Document:

EX-4.7

 Exhibit 4.7 

CURRENCYSHARES® CANADIAN DOLLAR TRUST 

PARTICIPANT AGREEMENT 
 This Participant
Agreement (this “Agreement”), dated as of             , 2015, is entered into by and between
             (with respect to this Agreement, the “Authorized Participant”, and with respect to the Trust Agreement referred to below, an “Authorized
Participant”), The Bank of New York Mellon, a New York banking corporation, not in its individual capacity but solely as trustee (the “Trustee”) of the
CurrencyShares® Canadian Dollar Trust (the “Trust”), and Guggenheim Specialized Products LLC, d/b/a Guggenheim Investments, as sponsor (the “Sponsor”) of the
Trust. 
 SUMMARY 
 The Trustee serves
as the trustee of the Trust pursuant to the Depositary Trust Agreement dated as of June 8, 2006, among the Sponsor, the Trustee, the registered owners and beneficial owners from time to time of Shares issued thereunder and all depositors (the
“Trust Agreement”). As provided in the Trust Agreement and described in the Prospectus (defined below), units of fractional undivided beneficial interests in and ownership of the Trust (the “Shares”) may be created
or redeemed by the Trustee for an Authorized Participant in aggregations of fifty thousand (50,000) Shares (each aggregation, a “Basket”). Baskets are offered only pursuant to the registration statement of the Trust on Form
S-3, as amended (Registration No: 333-187566), as declared effective by the Securities and Exchange Commission (“SEC”) and as the same may be amended from time to time thereafter (collectively, the “Registration
Statement”) together with the prospectus of the Trust in the form first filed with the SEC pursuant to Rule 424 (the “Prospectus”) adopted under the Securities Act of 1933, as amended (the “1933 Act”).
Under the Trust Agreement, the Trustee is authorized to issue Baskets to, and redeem Baskets from, Authorized Participants under the Trust Agreement, only through the facilities of The Depository Trust Company (“DTC”) or a successor
depository, and only in exchange for an amount of Canadian Dollars that is transferred between such Authorized Participant and the Trust. Under the Trust Agreement, the Trustee issues Baskets in exchange for Canadian Dollars which are transferred by
an Authorized Participant to the London Branch of JPMorgan Chase Bank, N.A. (the “Depository”), and when the Trustee redeems Baskets tendered for redemption by an Authorized Participant in exchange for Canadian Dollars, the Canadian
Dollars held in the Trust Account are transferred to the Authorized Participant by the Depository. The foregoing Canadian Dollar transfers are also governed by the Deposit Account Agreement the Trust has entered into with the Depository (the
“Deposit Account Agreement”). This Agreement sets forth the specific procedures by which an Authorized Participant may create or redeem Baskets. 

Because new Shares can be created and issued on an ongoing basis, at any point during the life of the Trust, a “distribution,” as such term is used
in the 1933 Act, may be occurring. The Authorized Participant is cautioned that some of its activities may result in its being deemed a participant in a distribution in a manner that would render it a statutory underwriter and subject it to the
prospectus-delivery and liability provisions of the 1933 Act. The Authorized Participant should review the “Plan of Distribution” portion of the Prospectus and consult with its own counsel in connection with entering into this Agreement
and placing an Order (defined below). 
 Capitalized terms used but not defined in this Agreement shall have the meanings assigned to such terms in the
Trust Agreement. To the extent there is a conflict between any provision of this Agreement and the provisions of the Trust Agreement, the provisions of the Trust Agreement shall control. 

To give effect to the foregoing premises and in consideration of the mutual covenants and agreements set forth below, the parties hereto agree as follows:

 Section 1. Order Placement. To place orders for the Trustee to create or redeem one or more Baskets, Authorized Participants must follow the
procedures for creation and redemption referred to in Section 3 of this Agreement and the procedures described in Attachment A hereto (the “Procedures”), as each may be amended, modified or supplemented from time to time. 

 Section 2. Status, Representations and Warranties of the Parties. 

(a) The Authorized Participant represents and warrants and covenants the following on the date hereof and at each time of purchase by the
Authorized Participant of a Basket from the Trust (each such time, the “Time of Purchase”), that: 
 (i) The Authorized Participant
is a participant of DTC (as such a participant, a “DTC Participant”). If the Authorized Participant ceases to be a DTC Participant, the Authorized Participant shall give immediate notice to the Trustee of such event, and this
Agreement shall terminate immediately as of the date the Authorized Participant ceased to be a DTC Participant. 
 (ii) Unless
Section 2(a)(iii) applies, the Authorized Participant either (A) is registered as a broker-dealer under the Securities Exchange Act of 1934, as amended (“1934 Act”), and is a member in good standing of Financial Industry
Regulatory Authority, Inc. (“FINRA”), or (B) is exempt from being, or otherwise is not required to be, licensed as a broker-dealer or a member of FINRA, and in either case is qualified to act as a broker or dealer in the states
or other jurisdictions where the nature of its business so requires. In connection with the purchase or redemption of Baskets and any related offers or sales of Shares, the Authorized Participant will maintain any such registrations, qualifications
and membership in good standing and in full force and effect throughout the term of this Agreement. The Authorized Participant will comply with all applicable federal laws, the laws of the states or other jurisdictions concerned, and the rules and
regulations promulgated thereunder, and with FINRA’s rules (if it is a FINRA member), including the NASD Conduct Rules, and will not offer or sell Shares in any state or jurisdiction where they may not lawfully be offered and/or sold. 

(iii) If the Authorized Participant is offering or selling Shares in jurisdictions outside the several states, territories and possessions of
the United States and is not otherwise required to be registered, qualified or a member of FINRA as set forth in Section 2(a)(ii) above, the Authorized Participant will, in connection with such offers and sales, (A) observe the applicable
laws of the jurisdiction in which such offer and/or sale is made, (B) comply with the prospectus delivery and other requirements of the 1933 Act, and the regulations promulgated thereunder, and (C) conduct its business in accordance with
FINRA’s rules, including the NASD Conduct Rules. 
 (iv) The Authorized Participant is in compliance with the money laundering and
related provisions of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, and the regulations promulgated thereunder (“USA PATRIOT Act”), if
the Authorized Participant is subject to the requirements of the USA PATRIOT Act. 
 (v) The Authorized Participant has the capability to
send and receive communications via authenticated telecommunication facility to and from the Trustee. The Authorized Participant shall confirm such capability to the satisfaction of the Trustee by the end of the Business Day before placing its first
order with the Trustee (whether such order is to create or to redeem Baskets). 

 (b) The Sponsor represents and warrants that: 

(i) on the effective date of the Registration Statement and at each Time of Purchase, the Trust’s Registration Statement shall be
effective and no stop order of the SEC with respect thereto shall have been issued and no proceedings for such purpose shall have been instituted or, to the Sponsor’s knowledge, will then be contemplated by the SEC; the Registration Statement
complies in all material respects with the requirements of the 1933 Act, and the Prospectus complied as of its date, and complies at the Time of Purchase, in all material respects with the requirements of the 1933 Act; and the conditions to the use
of Form S-1 have been satisfied; the Registration Statement does not 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 not misleading, the
Prospectus will not, as of its date and at the Time of Purchase, contain an 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 and, as of 4:00 p.m. on the date of this Agreement (the “Time of Sale”), the documents comprising the Disclosure Package (as defined below) did not contain an 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; provided, however, that the Sponsor
makes no warranty or representation with respect to any statement contained in the Registration Statement, the Prospectus or the Disclosure Package in reliance upon and in conformity with information concerning the Authorized Participant and
furnished in writing by or on behalf of the Authorized Participant to the Sponsor expressly for use therein. The “Disclosure Package” is the Prospectus and any amendments and supplements thereto at the Time of Sale and any free
writing prospectus as defined in Rule 405 of the 1933 Act (a “FWP”) prepared by, for or on behalf of the Sponsor before the Time of Sale and intended for general distribution; 

(ii) the Shares, when issued and delivered against payment of consideration therefor, as provided in this Agreement, will be duly and validly
authorized, issued, fully paid and non-assessable and free of statutory and contractual preemptive rights, rights of first refusal and similar rights; 

(iii) the Sponsor has been duly organized and, on the effective date of the Registration Statement and at each Time of Purchase, will be
validly existing as a limited liability company in good standing under the laws of the State of Delaware, with full power and authority to act as the sponsor of the Trust as described in the Registration Statement and the Prospectus, and has all
requisite power and authority to execute and deliver this Agreement; and 
 (iv) at the time the Sponsor makes an offer of Shares following
the filing of the Registration Statement, neither the Trust nor the Sponsor will be an “ineligible issuer” as defined in Rule 405 of the 1933 Act. 

Section 3. Orders. 
 (a) All orders
to create or redeem Baskets shall be made in accordance with the terms of the Trust Agreement, the Deposit Account Agreement, this Agreement and the Procedures. Each party will comply with such foregoing terms and procedures to the extent applicable
to it. The Authorized Participant hereby consents to the use of recorded telephone lines whether or not 

 
such use is reflected in the Procedures. The Trustee and Sponsor may issue additional or other procedures from time to time relating to the manner of creating or redeeming Baskets which are not
related to the Procedures, and the Authorized Participant will comply with such procedures of which it has received notice in accordance with Section 18(c). 

(b) The Authorized Participant acknowledges and agrees that each order to create a Basket (a “Purchase Order”) and each order
to redeem a Basket (a “Redemption Order”, and each Purchase Order and Redemption Order, an “Order”) may not be revoked by the Authorized Participant upon its delivery to the Trustee. A form of Purchase Order is
attached hereto as Exhibit B and a form of Redemption Order is attached hereto as Exhibit C. 
 (c) The delivery of the Shares against
deposits of Canadian Dollars may be suspended generally, or refused with respect to particular requested deliveries, during any period when the transfer books of the Trustee are closed or if any such action is deemed necessary or advisable by the
Trustee or the Sponsor for any reason at any time or from time to time. Except as otherwise provided in the Trust Agreement, the surrender of Shares for purposes of withdrawing Canadian Dollars may not be suspended. 

Section 4. Canadian Dollars Transfers. Any Canadian Dollars to be transferred in connection with any Order shall be transferred between the
Authorized Participant’s account and the Trust’s deposit accounts established for such transfers pursuant to the Deposit Account Agreement (the “Deposit Accounts”) in accordance with the Procedures. The Authorized
Participant shall be responsible for all costs and expenses relating to or connected with any transfer of Canadian Dollars between its account and the Deposit Accounts, including any late fees and other charges, if any, for which the Trustee becomes
responsible in the event that Canadian Dollars are not transferred from the Authorized Participant’s account in accordance with the Procedures. 

Section 5. Fees. 
 (a) In connection
with each Order by an Authorized Participant to create or redeem one or more Baskets, the Trustee shall charge, and the Authorized Participant shall pay to the Trustee, the transaction fee prescribed in the Trust Agreement applicable to such
creation or redemption. The initial transaction fee shall be five hundred dollars ($500). The transaction fee may be waived or otherwise adjusted from time to time as set forth in the Prospectus. 

(b) In addition to the fee described in Section 5(a), in connection with each Order by an Authorized Participant to create or redeem two
or more Baskets, the Sponsor shall charge, and the Authorized Participant shall pay to the Sponsor, an additional transaction fee applicable to such creation or redemption. The additional transaction fee shall range from five hundred dollars ($500)
to two thousand dollars ($2,000), based on the number of Baskets created or redeemed per Order. The additional transaction fee may be waived or otherwise adjusted from time to time as set forth in the Prospectus or the Procedures. 

(c) Remittance of payment for the transaction fees set forth in Sections 5(a) and 5(b) shall be made in accordance with the Procedures. 

Section 6. Authorized Persons. Concurrently with the execution of this Agreement and from time to time thereafter, the Authorized Participant
shall deliver to the Trustee notarized and duly certified as appropriate by its secretary or other duly authorized official, a certificate in the form of Exhibit A setting forth the names and signatures of all persons authorized to give instructions
relating to activity contemplated hereby or by any other notice, request or instruction given on behalf of the Authorized Participant (each, an “Authorized Person”). The Trustee may accept and rely upon such certificate as
conclusive evidence of the facts set forth therein and shall consider such certificate to be in full force and effect until the Trustee receives a superseding certificate bearing a subsequent date. Upon the termination or revocation of authority of
any Authorized Person by the Authorized Participant, the Authorized Participant shall give immediate written notice of such fact to the Trustee and such notice shall be effective upon receipt by the 

 
Trustee. The Trustee shall issue to each Authorized Person a unique personal identification number (the “PIN”) by which such Authorized Person shall be identified and by which
instructions issued by the Authorized Participant hereunder shall be authenticated. The PIN shall be kept confidential by the Authorized Participant and shall only be provided to the Authorized Person. If, after issuance, the Authorized
Person’s PIN is changed, the new PIN shall become effective on a date mutually agreed upon by the Authorized Participant and the Trustee. 

Section 7. Redemption. The Authorized Participant represents and warrants that it will not obtain an Order Number (as described in the Procedures)
from the Trustee for the purpose of redeeming a Basket unless it first ascertains that (i) it or its customer, as the case may be, owns outright or has full legal authority and legal and beneficial right to tender for redemption the Baskets to
be redeemed and to receive the entire proceeds of the redemption, and (ii) such Baskets have not been loaned or pledged to another party, borrowed or temporarily obtained from another party and are not the subject of any repurchase agreement,
reverse repurchase agreement or securities lending agreement, or any other arrangement which would preclude the delivery of such Baskets to the Trustee on the third Business Day following the date of the Redemption Order. 

Section 8. Role of Authorized Participant. 

(a) The Authorized Participant acknowledges that, for all purposes of this Agreement and the Trust Agreement, the Authorized Participant is and
shall be deemed to be an independent contractor and has and shall have no authority to act as agent for the Trust, the Sponsor, the Trustee or the Depository, in any matter or in any respect. 

(b) The Authorized Participant will make itself and its employees available, upon request, during normal business hours to consult with the
Trustee, the Depository or their designees concerning the performance of the Authorized Participant’s responsibilities under this Agreement. 

(c) The Authorized Participant will maintain records of all sales of Shares made by or through it as required by law and will furnish copies of
such records to the Sponsor upon the reasonable request of the Sponsor, subject to any privacy or confidentiality obligations it may have to its customers arising under federal or state securities laws or the applicable rules of any self regulatory
organization. The Sponsor will not use any information provided by the Authorized Participant pursuant to this paragraph or disclose such information to others except in connection with the performance of its duties and responsibilities hereunder,
including making servicing and informational mailings related to the Trust, or except as may be required by applicable law. 
 Section 9.
Indemnification. 
 (a) The Authorized Participant hereby indemnifies and holds harmless the Trustee, the Depository, the Trust, the
Sponsor, their respective direct or indirect affiliates (as defined below) and their respective directors, officers, employees and agents (each, an “AP Indemnified Party”) from and against any losses, liabilities, damages, costs and
expenses (including attorney’s fees and the reasonable cost of investigation) incurred by such AP Indemnified Party as a result of or in connection with: (i) any breach by the Authorized Participant of any provision of this Agreement,
including any of its representations, warranties or covenants; (ii) any failure on the part of the Authorized Participant to perform any of its other obligations set forth in this Agreement; (iii) any failure by the Authorized Participant
to comply with applicable laws and the rules and regulations of any governmental entity or any self-regulatory organization; (iv) any actions of such AP Indemnified Party in reliance upon any instructions issued in accordance with the
Procedures reasonably believed by the AP Indemnified Party to be genuine and to have been given by the Authorized Participant; or (v) (A) any representation by the Authorized Participant, its employees or its agents or other
representatives about the Shares, any AP Indemnified Party or the Trust that is not consistent with the Trust’s Prospectus as then-supplemented made in connection with the offer or the solicitation of an offer to buy or sell Shares and
(B) any untrue statement or alleged untrue statement of a material fact (1) contained in any research report, marketing material or sales 

 
literature described in Section 13(b) or in any FWP prepared by the Authorized Participant or (2) furnished by the Authorized Participant for use in a FWP prepared by, for or on behalf
of the Sponsor, or any alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading to the extent that such statement or omission relates to the Shares, any AP
Indemnified Party or the Trust, unless, in either case, such representation, statement or omission was made or included by the Authorized Participant at the written direction of the Sponsor or is based upon any omission or alleged omission by the
Sponsor to state a material fact in connection with such representation, statement or omission necessary in order to make such representation, statement or omission not misleading. 

(b) The Sponsor hereby agrees to indemnify and hold harmless the Authorized Participant, its respective subsidiaries, affiliates, directors,
officers, employees and agents, and each person, if any, who controls such persons within the meaning of Section 15 of the 1933 Act (each, a “Sponsor Indemnified Party”) from and against any losses, liabilities, damages, costs
and expenses (including attorneys’ fees and the reasonable cost of investigation) incurred by such Sponsor Indemnified Party as a result of (i) any breach by the Sponsor of any provision of this Agreement that relates to the Sponsor,
including its representations, warranties and covenants; (ii) any failure on the part of the Sponsor to perform any other obligation of the Sponsor set forth in this Agreement; (iii) any failure by the Sponsor to comply with applicable
laws; or (iv) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or in any amendment thereof, or in the Prospectus, or in any amendment thereof or supplement thereto, or in any FWP
prepared by, for or on behalf of the Sponsor, or arising out of or based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, except
those statements based on information furnished in writing by or on behalf of the Authorized Participant expressly for use in the Registration Statement, amendment thereof, Prospectus, amendment thereof or supplement thereto, or FWP. 

(c) (i) This Section 9 shall not apply to any AP Indemnified Party or any Sponsor Indemnified Party (each, an “Indemnified
Party”) to the extent any such losses, liabilities, damages, costs and expenses are incurred as a result of, or in connection with, any action or failure to act that constitutes gross negligence, bad faith or willful misconduct on the part
of the such Indemnified Party. (ii) The term “affiliate” in this Section 9 shall include, with respect to any person, entity or organization, any other person, entity or organization which directly, or indirectly through one or
more intermediaries, controls, is controlled by or is under common control with such person, entity or organization. 
 (d) If the
indemnification provided for in this Section 9 is unavailable to an indemnified party under Sections 9(a) or 9(b) or insufficient to hold an indemnified party harmless in respect of any losses, liabilities, damages, costs and expenses referred
to therein, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, liabilities, damages, costs and expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Sponsor and the Trust, on the one hand, and by the Authorized Participant, on the other hand, from the services provided hereunder or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Sponsor and the Trust, on the one hand, and of the Authorized
Participant, on the other hand, in connection with, to the extent applicable, the statements or omissions which resulted in such losses, liabilities, damages, costs and expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Sponsor and the Trust, on the one hand, and the Authorized Participant, on the other hand, shall be deemed to be in the same respective proportions as the amount of Canadian Dollars transferred to the Trust under this
Agreement on the one hand (expressed in dollars) bears to the amount of economic benefit received by the Authorized Participant in connection with this Agreement on the other hand. To the extent applicable, the relative fault of the Sponsor on the
one hand and of the Authorized Participant on the other shall be determined by reference to, among other things, whether the 

 
untrue statement or alleged untrue statement of a material fact or omission or alleged omission relates to information supplied by the Sponsor or by the Authorized Participant and the
parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, liabilities, damages, costs and expenses referred to
in this Section 9(d) shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating, preparing to defend or defending any action, suit or proceeding (each a
“Proceeding”) related to such losses, liabilities, damages, costs and expenses. 
 (e) The Sponsor and the Authorized
Participant agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred
to in Section 9(d) above. The Authorized Participant shall not be required to contribute any amount in excess of the amount by which the total price at which the Shares created by the Authorized Participant and distributed to the public were
offered to the public exceeds the amount of any damage which the Authorized Participant has otherwise been required to pay by reason of such untrue statement or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 

(f) The indemnity and contribution agreements contained in this Section 9 shall remain in full force and effect regardless of any
investigation made by or on behalf of the Authorized Participant, its partners, stockholders, members, directors, officers, employees and or any person (including each partner, stockholder, member, director, officer or employee of such person) who
controls the Authorized Participant within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, or by or on behalf of the Sponsor, its partners, stockholders, members, directors, officers, employees or any person who
controls the Sponsor within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, and shall survive any termination of this Agreement. The Sponsor and the Authorized Participant agree promptly to notify each other of the
commencement of any Proceeding against it and, in the case of the Sponsor, against any of the Sponsor’s officers or directors, in connection with the issuance and sale of the Shares or in connection with the Registration Statement or the
Prospectus. 
 Section 10. Liability. 

(a) Limitation of Liability. None of the Sponsor, the Trustee, the Authorized Participant, and the Depository shall be liable to each other or
to any other person, including any party claiming by, through or on behalf of the Authorized Participant, for any losses, liabilities, damages, costs or expenses arising out of any mistake or error in data or other information provided to any of
them by each other or any other person, which results from any interruption or delay in the electronic means of communications used by them. 

(b) Tax Liability. The Authorized Participant shall be responsible for the payment of any transfer tax, sales or use tax, stamp tax, recording
tax, value added tax and any other similar tax or government charge applicable to the creation or redemption of any Basket made pursuant to this Agreement, regardless of whether or not such tax or charge is imposed directly on the Authorized
Participant. To the extent the Trustee, the Sponsor or the Trust is required by law to pay any such tax or charge, the Authorized Participant agrees to promptly indemnify such party for any such payment, together with any applicable penalties,
additions to tax or interest thereon. 
 (c) In no event shall an undersigned party be liable for any special, indirect, incidental,
punitive, exemplary or consequential damages of any kind whatsoever in connection with this Agreement, even if previously informed of or advised of the likelihood of such damages and regardless of the form of action or theory under which such
damages are sought. 

 Section 11. Acknowledgment. The Authorized Participant acknowledges receipt of (i) a copy of the
Trust Agreement and (ii) the current Prospectus of the Trust, and represents that it has reviewed and understands such documents. 

Section 12. Effectiveness and Termination. Upon the execution of this Agreement by the parties hereto, this Agreement shall become effective in
this form as of the Time of Sale, and may be terminated at any time by any party upon thirty (30) days prior written notice to the other parties unless earlier terminated: (i) in accordance with Section 2(a)(i); (ii) upon notice
to the Authorized Participant by the Trustee in the event of a breach by the Authorized Participant of this Agreement or the procedures described or incorporated herein; (iii) immediately in the circumstances described in Section 18(j); or
(iv) at such time as the Trust is terminated pursuant to the Trust Agreement. 
 Section 13. Marketing Materials; Representations Regarding
Shares; Identification in Registration Statement. 
 (a) The Authorized Participant represents, warrants and covenants that (i), without
the written consent of the Sponsor, the Authorized Participant will not (A) make, or permit any of its representatives to make, any representations concerning the Shares or any AP Indemnified Party other than representations contained
(1) in the Prospectus of the Trust, as then amended and supplemented, (2) in printed information approved by the Sponsor as information supplemental to such Prospectus or (3) in any promotional materials or sales literature furnished
to the Authorized Participant by the Sponsor, or (B) issue any FWP pursuant to Rules 164 and 433 of the 1933 Act and (ii) the Authorized Participant will not furnish or cause to be furnished to any person or display or publish any
information or material relating to the Shares, any AP Indemnified Person or the Trust that are not consistent with the Prospectus, as then amended and supplemented. Copies of the Prospectus of the Trust, as then amended and supplemented, and any
such printed supplemental information will be supplied by the Sponsor to the Authorized Participant in reasonable quantities upon request. 

(b) Notwithstanding the foregoing, the Authorized Participant may without the written approval of the Sponsor prepare and circulate in the
regular course of its business research reports, marketing material and sales literature, but in no event FWPs, that include information, opinions or recommendations relating to the Shares (i) for public dissemination, provided that such
research reports, marketing material or sales literature is prepared in accordance with applicable rules and regulations of the 1933 Act, any applicable state securities laws and FINRA rules; or (ii) for internal use by the Authorized
Participant. The Authorized Participant will file all such research reports, marketing material and sales literature related to the Shares with FINRA to the extent required by FINRA’s rules, including the NASD Conduct Rules. 

(c) The Authorized Participant and its affiliates may prepare and circulate in the regular course of their businesses, without having to refer
to the Shares or the Prospectus, as then amended and supplemented, data and information relating to the price of Canadian Dollars. 
 (d) The
Authorized Participant hereby agrees that for the term of this Agreement the Sponsor may deliver the Prospectus, and any supplements or amendments thereto or recirculation thereof, to the Authorized Participant in Portable Document Format
(“PDF”) via electronic mail in lieu of delivering the Prospectus in paper form. The Authorized Participant may revoke the foregoing agreement at any time by delivering written notice to the Sponsor and, whether or not such agreement
is in effect, the Authorized Participant may, at any time, request reasonable quantities of the Prospectus, and any supplements or amendments thereto or recirculation thereof, in paper form from the Sponsor. The Authorized Participant acknowledges
that it has the capability to access, view, save and print material provided to it in PDF and that it will incur no appreciable extra costs by receiving the Prospectus in PDF instead of in paper form. The Sponsor will, when requested by the
Authorized Participant, make available at no cost the software and technical assistance necessary to allow the Authorized Participant to access, view and print the PDF version of the Prospectus. 

 (e) For as long as this Agreement is effective, the Authorized Participant agrees to be
identified as an authorized participant of the Trust (i) in the section of the Prospectus included within the Registration Statement entitled “Creation and Redemption of Shares” (including identifying the Authorized Participant in
such section by a supplement to the Prospectus) and in any other section as may be required by the SEC and (ii) on the Trust’s website. Upon the termination of this Agreement, (i) during the period prior to when the Sponsor qualifies
and elects to file on Form S-3, the Sponsor will remove such identification from the Prospectus in the amendment of the Registration Statement next occurring after the date of the termination of this Agreement and, during the period after when the
Sponsor qualifies and elects to file on Form S-3, the Sponsor will promptly file a current report on Form 8-K indicating the withdrawal of the Authorized Participant as an authorized participant of the Trust and (ii) the Sponsor will promptly
update the Trust’s website to remove any identification of the Authorized Participant as an authorized participant of the Trust. 
 Section 14.
Title To Canadian Dollars. The Authorized Participant represents and warrants that upon delivery of the Basket Canadian Dollar Amount (as defined in the Trust Agreement) to the Trustee in accordance with the terms of the Trust Agreement and this
Agreement, the Trust will acquire good and unencumbered title to the Canadian Dollars which are the subject of such Basket Canadian Dollar Amount, free and clear of all pledges, security interests, liens, charges, taxes, assessments, encumbrances,
equities, claims, options or limitations of any kind or nature, fixed or contingent, and not subject to any adverse claims, including any restriction upon the sale or transfer of all or any part of such Canadian Dollars which is imposed by any
agreement or arrangement entered into by the Authorized Participant or any party for which it is acting in connection with a Purchase Order. 

Section 15. Third Party Beneficiaries. Each AP Indemnified Party, to the extent it is not a party to this Agreement, is a third-party beneficiary
of this Agreement (each, a “Third Party Beneficiary”) and may proceed directly against the Authorized Participant (including by bringing proceedings against the Authorized Participant in its own name) to enforce any obligation of
the Authorized Participant under this Agreement which directly or indirectly benefits such Third Party Beneficiary. 
 Section 16. Force
Majeure. No party to this Agreement shall incur any liability for any delay in performance, or for the non-performance, of any of its obligations under this Agreement by reason of any act of God or war or terrorism, acts and regulations and
rules of any governmental or supra national bodies or authorities or regulatory or self-regulatory organization or failure of any such body, authority or organization for any reason, to perform its obligations, or any cause beyond its reasonable
control, including, without limitation, any breakdown, malfunction or failure of transmission in connection with or other unavailability of any wire, communication or computer facilities, any transport, port or airport disruption, or any industrial
action. 
 Section 17. Ambiguous Instructions. If a Purchase Order Form or a Redemption Order Form otherwise in good form contains order terms
that differ from the information provided in the telephone call at the time of issuance of the applicable order number, the Trustee will attempt to contact one of the Authorized Persons of the Authorized Participant to request confirmation of the
terms of the Order. If an Authorized Person confirms the terms as they appear in the Order, then the Order will be accepted and processed. If an Authorized Person contradicts the Order terms, the Order will be deemed invalid, and a corrected Order
must be received by the Trustee. If the Trustee is not able to contact an Authorized Person, then the Order shall be accepted and processed in accordance with its terms notwithstanding any inconsistency from the terms of the telephone information.
In the event that an Order contains terms that are not complete or are illegible, the Order will be deemed invalid and the Trustee will attempt to contact one of the Authorized Persons of the Authorized Participant to request retransmission of the
Order. 
 Section 18. Miscellaneous. 

(a) Amendment and Modification. This Agreement, the Procedures attached as Attachment A and the Exhibits hereto may be amended, modified or
supplemented by the Trustee and the Sponsor, 

 
without consent of any Authorized Participant from time to time by the following procedure. After the amendment, modification or supplement has been agreed to, the Trustee will mail a copy of the
proposed amendment, modification or supplement to the Authorized Participant. For the purposes of this Agreement, mail will be deemed received by the recipient thereof on the third (3rd) day following the deposit of such mail into the United
States postal system. Within ten (10) calendar days after its deemed receipt, the amendment, modification or supplement will become part of this Agreement, the Attachments or the Exhibits, as the case may be, in accordance with its terms. If at
any time there is any material amendment, modification or supplement of any Participant Agreement (other than this Agreement), the Trustee will promptly mail a copy of such amendment, modification or supplement to the Authorized Participant. 

(b) Waiver of Compliance. Any failure of any of the parties to comply with any obligation, covenant, agreement or condition herein may be
waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but any such written waiver, or the failure to insist upon strict compliance with any obligation, covenant, agreement or
condition herein, shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 
 (c) Notices. Except as
otherwise specifically provided in this Agreement, all notices required or permitted to be given pursuant to this Agreement shall be given in writing and delivered by personal delivery, by postage prepaid registered or certified United States first
class mail, return receipt requested, by nationally recognized overnight courier (delivery confirmation received) or by telex, telegram or telephonic facsimile or similar means of same day delivery (transmission confirmation received), with a
confirming copy regular mailed, postage prepaid. For avoidance of doubt, notices may not be given or transmitted by electronic mail. Unless otherwise notified in writing, all notices to the Trust shall be given or sent to the Trustee. All notices
shall be directed to the address or telephone or facsimile numbers indicated below the signature line of the parties on the signature page hereof. 

(d) Successors and Assigns. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. 
 (e) Assignment. Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any party without the prior written consent of the other parties, except that any entity into which a party hereto may be merged or converted or with which it may be consolidated or any entity resulting from any
merger, conversion, or consolidation to which such party hereunder shall be a party, or any entity succeeding to all or substantially all of the business of the party, shall be the successor of the party under this Agreement. The party resulting
from any such merger, conversion, consolidation or succession shall notify the other parties hereto of the change. Any purported assignment in violation of the provisions hereof shall be null and void. Notwithstanding the foregoing, this Agreement
shall be automatically assigned to any successor Trustee or Sponsor at such time such successor qualifies as a successor Trustee or Sponsor under the terms of the Trust Agreement. 

(f) Governing Law; Consent to Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New
York (regardless of the laws that might otherwise govern under applicable New York conflict of laws principles) as to all matters, including matters of validity, construction, effect, performance and remedies. Each party hereto irrevocably consents
to the jurisdiction of the courts of the State of New York and of any federal court located in the Borough of Manhattan in such State in connection with any action, suit or other proceeding arising out of or relating to this Agreement or any action
taken or omitted hereunder, and waives any claim of forum non convenient and any objections as to laying of venue. Each party further waives personal service of any summons, complaint or other process and agrees that service thereof may be made by
certified or registered mail directed to such party at such party’s address for purposes of notices hereunder. Each party hereby waives its right to a trial by jury of any claim arising under or in connection with this Agreement. 

 (g) Counterparts. This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement, and it shall not be necessary in making proof of this Agreement as to any party hereto to produce or
account for more than one such counterpart executed and delivered by such party. 
 (h) Interpretation. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. 

(i) Entire Agreement. This Agreement and the Trust Agreement, along with any other agreement or instrument delivered pursuant to this Agreement
and the Trust Agreement, supersede all prior agreements and understandings between the parties with respect to the subject matter hereof, provided, however, that the Authorized Participant shall not be deemed by this provision to be a party to the
Trust Agreement. 
 (j) Severance. If any provision of this Agreement is held by any court or any act, regulation, rule or decision of any
other governmental or supra national body or authority or regulatory or self-regulatory organization to be invalid, illegal or unenforceable for any reason, it shall be invalid, illegal or unenforceable only to the extent so held and shall not
affect the validity, legality or enforceability of the other provisions of this Agreement and this Agreement will be construed as if such invalid, illegal, or unenforceable provision had never been contained herein, unless the Sponsor determines in
its discretion, after consulting with the Trustee, that the provision of this Agreement that was held invalid, illegal or unenforceable does affect the validity, legality or enforceability of one or more other provisions of this Agreement, and that
this Agreement should not be continued without the provision that was held invalid, illegal or unenforceable, and in that case, upon the Sponsor’s notification of the Trustee of such a determination, this Agreement shall immediately terminate
and the Trustee will so notify the Authorized Participant immediately. 
 (k) No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. 

(l) Survival. Sections 9 (Indemnification) and 15 (Third Party Beneficiaries) hereof shall survive the termination of this Agreement. 

(m) Other Usages. The following usages shall apply in interpreting this Agreement: (i) references to a governmental or quasigovernmental
agency, authority or instrumentality shall also refer to a regulatory body that succeeds to the functions of such agency, authority or instrumentality; and (ii) “including” means “including, but not limited to.” 

* * * * * * * 

 IN WITNESS WHEREOF, the Authorized Participant, the Sponsor and the Trustee, on behalf of the Trust, have caused
this Agreement to be executed by their duly authorized representatives as of the date first set forth above. 
  

													
	 THE BANK OF NEW YORK MELLON,
 not in
its individual capacity,
 but solely as Trustee of the CurrencyShares® Canadian Dollar
Trust
	 	 [NAME OF AUTHORIZED PARTICIPANT]

					
	By:        	 	      
	 		 	By:        	 	      

		 	Name:	 		 		 		 	Name:	 	
		 	Title	 		 		 		 	Title	 	

  

									
	Address:	 		 		 	Address:
					
	Telephone:	 		 		 	Telephone:	 	
					
	Facsimile:	 		 		 	Facsimile:	 	

  

					
	GUGGENHEIM SPECIALIZED PRODUCTS LLC,
	Sponsor of the CurrencyShares® Canadian Dollar Trust
		
	      
	 	
	Name:	 	
	Title:	 	

  

			
	Address:	 	

  

			
	Telephone:	 	

  

			
	Facsimile:	 	

 EXHIBIT A 

CURRENCYSHARES® CANADIAN DOLLAR TRUST 

FORM OF CERTIFIED AUTHORIZED PERSONS OF AUTHORIZED PARTICIPANT 

The following are the names, titles and signatures of all persons (each an “Authorized Person”) authorized to give instructions relating to
any activity contemplated by the Participant Agreement or any other notice, request or instruction on behalf of the Authorized Participant pursuant to the CurrencyShares® Canadian Dollar Trust
Participant Agreement. 
  

							
	Authorized Participant:	 		 	  
	 	

  

									
	Name:	 		 		 	Name:	 	
	Title:	 		 		 	Title:	 	

  

									
	Signature:	 		 		 	Signature:	 	

  

									
	Name:	 		 		 	Name:	 	
	Title:	 		 		 	Title:	 	

  

									
	Signature:	 		 		 	Signature:	 	

 The undersigned, [name], [title] of [company], does hereby certify that the persons listed above have been duly elected to the
offices set forth beneath their names, that they presently hold such offices, that they have been duly authorized to act as Authorized Persons pursuant to the CurrencyShares® Canadian Dollar
Trust Participant Agreement by and between [Authorized Participant] and the Trustee and the Sponsor of the CurrencyShares® Canadian Dollar Trust, dated
[            ], and that their signatures set forth above are their own true and genuine signatures. 

In Witness Whereof, the undersigned has hereby set his/her hand on the date set forth below. 

 

							
	Subscribed and sworn to before me	 		 	By:	 	
	this              day of             , 20	 		 		 	
		 		 	Name:
		 		 	Title:
		 		 	Date:
				
	Notary Public	 		 		 	

 Note: Print on Company Letterhead prior to executing 

 EXHIBIT C 

THE BANK OF NEW YORK MELLON, TRUSTEE` 

CREATION/REDEMPTION ORDER FORM 

CURRENCYSHARES CANADIAN DOLLAR TRUST ETF 
  

 
 CONTACT INFORMATION FOR ORDER
EXECUTION: 

			
	Telephone order number:	  	(718) 315–7500
	Fax order number:	  	(732) 667-9478 (Alt. Fax (718) 315–3080)
	Custodian Instructions	  	(000-000-0000)/ SWIFT CHASDEFX

  
  

Participant must complete all items in Part 1. The Trustee and/or Transfer Agent, in their discretion may reject any order not submitted in complete form. 

 

	I.	TO BE COMPLETED BY PARTICIPANT:

			
	Date:	 	  

			
	Broker Name:	 	  

			
	DTC Participant Number:	 	  

			
	Telephone Number:	 	  

			
	Time:	 	  

			
	Firm Name:	 	  

			
	Fax Number:	 	  

 
 

  

					
	Type of order (Check Creation or Redemption please)	  	(One CU = 50,000 FXC)	 	

 

 Creation of FXC’s             

 Redemption of FXC’s             

 

 

 # Of Creation Units (CU) Transacted:

 Number:
                     

 

 

 Order #             

 Number written out:
                     

 

  
 This Purchase Order is subject to the
terms and conditions of the Depositary Trust Agreement of the Canadian Dollar Currency Trust as currently in effect and the Authorized Participant Agreement between the Authorized Participant, the Trustee and the Sponsor named therein. All
representations and warranties of the Authorized Participant set Forth in such Depositary Trust Agreement and the Authorized Participant Agreement are incorporated herein by reference and are true and accurate as of the date hereof. 

The undersigned does hereby certify as of the date set forth below that he/she is an Authorized Representative under the Authorized Participant Agreement and
that he/she is authorized to deliver this Purchase Order to the Trustee on behalf of the Authorized Participant. The Authorized Participant enters into this agreement based on an estimated Basket disseminated the previous business day and recognizes
the final Basket ounces of Canadian Dollar represented will be decreased based on the Trusts daily accrual. At the conclusion of the trading day a Final NAV will be disseminated to all Authorized Participants, and the Basket and or cash required for
the creation/redemption order entered into on this day will be finalized and this Order Form will serve as a legally binding contract for settlement in 3 business days. 
  

							
	          
	 		 	  

		 	 Date
	 		 	Authorized Person’s Signature

  

	II.	TO BE COMPLETED BY TRUSTEE: 

 This certifies that the above order has been: 

                     Accepted by the Trustee 

                     Declined-Reason:
                                         
                                         
                                       

 

							
	Final # of Canadian Dollar                     	  		 	Final # of FXC Shares                     	  	
	Final Cash Due to BNY                    	  		 	Final Cash Due to AP                     	  	

  

									
	  
	 		 	  
	 		 	  

	Date	 		 	Time	 		 	Authorized Signature of Trustee

 ATTACHMENT A 

CREATION AND REDEMPTION OF CANADIAN DOLLAR SHARES AND 

RELATED CANADIAN DOLLARS TRANSACTIONS 

Scope of Procedures and Overview 
 These procedures (the
“Procedures”) describe the processes by which one or more Baskets of Canadian Dollar Trust shares (the “Shares”) issuable by The Bank of New York Mellon, as trustee (the “Trustee”) of the
CurrencyShares® Canadian Dollar Trust (the “Trust”), may be purchased or, once Shares have been issued, redeemed by an Authorized Participant. Shares may be created or
redeemed only in blocks of 50,000 Shares (each such block, a “Basket”). Because the issuance and redemption of Baskets also involve the transfer of Canadian Dollars between the Authorized Participant and the Trust, certain processes
relating to the underlying transfers of Canadian Dollars also are described. 
 Under these Procedures, Baskets may be issued only in consideration for
Canadian Dollars transferred to and held in the Trust’s accounts maintained in London, England by the London Branch of JPMorgan Chase Bank, N.A., as depository (the “Depository”). Capitalized terms used in these Procedures
without further definition have the meanings assigned to them in the Depositary Trust Agreement, dated as of [            ], 2006, between Rydex Specialized Products LLC, succeeded
by Guggenheim Specialized Products, LLC (the “Sponsor”), the Trustee, the registered owners and beneficial owners from time to time of Shares issued thereunder and all depositors (the “Trust Agreement”), or the
Participant Agreement entered into by each Authorized Participant with the Sponsor and the Trustee. 
 For purposes of these Procedures, a “Business
Day” is defined as any day other than (i) a Saturday or Sunday or (ii) a day on which the New York Stock Exchange (the “NYSE”) is not open for regular trading at noon New York City time. 

Baskets are issued pursuant to the Prospectus, which will be delivered by the Sponsor to each Authorized Participant prior to its execution of the Participant
Agreement, and are issued and redeemed in accordance with the Trust Agreement and the Participant Agreement. Baskets may be issued and redeemed on any Business Day by the Trustee in exchange for Canadian Dollars, which the Trustee receives from
Authorized Participants or transfers to Authorized Participants, in each case on behalf of the Trust. Authorized Participants will be required to pay a nonrefundable per order transaction fee of $500 to the Trustee. Also, in connection with each
Purchase Order and Redemption Order (each as defined below) for two or more Baskets, the Authorized Participant shall pay an additional transaction fee, as follows: 
  

			
	 Baskets Created or Redeemed Per

Order
	 	Additional Transaction Fee
	2	 	$500
	3	 	$1,000
	4	 	$1,500
	5 or more	 	$2,000

 The additional transaction fee described above shall be remitted to the Authorized Participant to the Trustee in accordance
with these Procedures. The Trustee shall then remit payment of the additional transaction fee to the Sponsor. The fees described above shall collectively be referred to herein as “Transaction Fees”. 

Authorized Participants and the Trust Transfer Canadian Dollars and Baskets of Shares 

Upon acceptance of the Participant Agreement by the Sponsor and the Trustee, the Trustee will assign a personal identification number (a
“PIN”) to each person authorized to act for the Authorized Participant (an “Authorized Person”). This will allow the Authorized Participant through its Authorized Person(s) to place Purchase Order(s) or Redemption Order(s)
(each as defined herein and, together, “Orders”) for Baskets. 
 Important Notes: 

 

	•	 	Any Order is subject to rejection by the Trustee for the reasons set forth in the Trust Agreement. 

  

	•	 	All Orders are subject to the provisions of the Participant Agreement relating to unclear or ambiguous instructions. 

 CREATION PROCESS 

OVERVIEW 
 The following
describes the process by which Baskets are created. In summary, an order to purchase one or more Baskets of Shares is placed by an Authorized Participant with the Trustee by 4:00 p.m. New York City (“NYC”) time on the Business Day
that is the Order Date under the Trust Agreement (“CREATION T”), and a Basket is created by 11 a.m. NYC time (usually 5 p.m.) Central European Time (“CET”) on the third Business Day following CREATION T
(“CREATION T+3”). In order for the creation of a Basket to occur, the Authorized Participant must transfer to the Trust Canadian Dollars and the Trustee will transfer to the Authorized Participant’s account at The Depository Trust
Company (“DTC”) Shares corresponding to the Canadian Dollars the Participant has transferred to the Trust. 
  

