Document:

Exhibit 10.1

 

EXECUTION VERSION

 

	
 
    

 

STOCK PURCHASE AGREEMENT

 

between

 

TRIANGLE PETROLEUM CORPORATION

 

and

 

NGP TRIANGLE HOLDINGS, LLC

 

dated as of March 2, 2013

 

	
 
    

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I
    
	
 
    
	
DEFINITIONS
    
	
 
    	
 
    	
 
    
	
Section 1.01
    	
Definitions
    	
1
    
	
Section 1.02
    	
Accounting Procedures and Interpretation
    	
6
    
	
 
    	
 
    	
 
    
	
ARTICLE II
    
	
 
    
	
AGREEMENT   TO SELL AND PURCHASE
    
	
 
    	
 
    	
 
    
	
Section 2.01
    	
Sale and Purchase
    	
6
    
	
Section 2.02
    	
Closing
    	
6
    
	
Section 2.03
    	
Mutual Conditions to Each Party’s Obligations
    	
6
    
	
Section 2.04
    	
Conditions to Purchaser’s Obligations
    	
7
    
	
Section 2.05
    	
Conditions to Triangle’s Obligations
    	
7
    
	
Section 2.06
    	
Triangle Closing Deliverables
    	
8
    
	
Section 2.07
    	
Purchaser Closing Deliverables
    	
9
    
	
 
    	
 
    	
 
    
	
ARTICLE III
    
	
 
    
	
REPRESENTATIONS   AND WARRANTIES OF TRIANGLE
    
	
 
    	
 
    	
 
    
	
Section 3.01
    	
Formation and Qualification
    	
10
    
	
Section 3.02
    	
Ownership of Subsidiaries
    	
10
    
	
Section 3.03
    	
No Other Subsidiaries
    	
10
    
	
Section 3.04
    	
Authorization; Enforceability; Valid Issuance
    	
11
    
	
Section 3.05
    	
Capitalization; No Preemptive Rights, Registration   Rights or Options
    	
11
    
	
Section 3.06
    	
No Breach
    	
12
    
	
Section 3.07
    	
No Approvals
    	
12
    
	
Section 3.08
    	
Compliance with Laws and Agreements
    	
12
    
	
Section 3.09
    	
Corporate Records
    	
13
    
	
Section 3.10
    	
Triangle SEC Documents; Triangle Financial Statements
    	
13
    
	
Section 3.11
    	
Books and Records; Sarbanes-Oxley Compliance
    	
14
    
	
Section 3.12
    	
No Material Adverse Change
    	
15
    
	
Section 3.13
    	
Title to Property
    	
15
    
	
Section 3.14
    	
Reserve Engineers; Reserve Estimates
    	
16
    
	
Section 3.15
    	
Insurance
    	
16
    
	
Section 3.16
    	
Litigation
    	
16
    
	
Section 3.17
    	
Labor, Employment and Benefit Matters
    	
16
    
	
Section 3.18
    	
Tax Returns
    	
18
    
	
Section 3.19
    	
Environmental Matters
    	
18
    
	
Section 3.20
    	
Permits
    	
19
    
	
Section 3.21
    	
Foreign Corrupt Practices Act; Money Laundering
    	
19
    

 

i

 

	
Section 3.22
    	
NYSE MKT Listing
    	
20
    
	
Section 3.23
    	
Related Party Transactions
    	
20
    
	
Section 3.24
    	
Business Combinations
    	
20
    
	
Section 3.25
    	
Investment Company
    	
20
    
	
Section 3.26
    	
Certain Fees
    	
20
    
	
Section 3.27
    	
Form S-3 Eligibility
    	
20
    
	
Section 3.28
    	
Private Placement
    	
21
    
	
Section 3.29
    	
Other Regulatory Compliance
    	
21
    
	
 
    	
 
    	
 
    
	
ARTICLE IV
    
	
 
    
	
REPRESENTATIONS   AND WARRANTIES OF THE PURCHASER
    
	
 
    	
 
    	
 
    
	
Section 4.01
    	
Existence
    	
21
    
	
Section 4.02
    	
Authorization; Enforceability
    	
21
    
	
Section 4.03
    	
No Breach
    	
21
    
	
Section 4.04
    	
Certain Fees
    	
22
    
	
Section 4.05
    	
Unregistered Securities
    	
22
    
	
 
    	
 
    	
 
    
	
ARTICLE V
    
	
 
    
	
COVENANTS
    
	
 
    
	
Section 5.01
    	
Conduct of Business
    	
23
    
	
Section 5.02
    	
Reasonable Best Efforts Prior to Closing
    	
23
    
	
Section 5.03
    	
Other Actions
    	
23
    
	
Section 5.04
    	
Further Assurances; Listing of Shares
    	
24
    
	
Section 5.05
    	
Section 16(b) Matters
    	
24
    
	
Section 5.06
    	
Restriction on Sale of Shares
    	
24
    
	
 
    	
 
    	
 
    
	
ARTICLE VI
    
	
 
    
	
INDEMNIFICATION,   COSTS AND EXPENSES
    
	
 
    	
 
    	
 
    
	
Section 6.01
    	
Indemnification by Triangle
    	
24
    
	
Section 6.02
    	
Indemnification by the Purchaser
    	
25
    
	
Section 6.03
    	
Indemnification Procedure
    	
25
    
	
Section 6.04
    	
Tax Matters
    	
26
    
	
Section 6.05
    	
Exclusive Remedy
    	
26
    
	
 
    	
 
    	
 
    
	
ARTICLE VII
    
	
 
    
	
MISCELLANEOUS
    
	
 
    	
 
    	
 
    
	
Section 7.01
    	
Termination
    	
27
    
	
Section 7.02
    	
Fees and Expenses
    	
27
    
	
Section 7.03
    	
Interpretation
    	
27
    
	
Section 7.04
    	
Survival of Provisions
    	
28
    
	
Section 7.05
    	
No Waiver; Modifications in Writing
    	
28
    
	
Section 7.06
    	
Binding Effect; Assignment
    	
28
    

 

ii

 

	
Section 7.07
    	
Non-Disclosure
    	
29
    
	
Section 7.08
    	
Communications
    	
29
    
	
Section 7.09
    	
Removal of Legend
    	
30
    
	
Section 7.10
    	
Entire Agreement
    	
31
    
	
Section 7.11
    	
Governing Law; Submission to Jurisdiction
    	
31
    
	
Section 7.12
    	
Waiver of Jury Trial
    	
32
    
	
Section 7.13
    	
Waiver by Purchaser
    	
32
    
	
Section 7.14
    	
Acknowledgement by Triangle
    	
32
    
	
Section 7.15
    	
Execution in Counterparts
    	
32
    
	
 
    	
 
    	
 
    
	
Schedules
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Exhibit A
    	
Form of Amended   and Restated Registration Rights Agreement
    	
 
    
	
Exhibit B
    	
Form of First   Amendment to Investment Agreement
    	
 
    

 

iii

 

STOCK PURCHASE AGREEMENT

 

This STOCK PURCHASE AGREEMENT, dated as of March 2, 2013 (this “Agreement”), is entered into by and between Triangle Petroleum Corporation, a Delaware corporation (“Triangle”), and NGP Triangle Holdings, LLC, a Delaware limited liability company (the “Purchaser” and together with Triangle, the “Parties”).

 

WHEREAS, at the Closing (as defined below), and in accordance with the provisions of this Agreement, Triangle desires to sell and issue to the Purchaser, and the Purchaser desires to purchase from Triangle, an aggregate of 9,300,000 shares (the “Shares”) of common stock, par value $0.00001 per share, of Triangle (“Common Stock”);

 

WHEREAS, at the Closing, the parties hereto will execute and deliver an Amended and Restated Registration Rights Agreement, in substantially the form attached hereto as Exhibit A (the “Amended Registration Rights Agreement”), which will amend and restate the Registration Rights Agreement, dated as of July 31, 2012, by and between Triangle and the Purchaser (the “Original Registration Rights Agreement”); and

 

WHEREAS, at the Closing, the parties hereto will execute and deliver the First Amendment to the Investment Agreement, in substantially the form attached hereto as Exhibit B (the “Investment Agreement Amendment”), which will amend the Investment Agreement, dated as of July 31, 2012, by and among Triangle, NGP Natural Resources X, L.P. and the Purchaser (the “Original Investment Agreement”).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01                             Definitions.  As used in this Agreement, the following terms have the meanings indicated:

 

“Affiliate” means, with respect to a specified Person, any other Person, whether now in existence or hereafter created, directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person.  For purposes of this definition, “control” (including, with correlative meanings, “controlling,” “controlled by” and “under common control with”) means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; provided, however, that “Affiliate” shall not be deemed to include any portfolio company in which the Purchaser or any of its investment fund Affiliates have made a debt or equity investment.

 

“Agreement” has the meaning set forth in the introductory paragraph of this Agreement.

 

 

“Amended Investment Agreement” means the Original Investment Agreement, as amended by the Investment Agreement Amendment.

 

“Amended Registration Rights Agreement” shall have the meaning specified in the recitals to this Agreement.

 

“Board” means the Board of Directors of Triangle or any duly authorized committee thereof.

 

“Business Day” means any day other than a Saturday, Sunday, any federal holiday or day on which banking institutions in the State of Texas are authorized or required by Law or other governmental action to close.

 

“Closing” shall have the meaning specified in Section 2.02.

 

“Closing Date” shall have the meaning specified in Section 2.02.

 

“Code” shall have the meaning specified in Section 3.17(b).

 

“Commission” means the United States Securities and Exchange Commission.

 

“Common Stock” shall have the meaning specified in the recitals to this Agreement.

 

“Contract” means any contract, agreement, indenture, note, bond, mortgage, deed of trust, loan, instrument, lease, license, commitment or other arrangement, understanding, undertaking, commitment or obligation, whether written or oral.

 

“Convertible Note” means that certain Triangle Petroleum Corporation 5.0% Convertible Promissory Note, dated as of July 31, 2012, by and between Triangle and the Purchaser.

 

“Environmental Law” means any Law, Environmental Permit, obligation required by common law and other legally enforceable requirements applicable to the Triangle Entities or the operation of their business relating to the protection of human health and safety (to the extent such health or safety relate to exposure to Hazardous Materials), the environment and natural resources (including, any natural resource damages, any generation, manufacture, processing, use, storage, treatment, disposal, release, threatened release, discharge, or emission of Hazardous Materials into the environment, and any exposure to Hazardous Materials), including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Occupational Safety and Health Act (29 C.F.R. part 24 et seq.), and the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.).

 

“Environmental Permits” means all permits, approvals, identification numbers, registrations, consents, licenses, exemptions, variances and governmental authorizations required under or issued pursuant to any applicable Environmental Law.

 

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“ERISA” shall have the meaning specified in Section 3.17(b).

 

“ERISA Affiliate” shall have the meaning specified in Section 3.17(b).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

 

“FCPA” shall have the meaning specified in Section 3.21(a).

 

“GAAP” means generally accepted accounting principles and practices as in the United States of America as of the period presented.

 

“Governmental Authority” means, with respect to a particular Person, any state, county, city and political subdivision of the United States in which such Person or such Person’s property or assets is located or which exercises valid jurisdiction over any such Person or such Person’s property or assets, and any court, agency, department, commission, board, bureau or instrumentality of any of them and any monetary authority that exercises valid jurisdiction over any such Person or such Person’s property or assets.  Unless otherwise specified, all references to Governmental Authority herein with respect to Triangle means a Governmental Authority having jurisdiction over the Triangle Entities or any of their respective properties or assets.

 

“Hazardous Material” means any substance regulated by or as to which liability arises under any applicable Environmental Law including any: (i) chemical, product, material, substance or waste defined as “hazardous substance,” “hazardous material,” “hazardous waste,” “restricted hazardous waste,” “extremely hazardous waste,” “solid waste,” “toxic waste,” “extremely hazardous substance,” “toxic substance,” “toxic pollutant,” “contaminant,” “pollutant,” or words of similar meaning or import found in any applicable Environmental Law; (ii) petroleum hydrocarbons, petrochemical or petroleum products, petroleum substances, natural gas and crude oil or any components, fractions or derivatives thereof; and (iii) asbestos containing materials, polychlorinated biphenyls, urea formaldehyde foam insulation, or radon gas.

 

“Indemnified Party” shall have the meaning specified in Section 6.03(b).

 

“Indemnifying Party” shall have the meaning specified in Section 6.03(b).

 

“Investment Agreement Amendment” shall have the meaning specified in the recitals to this Agreement.

 

“Knowledge” means, with respect to Triangle, the actual knowledge of Jonathan Samuels, Joseph Feiten or Justin Bliffen.

 

“Law” means any applicable federal, state or local order, writ, injunction, judgment, settlement, award, decree, statute, law (including common law), rule or regulation.

 

“Lien” means any lien, pledge, condemnation award, claim, restriction, easement, covenant, exception to title, charge, preferential purchase right, equity, security interest,

 

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exclusive license, mortgage, deed of trust, hypothecation or encumbrance of any nature whatsoever including as a statutory landlord lien.

 

“Money Laundering Laws” shall have the meaning specified in Section 3.21(b).

 

“NGP Agreements” means (i) the Convertible Note, (ii) the Original Registration Rights Agreement and (iii) the Original Investment Agreement.

 

“NYSE MKT” means NYSE MKT LLC.

 

“Organizational Documents” means, with respect to a particular Person (other than a natural person), the certificate or articles of incorporation, certificate or articles of organization, certificate of formation, bylaws, limited liability company agreement, limited partnership agreement, operating agreement or similar organizational document or agreement, as applicable, of such Person.

 

“Original Investment Agreement” shall have the meaning specified in the recitals to this Agreement.

 

“Original Registration Rights Agreement” shall have the meaning specified in the recitals to this Agreement.

 

“Parties” has the meaning set forth in the introductory paragraph of this Agreement.

 

“permits” shall have the meaning specified in Section 3.20.

 

“Person” means any individual, corporation, company, voluntary association, partnership, joint venture, trust, limited liability company, unincorporated organization, Governmental Authority or any agency, instrumentality or political subdivision thereof or any other form of entity.

 

“Plan” shall have the meaning specified in Section 3.17(b).

 

“Purchase Price” means $55,800,000.

 

“Purchaser” has the meaning set forth in the introductory paragraph of this Agreement.

 

“Purchaser Related Parties” shall have the meaning specified in Section 6.01.

 

“Representatives” means, with respect to a specified Person, the officers, directors, managers, employees, agents, counsel, accountants, investment bankers, and other representatives of such Person and, when used with respect to the Purchaser, also includes the Purchaser’s direct and indirect stockholders, partners, members, subsidiaries, parent companies and other Affiliates.

 

“RockPile Credit Agreement” shall have the meaning specified in Section 3.02.

 

“Ryder Scott” shall have the meaning specified in Section 3.14(a).

 

4

 

“Securities Act” shall have the meaning specified in the recitals to this Agreement.

 

“Shares” shall have the meaning specified in the recitals to this Agreement.

 

“Stockholders” means holders of Common Stock.

 

“Subsidiary” means, as to any Person, any corporation or other entity of which: (i) such Person, or a Subsidiary of such Person, is a general partner or manager; (ii) at least a majority of the outstanding equity interest having by the terms thereof ordinary voting power to elect a majority of the board of directors or similar governing body of such corporation or other entity (irrespective of whether or not at the time any equity interest of any other class or classes of such corporation or other entity shall have or might have ordinary voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more of its Subsidiaries; or (iii) any corporation or other entity as to which such Person consolidates for accounting purposes.

 

“Subsidiary Organizational Documents” means the Organizational Documents of the Triangle Subsidiaries.

 

“Taxes” shall have the meaning specified in Section 3.18(b).

 

“Tax Return” shall have the meaning specified in Section 3.18(b).

 

“Third Party Claim” shall have the meaning specified in Section 6.03(b).

 

“Transaction Documents” means, collectively, this Agreement, the Amended Registration Rights Agreement and the Investment Agreement Amendment.

 

“Transfer” shall have the meaning specified in Section 5.06.

 

“Triangle” has the meaning set forth in the introductory paragraph of this Agreement.

 

“Triangle Credit Agreement” shall have the meaning specified in Section 3.02.

 

“Triangle Entities” means the entities listed on Schedule I to this Agreement.

 

“Triangle Financial Statements” shall have the meaning specified in Section 3.10(a).

 

“Triangle Material Adverse Effect” means any event, circumstance or condition that has a material and adverse effect on (i) the assets, liabilities, condition (financial or other), business, results of operations, affairs or prospects of the Triangle Entities taken as a whole; or (ii) the ability of Triangle to consummate the transactions under any Transaction Document to which it is a party.

 

“Triangle Organizational Documents” means the Organizational Documents of Triangle.

 

“Triangle Related Parties” shall have the meaning specified in Section 6.02.

 

5

 

“Triangle SEC Disclosure” shall mean the disclosure included in the Triangle SEC Documents, but excluding any risk factor disclosure contained in any such Triangle SEC Document under the heading “Risk Factors” or “Cautionary Note Regarding Forward-Looking Statements” or similar heading and excluding any information set forth in any exhibit thereto.

 

“Triangle SEC Documents” shall have the meaning specified in Section 3.10(a).

 

“Triangle Subsidiaries” means the entities designated as “Triangle Subsidiaries” on Schedule I to this Agreement.

 

Section 1.02                             Accounting Procedures and Interpretation.  Unless otherwise specified in this Agreement, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters under this Agreement shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Purchaser under this Agreement shall be prepared, in accordance with GAAP applied on a consistent basis during the periods involved and in compliance as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto.

 

ARTICLE II

 

AGREEMENT TO SELL AND PURCHASE

 

Section 2.01                             Sale and Purchase.  Pursuant to the terms of this Agreement, at the Closing: (i) Triangle hereby agrees to issue and sell to the Purchaser, and the Purchaser hereby agrees to purchase from Triangle, the Shares; and (ii) as consideration for the issuance and sale of the Shares to the Purchaser, the Purchaser hereby agrees to pay Triangle the Purchase Price.

 

Section 2.02                             Closing.  Pursuant to the terms of this Agreement, the consummation of the purchase and sale of the Shares hereunder (the “Closing”) shall, unless otherwise agreed to in writing by the Parties, take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 1000 Louisiana, Suite 6800, Houston, Texas 77002, two Business Days following the date on which all conditions set forth in Sections 2.03, 2.04 and 2.05 have been met (or waived by the Parties) (other than those conditions which can only be satisfied as of the Closing Date, which shall have been met or waived on such date).  The date on which the Closing occurs is referred to herein as the “Closing Date.”  The parties agree that the Closing may occur via delivery of facsimiles or photocopies (via actual delivery or electronically via electronic mail) of the Transaction Documents and the closing deliverables contemplated by the Transaction Documents.  Unless otherwise provided herein, all proceedings to be taken and all documents to be executed and delivered by all parties at the Closing will be deemed to have been taken and executed simultaneously, and no proceedings will be deemed to have been taken nor documents executed or delivered until all have been taken.

 

Section 2.03                             Mutual Conditions to Each Party’s Obligations.  The respective obligations of each Party to consummate the purchase and issuance and sale of the Shares shall be subject to the satisfaction or waiver by each Party (on behalf of itself in writing, in whole or in

 

6

 

part, to the extent permitted by applicable Law) on or prior to the Closing Date of each of the following conditions:

 

(a)                       no Law shall have been enacted or promulgated, and no action shall have been taken, by any Governmental Authority of competent jurisdiction that temporarily, preliminarily or permanently restrains, precludes, enjoins or otherwise prohibits the consummation of the transactions contemplated by the Transaction Documents or makes the transactions contemplated by the Transaction Documents illegal;

 

(b)                       there shall not be pending any suit, action or proceeding by any Governmental Authority seeking to restrain, preclude, enjoin or prohibit the transactions contemplated by the Transaction Documents; and

 

(c)                        the NYSE MKT shall have authorized, upon notice of official issuance, the listing of the Shares.

 

Section 2.04                             Conditions to Purchaser’s Obligations.  The obligation of the Purchaser to consummate the purchase of the Shares shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions (any or all of which may be waived by the Purchaser on behalf of itself in writing, in whole or in part, to the extent permitted by applicable Law):

 

(a)                       Triangle shall have performed and complied in all material respects with the covenants and agreements contained in this Agreement that are required to be performed and complied with by Triangle on or prior to the Closing Date;

 

(b)                       each of the representations and warranties of Triangle contained in Article III shall be true and correct in all material respects on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date; and

 

(c)                        Triangle shall have executed and delivered the closing deliverables described in Section 2.06.

 

Section 2.05                             Conditions to Triangle’s Obligations.  The obligation of Triangle to consummate the sale of the Shares to the Purchaser shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions (any or all of which may be waived by Triangle in writing, in whole or in part, to the extent permitted by applicable Law):

 

(a)                       the Purchaser shall have performed and complied in all material respects with the covenants and agreements contained in this Agreement that are required to be performed and complied with by the Purchaser on or prior to the Closing Date;

 

(b)                       each of the representations and warranties of the Purchaser contained in Article IV shall be true and correct in all material respects on and as of the Closing Date with the same effect as though such representations and warranties had been made on and as of the Closing Date; and

 

7

 

(c)                        The Purchaser shall have executed and delivered the closing deliverables described in Section 2.07.

 

Section 2.06                             Triangle Closing Deliverables.  Upon the terms and subject to the conditions of this Agreement, at the Closing, Triangle shall deliver (or cause to be delivered) the following:

 

(a)                                 the Shares, which shall be evidenced by a Common Stock certificate delivered to the Purchaser;

 

(b)                                 a certificate of the Secretary or Assistant Secretary of Triangle, dated as of the Closing Date, certifying as to and attaching: (i) the Bylaws of Triangle, as amended, (ii) the resolutions of the Board authorizing the Transaction Documents and the transactions contemplated thereby, including the issuance of the Shares and (iii) the incumbency of the officers executing the Transaction Documents;

 

(c)                                  copies of the Articles of Incorporation, Certificate of Formation or Certificate of Incorporation, as the case may be, and all amendments thereto, of each of the Triangle Entities, certified by the Secretary of State (or corresponding governmental official) of its jurisdiction of formation and dated as of a recent date;

 

(d)                                 certificates, dated as of a recent date, from the Secretary of State (or corresponding governmental official) of the jurisdiction of formation of each of the Triangle Entities evidencing that such Triangle Entity is in good standing in such jurisdiction;

 

(e)                                  certificates, dated as of a recent date, of the Secretary of State (or corresponding governmental official) of each of the jurisdictions listed under “Foreign Qualifications” on Schedule I to this Agreement evidencing the qualification and good standing in such jurisdiction of each of the Triangle Entities as a foreign limited liability company or foreign corporation, as the case may be;

 

(f)                                   a certificate, dated the Closing Date and signed by the Chief Executive Officer and the Chief Financial Officer of Triangle, in their capacities as such, stating that:

 

(i)                                     Triangle has performed and complied in all material respects with the covenants and agreements contained in this Agreement that are required to be performed and complied with by Triangle on or prior to the Closing Date; and

 

(ii)                                  each of the representations and warranties of Triangle contained in Article III are true and correct on and as of the Closing Date in all material respects;

 

(g)                                  a cross-receipt executed by Triangle and delivered to the Purchaser certifying that it has received the Purchase Price;

 

(h)                                 the Amended Registration Rights Agreement, which shall have been duly executed by Triangle;

 

8

 

(i)                                     the Investment Agreement Amendment, which shall have been duly executed by Triangle;

 

(j)                                    a written opinion of outside counsel for Triangle reasonably satisfactory to the Purchaser;

 

(k)                                 a supplemental listing application, duly executed by Triangle and NYSE MKT, authorizing, subject to official notice of issuance, the listing of the Shares; and

 

(l)                                     all other documents, instruments and writings required to be delivered by Triangle at the Closing under the Transaction Documents.

 

Section 2.07                             Purchaser Closing Deliverables.  Upon the terms and subject to the conditions of this Agreement, at the Closing, the Purchaser shall deliver (or cause to be delivered) the following:

 

(a)                                 the Purchase Price, in immediately available U.S. funds via wire transfer to an account designated by Triangle;

 

(b)                                 the Amended Registration Rights Agreement, which shall have been duly executed by the Purchaser;

 

(c)                                  the Investment Agreement Amendment, which shall have been duly executed by the Purchaser and NGP Parent (as defined in the Original Investment Agreement);

 

(d)                                 a certificate, dated the Closing Date and signed by a duly authorized officer of the managing member of the Purchaser, in its capacity as such, stating that:

 

(i)                                     the Purchaser has performed and complied in all material respects with the covenants and agreements contained in this Agreement that are required to be performed and complied with by the Purchaser on or prior to the Closing Date; and

 

(ii)                                  each of the representations and warranties of the Purchaser contained in Article IV are true and correct on and as of the Closing Date in all material respects;

 

(e)                                  a cross-receipt executed by the Purchaser and delivered to Triangle certifying that it has received the Shares; and

 

(f)                                   all other documents, instruments and writings required to be delivered by the Purchaser at the Closing under the Transaction Documents.

 

9

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF TRIANGLE

 

Except as otherwise disclosed in any Triangle SEC Disclosure contained in the Triangle SEC Documents furnished or filed with the Commission after January 31, 2012 and prior to the date hereof, and except as set forth in the Schedules, which Schedules shall be deemed a part hereof (it being understood that (i) the matters disclosed for the purpose of one section or subsection of the Schedules shall constitute disclosure of such matters for the purposes of other sections or subsections hereof to the extent that such relevance to such other sections or subsections is reasonably apparent (ii) the duplication or cross-referencing of any disclosures made in the Schedules shall not, in any instance or in the aggregate, effect a waiver of the foregoing statement and (iii) the inclusion of an item in the Schedules shall not be deemed to be an admission of the materiality thereof), Triangle represents and warrants to the Purchaser, on and as of the date of this Agreement, as follows:

 

Section 3.01                             Formation and Qualification.  Each of the Triangle Entities has been duly formed and is validly existing in good standing under the Laws of its jurisdiction of formation, and is duly registered or qualified to do business and is in good standing as a foreign corporation, limited liability company, limited partnership or general partnership, as the case may be, in each jurisdiction in which its ownership or lease of property or the conduct of its businesses requires such registration or qualification, except where the failure to so register or qualify would not, individually or in the aggregate, be reasonably likely to have a Triangle Material Adverse Effect.  Each of the Triangle Entities has all corporate or limited liability company, as the case may be, power and authority necessary to own or lease its properties and assets currently owned or leased and to conduct its business as currently conducted, except where the failure to have such power or authority would not, individually or in the aggregate, be reasonably likely to have a Triangle Material Adverse Effect. None of the Triangle Entities is in violation of its applicable Organizational Documents.

 

Section 3.02                             Ownership of Subsidiaries.  Triangle directly or indirectly owns 100% of the issued and outstanding capital stock or membership interests, as the case may be, of the Triangle Subsidiaries free and clear of all Liens except for Liens created pursuant to the Credit Agreement dated as of April 12, 2012 among Triangle USA Petroleum Corporation, as the borrower, Wells Fargo Bank, National Association, as administrative agent, issuing lender, arranger and sole bookrunner, and the other lenders party thereto (the “Triangle Credit Agreement”) and the Credit and Security Agreement, dated February 25, 2013, between RockPile Energy Services, LLC, as borrower, and Wells Fargo Bank, National Association, as lender (the “RockPile Credit Agreement”).  Such capital stock or limited liability company interests, as the case may be, of the Triangle Subsidiaries have been duly authorized and validly issued and, with respect to any capital stock, are fully paid and non-assessable.

 

Section 3.03                             No Other Subsidiaries.  Except as described on Schedule 3.03, other than its ownership interests in the Triangle Subsidiaries, Triangle does not own, directly or indirectly, any equity or long-term debt securities of any other Person.

 

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Section 3.04                             Authorization; Enforceability; Valid Issuance.

 

(a)                       Triangle has all requisite corporate power and authority and has taken all requisite corporate action necessary for (i) the authorization, execution and delivery of the Transaction Documents, (ii) the authorization of the performance of all obligations of Triangle under the Transaction Documents, and (iii) the authorization, issuance (or reservation for issuance) and delivery of the Shares in accordance with and upon the terms and conditions set forth in the Transaction Documents.  The Transaction Documents have been duly authorized and validly executed and delivered by Triangle, and assuming due authorization, execution and delivery by the other parties thereto, the Transaction Documents will constitute valid and binding obligations of Triangle enforceable against Triangle in accordance with their terms; provided, that the enforceability thereof may be limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar Laws relating to or affecting creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at Law) and (ii) public policy, applicable Law relating to fiduciary duties and indemnification and contribution and an implied covenant of good faith and fair dealing.

 

(b)                       The Shares, when issued and sold pursuant to the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable and will be free of any and all Liens, other than (i) restrictions on transfer under applicable state and federal securities Laws and the Transaction Documents and (ii) such Liens as are created by or related to the Purchaser.

 

Section 3.05                             Capitalization; No Preemptive Rights, Registration Rights or Options.

 

(a)                       Schedule 3.05(a) sets forth, as of the date hereof, (a) the authorized capital stock of Triangle, (b) the number of shares of capital stock of Triangle issued and outstanding, (c) the number of shares of capital stock issuable pursuant to Triangle’s employee benefits or other compensation plans, and (d) the number of shares of capital stock of Triangle issuable or reserved for issuance pursuant to warrants, options, convertible securities or other rights exercisable for, or convertible into or exchangeable for any shares of capital stock of Triangle.  All of the issued and outstanding shares of Triangle’s capital stock have been duly authorized and validly issued and are fully paid and non-assessable, and none of the outstanding shares of capital stock of Triangle were issued in violation of the preemptive or similar rights of any security holder of Triangle or in violation of any applicable state or federal securities Laws.  No indebtedness having the right to vote (or convertible into or exchangeable for securities having the right to vote) on any matters on which Stockholders have the right to vote are issued or outstanding.

 

(b)                       Except as described on Schedule 3.05(b) or as contemplated by the Transaction Documents and the NGP Agreements, no Person is entitled to preemptive or similar rights with respect to any securities of any of the Triangle Entities.  Except as described on Schedule 3.05(b) or as contemplated by the Transaction Documents or the NGP Agreements, there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which any of the Triangle Entities is or may be obligated to issue any equity securities of any kind.  Except as contemplated by the Transaction Documents or the NGP Agreements, there are no voting agreements, buy-sell agreements, option or right of first purchase agreements or other agreements of any kind among any of the Triangle Entities

 

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and any of the security holders of any of the Triangle Entities relating to the securities of the Triangle Entities held by them.  Except as provided in the NGP Agreements, no Person has the right to require any of the Triangle Entities to register any securities of any of the Triangle Entities under the Securities Act, whether on a demand basis or in connection with the registration of securities of any of the Triangle Entities for their own account or for the account of any other Person.

 

(c)                        Assuming the validity of the waiver of the Purchaser set forth in Section 7.12, the issuance and sale of the Shares will not obligate any of the Triangle Entities to issue shares of capital stock or other securities to any other Person and will not result in the adjustment of the exercise, conversion, exchange or reset price of any outstanding security.  Triangle does not have outstanding shareholder purchase rights, a “poison pill” or any similar arrangement.

 

Section 3.06                             No Breach.  None of the execution, delivery and performance of the Transaction Documents by Triangle or the consummation of the transactions contemplated by the Transaction Documents, including the issuance and sale of the Shares pursuant to this Agreement, (i) conflicts or will conflict with or constitutes or will constitute a violation of any of the provisions of the Triangle Organizational Documents or the Subsidiary Organizational Documents, (ii) requires any consent, approval or notice under or results in a breach or violation of, or constitutes a default (or an event which, with notice or lapse of time or both, would constitute such a default) under, any of the terms and provisions of any Contract to which any of the Triangle Entities is a party or by which any of them or any of their respective properties or assets may be bound, (iii) violates or will violate any Law of any Governmental Authority or (iv) results or will result in the creation or imposition of any Lien upon any property or assets of any of the Triangle Entities; except in the cases of clauses (ii) - (iv), where such conflicts, breaches, violations or Liens would not, individually or in the aggregate, be reasonably likely to have a Triangle Material Adverse Effect.

 

Section 3.07                             No Approvals.  Except for the approvals required by the Commission in connection with any registration statement filed under the Amended Registration Rights Agreement, no consent, approval, authorization or order of, or filing or registration with, any Governmental Authority is required in connection with the execution, delivery and performance by Triangle of each of the Transaction Documents or the consummation by Triangle of the transactions contemplated by the Transaction Documents, including the sale and issuance of the Shares.

 

Section 3.08                             Compliance with Laws and Agreements.

 

(a)                       Except as described on Schedule 3.08, each of the Triangle Entities is in compliance (i) with all terms, covenants and conditions contained in any Contract to which it is a party or by which it is bound or to which any of its properties or assets is subject and (ii) with all Laws of any Governmental Authority applicable to its business, operations, properties or assets, except in each case where the failure to be in compliance would not, individually or in the aggregate, be reasonably likely to have a Triangle Material Adverse Effect.  None of the Triangle Entities has received written notice of any material violation of any Law.

 

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(b)                       To the Knowledge of the Triangle Entities, all third parties to any Contract to which any of the Triangle Entities is a party or by which any of them is bound or to which any of their properties or assets is subject are in compliance with all terms, covenants and conditions contained in each such Contract, except where the failure to be in compliance would not, individually or in the aggregate, be reasonably likely to have a Triangle Material Adverse Effect.

