligations as provided in this Agreement.  In the event that, notwithstanding the provisions of this Section 6.13, the Borrower receives or otherwise has dominion and control of any such cash receipts or collections, such receipts and collections shall be held in trust by the Borrower for the Lender, shall not be commingled with any of the Borrower’s other funds or deposited in any account of the Borrower and shall, not later than the Business Day after receipt thereof, be deposited into the Concentration Account or dealt with in such other fashion as the Borrower may be instructed by the Lender.

 

(f)           Upon the request of the Lender, the Borrower shall cause bank statements and/or other reports to be delivered to the Lender not less often than monthly, accurately setting forth all amounts deposited in each Blocked Account to ensure the proper transfer of funds as set forth above.

 

6.14        Information Regarding the Collateral.

 

 

  

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(a)          Furnish to the Lender at least thirty (30) days prior written notice of any change in: (i) the Borrower’s name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties; (ii) the location of the Borrower’s chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility); (iii) the Borrower’s organizational structure or jurisdiction of incorporation or formation; or (iv) the Borrower’s Federal Taxpayer Identification Number or organizational identification number assigned to it by its state of organization. The Borrower agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the UCC or otherwise that are required in order for the Lender to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Collateral for its own benefit and the benefit of the other Credit Parties.

 

(b)     Should any of the information on any of the Schedules hereto become inaccurate or misleading in any material respect as a result of changes after the Effective Date, the Borrower shall advise the Lender in writing of such revisions or updates as may be necessary or appropriate to update or correct the same.  From time to time as may be reasonably requested by the Lender, the Borrower shall supplement each Schedule hereto, or any representation herein or in any other Loan Document, with respect to any matter arising after the Effective Date that, if existing or occurring on the Effective Date, would have been required to be set forth or described in such Schedule or as an exception to such representation or that is necessary to correct any information in such Schedule or representation which has been rendered inaccurate thereby (and, in the case of any supplements to any Schedule, such Schedule shall be appropriately marked to show the changes made therein).  Notwithstanding the foregoing, no supplement or revision to any Schedule or representation shall be deemed the Credit Parties’ consent to the matters reflected in such updated Schedules or revised representations nor permit the Borrower to undertake any actions otherwise prohibited hereunder or fail to undertake any action required hereunder from the restrictions and requirements in existence prior to the delivery of such updated Schedules or such revision of a representation; nor shall any such supplement or revision to any Schedule or representation be deemed the Credit Parties’ waiver of any Default or Event of Default resulting from the matters disclosed therein.

 

6.15        Cycle Counts.

 

(a)          Cause periodic cycle counts to be undertaken, at the expense of the Borrower, consistent with past practices, conducted by such inventory takers as are satisfactory to the Lender and following such methodology as is consistent with the methodology used in past cycle counts or as otherwise may be satisfactory to the Lender. The Lender, at the expense of the Borrower, may participate in and/or observe each scheduled physical count of Inventory which is undertaken on behalf of the Borrower.   The Borrower, upon the Lender’s reasonable request therefor, shall provide the Lender with a reconciliation of the results of such cycle count and shall post such results to the Borrower’s stock ledger and general ledger, as applicable.

 

(b)          Permit the Lender, in its discretion, if any Default or Event of Default exists, to cause physical inventories to be taken as the Lender determines (each, at the expense of the Borrower).

 

 

6.16        Environmental Laws.

 

(a)          Conduct its operations and keep and maintain its Real Estate in material compliance with all Environmental Laws; (b) obtain and renew all environmental permits necessary for its operations and properties; and (c) implement any and all investigation, remediation, removal and response actions that are appropriate or necessary to maintain the value and marketability of the Real 

 

 

  

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Estate or to otherwise comply with Environmental Laws pertaining to the presence, generation, treatment, storage, use, disposal, transportation or release of any Hazardous Materials on, at, in, under, above, to, from or about any of its Real Estate, provided, however, that the Borrower shall not be required to undertake any such cleanup, removal, remedial or other action to the extent that its obligation to do so is being contested in good faith and by proper proceedings and adequate reserves have been set aside and are being maintained by the Borrower with respect to such circumstances in accordance with GAAP.

 

6.17        Further Assurances.

 

(a)          Execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements and other documents), that may be required under any applicable Law, or which the Lender may request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created or intended to be created by the Security Documents or the validity or priority of any such Lien, all at the expense of the Borrower. The Borrower also agrees to provide to the Lender, from time to time upon request, evidence satisfactory to the Lender as to the perfection and priority of the Liens created or intended to be created by the Security Documents.

 

(b)          If any material assets are acquired by the Borrower after the Effective Date (other than assets constituting Collateral under the Security Documents that become subject to the perfected first-priority Lien under the Security Documents upon acquisition thereof), notify the Lender thereof, and the Borrower will cause such assets to be subjected to a Lien securing the Obligations and will take such actions as shall be necessary or shall be requested by the Lender to grant and perfect such Liens, including actions described in paragraph (a) of this Section 6.17, all at the expense of the Borrower. In no event shall compliance with this Section 6.17(b) waive or be deemed a waiver or consent to any transaction giving rise to the need to comply with this Section 6.17(b) if such transaction was not otherwise expressly permitted by this Agreement or constitute or be deemed to constitute consent to the inclusion of any acquired assets in the computation of the Borrowing Base.

 

(c)     Upon the request of the Lender, cause each of its customs brokers, freight forwarders, consolidators and/or carriers to deliver an agreement (including, without limitation, a Customs Broker/Carrier Agreement) to the Lender covering such matters and in such form as the Lender may reasonably require.

 

(d)          Upon the request of the Lender, cause any of its landlords to deliver a Collateral Access Agreement to the Lender in such form as the Lender may reasonably require.

 

6.18        Compliance with Terms of Leaseholds

 

Except as otherwise expressly permitted hereunder, (a) make all payments and otherwise perform all obligations in respect of all Leases to which the Borrower is a party and keep such Leases in full force and effect, except to the extent that any such failure could not reasonably be expected to have a Material Adverse Effect, (b) not allow any material Leases to lapse or be terminated or any rights to renew such material Leases to be forfeited or cancelled, and (c) notify the Lender of any material default by any party with respect to such material Leases and cooperate with the Lender in all respects to cure any such default.

 

6.19        Material Contracts.  (a) Perform and observe all the material terms and provisions of each Material Contract to be performed or observed by it, (b) maintain each such Material Contract in full force and effect unless a suitable replacement has been put in place, (c) enforce each such Material Contract in accordance with its terms, expect for any failure to enforce that could not reasonably be 

 

 

  

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expected to have a Material Adverse Effect, and (d) upon request of the Lender, make to each other party to each such Material Contract such reasonable requests for information and reports or for action as the Borrower is entitled to make under such Material Contract.

 

ARTICLE VII

NEGATIVE COVENANTS

 

So long as the Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding (other than contingent indemnification obligations for which a claim has not been asserted), the Borrower shall not, directly or indirectly:

 

7.01        Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired or sign or file or suffer to exist under the UCC or any similar Law or statute of any jurisdiction a financing statement that names the Borrower or any Subsidiary thereof as debtor; sign or suffer to exist any security agreement authorizing any Person thereunder to file such financing statement; sell any of its property or assets subject to an understanding or agreement (contingent or otherwise) to repurchase such property or assets with recourse to it or any of its Subsidiaries; or assign or otherwise transfer any accounts or other rights to receive income, other than, as to all of the above, Permitted Encumbrances.

 

7.02        Investments.  Without the consent of the Lender, make any Investments, except Permitted Investments.

 

7.03        Indebtedness; Disqualified Stock

 

(a)  Create, incur, assume, guarantee, suffer to exist or otherwise become or remain liable with respect to, any Indebtedness, except Permitted Indebtedness, or (b) issue Disqualified Stock.

 

7.04        Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into another Person, (or agree to do any of the foregoing), except that, so long as no Default or Event of Default shall have occurred and be continuing prior to or immediately after giving effect to any action described below or would result therefrom, any Subsidiary of the Borrower (other than any CFC) may merge with the Borrower, provided that the Borrower shall be the continuing or surviving Person.

 

7.05        Dispositions.  Make any Disposition or enter into any agreement to make any Disposition, except Permitted Dispositions.

 

7.06        Restricted Payments.  Without the consent of the Lender, declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that, so long as no Default or Event of Default shall have occurred and be continuing prior to or immediately after giving effect  to any action described below or would result therefrom:

 

(a)           each Subsidiary of the Borrower may make Restricted Payments to the Borrower; and

 

(b)           the Borrower may declare and make dividend payments or other distributions payable solely in the common stock or other Equity Interests of the Borrower

 

7.07        Prepayments of Indebtedness.    Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner any Indebtedness, except (a) as long as no Default 

 

 

  

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or Event of Default then exists, regularly scheduled or mandatory repayments, repurchases, redemptions or defeasances of Permitted Indebtedness, and (b) Permitted Refinancings of any Permitted Indebtedness.

 

7.08        Change in Nature of Business

 

Engage in any line of business substantially different from the business conducted by the Borrower on the Effective Date or any business substantially related or incidental thereto.

 

7.09        Transactions with Affiliates.  Enter into, renew, extend or be a party to any transaction of any kind with any Affiliate of the Borrower, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Borrower as would be obtainable by the Borrower at the time in a comparable arm’s length transaction with a Person other than an Affiliate, provided that the foregoing restriction shall not apply to (a) advances for commissions, travel and other similar purposes in the ordinary course of business to directors, officers and employees, (b) the issuance of Equity Interests in the Borrower to any officer, director, employee or consultant of the Borrower, (c) the payment of reasonable fees and out-of-pocket costs to directors, and compensation and employee benefit arrangements paid to, and indemnities provided for the benefit of, directors, officers or employees of the Borrower, and (d) any issuances of securities of the Borrower (other than Disqualified Stock and other Equity Interests not permitted hereunder) or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment agreements, stock options and stock ownership plans (in each case in respect of Equity Interests in the Borrower) of the Borrower.

 

7.10        Burdensome Agreements. Enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that (a) limits the ability (i) of any Subsidiary to make Restricted Payments or other distributions to the Borrower or to otherwise transfer property to or invest in the Borrower, (ii) of any Subsidiary to Guarantee the Obligations, (iii) of any Subsidiary to make or repay loans to the Borrower, or (iv) of the Borrower or any Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person in favor of the Lender; provided, however, that this clause (iv) shall not prohibit any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under clauses (c) of the definition of Permitted Indebtedness solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness; or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person.

 

7.11        Use of Proceeds.  Use the proceeds of any Credit Extension, whether directly or indirectly, and whether immediately, incidentally or ultimately, (a) to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund Indebtedness originally incurred for such purpose; or (b) for purposes other than those permitted under this Agreement.

 

7.12        Amendment of Material Documents.

 

Amend, modify or waive any of the Borrower’s rights under (a) its Organization Documents in a manner materially adverse to the Credit Parties, or (b) any Material Contract or Material Indebtedness (other than on account of any refinancing thereof otherwise permitted hereunder), in each case to the extent that such amendment, modification or waiver would result in a Default or Event of Default under any of the Loan Documents, would be materially adverse to the Credit Parties or otherwise would be reasonably likely to have a Material Adverse Effect.

 

7.13        Fiscal Year.

 

  

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Change the Fiscal Year of the Borrower, or the accounting policies or reporting practices of the Borrower, except as required  by GAAP.

 

7.14        Deposit Accounts; Credit Card Processors.

 

Open new DDAs or Blocked Accounts unless the Borrower shall have delivered to the Lender appropriate DDA Notifications (to the extent requested by Lender pursuant to the provisions of Section 6.13(b) hereof) or Blocked Account Agreements consistent with the provisions of Section 6.13 and otherwise satisfactory to the Lender.  The Borrower shall not maintain any bank accounts or enter into any agreements with Credit Card Issuers or Credit Card Processors other than the ones expressly contemplated herein or in Section 6.13 hereof.

 

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

 

8.01        Events of Default.  Any of the following shall constitute an Event of Default:

 

(a)           Non-Payment.  The Borrower fails to pay when and as required to be paid herein, (i) any amount of principal of any Loan or any L/C Obligation, or deposit any funds as Cash Collateral in respect of L/C Obligations, or (ii) any interest on any Loan or on any L/C Obligation, or any fee due hereunder, or (iii) any other amount payable hereunder or under any other Loan Document and such failure under this clause (iii) continues without cure for a period of five (5) days; or

 

(b)           Specific Covenants.  (i) The Borrower fails to perform or observe any term, covenant or agreement contained in any of Section 6.01 (other than as set forth in Section 8.01(c) below), 6.02 (other than as set forth in Section 8.01(c) below), 6.03 (other than as set forth in Section 8.01(c) below), 6.05, 6.07, 6.10, 6.13 or 6.14(a) or Article VII; or

 

(c)           Other Defaults.  The Borrower fails to perform or observe (i) any term, covenant or agreement contained in any of Section 6.01(c), 6.02(d), (e) or (g), or Section 6.03(d), (f), (g) or (i) on its part to be performed or observed and such failure continues for five (5) days following the earlier of the Borrower’s knowledge of such breach or of its receipt of written notice from the Lender of such breach, or (ii) any other covenant or agreement (not specified in subsection (a), (b) or (c)(i) above) contained in any Loan Document on its part to be performed or observed and such failure continues for ten (10) days following the earlier of the Borrower’s knowledge of such breach or of its receipt of written notice from the Lender of such breach; or

 

(d)          Representations and Warranties.  Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower herein, in any other Loan Document, or in any document delivered in connection herewith or therewith (including, without limitation, any Borrowing Base Certificate) shall be incorrect or misleading in any material respect when made or deemed made; or

 

(e)           Cross-Default.  (i) The Borrower or any Subsidiary (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Material Indebtedness (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement), or (B) fails to observe or perform any other agreement or condition relating to any 

 

 

  

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such Material Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Material Indebtedness or the beneficiary or beneficiaries of any Guarantee thereof (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which the Borrower or any Subsidiary thereof is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which the Borrower or any Subsidiary thereof is an Affected Party (as so defined); or

 

(f)           Insolvency Proceedings, Etc.  The Borrower or any Subsidiary thereof institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or a proceeding shall be commenced or a petition filed, without the application or consent of such Person, seeking or requesting the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed and the appointment continues undischarged, undismissed or unstayed for 30 calendar days or an order or decree approving or ordering any of the foregoing shall be entered; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 30 calendar days, or an order for relief is entered in any such proceeding; or

 

(g)           Inability to Pay Debts; Attachment.  (i) The Borrower or any Subsidiary thereof becomes unable or admits in writing its inability or fails generally to pay its debts as they become due in the ordinary course of business, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 10 days after its issuance or levy; or

 

(h)           Judgments.  There is entered against the Borrower or any Subsidiary thereof (i) one or more judgments or orders for the payment of money in an aggregate amount (as to all such judgments and orders) exceeding $250,000 (to the extent not covered by independent third-party insurance as to which the insurer is rated at least “A” by A.M. Best Company, has been notified of the potential claim and does not dispute coverage), or (ii) any one or more non-monetary judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, such judgment is not stayed or appealed from (with execution or similar process stayed) within thirty (30) days of its entry; or

 

(i)           ERISA.  (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $250,000 or which would reasonably likely result in a Material Adverse Effect, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $250,000 or which would reasonably likely result in a Material Adverse Effect; or

 

  

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(j)            Invalidity of Loan Documents.  (i)  The Borrower or any of its Related Parties contests in any manner the validity or enforceability of any provision of any Loan Document; or the Borrower denies that it has any or further liability or obligation under any provision of any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document or seeks to avoid, limit or otherwise adversely affect any Lien purported to be created under any Security Document; or (ii) any Lien purported to be created under any Security Document shall be asserted by the Borrower or any of its Related Parties not to be, a valid and perfected Lien on any Collateral, with the priority required by the applicable Security Document; or

 

(k)           Change of Control.  There occurs any Change of Control; or

 

(l)           Cessation of Business.  Except as otherwise expressly permitted hereunder, the Borrower shall take any action to suspend the operation of its business in the ordinary course, liquidate all or a material portion of its assets or locations, or employ an agent or other third party to conduct a program of closings, liquidations or “Going-Out-Of-Business” sales of any material portion of its business; or

 

(m)          Loss of Collateral.  There occurs any uninsured loss to any material portion of the Collateral; or

 

(n)           Breach of Contractual Obligation.  The Borrower or any Subsidiary thereof fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Material Contract or fails to observe or perform any other material agreement or condition relating to any such Material Contract or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event could reasonably be expected to have a Material Adverse Effect; or

 

(o)          Indictment.  The indictment or institution of any legal process or proceeding against, the Borrower or any Subsidiary thereof, under any federal, state, municipal, and other criminal statute, rule, regulation, order, or other requirement having the force of law for a felony.