	C1	CREATION T (PURCHASE ORDER TRADE DATE) 

 C1.1 By the 4:00 p.m. NYC time (the “Order
Cut-Off Time”) or by 12:00 p.m. NYC time on the monthly dividend declaration date (the “Early Order Cut-Off Time”), the Authorized Participant submits to the Trustee the Authorized Participant’s order to create one or more
Baskets of Shares (a “Purchase Order”) in accordance with the following process. 
 C1.1.1 The Authorized Participant
(“AP”) submitting an order to create shall submit such orders containing the information required by the Trustee in the following manner: (a) through the Trustee’s electronic order entry system, as such may be made available and
constituted from time to time, the use of which shall be subject to the Order Entry System terms and conditions; or (b) by telephone to the Trustee’s Transfer Agent Representative according to the procedures set forth below. 

C1.1.2 By the Order Cut-Off Time or the Early Order Cut-Off Time, as applicable, an Authorized Person of the Authorized Participant calls the
Trustee at 718-315-7500 notifying the Trustee that the Authorized Participant wishes to place a Purchase Order for the Trustee to create an identified number of Baskets of Shares and requesting that the Trustee provide an order number. The
Authorized Person provides a PIN as identification to the Trustee. 
 C1.1.3 Incoming telephone calls are queued and will be handled in the
sequence received. The Trustee will process Purchase Orders if the phone call initiated by the Authorized Person is placed before the Order Cut-Off Time or the Early Order Cut-Off Time, as applicable, even though the remainder of the order process
is not completed until after the Order Cut-Off Time or the Early Order Cut-Off Time. Accordingly, do not hang up and redial. 
 C1.1.4
Purchase Orders initiated after the Order Cut-Off Time or the Early Order Cut-Off Time , as applicable will be rejected. 
 C1.1.5 During
the phone call from the Authorized Person of the Authorized Participant to initiate a Purchase Order, the Trustee will give an order number for the Authorized Participant’s Purchase Order. 

C1.1.6 Within 15 minutes after receiving the order number from the Trustee, the Authorized Participant will fax the Purchase Order to the
Trustee using the Purchase Order Form included as part of the Participant Agreement. 
 C1.1.7 The Purchase Order Form provides, among other
things, for the number of Baskets that the Authorized Participant is ordering and the condition that the Purchase Order is subject to the Trustee’s receipt of the Transaction Fees by (DTC SPO Charge) prior to delivery of the Baskets on CREATION
T+3. 

  
 A-2 

 C1.1.8 If the Trustee has not received the Purchase Order Form from the Authorized Participant
within 15 minutes after the Authorized Person placed the phone call to the Trustee, the Trustee places a phone call to the Authorized Participant to inquire about the status of the order. If the Authorized Participant does not fax the Purchase Order
Form to the Trustee within 15 minutes after the Trustee’s phone call, the Authorized Participant’s order is cancelled, but the Authorized Participant will remain liable to the Trustee for the Transaction Fees. 

C1.2 If the Trustee has received the Authorized Participant’s Purchase Order Form on time in accordance with the preceding timing rules,
then by 5:00 p.m. NYC time on CREATION T, the Trustee will return to the Participant a copy of the Purchase Order Form submitted, marking it “Affirmed subject to receipt of the Transaction Fees prior to delivery of Baskets on CREATION T+3”
and indicating, on a preliminary basis subject to confirmation, the number of Canadian Dollars the Participant must transfer in exchange for the Basket(s). 

C1.3 The Participant ensures that by 4:30 p.m. CET (usually.10:30 a.m. NYC time) on CREATION T+3, sufficient Canadian Dollars are wire
transferred to the Depository. 
 C1.4 NOTES FOR AUTHORIZED PARTICIPANT (CREATION T) 

C1.4.1 The Authorized Participant must be a participating member of DTC. 

C1.4.2 The Authorized Participant must be able to transfer Canadian Dollars via (RTGSplus, EBA EURO1 or TARGET). SWIFT BIC-CHASGB2L. 

C1.4.3 The Authorized Participant must have signed and delivered the Participant Agreement to the Trustee. The Trustee will accept an
Authorized Participant based on the representations made by the Authorized Participant in the Participant Agreement. The Trustee will not perform other due diligence or investigation of Authorized Participants. 

C1.4.4 The Authorized Participant must have in place, before a Purchase Order can be processed, account instructions for Canadian Dollars
transfers with its sending financial institution. 
 C1.4.5 By.4:30 pm CET on CREATION T+3, Canadian Dollars in the amount needed to acquire
the Shares must be standing to the credit of the Deposit Account in order for the Authorized Participant to receive Shares on CREATION T+3. 

C1.4.6 An Authorized Participant may only deliver Canadian Dollars for credit to the Depository in the following ways: (RTGSplus, EBA EURO1 or
TARGET). SWIFT BIC – CHASGB2L. 
 C1.4.7 Prior to the delivery of the Baskets by the Trustee on CREATION T+3, the Authorized
Participant must accept a DTC SPO Charge for the applicable Transaction Fees from the Trustee. Purchase Orders for which the Trustee has not received the Transaction Fees will be cancelled subject to handling pursuant to supplemental procedures to
be issued, but in any event the Authorized Participant will remain obligated to the Trustee for the Transaction Fees. 
 C1.5 NOTES FOR
TRUSTEE (CREATION T) 
 C1.5.1 Based on the Purchase Orders placed with it on CREATION T, the Trustee sends an authenticated electronic
message (SWIFT MT210) to the Depository (by T+1) indicating the approximate total amount of Canadian Dollars that the Depository will receive from the Authorized Participant on CREATION T+3. 

  
 A-3 

	C2	CREATION T+1 

 C2.1 The Purchase Orders and instructions given on CREATION T are all pending
with the Trustee. 
 C2.2 The Depository receives the Trustee’s email about the approximate total amount of Canadian Dollars the
Authorized Participant is required to transfer not later than 3:30 p.m. CET on CREATION T+3. 
  

	C3	CREATION T+2 

 C3.1 On CREATION T+2 the Trustee notifies the Authorized Participant of the final
amount of Canadian Dollars that must be deposited in the Deposit Account (the “Basket Canadian Dollars Amount”) no later than 4:30 p.m. CET (10:30 am EST ) on CREATION T+3 for creation of the Baskets on that day. 

C3.2 Based on the Purchase Orders placed with it on CREATION T, the Trustee sends an authenticated electronic message (SWIFT MT210) to the
Depository indicating the total Canadian Dollar amount of that the Depository will receive from the Authorized Participant on CREATION T+3. 
  

	C4	CREATION T+3 

 C4.1 By 4:30 p.m. CET (usually 10:30 a.m. NYC time), the Depository has received
each Authorized Participant’s wire transfer of the Basket Canadian Dollars Amount in the Deposit Account. 
 C4.2 As of 4:30 p.m. CET
time, the Depository notifies the Trustee that the Basket Canadian Dollars Amount has been transferred into the Deposit Account by an authenticated electronic message (SWIFT MT910). 

C4.3 Prior to the delivery of the Baskets on CREATION T+3, the Trustee must have received the Transaction Fees from the Authorized Participant
(SPO/DTC Charge). 
 C4.4 At 11:00 a.m. NYC time, following receipt of the notice from the Depository confirming the transfer of the Basket
Canadian Dollars Amount to the Deposit Account, the Trustee authorizes the creation and issuance of the Baskets ordered by each Authorized Participant on CREATION T for which the Trustee has received confirmation from the Depository of receipt of
the Basket Canadian Dollars Amount. 
 C4.5 By 11:00 a.m. NYC time, following receipt of the notice from the Depository confirming the
transfer of the Basket Canadian Dollars Amount to the Deposit Account, the Trustee notifies its transfer agent service desk that it has authorized the creation and issuance of Baskets in the number specified, and to increase the number of Shares
outstanding accordingly. By 11:00 a.m. NYC time, following receipt of the notice from the Trustee that it has authorized the creation and issuance of Shares in the number specified, the Trustee’s transfer agent service desk increases the number
of Shares outstanding, and notifies the Trustee and the Trustee’s DTC operations desk that an increased number of Shares is now outstanding and available for release in accordance with the Trustee’s instructions. 

C4.6 By 11:00 a.m. NYC time, following receipt of notice from the Trustee’s transfer agent service desk that the number of Shares now
outstanding has been increased, the Trustee notifies its DTC operations desk to release the increased number of Shares through DTC to the DTC participant accounts of the Authorized Participants scheduled to receive Baskets on CREATION T+3 for whom
the Trustee has received confirmation from the Depository that the Basket Canadian Dollars Amount has been received into the Deposit Account. 

  
 A-4 

 C4.7 Following the close of business (usually 4:30 p.m. CET time) on CREATION T+3, the Depository
makes appropriate entries in its books and records to reflect the creation of Baskets. 
 C4.8 Following the close of business (usually 4:30
p.m. CET time) on CREATION T+3, the Depository Canadian Dollars system updates account records, recording the movements of Canadian Dollars in the Deposit Account and providing updated balances in the affected accounts as of the close of business
(usually 4:30 p.m. CET time) on CREATION T+3. 
 C4.9 Following the close of business (usually 4:30 p.m. CET time) on CREATION T+3, the
Depository Canadian Dollars system automatically generates authenticated electronic messages constituting a statement of the activity affecting the Deposit Account (SWIFT MT940 or SWIFT MT950), (received only by the Trustee). 

C4.10 If the Authorized Participant fails to deliver Canadian Dollars by 4:30 p.m. CET on CREATION T+3, (a) the Trustee will apply a late
fee equal to four (4) times the creation charge; and (b) the Depository may, in its reasonable discretion, apply a late fee calculated in accordance with standard industry practices, payable by the Authorized Participant. 

In the event any such late fees are assessed, the Trustee will coordinate with the Authorized Participant to arrange payment of such fees.

 Note: Both creation and redemption activities (delivery/receipts) time frames are subject to change based on depository requirements.

 REDEMPTION PROCESS 

OVERVIEW 
 The following
describes the process by which Baskets are redeemed. In summary, an order to redeem one or more Baskets of Shares is placed by an Authorized Participant with the Trustee by 4:00 p.m. NYC time on the Business Day that is the Order Date under the
Trust Agreement (“REDEMPTION T”), and a Basket is redeemed by 4 p.m. CET (usually 10 a.m. NYC time) on the third Business Day following REDEMPTION T (“REDEMPTION T+3”). In order for the redemption of a Basket to
occur, the Authorized Participant must pay a transaction fee and the Trustee will instruct the Depository to transfer to the Authorized Participant Canadian Dollars corresponding to the Shares delivered for redemption. 

 

	R1	REDEMPTION T (REDEMPTION ORDER TRADE DATE) 

 R1.1 By the Order Cut-Off Time or the Early Order
Cut-Off Time, as applicable, the Authorized Participant submits to the Trustee the Authorized Participant’s order to redeem one or more Baskets of Shares (a “Redemption Order”) in accordance with the following process. 

R1.1.1 The Authorized Participant (“AP”) submitting an order to redeem shall submit such requests containing the information
required by the Trustee in the following manner: (a) through the Trustee’s electronic order entry system, as such may be made available and constituted from time to time, the use of which shall be subject to the terms and conditions in the
Electronic Service Agreement; or (b) by telephone to the Trustee’s Transfer Agent Representative , according to the procedures set forth below. 

R1.1.2 By the Order Cut-Off Time or the Early Order Cut-Off Time, as applicable, an Authorized Person of the Authorized Participant calls the
Trustee at (718)-315-7500 notifying the Trustee that the Authorized Participant wishes to place a Redemption Order for the Trustee to redeem an identified number of Baskets of Shares and requesting that the Trustee provide an order number. The
Authorized Person provides a PIN as identification to the Trustee. 

  
 A-5 

 R1.1.3 Incoming telephone calls are queued and will be handled in the sequence received. The
Trustee will process the Redemption Order(s) if the phone call initiated by the Authorized Person is placed before the Order Cut-Off Time or the Early Order Cut-Off Time as applicable, even though the remainder of the order process is not completed
until after the Order Cut-Off Time or the Early Order Cut-Off Time. Accordingly, do not hang up and redial. 
 R1.1.4 Redemption Orders
initiated after the Order Cut-Off Time or the Early Order Cut-Off Time are rejected. 
 R1.1.5 During the phone call from the Authorized
Person of the Authorized Participant to initiate a Redemption Order, the Trustee will give an order number for the Authorized Participant’s Redemption Order. 

R1.1.6 Within 15 minutes after the phone call initiating the Redemption Order, the Authorized Participant will fax the Redemption Order to the
Trustee using the Redemption Order Form included as part of the Participant Agreement. 
 R1.1.7 The Redemption Order Form provides, among
other things, for the number of Baskets that the Authorized Participant is redeeming and the condition that the Redemption Order is subject to Trustee’s receipt of the Transaction Fees by SPO/DTC Charge prior to the delivery of the Canadian
Dollars to the Authorized Participant on REDEMPTION T+3. 
 R1.1.8 If the Trustee has not received the Redemption Order Form from the
Authorized Participant within 15 minutes after the Authorized Person placed the phone call to the Trustee, the Trustee places a phone call to the Authorized Participant to inquire about the status of the order. If the Authorized Participant does not
fax the Redemption Order Form to the Trustee within 15 minutes after the Trustee’s phone call, the Authorized Participant’s order is cancelled, but the Authorized Participant will remain liable to the Trustee for the Transaction Fees. 

R1.2 If the Trustee has received the Authorized Participant’s Redemption Order Form on time in accordance with the preceding timing
rules, then by 5:00 p.m. NYC time on REDEMPTION T, the Trustee will return to the Authorized Participant a copy of the Redemption Order Form submitted, marking it “Affirmed subject to receipt of Transaction Fees prior to delivery of the
Canadian Dollars on REDEMPTION T+3” and indicating, on a preliminary basis subject to confirmation, the number of Canadian Dollars the Participant will receive upon redemption of the indicated Basket(s) of Shares. 

R1.3 For each Redemption Order, the Trustee sends an authenticated electronic message (SWIFT MT202) to the Depository indicating the amount of
Canadian Dollars to transfer from the Deposit Account by wire (RTGSplus, EBA EURO1 or TARGET) to the Authorized Participant’s designated account by 4:00 p.m. CET (usually 10:00 a.m. NYC time) on REDEMPTION T+3. 

R1.4 NOTES FOR TRUSTEE AND DEPOSITORY (REDEMPTION T) 

R1.4.1 The Trustee will prepare an authenticated electronic message (SWIFT MT202) containing instructions on REDEMPTION T specifying
REDEMPTION T+3 as the date on which the instructions will be executed. 
 R1.4.2 The Trustee will only deliver the authenticated electronic
message (SWIFT MT202) to the Depository on T+3 after confirming the Trustee’s receipt of Shares from the Authorized Participant through DTC. 
  

	R2	REDEMPTION T+1 

 R2.1 Redemption Orders and related instructions are in process. 

  
 A-6 

 R2.2 The Depository receives e-mail from the Trustee notifying the Depository of the approximate
amount of Canadian Dollars needed to be remitted to each Authorized Participant that has placed a Redemption Order on REDEMPTION T+3. 
  

	R3	REDEMPTION T+2 

 On REDEMPTION T+2 the Trustee notifies the Authorized Participant of the final
amount of Canadian Dollars the Authorized Participant will receive upon redemption of the Basket(s) on Redemption T+3 (the “Basket Canadian Dollars Amount”). 
  

	R4	REDEMPTION T+3 

 R4.1 Prior to the delivery of the Basket Canadian Dollars Amount on REDEMPTION
T+3, the Trustee must have received the Transaction Fees from the Authorized Participant (SPO/DTC) Charge. 
 R4.2 By 4 p.m. CET (usually 10
a.m. NYC time), the Authorized Participant delivers free to the Trustee’s participant account at DTC (#2209) the Shares to be redeemed. The Authorized Participant telephones the Trustee’s DTC operations desk ((718) 315-7500) to expect the
Authorized Participant’s Shares through DTC. 
 R4.2.1 By 4 p.m. CET (usually 10 a.m. NYC time), the Trustee’s DTC operations desk
notifies the Trustee whether the Shares being redeemed by the Authorized Participant have been received into the Trustee’s participant account at DTC. 

R4.2.2 By 4 p.m. CET (usually 10 a.m. NYC time), if the Shares being redeemed by the Authorized Participant have been received into the
Trustee’s participant account at DTC, then the Trustee’s DTC operations desk accepts the Shares to be redeemed, notifies the Trustee that the Trustee has received the Authorized Participant’s Shares and identifies the Authorized
Participant from whom the Shares have been received. 
 R4.2.3 By 4 p.m. CET (usually 10 a.m. NYC time), if the Shares of a redeeming
Authorized Participant have not been received into the Trustee’s participant account at DTC, then the Trustee’s operations desk notifies the Trustee that the Trustee has not received the Shares from the Authorized Participant, and
identifies the Authorized Participant from whom Shares have not been received. 
 R4.3 By 4:30 p.m. CET (usually prior to 10:30 a.m. NYC
time), the Trustee sends an authenticated electronic message (SWIFT MT202) to the Depository directing the Depository to transfer the Basket Canadian Dollars Amount to the accounts of those Authorized Participants from whom the Trustee has received
Shares. The Canadian Dollars will be sent to the designated accounts by wire (RTGSplus, EBA EURO1 or TARGET). 
 R4.4 As of 4:30 p.m. CET
time(usually 10:30 a.m. NYC time), following the receipt of the authenticated confirmatory electronic message from the Trustee, the Depository executes the instructions from the Trustee to wire the Basket Canadian Dollars Amount from the Trust
Account and to transfer the Basket Canadian Dollars Amount to the Authorized Participant’s designated account. 
 R4.4.1 By DTC free
delivery cut-off time (usually 2:00 p.m. NYC time), the Trustee’s DTC operations desk instructs the Trustee’s transfer agent services desk to cancel Shares received for redemption. 

R4.4.2 By DTC free delivery cut-off time (usually 2:00 p.m. NYC time), the Trustee’s transfer agent services desk cancels the Authorized
Participant’s Shares received for redemption and reduces the number of Trust Shares outstanding. 

  
 A-7 

 R4.5 Following the close of business (usually 3:30 p.m. CET) on REDEMPTION T+3, the Depository
makes the appropriate entries in its books and records to reflect the redemptions. 
 R4.6 Following the close of business (usually 3:30
p.m. CET) on REDEMPTION T+3, the Depository Canadian Dollars system updates its account records, recording the movements of Canadian Dollars in the Deposit Account and providing updated balances in the affected accounts as of the close of business
(usually 3:30 p.m. CET) on REDEMPTION T+3. 
 R4.7 Following the close of business (usually 3:30 p.m. CET) on REDEMPTION T+3, the Depository
Canadian Dollars system automatically generates an authenticated electronic message (SWIFT MT940 or Swift MT950) constituting a statement of the activity affecting the Deposit Account (received only by the Trustee). 

Note: Both creation and redemption activities (delivery/receipts) time frames are subject to change based on depository requirements.

  
 A-8 

 Schedule to Exhibit 4.7 

The following parties have each executed a separate Participation Agreement with The Bank of New York, as trustee, and Guggenheim Specialized Products, LLC,
as sponsor, which is substantially identical in all material respects to the Participation Agreement filed herewith as Exhibit 4.7 and is dated as of the date listed opposite its name below. 

 

			
	 Name of Party
	  	 Date of Agreement

	 BNP Paribas Securities Corp.
	  	November 10, 2015
	 BNP Paribas Prime Brokerage, Inc.
	  	November 10, 2015

 Except as noted above, there are no material details in which the above Participation Agreements differ from the Participation
Agreement filed herewith as Exhibit 4.7.Exhibit 10.1

 

 

	

    	
CREDIT AGREEMENT

 

by and among

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

 

as Administrative Agent,

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

 

as Sole Lead Arranger,
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
WELLS FARGO BANK, NATIONAL ASSOCIATION,
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
as Sole Book Runner,
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
THE LENDERS THAT ARE PARTIES HERETO
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
as the Lenders,
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
and
    	
 
    

 

HARTE HANKS, INC.,
 TRILLIUM SOFTWARE, INC.,
 3Q DIGITAL, INC.,
 HARTE-HANKS DATA SERVICES LLC,
 HARTE-HANKS DIRECT, INC.,
 HARTE-HANKS DIRECT MARKETING/DALLAS, INC.,
 HARTE-HANKS DIRECT MARKETING/FULLERTON, INC.,
 HARTE HANKS DIRECT MARKETING/BALTIMORE, INC.,
 HARTE-HANKS DIRECT MARKETING/JACKSONVILLE, LLC,
 HARTE-HANKS DIRECT MARKETING/KANSAS CITY, LLC,
 HARTE-HANKS LOGISTICS, LLC,
 HARTE-HANKS RESPONSE MANAGEMENT/AUSTIN, INC.,
 HARTE-HANKS RESPONSE MANAGEMENT/BOSTON, INC.,
 HARTE-HANKS STRATEGIC MARKETING, INC.,
 NSO, INC.,

 

and

 

SALES SUPPORT SERVICES, INC.,

 

as Borrowers

 

Dated as of March 10, 2016

 

 

 

	
1.
    	
DEFINITIONS AND CONSTRUCTION
    	
1
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
1.1.
    	
Definitions
    	
1
    
	
 
    	
1.2.
    	
Accounting   Terms
    	
1
    
	
 
    	
1.3.
    	
Code
    	
2
    
	
 
    	
1.4.
    	
Construction
    	
2
    
	
 
    	
1.5.
    	
Time   References
    	
3
    
	
 
    	
1.6.
    	
Schedules and   Exhibits
    	
3
    
	
 
    	
 
    	
 
    	
 
    
	
2.
    	
LOANS AND TERMS OF PAYMENT
    	
3
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
2.1.
    	
Revolving   Loans
    	
3
    
	
 
    	
2.2.
    	
Term Loan
    	
4
    
	
 
    	
2.3.
    	
Borrowing   Procedures and Settlements
    	
4
    
	
 
    	
2.4.
    	
Payments;   Reductions of Commitments; Prepayments
    	
12
    
	
 
    	
2.5.
    	
Promise to   Pay; Promissory Notes
    	
18
    
	
 
    	
2.6.
    	
Interest   Rates and Letter of Credit Fee: Rates, Payments, and Calculations
    	
19
    
	
 
    	
2.7.
    	
Crediting   Payments
    	
21
    
	
 
    	
2.8.
    	
Designated   Account
    	
21
    
	
 
    	
2.9.
    	
Maintenance   of Loan Account; Statements of Obligations
    	
21
    
	
 
    	
2.10.
    	
Fees
    	
22
    
	
 
    	
2.11.
    	
Letters of   Credit
    	
23
    
	
 
    	
2.12.
    	
LIBOR Option
    	
31
    
	
 
    	
2.13.
    	
Capital   Requirements
    	
33
    
	
 
    	
2.14.
    	
[Intentionally   Omitted]
    	
34
    
	
 
    	
2.15.
    	
Joint and   Several Liability of Borrowers
    	
34
    
	
 
    	
 
    	
 
    	
 
    
	
3.
    	
CONDITIONS; TERM OF AGREEMENT
    	
37
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
3.1.
    	
Conditions   Precedent to the Initial Extension of Credit
    	
37
    
	
 
    	
3.2.
    	
Conditions   Precedent to all Extensions of Credit
    	
37
    
	
 
    	
3.3.
    	
Maturity
    	
38
    
	
 
    	
3.4.
    	
Effect of   Maturity
    	
38
    
	
 
    	
3.5.
    	
Early   Termination by Borrowers
    	
38
    
	
 
    	
3.6.
    	
Post-Closing   Covenants
    	
38
    
	
 
    	
 
    	
 
    	
 
    
	
4.
    	
REPRESENTATIONS AND WARRANTIES
    	
38
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
4.1.
    	
Due   Organization and Qualification; Subsidiaries
    	
39
    
	
 
    	
4.2.
    	
Due   Authorization; No Conflict
    	
39
    
	
 
    	
4.3.
    	
Governmental   Consents
    	
40
    
	
 
    	
4.4.
    	
Binding   Obligations; Perfected Liens
    	
40
    
	
 
    	
4.5.
    	
Title to   Assets; No Encumbrances
    	
40
    
	
 
    	
4.6.
    	
Litigation
    	
41
    
	
 
    	
4.7.
    	
Compliance   with Laws
    	
41
    
	
 
    	
4.8.
    	
No Material   Adverse Effect
    	
41
    
	
 
    	
4.9.
    	
Solvency
    	
41
    
	
 
    	
4.10.
    	
Employee   Benefits
    	
42
    
	
 
    	
4.11.
    	
Environmental   Condition
    	
42
    
	
 
    	
4.12.
    	
Complete   Disclosure
    	
42
    

 

i

 

	
 
    	
4.13.
    	
Patriot Act
    	
43
    
	
 
    	
4.14.
    	
Obligations for Borrowed Money
    	
43
    
	
 
    	
4.15.
    	
Payment of Taxes
    	
43
    
	
 
    	
4.16.
    	
Margin Stock
    	
44
    
	
 
    	
4.17.
    	
Governmental Regulation
    	
44
    
	
 
    	
4.18.
    	
OFAC
    	
44
    
	
 
    	
4.19.
    	
Employee and Labor Matters
    	
44
    
	
 
    	
4.20.
    	
[Intentionally Omitted]
    	
45
    
	
 
    	
4.21.
    	
Leases
    	
45
    
	
 
    	
4.22.
    	
Eligible Accounts
    	
45
    
	
 
    	
4.23.
    	
Hedge Agreements
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
5.
    	
AFFIRMATIVE COVENANTS
    	
45
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
5.1.
    	
Financial Statements, Reports, Certificates
    	
45
    
	
 
    	
5.2.
    	
Reporting
    	
46
    
	
 
    	
5.3.
    	
Existence
    	
46
    
	
 
    	
5.4.
    	
Maintenance of Properties
    	
46
    
	
 
    	
5.5.
    	
Taxes
    	
46
    
	
 
    	
5.6.
    	
Insurance
    	
46
    
	
 
    	
5.7.
    	
Inspection
    	
47
    
	
 
    	
5.8.
    	
Compliance with Laws
    	
47
    
	
 
    	
5.9.
    	
Environmental
    	
48
    
	
 
    	
5.10.
    	
Disclosure Updates
    	
48
    
	
 
    	
5.11.
    	
Formation of Subsidiaries
    	
48
    
	
 
    	
5.12.
    	
Further Assurances
    	
49
    
	
 
    	
5.13.
    	
Lender Meetings
    	
49
    
	
 
    	
5.14.
    	
Bank Products
    	
50
    
	
 
    	
5.15.
    	
Hedge Agreements
    	
50
    
	
 
    	
5.16.
    	
Compliance with ERISA and the IRC
    	
50
    
	
 
    	
 
    	
 
    	
 
    
	
6.
    	
NEGATIVE COVENANTS
    	
50
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
6.1.
    	
Indebtedness
    	
51
    
	
 
    	
6.2.
    	
Liens
    	
51
    
	
 
    	
6.3.
    	
Restrictions on Fundamental Changes
    	
51
    
	
 
    	
6.4.
    	
Disposal of Assets
    	
51
    
	
 
    	
6.5.
    	
Nature of Business
    	
51
    
	
 
    	
6.6.
    	
Prepayments and Amendments
    	
52
    
	
 
    	
6.7.
    	
Restricted Payments
    	
52
    
	
 
    	
6.8.
    	
Accounting Methods
    	
53
    
	
 
    	
6.9.
    	
Investments
    	
53
    
	
 
    	
6.10.
    	
Transactions with Affiliates
    	
53
    
	
 
    	
6.11.
    	
Use of Proceeds
    	
54
    
	
 
    	
6.12.
    	
Limitation on Issuance of Equity Interests
    	
54
    
	
 
    	
6.13.
    	
Employee Benefits
    	
55
    

 

ii

 

	
7.
    	
FINANCIAL COVENANTS
    	
55
    
	
 
    	
 
    	
 
    	
 
    
	
8.
    	
EVENTS OF DEFAULT
    	
57
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
8.1.
    	
Payments
    	
57
    
	
 
    	
8.2.
    	
Covenants
    	
58
    
	
 
    	
8.3.
    	
Judgments
    	
58
    
	
 
    	
8.4.
    	
Voluntary   Bankruptcy, etc.
    	
58
    
	
 
    	
8.5.
    	
Involuntary   Bankruptcy, etc.
    	
58
    
	
 
    	
8.6.
    	
Default Under   Other Agreements
    	
59
    
	
 
    	
8.7.
    	
Representations,   etc.
    	
59
    
	
 
    	
8.8.
    	
Guaranty
    	
59
    
	
 
    	
8.9.
    	
Security   Documents
    	
59
    
	
 
    	
8.10.
    	
Loan   Documents
    	
59
    
	
 
    	
8.11.
    	
Change of   Control
    	
59
    
	
 
    	
8.12.
    	
ERISA
    	
59
    
	
 
    	
 
    	
 
    
	
9.
    	
RIGHTS AND REMEDIES
    	
60
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
9.1.
    	
Rights and   Remedies
    	
60
    
	
 
    	
9.2.
    	
Remedies   Cumulative
    	
61
    
	
 
    	
 
    	
 
    	
 
    
	
10.
    	
WAIVERS; INDEMNIFICATION
    	
61
    
	
 
    	
 
    	
 
    
	
 
    	
10.1.
    	
Demand; Protest;   etc.
    	
61
    
	
 
    	
10.2.
    	
The Lender   Group’s Liability for Collateral
    	
61
    
	
 
    	
10.3.
    	
Indemnification
    	
61
    
	
 
    	
 
    	
 
    
	
11.
    	
NOTICES
    	
62
    
	
 
    	
 
    	
 
    	
 
    
	
12.
    	
CHOICE OF LAW AND VENUE; JURY TRIAL   WAIVER; JUDICIAL REFERENCE PROVISION
    	
64
    
	
 
    	
 
    	
 
    	
 
    
	
13.
    	
ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS
    	
65
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
13.1.
    	
Assignments   and Participations
    	
65
    
	
 
    	
13.2.
    	
Successors
    	
69
    
	
 
    	
13.3.
    	
Intralender   Matters
    	
70
    
	
 
    	
 
    	
 
    	
 
    
	
14.
    	
AMENDMENTS; WAIVERS
    	
70
    
	
 
    	
 
    	
 
    
	
 
    	
14.1.
    	
Amendments   and Waivers
    	
70
    
	
 
    	
14.2.
    	
Replacement   of Certain Lenders
    	
72
    
	
 
    	
14.3.
    	
No Waivers; Cumulative   Remedies
    	
73
    
	
 
    	
 
    	
 
    
	
15.
    	
AGENT; THE LENDER GROUP
    	
73
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
15.1.
    	
Appointment   and Authorization of Agent
    	
73
    
	
 
    	
15.2.
    	
Delegation of   Duties
    	
74
    
	
 
    	
15.3.
    	
Liability of   Agent
    	
74
    
	
 
    	
15.4.
    	
Reliance by   Agent
    	
74
    
	
 
    	
15.5.
    	
Notice of   Default or Event of Default
    	
75
    
	
 
    	
15.6.
    	
Credit   Decision
    	
75
    
	
 
    	
15.7.
    	
Costs and   Expenses; Indemnification
    	
76
    

 

iii

 

	
 
    	
15.8.
    	
Agent in   Individual Capacity
    	
76
    
	
 
    	
15.9.
    	
Successor   Agent
    	
77
    
	
 
    	
15.10.
    	
Lender in   Individual Capacity
    	
77
    
	
 
    	
15.11.
    	
Collateral   Matters
    	
78
    
	
 
    	
15.12.
    	
Restrictions   on Actions by Lenders; Sharing of Payments
    	
79
    
	
 
    	
15.13.
    	
Agency for   Perfection
    	
80
    
	
 
    	
15.14.
    	
Payments by   Agent to the Lenders
    	
80
    
	
 
    	
15.15.
    	
Concerning   the Collateral and Related Loan Documents
    	
80
    
	
 
    	
15.16.
    	
Field Examination   Reports; Confidentiality; Disclaimers by Lenders; Other Reports and   Information
    	
81
    
	
 
    	
15.17.
    	
Several   Obligations; No Liability
    	
82
    
	
 
    	
15.18.
    	
Sole Lead   Arranger and Sole Book Runner
    	
82
    
	
 
    	
 
    	
 
    
	
16.
    	
WITHHOLDING TAXES
    	
82
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
16.1.
    	
Payments
    	
82
    
	
 
    	
16.2.
    	
Exemptions
    	
83
    
	
 
    	
16.3.
    	
Reductions
    	
85
    
	
 
    	
16.4.
    	
Refunds
    	
85
    
	
 
    	
 
    	
 
    
	
17.
    	
GENERAL PROVISIONS
    	
86
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
17.1.
    	
Effectiveness
    	
86
    
	
 
    	
17.2.
    	
Section Headings
    	
86
    
	
 
    	
17.3.
    	
Interpretation
    	
86
    
	
 
    	
17.4.
    	
Severability   of Provisions
    	
86
    
	
 
    	
17.5.
    	
Bank Product   Providers
    	
86
    
	
 
    	
17.6.
    	
Debtor-Creditor   Relationship
    	
87
    
	
 
    	
17.7.
    	
Counterparts;   Electronic Execution
    	
87
    
	
 
    	
17.8.
    	
Revival and   Reinstatement of Obligations; Certain Waivers
    	
88
    
	
 
    	
17.9.
    	
Confidentiality
    	
88
    
	
 
    	
17.10.
    	
Survival
    	
90
    
	
 
    	
17.11.
    	
Patriot Act
    	
90
    
	
 
    	
17.12.
    	
Integration
    	
90
    
	
 
    	
17.13.
    	
Harte Hanks   as Agent for Borrowers
    	
91
    
	
 
    	
17.14.
    	
No Setoff
    	
91
    

 

iv

 

EXHIBITS AND SCHEDULES

 

	
Exhibit A-1
    	
 
    	
Form of Assignment and Acceptance
    
	
Exhibit B-1
    	
 
    	
Form of Borrowing Base Certificate
    
	
Exhibit C-1
    	
 
    	
Form of Compliance Certificate
    
	
Exhibit I-1
    	
 
    	
Form of IP Reporting Certificate
    
	
Exhibit L-1
    	
 
    	
Form of LIBOR Notice
    
	
Exhibit P-1
    	
 
    	
Form of Perfection Certificate
    
	
Schedule A-1
    	
 
    	
Agent’s Account
    
	
Schedule A-2
    	
 
    	
Authorized Persons
    
	
Schedule C-1
    	
 
    	
Commitments
    
	
Schedule D-1
    	
 
    	
Designated Account
    
	
Schedule I-1
    	
 
    	
Immaterial Subsidiaries
    
	
Schedule P-1
    	
 
    	
Permitted Investments
    
	
Schedule P-2
    	
 
    	
Permitted Liens
    
	
Schedule 1.1
    	
 
    	
Definitions
    
	
Schedule 3.1
    	
 
    	
Conditions Precedent
    
	
Schedule 3.6
    	
 
    	
Conditions Subsequent
    
	
Schedule 4.1(b)
    	
 
    	
Capitalization of Administrative Borrower
    
	
Schedule 4.1(c)
    	
 
    	
Capitalization of Administrative Borrower’s Subsidiaries
    
	
Schedule 4.1(d)
    	
 
    	
Subscriptions, Options, Warrants, Calls
    
	
Schedule 4.6
    	
 
    	
Litigation
    
	
Schedule 4.8
    	
 
    	
Material Adverse Effect
    
	
Schedule 4.10
    	
 
    	
Benefit Plans
    
	
Schedule 4.11
    	
 
    	
Environmental Matters
    
	
Schedule 4.14
    	
 
    	
Permitted Indebtedness
    
	
Schedule 5.1
    	
 
    	
Financial Statements, Reports, Certificates
    
	
Schedule 5.2
    	
 
    	
Collateral Reporting
    
	
Schedule 6.5
    	
 
    	
Nature of Business
    
	
Schedule 6.10
    	
 
    	
Affiliate Transactions
    

 

v

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this “Agreement”), is entered into as of March 10, 2016, by and among the lenders identified on the signature pages hereof (each of such lenders, together with its successors and permitted assigns, is referred to hereinafter as a “Lender”, as that term is hereinafter further defined), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as administrative agent for each member of the Lender Group and the Bank Product Providers (in such capacity, together with its successors and assigns in such capacity, “Agent”), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as sole lead arranger (in such capacity, together with its successors and assigns in such capacity, the “Sole Lead Arranger”), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as sole book runner (in such capacity, together with its successors and assigns in such capacity, the “Sole Book Runner”), HARTE HANKS, INC., a Delaware corporation (“Harte Hanks”), TRILLIUM SOFTWARE, INC., a Delaware corporation (“Trillium”), 3Q DIGITAL, INC., a Delaware corporation (“3Q”), HARTE-HANKS DATA SERVICES LLC, a Maryland limited liability company (“Data Services”), HARTE-HANKS DIRECT, INC., a New York corporation (“HH Direct”), HARTE-HANKS DIRECT MARKETING/DALLAS, INC., a Delaware corporation (“HH Dallas”), HARTE-HANKS DIRECT MARKETING/FULLERTON, INC., a California corporation (“HH Fullerton”), HARTE HANKS DIRECT MARKETING/BALTIMORE, INC., a Maryland corporation (“HH Baltimore”), HARTE-HANKS DIRECT MARKETING/JACKSONVILLE, LLC, a Delaware limited liability company (“HH Jacksonville”), HARTE-HANKS DIRECT MARKETING/KANSAS CITY, LLC, a Delaware limited liability company (“HH Kansas City”), HARTE-HANKS LOGISTICS, LLC, a Florida limited liability company (“Logistics”), HARTE-HANKS RESPONSE MANAGEMENT/AUSTIN, INC., a Delaware corporation (“HH Austin”), HARTE-HANKS RESPONSE MANAGEMENT/BOSTON, INC., a Massachusetts corporation (“HH Boston”), HARTE-HANKS STRATEGIC MARKETING, INC., a Delaware corporation (“Strategic Marketing”), NSO, INC., an Ohio corporation (“NSO”), SALES SUPPORT SERVICES, INC., a New Jersey corporation (“Sales Support” and, together with Harte Hanks, Trillium, 3Q, Data Services, HH Direct, HH Dallas, HH Fullerton, HH Baltimore, HH Jacksonville, HH Kansas City, Logistics, HH Austin, HH Boston, Strategic Marketing and NSO are referred to hereinafter each individually as a “Borrower”, and individually and collectively, jointly and severally, as the “Borrowers”).

 

The parties agree as follows:

 

1.                                     DEFINITIONS AND CONSTRUCTION.

 

1.1.                          Definitions.  Capitalized terms used in this Agreement shall have the meanings specified therefor on Schedule 1.1.

 

1.2.                          Accounting Terms.  All accounting terms not specifically defined herein shall be construed in accordance with GAAP; provided, that if Borrowers notify Agent that Borrowers request an amendment to any provision hereof to eliminate the effect of any Accounting Change occurring after the Closing Date or in the application thereof on the operation of such provision

 

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(or if Agent notifies Borrowers that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such Accounting Change or in the application thereof, then Agent and Borrowers agree that they will negotiate in good faith amendments to the provisions of this Agreement that are directly affected by such Accounting Change with the intent of having the respective positions of the Lenders and Borrowers after such Accounting Change conform as nearly as possible to their respective positions before such Accounting Change and, until any such amendments have been agreed upon and agreed to by the Required Lenders, the provisions in this Agreement shall be calculated as if no such Accounting Change had occurred.  When used herein, the term “financial statements” shall include the notes and schedules thereto.  Whenever the term “Borrowers” is used in respect of a financial covenant or a related definition, it shall be understood to mean Administrative Borrower and its Subsidiaries on a consolidated basis, unless the context clearly requires otherwise.  Notwithstanding anything to the contrary contained herein, (a) all financial statements delivered hereunder shall be prepared, and all financial covenants contained herein shall be calculated, without giving effect to any election under the Statement of Financial Accounting Standards No. 159 (or any similar accounting principle) permitting a Person to value its financial liabilities or Indebtedness at the fair value thereof, and (b) the term “unqualified opinion” as used herein to refer to opinions or reports provided by accountants shall mean an opinion or report that is (i) unqualified, and (ii) does not include any explanation, supplemental comment, or other comment concerning the ability of the applicable Person to continue as a going concern or concerning the scope of the audit

 

1.3.                          Code.  Any terms used in this Agreement that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein; provided, that to the extent that the Code is used to define any term herein and such term is defined differently in different Articles of the Code, the definition of such term contained in Article 9 of the Code shall govern.

 

1.4.                          Construction.  Unless the context of this Agreement or any other Loan Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the terms “includes” and “including” are not limiting.  The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document, as the case may be.  Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified.  Any reference in this Agreement or in any other Loan Document to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein).  The words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties.  Any reference herein or in any other Loan Document to the satisfaction, repayment, or payment in full of the Obligations shall mean (a) the payment or repayment in full in immediately available funds of (i) the principal amount of, and interest accrued and unpaid with respect to, all outstanding Loans, together with the payment of any premium applicable to the repayment of the Loans, (ii) all Lender Group Expenses that have accrued and are unpaid

 

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regardless of whether demand has been made therefor, (iii) all fees or charges that have accrued hereunder or under any other Loan Document (including the Letter of Credit Fee and the Unused Line Fee) and are unpaid, (b) in the case of contingent reimbursement obligations with respect to Letters of Credit, providing Letter of Credit Collateralization, (c) in the case of obligations with respect to Bank Products (other than Hedge Obligations), providing Bank Product Collateralization, (d) the receipt by Agent of cash collateral in order to secure any other contingent Obligations for which a claim or demand for payment has been made on or prior to such time or in respect of matters or circumstances known to Agent or a Lender at such time that are reasonably expected to result in any loss, cost, damage, or expense (including attorneys’ fees and legal expenses), such cash collateral to be in such amount as Agent reasonably determines is appropriate to secure such contingent Obligations, (e) the payment or repayment in full in immediately available funds of all other outstanding Obligations (including the payment of any termination amount then applicable (or which would or could become applicable as a result of the repayment of the other Obligations) under Hedge Agreements provided by Hedge Providers) other than (i) unasserted contingent indemnification Obligations, (ii) any Bank Product Obligations (other than Hedge Obligations) that, at such time, are allowed by the applicable Bank Product Provider to remain outstanding without being required to be repaid or cash collateralized, and (iii) any Hedge Obligations that, at such time, are allowed by the applicable Hedge Provider to remain outstanding without being required to be repaid, and (f) the termination of all of the Commitments of the Lenders.  Any reference herein to any Person shall be construed to include such Person’s successors and assigns.  Any requirement of a writing contained herein or in any other Loan Document shall be satisfied by the transmission of a Record.

 

1.5.                          Time References.  Unless the context of this Agreement or any other Loan Document clearly requires otherwise, all references to time of day refer to Central standard time or Central daylight saving time, as in effect in Dallas, Texas on such day.  For purposes of the computation of a period of time from a specified date to a later specified date, unless otherwise expressly provided, the word “from” means “from and including” and the words “to” and “until” each means “to and including”; provided that, with respect to a computation of fees or interest payable to Agent or any Lender, such period shall in any event consist of at least one full day.