 

Section 3.09                             Corporate Records.  The minute books of each of the Triangle Entities have been made available to the Purchaser, and such books (i) reflect all meetings and actions of the board of directors (including each board committee) and stockholders (or analogous governing bodies or interest holders) of each of the Triangle Entities since the time of its respective organization through the date of the latest meeting and action, and (ii) accurately in all material respects reflect all transactions referred to in such minutes.

 

Section 3.10                             Triangle SEC Documents; Triangle Financial Statements.

 

(a)                       Triangle has timely filed or furnished with the Commission all reports, schedules, forms, statements and other documents (including exhibits and other information incorporated therein) required to be filed or furnished by it under the Exchange Act or the Securities Act since February 1, 2010 (all such documents, collectively, the “Triangle SEC Documents”).  The Triangle SEC Documents, including any audited or unaudited financial statements and any notes thereto or schedules included therein (the “Triangle Financial Statements”), at the time filed or furnished (except to the extent corrected by a subsequently filed or furnished Triangle SEC Document filed or furnished prior to the date hereof) (i) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein (in the light of the circumstances under which they were made) not misleading, (ii) complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as applicable, (iii) complied as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto, (iv) in the case of the Triangle Financial Statements, were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q of the Commission), and (v) in the case of the Triangle Financial Statements, fairly present the financial condition, results of operations and cash flows of Triangle and its Subsidiaries as of the dates and for the periods indicated.

 

(b)                       KPMG LLP, who have audited and reviewed certain Triangle Financial Statements and audited the effectiveness of Triangle’s internal control over financial reporting and, expressed an unqualified opinion on management’s assessment thereof, are (i) independent public accountants as required by the Securities Act and (ii) in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X.  KPMG LLP is a registered public accounting firm as defined by the Public Company Accounting Oversight Board.  Except as described on Schedule 3.10, since February 1, 2010, (i) Triangle has not been advised of (A) any significant deficiency or material weakness in the design or operation of internal controls that could adversely affect Triangle’s internal controls or (B) any fraud, whether or not material, that involves management or other employees

 

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who have a significant role in Triangle’s internal controls, and (ii) there have been no changes in internal controls or in other factors that could materially affect internal controls, including any corrective actions with regard to any significant deficiency or material weakness.

 

(c)                        Triangle has provided to the Purchaser copies of all issued auditors’ reports received since February 1, 2010, in each case to the extent relating to the business of the Triangle Entities and the operation thereof.  Except as described on Schedule 3.10, since February 1, 2010, Triangle has not received any letters to management regarding accounting practices and systems of internal controls.  Since February 1, 2010, none of the Triangle Entities nor, to Triangle’s Knowledge, any director, officer, employee, auditor, accountant or representative of any of the Triangle Entities has received any complaint, allegation, assertion or claim, in each case of a material nature, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Triangle Entities or their respective internal accounting controls, including any such complaint, allegation, assertion or claim that any Triangle Entity has engaged in questionable accounting or auditing practices.

 

Section 3.11                             Books and Records; Sarbanes-Oxley Compliance.

 

(a)                       Each of the Triangle Entities (i) makes and keeps accurate books and records and (ii) maintains and has maintained effective internal control over financial reporting (as defined in Rule 13a-15 under the Exchange Act) and a system of internal accounting controls sufficient to provide reasonable assurance that (A) transactions are executed in accordance with management’s general or specific authorizations, (B) transactions are recorded as necessary to permit preparation of Triangle’s consolidated financial statements in conformity with GAAP and to maintain accountability for its assets, (C) access to the Triangle Entities’ assets is permitted only in accordance with management’s general or specific authorization and (D) the recorded accountability for the Triangle Entities’ assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Triangle is not aware of any failures of such internal accounting controls that are material or that would be required to be disclosed pursuant to any applicable Law.

 

(b)                       Triangle has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15 under the Exchange Act), such disclosure controls and procedures are designed to ensure that the information required to be disclosed by Triangle in the reports it files or submits under the Exchange Act is accumulated and communicated to management of Triangle, including its principal executive officers and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure to be made and such disclosure controls and procedures are effective in alerting Triangle in a timely manner to material information required to be disclosed in Triangle’s reports filed with the Commission.

 

(c)                        To the Knowledge of Triangle, there is and has been no failure on the part of Triangle or any of Triangle’s directors or officers, in their capacities as such, to comply in all material respects with the provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith.

 

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Section 3.12                             No Material Adverse Change.  Except as described on Schedule 3.12, since January 31, 2012, there has not been (i) any change, development, condition, circumstance, occurrence or event that has had or is reasonably likely to have a Triangle Material Adverse Effect, (ii) any transaction that is material to the Triangle Entities taken as a whole, (iii) any obligation or liability, direct or contingent (including any off-balance sheet obligations), incurred by any of the Triangle Entities that is material to the Triangle Entities taken as a whole, (iv) any change in the capital stock, membership or other equity interests or outstanding indebtedness of any of the Triangle Entities that is material to the Triangle Entities taken as a whole, (v) any dividend or distribution of any kind declared, paid or made on the capital stock of Triangle or (vi) any material change in Triangle’s accounting or tax principles, practices or methods.

 

Section 3.13                             Title to Property.

 

(a)                       Except as described on Schedule 3.13, other than to the extent such would not, individually or in the aggregate, reasonably be expected to have a Triangle Material Adverse Effect, each of the Triangle Entities has good and marketable title to all real property (other than oil and gas properties) and personal property owned by them and valid, legal and defensible title to the interests in oil and gas properties underlying the estimates of the Triangle Entities’ proved reserves set forth in Triangle’s most recently-filed Form 10-K, as amended, in each case free and clear of all Liens except (i) Liens arising under or securing indebtedness incurred under the Triangle Credit Agreement or the RockPile Credit Agreement or (ii) Liens that do not materially affect the value of such properties taken as a whole.

 

(b)                       Other than to the extent such would not, individually or in the aggregate, reasonably be expected to have a Triangle Material Adverse Effect, all real property and buildings held under lease by the Triangle Entities are held by them under valid, subsisting and enforceable leases, and the working interests derived from oil, gas and mineral leases or mineral interests held or leased by the Triangle Entities give the Triangle Entities the right to explore, develop and produce hydrocarbons from such properties consistent with standard industry practices.  The care taken by the Triangle Entities with respect to acquiring or otherwise procuring such leases or mineral interests was generally consistent with standard industry practices in the areas in which the Triangle Entities operate for acquiring or procuring leases and mineral interests therein to explore, develop and produce hydrocarbons. No real property (including oil, gas and mineral leases and mineral interests) owned, leased, licensed or used by the Triangle Entities lies in an area which is, or to the Knowledge of the Triangle Entities will be, subject to restrictions which would prohibit, and no statements of facts relating to the actions or inaction of another Person or its ownership, leasing, licensing, or use of any real or personal property (including oil, gas and mineral leases and mineral interests) exists or will exist which would prevent, the continued effective ownership, leasing, licensing, exploration, development or production or use of such property in the business of the Triangle Entities as presently conducted or as the Triangle SEC Documents indicate they contemplate conducting.

 

(c)                        As of the date hereof, (i) all royalties, rentals, deposits and other amounts owed under the oil and gas leases constituting the oil and gas properties of the Triangle Entities have been properly and timely paid (other than amounts held in suspense accounts pending routine payments or related to disputes about the proper identification of royalty

 

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owners), and no material amount of proceeds from the sale or production attributable to the oil and gas properties of the Triangle Entities are currently being held in suspense by any purchaser thereof, and (ii) there are no claims under take-or-pay contracts pursuant to which natural gas purchasers have any make-up rights affecting the interests of the Triangle Entities in their oil and gas properties, except in each case where such failure to pay or claim would not, individually or in the aggregate, be reasonably likely to have a Triangle Material Adverse Effect.

 

Section 3.14                             Reserve Engineers; Reserve Estimates.

 

(a)                       Ryder Scott Company, L.P. (“Ryder Scott”), who issued a report with respect to the Triangle Entities’ oil and natural gas reserves at January 31, 2012, has represented to Triangle that it is, and to the Knowledge of Triangle is, an independent petroleum engineer with respect to Triangle.

 

(b)                       The oil and gas reserve estimates of the Triangle Entities included in Triangle’s most recently-filed Form 10-K, as amended, have been prepared by independent reserve engineers in accordance with Commission guidelines applied on a consistent basis throughout the periods involved, and Triangle has no reason to believe that such estimates do not fairly reflect the oil and gas reserves of the Triangle Entities as of the dates indicated.  Other than normal production of the reserves and intervening market commodity price fluctuations, and except as described in Triangle’s most recently-filed Form 10-K, as amended, Triangle is not aware of any facts or circumstances that would result in a material adverse change in the aggregate net reserves, or the aggregate present value of future net cash flows therefrom, as described in Triangle’s most recently-filed Form 10-K, as amended.

 

Section 3.15                             Insurance.  The Triangle Entities are insured by insurers in such amounts as Triangle believes are adequate for the conduct of their business and as Triangle believes are customary for the business in which they are engaged.  All such policies of insurance insuring the Triangle Entities are in full force and effect and the Triangle Entities have no reason to believe that any of them will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business. There are no material claims by any of the Triangle Entities under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause.

 

Section 3.16                             Litigation.  Except as described on Schedule 3.16, there are no actions, suits, claims, investigations or proceedings pending or, to the Knowledge of Triangle, threatened, to which any of the Triangle Entities is or would be a party or of which any of their respective properties or assets is or would be subject at Law or in equity, before or by any Governmental Authority, or before or by any self-regulatory organization or other non-governmental regulatory authority (including NYSE MKT), which are reasonably likely to, individually or in the aggregate, have a Triangle Material Adverse Effect.

 

Section 3.17                             Labor, Employment and Benefit Matters.

 

(a)                       None of the Triangle Entities have agreed to recognize any union or other collective bargaining representative, and no union or other collective bargaining

 

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representative has been certified as the exclusive bargaining representative of any of their employees.  To the Knowledge of Triangle, no union organizational campaign or representation petition is currently pending with respect to any of the employees of the Triangle Entities.  None of the Triangle Entities are party to or bound by any collective bargaining agreement or labor contract or individual agreement applicable to any employees of the Triangle Entities.  No collective bargaining agreements or other labor contract relating to employees of the Triangle Entities are being negotiated.  Except for such exceptions as would not, individually or in the aggregate, reasonably be expected to have a Triangle Material Adverse Effect, none of the Triangle Entities are subject to any consent decree with any Governmental Authority or arbitrator relating to claims of unfair labor practices, employment discrimination, or other claims with respect to employment and labor practices and policies, and no Government Authority or arbitrator has issued a judgment, order, decree, injunction, decision, award or finding with respect to the employment and labor practices or policies of the Triangle Entities. No labor dispute with the employees of the Triangle Entities exists or, to the Knowledge of Triangle, is imminent, and Triangle is not aware of any existing or imminent labor disturbance by the employees of any of the Triangle Entities’ principal operators, contractors, suppliers or customers, which, in any such case would, individually or in the aggregate, reasonably be likely to have a Triangle Material Adverse Effect.  To the Knowledge of Triangle, no executive officer of Triangle presently plans to terminate his or her employment.

 

(b)                       Each Plan has been established, administered and operated in compliance with its terms and all applicable Laws, including without limitation the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the Internal Revenue Code of 1986, as amended (the “Code”), except where the failure to so comply would not, individually or in the aggregate, be reasonably likely to have a Triangle Material Adverse Effect.  Each Plan intended to be qualified under section 401(a) of the Code (i) is maintained pursuant to a prototype document approved by the Internal Revenue Service, for which a separate determination letter is not required, or has received a favorable determination letter from the Internal Revenue Service regarding such qualified status, and (ii) has not been operated in a way that would reasonably be expected to adversely affect its qualified status.  No Plan is, and none of Triangle, the Triangle Subsidiaries or any ERISA Affiliate has any liability with respect to, a multiemployer plan (within the meaning of section 3(37) of ERISA) or a plan subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code.  No Plan provides or promises to provide retiree medical, dental or life insurance benefits to any current or former employee of Triangle or any Triangle Subsidiary (except to the extent required pursuant to Section 4980B(f) of the Code and the corresponding provisions of ERISA).  As used herein: (1) the term “Plan” means each of the following that is sponsored, maintained or contributed to by Triangle, any Triangle Subsidiary or any ERISA Affiliate, or with respect to which any of such entities could have any liability: (A) each “employee benefit plan,” as such term is defined in section 3(3) of ERISA (including employee benefit plans, such as foreign plans, which are not subject to the provisions of ERISA); and (B) each bonus, equity ownership, equity option, phantom equity, deferred compensation, incentive compensation, vacation, holiday, sick leave, and each other employee benefit plan, agreement, program, practice or understanding which is not described in clause (A); and (2) the term “ERISA Affiliate” means any entity, trade or business that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(l) of ERISA that includes Triangle or any Triangle Subsidiary, or that is a member of the same

 

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“controlled group” as Triangle or any Triangle Subsidiary pursuant to Section 4001(a)(14) of ERISA.

 

(c)                        All employees and former employees of the Triangle Entities have been paid in full all accrued and due wages, salaries, commissions, bonuses, vacation pay, severance and termination pay, sick pay, and other accrued and due compensation for all services performed by them up to the date hereof.  Except for such exceptions as would not, individually or in the aggregate, reasonably be expected to have a Triangle Material Adverse Effect, the Triangle Entities have, and have always been since February 1, 2010, in compliance with all applicable laws and regulations regarding labor and employment practices.

 

Section 3.18                             Tax Returns.

 

(a)                       (i) Each of the Triangle Entities has prepared and timely filed all Tax Returns required to be filed by any of them or has requested extensions thereof and all such filed Tax Returns are complete and accurate, (ii) each of the Triangle Entities has timely paid all Taxes that are required to be paid by any of them, (iii) there are no audits, examinations, investigations, actions, suits, claims or other proceedings in respect of Taxes pending or threatened in writing nor has any deficiency for any Tax been assessed by any Governmental Authority in writing against any Triangle Entity which are reasonably likely to, individually or in the aggregate, have a Triangle Material Adverse Effect, and (iv) all Taxes required to be withheld by any Triangle Entity have been withheld and paid over to the appropriate Tax authority (except, in the case of this clause (iv) or clause (i) or (ii) above, with respect to matters which would not, individually or in the aggregate, be reasonably likely to have a Triangle Material Adverse Effect or which are contested in good faith and for which adequate reserves have been established on Triangle’s financial statements in accordance with GAAP). None of the Triangle Entities has entered into any transaction that, as of the date of this Agreement, has been identified by the Internal Revenue Service in published guidance as a “listed transaction” as defined under Section 1.6011-4(b)(2) of the Treasury Regulations promulgated under the Code.

 

(b)                       As used in this Agreement, (i) “Taxes” means any and all domestic or foreign, federal, state, local or other taxes of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority, including taxes on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, unemployment, social security, workers’ compensation or net worth, and taxes in the nature of excise, withholding, ad valorem or value added, and including any liability in respect of any items described above as a transferee or successor, pursuant to Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign Law), or as an indemnitor, guarantor, surety or in a similar capacity under any Contract, and (ii) “Tax Return” means any return, report or similar filing (including the attached schedules) filed or required to be filed with respect to Taxes (and any amendments thereto), including any information return, claim for refund or declaration of estimated Taxes.

 

Section 3.19                             Environmental Matters.  Except as described on Schedule 3.19, the Triangle Entities (i) are, and at all times since February 1, 2010 have been, and to the Knowledge of Triangle at all times during the five year period preceding the date of this Agreement have

 

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been, in compliance in all material respects with Environmental Law, (ii) have received all Environmental Permits required of them under Environmental Law to conduct their respective businesses in all material respects as they are currently being conducted, (iii) are in compliance in all material respects with all terms and conditions of such Environmental Permits, (iv) since February 1, 2010, have not received any notice from or been the subject to any suit, proceeding, investigation, claim or action by any Governmental Authority or other third party that would reasonably be expected to result in any material liability to or obligation of the Triangle Entities alleging or asserting any violation of Environmental Law or any liability under Environmental Law, which notice, suit, proceeding, investigation, claim or action has not been resolved to the satisfaction of the party giving or asserting it, and (v) to the Knowledge of the Triangle Entities, have not caused a release into the environment of any Hazardous Material in a manner that would reasonably be expected to result in any material liability to or obligation of the Triangle Entities.  The Triangle Entities have made available to the Purchaser complete and correct copies of all material environmental reports within the possession of the Triangle Entities relating to the business and any real estate owned, leased, or operated by the Triangle Entities or any of their predecessors in interest.  The representations and warranties in this Section 3.19 constitute the sole and exclusive representations of the Triangle Entities with respect to environmental matters.

 

Section 3.20                             Permits.  Each of the Triangle Entities has such permits, consents, licenses, franchises, certificates and authorizations of governmental or regulatory authorities (“permits”) as are necessary to own its properties and assets and to conduct its business in the manner described in the Triangle SEC Documents, except where the failure to have obtained the same would not, individually or in the aggregate, be reasonably likely to have a Triangle Material Adverse Effect.  Each of the Triangle Entities has fulfilled and performed all its obligations with respect to such permits which are or will be due to have been fulfilled and performed by the applicable date except where the failure to have so performed would not, individually or in the aggregate, be reasonably likely to have a Triangle Material Adverse Effect, and no event has occurred that would prevent the permits from being renewed or reissued or which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any impairment of the rights of the holder of any such permit.  No actions, suits, claims, investigations or proceedings are pending or, to the Knowledge of Triangle, are threatened, before or by any Governmental Authority, relating to the suspension, revocation, termination, impairment or modification of any such permit, which would be reasonably likely to, individually or in the aggregate, have a Triangle Material Adverse Effect.

 

Section 3.21                             Foreign Corrupt Practices Act; Money Laundering.

 

(a)                       None of the Triangle Entities, and, to the Knowledge of Triangle, no director, officer, agent, employee or other person associated with or acting on behalf of the Triangle Entities, is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the FCPA (as defined below), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and to the Knowledge of Triangle, the Triangle Entities have conducted their businesses in compliance with the FCPA and

 

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have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.  “FCPA” means Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder.

 

(b)                       The operations of the Triangle Entities are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Authority (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Triangle Entities with respect to the Money Laundering Laws is pending or, to the Knowledge of Triangle, threatened.

 

Section 3.22                             NYSE MKT Listing.  The Common Stock is listed on NYSE MKT, and Triangle has not received any notice of delisting.  The issuance and sale of the Shares in accordance with the terms of the Transaction Documents does not contravene NYSE MKT rules and regulations.

 

Section 3.23                             Related Party Transactions.  No relationship, direct or indirect, exists between or among the Triangle Entities on the one hand, and the directors, officers, stockholders, customers or suppliers of the Triangle Entities, on the other hand, that is required to be disclosed in the Triangle SEC Documents and is not so described.  There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees of indebtedness by the Triangle Entities to or for the benefit of any of the officers or directors of Triangle.

 

Section 3.24                             Business Combinations.  Triangle has taken all necessary action to cause Section 203 of the Delaware General Corporation Law to not apply to the transactions contemplated by the Transaction Documents, including the issuance and sale of the Shares.

 

Section 3.25                             Investment Company.  None of the Triangle Entities is now, and after the issuance and sale of the Shares will be, an “investment company” or a company “controlled by” an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

Section 3.26                             Certain Fees.  No fees or commissions are or will be payable by Triangle to brokers, finders or investment bankers with respect to the sale of the Shares or the consummation of the transactions contemplated by this Agreement.  Triangle agrees that it will indemnify and hold harmless the Purchaser from and against any and all claims, demands or liabilities for broker’s, finder’s, placement or other similar fees or commissions incurred by Triangle or alleged to have been incurred by Triangle in connection with the sale of the Shares or the consummation of the transactions contemplated by the Transaction Documents.

 

Section 3.27                             Form S-3 Eligibility.  As of the date of this Agreement, Triangle is eligible to register the resale of the Shares for resale by the Purchaser under Form S-3 promulgated under the Securities Act.

 

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Section 3.28                             Private Placement.  Assuming the accuracy of the representations and warranties set forth in Article IV, the offer and sale of the Shares to the Purchaser as contemplated herein is exempt from the registration requirements of the Securities Act.

 

Section 3.29                             Other Regulatory Compliance.  None of the transactions contemplated by the Transaction Documents will violate or result in a violation of Section 7 of the Exchange Act, or any regulation promulgated thereunder, including Regulations T, U and X of the Board of Governors of the Federal Reserve System.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

 

The Purchaser hereby represents and warrants to Triangle with respect to itself, on and as of the date of this Agreement, as follows:

 

Section 4.01                             Existence.  The Purchaser has been duly formed and is validly existing in good standing under the Laws of the State of Delaware.

 

Section 4.02                             Authorization; Enforceability.  The Purchaser has all requisite limited liability company power and authority and has taken all requisite action necessary for (i) the authorization, execution and delivery of the Transaction Documents and (ii) the authorization of the performance of all obligations of the Purchaser under the Transaction Documents.  The Transaction Documents have been duly authorized and validly executed and delivered by the Purchaser, and assuming due authorization, execution and delivery by Triangle, the Transaction Documents will constitute valid and binding obligations of the Purchaser enforceable against the Purchase in accordance with their terms; provided, that the enforceability thereof may be limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar Laws relating to or affecting creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at Law) and (ii) public policy, applicable Law relating to fiduciary duties and indemnification and contribution and an implied covenant of good faith and fair dealing.

 

Section 4.03                             No Breach.  None of the execution, delivery and performance of the Transaction Documents by the Purchaser and the consummation of the transactions contemplated by the Transaction Documents (i) conflicts or will conflict or constitutes or will constitute a violation of the provisions of the Organizational Documents of the Purchaser (ii) results or will result in a breach or violation of any of the terms or provisions of, or constitutes or will constitute a default under, any material agreement to which the Purchaser is a party or by which the Purchaser is bound or to which any of the property or assets of the Purchaser is subject, or (iii) violates or will violate any Law of any Governmental Authority, except in the cases of clauses (ii) and (iii) where such breach or violation would not reasonably be expected to have a material adverse effect on the ability of the Purchaser to consummate the transaction under any Transaction Documents to which it is a party.

 

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Section 4.04                             Certain Fees.  No fees or commissions are or will be payable by the Purchaser to brokers, finders or investment bankers with respect to the purchase of the Shares or the consummation of the transactions contemplated by this Agreement.  The Purchaser agrees that it will indemnify and hold harmless Triangle from and against any and all claims, demands or liabilities for broker’s, finder’s, placement or other similar fees or commissions incurred by the Purchaser or alleged to have been incurred by the Purchaser in connection with the purchase of the Shares or the consummation of the transactions contemplated by the Transaction Documents.

 

Section 4.05                             Unregistered Securities.

 

(a)                                 Accredited Investor Status; Sophisticated Purchaser.  The Purchaser is an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act and is able to bear the risk of its investment in the Shares for an indefinite period.  The Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Shares.

 

(b)                                 Information.  The Purchaser or its Representatives have been furnished with materials relating to the business, finances and operations of Triangle and relating to the offer and sale of the Shares that have been requested by the Purchaser.  The Purchaser or its Representatives have been afforded the opportunity to ask questions of Triangle or its Representatives.  The Purchaser understands and acknowledges that its purchase of the Shares involves a high degree of risk and uncertainty.  The Purchaser has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its investment in the Shares.

 

(c)                                  Purchaser Representation.  The Purchaser is purchasing the Shares for its own account and not with a view to distribution in violation of any securities Laws.  The Purchaser has been advised and understands and acknowledges that the Shares have not been registered under the Securities Act or under the “blue sky” Laws of any jurisdiction and may be resold only if registered pursuant to the provisions of the Securities Act (or if eligible, pursuant to the provisions of Rule 144 promulgated under the Securities Act or pursuant to another available exemption from the registration requirements of the Securities Act).  The Purchaser has been advised of and is aware of the provisions of Rule 144 promulgated under the Securities Act.

 

(d)                                 Legends.

 

(i)                                     The Purchaser understands and acknowledges that, until such time as the Shares have been registered pursuant to the provisions of the Securities Act, or the Shares are eligible for resale pursuant to Rule 144 promulgated under the Securities Act without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Shares will bear the following restrictive legend: “THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR

 

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PURSUANT TO AN EXEMPTION FROM REGISTRATION THEREUNDER AND, IN THE CASE OF A TRANSACTION EXEMPT FROM REGISTRATION, UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT OR THE ISSUER HAS RECEIVED DOCUMENTATION REASONABLY SATISFACTORY TO IT (WHICH MAY INCLUDE AN OPINION OF COUNSEL) THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.”

 

(ii)                                  The Purchaser understands and acknowledges that the Shares will contain restrictions on transfer as described therein.

 

(e)                                  Reliance Upon the Purchaser’s Representations and Warranties.  The Purchaser understands and acknowledges that the Shares are being offered and sold in reliance on a transactional exemption from the registration requirements of federal and state securities Laws, and that Triangle and Skadden, Arps, Slate, Meagher & Flom LLP, counsel for Triangle, are relying in part upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth in this Agreement in (i) concluding that the issuance and sale of the Shares is a “private offering” and, as such, is exempt from the registration requirements of the Securities Act, and (ii) determining the applicability of such exemptions and the suitability of the Purchaser to purchase the Shares.

 

ARTICLE V

 

COVENANTS

 

Section 5.01                             Conduct of Business.  From the date hereof through the Closing, Triangle shall, and shall cause its Subsidiaries to, operate their respective businesses in the ordinary course consistent with past practices.

 

Section 5.02                             Reasonable Best Efforts Prior to Closing.  Prior to the Closing, each of the Parties shall use its reasonable best efforts to take, or cause to be taken, all actions necessary or appropriate to satisfy the conditions to the Closing set forth in Sections 2.03, 2.04 and 2.05 and to consummate the transactions contemplated by the Transaction Documents.  Without limiting the foregoing, each of the Parties shall use its reasonable best efforts to make all filings and obtain all consents of Governmental Authorities that may be necessary or advisable for the consummation of the transactions contemplated by the Transaction Documents.

 

Section 5.03                             Other Actions.  From the date hereof through the Closing, Triangle shall use reasonable best efforts to obtain authorization of the listing of the Shares, subject to official notice of issuance.  Without limiting the foregoing, prior to Closing, Triangle shall (i) file a supplemental listing application with the NYSE MKT to list the Shares and provide to NYSE MKT any required supporting documentation, and any other requested information, related to the Shares and (ii) ensure that the issuance of the Shares is in compliance with applicable NYSE MKT rules and regulations.

 

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Section 5.04                             Further Assurances; Listing of Shares.  From time to time after the Closing, without further consideration, Triangle and the Purchaser shall use their commercially reasonable efforts to take, or cause to be taken, all actions necessary or appropriate to consummate the transactions contemplated by the Transaction Documents.  If Triangle applies to have its Common Stock or other securities traded on any principal stock exchange or market other than NYSE MKT, it shall include in such application the Shares and will take such other action as is necessary to cause the Shares to be so listed.

 

Section 5.05                             Section 16(b) Matters.  Prior to the Closing, Triangle shall take all actions reasonably necessary to cause the issuance and sale of the Shares pursuant to this Agreement and the exercise of the preemptive rights granted under the Amended Investment Agreement to be exempt under Section 16(b) of the Exchange Act, including any actions reasonably necessary pursuant to Rule 16b-3 under the Exchange Act.

 

Section 5.06                             Restriction on Sale of Shares.  The Purchaser agrees not to offer, sell, contract to sell, pledge or otherwise dispose of, or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) (collectively, “Transfer”) by the Purchaser or any of its Affiliates, directly or indirectly, including the filing (or participation in the filing) of a registration statement with the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to, any Shares or any securities that are convertible into, or exercisable or exchangeable for, or that represent the right to receive, the Shares, or publicly announce an intention to effect any such transaction, for a period of 180 days after the Closing without the prior written consent of Triangle; provided, however, that (i) the Purchaser may, without the consent of Triangle, Transfer any Shares to an Affiliate of the Purchaser, provided that such Affiliate agrees in writing to be bound by the restrictions on the Purchaser in this Section 5.06, and (ii) nothing in this Section 5.06 shall prevent the Purchaser or any of its Affiliates from (A) Transferring the Convertible Note or any Conversion Shares (as defined in the Convertible Note), (B) filing (or participating in the filing of) a registration statement with the Commission in respect of any Conversion Shares or (C) publicly announcing an intention to do any of the foregoing.

 

ARTICLE VI

 

INDEMNIFICATION, COSTS AND EXPENSES

 

Section 6.01                             Indemnification by Triangle.  Triangle agrees to indemnify the Purchaser and its Representatives (collectively, “Purchaser Related Parties”) from, and hold each of them harmless against, any and all losses, actions, suits, proceedings (including any investigations, litigation or inquiries), demands and causes of action, and, in connection therewith, and promptly upon demand, pay or reimburse each of them for all reasonable costs, losses, liabilities, damages or expenses of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel and all other reasonable expenses incurred in connection with investigating, defending or preparing to defend any such matter that may be incurred by them or asserted against or involve any of them), whether or not involving a Third

 

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Party Claim, as a result of, arising out of, or in any way related to (i) the failure of any of the representations or warranties made by Triangle contained herein to be true and correct in all material respects as of the date hereof or as of the Closing or (ii) the breach of any of the covenants of Triangle contained herein; provided, that in the case of the immediately preceding clause (i), such claim for indemnification relating to a breach of any representation or warranty is made prior to the expiration of such representation or warranty; provided, however, that for purposes of determining when an indemnification claim has been made, the date upon which a Purchaser Related Party shall have given notice to Triangle shall constitute the date upon which such claim has been made; provided, further, that, absent fraud or willful misconduct, the liability of Triangle shall not be greater in amount than the Purchase Price.  Notwithstanding the foregoing, Triangle shall not be required to indemnify the Purchaser Related Parties under clause (i) of the immediately preceding sentence for a breach of a particular representation or warranty if any of Roy Aneed, Jesse Bomer or Daniel Goodman had actual knowledge (without any duty of reasonable inquiry) of such breach as of the date hereof, as applicable.

 

Section 6.02                             Indemnification by the Purchaser.  The Purchaser agrees to indemnify Triangle and its Representatives (collectively, “Triangle Related Parties”) from, and hold each of them harmless against, any and all losses, actions, suits, proceedings (including any investigations, litigation or inquiries), demands and causes of action, and, in connection therewith, and promptly upon demand, pay or reimburse each of them for all reasonable costs, losses, liabilities, damages or expenses of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel and all other reasonable expenses incurred in connection with investigating, defending or preparing to defend any such matter that may be incurred by them or asserted against or involve any of them), whether or not involving a Third Party Claim, as a result of, arising out of, or in any way related to (i) the failure of any of the representations or warranties made by the Purchaser contained herein to be true and correct in all material respects as of the date hereof or as of the Closing or (ii) the breach of any of the covenants of the Purchaser contained herein; provided, that in the case of the immediately preceding clause (i), such claim for indemnification relating to a breach of any representation or warranty is made prior to the expiration of such representation or warranty; provided, however, that for purposes of determining when an indemnification claim has been made, the date upon which a Triangle Related Party shall have given notice to the Purchaser shall constitute the date upon which such claim has been made; provided, further, that, absent fraud or willful misconduct, the liability of the Purchaser shall not be greater in amount than the Purchase Price.

 

Section 6.03                             Indemnification Procedure.

 

(a)                                 A claim for indemnification for any matter not involving a Third Party Claim may be asserted by notice to the party from whom indemnification is sought; provided, however, that failure to so notify the indemnifying party shall not preclude the indemnified party from any indemnification that it may claim in accordance with this Article VI.

 

(b)                                 Promptly after any Triangle Related Party or Purchaser Related Party (hereinafter, the “Indemnified Party”) has received notice of any indemnifiable claim hereunder, or the commencement of any action, suit or proceeding by a third person, which the Indemnified Party believes in good faith is an indemnifiable claim under this Agreement (each, a “Third Party Claim”), the Indemnified Party shall give the indemnitor hereunder (the “Indemnifying Party”)

 

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written notice of such Third Party Claim but failure to so notify the Indemnifying Party will not relieve the Indemnifying Party from any liability it may have to such Indemnified Party hereunder except to the extent that the Indemnifying Party is prejudiced by such failure.  Such notice shall state the nature and the basis of such Third Party Claim to the extent then known.  The Indemnifying Party shall have the right to defend and settle, at its own expense and by its own counsel, any such matter as long as the Indemnifying Party pursues the same diligently and in good faith.  If the Indemnifying Party undertakes to defend or settle such Third Party Claim, it shall promptly, and in no event later than five (5) days following receipt of notice of such Third Party Claim, notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate with the Indemnifying Party and its counsel in all commercially reasonable respects in the defense thereof and/or the settlement thereof.  Such cooperation of the Indemnified Party shall be at the cost of the Indemnifying Party.  After the Indemnifying Party has notified the Indemnified Party of its intention to undertake to defend or settle any such asserted liability, and for so long as the Indemnifying Party diligently pursues such defense, the Indemnifying Party shall not be liable for any additional legal expenses incurred by the Indemnified Party in connection with any defense or settlement of such asserted liability; provided, however, that the Indemnified Party shall be entitled (i) at its expense, to participate in the defense of such asserted liability and the negotiations of the settlement thereof and (ii) if (A) the Indemnifying Party has, within ten (10) Business Days of when the Indemnified Party provides written notice of a Third Party Claim, failed (y) to assume the defense or settlement of such Third Party Claim and employ counsel and (z) notify the Indemnified Party of such assumption, or (B) if the defendants in any such action include both the Indemnified Party and the Indemnifying Party and counsel to the Indemnified Party shall have concluded that there may be reasonable defenses available to the Indemnified Party that are different from or in addition to those available to the Indemnifying Party or if the interests of the Indemnified Party reasonably may be deemed to conflict with the interests of the Indemnifying Party, then the Indemnified Party shall have the right to select a separate counsel and to assume such settlement or legal defense and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the Indemnifying Party as incurred; provided, however, that the Indemnifying Party shall not be responsible for the fees and expenses of more than one separate counsel for the Purchaser and its Affiliates.  Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not settle any indemnified claim without the consent of the Indemnified Party, unless the settlement thereof imposes no liability or obligation on, and includes a complete release from liability of, and does not contain any admission of wrongdoing by, the Indemnified Party.