 

8.02        Remedies Upon Event of Default.  If any Event of Default occurs and is continuing, the Lender may take any or all of the following actions upon written notice to the Borrower:

 

(a)           declare the Commitment of the Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such Commitment and obligation shall be terminated;

 

(b)           declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other Obligations to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower;

 

(c)           require that the Borrower Cash Collateralize the L/C Obligations; and

 

(d)           whether or not the maturity of the Obligations shall have been accelerated pursuant hereto, proceed to protect, enforce and exercise all rights and remedies of the Credit Parties under this Agreement, any of the other Loan Documents or applicable Law, including, but not limited to, by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other 

 

  

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Loan Documents or any instrument pursuant to which the Obligations are evidenced, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Credit Parties;

 

provided, however, that upon the occurrence of any Event of Default with respect to the Borrower or any Subsidiary thereof under Section 8.01(f), the obligation of the Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrower to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Lender.

 

No remedy herein is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of Law.

 

8.03        Application of Funds.  After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Lender in the following order:

 

First, to payment of that portion of the Obligations (excluding the Other Liabilities) constituting fees, indemnities, Credit Party Expenses and other amounts (including fees, charges and disbursements of counsel to the Lender and amounts payable under Article III) payable to the Lender;

 

Second, to payment of that portion of the Obligations (excluding the Other Liabilities) constituting indemnities, Credit Party Expenses, and other amounts (other than principal, interest and fees) payable to the L/C Issuer (including fees, charges and disbursements of counsel to the L/C Issuer and amounts payable under Article III);

 

Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Committed Loans and other Obligations, and fees (including Letter of Credit Fees and any Early Termination Fees), ratably among the Lender and the L/C Issuer in proportion to the respective amounts described in this clause Third payable to them;

 

Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Committed Loans;

 

Fifth, to the Lender for the account of the L/C Issuer, to Cash Collateralize that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit;

 

Sixth, to payment of all other Obligations (including without limitation the cash collateralization of unliquidated indemnification obligations as provided in Section 9.04(g), but excluding any Other Liabilities), ratably among the Credit Parties in proportion to the respective amounts described in this clause Sixth held by them;

 

Seventh, to payment of that portion of the Obligations arising from Cash Management Services to the extent secured under the Security Documents, ratably among the Credit Parties in proportion to the respective amounts described in this clause Seventh held by them;

 

  

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Eighth, to payment of all other Obligations arising from Bank Products to the extent secured under the Security Documents, ratably among the Credit Parties in proportion to the respective amounts described in this clause Eighth held by them; and

 

Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Borrower or as otherwise required by Law.

 

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fifth above shall be applied to satisfy drawings under such Letters of Credit as they occur.  If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.

 

ARTICLE IX

MISCELLANEOUS

 

9.01        Amendments, Etc.  No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower therefrom, shall be effective unless in writing signed by the Lender and the Borrower, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, that no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuer in addition to the Lender, affect the rights or duties of the L/C Issuer under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it.

 

Notwithstanding anything to the contrary in this Agreement or any other Loan Document, no provider or holder of any Bank Products or Cash Management Services shall have any voting or approval rights hereunder (or be deemed a Lender) solely by virtue of its status as the provider or holder of such agreements or products or the Obligations owing thereunder, nor shall the consent of any such provider or holder be required (other than in their capacities as the Lender, to the extent applicable) for any matter hereunder or under any of the other Loan Documents, including as to any matter relating to the Collateral or the release of Collateral.

 

9.02        Notices; Effectiveness; Electronic Communications.

 

(a)          Notices Generally.  Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 9.02.  Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient).  Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

 

(b)     Electronic Communications.  Notices and other communications to the Borrower, the Lender and the L/C Issuer hereunder may be delivered or furnished by electronic communication 

 

 

  

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(including e-mail and Internet or intranet websites) pursuant to procedures approved by the Lender, provided that approval of such procedures may be limited to particular notices or communications.

 

Unless the Lender otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

 

(c)          Change of Address, Etc.  Each of the Borrower, the Lender and the L/C Issuer may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto.

 

(d)          Reliance by Lender and L/C Issuer.  The Lender and the L/C Issuer shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The Borrower shall indemnify the Lender, the L/C Issuer and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower.  All telephonic notices to and other telephonic communications with the Lender may be recorded by the Lender, and each of the parties hereto hereby consents to such recording.

 

9.03        No Waiver; Cumulative Remedies.  No failure by any Credit Party to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under any other Loan Document preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges provided herein and in the other Loan Documents are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.  Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether any Credit Party may have had notice or knowledge of such Default or Event of Default at the time.

 

9.04        Expenses; Indemnity; Damage Waiver.

 

(a)           Costs and Expenses.  The Borrower shall pay all Credit Party Expenses.

 

(b)           Indemnification by the Borrower.  The Borrower shall indemnify the Lender (and any agent thereof), each other Credit Party, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless (on an after tax basis) from, any and all losses, claims, causes of action, damages, liabilities, settlement payments, costs, and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of 

 

 

  

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their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, or the administration of this Agreement and the other Loan Documents, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by the L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit, any bank advising or confirming a Letter of Credit or any other nominated person with respect to a Letter of Credit seeking to be reimbursed or indemnified or compensated, and any third party seeking to enforce the rights of the Borrower, beneficiary, nominated person, transferee, assignee of Letter of Credit proceeds, or holder of an instrument or document related to any Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any Subsidiary, or any Environmental Liability related in any way to the Borrower or any Subsidiary, (iv) any claims of, or amounts paid by any Credit Party to, a Blocked Account Bank or other Person which has entered into a control agreement with any Credit Party hereunder, or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any of its directors, shareholders or creditors, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower against an Indemnitee for breach in bad faith of such Indemnitee's obligations hereunder or under any other Loan Document, if the Borrower has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

 

(c)           Waiver of Consequential Damages, Etc.  To the fullest extent permitted by applicable Law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof.  No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

 

(d)           Payments.  All amounts due under this Section shall be payable on demand therefor.

 

(e)           Survival.  The agreements in this Section shall survive the the assignment of any Commitment or Loan by the Lender, the termination of the Commitment and the repayment, satisfaction or discharge of all the other Obligations.

 

 

9.05        Payments Set Aside.  To the extent that any payment by or on behalf of the Borrower is made to any Credit Party, or any Credit Party exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or 

 

  

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preferential, set aside or required (including pursuant to any settlement entered into by such Credit Party in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred.

 

9.06        Successors and Assigns.

 

(a)          Successors and Assigns Generally.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder or under any other Loan Document without the prior written consent of the Lender.  The Lender may at any time, without the consent of, or notice to, the Borrower, assign its rights or obligations hereunder (i) to an Eligible Assignee, (ii) by way of participation in accordance with the provisions of subsection Section 9.06(b), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 9.06(d).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (b) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Credit Parties) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(b)          Participations.  The Lender may at any time, without the consent of, or notice to, the Borrower, sell participations to any Person (other than a natural person or the Borrower or any of its Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of the Lender's rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including the Lender’s participations in L/C Obligations) owing to it); provided that (i) the Lender's obligations under this Agreement shall remain unchanged, (ii) the Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower and the L/C Issuer shall continue to deal solely and directly with the Lender in connection with the Lender's rights and obligations under this Agreement.  Any Participant shall agree in writing to comply with all confidentiality obligations set forth in Section 9.07 as if such Participant was a Lender hereunder.

 

Any agreement or instrument pursuant to which the Lender sells such a participation shall provide that the Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any  provision of this Agreement; provided that such agreement or instrument may provide that the Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification that affects such Participant.  Subject to subsection (c) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 9.06(a).

 

(c)          Limitations upon Participant Rights.  A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent.

 

(d)          Certain Pledges.  The Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under the Note, if any) to secure obligations of the Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release the Lender from any of its obligations hereunder or substitute any such pledgee or assignee for the Lender as a party hereto.

 

  

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(e)          Electronic Execution of Assignments.  The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act or any other similar state laws based on the Uniform Electronic Transactions Act.

 

(f)           Resignation as L/C Issuer after Assignment.  Notwithstanding anything to the contrary contained herein, if at any time the Lender assigns all of its Commitment and Loans pursuant to subsection (a) above, Wells Fargo may, upon 30 days’ notice to the Borrower, resign as L/C Issuer.  If Wells Fargo resigns as L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lender to make Base Rate Loans pursuant to Section 2.03(c)).  Upon the appointment of a successor L/C Issuer, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer, and (b) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to Wells Fargo to effectively assume the obligations of Wells Fargo with respect to such Letters of Credit.

 

9.07        Treatment of Certain Information; Confidentiality. Each of the Credit Parties agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, funding sources, attorneys, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to any Credit Party or any of their respective Affiliates on a non-confidential basis from a source other than the Borrower.

 

For purposes of this Section, “Information” means all information received from the Borrower relating to the Borrower or any Subsidiary thereof or its businesses, other than any such information that is available to any Credit Party on a non-confidential basis prior to disclosure by the Borrower, provided that, in the case of information received after the Effective Date, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

Each of the Credit Parties acknowledges that (a) the Information may include material non-public information concerning the Borrower or a Subsidiary, as the case may be, (b) it has developed compliance 

 

  

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procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws.

 

9.08        Right of Setoff.  If an Event of Default shall have occurred and be continuing or if the Lender shall have been served with a trustee process or similar attachment relating to property of the Borrower, the Lender, the L/C Issuer and each of their respective Affiliates is hereby authorized at any time and from time to time, 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 the Lender, the L/C Issuer or any such Affiliate to or for the credit or the account of the Borrower against any and all of the Obligations now or hereafter existing under this Agreement or any other Loan Document to the Lender or the L/C Issuer, regardless of the adequacy of the Collateral, and irrespective of whether or not the Lender or the L/C Issuer shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower may be contingent or unmatured or are owed to a branch or office of the Lender or the L/C Issuer different from the branch or office holding such deposit or obligated on such indebtedness.  The rights of the Lender, the L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that the Lender, the L/C Issuer or their respective Affiliates may have.  The Lender and the L/C Issuer agrees to notify the Borrower promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

9.09        Interest Rate Limitation.  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 (the “Maximum Rate”).  If the Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower.  In determining whether the interest contracted for, charged, or received by the 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.

 

9.10        Counterparts; Integration; Effectiveness.  This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Lender and when the Lender shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto.  Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be as effective as delivery of a manually executed counterpart of this Agreement.

 

9.11        Survival.  All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been or will be relied upon by the Credit Parties, regardless of any investigation made by any Credit Party or on their behalf and notwithstanding that any Credit Party may have had notice or knowledge of any Default or Event of Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.  Further, the provisions of Sections 3.01, 3.04, 3.05 and 9.04 shall 

 

  

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survive and remain in full force and effect regardless of the repayment of the Obligations, the expiration or termination of the Letters of Credit and the Commitment or the termination of this Agreement or any provision hereof.  In connection with the termination of this Agreement and the release and termination of the security interests in the Collateral, the Lender may require such indemnities and collateral security as it shall reasonably deem necessary or appropriate to protect the Credit Parties against (x) loss on account of credits previously applied to the Obligations that may subsequently be reversed or revoked, (y) any obligations that may thereafter arise with respect to the Other Liabilities and (z) any Obligations that may thereafter arise under Section 9.04.

 

9.12        Severability.  If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

9.13        Governing Law; Jurisdiction; Etc.

 

(a)          GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.

 

(b)          SUBMISSION TO JURISDICTION.  THE BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS SITTING IN SUFFOLK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE DISTRICT OF MASSACHUSETTS, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE BORROWER IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH MASSACHUSETTS STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  THE BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(c)           WAIVER OF VENUE.  THE BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION.  THE BORROWER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN 

 

  

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INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

(d)          SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.02.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

(e)     ACTIONS COMMENCED BY THE BORROWER. THE BORROWER AGREES THAT ANY ACTION COMMENCED BY THE BORROWER ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT SOLELY IN A COURT OF THE COMMONWEALTH OF MASSACHUSETTS SITTING IN SUFFOLK COUNTY OR ANY FEDERAL COURT SITTING THEREIN AS THE LENDER MAY ELECT IN ITS SOLE DISCRETION AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH RESPECT TO ANY SUCH ACTION.

 

9.14        Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

9.15        No Advisory or Fiduciary Responsibility.  In connection with all aspects of each transaction contemplated hereby, the Borrower acknowledges and agrees that: (i) the credit facility provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Borrower, on the one hand, and the Credit Parties, on the other hand, and the Borrower is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, each Credit Party is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person; (iii) none of the Credit Parties has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Borrower with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether any of the Credit Parties has advised or is currently advising the Borrower or any of its Affiliates on other matters) and none of the Credit Parties has any obligation to the Borrower or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Credit Parties and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and none of the Credit Parties has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Credit Parties have not provided and will not 

 

  

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provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate.  The Borrower hereby waives and releases, to the fullest extent permitted by law, any claims that it may have against each of the Credit Parties with respect to any breach or alleged breach of agency or fiduciary duty.