 

1.6.                          Schedules and Exhibits.  All of the schedules and exhibits attached to this Agreement shall be deemed incorporated herein by reference.

 

2.                                     LOANS AND TERMS OF PAYMENT.

 

2.1.                          Revolving Loans.

 

(a)                                 Subject to the terms and conditions of this Agreement, and during the term of this Agreement, each Revolving Lender agrees (severally, not jointly or jointly and severally) to make revolving loans (“Revolving Loans”) to Borrowers in an amount at any one time outstanding not to exceed the lesser of:

 

(i)                                     such Lender’s Revolver Commitment, or

 

(ii)                                  such Lender’s Pro Rata Share of an amount equal to the lesser of:

 

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(A)                               the amount equal to (1) the Maximum Revolver Amount less (2) the sum of (y) the Letter of Credit Usage at such time, plus (z) the principal amount of Swing Loans outstanding at such time, and

 

(B)                               the amount equal to (1) the Borrowing Base as of such date (based upon the most recent Borrowing Base Certificate delivered by Borrowers to Agent) less (2) the sum of (y) the Letter of Credit Usage at such time, plus (z) the principal amount of Swing Loans outstanding at such time.

 

(b)                                Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to the terms and conditions of this Agreement, reborrowed at any time during the term of this Agreement.  The outstanding principal amount of the Revolving Loans, together with interest accrued and unpaid thereon, shall constitute Obligations and shall be due and payable on the Maturity Date or, if earlier, on the date on which they are declared due and payable pursuant to the terms of this Agreement.

 

(c)                                 Anything to the contrary in this Section 2.1 notwithstanding, Agent shall have the right (but not the obligation), in the exercise of its Permitted Discretion, to establish and increase or decrease Receivable Reserves, Bank Product Reserves, 3QD Earnout Reserves and other Reserves against the Borrowing Base or the Maximum Revolver Amount.  The amount of any Receivable Reserve, Bank Product Reserve, 3QD Earnout Reserves or other Reserve established by Agent shall have a reasonable relationship to the event, condition, other circumstance, or fact that is the basis for such reserve and shall not be duplicative of any other reserve or exclusion based on eligibility criteria established and currently maintained.

 

2.2.                          Term Loan.  Subject to the terms and conditions of this Agreement, on the Closing Date each Lender with a Term Loan Commitment agrees (severally, not jointly or jointly and severally) to make term loans (collectively, the “Term Loan”) to Borrowers in an amount equal to such Lender’s Pro Rata Share of the Term Loan Amount.  The principal of the Term Loan shall be repaid in consecutive monthly installments equal to $375,000.00 each on the first day of each month commencing on May 1, 2016.  The outstanding unpaid principal balance and all accrued and unpaid interest on the Term Loan shall be due and payable on the earlier of (i) the Maturity Date, and (ii) the date of the acceleration of the Term Loan in accordance with the terms hereof.  Any principal amount of the Term Loan that is repaid or prepaid may not be reborrowed.  All principal of, interest on, and other amounts payable in respect of the Term Loan shall constitute Obligations hereunder.

 

2.3.                          Borrowing Procedures and Settlements.

 

(a)                                 Procedure for Borrowing Revolving Loans.  Each Borrowing shall be made by a written request by an Authorized Person delivered to Agent and received by Agent no later than 12:00 p.m. (i) on the Business Day that is the requested Funding Date in the case of a request for a Swing Loan, and (ii) on the Business Day that is 1 Business Day prior to the requested Funding Date in the case of all other requests, specifying (A) the amount of such Borrowing, and (B) the requested Funding Date (which shall be a Business Day); provided, that Agent may, in its sole discretion, elect to accept as timely requests that are received later than 12:00 p.m. on the applicable Business Day.  At Agent’s election, in lieu of delivering the above-

 

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described written request, any Authorized Person may give Agent telephonic notice of such request by the required time.  In such circumstances, Borrowers agree that any such telephonic notice will be confirmed in writing within 24 hours of the giving of such telephonic notice, but the failure to provide such written confirmation shall not affect the validity of the request.

 

(b)                                Making of Swing Loans.  In the case of a request for a Revolving Loan and so long as the aggregate amount of Swing Loans made since the last Settlement Date, minus all payments or other amounts applied to Swing Loans since the last Settlement Date, plus the amount of the requested Swing Loan does not exceed 10% of the Maximum Revolver Amount, Swing Lender shall make a Revolving Loan (any such Revolving Loan made by Swing Lender pursuant to this Section 2.3(b) being referred to as a “Swing Loan” and all such Revolving Loans being referred to as “Swing Loans”) available to Borrowers on the Funding Date applicable thereto by transferring immediately available funds in the amount of such requested Borrowing to the Designated Account. Each Swing Loan shall be deemed to be a Revolving Loan hereunder and shall be subject to all the terms and conditions (including Section 3) applicable to other Revolving Loans, except that all payments (including interest) on any Swing Loan shall be payable to Swing Lender solely for its own account.  Subject to the provisions of Section 2.3(d)(ii), Swing Lender shall not make and shall not be obligated to make any Swing Loan if Swing Lender has actual knowledge that (i) one or more of the applicable conditions precedent set forth in Section 3 will not be satisfied on the requested Funding Date for the applicable Borrowing, or (ii) the requested Borrowing would exceed the Availability on such Funding Date.  Swing Lender shall not otherwise be required to determine whether the applicable conditions precedent set forth in Section 3 have been satisfied on the Funding Date applicable thereto prior to making any Swing Loan.  The Swing Loans shall be secured by Agent’s Liens, constitute Revolving Loans and Obligations, and bear interest at the rate applicable from time to time to Revolving Loans that are Base Rate Loans.

 

(c)                                 Making of Revolving Loans.

 

(i)                                     In the event that Swing Lender is not obligated to make a Swing Loan, then after receipt of a request for a Borrowing pursuant to Section 2.3(a), Agent shall notify the Lenders by telecopy, telephone, email, or other electronic form of transmission, of the requested Borrowing; such notification to be sent on the Business Day that is 1 Business Day prior to the requested Funding Date.  If Agent has notified the Lenders of a requested Borrowing on the Business Day that is 1 Business Day prior to the Funding Date, then each Lender shall make the amount of such Lender’s Pro Rata Share of the requested Borrowing available to Agent in immediately available funds, to Agent’s Account, not later than 12:00 p.m. on the Business Day that is the requested Funding Date.  After Agent’s receipt of the proceeds of such Revolving Loans from the Lenders, Agent shall make the proceeds thereof available to Borrowers on the applicable Funding Date by transferring immediately available funds equal to such proceeds received by Agent to the Designated Account; provided, that, subject to the provisions of Section 2.3(d)(ii), no Lender shall have an obligation to make any Revolving Loan, if (1) one or more of the applicable conditions precedent set forth in Section 3 will not be satisfied on the requested Funding Date for the applicable Borrowing unless such condition has been waived, or (2) the requested Borrowing would exceed the Availability on such Funding Date.

 

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(ii)                                  Unless Agent receives notice from a Lender prior to 11:30 a.m. on the Business Day that is the requested Funding Date relative to a requested Borrowing as to which Agent has notified the Lenders of a requested Borrowing that such Lender will not make available as and when required hereunder to Agent for the account of Borrowers the amount of that Lender’s Pro Rata Share of the Borrowing, Agent may assume that each Lender has made or will make such amount available to Agent in immediately available funds on the Funding Date and Agent may (but shall not be so required), in reliance upon such assumption, make available to Borrowers a corresponding amount.  If, on the requested Funding Date, any Lender shall not have remitted the full amount that it is required to make available to Agent in immediately available funds and if Agent has made available to Borrowers such amount on the requested Funding Date, then such Lender shall make the amount of such Lender’s Pro Rata Share of the requested Borrowing available to Agent in immediately available funds, to Agent’s Account, no later than 12:00 p.m. on the Business Day that is the first Business Day after the requested Funding Date (in which case, the interest accrued on such Lender’s portion of such Borrowing for the Funding Date shall be for Agent’s separate account).  If any Lender shall not remit the full amount that it is required to make available to Agent in immediately available funds as and when required hereby and if Agent has made available to Borrowers such amount, then that Lender shall be obligated to immediately remit such amount to Agent, together with interest at the Defaulting Lender Rate for each day until the date on which such amount is so remitted.  A notice submitted by Agent to any Lender with respect to amounts owing under this Section 2.3(c)(ii) shall be conclusive, absent manifest error.  If the amount that a Lender is required to remit is made available to Agent, then such payment to Agent shall constitute such Lender’s Revolving Loan for all purposes of this Agreement.  If such amount is not made available to Agent on the Business Day following the Funding Date, Agent will notify Borrowers of such failure to fund and, upon demand by Agent, Borrowers shall pay such amount to Agent for Agent’s account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Revolving Loans composing such Borrowing.

 

(d)                                Protective Advances and Optional Overadvances.

 

(i)                                     Any contrary provision of this Agreement or any other Loan Document notwithstanding, but subject to Section 2.3(d)(iv), at any time (A) after the occurrence and during the continuance of a Default or an Event of Default, or (B) that any of the other applicable conditions precedent set forth in Section 3 are not satisfied, Agent hereby is authorized by Borrowers and the Lenders, from time to time, in Agent’s sole discretion, to make Revolving Loans to, or for the benefit of, Borrowers, on behalf of the Revolving Lenders, that Agent, in its Permitted Discretion, deems necessary or desirable (1) to preserve or protect the Collateral, or any portion thereof, or (2) to enhance the likelihood of repayment of the Obligations (other than the Bank Product Obligations) (the Revolving Loans described in this Section 2.3(d)(i) shall be referred to as “Protective Advances”).  Notwithstanding the foregoing, the aggregate amount of all Protective Advances outstanding at any one time shall not exceed 10% of the Maximum Credit Amount (unless Required Lenders in their sole discretion elect to exceed such amount).

 

(ii)                                  Any contrary provision of this Agreement or any other Loan Document notwithstanding, but subject to Section 2.3(d)(iv), the Lenders hereby authorize Agent

 

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or Swing Lender, as applicable, and either Agent or Swing Lender, as applicable, may, but is not obligated to, knowingly and intentionally, continue to make Revolving Loans (including Swing Loans) to Borrowers notwithstanding that an Overadvance exists or would be created thereby, so long as (A) after giving effect to such Revolving Loans, the outstanding Revolver Usage does not exceed the Borrowing Base by more than 10% of the Maximum Revolver Amount (unless Required Lenders in their sole discretion elect to exceed such amount), and (B) after giving effect to such Revolving Loans, the outstanding Revolver Usage (except for and excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) does not exceed the Maximum Revolver Amount.  In the event Agent obtains actual knowledge that the Revolver Usage exceeds the amounts permitted by the immediately foregoing provisions, regardless of the amount of, or reason for, such excess, Agent shall notify the Lenders as soon as practicable (and prior to making any (or any additional) intentional Overadvances (except for and excluding amounts charged to the Loan Account for interest, fees, or Lender Group Expenses) unless Agent determines that prior notice would result in imminent harm to the Collateral or its value, in which case Agent may make such Overadvances and provide notice as promptly as practicable thereafter), and the Lenders with Revolver Commitments thereupon shall, together with Agent, jointly determine the terms of arrangements that shall be implemented with Borrowers intended to reduce, within a reasonable time, the outstanding principal amount of the Revolving Loans to Borrowers to an amount permitted by the preceding sentence.  In such circumstances, if any Lender with a Revolver Commitment objects to the proposed terms of reduction or repayment of any Overadvance, the terms of reduction or repayment thereof shall be implemented according to the determination of the Required Lenders.  The foregoing provisions are meant for the benefit of the Lenders and Agent and are not meant for the benefit of Borrowers, which shall continue to be bound by the provisions of Section 2.4(e).  Each Lender with a Revolver Commitment shall be obligated to make Revolving Loans in accordance with Section 2.3(c) in, or settle Overadvances made by Agent with Agent as provided in Section 2.3(e) (or Section 2.3(g), as applicable) for, the amount of such Lender’s Pro Rata Share of any unintentional Overadvances by Agent reported to such Lender, any intentional Overadvances made as permitted under this Section 2.3(d)(ii), and any Overadvances resulting from the charging to the Loan Account of interest, fees, or Lender Group Expenses.

 

(iii)                               Each Protective Advance and each Overadvance (each, an “Extraordinary Advance”) shall be deemed to be a Revolving Loan hereunder.  No Extraordinary Advance shall be eligible to be a LIBOR Rate Loan.  Prior to Settlement with respect to Extraordinary Advances, all payments on the Extraordinary Advances, including interest thereon, shall be payable to Agent solely for its own account.  The Extraordinary Advances shall be repayable on demand, secured by Agent’s Liens, constitute Obligations hereunder, and bear interest at the rate applicable from time to time to Revolving Loans that are Base Rate Loans.  The provisions of this Section 2.3(d) are for the exclusive benefit of Agent, Swing Lender, and the Lenders and are not intended to benefit Borrowers (or any other Loan Party) in any way.

 

(iv)                              Notwithstanding anything contained in this Agreement or any other Loan Document to the contrary:  (A) no Extraordinary Advance may be made by Agent if such Extraordinary Advance would cause the aggregate principal amount of Extraordinary Advances outstanding to exceed an amount equal to 10% of the Maximum Credit Amount (unless Required Lenders otherwise agree to a higher amount); and (B) to the extent that the making of any Protective Advance causes the aggregate Revolver Usage to exceed the Maximum

 

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Revolver Amount, such portion of such Protective Advance shall be for Agent’s sole and separate account and not for the account of any Lender and shall be entitled to priority in repayment in accordance with Section 2.4(b).

 

(e)                                 Settlement.  It is agreed that each Lender’s funded portion of the Revolving Loans is intended by the Lenders to equal, at all times, such Lender’s Pro Rata Share of the outstanding Revolving Loans.  Such agreement notwithstanding, Agent, Swing Lender, and the other Lenders agree (which agreement shall not be for the benefit of Borrowers) that in order to facilitate the administration of this Agreement and the other Loan Documents, settlement among the Lenders as to the Revolving Loans (including the Swing Loans and the Extraordinary Advances) shall take place on a periodic basis in accordance with the following provisions:

 

(i)                                     Agent shall request settlement (“Settlement”) with the Lenders on a weekly basis, or on a more frequent basis if so determined by Agent in its sole discretion (1) on behalf of Swing Lender, with respect to the outstanding Swing Loans, (2) for itself, with respect to the outstanding Extraordinary Advances, and (3) with respect to Administrative Borrower’s or any of its Subsidiaries’ payments or other amounts received, as to each by notifying the Lenders by telecopy, telephone, or other similar form of transmission, of such requested Settlement, no later than 4:00 p.m. on the Business Day immediately prior to the date of such requested Settlement (the date of such requested Settlement being the “Settlement Date”).  Such notice of a Settlement Date shall include a summary statement of the amount of outstanding Revolving Loans (including Swing Loans and Extraordinary Advances) for the period since the prior Settlement Date.  Subject to the terms and conditions contained herein (including Section 2.3(g)):  (y) if the amount of the Revolving Loans (including Swing Loans and Extraordinary Advances) made by a Lender that is not a Defaulting Lender exceeds such Lender’s Pro Rata Share of the Revolving Loans (including Swing Loans and Extraordinary Advances) as of a Settlement Date, then Agent shall, by no later than 2:00 p.m. on the Settlement Date, transfer in immediately available funds to a Deposit Account of such Lender (as such Lender may designate), an amount such that each such Lender shall, upon receipt of such amount, have as of the Settlement Date, its Pro Rata Share of the Revolving Loans (including Swing Loans and Extraordinary Advances), and (z) if the amount of the Revolving Loans (including Swing Loans and Extraordinary Advances) made by a Lender is less than such Lender’s Pro Rata Share of the Revolving Loans (including Swing Loans and Extraordinary Advances) as of a Settlement Date, such Lender shall no later than 2:00 p.m. on the Settlement Date transfer in immediately available funds to Agent’s Account, an amount such that each such Lender shall, upon transfer of such amount, have as of the Settlement Date, its Pro Rata Share of the Revolving Loans (including Swing Loans and Extraordinary Advances).  Such amounts made available to Agent under clause (z) of the immediately preceding sentence shall be applied against the amounts of the applicable Swing Loans or Extraordinary Advances.  If any such amount is not made available to Agent by any Lender on the Settlement Date applicable thereto to the extent required by the terms hereof, Agent shall be entitled to recover for its account such amount on demand from such Lender together with interest thereon at the Defaulting Lender Rate.

 

(ii)                                  In determining whether a Lender’s balance of the Revolving Loans (including Swing Loans and Extraordinary Advances) is less than, equal to, or greater than such Lender’s Pro Rata Share of the Revolving Loans as of a Settlement Date, Agent shall, as part of

 

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the relevant Settlement, apply to such balance the portion of payments actually received in good funds by Agent with respect to principal, interest, fees payable by Borrowers and allocable to the Lenders hereunder, and proceeds of Collateral.

 

(iii)                               Between Settlement Dates, Agent, to the extent Extraordinary Advances for the account of Agent or Swing Loans for the account of Swing Lender are outstanding, may pay over to Agent or Swing Lender, as applicable, any payments or other amounts received by Agent, that in accordance with the terms of this Agreement would be applied to the reduction of the Revolving Loans, for application to the Extraordinary Advances or Swing Loans.  Between Settlement Dates, Agent, to the extent no Extraordinary Advances or Swing Loans are outstanding, may pay over to Swing Lender any payments or other amounts received by Agent, that in accordance with the terms of this Agreement would be applied to the reduction of the Revolving Loans, for application to Swing Lender’s Pro Rata Share of the Revolving Loans.  If, as of any Settlement Date, payments or other amounts of Administrative Borrower or its Subsidiaries received since the then immediately preceding Settlement Date have been applied to Swing Lender’s Pro Rata Share of the Revolving Loans other than to Swing Loans, as provided for in the previous sentence, Swing Lender shall pay to Agent for the accounts of the Lenders, and Agent shall pay to the Lenders (other than a Defaulting Lender if Agent has implemented the provisions of Section 2.3(g)), to be applied to the outstanding Revolving Loans of such Lenders, an amount such that each such Lender shall, upon receipt of such amount, have, as of such Settlement Date, its Pro Rata Share of the Revolving Loans.  During the period between Settlement Dates, Swing Lender with respect to Swing Loans, Agent with respect to Extraordinary Advances, and each Lender with respect to the Revolving Loans other than Swing Loans and Extraordinary Advances, shall be entitled to interest at the applicable rate or rates payable under this Agreement on the daily amount of funds employed by Swing Lender, Agent, or the Lenders, as applicable.

 

(iv)                              Anything in this Section 2.3(e) to the contrary notwithstanding, in the event that a Lender is a Defaulting Lender, Agent shall be entitled to refrain from remitting settlement amounts to the Defaulting Lender and, instead, shall be entitled to elect to implement the provisions set forth in Section 2.3(g).

 

(f)                                   Notation.  Agent, as a non-fiduciary agent for Borrowers, shall maintain a register showing the principal amount and stated interest of the Revolving Loans (and portion of the Term Loan, as applicable), owing to each Lender, including the Swing Loans owing to Swing Lender, and Extraordinary Advances owing to Agent, and the interests therein of each Lender, from time to time and such register shall, absent manifest error, conclusively be presumed to be correct and accurate.

 

(g)                                Defaulting Lenders.

 

(i)                                     Notwithstanding the provisions of Section 2.4(b)(ii), Agent shall not be obligated to transfer to a Defaulting Lender any payments made by Borrowers to Agent for the Defaulting Lender’s benefit or any proceeds of Collateral that would otherwise be remitted hereunder to the Defaulting Lender, and, in the absence of such transfer to the Defaulting Lender, Agent shall transfer any such payments (A) first, to Agent to the extent of any Extraordinary Advances that were made by Agent and that were required to be, but were not, paid by Defaulting Lender, (B) second, to Swing Lender to the extent of any Swing Loans that were made by Swing Lender and that were required to be, but were not,

 

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paid by the Defaulting Lender, (C) third, to Issuing Bank, to the extent of the portion of a Letter of Credit Disbursement that was required to be, but was not, paid by the Defaulting Lender, (D) fourth, to each Non-Defaulting Lender ratably in accordance with their Commitments (but, in each case, only to the extent that such Defaulting Lender’s portion of a Revolving Loan (or other funding obligation) was funded by such other Non-Defaulting Lender), (E) fifth, in Agent’s sole discretion, to a suspense account maintained by Agent, the proceeds of which shall be retained by Agent and may be made available to be re-advanced to or for the benefit of Borrowers (upon the request of Borrowers and subject to the conditions set forth in Section 3.2) as if such Defaulting Lender had made its portion of Revolving Loans (or other funding obligations) hereunder, and (F) sixth, from and after the date on which all other Obligations have been paid in full, to such Defaulting Lender in accordance with tier (L) of Section 2.4(b)(iii).  Subject to the foregoing, Agent may hold and, in its discretion, re-lend to Borrowers for the account of such Defaulting Lender the amount of all such payments received and retained by Agent for the account of such Defaulting Lender.  Solely for the purposes of voting or consenting to matters with respect to the Loan Documents (including the calculation of Pro Rata Share in connection therewith) and for the purpose of calculating the fee payable under Section 2.10(b), such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to be zero; provided, that the foregoing shall not apply to any of the matters governed by Section 14.1(a)(i) through (iii).  The provisions of this Section 2.3(g) shall remain effective with respect to such Defaulting Lender until the earlier of (y) the date on which all of the Non-Defaulting Lenders, Agent, Issuing Bank, and Borrowers shall have waived, in writing, the application of this Section 2.3(g) to such Defaulting Lender, or (z) the date on which such Defaulting Lender makes payment of all amounts that it was obligated to fund hereunder, pays to Agent all amounts owing by Defaulting Lender in respect of the amounts that it was obligated to fund hereunder, and, if requested by Agent, provides adequate assurance of its ability to perform its future obligations hereunder (on which earlier date, so long as no Event of Default has occurred and is continuing, any remaining cash collateral held by Agent pursuant to Section 2.3(g)(ii) shall be released to Borrowers).  The operation of this Section 2.3(g) shall not be construed to increase or otherwise affect the Commitment of any Lender, to relieve or excuse the performance by such Defaulting Lender or any other Lender of its duties and obligations hereunder, or to relieve or excuse the performance by any Borrower of its duties and obligations hereunder to Agent, Issuing Bank, or to the Lenders other than such Defaulting Lender.  Any failure by a Defaulting Lender to fund amounts that it was obligated to fund hereunder shall constitute a material breach by such Defaulting Lender of this Agreement and shall entitle Borrowers, at their option, upon written notice to Agent, to arrange for a substitute Lender to assume the Commitment of such Defaulting Lender, such substitute Lender to be reasonably acceptable to Agent.  In connection with the arrangement of such a substitute Lender, the Defaulting Lender shall have no right to refuse to be replaced hereunder, and agrees to execute and deliver a completed form of Assignment and Acceptance in favor of the substitute Lender (and agrees that it shall be deemed to have executed and delivered such document if it fails to do so) subject only to being paid its share of the outstanding Obligations (other than Bank Product Obligations, but including (1) all interest, fees, and other amounts that may be due and payable in respect thereof, and (2) an assumption of its Pro Rata Share of its participation in the Letters of Credit); provided, that any such assumption of the Commitment of such Defaulting Lender shall not be deemed to constitute a waiver of any

 

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of the Lender Groups’ or Borrowers’ rights or remedies against any such Defaulting Lender arising out of or in relation to such failure to fund.  In the event of a direct conflict between the priority provisions of this Section 2.3(g) and any other provision contained in this Agreement or any other Loan Document, it is the intention of the parties hereto that such provisions be read together and construed, to the fullest extent possible, to be in concert with each other.  In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this Section 2.3(g) shall control and govern.

 

(ii)         If any Swing Loan or Letter of Credit is outstanding at the time that a Lender becomes a Defaulting Lender then:

 

(A)        such Defaulting Lender’s Swing Loan Exposure and Letter of Credit Exposure shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Pro Rata Shares but only to the extent (x) the sum of all Non-Defaulting Lenders’ Revolving Loan Exposures plus such Defaulting Lender’s Swing Loan Exposure and Letter of Credit Exposure does not exceed the total of all Non-Defaulting Lenders’ Revolver Commitments and (y) the conditions set forth in Section 3.2 are satisfied at such time;

 

(B)        if the reallocation described in clause (A) above cannot, or can only partially, be effected, Borrowers shall within one Business Day following notice by the Agent (x) first, prepay such Defaulting Lender’s Swing Loan Exposure (after giving effect to any partial reallocation pursuant to clause (A) above) and (y) second, cash collateralize such Defaulting Lender’s Letter of Credit Exposure (after giving effect to any partial reallocation pursuant to clause (A) above), pursuant to a cash collateral agreement to be entered into in form and substance reasonably satisfactory to the Agent, for so long as such Letter of Credit Exposure is outstanding; provided, that Borrowers shall not be obligated to cash collateralize any Defaulting Lender’s Letter of Credit Exposure if such Defaulting Lender is also the Issuing Bank;

 

(C)        if Borrowers cash collateralize any portion of such Defaulting Lender’s Letter of Credit Exposure pursuant to this Section 2.3(g)(ii), Borrowers shall not be required to pay any Letter of Credit Fees to Agent for the account of such Defaulting Lender pursuant to Section 2.6(b) with respect to such cash collateralized portion of such Defaulting Lender’s Letter of Credit Exposure during the period such Letter of Credit Exposure is cash collateralized;

 

(D)        to the extent the Letter of Credit Exposure of the Non-Defaulting Lenders is reallocated pursuant to this Section 2.3(g)(ii), then the Letter of Credit Fees payable to the Non-Defaulting Lenders pursuant to Section 2.6(b) shall be adjusted in accordance with such Non-Defaulting Lenders’ Letter of Credit Exposure;

 

(E)        to the extent any Defaulting Lender’s Letter of Credit Exposure is neither cash collateralized nor reallocated pursuant to this Section 2.3(g)(ii), then, without prejudice to any rights or remedies of the Issuing Bank or any Lender hereunder, all Letter of Credit Fees that would have otherwise been payable to such Defaulting Lender under Section 2.6(b) with respect to such portion of such Letter of Credit Exposure shall instead be

 

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payable to the Issuing Bank until such portion of such Defaulting Lender’s Letter of Credit Exposure is cash collateralized or reallocated;

 

(F)        so long as any Lender is a Defaulting Lender, the Swing Lender shall not be required to make any Swing Loan and the Issuing Bank shall not be required to issue, amend, or increase any Letter of Credit, in each case, to the extent (x) the Defaulting Lender’s Pro Rata Share of such Swing Loans or Letter of Credit cannot be reallocated pursuant to this Section 2.3(g)(ii) or (y) the Swing Lender or Issuing Bank, as applicable, has not otherwise entered into arrangements reasonably satisfactory to the Swing Lender or Issuing Bank, as applicable, and Borrowers to eliminate the Swing Lender’s or Issuing Bank’s risk with respect to the Defaulting Lender’s participation in Swing Loans or Letters of Credit; and

 

(G)        Agent may release any cash collateral provided by Borrowers pursuant to this Section 2.3(g)(ii) to the Issuing Bank and the Issuing Bank may apply any such cash collateral to the payment of such Defaulting Lender’s Pro Rata Share of any Letter of Credit Disbursement that is not reimbursed by Borrowers pursuant to Section 2.11(d).

 

(h)        Independent Obligations.  All Revolving Loans (other than Swing Loans and Extraordinary Advances) shall be made by the Lenders contemporaneously and in accordance with their Pro Rata Shares.  It is understood that (i) no Lender shall be responsible for any failure by any other Lender to perform its obligation to make any Revolving Loan (or other extension of credit) hereunder, nor shall any Commitment of any Lender be increased or decreased as a result of any failure by any other Lender to perform its obligations hereunder, and (ii) no failure by any Lender to perform its obligations hereunder shall excuse any other Lender from its obligations hereunder.

 

2.4.       Payments; Reductions of Commitments; Prepayments.

 

(a)        Payments by Borrowers.

 

(i)         Except as otherwise expressly provided herein, all payments by Borrowers shall be made to Agent’s Account for the account of the Lender Group and shall be made in immediately available funds, no later than 3:30 p.m. on the date specified herein.  Any payment received by Agent later than 3:30 p.m. shall be deemed to have been received (unless Agent, in its sole discretion, elects to credit it on the date received) on the following Business Day and any applicable interest or fee shall continue to accrue until such following Business Day.

 

(ii)         Unless Agent receives notice from Borrowers prior to the date on which any payment is due to the Lenders that Borrowers will not make such payment in full as and when required, Agent may assume that Borrowers have made (or will make) such payment in full to Agent on such date in immediately available funds and Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender.  If and to the extent Borrowers do not make such payment in full to Agent on the date when due, each Lender severally shall repay to Agent on demand such amount distributed to such Lender, together with interest thereon at the

 

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Defaulting Lender Rate for each day from the date such amount is distributed to such Lender until the date repaid.

 

(b)        Apportionment and Application.

 

(i)         Subject to the Agreement Among Lenders, so long as no Application Event has occurred and is continuing and except as otherwise provided herein with respect to Defaulting Lenders, all principal and interest payments received by Agent shall be apportioned ratably among the Lenders (according to the unpaid principal balance of the Obligations to which such payments relate held by each Lender) and all payments of fees and expenses received by Agent (other than fees or expenses that are for Agent’s separate account or for the separate account of Issuing Bank) shall be apportioned ratably among the Lenders having a Pro Rata Share of the type of Commitment or Obligation to which a particular fee or expense relates.

 

(ii)         Subject to Section 2.2, Section 2.4(b)(v), Section 2.4(d)(ii), and Section 2.4(e), and the Agreement Among Lenders, all payments to be made hereunder by Borrowers shall be remitted to Agent and all such payments, and all proceeds of Collateral received by Agent, shall be applied, so long as no Application Event has occurred and is continuing and except as otherwise provided herein with respect to Defaulting Lenders, to reduce the balance of the Revolving Loans outstanding and, thereafter, to Borrowers (to be wired to the Designated Account) or such other Person entitled thereto under applicable law.

 

(iii)        Subject to the Agreement Among Lenders, at any time that an Application Event has occurred and is continuing and except as otherwise provided herein with respect to Defaulting Lenders, all payments remitted to Agent and all proceeds of Collateral received by Agent shall be applied as follows:

 

(A)        first, to pay any Lender Group Expenses (including cost or expense reimbursements) or indemnities then due to Agent under the Loan Documents, until paid in full,

 

(B)        second, to pay any fees or premiums then due to Agent under the Loan Documents until paid in full,

 

(C)        third, to pay interest due in respect of all Protective Advances until paid in full,

 

(D)        fourth, to pay the principal of all Protective Advances until paid in full,

 

(E)        fifth, ratably, to pay any Lender Group Expenses (including cost or expense reimbursements) or indemnities then due to any of the Lenders under the Loan Documents, until paid in full,

 

(F)        sixth, ratably, to pay any fees or premiums then due to any of the Lenders under the Loan Documents until paid in full,

 

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(G)        seventh, to pay interest accrued in respect of the Swing Loans until paid in full,

 

(H)        eighth, to pay the principal of all Swing Loans until paid in full,

 

(I)         ninth, ratably, to pay interest accrued in respect of the Revolving Loans (other than Protective Advances) and the Term Loan until paid in full,

 

(J)        tenth, ratably

 

i.          ratably, to pay the principal of all Revolving Loans and the Term Loan until paid in full,

 

ii.          to Agent, to be held by Agent, for the benefit of Issuing Bank (and for the ratable benefit of each of the Lenders that have an obligation to pay to Agent, for the account of Issuing Bank, a share of each Letter of Credit Disbursement), as cash collateral in an amount up to 105% of the Letter of Credit Usage (to the extent permitted by applicable law, such cash collateral shall be applied to the reimbursement of any Letter of Credit Disbursement as and when such disbursement occurs and, if a Letter of Credit expires undrawn, the cash collateral held by Agent in respect of such Letter of Credit shall, to the extent permitted by applicable law, be reapplied pursuant to this Section 2.4(b)(iii), beginning with tier (A) hereof),

 

iii.         ratably, up to the amount (after taking into account any amounts previously paid pursuant to this clause iii. during the continuation of the applicable Application Event) of the most recently established Bank Product Reserve, which amount was established prior to the occurrence of, and not in contemplation of, the subject Application Event, to (y) the Bank Product Providers based upon amounts then certified by the applicable Bank Product Provider to Agent (in form and substance satisfactory to Agent) to be due and payable to such Bank Product Providers on account of Bank Product Obligations, and (z) with any balance to be paid to Agent, to be held by Agent, for the ratable benefit of the Bank Product Providers, as cash collateral (which cash collateral may be released by Agent to the applicable Bank Product Provider and applied by such Bank Product Provider to the payment or reimbursement of any amounts due and payable with respect to Bank Product Obligations owed to the applicable Bank Product Provider as and when such amounts first become due and payable) and, if and at such time as all such Bank Product Obligations are paid or otherwise satisfied in full, the cash collateral held by Agent in respect of such Bank Product Obligations shall be reapplied pursuant to this Section 2.4(b)(iii), beginning with tier (A) hereof,

 

(K)        eleventh, to pay any other Obligations other than Obligations owed to Defaulting Lenders,

 

(L)        twelfth, ratably to pay any Obligations owed to Defaulting Lenders, and

 

(M)       thirteenth, to Borrowers (to be wired to the Designated Account) or such other Person entitled thereto under applicable law.

 

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(iv)        Agent promptly shall distribute to each Lender, pursuant to the applicable wire instructions received from each Lender in writing, such funds as it may be entitled to receive, subject to a Settlement delay as provided in Section 2.3(e).

 

(v)        Subject to the Agreement Among Lenders, in each instance, so long as no Application Event has occurred and is continuing, Section 2.4(b)(ii) shall not apply to any payment made by Borrowers to Agent and specified by Borrowers to be for the payment of specific Obligations then due and payable (or prepayable) under any provision of this Agreement or any other Loan Document.

 

(vi)        For purposes of Section 2.4(b)(iii), “paid in full” of a type of Obligation means payment in cash or immediately available funds of all amounts owing on account of such type of Obligation, including interest accrued after the commencement of any Insolvency Proceeding, default interest, interest on interest, and expense reimbursements, irrespective of whether any of the foregoing would be or is allowed or disallowed in whole or in part in any Insolvency Proceeding.

 

(vii)       In the event of a direct conflict between the priority provisions of this Section 2.4 and any other provision contained in this Agreement (other than Section 17.12) or any other Loan Document, it is the intention of the parties hereto that such provisions be read together and construed, to the fullest extent possible, to be in concert with each other.  In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, if the conflict relates to the provisions of Section 2.3(g) and this Section 2.4, then the provisions of Section 2.3(g) shall control and govern, and if otherwise, then the terms and provisions of this Section 2.4 shall control and govern.

 

(c)        Reduction of Commitments.

 

(i)         Revolver Commitments.  The Revolver Commitments shall terminate on the Maturity Date.  Borrowers may reduce the Revolver Commitments, without premium or penalty, to an amount not less than the greater of (1) the sum of (A) the Revolver Usage as of such date, plus (B) the principal amount of all Revolving Loans not yet made as to which a request has been given by Borrowers under Section 2.3(a), plus (C) the amount of all Letters of Credit not yet issued as to which a request has been given by Borrowers pursuant to Section 2.11(a) and (2) $10,000,000; provided, that Borrowers may reduce the Revolver Commitments, without premium or penalty, to $0 if, after giving effect to such reduction and any current prepayments made hereunder, the Obligations shall have been paid in full.  Each such reduction shall be in an amount which is not less than $1,000,000, and shall be made by providing not less than 10 Business Days prior written notice to Agent.  Each such reduction notice shall be irrevocable; provided, that Borrowers may rescind or postpone any reduction notice if such reduction would have resulted from an anticipated refinancing and payment in full of all of the Obligations, which refinancing is not consummated or otherwise is delayed. The Revolver Commitments, once reduced, may not be increased.  Each such reduction of the Revolver Commitments shall reduce the Revolver Commitments of each Lender proportionately in accordance with its ratable share thereof.

 

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(ii)         Term Loan Commitments.  The Term Loan Commitments shall terminate upon the making of the Term Loan.

 

(d)        Optional Prepayments.

 

(i)         Revolving Loans.  Borrowers may prepay the principal of any Revolving Loan at any time in whole or in part, without premium or penalty.

 

(ii)         Term Loan.  Borrowers may, upon at least 10 Business Days prior written notice to Agent, so long as, (A) for each day during the 30 calendar days prior to the making of such payment Excess Availability has been greater than the sum of (1) the greater of 13.5% of the Maximum Credit Amount and $14,850,000 and (2) the amount of such payment and (B) after giving effect to such payment Excess Availability is greater than the greater of 13.5% of the Maximum Credit Amount and $14,850,000, prepay the principal of the Term Loan, in whole or in part.  Each prepayment made pursuant to this Section 2.4(d)(ii) shall be accompanied by the amounts due pursuant to the Fee Letter and the payment of accrued interest to the date of such payment on the amount prepaid.  Subject to the Agreement Among Lenders, each such prepayment shall be applied against the remaining installments of principal due on the Term Loan on a pro rata basis (for the avoidance of doubt, any amount that is due and payable on the Maturity Date shall constitute an installment).

 

(e)        Mandatory Prepayments.

 

(i)         Borrowing Base.  If, at any time, (A) the Revolver Usage on such date exceeds (B) the Borrowing Base reflected in the Borrowing Base Certificate most recently delivered by Borrowers to Agent, then Borrowers shall immediately prepay the Obligations in accordance with Section 2.4(f)(i) in an aggregate amount equal to the amount of such excess.

 

(ii)         Dispositions.  Within 5 Business Days of the date of receipt by Administrative Borrower or any of its Subsidiaries of the Net Cash Proceeds of any voluntary or involuntary sale or disposition by Administrative Borrower or any of its Subsidiaries of assets (including insurance proceeds and proceeds from casualty losses or condemnations but excluding (x) Net Cash Proceeds received from any single sale or disposition (or series of related sales or dispositions that could have been made in a single sale or disposition), unless the aggregate amount of such Net Cash Proceeds exceeds $100,000, (y) Net Cash Proceeds received in any fiscal year (including those made pursuant to the foregoing clause (x)) until the aggregate amount of all such Net Cash Proceeds received in such fiscal year exceeds $300,000, and (z) proceeds from sales or dispositions which qualify as Permitted Dispositions under clauses (a), (b), (c), (d), (e), (f), (i), (j), (k), (l), (m), (n), or (o) of the definition of Permitted Dispositions and dispositions in the form of transactions expressly permitted by Section 6.3), Borrowers shall prepay the outstanding principal amount of the Obligations in accordance with Section 2.4(f)(ii) in an amount equal to 100% of such Net Cash Proceeds (including condemnation awards and payments in lieu thereof) received by such Person in connection with such sales or dispositions; provided that, so long as (A) no Default or Event of Default shall have occurred and is continuing or would result therefrom, (B) such Borrower shall have given Agent prior written notice of such Borrower’s intention to apply such monies to the costs of replacement of the properties or assets that are the subject of such sale or disposition or the cost of purchase or

 

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construction of other assets useful in the business of Administrative Borrower or its Subsidiaries, (C) the monies are held in a Deposit Account in which Agent has a perfected first-priority security interest, and (D) Administrative Borrower or its Subsidiaries, as applicable, complete such replacement, purchase, or construction within 180 days after the initial receipt of such monies, then the Loan Party whose assets were the subject of such disposition shall have the option to apply such monies to the costs of replacement of the assets that are the subject of such sale or disposition or the costs of purchase or construction of other assets useful in the business of such Loan Party unless and to the extent that such applicable period shall have expired without such replacement, purchase, or construction being made or completed, in which case, any amounts remaining in the Deposit Account referred to in clause (C) above shall be paid to Agent and applied in accordance with Section 2.4(f)(ii); provided, that no Borrower nor any of its Subsidiaries shall have the right to use such Net Cash Proceeds (1) to make such replacements, purchases, or construction in respect of voluntary sales or dispositions in excess of $500,000 in any given fiscal year or (2) to make such replacements, purchases or construction in respect of involuntary sales or dispositions in excess of $3,000,000 in any given fiscal year.  Nothing contained in this Section 2.4(e)(ii) shall permit Administrative Borrower or any of its Subsidiaries to sell or otherwise dispose of any assets other than in accordance with Section 6.4.

 

(iii)        [Intentionally Omitted].

 

(iv)        Indebtedness.  Within 1 Business Day of the date of incurrence by Administrative Borrower or any of its Subsidiaries of any Indebtedness (other than Permitted Indebtedness), Borrowers shall prepay the outstanding principal amount of the Obligations in accordance with Section 2.4(f)(ii) in an amount equal to 100% of the Net Cash Proceeds received by such Person in connection with such incurrence.  The provisions of this Section 2.4(e)(iv) shall not be deemed to be implied consent to any such incurrence otherwise prohibited by the terms of this Agreement.

 

(v)        [Intentionally Omitted].

 

(vi)        Excess Cash Flow.  Within 10 days of delivery to Agent of audited annual financial statements pursuant to Section 5.1, commencing with the delivery to Agent of the financial statements for Administrative Borrower’s fiscal year ended December 31, 2016 or, if such financial statements are not delivered to Agent on the date such statements are required to be delivered pursuant to Section 5.1, within 10 days after the date such statements were required to be delivered to Agent pursuant to Section 5.1, so long as, (A) for each day during the 30 calendar days prior to the making of such payment Excess Availability has been greater than the sum of (1) the greater of 10% of the Maximum Credit Amount and $11,000,000 and (2) the amount of such payment and (B) after giving effect to such payment Excess Availability is greater than the greater of 10% of the Maximum Credit Amount and $11,000,000, Borrowers shall (A) if such financial statements demonstrate that the Leverage Ratio of Administrative Borrower and its Subsidiaries as of the end of such fiscal year was greater than or equal to 2.0:1.0, prepay the outstanding principal amount of the Obligations in accordance with Section 2.4(f)(ii) in an amount equal to (1) 50% of the Excess Cash Flow of Administrative Borrower and its Subsidiaries for such fiscal year, minus (2) the aggregate amount of all voluntary prepayments

 

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in respect of the outstanding principal balance of the Term Loan made by Borrowers during such fiscal year, minus (3) the aggregate amount of all voluntary prepayments in respect of the outstanding principal balance of the Revolving Loans made by Borrowers during such fiscal, solely to the extent such prepayments are accompanied by a corresponding reduction in the Revolver Commitment; provided, that any Excess Cash Flow payment made pursuant to this Section 2.4(e)(vi) shall exclude the portion of Excess Cash Flow that is attributable to the target of a Permitted Acquisition and that accrued prior to the closing date of such Permitted Acquisition, and (B) if such financial statements demonstrate that the Leverage Ratio of Administrative Borrower and its Subsidiaries as of the end of such fiscal year was less than 2.0:1.0 (in the case of the fiscal year ending December 31, 2016) or 1.75:1.0 (in the case of each other fiscal year), as applicable, then no prepayment shall be required; provided, that in the case of the fiscal year ended December 31, 2016, Borrowers shall only be obligated to prepay the outstanding principal amount of the Obligations in an amount equal to the applicable percentage of the Excess Cash Flow of the Administrative Borrower and its Subsidiaries for the period commencing with the Closing Date and ending on December 31, 2016.