 

Section 6.04                             Tax Matters.  All indemnification payments under this Article VI shall be adjustments to the Purchase Price, except as otherwise required by applicable Law.

 

Section 6.05                             Exclusive Remedy.  Except for the assertion of any claim based on fraud, the remedies provided in this Article VI shall be the sole and exclusive legal remedies of the parties hereto, from and after the Closing and prior to the expiration of the applicable survival period in Section 7.03, with respect to breaches of representations, warranties and covenants under this Agreement and the transactions contemplated hereby.

 

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ARTICLE VII

 

MISCELLANEOUS

 

Section 7.01                             Termination.  This Agreement may be terminated at any time prior to the Closing by either Triangle or the Purchaser, by notice to the other Party, if the Closing has not occurred on or before 21 days following the date of this Agreement.  If this Agreement is terminated pursuant to this Section 7.01, this Agreement shall become void and of no further force and effect, except that the provisions of Sections 3.26 and 4.04, Article VI and Article VII shall remain operative and in full force and effect, unless Triangle and the Purchaser execute a writing that expressly (with specific references to the applicable Section or subsection of this Agreement) terminates such rights and obligations as between Triangle and the Purchaser.  Notwithstanding the foregoing, the termination of this Agreement pursuant to this Section 7.01 shall not relieve any Party from liability for damages for any willful failure to perform or observe in any material respect any of its agreements or covenants contained herein that are to be performed or observed at or prior to the Closing.

 

Section 7.02                             Fees and Expenses.  Triangle shall pay out of the proceeds received from the consummation of the transactions contemplated by this Agreement the reasonable out-of-pocket fees and expenses incurred by the Purchaser in connection the transactions contemplated by the Transaction Documents, including legal, accounting, advisory and other reasonable out-of-pocket fees and expenses; provided, that the expenses of the Purchaser paid out of such proceeds shall not exceed $100,000 in the aggregate.

 

Section 7.03                             Interpretation.  Article, Section and Schedule references in this Agreement are references to the corresponding Article, Section and Schedule to this Agreement, unless otherwise specified.  All Schedules to this Agreement are hereby incorporated and made a part hereof as if set forth in full herein and are an integral part of this Agreement.  All references to instruments, documents, Contracts and agreements are references to such instruments, documents, Contracts and agreements as the same may be amended, supplemented and otherwise modified from time to time, unless otherwise specified.  The word “including” shall mean “including but not limited to” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.  Any reference in this Agreement to $ shall mean U.S. dollars.  Whenever any determination, consent or approval is to be made or given by the Purchaser, such action shall be in the Purchaser’s sole discretion, unless otherwise specified in this Agreement.  If any provision in the Transaction Documents is held to be illegal, invalid, not binding or unenforceable, (i) such provision shall be fully severable and the Transaction Documents shall be construed and enforced as if such illegal, invalid, not binding or unenforceable provision had never comprised a part of the Transaction Documents, and the remaining provisions shall remain in full force and effect and (ii) the parties hereto shall negotiate in good faith to modify the Transaction Documents so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.  When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to the Transaction Documents, the date that is the reference date in calculating such period shall be excluded.  If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.  Any

 

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words imparting the singular number only shall include the plural and vice versa.  The words such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.  The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement.

 

Section 7.04                             Survival of Provisions.  The representations and warranties set forth in Sections 3.01, 3.04, 3.05, 4.01 and 4.02 shall survive the execution and delivery of this Agreement and the Closing and remain operative and in full force and effect indefinitely.  Any other representations and warranties made herein shall survive the execution and delivery of this Agreement and the Closing until the 6-month anniversary of the Closing Date and no claim may be made regarding the representations and warranties after such date.  The covenants made in this Agreement or any other Transaction Document shall survive the Closing and remain operative and in full force and effect indefinitely.

 

Section 7.05                             No Waiver; Modifications in Writing.

 

(a)                                 Delay.  Except as otherwise provided herein, no failure or delay on the part of any party 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 preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to a party at Law or in equity or otherwise.

 

(b)                                 Specific Waiver.  Except as otherwise provided herein, no amendment, waiver, consent, modification or termination of any provision of this Agreement or any other Transaction Document shall be effective unless signed by each of the parties hereto or thereto affected by such amendment, waiver, consent, modification or termination.  Any amendment, supplement or modification of or to any provision of this Agreement or any other Transaction Document, any waiver of any provision of this Agreement or any other Transaction Document and any consent to any departure by Triangle from the terms of any provision of this Agreement or any other Transaction Document 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 Agreement, no notice to or demand on Triangle in any case shall entitle Triangle to any other or further notice or demand in similar or other circumstances.  Any investigation by or on behalf of any party shall not be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein.

 

Section 7.06                             Binding Effect; Assignment.

 

(a)                                 Binding Effect.  This Agreement shall be binding upon Triangle, the Purchaser and their respective successors and permitted assigns.  Except as expressly provided in this Agreement, this Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and permitted assigns.

 

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(b)                                 Assignment of Rights.  The Purchaser’s rights and obligations hereunder (including the right to seek indemnification) may be transferred or assigned in whole or in part by the Purchaser to any Affiliate of the Purchaser without the consent of Triangle.  Upon any such permitted transfer or assignment, references in this Agreement to the Purchaser (as they apply to the transferor or assignor, as the case may be) shall thereafter apply to such transferee or assignee of the Purchaser unless the context otherwise requires, and such Affiliate transferee or assignee shall become a party to the other Transaction Documents, with such modifications as the Parties shall reasonably agree are necessary or appropriate to reflect the ownership of the Shares by such Affiliate transferee.  Except as provided in the first sentence of this Section 7.06(b), the Purchaser and its permitted Affiliate transferees of the Shares shall not assign or transfer any portion of the rights and obligations of the Purchaser under this Agreement without the written consent of Triangle, which shall not be unreasonably withheld.  No portion of the rights and obligations of Triangle under this Agreement may be transferred or assigned without the prior written consent of the Purchaser, which consent shall not be unreasonably withheld.

 

Section 7.07                             Non-Disclosure.  Prior to the Triangle Entities or any of their respective Representatives disclosing any information naming the Purchaser or any of its Affiliates in any filing with the Commission, NYSE MKT or any Governmental Authority or other public disclosure, the Triangle Entities shall provide the Purchaser a reasonable opportunity to review and comment on such disclosure (with such comments being incorporated or reflected, to the extent reasonable, in any such disclosure); provided, however, that nothing in this Section 7.07 shall delay any required filing with the Commission, NYSE MKT or any Governmental Authority or other public disclosure or otherwise hinder the Triangle Entities’ or their Representatives’ ability to timely comply with all Laws or rules and regulations of the Commission, NYSE MKT or other Governmental Authority.

 

Section 7.08                             Communications.  All notices and demands provided for hereunder shall be in writing and shall be given by hand delivery, electronic mail, registered or certified mail, return receipt requested, regular mail, facsimile or air courier guaranteeing overnight delivery to the following addresses:

 

(a)                                 If to the Purchaser:

 

NGP Triangle Holdings, LLC

125 East John Carpenter Fwy., Suite 600

Irving, Texas 75062

Attention: Craig Glick

Facsimile: (972) 432-1441

Internet electronic mail: cglick@ngptrs.com

 

with a copy to:

 

Vinson & Elkins L.L.P.

1001 Fannin, Suite 2500

Houston, Texas 77002

Attention: Doug McWilliams

 

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Facsimile: (713) 615-5725 

Internet electronic mail: dmcwilliams@velaw.com

 

(b)                                 If to Triangle:

 

Triangle Petroleum Corporation

1200 17th Street, Suite 2600

Denver, Colorado 80202

Attention: Justin Bliffen 

Facsimile: (303) 260-5080

Internet electronic mail: jbliffen@trianglepetroleum.com

 

with a copy to:

 

Skadden, Arps, Slate, Meagher & Flom LLP

1000 Louisiana, Suite 6800

Houston, TX 77002

Attention: Richard Aftanas and Christian Callens

Facsimile: (212) 735-2000

Internet electronic mail: richard.aftanas@skadden.com and

christian.callens@skadden.com

 

or to such other address as Triangle or the Purchaser may designate in writing.  All notices and communications shall be deemed to have been duly given: (i) at the time delivered by hand, if personally delivered; (ii) when notice is sent to the sender that the recipient has read the message, if sent by electronic mail; (iii) upon actual receipt if sent by registered or certified mail, return receipt requested, or regular mail, if mailed; (iv) when receipt is acknowledged, if sent by facsimile; and (v) upon actual receipt when delivered to an air courier guaranteeing overnight delivery.

 

Section 7.09                             Removal of Legend.

 

(a)                                 The Purchaser may request Triangle to remove the legend set forth on the Shares by submitting to Triangle such certificates, together with an opinion of outside counsel reasonably acceptable to Triangle to the effect that such legend is no longer required under the Securities Act or applicable state Laws as the case may be, as Triangle may request; provided, that, no opinion of counsel shall be required if the Purchaser is effecting a sale of the Shares pursuant to Rule 144 under the Securities Act (and the Purchaser delivers a Rule 144 Representation Letter to Triangle) or the Shares have been registered under the Securities Act pursuant to an effective registration statement.  Triangle shall reasonably cooperate with the Purchaser to effect removal of such legend.  The legend on the Shares shall be removed and Triangle shall issue new shares of Common Stock without such legend to the holder of the Shares upon which it is stamped, if, unless otherwise required by state securities Laws, (i) such Shares are sold pursuant to an effective registration statement, (ii) in connection with a sale, assignment or other transfer, such holder provides Triangle with an opinion of a law firm reasonably acceptable to Triangle, in a generally acceptable form, to the effect that such sale, assignment or transfer of such Shares may be made without registration under the applicable

 

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requirements of the Securities Act, or (iii) in connection with a sale, assignment of or other transfer of such Shares, such holder provides Triangle with a representation letter that such Shares will be sold, assigned or transferred pursuant to Rule 144 under the Securities Act.  Triangle shall bear all direct costs and expenses associated with the removal of a legend pursuant to this Section 7.09; provided, that the Purchaser shall be responsible for all legal fees and expenses of counsel incurred by the Purchaser with respect to matters addressed in this Section 7.09.

 

(b)                                 Certificates evidencing Shares shall not contain any legend (including the legend set forth in Section 4.05(d)(i)), (i) while a registration statement covering the resale of such security is effective under the Securities Act and the Purchaser delivers to Triangle a representation letter agreeing that such Shares will be sold under such effective registration statement, or (ii) following any sale of such Shares pursuant to Rule 144, (iii) if such Shares may be sold free of restrictions pursuant to Rule 144(b) or (iv) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission).

 

Section 7.10                             Entire Agreement.  This Agreement, the other Transaction Documents and the other agreements and documents referred to herein are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or the other Transaction Documents or the NGP Agreements with respect to the rights granted by Triangle or any of its Affiliates or the Purchaser or any of their Affiliates set forth herein or therein.  This Agreement, the other Transaction Documents and the other agreements and documents referred to herein or therein supersede all prior agreements and understandings between the parties with respect to such subject matter.

 

Section 7.11                             Governing Law; Submission to Jurisdiction.  This Agreement, and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or warranty made in or in connection with this Agreement), will be construed in accordance with and governed by the Laws of the State of New York without regard to principles of conflicts of Laws (except that matters to which the Law of the jurisdiction of formation of Triangle is applicable shall be subject to the internal Laws of such state).  Any action against any party relating to the foregoing shall be brought in any federal or state court of competent jurisdiction located within the State of New York in the Borough of Manhattan in the City of New York, and the parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of any federal or state court located within the State of New York in the Borough of Manhattan in the City of New York over any such action.  The parties hereby irrevocably waive, to the fullest extent permitted by applicable Law, any objection that they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute.  Each of the parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.

 

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Section 7.12                             Waiver of Jury Trial.  THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, AND AGREES TO CAUSE ITS AFFILIATES TO WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

Section 7.13                             Waiver by Purchaser.  The Purchaser hereby waives any rights it may have pursuant to the NGP Agreements with respect to the issuance of the Shares pursuant to this Agreement, including, without limitation, its preemptive rights pursuant to Section 4.01 of the Original Investment Agreement, its consent rights pursuant to Section 4.02 of the Original Investment Agreement and its consent rights pursuant to Section 10 of the Convertible Note.

 

Section 7.14                             Acknowledgement by Triangle.  Triangle hereby acknowledges and agrees that the entry into the Transaction Documents and the consummation of the transactions contemplated thereby by the Purchaser do not and shall not constitute a violation of its standstill obligations under Section 3.01 of the Original Investment Agreement.

 

Section 7.15                             Execution in Counterparts.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same agreement.

 

[Remainder of Page Left Intentionally Blank]

 

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IN WITNESS WHEREOF, the parties hereto execute this Agreement, effective as of the date first above written.

 

	
 
    	
TRIANGLE PETROLEUM   CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Jonathan   Samuels
    
	
 
    	
Name:
    	
Jonathan Samuels
    
	
 
    	
Title:
    	
President and   Chief Executive Officer
    
				

 

 

	
 
    	
NGP TRIANGLE HOLDINGS,   LLC
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
NGP Natural   Resources X, L.P., its managing member
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
G.F.W. Energy X,   L.P., its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
GFW X, L.L.C., its   general partner
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Kenneth A. Hersh
    
	
 
    	
Name:
    	
Kenneth A. Hersh
    
	
 
    	
Title:
    	
Authorized Member
    
				

 

 

Exhibit A

 

FORM OF

AMENDED AND RESTATED
 REGISTRATION RIGHTS AGREEMENT

 

This Amended and Restated Registration Rights Agreement (this “Agreement”) is made and entered into as of March [  ], 2013, by and between Triangle Petroleum Corporation, a Delaware corporation (“Triangle”) and NGP Triangle Holdings, LLC, a Delaware limited liability company (the “Purchaser”).  Triangle and Purchaser are referred to collectively herein as the “Parties.”

 

WHEREAS, pursuant to the Note Purchase Agreement, dated as of July 31, 2012, between Triangle and the Purchaser (the “Initial Purchase Agreement”), Triangle issued and sold to the Purchaser a convertible promissory note dated as of July 31, 2012 (the “Convertible Note”) in the aggregate principal amount of $120,000,000, which is convertible into shares of common stock, par value $0.00001 per share, of Triangle (the “Common Stock”) as described therein;

 

WHEREAS, in connection with the entry into the Initial Purchase Agreement, Triangle and Purchaser entered into a Registration Rights Agreement, dated as of July 31, 2012 (the “Initial Registration Rights Agreement”);

 

WHEREAS, pursuant to the Stock Purchase Agreement, dated as of March 2, 2013, between Triangle and the Purchaser (the “New Purchase Agreement” and, together with the Initial Purchase Agreement, the “Purchase Agreements”), Triangle agreed to issue and sell to the Purchaser an aggregate of 9,300,000 shares of Common Stock (the “Purchased Stock”); and

 

WHEREAS, as a condition to the closing of the transactions contemplated by the New Purchase Agreement, the Parties have agreed to amend and restate the Initial Registration Rights Agreement as set forth herein.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each party hereto, the Parties hereby amend and restate the Initial Registration Rights Agreement as follows:

 

1.                                      Definitions.  Capitalized terms used in this Agreement and not defined herein shall have the meanings ascribed to such terms in the Purchase Agreements.  As used in this Agreement, the following terms have the meanings indicated:

 

“Affiliate” of any specified Person means any other person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified Person.  For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

 

“Agreement” has the meaning set forth in the preamble.

 

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“Automatic Shelf Registration Statement” means an “automatic shelf registration statement” as defined under Rule 405.

 

“Blackout Period” has the meaning set forth in Section 2(a).

 

“Board” means the board of directors of Triangle.

 

“Business Day” means any day other than a Saturday, Sunday, any federal holiday or any day on which banking institutions in the State of Texas are authorized or required by law or governmental action to close.

 

“Commission” means the Securities and Exchange Commission or any other federal agency then administering the Securities Act or Exchange Act.

 

“Common Stock” has the meaning set forth in the recitals to this Agreement.

 

“Conversion Shares” means the Common Stock issuable upon conversion of the Convertible Note in accordance with the terms of the Convertible Note (including any Reference Property into which the Convertible Note shall become convertible pursuant to the terms of the Convertible Note).

 

“Convertible Note” has the meaning set forth in the recitals to this Agreement.

 

“Demand Notice” has the meaning set forth in Section 2(a).

 

“Demand Registration” has the meaning set forth in Section 2(a).

 

“Effective Date” means the time and date that a Registration Statement is first declared effective by the Commission or otherwise becomes effective.

 

“Effectiveness Period” has the meaning set forth in Section 2(a).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations of the Commission promulgated thereunder.

 

“Holder” means (i) the Purchaser unless and until the Purchaser ceases to hold the Convertible Note or any Registrable Securities and (ii) any holder of Registrable Securities to whom registration rights conferred by this Agreement have been transferred in compliance with Section 7(e) hereof; provided that any Person referenced in clause (ii) shall be a Holder only if such Person agrees in writing to be bound by and subject to the terms set forth in this Agreement.

 

“Holder Indemnified Persons” has the meaning set forth in Section 5(a).

 

“Initiating Holder” has the meaning set forth in Section 2(a).

 

“Initial Purchase Agreement” has the meaning set forth in the recitals to this Agreement.

 

“Initial Registration Rights Agreement” has the meaning set forth in the recitals to

 

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this Agreement.

“Losses” has the meaning set forth in Section 5(a).

 

“New Purchase Agreement” has the meaning set forth in the recitals to this Agreement.

 

“Parties” has the meaning set forth in the preamble.

 

“Person” means an individual or group, corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Piggyback Notice” has the meaning set forth in Section 2(b).

 

“Piggyback Registration” has the meaning set forth in Section 2(b).

 

“Piggyback Request” has the meaning set forth in Section 2(b).

 

“Proceeding” means any action, claim, suit, proceeding or investigation (including a preliminary investigation or partial proceeding, such as a deposition) pending or, to the knowledge of Triangle, to be threatened.

 

“Prospectus” means the prospectus included in a Registration Statement (including a prospectus that includes any information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A, Rule 430B or Rule 430C promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

 

“Purchase Agreements” has the meaning set forth in the recitals to this Agreement.

 

“Purchased Stock” shall have the meaning set forth in the recitals to this Agreement.

 

“Purchaser” has the meaning set forth in the preamble.

 

“Reference Property” has the meaning set forth in the Convertible Note.

 

“Registrable Securities” means the Conversion Shares and the Shares; provided, however, that Registrable Securities shall not include:  (i) any Conversion Shares or Shares that have been registered under the Securities Act and disposed of pursuant to an effective registration statement or otherwise transferred to a Person who is not entitled to the registration and other rights hereunder; (ii) any Conversion Shares or Shares that may be sold or transferred by the Holder thereof under Rule 144 under the Securities Act without any limitation on the

 

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volume, timing, recipients or intended method or methods of distribution, including through the use of an underwriter; and (iii) any Conversion Shares or Shares that cease to be outstanding (whether as a result of repurchase and cancellation, conversion or otherwise).

 

“Registration Expenses” has the meaning set forth in Section 4.

 

“Registration Statement” means a registration statement in the form required to register the resale of the Registrable Securities under the Securities Act and other applicable law, and including any Prospectus, amendments and supplements to each such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act.

 

“Rule 405” means Rule 405 promulgated by the Commission pursuant to the Securities Act.

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Selling Expenses” means all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder.

 

“Shares” means the Purchased Stock and any other equity interests of Triangle or equity interests in any successor of Triangle issued in respect of such Purchased Stock by reason of or in connection with any stock dividend, stock split, combination, reorganization, recapitalization, conversion to another type of entity or similar event involving a change in the capital structure of Triangle.

 

“Suspension Notice” has the meaning set forth in Section 7(b).

 

“Suspension Period” has the meaning set forth in Section 7(b).

 

“Trading Market” means the principal national securities exchange on which Registrable Securities are listed.

 

“Triangle” has the meaning set forth in the preamble.

 

“Triangle Indemnified Persons” has the meaning set forth in Section 5(b).

 

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“Triangle Securities” means any equity interest of any class or series in Triangle.

 

“Underwritten Offering” has the meaning set forth in Section 3(k).

 

“Underwritten Offering Notice” has the meaning set forth in Section 3(k).

 

“VWAP”  means, as of a specified date and in respect of Registrable Securities, the volume weighted average price for such security on the Trading Market with respect to the Registrable Securities for the five (5) trading days immediately preceding, but excluding, such date.

 

“WKSI” means a “well known seasoned issuer” as defined under Rule 405.

 

Unless the context requires otherwise: (a) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms; (b) references to Sections and Annexes refer to Sections of and Annexes to this Agreement; (c) the terms “include”, “includes”, “including” or words of like import shall be deemed to be followed by the words “without limitation”; (d) the terms “hereof”, “herein” or “hereunder” refer to this Agreement as a whole and not to any particular provision of this Agreement; (e) unless the context otherwise requires, the term “or” is not exclusive and shall have the inclusive meaning of “and/or”; (f) defined terms herein will apply equally to both the singular and plural forms and derivative forms of defined terms will have correlative meanings; (g) references to any law or statute shall include all rules and regulations promulgated thereunder, and references to any law or statute shall be construed as including any legal and statutory provisions consolidating, amending, succeeding or replacing the applicable law or statute; (h) references to any Person include such Person’s successors and permitted assigns; and (i) references to “days” are to calendar days unless otherwise indicated.

 

For the avoidance of doubt, where this Agreement refers to allocation of rights on a pro rata basis to holders of Registrable Securities, such allocation shall be determined considering the Convertible Note on an as-converted basis and as adjusted as provided in the Convertible Note. For purposes of this Agreement, holders of the Convertible Note will be deemed to be holders of the number of Conversion Shares issuable upon conversion of the Convertible Note held by such holder based on the Outstanding Balance (as defined in the Convertible Note) at such time.  Any limit imposed by the rules of NYSE MKT LLC on the number of Conversion Shares issuable to the Purchaser upon conversion of the Convertible Note will not be taken into account for purposes of this definition.

 

2.                                      Registration.

 

(a)                                 Demand Registration.

 

(i)                                     Any Holder that holds any Registrable Securities shall have the option and right, exercisable by delivering a written notice to Triangle (a “Demand Notice,” and the Holder that delivers such a Demand Notice, the “Initiating Holder”), to require Triangle to, pursuant to the terms of and subject to the limitations contained in this Agreement, prepare and file with the Commission a Registration Statement registering the offering and sale of the number and type of Registrable Securities on the

 

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terms and conditions specified in the Demand Notice in accordance with the intended timing and method or methods of distribution thereof specified in the Demand Notice, which may include sales on a delayed or continuous basis pursuant to Rule 415 (a “Demand Registration”).  The Demand Notice must set forth the number of Registrable Securities that the Initiating Holder intends to include in such Demand Registration.  Notwithstanding anything to the contrary herein, in no event shall Triangle be required to effectuate a Demand Registration for Registrable Securities having an aggregate value of less than $30 million based on the VWAP of such Registrable Securities as of the date of the Demand Notice.

 

(ii)                                  Within five Business Days of the receipt of the Demand Notice, Triangle shall give written notice of such Demand Notice to all Holders and, as soon as reasonably practicable thereafter, shall, subject to the limitations of this Section 2(a), file a Registration Statement covering all of the Registrable Securities that the Holders shall in writing request (such request to be given to Triangle within three days of receipt of such notice of the Demand Notice given by Triangle pursuant to this Section 2(a)(ii)) to be included in such Demand Registration as promptly as practicable as directed by the Initiating Holder in accordance with the terms and conditions of the Demand Notice and use all commercially reasonable efforts to cause such Registration Statement to become effective under the Securities Act and remain effective under the Securities Act until all Registrable Securities covered by such Registration Statement have been sold (the “Effectiveness Period”).

 

(iii)                               Subject to the other limitations contained in this Agreement, Triangle is not obligated hereunder to effect (A) more than two Demand Registrations in any 12 month period, (B) more than a total of five Demand Registrations pursuant to this Agreement and (C) a subsequent Demand Registration pursuant to a Demand Notice if a Registration Statement covering all of the Registrable Securities held by the Holders providing such Demand Notice shall have become effective under the Securities Act and remains effective under the Securities Act and is sufficient to permit offers and sales of the number and type of Registrable Securities on the terms and conditions specified in the Demand Notice in accordance with the intended timing and method or methods of distribution thereof specified in the Demand Notice.

 

(iv)                              Notwithstanding any other provision of this Section 2(a), Triangle shall not be required to effect a registration or file a Registration Statement (or any amendment thereto) for a period of up to 60 days, if (A) the Board determines that a postponement is in the best interest of Triangle and its stockholders generally due to a pending transaction involving Triangle, (B) the Board determines such registration would render Triangle unable to comply with applicable securities laws or (C) the Board determines such registration would require disclosure of material information that Triangle has a bona fide business purpose for preserving as confidential (any such period, a “Blackout Period”); provided, however, that (i) in no event shall any Blackout Period together with any Suspension Period collectively exceed an aggregate of 120 days in any 12 month period, (ii) during any Blackout Period contemplated by Section 2(a)(iv)(B) or any Suspension Period, Triangle shall not engage in any transaction involving the offer, issuance, sale, or purchase of Triangle Securities (whether for the benefit of Triangle or a

 

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third Person), except transactions involving the issuance or purchase of Triangle Securities as contemplated by Triangle employee benefit plans or employee or director arrangements or in connection with the conversion or exercise of outstanding securities, including the Convertible Note, and (iii) during any Blackout Period contemplated by Section 2(a)(iv)(B) or (C) or any Suspension Period, Triangle shall not file a registration statement (or any amendment or supplement thereto) for any other holder of registration rights.

 

(v)                                 Triangle may include in any such Demand Registration other Triangle Securities for sale for its own account or for the account of any other Person; provided that if the managing underwriter, if any, for the Underwritten Offering determines that the type or number of Triangle Securities proposed to be offered in such offering would likely have an adverse effect in any material respect on the price, timing or distribution of the Registrable Securities proposed to be included in such offering, the Registrable Securities to be sold by the Holders shall be included in such registration before any Triangle Securities proposed to be sold for the account of Triangle or any other Person.

 

(vi)                              Subject to the limitations contained in this Agreement, Triangle shall effect any Demand Registration on Form S-3 (except if Triangle is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such Demand Registration shall be effected on another appropriate form for such purpose pursuant to the Securities Act) and if Triangle becomes, and is at the time of its receipt of a Demand Notice, a WKSI, the Demand Registration for any offering and selling of Registrable Securities shall be effected pursuant to an Automatic Shelf Registration Statement, which shall be on Form S-3 or any equivalent or successor form under the Securities Act (if available to Triangle); provided, however, that if at any time a Registration Statement on Form S-3 is effective and a Holder provides written notice to Triangle that it intends to effect an offering of all or part of the Registrable Securities included on such Registration Statement, Triangle will amend or supplement such Registration Statement as may be necessary in order to enable such offering to take place.

 

(vii)                           Without limiting Section 3, in connection with any Demand Registration pursuant to and in accordance with this Section 2(a), Triangle shall, (A) promptly prepare and file or cause to be prepared and filed (1) such additional forms, amendments, supplements, prospectuses, certificates, letters, opinions and other documents, as may be necessary or advisable to register or qualify the securities subject to such Demand Registration, including under the securities laws of such states as the Holders shall reasonably request; provided, however, that no such qualification shall be required in any jurisdiction where, as a result thereof, Triangle would become subject to general service of process or to taxation or qualification to do business in such jurisdiction solely as a result of registration and (2) such forms, amendments, supplements, prospectuses, certificates, letters, opinions and other documents as may be necessary to apply for listing or to list the Registrable Securities subject to such Demand Registration on the Trading Market and (B) do any and all other acts and things that may be reasonably necessary or appropriate or reasonably requested by the Holders to enable

 

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the Holders to consummate a public sale of such Registrable Securities in accordance with the intended timing and method or methods of distribution thereof.

 

(ix)                              In the event a Holder transfers Registrable Securities included on a Registration Statement and such Registrable Securities remain Registrable Securities following such transfer, at the request of such Holder, Triangle shall amend or supplement such Registration Statement as may be necessary in order to enable such transferee to offer and sell such Registrable Securities pursuant to such Registration Statement; provided that in no event shall Triangle be required to file a post-effective amendment to the Registration Statement unless (A) such Registration Statement includes only Registrable Securities held by the Holder, Affiliates of the Holder or transferees of the Holder or (B) Triangle has received written consent therefor from whom Registrable Securities have been registered on (but not yet sold under) such Registration Statement, other than the Holder, Affiliates of the Holder or transferees of the Holder.

 

(x)                                 The rights of the Holders under this Section 2(a) shall terminate at such time that both (A) the number of Registrable Securities is less than 3% of the number of outstanding shares of Common Stock (determined considering the Convertible Note on an as-converted basis and as adjusted as provided in the Convertible Note) and (B) such Registrable Securities may be sold or transferred by the Holder thereof under Rule 144 under the Securities Act without any limitation on the volume or timing.

 

(b)                                 Piggyback Registration.

 

(i)                                     If Triangle shall at any time propose to conduct, other than pursuant to any Demand Registration, a public offering of Common Stock for cash (whether in connection with a public offering of Common Stock by Triangle, a public offering of Common Stock by stockholders, or both, but excluding an offering relating solely to an employee benefit plan, an offering relating to a transaction on Form S-4 or S-8 or an offering on any registration statement form that does not permit secondary sales), Triangle shall promptly notify all Holders of such proposal reasonably in advance of (and in any event at least five Business Days before) the commencement of the offering (the “Piggyback Notice”).  The Piggyback Notice shall offer the Holders the opportunity to include for registration in such Registration Statement the number of Registrable Securities as they may request (a “Piggyback Registration”).  Triangle shall use commercially reasonable efforts to include in each such Piggyback Registration such Registrable Securities for which Triangle has received written requests within three Business Days after sending the Piggyback Notice (“Piggyback Request”) for inclusion therein.  If a Holder decides not to include all of its Registrable Securities in any Registration Statement thereafter filed by Triangle, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by Triangle with respect to offerings of Common Stock, all upon the terms and conditions set forth herein.

 

(ii)                                  If the Registration Statement under which Triangle gives notice under this Section 2(b) is for an underwritten offering, Triangle shall so advise the Holders of Registrable Securities.  In such event, the right of any such Holder to be

 

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included in a registration pursuant to this Section 2(b) shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein.  All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by Triangle.  If the managing underwriter or managing underwriters of such offering advise Triangle and the Holders in writing that in their reasonable opinion that the inclusion of all of the Holders’ Registrable Securities in the subject Registration Statement (or any other Common Stock proposed to be included in such offering) would likely have an adverse effect in any material respect on the price, timing or distribution of Common Stock proposed to be included in such offering, Triangle shall include in such offering only that number of shares of Common Stock proposed to be included in such offering that, in the reasonable opinion of the managing underwriter or managing underwriters, will not have such effect, with such number to be allocated as follows:  (i) first, to Triangle, (ii) if there remains availability for additional shares of Common Stock to be included in such registration, second pro-rata among all Holders desiring to register Registrable Securities based on the number of Registrable Securities such Holder is entitled to include in such registration and, if applicable, to any other holders on whose behalf Triangle filed such Registration Statement and (iii) if there remains availability for additional shares of Common Stock to be included in such registration, third pro-rata among all other holders of Common Stock who may be seeking to register such Common Stock based on the number of Common Stock such holder is entitled to include in such registration.  If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to Triangle and the managing underwriter(s) delivered on or prior to the time of the commencement of such offering.  Any Registrable Securities withdrawn from such underwriting shall be excluded and withdrawn from the registration.

 

(iii)                               Triangle shall have the right to terminate or withdraw any registration initiated by it under this Section 2(b) at any time in its sole discretion whether or not any Holder has elected to include Registrable Securities in such Registration Statement.  The registration expenses of such withdrawn registration shall be borne by Triangle in accordance with Section 4 hereof.

 

(iv)                              The rights of the Holders under this Section 2(b) shall terminate if the number of Registrable Securities is less than 5% of the number of outstanding shares of Common Stock (determined considering the Convertible Note on an as-converted basis and as adjusted as provided in the Convertible Note).