 

9.16        USA PATRIOT Act Notice.  The Lender hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow the Lender to identify the Borrower in accordance with the Act. The Borrower is in compliance, in all material respects, with the Act.  No part of the proceeds of the Loans will be used by the Borrower, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

9.17        Foreign Asset Control Regulations.  Neither of the advance of the Loans nor the use of the proceeds of any thereof will violate the Trading With the Enemy Act (50 U.S.C. § 1 et seq., as amended) (the "Trading With the Enemy Act") or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) (the "Foreign Assets Control Regulations") or any enabling legislation or executive order relating thereto (which for the avoidance of doubt shall include, but shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the "Executive Order") and (b) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)).  Furthermore, none of the Borrower or its Affiliates (a) is or will become a "blocked person" as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (b) engages or will engage in any dealings or transactions, or be otherwise associated, with any such "blocked person" or in any manner violative of any such order.

 

9.18        Time of the Essence.  Time is of the essence of the Loan Documents.

 

9.19        Press Releases.

 

The Borrower consents to the publication by the Lender of advertising material, including any “tombstone” or comparable advertising, on its website or in other marketing materials of the Lender, relating to the financing transactions contemplated by this Agreement using the Borrower’s name, product photographs, logo, trademark or other insignia.  The Lender shall provide a draft reasonably in advance of any advertising material to the Borrower for review and comment prior to the publication thereof.  The Lender reserves the right to provide to industry trade organizations and loan syndication and pricing reporting services information necessary and customary for inclusion in league table measurements.

 

9.20        Additional Waivers.

 

(a)          To the fullest extent permitted by Applicable Law, the obligations of the Borrower shall not be affected by any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, this Agreement or any other Loan Document, or the failure to 

 

  

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perfect any security interest in, or the release of, any of the Collateral or other security held by or on behalf of the Lender or any other Credit Party.

 

(b)          The obligations of the Borrower  shall not be subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Obligations after the termination of the Commitment), including any claim of waiver, release, surrender, alteration or compromise of any of the Obligations, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of any of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Borrower hereunder shall not be discharged or impaired or otherwise affected by the failure of the Lender or any other Credit Party to assert any claim or demand or to enforce any remedy under this Agreement, any other Loan Document or any other agreement, by any waiver or modification of any provision of any thereof, any default, failure or delay, willful or otherwise, in the performance of any of the Obligations, or by any other act or omission that may or might in any manner or to any extent vary the risk of the Borrower or that would otherwise operate as a discharge of the Borrower as a matter of law or equity (other than the indefeasible payment in full in cash of all the Obligations after the termination of the Commitment).

 

(c)          To the fullest extent permitted by applicable Law, the Borrower waives any defense based on or arising out of the unenforceability of the Obligations or any part thereof from any cause, other than the indefeasible payment in full in cash of all the Obligations and the termination of the Commitment.

 

9.21        No Strict Construction.

 

The parties hereto have participated jointly in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

 

9.22        Attachments.

 

The exhibits, schedules and annexes attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein, except that in the event of any conflict between any of the provisions of such exhibits and the provisions of this Agreement, the provisions of this Agreement shall prevail.

 

9.23        Amendment and Restatement.  This Agreement is an amendment and restatement of the Existing Credit Agreement, it being acknowledged and agreed that as of the Effective Date all obligations outstanding under or in connection with the Existing Credit Agreement and any of the other Loan Documents (such obligations, collectively, the “Existing Obligations”) constitute obligations under this Agreement.  This Agreement is in no way intended to constitute a novation of the Existing Credit Agreement or the Existing Obligations.  With respect to (i) any date or time period occurring and ending prior to the Effective Date, the Existing Credit Agreement and the other Loan Documents shall govern the respective rights and obligations of any party or parties hereto also party thereto and shall for such purposes remain in full force and effect; and (ii) any date or time period occurring or ending on or after the Effective Date, the rights and obligations of the parties hereto shall be governed by this Agreement (including, without limitation, the exhibits and schedules hereto) and the other Loan Documents.  From and after the Effective Date, any reference to the Existing Credit Agreement in any of the other Loan Documents executed or issued by and/or delivered to any one or more parties hereto pursuant to or in connection therewith shall be deemed to be a reference to this Agreement, and the provisions of this 

 

 

  

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Agreement shall prevail in the event of any conflict or inconsistency between such provisions and those of the Existing Credit Agreement.

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

 

	
BLUEFLY, INC., as Borrower

	  
	
By:

	
/ s / Kara B. Jenny

	
Name:

	
Kara B. Jenny

	
Title:

	
Chief Financial Officer and Secretary

	  
	
WELLS FARGO BANK, NATIONAL 

ASSOCIATION as Lender and L/C Issuer

	  	  
	
By:

	
/ s / Michele L. Ayou

	
Name:

	
Michele L. Ayou

	
Title:

	
Authorized Signatory

 

Signature Page to Amended and Restated Credit AgreementUnassociated Document

Exhibit 10.2

 

	
 

AMENDED AND RESTATED SECURITY AGREEMENT

 

by

 

BLUEFLY, INC.

as Borrower

and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Lender

 

Dated as of June 17, 2011

	
 

 

  

  

  

 

TABLE OF CONTENTS

	  	 	
Page

	  	 	  
	
PREAMBLE

	 	
1

	  	 	  
	
RECITALS

	 	
1

	  	 	  
	
AGREEMENT

	 	
1

	  
	
ARTICLE I

	  
	
DEFINITIONS AND INTERPRETATION

	  	  	 	  
	
SECTION 1.1.

	
Definitions

	 	
2

	
SECTION 1.2.

	
Interpretation

	 	
6

	
SECTION 1.3.

	
Perfection Certificate

	 	
6

	
ARTICLE II

	  
	
GRANT OF SECURITY AND SECURED OBLIGATIONS

	  	  	 	  
	
SECTION 2.1.

	
Pledge

	 	
6

	
SECTION 2.2.

	
Secured Obligations

	 	
7

	
SECTION 2.3.

	
Security Interest

	 	
7

	  	  	 	  
	
ARTICLE III

	  
	
PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES;

	
USE OF COLLATERAL

	  	  	 	  
	
SECTION 3.1.

	
Delivery of Certificated Securities Collateral

	 	
8

	
SECTION 3.2.

	
Perfection of Uncertificated Securities Collateral

	 	
8

	
SECTION 3.3.

	
Financing Statements and Other Filings; Maintenance of Perfected Security Interest

	 	
9

	
SECTION 3.4.

	
Other Actions

	 	
9

	
SECTION 3.5.

	
Supplements; Further Assurances

	 	
12

	 	 	 	 
	
ARTICLE IV

	  
	
REPRESENTATIONS, WARRANTIES AND COVENANTS

	  	  	 	  
	
SECTION 4.1.

	
Title

	 	
13

  

-i-

  

	
SECTION 4.2.

	
Limitation on Liens; Defense of Claims; Transferability of Collateral

	 	
13

	
SECTION 4.3.

	
Chief Executive Office; Change of Name; Jurisdiction of Organization

	 	
13

	
SECTION 4.4.

	
Location of Inventory and Equipment

	 	
14

	
SECTION 4.5.

	
Condition and Maintenance of Equipment

	 	
14

	
SECTION 4.6.

	
Due Authorization and Issuance

	 	
14

	
SECTION 4.7.

	
No Conflicts, Consents, etc.

	 	
14

	
SECTION 4.8.

	
Collateral

	 	
15

	
SECTION 4.9.

	
Insurance

	 	
15

	
SECTION 4.10.

	
Payment of Taxes; Compliance with Laws; Contested Liens; Claims

	 	
15

	
SECTION 4.11.

	
Access to Collateral, Books and Records; Other Information

	 	
16

	  
	
ARTICLE V

	  
	
CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL

	  	  	 	  
	
SECTION 5.1.

	
Pledge of Additional Securities Collateral

	 	
16

	
SECTION 5.2.

	
Voting Rights; Distributions; etc.

	 	
16

	
SECTION 5.3.

	
Organization Documents

	 	
18

	
SECTION 5.4.

	
Defaults, Etc

	 	
18

	  	  	 	  
	
ARTICLE VI

	  
	
CERTAIN PROVISIONS CONCERNING INTELLECTUAL

	
PROPERTY COLLATERAL

	  	  	 	  
	
SECTION 6.1.

	
Grant of License

	 	
18

	
SECTION 6.2.

	
Registrations

	 	
19

	
SECTION 6.3.

	
No Violations or Proceedings

	 	
19

	
SECTION 6.4.

	
Protection of Lender’s Security

	 	
19

	
SECTION 6.5.

	
After-Acquired Property

	 	
20

	
SECTION 6.6.

	
Modifications

	 	
20

	
SECTION 6.7.

	
Litigation

	 	
20

	
SECTION 6.8.

	
Third Party Consents

	 	
21

	  	  	 	  
	
ARTICLE VII

	  
	
CERTAIN PROVISIONS CONCERNING ACCOUNTS

	  	  	 	  
	
SECTION 7.1.

	
Special Representations and Warranties

	 	
21

	
SECTION 7.2.

	
Maintenance of Records

	 	
21

  

-ii-

  

	
SECTION 7.3.

	
Legend

	 	
21

	
SECTION 7.4.

	
Modification of Terms, Etc

	 	
22

	
SECTION 7.5.

	
Collection

	 	
22

	  	  	 	  
	
ARTICLE VIII

	
REMEDIES

	  	  	 	  
	
SECTION 8.1.

	
Remedies

	 	
22

	
SECTION 8.2.

	
Notice of Sale

	 	
24

	
SECTION 8.3.

	
Waiver of Notice and Claims

	 	
24

	
SECTION 8.4.

	
Certain Sales of Collateral

	 	
25

	
SECTION 8.5.

	
No Waiver; Cumulative Remedies

	 	
26

	
SECTION 8.6.

	
Certain Additional Actions Regarding Intellectual Property

	 	
26

	
SECTION 8.7.

	
Application of Proceeds

	 	
26

	  	  	 	  
	
ARTICLE IX

	  
	
MISCELLANEOUS

	  	  	 	  
	
SECTION 9.1.

	
Concerning Lender

	 	
27

	
SECTION 9.2.

	
Lender May Perform; Lender Appointed Attorney-in-Fact

	 	
28

	
SECTION 9.3.

	
Expenses

	 	
28

	
SECTION 9.4.

	
Continuing Security Interest; Assignment

	 	
28

	
SECTION 9.5.

	
Termination; Release

	 	
28

	
SECTION 9.6.

	
Modification in Writing

	 	
29

	
SECTION 9.7.

	
Notices

	 	
29

	
SECTION 9.8.

	
GOVERNING LAW

	 	
30

	
SECTION 9.9.

	
CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL

	 	
30

	
SECTION 9.10.

	
Severability of Provisions

	 	
31

	
SECTION 9.11.

	
Execution in Counterparts; Effectiveness

	 	
31

	
SECTION 9.12.

	
No Release

	 	
31

	
SECTION 9.13.

	
Obligations Absolute

	 	
32

	
SECTION 9.14.

	
Existing Security Agreement Amended and Restated

	 	
33

	  	  	 	  
	
SIGNATURES

	  	 	  
	  	  	 	  
	
EXHIBIT 1

	
Form of Securities Pledge Amendment

	 	  
	
SCHEDULE I

	
Filings, Registrations and Recordings

	 	  
	
SCHEDULE II

	
Pledged Interests

	 	  

  

-iii-

  

 

AMENDED AND RESTATED SECURITY AGREEMENT

 

AMENDED AND RESTATED SECURITY AGREEMENT dated as of June 17, 2011 (as amended, restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this “Security Agreement”) made by BLUEFLY, INC., a Delaware corporation having an office at 42 West 39th Street, New York, New York 10018 (the “Borrower”), as pledgor, assignor and debtor (the Borrower, in such capacities and together with any successors in such capacities, the “Grantor”), in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION, having an office at One Boston Place, 18th Floor, Boston, Massachusetts 02108, as Lender, for the ratable benefit of itself and the other Credit Parties (as defined in the Credit Agreement defined below) pursuant to the Credit Agreement, as pledgee, assignee and secured party (in such capacities and together with any successors in such capacities, the “Lender”).

RECITALS:

 

A.          In connection with the execution and delivery of this Security Agreement, the Borrower and the Lender, among others, have entered into that certain Amended and Restated Credit Agreement dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).

 

B.           This Security Agreement is given by the Grantor in favor of the Lender for the benefit of the Credit Parties to secure the payment and performance of all of the Secured Obligations (as hereinafter defined).

 

C.           It is a condition to the obligations of the Lender to make the Loans under the Credit Agreement and a condition to the L/C Issuer issuing Letters of Credit under the Credit Agreement that the Grantor execute and deliver the applicable Loan Documents, including this Security Agreement.

 

AGREEMENT:

 

NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantor and the Lender hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS AND INTERPRETATION

 

SECTION 1.1.      Definitions.

 

  

  

  

 

 

(a)          Unless otherwise defined herein or in the Credit Agreement, capitalized terms used herein that are defined in the UCC shall have the meanings assigned to them in the UCC.

(b)          Capitalized terms used but not otherwise defined herein that are defined in

the Credit Agreement shall have the meanings given to them in the Credit Agreement.

 

(c)          The following terms shall have the following meanings:

 

“Borrower” shall have the meaning assigned to such term in the Preamble hereof.

 

“Claims” shall mean any and all property taxes and other taxes, assessments and special assessments, levies, fees and all governmental charges imposed upon or assessed against, and all claims (including, without limitation, landlords’, carriers’, mechanics’, workmen’s, repairmen’s, laborers’, materialmen’s, suppliers’ and warehousemen’s Liens and other claims arising by operation of applicable Law) against, all or any portion of the Collateral.

 

“Collateral” shall have the meaning assigned to such term in SECTION 2.1 hereof.

 

“Control” shall mean (i) in the case of each DDA, “control,” as such term is defined in Section 9-104 of the UCC, and (ii) in the case of any security entitlement, “control,” as such term is defined in Section 8-106 of the UCC.

 

“Control Agreements” shall mean, collectively, the Blocked Account Agreements and the Securities Account Control Agreements.

 

“Copyrights” shall mean, collectively, with respect to the Grantor, all copyrights (whether statutory or common Law, whether established or registered in the United States or any other country or any political subdivision thereof whether registered or unregistered and whether published or unpublished) and all copyright registrations and applications made by the Grantor, in each case, whether now owned or hereafter created or acquired by or assigned to the Grantor, including, without limitation, the registrations and applications listed in Section IV of the Perfection Certificate, together with any and all (i) rights and privileges arising under applicable Law with respect to the Grantor’s use of such copyrights, (ii) reissues, renewals, continuations and extensions thereof, (iii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable with respect thereto, including, without limitation, damages and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present or future infringements thereof.