 

(f)         Application of Payments.

 

(i)         Each prepayment pursuant to Section 2.4(e)(i) shall, (A) so long as no Application Event shall have occurred and be continuing, be applied, first, to the outstanding principal amount of the Revolving Loans (without a corresponding permanent reduction in the Maximum Revolver Amount) until paid in full, second, to cash collateralize the Letters of Credit in an amount equal to 105% of the then outstanding Letter of Credit Usage (without a corresponding permanent reduction in the Maximum Revolver Amount), and third, to the outstanding principal amount of the Term Loan until paid in full, and (B) if an Application Event shall have occurred and be continuing, be applied in the manner set forth in Section 2.4(b)(iii).  Subject to the Agreement Among Lenders, each such prepayment of the Term Loan shall be applied against the remaining installments of principal of the Term Loan in the inverse order of maturity (for the avoidance of doubt, any amount that is due and payable on the Maturity Date shall constitute an installment).

 

(ii)         Subject to the Agreement Among Lenders, each prepayment pursuant to Section 2.4(e)(ii), 2.4(e)(iv), or 2.4(e)(vi) shall (A) so long as no Application Event shall have occurred and be continuing, be applied, first, to the outstanding principal amount of the Term Loan until paid in full, second, to the outstanding principal amount of the Revolving Loans (without a corresponding permanent reduction in the Maximum Revolver Amount), until paid in full, and third, to cash collateralize the Letters of Credit in an amount equal to 105% of the then outstanding Letter of Credit Usage (without a corresponding permanent reduction in the Maximum Revolver Amount), and (B) if an Application Event shall have occurred and be continuing, be applied in the manner set forth in Section 2.4(b)(iii).  Subject to the Agreement Among Lenders, each such prepayment of the Term Loan shall be applied against the remaining installments of principal of the Term Loan in the inverse order of maturity (for the avoidance of doubt, any amount that is due and payable on the Maturity Date shall constitute an installment).

 

2.5.       Promise to Pay; Promissory Notes.

 

(a)        Borrowers agree to pay the Lender Group Expenses on the earlier of (i) the first day of the month following the date on which the applicable Lender Group Expenses were first incurred or (ii) the date on which demand therefor is made by Agent (it being

 

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acknowledged and agreed that any charging of such costs, expenses or Lender Group Expenses to the Loan Account pursuant to the provisions of Section 2.6(d) shall be deemed to constitute a demand for payment thereof for the purposes of this subclause (ii)).  Borrowers promise to pay all of the Obligations (including principal, interest, premiums, if any, fees, costs, and expenses (including Lender Group Expenses)) in full on the Maturity Date or, if earlier, on the date on which the Obligations (other than the Bank Product Obligations) become due and payable pursuant to the terms of this Agreement.  Borrowers agree that their obligations contained in the first sentence of this Section 2.5(a) shall survive payment or satisfaction in full of all other Obligations.

 

(b)        Any Lender may request that any portion of its Commitments or the Loans made by it be evidenced by one or more promissory notes.  In such event, Borrowers shall execute and deliver to such Lender the requested promissory notes payable to the order of such Lender in a form furnished by Agent and reasonably satisfactory to Borrowers.  Thereafter, the portion of the Commitments and Loans evidenced by such promissory notes and interest thereon shall at all times be represented by one or more promissory notes in such form payable to the order of the payee named therein.

 

2.6.       Interest Rates and Letter of Credit Fee:  Rates, Payments, and Calculations.

 

(a)        Interest Rates.  Except as provided in Section 2.6(c), all Loans, and all Obligations (except for undrawn Letters of Credit) that have been charged to the Loan Account pursuant to the terms hereof, shall bear interest as follows:

 

(i)         if the relevant Obligation is a portion of a Revolving Loan that is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin,

 

(ii)         if the relevant Obligation is a portion of a Revolving Loan that is a Base Rate Loan, at a per annum rate equal to the Base Rate plus the Base Rate Margin,

 

(iii)        if the relevant Obligation is a portion of the Term Loan that is a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus 7.22 percentage points,

 

(iv)        if the relevant Obligation is a portion of the Term Loan that is a Base Rate Loan, at a per annum rate equal to the Base Rate plus 6.22 percentage points, and

 

(v)        otherwise, at a per annum rate equal to the Base Rate plus the Base Rate Margin.

 

(b)        Letter of Credit Fee.  Borrowers shall pay Agent (for the ratable benefit of the Revolving Lenders), a Letter of Credit fee (the “Letter of Credit Fee”) (which fee shall be in addition to the fronting fees and commissions, other fees, charges and expenses set forth in Section 2.11(k)) that shall accrue at a per annum rate equal to the applicable LIBOR Rate Margin times the Letter of Credit Usage.

 

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(c)        Default Rate.  Subject to the Agreement Among Lenders, upon the occurrence and during the continuation of an Event of Default and at the election of Agent or the Required Lenders,

 

(i)         all or any portion of the Loans and other Obligations (except for undrawn Letters of Credit) that have been charged to the Loan Account pursuant to the terms hereof, shall bear interest at a per annum rate equal to 2 percentage points above the per annum rate otherwise applicable thereunder, and

 

(ii)         the Letter of Credit Fee shall be increased to 2 percentage points above the per annum rate otherwise applicable hereunder.

 

(d)        Payment.  Except to the extent provided to the contrary in Section 2.10, Section 2.11(k) or Section 2.12(a), (i) all interest, all Letter of Credit Fees and all other fees payable hereunder or under any of the other Loan Documents shall be due and payable, in arrears, on the first day of each month and (ii) all costs and expenses payable hereunder or under any of the other Loan Documents, and all Lender Group Expenses shall be due and payable on the earlier of (x) the first day of the month following the date on which the applicable costs, expenses, or Lender Group Expenses were first incurred or (y) the date on which demand therefor is made by Agent (it being acknowledged and agreed that any charging of such costs, expenses or Lender Group Expenses to the Loan Account pursuant to the provisions of the following sentence shall be deemed to constitute a demand for payment thereof for the purposes of this subclause (y)).  Borrowers hereby authorize Agent, from time to time without prior notice to Borrowers, to charge to the Loan Account at Agent’s election in its discretion (A) on the first day of each month, all interest accrued during the prior month on the Revolving Loans or the Term Loan hereunder, (B) on the first day of each month, all Letter of Credit Fees accrued or chargeable hereunder during the prior month, (C) as and when incurred or accrued, all fees and costs provided for in Section 2.10 (a) or (c), (D) on the first day of each month, the Unused Line Fee accrued during the prior month pursuant to Section 2.10(b), (E) as and when due and payable, all other fees payable hereunder or under any of the other Loan Documents, (F) as and when incurred or accrued, the fronting fees and all commissions, other fees, charges and expenses provided for in Section 2.11(k), (G) as and when incurred or accrued, all other Lender Group Expenses, and (H) as and when due and payable all other payment obligations payable under any Loan Document or any Bank Product Agreement (including any amounts due and payable to the Bank Product Providers in respect of Bank Products).  All amounts (including interest, fees, costs, expenses, Lender Group Expenses, or other amounts payable hereunder or under any other Loan Document or under any Bank Product Agreement) charged to the Loan Account shall thereupon constitute Revolving Loans hereunder, shall constitute Obligations hereunder, and shall initially accrue interest at the rate then applicable to Revolving Loans that are Base Rate Loans (unless and until converted into LIBOR Rate Loans in accordance with the terms of this Agreement).

 

(e)        Computation.  All interest and fees chargeable under the Loan Documents shall be computed on the basis of a 360 day year, in each case, for the actual number of days elapsed in the period during which the interest or fees accrue.  In the event the Base Rate is changed from time to time hereafter, the rates of interest hereunder based upon the Base Rate

 

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automatically and immediately shall be increased or decreased by an amount equal to such change in the Base Rate.

 

(f)                                   Intent to Limit Charges to Maximum Lawful Rate.  In no event shall the interest rate or rates payable under this Agreement, plus any other amounts paid in connection herewith, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable.  Borrowers and the Lender Group, in executing and delivering this Agreement, intend legally to agree upon the rate or rates of interest and manner of payment stated within it; provided, that, anything contained herein to the contrary notwithstanding, if such rate or rates of interest or manner of payment exceeds the maximum allowable under applicable law, then, ipso facto, as of the date of this Agreement, Borrowers are and shall be liable only for the payment of such maximum amount as is allowed by law, and payment received from Borrowers in excess of such legal maximum, whenever received, shall be applied to reduce the principal balance of the Obligations to the extent of such excess.

 

2.7.                          Crediting Payments.  The receipt of any payment item by Agent shall not be required to be considered a payment on account unless such payment item is a wire transfer of immediately available federal funds made to Agent’s Account or unless and until such payment item is honored when presented for payment.  Should any payment item not be honored when presented for payment, then Borrowers shall be deemed not to have made such payment and interest shall be calculated accordingly.  Anything to the contrary contained herein notwithstanding, any payment item shall be deemed received by Agent only if it is received into Agent’s Account on a Business Day on or before 3:30 p.m.  If any payment item is received into Agent’s Account on a non-Business Day or after 3:30 p.m. on a Business Day (unless Agent, in its sole discretion, elects to credit it on the date received), it shall be deemed to have been received by Agent as of the opening of business on the immediately following Business Day.

 

2.8.                          Designated Account.  Agent is authorized to make the Revolving Loans and the Term Loan, and Issuing Bank is authorized to issue the Letters of Credit, under this Agreement based upon telephonic or other instructions received from anyone purporting to be an Authorized Person or, without instructions, if pursuant to Section 2.6(d).  Borrowers agree to establish and maintain the Designated Account with the Designated Account Bank for the purpose of receiving the proceeds of the Revolving Loans requested by Borrowers and made by Agent or the Lenders hereunder.  Unless otherwise agreed by Agent and Borrowers, any Revolving Loan or Swing Loan requested by Borrowers and made by Agent or the Lenders hereunder shall be made to the Designated Account.

 

2.9.                          Maintenance of Loan Account; Statements of Obligations.  Agent shall maintain an account on its books in the name of Borrowers (the “Loan Account”) on which Borrowers will be charged with the Term Loan, all Revolving Loans (including Extraordinary Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders to Borrowers or for Borrowers’ account, the Letters of Credit issued or arranged by Issuing Bank for Borrowers’ account, and with all other payment Obligations hereunder or under the other Loan Documents, including, accrued interest, fees and expenses, and Lender Group Expenses.  In accordance with Section 2.7, the Loan Account will be credited with all payments received by Agent from Borrowers or for Borrowers’ account.  Agent shall make available to Borrowers monthly statements regarding the Loan Account, including the principal amount of the Term Loan and the

 

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Revolving Loans, interest accrued hereunder, fees accrued or charged hereunder or under the other Loan Documents, and a summary itemization of all charges and expenses constituting Lender Group Expenses accrued hereunder or under the other Loan Documents, and each such statement, absent manifest error, shall be conclusively presumed to be correct and accurate and constitute an account stated between Borrowers and the Lender Group unless, within 30 days after Agent first makes such a statement available to Borrowers, Borrowers shall deliver to Agent written objection thereto describing the error or errors contained in such statement.

 

2.10.                   Fees.

 

(a)                                 Agent Fees.  Borrowers shall pay to Agent, for the account of Agent, as and when due and payable under the terms of the Fee Letter, the fees set forth in the Fee Letter.

 

(b)                                Unused Line Fee.  Borrowers shall pay to Agent, for the ratable account of the Revolving Lenders, an unused line fee (the “Unused Line Fee”) in an amount equal to the Applicable Unused Line Fee Percentage per annum times the result of (i) the aggregate amount of the Revolver Commitments, less (ii) the average amount of the Revolver Usage during the immediately preceding month (or portion thereof), which Unused Line Fee shall be due and payable on the first day of each month from and after the Closing Date up to the first day of the month prior to the date on which the Obligations are paid in full and on the date on which the Obligations are paid in full.

 

(c)                                 Field Examination and Other Fees.  Borrowers shall pay to Agent, field examination, appraisal, and valuation fees and charges, as and when incurred or chargeable, as follows (i) a fee of $1,000 per day, per examiner, plus out-of-pocket expenses (including travel, meals, and lodging) for each field examination of any Borrower performed by personnel employed by Agent, and (ii) the fees or charges paid or incurred by Agent (but, in any event, no less than a charge of $1,000 per day, per Person, plus out-of-pocket expenses (including travel, meals, and lodging)) if it elects to employ the services of one or more third Persons to perform field examinations of Administrative Borrower or its Subsidiaries, to appraise the Collateral, or any portion thereof, or to assess Administrative Borrower’s or its Subsidiaries’ business/recurring revenue valuation; provided, that so long as no Event of Default shall have occurred and be continuing, Borrowers shall not be obligated to reimburse Agent for more than two (2) field examinations during any calendar year.

 

(d)                                Prepayment Premiums.

 

(i)                                     Early Termination.  Upon the prepayment in full of the Term Loan pursuant to Section 2.4(d)(ii) or pursuant to Sections 2.4(e)(ii) or (iv), Borrowers shall pay to Agent, in cash, for the ratable account of the Term Loan Lenders, the Applicable Prepayment Premium.  In the event of a payment in full of the Term Loan at any time prior to the Maturity Date for any other reason, including (a) acceleration of the Term Loan as a result of the occurrence of an Event of Default, (b) foreclosure and sale of, or collection of, the Collateral, (c) sale of the Collateral in any Insolvency Proceeding, or (d) the restructure, reorganization, or compromise of the Term Loan by the confirmation of a plan of reorganization or any other plan of compromise, restructure, or arrangement in any Insolvency Proceeding, then, in view of the impracticability and extreme difficulty of ascertaining the actual amount of damages to the Term

 

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Lenders or profits lost by the Term Loan Lenders as a result of such payment in full of the Term Loan, and by mutual agreement of the parties as to a reasonable estimation and calculation of the lost profits or damages of the Term Lenders, Borrowers shall pay to Agent, in cash, for the ratable account of the Term Loan Lenders the Applicable Prepayment Premium, measured as of the date of such payment in full of the Term Loan.

 

(ii)                                  Partial Term Loan Prepayments.  If Borrowers make a partial prepayment of the Term Loan pursuant to Section 2.4(d)(ii) or pursuant to Sections 2.4(e)(ii) or (iv) then on the date of such prepayment, Borrowers shall pay to Agent, in cash, for the ratable account of the Term Loan Lenders, the Applicable Partial Prepayment Premium.

 

2.11.                   Letters of Credit.

 

(a)                                 Subject to the terms and conditions of this Agreement, upon the request of Borrowers made in accordance herewith, and prior to the Maturity Date, Issuing Bank agrees to issue a requested Letter of Credit for the account of Borrowers, provided that any Letter of Credit may be for the benefit of any Subsidiary of the Administrative Borrower.  By submitting a request to Issuing Bank for the issuance of a Letter of Credit, Borrowers shall be deemed to have requested that Issuing Bank issue the requested Letter of Credit.  Each request for the issuance of a Letter of Credit, or the amendment, renewal, or extension of any outstanding Letter of Credit, shall be irrevocable and shall be made in writing by an Authorized Person and delivered to Issuing Bank via telefacsimile or other electronic method of transmission reasonably acceptable to Issuing Bank and reasonably in advance of the requested date of issuance, amendment, renewal, or extension.  Each such request shall be in form and substance reasonably satisfactory to Issuing Bank and (i) shall specify (A) the amount of such Letter of Credit, (B) the date of issuance, amendment, renewal, or extension of such Letter of Credit, (C) the proposed expiration date of such Letter of Credit, (D) the name and address of the beneficiary of the Letter of Credit, and (E) such other information (including, the conditions to drawing, and, in the case of an amendment, renewal, or extension, identification of the Letter of Credit to be so amended, renewed, or extended) as shall be necessary to prepare, amend, renew, or extend such Letter of Credit, and (ii) shall be accompanied by such Issuer Documents as Agent or Issuing Bank may request or require, to the extent that such requests or requirements are consistent with the Issuer Documents that Issuing Bank generally requests for Letters of Credit in similar circumstances.  Bank’s records of the content of any such request will be conclusive.  Anything contained herein to the contrary notwithstanding, Issuing Bank may, but shall not be obligated to, issue a Letter of Credit that supports the obligations of Administrative Borrower or one of its Subsidiaries in respect of (x) a lease of real property to the extent that the face amount of such Letter of Credit exceeds the highest rent (including all rent-like charges) payable under such lease for a period of one year, or (y) an employment contract to the extent that the face amount of such Letter of Credit exceeds the highest compensation payable under such contract for a period of one year.

 

(b)                                Issuing Bank shall have no obligation to issue a Letter of Credit if any of the following would result after giving effect to the requested issuance:

 

(i)                                     the Letter of Credit Usage would exceed $6,500,000, or

 

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(ii)                                  the Letter of Credit Usage would exceed the Maximum Revolver Amount less the outstanding amount of Revolving Loans (including Swing Loans), or

 

(iii)                               the Letter of Credit Usage would exceed the Borrowing Base at such time less the outstanding principal balance of the Revolving Loans (inclusive of Swing Loans) at such time.

 

(c)                                 In the event there is a Defaulting Lender as of the date of any request for the issuance of a Letter of Credit, the Issuing Bank shall not be required to issue or arrange for such Letter of Credit to the extent (i) the Defaulting Lender’s Letter of Credit Exposure with respect to such Letter of Credit may not be reallocated pursuant to Section 2.3(g)(ii), or (ii) the Issuing Bank has not otherwise entered into arrangements reasonably satisfactory to it and Borrowers to eliminate the Issuing Bank’s risk with respect to the participation in such Letter of Credit of the Defaulting Lender, which arrangements may include Borrowers cash collateralizing such Defaulting Lender’s Letter of Credit Exposure in accordance with Section 2.3(g)(ii).  Additionally, Issuing Bank shall have no obligation to issue a Letter of Credit if (A) any order, judgment, or decree of any Governmental Authority or arbitrator shall, by its terms, purport to enjoin or restrain Issuing Bank from issuing such Letter of Credit, or any law applicable to Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over Issuing Bank shall prohibit or request that Issuing Bank refrain from the issuance of letters of credit generally or such Letter of Credit in particular, (B) the issuance of such Letter of Credit would violate one or more policies of Issuing Bank applicable to letters of credit generally, or (C) if amounts demanded to be paid under any Letter of Credit will or may not be in United States Dollars.

 

(d)                                Any Issuing Bank (other than Wells Fargo or any of its Affiliates) shall notify Agent in writing no later than the Business Day immediately following the Business Day on which such Issuing Bank issued any Letter of Credit; provided that (i) until Agent advises any such Issuing Bank that the provisions of Section 3.2 are not satisfied, or (ii) unless the aggregate amount of the Letters of Credit issued in any such week exceeds such amount as shall be agreed by Agent and such Issuing Bank, such Issuing Bank shall be required to so notify Agent in writing only once each week of the Letters of Credit issued by such Issuing Bank during the immediately preceding week as well as the daily amounts outstanding for the prior week, such notice to be furnished on such day of the week as Agent and such Issuing Bank may agree.  Each Letter of Credit shall be in form and substance reasonably acceptable to Issuing Bank, including the requirement that the amounts payable thereunder must be payable in Dollars.  If Issuing Bank makes a payment under a Letter of Credit, Borrowers shall pay to Agent an amount equal to the applicable Letter of Credit Disbursement on the Business Day such Letter of Credit Disbursement is made and, in the absence of such payment, the amount of the Letter of Credit Disbursement immediately and automatically shall be deemed to be a Revolving Loan hereunder (notwithstanding any failure to satisfy any condition precedent set forth in Section 3) and, initially, shall bear interest at the rate then applicable to Revolving Loans that are Base Rate Loans. If a Letter of Credit Disbursement is deemed to be a Revolving Loan hereunder, Borrowers’ obligation to pay the amount of such Letter of Credit Disbursement to Issuing Bank shall be automatically converted into an obligation to pay the resulting Revolving Loan.  Promptly following receipt by Agent of any payment from Borrowers pursuant to this paragraph, Agent shall distribute such payment to Issuing Bank or, to the extent that Revolving Lenders

 

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have made payments pursuant to Section 2.11(e) to reimburse Issuing Bank, then to such Revolving Lenders and Issuing Bank as their interests may appear.

 

(e)                                 Promptly following receipt of a notice of a Letter of Credit Disbursement pursuant to Section 2.11(d), each Revolving Lender agrees to fund its Pro Rata Share of any Revolving Loan deemed made pursuant to Section 2.11(d) on the same terms and conditions as if Borrowers had requested the amount thereof as a Revolving Loan and Agent shall promptly pay to Issuing Bank the amounts so received by it from the Revolving Lenders.  By the issuance of a Letter of Credit (or an amendment, renewal, or extension of a Letter of Credit) and without any further action on the part of Issuing Bank or the Revolving Lenders, Issuing Bank shall be deemed to have granted to each Revolving Lender, and each Revolving Lender shall be deemed to have purchased, a participation in each Letter of Credit issued by Issuing Bank, in an amount equal to its Pro Rata Share of such Letter of Credit, and each such Revolving Lender agrees to pay to Agent, for the account of Issuing Bank, such Revolving Lender’s Pro Rata Share of any Letter of Credit Disbursement made by Issuing Bank under the applicable Letter of Credit.  In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees to pay to Agent, for the account of Issuing Bank, such Revolving Lender’s Pro Rata Share of each Letter of Credit Disbursement made by Issuing Bank and not reimbursed by Borrowers on the date due as provided in Section 2.11(d), or of any reimbursement payment that is required to be refunded (or that Agent or Issuing Bank elects, based upon the advice of counsel, to refund) to Borrowers for any reason.  Each Revolving Lender acknowledges and agrees that its obligation to deliver to Agent, for the account of Issuing Bank, an amount equal to its respective Pro Rata Share of each Letter of Credit Disbursement pursuant to this Section 2.11(e) shall be absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuation of an Event of Default or Default or the failure to satisfy any condition set forth in Section 3.  If any such Revolving Lender fails to make available to Agent the amount of such Revolving Lender’s Pro Rata Share of a Letter of Credit Disbursement as provided in this Section, such Revolving Lender shall be deemed to be a Defaulting Lender and Agent (for the account of Issuing Bank) shall be entitled to recover such amount on demand from such Revolving Lender together with interest thereon at the Defaulting Lender Rate until paid in full.

 

(f)                                   Each Borrower agrees to indemnify, defend and hold harmless each member of the Lender Group (including Issuing Bank and its branches, Affiliates, and correspondents) and each such Person’s respective directors, officers, employees, attorneys and agents (each, including Issuing Bank, a “Letter of Credit Related Person”) (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, liabilities, fines, costs, penalties, and damages, and all reasonable fees and disbursements of attorneys, experts, or consultants and all other costs and expenses actually incurred in connection therewith or in connection with the enforcement of this indemnification (as and when they are incurred and irrespective of whether suit is brought), which may be incurred by or awarded against any such Letter of Credit Related Person (other than Taxes, which shall be governed by Section 16) (the “Letter of Credit Indemnified Costs”), and which arise out of or in connection with, or as a result of:

 

(i)                                     any Letter of Credit or any pre-advice of its issuance;

 

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(ii)                                  any transfer, sale, delivery, surrender or endorsement of any Drawing Document at any time(s) held by any such Letter of Credit Related Person in connection with any Letter of Credit;

 

(iii)                               any action or proceeding arising out of, or in connection with, any Letter of Credit (whether administrative, judicial or in connection with arbitration), including any action or proceeding to compel or restrain any presentation or payment under any Letter of Credit, or for the wrongful dishonor of, or honoring a presentation under, any Letter of Credit;

 

(iv)                              any independent undertakings issued by the beneficiary of any Letter of Credit;

 

(v)                                 any unauthorized instruction or request made to Issuing Bank in connection with any Letter of Credit or requested Letter of Credit or error in computer or electronic transmission;

 

(vi)                              an adviser, confirmer or other nominated person seeking to be reimbursed, indemnified or compensated;

 

(vii)                           any third party seeking to enforce the rights of an applicant, beneficiary, nominated person, transferee, assignee of Letter of Credit proceeds or holder of an instrument or document;

 

(viii)                        the fraud, forgery or illegal action of parties other than the Letter of Credit Related Person;

 

(ix)                              Issuing Bank’s performance of the obligations of a confirming institution or entity that wrongfully dishonors a confirmation; or

 

(x)                                 the acts or omissions, whether rightful or wrongful, of any present or future de jure or de facto governmental or regulatory authority or cause or event beyond the control of the Letter of Credit Related Person;

 

in each case, including that resulting from the Letter of Credit Related Person’s own negligence; provided, however, that such indemnity shall not be available to any Letter of Credit Related Person claiming indemnification under clauses (i) through (x) above to the extent that such Letter of Credit Indemnified Costs may be finally determined in a non-appealable judgment of a court of competent jurisdiction to have resulted directly from the gross negligence or willful misconduct of the Letter of Credit Related Person claiming indemnity.  Borrowers hereby agree to pay the Letter of Credit Related Person claiming indemnity on demand from time to time all amounts owing under this Section 2.11(f).  If and to the extent that the obligations of Borrowers under this Section 2.11(f) are unenforceable for any reason, Borrowers agree to make the maximum contribution to the Letter of Credit Indemnified Costs permissible under applicable law.  This indemnification provision shall survive termination of this Agreement and all Letters of Credit.

 

(g)                                The liability of Issuing Bank (or any other Letter of Credit Related Person) under, in connection with or arising out of any Letter of Credit (or pre-advice), regardless of the

 

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form or legal grounds of the action or proceeding, shall be limited to direct damages suffered by Borrowers that are caused directly by Issuing Bank’s gross negligence or willful misconduct in (i) honoring a presentation under a Letter of Credit that on its face does not at least substantially comply with the terms and conditions of such Letter of Credit, (ii) failing to honor a presentation under a Letter of Credit that strictly complies with the terms and conditions of such Letter of Credit or (iii) retaining Drawing Documents presented under a Letter of Credit.  Issuing Bank shall be deemed to have acted with due diligence and reasonable care if Issuing Bank’s conduct is in accordance with Standard Letter of Credit Practice or in accordance with this Agreement.  Borrowers’ aggregate remedies against Issuing Bank and any Letter of Credit Related Person for wrongfully honoring a presentation under any Letter of Credit or wrongfully retaining honored Drawing Documents shall in no event exceed the aggregate amount paid by Borrowers to Issuing Bank in respect of the honored presentation in connection with such Letter of Credit under Section 2.11(d), plus interest at the rate then applicable to Base Rate Loans hereunder.  Borrowers shall take action to avoid and mitigate the amount of any damages claimed against Issuing Bank or any other Letter of Credit Related Person, including by enforcing its rights against the beneficiaries of the Letters of Credit.  Any claim by Borrowers under or in connection with any Letter of Credit shall be reduced by an amount equal to the sum of (x) the amount (if any) saved by Borrowers as a result of the breach or alleged wrongful conduct complained of; and (y) the amount (if any) of the loss that would have been avoided had Borrowers taken all reasonable steps to mitigate any loss, and in case of a claim of wrongful dishonor, by specifically and timely authorizing Issuing Bank to effect a cure.

 

(h)                                 Borrowers are responsible for preparing or approving the final text of the Letter of Credit as issued by Issuing Bank, irrespective of any assistance Issuing Bank may provide such as drafting or recommending text or by Issuing Bank’s use or refusal to use text submitted by Borrowers.  Borrowers are solely responsible for the suitability of the Letter of Credit for Borrowers’ purposes.  With respect to any Letter of Credit containing an “automatic amendment” to extend the expiration date of such Letter of Credit, Issuing Bank, in its sole and absolute discretion, may give notice of nonrenewal of such Letter of Credit and, if Borrowers do not at any time want such Letter of Credit to be renewed, Borrowers will so notify Agent and Issuing Bank at least 15 calendar days before Issuing Bank is required to notify the beneficiary of such Letter of Credit or any advising bank of such nonrenewal pursuant to the terms of such Letter of Credit.

 

(i)                                     Borrowers’ reimbursement and payment obligations under this Section 2.11 are absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever, including:

 

(i)                                     any lack of validity, enforceability or legal effect of any Letter of Credit or this Agreement or any term or provision therein or herein;

 

(ii)                                  payment against presentation of any draft, demand or claim for payment under any Drawing Document that does not comply in whole or in part with the terms of the applicable Letter of Credit or which proves to be fraudulent, forged or invalid in any respect or any statement therein being untrue or inaccurate in any respect, or which is signed, issued or presented by a Person or a transferee of such Person purporting to be a successor or transferee of the beneficiary of such Letter of Credit;

 

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(iii)                               Issuing Bank or any of its branches or Affiliates being the beneficiary of any Letter of Credit;

 

(iv)                              Issuing Bank or any correspondent honoring a drawing against a Drawing Document up to the amount available under any Letter of Credit even if such Drawing Document claims an amount in excess of the amount available under the Letter of Credit;

 

(v)                                 the existence of any claim, set-off, defense or other right that any Borrower or any of its Subsidiaries may have at any time against any beneficiary, any assignee of proceeds, Issuing Bank or any other Person;

 

(vi)                              any other event, circumstance or conduct whatsoever, whether or not similar to any of the foregoing that might, but for this Section 2.11(i), constitute a legal or equitable defense to or discharge of, or provide a right of set-off against, any Borrower’s or any of its Subsidiaries’ reimbursement and other payment obligations and liabilities, arising under, or in connection with, any Letter of Credit, whether against Issuing Bank, the beneficiary or any other Person; or

 

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

 

provided, however, that subject to Section 2.11(g) above, the foregoing shall not release Issuing Bank from such liability to Borrowers as may be finally determined in a final, non-appealable judgment of a court of competent jurisdiction against Issuing Bank following reimbursement or payment of the obligations and liabilities, including reimbursement and other payment obligations, of Borrowers to Issuing Bank arising under, or in connection with, this Section 2.11 or any Letter of Credit.

 

(j)                                     Without limiting any other provision of this Agreement, Issuing Bank and each other Letter of Credit Related Person (if applicable) shall not be responsible to Borrowers for, and Issuing Bank’s rights and remedies against Borrowers and the obligation of Borrowers to reimburse Issuing Bank for each drawing under each Letter of Credit shall not be impaired by:

 

(i)                                     honor of a presentation under any Letter of Credit that on its face substantially complies with the terms and conditions of such Letter of Credit, even if the Letter of Credit requires strict compliance by the beneficiary;

 

(ii)                                  honor of a presentation of any Drawing Document that appears on its face to have been signed, presented or issued (A) by any purported successor or transferee of any beneficiary or other Person required to sign, present or issue such Drawing Document or (B) under a new name of the beneficiary;

 

(iii)                               acceptance as a draft of any written or electronic demand or request for payment under a Letter of Credit, even if nonnegotiable or not in the form of a draft or notwithstanding any requirement that such draft, demand or request bear any or adequate reference to the Letter of Credit;

 

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(iv)                              the identity or authority of any presenter or signer of any Drawing Document or the form, accuracy, genuineness or legal effect of any Drawing Document (other than Issuing Bank’s determination that such Drawing Document appears on its face substantially to comply with the terms and conditions of the Letter of Credit);

 

(v)                                 acting upon any instruction or request relative to a Letter of Credit or requested Letter of Credit that Issuing Bank in good faith believes to have been given by a Person authorized to give such instruction or request;

 

(vi)                              any errors, omissions, interruptions or delays in transmission or delivery of any message, advice or document (regardless of how sent or transmitted) or for errors in interpretation of technical terms or in translation or any delay in giving or failing to give notice to Borrowers;

 

(vii)                           any acts, omissions or fraud by, or the insolvency of, any beneficiary, any nominated person or entity or any other Person or any breach of contract between any beneficiary and any Borrower or any of the parties to the underlying transaction to which the Letter of Credit relates;

 

(viii)                        assertion or waiver of any provision of the ISP or UCP that primarily benefits an issuer of a letter of credit, including any requirement that any Drawing Document be presented to it at a particular hour or place;

 

(ix)                              payment to any paying or negotiating bank (designated or permitted by the terms of the applicable Letter of Credit) claiming that it rightfully honored or is entitled to reimbursement or indemnity under Standard Letter of Credit Practice applicable to it;

 

(x)                                 acting or failing to act as required or permitted under Standard Letter of Credit Practice applicable to where Issuing Bank has issued, confirmed, advised or negotiated such Letter of Credit, as the case may be;

 

(xi)                              honor of a presentation after the expiration date of any Letter of Credit notwithstanding that a presentation was made prior to such expiration date and dishonored by Issuing Bank if subsequently Issuing Bank or any court or other finder of fact determines such presentation should have been honored;

 

(xii)                           dishonor of any presentation that does not strictly comply or that is fraudulent, forged or otherwise not entitled to honor; or

 

(xiii)                        honor of a presentation that is subsequently determined by Issuing Bank to have been made in violation of international, federal, state or local restrictions on the transaction of business with certain prohibited Persons.

 

(k)                                 Borrowers shall pay immediately upon demand to Agent for the account of Issuing Bank as non-refundable fees, commissions, and charges (it being acknowledged and agreed that any charging of such fees, commissions, and charges to the Loan Account pursuant to the provisions of Section 2.6(d) shall be deemed to constitute a demand for payment thereof for the purposes of this Section 2.11(k)):  (i) a fronting fee which shall be imposed by Issuing

 

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Bank upon the issuance of each Letter of Credit of .125 per annum of the face amount thereof, plus (ii) any and all other customary commissions, fees and charges then in effect imposed by, and any and all expenses incurred by, Issuing Bank, or by any adviser, confirming institution or entity or other nominated person, relating to Letters of Credit, at the time of issuance of any Letter of Credit and upon the occurrence of any other activity with respect to any Letter of Credit (including transfers, assignments of proceeds, amendments, drawings, renewals or cancellations).  Notwithstanding the foregoing, if Issuing Bank is a Person other than Wells Fargo, all fronting fees payable in respect of Letters of Credit issued by such Issuing Bank shall be paid by Borrowers immediately upon demand directly to such Issuing Bank for its own account.

 

(l)                                     If by reason of (x) any Change in Law, or (y) compliance by Issuing Bank or any other member of the Lender Group with any direction, request, or requirement (irrespective of whether having the force of law) of any Governmental Authority or monetary authority including, Regulation D of the Board of Governors as from time to time in effect (and any successor thereto):

 

(i)                                     any reserve, deposit, or similar requirement is or shall be imposed or modified in respect of any Letter of Credit issued or caused to be issued hereunder or hereby, or

 

(ii)                                  there shall be imposed on Issuing Bank or any other member of the Lender Group any other condition regarding any Letter of Credit,

 

and the result of the foregoing is to increase, directly or indirectly, the cost to Issuing Bank or any other member of the Lender Group of issuing, making, participating in, or maintaining any Letter of Credit or to reduce the amount receivable in respect thereof, then, and in any such case, Agent may, at any time within a reasonable period after the additional cost is incurred or the amount received is reduced, notify Borrowers, and Borrowers shall pay within 30 days after demand therefor, such amounts as Agent may specify to be necessary to compensate Issuing Bank or any other member of the Lender Group for such additional cost or reduced receipt, together with interest on such amount from the date of such demand until payment in full thereof at the rate then applicable to Base Rate Loans hereunder; provided, that (A) Borrowers shall not be required to provide any compensation pursuant to this Section 2.11(l) for any such amounts incurred more than 180 days prior to the date on which the demand for payment of such amounts is first made to Borrowers, and (B) if an event or circumstance giving rise to such amounts is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.  The determination by Agent of any amount due pursuant to this Section 2.11(l), as set forth in a certificate setting forth the calculation thereof in reasonable detail, shall, in the absence of manifest or demonstrable error, be final and conclusive and binding on all of the parties hereto.

 

(m)                             Unless otherwise expressly agreed by Issuing Bank and Borrowers when a Letter of Credit is issued, (i) the rules of the ISP shall apply to each standby Letter of Credit, and (ii) the rules of the UCP shall apply to each commercial Letter of Credit.

 

(n)                                 In the event of a direct conflict between the provisions of this Section 2.11 and any provision contained in any Issuer Document, it is the intention of the parties hereto that

 

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such provisions be read together and construed, to the fullest extent possible, to be in concert with each other.  In the event of any actual, irreconcilable conflict that cannot be resolved as aforesaid, the terms and provisions of this Section 2.11 shall control and govern.

 

2.12.     LIBOR Option.

 

(a)        Interest and Interest Payment Dates.  In lieu of having interest charged at the rate based upon the Base Rate, Borrowers shall have the option, subject to Section 2.12(b) below (the “LIBOR Option”) to have interest on all or a portion of the Revolving Loans or the Term Loan be charged (whether at the time when made (unless otherwise provided herein), upon conversion from a Base Rate Loan to a LIBOR Rate Loan, or upon continuation of a LIBOR Rate Loan as a LIBOR Rate Loan) at a rate of interest based upon the LIBOR Rate.  Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the last day of the Interest Period applicable thereto; provided, that, subject to the following clauses (ii) and (iii), in the case of any Interest Period greater than 3 months in duration, interest shall be payable at 3 month intervals after the commencement of the applicable Interest Period and on the last day of such Interest Period), (ii) the date on which all or any portion of the Obligations are accelerated pursuant to the terms hereof, or (iii) the date on which this Agreement is terminated pursuant to the terms hereof.  On the last day of each applicable Interest Period, unless Borrowers have properly exercised the LIBOR Option with respect thereto, the interest rate applicable to such LIBOR Rate Loan automatically shall convert to the rate of interest then applicable to Base Rate Loans of the same type hereunder.  At any time that an Event of Default has occurred and is continuing, at the written election of the Required Lenders, Borrowers no longer shall have the option to request that Revolving Loans bear interest at a rate based upon the LIBOR Rate.

 

(b)        LIBOR Election.

 

(i)         Borrowers may, at any time and from time to time, so long as Borrowers have not received a notice from Agent (which notice Agent may elect to give or not give in its discretion unless Agent is directed to give such notice by the Required Lenders, in which case, it shall give the notice to Borrowers), after the occurrence and during the continuance of an Event of Default, to terminate the right of Borrowers to exercise the LIBOR Option during the continuance of such Event of Default, elect to exercise the LIBOR Option by notifying Agent prior to 1:00 p.m. at least 1 Business Day prior to the commencement of the proposed Interest Period (the “LIBOR Deadline”).  Notice of Borrowers’ election of the LIBOR Option for a permitted portion of the Revolving Loans or the Term Loan and an Interest Period pursuant to this Section shall be made by delivery to Agent of a LIBOR Notice received by Agent before the LIBOR Deadline, or by telephonic notice received by Agent before the LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice received by Agent prior to 5:00 p.m. on the same day).  Promptly upon its receipt of each such LIBOR Notice, Agent shall provide a copy thereof to each of the affected Lenders.

 

(ii)         Each LIBOR Notice shall be irrevocable and binding on Borrowers.  In connection with each LIBOR Rate Loan, each Borrower shall indemnify, defend, and hold Agent and the Lenders harmless against any loss, cost, or expense actually incurred by Agent or any Lender as a result of (A) the payment of any principal of any LIBOR Rate Loan other than on the last day of an Interest Period applicable thereto (including as a result of an

 

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Event of Default), (B) the conversion of any LIBOR Rate Loan other than on the last day of the Interest Period applicable thereto, or (C) the failure to borrow, convert, continue or prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered pursuant hereto (such losses, costs, or expenses, “Funding Losses”).  A certificate of Agent or a Lender delivered to Borrowers setting forth in reasonable detail any amount or amounts that Agent or such Lender is entitled to receive pursuant to this Section 2.12 shall be conclusive absent manifest error.  Borrowers shall pay such amount to Agent or the Lender, as applicable, within 30 days of the date of its receipt of such certificate.

 

(iii)        Unless Agent, in its sole discretion, agrees otherwise, Borrowers shall have not more than 5 LIBOR Rate Loans in effect at any given time.  Borrowers may only exercise the LIBOR Option for proposed LIBOR Rate Loans of at least $1,000,000.

 

(c)        Conversion.  Borrowers may convert LIBOR Rate Loans to Base Rate Loans at any time; provided, that in the event that LIBOR Rate Loans are converted or prepaid on any date that is not the last day of the Interest Period applicable thereto, including as a result of any prepayment through the required application by Agent of any payments or proceeds of Collateral in accordance with Section 2.4(b) or for any other reason, including early termination of the term of this Agreement or acceleration of all or any portion of the Obligations pursuant to the terms hereof, each Borrower shall indemnify, defend, and hold Agent and the Lenders and their Participants harmless against any and all Funding Losses in accordance with Section 2.12(b)(ii).

 

(d)        Special Provisions Applicable to LIBOR Rate.

 

(i)         The LIBOR Rate may be adjusted by Agent with respect to any Lender on a prospective basis to take into account any additional or increased costs to such Lender of maintaining or obtaining any eurodollar deposits or increased costs (other than Taxes which shall be governed by Section 16), in each case, due to changes in applicable law occurring subsequent to the commencement of the then applicable Interest Period, including any Changes in Law) and changes in the reserve requirements imposed by the Board of Governors, which additional or increased costs would increase the cost of funding or maintaining loans bearing interest at the LIBOR Rate.  In any such event, the affected Lender shall give Borrowers and Agent notice of such a determination and adjustment and Agent promptly shall transmit the notice to each other Lender and, upon its receipt of the notice from the affected Lender, Borrowers may, by notice to such affected Lender (A) require such Lender to furnish to Borrowers a statement setting forth in reasonable detail the basis for adjusting such LIBOR Rate and the method for determining the amount of such adjustment, or (B) repay the LIBOR Rate Loans of such Lender with respect to which such adjustment is made (together with any amounts due under Section 2.12(b)(ii)).

 

(ii)         In the event that any change in market conditions or any Change in Law shall at any time after the date hereof, in the reasonable opinion of any Lender, make it unlawful or impractical for such Lender to fund or maintain LIBOR Rate Loans or to continue such funding or maintaining, or to determine or charge interest rates at the LIBOR Rate, such Lender shall give notice of such changed circumstances to Agent and Borrowers and Agent promptly shall transmit the notice to each other Lender and (y) in the case of any LIBOR Rate

 

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Loans of such Lender that are outstanding, the date specified in such Lender’s notice shall be deemed to be the last day of the Interest Period of such LIBOR Rate Loans, and interest upon the LIBOR Rate Loans of such Lender thereafter shall accrue interest at the rate then applicable to Base Rate Loans, and (z) Borrowers shall not be entitled to elect the LIBOR Option until such Lender determines that it would no longer be unlawful or impractical to do so.

 

(e)        No Requirement of Matched Funding.  Anything to the contrary contained herein notwithstanding, neither Agent, nor any Lender, nor any of their Participants, is required actually to acquire eurodollar deposits to fund or otherwise match fund any Obligation as to which interest accrues at the LIBOR Rate.