 

3.                                      Registration Procedures.

 

The procedures to be followed by Triangle and each Holder electing to sell Registrable Securities in a Registration Statement pursuant to this Agreement, and the respective rights and obligations of Triangle and such Holders, with respect to the preparation, filing and effectiveness of such Registration Statement, are as follows:

 

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(a)                                 in connection with a Demand Registration, Triangle will at least two Business Days prior to the anticipated filing of the Registration Statement and any related Prospectus or any amendment or supplement thereto (other than, after effectiveness of the Registration Statement, any filing made under the Exchange Act that is incorporated by reference into the Registration Statement), (i) furnish to such Holders copies of all such documents prior to filing and (ii) use commercially reasonable efforts to address in each such document when so filed with the Commission such comments as such Holders reasonably shall propose prior to the filing thereof.

 

(b)                                 in connection with a Piggyback Registration, Triangle will at least two days prior to the anticipated filing of the initial Registration Statement that identifies the Holders and any related Prospectus or any amendment or supplement thereto (other than amendments and supplements that do not materially alter the previous disclosure or do nothing more than name Holders and provide information with respect thereto), (i) furnish to such Holders copies of all Registration Statements that identify the Holders and any related Prospectus or any amendment or supplement thereto (other than amendments and supplements that do not materially alter the previous disclosure or do nothing more than name Holders and provide information with respect thereto) prior to filing and (ii) use commercially reasonable efforts to address in each such document when so filed with the Commission such comments as such Holders reasonably shall propose prior to the filing thereof.

 

(c)                                  Triangle will use commercially reasonable efforts to as promptly as reasonably practicable (i) prepare and file with the Commission such amendments, including post-effective amendments, and supplements to each Registration Statement and the Prospectus used in connection therewith as may be necessary under applicable law to keep such Registration Statement continuously effective with respect to the disposition of all Registrable Securities covered thereby for its Effectiveness Period and, subject to the limitations contained in this Agreement, prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities held by the Holders; (ii) cause the related Prospectus to be amended or supplemented by any required prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; and (iii) respond to any comments received from the Commission with respect to each Registration Statement or any amendment thereto and, as promptly as reasonably practicable provide such Holders true and complete copies of all correspondence from and to the Commission relating to such Registration Statement that pertains to such Holders as selling Holders but not any comments that would result in the disclosure to such Holders of material and non-public information concerning Triangle.

 

(d)                                 Triangle will comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the Registration Statements and the disposition of all Registrable Securities covered by each Registration Statement.

 

(e)                                  Triangle will notify such Holders who are included in a Registration Statement as promptly as reasonably practicable: (i)(A) when a Prospectus or any prospectus supplement or post-effective amendment to a Registration Statement in which such Holder is included has been filed; (B) when the Commission notifies Triangle whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on

 

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such Registration Statement (in which case Triangle shall provide true and complete copies thereof and all written responses thereto to each of such Holders that pertain to such Holders as selling Holders); and (C) with respect to each such Registration Statement or any post-effective amendment thereto, when the same has been declared effective; (ii) of any request by the Commission or any other federal or state governmental authority for amendments or supplements to such Registration Statement or Prospectus or for additional information that pertains to such Holders as sellers of Registrable Securities; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of such Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by Triangle of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of any event or passage of time that makes any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided, however, that no notice by Triangle shall be required pursuant to this clause (v) in the event that Triangle either promptly files a prospectus supplement to update the Prospectus or a Form 8-K or other appropriate Exchange Act report that is incorporated by reference into the Registration Statement, which in either case, contains the requisite information that results in such Registration Statement no longer containing any untrue statement of material fact or omitting to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading).

 

(f)                                   Triangle will use commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as promptly as reasonably practicable, or if any such order or suspension is made effective during any Blackout Period or Suspension Period, as promptly as reasonably practicable after such Blackout Period or Suspension Period is over.

 

(g)                                  During the Effectiveness Period, Triangle will furnish to each such Holder, without charge, at least one conformed copy of each Registration Statement and each amendment thereto and all exhibits to the extent requested by such Holder (including those incorporated by reference) promptly after the filing of such documents with the Commission; provided, that Triangle will not have any obligation to provide any document pursuant to this clause that is available on the Commission’s EDGAR system.

 

(h)                                 Triangle will promptly deliver to each Holder, without charge, as many copies of each Prospectus or Prospectuses (including each form of prospectus) authorized by Triangle for use and each amendment or supplement thereto as such Holder may reasonably request during the Effectiveness Period.  Subject to the terms of this Agreement, including Section 7(b), Triangle consents to the use of such Prospectus and each amendment or supplement

 

11

 

thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto.

 

(i)                                     Triangle will cooperate with such Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates shall be free of all restrictive legends indicating that the Registrable Securities are unregistered or unqualified for resale under the Securities Act, Exchange Act or other applicable securities laws, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holder may request in writing.  In connection therewith, if required by Triangle’s transfer agent, Triangle will promptly, after the Effective Date of the Registration Statement, cause an opinion of counsel as to the effectiveness of the Registration Statement to be delivered to and maintained with its transfer agent, together with any other authorizations, certificates and directions required by the transfer agent which authorize and direct the transfer agent to issue such Registrable Securities without any such legend upon sale by the Holder of such Registrable Securities under the Registration Statement.

 

(j)                                    Upon the occurrence of any event contemplated by Section 3(e)(v), subject to Section 2(a)(iv) and this Section 3(j), as promptly as reasonably practicable, Triangle will prepare a supplement or amendment, including a post-effective amendment, if required by applicable law, to the affected Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, no Registration Statement nor any Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(k)                                 Such Holders may distribute the Registrable Securities by means of an underwritten offering; provided that (i) in the case of a Demand Registration, (A) the Initiating Holder provides written notice to Triangle of its intention to distribute Registrable Securities by means of an underwritten offering, which for the avoidance of doubt may be made at a date later than the original Demand Notice (the “Underwritten Offering Notice” and such underwritten offering being referred to herein as an “Underwritten Offering”) and (B) Holders (including the Initiating Holder) having an aggregate value of at least $30 million based on the VWAP of such Registrable Securities as of the date of such Underwritten Offering Notice desire to participate in such Underwritten Offering and, in the case of a Piggyback Registration, the electing Holders must include their Registrable Securities in an underwritten offering if the Piggyback Notice so requires, (ii) the right of any Holder to include such Holder’s Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein, (iii) the managing underwriter or managing underwriters thereof shall be designated by the Initiating Holder in the case of a Demand Registration (provided, however, that such designated managing underwriter or managing underwriters shall be reasonably acceptable to Triangle) or by Triangle in the case of a registration initiated by Triangle, (iv) each Holder participating in such underwritten offering agrees to enter into an underwriting agreement in customary form and sell such Holder’s Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled to select the managing underwriter

 

12

 

or managing underwriters hereunder and (v) each Holder participating in such underwritten offering completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements.  Triangle hereby agrees with each Holder that, in connection with any Underwritten Offering in accordance with the terms hereof, it will negotiate in good faith and execute all indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, including using all commercially reasonable efforts to procure customary legal opinions and auditor “comfort” letters.  Notwithstanding the foregoing, Triangle is not obligated to effect more than (A) two Underwritten Offerings in any 12 month period and (B) a total of five Underwritten Offerings pursuant to this Agreement.  If, in the case of an Underwritten Offering, the managing underwriter advises Triangle that the inclusion of all of the Holders’ Registrable Securities in the subject Underwritten Offering would likely have an adverse effect in any material respect on the price, timing or distribution of Registrable Securities proposed to be included in such Underwritten Offering, then Triangle shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the Underwritten Offering shall be allocated to the Holders of such Registrable Securities on a pro rata basis based on the number of Registrable Securities held by all such Holders (including the Initiating Holders).  Any Registrable Securities excluded or withdrawn from such Underwritten Offering shall be withdrawn from the Underwritten Offering.  In the event that the managing underwriter limits the number of Registrable Securities to be included in the Underwritten Offering pursuant to this Section 3(k) such that at least two-thirds of the aggregate Registrable Securities set forth in such Holders’ written requests pursuant to this Section 3(k) are included in the Underwritten Offering, such Underwritten Offering shall not be considered to be an Underwritten Offering for purposes of the limitations set forth in this Section 3(k).

 

(l)                                     In the event such Holders seek to complete an Underwritten Offering, for a reasonable period prior to the filing of any Registration Statement and throughout the Effectiveness Period, Triangle will make available upon reasonable notice at Triangle’s principal place of business or such other reasonable place for inspection during normal business hours by the managing underwriter or managing underwriters selected in accordance with Section 3(k) such financial and other information and books and records of Triangle, and cause the officers, employees, counsel and independent certified public accountants of Triangle to respond to such inquiries, as shall be reasonably necessary (and in the case of counsel, not violate an attorney-client privilege in such counsel’s reasonable belief) to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act.

 

(m)                             In connection with any Demand Registration, Triangle will use commercially reasonable efforts to cause appropriate officers and employees to be available, on a customary basis and upon reasonable notice, to meet with prospective investors in presentations, meetings and road shows.

 

(n)                                 Triangle may require the Holder to furnish to Triangle any other information regarding the Holder and the distribution of such securities as Triangle reasonably determines is required to be included in any Registration Statement.

 

13

 

4.                                      Registration Expenses.  All Registration Expenses incident to the Parties’ performance of or compliance with their respective obligations under this Agreement or otherwise in connection with any Demand Registration or Piggyback Registration (in each case, excluding any Selling Expenses) shall be borne by Triangle, whether or not any Registrable Securities are sold pursuant to a Registration Statement.  “Registration Expenses” shall include, without limitation, (i) all registration and filing fees (including fees and expenses (A) with respect to filings required to be made with the Trading Market and (B) in compliance with applicable state securities or “Blue Sky” laws), (ii) printing expenses (including expenses of printing certificates for Triangle Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by a Holder of Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel, auditors and accountants for Triangle, (v) Securities Act liability insurance, if Triangle so desires such insurance, (vi) fees and expenses of all other Persons retained by Triangle in connection with the consummation of the transactions contemplated by this Agreement and (vii) all expenses relating to marketing the sale of the Registrable Securities, including expenses related to conducting a “road show.”  In addition, Triangle shall be responsible for all of its expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including expenses payable to third parties and including all salaries and expenses of their officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on the Trading Market.

 

5.                                      Indemnification.

 

(a)                                 Triangle shall indemnify and hold harmless each Holder, its Affiliates and each of their respective officers and directors and any Person who controls any such Holder (within the meaning of the Securities Act) and any agent thereof (collectively, “Holder Indemnified Persons”), to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, joint or several, costs (including reasonable costs of preparation and reasonable attorneys’ fees) and expenses, judgments, fines, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which any Indemnified Person may be involved, or is threatened to be involved, as a party or otherwise, under the Securities Act or otherwise (collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in any Registration Statement under which any Registrable Securities were registered, in any preliminary prospectus (if Triangle authorized the use of such preliminary prospectus prior to the Effective Date), or in any summary or final prospectus or free writing prospectus (if such free writing prospectus was authorized for use by Triangle) or in any amendment or supplement thereto (if used during the period Triangle is required to keep the Registration Statement current), or arising out of, based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances in which they were made, not misleading; provided, however, that Triangle shall not be liable to any Holder Indemnified Person to the extent that any such claim arises out of, is based upon or results from an untrue or alleged untrue statement or omission or alleged omission made in such Registration Statement, such preliminary, summary or final prospectus or free writing prospectus or such amendment or supplement, in reliance upon and in conformity with

 

14

 

written information furnished to Triangle by or on behalf of such Holder Indemnified Person or any underwriter specifically for use in the preparation thereof.  Triangle shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which Triangle is aware in connection with the transactions contemplated by this Agreement.  Notwithstanding anything to the contrary herein, this Section 5 shall survive any termination or expiration of this Agreement indefinitely.

 

(b)                                 In connection with any Registration Statement in which a Holder participates, such Holder shall indemnify and hold harmless Triangle, its Affiliates and each of their respective officers, directors and any Person who controls Triangle (within the meaning of the Securities Act) and any agent thereof (collectively, the “Triangle Indemnified Persons”), to the fullest extent permitted by applicable law, from and against any and all Losses as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in any such Registration Statement, in any preliminary prospectus (if used prior to the Effective Date of such Registration Statement), or in any summary or final prospectus or free writing prospectus or in any amendment or supplement thereto (if used during the period Triangle is required to keep the Registration Statement current), or arising out of, based upon or resulting from the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements made therein, in the light of the circumstances in which they were made, not misleading, but only to the extent that the same are made in reliance and in conformity with information relating to the Holder furnished in writing to Triangle by such Holder for use therein.

 

(c)                                  Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim or there may be reasonable defenses available to the indemnified party that are different from or additional to those available to the indemnifying party, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party.  If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld).  An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel (in addition to any local counsel) for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party there may be one or more legal or equitable defenses available to such indemnified party that are in addition to or may conflict with those available to another indemnified party with respect to such claim.  Failure to give prompt written notice shall not release the indemnifying party from its obligations hereunder.

 

6.                                      Facilitation of Sales Pursuant to Rule 144.  To the extent it shall be required to do so under the Exchange Act, Triangle shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144), and shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable the Holders to sell Registrable Securities without registration under the Securities Act

 

15

 

within the limitations of the exemption provided by Rule 144.  Upon the request of any Holder in connection with that Holder’s sale pursuant to Rule 144, Triangle shall deliver to such Holder a written statement as to whether it has complied with such requirements.

 

7.                                      Miscellaneous.

 

(a)                                 Remedies.  In the event of a breach by Triangle of any of its obligations under this Agreement, each Holder, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement.  Triangle agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

 

(b)                                 Discontinued Disposition.  Each Holder agrees that, upon receipt of a notice from Triangle of the occurrence of any event of the kind described in clauses (ii) through (v) of Section 3(e) (a “Suspension Notice”), such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder’s receipt of the copies of the supplemental Prospectus or amended Registration Statement as contemplated by Section 3(j) or until it is advised in writing by Triangle that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement (a “Suspension Period”).  Triangle may provide appropriate stop orders to enforce the provisions of this Section 7(b).

 

(c)                                  Amendments and Waivers.  No provision of this Agreement may be waived or amended except in a written instrument signed by Triangle and Holders that hold a majority of the Registrable Securities as of the date of such waiver or amendment.  Triangle shall provide prior notice to all Holders of any proposed waiver or amendment.  No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair the exercise of any such right.

 

(d)                                 Notices.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or electronic mail as specified in this Section 7(d) prior to 5:00 p.m. (Denver Time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile or electronic mail as specified in this Agreement later than 5:00 p.m. (Denver Time) on any date and earlier than 11:59 p.m. (Denver Time) on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service or (iv) upon actual receipt by the Party to whom such notice is required to be given.  The address for such notices and communications shall be as follows:

 

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If   to Triangle:
    	
Triangle   Petroleum Corporation
    
	
 
    	
 
    	
Attention:   Justin Bliffen
    
	
 
    	
 
    	
1200   17th Street, Suite 2600
    
	
 
    	
 
    	
Denver,   Colorado 80202
    
	
 
    	
 
    	
Fax:   (303) 260-5080
    
	
 
    	
 
    	
Electronic   mail: jbliffen@trianglepetroleum.com
    
	
 
    	
 
    	
 
    
	
 
    	
If   to the Purchaser or any of its Affiliates:
    	
c/o Natural Gas Partners
    
	
 
    	
 
    	
Attention:   Craig Glick
    
	
 
    	
 
    	
125   E. John Carpenter Fwy., Suite 600
    
	
 
    	
 
    	
Irving,   Texas 75062
    
	
 
    	
 
    	
Fax:   (972) 432-1441
    
	
 
    	
 
    	
Electronic   mail: cglick@ngptrs.com
    
	
 
    	
 
    	
 
    
	
 
    	
If   to any other Person who is then the registered Holder:
    	
To   the address of such Holder as it appears in the applicable register for the   Registrable Securities or such other address as may be designated in writing   hereafter, in the same manner, by such Person.
    

 

(e)                                  Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.  Except as provided in this Section 7(e), this Agreement, and any rights or obligations hereunder, may not be assigned without the prior written consent of Triangle and the Purchaser.  Notwithstanding anything in the foregoing to the contrary, the registration rights of a Holder pursuant to this Agreement with respect to all or any portion of its Registrable Securities may be assigned without such consent (but only with all related obligations) with respect to such Registrable Securities (and any Registrable Securities issued as a dividend or other distribution with respect to, in exchange for or in replacement of such Registrable Securities) by such Holder to a transferee of such Registrable Securities; provided (i) Triangle is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being assigned and (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms set forth in this Agreement.  Triangle may not assign its respective rights or obligations hereunder without the prior written consent of the Purchaser.

 

(f)                                   Third Party Beneficiaries.  Other than the Holders (other than the Purchaser), there are no third party beneficiaries having rights under or with respect to this Agreement.

 

(g)                                  Execution and Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement.  In the event that any signature is delivered by facsimile or electronic mail transmission, such signature shall create a

 

17

 

valid binding obligation of the Party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such signature delivered by facsimile or electronic mail transmission were the original thereof.

 

(h)                                 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.  This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, without reference to the choice of law provisions thereof.  Each of the Parties irrevocably submits to the exclusive jurisdiction of the courts of the State of New York located in in the Borough of Manhattan in the City of New York and the United States District Court for the Southern District of New York for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the transactions contemplated hereby.  Service of process in connection with any such suit, action or proceeding may be served on each Party anywhere in the world by the same methods as are specified for the giving of notices under this Agreement.  Each of the Parties irrevocably waives any objection to the laying of venue of any such suit, action or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  EACH OF THE PARTIES HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

(i)                                     Cumulative Remedies.  The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

 

(j)                                    Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the Parties shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction.  It is hereby stipulated and declared to be the intention of the Parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(k)                                 Entire Agreement.  This Agreement constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior contracts or agreements with respect to the subject matter hereof and the matters addressed or governed hereby, whether oral or written.

 

[THIS SPACE LEFT BLANK INTENTIONALLY]

 

18

 

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

 

	
 
    	
TRIANGLE PETROLEUM CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Jonathan   Samuels
    
	
 
    	
Title:
    	
President   and Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NGP TRIANGLE HOLDINGS, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
NGP Natural Resources X, L.P., its managing   member
    
	
 
    	
 
    
	
 
    	
By:
    	
G.F.W. Energy X, L.P., its general partner
    
	
 
    	
 
    
	
 
    	
By:
    	
GFW X, L.L.C., its general partner
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Kenneth A. Hersh
    
	
 
    	
Title:
    	
Authorized Member
    

 

Signature Page to Registration Rights Agreement

 

 

Exhibit B

 

FORM OF FIRST AMENDMENT

 

TO

 

INVESTMENT AGREEMENT

 

This First Amendment (this “Amendment”) to the INVESTMENT AGREEMENT, dated as of July 31, 2012 (the “Investment Agreement”), is entered into as of March [·], 2013 by and between Triangle Petroleum Corporation, a Delaware corporation (“Triangle”), NGP Natural Resources X, L.P., a Delaware limited partnership (the “Parent”) and NGP Triangle Holdings, LLC, a Delaware limited liability company (the “Purchaser”).  Unless otherwise specified, capitalized terms used but not defined herein are used as defined in the Investment Agreement.

 

RECITALS

 

WHEREAS, pursuant to the Purchase Agreement, Triangle issued and sold to the Purchaser the Convertible Note, which is convertible into shares of Common Stock;

 

WHEREAS, pursuant to the Stock Purchase Agreement, dated as of March 2, 2013, between Triangle and the Purchaser (the “March 2013 Purchase Agreement”), Triangle agreed to issue and sell to the Purchaser 9,300,000 shares of Common Stock (the “Shares” and together with the Convertible Note, the “Purchased Securities”);

 

WHEREAS, the Purchaser is the “Purchaser” under the March 2013 Purchase Agreement;

 

WHEREAS, to induce the Purchaser to enter into the March 2013 Purchase Agreement and the transactions contemplated thereby, Triangle is required to deliver this Amendment, duly executed by Triangle, to the Purchaser contemporaneously with the Closing of the transaction contemplated by the March 2013 Purchase Agreement; and

 

WHEREAS, the Purchaser’s investment in Triangle pursuant to the March 2013 Purchase Agreement is reasonably expected to benefit Triangle.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each party hereto, the Investment Agreement is hereby amended as follows:

 

Section 1.  Amendments.

 

(a)  Section 1.01 of the Investment Agreement is hereby amended to add or amend and restate the following definitions:

 

“Agreement” shall mean the Investment Agreement, as amended by this Amendment.

 

 

“Amendment” shall have the meaning specified in the introductory paragraph to this Amendment.

 

“Investment Agreement” shall have the meaning specified in the introductory paragraph to this Amendment.

 

“March 2013 Purchase Agreement” shall have the meaning specified in the Recitals to this Amendment.

 

“Purchased Securities” shall have the meaning specified in the Recitals to this Amendment.

 

“Shares” shall have the meaning specified in the Recitals to this Amendment.

 

“Termination Event” means (A) the Purchaser and its Affiliates to which it has transferred any of the Purchased Securities in accordance with the terms of the Convertible Note or the March 2013 Purchase Agreement, as applicable, owning (such ownership being determined after giving pro forma effect to an assumed full conversion of any outstanding portion of the Convertible Note): neither (i) at least fifty percent (50%) of the shares of Common Stock that would be issuable to the Purchaser upon full conversion of the Convertible Note on the Original Issuance Date nor (ii) at least ten percent (10%) of the shares of Common Stock outstanding as of the date of determination or (B) the Purchaser or its Affiliates shall have breached any covenant or other obligation under Article III of this Agreement in any material respect and such breach shall not have been cured within five Business Days following written notice of such breach or is of such nature that it cannot be cured.  Any shares of Common Stock acquired by the Purchaser (and its Affiliates to which it has transferred any of the Purchased Securities in accordance with the terms of the Convertible Note or the March 2013 Purchase Agreement, as applicable) other than through the conversion of the Convertible Note shall not count towards the ownership requirements set forth in clause (A)(i) above and any shares of Common Stock acquired by the Purchaser (and its Affiliates to which it has transferred any of the Purchased Securities in accordance with the terms of the Convertible Note or the March 2013 Purchase Agreement, as applicable) other than through the conversion of the Convertible Note, pursuant to Article IV or pursuant to the March 2013 Purchase Agreement shall not count towards the ownership requirements set forth in clause (A)(ii) above.  Any limit imposed by the rules of NYSE MKT (or any other principal stock exchange or market upon which the Common Stock may trade) on the number of shares of Common Stock issuable to the Purchaser upon conversion of the Convertible Note will not be taken into account for purposes of this definition.

 

(b)  Section 4.01(b) of the Investment Agreement is hereby amended and restated in its entirety as follows:

 

(b)  On or before the seventh Business Day following the date of the Preemptive Offer Notice (the “Preemptive Offer Period”), the Purchaser shall have the option to subscribe for up to its pro rata share of such Offered Securities (based on the percentage of

 

2

 

outstanding Common Stock owned by it and its Affiliates to which it has transferred any portion of the Convertible Note calculated on a fully-diluted basis using the treasury stock method and assuming full conversion of the Convertible Note (but excluding, for purposes of calculating both the number of shares of Common Stock owned by the Purchaser and the number of shares of Common Stock outstanding on the date of determination, all Shares issued pursuant to the March 2013 Purchase Agreement that are then held by the Purchaser and its Affiliates to which it has transferred any portion of the Convertible Note)) by delivering written notice to Triangle (a “Preemptive Offer Acceptance Notice”).  Notwithstanding the preceding sentence, the number of Offered Securities that the Purchaser is entitled to purchase shall not exceed an amount that would require Stockholder Approval under, or would result in a violation of, the rules and regulations of NYSE MKT or any other principal stock exchange or market upon which the Offered Securities trade; provided, however, that if the Purchaser cannot purchase at least 75% of the number of Offered Securities as to which a Preemptive Offer Acceptance Notice has been given by the Purchaser as a result of the limitations set forth in this sentence, then Triangle shall not issue, exchange or otherwise Dispose, agree to issue, exchange or otherwise Dispose, or reserve or set aside for the same all or any part of the Offered Securities without the prior written consent of the Purchaser.  Each Preemptive Offer Acceptance Notice shall specify: (i) the amount of Offered Securities the Purchaser desires to subscribe for and (ii) the prices at which the Purchaser is willing to purchase such amounts of the Offered Securities at each such price.

 

(c)  Section 5.02 of the Investment Agreement is hereby amended and restated in its entirety as follows:

 

Section 5.02  Entire Agreement.  This Agreement, together with the Convertible Note, the Purchase Agreement and the March 2013 Purchase Agreement and the other agreements contemplated thereby, is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein.  There are no restrictions, promises, warranties or undertakings other than those set forth or referred to herein with respect to the rights granted by Triangle or any of its Affiliates or the Purchaser or any of its Affiliates set forth herein.  This Agreement supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof.

 

Section 2.  Ratification of the Investment Agreement.  Except as expressly modified and amended herein, all of the terms and conditions of the Investment Agreement shall remain in full force and effect.

 

Section 3.  Governing Law.  This Amendment will be governed by and construed in accordance with the laws of the State of New York.

 

Section 4.  Counterparts.  This Amendment may be executed in counterparts, all of which together shall constitute an agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart.

 

[Signature Page Follows]

 

3

 

IN WITNESS WHEREOF, the parties hereto execute this Amendment, effective as of the date first above written.

 

	
 
    	
TRIANGLE   PETROLEUM CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Jonathan   Samuels
    
	
 
    	
Title:
    	
President   and Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NGP   NATURAL RESOURCES X, L.P.
    
	
 
    	
 
    
	
 
    	
By:
    	
G.F.W.   Energy X, L.P., its general partner
    
	
 
    	
 
    
	
 
    	
By:
    	
GFW   X, L.L.C., its general partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NGP   TRIANGLE HOLDINGS, LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
NGP   Natural Resources X, L.P., its managing member
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
G.F.W.   Energy X, L.P., its general partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
GFW   X, L.L.C., its general partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

Signature Page to First Amendment to Investment AgreementExhibit 10.1

 

EXECUTION VERSION

 

 

SUMMER INFANT, INC., and

 

SUMMER INFANT (USA), INC.,

 

as Borrowers, and

 

THE GUARANTORS FROM TIME TO TIME PARTY HERETO

 

 

LOAN AND SECURITY AGREEMENT

 

Dated as of February 28, 2013

 

$80,000,000

 

 

CERTAIN FINANCIAL INSTITUTIONS,

 

as Lenders

 

and

 

BANK OF AMERICA, N.A.,

 

as Agent

 

and

 

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

 

as Sole Lead Arranger and Sole Book Runner

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
SECTION 1.
    	
DEFINITIONS; RULES OF   CONSTRUCTION
    	
1
    
	
 
    	
 
    	
 
    
	
1.1.
    	
Definitions
    	
1
    
	
1.2.
    	
Accounting Terms
    	
26
    
	
1.3.
    	
Uniform Commercial Code and PPSA
    	
26
    
	
1.4.
    	
Certain Matters of Construction
    	
26
    
	
1.5.
    	
Currency Equivalents
    	
27
    
	
 
    	
 
    	
 
    
	
SECTION 2.
    	
CREDIT FACILITIES
    	
28
    
	
 
    	
 
    	
 
    
	
2.1.
    	
Commitment
    	
28
    
	
2.2.
    	
[Intentionally deleted]
    	
29
    
	
2.3.
    	
Letter of Credit Facility
    	
29
    
	
 
    	
 
    	
 
    
	
SECTION 3.
    	
INTEREST, FEES AND CHARGES
    	
31
    
	
 
    	
 
    	
 
    
	
3.1.
    	
Interest
    	
31
    
	
3.2.
    	
Fees
    	
32
    
	
3.3.
    	
Computation of Interest, Fees,   Yield Protection
    	
33
    
	
3.4.
    	
Reimbursement Obligations
    	
33
    
	
3.5.
    	
Illegality
    	
33
    
	
3.6.
    	
Inability to Determine Rates
    	
33
    
	
3.7.
    	
Increased Costs; Capital Adequacy
    	
34
    
	
3.8.
    	
Mitigation
    	
35
    
	
3.9.
    	
Funding Losses
    	
35
    
	
3.10.
    	
Maximum Interest
    	
35
    
	
 
    	
 
    	
 
    
	
SECTION 4.
    	
LOAN ADMINISTRATION
    	
35
    
	
 
    	
 
    	
 
    
	
4.1.
    	
Manner of Borrowing and Funding   Revolver Loans
    	
35
    
	
4.2.
    	
Defaulting Lender
    	
37
    
	
4.3.
    	
Number and Amount of LIBOR Loans; Determination of Rate
    	
37
    
	
4.4.
    	
Borrower Agent
    	
37
    
	
4.5.
    	
One Obligation
    	
38
    
	
4.6.
    	
Effect of Termination
    	
38
    
	
 
    	
 
    	
 
    
	
SECTION 5.
    	
PAYMENTS
    	
38
    
	
 
    	
 
    	
 
    
	
5.1.
    	
General Payment Provisions
    	
38
    
	
5.2.
    	
Repayment of Revolver Loans
    	
38
    
	
5.3.
    	
[Intentionally deleted]
    	
38
    
	
5.4.
    	
Payment of Other Obligations
    	
38
    

 

 

	
5.5.
    	
Marshaling; Payments Set Aside
    	
38
    
	
5.6.
    	
Application and Allocation of Payments
    	
39
    
	
5.7.
    	
Dominion Accounts
    	
40
    
	
5.8.
    	
Account Stated
    	
40
    
	
5.9.
    	
Taxes
    	
40
    
	
5.10.
    	
Lender Tax Information
    	
41
    
	
5.11.
    	
Nature and Extent of Each   Borrower’s Liability
    	
41
    
	
 
    	
 
    	
 
    
	
SECTION 6.
    	
CONDITIONS PRECEDENT
    	
43
    
	
 
    	
 
    	
 
    
	
6.1.
    	
Conditions Precedent to Initial   Loans
    	
43
    
	
6.2.
    	
Conditions Precedent to All   Credit Extensions
    	
45
    
	
 
    	
 
    	
 
    
	
SECTION 7.
    	
COLLATERAL
    	
45
    
	
 
    	
 
    	
 
    
	
7.1.
    	
Grant of Security Interest
    	
45
    
	
7.2.
    	
Lien on Deposit Accounts; Cash Collateral
    	
46
    
	
7.3.
    	
Real Estate Collateral
    	
46
    
	
7.4.
    	
Other Collateral
    	
47
    
	
7.5.
    	
No Assumption of Liability
    	
47
    
	
7.6.
    	
Further Assurances
    	
47
    
	
 
    	
 
    	
 
    
	
SECTION 8.
    	
COLLATERAL ADMINISTRATION
    	
47
    
	
 
    	
 
    	
 
    
	
8.1.
    	
Borrowing Base Certificates
    	
47
    
	
8.2.
    	
Administration of Accounts
    	
47
    
	
8.3.
    	
Administration of Inventory
    	
48
    
	
8.4.
    	
Administration of Equipment
    	
49
    
	
8.5.
    	
Administration of Deposit Accounts
    	
49
    
	
8.6.
    	
General Provisions
    	
49
    
	
8.7.
    	
Power of Attorney
    	
50
    
	
 
    	
 
    	
 
    
	
SECTION 9.
    	
REPRESENTATIONS AND WARRANTIES
    	
51
    
	
 
    	
 
    	
 
    
	
9.1.
    	
General Representations and   Warranties
    	
51
    
	
9.2.
    	
Complete Disclosure
    	
56
    
	
 
    	
 
    	
 
    
	
SECTION 10.
    	
COVENANTS AND CONTINUING AGREEMENTS
    	
56
    
	
 
    	
 
    	
 
    
	
10.1.
    	
Affirmative Covenants
    	
56
    
	
10.2.
    	
Negative Covenants
    	
59
    
	
10.3.
    	
Financial Covenants
    	
63
    
	
10.4.
    	
Restrictions on Activities of Company
    	
63
    
	
10.5.
    	
Restrictions on Activities of Foreign Subsidiaries
    	
63
    
	
 
    	
 
    	
 
    
	
SECTION 11.
    	
EVENTS OF DEFAULT; REMEDIES ON DEFAULT
    	
64
    
	
 
    	
 
    	
 
    
	
11.1.
    	
Events of Default
    	
64
    

 

2

 

	
11.2.
    	
Remedies upon Default
    	
65
    
	
11.3.
    	
License
    	
66
    
	
11.4.
    	
Setoff
    	
66
    
	
11.5.
    	
Remedies Cumulative; No Waiver
    	
66
    
	
 
    	
 
    	
 
    
	
SECTION 12.
    	
AGENT
    	
67
    
	
 
    	
 
    	
 
    
	
12.1.
    	
Appointment, Authority and Duties of Agent
    	
67
    
	
12.2.
    	
Agreements Regarding Collateral and Borrower Materials
    	
68
    
	
12.3.
    	
Reliance By Agent
    	
68
    
	
12.4.
    	
Action Upon Default
    	
68
    
	
12.5.
    	
Ratable Sharing
    	
69
    
	
12.6.
    	
Indemnification
    	
69
    
	
12.7.
    	
Limitation on Responsibilities of   Agent
    	
69
    
	
12.8.
    	