“Credit Agreement” shall have the meaning assigned to such term in Recital A hereof.

 

  

2

  

 

“Distributions” shall mean, collectively, with respect to the Grantor, all Restricted Payments from time to time received, receivable or otherwise distributed to the Grantor in respect of or in exchange for any or all of the Pledged Interests.

 

“Excluded Property” shall mean the following:

 

(a)          any license, permit or lease held by the Grantor (i) that validly prohibits the creation by the Grantor of a security interest therein or thereon or (ii) to the extent that applicable Law prohibits the creation of a security interest therein or thereon;

 

(b)         any Intellectual Property Collateral consisting of intent-to-use trademark applications, for which the creation by the Grantor of a security interest therein is prohibited without the consent of third party or by applicable Law;

 

provided, however, that in each case described in clauses (a) and (b) of this definition, such property shall constitute “Excluded Property” only to the extent and for so long as such license, permit, lease or applicable Law validly prohibits the creation of a Lien on such property in favor of the Lender and, upon the termination of such prohibition (howsoever occurring), such property shall cease to constitute “Excluded Property”; provided further, that “Excluded Property” shall not include the right to receive any proceeds arising therefrom or any other rights referred to in Sections 9-406(f), 9-407(a) or 9-408(a) of the UCC or any Proceeds, substitutions or replacements of any Excluded Property (unless such Proceeds, substitutions or replacements would otherwise constitute Excluded Property).

 

 “Goodwill” shall mean, collectively, with respect to the Grantor, the goodwill connected with the Grantor’s business including, without limitation, (i) all goodwill connected with the use of and symbolized by any of the Intellectual Property Collateral in which the Grantor has any interest, (ii) all know-how, trade secrets, customer and supplier lists, proprietary information, inventions, methods, procedures, formulae, descriptions, compositions, technical data, drawings, specifications, name plates, catalogs, confidential information and the right to limit the use or disclosure thereof by any Person, pricing and cost information, business and marketing plans and proposals, consulting agreements, engineering contracts and such other assets which relate to such goodwill and (iii) all product lines of the Grantor’s business.

 

“Grantor” shall have the meaning assigned to such term in the Preamble hereof.

 

“Intellectual Property Collateral” shall mean, collectively, the Patents, Trademarks, Copyrights, Licenses and Goodwill.

 

“Letters of Credit” unless the context otherwise requires, shall have the meaning given to such term in the UCC.

 

 “Licenses” shall mean, collectively, with respect to the Grantor, all license and distribution agreements with any other Person with respect to any Patent, Trademark or 

  

3

  

 

 

Copyright or any other patent, trademark or copyright, whether the Grantor is a licensor or licensee, distributor or distributee under any such license or distribution agreement, together with any and all (i) renewals, extensions, supplements and continuations thereof, (ii) income, fees, royalties, damages, claims and payments now and hereafter due and/or payable thereunder and with respect thereto including, without limitation, damages and payments for past, present or future infringements or violations thereof, (iii) rights to sue for past, present and future infringements or violations thereof and (iv) other rights to use, exploit or practice any or all of the Patents, Trademarks or Copyrights or any other patent, trademark or copyright.

 

“Patents” shall mean, collectively, with respect to the Grantor, all patents issued or assigned to and all patent applications made by the Grantor (whether established or registered or recorded in the United States or any other country or any political subdivision thereof), including, without limitation, those patents, patent applications listed in Section IV of the Perfection Certificate, together with any and all (i) rights and privileges arising under applicable Law with respect to the Grantor’s use of any patents, (ii) inventions and improvements described and claimed therein, (iii) reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof, (iv) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable thereunder and with respect thereto including, without limitation, damages and payments for past, present or future infringements thereof, (v) rights corresponding thereto throughout the world and (vi) rights to sue for past, present or future infringements thereof.

 

“Perfection Certificate” shall mean that certain perfection certificate dated as of the date hereof, executed and delivered by the Grantor in favor of the Lender for the benefit of the Credit Parties, and each other Perfection Certificate (which shall be in form and substance reasonably acceptable to the Lender) executed and delivered by the applicable loan party in favor of the Lender for the benefit of the Credit Parties contemporaneously with the execution and delivery of a joinder agreement executed in accordance with Section 6.12 of the Credit Agreement, in each case, as the same may be amended, amended and restated, restated, supplemented or otherwise modified from time to time in accordance with the Credit Agreement.

 

“Pledged Interests” shall mean, collectively, with respect to the Grantor, all Equity Interests in any issuer now existing or hereafter acquired or formed, including, without limitation, all Equity Interests of such issuer described in Schedule II hereof and all Equity Interests in any successor corporation or interests or certificates of any successor limited liability company, partnership or other entity owned by the Grantor formed by or resulting from any consolidation, merger or amalgamation in which any Person listed in Section I of the Information Certificate is not the surviving entity, together with all rights, privileges, authority and powers of the Grantor relating to such Equity Interests issued by any such issuer or any such successor Person under the Organization Documents of any such issuer or any such successor Person, and the certificates, instruments and agreements representing such Equity Interests and any and all interest of the Grantor in the entries on the books of any financial intermediary pertaining to such Equity Interests, from time to time acquired by the Grantor in any manner, and all other Investment Property owned by the Grantor; provided, however, that to the extent applicable, 

 

  

4

  

 

Pledged Interests shall not include any interest possessing more than 65% of the voting power or control of all classes of interests entitled to vote of any CFC to the extent such pledge would result in an adverse tax consequence to the Grantor.

 

“Secured Obligations” shall mean the Obligations; provided, however, that Other Liabilities shall be Secured Obligations solely to the extent that there is sufficient Collateral following satisfaction of the Obligations described in clause (a) of the definition of Obligations.

 

“Securities Account Control Agreement” shall mean an agreement in form and substance satisfactory to the Lender with respect to any Securities Account of the Grantor.

 

“Securities Act” means the Securities Exchange Act of 1934 and the applicable regulations promulgated by the Securities and Exchange Commission pursuant to such Act.

 

“Securities Collateral” shall mean, collectively, the Pledged Interests and the Distributions.

 

“Security Agreement” shall have the meaning assigned to such in the Preamble hereof.

 

“Trademarks” shall mean, collectively, with respect to the Grantor, all trademarks (including service marks), slogans, logos, certification marks, trade dress, uniform resource locations (URLs), domain names, corporate names and trade names, whether registered or unregistered, owned by or assigned to the Grantor and all registrations and applications for the foregoing (whether statutory or common Law and whether established or registered in the United States or any other country or any political subdivision thereof), including, without limitation, the registrations and applications listed in Section IV of the Perfection Certificate, together with any and all (i) rights and privileges arising under applicable Law with respect to the Grantor’s use of any trademarks, (ii) reissues, continuations, extensions and renewals thereof, (iii) income, fees, royalties, damages and payments now and hereafter due and/or payable thereunder and with respect thereto, including, without limitation, damages, claims and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present and future infringements thereof.

 

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in the Commonwealth of Massachusetts; provided, however, that if a term is defined in Article 9 of the Uniform Commercial Code differently than in another Article thereof, the term shall have the meaning set forth in Article 9; provided further that, if by reason of mandatory provisions of law, perfection, or the effect of perfection or non-perfection, of a security interest in any Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the Commonwealth of Massachusetts, “Uniform Commercial Code” means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy, as the case may be.

 

  

5

  

 

SECTION 1.2.      Interpretation.  The rules of interpretation specified in Article I of the Credit Agreement shall be applicable to this Security Agreement.

  

SECTION 1.3.      Perfection Certificate. The Lender and the Grantor agree that the Perfection Certificate, and all schedules, amendments and supplements thereto are and shall at all times remain a part of this Security Agreement.

 

ARTICLE II

 

GRANT OF SECURITY AND SECURED OBLIGATIONS

 

SECTION 2.1.      Pledge; Grant of Security Interest.  As collateral security for the payment and performance in full of all the Secured Obligations, the Grantor hereby pledges and grants to the Lender for its benefit and for the benefit of the other Credit Parties, a lien on and security interest in and to all of the right, title and interest of the Grantor in, to and under all personal property and interests in such personal property, wherever located, and whether now existing or hereafter arising or acquired from time to time (collectively, the “Collateral”), including, without limitation:

 

	
  

	
    (i)

	
all Accounts;

 

	
  

	
   (ii)

	
all Goods, including Equipment, Inventory and Fixtures;

 

	
  

	
  (iii)

	
all Documents, Instruments and Chattel Paper;

 

	
  

	
  (iv)

	
all Letters of Credit and Letter-of-Credit Rights;

 

	
  

	
   (v)

	
all Securities Collateral;

 

	
  

	
  (vi)

	
all Investment Property;

 

	
  

	
 (vii)

	
all Intellectual Property Collateral;

 

	
  

	
(viii)

	
all Commercial Tort Claims, including, without limitation, those described in Section V of the Perfection Certificate;

 

	
   

	
   (ix)

	
all General Intangibles;

 

	
  

	
    (x)

	
all Deposit Accounts;

 

	
  

	
   (xi)

	
all Supporting Obligations;

 

	
  

	
  (xii)

	
all books and records relating to the Collateral; and

 

  

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 (xiii)

	
to the extent not covered by clauses (i) through (xii) of this sentence, all other personal property of the Grantor, whether tangible or intangible and all Proceeds and products of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of, each of the foregoing, any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Grantor from time to time with respect to any of the foregoing.

 

Notwithstanding anything to the contrary contained in clauses (i) through (xiii) above, the security interest created by this Security Agreement shall not extend to, and the term “Collateral” shall not include, any Excluded Property and the Grantor shall from time to time at the request of the Lender give written notice to the Lender identifying in reasonable detail the Excluded Property and shall provide to the Lender such other information regarding the Excluded Property as the Lender may reasonably request.

 

SECTION 2.2.      Secured Obligations.  This Security Agreement secures, and the Collateral is collateral security for, the payment and performance in full when due of the Secured Obligations.

 

SECTION 2.3.      Security Interest.  (a)  The Grantor hereby irrevocably authorizes the Lender at any time and from time to time to authenticate and file in any relevant jurisdiction any financing statements (including fixture filings) and amendments thereto that contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Collateral, including, without limitation, (i) whether the Grantor is an organization, the type of organization and any organizational identification number issued to the Grantor, (ii) a description of the Collateral as “all assets of the Grantor, wherever located, whether now owned or hereafter acquired” and (iii) in the case of a financing statement filed as a fixture filing, a sufficient description of the real property to which such Collateral relates.  The Grantor agrees to provide all information described in the immediately preceding sentence to the Lender promptly upon request.

 

(b)          The Grantor hereby ratifies its prior authorization for the Lender to file in any relevant jurisdiction any financing statements or amendments thereto relating to the Collateral if filed prior to the date hereof.

 

(c)          The Grantor hereby further authorizes the Lender to file filings

with the United States Patent and Trademark Office and United States Copyright Office (or any successor office or any similar office in any other country) or other necessary documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the security interest granted by the Grantor hereunder in any Intellectual Property Collateral, without the signature of the Grantor, and naming the Grantor, as debtor, and the Lender, as secured party.

 

  

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ARTICLE III

 

PERFECTION; SUPPLEMENTS; FURTHER ASSURANCES;

USE OF COLLATERAL

 

SECTION 3.1.      Delivery of Certificated Securities Collateral.  The Grantor represents and warrants that all certificates, agreements or instruments representing or evidencing the Securities Collateral in existence on the date hereof have been delivered to the Lender in suitable form for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank and that the Lender has a perfected first priority security interest therein.  The Grantor hereby agrees that all certificates, agreements or instruments representing or evidencing Securities Collateral acquired by the Grantor after the date hereof, shall promptly (and in any event within three (3) Business Days) upon receipt thereof by the Grantor be delivered to and held by or on behalf of the Lender pursuant hereto.  All certificated Securities Collateral shall be in suitable form for transfer by delivery or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Lender.  The Lender shall have the right, at any time upon the occurrence and during the continuance of any Event of Default, to endorse, assign or otherwise transfer to or to register in the name of the Lender or any of its nominees or endorse for negotiation any or all of the Securities Collateral, without any indication that such Securities Collateral is subject to the security interest hereunder.  In addition, the Lender shall have the right with written notice to exchange certificates representing or evidencing Securities Collateral for certificates of smaller or larger denominations, accompanied by instruments of transfer or assignment and letters of direction duly executed in blank.

 

SECTION 3.2.      Perfection of Uncertificated Securities Collateral.  The Grantor represents and warrants that the Lender has a perfected first priority security interest in all uncertificated Pledged Interests pledged by it hereunder that is in existence on the date hereof and that the applicable Organization Documents do not require the consent of the other shareholders, members, partners or other Person to permit the Lender or its designee to be substituted for the Grantor as a shareholder, member, partner or other equity owner, as applicable, thereto.  The Grantor hereby agrees that if any of the Pledged Interests are at any time not evidenced by certificates of ownership, then the Grantor shall, to the extent permitted by applicable Law and upon the request of the Lender, cause such pledge to be recorded on the equityholder register or the books of the issuer, execute customary pledge forms or other documents necessary or reasonably requested to complete the pledge and give the Lender the right to transfer such Pledged Interests under the terms hereof and, provide to the Lender an opinion of counsel, in form and substance reasonably satisfactory to the Lender, confirming such pledge and perfection thereof.

 

SECTION 3.3.      Financing Statements and Other Filings; Maintenance of Perfected Security Interest.  The Grantor represents and warrants that the only filings, registrations and recordings necessary and appropriate to create, preserve, protect, publish notice 

 

  

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of and perfect the security interest granted by the Grantor to the Lender (for the benefit of the Credit Parties) pursuant to this Security Agreement in respect of the Collateral are listed on Schedule I hereto.  The Grantor represents and warrants that all such filings, registrations and recordings have been delivered to the Lender in completed and, to the extent necessary or appropriate, duly executed form for filing in each governmental, municipal or other office specified in Schedule I.  The Grantor agrees that at the sole cost and expense of the Grantor, (i) the Grantor will maintain the security interest created by this Security Agreement in the Collateral as a perfected first priority security interest and shall defend such security interest against the claims and demands of all Persons (other than with respect to Permitted Encumbrances), (ii) the Grantor shall furnish to the Lender from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Lender may reasonably request, all in reasonable detail and (iii) at any time and from time to time, upon the written request of the Lender, the Grantor shall promptly and duly execute and deliver, and file and have recorded, such further instruments and documents and take such further action as the Lender may  reasonably request, including the filing of any financing statements, continuation statements and other documents (including this Security Agreement) under the UCC (or other applicable Laws) in effect in any jurisdiction with respect to the security interest created hereby and the execution and delivery of Control Agreements, all in form reasonably satisfactory to the Lender and in such offices (including, without limitation, the United States Patent and Trademark Office and the United States Copyright Office) wherever required by applicable Law in each case to perfect, continue and maintain a valid, enforceable, first priority security interest in the Collateral as provided herein and to preserve the other rights and interests granted to the Lender hereunder, as against the Grantor and third parties (other than with respect to Permitted Encumbrances), with respect to the Collateral.