 

2.13.     Capital Requirements.

 

(a)        If, after the date hereof, Issuing Bank or any Lender determines that (i) any Change in Law regarding capital or reserve requirements for banks or bank holding companies, or (ii) compliance by Issuing Bank or such Lender, or their respective parent bank holding companies, with any guideline, request or directive of any Governmental Authority regarding capital adequacy (whether or not having the force of law), has the effect of reducing the return on Issuing Bank’s, such Lender’s, or such holding companies’ capital as a consequence of Issuing Bank’s or such Lender’s commitments hereunder to a level below that which Issuing Bank, such Lender, or such holding companies could have achieved but for such Change in Law or compliance (taking into consideration Issuing Bank’s, such Lender’s, or such holding companies’ then existing policies with respect to capital adequacy and assuming the full utilization of such entity’s capital) by any amount deemed by Issuing Bank or such Lender to be material, then Issuing Bank or such Lender may notify Borrowers and Agent thereof.  Following receipt of such notice, Borrowers agree to pay Issuing Bank or such Lender on demand the amount of such reduction of return of capital as and when such reduction is determined, payable within 30 days after presentation by Issuing Bank or such Lender of a statement in the amount and setting forth in reasonable detail Issuing Bank’s or such Lender’s calculation thereof and the assumptions upon which such calculation was based (which statement shall be deemed true and correct absent manifest error).  In determining such amount, Issuing Bank or such Lender may use any reasonable averaging and attribution methods.  Failure or delay on the part of Issuing Bank or any Lender to demand compensation pursuant to this Section shall not constitute a waiver of Issuing Bank’s or such Lender’s right to demand such compensation; provided that Borrowers shall not be required to compensate Issuing Bank or a Lender pursuant to this Section for any reductions in return incurred more than 180 days prior to the date that Issuing Bank or such Lender notifies Borrowers of such Change in Law giving rise to such reductions and of such Lender’s intention to claim compensation therefor; provided further that if such claim arises by reason of the Change in Law that is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

 

(b)        If Issuing Bank or any Lender requests additional or increased costs referred to in Section 2.11(l) or Section 2.12(d)(i) or amounts under Section 2.13(a) or sends a notice under Section 2.12(d)(ii) relative to changed circumstances (such Issuing Bank or Lender, an “Affected Lender”), then such Affected Lender shall use reasonable efforts to promptly designate a different one of its lending offices or to assign its rights and obligations hereunder to another of its offices or branches, if (i) in the reasonable judgment of such Affected Lender, such

 

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designation or assignment would eliminate or reduce amounts payable pursuant to Section 2.11(l), Section 2.12(d)(i) or Section 2.13(a), as applicable, or would eliminate the illegality or impracticality of funding or maintaining LIBOR Rate Loans and (ii) in the reasonable judgment of such Affected Lender, such designation or assignment would not subject it to any material unreimbursed cost or expense and would not otherwise be materially disadvantageous to it.  Borrowers agree to pay all reasonable out-of-pocket costs and expenses incurred by such Affected Lender in connection with any such designation or assignment.  If, after such reasonable efforts, such Affected Lender does not so designate a different one of its lending offices or assign its rights to another of its offices or branches so as to eliminate Borrowers’ obligation to pay any future amounts to such Affected Lender pursuant to Section 2.11(l), Section 2.12(d)(i) or Section 2.13(a), as applicable, or to enable Borrowers to obtain LIBOR Rate Loans, then Borrowers (without prejudice to any amounts then due to such Affected Lender under Section 2.11(l), Section 2.12(d)(i) or Section 2.13(a), as applicable) may, unless prior to the effective date of any such assignment the Affected Lender withdraws its request for such additional amounts under Section 2.11(l), Section 2.12(d)(i) or Section 2.13(a), as applicable, or indicates that it is no longer unlawful or impractical to fund or maintain LIBOR Rate Loans, may designate a different Issuing Bank or substitute a Lender, in each case, reasonably acceptable to Agent to purchase the Obligations owed to such Affected Lender and such Affected Lender’s commitments hereunder (a “Replacement Lender”), and if such Replacement Lender agrees to such purchase, such Affected Lender shall assign to the Replacement Lender its Obligations and commitments, and upon such purchase by the Replacement Lender, which such Replacement Lender shall be deemed to be “Issuing Bank” or a “Lender” (as the case may be) for purposes of this Agreement and such Affected Lender shall cease to be “Issuing Bank” or a “Lender” (as the case may be) for purposes of this Agreement.

 

(c)        Notwithstanding anything herein to the contrary, the protection of Sections 2.11(l), 2.12(d), and 2.13 shall be available to Issuing Bank and each Lender (as applicable) regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, judicial ruling, judgment, guideline, treaty or other change or condition which shall have occurred or been imposed, so long as it shall be customary for issuing banks or lenders affected thereby to comply therewith.  Notwithstanding any other provision herein, neither Issuing Bank nor any Lender shall demand compensation pursuant to this Section 2.13 if it shall not at the time be the general policy or practice of Issuing Bank or such Lender (as the case may be) to demand such compensation in similar circumstances under comparable provisions of other credit agreements, if any.

 

2.14.     [Intentionally Omitted].

 

2.15.     Joint and Several Liability of Borrowers.

 

(a)        Each Borrower is accepting joint and several liability hereunder and under the other Loan Documents in consideration of the financial accommodations to be provided by the Lender Group under this Agreement, for the mutual benefit, directly and indirectly, of each Borrower and in consideration of the undertakings of the other Borrowers to accept joint and several liability for the Obligations.

 

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(b)        Each Borrower, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrowers, with respect to the payment and performance of all of the Obligations (including any Obligations arising under this Section 2.15), it being the intention of the parties hereto that all the Obligations shall be the joint and several obligations of each Borrower without preferences or distinction among them.

 

(c)        If and to the extent that any Borrower shall fail to make any payment with respect to any of the Obligations as and when due or to perform any of the Obligations in accordance with the terms thereof, then in each such event the other Borrowers will make such payment with respect to, or perform, such Obligation until such time as all of the Obligations are paid in full.

 

(d)        The Obligations of each Borrower under the provisions of this Section 2.15 constitute the absolute and unconditional, full recourse Obligations of each Borrower enforceable against each Borrower to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of the provisions of this Agreement (other than this Section 2.15(d)) or any other circumstances whatsoever.

 

(e)        Except as otherwise expressly provided in this Agreement, each Borrower hereby waives notice of acceptance of its joint and several liability, notice of any Revolving Loans or Letters of Credit issued under or pursuant to this Agreement, notice of the occurrence of any Default, Event of Default, or of any demand for any payment under this Agreement, notice of any action at any time taken or omitted by Agent or Lenders under or in respect of any of the Obligations, any requirement of diligence or to mitigate damages and, generally, to the extent permitted by applicable law, all demands, notices and other formalities of every kind in connection with this Agreement (except as otherwise provided in this Agreement).  Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the Obligations, the acceptance of any payment of any of the Obligations, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by Agent or Lenders at any time or times in respect of any default by any Borrower in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by Agent or Lenders in respect of any of the Obligations, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of the Obligations or the addition, substitution or release, in whole or in part, of any Borrower.  Without limiting the generality of the foregoing, each Borrower assents to any other action or delay in acting or failure to act on the part of any Agent or Lender with respect to the failure by any Borrower to comply with any of its respective Obligations, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with applicable laws or regulations thereunder, which might, but for the provisions of this Section 2.15 afford grounds for terminating, discharging or relieving any Borrower, in whole or in part, from any of its Obligations under this Section 2.15, it being the intention of each Borrower that, so long as any of the Obligations hereunder remain unsatisfied, the Obligations of each Borrower under this Section 2.15 shall not be discharged except by performance and then only to the extent of such performance.  The Obligations of each Borrower under this Section 2.15 shall not be diminished or rendered unenforceable by any

 

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winding up, reorganization, arrangement, liquidation, reconstruction or similar proceeding with respect to any other Borrower or any Agent or Lender.

 

(f)         Each Borrower represents and warrants to Agent and Lenders that such Borrower is currently informed of the financial condition of Borrowers and of all other circumstances which a diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations.  Each Borrower further represents and warrants to Agent and Lenders that such Borrower has read and understands the terms and conditions of the Loan Documents.  Each Borrower hereby covenants that such Borrower will continue to keep informed of Borrowers’ financial condition and of all other circumstances which bear upon the risk of nonpayment or nonperformance of the Obligations.

 

(g)        The provisions of this Section 2.15 are made for the benefit of Agent, each member of the Lender Group, each Bank Product Provider, and their respective successors and assigns, and may be enforced by it or them from time to time against any or all Borrowers as often as occasion therefor may arise and without requirement on the part of Agent, any member of the Lender Group, any Bank Product Provider, or any of their successors or assigns first to marshal any of its or their claims or to exercise any of its or their rights against any Borrower or to exhaust any remedies available to it or them against any Borrower or to resort to any other source or means of obtaining payment of any of the Obligations hereunder or to elect any other remedy.  The provisions of this Section 2.15 shall remain in effect until all of the Obligations shall have been paid in full or otherwise fully satisfied.  If at any time, any payment, or any part thereof, made in respect of any of the Obligations, is rescinded or must otherwise be restored or returned by Agent or any Lender upon the insolvency, bankruptcy or reorganization of any Borrower, or otherwise, the provisions of this Section 2.15 will forthwith be reinstated in effect, as though such payment had not been made.

 

(h)        Each Borrower hereby agrees that it will not enforce any of its rights of contribution or subrogation against any other Borrower with respect to any liability incurred by it hereunder or under any of the other Loan Documents, any payments made by it to Agent or Lenders with respect to any of the Obligations or any collateral security therefor until such time as all of the Obligations have been paid in full in cash.  Any claim which any Borrower may have against any other Borrower with respect to any payments to any Agent or any member of the Lender Group hereunder or under any of the Bank Product Agreements are hereby expressly made subordinate and junior in right of payment, without limitation as to any increases in the Obligations arising hereunder or thereunder, to the prior payment in full in cash of the Obligations and, in the event of any insolvency, bankruptcy, receivership, liquidation, reorganization or other similar proceeding under the laws of any jurisdiction relating to any Borrower, its debts or its assets, whether voluntary or involuntary, all such Obligations shall be paid in full in cash before any payment or distribution of any character, whether in cash, securities or other property, shall be made to any other Borrower therefor.

 

(i)         Notwithstanding anything to the contrary in the foregoing, no Borrower that is not a Qualified ECP Guarantor shall be jointly and severally liable for any Excluded Swap Obligations in respect of such Borrower.

 

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(j)         Each Borrower that is a Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Borrower to guaranty and otherwise honor all Obligations in respect of Swap Obligations.  The obligations of each Qualified ECP Guarantor under this Section shall remain in full force and effect until payment in full of the Obligations.  Each Qualified ECP Guarantor intends that this Section 2.15(j) constitute, and this Section 2.15(j) shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Grantor for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

(k)        Notwithstanding any other provision of this Section 2.15, the joint and several liability of each Borrower hereunder shall be limited to a maximum amount as would not, after giving effect to such maximum amount, render its obligations hereunder subject to avoidance under Section 548 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or comparable law.  In determining the limitations, if any, on the amount of any Borrower’s obligations hereunder pursuant to the preceding sentence, it is the intention of the parties hereto that any rights of subrogation, indemnification or contribution which such Borrower may have under this Section 2.15, any other agreement or applicable law shall be taken into account.  Subject to the restrictions, limitations and other terms of this Agreement (including Section 2.15(h)), each Borrower hereby agrees that to the extent that a Borrower shall have paid more than its proportionate share of any payment made hereunder, such Borrower shall be entitled to seek and receive contribution from and against any other Borrower hereunder which has not paid its proportionate share of such payment.

 

3.                                     CONDITIONS; TERM OF AGREEMENT.

 

3.1.       Conditions Precedent to the Initial Extension of Credit.  The obligation of each Lender to make the initial extensions of credit provided for hereunder is subject to the fulfillment, to the satisfaction of Agent and each Lender, of each of the conditions precedent set forth on Schedule 3.1 (the making of such initial extensions of credit by a Lender being conclusively deemed to be its satisfaction or waiver of the conditions precedent).

 

3.2.       Conditions Precedent to all Extensions of Credit.  The obligation of the Lender Group (or any member thereof) to make any Revolving Loans hereunder (or to extend any other credit hereunder) at any time shall be subject to the following conditions precedent:

 

(a)        the representations and warranties of each Borrower or its Subsidiaries contained in this Agreement or in the other Loan Documents shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) on and as of the date of such extension of credit, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of such earlier date); and

 

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(b)        no Default or Event of Default shall have occurred and be continuing on the date of such extension of credit, nor shall either result from the making thereof.

 

3.3.       Maturity.  This Agreement shall continue in full force and effect for a term ending on the Maturity Date.

 

3.4.       Effect of Maturity.  On the Maturity Date, all commitments of the Lender Group to provide additional credit hereunder shall automatically be terminated and all of the Obligations immediately shall become due and payable without notice or demand and Borrowers shall be required to repay all of the Obligations in full.  No termination of the obligations of the Lender Group (other than payment in full of the Obligations and termination of the Commitments) shall relieve or discharge any Loan Party of its duties, obligations, or covenants hereunder or under any other Loan Document and Agent’s Liens in the Collateral shall continue to secure the Obligations and shall remain in effect until all Obligations have been paid in full and the Commitments have been terminated.  When all of the Obligations have been paid in full and the Lender Group’s obligations to provide additional credit under the Loan Documents have been terminated irrevocably, Agent will, at Borrowers’ sole expense, execute and deliver any termination statements, lien releases, discharges of security interests, and other similar discharge or release documents (and, if applicable, in recordable form) as are reasonably necessary to release, as of record, Agent’s Liens and all notices of security interests and liens previously filed by Agent.

 

3.5.       Early Termination by Borrowers.  Borrowers have the option, at any time upon 10 Business Days prior written notice to Agent, to terminate this Agreement and terminate the Commitments hereunder by repaying to Agent all of the Obligations in full.  The foregoing notwithstanding, (a) Borrowers may rescind termination notices relative to proposed payments in full of the Obligations with the proceeds of third party Indebtedness if the closing for such issuance or incurrence does not happen on or before the date of the proposed termination (in which case, a new notice shall be required to be sent in connection with any subsequent termination), and (b) Borrowers may extend the date of termination at any time with the consent of Agent (which consent shall not be unreasonably withheld or delayed).

 

3.6.       Post-Closing Covenants.  Each Borrower covenants and agrees to fulfill the obligations set forth on Schedule 3.6 (the failure by Borrowers to so perform or cause to be performed such obligations as and when required by the terms thereof (unless such date is extended, in writing, by Agent, which Agent may do without obtaining the consent of the other members of the Lender Group), shall constitute an Event of Default).

 

4.                                     REPRESENTATIONS AND WARRANTIES.

 

In order to induce the Lender Group to enter into this Agreement, each Borrower makes the following representations and warranties to the Lender Group which shall be true, correct, and complete, in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof), as of the Closing Date, and shall be true, correct, and complete, in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text

 

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thereof), as of the date of the making of each Revolving Loan (or other extension of credit) made thereafter, as though made on and as of the date of such Revolving Loan (or other extension of credit) (except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of such earlier date) and such representations and warranties shall survive the execution and delivery of this Agreement:

 

4.1.       Due Organization and Qualification; Subsidiaries.

 

(a)        Each Loan Party (i) is duly organized and existing and in good standing under the laws of the jurisdiction of its organization, (ii) is qualified to do business in any state where the failure to be so qualified could reasonably be expected to result in a Material Adverse Effect, and (iii) has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents to which it is a party and to carry out the transactions contemplated thereby.

 

(b)        As of December 31, 2015, set forth on Schedule 4.1(b) is a complete and accurate description of the authorized Equity Interests of Harte Hanks, by class, and, as of the Closing Date, a description of the number of shares of each such class that are issued and outstanding.  Except as set forth on Schedule 4.1(b), Harte Hanks is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its Equity Interests or any security convertible into or exchangeable for any of its Equity Interests.

 

(c)        Set forth on Schedule 4.1(c) (as such Schedule may be updated from time to time to reflect changes resulting from transactions permitted under this Agreement), is a complete and accurate list of Harte Hanks’ direct and indirect Subsidiaries, showing:  (i) the number of shares of each class of common and preferred Equity Interests authorized for each of such Subsidiaries, and (ii) the number and the percentage of the outstanding shares of each such class owned directly or indirectly by Administrative Borrower.  All of the outstanding Equity Interests of each such Subsidiary has been validly issued and is fully paid and non-assessable.

 

(d)        Except as set forth on Schedule 4.1(d), there are no subscriptions, options, warrants, or calls relating to any shares of any Borrower’s or any of its Subsidiaries’ Equity Interests, including any right of conversion or exchange under any outstanding security or other instrument.

 

4.2.       Due Authorization; No Conflict.

 

(a)        As to each Loan Party, the execution, delivery, and performance by such Loan Party of the Loan Documents to which it is a party have been duly authorized by all necessary action on the part of such Loan Party.

 

(b)        As to each Loan Party, the execution, delivery, and performance by such Loan Party of the Loan Documents to which it is a party do not and will not (i) violate any material provision of federal, state, or local law or regulation applicable to any Loan Party or its Subsidiaries, the Governing Documents of any Loan Party or its Subsidiaries, or any order,

 

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judgment, or decree of any court or other Governmental Authority binding on any Loan Party or its Subsidiaries, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material agreement of any Loan Party or its Subsidiaries where any such conflict, breach or default could individually or in the aggregate reasonably be expected to have a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any assets of any Loan Party, other than Permitted Liens, or (iv) require any approval of any holder of Equity Interests of a Loan Party or any approval or consent of any Person under any material agreement of any Loan Party, other than consents or approvals that have been obtained and that are still in force and effect and except, in the case of material agreements, for consents or approvals, the failure to obtain could not individually or in the aggregate reasonably be expected to cause a Material Adverse Effect.

 

4.3.       Governmental Consents.  The execution, delivery, and performance by each Loan Party of the Loan Documents to which such Loan Party is a party and the consummation of the transactions contemplated by the Loan Documents do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any Governmental Authority, other than registrations, consents, approvals, notices, or other actions that have been obtained and that are still in force and effect and except for filings and recordings with respect to the Collateral to be made, or otherwise delivered to Agent for filing or recordation, as of the Closing Date.

 

4.4.       Binding Obligations; Perfected Liens.

 

(a)        Each Loan Document has been duly executed and delivered by each Loan Party that is a party thereto and is the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its respective terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.

 

(b)        Agent’s Liens are validly created, perfected (other than (i) in respect of motor vehicles that are subject to a certificate of title, (ii) money, (iii) letter-of-credit rights (other than supporting obligations, (iv) commercial tort claims (other than those that, by the terms of the Guaranty and Security Agreement, are required to be perfected), and (v) any Deposit Accounts and Securities Accounts not subject to a Control Agreement as permitted by Section 7(k)(iv) of the Guaranty and Security Agreement, and subject only to the filing of financing statements, the recordation of the Copyright Security Agreement, and the recordation of the Mortgages, in each case, in the appropriate filing offices), and first priority Liens, subject only to Permitted Liens which are non-consensual Permitted Liens, permitted purchase money Liens, or the interests of lessors under Capital Leases.

 

4.5.       Title to Assets; No Encumbrances.  Each of the Loan Parties and its Subsidiaries has (a) good, sufficient and legal title to (in the case of fee interests in Real Property), (b) valid leasehold interests in (in the case of leasehold interests in real or personal property), and (c) good and marketable title to (in the case of all other personal property), all of their respective assets reflected in their most recent financial statements delivered pursuant to Section 5.1, in each case except for assets disposed of since the date of such financial statements

 

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to the extent permitted hereby.  All of such assets are free and clear of Liens except for Permitted Liens.

 

4.6.                          Litigation.

 

(a)                                 There are no actions, suits, or proceedings pending or, to the knowledge of any Borrower, after due inquiry, threatened in writing against a Loan Party or any of its Subsidiaries that either individually or in the aggregate could reasonably be expected to result in a Material Adverse Effect.

 

(b)                                Schedule 4.6(b) sets forth a complete and accurate description, with respect to each of the actions, suits, or proceedings with asserted liabilities in excess of, or that could reasonably be expected to result in liabilities in excess of, $1,000,000 that, as of the Closing Date, is pending or, to the knowledge of any Borrower, after due inquiry, threatened against a Loan Party or any of its Subsidiaries, of (i) the parties to such actions, suits, or proceedings, (ii) the nature of the dispute that is the subject of such actions, suits, or proceedings, (iii) the procedural status, as of the Closing Date, with respect to such actions, suits, or proceedings, and (iv) whether any liability of the Loan Parties’ and their Subsidiaries in connection with such actions, suits, or proceedings is covered by insurance.

 

4.7.                          Compliance with Laws.  No Loan Party nor any of its Subsidiaries (a) is in violation of any applicable laws, rules, regulations, executive orders, or codes (including Environmental Laws) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, or (b) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

 

4.8.                          No Material Adverse Effect.  All historical financial statements relating to the Loan Parties and their Subsidiaries that have been delivered by Borrowers to Agent have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and present fairly in all material respects, the Loan Parties’ and their Subsidiaries’ consolidated financial condition as of the date thereof and results of operations for the period then ended.  Except as set forth on Schedule 4.8, since December 31, 2014, no event, circumstance, or change has occurred that has or could reasonably be expected to result in a Material Adverse Effect with respect to the Loan Parties and their Subsidiaries.

 

4.9.                          Solvency.

 

(a)                                 Each Borrower is Solvent, and on a consolidated basis the Loan Parties are Solvent.

 

(b)                                No transfer of property is being made by any Loan Party and no obligation is being incurred by any Loan Party in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of such Loan Party.

 

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4.10.                   Employee Benefits.

 

(a)                                 Except as set forth on Schedule 4.10, no Loan Party, none of their Subsidiaries, nor any of their ERISA Affiliates maintains or contributes to any Benefit Plan as of the Closing Date.

 

(b)                                Each Employee Benefit Plan is, and has been, maintained in substantial compliance with ERISA, the IRC, all applicable laws and the terms of each such Employee Benefit Plan.

 

(c)                                 Each Employee Benefit Plan that is intended to qualify under Section 401(a) of the IRC has received a favorable determination or opinion letter from the Internal Revenue Service that can be relied upon or an application for such letter is currently being processed by the Internal Revenue Service.  To the best knowledge of each Loan Party and the ERISA Affiliates after due inquiry, nothing has occurred which would prevent, or cause the loss of, such qualification.

 

(d)                                No liability to the PBGC (other than for the payment of current premiums which are not past due) by any Loan Party or ERISA Affiliate has been incurred or is expected by any Loan Party or ERISA Affiliate to be incurred with respect to any Pension Plan.

 

(e)                                 No Notification Event exists or has occurred in the past six (6) years that could reasonably be expected to result in a material liability to any Loan Party or Lien on the assets of any Loan Party.

 

(f)                                   No Loan Party or ERISA Affiliate has provided any security under Section 436 of the IRC.

 

4.11.                   Environmental Condition.  Except as set forth on Schedule 4.11, as of the Closing Date, (a) to each Borrower’s knowledge, no Loan Party’s nor any of its Subsidiaries’ properties or assets has ever been used by a Loan Party, its Subsidiaries, or by previous owners or operators in the disposal of, or to produce, store, handle, treat, release, or transport, any Hazardous Materials, where such disposal, production, storage, handling, treatment, release or transport was in violation, in any material respect, of any applicable Environmental Law, (b) to each Borrower’s knowledge, after due inquiry, no Loan Party’s nor any of its Subsidiaries’ properties or assets has ever been designated or identified in any manner pursuant to any environmental protection statute as a Hazardous Materials disposal site, (c) no Loan Party nor any of its Subsidiaries has received notice that a Lien arising under any Environmental Law has attached to any revenues or to any Real Property owned or operated by a Loan Party or its Subsidiaries, and (d) no Loan Party nor any of its Subsidiaries nor any of their respective facilities or operations is subject to any outstanding written order, consent decree, or settlement agreement with any Person relating to any Environmental Law or Environmental Liability that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

 

4.12.                   Complete Disclosure.  All factual information taken as a whole (other than forward-looking information and projections and information of a general economic nature and general information about Borrowers’ industry) furnished by or on behalf of a Loan Party or its 

 

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Subsidiaries in writing to Agent or any Lender (including all information contained in the Schedules hereto or in the other Loan Documents) for purposes of or in connection with this Agreement or the other Loan Documents, and all other such factual information taken as a whole (other than forward-looking information and projections and information of a general economic nature and general information about Borrowers’ industry) hereafter furnished by or on behalf of a Loan Party or its Subsidiaries in writing to Agent or any Lender will be, true and accurate, in all material respects, on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided.  The Projections delivered to Agent on March 2, 2016 represent, and as of the date on which any other Projections are delivered to Agent, such additional Projections represent, Borrowers’ good faith estimate, on the date such Projections are delivered, of the Loan Parties’ and their Subsidiaries’ future performance for the periods covered thereby based upon assumptions believed by Borrowers to be reasonable at the time of the delivery thereof to Agent (it being understood that such Projections are subject to significant uncertainties and contingencies, many of which are beyond the control of the Loan Parties and their Subsidiaries, and no assurances can be given that such Projections will be realized, and although reflecting Borrowers’ good faith estimate, projections or forecasts based on methods and assumptions which Borrowers believed to be reasonable at the time such Projections were prepared, are not to be viewed as facts, and that actual results during the period or periods covered by the Projections may differ materially from projected or estimated results).

 

4.13.                   Patriot Act.  To the extent applicable, each Loan Party is in compliance, in all material respects, with the (a) Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (b) Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001) (the “Patriot Act”).  No part of the proceeds of the loans made hereunder will be used by any Loan Party or any of their Affiliates, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

4.14.                   Obligations for Borrowed Money.  Set forth on Schedule 4.14 is a true and complete list of all obligations of each Loan Party and each of its Subsidiaries for borrowed money with a principal amount (for such obligation or series of related obligations) in excess of $500,000, outstanding immediately prior to the Closing Date that is to remain outstanding immediately after giving effect to the closing hereunder on the Closing Date and such Schedule accurately sets forth the aggregate principal amount of such obligations as of the Closing Date, provided that with respect to the such intercompany obligations, the aggregate principal amount of such obligations is as of January 31, 2016.

 

4.15.                   Payment of Taxes.  Except as otherwise permitted under Section 5.5, all tax returns and reports of each Loan Party and its Subsidiaries required to be filed by any of them have been timely filed, and all taxes shown on such tax returns to be due and payable and all assessments, fees and other governmental charges upon a Loan Party and its Subsidiaries and 

 

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upon their respective assets, income, businesses and franchises that are due and payable have been paid when due and payable.  Each Loan Party and each of its Subsidiaries have made adequate provision in accordance with GAAP for all taxes not yet due and payable.  No Borrower knows of any proposed tax assessment against a Loan Party or any of its Subsidiaries that is not being actively contested by such Loan Party or such Subsidiary diligently, in good faith, and by appropriate proceedings; provided such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor.

 

4.16.                   Margin Stock.  No Loan Party nor any of its Subsidiaries 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 part of the proceeds of the loans made to Borrowers will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock or for any purpose that violates the provisions of Regulation T, U or X of the Board of Governors.

 

4.17.                   Governmental Regulation.  No Loan Party nor any of its Subsidiaries is subject to regulation under the Federal Power Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable.  No Loan Party nor any of its Subsidiaries is a “registered investment company” or a company “controlled” by a “registered investment company” or a “principal underwriter” of a “registered investment company” as such terms are defined in the Investment Company Act of 1940.

 

4.18.                   OFAC.  No Loan Party nor any of its Subsidiaries is in violation of any of the country or list based economic and trade sanctions administered and enforced by OFAC.  No Loan Party nor any of its Subsidiaries (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its assets located in Sanctioned Entities, or (c) derives revenues from investments in, or transactions with Sanctioned Persons or Sanctioned Entities.  No proceeds of any loan made hereunder will be used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.

 

4.19.                   Employee and Labor Matters.  There is (i) no unfair labor practice complaint pending or, to the knowledge of any Borrower, threatened against any Borrower or its Subsidiaries before any Governmental Authority and no grievance or arbitration proceeding pending or threatened against any Borrower or its Subsidiaries which arises out of or under any collective bargaining agreement and that could reasonably be expected to result in a Material Adverse Effect, (ii) no strike, labor dispute, slowdown, stoppage or similar action or grievance pending or threatened in writing against any Borrower or its Subsidiaries that could reasonably be expected to result in a Material Adverse Effect, or (iii) to the knowledge of any Borrower, after due inquiry, no union representation question existing with respect to the employees of any Borrower or its Subsidiaries and no union organizing activity taking place with respect to any of the employees of any Borrower or its Subsidiaries that could reasonably be expected to result in a Material Adverse Effect.  None of any Borrower or its Subsidiaries has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act or similar state law, which remains unpaid or unsatisfied.  The hours worked and payments made to employees of each Borrower and its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable legal requirements, except to the extent such violations could not,

 

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individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  All material payments due from any Borrower or its Subsidiaries on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as a liability on the books of Borrowers, except where the failure to do so could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

4.20.                   [Intentionally Omitted].

 

4.21.                   Leases.  As of the Closing Date, each Loan Party and its Subsidiaries enjoy peaceful and undisturbed possession under all leases material to their business and to which they are parties or under which they are operating, and as of the Closing Date, subject to Permitted Protests, all of such material leases are valid and subsisting and, as of the Closing Date no material default by the applicable Loan Party or its Subsidiaries exists under any of them.

 

4.22.                   Eligible Accounts.  As to each Account that is identified by Borrowers as an Eligible Billed Account, an Eligible Unbilled Account or an Eligible Foreign Account in a Borrowing Base Certificate submitted to Agent, such Account is (a) a bona fide existing payment obligation of the applicable Account Debtor created by the sale and delivery of Inventory or the rendition of services to such Account Debtor in the ordinary course of the Borrowers’ business, (b) owed to a Borrower without any known defenses, disputes, offsets, counterclaims, or rights of return or cancellation, and (c) not excluded as ineligible by virtue of one or more of the excluding criteria (other than any Agent-discretionary criteria) set forth in the definition of Eligible Billed Accounts, Eligible Unbilled Accounts or Eligible Foreign Accounts, as applicable.

 

4.23.                   Hedge Agreements.  On each date that any Hedge Agreement is executed by any Hedge Provider, each Borrower and each other Loan Party satisfy all eligibility, suitability and other requirements under the Commodity Exchange Act (7 U.S.C. § 1, et seq., as in effect from time to time) and the Commodity Futures Trading Commission regulations.

 

5.                                     AFFIRMATIVE COVENANTS.

 

Each Borrower covenants and agrees that, until termination of all of the Commitments and payment in full of the Obligations:

 

5.1.                          Financial Statements, Reports, Certificates.  Borrowers (a) will deliver to Agent and each Lender each of the financial statements, reports, and other items set forth on Schedule 5.1 no later than the times specified therein, (b) agree that no Subsidiary of a Loan Party will have a fiscal year different from that of Administrative Borrower, (c) agree to maintain a system of accounting that enables Borrowers to produce financial statements in accordance with GAAP, and (d) agree that they will, and will cause each other Loan Party to, (i) keep a reporting system that shows all additions, sales, claims, returns, and allowances with respect to their and their Subsidiaries’ sales, and (ii) maintain their billing systems and practices substantially as in effect as of the Closing Date and shall only make material modifications thereto with notice to, and with the consent of, Agent.  Notwithstanding the foregoing, the documents required to be delivered pursuant to clauses (b), (f), (g), (k) and (l) of Schedule 5.1 (to the extent any such documents are included in materials otherwise filed with the SEC) shall be

 

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deemed delivered upon Administrative Borrower’s filing of such materials with the SEC and included in a link that is delivered electronically by Borrowers to Agent and the Lenders within the applicable deadlines.

 

5.2.                          Reporting.  Borrowers (a) will deliver to Agent and each Lender each of the reports set forth on Schedule 5.2 at the times specified therein, and (b) agree to use commercially reasonable efforts in cooperation with Agent to facilitate and implement a system of electronic collateral reporting in order to provide electronic reporting of each of the items set forth on such Schedule.

 

5.3.                          Existence.  Except as otherwise permitted under Section 6.3 or Section 6.4, each Borrower will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect such Person’s valid existence and good standing in its jurisdiction of organization and, except as could not reasonably be expected to result in a Material Adverse Effect, good standing with respect to all other jurisdictions in which it is qualified to do business and any rights, franchises, permits, licenses, accreditations, authorizations, or other approvals material to their businesses.

 

5.4.                          Maintenance of Properties.  Each Borrower will, and will cause each of its Subsidiaries to, maintain and preserve all of its assets that are necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear, tear, casualty, and condemnation and Permitted Dispositions excepted.

 

5.5.                          Taxes.  Each Borrower will, and will cause each of its Subsidiaries to, pay in full before delinquency or before the expiration of any extension period all material governmental assessments and taxes imposed, levied, or assessed against it, or any of its assets or in respect of any of its income, businesses, or franchises, except to the extent that the validity of such governmental assessment or tax is the subject of a Permitted Protest.

 

5.6.                          Insurance.  Each Borrower will, and will cause each of its Subsidiaries to, at Borrowers’ expense, (a) maintain insurance respecting each of each Loan Party’s and its Subsidiaries’ assets wherever located, covering liabilities, losses or damages as are customarily insured against by other Persons engaged in same or similar businesses and similarly situated and located.  All such policies of insurance shall be with financially sound and reputable insurance companies acceptable to Agent (it being agreed that, as of the Closing Date, Wells Fargo Insurance is acceptable to Agent) and in such amounts as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated and located and, in any event, in amount, adequacy, and scope reasonably satisfactory to Agent (it being agreed that the amount, adequacy, and scope of the policies of insurance of Borrowers in effect as of the Closing Date are acceptable to Agent).  All property insurance policies covering the Collateral are to be made payable to Agent for the benefit of Agent and the Lenders, as their interests may appear, in case of loss, pursuant to a standard loss payable endorsement with a standard non-contributory “lender” or “secured party” clause and are to contain such other provisions as Agent may reasonably require to fully protect the Lenders’ interest in the Collateral and to any payments to be made under such policies.  All certificates of property and general liability insurance are to be delivered to Agent (with a copy to each Lender), with the loss payable (but only in respect of Collateral) and additional insured endorsements in favor of Agent and shall

 

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provide for not less than 30 days (10 days in the case of non-payment) prior written notice to Agent of the exercise of any right of cancellation.  Unless Borrowers provide Agent with evidence of the continuing insurance coverage required by this Agreement, Agent may purchase insurance at Borrowers’ expense to protect Agent’s and Lenders’ interests in the Collateral; provided, that Agent shall have such right to purchase insurance at Borrowers’ expense only if Borrowers fail to provide Agent with evidence of continuing insurance coverage after 3 Business Days’ written notice from Agent.  This insurance may, but need not, protect each Borrower’s and each other Loan Party’s interests.  The coverage that Agent purchases may, but need not, pay any claim that is made against any Borrower or any other Loan Party in connection with the Collateral.  Borrowers may later cancel any insurance purchased by Agent, but only after providing Agent with evidence that Borrowers have obtained the insurance coverage required by this Agreement.  If Agent purchases insurance for the Collateral, as set forth above, Borrowers will be responsible for the costs of that insurance, including interest and any other charges that may be imposed with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance and the costs of the insurance may be added to the principal amount of the Loans owing hereunder.  Borrowers shall give Agent prompt notice of any loss exceeding $500,000 covered by their or their Subsidiaries’ casualty or business interruption insurance.  Upon the occurrence and during the continuance of an Event of Default, Agent shall have the sole right to file claims under any property and general liability insurance policies in respect of the Collateral, to receive, receipt and give acquittance for any payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies.

 

5.7.                          Inspection.

 

(a)                                 Each Borrower will, and will cause each of its Subsidiaries to, permit Agent, any Lender, and each of their respective duly authorized representatives or agents to visit any of its properties and inspect any of its assets or books and records, to examine and make copies of its books and records, and to discuss its affairs, finances, and accounts with, and to be advised as to the same by, its officers and employees (provided an authorized representative of a Borrower shall be allowed to be present) at such reasonable times and intervals as Agent or any Lender, as applicable, may designate and, so long as no Default or Event of Default has occurred and is continuing, with reasonable prior notice to Borrowers and during regular business hours.

 

(b)                                Each Borrower will, and will cause each of its Subsidiaries to, permit Agent and each of its duly authorized representatives or agents to conduct appraisals and valuations at such reasonable times and intervals as Agent may designate.

 

5.8.                          Compliance with Laws.  Each Borrower will, and will cause each of its Subsidiaries to, comply with the requirements of all applicable laws, rules, regulations, and orders of any Governmental Authority, other than laws, rules, regulations, and orders the non-compliance with which, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

 

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5.9.                          Environmental.  Each Borrower will, and will cause each of its Subsidiaries to,

 

(a)                                 Keep any property either owned or operated by any Loan Party or its Subsidiaries free of any Environmental Liens or post bonds or other financial assurances sufficient to satisfy the obligations or liability evidenced by such Environmental Liens,

 

(b)                                Comply, in all material respects, with Environmental Laws and provide to Agent documentation of such compliance which Agent reasonably requests,

 

(c)                                 Promptly notify Agent of any release of which any Borrower has knowledge of a Hazardous Material in any reportable quantity from or onto property owned or operated by any Loan Party or its Subsidiaries and take any Remedial Actions required to abate said release or otherwise to come into compliance, in all material respects, with applicable Environmental Law, and

 

(d)                                Promptly, but in any event within 5 Business Days of its receipt thereof, provide Agent with written notice of any of the following:  (i) notice that an Environmental Lien has been filed against any of the real or personal property of a Loan Party or its Subsidiaries, (ii) commencement of any Environmental Action or written notice that an Environmental Action will be filed against a Loan Party or its Subsidiaries, and (iii) written notice of a violation, citation, or other administrative order from a Governmental Authority.

 

5.10.                   Disclosure Updates.  Each Borrower will, promptly and in no event later than 5 Business Days after obtaining knowledge thereof, notify Agent if any written information, exhibit, or report furnished to Agent or the Lenders contained, at the time it was furnished, any untrue statement of a material fact or omitted to state any material fact necessary to make the statements contained therein not misleading in light of the circumstances in which made.  The foregoing to the contrary notwithstanding, any notification pursuant to the foregoing provision will not cure or remedy the effect of the prior untrue statement of a material fact or omission of any material fact nor shall any such notification have the effect of amending or modifying this Agreement or any of the Schedules hereto.

 

5.11.                   Formation of Subsidiaries.  Within 10 Business Days after delivery of the Compliance Certificate for any month that is a fiscal quarter end, each Borrower will (a) cause each new Subsidiary disclosed therein to provide to Agent a joinder to the Guaranty and Security Agreement, together with such other security agreements (including mortgages with respect to any Real Property owned in fee of such new Subsidiary with a fair market value greater than $500,000), as well as appropriate financing statements (and with respect to all property subject to a mortgage, fixture filings), all in form and substance reasonably satisfactory to Agent (including being sufficient to grant Agent a first priority Lien (subject to Permitted Liens) in and to the assets of such newly formed or acquired Subsidiary); provided, that the joinder to the Guaranty and Security Agreement, and such other security agreements shall not be required to be provided to Agent with respect to any Subsidiary of any Borrower that is an Immaterial Subsidiary or a CFC if providing such agreements would result in adverse tax consequences or the costs to the Loan Parties of providing such guaranty or such security agreements are unreasonably excessive (as determined by Agent in consultation with Borrowers) in relation to the benefits to Agent and the Lenders of the security or guarantee afforded thereby, (b) provide, or cause the applicable

 

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Loan Party to provide, to Agent a pledge agreement (or an addendum to the Guaranty and Security Agreement) and appropriate certificates and powers or financing statements, pledging all of the direct or beneficial ownership interest in such new Subsidiary in form and substance reasonably satisfactory to Agent; provided, that only 65% of the total outstanding voting Equity Interests of any first tier Subsidiary of a Borrower that is a CFC (and none of the Equity Interests of any Subsidiary of such CFC) shall be required to be pledged if pledging a greater amount would result in adverse tax consequences or the costs to the Loan Parties of providing such pledge are unreasonably excessive (as determined by Agent in consultation with Borrowers) in relation to the benefits to Agent and the Lenders of the security afforded thereby (which pledge, if reasonably requested by Agent, shall be governed by the laws of the jurisdiction of such Subsidiary), and (c) provide to Agent all other documentation, including one or more opinions of counsel reasonably satisfactory to Agent, which, in its opinion, is appropriate with respect to the execution and delivery of the applicable documentation referred to above (including policies of title insurance, flood certification documentation or other documentation with respect to all Real Property owned in fee and subject to a mortgage).  Any document, agreement, or instrument executed or issued pursuant to this Section 5.11 shall constitute a Loan Document.

 

5.12.                   Further Assurances.  Each Borrower will, and will cause each of the other Loan Parties to, at any time upon the reasonable request of Agent, execute or deliver to Agent any and all financing statements, fixture filings, security agreements, pledges, assignments, mortgages, deeds of trust, opinions of counsel, and all other documents (the “Additional Documents”) that Agent may reasonably request in form and substance reasonably satisfactory to Agent, to create, perfect, and continue perfected or to better perfect Agent’s Liens in all of the assets of each Borrower and its Subsidiaries (whether now owned or hereafter arising or acquired, tangible or intangible, real or personal), to create and perfect Liens in favor of Agent in any Real Property acquired by any Borrower or any other Loan Party with a fair market value in excess of $500,000, and in order to fully consummate all of the transactions contemplated hereby and under the other Loan Documents; provided that the foregoing shall not apply to any Subsidiary of a Borrower that is an Immaterial Subsidiary or a CFC if providing such documents would result in adverse tax consequences or the costs to the Loan Parties of providing such documents are unreasonably excessive (as determined by Agent in consultation with Borrowers) in relation to the benefits to Agent and the Lenders of the security afforded thereby.  To the maximum extent permitted by applicable law, if any Borrower or any other Loan Party refuses or fails to execute or deliver any reasonably requested Additional Documents within a reasonable period of time following the request to do so, each Borrower and each other Loan Party hereby authorizes Agent to execute any such Additional Documents in the applicable Loan Party’s name and authorizes Agent to file such executed Additional Documents in any appropriate filing office.  In furtherance of, and not in limitation of, the foregoing, each Loan Party shall take such actions as Agent may reasonably request from time to time to ensure that the Obligations are guaranteed by the Guarantors and are secured by substantially all of the assets of each Borrower and its Subsidiaries, including all of the outstanding capital Equity Interests of each Borrower (other than the Administrative Borrower) and their respective Subsidiaries (subject to exceptions and limitations contained in the Loan Documents with respect to CFCs).

 

5.13.                   Lender Meetings.  Borrowers will, within 90 days after the close of each fiscal year of Administrative Borrower, at the request of Agent or any Lender and upon reasonable prior notice, hold a meeting (at a mutually agreeable location and time or, at the option of Agent,

 

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by conference call) with all Lenders who choose to attend such meeting at which meeting shall be reviewed the financial results of the previous fiscal year and the financial condition of Borrowers and their Subsidiaries and the projections presented for the current fiscal year of Administrative Borrower.