Successor Agent and Co-Agents
    	
69
    
	
12.9.
    	
Due Diligence and Non-Reliance
    	
70
    
	
12.10.
    	
Remittance of Payments and Collections
    	
70
    
	
12.11.
    	
Individual Capacities
    	
71
    
	
12.12.
    	
Titles
    	
71
    
	
12.13.
    	
Bank Product Providers
    	
71
    
	
12.14.
    	
No Third Party Beneficiaries
    	
71
    
	
 
    	
 
    	
 
    
	
SECTION 13.
    	
BENEFIT OF AGREEMENT; ASSIGNMENTS
    	
71
    
	
 
    	
 
    	
 
    
	
13.1.
    	
Successors and Assigns
    	
71
    
	
13.2.
    	
Participations
    	
71
    
	
13.3.
    	
Assignments
    	
72
    
	
13.4.
    	
Replacement of Certain Lenders
    	
73
    
	
 
    	
 
    	
 
    
	
SECTION 14.
    	
THE GUARANTEE
    	
73
    
	
 
    	
 
    	
 
    
	
14.1.
    	
Guarantee
    	
73
    
	
14.2.
    	
Obligations Unconditional
    	
73
    
	
14.3.
    	
Reinstatement
    	
74
    
	
14.4.
    	
Subrogation
    	
74
    
	
14.5.
    	
Remedies
    	
74
    
	
14.6.
    	
Instrument for the Payment of   Money
    	
75
    
	
14.7.
    	
Continuing Guarantee
    	
75
    
	
14.8.
    	
General Limitation on Amount of   Obligations Guaranteed
    	
75
    
	
14.9.
    	
Joint Enterprise
    	
75
    
	
14.10.
    	
Subordination
    	
75
    
	
14.11.
    	
Conflicts with Canadian Guaranty   or UK Guaranty
    	
75
    

 

3

 

	
SECTION 15.
    	
MISCELLANEOUS
    	
75
    
	
 
    	
 
    	
 
    
	
15.1.
    	
Consents, Amendments and Waivers
    	
75
    
	
15.2.
    	
Indemnity
    	
76
    
	
15.3.
    	
Notices and Communications
    	
76
    
	
15.4.
    	
Performance of Obligors’   Obligations
    	
77
    
	
15.5.
    	
Credit Inquiries
    	
77
    
	
15.6.
    	
Severability
    	
78
    
	
15.7.
    	
Cumulative Effect; Conflict of   Terms
    	
78
    
	
15.8.
    	
Counterparts
    	
78
    
	
15.9.
    	
Entire Agreement
    	
78
    
	
15.10.
    	
Relationship with Lenders
    	
78
    
	
15.11.
    	
No Advisory or Fiduciary   Responsibility
    	
78
    
	
15.12.
    	
Confidentiality
    	
78
    
	
15.13.
    	
GOVERNING LAW
    	
79
    
	
15.14.
    	
Consent to Forum
    	
79
    
	
15.15.
    	
Waivers by Obligors
    	
79
    
	
15.16.
    	
Patriot Act Notice
    	
80
    
	
15.17.
    	
Intercreditor Agreement.
    	
80
    

 

LIST OF EXHIBITS AND SCHEDULES

 

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

 

4

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT is dated as of February 28, 2013, among SUMMER INFANT, INC., a Delaware corporation (the “Company”), SUMMER INFANT (USA), INC., a Rhode Island corporation (“SI USA”, and together with Company, collectively, “Borrowers”), THE GUARANTORS FROM TIME TO TIME PARTY HERETO, the financial institutions party to this Agreement from time to time as lenders (collectively, “Lenders”), BANK OF AMERICA, N.A., a national banking association, as agent for the Lenders (“Agent”) and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Sole Lead Arranger and Sole Bookrunner (“Arranger”).

 

R E C I T A L S:

 

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

 

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

 

SECTION 1.                         DEFINITIONS; RULES OF CONSTRUCTION

 

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

 

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

 

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

 

Accounts Formula Amount: 85% of the Value of Eligible Accounts, provided that the Agent shall have the right, in its Permitted Discretion, to reduce such percentage at any time upon three (3) Business Days prior notice to the Borrower Agent.

 

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

 

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

 

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

 

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

 

Agreement Currency: as defined in Section 1.5.

 

 

Allocable Amount: as defined in Section 5.11.3.

 

Anti-Terrorism Law: any law relating to terrorism or money laundering, including the Patriot Act, the Proceeds of Crime Act and the UK Anti-Terrorism Laws.

 

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

 

Applicable Margin: with respect to any Type of Loan, the margin set forth below, as determined for the most recently ended Fiscal Quarter:

 

	
Level
    	
 
    	
Average Quarterly
   Availability
    	
 
    	
Base Rate
   Revolver
   Loans
    	
 
    	
LIBOR
   Revolver
   Loans
    	
 
    
	
I
    	
 
    	
> $22,000,000
    	
 
    	
0.25
    	
%
    	
1.75
    	
%
    
	
II
    	
 
    	
< $22,000,000 but > $16,000,000
    	
 
    	
0.50
    	
%
    	
2.00
    	
%
    
	
III
    	
 
    	
< $16,000,000
    	
 
    	
0.75
    	
%
    	
2.25
    	
%
    

 

Until August 1, 2013, margins shall be determined as if Level II were applicable.  Thereafter, the margins shall be determined based upon Average Quarterly Availability for each Fiscal Quarter as determined by Agent based upon the Borrowing Base Certificates delivered pursuant to Section 8.1 for each week during such Fiscal Quarter, which determination shall be effective on the first day of the calendar month after receipt by Agent of the Borrowing Base Certificate for the last week in such Fiscal Quarter.  If any financial statement, Borrowing Base Certificate or Compliance Certificate due in the preceding month has not been received, then, at the option of Agent or Required Lenders, the margins shall be determined as if Level III were applicable, from such day until the first day of the calendar month following actual receipt.

 

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

 

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

 

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

 

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

 

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

 

Availability Reserve: the sum (without duplication) of (a) the Inventory Reserve; (b) the Rent and Charges Reserve; (c) reserves for accrued and unpaid Royalties, whether or not then due and payable;

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Bankruptcy Code: Title 11 of the United States Code.

 

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

 

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

 

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

 

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

 

Book Debts:  as defined in the UK Security Agreements.

 

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

 

Borrower Agent: as defined in Section 4.4.

 

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

 

3

 

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

 

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

 

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

 

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

 

Canadian Benefit Plans:  all employee benefit plans, programs or arrangements of any nature or kind whatsoever that are not Canadian Pension Plans or Canadian MEPPs and are maintained or contributed to by, or to which there is any liability, contingent or otherwise by, any Obligor or its Subsidiaries which are governed by Canadian Applicable Law.

 

Canadian Dollars:  lawful money of Canada.

 

Canadian Guarantor:  each Canadian Subsidiary that guarantees payment or performance of the Obligations.  The definition of “Canadian Guarantors” means all of such entities collectively.

 

Canadian Guaranty:  that certain Guarantee and Indemnity Agreement of even date herewith made by the Canadian Guarantor, as may be amended, restated or otherwise modified from time to time.

 

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

 

Canadian Pension Plan:  a pension plan that is required to be registered as a pension plan under any applicable pension benefits standards statute or tax statute or regulation in Canada that any Obligor or its Subsidiaries has any liability, contingent or otherwise which are governed by Canadian Applicable Law.

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Cash Collateralize: the delivery of cash to Agent, as security for the payment of Obligations, in an amount equal to (a) with respect to LC Obligations, 105% of the aggregate LC Obligations, and (b) with respect to any inchoate, contingent or other Obligations (including Secured Bank Product Obligations), Agent’s good faith estimate of the amount that is due or could become due, including all fees and other amounts relating to such Obligations.  “Cash Collateralization” has a correlative meaning.

 

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

 

Cash Dominion Trigger Amount:  an amount equal to 15% of the lesser of (A) the Total Commitment Amount and (B) the Borrowing Base.

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)           any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of 35% or more of the Equity Interests of a Borrower entitled to vote for members of the board of directors or equivalent governing body of such Borrower on a fully-diluted basis (and taking into account all such Equity Interests that such person or group has the right to acquire pursuant to any option right);

 

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

 

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member of that board or equivalent governing body occurs as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors by any person or group other than a solicitation for the election of one or more directors by or on behalf of the board of directors);

 

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

 

(d)                                 a Borrower ceases to own, directly or indirectly 100% of the Equity Interests of any Guarantor;

 

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

 

(f)                                   a “Change of Control” occurs under the Permitted Term Debt Documents.

 

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

 

Closing Date: as defined in Section 6.1.

 

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

 

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

 

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

 

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

 

Company:  as defined in the Preamble hereto.

 

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

 

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

 

Contribution Notice:  a contribution notice issued by the Pensions Regulator under section 38 or section 47 of the Pensions Act 2004.

 

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

 

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

 

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

 

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

 

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

 

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

 

Defaulting Lender: any Lender that, as determined by Agent, (a) has failed to perform any funding obligations hereunder, and such failure is not cured within three Business Days; (b) has notified Agent or any Borrower that such Lender does not intend to comply with its funding obligations hereunder or has made a public statement to the effect that it does not intend to comply with its funding obligations hereunder or under any other credit facility; (c) has failed, within three Business Days following request by Agent, to confirm in a manner satisfactory to Agent that such Lender will comply with its funding obligations hereunder; or (d) has, or has a direct or indirect parent company that has, become the subject of an Insolvency Proceeding or taken any action in furtherance thereof; provided, however, that a Lender shall not be a Defaulting Lender solely by virtue of a Governmental Authority’s ownership of an equity interest in such Lender or parent company.

 

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

 

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Obligations.

 

Discharge of Term Obligations: as defined in the Intercreditor Agreement on the Closing Date.

 

Dilution Reserve: a reserve in an amount equal to the sum of the following: (a) the aggregate amount of accruals described on Schedule 1.1(b) attached hereto established by the Company from time to time and reflected on the most recent balance sheet of the Company and its Subsidiaries; and (b) an additional amount determined by Agent in its Permitted Discretion from time to time based upon the most recent field examination conducted by Agent, which additional amount shall initially equal $1,000,000.

 

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

 

Dollars: lawful money of the United States.

 

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

 

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

 

Eligible Account: an Account owing to a Borrower or Guarantor that arises in the Ordinary Course of Business from the sale of goods, is payable in Dollars, Canadian Dollars or GBP and is deemed

 

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by Agent, in its Permitted Discretion, to be an Eligible Account.  Without limiting the foregoing, no Account shall be an Eligible Account if (a) it is unpaid for more than 60 days after the original due date, or more than 120  days after the original invoice date; (b) 50% or more of the Accounts owing by the Account Debtor are not Eligible Accounts; (c) when aggregated with other Accounts owing by the Account Debtor and its Affiliates, it exceeds 15%  of the aggregate Eligible Accounts (or such higher percentage as Agent may establish for the Account Debtor from time to time), provided, however, that this clause (c) shall not apply to the following Account Debtors: (i) the Toys “R” Us Companies, (ii) the Wal-Mart Companies or (iii) the Target Companies; (d) with respect to any Account owing by the Toys “R” Us Companies, when aggregated with other Accounts owing by the Toys “R” Us Companies, it exceeds 35% of the aggregate Eligible Accounts, provided, however, that if, at any time, the corporate credit rating of Toys “R” Us, Inc. falls below “B-” (by S&P or Fitch) or “B3” (by Moody’s), the Agent shall have the right, in its sole discretion to decrease such maximum percentage; (e) with respect to any Account owing by the Wal-Mart Companies, when aggregated with other Accounts owing by the Wal-Mart Companies, it exceeds 25% of the aggregate Eligible Accounts; (f) with respect to any Account owing by the Target Companies, when aggregated with other Accounts owing by the Target Companies, it exceeds 25% of the aggregate Eligible Accounts; (g) it does not conform with a covenant or representation herein; (h) it is owing by a creditor or supplier, or is otherwise subject to a potential offset, counterclaim, dispute, deduction, discount, recoupment, reserve, defense, chargeback, credit or allowance (but ineligibility shall be limited to the amount thereof); (i) an Insolvency Proceeding has been commenced by or against the Account Debtor; or the Account Debtor has failed, has suspended or ceased doing business, is liquidating, dissolving or winding up its affairs, is not Solvent, or is subject to any country sanctions program or specially designated nationals list maintained by the Office of Foreign Assets Control of the U.S. Treasury Department; or the Borrower is not able to bring suit or enforce remedies against the Account Debtor through judicial process; (j) the Account Debtor is organized or has its principal offices or assets outside the United States, Canada or the United Kingdom, unless the Account is (i) supported by a letter of credit (delivered to and directly drawable by Agent) satisfactory in all respects to Agent; or (ii) is a Mexican subsidiary of Target Corporation or Wal-Mart Stores, Inc. and the aggregate amount of all Accounts deemed eligible by this clause (j)(ii) does not exceed $1,000,000 at any time; (k) it is owing by a Governmental Authority, unless the Account Debtor is the United States, Canada or any province or territory thereof or the United Kingdom or any department, agency or instrumentality thereof and the Account has been assigned to Agent in compliance with the federal Assignment of Claims Act or other Applicable Law; (l) it is not subject to a duly perfected, first priority Lien in favor of Agent, or is subject to any other Lien; (m) the goods giving rise to it have not been delivered to the Account Debtor, or it otherwise does not represent a final sale; (n) it is evidenced by Chattel Paper or an Instrument of any kind, or has been reduced to judgment; (o) its payment has been extended or the Account Debtor has made a partial payment; (p) it arises from a sale to an Affiliate, from a sale on a cash-on-delivery, bill-and-hold, sale-or-return, sale-on-approval, consignment, or other repurchase or return basis, or from a sale for personal, family or household purposes; (q) it represents a progress billing or retainage, or relates to services for which a performance, surety or completion bond or similar assurance has been issued; or (r) it includes a billing for interest, fees or late charges, but ineligibility shall be limited to the extent thereof.  In calculating delinquent portions of Accounts under clauses (a) and (b), credit balances more than 120 days old will be excluded.

 

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

 

Eligible In-Transit Inventory: Inventory owned by a Borrower or Guarantor that would be Eligible Inventory if it were not subject to a Document and in transit from a foreign location to a location of the Borrower or Guarantor within the United States, Canada or the United Kingdom, and that Agent, in

 

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its Permitted Discretion, deems to be Eligible In-Transit Inventory.  Without limiting the foregoing, no Inventory shall be Eligible In-Transit Inventory unless it (a) is subject to a negotiable Document showing Agent (or, with the consent of Agent, the applicable Borrower or Guarantor) as consignee, which Document is in the possession of Agent or such other Person as Agent shall approve; (b) is fully insured by marine cargo or other similar insurance, in such amounts, with such insurance companies and subject to such deductibles as are satisfactory to Agent and in respect of which Agent has been named as loss payee; (c) is not sold by a vendor that has a right to reclaim, divert shipment of, repossess, stop delivery, claim any reservation of title or otherwise assert Lien rights against the Inventory, or with respect to whom any Borrower or Guarantor is in default of any obligations; (d) is evidenced by a full set of clean, original negotiable bills of lading consigned to the order of Agent and such original bills of lading are in the possession of Agent or a customs broker from whom Agent has received an executed Customs Broker Agreement with respect to such inventory and title has passed to the Borrower or Guarantor at the time such inventory is delivered to the common carrier; (e) is shipped by a common carrier that is not affiliated with the vendor; and (f) is being handled by a customs broker, freight-forwarder or other handler that has delivered a Lien Waiver.

 

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

 

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

 

Environmental Laws: all Applicable Laws (including all programs, permits and guidance promulgated by regulatory agencies), relating to public health (but excluding occupational safety and health, to the extent regulated by OSHA) or the protection or pollution of the environment, including CERCLA, RCRA and CWA.

 

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

 

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

 

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

 

ERISA: the Employee Retirement Income Security Act of 1974.

 

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

 

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

 

Event of Default: as defined in Section 11.

 

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

 

Excluded Tax: with respect to Agent, any Lender, Issuing Bank or any other recipient of a payment to be made by or on account of any Obligation, (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 or, in the case of any Lender, in which its applicable Lending Office is located; (b) any branch profits taxes imposed by the United States or any similar tax imposed by any

 

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other jurisdiction in which Borrower Agent is located; (c) any backup withholding tax required by the Code to be withheld from amounts payable to a Lender that has failed to comply with Section 5.10; (d) in the case of a Foreign Lender, any United States withholding tax that is (i) required pursuant to laws in force at the time such Lender becomes a Lender (or designates a new Lending Office) hereunder, or (ii) attributable to such Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 5.10, except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from Borrowers with respect to such withholding tax; and (e) taxes imposed on it by reason of Section 1471 or 1472 of the Code.

 

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

 

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

 

Fee Letter: that certain fee letter dated as of January 22, 2013 among Agent, Arranger and Company as amended from time to time.

 

Financial Support Direction:  a financial support direction issued by the Pensions Regulator under section 43 of the Pensions Act 2004.

 

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

 

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

 

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

 

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Fixed Charges: the sum of interest expense (other than payment-in-kind), principal payments made on Borrowed Money (including, without limitation, Permitted Term Debt Payments), and Distributions made.

 

FLSA: the Fair Labor Standards Act of 1938.

 

Foreign Lender: any Lender that is organized under the laws of a jurisdiction other than the laws of the United States, or any state or district thereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Governmental Authority: any federal, state, provincial, territorial, municipal, local, foreign or other agency, authority, body, commission, court, instrumentality, political subdivision, or other entity or officer exercising executive, legislative, judicial, regulatory or administrative functions for any governmental, judicial, investigative, regulatory or self-regulatory authority, in each case whether associated with the United States, a state, district or territory thereof, Canada, a province or territory thereof, the United Kingdom or a country thereof or any other foreign entity or government.

 

Guarantor Payment: as defined in Section 5.11.3.

 

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

 

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

 

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

 

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Indemnified Taxes: Taxes other than Excluded Taxes.

 

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

 

Insolvency Law: collectively, the Bankruptcy Code, or any other insolvency, debtor relief, debt adjustment or similar law (whether state, provincial, territorial, federal or foreign), including, without limitation, the Bankruptcy and Insolvency Act (Canada), the Companies Creditors Arrangement Act (Canada) and the Insolvency Act 1986 (UK).

 

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

 

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

 

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

 

Intercreditor Agreement: the Intercreditor Agreement of even date herewith, between the Permitted Term Agent and Agent, relating to the Permitted Term Debt, as amended from time to time.

 

Interest Period: as defined in Section 3.1.3.

 

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

 

Inventory Formula Amount: the lesser of (i) 70% of the Value of Eligible Inventory; or (iii) 85% of the NOLV Percentage of the Value of Eligible Inventory, provided that the Agent shall have the right, in its Permitted Discretion, to reduce such percentages at any time upon three (3) Business Days prior notice to the Borrower Agent.

 

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

 

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

 

IRS: the United States Internal Revenue Service.

 

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

 

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

 

Judgment Currency: as defined in Section 1.5.

 

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

 

LC Conditions: the following conditions necessary for issuance of a Letter of Credit: (a) each of the conditions set forth in Section 6; (b) after giving effect to such issuance, total LC Obligations do not exceed the Letter of Credit Subline, no Overadvance exists and, if no Revolver Loans are outstanding, the LC Obligations do not exceed the Borrowing Base (without giving effect to the LC Reserve for purposes of this calculation); (c) the expiration date of such Letter of Credit is (i) no more than 365 days from issuance, in the case of standby Letters of Credit, and (ii) no more than 120 days from issuance, in the case of documentary Letters of Credit; (d) the Letter of Credit and payments thereunder are denominated in Dollars; and (e) the purpose and form of the proposed Letter of Credit is satisfactory to Agent and Issuing Bank in their discretion.

 

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

 

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

 

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

 

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

 

Lender Indemnitees: Lenders and their officers, directors, employees, Affiliates, agents and attorneys.

 

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

 

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

 

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

 

Letter of Credit Subline: $10,000,000.

 

LIBOR: for any Interest Period for a LIBOR Loan, the per annum rate of interest (rounded up, if necessary, to the nearest 1/8th of 1%) determined by Agent at approximately 11:00 a.m. (London time) two Business Days prior to commencement of such Interest Period, for a term comparable to such Interest Period, equal to (a) the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source designated by Agent); or (b) if BBA LIBOR is unavailable for any reason, the interest rate at which Dollar deposits in the approximate amount of the LIBOR Loan would be offered by Agent’s London branch to major banks in the London interbank

 

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Eurodollar market.  If the Board of Governors imposes a Reserve Percentage with respect to LIBOR deposits, then LIBOR shall be the foregoing rate, divided by 1 minus the Reserve Percentage.

 

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

 

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

 

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

 

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

 

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

 

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

 

Loan: a Revolver Loan.

 

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

 

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

 

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

 

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

 

Material Contract: any agreement or arrangement to which a Borrower or Subsidiary is party (other than the Loan Documents) (a) that is deemed to be a material contract under any securities law

 

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applicable to such Person, including the Securities Act of 1933; (b) for which breach, termination, nonperformance or failure to renew could reasonably be expected to have a Material Adverse Effect; or (c) that relates to Subordinated Debt, or to Debt in an aggregate amount of $3,000,000 or more.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

OSHA: the Occupational Safety and Hazard Act of 1970.

 

Other Agreement: each LC Document, fee letter, Lien Waiver, Intercreditor Agreement, Borrowing Base Certificate, Compliance Certificate, Borrower Materials, or other note, document,

 

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instrument or agreement (other than this Agreement or a Security Document) now or hereafter delivered by an Obligor or other Person to Agent or a Lender in connection with any transactions relating hereto.

 

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

 

Overadvance: as defined in Section 2.1.5.

 

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

 

Participant: as defined in Section 13.2.

 

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

 

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

 

PBA: the Pension Benefits Act (Canada), as amended.

 

PBGC: the Pension Benefit Guaranty Corporation.

 

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

 

Pensions Regulator: the body corporate called the Pensions Regulator established under Part I of the Pensions Act 2004.

 

Permitted Acquisition: any Acquisition as long as (a) no Default or Event of Default exists or is caused thereby; (b) the Acquisition is consensual; (c) the assets, business or Person being acquired is useful or engaged in the business of Borrowers and Subsidiaries, is located and organized within the United States (or such other jurisdiction as Agent shall approve in its Permitted Discretion) and had positive EBITDA for the 12 month period most recently ended; (d) no Debt or Liens are incurred, assumed or result from the Acquisition, except Debt permitted under Section 10.2.1(f) or (i); (e) the Person to be acquired (or its board of directors or equivalent governing body) has not (i) announced it will oppose such Acquisition or (ii) commenced any action which alleges that such Acquisition violates, or will violate, any Applicable Law; (f) upon giving pro forma effect thereto, Availability (calculated without giving effect to the assets acquired in the Acquisition unless Agent has completed its diligence (including a field exam) with respect to such assets) is at least equal to 25% of the Total Commitment Amount for the 30 days preceding and as of the Acquisition; (g) the Fixed Charge Coverage Ratio, determined on a pro forma basis giving effect to the Acquisition, is not less than 1.10 to 1 at any time; and (h) Borrowers deliver to Agent, at least 10 Business Days prior to the Acquisition, copies of all material agreements relating thereto and a certificate, in form and substance satisfactory to Agent, stating that the Acquisition is a “Permitted Acquisition” and demonstrating compliance with the foregoing requirements.

 

Permitted Asset Disposition: (a) until the Discharge of Term Obligations, sales and other dispositions of Term Priority Collateral permitted under the Permitted Term Debt Documents in effect on the Closing Date; and (b) as long as no Default or Event of Default exists and all Net Proceeds are remitted to Agent, an Asset Disposition that is (i) a sale of Inventory in the Ordinary Course of Business;

 

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(ii) after the Discharge of Term Obligations, a disposition of Equipment that, in the aggregate during any 12 month period, has a fair market or book value (whichever is more) of $500,000 or less; (iii) a disposition of Inventory that is obsolete, unmerchantable or otherwise unsalable in the Ordinary Course of Business; (iv) termination of a lease of real or personal Property that is not necessary for the Ordinary Course of Business, could not reasonably be expected to have a Material Adverse Effect and does not result from an Obligor’s default; or (v) approved in writing by Agent and Required Lenders.

 

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

 

Permitted Discretion:  a determination made by Agent, in good faith, in the exercise of reasonable business judgment (from the perspective of a secured, asset-based lender), based upon Agent’s consideration of factors that in the exercise of such reasonable business judgment Agent believes: (a) could be expected to materially and adversely affect the quantity, quality, mix or value of Collateral (including any Applicable Law that may inhibit collection of an Account), the enforceability or priority of Agent’s Liens, or the amount that Agent and Lenders could receive in liquidation of any Collateral; (b) that any collateral report or financial information delivered by any Obligor is incomplete, inaccurate or misleading in any material respect; (c) could materially increase the likelihood of any Insolvency Proceeding involving an Obligor; (d) could increase the credit risk of lending to Borrowers on the security of the Collateral; or (e) could reasonably be expected to result in a Default or Event of Default.

 

Permitted Lien: as defined in Section 10.2.2.

 

Permitted Purchase Money Debt: Purchase Money Debt of Borrowers and Subsidiaries that is unsecured or secured only by a Purchase Money Lien, as long as the aggregate amount does not exceed $2,500,000 at any time when combined with Capital Lease obligations permitted under Section 10.1.1(c).

 

Permitted Term Agent: means Salus Capital Partners, LLC, in its capacity as administrative and collateral agent for the Permitted Term Debt Lenders, or any successor administrative agent or collateral agent appointed under the Permitted Term Debt Documents in accordance with the provisions thereof.

 

Permitted Term Debt:  means Debt incurred pursuant to the Permitted Term Debt Documents, as in effect on the Closing Date (and as the same may be amended or refinanced from time to time in accordance with the terms of the Intercreditor Agreement).

 

Permitted Term Debt Agreement:  the “Term Loan Agreement”, as such term is defined in the Intercreditor Agreement.

 

Permitted Term Debt Documents:  the “Term Documents”, as such term is defined in the Intercreditor Agreement.

 

Permitted Term Debt Lenders: the “Lenders” as such term is defined in the Permitted Term Debt Agreement.

 

Permitted Term Debt Payments:  (a) regularly scheduled payments of principal and interest, and other payments of fees and expenses, in respect of Permitted Term Debt as required by the Permitted Term Debt Agreement in existence as of the Closing Date, (b) upon the maturity of the Permitted Term

 

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Debt on February 28, 2018 (or any later date to which the maturity of the Permitted Term Debt shall be extended), payments of principal in respect of the Permitted Term Debt then outstanding, (c) other mandatory payments and prepayments as required by the terms of the Permitted Term Debt Agreement in existence as of the Closing Date and permitted by the terms of the Intercreditor Agreement; and (d) other payments and prepayments in respect of Permitted Term Debt; provided that, solely with respect to any payments or prepayment pursuant to this clause (d), (i) at the time of any such payment or prepayment and immediately after giving effect to such payment or prepayment, the funding of any Revolver Loans made to finance such payment or prepayment, and the payment of any reasonable costs and expenses related thereto, no Event of Default shall have occurred and be continuing; (ii) on a pro forma basis as if such Permitted Term Debt Payment and any Revolving Loans made in connection therewith occurred on the first day of such 30 day period after giving effect to any such payment or prepayment and all Debt incurred to finance such payment or prepayment (including without limitation, any Revolver Loans made to finance such payment or prepayment), both (x) Average Availability during the period of 30 consecutive days prior to such payment or prepayment and (y) Availability as of the date of such payment or prepayment, shall equal or exceed an amount equal to 25% of the Total Commitment Amount at such time; and (iii) after giving effect to any such payment or prepayment and all Debt incurred to finance such payment or prepayment (including without limitation, any Revolver Loans made to finance such payment or prepayment), on a pro forma basis, the Fixed Charge Coverage Ratio determined as if such payment or prepayment had been made, and all Debt related to such payment or prepayment (including without limitation, any Revolver Loans made to finance such payment or prepayment) had been incurred, on the first day of the period of four Fiscal Quarters then most recently ended for which financial statements have been (or required to have been) delivered to Agent pursuant to Section 10.1.2(a) or (b), shall equal or exceed 1.10 to 1.00.

 

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

 

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

 

Platform: as defined in Section 14.3.3.

 

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

 

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

 

Pro Rata: with respect to any Lender, a percentage (rounded to the ninth decimal place) determined (a) while Commitments are outstanding, by dividing the amount of such Lender’s Commitment by the Total Commitment Amount; and (b) at any other time, by dividing the amount of such Lender’s Loans and LC Obligations by the aggregate amount of all outstanding Loans and LC

 

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Obligations.

 

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

 

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

 

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

 

Protective Advances: as defined in Section 2.1.6.

 

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

 

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

 

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

 

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

 

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

 

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

 

Reimbursement Date: as defined in Section 2.3.2.

 

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

 

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Report: as defined in Section 12.2.3.

 

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

 

Required Lenders: Lenders (subject to Section 4.2) having (a) Commitments in excess of 50% of the aggregate Commitments; and (b) if the Commitments have terminated, Loans in excess of 50% of all outstanding Loans; provided, however, that (i) if at any time there shall be two or fewer Lenders, “Required Lenders” shall mean all Lenders and (ii) the Commitments and Loans of any Defaulting Lender shall be excluded from such calculation.

 

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

 

Restricted Investment: any Investment by a Borrower or Subsidiary, other than (a) Investments in Subsidiaries to the extent existing on the Closing Date; (b) Cash Equivalents that are subject to Agent’s Lien and control, pursuant to documentation in form and substance satisfactory to Agent; (c) loans and advances permitted under Section 10.2.7;  (d) Permitted Acquisitions and (e) Investments in Foreign Subsidiaries in an aggregate amount not to exceed $250,000 per Fiscal Year.

 

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

 

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

 

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

 

Revolver Termination Date: February 28, 2018.

 

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

 

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

 

Secured Bank Product Obligations: Debt, obligations and other liabilities with respect to Bank Products owing by a Borrower or Subsidiary to a Secured Bank Product Provider.

 

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

 

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

 

Security Documents: the Guaranties, IP Assignments, Deposit Account Control Agreements, the Canadian Security Agreements, the UK Security Agreements and all other documents, instruments and

 

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agreements now or hereafter securing (or given with the intent to secure) any Obligations.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Target Companies: collectively, Target Corporation and its Affiliates.

 

Taxes: all present or future taxes, levies, imposts, duties, deductions, withholdings (including

 

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backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

Term Priority Collateral:  as defined in the Intercreditor Agreement.

 

Termination Event:  (a) the whole or partial withdrawal of any Canadian Guarantor from a Canadian Pension Plan or Canadian MEPP during a plan year; or (b) the filing of a notice of intent to terminate in whole or in part a Canadian Pension Plan or Canadian MEPP or the treatment of a Canadian Pension Plan or Canadian MEPP amendment as a termination or partial termination; or (c) the institution of proceedings by any Governmental Authority to terminate in whole or in part or have a trustee appointed to administer a Canadian Pension Plan or Canadian MEPP; or (d) any other event or condition which might constitute grounds for the termination or winding up or partial termination or winding up of any Canadian Pension Plan or Canadian MEPP.

 

Total Commitment Amount:  the aggregate of all Commitments at any time.  As of the Closing Date, the Total Commitment Amount shall be $80,000,000.

 

Toys “R” Us Companies: collectively, Toys “R” Us, Inc., Babies “R” Us, Inc., and their respective Affiliates.

 

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

 

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

 

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

 

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

 

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

 

UK Guaranty:  that certain Guarantee of even date herewith made by the UK Guarantor, as may be amended, restated or otherwise modified from time to time.

 

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

 

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

 

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UK Security Agreements:  (a) the Debenture dated as of the date hereof, in form and substance reasonably acceptable to Agent, executed by the UK Guarantors in favor of Agent, as the same may be amended, restated or supplemented from time to time, and (b) any other UK security agreement required to be executed by any Obligor in favor of Agent after the Closing Date, in each case, as the same may be amended, restated or supplemented from time to time.

 

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

 

UK ST Law: the Law of Property Act 1925.

 

Unfunded Pension Liability: the excess of a Pension Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to the Code, ERISA or the Pension Protection Act of 2006 for the applicable plan year; and with respect to a Canadian Pension Plan, shall mean the amount, if any, by which a Canadian Pension Plan’s liabilities, calculated on a solvency basis and going concern basis (using actuarial methods and assumptions which are consistent with the valuations last filed with the applicable Governmental Authorities and consistent with GAAP), exceeds the market value of such Canadian Pension Plan’s assets as disclosed in a finalized or draft actuarial report most recently filed with the applicable Governmental Authority or commissioned by any Obligor (specifically excluding SI UK from this definition).

 

Unused Line Fee Rate: a per annum rate equal to 0.375%.

 

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

 

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

 

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

 

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

 

1.3.         Uniform Commercial Code and PPSA.  As used herein, the following terms are defined in accordance with the UCC in effect in the State of New York from time to time (or, with respect to any such property of Canadian Guarantor to which the PPSA is applicable, in accordance with the PPSA in effect in the Province of Ontario from time to time or, if applicable, with respect to any such property of the UK Guarantor to which the UK Security Agreements are applicable, in accordance with the UK Security Agreements).  “Chattel Paper,” “Commercial Tort Claim,” “Deposit Account,” “Document,” “Equipment,” “General Intangibles,” “Goods,” “Instrument,” “Intangible,” “Investment Property,” “Letter-of-Credit Right”, “Securities Account” and “Supporting Obligation.”