 

SECTION 3.4.      Other Actions.  In order to further evidence the attachment, perfection and priority of, and the ability of the Lender to enforce, the Lender’s security interest in the Collateral, the Grantor represents, warrants and agrees, in each case at the Grantor’s own expense, with respect to the following Collateral that:

 

(a)          Instruments and Tangible Chattel Paper.  As of the date hereof (i) no amount payable under or in connection with any of the Collateral is evidenced by any Instrument or Tangible Chattel Paper other than such Instruments and Tangible Chattel Paper listed in Section III. D. of the Perfection Certificate and (ii) each Instrument and each item of Tangible Chattel Paper listed in Section III. D. of the Perfection Certificate, to the extent requested by the Lender, has been properly endorsed, assigned and delivered to the Lender, accompanied by instruments of transfer or assignment and letters of direction duly executed in blank.  If any amount payable under or in connection with any of the Collateral shall be evidenced by any Instrument or Tangible Chattel Paper, the Grantor shall forthwith endorse, assign and deliver the same to the Lender, accompanied by such instruments of transfer or assignment duly executed in blank as the Lender may reasonably request from time to time.

 

  

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(b)        Investment Property.  (i) As of the date hereof (1) it has no Securities Accounts other than those listed in Section III.B. of the Perfection Certificate, (2) it does not hold, own or have any interest in any certificated securities or uncertificated securities other than those constituting Pledged Interests with respect to which the Lender has a perfected first priority security interest in such Pledged Interests, and (3) it has entered into a duly authorized, executed and delivered Securities Account Control Agreement with respect to each Securities Account listed in Section III.B. of the Perfection Certificate with respect to which the Lender has a perfected first priority security interest in such Securities Accounts by Control.

(ii)            If the Grantor shall at any time hold or acquire any certificated securities, other than any securities of any CFC not required to be pledged hereunder, the Grantor shall promptly (a) notify the Lender thereof and endorse, assign and deliver the same to the Lender, accompanied by such instruments of transfer or assignment duly executed in blank, all in form and substance reasonably satisfactory to the Lender or (b) deliver such securities into a Securities Account with respect to which a Securities Account Control Agreement is in effect in favor of the Lender.  If any securities now or hereafter acquired by the Grantor, other than any securities of any CFC not required to be pledged hereunder, are uncertificated, the Grantor shall promptly notify the Lender thereof and pursuant to an agreement in form and substance reasonably satisfactory to the Lender, either (a) grant Control to the Lender and cause the issuer to agree to comply with instructions from the Lender as to such securities, without further consent of the Grantor or such nominee, (b) cause a security entitlement with respect to such uncertificated security to be held in a Securities Account with respect to which the Lender has Control or (c) arrange for the Lender to become the registered owner of the securities.  The Grantor shall not hereafter establish and maintain any Securities Account with any Securities Intermediary unless (1) the Grantor shall have given the Lender ten (10) Business Days’ prior written notice of its intention to establish such new Securities Account with such Securities Intermediary, (2) such Securities Intermediary shall be reasonably acceptable to the Lender and (3) such Securities Intermediary and the Grantor shall have duly executed and delivered a Control Agreement with respect to such Securities Account.  The Grantor shall accept any cash and Investment Property which are proceeds of the Pledged Interests in trust for the benefit of the Lender and promptly upon receipt thereof, deposit any cash received by it into an account in which the Lender has Control, or with respect to any Investment Properties or additional securities, take such actions as required above with respect to such securities.  The Lender agrees with the Grantor that the Lender shall not give any entitlement orders or instructions or directions to any issuer of uncertificated securities or Securities Intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by the Grantor, unless a Cash Dominion Event has occurred and is continuing.  The Grantor shall not grant control over any Pledged Interests to any Person other than the Lender.

 

(iii)           As between the Lender and the Grantor, the Grantor shall bear the investment risk with respect to the Investment Property and Pledged Interests, and the 

 

  

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risk of loss of, damage to, or the destruction of the Investment Property and Pledged Interests, whether in the possession of, or maintained as a security entitlement or deposit by, or subject to the control of, the Lender, a Securities Intermediary, the Grantor or any other Person; provided, however, that nothing contained in this SECTION 3.4(b) shall release or relieve any Securities Intermediary of its duties and obligations to the Grantor or any other Person under any Control Agreement or under applicable Law.  The Grantor shall promptly pay all Claims and fees of whatever kind or nature with respect to the Pledged Interests pledged by it under this Security Agreement.  In the event the Grantor shall fail to make such payment contemplated in the immediately preceding sentence, the Lender may do so for the account of the Grantor and the Grantor shall promptly reimburse and indemnify the Lender for all costs and expenses incurred by the Lender under this SECTION 3.4(b) and under SECTION 9.3 hereof.

 

(c)        Electronic Chattel Paper and Transferable Records.  As of the date hereof no amount payable under or in connection with any of the Collateral is evidenced by any Electronic Chattel Paper or any “transferable record” (as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction).  If any amount payable under or in connection with any of the Collateral shall be evidenced by any Electronic Chattel Paper or any transferable record, the Grantor shall promptly notify the Lender thereof and shall take such action as the Lender may reasonably request to vest in the Lender control under UCC Section 9-105 of such Electronic Chattel Paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record.  The Lender agrees with the Grantor that the Lender will arrange, pursuant to procedures reasonably satisfactory to the Lender and so long as such procedures will not result in the Lender’s loss of control, for the Grantor to make alterations to the Electronic Chattel Paper or transferable record permitted under UCC Section 9-105 or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act of Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by the Grantor with respect to such Electronic Chattel Paper or transferable record.

 

(d)        Letter-of-Credit Rights.  If the Grantor is at any time a beneficiary under a Letter of Credit now or hereafter issued in favor of the Grantor, (which, for the avoidance of doubt, shall not include any Letter of Credit issued pursuant to the Credit Agreement), the Grantor shall promptly notify the Lender thereof and the Grantor shall, at the request of the Lender, pursuant to an agreement in form and substance reasonably satisfactory to the Lender, either (i) arrange for the issuer and any confirmer of such Letter of Credit to consent to an assignment to the Lender of, and to pay to the Lender, the proceeds of, any drawing under the Letter of Credit or (ii) arrange for the Lender to become the beneficiary of such Letter of Credit, with the Lender agreeing, in each case, that the 

 

  

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proceeds of any drawing under the Letter of Credit are to be applied as provided in the Credit Agreement.

 

(e)          Commercial Tort Claims.   As of the date hereof it holds no Commercial Tort Claims other than those listed in Section V of the Perfection Certificate.  If the Grantor shall at any time hold or acquire a Commercial Tort Claim, the Grantor shall immediately notify the Lender in writing signed by the Grantor of the brief details thereof and grant to the Lender in such writing a security interest therein and in the Proceeds thereof, all upon the terms of this Security Agreement, with such writing to be in form and substance reasonably satisfactory to the Lender.

 

SECTION 3.5.      Supplements; Further Assurances.  The Grantor shall take such further actions, and execute and deliver to the Lender such additional assignments, agreements, supplements, powers and instruments, as the Lender may in its reasonable judgment deem necessary or appropriate, wherever required by Law, in order to perfect, preserve and protect the security interest in the Collateral as provided herein and the rights and interests granted to the Lender hereunder, to carry into effect the purposes hereof or better to assure and confirm unto the Lender or permit the Lender to exercise and enforce its rights, powers and remedies hereunder with respect to any Collateral.  Without limiting the generality of the foregoing, the Grantor shall make, execute, endorse, acknowledge, file or refile and/or deliver to the Lender from time to time upon reasonable request such lists, descriptions and designations of the Collateral, copies of warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, supplements, additional security agreements, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments.  If an Event of Default has occurred and is continuing, the Lender may institute and maintain, in its own name or in the name of the Grantor, such suits and proceedings as the Lender may be advised by counsel shall be necessary or expedient to prevent any impairment of the security interest in or the perfection thereof in the Collateral.  All of the foregoing shall be at the sole cost and expense of the Grantor.  The Grantor and the Lender acknowledge that this Security Agreement is intended to grant to the Lender for the benefit of the Credit Parties a security interest in and Lien upon the Collateral and shall not constitute or create a present assignment of any of the Collateral.

 

ARTICLE IV

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

In addition to, and without limitation of, each of the representations, warranties and covenants set forth in the Credit Agreement and the other Loan Documents, the Grantor represents, warrants and covenants as follows:

 

  

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SECTION 4.1.      Title.  No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the Lender pursuant to this Security Agreement or as are permitted by the Credit Agreement.  No Person other than the Lender has control or possession of all or any part of the Collateral, except as permitted by the Credit Agreement.

 

SECTION 4.2.      Limitation on Liens; Defense of Claims; Transferability of Collateral.  The Grantor is as of the date hereof, and, as to Collateral acquired by it from time to time after the date hereof, the Grantor will be, the sole direct and beneficial owner of all Collateral pledged by it hereunder free from any Lien or other right, title or interest of any Person other than the Liens and security interest created by this Security Agreement and Permitted Encumbrances.  The Grantor shall, at its own cost and expense, defend title to the Collateral pledged by it hereunder and the security interest therein and Lien thereon granted to the Lender and the priority thereof against all claims and demands of all Persons, at its own cost and expense, at any time claiming any interest therein adverse to the Lender or any other Credit Party other than (i) with respect to claims or demands regarding priority of Liens, Permitted Encumbrances having priority by operation of applicable Law, and (ii) with respect to all other claims and demands, Permitted Encumbrances.  There is no agreement, and the Grantor shall not enter into any agreement or take any other action, that would restrict the transferability of any of the Collateral or otherwise impair or conflict with the Grantor’s obligations or the rights of the Lender hereunder.

 

SECTION 4.3.      Chief Executive Office; Change of Name; Jurisdiction of Organization.  (a)  The exact legal name, type of organization, jurisdiction of organization, federal taxpayer identification number, organizational identification number and chief executive office of the Grantor is indicated next to its name in Sections I.A. and I.B. of the Perfection Certificate.  The Grantor shall furnish to the Lender prompt written notice of any change in (i) its corporate name, (ii) the location of its chief executive office, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility), (iii) its identity or type of organization or corporate structure, (iv) its federal taxpayer identification number or organizational identification number or (v) its jurisdiction of organization (in each case, including, without limitation, by merging with or into any other entity, reorganizing, dissolving, liquidating, reincorporating or incorporating in any other jurisdiction).  The Grantor agrees (A) not to effect or permit any such change unless all filings have been made under the UCC or otherwise that are required in order for the Lender to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Collateral (subject to, with respect to priority, Permitted Encumbrances having priority by operation of applicable Law) and (B) to take all action reasonably satisfactory to the Lender to maintain the perfection and priority of the security interest of the Lender for the benefit of the Credit Parties in the Collateral intended to be granted hereunder.  The Grantor agrees to promptly provide the Lender with certified Organization Documents reflecting any of the changes described in the preceding sentence.

 

  

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(b)          The Lender may rely on opinions of counsel as to whether any or all UCC financing statements of the Grantor need to be amended as a result of any of the changes described in SECTION 4.3(a).  If the Grantor fails to provide information to the Lender about such changes on a timely basis, the Lender shall not be liable or responsible to any party for any failure to maintain a perfected security interest in the Grantor’s property constituting Collateral, for which the Lender needed to have information relating to such changes.  The Lender shall have no duty to inquire about such changes if the Grantor does not inform the Lender of such changes, the parties acknowledging and agreeing that it would not be feasible or practical for the Lender to search for information on such changes if such information is not provided by the Grantor.

 

SECTION 4.4.      Location of Inventory and Equipment.  As of the Closing Date, all Equipment and Inventory of the Grantor is located at the chief executive office or such other location listed in Schedule 5.08(b)(1) and Schedule 5.08(b)(2) of the Credit Agreement.

 

SECTION 4.5.      Condition and Maintenance of Equipment.  The Equipment of the Grantor is in good repair, working order and condition, reasonable wear and tear excepted.  The Grantor shall cause the Equipment to be maintained and preserved in good repair, working order and condition, reasonable wear and tear excepted, and shall as quickly as commercially reasonable make or cause to be made all repairs, replacements and other improvements which are necessary in the conduct of the Grantor’s business.

 

SECTION 4.6.      Due Authorization and Issuance.  All of the Pledged Interests have been, and to the extent any Pledged Interests are hereafter issued, such shares or other equity interests will be, upon such issuance, duly authorized, validly issued and, to the extent applicable, fully paid and non-assessable.  All of the Pledged Interests have been fully paid for, and there is no amount or other obligation owing by the Grantor to any issuer of the Pledged Interests in exchange for or in connection with the issuance of the Pledged Interests or the Grantor’s status as a partner or a member of any issuer of the Pledged Interests, other than those expressly set forth in the Organization Documents of the issuer of such Pledged Interests as in effect as of the date hereof.

 

SECTION 4.7.      No Conflicts, Consents, etc.  No consent of any party (including, without limitation, equity holders or creditors of the Grantor) and no consent, authorization, approval, license or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or other Person is required (A) for the grant of the security interest by the Grantor of the Collateral pledged by it pursuant to this Security Agreement or for the execution, delivery or performance hereof by the Grantor, (B) for the exercise by the Lender of the voting or other rights provided for in this Security Agreement or (C) for the exercise by the Lender of the remedies in respect of the Collateral pursuant to this Security Agreement except, in each case, for such consents which have been obtained prior to the date hereof.  Following the occurrence and during the continuation of an Event of Default, if the Lender desires to exercise any remedies, voting or consensual rights or attorney-in-fact powers set forth in this Security Agreement and determines it necessary to obtain any approvals or consents of any Governmental 

 

 

  

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Authority or any other Person therefor, then, upon the reasonable request of the Lender, the Grantor agrees to use commercially reasonable efforts to assist and aid the Lender to obtain as soon as commercially practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers.

SECTION 4.8.      Collateral.  All information set forth herein, including the schedules annexed hereto, and all information contained in any documents, schedules and lists heretofore delivered to any Credit Party in connection with this Security Agreement, in each case, relating to the Collateral, is accurate and complete in all material respects.  The Collateral described on the schedules annexed hereto or in the Perfection Certificate constitutes all of the material property of such type of Collateral owned or held by the Grantor.