 

5.14.                   Bank Products.  On or before the 60th day after the Closing Date, the Loan Parties shall establish their primary depository and treasury management relationships with Wells Fargo or one or more of its Affiliates and will maintain such depository and treasury management relationships at all times during the term of the Agreement.  From and after the Closing Date, the Loan Parties shall cause all funds on deposit in their existing Deposit Accounts and Securities Accounts (other than Excluded Accounts) to be swept on a daily basis to bank accounts at Wells Fargo, and on or before the 90th day after the Closing Date, the Loan Parties shall close their existing Deposit Accounts and Securities Accounts with Bank of America, N.A., Comerica Bank, BBVA Compass Bank, UMB Bank, PNC Bank and JPMorgan Chase Bank, N.A.

 

5.15.                   Hedge Agreements.  Borrowers agree that it shall offer to Wells Fargo or one or more of its Affiliates the first opportunity to bid for all Hedge Agreements to be entered into by any Loan Party or any of its Subsidiaries during the term of the Agreement.

 

5.16.                   Compliance with ERISA and the IRC.  In addition to and without limiting the generality of Section 5.8, (a) comply in all material respects with applicable provisions of ERISA and the IRC with respect to all Employee Benefit Plans, (b) without the prior written consent of Agent and the Required Lenders, not take any action or fail to take action the result of which could result in a Loan Party incurring a material liability to the PBGC or to a Multiemployer Plan (other than to pay contributions or premiums payable in the ordinary course), (c) allow any facts or circumstances to exist with respect to one or more Employee Benefit Plans that, in the aggregate, reasonably could be expected to result in a material liability to any Loan Party, (d) not participate in any prohibited transaction that could result in other than a de minimis civil penalty excise tax, fiduciary liability or correction obligation under ERISA or the IRC being imposed on any Loan Party, and (e) operate each Employee Benefit Plan in such a manner that will not incur any material tax liability of any Loan Party under the IRC (including Section 4980B of the IRC).  With respect to each Pension Plan, except as could not reasonably be expected to result in a material liability to the Loan Parties, the Loan Parties and the ERISA Affiliates shall (i) satisfy in full and in a timely manner, without incurring any late payment or underpayment charge or penalty and without giving rise to any Lien, all of the contribution and funding requirements of the IRC and of ERISA, and (ii) pay, or cause to be paid, to the PBGC in a timely manner, without incurring any late payment or underpayment charge or penalty, all premiums required pursuant to ERISA.

 

6.                                     NEGATIVE COVENANTS.

 

Each Borrower covenants and agrees that, until termination of all of the Commitments and payment in full of the Obligations:

 

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6.1.                          Indebtedness.  No Borrower will, and no Borrower will permit any of its Subsidiaries to, create, incur, assume, suffer to exist, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness, except for Permitted Indebtedness.

 

6.2.                          Liens.  No Borrower will, and no Borrower will permit any of its Subsidiaries to, create, incur, assume, or suffer to exist, directly or indirectly, any Lien on or with respect to any of its assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for Permitted Liens.

 

6.3.                          Restrictions on Fundamental Changes.  No Borrower will, and no Borrower will permit any of its Subsidiaries to,

 

(a)                                 other than in order to consummate a Permitted Acquisition, enter into any merger, consolidation, reorganization, or recapitalization, or reclassify its Equity Interests, except for (i) any merger between Loan Parties, provided, that a Borrower must be the surviving entity of any such merger to which it is a party (and Administrative Borrower must be the surviving entity of any such merger to which it and another Borrower is a party), (ii) any merger between a Loan Party and a Subsidiary of such Loan Party that is not a Loan Party so long as such Loan Party is the surviving entity of any such merger or the surviving entity of any such merger becomes a Loan Party immediately following such merger, and (iii) any merger between Subsidiaries of any Borrower that are not Loan Parties,

 

(b)                                liquidate, wind up, or dissolve itself (or suffer any liquidation or dissolution), except for (i) the liquidation or dissolution of non-operating Subsidiaries of any Borrower with nominal assets and nominal liabilities, (ii) the liquidation or dissolution of a Loan Party (other than any Borrower) or any of its wholly-owned Subsidiaries so long as all of the assets (including any interest in any Equity Interests) of such liquidating or dissolving Loan Party or Subsidiary are transferred to a Loan Party that is not liquidating or dissolving, or (iii) the liquidation or dissolution of a Subsidiary of any Borrower that is not a Loan Party, so long as all of the assets of such liquidating or dissolving Subsidiary are transferred to a Subsidiary of a Borrower that is not liquidating or dissolving and, to the extent of any Lien in favor of the Agent on the Equity Interest of such liquidating or dissolving Subsidiary, Agent shall have a comparable or greater Lien on the Equity Interest of such non-liquidating or dissolving Subsidiary, in accordance with Sections 5.11 and 5.12 hereof, or

 

(c)                                 suspend or cease operating a substantial portion of its or their business, except as permitted pursuant to clauses (a) or (b) above or in connection with a transaction permitted under Section 6.4.

 

6.4.                          Disposal of Assets.  Other than Permitted Dispositions or transactions expressly permitted by Sections 6.3 or 6.9, no Borrower will, and no Borrower will permit any of its Subsidiaries to, convey, sell, lease, license, assign, transfer, or otherwise dispose of (or enter into an agreement to convey, sell, lease, license, assign, transfer, or otherwise dispose of) any of its or their assets.

 

6.5.                          Nature of Business.  No Borrower will, and no Borrower will permit any of its Subsidiaries to, make any change in the nature of its or their business as described in 

 

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Administrative Borrower’s public filings as of the Closing Date or acquire any properties or assets that are not reasonably related to the conduct of such business activities; provided, that the foregoing shall not prevent Borrowers and their Subsidiaries from engaging in any business that is reasonably related or ancillary to their business.

 

6.6.                          Prepayments and Amendments.  No Borrower will, and no Borrower will permit any of its Subsidiaries to,

 

(a)                                 Except in connection with Refinancing Indebtedness permitted by Section 6.1,

 

(i)                                     optionally prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness of any Borrower or its Subsidiaries, other than (A) the Obligations in accordance with this Agreement, (B) Permitted Intercompany Advances, and (C) Indebtedness of any Borrower or any of their Subsidiaries not to exceed $500,000 in the aggregate so long as, solely in the case of this clause (C) both before and after giving effect thereto, the Payment Conditions are satisfied, or

 

(ii)                                  make any payment on account of Indebtedness (A) of the type described on Schedule 4.14 hereof owing by a Loan Party to a Subsidiary that is not a Loan Party or any Refinancing Indebtedness in respect thereof unless (x) the aggregate amount of all such Indebtedness paid from and after the Closing Date does not exceed $4,250,000, less the amount of loans and other Investments outstanding at any time pursuant to clause (d)(i) of the definition of Permitted Intercompany Advances, (y) at the time of the making of such payment, no Event of Default has occurred and is continuing or would result therefrom, and (z) Borrowers have Excess Availability of $22,000,000 or greater immediately after giving effect to each such payment, provided that any forgiveness or cancellation by such Subsidiary that is not a Loan Party of Indebtedness of the type described in this clause (A) shall be permitted regardless of whether the foregoing clauses (x) through (z) are satisfied, or (B) that has been contractually subordinated in right of payment to the Obligations if such payment is not permitted at such time under the subordination terms and conditions, or

 

(b)                                Directly or indirectly, amend, modify, or change any of the terms or provisions of

 

(i)                                     any agreement, instrument, document, indenture, or other writing evidencing or concerning Permitted Indebtedness other than (A) the Obligations in accordance with this Agreement, (B) Permitted Intercompany Advances, and (C) Indebtedness permitted under clauses (c), (h), (j) and (k) of the definition of Permitted Indebtedness, or

 

(ii)                                  the Governing Documents of any Loan Party or any of its Subsidiaries if the effect thereof, either individually or in the aggregate, could reasonably be expected to be materially adverse to the interests of the Lenders.

 

6.7.                          Restricted Payments.  No Borrower will, and no Borrower will permit any of its Subsidiaries to, make any Restricted Payment; provided, that, (a) so long as it is permitted by law, Administrative Borrower may make Restricted Payments so long as, both before and after giving effect thereto, the Payment Conditions are satisfied, (b) Borrowers and their Subsidiaries 

 

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may pay the 3QD Earnout when due and payable, (c) Borrowers and their Subsidiaries may make the dividend payment on account of Equity Interests issued by Administrative Borrower, which dividend was declared prior to the Closing Date and is payable on March 15, 2016, in an amount not to exceed $5,300,000, and (d) pursuant to customary equity based compensation plans for current and former employees, officers and directors of Administrative Borrower (or any spouses, ex-spouses, or estates of any of the foregoing), Borrowers and their Subsidiaries may make ordinary course withholding tax payments in respect of Equity Interests of Administrative Borrower following the vesting of such Equity Interests (and may redeem or take payment in the form of Equity Interests corresponding in value to the amount of such withholding tax payments and the exercise price for stock options).  Notwithstanding anything to the contrary in this Section 6.7, so long as it is permitted by law, and so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom, (i) any Borrower and any of their Subsidiaries may make Restricted Payments (other than in respect of Indebtedness that is required to be subordinated pursuant to the terms of this Agreement) to any Loan Party, and each Subsidiary that is not a Loan Party may make Restricted Payments to any Subsidiary, (ii) Administrative Borrower may make distributions to current and former employees, officers, or directors of Administrative Borrower (or any spouses, ex-spouses, or estates of any of the foregoing) on account of redemptions of Equity Interests of Administrative Borrower held by such Persons, provided, that the aggregate amount of such redemptions made by Administrative Borrower during the term of this Agreement plus the amount of Indebtedness outstanding under clause (l) of the definition of Permitted Indebtedness, does not exceed $600,000 in the aggregate, and (iii) Administrative Borrower may make distributions to former employees, officers, or directors of Administrative Borrower (or any spouses, ex-spouses, or estates of any of the foregoing), solely in the form of forgiveness of Indebtedness of such Persons owing to Administrative Borrower on account of repurchases of the Equity Interests of Administrative Borrower held by such Persons; provided that such Indebtedness was incurred by such Persons solely to acquire Equity Interests of Administrative Borrower.

 

6.8.                          Accounting Methods.  No Borrower will, and no Borrower will permit any of its Subsidiaries to, modify or change its fiscal year or its method of accounting (other than as may be required to conform to GAAP).

 

6.9.                          Investments.  No Borrower will, and no Borrower will permit any of its Subsidiaries to, directly or indirectly, make or acquire any Investment or incur any liabilities (including contingent obligations) for or in connection with any Investment except for Permitted Investments.

 

6.10.                   Transactions with Affiliates.  No Borrower will, and no Borrower will permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction with any Affiliate of any Borrower or any of its Subsidiaries except for:

 

(a)                                 transactions between any Loan Parties, including between a Loan Party and a Subsidiary that becomes a Loan Party as a result of such transaction,

 

(b)                                transactions between any Borrower or any Loan Party and any Subsidiary that is not a Loan Party, provided that such transaction is no less favorable, taken as a whole, to 

 

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such Borrower or such Loan Party than would be obtained in an arm’s length transaction with a non-Affiliate,

 

(c)                                 transactions (other than the payment of management, consulting, monitoring, or advisory fees) between such Borrower or its Subsidiaries, on the one hand, and any Affiliate of such Borrower or its Subsidiaries, on the other hand, so long as such transactions (i) are fully disclosed to Agent prior to the consummation thereof, if they involve one or more payments by such Borrower or its Subsidiaries in excess of $500,000 for any single transaction or series of related transactions, and (ii) are no less favorable, taken as a whole, to such Borrower or its Subsidiaries, as applicable, than would be obtained in an arm’s length transaction with a non-Affiliate,

 

(d)                                so long as it has been approved by such Borrower’s or its applicable Subsidiary’s board of directors (or comparable governing body) in accordance with applicable law, (i) any indemnity provided for the benefit of directors (or comparable managers) of such Borrower or its applicable Subsidiary, and (ii) any payment of customary fees and reasonable out-of-pocket expenses to, directors (or comparable managers) of such Borrower or its applicable Subsidiary acting in their capacity as such in an aggregate amount for this clause (ii) not to exceed $2,000,000 in any fiscal year,

 

(e)                                 so long as it has been approved by such Borrower’s or its applicable Subsidiary’s board of directors (or comparable governing body) in accordance with applicable law, the payment of reasonable compensation, severance, or employee benefit arrangements to employees, officers, and outside directors of such Borrower and its Subsidiaries in the ordinary course of business pursuant to shareholder approved plans and benefit plans and arrangements,

 

(f)                                   transactions permitted by Section 6.3 or Section 6.7, or any Permitted Intercompany Advance, and

 

(g)                                transactions pursuant to permitted agreements in existence on the Closing Date and set forth on Schedule 6.10.

 

6.11.                   Use of Proceeds.  No Borrower will, and no Borrower will permit any of its Subsidiaries to, use the proceeds of any loan made hereunder for any purpose other than (a) on the Closing Date, (i) to repay, in full, the outstanding principal, accrued interest, and accrued fees and expenses owing under or in connection with the Existing Credit Facility, and (ii) to pay the fees, costs, and expenses incurred in connection with this Agreement, the other Loan Documents, and the transactions contemplated hereby and thereby, and (b) thereafter, consistent with the terms and conditions hereof, for their lawful and permitted purposes (including that no part of the proceeds of the loans made to Borrowers will be used to purchase or carry any such Margin Stock or to extend credit to others for the purpose of purchasing or carrying any such Margin Stock or for any purpose that violates the provisions of Regulation T, U or X of the Board of Governors).

 

6.12.                   Limitation on Issuance of Equity Interests.  Except for the issuance (including pursuant to any shareholder approved stock or restricted stock grant plan or any inducement awards approved by the Board of Directors of Administrative Borrower) or sale of Qualified 

 

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Equity Interests by Administrative Borrower, no Borrower will, and no Borrower will permit any of its Subsidiaries to, issue or sell or enter into any agreement or arrangement for the issuance or sale of any of its Equity Interests.

 

6.13.                   Employee Benefits.

 

(a)                                 Terminate, or permit any ERISA Affiliate to terminate, any Pension Plan in a manner, or take any other action with respect to any Pension Plan, which could reasonably be expected to result in any material liability of any Loan Party or ERISA Affiliate to the PBGC.

 

(b)                                Fail to make, or permit any ERISA Affiliate to fail to make, full payment when due of all amounts (including without limitation all contributions, benefits, distributions and premiums) which, under the provisions of any Benefit Plan, agreement relating thereto or applicable Law, any Loan Party or ERISA Affiliate is required to pay if such failure could reasonably be expected to have a material liability with respect to any Loan Party or ERISA Affiliate.

 

(c)                                 Without prior notice to Agent and written consent therefrom, contribute to or assume an obligation to contribute to, or permit any ERISA Affiliate to contribute to or assume an obligation to contribute to, any Multiemployer Plan not set forth on Schedule 4.10.

 

(d)                                Amend, or permit any ERISA Affiliate to amend, a Pension Plan resulting in a material increase in current liability such that a Loan Party or ERISA Affiliate is required to provide security to such Plan under the IRC.

 

7.                                     FINANCIAL COVENANTS.

 

Each Borrower covenants and agrees that, until termination of all of the Commitments and payment in full of the Obligations, Borrowers will:

 

(a)                                 Fixed Charge Coverage Ratio.  Have a Fixed Charge Coverage Ratio, measured on a month-end basis, of at least the required amount set forth in the following table for the applicable period set forth opposite thereto:

 

	
Applicable Ratio
    	
 
    	
Applicable Period
    
	
1.0:1.0
    	
 
    	
For the 12 month period ending on   each of March 31, 2016, April 30, 2016, May 31, 2016 and   June 30, 2016
    
	
1.1:1.0
    	
 
    	
For the 12 month period
   ending each month thereafter
    

 

(b)                                Leverage Ratio.  Have a Leverage Ratio, measured on a month-end basis, of not greater than the applicable ratio set forth in the following table for the applicable date set forth opposite thereto:

 

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Applicable Ratio
    	
 
    	
Applicable Date
    
	
2.25:1.0
    	
 
    	
March 31, 2016, April 30,   2016, May 31, 2016, June 30, 2016, July 31, 2016,   August 31, 2016, September 30, 2016, October 31, 2016,   November 30, 2016 and December 31, 2016
    
	
2.0:1.0
    	
 
    	
The last day of
   each month thereafter
    

 

(c)                                 Minimum Recurring Revenue.  Fail to maintain Recurring Revenue, measured on a quarter-end basis, of at least the required amount set forth in the following table for the applicable period set forth opposite thereto:

 

	
Applicable Amount
    	
 
    	
Applicable Trailing Four Quarter
   Period Ending
    
	
$
    	
35,000,000
    	
 
    	
March 31, 2016, June 30,   2016 and September 30, 2016
    
	
$
    	
35,210,000
    	
 
    	
December 31, 2016
    
	
$
    	
35,629,000
    	
 
    	
March 31, 2017
    
	
$
    	
36,097,000
    	
 
    	
June 30, 2017
    
	
$
    	
36,532,000
    	
 
    	
September 30, 2017
    
	
$
    	
36,970,000
    	
 
    	
December 31, 2017
    
	
$
    	
37,410,000
    	
 
    	
March 31, 2018
    
	
$
    	
37,902,000
    	
 
    	
June 30, 2018
    
	
$
    	
38,359,000
    	
 
    	
September 30, 2018
    
	
$
    	
38,819,000
    	
 
    	
December 31, 2018
    
	
$
    	
39,281,000
    	
 
    	
March 31, 2019
    
	
$
    	
39,797,000
    	
 
    	
June 30, 2019
    
	
$
    	
40,277,000
    	
 
    	
September 30, 2019
    
	
$
    	
40,759,000
    	
 
    	
December 31, 2019
    

 

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Applicable Amount
    	
 
    	
Applicable Trailing Four Quarter
   Period Ending
    
	
$
    	
41,244,000
    	
 
    	
March 31, 2020
    
	
$
    	
41,787,000
    	
 
    	
June 30, 2020
    
	
$
    	
42,290,000
    	
 
    	
September 30, 2020
    
	
$
    	
42,798,000
    	
 
    	
For the 4 fiscal quarter period
   ending each quarter thereafter
    

 

(d)                                Capital Expenditures.  Make Capital Expenditures (excluding the amount, if any, of Capital Expenditures made with Net Cash Proceeds reinvested pursuant to the proviso in Section 2.4(e)(ii)) in any fiscal year in an amount less than or equal to, but not greater than, $14,000,000 in any fiscal year (or, in the case of the fiscal year ending December 31, 2016, from the Closing Date through December 31, 2016); provided, that if the amount of the Capital Expenditures permitted to be made in any fiscal year as set forth herein is greater than the actual amount of the Capital Expenditures (excluding the amount, if any, of Capital Expenditures made with Net Cash Proceeds reinvested pursuant to the proviso in Section 2.4(e)(ii)) actually made in such fiscal year (the amount by which such permitted Capital Expenditures for such fiscal year exceeds the actual amount of Capital Expenditures for such fiscal year, the “Excess Amount”), then the lesser of (i) such Excess Amount and (ii) 50% of the amount set forth in the above table for the next succeeding fiscal year (such lesser amount referred to as the “Carry-Over Amount”) may be carried forward to the next succeeding fiscal year (the “Succeeding Fiscal Year”); provided further that the Carry-Over Amount applicable to a particular Succeeding Fiscal Year may not be used in that fiscal year until the amount permitted above to be expended in such fiscal year has first been used in full and the Carry-Over Amount applicable to a particular Succeeding Fiscal Year may not be carried forward to another fiscal year.

 

8.                                     EVENTS OF DEFAULT.

 

Any one or more of the following events shall constitute an event of default (each, an “Event of Default”) under this Agreement:

 

8.1.                          Payments.  If Borrowers fail to pay when due and payable, or when declared due and payable, (a) all or any portion of the Obligations consisting of interest, fees, or charges due the Lender Group, reimbursement of Lender Group Expenses, or other amounts (other than any portion thereof constituting principal) constituting Obligations (including any portion thereof that accrues after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding) to the extent required hereunder, and such failure continues for a period of 3 Business Days, after the same becomes due, (b) all or any portion of the principal of the Loans, or (c) any amount payable to Issuing Bank in reimbursement of any drawing under a Letter of Credit;

 

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8.2.                          Covenants.  If any Loan Party or any of its Subsidiaries:

 

(a)                                 fails to perform or observe any covenant or other agreement contained in any of (i) Sections 3.6, 5.1, 5.2, 5.3 (solely if any Borrower is not in good standing in its jurisdiction of organization), 5.5, 5.6, 5.7 (solely if any Borrower refuses to allow Agent or its representatives or agents to visit any Borrower’s properties, inspect its assets or books or records, examine and make copies of its books and records, or discuss Borrowers’ affairs, finances, and accounts with officers and employees of any Borrower), 5.10, 5.11, 5.13, or 5.14, 5.15 or 5.16 of this Agreement, (ii) Section 6 of this Agreement, (iii) Section 7 of this Agreement, or (iv) Section 7 of the Guaranty and Security Agreement;

 

(b)                                fails to perform or observe any covenant or other agreement contained in any of Sections 5.3 (other than if any Borrower is not in good standing in its jurisdiction of organization), 5.4, 5.8, and 5.12 of this Agreement and such failure continues for a period of 10 days after the earlier of (i) the date on which such failure shall first become known to any officer of any Borrower or (ii) the date on which written notice thereof is given to Borrowers by Agent; or

 

(c)                                 fails to perform or observe any covenant or other agreement contained in this Agreement, or in any of the other Loan Documents, in each case, other than any such covenant or agreement that is the subject of another provision of this Section 8 (in which event such other provision of this Section 8 shall govern), and such failure continues for a period of 30 days after the earlier of (i) the date on which such failure shall first become known to any officer of any Borrower or (ii) the date on which written notice thereof is given to Borrowers by Agent;

 

8.3.                          Judgments.  If one or more judgments, orders, or awards for the payment of money involving an aggregate amount of $1,000,000, or more (except to the extent fully covered (other than to the extent of customary deductibles) by insurance pursuant to which the insurer has not denied coverage) is entered or filed against a Loan Party or any of its Subsidiaries, or with respect to any of their respective assets, and either (a) there is a period of 30 consecutive days at any time after the entry of any such judgment, order, or award during which (1) the same is not discharged, satisfied, vacated, or bonded pending appeal, or (2) a stay of enforcement thereof is not in effect, or (b) enforcement proceedings are commenced upon such judgment, order, or award;

 

8.4.                          Voluntary Bankruptcy, etc.  If an Insolvency Proceeding is commenced by a Loan Party or any of its Subsidiaries;

 

8.5.                          Involuntary Bankruptcy, etc.  If an Insolvency Proceeding is commenced against a Loan Party or any of its Subsidiaries and any of the following events occur:  (a) such Loan Party or such Subsidiary consents to the institution of such Insolvency Proceeding against it, (b) the petition commencing the Insolvency Proceeding is not timely controverted, (c) the petition commencing the Insolvency Proceeding is not dismissed within 60 calendar days of the date of the filing thereof, (d) an interim trustee is appointed to take possession of all or any substantial portion of the properties or assets of, or to operate all or any substantial portion of the business of, such Loan Party or its Subsidiary, or (e) an order for relief shall have been issued or entered therein;

 

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8.6.                          Default Under Other Agreements.  If there is (a) a default in one or more agreements to which a Loan Party or any of its Subsidiaries is a party with one or more third Persons relative to a Loan Party’s or any of its Subsidiaries’ Indebtedness involving an aggregate amount of $1,000,000 or more, and such default (i) occurs at the final maturity of the obligations thereunder, or (ii) results in a right by such third Person, irrespective of whether exercised, to accelerate the maturity of such Loan Party’s or its Subsidiary’s obligations thereunder, or (b) a default in or an involuntary early termination of one or more Hedge Agreements to which a Loan Party or any of its Subsidiaries is a party;

 

8.7.                          Representations, etc.  If any warranty, representation, certificate, statement, or Record made herein or in any other Loan Document or delivered in writing to Agent or any Lender in connection with this Agreement or any other Loan Document proves to be untrue in any material respect (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of the date of issuance or making or deemed making thereof;

 

8.8.                          Guaranty.  If the obligation of any Guarantor under the guaranty contained in the Guaranty and Security Agreement is limited or terminated by operation of law or by such Guarantor (other than in accordance with the terms of this Agreement);

 

8.9.                          Security Documents.  If the Guaranty and Security Agreement or any other Loan Document that purports to create a Lien, shall, for any reason, fail or cease to create a valid and perfected and, except to the extent of Permitted Liens which are non-consensual Permitted Liens, permitted purchase money Liens or the interests of lessors under Capital Leases, first priority Lien on the Collateral covered thereby, except (a) as a result of a disposition of the applicable Collateral in a transaction permitted under this Agreement, or (b) as the result of an action or failure to act on the part of Agent;

 

8.10.                   Loan Documents.  The validity or enforceability of any Loan Document shall at any time for any reason (other than solely as the result of an action or failure to act on the part of Agent) be declared to be null and void, or a proceeding shall be commenced by a Loan Party or its Subsidiaries, or by any Governmental Authority having jurisdiction over a Loan Party or its Subsidiaries, seeking to establish the invalidity or unenforceability thereof, or a Loan Party or its Subsidiaries shall deny that such Loan Party or its Subsidiaries has any liability or obligation purported to be created under any Loan Document;

 

8.11.                   Change of Control.  A Change of Control shall occur, whether directly or indirectly; or

 

8.12.                   ERISA.  The occurrence of any of the following events:  (a) any Loan Party or ERISA Affiliate fails to make full payment when due of all amounts which any Loan Party or ERISA Affiliate is required to pay as contributions, installments, or otherwise to or with respect to a Pension Plan or Multiemployer Plan, and such failure could reasonably be expected to result in liability in excess of $500,000 to any Loan Party, (b) a Notification Event, which could reasonably be expected to result in liability to any Loan Party in excess of $500,000, either individually or in the aggregate, or (c) any Loan Party or ERISA Affiliate completely or partially withdraws from one or more Multiemployer Plans which could reasonably be expected to result 

 

59

 

in Withdrawal Liability to any Loan Party in excess of $500,000 in the aggregate, or any Loan Party fails to make any Withdrawal Liability payment when due.

 

9.                                     RIGHTS AND REMEDIES.

 

9.1.                          Rights and Remedies.  Upon the occurrence and during the continuation of an Event of Default, Agent may, and, at the instruction of the Required Lenders, shall (in each case under clauses (a) or (b) by written notice to Borrowers), in addition to any other rights or remedies provided for hereunder or under any other Loan Document or by applicable law, do any one or more of the following:

 

(a)                                 (i) declare the principal of, and any and all accrued and unpaid interest and fees in respect of, the Loans and all other Obligations (other than the Bank Product Obligations), whether evidenced by this Agreement or by any of the other Loan Documents to be immediately due and payable, whereupon the same shall become and be immediately due and payable and Borrowers shall be obligated to repay all of such Obligations in full, without presentment, demand, protest, or further notice or other requirements of any kind, all of which are hereby expressly waived by each Borrower, and (ii) direct Borrowers to provide (and Borrowers agree that upon receipt of such notice Borrowers will provide) Letter of Credit Collateralization to Agent to be held as security for Borrowers’ reimbursement obligations for drawings that may subsequently occur under issued and outstanding Letters of Credit;

 

(b)                                declare the Commitments terminated, whereupon the Commitments shall immediately be terminated together with (i) any obligation of any Revolving Lender to make Revolving Loans, (ii) the obligation of the Swing Lender to make Swing Loans, and (iii) the obligation of Issuing Bank to issue Letters of Credit; and

 

(c)                                 exercise all other rights and remedies available to Agent or the Lenders under the Loan Documents, under applicable law, or in equity.

 

The foregoing to the contrary notwithstanding, upon the occurrence of any Event of Default described in Section 8.4 or Section 8.5, in addition to the remedies set forth above, without any notice to Borrowers or any other Person or any act by the Lender Group, the Commitments shall automatically terminate and the Obligations (other than the Bank Product Obligations), inclusive of the principal of, and any and all accrued and unpaid interest and fees in respect of, the Loans and all other Obligations (other than the Bank Product Obligations), whether evidenced by this Agreement or by any of the other Loan Documents, shall automatically become and be immediately due and payable and Borrowers shall automatically be obligated to repay all of such Obligations in full (including Borrowers being obligated to provide (and Borrowers agree that they will provide) (1) Letter of Credit Collateralization to Agent to be held as security for Borrowers’ reimbursement obligations in respect of drawings that may subsequently occur under issued and outstanding Letters of Credit and (2) Bank Product Collateralization to be held as security for Borrowers’ or their Subsidiaries’ obligations in respect of outstanding Bank Products), without presentment, demand, protest, or notice or other requirements of any kind, all of which are expressly waived by Borrowers.

 

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9.2.                          Remedies Cumulative.  The rights and remedies of the Lender Group under this Agreement, the other Loan Documents, and all other agreements shall be cumulative.  The Lender Group shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity.  No exercise by the Lender Group of one right or remedy shall be deemed an election, and no waiver by the Lender Group of any Event of Default shall be deemed a continuing waiver.  No delay by the Lender Group shall constitute a waiver, election, or acquiescence by it.

 

10.                              WAIVERS; INDEMNIFICATION.

 

10.1.                   Demand; Protest; etc.  Each Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, nonpayment at maturity, release, compromise, settlement, extension, or renewal of documents, instruments, chattel paper, and guarantees at any time held by the Lender Group on which any Borrower may in any way be liable.

 

10.2.                   The Lender Group’s Liability for Collateral.  Each Borrower hereby agrees that:  (a) so long as Agent complies with its obligations, if any, under the Code, the Lender Group shall not in any way or manner be liable or responsible for:  (i) the safekeeping of the Collateral, (ii) any loss or damage thereto occurring or arising in any manner or fashion from any cause, (iii) any diminution in the value thereof, or (iv) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of loss, damage, or destruction of the Collateral shall be borne by Borrowers.

 

10.3.                   Indemnification.  Each Borrower shall pay, indemnify, defend, and hold the Agent-Related Persons, the Lender-Related Persons, and each Participant (each, an “Indemnified Person”) harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, liabilities, fines, costs, penalties, and damages, and all reasonable fees and disbursements of attorneys, experts, or consultants and all other costs and expenses actually incurred in connection therewith or in connection with the enforcement of this indemnification (as and when they are incurred and irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them (a) in connection with or as a result of or related to the execution and delivery, enforcement, performance, or administration (including any restructuring or workout with respect hereto) of this Agreement, any of the other Loan Documents, or the transactions contemplated hereby or thereby or the monitoring of Borrowers’ and their Subsidiaries’ compliance with the terms of the Loan Documents (provided, that the indemnification in this clause (a) shall not extend to any claims for Taxes or any costs attributable to Taxes (which shall be governed by Section 16), except to the extent related to primarily non-Tax claims, (b) with respect to any actual or prospective investigation, litigation, or proceeding related to this Agreement, any other Loan Document, the making of any Loans or issuance of any Letters of Credit hereunder, or the use of the proceeds of the Loans or the Letters of Credit provided hereunder (irrespective of whether any Indemnified Person is a party thereto), or any act, omission, event, or circumstance in any manner related thereto, and (c) in connection with or arising out of any presence or release of Hazardous Materials at, on, under, to or from any assets or properties owned, leased or operated by any Borrower or any of its Subsidiaries or any Environmental Actions, Environmental Liabilities or Remedial Actions related in any way to any such assets or properties of any 

 

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Borrower or any of its Subsidiaries (each and all of the foregoing, the “Indemnified Liabilities”).  The foregoing to the contrary notwithstanding, no Borrower shall have any obligation to any Indemnified Person under this Section 10.3 with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of such Indemnified Person or its officers, directors, employees, attorneys, or agents.  This provision shall survive the termination of this Agreement and the repayment in full of the Obligations.  If any Indemnified Person makes any payment to any other Indemnified Person with respect to an Indemnified Liability as to which Borrowers were required to indemnify the Indemnified Person receiving such payment, the Indemnified Person making such payment is entitled to be indemnified and reimbursed by Borrowers with respect thereto.  WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

 

11.                              NOTICES.

 

Unless otherwise provided in this Agreement, all notices or demands relating to this Agreement or any other Loan Document shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested), overnight courier, electronic mail (at such email addresses as a party may designate in accordance herewith), or telefacsimile.  In the case of notices or demands to any Borrower or Agent, as the case may be, they shall be sent to the respective address set forth below:

 

	
If to any Borrower:
    	
HARTE HANKS, INC.
    
	
 
    	
9601 McAllister Freeway
    
	
 
    	
Suite 610
    
	
 
    	
San Antonio, Texas 78216
    
	
 
    	
Attn:   Doug Shepard, Chief Financial   Officer
    
	
 
    	
Fax No. (210) 829-9139
    
	
 
    	
 
    
	
with copies to:
    	
HARTE HANKS, INC.
    
	
 
    	
9601 McAllister Freeway
    
	
 
    	
Suite 610
    
	
 
    	
San Antonio, Texas 78216
    
	
 
    	
Attn:  Robert Munden, Senior Vice President, 

General Counsel & Secretary
    
	
 
    	
Fax No. (210) 829-9139
    
	
 
    	
 
    
	
and:
    	
DYKEMA GOSSETT PLLC
    
	
 
    	
112 E. Pecan Street
    
	
 
    	
Suite 1800
    
	
 
    	
San Antonio, Texas 78205
    
	
 
    	
Attn:  James M. McDonough, Esq.
    
	
 
    	
Fax No.  (210) 226-8395
    

 

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If to Agent:
    	
WELLS FARGO BANK, NATIONAL 

ASSOCIATION
    
	
 
    	
14241 Dallas Parkway
    
	
 
    	
Suite 900
    
	
 
    	
Dallas, Texas 75254
    
	
 
    	
Attn:  Portfolio Manager — Harte Hanks
    
	
 
    	
Fax No.  (866) 718-6291
    
	
 
    	
 
    
	
with copies to:
    	
WELLS FARGO BANK, NATIONAL 

ASSOCIATION
    
	
 
    	
10 South Wacker Drive
    
	
 
    	
13th Floor
    
	
 
    	
Chicago, Illinois 60606
    
	
 
    	
Attn:  Steven Linderman
    
	
 
    	
Fax No.  (312) 332-0424
    
	
 
    	
 
    
	
and
    	
GOLDBERG KOHN LTD.
    
	
 
    	
55 East Monroe Street
    
	
 
    	
Suite 3300
    
	
 
    	
Chicago, Illinois 60603
    
	
 
    	
Attn:  Jessica DeBruin, Esq.
    
	
 
    	
Fax No.  (312) 863-7857
    
	
 
    	
 
    
	
If to Specified Lender:
    	
LBC CREDIT PARTNERS, INC.
    
	
 
    	
Cira Centre
    
	
 
    	
2929 Arch Street, Suite 1550
    
	
 
    	
Philadelphia, Pennsylvania 19104
    
	
 
    	
Attn:  Portfolio Manager — Harte Hanks
    
	
 
    	
Fax No.  (215) 609-3344
    
	
 
    	
 
    
	
with copies to:
    	
SCHIFF HARDIN LLP
    
	
 
    	
300 Crescent Court
    
	
 
    	
Suite 400
    
	
 
    	
Dallas, Texas 75201
    
	
 
    	
Attn:  Jamie Whatley, Esq.
    
	
 
    	
Fax No.  (214) 981-9901
    

 

Any party hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other party.  All notices or demands sent in accordance with this Section 11, shall be deemed received on the earlier of the date of actual receipt or 3 Business Days after the deposit thereof in the mail; provided, that (a) notices sent by overnight courier service shall be deemed to have been given when received, (b) notices by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient) and (c) notices by electronic mail shall be deemed 

 

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received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return email or other written acknowledgment).

 

12.                              CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER; JUDICIAL REFERENCE PROVISION.

 

(a)                                 THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO, AND ANY CLAIMS, CONTROVERSIES OR DISPUTES ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS.

 

(b)                                THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE COUNTY OF COOK, STATE OF ILLINOIS; PROVIDED, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  EACH BORROWER AND EACH MEMBER OF THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 12(b).

 

(c)                                 TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE RIGHTS, IF ANY, TO A JURY TRIAL OF ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS (EACH A “CLAIM”).  EACH BORROWER AND EACH MEMBER OF THE LENDER GROUP REPRESENT THAT EACH HAS  REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  IN THE EVENT OF LITIGATION, A 

 

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COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

(d)                                EACH BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF COOK AND THE STATE OF ILLINOIS, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT AGENT MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(e)                                 NO CLAIM MAY BE MADE BY ANY LOAN PARTY AGAINST THE AGENT, THE SWING LENDER, ANY OTHER LENDER, ISSUING BANK, OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, COUNSEL, REPRESENTATIVE, AGENT, OR ATTORNEY-IN-FACT OF ANY OF THEM FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES OR LOSSES IN RESPECT OF ANY CLAIM FOR BREACH OF CONTRACT OR ANY OTHER THEORY OF LIABILITY ARISING OUT OF OR RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION THEREWITH, AND EACH LOAN PARTY HEREBY WAIVES, RELEASES, AND AGREES NOT TO SUE UPON ANY CLAIM FOR SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.

 

13.                              ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.

 

13.1.                   Assignments and Participations.

 

(a)         (i)          Subject to the conditions set forth in clause (a)(ii) below, any Lender may assign and delegate all or any portion of its rights and duties under the Loan Documents (including the Obligations owed to it and its Commitments) to one or more assignees so long as such prospective assignee is an Eligible Transferee (each, an “Assignee”), with the prior written consent (such consent not be unreasonably withheld or delayed) of:

 

(A)      Borrowers; provided, that no consent of Borrowers shall be required (1) if an Event of Default has occurred and is continuing, or (2) in connection with an assignment to a Person that is a Lender or an Affiliate (other than natural persons) of a Lender or a Related Fund; provided further, that Borrowers shall be deemed to have consented to a 

 

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proposed assignment unless they object thereto by written notice to Agent within 5 Business Days after having received notice thereof; and

(B)                               Agent, Swing Lender, and Issuing Bank; provided, that (i) no consent of Agent shall be required in connection with an assignment of Revolving Loans or Revolver Commitment to a Person that is a Revolving Lender, (ii) no consent of Agent shall be required in connection with an assignment of Term Loans or Term Loan Commitments to a Person that is a Term Lender or an Affiliate (other than natural persons) of a Term Lender, and (iii) no consent of Swing Lender or Issuing Bank shall be required in connection with an assignment of Term Loans or Term Loan Commitments.

 

(ii)                                  Assignments shall be subject to the following additional conditions:

 

(A)                               no assignment may be made to a natural person,

 

(B)                               no assignment may be made to a Loan Party or an Affiliate of a Loan Party,

 

(C)                               the amount of the Commitments and the other rights and obligations of the assigning Lender hereunder and under the other Loan Documents subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to Agent) shall be in a minimum amount (unless waived by Agent) of $5,000,000 (except such minimum amount shall not apply to (I) an assignment or delegation by any Lender to any other Lender, an Affiliate of any Lender, or a Related Fund of such Lender or (II) a group of new Lenders, each of which is an Affiliate of each other or a Related Fund of such new Lender to the extent that the aggregate amount to be assigned to all such new Lenders is at least $5,000,000),

 

(D)                              each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement,

 

(E)                               the parties to each assignment shall execute and deliver to Agent an Assignment and Acceptance; provided, that Borrowers and Agent may continue to deal solely and directly with the assigning Lender in connection with the interest so assigned to an Assignee until written notice of such assignment, together with payment instructions, addresses, and related information with respect to the Assignee, have been given to Borrowers and Agent by such Lender and the Assignee,

 

(F)                                unless waived by Agent, the assigning Lender or Assignee has paid to Agent, for Agent’s separate account, a processing fee in the amount of $3,500, and

 

(G)                              the assignee, if it is not a Lender, shall deliver to Agent an Administrative Questionnaire in a form approved by Agent (the “Administrative Questionnaire”).

 

(b)                                From and after the date that Agent receives the executed Assignment and Acceptance and, if applicable, payment of the required processing fee, (i) the Assignee 

 

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thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, shall be a “Lender” and shall have the rights and obligations of a Lender under the Loan Documents, and (ii) the assigning Lender shall, to the extent that rights and obligations hereunder and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights (except with respect to Section 10.3) and be released from any future obligations under this Agreement (and in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender’s rights and obligations under this Agreement and the other Loan Documents, such Lender shall cease to be a party hereto and thereto); provided, that nothing contained herein shall release any assigning Lender from obligations that survive the termination of this Agreement, including such assigning Lender’s obligations under Section 15 and Section 17.9(a).

 

(c)                                 By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm to and agree with each other and the other parties hereto as follows:  (i) other than as provided in such Assignment and Acceptance, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document furnished pursuant hereto, (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its obligations under this Agreement or any other Loan Document furnished pursuant hereto, (iii) such Assignee confirms that it has received a copy of this Agreement, together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance, (iv) such Assignee will, independently and without reliance upon Agent, such assigning Lender or any other Lender, 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 this Agreement, (v) such Assignee appoints and authorizes Agent to take such actions and to exercise such powers under this Agreement and the other Loan Documents as are delegated to Agent, by the terms hereof and thereof, together with such powers as are reasonably incidental thereto, and (vi) such Assignee agrees that it will perform all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

 

(d)                                Immediately upon Agent’s receipt of the required processing fee, if applicable, and delivery of notice to the assigning Lender pursuant to Section 13.1(b), this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition of the Assignee and the resulting adjustment of the Commitments arising therefrom.  The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Lender pro tanto.

 

(e)                                 Any Lender may at any time sell to one or more commercial banks, financial institutions, or other Persons (a “Participant”) participating interests in all or any portion of its Obligations, its Commitment, and the other rights and interests of that Lender (the “Originating Lender”) hereunder and under the other Loan Documents; provided, that (i) the Originating Lender shall remain a “Lender” for all purposes of this Agreement and the other 

 

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Loan Documents and the Participant receiving the participating interest in the Obligations, the Commitments, and the other rights and interests of the Originating Lender hereunder shall not constitute a “Lender” hereunder or under the other Loan Documents and the Originating Lender’s obligations under this Agreement shall remain unchanged, (ii) the Originating Lender shall remain solely responsible for the performance of such obligations, (iii) Borrowers, Agent, and the Lenders shall continue to deal solely and directly with the Originating Lender in connection with the Originating Lender’s rights and obligations under this Agreement and the other Loan Documents, (iv) no Lender shall transfer or grant any participating interest under which the Participant has the right to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment to, or consent or waiver with respect to this Agreement or of any other Loan Document would (A) extend the final maturity date of the Obligations hereunder in which such Participant is participating, (B) reduce the interest rate applicable to the Obligations hereunder in which such Participant is participating, (C) release all or substantially all of the Collateral or guaranties (except to the extent expressly provided herein or in any of the Loan Documents) supporting the Obligations hereunder in which such Participant is participating, (D) postpone the payment of, or reduce the amount of, the interest or fees payable to such Participant through such Lender (other than a waiver of default interest), or (E) decreases the amount or postpones the due dates of scheduled principal repayments or prepayments or premiums payable to such Participant through such Lender, (v) no participation shall be sold to a natural person, (vi) no participation shall be sold to a Loan Party or an Affiliate of a Loan Party, and (vii) all amounts payable by Borrowers hereunder shall be determined as if such Lender had not sold such participation, except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set off in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement.  The rights of any Participant only shall be derivative through the Originating Lender with whom such Participant participates and no Participant shall have any rights under this Agreement or the other Loan Documents or any direct rights as to the other Lenders, Agent, Borrowers, the Collateral, or otherwise in respect of the Obligations.  No Participant shall have the right to participate directly in the making of decisions by the Lenders among themselves.