 

1.4.         Certain Matters of Construction.  The terms “herein,” “hereof,” “hereunder” and other

 

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words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision.  Any pronoun used shall be deemed to cover all genders.  In the computation of periods of time from a specified date to a later specified date, “from” means “from and including,” and “to” and “until” each mean “to but excluding.”  The terms “including” and “include” shall mean “including, without limitation” and, for purposes of each Loan Document, the parties agree that the rule of ejusdem generis shall not be applicable to limit any provision.  Section titles appear as a matter of convenience only and shall not affect the interpretation of any Loan Document.  All references to (a) laws or statutes include all related rules, regulations, interpretations, amendments and successor provisions; (b) any document, instrument or agreement include any amendments, waivers and other modifications, extensions or renewals (to the extent permitted by the Loan Documents); (c) any section mean, unless the context otherwise requires, a section of this Agreement; (d) any exhibits or schedules mean, unless the context otherwise requires, exhibits and schedules attached hereto, which are hereby incorporated by reference; (e) any Person include successors and assigns; (f) time of day mean time of day at Agent’s notice address under Section 14.3.1; or (g) discretion of Agent, Issuing Bank or any Lender mean the sole and absolute discretion of such Person.  All determinations (including calculations of Borrowing Base and financial covenants) made from time to time under the Loan Documents shall be made in light of the circumstances existing at such time.  Borrowing Base calculations shall be consistent with historical methods of valuation and calculation, and otherwise satisfactory to Agent (and not necessarily calculated in accordance with GAAP).  Borrowers shall have the burden of establishing any alleged negligence, misconduct or lack of good faith by Agent, Issuing Bank or any Lender under any Loan Documents.  No provision of any Loan Documents shall be construed against any party by reason of such party having, or being deemed to have, drafted the provision.  A reference to Borrowers’ “knowledge” or similar concept means actual knowledge of a Senior Officer, or knowledge that a Senior Officer would have obtained if he or she had engaged in good faith and diligent performance of his or her duties, including reasonably specific inquiries of employees or agents and a good faith attempt to ascertain the matter.

 

1.5.         Currency Equivalents.

 

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

 

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

 

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SECTION 2.        CREDIT FACILITIES

 

2.1.         Commitment.

 

2.1.1.      Revolver Loans.  Each Lender agrees, severally on a Pro Rata basis up to its Commitment, on the terms set forth herein, to make Revolver Loans to Borrowers from time to time through the Commitment Termination Date.  The Revolver Loans may be repaid and reborrowed as provided herein.  In no event shall Lenders have any obligation to honor a request for a Revolver Loan if the unpaid balance of Revolver Loans outstanding at such time (including the requested Loan) would cause Availability to be less than zero.

 

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

 

2.1.3.      Use of Proceeds.  The proceeds of Revolver Loans shall be used by Borrowers solely (a) to satisfy existing Debt; (b) to pay fees and transaction expenses associated with the closing of this credit facility; (c) to pay Obligations in accordance with this Agreement; (d) to make Permitted Term Debt Payments, and (e) for lawful corporate purposes of Borrowers, including working capital.

 

2.1.4.      Voluntary Reduction or Termination of Commitments.

 

(a)           The Commitments shall terminate on the Revolver Termination Date, unless sooner terminated in accordance with this Agreement.  Upon at least 90 days prior written notice to Agent at any time after the first Loan Year, Borrowers may, at their option, terminate the Commitments and this credit facility.  Any notice of termination given by Borrowers shall be irrevocable.  On the termination date, Borrowers shall make Full Payment of all Obligations.

 

(b)           Borrowers may permanently reduce the Commitments, on a Pro Rata basis for each Lender, upon at least 90 days prior written notice to Agent, which notice shall specify the amount of the reduction and shall be irrevocable once given.  Each reduction shall be in a minimum amount of $5,000,000, or an increment of $1,000,000 in excess thereof.

 

2.1.5.      Overadvances.  If the aggregate Revolver Loans exceed the Borrowing Base (“Overadvance”) at any time, the excess amount shall be payable by Borrowers on demand by Agent, but all such Revolver Loans shall nevertheless constitute Obligations secured by the Collateral and entitled to all benefits of the Loan Documents.  Agent may require Lenders to honor requests for Overadvance Loans and to forbear from requiring Borrowers to cure an Overadvance, as long as (a) the Overadvance does not continue for more than 30 consecutive days (and no Overadvance may exist for at least five consecutive days thereafter before further Overadvance Loans are required), and (b) the Overadvance is not known by Agent to exceed $8,000,000.  In no event shall Overadvance Loans be required that would cause the outstanding Revolver Loans and LC Obligations to exceed the Total Commitment Amount.  Any funding of an Overadvance Loan or sufferance of an Overadvance shall not constitute a waiver by Agent or Lenders of the Event of Default caused thereby.  In no event shall any Borrower or other Obligor be deemed a beneficiary of this Section nor authorized to enforce any of its terms.

 

2.1.6.      Protective Advances.  Agent shall be authorized, in its discretion, at any time that any conditions in Section 6 are not satisfied to make Base Rate Revolver Loans (“Protective Advances”) (a) up to an aggregate amount of $8,000,000 outstanding at any time, if Agent deems such Loans necessary or desirable to preserve or protect Collateral, or to enhance the collectibility or repayment of Obligations, as long as such Loans do not cause the outstanding Revolver Loans and LC Obligations to exceed the aggregate Commitments; or (b) to pay any other amounts chargeable to Obligors under any Loan Documents, including interest, costs, fees and expenses.  Each Lender shall participate in each Protective Advance on a Pro Rata basis.  Required Lenders may at any time revoke Agent’s authority to make further Protective Advances under clause (a) by written notice to Agent.

 

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Absent such revocation, Agent’s determination that funding of a Protective Advance is appropriate shall be conclusive.

 

2.2.         [Intentionally deleted].

 

2.3.         Letter of Credit Facility.

 

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

 

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

 

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

 

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

 

(d)           In connection with its administration of and enforcement of rights or remedies under any Letters of Credit or LC Documents, Issuing Bank shall be entitled to act, and shall be fully protected in acting, upon any certification, documentation or communication in whatever form believed by Issuing Bank, in good faith, to be genuine and correct and to have been signed, sent or made by a proper Person.  Issuing Bank may consult with and employ legal counsel, accountants and other experts to advise it concerning its obligations, rights and remedies, and shall be entitled to act upon, and shall be fully protected in any action taken in good faith reliance upon, any advice given by such experts.  Issuing

 

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Bank may employ agents and attorneys-in-fact in connection with any matter relating to Letters of Credit or LC Documents, and shall not be liable for the negligence or misconduct of agents and attorneys-in-fact selected with reasonable care.

 

2.3.2.      Reimbursement; Participations.

 

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

 

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

 

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

 

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

 

2.3.3.      Cash Collateral.  If any LC Obligations, whether or not then due or payable, shall for any reason be outstanding at any time (a) that an Event of Default exists, (b) that Availability is less than zero, (c) after the Commitment Termination Date, or (d) within 20 Business Days prior to the

 

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Revolver Termination Date, then Borrowers shall, at Issuing Bank’s or Agent’s request, Cash Collateralize the stated amount of all outstanding Letters of Credit and pay to Issuing Bank the amount of all other LC Obligations.  Borrowers shall, on demand by Issuing Bank or Agent from time to time, Cash Collateralize the Fronting Exposure of any Defaulting Lender.  If Borrowers fail to provide any Cash Collateral as required hereunder, Lenders may (and shall upon direction of Agent) advance, as Revolver Loans, the amount of the Cash Collateral required (whether or not the Commitments have terminated, an Overadvance exists or the conditions in Section 6 are satisfied).

 

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

 

SECTION 3.        INTEREST, FEES AND CHARGES

 

3.1.         Interest.

 

3.1.1.      Rates and Payment of Interest.

 

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

 

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

 

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

 

3.1.2.      Application of LIBOR to Outstanding Loans.

 

(a)           Borrowers may on any Business Day, subject to delivery of a Notice of Conversion/Continuation, elect to convert any portion of the Base Rate Loans to, or to continue any LIBOR Loan at the end of its Interest Period as, a LIBOR Loan.  During any Default or Event of Default, Agent may (and shall at the direction of Required Lenders) declare that no Loan may be made, converted or continued as a LIBOR Loan.  In addition, until Agent notifies Borrowers that syndication of the credit facility hereunder is complete, no Loan may be made as or converted into a LIBOR Loan with an Interest Period of greater than 30 days.

 

(b)           Whenever Borrowers desire to convert or continue Loans as LIBOR Loans,

 

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Borrower Agent shall give Agent a Notice of Conversion/Continuation, no later than 11:00 a.m. at least three Business Days before the requested conversion or continuation date.  Promptly after receiving any such notice, Agent shall notify each Lender thereof.  Each Notice of Conversion/Continuation shall be irrevocable, and shall specify the amount of Loans to be converted or continued, the conversion or continuation date (which shall be a Business Day), and the duration of the Interest Period (which shall be deemed to be 30 days if not specified).  If, upon the expiration of any Interest Period in respect of any LIBOR Loans, Borrowers shall have failed to deliver a Notice of Conversion/Continuation, they shall be deemed to have elected to convert such Loans into Base Rate Loans.

 

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

 

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

 

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

 

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

 

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

 

3.2.         Fees.

 

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

 

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

 

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

 

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3.3.         Computation of Interest, Fees, Yield Protection.  All interest, as well as fees and other charges calculated on a per annum basis, shall be computed for the actual days elapsed, based on a year of 360 days.  For purposes of the Interest Act (Canada), if applicable, (i) whenever any interest or fee under this Agreement is calculated using a rate based on a year of 360 days, the rate determined pursuant to such calculation, when expressed as an annual rate, is equivalent to (x) the applicable rate based on a year of 360 days, multiplied by (y) the actual number of days in the calendar year in which the period for which such interest or fee is payable (or compounded) ends, and divided by (z) 360, (ii) the principle of deemed reinvestment of interest does not apply to any interest calculation under this Agreement, and (iii) the rates of interest stipulated in this Agreement are intended to be nominal rates and not effective rates or yields.  Each determination by Agent of any interest, fees or interest rate hereunder shall be final, conclusive and binding for all purposes, absent manifest error.  All fees shall be fully earned when due and shall not be subject to rebate, refund or proration.  All fees payable under Section 3.2 are compensation for services and are not, and shall not be deemed to be, interest or any other charge for the use, forbearance or detention of money.  A certificate as to amounts payable by Borrowers under Section 3.4, 3.6, 3.7,  3.9 or 5.9, submitted to Borrower Agent by Agent or the affected Lender, as applicable, shall be final, conclusive and binding for all purposes, absent manifest error, and Borrowers shall pay such amounts to the appropriate party within 10 days following receipt of the certificate.

 

3.4.         Reimbursement Obligations.  Borrowers shall reimburse Agent for all Extraordinary Expenses.  Borrowers shall also reimburse Agent for all legal, accounting, appraisal, consulting, and other fees, costs and expenses incurred by it in connection with (a) negotiation and preparation of any Loan Documents, including any amendment or other modification thereof; (b) administration of and actions relating to any Collateral, Loan Documents and transactions contemplated thereby, including any actions taken to perfect or maintain priority of Agent’s Liens on any Collateral, to maintain any insurance required hereunder or to verify Collateral; and (c) subject to the limits of Section 10.1.1(b), each inspection, audit or appraisal with respect to any Obligor or Collateral, whether prepared by Agent’s personnel or a third party.  If, for any reason (including inaccurate reporting on financial statements or a Compliance Certificate), it is determined that a higher Applicable Margin should have applied to a period than was actually applied, then the proper margin shall be applied retroactively and Borrowers shall immediately pay to Agent, for the Pro Rata benefit of Lenders, an amount equal to the difference between the amount of interest and fees that would have accrued using the proper margin and the amount actually paid.  All amounts payable by Borrowers under this Section shall be due on demand.

 

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

 

3.6.         Inability to Determine Rates.  If Required Lenders notify Agent for any reason in connection with a request for a Borrowing of, or conversion to or continuation of, a LIBOR Loan that (a) Dollar deposits are not being offered to banks in the London interbank Eurodollar market for the applicable amount and Interest Period of such Loan, (b) adequate and reasonable means do not exist for determining LIBOR for the requested Interest Period, or (c) LIBOR for the requested Interest Period does not adequately and fairly reflect the cost to such Lenders of funding such Loan, then Agent will promptly

 

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so notify Borrower Agent and each Lender.  Thereafter, the obligation of Lenders to make or maintain LIBOR Loans shall be suspended until Agent (upon instruction by Required Lenders) revokes such notice.  Upon receipt of such notice, Borrower Agent may revoke any pending request for a Borrowing of, conversion to or continuation of a LIBOR Loan or, failing that, will be deemed to have submitted a request for a Base Rate Loan.

 

3.7.         Increased Costs; Capital Adequacy.

 

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

 

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

 

(b)           subject any Lender or Issuing Bank to any Tax with respect to any Loan, Loan Document, Letter of Credit or participation in LC Obligations, or change the basis of taxation of payments to such Lender or Issuing Bank in respect thereof (except for Indemnified Taxes or Other Taxes covered by Section 5.9 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender or Issuing Bank); or

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION 4.        LOAN ADMINISTRATION

 

4.1.         Manner of Borrowing and Funding Revolver Loans.

 

4.1.1.      Notice of Borrowing.

 

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

 

(b)           Unless payment is otherwise timely made by Borrowers, the becoming due of any Obligations (whether principal, interest, fees or other charges, including Extraordinary Expenses, LC Obligations, Cash Collateral and Secured Bank Product Obligations) shall be deemed to be a request for Base Rate Revolver Loans on the due date, in the amount of such Obligations.  The proceeds of such

 

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Revolver Loans shall be disbursed as direct payment of the relevant Obligation.  In addition, Agent may, at its option, charge such Obligations against any operating, investment or other account of a Borrower maintained with Agent or any of its Affiliates.

 

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

 

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

 

4.1.3.                  Swingline Loans; Settlement.

 

(a)                                 Agent may, but shall not be obligated to, advance Swingline Loans to Borrowers, up to an aggregate outstanding amount of $8,000,000, unless the funding is specifically required to be made by all Lenders hereunder.  Each Swingline Loan shall constitute a Revolver Loan for all purposes, except that payments thereon shall be made to Agent for its own account.  The obligation of Borrowers to repay Swingline Loans shall be evidenced by the records of Agent and need not be evidenced by any promissory note.

 

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

 

4.1.4.                  Notices.  Borrowers may request, convert or continue Loans, select interest rates and transfer funds based on telephonic or e-mailed instructions to Agent.  Borrowers shall confirm each such request by prompt delivery to Agent of a Notice of Borrowing or Notice of Conversion/Continuation, if applicable, but if it differs materially from the action taken by Agent or Lenders, the records of Agent and Lenders shall govern.  Neither Agent nor any Lender shall have any

 

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liability for any loss suffered by a Borrower as a result of Agent or any Lender acting upon its understanding of telephonic or e-mailed instructions from a person believed in good faith by Agent or any Lender to be a person authorized to give such instructions on a Borrower’s behalf.

 

4.2.                            Defaulting Lender.

 

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

 

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

 

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

 

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

 

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

 

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Borrower Agent on behalf of such Borrower or another Obligor.  Each of Agent, Issuing Bank and Lenders shall have the right, in its discretion, to deal exclusively with Borrower Agent for any or all purposes under the Loan Documents.  Each Borrower and Obligor agrees that any notice, election, communication, representation, agreement or undertaking made on its behalf by Borrower Agent shall be binding upon and enforceable against it.

 

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

 

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

 

SECTION 5.                         PAYMENTS

 

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

 

5.2.                            Repayment of Revolver Loans.  Revolver Loans shall be due and payable in full on the Revolver Termination Date, unless payment is sooner required hereunder.  Revolver Loans may be prepaid from time to time, without penalty or premium.  If any Asset Disposition includes the disposition of Accounts or Inventory, then Net Proceeds equal to the greater of (a) the net book value of such Accounts and Inventory, or (b) the reduction in the Borrowing Base upon giving effect to such disposition, shall be applied to the Revolver Loans.  Notwithstanding anything herein to the contrary, if an Overadvance exists, Borrowers shall, on the sooner of Agent’s demand or the first Business Day after any Borrower has knowledge thereof, repay the outstanding Revolver Loans in an amount sufficient to cause Availability to no longer be less than zero.

 

5.3.                            [Intentionally deleted].

 

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

 

5.5.                            Marshaling; Payments Set Aside.  None of Agent or Lenders shall be under any obligation to marshal any assets in favor of any Obligor or against any Obligations.  If any payment by or on behalf of Borrowers is made to Agent, Issuing Bank or any Lender, or Agent, Issuing Bank or any Lender exercises a right of setoff, and such payment or the proceeds of such setoff or any part thereof is

 

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subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by Agent, Issuing Bank or such Lender in its discretion) to be repaid to a trustee, receiver or any other Person, then to the extent of such recovery, the Obligation originally intended to be satisfied, and all Liens, rights and remedies relating thereto, shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred.

 

5.6.                            Application and Allocation of Payments.

 

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

 

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

 

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

 

(b)                                 second, to all amounts owing to Agent on Swingline Loans;

 

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

 

(d)                                 fourth, to all Obligations constituting fees (other than Secured Bank Product Obligations);

 

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

 

(f)                                   sixth, to Cash Collateralization of LC Obligations;

 

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

 

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

 

(i)                                     last, to all remaining Obligations.

 

Amounts shall be applied to payment of each category of Obligations only after Full Payment of all preceding categories.  If amounts are insufficient to satisfy a category, Obligations in the category shall be paid on a pro rata basis.  Amounts distributed with respect to any Secured Bank Product Obligation shall be calculated using the methodology reported to Agent for such Obligation (but no greater than the maximum amount reported to Agent).  Agent shall have no obligation to calculate the amount of any Secured Bank Product Obligation and may request a reasonably detailed calculation thereof from the applicable Secured Bank Product Provider.  If the provider fails to deliver the calculation within five days following request, Agent may assume the amount is zero.  The allocations set forth in this Section are solely to determine the rights and priorities among Secured Parties, and may be changed by agreement among them without the consent of any Obligor.  This Section is not for the benefit of or enforceable by any Obligor, and each Borrower irrevocably waives the right to direct the application of any payments or Collateral proceeds subject to this Section.

 

5.6.3.                  Erroneous Application.  Agent shall not be liable for any application of amounts made by it in good faith and, if any such application is subsequently determined to have been

 

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made in error, the sole recourse of any Lender or other Person to which such amount should have been made shall be to recover the amount from the Person that actually received it (and, if such amount was received by any Lender, such Lender hereby agrees to return it).

 

5.7.                            Dominion Accounts.  During any Cash Dominion Period, the ledger balances in the Dominion Accounts as of the end of each Business Day shall be applied to the Obligations at the beginning of the next Business Day.  If, as a result of such application, a credit balance exists, the balance shall not accrue interest in favor of Borrowers and shall be made available to Borrowers as long as no Default or Event of Default exists.  If, at any time a Cash Dominion Period shall not be in effect, the aggregate balance of all cash held in all Deposit Accounts of Obligors (including all Dominion Accounts and all Excluded Deposit Accounts (other than Deposit Accounts described in clause (a) of the definition of “Excluded Deposit Accounts”) shall exceed $2,000,000 for more than five Business Days, the Obligors shall remit to Agent to be applied to the Obligations an amount sufficient to cause such aggregate balance in all Deposit Accounts to be less than $2,000,000.  For the avoidance of doubt, the Agent hereby agrees that a notice regarding the commencement of a Cash Dominion Period shall not be delivered to the applicable depository bank under a Deposit Account Control Agreement until such time as a Cash Dominion Period has occurred.

 

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

 

5.9.                            Taxes.

 

5.9.1.                  Payments Free of Taxes.  All payments by Obligors of Obligations shall be free and clear of and without reduction for any Taxes.  If Applicable Law requires any Obligor or Agent to withhold or deduct any Tax (including backup withholding or withholding Tax), the withholding or deduction shall be based on information provided pursuant to Section 5.10 and the Obligors or Agent shall pay the amount withheld or deducted to the relevant Governmental Authority.  If the withholding or deduction is made on account of Indemnified Taxes or Other Taxes, the sum payable by Borrowers shall be increased so that Agent, Lender or Issuing Bank, as applicable, receives an amount equal to the sum it would have received if no such withholding or deduction (including deductions applicable to additional sums payable under this Section) had been made.  Without limiting the foregoing, Borrowers shall timely pay all Other Taxes to the relevant Governmental Authorities.

 

5.9.2.                  Payment.  Borrowers shall indemnify, hold harmless and reimburse (within 10 days after demand therefor) Agent, Lenders and Issuing Bank for any Indemnified Taxes or Other Taxes (including those attributable to amounts payable under this Section) withheld or deducted by any Obligor or Agent, or paid by Agent, any Lender or Issuing Bank, with respect to any Obligations, Letters of Credit or Loan Documents, whether or not such Taxes were properly asserted by the relevant Governmental Authority, and including all penalties, interest and reasonable expenses relating thereto, as well as any amount that a Lender or Issuing Bank fails to pay indefeasibly to Agent under Section 5.10.  A certificate as to the amount of any such payment or liability delivered to Borrower Agent by Agent, or by a Lender or Issuing Bank (with a copy to Agent), shall be conclusive, absent manifest error.  As soon as practicable after any payment of Taxes by a Borrower, Borrower Agent shall deliver to Agent a receipt from the Governmental Authority or other evidence of payment satisfactory to Agent.

 

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5.10.                     Lender Tax Information.

 

5.10.1.           Status of Lenders.  Each Lender shall deliver documentation and information to Agent and Borrower Agent, at the times and in form required by Applicable Law or reasonably requested by Agent or Borrower Agent, sufficient to permit Agent or Borrowers to determine (a) whether or not payments made with respect to Obligations are subject to Taxes, (b) if applicable, the required rate of withholding or deduction, and (c) such Lender’s entitlement to any available exemption from, or reduction of, applicable Taxes for such payments or otherwise to establish such Lender’s status for withholding tax purposes in the applicable jurisdiction.

 

5.10.2.           Documentation.  If a Borrower is resident for tax purposes in the United States, any Lender that is a “United States person” within the meaning of section 7701(a)(30) of the Code shall deliver to Agent and Borrower Agent IRS Form W-9 or such other documentation or information prescribed by Applicable Law or reasonably requested by Agent or Borrower Agent to determine whether such Lender is subject to backup withholding or information reporting requirements.  If any Foreign Lender is entitled to any exemption from or reduction of withholding tax for payments with respect to the Obligations, it shall deliver to Agent and Borrower Agent, on or prior to the date on which it becomes a Lender hereunder (and from time to time thereafter upon request by Agent or Borrower Agent, but only if such Foreign Lender is legally entitled to do so), (a) IRS Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party; (b) IRS Form W-8ECI; (c) IRS Form W-8IMY and all required supporting documentation; (d) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, IRS Form W-8BEN and a certificate showing such Foreign Lender is not (i) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (ii) a “10 percent shareholder” of any Obligor within the meaning of section 881(c)(3)(B) of the Code, or (iii) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code; or (e) any other form prescribed by Applicable Law as a basis for claiming exemption from or a reduction in withholding tax, together with such supplementary documentation necessary to allow Agent and Borrowers to determine the withholding or deduction required to be made.

 

5.10.3.           Lender Obligations.  Each Lender and Issuing Bank shall promptly notify Borrowers and Agent of any change in circumstances that would change any claimed Tax exemption or reduction.  Each Lender and Issuing Bank shall indemnify, hold harmless and reimburse (within 10 days after demand therefor) Borrowers and Agent for any Taxes, losses, claims, liabilities, penalties, interest and expenses (including reasonable attorneys’ fees) incurred by or asserted against a Borrower or Agent by any Governmental Authority due to such Lender’s or Issuing Bank’s failure to deliver, or inaccuracy or deficiency in, any documentation required to be delivered by it pursuant to this Section.  Each Lender and Issuing Bank authorizes Agent to set off any amounts due to Agent under this Section against any amounts payable to such Lender or Issuing Bank under any Loan Document.

 

5.11.                     Nature and Extent of Each Borrower’s Liability.

 

5.11.1.           Joint and Several Liability.  Each Borrower agrees that it is jointly and severally liable for, and absolutely and unconditionally guarantees to Agent and Lenders the prompt payment and performance of, all Obligations and all agreements under the Loan Documents.  Each Borrower agrees that its guaranty obligations hereunder constitute a continuing guaranty of payment and not of collection, that such obligations shall not be discharged until Full Payment of the Obligations, and that such obligations are absolute and unconditional, irrespective of (a) the genuineness, validity, regularity, enforceability, subordination or any future modification of, or change in, any Obligations or Loan Document, or any other document, instrument or agreement to which any Obligor is or may become a party or be bound; (b) the absence of any action to enforce this Agreement (including this Section) or any other Loan Document, or any waiver, consent or indulgence of any kind by Agent or any Lender with respect thereto; (c) the existence, value or condition of, or failure to perfect a Lien or to preserve rights against, any security or guaranty for the Obligations or any action, or the absence of any action, by Agent or any Lender in respect thereof (including the release of any security or guaranty); (d) the insolvency of any Obligor; (e) any election by Agent or any Lender in an Insolvency Proceeding for the application of

 

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Section 1111(b)(2) of the Bankruptcy Code; (f) any borrowing or grant of a Lien by any other Borrower, as debtor-in-possession under Section 364 of the Bankruptcy Code or otherwise; (g) the disallowance of any claims of Agent or any Lender against any Obligor for the repayment of any Obligations under Section 502 of the Bankruptcy Code or otherwise; or (h) any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, except Full Payment of all Obligations.

 

5.11.2.           Waivers.

 

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

 

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

 

5.11.3.           Extent of Liability; Contribution.

 

(a)                                 Notwithstanding anything herein to the contrary, each Borrower’s liability under this Section 5.11 shall be limited to the greater of (i) all amounts for which such Borrower is primarily liable, as described below, and (ii) such Borrower’s Allocable Amount.

 

(b)                                 If any Borrower makes a payment under this Section 5.11 of any Obligations (other than amounts for which such Borrower is primarily liable) (a “Guarantor Payment”) that, taking into account all other Guarantor Payments previously or concurrently made by any other Borrower, exceeds the amount that such Borrower would otherwise have paid if each Borrower had paid the

 

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aggregate Obligations satisfied by such Guarantor Payments in the same proportion that such Borrower’s Allocable Amount bore to the total Allocable Amounts of all Borrowers, then such Borrower shall be entitled to receive contribution and indemnification payments from, and to be reimbursed by, each other Borrower for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.  The “Allocable Amount” for any Borrower shall be the maximum amount that could then be recovered from such Borrower under this Section 5.11 without rendering such payment voidable under Section 548 of the Bankruptcy Code or under any applicable state fraudulent transfer or conveyance act, or similar statute or common law.

 

(c)                                  Nothing contained in this Section 5.11 shall limit the liability of any Borrower to pay Loans made directly or indirectly to that Borrower (including Loans advanced to any other Borrower and then re-loaned or otherwise transferred to, or for the benefit of, such Borrower), LC Obligations relating to Letters of Credit issued to support such Borrower’s business, and all accrued interest, fees, expenses and other related Obligations with respect thereto, for which such Borrower shall be primarily liable for all purposes hereunder.  Agent and Lenders shall have the right, at any time in their discretion, to condition Loans and Letters of Credit upon a separate calculation of borrowing availability for each Borrower and to restrict the disbursement and use of such Loans and Letters of Credit to such Borrower.

 

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

 

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

 

SECTION 6.                         CONDITIONS PRECEDENT

 

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

 

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

 

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

 

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

 

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

 

(f)                                   Agent shall have received a written opinion of (i) Poore & Rosenbaum LLP, US counsel to the Obligors, (ii) Stikeman Elliott LLP, special Ontario counsel to the Canadian Guarantor, (iii) Stewart McKelvey, special New Brunswick counsel to the Canadian Guarantor, and (iv) Clyde & Co LLP, special UK counsel to Agent, as well as any local counsel to Borrowers or Agent, in form and substance satisfactory to Agent.

 

(g)                                  Agent shall have received copies of the charter documents of each Obligor, certified by the Secretary of State or other appropriate official of such Obligor’s jurisdiction of organization (or, if customary in a particular jurisdiction, certified by an officer of such Obligor).  Agent shall have received good standing certificates (or their equivalents) for each Obligor, issued by the Secretary of State or other appropriate official of such Obligor’s jurisdiction of organization and each jurisdiction where such Obligor’s conduct of business or ownership of Property necessitates qualification.

 

(h)                                 Agent shall have received copies of policies or certificates of insurance for the insurance policies carried by Borrowers, together with loss payable endorsements naming Agent as loss payee and as additional insured (in the case of Canadian insurance policies, first mortgagee, and in the case of UK Insurance policies, first loss payee, all in compliance with the Loan Documents.

 

(i)                                     Agent shall have completed its business, financial and legal due diligence of Obligors, including a satisfactory confirmatory field examination with results satisfactory to Agent.  Except for the matters disclosed in the Company’s filings with the Securities and Exchange Commission, no material adverse change, in the opinion of Agent, in the business, assets, Properties, liabilities, operations, condition (financial or otherwise) or prospects of the Borrowers and the Guarantors, taken as a whole, financial condition of any Obligor or in the quality, quantity or value of any Collateral has occurred since December 31, 2011.

 

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

 

(k)                                 Agent shall have received a Borrowing Base Certificate prepared as of January 31, 2013.  Upon giving effect to the initial funding of Loans and issuance of Letters of Credit, and the payment by Borrowers of all fees and expenses incurred in connection herewith as well as any payables stretched beyond their customary payment practices, Availability (after the netting of any Accounts stretched beyond contractual selling terms provided by vendors) shall be at least $7,500,000.

 

(l)                                     Agent shall have received reasonably satisfactory evidence that all principal, interest, and other amounts owing in respect of all indebtedness for borrowed money of Obligors (other than indebtedness listed on Schedule 10.2.1) hereto) will be repaid in full on the Closing Date with the proceeds of the initial Loans hereunder on the Closing Date and any and all Liens securing such indebtedness will be terminated and released on the Closing Date.

 

(m)                             With respect to each leased property or warehouse of each Obligor, Agent shall have either (i) received a Lien Waiver with respect to such leased property or warehouse or (ii) established a Rent and Charges Reserve with respect to such leased property or warehouse.

 

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(n)                                 Agent shall have received the internally prepared monthly divisional financial statements of the Company and its Subsidiaries for the month and fiscal year ended December 31, 2012 and, if the Closing Date occurs after February 28, 2013, for the month ended January 31, 2013.

 

(o)                                 The Obligors shall have entered into definitive financing documentation with respect to the Permitted Term Debt on terms and conditions reasonably acceptable to Agent, the Borrowers shall have received the cash proceeds of such Permitted Term Debt, and Agent and the holders of the Permitted Term Debt shall have entered into the Intercreditor Agreement.

 

(p)                                 No action, suit, investigation, litigation or proceeding shall be threatened or pending in any court or before any arbitrator or governmental instrumentality that in Agent’s judgment could reasonably be expected to have a Material Adverse Effect.

 

(q)                                 Agent shall have received satisfactory evidence that the Obligors have received all governmental and third party consents and approvals as may be appropriate in connection with the Loans and the transactions contemplated by this Agreement.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION 7.                         COLLATERAL

 

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

 

(a)                                 all Accounts;

 

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

 

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

 

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(d)           all Deposit Accounts;

 

(e)           all Documents;

 

(f)            all General Intangibles and Intangibles, including Intellectual Property;

 

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

 

(h)           all Instruments;

 

(i)            all Investment Property;

 

(j)            all Letters of Credit (which, for purposes of this clause (j) only, shall have the meaning given to such term in the UCC) and Letter-of-Credit Rights;

 

(k)           all Supporting Obligations;

 

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

 

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

 

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

 

7.2.         Lien on Deposit Accounts; Cash Collateral.

 

7.2.1.      Deposit Accounts.  To further secure the prompt payment and performance of all Obligations, each Obligor hereby grants to Agent a continuing security interest in and Lien upon all amounts credited to any Deposit Account of such Obligor, including any sums in any lockbox or Dominion Account.  Within 60 days of the Closing Date (or such later date as Agent, in its discretion, may otherwise specify), each Obligor (i) shall cause separate lockbox or Dominion Accounts and separate disbursement accounts to be established at Bank of America for the Obligors operations in each of the United States, Canada and the United Kingdom, (ii) shall enter into a Deposit Account Control Agreement with respect to each Dominion Account that provides, during a Cash Dominion Period, for all cash in each Dominion Account to be applied against the Obligations on a daily basis, and (iii) shall close any Deposit Account maintained by any Obligor at any financial institution other than Bank of America.

 

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

 

7.3.         Real Estate Collateral.  To further secure the prompt payment and performance of all Obligations, each Obligor hereby transfers and assigns to Agent all of such Obligor’s right, title and interest in, to and under all now or hereafter existing leases of real Property to which such Borrower is a party, whether as lessor or lessee, and all extensions, renewals, modifications and proceeds thereof.