 

SECTION 4.9.      Insurance.  The Grantor shall (i) maintain or shall cause to be maintained such insurance as is required pursuant to Section 6.07 of the Credit Agreement; (ii) maintain such other insurance as may be required by applicable Law; and (iii) furnish to the Lender, upon written request, full information as to the insurance carried.  The Grantor hereby irrevocably makes, constitutes and appoints the Lender (and all officers, employees or agents designated by the Lender) as the Grantor’s true and lawful agent (and attorney-in-fact), exercisable only after the occurrence and during the continuance of an Event of Default, for the purpose of making, settling and adjusting claims in respect of the Collateral under policies of insurance, endorsing the name of the Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto.  In the event that the Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or in part relating thereto, the Lender may, without waiving or releasing any obligation or liability of the Grantor hereunder or any Default or Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Lender deems advisable.  All sums disbursed by the Lender in connection with this SECTION 4.9, including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantor to the Lender and shall be additional Secured Obligations secured hereby.

SECTION 4.10.    Payment of Taxes; Compliance with Laws; Contested Liens; Claims.  The Grantor represents and warrants that all Claims imposed upon or assessed against the Collateral have been paid and discharged except to the extent such Claims constitute a Lien not yet due and payable or a Permitted Encumbrance.  The Grantor shall comply with all applicable Law relating to the Collateral the failure to comply with which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.  The Grantor may at its own expense contest the validity, amount or applicability of any Claims so long as the contest thereof shall be conducted in accordance with, and permitted pursuant to the provisions of, the Credit Agreement.  Notwithstanding the foregoing provisions of this SECTION 4.10, no contest of any such obligation may be pursued by the Grantor if such contest would expose the Lender or any other Credit Party to (i) any possible criminal liability or (ii) any additional civil liability 

 

 

  

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for failure to comply with such obligations unless the Grantor shall have furnished a bond or other security therefor satisfactory to the Lender, or such other Credit Party, as the case may be.

 

SECTION 4.11.    Access to Collateral, Books and Records; Other Information.  Without limitation or duplication of the provisions of Section 6.10 of the Credit Agreement, upon reasonable prior request to the Grantor, the Lender, its agents, accountants and attorneys shall have full and free access to visit and inspect, as applicable, during normal business hours, all of the Collateral including, without limitation, all of the books, correspondence and records of the Grantor relating thereto.  The Lender and its representatives may examine the same, take extracts therefrom and make photocopies thereof, and the Grantor agrees to render to the Lender, at the Grantor’s cost and expense, such clerical and other assistance as may be reasonably requested by the Lender with regard thereto.  The Grantor shall, at any and all times, within a reasonable time after written request by the Lender, furnish or cause to be furnished to the Lender, in such manner and in such detail as may be reasonably requested by the Lender, additional information with respect to the Collateral.

 

ARTICLE V

 

CERTAIN PROVISIONS CONCERNING SECURITIES COLLATERAL

 

SECTION 5.1.      Pledge of Additional Securities Collateral.  The Grantor shall, upon obtaining any Pledged Interests of any Person required to be pledged hereunder, accept the same in trust for the benefit of the Lender and forthwith deliver to the Lender a pledge amendment, duly executed by the Grantor, in substantially the form of Exhibit 1 annexed hereto (each, a “Pledge Amendment”), and the certificates and other documents required under SECTION 3.1 and SECTION 3.2 hereof in respect of the additional Pledged Interests which are to be pledged pursuant to this Security Agreement, and confirming the attachment of the Lien hereby created on and in respect of such additional Pledged Interests.  The Grantor hereby authorizes the Lender to attach each Pledge Amendment to this Security Agreement and agrees that all Pledged Interests listed on any Pledge Amendment delivered to the Lender shall for all purposes hereunder be considered Collateral.

 

SECTION 5.2.      Voting Rights; Distributions; etc.

 

(i)           So long as no Event of Default shall have occurred and be continuing, the Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Securities Collateral or any part thereof for any purpose not inconsistent with the terms or purposes hereof, the Credit Agreement or any other Loan Document evidencing the Secured Obligations.  The Lender shall be deemed without further action or formality to have granted to the Grantor all necessary consents relating to voting rights and shall, if necessary, upon written request of the Grantor and at the sole cost and expense of the Grantor, from time to time execute and deliver (or cause to be executed and delivered) to such Grantor all such instruments as the 

 

 

  

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Grantor may reasonably request in order to permit the Grantor to exercise the voting and other rights which it is entitled to exercise pursuant to this SECTION 5.2(i).

 

(ii)          Upon the occurrence and during the continuance of any Event of Default, all rights of the Grantor to exercise the voting and other consensual rights it would otherwise be entitled to exercise pursuant to SECTION 5.2(i) hereof without any action, other than, in the case of any Securities Collateral, or the giving of any notice shall immediately cease, and all such rights shall thereupon become vested in the Lender, which shall thereupon have the sole right to exercise such voting and other consensual rights; provided that the Lender shall have the right, in its sole discretion, from time to time following the occurrence and continuance of an Event of Default to permit the Grantor to exercise such rights under SECTION 5.2(i).  After such Event of Default is no longer continuing, the Grantor shall have the right to exercise the voting, managerial and other consensual rights and powers that it would otherwise be entitled to pursuant to SECTION 5.2(i) hereof.

 

(iii)         So long as no Cash Dominion Event shall have occurred and be continuing, the Grantor shall be entitled to receive and retain, and to utilize free and clear of the Lien hereof, any and all Distributions, but only if and to the extent made in accordance with, and to the extent permitted by, the provisions of the Credit Agreement; provided, however, that any and all such Distributions consisting of rights or interests in the form of securities shall be forthwith delivered to the Lender to hold as Collateral and shall, if received by the Grantor, be received in trust for the benefit of the Lender, be segregated from the other property or funds of the Grantor and be forthwith delivered to the Lender as Collateral in the same form as so received (with any necessary endorsement).  The Lender shall, if necessary, upon written request of the Grantor and at the sole cost and expense of the Grantor, from time to time execute and deliver (or cause to be executed and delivered) to the Grantor all such instruments as the Grantor may reasonably request in order to permit the Grantor to receive the Distributions which it is authorized to receive and retain pursuant to this SECTION 5.2(iii).

 

(iv)         Upon the occurrence and during the continuance of any Cash Dominion Event, all rights of the Grantor to receive Distributions which it would otherwise be authorized to receive and retain pursuant to SECTION 5.2(iii) hereof shall cease and all such rights shall thereupon become vested in the Lender, which shall thereupon have the sole right to receive and hold as Collateral such Distributions.  After such Cash Dominion Event is no longer continuing, the Grantor shall have the right to receive the Distributions which it would be authorized to receive and retain pursuant to SECTION 5.2(iii).

 

(v)          The Grantor shall, at its sole cost and expense, from time to time execute and deliver to the Lender appropriate instruments as the Lender may reasonably request in order to permit the Lender to exercise the voting and other rights which it may be entitled to exercise pursuant to SECTION 5.2(ii) hereof and to receive all Distributions which it may be entitled to receive under SECTION 5.2(iii) hereof.

  

  

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(vi)         All Distributions which are received by the Grantor contrary to the provisions of SECTION 5.2(ii) or SECTION 5.2(iii) hereof shall be received in trust for the benefit of the Lender, shall be segregated from other funds of the Grantor and shall immediately be paid over to the Lender as Collateral in the same form as so received (with any necessary endorsement).

 

SECTION 5.3.       Organization Documents.  The Grantor has delivered to the Lender true, correct and complete copies of its Organization Documents.  The Organization Documents are in full force and effect.  The Grantor will not terminate or agree to terminate any Organization Documents or make any amendment or modification to any Organization Documents (including electing to treat any Pledged Interests of the Grantor as a security under Section 8-103 of the UCC) except to the extent permitted pursuant to the Credit Agreement.

 

SECTION 5.4.      Defaults, Etc.  The Grantor is not in default in the payment of any portion of any mandatory capital contribution, if any, required to be made under any agreement to which the Grantor is a party relating to the Pledged Interests pledged by it, and the Grantor is not in violation of any other provisions of any such agreement to which the Grantor is a party, or otherwise in default or violation thereunder, other than any such violation which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  No Securities Collateral pledged by the Grantor is subject to any defense, offset or counterclaim, nor have any of the foregoing been asserted or alleged against the Grantor by any Person with respect thereto, and as of the date hereof, there are no certificates, instruments, documents or other writings (other than the Organization Documents and certificates, if any, delivered to the Lender) which evidence any Pledged Interests of the Grantor.

 

ARTICLE VI

 

CERTAIN PROVISIONS CONCERNING INTELLECTUAL

PROPERTY COLLATERAL

 

SECTION 6.1.      Grant of License.  Without limiting the rights of Lender as the holder of a Lien on the Intellectual Property Collateral, for the purpose of enabling the Lender, during the continuance of an Event of Default, to exercise rights and remedies under Article VIII hereof at such time as the Lender shall be lawfully entitled to exercise such rights and remedies, and for no other purpose, the Grantor hereby grants to the Lender, to the extent assignable, an irrevocable, non-exclusive license (exercisable without payment of royalty, rent or other compensation to the Grantor) to use, assign, license or sublicense any of the Intellectual Property Collateral now owned or hereafter acquired by the Grantor and to occupy any Real Property owned or leased by the Grantor, wherever the same may be located, including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer programs used for the compilation or printout hereof.

 

  

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SECTION 6.2.      Registrations.  Except pursuant to licenses and other user agreements entered into by the Grantor in the ordinary course of business, on and as of the date hereof (i) the Grantor owns/or and possesses the right to use, and has done nothing to authorize or enable any other Person to use, any material Copyright, Patent or Trademark listed in Section IV of the Perfection Certificate, and (ii) all registrations listed in Section IV of the Perfection Certificate are valid and in full force and effect.

 

SECTION 6.3.      No Violations or Proceedings.  To the Grantor’s knowledge, on and as of the date hereof, there is no violation by others of any right of the Grantor with respect to any Copyright, Patent or Trademark listed in Section IV of the Perfection Certificate, respectively, pledged by it under the name of the Grantor, except any such violations that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

 

SECTION 6.4.      Protection of Lender’s Security.  On a continuing basis, the Grantor shall, at its sole cost and expense, (i) promptly following its becoming aware thereof, notify the Lender of (A) any adverse determination in any proceeding in the United States Patent and Trademark Office or the United States Copyright Office with respect to any Patent, Trademark or Copyright necessary for the conduct of business of the Grantor or (B) the institution of any proceeding or any adverse determination in any federal, state or local court or administrative body regarding the Grantor’s claim of ownership in or right to use any of the Intellectual Property Collateral material to the use and operation of the Collateral, its right to register such Intellectual Property Collateral or its right to keep and maintain such registration in full force and effect, (ii) maintain and protect the Intellectual Property Collateral necessary for the conduct of business of the Grantor, (iii) not permit to lapse or become abandoned any Intellectual Property Collateral necessary for the conduct of business of the Grantor, and not settle or compromise any pending or future litigation or administrative proceeding with respect to such Intellectual Property Collateral, in each case except as shall be consistent with commercially reasonable business judgment, (iv) upon the Grantor’s obtaining knowledge thereof, promptly notify the Lender in writing of any event which may be reasonably expected to materially and adversely affect the value or utility of the Intellectual Property Collateral or any portion thereof material to the use and operation of the Collateral, the ability of the Grantor or the Lender to dispose of the Intellectual Property Collateral or any portion thereof or the rights and remedies of the Lender in relation thereto including, without limitation, a levy or threat of levy or any legal process against the Intellectual Property Collateral or any material portion thereof, (v) not license the Intellectual Property Collateral other than licenses entered into by the Grantor in, or incidental to, the ordinary course of business, or amend or permit the amendment of any of the material licenses in a manner that materially and adversely affects the right to receive payments thereunder, or in any manner that would materially impair the value of the Intellectual Property Collateral or the Lien on and security interest in the Intellectual Property Collateral intended to be granted to the Lender for the benefit of the Credit Parties, without the consent of the Lender, (vi) until the Lender exercises its rights to make collection, diligently keep adequate records respecting the Intellectual Property Collateral and (vii) furnish to the Lender from time to time upon the Lender’s reasonable request therefor detailed statements and 

 

  

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amended schedules further identifying and describing the Intellectual Property Collateral and such other materials evidencing or reports pertaining to the Intellectual Property Collateral as the Lender may from time to time request.  Notwithstanding the foregoing, nothing herein shall prevent the Grantor from selling, disposing of or otherwise using any Intellectual Property Collateral as permitted under the Credit Agreement.

 

SECTION 6.5.      After-Acquired Property.  If the Grantor shall, at any time before this Security Agreement shall have been terminated in accordance with SECTION 9.5(a), (i) obtain any rights to any additional Intellectual Property Collateral or (ii) become entitled to the benefit of any additional Intellectual Property Collateral or any renewal or extension thereof, including any reissue, division, continuation, or continuation-in-part of any Intellectual Property Collateral, or any improvement on any Intellectual Property Collateral, the provisions hereof shall automatically apply thereto and any such item enumerated in clause (i) or (ii) of this SECTION 6.5 with respect to the Grantor shall automatically constitute Intellectual Property Collateral if such would have constituted Intellectual Property Collateral at the time of execution hereof and be subject to the Lien and security interest created by this Security Agreement without further action by any party.  With respect to any federally registered Intellectual Property Collateral, the Grantor shall, no less frequently than once per Fiscal Quarter, (a) provide to the Lender a written notice of all of the foregoing items enumerated in clause (i) or (ii) of this SECTION 6.5 occurring during the immediately preceding Fiscal Quarter, and (b) confirm the attachment of the Lien and security interest created by this Security Agreement to any rights described in clauses (i) and (ii) of the immediately preceding sentence of this SECTION 6.5 by execution of an instrument in form reasonably acceptable to the Lender.

 

SECTION 6.6.      Modifications.  The Grantor authorizes the Lender to modify this Security Agreement by amending Section IV of the Perfection Certificate to include any Intellectual Property Collateral acquired or arising after the date hereof of the Grantor including, without limitation, any of the items listed in SECTION 6.5 hereof.