 

(f)                                   In connection with any such assignment or participation or proposed assignment or participation or any grant of a security interest in, or pledge of, its rights under and interest in this Agreement, a Lender may, subject to the provisions of Section 17.9, disclose all documents and information which it now or hereafter may have relating to any Borrower and its Subsidiaries and their respective businesses.

 

(g)                                Any other provision in this Agreement notwithstanding, any Lender may at any time create a security interest in, or pledge, all or any portion of its rights under and interest in this Agreement in favor of any Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank or U.S. Treasury Regulation 31 CFR §203.24, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law.

 

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(h)                                 Agent (as a non-fiduciary agent on behalf of Borrowers) shall maintain, or cause to be maintained, a register (the “Register”) on which it enters the name and address of each Lender as the registered owner of the Term Loan and Revolver Commitments (and the principal amount thereof and stated interest thereon) held by such Lender (each, a “Registered Loan”).  Other than in connection with an assignment by a Lender of all or any portion of its portion of the Term Loan and Revolver Commitments to an Affiliate of such Lender or a Related Fund of such Lender (i) a Registered Loan (and the registered note, if any, evidencing the same) may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register (and each registered note shall expressly so provide) and (ii) any assignment or sale of all or part of such Registered Loan (and the registered note, if any, evidencing the same) may be effected only by registration of such assignment or sale on the Register, together with the surrender of the registered note, if any, evidencing the same duly endorsed by (or accompanied by a written instrument of assignment or sale duly executed by) the holder of such registered note, whereupon, at the request of the designated assignee(s) or transferee(s), one or more new registered notes in the same aggregate principal amount shall be issued to the designated assignee(s) or transferee(s).  Prior to the registration of assignment or sale of any Registered Loan (and the registered note, if any evidencing the same), Borrowers shall treat the Person in whose name such Registered Loan (and the registered note, if any, evidencing the same) is registered as the owner thereof for the purpose of receiving all payments thereon and for all other purposes, notwithstanding notice to the contrary.  In the case of any assignment by a Lender of all or any portion of its Term Loan and Revolver Commitments to an Affiliate of such Lender or a Related Fund of such Lender, and which assignment is not recorded in the Register, the assigning Lender, on behalf of Borrowers, shall maintain a register comparable to the Register.

 

(i)                                     In the event that a Lender sells participations in the Registered Loan, such Lender, as a non-fiduciary agent on behalf of Borrowers, shall maintain (or cause to be maintained) a register on which it enters the name of all participants in the Registered Loans held by it (and the principal amount (and stated interest thereon) of the portion of such Registered Loans that is subject to such participations) (the “Participant Register”).  A Registered Loan (and the Registered Note, if any, evidencing the same) may be participated in whole or in part only by registration of such participation on the Participant Register (and each registered note shall expressly so provide).  Any participation of such Registered Loan (and the registered note, if any, evidencing the same) may be effected only by the registration of such participation on the Participant Register.

 

(j)                                     Agent shall make a copy of the Register (and each Lender shall make a copy of its Participant Register to the extent it has one) available for review by Borrowers from time to time as Borrowers may reasonably request.

 

13.2.                   Successors.  This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, that no Borrower may assign this Agreement or any rights or duties hereunder without the Lenders’ prior written consent and any prohibited assignment shall be absolutely void ab initio.  No consent to assignment by the Lenders shall release any Borrower from its Obligations.  A Lender may assign this Agreement and the other Loan Documents and its rights and duties hereunder and thereunder pursuant to Section 13.1 and, except as expressly required pursuant to Section 13.1, no consent or approval by any Borrower is required in connection with any such assignment.

 

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13.3.                   Intralender Matters.  Anything to the contrary contained herein notwithstanding, any Person that is to become a party to this Agreement as a Term Lender (regardless of whether by assignment pursuant to Section 13.1 or otherwise) shall join the Agreement Among Lenders as a condition to such Person becoming a party to this Agreement as a Lender.  In each case, such joinder shall be on terms and conditions (including with respect to its priority vis-a-vis other Lenders to payments and proceeds of Collateral and pricing arrangements) satisfactory to Agent and the other Lenders party to such agreement.  No Loan Party is a party to such agreement or a third party beneficiary of such agreement and Agent and each Lender hereby agree that such agreement shall not impose any additional obligations or duties on any Loan Party.

 

14.                              AMENDMENTS; WAIVERS.

 

14.1.                   Amendments and Waivers.

 

(a)                                 No amendment, waiver or other modification of any provision of this Agreement or any other Loan Document (other than Bank Product Agreements or the Fee Letter), and no consent with respect to any departure by any Borrower therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders (or by Agent at the written request of the Required Lenders) and the Loan Parties that are party thereto and then any such waiver or consent shall be effective, but only in the specific instance and for the specific purpose for which given; provided, that no such waiver, amendment, or consent shall, unless in writing and signed by all of the Lenders directly affected thereby and all of the Loan Parties that are party thereto, do any of the following:

 

(i)                                     increase the amount of or extend the expiration date of any Commitment of any Lender or amend, modify, or eliminate the last sentence of Section 2.4(c)(i),

 

(ii)                                  postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest, fees, or other amounts due hereunder or under any other Loan Document,

 

(iii)                               reduce the principal of, or the rate of interest on, any loan or other extension of credit hereunder, or reduce any fees or other amounts payable hereunder or under any other Loan Document (except (y) in connection with the waiver of applicability of Section 2.6(c) (which waiver shall be effective with the written consent of the Required Lenders, and (z) that any amendment or modification of defined terms Borrowing Base and the terms used therein are subject to clause (c) below and shall not constitute a reduction in the rate of interest or a reduction of fees for purposes of this clause (iii)),

 

(iv)                              amend, modify, or eliminate this Section or any provision of this Agreement providing for consent or other action by all Lenders,

 

(v)                                 amend, modify, or eliminate Section 3.1 or 3.2,

 

(vi)                              amend, modify, or eliminate Section 15.11,

 

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(vii)       other than as permitted by Section 15.11, release Agent’s Lien in and to any of the Collateral,

 

(viii)      amend, modify, or eliminate the definitions of “Required Lenders”, “Supermajority Lenders” or “Pro Rata Share”,

 

(ix)        contractually subordinate any of Agent’s Liens,

 

(x)        other than in connection with a merger, liquidation, dissolution or sale of such Person expressly permitted by the terms hereof or the other Loan Documents, release any Borrower or any Guarantor from any obligation for the payment of money or consent to the assignment or transfer by any Borrower or any Guarantor of any of its rights or duties under this Agreement or the other Loan Documents, or

 

(xi)        amend, modify, or eliminate any of the provisions of Section 2.4(b)(i), (ii) or (iii).

 

(b)        No amendment, waiver, modification, or consent shall amend, modify, waive, or eliminate,

 

(i)         the definition of, or any of the terms or provisions of, the Fee Letter, without the written consent of Agent and Borrowers (and shall not require the written consent of any of the Lenders),

 

(ii)         any provision of Section 15 pertaining to Agent, or any other rights or duties of Agent under this Agreement or the other Loan Documents, without the written consent of Agent, Borrowers, and the Required Lenders,

 

(c)        No amendment, waiver, modification, elimination, or consent shall amend, without written consent of Agent, Borrowers and the Supermajority Lenders, modify, or eliminate the definition of Borrowing Base or any of the defined terms (including the definitions of Eligible Accounts, Eligible Billed Accounts, Eligible Unbilled Accounts and Eligible Foreign Accounts) that are used in such definition to the extent that any such change results in more credit being made available to Borrowers based upon the Borrowing Base, but not otherwise, or the definition of Maximum Revolver Amount, or change Section 2.1(c);

 

(d)        No amendment, waiver, modification, elimination, or consent shall amend, modify, or waive any provision of this Agreement or the other Loan Documents pertaining to Issuing Bank, or any other rights or duties of Issuing Bank under this Agreement or the other Loan Documents, without the written consent of Issuing Bank, Agent, Borrowers, and the Required Lenders;

 

(e)        No amendment, waiver, modification, elimination, or consent shall amend, modify, or waive any provision of this Agreement or the other Loan Documents pertaining to Swing Lender, or any other rights or duties of Swing Lender under this Agreement or the other Loan Documents, without the written consent of Swing Lender, Agent, Borrowers, and the Required Lenders; and

 

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(f)         Anything in this Section 14.1 to the contrary notwithstanding, (i) any amendment, modification, elimination, waiver, consent, termination, or release of, or with respect to, any provision of this Agreement or any other Loan Document that relates only to the relationship of the Lender Group among themselves, and that does not affect the rights or obligations of any Borrower, shall not require consent by or the agreement of any Loan Party, and (ii) any amendment, waiver, modification, elimination, or consent of or with respect to any provision of this Agreement or any other Loan Document may be entered into without the consent of, or over the objection of, any Defaulting Lender.

 

14.2.     Replacement of Certain Lenders.

 

(a)        If (i) any action to be taken by the Lender Group or Agent hereunder requires the consent, authorization, or agreement of all Lenders or all Lenders affected thereby and if such action has received the consent, authorization, or agreement of the Required Lenders but not of all Lenders or all Lenders affected thereby, or (ii) any Lender makes a claim for compensation under Section 16, then Borrowers or Agent, upon at least 5 Business Days prior irrevocable notice, may permanently replace any Lender that failed to give its consent, authorization, or agreement (a “Non-Consenting Lender”) or any Lender that made a claim for compensation (a “Tax Lender”) with one or more Replacement Lenders, and the Non-Consenting Lender or Tax Lender, as applicable, shall have no right to refuse to be replaced hereunder.  Such notice to replace the Non-Consenting Lender or Tax Lender, as applicable, shall specify an effective date for such replacement, which date shall not be later than 15 Business Days after the date such notice is given.

 

(b)        Prior to the effective date of such replacement, the Non-Consenting Lender or Tax Lender, as applicable, and each Replacement Lender shall execute and deliver an Assignment and Acceptance, subject only to the Non-Consenting Lender or Tax Lender, as applicable, being repaid in full its share of the outstanding Obligations (without any premium or penalty of any kind whatsoever, but including (i) all interest, fees and other amounts that may be due in payable in respect thereof, and (ii) an assumption of its Pro Rata Share of participations in the Letters of Credit).  If the Non-Consenting Lender or Tax Lender, as applicable, shall refuse or fail to execute and deliver any such Assignment and Acceptance prior to the effective date of such replacement, Agent may, but shall not be required to, execute and deliver such Assignment and Acceptance in the name or and on behalf of the Non-Consenting Lender or Tax Lender, as applicable, and irrespective of whether Agent executes and delivers such Assignment and Acceptance, the Non-Consenting Lender or Tax Lender, as applicable, shall be deemed to have executed and delivered such Assignment and Acceptance.  The replacement of any Non-Consenting Lender or Tax Lender, as applicable, shall be made in accordance with the terms of Section 13.1.  Until such time as one or more Replacement Lenders shall have acquired all of the Obligations, the Commitments, and the other rights and obligations of the Non-Consenting Lender or Tax Lender, as applicable, hereunder and under the other Loan Documents, the Non-Consenting Lender or Tax Lender, as applicable, shall remain obligated to make the Non-Consenting Lender’s or Tax Lender’s, as applicable, Pro Rata Share of Revolving Loans and to purchase a participation in each Letter of Credit, in an amount equal to its Pro Rata Share of participations in such Letters of Credit.

 

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14.3.     No Waivers; Cumulative Remedies.  No failure by Agent or any Lender to exercise any right, remedy, or option under this Agreement or any other Loan Document, or delay by Agent or any Lender in exercising the same, will operate as a waiver thereof.  No waiver by Agent or any Lender will be effective unless it is in writing, and then only to the extent specifically stated.  No waiver by Agent or any Lender on any occasion shall affect or diminish Agent’s and each Lender’s rights thereafter to require strict performance by Borrowers of any provision of this Agreement.  Agent’s and each Lender’s rights under this Agreement and the other Loan Documents will be cumulative and not exclusive of any other right or remedy that Agent or any Lender may have.

 

15.                              AGENT; THE LENDER GROUP.

 

15.1.     Appointment and Authorization of Agent.  Each Lender hereby designates and appoints Wells Fargo as its agent under this Agreement and the other Loan Documents and each Lender hereby irrevocably authorizes (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to designate, appoint, and authorize) Agent to execute and deliver each of the other Loan Documents on its behalf and to take such other action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to Agent by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto.  Agent agrees to act as agent for and on behalf of the Lenders (and the Bank Product Providers) on the conditions contained in this Section 15.  Any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the other Loan Documents, nor shall Agent have or be deemed to have any fiduciary relationship with any Lender (or Bank Product Provider), and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against Agent.  Without limiting the generality of the foregoing, the use of the term “agent” in this Agreement or the other Loan Documents with reference to Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law.  Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only a representative relationship between independent contracting parties.  Each Lender hereby further authorizes (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to authorize) Agent to act as the secured party under each of the Loan Documents that create a Lien on any item of Collateral.  Except as expressly otherwise provided in this Agreement, Agent shall have and may use its sole discretion with respect to exercising or refraining from exercising any discretionary rights or taking or refraining from taking any actions that Agent expressly is entitled to take or assert under or pursuant to this Agreement and the other Loan Documents.  Without limiting the generality of the foregoing, or of any other provision of the Loan Documents that provides rights or powers to Agent, Lenders agree that Agent shall have the right to exercise the following powers as long as this Agreement remains in effect:  (a) maintain, in accordance with its customary business practices, ledgers and records reflecting the status of the Obligations, the Collateral, payments and proceeds of Collateral, and related matters, (b) execute or file any and all financing or similar statements or notices, amendments, renewals, supplements, documents, instruments, proofs of claim, notices and other written agreements with respect to the Loan Documents, (c) make Revolving Loans, for itself or on behalf of Lenders, as provided in the

 

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Loan Documents, (d) exclusively receive, apply, and distribute payments and proceeds of the Collateral as provided in the Loan Documents, (e) open and maintain such bank accounts and cash management arrangements as Agent deems necessary and appropriate in accordance with the Loan Documents for the foregoing purposes, (f) perform, exercise, and enforce any and all other rights and remedies of the Lender Group with respect to any Borrower or its Subsidiaries, the Obligations, the Collateral, or otherwise related to any of same as provided in the Loan Documents, and (g) incur and pay such Lender Group Expenses as Agent may deem necessary or appropriate for the performance and fulfillment of its functions and powers pursuant to the Loan Documents.

 

15.2.     Delegation of Duties.  Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys in fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  Agent shall not be responsible for the negligence or misconduct of any agent or attorney in fact that it selects as long as such selection was made without gross negligence or willful misconduct.

 

15.3.     Liability of Agent.  None of the Agent-Related Persons shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (b) be responsible in any manner to any of the Lenders (or Bank Product Providers) for any recital, statement, representation or warranty made by any Borrower or any of its Subsidiaries or Affiliates, or any officer or director thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Borrower or its Subsidiaries or any other party to any Loan Document to perform its obligations hereunder or thereunder.  No Agent-Related Person shall be under any obligation to any Lenders (or Bank Product Providers) to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the books and records or properties of any Borrower or its Subsidiaries.

 

15.4.     Reliance by Agent.  Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, telefacsimile or other electronic method of transmission, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent, or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Borrowers or counsel to any Lender), independent accountants and other experts selected by Agent.  Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless Agent shall first receive such advice or concurrence of the Lenders as it deems appropriate and until such instructions are received, Agent shall act, or refrain from acting, as it deems advisable.  If Agent so requests, it shall first be indemnified to its reasonable satisfaction by the Lenders (and, if it so elects, the Bank Product Providers) against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action.  Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in

 

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accordance with a request or consent of the Required Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders (and Bank Product Providers).

 

15.5.     Notice of Default or Event of Default.  Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest, fees, and expenses required to be paid to Agent for the account of the Lenders and, except with respect to Events of Default of which Agent has actual knowledge, unless Agent shall have received written notice from a Lender or Borrowers referring to this Agreement, describing such Default or Event of Default, and stating that such notice is a “notice of default.”  Agent promptly will notify the Lenders of its receipt of any such notice or of any Event of Default of which Agent has actual knowledge.  If any Lender obtains actual knowledge of any Event of Default, such Lender promptly shall notify the other Lenders and Agent of such Event of Default.  Each Lender shall be solely responsible for giving any notices to its Participants, if any.  Subject to Section 15.4, Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Section 9; provided, that unless and until Agent has received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable.

 

15.6.     Credit Decision.  Each Lender (and Bank Product Provider) acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by Agent hereinafter taken, including any review of the affairs of any Borrower and its Subsidiaries or Affiliates, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender (or Bank Product Provider).  Each Lender represents (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to represent) to Agent that it has, independently and without reliance upon any Agent-Related Person and based on such due diligence, documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of each Borrower or any other Person party to a Loan Document, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Borrowers.  Each Lender also represents (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to represent) that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of each Borrower or any other Person party to a Loan Document.  Except for notices, reports, and other documents expressly herein required to be furnished to the Lenders by Agent, Agent shall not have any duty or responsibility to provide any Lender (or Bank Product Provider) with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any Borrower or any other Person party to a Loan Document that may come into the possession of any of the Agent-Related Persons.  Each Lender acknowledges (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to acknowledge) that Agent does not have any duty or responsibility, either

 

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initially or on a continuing basis (except to the extent, if any, that is expressly specified herein) to provide such Lender (or Bank Product Provider) with any credit or other information with respect to any Borrower, its Affiliates or any of their respective business, legal, financial or other affairs, and irrespective of whether such information came into Agent’s or its Affiliates’ or representatives’ possession before or after the date on which such Lender became a party to this Agreement (or such Bank Product Provider entered into a Bank Product Agreement).

 

15.7.     Costs and Expenses; Indemnification.  Agent may incur and pay Lender Group Expenses to the extent Agent reasonably deems necessary or appropriate for the performance and fulfillment of its functions, powers, and obligations pursuant to the Loan Documents, including court costs, attorneys’ fees and expenses, fees and expenses of financial accountants, advisors, consultants, and appraisers, costs of collection by outside collection agencies, auctioneer fees and expenses, and costs of security guards or insurance premiums paid to maintain the Collateral, whether or not Borrowers are obligated to reimburse Agent or Lenders for such expenses pursuant to this Agreement or otherwise.  Agent is authorized and directed to deduct and retain sufficient amounts from payments or proceeds of the Collateral received by Agent to reimburse Agent for such out-of-pocket costs and expenses prior to the distribution of any amounts to Lenders (or Bank Product Providers).  In the event Agent is not reimbursed for such costs and expenses by Borrowers or their Subsidiaries, each Lender hereby agrees that it is and shall be obligated to pay to Agent such Lender’s ratable thereof.  Whether or not the transactions contemplated hereby are consummated, each of the Lenders, on a ratable basis, shall indemnify and defend the Agent-Related Persons (to the extent not reimbursed by or on behalf of Borrowers and without limiting the obligation of Borrowers to do so) from and against any and all Indemnified Liabilities; provided, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities resulting solely from such Person’s gross negligence or willful misconduct nor shall any Lender be liable for the obligations of any Defaulting Lender in failing to make a Revolving Loan or other extension of credit hereunder.  Without limitation of the foregoing, each Lender shall reimburse Agent upon demand for such Lender’s ratable share of any costs or out of pocket expenses (including attorneys, accountants, advisors, and consultants fees and expenses) incurred by Agent in connection with the preparation, execution, delivery, administration, modification, amendment, or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement or any other Loan Document to the extent that Agent is not reimbursed for such expenses by or on behalf of Borrowers.  The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of Agent.

 

15.8.     Agent in Individual Capacity.  Wells Fargo and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, provide Bank Products to, acquire Equity Interests in, and generally engage in any kind of banking, trust, financial advisory, underwriting, or other business with any Borrower and its Subsidiaries and Affiliates and any other Person party to any Loan Document as though Wells Fargo were not Agent hereunder, and, in each case, without notice to or consent of the other members of the Lender Group.  The other members of the Lender Group acknowledge (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to acknowledge) that, pursuant to such activities, Wells Fargo or its Affiliates may receive information regarding a Borrower or its Affiliates or any other Person party to any Loan Documents that is subject to confidentiality

 

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obligations in favor of such Borrower or such other Person and that prohibit the disclosure of such information to the Lenders (or Bank Product Providers), and the Lenders acknowledge (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to acknowledge) that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver Agent will use its reasonable best efforts to obtain), Agent shall not be under any obligation to provide such information to them.  The terms “Lender” and “Lenders” include Wells Fargo in its individual capacity.

 

15.9.     Successor Agent.  Agent may resign as Agent upon 30 days (10 days if an Event of Default has occurred and is continuing) prior written notice to the Lenders (unless such notice is waived by the Required Lenders) and Borrowers (unless such notice is waived by Borrowers or an Event of Default exists) and without any notice to the Bank Product Providers.  If Agent resigns under this Agreement, the Required Lenders shall be entitled, with (so long as no Event of Default has occurred and is continuing) the consent of Borrowers (such consent not to be unreasonably withheld, delayed, or conditioned), appoint a successor Agent for the Lenders (and the Bank Product Providers).  If, at the time that Agent’s resignation is effective, it is acting as Issuing Bank or the Swing Lender, such resignation shall also operate to effectuate its resignation as Issuing Bank or the Swing Lender, as applicable, and it shall automatically be relieved of any further obligation to issue Letters of Credit, or to make Swing Loans.  If no successor Agent is appointed prior to the effective date of the resignation of Agent, Agent may appoint, after consulting with the Lenders and Borrowers, a successor Agent.  If Agent has materially breached or failed to perform any material provision of this Agreement or of applicable law, the Required Lenders may agree in writing to remove and replace Agent with a successor Agent from among the Lenders with (so long as no Event of Default has occurred and is continuing) the consent of Borrowers (such consent not to be unreasonably withheld, delayed, or conditioned).  In any such event, upon the acceptance of its appointment as successor Agent hereunder, such successor Agent shall succeed to all the rights, powers, and duties of the retiring Agent and the term “Agent” shall mean such successor Agent and the retiring Agent’s appointment, powers, and duties as Agent shall be terminated.  After any retiring Agent’s resignation hereunder as Agent, the provisions of this Section 15 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.  If no successor Agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of Agent hereunder until such time, if any, as the Lenders appoint a successor Agent as provided for above.

 

15.10.   Lender in Individual Capacity.  Any Lender and its respective Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, provide Bank Products to, acquire Equity Interests in and generally engage in any kind of banking, trust, financial advisory, underwriting, or other business with any Borrower and its Subsidiaries and Affiliates and any other Person party to any Loan Documents as though such Lender were not a Lender hereunder without notice to or consent of the other members of the Lender Group (or the Bank Product Providers).  The other members of the Lender Group acknowledge (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to acknowledge) that, pursuant to such activities, such Lender and its respective Affiliates may receive information regarding a Borrower or its Affiliates or any other Person party to any Loan Documents that is subject to confidentiality obligations in favor of such Borrower or such other

 

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Person and that prohibit the disclosure of such information to the Lenders, and the Lenders acknowledge (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to acknowledge) that, in such circumstances (and in the absence of a waiver of such confidentiality obligations, which waiver such Lender will use its reasonable best efforts to obtain), such Lender shall not be under any obligation to provide such information to them.

 

15.11.   Collateral Matters.

 

(a)        The Lenders hereby irrevocably authorize (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to authorize) Agent to release any Lien on any Collateral (i) upon the termination of the Commitments and payment and satisfaction in full by Borrowers of all of the Obligations, (ii) constituting property being sold or disposed of if a release is required or desirable in connection therewith and if Borrowers certify to Agent that the sale or disposition is permitted under Section 6.4 (and Agent may rely conclusively on any such certificate, without further inquiry), (iii) constituting property in which neither any Borrower nor any of its Subsidiaries owned any interest at the time Agent’s Lien was granted nor at any time thereafter, (iv) constituting property leased or licensed to a Borrower or its Subsidiaries under a lease or license that has expired or is terminated in a transaction permitted under this Agreement, or (v) in connection with a credit bid or purchase authorized under this Section 15.11.  The Loan Parties and the Lenders hereby irrevocably authorize (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to authorize) Agent, based upon the instruction of the Required Lenders and subject to the Agreement Among Lenders, to (a) consent to the sale of, credit bid or purchase (either directly or indirectly through one or more entities) all or any portion of the Collateral at any sale thereof conducted under the provisions of the Bankruptcy Code, including Section 363 of the Bankruptcy Code, (b) credit bid or purchase (either directly or indirectly through one or more entities) all or any portion of the Collateral at any sale or other disposition thereof conducted under the provisions of the Code, including pursuant to Sections 9-610 or 9-620 of the Code, or (c) credit bid or purchase (either directly or indirectly through one or more entities) all or any portion of the Collateral at any other sale or foreclosure conducted or consented to by Agent in accordance with applicable law in any judicial action or proceeding or by the exercise of any legal or equitable remedy.  In connection with any such credit bid or purchase, subject to the Agreement Among Lenders, (i) the Obligations owed to the Lenders and the Bank Product Providers shall be entitled to be, and shall be, credit bid on a ratable basis (with Obligations with respect to contingent or unliquidated claims being estimated for such purpose if the fixing or liquidation thereof would not impair or unduly delay the ability of Agent to credit bid or purchase at such sale or other disposition of the Collateral and, if such contingent or unliquidated claims cannot be estimated without impairing or unduly delaying the ability of Agent to credit bid at such sale or other disposition, then such claims shall be disregarded, not credit bid, and not entitled to any interest in the Collateral that is the subject of such credit bid or purchase) and the Lenders and the Bank Product Providers whose Obligations are credit bid shall be entitled to receive interests (ratably based upon the proportion of their Obligations credit bid in relation to the aggregate amount of Obligations so credit bid) in the Collateral that is the subject of such credit bid or purchase (or in the Equity Interests of the any entities that are used to consummate such credit bid or purchase), and (ii) Agent, based upon the instruction of the Required Lenders, may accept non-cash consideration, including debt and equity securities issued by any entities used to consummate such credit bid or purchase and in connection therewith Agent may reduce

 

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the Obligations owed to the Lenders and the Bank Product Providers (ratably based upon the proportion of their Obligations credit bid in relation to the aggregate amount of Obligations so credit bid) based upon the value of such non-cash consideration; provided, that Bank Product Obligations not entitled to the application set forth in Section 2.4(b)(ii)(J) shall not be entitled to be, and shall not be, credit bid, or used in the calculation of the ratable interest of the Lenders and Bank Product Providers in the Obligations which are credit bid.  Except as provided above, Agent will not execute and deliver a release of any Lien on any Collateral without the prior written authorization of (y) if the release is of all or substantially all of the Collateral, all of the Lenders (without requiring the authorization of the Bank Product Providers), or (z) otherwise, the Required Lenders (without requiring the authorization of the Bank Product Providers).  Upon request by Agent or Borrowers at any time, the Lenders will (and if so requested, the Bank Product Providers will) confirm in writing Agent’s authority to release any such Liens on particular types or items of Collateral pursuant to this Section 15.11; provided, that (1) anything to the contrary contained in any of the Loan Documents notwithstanding, Agent shall not be required to execute any document or take any action necessary to evidence such release on terms that, in Agent’s opinion, could expose Agent to liability or create any obligation or entail any consequence other than the release of such Lien without recourse, representation, or warranty, and (2) such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly released) upon (or obligations of Borrowers in respect of) any and all interests retained by any Borrower, including, the proceeds of any sale, all of which shall continue to constitute part of the Collateral.  Each Lender further hereby irrevocably authorize (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to irrevocably authorize) Agent, at its option and in its sole discretion, to subordinate any Lien granted to or held by Agent under any Loan Document to the holder of any Permitted Lien on such property if such Permitted Lien secures Permitted Purchase Money Indebtedness.

 

(b)        Agent shall have no obligation whatsoever to any of the Lenders (or the Bank Product Providers) (i) to verify or assure that the Collateral exists or is owned by Borrowers or their Subsidiaries or is cared for, protected, or insured or has been encumbered, (ii) to verify or assure that Agent’s Liens have been properly or sufficiently or lawfully created, perfected, protected, or enforced or are entitled to any particular priority, (iii) to verify or assure that any particular items of Collateral meet the eligibility criteria applicable in respect thereof, (iv) to impose, maintain, increase, reduce, implement, or eliminate any particular reserve hereunder or to determine whether the amount of any reserve is appropriate or not, or (v) to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent pursuant to any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, subject to the terms and conditions contained herein, Agent may act in any manner it may deem appropriate, in its sole discretion given Agent’s own interest in the Collateral in its capacity as one of the Lenders and that Agent shall have no other duty or liability whatsoever to any Lender (or Bank Product Provider) as to any of the foregoing, except as otherwise expressly provided herein.

 

15.12.   Restrictions on Actions by Lenders; Sharing of Payments.

 

(a)        Each of the Lenders agrees that it shall not, without the express written consent of Agent, and that it shall, to the extent it is lawfully entitled to do so, upon the written

 

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request of Agent, set off against the Obligations, any amounts owing by such Lender to any Borrower or its Subsidiaries or any deposit accounts of any Borrower or its Subsidiaries now or hereafter maintained with such Lender.  Each of the Lenders further agrees that it shall not, unless specifically requested to do so in writing by Agent, take or cause to be taken any action, including, the commencement of any legal or equitable proceedings to enforce any Loan Document against any Borrower or any Guarantor or to foreclose any Lien on, or otherwise enforce any security interest in, any of the Collateral.

 

(b)        If, at any time or times any Lender shall receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments with respect to the Obligations, except for any such proceeds or payments received by such Lender from Agent pursuant to the terms of this Agreement, or (ii) payments from Agent (other than fees, Lender Group Expenses, or similar payments made solely for the benefit of such Lender pursuant to the terms of any Loan Document) in excess of such Lender’s Pro Rata Share of all such distributions by Agent, such Lender promptly shall (A) turn the same over to Agent, in kind, and with such endorsements as may be required to negotiate the same to Agent, or in immediately available funds, as applicable, for the account of all of the Lenders and for application to the Obligations in accordance with the applicable provisions of this Agreement, or (B) purchase, without recourse or warranty, an undivided interest and participation in the Obligations owed to the other Lenders so that such excess payment received shall be applied ratably as among the Lenders in accordance with their Pro Rata Shares; provided, that to the extent that such excess payment received by the purchasing party is thereafter recovered from it, those purchases of participations shall be rescinded in whole or in part, as applicable, and the applicable portion of the purchase price paid therefor shall be returned to such purchasing party, but without interest except to the extent that such purchasing party is required to pay interest in connection with the recovery of the excess payment.

 

15.13.   Agency for Perfection.  Agent hereby appoints each other Lender (and each Bank Product Provider) as its agent (and each Lender hereby accepts (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to accept) such appointment) for the purpose of perfecting Agent’s Liens in assets which, in accordance with Article 8 or Article 9, as applicable, of the Code can be perfected by possession or control.  Should any Lender obtain possession or control of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent’s request therefor shall deliver possession or control of such Collateral to Agent or in accordance with Agent’s instructions.

 

15.14.   Payments by Agent to the Lenders.  All payments to be made by Agent to the Lenders (or Bank Product Providers) shall be made by bank wire transfer of immediately available funds pursuant to such wire transfer instructions as each party may designate for itself by written notice to Agent.  Concurrently with each such payment, Agent shall identify whether such payment (or any portion thereof) represents principal, premium, fees, or interest of the Obligations.

 

15.15.   Concerning the Collateral and Related Loan Documents.  Each member of the Lender Group authorizes and directs Agent to enter into this Agreement and the other Loan Documents.  Each member of the Lender Group agrees (and by entering into a Bank Product Agreement, each Bank Product Provider shall be deemed to agree) that any action taken by

 

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Agent in accordance with the terms of this Agreement or the other Loan Documents relating to the Collateral and the exercise by Agent of its powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all of the Lenders (and such Bank Product Provider).

 

15.16.   Field Examination Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information.  By becoming a party to this Agreement, each Lender:

 

(a)        is deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a copy of each field examination report, appraisal or valuation respecting any Borrower or its Subsidiaries (each, a “Report”) prepared by or at the request of Agent, and Agent shall so furnish each Lender with such Reports,

 

(b)        expressly agrees and acknowledges that Agent does not (i) make any representation or warranty as to the accuracy of any Report, and (ii) shall not be liable for any information contained in any Report,

 

(c)        expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agent or other party performing any field examination will inspect only specific information regarding Borrowers and their Subsidiaries and will rely significantly upon Borrowers’ and their Subsidiaries’ books and records, as well as on representations of Borrowers’ personnel,

 

(d)        agrees to keep all Reports and other material, non-public information regarding Borrowers and their Subsidiaries and their operations, assets, and existing and contemplated business plans in a confidential manner in accordance with Section 17.9, and

 

(e)        without limiting the generality of any other indemnification provision contained in this Agreement, agrees:  (i) to hold Agent and any other Lender preparing a Report harmless from any action the indemnifying Lender may take or fail to take or any conclusion the indemnifying Lender may reach or draw from any Report in connection with any loans or other credit accommodations that the indemnifying Lender has made or may make to Borrowers, or the indemnifying Lender’s participation in, or the indemnifying Lender’s purchase of, a loan or loans of Borrowers, and (ii) to pay and protect, and indemnify, defend and hold Agent, and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including, attorneys’ fees and costs) incurred by Agent and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.

 

(f)         In addition to the foregoing, (x) any Lender may from time to time request of Agent in writing that Agent provide to such Lender a copy of any report or document provided by any Borrower or its Subsidiaries to Agent that has not been contemporaneously provided by such Borrower or such Subsidiary to such Lender, and, upon receipt of such request, Agent promptly shall provide a copy of same to such Lender, (y) to the extent that Agent is entitled, under any provision of the Loan Documents, to request additional reports or information from any Borrower or its Subsidiaries, any Lender may, from time to time, reasonably request Agent to exercise such right as specified in such Lender’s notice to Agent, whereupon Agent 

 

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promptly shall request of Borrowers the additional reports or information reasonably specified by such Lender, and, upon receipt thereof from such Borrower or such Subsidiary, Agent promptly shall provide a copy of same to such Lender, and (z) any time that Agent renders to Borrowers a statement regarding the Loan Account, Agent shall send a copy of such statement to each Lender.

 

15.17.   Several Obligations; No Liability.  Notwithstanding that certain of the Loan Documents now or hereafter may have been or will be executed only by or in favor of Agent in its capacity as such, and not by or in favor of the Lenders, any and all obligations on the part of Agent (if any) to make any credit available hereunder shall constitute the several (and not joint) obligations of the respective Lenders on a ratable basis, according to their respective Commitments, to make an amount of such credit not to exceed, in principal amount, at any one time outstanding, the amount of their respective Commitments.  Nothing contained herein shall confer upon any Lender any interest in, or subject any Lender to any liability for, or in respect of, the business, assets, profits, losses, or liabilities of any other Lender.  Each Lender shall be solely responsible for notifying its Participants of any matters relating to the Loan Documents to the extent any such notice may be required, and no Lender shall have any obligation, duty, or liability to any Participant of any other Lender.  Except as provided in Section 15.7, no member of the Lender Group shall have any liability for the acts of any other member of the Lender Group.  No Lender shall be responsible to any Borrower or any other Person for any failure by any other Lender (or Bank Product Provider) to fulfill its obligations to make credit available hereunder, nor to advance for such Lender (or Bank Product Provider) or on its behalf, nor to take any other action on behalf of such Lender (or Bank Product Provider) hereunder or in connection with the financing contemplated herein.

 

15.18.   Sole Lead Arranger and Sole Book Runner.  Each of the Sole Lead Arranger and Sole Book Runner, in such capacities, shall not have any right, power, obligation, liability, responsibility, or duty under this Agreement other than those applicable to it in its capacity as a Lender, as Agent, as Swing Lender, or as Issuing Bank.  Without limiting the foregoing, each of the Sole Lead Arranger and Sole Book Runner, in such capacities, shall not have or be deemed to have any fiduciary relationship with any Lender or any Loan Party.  Each Lender, Agent, Swing Lender, Issuing Bank, and each Loan Party acknowledges that it has not relied, and will not rely, on the Sole Lead Arranger and Sole Book Runner in deciding to enter into this Agreement or in taking or not taking action hereunder.  Each of the Sole Lead Arranger and Sole Book Runner, in such capacities, shall be entitled to resign at any time by giving notice to Agent and Borrowers.

 

16.                              WITHHOLDING TAXES.

 

16.1.     Payments.  All payments made by any Loan Party under any Loan Document will be made free and clear of, and without deduction or withholding for, any present or future Indemnified Taxes, and in the event any deduction or withholding of Indemnified Taxes is required, the applicable Loan Party shall comply with the next sentence of this Section 16.1.  If any Indemnified Taxes are so levied or imposed, the Loan Parties agree to pay the full amount of such Indemnified Taxes and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement, any note, or Loan Document, including any amount paid pursuant to this Section 16.1 after withholding or deduction for or on account of any Indemnified Taxes, will not be less than the amount provided for herein.  The Loan Parties will 

 

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furnish to Agent as promptly as possible after the date the payment of any Indemnified Tax is due pursuant to applicable law, certified copies of tax receipts evidencing such payment by the Loan Parties.  Borrowers agree to pay any present or future stamp, value added or documentary taxes or any other excise or property taxes, charges, or similar levies that arise from any payment made hereunder or from the execution, delivery, performance, recordation, or filing of, or otherwise with respect to this Agreement or any other Loan Document.  Loan Parties shall jointly and severally indemnify each Indemnified Person (as defined in Section 10.3) (collectively a “Tax Indemnitee”) for the full amount of Indemnified Taxes arising in connection with this Agreement or any other Loan Document or breach thereof by any Loan Party (including, without limitation, any Indemnified Taxes imposed or asserted on, or attributable to, amounts payable under this Section 16) imposed on, or paid by, such Tax Indemnitee and all reasonable costs and expenses related thereto (including fees and disbursements of attorneys and other tax professionals), as and when they are incurred and irrespective of whether suit is brought, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority (other than Indemnified Taxes and additional amounts that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of such Tax Indemnitee).  The obligations of the Loan Parties under this Section 16 shall survive the termination of this Agreement, the resignation and replacement of the Agent, and the repayment of the Obligations.

 

16.2.     Exemptions.

 

(a)        If a Lender or Participant is entitled to claim an exemption or reduction from United States withholding tax, such Lender or Participant agrees with and in favor of Agent, to deliver to Agent (or, in the case of a Participant, to the Lender granting the participation only) and the Administrative Borrower on behalf of all Borrowers one of the following before receiving its first payment under this Agreement:

 

(i)         if such Lender or Participant is entitled to claim an exemption from United States withholding tax pursuant to the portfolio interest exception, (A) a statement of the Lender or Participant, signed under penalty of perjury, that it is not a (I) a “bank” as described in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder of Administrative Borrower (within the meaning of Section 871(h)(3)(B) of the IRC), or (III) a controlled foreign corporation related to Borrowers within the meaning of Section 864(d)(4) of the IRC, and (B) a properly completed and executed IRS Form W-8BEN, Form W-8BEN-E, or Form W-8IMY (with proper attachments as applicable);

 

(ii)         if such Lender or Participant is entitled to claim an exemption from, or a reduction of, withholding tax under a United States tax treaty, a properly completed and executed copy of IRS Form W-8BEN or Form W-8BEN-E, as applicable;

 

(iii)        if such Lender or Participant is entitled to claim that interest paid under this Agreement is exempt from United States withholding tax because it is effectively connected with a United States trade or business of such Lender, a properly completed and executed copy of IRS Form W-8ECI;

 

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(iv)        if such Lender or Participant is entitled to claim that interest paid under this Agreement is exempt from United States withholding tax because such Lender or Participant serves as an intermediary, a properly completed and executed copy of IRS Form W-8IMY (with proper attachments); or

 

(v)        a properly completed and executed copy of any other form or forms, including IRS Form W-9, as may be required under the IRC or other laws of the United States as a condition to exemption from, or reduction of, United States withholding or backup withholding tax.

 

(b)        Each Lender or Participant shall provide new forms (or successor forms) upon the expiration or obsolescence of any previously delivered forms and to promptly notify Agent and Administrative Borrower (or, in the case of a Participant, to the Lender granting the participation only) of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

 

(c)        If a Lender or Participant claims an exemption from withholding tax in a jurisdiction other than the United States, such Lender or such Participant agrees with and in favor of Agent and Borrowers, to deliver to Agent and Administrative Borrower (or, in the case of a Participant, to the Lender granting the participation only) any such form or forms, as may be required under the laws of such jurisdiction as a condition to exemption from, or reduction of, foreign withholding or backup withholding tax before receiving its first payment under this Agreement, but only if such Lender or such Participant is legally able to deliver such forms, or the providing of or delivery of such forms in the Lender’s reasonable judgment would not subject such Lender to any material unreimbursed cost or expense or materially prejudice the legal or commercial position of such Lender (or its Affiliates); provided further, that nothing in this Section 16.2(c) shall require a Lender or Participant to disclose any information that it deems to be confidential (including without limitation, its tax returns).  Each Lender and each Participant shall provide new forms (or successor forms) upon the expiration or obsolescence of any previously delivered forms and to promptly notify Agent and Administrative Borrower (or, in the case of a Participant, to the Lender granting the participation only) of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

 

(d)        If a Lender or Participant claims exemption from, or reduction of, withholding tax and such Lender or Participant sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of Borrowers to such Lender or Participant, such Lender or Participant agrees to notify Agent and Administrative Borrower (or, in the case of a sale of a participation interest, to the Lender granting the participation only) of the percentage amount in which it is no longer the beneficial owner of Obligations of Borrowers to such Lender or Participant.  To the extent of such percentage amount, Agent and Administrative Borrower will treat such Lender’s or such Participant’s documentation provided pursuant to Section 16.2(a) or 16.2(c) as no longer valid.  With respect to such percentage amount, such Participant or Assignee may provide new documentation, pursuant to Section 16.2(a) or 16.2(c), if applicable.  Borrowers agree that each Participant shall be entitled to the benefits of this Section 16 with respect to its participation in any portion of the Commitments and the Obligations so long as such Participant complies with the obligations set forth in this Section 16 with respect thereto.

 

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(e)        If a payment made to a Lender under any Loan Document would be subject to U.S. federal income withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the IRC, as applicable), such Lender shall deliver to Agent (or, in the case of a Participant, to the Lender granting the participation only) at the time or times prescribed by law and at such time or times reasonably requested by Agent (or, in the case of a Participant, the Lender granting the participation) such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the IRC) and such additional documentation reasonably requested by Agent (or, in the case of a Participant, the Lender granting the participation) as may be necessary for Agent or Borrowers to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this clause (e), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

16.3.     Reductions.

 

(a)        If a Lender or a Participant is subject to an applicable withholding tax, Agent and Borrowers (or, in the case of a Participant, the Lender granting the participation) may withhold from any payment to such Lender or such Participant an amount equivalent to the applicable withholding tax.  If the forms or other documentation required by Section 16.2(a) or 16.2(c) are not delivered to Agent and Administrative Borrower (or, in the case of a Participant, to the Lender granting the participation), then Agent (or, in the case of a Participant, to the Lender granting the participation) may withhold from any payment to such Lender or such Participant not providing such forms or other documentation an amount equivalent to the applicable withholding tax.