 

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7.4.         Other Collateral.

 

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

 

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

 

7.5.         No Assumption of Liability.  The Lien on Collateral granted hereunder is given as security only and shall not subject Agent or any Lender to, or in any way modify, any obligation or liability of Obligors relating to any Collateral.

 

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

 

SECTION 8.        COLLATERAL ADMINISTRATION

 

8.1.         Borrowing Base Certificates.  Obligors shall deliver to Agent (and Agent shall promptly deliver same to Lenders) (i) by the fifteenth (15th) day of each calendar month, and at such other times as Agent may request, a Borrowing Base Certificate setting forth the amounts of Accounts, Inventory, Eligible Accounts, Eligible Inventory, the Accounts Formula Amount, the Inventory Formula Amount, the Availability Reserve, the Borrowing Base, the Revolver Exposure and Availability as of the most recently ended calendar month, and (ii) by Wednesday of each week, an updated Borrowing Base Certificate (which updated Borrowing Base Certificate shall include updated calculations of the Borrowing Base and Availability as of the end of the most recently ended week based solely upon sales, collections and Loan activity since the last day of the calendar month for which a monthly Borrowing Base Certificate shall have been prepared).  All calculations of Availability in any Borrowing Base Certificate shall originally be made by Obligors and certified by a Senior Officer, provided that Agent may from time to time review and, in its Permitted Discretion, adjust any such calculation (a) to reflect its estimate of declines in value of any Collateral, due to collections received or otherwise; or (b) to the extent Agent believes that the calculation was not made in accordance with this Agreement or does not accurately reflect the Availability Reserve.

 

8.2.         Administration of Accounts.

 

8.2.1.      Records and Schedules of Accounts.  Each Obligor shall keep accurate and complete records of its Accounts, including all payments and collections thereon, and shall submit to Agent sales, collection, reconciliation and other reports in form satisfactory to Agent, on such periodic basis as Agent may request.  Each Obligor shall also provide to Agent, on or before the 15th day of each

 

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month, a detailed aged trial balance of all Accounts as of the end of the most recent month, specifying each Account’s Account Debtor name and address, amount, invoice date and due date, showing any discount, allowance, credit, authorized return or dispute, and including such proof of delivery, copies of invoices and invoice registers, copies of related documents, repayment histories, status reports and other information as Agent may reasonably request.  If Accounts in an aggregate face amount of $250,000 or more cease to be Eligible Accounts, Obligors shall notify Agent of such occurrence promptly (and in any event within one Business Day) after any Obligor has knowledge thereof.

 

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

 

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

 

8.2.4.      Maintenance of Dominion Accounts.  Obligors shall maintain Dominion Accounts pursuant to lockbox or other arrangements acceptable to Agent.  Within 60 days of the Closing Date (or such later date as Agent, in its discretion, may otherwise specify), Obligors shall have entered into agreements (in form and substance satisfactory to Agent) with Bank of America, in its capacity as lockbox servicer and Dominion Account bank, establishing Agent’s Lien on and control over all lockboxes and Dominion Accounts, which may be exercised by Agent during any Cash Dominion Period, requiring immediate deposit of all remittances received in a lockbox to a Dominion Account. Agent and Lenders assume no responsibility to Obligors for any lockbox arrangement or Dominion Account, including any claim of accord and satisfaction or release with respect to any Payment Items accepted by any bank.

 

8.2.5.      Proceeds of Collateral.  Borrowers shall request in writing and otherwise take all necessary steps to ensure that not later than 60 days after the Closing Date (or such later date as Agent, in its discretion, may otherwise specify) and at all times thereafter all payments on Accounts or otherwise relating to Collateral are made directly to a Dominion Account (or a lockbox relating to a Dominion Account).  If any Obligor or Subsidiary receives cash or Payment Items with respect to any Collateral, it shall hold same in trust for Agent and promptly (not later than the next Business Day) deposit same into a Dominion Account (or a lockbox which is swept into a Dominion Account).

 

8.3.         Administration of Inventory.

 

8.3.1.      Records and Reports of Inventory.  Each Obligor shall keep accurate and complete records of its Inventory, including costs and daily withdrawals and additions, and, prior to the 15th day after the end of each month, shall submit to Agent inventory and reconciliation reports for such month in form satisfactory to Agent.  Each Obligor shall conduct a physical inventory at least once per calendar year (and on a more frequent basis if requested by Agent when an Event of Default exists) and periodic cycle counts consistent with historical practices, and shall provide to Agent a report based on each such inventory and count promptly upon completion thereof, together with such supporting information as Agent may request.  Agent may participate in and observe each physical count.

 

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

 

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$375,000; and (d) any payment received by an Obligor for a return is promptly remitted to Agent for application to the Obligations.

 

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

 

8.4.         Administration of Equipment.

 

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

 

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

 

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

 

8.5.         Administration of Deposit Accounts.  Schedule 8.5 sets forth all Deposit Accounts maintained by Obligors, including all Dominion Accounts.  Each Obligor shall take all actions necessary to establish as soon as possible but not later than 60 days after the Closing Date (or such later date as Agent, in its discretion, may otherwise specify) Agent’s control over each such Deposit Account (other than Excluded Deposit Accounts).  Each Obligor shall be the sole account holder of each Deposit Account and shall not allow any Person (other than Agent) to have control over a Deposit Account or any Property deposited therein.  Each Obligor shall promptly notify Agent of any opening or closing of a Deposit Account and, with the consent of Agent, will amend Schedule 8.5 to reflect same.

 

8.6.         General Provisions.

 

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

 

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8.6.2.      Insurance of Collateral; Condemnation Proceeds.

 

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

 

(b)           Any proceeds of insurance (other than proceeds from workers’ compensation or D&O insurance) and any awards arising from condemnation of any Collateral shall be paid to Agent.  Any such proceeds or awards that relate to Inventory shall be applied to payment of the Revolver Loans, and then to any other Obligations outstanding.  Subject to clause (c) below and the Intercreditor Agreement, any proceeds or awards that relate to Equipment or Real Estate shall be applied first to Revolver Loans and then to other Obligations.

 

(c)           If requested by Obligors in writing within 15 days after Agent’s receipt of any insurance proceeds or condemnation awards relating to any loss or destruction of Equipment or Real Estate, Obligors may use such proceeds or awards to repair or replace such Equipment or Real Estate (and until so used, the proceeds shall be held by Agent as Cash Collateral) as long as (i) no Default or Event of Default exists; (ii) such repair or replacement is promptly undertaken and concluded, in accordance with plans satisfactory to Agent; (iii) replacement buildings are constructed on the sites of the original casualties and are of comparable size, quality and utility to the destroyed buildings; (iv) the repaired or replaced Property is free of Liens, other than Permitted Liens that are not Purchase Money Liens; (v) Borrowers comply with disbursement procedures for such repair or replacement as Agent may reasonably require; and (vi) the aggregate amount of such proceeds or awards from any single casualty or condemnation does not exceed $1,000,000.

 

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

 

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

 

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

 

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(a)           Endorse an Obligor’s name on any Payment Item remitted to or deposited in any lockbox or Dominion Account; and

 

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

 

SECTION 9.        REPRESENTATIONS AND WARRANTIES

 

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

 

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

 

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

 

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

 

9.1.4.      Capital Structure.  Schedule 9.1.4 shows (a) for each Obligor and Subsidiary, its name, jurisdiction of organization and any agreement binding on the holders of its Equity Interests with respect to such Equity Interests, and (b) for each Subsidiary of the Company, its authorized and issued Equity Interests and the names of the holders of its Equity Interests.  Except as disclosed on Schedule 9.1.4, in the five years preceding the Closing Date, no Obligor or Subsidiary has acquired any substantial assets from any other Person nor been the surviving entity in a merger or combination.  Each

 

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Obligor has good title to its Equity Interests in its Subsidiaries, subject only to Liens in favor of Agent and the Permitted Term Agent, and all such Equity Interests are duly issued, fully paid and non-assessable.  Except for the Equity Interests issued under the 2006 Performance Equity Plan of the Company and the 2012 Incentive Compensation Plan for the Company, there are no outstanding purchase options, warrants, subscription rights, agreements to issue or sell, convertible interests, phantom rights or powers of attorney relating to Equity Interests of any Obligor or Subsidiary.

 

9.1.5.      Title to Properties; Priority of Liens.  Each Obligor and Subsidiary has good and marketable title to (or valid leasehold interests in) all of its Real Estate, and good title to all of its personal Property, including all Property reflected in any financial statements delivered to Agent or Lenders, in each case free of Liens except Permitted Liens.  Except as otherwise indicated on Schedule 9.1.5, each Obligor and Subsidiary has paid and discharged all lawful claims that, if unpaid, could become a Lien on its Properties, other than Permitted Liens.  All Liens of Agent in the Collateral are duly perfected, first priority Liens, subject only to Permitted Liens that are expressly allowed to have priority over Agent’s Liens.

 

9.1.6.      Accounts.  Agent may rely, in determining which Accounts are Eligible Accounts, on all statements and representations made by Obligors with respect thereto.  Obligors warrant, with respect to each Account at the time it is shown as an Eligible Account in a Borrowing Base Certificate, that:

 

(a)           it is genuine and in all respects what it purports to be, and is not evidenced by a judgment;

 

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

 

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

 

(d)           it is not subject to any offset, Lien (other than Agent’s Lien and the Lien in favor of the Permitted Term Agent), defense, dispute, counterclaim or other adverse condition except as arising in the Ordinary Course of Business and disclosed to Agent and is not subject to any discount or deduction except discounts and deductions arising in the Ordinary Course of Business consistent with past practices or otherwise disclosed in writing to Agent; and it is absolutely owing by the Account Debtor, without contingency in any respect;

 

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

 

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

 

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

 

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adverse effect on the Account Debtor’s financial condition.

 

9.1.7.      Financial Statements.  The consolidated and consolidating balance sheets, and related statements of income, cash flow and shareholder’s equity, of Company and Subsidiaries that have been and are hereafter delivered to Agent and Lenders, are prepared in accordance with GAAP, and fairly present the financial positions and results of operations of Company and Subsidiaries at the dates and for the periods indicated.  All projections delivered from time to time to Agent and Lenders have been prepared in good faith, based on reasonable assumptions in light of the circumstances at such time.  Except as otherwise disclosed by the Company in its filings with the Securities and Exchange Commission, since December 31, 2011, there has been no change in the business, assets, Properties, liabilities, operations, condition (financial or otherwise) or prospects of the Obligors, taken as a whole, that could reasonably be expected to have a Material Adverse Effect.  No financial statement delivered to Agent or Lenders at any time contains any untrue statement of a material fact, nor fails to disclose any material fact necessary to make such statement not materially misleading.  The Obligors, taken as a whole, are Solvent.

 

9.1.8.      Surety Obligations.  Except as disclosed on Schedule 9.1.8, no Obligor or Subsidiary is obligated as surety or indemnitor under any bond or other Material Contract that assures payment or performance of any obligation of any Person, except as permitted hereunder.

 

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

 

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

 

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

 

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

 

9.1.13.    Compliance with Laws.  Each Obligor and Subsidiary has duly complied, and its Properties and business operations are in compliance, in all material respects with all Applicable Law, except where noncompliance could not reasonably be expected to have a Material Adverse Effect.  There have been (i) no citations, notices of noncompliance or requests for information issued to any Obligor by the CPSC other than those described on Schedule 9.1.13, and (ii) no notices or orders of material noncompliance issued to any Obligor by any other Governmental Authority under any

 

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Applicable Law.  To the best knowledge of the Obligors, no Inventory has been produced by Obligors in violation of the FLSA or in violation of any CPSC Regulations.  The Obligors have current and effective certificates of compliance for each children’s product and each children’s toy that the Obligors sell, manufacture or distribute.  The Obligors conduct current testing of all children’s products and children’s toys that the Obligors sell, manufacture or distribute.  Except as described on Schedule 9.1.13, there are no pending or, to the knowledge of the Obligors, threatened regulatory actions or investigations by the CPSC with respect to the Obligors or any of the products or toys that the Obligors sell, manufacture or distribute.  To the best knowledge of the Obligors, none of the products or toys that the Obligors sell, manufacture or distribute contains a defect that could create a substantial product hazard or could create an unreasonable risk of serious injury or death.  The Obligors have complied in a timely manner with all reporting requirements under the CPSC Regulations.  To the best knowledge of the Obligors, the Obligors have not misrepresented in any report filed by the Obligors with the CPSC, the scope of the hazards posed by any toys or products that the Obligors sell, manufacture or distribute or the numbers of incidents or injuries that have been caused by or that have been alleged to have been caused by such toys and products.

 

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

 

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

 

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

 

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

 

9.1.18.    ERISA.  Except as disclosed on Schedule 9.1.18:

 

(a)           Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code, and other federal and state laws.  Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the knowledge of Borrowers, nothing has occurred which would prevent, or cause the loss of, such qualification.  Each Obligor and

 

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ERISA Affiliate has met all applicable requirements under the Code, ERISA and the Pension Protection Act of 2006, and no application for a waiver of the minimum funding standards or an extension of any amortization period has been made with respect to any Plan.

 

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

 

(c)           (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan, Canadian Pension Plan or Canadian MEPP has any Unfunded Pension Liability; (iii) no Obligor or ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) no Obligor or ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; (v) no Obligor or ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA; and (vi) as of the most recent valuation date for any Pension Plan or Multiemployer Plan, the funding target attainment percentage (as defined in Section 430(d)(2) of the Code) is at least 60%, and no Obligor or ERISA Affiliate knows of any fact or circumstance that could reasonably be expected to cause the funding target attainment percentage for any such plan to drop below 60% as of such date.

 

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

 

(e)           Except as would not reasonably be expected to result in a Material Adverse Effect: (i) each Obligor is in compliance with the requirements of the PBA and other federal, provincial or territorial Applicable Laws with respect to each Canadian Pension Plan, (ii) to the knowledge of the Obligors, no fact or situation that may reasonably be expected to result in liability to Obligors exists in connection with any Canadian Pension Plan, (iii) no Obligor or any Subsidiary of a Obligor has any withdrawal liability in connection with a Canadian Pension Plan or Canadian MEPP, and (iv) no Canadian MEPP requires any Obligor to make deficit payments.  No Termination Event has occurred.  No Lien has arisen in respect of Obligors or their property in connection with any Canadian Pension Plan or Canadian MEPP (save for contribution amounts not yet due).  All required contributions of any Obligor to each Canadian Pension Plan and Canadian MEPP have been made.  No Canadian Benefit Plan is self insured, has deficit reserve or permits a retroactive increase in premiums.  All Canadian Pension Plans are administered by an Obligor, or an Obligor is the delegated administrator.

 

(f)            Neither SI UK nor any of its Subsidiaries is or has at any time been (i) an employer (for the purposes of sections 38 to 51 of the Pensions Act 2004) of an occupational pension scheme which is not a money purchase scheme (both terms as defined in the Pensions Schemes Act 1993); or (ii) “connected” with or an “associate” of (as those terms are used in sections 38 and 43 of the Pensions Act 2004) such an employer.

 

9.1.19.    Trade Relations.  Except as set forth on the Company’s filings with the

 

55

 

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

 

9.1.20.           Labor Relations.  Except as described on Schedule 9.1.20, no Obligor or Subsidiary is party to or bound by any collective bargaining agreement, management agreement or consulting agreement (other than design services consulting agreements and other consulting agreements that have been disclosed to Agent).  There are no material grievances, disputes or controversies with any union or other organization of any Obligor’s or Subsidiary’s employees, or, to any Obligor’s knowledge, any asserted or threatened strikes, work stoppages or demands for collective bargaining.

 

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

 

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

 

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

 

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

 

SECTION 10.                  COVENANTS AND CONTINUING AGREEMENTS

 

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

 

10.1.1.           Inspections; Appraisals.

 

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

 

(b)                                 Reimburse Agent for all reasonable charges, costs and expenses of Agent in

 

56

 

connection with (i) examinations of any Obligor’s books and records or any other financial or Collateral matters as Agent deems appropriate, up to two times per Loan Year; and (ii) appraisals of Inventory, up to two times per Loan Year; provided, however, that if an examination or appraisal is initiated (i) at any time Availability falls below 15% of the Total Commitment Amount, the Obligors shall reimburse Agent for up to three appraisals of Inventory and field examinations per Loan Year, and (ii) during a Default or Event of Default, all charges, costs and expenses therefor shall be reimbursed by Borrowers without regard to such limits.  Obligors agree to pay Agent’s then standard charges for examination activities, including the standard charges of Agent’s internal examination and appraisal groups, as well as the charges of any third party used for such purposes.

 

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

 

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

 

(b)                                 as soon as available, and in any event within 45 days after the end of each Fiscal Quarter ending thereafter, unaudited balance sheets as of the end of such quarter and the related statements of income and cash flow for such Fiscal Quarter and for the portion of the Fiscal Year then elapsed, on consolidated and, to the extent applicable, consolidating bases for Obligors and Subsidiaries, setting forth in comparative form corresponding figures for the preceding Fiscal Year and certified by a Senior Officer of Obligors as prepared in accordance with GAAP and fairly presenting in all material respects the financial position and results of operations for such Fiscal Quarter and period, subject to normal year-end adjustments and the absence of footnotes;

 

(c)                                  as soon as available, and in any event within 30 days after the end of each month, unaudited balance sheets as of the end of such month and the related statements of income and cash flow for such month and for the portion of the Fiscal Year then elapsed, on consolidated and, to the extent applicable, consolidating bases for Obligors and Subsidiaries, setting forth in comparative form corresponding figures for the preceding Fiscal Year and certified by the chief financial officer of Borrower Agent as prepared in accordance with GAAP and fairly presenting the financial position and results of operations for such month and period, subject to normal year-end adjustments and the absence of footnotes;

 

(d)                                 concurrently with delivery of financial statements under clauses (a), (b) and (c) above, or more frequently if requested by Agent while a Default or Event of Default exists, a Compliance Certificate executed by the chief financial officer of Borrower Agent;

 

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

 

(f)                                   not later than 30 days prior to the end of each Fiscal Year, projections of Borrowers’ consolidated balance sheets, results of operations, cash flow and Availability for the next Fiscal Year, month by month;

 

(g)                                  at Agent’s request, a listing of each Borrower’s trade payables, specifying the

 

57

 

trade creditor and balance due, and a detailed trade payable aging, all in form satisfactory to Agent;

 

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

 

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

 

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

 

10.1.3.           Notices.  Notify Agent and Lenders in writing, promptly after an Obligor’s obtaining knowledge thereof, of any of the following that affects an Obligor:  (a) the threat or commencement of any proceeding or investigation, whether or not covered by insurance, if an adverse determination could have a Material Adverse Effect; (b) any pending or threatened labor dispute, strike or walkout, or the expiration of any material labor contract; (c) any default under or termination of a Material Contract; (d) the existence of any Default or Event of Default; (e) any judgment in an amount exceeding $1,000,000; (f) the assertion of any Intellectual Property Claim, if an adverse resolution could have a Material Adverse Effect; (g) any violation or asserted violation of any Applicable Law (including ERISA, OSHA, FLSA or any Environmental Laws), if an adverse resolution could have a Material Adverse Effect; (h) any Environmental Release by an Obligor or on any Property owned, leased or occupied by an Obligor; or receipt of any Environmental Notice; (i) the occurrence of any ERISA Event or Termination Event; (j) the discharge of or any withdrawal or resignation by Borrowers’ independent accountants; (k) any opening of a new office or place of business, at least 30 days prior to such opening; (l) simultaneously with delivery of such notice under the Permitted Term Debt Agreement, the existence of any default or event of default under the Permitted Term Debt Documents; (m) the threat or commencement of any regulatory action or investigation by the CPSC with respect to any Obligor or with respect to any product or toy sold, manufactured or distributed by any Obligor; (n) the receipt by any Obligor of any Epidemiological Report, the posting of any notice on SaferProducts.gov, or request for information issued to any Obligor by the CPSC, all with respect to any product or toy sold, manufactured or distributed by any Obligor; or (o) the commencement of any voluntary or involuntary recall of any product or toy that the Obligors sell, manufacture or distribute.

 

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

 

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

 

58

 

Governmental Authority.  Maintain adequate testing and other procedures to ensure the safety of all products and toys that the Obligors sell, manufacture or distribute.

 

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

 

10.1.7.           Insurance.  In addition to the insurance required hereunder with respect to Collateral, maintain insurance with insurers (with a Best Rating of at least A-, unless otherwise approved by Agent) satisfactory to Agent, (a) with respect to the Properties and business of Obligors and Subsidiaries of such type (including product liability, workers’ compensation, larceny, embezzlement, or other criminal misappropriation insurance), in such amounts, and with such coverages and deductibles as are customary for companies similarly situated; and (b) business interruption insurance in an amount not less than $20,000,000, with deductibles and subject to an insurance assignment satisfactory to Agent, which shall provide for the proceeds of business interruption insurance to be payable to Agent for application to the Obligations.

 

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

 

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

 

10.1.10.    UK Pension Schemes.  Ensure that neither SI UK nor any of its Subsidiaries is or has been at any time an employer (for the purposes of sections 38 to 51 of the Pensions Act 2004) of an occupational pension scheme which is not a money purchase scheme (both terms as defined in the Pension Schemes Act 1993) or “connected” with or an “associate” of (as those terms are used in sections 38 or 43 of the Pensions Act 2004) such an employer.

 

10.2.                     Negative Covenants.  As long as any Commitments or Obligations are outstanding, each Obligor shall not and shall not permit any Subsidiary (other than Foreign Subsidiaries) to:

 

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

 

(a)                                 the Obligations;

 

(b)                                 Subordinated Debt and the Permitted Term Debt;

 

(c)                                  Permitted Purchase Money Debt and obligations with respect to Capital Leases so long as the aggregate amount outstanding under this clause (c) does not exceed $2,500,000 at any time;

 

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

 

(e)                                  Debt with respect to Bank Products incurred in the ordinary course of business;

 

59

 

(f)                                   Debt that is in existence when a Person becomes a Subsidiary or that is secured by an asset when acquired by a Borrower or Subsidiary, as long as such Debt was not incurred in contemplation of such Person becoming a Subsidiary or such acquisition, and does not exceed $1,000,000 in the aggregate at any time;

 

(g)                                  Permitted Contingent Obligations;

 

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

 

(i)                                     Debt that is not included in any of the preceding clauses of this Section, is not secured by a Lien and does not exceed $500,000 in the aggregate at any time.

 

10.2.2.           Permitted Liens.  Create or suffer to exist any Lien upon any of its Property, except the following (collectively, “Permitted Liens”):

 

(a)                                 Liens in favor of Agent;

 

(b)                                 Liens in favor of the Permitted Term Agent subject to the Intercreditor Agreement;

 

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

 

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

 

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

 

(f)                                   Liens incurred or deposits made in the Ordinary Course of Business to secure the performance of tenders, bids, leases, contracts (except those relating to Borrowed Money), statutory obligations and other similar obligations, or arising as a result of progress payments under government contracts, as long as such Liens are at all times junior to Agent’s Liens;

 

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

 

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

 

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

 

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

 

(k)                                 Liens securing Debt permitted by Section 10.2.1(b) so long as such Lien does not cover more than the property subject to such Capital Lease;

 

(l)                                     with respect to any Collateral covered by the UK Security Agreements, any Security (as such term is defined in the UK Security Agreements) arising solely by operation of law or in the ordinary course of trading securing amounts not more than 30 days overdue and not arising as a result

 

60

 

of any default or omission of an Obligor or its Subsidiaries; and

 

(o)                                 existing Liens shown on Schedule 10.2.2.

 

Notwithstanding anything to the contrary contained in this Agreement or any other Loan Document (including any provision for, reference to, or acknowledgement of, any Lien or Permitted Lien), nothing herein and no approval by the Agent or any Lender of any Lien or Permitted Lien (whether such approval is oral or in writing) shall be construed as or deemed to constitute a subordination by the Agent or such Lender of any security interest or other right, interest or Lien in or to the Collateral or any part thereof in favor of any Lien or Permitted Lien or any holder of any Lien or Permitted Lien.

 

10.2.3.           [Intentionally Deleted].

 

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

 

10.2.5.           Restricted Investments.  Make any Restricted Investment.

 

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

 

10.2.7.           Loans.  Make any loans or other advances of money to any Person, except (a) advances to an officer or employee for salary, travel expenses, commissions and similar items in the Ordinary Course of Business; (b) prepaid expenses and extensions of trade credit made in the Ordinary Course of Business; (c) deposits with financial institutions permitted hereunder;  (d) as long as no Default or Event of Default exists, intercompany loans by an Obligor to another Obligor, provided that intercompany loans from the Borrowers (i) to the Canadian Guarantors shall not exceed $500,000 in the aggregate at any time and (ii) to the UK Guarantors shall not exceed $500,000 in the aggregate at any time; and (e) so long as no Default or Event of Default exists, intercompany loans by Obligors to Foreign Subsidiaries not to exceed $250,000 in the aggregate at any time.

 

10.2.8.           Restrictions on Payment of Certain Debt.  Except in connection with any Refinancing permitted under Section 10.2.1, make any payments (whether voluntary or mandatory, or a prepayment, redemption, retirement, defeasance or acquisition) with respect to any (a) Subordinated Debt, except regularly scheduled payments of principal, interest and fees, but only to the extent permitted under any subordination agreement relating to such Debt (and a Senior Officer of Borrower Agent shall certify to Agent, not less than five Business Days prior to the date of payment, that all conditions under such agreement have been satisfied); or (b) Borrowed Money (other than the Obligations) prior to its due date under the agreements evidencing such Debt as in effect on the Closing Date (or as amended thereafter with the consent of Agent), provided that Borrowers may make Permitted Term Debt Payments.

 

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

 

10.2.10.    Subsidiaries.  Form or acquire any Subsidiary after the Closing Date,

 

61

 

except in accordance with Sections 10.1.9, 10.2.5 and 10.2.9; or permit any existing Subsidiary to issue any additional Equity Interests except director’s qualifying shares.

 

10.2.11.    Organic Documents.  Amend, modify or otherwise change any of its Organic Documents, except in connection with either a rights distribution by the Company or a transaction permitted under Section 10.2.9.

 

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

 

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

 

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

 

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

 

10.2.16.    Conduct of Business.  Engage in any business, other than (i) the businesses conducted by the Obligors on the Closing Date and activities incidental or supplemental thereto, and (ii) businesses similar to the business conducted by the Obligors on the Closing Date or other businesses approved by Agent in its Permitted Discretion.

 

10.2.17.    Affiliate Transactions.  Enter into or be party to any transaction with an Affiliate, except (a) transactions expressly permitted by the Loan Documents; (b) payment of reasonable compensation to officers and employees for services actually rendered, and payment of customary directors’ fees and indemnities; (c) transactions solely among Borrowers; (d) transactions with Affiliates that were consummated prior to the Closing Date, as shown on Schedule 10.2.17; (e) intercompany loans permitted under Section 10.2.7; and (f) transactions with Affiliates in the Ordinary Course of Business, upon fair and reasonable terms fully disclosed to Agent and no less favorable than would be obtained in a comparable arm’s-length transaction with a non-Affiliate.

 

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

 

10.2.19.    Amendments to Subordinated Debt  or Permitted Term Debt.  Amend, supplement or otherwise modify the (a) the Permitted Term Debt Agreement or any other document, instrument or agreement relating to the Permitted Term Debt except as permitted by the Intercreditor Agreement or (b) amend, supplement or otherwise modify any document, instrument or agreement relating to the Subordinated Debt, if such modification (i) increases the principal balance of such Debt, or increases any required payment of principal or interest; (ii) accelerates the date on which any installment of principal or any interest is due, or adds any additional redemption, put or prepayment provisions; (iii) shortens the final maturity date or otherwise accelerates amortization; (iv) increases the interest rate; (v) increases or adds any fees or charges; (vi) modifies any covenant in a manner or adds any representation, covenant or default that is more onerous or restrictive in any material respect for any Obligor or Subsidiary, or that is otherwise materially adverse to any Obligor, any Subsidiary or Lenders; or (vii) results in the Obligations not being fully benefited by the subordination provisions thereof.

 

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

 

10.3.1.           Minimum EBITDA.  For the first Loan Year, maintain Consolidated EBITDA for each of the consecutive month periods set forth below at least equal to the amounts set forth below for such periods:

 

	
Period of Consecutive Months Beginning
   March 1, 2013 and Ending
    	
 
    	
Minimum Consolidated
   EBITDA
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
March 31, 2013 
    	
 
    	
$
    	
750,000
    	
 
    
	
April 30, 2013
    	
 
    	
$
    	
1,500,000
    	
 
    
	
May 31, 2013
    	
 
    	
$
    	
2,500,000
    	
 
    
	
June 30, 2013
    	
 
    	
$
    	
3,500,000
    	
 
    
	
July 31, 2013
    	
 
    	
$
    	
4,500,000
    	
 
    
	
August 31, 2013
    	
 
    	
$
    	
6,000,000
    	
 
    
	
September 30, 2013
    	
 
    	
$
    	
7,000,000
    	
 
    
	
October 31, 2013
    	
 
    	
$
    	
8,000,000
    	
 
    
	
November 30, 2013
    	
 
    	
$
    	
9,000,000
    	
 
    
	
December 31, 2013
    	
 
    	
$
    	
10,000,000
    	
 
    
	
January 31, 2014
    	
 
    	
$
    	
11,000,000
    	
 
    
	
February 28, 2014
    	
 
    	
$
    	
12,000,000
    	
 
    

 

10.3.2.           Fixed Charge Coverage Ratio.  At all times after the end of the first Loan Year (beginning with the Fiscal Quarter ending March 31, 2014), maintain a Fixed Charge Coverage Ratio of at least 1.0 to 1.0 for each period of four Fiscal Quarters most recently ended.

 

10.4.                     Restrictions on Activities of Company.  Obligors covenant and agree that Company shall not (i) hold any assets other than the Equity Interests of SI USA, SI UK or SI Asia cash and Cash Equivalents, (ii) have any material liabilities other than liabilities under the Loan Documents and under the Permitted Term Debt Documents, tax liabilities in the Ordinary Course of Business, liabilities under employment agreements and written employment arrangements, and corporate, administrative and operating expenses in the Ordinary Course of Business, or (iii) engage in any business other than owning the Equity Interests of SI USA and activities incidental to such ownership, acting as a co-borrower in respect of the Obligations hereunder and under the Permitted Term Debt Documents, and granting to Agent for the benefit of Lenders, and granting to Permitted Term Agent for the benefit of Term Debt Lenders, security interests in and Liens upon its assets pursuant to the Security Documents and Permitted Term Debt Documents to which it is a party.

 

10.5.                     Restrictions on Activities of Foreign Subsidiaries.  Obligors covenant and agree that (a) no Obligor shall guaranty any liabilities or obligations of any Foreign Subsidiary; (b) no Obligor shall make any Investment in, or transfer any properties or assets to, any Foreign Subsidiary, other than as permitted under Sections 10.2.5 and 10.2.17; (c) no Foreign Subsidiary shall create or suffer to exist any encumbrance or restriction on the ability of a Subsidiary to make any Upstream Payment, except for restrictions under the Loan Documents, under Applicable Law or in effect on the Closing Date as shown on Schedule 9.1.15 and (d) the aggregate outstanding Debt owed by Foreign Subsidiaries (excluding Debt owed to Obligors that is permitted under Section 10.2.7) shall not at any time exceed the foreign currency equivalent of $250,000.

 

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SECTION 11.                  EVENTS OF DEFAULT; REMEDIES ON DEFAULT

 

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

 

(a)                                 An Obligor fails to pay any Obligations when due (whether at stated maturity, on demand, upon acceleration or otherwise);

 

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

 

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

 

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

 

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

 

(f)                                   Any (i) breach or default of an Obligor occurs under the Permitted Term Debt or any Hedging Agreement, or any breach or default of an Obligor occurs under any instrument or agreement to which it is a party or by which it or any of its Properties is bound, relating to any Debt (other than the Obligations) in excess of $1,000,000, if, with respect to this clause (ii), the maturity of or any payment with respect to such Debt may be accelerated or demanded due to such breach;

 

(g)                                  Any judgment or order for the payment of money is entered against an Obligor in an amount that exceeds, individually or cumulatively with all unsatisfied judgments or orders against all Obligors, $1,000,000 (net of insurance coverage therefor that has not been denied by the insurer), unless a stay of enforcement of such judgment or order is in effect, by reason of a pending appeal or otherwise;

 

(h)                                 A loss, theft, damage or destruction occurs with respect to any Collateral if the amount not covered by insurance exceeds $1,000,000;

 

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

 

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

 

(k)                                 (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan

 

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that has resulted or could reasonably be expected to result in liability of an Obligor to a Pension Plan, Multiemployer Plan or PBGC or that constitutes grounds for appointment of a trustee for or termination by the PBGC of any Pension Plan or Multiemployer Plan; an Obligor or ERISA Affiliate fails to pay when due any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan; (ii) a Termination Event shall occur which constitutes grounds for the termination under any Applicable Law, of any Canadian Pension Plan or Canadian MEPP or for the appointment by the appropriate Governmental Authority of a trustee for any Canadian Pension Plan, or if any Canadian Pension Plan or Canadian MEPP shall be terminated or any such trustee shall be requested or appointed, or if any Obligor is in default with respect to payments to a Canadian Pension Plan or Canadian MEPP resulting from their complete or partial withdrawal from such Canadian Pension Plan or Canadian MEPP or failure of any Obligor to make required payments to any Canadian Pension Plan or Canadian MEPP, or any Lien arises in respect of Obligors (save for contribution amounts not yet due) in connection with any Canadian Pension Plan or Canadian MEPP, or an Unfunded Pension Liability; (iii) an event occurs which constitutes grounds for the termination of any UK Pension Scheme or for the appointment of a receiver, liquidator, administrator or trustee in bankruptcy of any UK Pension Scheme or if any Loan Party is in default with respect to the terms of payment or the performance of its obligations under any UK Pension Scheme or any Lien arises in respect of any Loan Party in connection with any UK Pension Scheme or (iv) any event similar to the foregoing occurs or exists with respect to a Foreign Plan;

 

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

 

(m)                             A Change of Control occurs;

 

(n)                                 Any event occurs or condition exists that has a Material Adverse Effect; or

 

(o)                                 Any fine is issued against any Obligors by the CPSC in an amount that exceeds, individually or cumulatively with all other fines issued by the CPSC against the Obligors within the prior 12 months, $1,000,000; or

 

(p)                                 Obligors institute a recall of products or toys having an aggregate Value of $2,000,000 or more.