 

SECTION 6.7.      Litigation.  Unless there shall occur and be continuing any Event of Default, the Grantor shall have the right to commence and prosecute in its own name, as the party in interest, for its own benefit and at the sole cost and expense of the Grantor, such applications for protection of the Intellectual Property Collateral and suits, proceedings or other actions to prevent the infringement, counterfeiting, unfair competition, dilution, diminution in value or other damage as are necessary to protect the Intellectual Property Collateral.  Upon the occurrence and during the continuance of any Event of Default, the Lender shall have the right but shall in no way be obligated to file applications for protection of the Intellectual Property Collateral and/or bring suit in the name of the Grantor, the Lender or the other Credit Parties to enforce the Intellectual Property Collateral and any license thereunder.  In the event of such suit, the Grantor shall, at the reasonable request of the Lender, do any and all lawful acts and execute any and all documents requested by the Lender in aid of such enforcement and the Grantor shall promptly reimburse and indemnify the Lender, as the case may be, for all costs and expenses incurred by the Lender in the exercise of its rights under this SECTION 6.7 in accordance with SECTION 9.3 hereof.  In the event that the Lender shall elect not to bring suit to enforce the 

 

  

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Intellectual Property Collateral, the Grantor agrees, at the request of the Lender, to take all commercially reasonable actions necessary, whether by suit, proceeding or other action, to prevent the infringement, counterfeiting, unfair competition, dilution, diminution in value of or other damage to any of the Intellectual Property Collateral by others and for that purpose agrees to diligently maintain any suit, proceeding or other action against any Person so infringing necessary to prevent such infringement.

 

SECTION 6.8.      Third Party Consents.  The Grantor shall use commercially reasonable efforts to obtain the consent of third parties to the extent such consent is necessary or desirable to create a valid, perfected security interest in favor of the Lender in any Intellectual Property Collateral.

 

ARTICLE VII

 

CERTAIN PROVISIONS CONCERNING ACCOUNTS

 

SECTION 7.1.      Special Representations and Warranties.  As of the time when each of its Accounts is included in the Borrowing Base as an Eligible Credit Card Receivable the Grantor shall be deemed to have represented and warranted that such Account and all records, papers and documents relating thereto (i) are genuine and correct and in all material respects what they purport to be, (ii) represent the legal, valid and binding obligation of the account debtor, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability, evidencing indebtedness unpaid and owed by such account debtor, arising out of the performance of labor or services or the sale, lease, license, assignment or other disposition and delivery of the goods or other property listed therein or out of an advance or a loan, and (iii) are in all material respects in compliance and conform with all applicable material federal, state and local Laws and applicable Laws of any relevant foreign jurisdiction.

 

SECTION 7.2.      Maintenance of Records.  The Grantor shall keep and maintain at its own cost and expense materially complete records of each Account, in a manner consistent with prudent business practice, including, without limitation, records of all payments received, all credits granted thereon, all merchandise returned and all other documentation relating thereto.  The Grantor shall, at the Grantor’s sole cost and expense, upon the Lender’s demand made at any time after the occurrence and during the continuance of any Event of Default, deliver all tangible evidence of Accounts, including, without limitation, all documents evidencing Accounts and any books and records relating thereto to the Lender or to its representatives (copies of which evidence and books and records may be retained by the Grantor).  Upon the occurrence and during the continuance of any Event of Default, the Lender may transfer a full and complete copy of the Grantor’s books, records, credit information, reports, memoranda and all other writings relating to the Accounts to and for the use by any Person that has acquired or is 

 

  

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contemplating acquisition of an interest in the Accounts or the Lender’s security interest therein in accordance with applicable Law without the consent of the Grantor.

 

SECTION 7.3.      Legend.  The Grantor shall legend, at the request of the Lender made at any time after the occurrence and during the continuance of any Event of Default and in form and manner reasonably satisfactory to the Lender, the Accounts and the other books, records and documents of the Grantor evidencing or pertaining to the Accounts with an appropriate reference to the fact that the Accounts have been collaterally assigned to the Lender for the benefit of the Credit Parties and that the Lender has a security interest therein.

 

SECTION 7.4.      Modification of Terms, Etc.  The Grantor shall not rescind or cancel any indebtedness evidenced by any Account or modify any term thereof or make any adjustment with respect thereto except in the ordinary course of business consistent with prudent business practice, or extend or renew any such indebtedness except in the ordinary course of business consistent with prudent business practice or compromise or settle any dispute, claim, suit or legal proceeding relating thereto or sell any Account or interest therein except in the ordinary course of business consistent with prudent business practice or in accordance with the Credit Agreement without the prior written consent of the Lender.

 

SECTION 7.5.      Collection.  The Grantor shall cause to be collected from the account debtor of each of the Accounts, as and when due in the ordinary course of business consistent with prudent business practice (including, without limitation, Accounts that are delinquent, such Accounts to be collected in accordance with generally accepted commercial collection procedures), any and all amounts owing under or on account of such Account, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Account.  The costs and expenses (including, without limitation, attorneys’ fees) of collection, in any case, whether incurred by the Grantor, the Lender or any other Credit Party, shall be paid by the Grantor.

 

ARTICLE VIII

REMEDIES

 

SECTION 8.1.      Remedies.   Upon the occurrence and during the continuance of any Event of Default the Lender may, from time to time in respect of the Collateral, in addition to the other rights and remedies provided for herein, under applicable Law or otherwise available to it:

 

(i)         Personally, or by agents or attorneys, immediately take possession of the Collateral or any part thereof, from the Grantor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon the Grantor’s premises where any of the Collateral is located, remove such Collateral, remain present at such premises to receive copies of all communications and remittances relating to the 

 

 

  

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Collateral and use in connection with such removal and possession any and all services, supplies, aids and other facilities of the Grantor;

 

(ii)        Demand, sue for, collect or receive any money or property at any time payable or receivable in respect of the Collateral including, without limitation, instructing the obligor or obligors on any agreement, instrument or other obligation constituting part of the Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Lender, and in connection with any of the foregoing, compromise, settle, extend the time for payment and make other modifications with respect thereto; provided, however, that in the event that any such payments are made directly to the Grantor, prior to receipt by any such obligor of such instruction, the Grantor shall segregate all amounts received pursuant thereto in trust for the benefit of the Lender and shall promptly pay such amounts to the Lender;

 

(iii)       Sell, assign, grant a license to use or otherwise liquidate, or direct the Grantor to sell, assign, grant a license to use or otherwise liquidate, any and all investments made in whole or in part with the Collateral or any part thereof, and take possession of the proceeds of any such sale, assignment, license or liquidation;

 

(iv)       Take possession of the Collateral or any part thereof, by directing the Grantor in writing to deliver the same to the Lender at any place or places so designated by the Lender, in which event the Grantor shall at its own expense:  (A) forthwith cause the same to be moved to the place or places designated by the Lender and therewith delivered to the Lender, (B) store and keep any Collateral so delivered to the Lender at such place or places pending further action by the Lender and (C) while the Collateral shall be so stored and kept, provide such security and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition.  The Grantor’s obligation to deliver the Collateral as contemplated in this SECTION 8.1 is of the essence hereof.  Upon application to a court of equity having jurisdiction, the Lender shall be entitled to a decree requiring specific performance by the Grantor of such obligation;

 

(v)        Withdraw all moneys, instruments, securities and other property in any bank, financial securities, deposit or other account of the Grantor constituting Collateral for application to the Secured Obligations as provided in Article VIII hereof;

 

(vi)       Retain and apply the Distributions to the Secured Obligations as provided in Article VIII hereof;

 

(vii)      Exercise any and all rights as beneficial and legal owner of the Collateral, including, without limitation, perfecting assignment of and exercising any and all voting, consensual and other rights and powers with respect to any Collateral; and

 

(viii)     Exercise all the rights and remedies of a secured party under the UCC, and the Lender may also in its sole discretion, without notice except as specified in SECTION 8.2 

 

 

  

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hereof, sell, assign or grant a license to use the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker’s board or at any of the Lender’s offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Lender may deem commercially reasonable.  The Lender or any other Credit Party or any of their respective Affiliates may be the purchaser, licensee, assignee or recipient of any or all of the Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold, assigned or licensed at such sale, to use and apply any of the Secured Obligations owed to such Person as a credit on account of the purchase price of any Collateral payable by such Person at such sale.  Each purchaser, assignee, licensee or recipient at any such sale shall acquire the property sold, assigned or licensed absolutely free from any claim or right on the part of the Grantor, and the Grantor hereby waives, to the fullest extent permitted by Law, all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.  The Lender shall not be obligated to make any sale of Collateral regardless of notice of sale having been given.  The Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.  To the fullest extent permitted by Law, the Grantor hereby waives any claims against the Lender arising by reason of the fact that the price at which any Collateral may have been sold, assigned or licensed at such a private sale was less than the price which might have been obtained at a public sale, even if the Lender accepts the first offer received and does not offer such Collateral to more than one offeree.

 

SECTION 8.2.      Notice of Sale.  The Grantor acknowledges and agrees that, to the extent notice of sale or other disposition of Collateral shall be required by applicable Law and unless the Collateral is perishable or threatens to decline speedily in value, or is of a type customarily sold on a recognized market (in which event the Lender shall provide the Grantor such advance notice as may be practicable under the circumstances), ten (10) days’ prior notice to the Grantor of the time and place of any public sale or of the time after which any private sale or other intended disposition is to take place shall be commercially reasonable notification of such matters.  No notification need be given to the Grantor if it has signed, after the occurrence of an Event of Default, a statement renouncing or modifying (as permitted under Law) any right to notification of sale or other intended disposition.

 

SECTION 8.3.      Waiver of Notice and Claims.  The Grantor hereby waives, to the fullest extent permitted by applicable Law, notice or judicial hearing in connection with the Lender’s taking possession or the Lender’s disposition of any of the Collateral, including, without limitation, any and all prior notice and hearing for any prejudgment remedy or remedies and any such right which the Grantor would otherwise have under law, and the Grantor hereby further waives, to the fullest extent permitted by applicable Law:  (i) all damages occasioned by such taking of possession, (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Lender’s rights hereunder and (iii) all rights of redemption, appraisal, valuation, stay, extension or moratorium now or hereafter in force under any applicable Law.  The Lender shall not be liable for any incorrect or improper 

 

  

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payment made pursuant to this Article VIII in the absence of gross negligence or willful misconduct.  Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the Grantor therein and thereto, and shall be a perpetual bar both at law and in equity against the Grantor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through or under the Grantor.

 

SECTION 8.4.      Certain Sales of Collateral.

 

(i)       The Grantor recognizes that, by reason of certain prohibitions contained in law, rules, regulations or orders of any Governmental Authority (including, without limitation, the Securities Act, and applicable state securities Laws), the Lender may be compelled, with respect to any sale of all or any part of the Collateral (including, without limitation, Securities Collateral and Investment Property), to limit purchasers to those who meet the requirements of such Governmental Authority (which requirements may include, with respect to Securities Collateral and/or Investment Property, that such purchasers shall agree, among other things, to acquire such Securities Collateral or Investment Property for their own account, for investment and not with a view to the distribution or resale thereof).    The Grantor acknowledges that any such sales may be at prices and on terms less favorable to the Lender than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such circumstances, agrees that any such restricted sale shall be deemed to have been made in a commercially reasonable manner and that, except as may be required by applicable Law, the Lender shall have no obligation to engage in public sales and no obligation to delay the sale of any Securities Collateral or Investment Property for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities Laws, even if such issuer would agree to do so.

 

(ii)      If the Lender determines to exercise its right to sell any or all of the Securities Collateral or Investment Property, upon written request, the Grantor shall from time to time furnish to the Lender all such information as the Lender may reasonably request in order to determine the number of securities included in the Securities Collateral or Investment Property which may be sold by the Lender as exempt transactions under the Securities Act and the rules of the Securities and Exchange Commission thereunder, as the same are from time to time in effect.

 

(iii)     The Grantor further agrees that a breach of any of the covenants contained in this SECTION 8.4 will cause irreparable injury to the Lender and the other Credit Parties, that the Lender and the other Credit Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this SECTION 8.4 shall be specifically enforceable against the Grantor, and the Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred and is continuing.

 

SECTION 8.5.      No Waiver; Cumulative Remedies.

 

  

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(i)         No failure on the part of the Lender to exercise, no course of dealing with respect to, and no delay on the part of the Lender in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy; nor shall the Lender be required to look first to, enforce or exhaust any other security, collateral or guaranties.  The remedies herein provided are cumulative and are not exclusive of any remedies provided by law.

 

(ii)        In the event that the Lender shall have instituted any proceeding to enforce any right, power or remedy under this Security Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Lender, then and in every such case, the Grantor, the Lender and each other Credit Party shall be restored to their respective former positions and rights hereunder with respect to the Collateral, and all rights, remedies and powers of the Lender and the other Credit Parties shall continue as if no such proceeding had been instituted.

 

SECTION 8.6.      Certain Additional Actions Regarding Intellectual Property.  If any Event of Default shall have occurred and be continuing, upon the written demand of Lender, the Grantor shall execute and deliver to Lender an assignment or assignments of the registered Patents, Trademarks and/or Copyrights and such other documents as are necessary or appropriate to carry out the intent and purposes hereof to the extent such assignment does not result in any loss of rights therein under applicable Law.  Within five (5) Business Days of written notice thereafter from Lender, the Grantor shall make available to Lender, to the extent within the Grantor’s power and authority, such personnel then in the Grantor’s employ as Lender may reasonably designate to permit the Grantor to continue, directly or indirectly, to produce, advertise and sell the products and services sold by the Grantor under the registered Patents, Trademarks and/or Copyrights, and such Persons shall be available to perform their prior functions on Lender’s behalf.

 

SECTION 8.7.      Application of Proceeds.  The proceeds received by the Lender in respect of any sale of, collection from or other realization upon all or any part of the Collateral pursuant to the exercise by the Lender of its remedies shall be applied, together with any other sums then held by the Lender pursuant to this Security Agreement, in accordance with and as set forth in Section 8.03 of the Credit Agreement.

 

ARTICLE IX

 

MISCELLANEOUS

 

SECTION 9.1.      Concerning Lender.

 

(i)         The actions of the Lender hereunder are subject to the provisions of the Credit Agreement.  The Lender shall have the right hereunder to make demands, to give notices,

 

  

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to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release or substitution of the Collateral), in accordance with this Security Agreement and the Credit Agreement.  The Lender may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact.

 

(ii)        The Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if such Collateral is accorded treatment substantially equivalent to that which the Lender, in its individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Lender nor any of the other Credit Parties shall have responsibility for, without limitation (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Securities Collateral, whether or not the Lender or any other Credit Party has or is deemed to have knowledge of such matters or (ii) taking any necessary steps to preserve rights against any Person with respect to any Collateral.  In no event shall the Lender’s or any other Credit Party’s responsibility for the custody and preservation of the Collateral in its possession extend to matters beyond the control of such Person, including, without limitation, acts of God, war, insurrection, riot, governmental actions or acts of any corporate or other depository.

(iii)       The Lender shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper Person, and, with respect to all matters pertaining to this Security Agreement and its duties hereunder, upon advice of counsel selected by it.

(iv)       If any item of Collateral also constitutes collateral granted to Lender under any other deed of trust, mortgage, security agreement, pledge or instrument of any type, in the event of any conflict between the provisions hereof and the provisions of such other deed of trust, mortgage, security agreement, pledge or instrument of any type in respect of such collateral, Lender, in its sole discretion, shall select which provision or provisions shall control.

 

SECTION 9.2.      Lender May Perform; Lender Appointed Attorney-in-Fact.  If the Grantor shall fail to perform any covenants contained in this Security Agreement or in the Credit Agreement (including, without limitation, the Grantor’s covenants to (i) pay the premiums in respect of all required insurance policies hereunder, (ii) pay Claims, (iii) make repairs, (iv) discharge Liens or (v) pay or perform any other obligations of the Grantor with respect to any Collateral) or if any warranty on the part of the Grantor contained herein shall be breached, the Lender may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose; provided, however, that Lender shall in no event be bound to inquire into the validity of any tax, lien, imposition or other obligation which the Grantor fails to pay or perform as and when required hereby.  Any and all amounts so expended by the Lender shall be paid by the Grantor in accordance with the provisions of SECTION 9.3 hereof.  Neither the provisions of this SECTION 9.2 nor any action taken by 

 

  

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Lender pursuant to the provisions of this SECTION 9.2 shall prevent any such failure to observe any covenant contained in this Security Agreement nor any breach of warranty from constituting an Event of Default.  The Grantor hereby appoints the Lender its attorney-in-fact, with full authority in the place and stead of the Grantor and in the name of the Grantor, or otherwise, from time to time after the occurrence and during the continuation of an Event of Default in the Lender’s discretion to take any action and to execute any instrument consistent with the terms of the Credit Agreement and the other Security Documents which the Lender may deem necessary to accomplish the purposes hereof.  The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof.  The Grantor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof.

 

SECTION 9.3.      Expenses.  The Grantor will upon demand pay to the Lender the amount of any and all amounts required to be paid pursuant to Section 9.04 of the Credit Agreement.

 

SECTION 9.4.      Continuing Security Interest; Assignment.  This Agreement shall create a continuing security interest in the Collateral and shall (i) be binding upon the Grantor, its successors and assigns, and (ii) inure, together with the rights and remedies of the Lender hereunder, to the benefit of the Lender and the other Credit Parties and each of their respective successors, transferees and assigns.  No other Persons (including, without limitation, any other creditor of the Grantor) shall have any interest herein or any right or benefit with respect hereto.  Without limiting the generality of the foregoing clause (ii), any Credit Party may assign or otherwise transfer any indebtedness held by it secured by this Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Credit Party, herein or otherwise, subject, however, to the provisions of the Credit Agreement.

 

SECTION 9.5.      Termination; Release.

 

(i)         This Security Agreement, the Lien in favor of the Lender (for the benefit of itself and the other Credit Parties) and all other security interests granted hereby shall terminate with respect to all Secured Obligations when (i) the Commitments shall have expired or been terminated, (ii) the principal of and interest on each Loan and all fees and other Secured Obligations shall have been indefeasibly paid in full in cash, (iii) all Letters of Credit (as defined in the Credit Agreement) shall have (A) expired or terminated and have been reduced to zero, (B) been Cash Collateralized to the extent required by the Credit Agreement, or (C) been supported by another letter of credit in a manner reasonably satisfactory to the L/C Issuer and the Lender, and (iv) all Unreimbursed Amounts shall have been indefeasibly paid in full in cash, provided, however, that (A) this Security Agreement, the Lien in favor of the Lender (for the benefit of itself and the other Credit Parties) and all other security interests granted hereby shall be reinstated if at any time payment, or any part thereof, of any Secured Obligation is rescinded or must otherwise be restored by any Credit Party or the Grantor upon the bankruptcy or reorganization of the Grantor or otherwise, and (B) in connection with the termination of this 

 

  

28

  

 

Security Agreement, the Lender may require such indemnities and collateral security as it shall reasonably deem necessary or appropriate to protect the Credit Parties against (x) loss on account of credits previously applied to the Secured Obligations that may subsequently be reversed or revoked, (y) any obligations that may thereafter arise with respect to the Other Liabilities, and (z) any Secured Obligations that may thereafter arise under Section 9.04 of the Credit Agreement.

 

(ii)        The Collateral shall be released from the Lien of this Security Agreement in accordance with the provisions of the Credit Agreement.  Upon termination hereof or any release of Collateral in accordance with the provisions of the Credit Agreement, the Lender shall, upon the request and at the sole cost and expense of the Grantor, assign, transfer and deliver to the Grantor, against receipt and without recourse to or warranty by the Lender, such of the Collateral to be released (in the case of a release) or all of the Collateral (in the case of termination of this Security Agreement) as may be in possession of the Lender and as shall not have been sold or otherwise applied pursuant to the terms hereof, and, with respect to any other Collateral, proper documents and instruments (including UCC-3 termination statements or releases) acknowledging the termination hereof or the release of such Collateral, as the case may be.

 

(iii)       At any time that the Grantor desires that the Lender take any action described in clause (b) of this SECTION 9.5, the Grantor shall, upon request of the Lender, deliver to the Lender an officer’s certificate certifying that the release of the respective Collateral is permitted pursuant to clause (a) or (b) of this SECTION 9.5.  The Lender shall have no liability whatsoever to any other Credit Party as the result of any release of Collateral by it as permitted (or which the Lender in good faith believes to be permitted) by this SECTION 9.5.

 

SECTION 9.6.      Modification in Writing.  No amendment, modification, supplement, termination or waiver of or to any provision hereof, nor consent to any departure by the Grantor therefrom, shall be effective unless the same shall be made in accordance with the terms of the Credit Agreement and unless in writing and signed by the Lender and the Grantor.  Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by the Grantor from the terms of any provision hereof shall be effective only in the specific instance and for the specific purpose for which made or given.  Except where notice is specifically required by this Security Agreement or any other document evidencing the Secured Obligations, no notice to or demand on the Grantor in any case shall entitle the Grantor to any other or further notice or demand in similar or other circumstances.

 

SECTION 9.7.      Notices.  Unless otherwise provided herein or in the Credit Agreement, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Credit Agreement, as to the Grantor, addressed to it at the address of the Borrower set forth in the Credit Agreement and as to the Lender, addressed to it at the address set forth in the Credit Agreement, or in each case at such other address as shall be designated by such party in a written notice to the other parties hereto complying as to delivery with the terms of this SECTION 9.7.

 

  

29

  

 

SECTION 9.8.      GOVERNING LAW.  THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

 

SECTION 9.9.      CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY TRIAL.

 

(a)        THE GRANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS SITTING IN SUFFOLK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE DISTRICT OF MASSACHUSETTS, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE GRANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH MASSACHUSETTS STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  THE GRANTOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS SECURITY AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE GRANTOR OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(b)        THE GRANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (A) OF THIS SECTION.  THE GRANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

(c)        THE GRANTOR AGREES THAT ANY ACTION COMMENCED BY THE GRANTOR ASSERTING ANY CLAIM OR COUNTERCLAIM ARISING UNDER OR IN CONNECTION WITH THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT SOLELY IN A COURT OF THE COMMONWEALTH OF MASSACHUSETTS SITTING IN SUFFOLK COUNTY OR ANY FEDERAL COURT 

 

 

  

30

  

SITTING THEREIN AS THE LENDER MAY ELECT IN ITS SOLE DISCRETION AND CONSENTS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS WITH RESPECT TO ANY SUCH ACTION.

 

(d) EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 9.7.  NOTHING IN THIS SECURITY AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

 

(e)        EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND WHETHER INITIATED BY OR AGAINST ANY SUCH PERSON OR IN WHICH ANY SUCH PERSON IS JOINED AS A PARTY LITIGANT).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS SECURITY AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 9.10.    Severability of Provisions.  Any provision hereof which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

 

SECTION 9.11.    Execution in Counterparts; Effectiveness.  This Security Agreement may be executed in any number of counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  Delivery of an executed counterpart of a signature page of this Security Agreement by telecopy, pdf or other electronic transmission shall be as effective as delivery of a manually executed counterpart of this Security Agreement.

 

SECTION 9.12.    No Release.  Nothing set forth in this Security Agreement shall relieve the Grantor from the performance of any term, covenant, condition or agreement on the Grantor’s part to be performed or observed under or in respect of any of the Collateral or from any liability to any Person under or in respect of any of the Collateral or shall impose any obligation on the Lender or any other Credit Party to perform or observe any such term, covenant, condition or agreement on the Grantor’s part to be so performed or observed or shall impose any liability on the Lender or any other Credit Party for any act or omission on the part 

 

 

  

31

  

 

of the Grantor relating thereto or for any breach of any representation or warranty on the part of the Grantor contained in this Security Agreement, the Credit Agreement or the other Loan Documents, or under or in respect of the Collateral or made in connection herewith or therewith.  The obligations of the Grantor contained in this SECTION 9.12 shall survive the termination hereof and the discharge of the Grantor’s other obligations under this Security Agreement, the Credit Agreement and the other Loan Documents.

 

SECTION 9.13.    Obligations Absolute.  All obligations of the Grantor hereunder shall be absolute and unconditional irrespective of:

 

(i)       any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Grantor;

 

(ii)      any lack of validity or enforceability of the Credit Agreement or any other Loan Document, or any other agreement or instrument relating thereto;

 

(iii)     any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement or any other Loan Document or any other agreement or instrument relating thereto;

 

(iv)     any pledge, exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Secured Obligations;

 

(v)      any exercise, non-exercise or waiver of any right, remedy, power or privilege under or in respect hereof, the Credit Agreement or any other Loan Document except as specifically set forth in a waiver granted pursuant to the provisions of SECTION 9.6 hereof; or

 

(vi)      any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Grantor (other than the termination of this Security Agreement in accordance with SECTION 9.5(a) hereof).

 

SECTION 9.14.    Existing Security Agreement Amended and Restated.  This Security Agreement is an amendment and restatement of (i) the provisions of the Existing Credit Agreement with respect to the grant of security interest by the Grantor, (ii) that certain Pledge Agreement dated as of January 4, 2011 between the Grantor and the Lender, and (iii) that certain Intellectual Property Security Agreement dated as of July 26, 2005 between the Grantor and the Lender (the foregoing, each as in effect as of the date hereof, collectively, the “Existing Security Provisions”).  This Security Agreement is in no way intended to constitute a novation of the Existing Security Provisions or the Liabilities (as defined in the Existing Credit Agreement).  With respect to (i) any date or time period occurring and ending prior to the Effective Date, the Existing Security Provisions and the other Loan Documents shall govern the respective rights and obligations of any party or parties hereto also party thereto and shall for such purposes 

 

  

32

  

 

remain in full force and effect; and (ii) any date or time period occurring or ending on or after the Effective Date, the rights and obligations of the parties hereto shall be governed by this Security Agreement (including, without limitation, the schedules hereto) and the other Loan Documents.  From and after the Effective Date, the provisions of this Security Agreement shall prevail in the event of any conflict or inconsistency between such provisions and those of the Existing Security Provisions.  Any security granted pursuant to or in connection with the Existing Credit Agreement and the other Loan Documents (whether pursuant to the Existing Security Provisions or otherwise) shall continue to secure the obligations of the Grantors arising pursuant to or in connection with the Credit Agreement (including all such obligations arising initially pursuant to or in connection with the Existing Credit Agreement and the other Loan Documents).

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

  

33

  

IN WITNESS WHEREOF, the Grantor and the Lender have caused this Security Agreement to be duly executed and delivered by their duly authorized officers as of the date first above written.

 

	
BLUEFLY, INC., as Grantor

	  
	
By:

	
/ s / Kara B. Jenny

	
Name:

	
Kara B. Jenny

	
Title:

	
Chief Financial Officer and Secretary

 

Signature Page to Amended and Restated Security Agreement

 

  

  

  

 

	
WELLS FARGO BANK, NATIONAL

ASSOCIATION, as Lender

	  
	
By:

	
/ s / Michele L. Ayou

	
Name:

	
Michele L. Ayou

	
Title:

	
Authorized Signatory

 

Signature Page to Amended and Restated Security Agreement

 

  

  

  

EXHIBIT 1

 

[Form of]

 

SECURITIES PLEDGE AMENDMENT

 

This Securities Pledge Amendment, dated as of _________, is delivered pursuant to SECTION 5.1 of that certain Amended and Restated Security Agreement (as amended, amended and restated, restated, supplemented or otherwise modified from time to time, the “Security Agreement;” capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement), dated as of June 17, 2011, made by BLUEFLY, INC., a Delaware corporation having an office at 42 West 39th Street, New York, New York 10018 (the “Borrower”), as pledgor, assignor and debtor (the Borrower, in such capacities and together with any successors in such capacities, the “Grantor”), in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION, having an office at One Boston Place, 18th Floor, Boston, Massachusetts 02108, as Lender, for the ratable benefit of itself and the other Credit Parties (as defined in the Credit Agreement referred to in the Security Agreement) pursuant to the Credit Agreement, as pledgee, assignee and secured party (in such capacities and together with any successors in such capacities, the “Lender”).  The undersigned hereby agrees that this Securities Pledge Amendment may be attached to the Security Agreement and that the Pledged Interests listed on this Securities Pledge Amendment shall be deemed to be and shall become part of the Collateral and shall secure all Secured Obligations.

 

PLEDGED INTERESTS

 

	

‎‎‎ISSUER

	  	

CLASS‎

OF STOCK‎

OR

INTERESTS

	  	

‎‎PAR‎

VALUE

	  	

‎‎CERTIFICATE‎

NO(S).

	  	

NUMBER OF

SHARES

‎OR

‎INTERESTS

	  	

PERCENTAGE OF‎

ALL ISSUED CAPITAL‎

OR OTHER EQUITY

INTERESTS OF ISSUER

	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  	  
	  	
  

	  	
  

	  	
  

	  	
  

	  	
  

	  

  

  

  

 

	
BLUEFLY, INC., as Grantor

	
By:

	
   

	  	
Name:

	  	
Title:

 

AGREED TO AND ACCEPTED:

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender

	
By:

	
   

	  	
Name:

	  	
Title:

 

  

  

  

 

SCHEDULE I

 

Filings, Registrations and Recordings

 

1.           UCC-1 Financing Statement filed with Secretary of State of State of Delaware

2.           Grant of Security Interest in United States Trademarks filed with United States Patent and Trademark Office

  

  

  

 

SCHEDULE II

 

Pledged Interests

	
Grantor

	  	
Issuer

	  	
Type of

Organization

	  	
# of Shares Owned

	  	
Total Shares

Outstanding

	  	
% of

Interest

Pledged

	  	
Certificate No. 

(if uncertificated,

please indicate so)

	
 

	  	  	  	  	  	  	  	  	  	  	  	  
	
Bluefly, Inc.

	
  

	
Eyefly LLC

	
  

	
limited liability company

	
  

	
4,420,000

	
  

	
8,500,000

 

	
  

	
100% of interests owned

	
  

	
uncertificated

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