 

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

 

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

 

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

 

(c)                                  require Obligors to Cash Collateralize LC Obligations, Secured Bank Product Obligations and other Obligations that are contingent or not yet due and payable, and, if Obligors fail

 

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promptly to deposit such Cash Collateral, Agent may (and shall upon the direction of Required Lenders) advance the required Cash Collateral as Revolver Loans (whether or not an Overadvance exists or is created thereby, or the conditions in Section 6 are satisfied); and

 

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

 

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

 

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

 

11.5.                     Remedies Cumulative; No Waiver.

 

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

 

11.5.2.                                         Waivers.  No waiver or course of dealing shall be established by (a) the failure or delay of Agent or any Lender to require strict performance by Obligors with any terms of the

 

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Loan Documents, or to exercise any rights or remedies with respect to Collateral or otherwise; (b) the making of any Loan or issuance of any Letter of Credit during a Default, Event of Default or other failure to satisfy any conditions precedent; or (c) acceptance by Agent or any Lender of any payment or performance by an Obligor under any Loan Documents in a manner other than that specified therein.  It is expressly acknowledged by Obligors that any failure to satisfy a financial covenant on a measurement date shall not be cured or remedied by satisfaction of such covenant on a subsequent date.

 

SECTION 12.                  AGENT

 

12.1.                     Appointment, Authority and Duties of Agent.

 

12.1.1.                                         Appointment and Authority.  Each Secured Party appoints and designates Bank of America as Agent under all Loan Documents.  Agent may, and each Secured Party authorizes Agent to, enter into all Loan Documents to which Agent is intended to be a party and accept all Security Documents, for the benefit of Secured Parties.  Any action taken by Agent in accordance with the provisions of the Loan Documents, and the exercise by Agent of any rights or remedies set forth therein, together with all other powers reasonably incidental thereto, shall be authorized by and binding upon all Secured Parties.  Without limiting the generality of the foregoing, Agent shall have the sole and exclusive authority to (a) act as the disbursing and collecting agent for Lenders with respect to all payments and collections arising in connection with the Loan Documents; (b) execute and deliver as Agent each Loan Document, including any intercreditor or subordination agreement, and accept delivery of each Loan Document; (c) act as collateral agent for Secured Parties for purposes of perfecting and administering Liens under the Loan Documents, and for all other purposes stated therein; (d) manage, supervise or otherwise deal with Collateral; and (e) take any Enforcement Action or otherwise exercise any rights or remedies with respect to any Collateral or under any Loan Documents, Applicable Law or otherwise.  The duties of Agent are ministerial and administrative in nature only, and Agent shall not have a fiduciary relationship with any Secured Party, Participant or other Person, by reason of any Loan Document or any transaction relating thereto.  Agent alone shall be authorized to determine whether any Account or Inventory constitutes an Eligible Account, Eligible In-Transit Inventory or Eligible Inventory, whether to impose or release any reserve, or whether any conditions to funding or to issuance of a Letter of Credit have been satisfied, which determinations and judgments, if exercised in good faith, shall exonerate Agent from liability to any Secured Party or other Person for any error in judgment.

 

12.1.2.                                         Duties.  Agent shall not have any duties except those expressly set forth in the Loan Documents.  The conferral upon Agent of any right shall not imply a duty to exercise such right, unless instructed to do so by Lenders in accordance with this Agreement.

 

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

 

12.1.4.                                         Instructions of Required Lenders.  The rights and remedies conferred upon Agent under the Loan Documents may be exercised without the necessity of joinder of any other party, unless required by Applicable Law.  Agent may request instructions from Required Lenders or other Secured Parties with respect to any act (including the failure to act) in connection with any Loan Documents or Collateral, and may seek assurances to its satisfaction from Secured Parties of their indemnification obligations against Claims that could be incurred by Agent.  Agent may refrain from any act until it has received such instructions or assurances, and shall not incur liability to any Person by reason of so refraining.  Instructions of Required Lenders shall be binding upon all Secured Parties, and no Secured Party shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting pursuant to instructions of Required Lenders.  Notwithstanding the foregoing,

 

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instructions by and consent of specific parties shall be required to the extent provided in Section 14.1.1.  In no event shall Agent be required to take any action that, in its opinion, is contrary to Applicable Law or any Loan Documents or could subject any Agent Indemnitee to personal liability.

 

12.2.                     Agreements Regarding Collateral and Borrower Materials.

 

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

 

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

 

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

 

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

 

12.4.                     Action Upon Default.  Agent shall not be deemed to have knowledge of any Default or Event of Default, or of any failure to satisfy any conditions in Section 6, unless it has received written notice from a Borrower or Required Lenders specifying the occurrence and nature thereof.  If any Lender acquires knowledge of a Default, Event of Default or failure of such conditions, it shall promptly notify Agent and the other Lenders thereof in writing.  Each Secured Party agrees that, except as otherwise

 

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provided in any Loan Documents or with the written consent of Agent and Required Lenders, it will not take any Enforcement Action, accelerate Obligations (other than Secured Bank Product Obligations), or exercise any right that it might otherwise have under Applicable Law to credit bid at foreclosure sales, UCC sales or other dispositions of Collateral, or to assert any rights relating to any Collateral.

 

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

 

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

 

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

 

12.8.                     Successor Agent and Co-Agents.

 

12.8.1.                                         Resignation; Successor Agent.  Subject to the appointment and acceptance of a successor Agent as provided below, Agent may resign at any time by giving at least 30 days written notice thereof to Lenders and Borrower Agent.  Upon receipt of such notice, Required Lenders shall have

 

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the right to appoint a successor Agent which shall be (a) a Lender or an Affiliate of a Lender; or (b) a financial institution reasonably acceptable to Required Lenders and (provided no Default or Event of Default exists) Borrower Agent.  If no successor agent is appointed prior to the effective date of Agent’s resignation, then Agent may appoint a successor agent that is a financial institution acceptable to it, which shall be a Lender unless no Lender accepts the role.  Upon acceptance by a successor Agent of its appointment hereunder, such successor Agent shall thereupon succeed to and become vested with all the powers and duties of the retiring Agent without further act, and the retiring Agent shall be discharged from its duties and obligations hereunder but shall continue to have the benefits of the indemnification set forth in Sections 12.6 and 14.2.  Notwithstanding any Agent’s resignation, the provisions of this Section 12 shall continue in effect for its benefit with respect to any actions taken or omitted to be taken by it while Agent.  Any successor to Bank of America by merger or acquisition of stock or this loan shall continue to be Agent hereunder without further act on the part of any Secured Party or Obligor.

 

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

 

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

 

12.10.              Remittance of Payments and Collections.

 

12.10.1.                    Remittances Generally.  All payments by any Lender to Agent shall be made by the time and on the day set forth in this Agreement, in immediately available funds.  If no time for payment is specified or if payment is due on demand by Agent and request for payment is made by Agent by 11:00 a.m. on a Business Day, payment shall be made by Lender not later than 2:00 p.m. on such day, and if request is made after 11:00 a.m., then payment shall be made by 11:00 a.m. on the next Business Day.  Payment by Agent to any Secured Party shall be made by wire transfer, in the type of funds received by Agent.  Any such payment shall be subject to Agent’s right of offset for any amounts due from such payee under the Loan Documents.

 

12.10.2.                    Failure to Pay.  If any Secured Party fails to pay any amount when due by it to Agent pursuant to the terms hereof, such amount shall bear interest, from the due date until paid in full, at the rate determined by Agent as customary for interbank compensation for two Business Days and thereafter at the Default Rate for Base Rate Revolver Loans.  In no event shall Borrowers be entitled to

 

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receive credit for any interest paid by a Secured Party to Agent, nor shall any Defaulting Lender be entitled to interest on any amounts held by Agent pursuant to Section 4.2.

 

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

 

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

 

12.12.              Titles.  Each Lender, other than Bank of America, that is designated (on the cover page of this Agreement or otherwise) by Bank of America as an “Arranger,” “Bookrunner” or “Agent” of any type shall have no right, power or duty under any Loan Documents other than those applicable to all Lenders, and shall in no event have any fiduciary duty to any Secured Party.

 

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

 

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

 

SECTION 13.                  BENEFIT OF AGREEMENT; ASSIGNMENTS

 

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

 

13.2.                     Participations.

 

13.2.1.                                         Permitted Participants; Effect.  Subject to Section 13.3.3, any Lender may sell to a financial institution (“Participant”) a participating interest in the rights and obligations of such

 

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Lender under any Loan Documents.  Despite any sale by a Lender of participating interests to a Participant, such Lender’s obligations under the Loan Documents shall remain unchanged, it shall remain solely responsible to the other parties hereto for performance of such obligations, it shall remain the holder of its Loans and Commitments for all purposes, all amounts payable by Obligors shall be determined as if it had not sold such participating interests, and Obligors and Agent shall continue to deal solely and directly with such Lender in connection with the Loan Documents.  Each Lender shall be solely responsible for notifying its Participants of any matters under the Loan Documents, and Agent and the other Lenders shall not have any obligation or liability to any such Participant.  A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 5.9 unless Borrower Agent agrees otherwise in writing.

 

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

 

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

 

13.3.                     Assignments.

 

13.3.1.                                         Permitted Assignments.  A Lender may assign to an Eligible Assignee any of its rights and obligations under the Loan Documents, as long as (a) each assignment is of a constant, and not a varying, percentage of the transferor Lender’s rights and obligations under the Loan Documents and, in the case of a partial assignment, is in a minimum principal amount of $10,000,000 (unless otherwise agreed by Agent in its discretion) and integral multiples of $500,000 in excess of that amount; (b) except in the case of an assignment in whole of a Lender’s rights and obligations, the aggregate amount of the Commitments retained by the transferor Lender is at least $10,000,000 (unless otherwise agreed by Agent in its discretion); and (c) the parties to each such assignment shall execute and deliver to Agent, for its acceptance and recording, an Assignment and Acceptance.  Nothing herein shall limit the right of a Lender to pledge or assign any rights under the Loan Documents to secure obligations of such Lender, including a pledge or assignment to a Federal Reserve Bank; provided, however, that no such pledge or assignment shall release the Lender from its obligations hereunder nor substitute the pledge or assignee for such Lender as a party hereto.

 

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

 

13.3.3.                                         Certain Assignees.  No assignment or participation may be made to an Obligor, Affiliate of an Obligor, Defaulting Lender or natural person.  Any assignment by a Defaulting Lender shall be effective only upon payment by the Eligible Assignee or Defaulting Lender to Agent of an aggregate amount sufficient, upon distribution (through direct payment, purchases of participations or

 

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other compensating actions as Agent deems appropriate), to satisfy all funding and payment liabilities then owing by the Defaulting Lender hereunder.  If an assignment by a Defaulting Lender shall become effective under Applicable Law for any reason without compliance with the foregoing sentence, then the assignee shall be deemed a Defaulting Lender for all purposes until such compliance occurs.

 

13.3.4.                                         Register.  Agent, acting as a non-fiduciary agent of Obligors (solely for tax purposes), shall maintain (a) a copy of each Assignment and Acceptance delivered to it, and (b) a register for recordation of the names, addresses and Commitments of, and the Loans, interest and LC Obligations owing to, each Lender.  Entries in the register shall be conclusive, absent manifest error, and Obligors, Agent and Lenders shall treat each lender recorded in such register as a Lender for all purposes under the Loan Documents, notwithstanding any notice to the contrary.  The register shall be available for inspection by Obligors or any Lender, from time to time upon reasonable notice.

 

13.4.                     Replacement of Certain Lenders.  If a Lender (a) fails to give its consent to any amendment, waiver or action for which consent of all Lenders was required and Required Lenders consented, or (b) is a Defaulting Lender, then, in addition to any other rights and remedies that any Person may have, Agent or Borrower Agent may, by notice to such Lender within 120 days after such event, require such Lender to assign all of its rights and obligations under the Loan Documents to Eligible Assignee(s), pursuant to appropriate Assignment and Acceptance(s), within 20 days after the notice.  Agent is irrevocably appointed as attorney-in-fact to execute any such Assignment and Acceptance if the Lender fails to execute it.  Such Lender shall be entitled to receive, in cash, concurrently with such assignment, all amounts owed to it under the Loan Documents through the date of assignment.

 

SECTION 14.                  THE GUARANTEE

 

14.1.                     Guarantee.  The Guarantors hereby guarantee to each Lender, the Issuing Bank and Agent and their respective successors and permitted assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Obligations.  The Guarantors hereby further agree that if the Borrowers shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the obligations, the Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal.

 

14.2.                     Obligations Unconditional.  The obligations of the Guarantors under Section 14.1 are absolute and unconditional irrespective of the value, genuineness, validity, regularity or enforceability of this Agreement, the other Loan Documents or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 14.2 that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances.  Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder, which shall remain absolute and unconditional as described above:

 

(I)                                   AT ANY TIME OR FROM TIME TO TIME, WITHOUT NOTICE TO SUCH GUARANTORS, THE TIME FOR ANY PERFORMANCE OF OR COMPLIANCE WITH ANY OF THE OBLIGATIONS SHALL BE EXTENDED, OR SUCH PERFORMANCE OR COMPLIANCE SHALL BE WAIVED;

 

(II)                              ANY OF THE ACTS MENTIONED IN ANY OF THE PROVISIONS HEREOF OR OF THE OTHER LOAN DOCUMENTS OR ANY OTHER

 

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AGREEMENT OR INSTRUMENT REFERRED TO HEREIN OR THEREIN SHALL BE DONE OR OMITTED;

 

(III)                         THE MATURITY OF ANY OF THE OBLIGATIONS SHALL BE ACCELERATED, OR ANY OF THE OBLIGATIONS SHALL BE MODIFIED, SUPPLEMENTED OR AMENDED IN ANY RESPECT, OR ANY RIGHT HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS OR ANY OTHER AGREEMENT OR INSTRUMENT REFERRED TO HEREIN OR THEREIN SHALL BE WAIVED OR ANY OTHER GUARANTEE OF ANY OF THE OBLIGATIONS OR ANY SECURITY THEREFOR SHALL BE RELEASED OR EXCHANGED IN WHOLE OR IN PART OR OTHERWISE DEALT WITH; OR

 

(IV)                          ANY LIEN OR SECURITY INTEREST GRANTED TO, OR IN FAVOR OF, AGENT, THE ISSUING BANK OR ANY LENDER OR LENDERS AS SECURITY FOR ANY OF THE OBLIGATIONS SHALL FAIL TO BE PERFECTED.

 

EACH GUARANTOR HEREBY EXPRESSLY WAIVES DILIGENCE, PRESENTMENT, DEMAND OF PAYMENT, PROTEST AND ALL NOTICES WHATSOEVER, AND ANY REQUIREMENT THAT AGENT, THE ISSUING BANK OR ANY LENDER EXHAUST ANY RIGHT, POWER OR REMEDY OR PROCEED AGAINST BORROWERS OR ANY OTHER GUARANTOR HEREUNDER OR UNDER THE OTHER LOAN DOCUMENTS OR ANY OTHER AGREEMENT OR INSTRUMENT REFERRED TO HEREIN OR THEREIN, OR AGAINST ANY OTHER PERSON UNDER ANY OTHER GUARANTEE OF, OR SECURITY FOR, ANY OF THE OBLIGATIONS, AND HEREBY WAIVE THE BENEFITS OF DIVISION AND DISCUSSION.

 

14.3.                     Reinstatement.  The obligations of the Guarantors under this Section 14 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Borrower in respect of the Obligations is rescinded or must be otherwise restored by any holder of any of the Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify Agent, the Issuing Bank and each Lender on demand for all reasonable costs and expenses (including fees and expenses of counsel) incurred by Agent, any Lender or the Issuing Bank in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law.

 

14.4.                     Subrogation.  Until Full Payment of the Obligations, each of the Guarantors hereby waives all rights of subrogation or contribution, whether arising by contract or operation of law (including, without limitation, any such right arising under the bankruptcy code, as amended) or otherwise by reason of any payment by it pursuant to the provisions of this Section 14 and further agrees with each Borrower for the benefit of each creditor of such Borrower (including Agent, the Issuing Bank and each Lender) that any such payment by it shall constitute a contribution of capital by such Guarantor to such Borrower.

 

14.5.                     Remedies.  The Guarantors agree that, as between the Guarantors and the Lenders, the Obligations of Borrowers hereunder may be declared to be forthwith due and payable as provided in Section 11.2 (and shall be deemed to have become automatically due and payable in the circumstances provided in Section 11.2) for purposes of Section 14.1 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against Borrowers and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such Obligations (whether or not due and payable by Borrowers) shall forthwith become due and payable by the Guarantor for purposes of, and, in the case of the Canadian Guarantors, subject to the limitations set forth in, Section 14.1.

 

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14.6.                     Instrument for the Payment of Money.  Each of the Guarantors hereby acknowledges that the guarantee in this Section 14 constitutes an instrument for the payment of money only, and consents and agrees that Agent, the Issuing Bank, or any Lender, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to summary judgment or such other expedited procedure as may be available for a suit on a note or other instrument for the payment of money only.

 

14.7.                     Continuing Guarantee.  The guarantee in this Section 14 is a continuing guarantee and shall apply to all Obligations whenever arising.

 

14.8.                     General Limitation on Amount of Obligations Guaranteed.   In any action or proceeding involving any state or non-U.S. corporate law, or any state or federal or non-U.S. bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of the Guarantors under Section 14.1 would otherwise be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 14.1, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by the Guarantors, any Lender, Agent or other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding.

 

14.9.                     Joint Enterprise.  Each Guarantor acknowledges that (a) the Obligors’ business is a mutual and collective enterprise, and the successful operation of each Obligor is dependent upon the successful performance of the integrated group and (b) such Guarantor shall derive direct and indirect economic and other benefits from the establishment by the Secured Parties of the credit facility under this Agreement in favor of Borrowers.

 

14.10.              Subordination.  Each Borrower and each Guarantor hereby subordinates any claims, including any right of payment, subrogation, contribution and indemnity, that it may have at any time against any other Obligor, howsoever arising, to the Full Payment of the Obligations.

 

14.11.              Conflicts with Canadian Guaranty or UK Guaranty.  In the event that any of the terms of this Section 14 conflict with (i) the Canadian Guaranty as they relate to the Canadian Guarantors and/or (ii) the UK Guaranty as they relate to the UK Guarantors, the terms of the Canadian Guaranty and/or the UK Guaranty (as applicable) shall control.

 

SECTION 15.                  MISCELLANEOUS

 

15.1.                     Consents, Amendments and Waivers.

 

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

 

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

 

(b)                                 without the prior written consent of Issuing Bank, no modification shall be effective with respect to any LC Obligations, Section 2.3 or any other provision in a Loan Document that relates to any rights, duties or discretion of Issuing Bank;

 

(c)                                  without the prior written consent of each affected Lender, including a Defaulting

 

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Lender, no modification shall be effective that would (i) increase the Commitment of such Lender; (ii) reduce the amount of, or waive or delay payment of, any principal, interest or fees payable to such Lender (except as provided in Section 4.2); (iii) extend the Revolver Termination Date applicable to such Lender’s Obligations; or (iv) amend this clause (c);

 

(d)           without the prior written consent of all Lenders (except any Defaulting Lender), no modification shall be effective that would (i) alter Section 5.6.2, 7.1 (except to add Collateral) or 14.1.1; (ii) amend the definitions of the terms “Pro Rata”, “Required Lenders” or “Borrowing Base” (or any defined term used in the definition of “Borrowing Base”, provided that the Agent may in its Permitted Discretion, without the necessity of obtaining the consent of any Lender, increase or decrease the amount of the Availability Reserve, or increase, decrease, add or eliminate any of the components thereof, or reduce the percentages used in the definitions of Accounts Formula Amount and Inventory Formula Amount); (iii) release all or substantially all of the Collateral; or (iv) except in connection with a merger, disposition or similar transaction expressly permitted hereby, release any Obligor from liability for any Obligations; and

 

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

 

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

 

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

 

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

 

15.3.       Notices and Communications.

 

15.3.1.              Notice Address.  Subject to Section 4.1.4, all notices and other communications by or to a party hereto shall be in writing and shall be given to any Obligor, at Borrower Agent’s address shown on the signature pages hereof, and to any other Person at its address shown on the signature pages hereof (or, in the case of a Person who becomes a Lender after the Closing Date, at the address shown on its Assignment and Acceptance), or at such other address as a party may hereafter specify by notice in accordance with this Section 14.3.  Each communication shall be effective only (a) if given by facsimile transmission, when transmitted to the applicable facsimile number, if confirmation of receipt is received; (b) if given by mail, three Business Days after deposit in the U.S. mail, with first-class postage pre-paid, addressed to the applicable address; or (c) if given by personal delivery, when duly

 

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delivered to the notice address with receipt acknowledged.  Notwithstanding the foregoing, no notice to Agent pursuant to Section 2.1.4, 2.3, 3.1.2, 4.1.1 or 5.3.3 shall be effective until actually received by the individual to whose attention at Agent such notice is required to be sent.  Any written communication that is not sent in conformity with the foregoing provisions shall nevertheless be effective on the date actually received by the noticed party.  Any notice received by Borrower Agent shall be deemed received by all Obligors.

 

15.3.2.              Electronic Communications; Voice Mail.  Electronic mail and internet websites may be used only for routine communications, such as delivery of Borrower Materials, administrative matters, distribution of Loan Documents, and matters permitted under Section 4.1.4.  Agent and Lenders make no assurances as to the privacy and security of electronic communications.  Electronic and voice mail may not be used as effective notice under the Loan Documents.

 

15.3.3.              Platform.  Borrower Materials shall be delivered pursuant to procedures approved by Agent, including electronic delivery (if possible) upon request by Agent to an electronic system maintained by Agent (“Platform”).  Borrowers shall notify Agent of each posting of Borrower Materials on the Platform and the materials shall be deemed received by Agent only upon its receipt of such notice.  Borrower Materials and other information relating to this credit facility may be made available to Lenders on the Platform.  The Platform is provided “as is” and “as available.”  Agent does not warrant the accuracy or completeness of any information on the Platform nor the adequacy or functioning of the Platform, and expressly disclaims liability for any errors or omissions in the Borrower Materials or any issues involving the Platform.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS, OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY AGENT WITH RESPECT TO BORROWER MATERIALS OR THE PLATFORM.  Lenders acknowledge that Borrower Materials may include material non-public information of Obligors and should not be made available to any personnel who do not wish to receive such information or who may be engaged in investment or other market-related activities with respect to any Obligor’s securities.  No Agent Indemnitee shall have any liability to Borrowers, Lenders or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) relating to use by any Person of the Platform or delivery of Borrower Materials and other information through the Platform.

 

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

 

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

 

15.5.       Credit Inquiries.  Agent and Lenders may (but shall have no obligation) to respond to

 

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usual and customary credit inquiries from third parties concerning any Obligor or Subsidiary.

 

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

 

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

 

15.8.       Counterparts.  Any Loan Document may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement shall become effective when Agent has received counterparts bearing the signatures of all parties hereto.  Delivery of a signature page of any Loan Document by telecopy or other electronic means shall be effective as delivery of a manually executed counterpart of such agreement.

 

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

 

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

 

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

 

15.12.     Confidentiality.  Each of Agent, Lenders and Issuing Bank shall maintain the confidentiality of all Information (as defined below), except that Information may be disclosed (a) to its Affiliates, and to its and their partners, directors, officers, employees, agents, advisors and representatives

 

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

 

15.13.     GOVERNING LAW.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, UNLESS OTHERWISE SPECIFIED, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES (BUT GIVING EFFECT TO FEDERAL LAWS RELATING TO NATIONAL BANKS).

 

15.14.     Consent to Forum.  EACH OBLIGOR HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT SITTING IN OR WITH JURISDICTION OVER NEW YORK, IN ANY PROCEEDING OR DISPUTE RELATING IN ANY WAY TO ANY LOAN DOCUMENTS, AND AGREES THAT ANY SUCH PROCEEDING SHALL BE BROUGHT BY IT SOLELY IN ANY SUCH COURT.  EACH OBLIGOR IRREVOCABLY WAIVES ALL CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING SUCH COURT’S PERSONAL OR SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 14.3.1.  Nothing herein shall limit the right of Agent or any Lender to bring proceedings against any Obligor in any other court, nor limit the right of any party to serve process in any other manner permitted by Applicable Law.  Nothing in this Agreement shall be deemed to preclude enforcement by Agent of any judgment or order obtained in any forum or jurisdiction.

 

15.15.     Waivers by Obligors.  To the fullest extent permitted by Applicable Law, each Obligor waives (a) the right to trial by jury (which Agent and each Lender hereby also waives) in any proceeding or dispute of any kind relating in any way to any Loan Documents, Obligations or Collateral; (b) presentment, demand, protest, notice of presentment, default, non-payment, maturity, release, compromise, settlement, extension or renewal of any commercial paper, accounts, documents, instruments, chattel paper and guaranties at any time held by Agent on which an Obligor may in any way be liable, and hereby ratifies anything Agent may do in this regard; (c) notice prior to taking possession or control of any Collateral; (d) any bond or security that might be required by a court prior to allowing Agent to exercise any rights or remedies; (e) the benefit of all valuation, appraisement and exemption laws; (f) any claim against Agent, Issuing Bank or any Lender, on any theory of liability, for special, indirect, consequential, exemplary or punitive damages (as opposed to direct or actual damages) in any way relating to any Enforcement Action, Obligations, Loan Documents or transactions relating thereto; and (g) notice of acceptance hereof.

 

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Each Obligor acknowledges that the foregoing waivers are a material inducement to Agent, Issuing Bank and Lenders entering into this Agreement and that they are relying upon the foregoing in their dealings with Obligors.  Each Obligor has reviewed the foregoing waivers with its legal counsel and has knowingly and voluntarily waived its jury trial and other rights following consultation with legal counsel.  In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

 

15.16.     Patriot Act Notice.  Agent and Lenders hereby notify Obligors that pursuant to the Patriot Act, Agent and Lenders are required to obtain, verify and record information that identifies each Obligor, including its legal name, address, tax ID number and other information that will allow Agent and Lenders to identify it in accordance with the Patriot Act.  Agent and Lenders will also require information regarding each personal guarantor, if any, and may require information regarding Obligors’ management and owners, such as legal name, address, social security number and date of birth.

 

15.17.     Intercreditor Agreement.  Notwithstanding anything herein to the contrary, each of Agent, on behalf of the Lenders, and each Obligor acknowledges that the Lien and security interests granted to Agent pursuant to this Agreement and the other Loan Documents and the exercise of any right or remedy by Agent thereunder and the obligations of the Obligors under this Agreement and the other Loan Documents are subject to the provisions of the Intercreditor Agreement, which Agent is hereby directed by the Lenders to execute and deliver, and perform in accordance with its terms.  In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement or any other Loan Document, the terms of the Intercreditor Agreement shall govern and control and notwithstanding anything to the contrary herein, Agent and the Lenders hereby agree and acknowledge that prior to the Discharge of Term Obligations any requirement of this Agreement to deliver any Term Priority Collateral, or the proceeds thereof, to Agent shall be deemed satisfied by delivery of such Term Priority Collateral or the proceeds thereof to the Permitted Term Agent.

 

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

 

80

 

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

 

	
 
    	
BORROWERS:
    
	
 
    	
 
    	
 
    
	
 
    	
SUMMER   INFANT, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Paul Francese 
    
	
 
    	
Name:   
    	
Paul   Francese 
    
	
 
    	
Title:   
    	
CFO
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
1275   Park East Drive
    
	
 
    	
 
    	
Woonsocket,   Rhode Island 02895
    
	
 
    	
 
    	
Attn:   Paul Francese
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SUMMER   INFANT (USA), INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Paul Francese
    
	
 
    	
Name:   
    	
Paul   Francese
    
	
 
    	
Title:   
    	
CFO
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
1275   Park East Drive
    
	
 
    	
 
    	
Woonsocket,   Rhode Island 02895
    
	
 
    	
 
    	
Attn:   Paul Francese
    

 

[Loan and Security Agreement (Revolver)]

 

 

	
 
    	
GUARANTORS:
    
	
 
    	
 
    	
 
    
	
 
    	
SUMMER   INFANT CANADA, LIMITED
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:   
    	
/s/   David S. Hemendinger
    
	
 
    	
Name:   
    	
David   S. Hemendinger
    
	
 
    	
Title:
    	
COO
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
1275   Park East Drive
    
	
 
    	
 
    	
Woonsocket,   Rhode Island 02895
    
	
 
    	
 
    	
Attn:   Paul Francese
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
SUMMER   INFANT EUROPE LIMITED
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Jason P. Macari
    
	
 
    	
Name:   
    	
Jason   P. Macari
    
	
 
    	
Title:
    	
Director
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
1275   Park East Drive
    
	
 
    	
 
    	
Woonsocket,   Rhode Island 02895
    
	
 
    	
 
    	
Attn:   Paul Francese
    

 

[Loan and Security Agreement (Revolver)]

 

	
 
    	
AGENT   AND LENDER:
    
	
 
    	
 
    
	
 
    	
BANK OF AMERICA, N.A.,
    
	
 
    	
as   Agent and Lender
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:   
    	
/s/   Steven Blumberg
    
	
 
    	
Name:   
    	
Steven   Blumberg
    
	
 
    	
Title:
    	
Senior   Vice President
    
	
 
    	
Address:
    	
 
    
	
 
    	
 
    	
Bank   of America, N.A.
    
	
 
    	
 
    	
Mail   Code: CT2-500-35-02
    
	
 
    	
 
    	
Cityplace   1, 185 Asylum Street
    
	
 
    	
 
    	
Hartford,   CT 06103
    
	
 
    	
 
    	
Attn:   Cynthia Stannard, SVP
    

 

[Loan and Security Agreement (Revolver)]

 

 

Exhibit A

to

Loan and Security Agreement

 

ASSIGNMENT AND ACCEPTANCE

 

Reference is made to the Loan and Security Agreement dated as of February 28, 2013, as amended (“Loan Agreement”), among SUMMER INFANT, INC., and SUMMER INFANT (USA), INC. (collectively, “Borrowers”), the Guarantors party thereto from time to time, BANK OF AMERICA, N.A., as agent (“Agent”) for the financial institutions from time to time party to the Loan Agreement (“Lenders”), and such Lenders.  Terms are used herein as defined in the Loan Agreement.

 

(“Assignor”) and                                                                               (“Assignee”) agree as follows:

 

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

 

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

 

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

 

 

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

 

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

 

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

 

 

 

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

 

 

 

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

 

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

 

 

ABA No.

 

Account No.

Reference:

 

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

 

 

ABA No.

 

Account No.

Reference:

 

 

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

 

 

	
 
    	
 
    
	
 
    	
(“Assignee”)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(“Assignor”)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    

 

 

EXHIBIT B

to

Loan and Security Agreement

 

ASSIGNMENT NOTICE

 

Reference is made to (1) the Loan and Security Agreement dated as of               , 20    , as amended (“Loan Agreement”), among SUMMER INFANT, INC., and SUMMER INFANT (USA), INC. (collectively, “Borrowers”), the Guarantors party thereto from time to time, BANK OF AMERICA, N.A., as agent (“Agent”) for the financial institutions from time to time party to the Loan Agreement (“Lenders”), and such Lenders; and (2) the Assignment and Acceptance dated as of                         , 20     (“Assignment Agreement”), between                                      (“Assignor”) and                                          (“Assignee”).  Terms are used herein as defined in the Loan Agreement.

 

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

 

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

 

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

 

 

 

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

 

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

 

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

 

 

	
 
    	
 
    
	
 
    	
(“Assignee”)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    

 

 

	
 
    	
 
    
	
 
    	
(“Assignor”)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Title:
    

 

ACKNOWLEDGED AND AGREED,

AS OF THE DATE SET FORTH ABOVE:

 

BORROWER AGENT:*

 

SUMMER INFANT (USA), INC.

 

 

	
By
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    

 

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

 

 

BANK OF AMERICA, N.A.,

as Agent

 

 

	
By
    	
 
    	
 
    
	
 
    	
Title:

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