 

(b)        If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that Agent (or, in the case of a Participant, to the Lender granting the participation) did not properly withhold tax from amounts paid to or for the account of any Lender or any Participant due to a failure on the part of the Lender or any Participant (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify Agent (or such Participant failed to notify the Lender granting the participation) of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify and hold Agent harmless (or, in the case of a Participant, such Participant shall indemnify and hold the Lender granting the participation harmless) for all amounts paid, directly or indirectly, by Agent (or, in the case of a Participant, to the Lender granting the participation), as Tax or otherwise, including penalties and interest, and including any Taxes imposed by any jurisdiction on the amounts payable to Agent (or, in the case of a Participant, to the Lender granting the participation only) under this Section 16, together with all costs and expenses (including attorneys’ fees and expenses).  The obligation of the Lenders and the Participants under this subsection shall survive the payment of all Obligations and the resignation or replacement of Agent.

 

16.4.     Refunds.  If Agent or a Lender determines, in its sole discretion, that it has received a refund of any Indemnified Taxes to which the Loan Parties have paid additional amounts pursuant to this Section 16, so long as no Default or Event of Default has occurred and 

 

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is continuing, it shall pay over such refund to the Administrative Borrower on behalf of the Loan Parties (but only to the extent of payments made, or additional amounts paid, by the Loan Parties under this Section 16 with respect to Indemnified Taxes giving rise to such a refund), net of all out-of-pocket expenses of Agent or such Lender and without interest (other than any interest paid by the applicable Governmental Authority with respect to such a refund); provided, that the Loan Parties, upon the request of Agent or such Lender, agrees to repay the amount paid over to the Loan Parties (plus any penalties, interest or other charges, imposed by the applicable Governmental Authority, other than such penalties, interest or other charges imposed as a result of the willful misconduct or gross negligence of Agent or Lender hereunder as finally determined by a court of competent jurisdiction) to Agent or such Lender in the event Agent or such Lender is required to repay such refund to such Governmental Authority.  Notwithstanding anything in this Agreement to the contrary, this Section 16 shall not be construed to require Agent or any Lender to make available its tax returns (or any other information which it deems confidential) to Loan Parties or any other Person or require Agent or any Lender to pay any amount to an indemnifying party pursuant to Section 16.4, the payment of which would place Agent or such Lender (or their Affiliates) in a less favorable net after-Tax position than such Person would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.

 

17.                              GENERAL PROVISIONS.

 

17.1.     Effectiveness.  This Agreement shall be binding and deemed effective when executed by each Borrower, Agent, and each Lender whose signature is provided for on the signature pages hereof.

 

17.2.     Section Headings.  Headings and numbers have been set forth herein for convenience only.  Unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Agreement.

 

17.3.     Interpretation.  Neither this Agreement nor any uncertainty or ambiguity herein shall be construed against the Lender Group or any Borrower, whether under any rule of construction or otherwise.  On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to accomplish fairly the purposes and intentions of all parties hereto.

 

17.4.     Severability of Provisions.  Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

 

17.5.     Bank Product Providers.  Each Bank Product Provider in its capacity as such shall be deemed a third party beneficiary hereof and of the provisions of the other Loan Documents for purposes of any reference in a Loan Document to the parties for whom Agent is acting.  Agent hereby agrees to act as agent for such Bank Product Providers and, by virtue of entering into a Bank Product Agreement, the applicable Bank Product Provider shall be automatically deemed to have appointed Agent as its agent and to have accepted the benefits of the Loan Documents.  It is understood and agreed that the rights and benefits of each Bank 

 

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Product Provider under the Loan Documents consist exclusively of such Bank Product Provider’s being a beneficiary of the Liens and security interests (and, if applicable, guarantees) granted to Agent and the right to share in payments and collections out of the Collateral as more fully set forth herein. In addition, each Bank Product Provider, by virtue of entering into a Bank Product Agreement, shall be automatically deemed to have agreed that Agent shall have the right, but shall have no obligation, to establish, maintain, relax, or release reserves in respect of the Bank Product Obligations and that if reserves are established there is no obligation on the part of Agent to determine or insure whether the amount of any such reserve is appropriate or not.  In connection with any such distribution of payments or proceeds of Collateral, Agent shall be entitled to assume no amounts are due or owing to any Bank Product Provider unless such Bank Product Provider has provided a written certification (setting forth a reasonably detailed calculation) to Agent as to the amounts that are due and owing to it and such written certification is received by Agent a reasonable period of time prior to the making of such distribution.  Agent shall have no obligation to calculate the amount due and payable with respect to any Bank Products, but may rely upon the written certification of the amount due and payable from the applicable Bank Product Provider.  In the absence of an updated certification, Agent shall be entitled to assume that the amount due and payable to the applicable Bank Product Provider is the amount last certified to Agent by such Bank Product Provider as being due and payable (less any distributions made to such Bank Product Provider on account thereof).  Borrowers may obtain Bank Products from any Bank Product Provider, although Borrowers are not required to do so.  Each Borrower acknowledges and agrees that no Bank Product Provider has committed to provide any Bank Products and that the providing of Bank Products by any Bank Product Provider is in the sole and absolute discretion of such Bank Product Provider.  Notwithstanding anything to the contrary in this Agreement or any other Loan Document, no provider or holder of any Bank Product shall have any voting or approval rights hereunder (or be deemed a Lender) solely by virtue of its status as the provider or holder of such agreements or products or the Obligations owing thereunder, nor shall the consent of any such provider or holder be required (other than in their capacities as Lenders, to the extent applicable) for any matter hereunder or under any of the other Loan Documents, including as to any matter relating to the Collateral or the release of Collateral or Guarantors.

 

17.6.     Debtor-Creditor Relationship.  The relationship between the Lenders and Agent, on the one hand, and the Loan Parties, on the other hand, is solely that of creditor and debtor.  No member of the Lender Group has (or shall be deemed to have) any fiduciary relationship or duty to any Loan Party arising out of or in connection with the Loan Documents or the transactions contemplated thereby, and there is no agency or joint venture relationship between the members of the Lender Group, on the one hand, and the Loan Parties, on the other hand, by virtue of any Loan Document or any transaction contemplated therein.

 

17.7.     Counterparts; Electronic Execution.  This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement.  Delivery of an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Agreement.  Any party delivering an executed counterpart of this Agreement by telefacsimile or other electronic method of transmission also shall deliver an original executed counterpart of this Agreement but the failure 

 

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to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement.  The foregoing shall apply to each other Loan Document mutatis mutandis.

 

17.8.     Revival and Reinstatement of Obligations; Certain Waivers.  If any member of the Lender Group or any Bank Product Provider repays, refunds, restores, or returns in whole or in part, any payment or property (including any proceeds of Collateral) previously paid or transferred to such member of the Lender Group or such Bank Product Provider in full or partial satisfaction of any Obligation or on account of any other obligation of any Loan Party under any Loan Document or any Bank Product Agreement, because the payment, transfer, or the incurrence of the obligation so satisfied is asserted or declared to be void, voidable, or otherwise recoverable under any law relating to creditors’ rights, including provisions of the Bankruptcy Code relating to fraudulent transfers, preferences, or other voidable or recoverable obligations or transfers (each, a “Voidable Transfer”), or because such member of the Lender Group or Bank Product Provider elects to do so on the reasonable advice of its counsel in connection with a claim that the payment, transfer, or incurrence is or may be a Voidable Transfer, then, as to any such Voidable Transfer, or the amount thereof that such member of the Lender Group or Bank Product Provider elects to repay, restore, or return (including pursuant to a settlement of any claim in respect thereof), and as to all reasonable costs, expenses, and attorneys’ fees of such member of the Lender Group or Bank Product Provider related thereto, (i) the liability of the Loan Parties with respect to the amount or property paid, refunded, restored, or returned will automatically and immediately be revived, reinstated, and restored and will exist and (ii) Agent’s Liens securing such liability shall be effective, revived, and remain in full force and effect, in each case, as fully as if such Voidable Transfer had never been made.  If, prior to any of the foregoing, (A) Agent’s Liens shall have been released or terminated or (B) any provision of this Agreement shall have been terminated or cancelled, Agent’s Liens, or such provision of this Agreement, shall be reinstated in full force and effect and such prior release, termination, cancellation or surrender shall not diminish, release, discharge, impair or otherwise affect the obligation of any Loan Party in respect of such liability or any Collateral securing such liability.

 

17.9.     Confidentiality.

 

(a)        Agent and Lenders each individually (and not jointly or jointly and severally) agree that material, non-public information regarding Borrowers and their Subsidiaries, their operations, assets, and existing and contemplated business plans (“Confidential Information”) shall be treated by Agent and the Lenders in a confidential manner, and shall not be disclosed by Agent and the Lenders to Persons who are not parties to this Agreement, except:  (i) to attorneys for and other advisors, accountants, auditors, and consultants to any member of the Lender Group and to employees, directors and officers of any member of the Lender Group (the Persons in this clause (i), “Lender Group Representatives”) on a “need to know” basis in connection with this Agreement and the transactions contemplated hereby and on a confidential basis, (ii) to Subsidiaries and Affiliates of any member of the Lender Group (including the Bank Product Providers), provided that any such Subsidiary or Affiliate shall have agreed to receive such information hereunder subject to the terms of this Section 17.9, (iii) as may be required by regulatory authorities so long as such authorities are informed of the confidential nature of such information, (iv) as may be required by statute, decision, or judicial or administrative order, rule, or regulation; provided that (x) prior to any disclosure under this 

 

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clause (iv), the disclosing party agrees to provide Borrowers with prior notice thereof, to the extent that it is practicable to do so and to the extent that the disclosing party is permitted to provide such prior notice to Borrowers pursuant to the terms of the applicable statute, decision, or judicial or administrative order, rule, or regulation and (y) any disclosure under this clause (iv) shall be limited to the portion of the Confidential Information as may be required by such statute, decision, or judicial or administrative order, rule, or regulation, (v) as may be agreed to in advance in writing by Borrowers, (vi) as requested or required by any Governmental Authority pursuant to any subpoena or other legal process, provided, that, (x) prior to any disclosure under this clause (vi) the disclosing party agrees to provide Borrowers with prior written notice thereof, to the extent that it is practicable to do so and to the extent that the disclosing party is permitted to provide such prior written notice to Borrowers pursuant to the terms of the subpoena or other legal process and (y) any disclosure under this clause (vi) shall be limited to the portion of the Confidential Information as may be required by such Governmental Authority pursuant to such subpoena or other legal process, (vii) as to any such information that is or becomes generally available to the public (other than as a result of prohibited disclosure by Agent or the Lenders or the Lender Group Representatives), (viii) in connection with any assignment, participation or pledge of any Lender’s interest under this Agreement, provided that prior to receipt of Confidential Information any such assignee, participant, or pledgee shall have agreed in writing to receive such Confidential Information either subject to the terms of this Section 17.9 or pursuant to confidentiality requirements substantially similar to those contained in this Section 17.9 (and such Person may disclose such Confidential Information to Persons employed or engaged by them as described in clause (i) above), (ix) in connection with any litigation or other adversary proceeding involving parties hereto which such litigation or adversary proceeding involves claims related to the rights or duties of such parties under this Agreement or the other Loan Documents; provided, that, prior to any disclosure to any Person (other than any Loan Party, Agent, any Lender, any of their respective Affiliates, or their respective counsel) under this clause (ix) with respect to litigation involving any Person (other than any Borrower, Agent, any Lender, any of their respective Affiliates, or their respective counsel), the disclosing party agrees to provide Borrowers with prior written notice thereof, and (x) in connection with, and to the extent reasonably necessary for, the exercise of any secured creditor remedy under this Agreement or under any other Loan Document.

 

(b)        Anything in this Agreement to the contrary notwithstanding, Agent may disclose information concerning the terms and conditions of this Agreement and the other Loan Documents to loan syndication and pricing reporting services or in its marketing or promotional materials, with such information to consist of deal terms and other information customarily found in such publications or marketing or promotional materials and may otherwise use the name, logos, and other insignia of any Borrower or the other Loan Parties and the Commitments provided hereunder in any “tombstone” or other advertisements, on its website or in other marketing materials of the Agent.

 

(c)        The Loan Parties hereby acknowledge that Agent or its Affiliates may make available to the Lenders materials or information provided by or on behalf of Borrowers hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks, SyndTrak or another similar electronic system (the “Platform”) and certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Loan Parties or their securities) (each, a “Public Lender”).  The 

 

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Loan Parties shall be deemed to have authorized Agent and its Affiliates and the Lenders to treat Borrower Materials marked “PUBLIC” or otherwise at any time filed with the SEC as not containing any material non-public information with respect to the Loan Parties or their securities for purposes of United States federal and state securities laws.  All Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated as “Public Investor” (or another similar term).  Agent and its Affiliates and the Lenders shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” or that are not at any time filed with the SEC as being suitable only for posting on a portion of the Platform not marked as “Public Investor” (or such other similar term).

 

17.10.   Survival.  All representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that Agent, Issuing Bank, or any Lender may have had notice or knowledge of any Default or Event of Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of, or any accrued interest on, any Loan or any fee or any other amount payable under this Agreement is outstanding or unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or been terminated.

 

17.11.   Patriot Act.  Each Lender that is subject to the requirements of the Patriot Act hereby notifies Borrowers that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies each Borrower, which information includes the name and address of each Borrower and other information that will allow such Lender to identify each Borrower in accordance with the Patriot Act.  In addition, if Agent is required by law or regulation or internal policies to do so, it shall have the right to periodically conduct (a) Patriot Act searches, OFAC/PEP searches, and customary individual background checks for the Loan Parties and (b) OFAC/PEP searches and customary individual background checks for the Loan Parties’ senior management and key principals, and each Borrower agrees to cooperate in respect of the conduct of such searches and further agrees that the reasonable costs and charges for such searches shall constitute Lender Group Expenses hereunder and be for the account of Borrowers.

 

17.12.   Integration.  This Agreement and the Agreement Among Lenders, together with the other Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof.  The foregoing to the contrary notwithstanding, all Bank Product Agreements, if any, are independent agreements governed by the written provisions of such Bank Product Agreements, which will remain in full force and effect, unaffected by any repayment, prepayments, acceleration, reduction, increase, or change in the terms of any credit extended hereunder, except as otherwise expressly provided in such Bank Product Agreement.  Notwithstanding anything contained herein to the contrary, the parties hereto acknowledge and agree that the Agreement Among Lenders may modify (i) the rights and obligations of Agent and Lenders under Sections 14, 15 and 17 of this Agreement, (ii) the rights and remedies of Agent under Section 9 of this Agreement, and (iii) the application of proceeds of

 

90

 

Collateral and payments in respect of the Obligations, and in the event of a conflict between the Agreement Among Lenders and this Agreement, the Agreement Among Lenders shall govern.

 

17.13.   Harte Hanks as Agent for Borrowers.  Each Borrower hereby irrevocably appoints Harte Hanks as the borrowing agent and attorney-in-fact for all Borrowers (the “Administrative Borrower”) which appointment shall remain in full force and effect during the term of this Agreement.  Each Borrower hereby irrevocably appoints and authorizes the Administrative Borrower (a) to provide Agent with all notices with respect to Revolving Loans and Letters of Credit obtained for the benefit of any Borrower and all other notices and instructions under this Agreement and the other Loan Documents (and any notice or instruction provided by Administrative Borrower shall be deemed to be given by Borrowers hereunder and shall bind each Borrower), (b) to receive notices and instructions from members of the Lender Group (and any notice or instruction provided by any member of the Lender Group to the Administrative Borrower in accordance with the terms hereof shall be deemed to have been given to each Borrower), and (c) to take such action as the Administrative Borrower deems appropriate on its behalf to obtain Revolving Loans and Letters of Credit and to exercise such other powers as are reasonably incidental thereto to carry out the purposes of this Agreement.  It is understood that the handling of the Loan Account and Collateral in a combined fashion, as more fully set forth herein, is done solely as an accommodation to Borrowers in order to utilize the collective borrowing powers of Borrowers in the most efficient and economical manner and at their request, and that Lender Group shall not incur liability to any Borrower as a result hereof.  Each Borrower expects to derive benefit, directly or indirectly, from the handling of the Loan Account and the Collateral in a combined fashion since the successful operation of each Borrower is dependent on the continued successful performance of the integrated group.  To induce the Lender Group to do so, and in consideration thereof, each Borrower hereby jointly and severally agrees to indemnify each member of the Lender Group and hold each member of the Lender Group harmless against any and all liability, expense, loss or claim of damage or injury, made against the Lender Group by any Borrower or by any third party whosoever, arising from or incurred by reason of (i) the handling of the Loan Account and Collateral of Borrowers as herein provided, or (ii) the Lender Group’s relying on any instructions of the Administrative Borrower, except that Borrowers will have no liability to the relevant Agent-Related Person or Lender-Related Person under this Section 17.13 with respect to any liability that has been finally determined by a court of competent jurisdiction to have resulted solely from the gross negligence or willful misconduct of such Agent-Related Person or Lender-Related Person, as the case may be.

 

17.14.   No Setoff.  All payments made by Borrowers hereunder or under any note or other Loan Document will be made without setoff, counterclaim, or other defense.

 

[SIGNATURE PAGES FOLLOW.]

 

91

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written.

 

	
BORROWERS:
    	
 
    	
HARTE   HANKS, INC.
    
	
 
    	
 
    	
TRILLIUM SOFTWARE, INC.
    
	
 
    	
 
    	
HARTE-HANKS RESPONSE   MANAGEMENT/BOSTON, INC. 
    
	
 
    	
 
    	
HARTE-HANKS   LOGISTICS, LLC
    
	
 
    	
 
    	
HARTE HANKS   DIRECT MARKETING/BALTIMORE, INC.
    
	
 
    	
 
    	
HARTE-HANKS   DIRECT, INC.
    
	
 
    	
 
    	
HARTE-HANKS DIRECT MARKETING/JACKSONVILLE, LLC
    
	
 
    	
 
    	
HARTE-HANKS DIRECT MARKETING/KANSAS CITY, LLC
    
	
 
    	
 
    	
HARTE-HANKS   STRATEGIC MARKETING, INC.
    
	
 
    	
 
    	
HARTE-HANKS   RESPONSE MANAGEMENT/AUSTIN, INC.
    
	
 
    	
 
    	
SALES   SUPPORT SERVICES, INC.
    
	
 
    	
 
    	
3Q   DIGITAL, INC.
    
	
 
    	
 
    	
HARTE-HANKS   DATA SERVICES LLC
    
	
 
    	
 
    	
HARTE-HANKS   DIRECT MARKETING/DALLAS, INC.
    
	
 
    	
 
    	
HARTE-HANKS   DIRECT MARKETING/FULLERTON, INC.
    
	
 
    	
 
    	
NSO, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Douglas C.   Shepard
    
	
 
    	
 
    	
Name:
    	
Douglas C. Shepard
    
	
 
    	
 
    	
Title:
    	
Authorized Officer
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
 
    	
WELLS FARGO   BANK, NATIONAL
   ASSOCIATION,   a national banking association, as
   Agent, as Sole Lead Arranger, as Sole Book Runner and
   as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Samantha   Alexander
    
	
 
    	
 
    	
Name:
    	
Samantha Alexander
    
	
 
    	
 
    	
Title:
    	
Director
    

 

Signature Page to Credit Agreement

 

 

	
 
    	
 
    	
LBC III WF   FUNDING, LLC,
   as a Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/ Christopher J.   Calabrese
    
	
 
    	
 
    	
Name:
    	
Christopher J.   Calabrese
    
	
 
    	
 
    	
Title:
    	
Executive Manager
    

 

Signature Page to Credit Agreement

 

 

EXHIBIT A-1

 

FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT

 

This ASSIGNMENT AND ACCEPTANCE AGREEMENT (“Assignment Agreement”) is entered into as of                                 between                                 (“Assignor”) and                                 (“Assignee”).  Reference is made to the Agreement described in Annex I hereto (the “Credit Agreement”).  Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Credit Agreement; provided, however that, notwithstanding anything to the contrary set forth in the definition of Loan Documents in the Credit Agreement, for all purposes set forth in this Assignment Agreement, Loan Documents shall be deemed to include the Agreement Among Lenders.

 

1.                                     In accordance with the terms and conditions of Section 13 of the Credit Agreement, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to the Assignor’s rights and obligations under the Loan Documents as of the date hereof with respect to the Obligations owing to the Assignor, and Assignor’s portion of the Commitments, all to the extent specified on Annex I.

 

2.                                     The Assignor (a) represents and warrants that (i) it 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 (ii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment Agreement and to consummate the transactions contemplated hereby; (b) makes no representation or warranty and assumes no responsibility with respect to (i) any statements, representations or warranties made in or in connection with the Loan Documents, or (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any other instrument or document furnished pursuant thereto; (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or any Guarantor or the performance or observance by Borrower or any Guarantor of any of their respective obligations under the Loan Documents or any other instrument or document furnished pursuant thereto, and (d) represents and warrants that the amount set forth as the Purchase Price on Annex I represents the amount owed by Borrower to Assignor with respect to Assignor’s share of the Term Loan and the Revolving Loans assigned hereunder, as reflected on Assignor’s books and records.

 

3.                                     The Assignee (a) confirms that it has received copies of the Credit Agreement and the other Loan Documents, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement; (b) agrees that it will, independently and without reliance upon Agent, Assignor, or any other Lender, based upon such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under the Loan Documents; (c) confirms that it is an Eligible Transferee; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to Agent by the

 

 

terms thereof, together with such powers as are reasonably incidental thereto; (e) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender; [and (f) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee’s status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty.]

 

4.                                     Following the execution of this Assignment Agreement by the Assignor and Assignee, the Assignor will deliver this Assignment Agreement to the Agent for recording by the Agent.  The effective date of this Assignment (the “Settlement Date”) shall be the latest to occur of (a) the date of the execution and delivery hereof by the Assignor and the Assignee, (b) the receipt by Agent for its sole and separate account a processing fee in the amount of $3,500 (if required by the Credit Agreement), (c) the receipt of any required consent of the Agent, and (d) the date specified in Annex I.

 

5.                                     As of the Settlement Date (a) the Assignee shall be a party to the Credit Agreement and, to the extent of the interest assigned pursuant to this Assignment Agreement, have the rights and obligations of a Lender thereunder and under the other Loan Documents, and (b) the Assignor shall, to the extent of the interest assigned pursuant to this Assignment Agreement, relinquish its rights and be released from its obligations under the Credit Agreement and the other Loan Documents, provided, however, that nothing contained herein shall release any assigning Lender from obligations that survive the termination of this Agreement, including such assigning Lender’s obligations under Article 15 and Section 17.9(a) of the Credit Agreement.

 

6.                                     Upon the Settlement Date, Assignee shall pay to Assignor the Purchase Price (as set forth in Annex I).  From and after the Settlement Date, Agent shall make all payments that are due and payable to the holder of the interest assigned hereunder (including payments of principal, interest, fees and other amounts) to Assignor for amounts which have accrued up to but excluding the Settlement Date and to Assignee for amounts which have accrued from and after the Settlement Date.  On the Settlement Date, Assignor shall pay to Assignee an amount equal to the portion of any interest, fee, or any other charge that was paid to Assignor prior to the Settlement Date on account of the interest assigned hereunder and that are due and payable to Assignee with respect thereto, to the extent that such interest, fee or other charge relates to the period of time from and after the Settlement Date.

 

7.                                     This Assignment Agreement may be executed in counterparts and by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  This Assignment Agreement may be executed and delivered by telecopier or other facsimile transmission all with the same force and effect as if the same were a fully executed and delivered original manual counterpart.

 

8.                                     THIS ASSIGNMENT AGREEMENT SHALL BE SUBJECT TO THE PROVISIONS REGARDING CHOICE OF LAW AND VENUE, JURY TRIAL WAIVER, AND JUDICIAL REFERENCE SET FORTH IN SECTION 12 OF THE CREDIT AGREEMENT,

 

2

 

AND SUCH PROVISIONS ARE INCORPORATED HEREIN BY THIS REFERENCE, MUTATIS MUTANDIS.

 

[Signature page follows]

 

3

 

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

 

	
 
    	
[NAME OF   ASSIGNOR]
    
	
 
    	
as Assignor
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

	
 
    	
[NAME OF   ASSIGNEE]
    
	
 
    	
as Assignee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

	
ACCEPTED   THIS      DAY OF
    	
 
    
	
                            
    	
 
    
	
 
    	
 
    
	
WELLS FARGO   BANK, NATIONAL

ASSOCIATION, a national banking   association,
    	
 
    
	
as Agent
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
By
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    

 

4

 

ANNEX FOR ASSIGNMENT AND ACCEPTANCE

 

ANNEX I

 

1.            Borrowers:  Harte Hanks, Inc., a Delaware corporation, Trillium Software, Inc., a Delaware corporation and the other borrowers party thereto

 

2.             Name and Date of Credit Agreement:

 

Credit Agreement dated as of March 10, 2016 (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”) by and among Borrowers, the lenders party thereto as “Lenders”, Wells Fargo Bank, National Association, a national banking association (“Wells Fargo”), as administrative agent for each member of the Lender Group and the Bank Product Providers (in such capacity, together with its successors and assigns in such capacity, “Agent”), Wells Fargo Bank, National Association, a national banking association, as sole lead arranger (in such capacity, together with its successors and assigns in such capacity, the “Sole Lead Arranger”), and Wells Fargo Bank, National Association, a national banking association, as sole book runner (in such capacity, together with its successors and assigns in such capacity, the “Sole Book Runner”).

 

	
3.
    	
Date   of Assignment Agreement:
    	
                                    
    
	
 
    	
 
    	
 
    
	
4.
    	
Amounts:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
(a)
    	
Assigned   Amount of Revolver Commitment
    	
$                                    
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(b)
    	
Assigned   Amount of Revolving Loans
    	
$                                    
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
(c)
    	
Assigned   Amount of Term Loan
    	
$                                    
    
	
 
    	
 
    	
 
    
	
5.
    	
Settlement   Date:
    	
                                    
    
	
 
    	
 
    	
 
    
	
6.
    	
Purchase   Price
    	
$                                    
    
	
 
    	
 
    	
 
    
	
7.
    	
Notice and Payment Instructions, etc.
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Assignee:
    	
 
    	
Assignor:
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
							

 

 

EXHIBIT B-1

 

FORM OF BORROWING BASE CERTIFICATE

 

See attached.

 

 

EXHIBIT C-1

 

FORM OF COMPLIANCE CERTIFICATE

 

[on Administrative Borrower’s letterhead]

 

To:                             Wells Fargo Bank, National Association in its capacity as Agent for the benefit of the Lenders
 14241 Dallas Parkway
 Suite 1300
 Dallas, Texas 75254
 Attn:  Loan Portfolio Manager

 

Re:                            Compliance Certificate dated              , 20

 

Ladies and Gentlemen:

 

Reference is made to that certain Credit Agreement dated as of March 10, 2016 (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”) by and among Harte Hanks, Inc., a Delaware corporation (“Harte Hanks”), Trillium Software, Inc., a Delaware corporation (“Trillium”), the other borrowers party thereto (together with Harte Hanks and Trillium, are referred to hereinafter each individually as a “Borrower”, and individually and collectively, jointly and severally, as the “Borrowers”), the lenders party thereto as “Lenders”, Wells Fargo Bank, National Association, a national banking association (“Wells Fargo”), as administrative agent for each member of the Lender Group and the Bank Product Providers (in such capacity, together with its successors and assigns in such capacity, “Agent”), Wells Fargo Bank, National Association, a national banking association, as sole lead arranger (in such capacity, together with its successors and assigns in such capacity, the “Sole Lead Arranger”), and Wells Fargo Bank, National Association, a national banking association, as sole book runner (in such capacity, together with its successors and assigns in such capacity, the “Sole Book Runner”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.

 

Pursuant to Section 5.1 of the Credit Agreement, the undersigned officer of each Borrower hereby certifies as of the date hereof that:

 

1.         The financial information of the Loan Parties and their Subsidiaries furnished in Schedule 1 attached hereto, has been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for year-end audit adjustments and the lack of footnotes), and fairly presents in all material respects the consolidated financial condition of the Loan Parties and their Subsidiaries as of the date set forth therein.

 

2.         Such officer has reviewed the terms of the Credit Agreement and has made, or caused to be made under his/her supervision, a review in reasonable detail of the transactions and consolidated financial condition of the Loan Parties and their Subsidiaries during the

 

 

accounting period covered by the financial statements delivered pursuant to Section 5.1 of the Credit Agreement.

 

3.         Such review has not disclosed the existence on and as of the date hereof, and the undersigned does not have knowledge of the existence as of the date hereof, of any event or condition that constitutes a Default or Event of Default, except for such conditions or events listed on Schedule 2 attached hereto, in each case specifying the nature and period of existence thereof and what action the Loan Parties or their Subsidiaries have taken, are taking, or propose to take with respect thereto.

 

4.         Except as set forth on Schedule 3 attached hereto, the representations and warranties of the Loan Parties and their Subsidiaries set forth in the Credit Agreement and the other Loan Documents are true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) on and as of the date hereof (except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of such earlier date).

 

5.         Schedule 4 sets forth a calculation of EBITDA, Fixed Charge Coverage Ratio, Leverage Ratio, Recurring Revenue and Capital Expenditures, as applicable, for the 12 month period ending as of the date of the financial statements attached to Schedule 1.

 

6.         Schedule 5 sets forth a list of all direct or indirect Subsidiaries formed or acquired by any Loan Party subsequent to the date of the most recent Compliance Certificate (or in the case of the first Compliance Certificate, since the Closing Date) submitted by Borrowers.  Within ten (10) Business Days of the date hereof, Borrowers will cause the applicable Loan Party and such formed or acquired Subsidiary to comply with Section 5.11 of the Credit Agreement.

 

[Signature pages follow]

 

2

 

IN WITNESS WHEREOF, this Compliance Certificate is executed by the undersigned this       day of                ,         .

 

	
 
    	
HARTE HANKS, INC.
    
	
 
    	
TRILLIUM   SOFTWARE, INC.
    
	
 
    	
HARTE-HANKS   RESPONSE
    
	
 
    	
 
    	
MANAGEMENT/BOSTON, INC.
    
	
 
    	
HARTE-HANKS   LOGISTICS, LLC
    
	
 
    	
HARTE HANKS   DIRECT
    
	
 
    	
 
    	
MARKETING/BALTIMORE, INC.
    
	
 
    	
HARTE-HANKS   DIRECT, INC.
    
	
 
    	
HARTE-HANKS   DIRECT
    
	
 
    	
 
    	
MARKETING/JACKSONVILLE,   LLC
    
	
 
    	
HARTE-HANKS   DIRECT MARKETING/KANSAS
    
	
 
    	
 
    	
CITY, LLC
    
	
 
    	
HARTE-HANKS   STRATEGIC MARKETING, INC.
    
	
 
    	
HARTE-HANKS   RESPONSE
    
	
 
    	
 
    	
MANAGEMENT/AUSTIN, INC.
    
	
 
    	
SALES   SUPPORT SERVICES, INC.
    
	
 
    	
3Q   DIGITAL, INC.
    
	
 
    	
HARTE-HANKS   DATA SERVICES LLC
    
	
 
    	
HARTE-HANKS   DIRECT MARKETING/DALLAS,
    
	
 
    	
 
    	
INC.
    
	
 
    	
HARTE-HANKS   DIRECT
    
	
 
    	
 
    	
MARKETING/FULLERTON, INC.
    
	
 
    	
NSO, INC.
    

 

	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Douglas C. Shepard
    
	
 
    	
Title:
    	
Authorized Officer
    

 

3

 

SCHEDULE 1

 

Financial Information

 

 

SCHEDULE 2

 

Default or Event of Default

 

 

SCHEDULE 3

 

Representations and Warranties

 

 

SCHEDULE 4

 

Financial Covenants

 

1.             Borrowers’ and their Subsidiaries’ EBITDA, measured on a month-end basis, for the 12 month period ending                 , 20   , is $       .

 

2.             Borrowers’ and their Subsidiaries’ Fixed Charge Coverage Ratio, measured on a month-end basis, for the 12 month period ending                 , 20   , is    :1.0, which ratio [is/is not] greater than or equal to the ratio set forth in Section 7(a) of the Credit Agreement for the corresponding period.

 

3.             Borrowers’ and their Subsidiaries’ Leverage Ratio, measured on a month-end basis, for the 12 month period ending                 , 20   , is    :1.0, which ratio [is/is not] less than or equal to the ratio set forth in Section 7(b) of the Credit Agreement for the corresponding period.

 

4.             Borrowers’ and their Subsidiaries’ Recurring Revenue, measured on a month-end basis, for the 12 month period ending               , 20  , is $       , which [is/is not] greater than or equal to the amount set forth in Section 7(c) of the Credit Agreement for the corresponding period.

 

5.             Borrowers’ and their Subsidiaries’ year to date Capital Expenditures during the fiscal year ending December 31, 20   is $       , which [is/is not] less than or equal to the amount set forth in Section 7(d) of the Credit Agreement for the corresponding fiscal year, plus any applicable Carry-Over Amount.

 

 

SCHEDULE 5

 

Formed or Acquired Subsidiaries

 

 

EXHIBIT I-1

 

FORM OF IP REPORTING CERTIFICATE(1)

 

 

The undersigned officer of the Loan Parties hereby certify as of the date hereof on behalf of such Loan Parties in their capacity as officers of such Loan Parties and not in their individual capacities that the information in this IP Reporting Certificate is true, correct, and complete.

 

Set forth below is a list identifying all of the Copyrights for proprietary software that is material to generating revenue of any Loan Party, whether created or acquired before, on, or after the Closing Date, to the extent not previously disclosed.  Such list sets forth such Copyrights sequentially based on the amount of revenue generated from licensing the corresponding software programs, starting from the software program that generates the highest amount of revenue to the software program that generates the least amount of revenue.  Such list identifies which of the Copyrights in such proprietary software have been filed for registration with the United States Copyright Office.

 

< List here, or attach separate schedule if needed >

 

(1)  All initially capitalized terms used herein without definition shall have the meanings ascribed thereto in that certain Credit Agreement dated as of March 10, 2016 (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”) by and among Harte Hanks, Inc., a Delaware corporation (“Harte Hanks”), Trillium Software, Inc., a Delaware corporation (“Trillium”), the other borrowers party thereto (together with Harte Hanks and Trillium, are referred to hereinafter each individually as a “Borrower”, and individually and collectively, jointly and severally, as the “Borrowers”), the lenders party thereto as “Lenders”, Wells Fargo Bank, National Association, a national banking association (“Wells Fargo”), as administrative agent for each member of the Lender Group and the Bank Product Providers (in such capacity, together with its successors and assigns in such capacity, “Agent”), Wells Fargo Bank, National Association, a national banking association, as sole lead arranger (in such capacity, together with its successors and assigns in such capacity, the “Sole Lead Arranger”), and Wells Fargo Bank, National Association, a national banking association, as sole book runner (in such capacity, together with its successors and assigns in such capacity, the “Sole Book Runner”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.

 

 

Set forth below is a description of all new Patents, Trademarks or Copyrights that are registered or the subject of pending applications for registrations with the United States Copyright Office, and of all Intellectual Property Licenses that are material to the conduct of such Grantor’s business, in each case, which were acquired, registered, or for which applications for registration were filed by any Grantor during the prior quarter.

 

< List here, or attach separate schedule if needed >

 

2

 

Set forth below is a description of each statement of use or amendment to allege use filed during the prior quarter with respect to intent-to-use trademark applications that are material to the conduct of such Grantor’s business.

 

< List here, or attach separate schedule if needed >

 

3

 

IN WITNESS WHEREOF, this IP Reporting Certificate is executed by each of the undersigned officer, in his/her capacity as an officer of a Loan Party and not in an individual capacity, on behalf of the applicable Loan Party, this         day of                , 20    .

 

	
 
    	
HARTE HANKS, INC.
    TRILLIUM SOFTWARE, INC.
    HARTE-HANKS RESPONSE

MANAGEMENT/BOSTON, INC.

HARTE-HANKS LOGISTICS, LLC
    HARTE HANKS DIRECT

MARKETING/BALTIMORE, INC.

HARTE-HANKS DIRECT, INC.
    HARTE-HANKS DIRECT

MARKETING/JACKSONVILLE, LLC

HARTE-HANKS DIRECT MARKETING/KANSAS

CITY, LLC

HARTE-HANKS STRATEGIC MARKETING, INC.
    HARTE-HANKS RESPONSE

MANAGEMENT/AUSTIN, INC.

SALES SUPPORT SERVICES, INC.
    3Q DIGITAL, INC.
    HARTE-HANKS DATA SERVICES LLC
    HARTE-HANKS DIRECT   MARKETING/DALLAS,

INC.

HARTE-HANKS DIRECT

MARKETING/FULLERTON, INC.

NSO, INC.
    HARTE-HANKS FLORIDA, INC.
    HARTE-HANKS PRINT, INC.
    HARTE-HANKS STS, INC.
    

 

 

	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Douglas   C. Shepard
    
	
 
    	
Title: 
    	
Authorized Officer
    

 

4

 

EXHIBIT L-1

 

FORM OF LIBOR NOTICE

 

Wells Fargo Bank, National Association, as Agent
 under the below referenced Credit Agreement
 14241 Dallas Parkway
 Suite 1300
 Dallas, Texas 75254

 

Ladies and Gentlemen:

 

Reference hereby is made to that certain Credit Agreement dated as of March 10, 2016 (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”) by and among Harte Hanks, Inc., a Delaware corporation (“Harte Hanks”), Trillium Software, Inc., a Delaware corporation (“Trillium”), the other borrowers party thereto (together with Harte Hanks and Trillium, are referred to hereinafter each individually as a “Borrower”, and individually and collectively, jointly and severally, as the “Borrowers”), the lenders party thereto as “Lenders”, Wells Fargo Bank, National Association, a national banking association (“Wells Fargo”), as administrative agent for each member of the Lender Group and the Bank Product Providers (in such capacity, together with its successors and assigns in such capacity, “Agent”), Wells Fargo Bank, National Association, a national banking association, as sole lead arranger (in such capacity, together with its successors and assigns in such capacity, the “Sole Lead Arranger”), and Wells Fargo Bank, National Association, a national banking association, as sole book runner (in such capacity, together with its successors and assigns in such capacity, the “Sole Book Runner”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement.

 

This LIBOR Notice represents Borrowers’ request to elect the LIBOR Option with respect to outstanding Revolving Loans or the Term Loan in the amount of $         (the “LIBOR Rate Advance”)[, and is a written confirmation of the telephonic notice of such election given to Agent].

 

The LIBOR Rate Advance will have an Interest Period of 1, 2, or 3 month(s) commencing on                       .

 

This LIBOR Notice further confirms Borrowers’ acceptance, for purposes of determining the rate of interest based on the LIBOR Rate under the Credit Agreement, of the LIBOR Rate as determined pursuant to the Credit Agreement.

 

Each Borrower represents and warrants that (i) as of the date hereof, the representations and warranties of each Loan Party and Subsidiary contained in the Credit Agreement or in the other Loan Documents are true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) on and as of the date hereof, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties shall be true and

 

 

correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of such earlier date), (ii) each of the covenants and agreements contained in any Loan Document have been performed (to the extent required to be performed on or before the date hereof or each such effective date), and (iii) no Default or Event of Default has occurred and is continuing on the date hereof, nor will any thereof occur after giving effect to the request above.

 

[Signature page follows]

 

2

 

	
 
    	
Dated:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
HARTE HANKS, INC.
    TRILLIUM SOFTWARE, INC.
    HARTE-HANKS RESPONSE

MANAGEMENT/BOSTON, INC.

HARTE-HANKS LOGISTICS, LLC
    HARTE HANKS DIRECT

MARKETING/BALTIMORE, INC.

HARTE-HANKS DIRECT, INC.
    HARTE-HANKS DIRECT

MARKETING/JACKSONVILLE, LLC

HARTE-HANKS DIRECT MARKETING/KANSAS

CITY, LLC

HARTE-HANKS STRATEGIC MARKETING, INC.
    HARTE-HANKS RESPONSE

MANAGEMENT/AUSTIN, INC.

SALES SUPPORT SERVICES, INC.
    3Q DIGITAL, INC.
    HARTE-HANKS DATA SERVICES LLC
    HARTE-HANKS DIRECT   MARKETING/DALLAS,

INC.

HARTE-HANKS DIRECT

MARKETING/FULLERTON, INC.

NSO, INC.
    

 

 

	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Douglas C. Shepard
    
	
 
    	
Title:
    	
Authorized Officer
    

 

 

	
Acknowledged by:

WELLS FARGO BANK, NATIONAL
   ASSOCIATION, a national banking association, as
   Agent
    

 

 

	
 
    	
By
    	
 
    	
 
    
	
 
    	
Name:
    	
 
    	
 
    
	
 
    	
Title:
    	
 
    	
 
    

 

3

 

EXHIBIT P-1

 

FORM OF PERFECTION CERTIFICATE

 

Reference is hereby made to (a) that certain Credit Agreement dated as of March 10, 2016 (as amended, restated, supplemented, or otherwise modified from time to time, the “Credit Agreement”) by and among Harte Hanks, Inc., as a borrower (“HH”), Trillium Software, Inc., as a borrower (“Trillium”) the other borrowers party thereto (with HH and Trillium collectively, “Borrowers” and each a “Borrower”), the lenders party thereto as “Lenders” (each of such Lenders, together with its successors and permitted assigns, is referred to hereinafter as a “Lender”), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (“Wells Fargo”), in its capacity as administrative agent for each member of the Lender Group and the Bank Product Providers (in such capacity, together with its successors and assigns in such capacity, “Agent”), Wells Fargo, as sole lead arranger, Wells Fargo, as sole book runner, Wells Fargo, as syndication agent, and Wells Fargo, as documentation agent and (b) that certain Guaranty and Security Agreement dated as of March 10, 2016 (as amended, restated, supplemented, or otherwise modified from time to time, the “Guaranty and Security Agreement”) by and among Borrowers, the Subsidiaries of Borrowers party thereto as “Grantors”, and Agent.

 

All initially capitalized terms used herein without definition shall have the meanings ascribed thereto in the Credit Agreement.  Any terms (whether capitalized or lower case) used in this Perfection Certificate that are defined in the Code shall be construed and defined as set forth in the Code unless otherwise defined herein or in the Credit Agreement; provided that to the extent that the Code is used to define any term used herein and if such term is defined differently in different Articles of the Code, the definition of such term contained in Article 9 of the Code shall govern.  As used herein, the term “Loan Parties” shall mean the “Loan Parties” as that term is defined in the Credit Agreement and “Code” shall mean the “Code” as that term is defined in the Guaranty and Security Agreement.

 

The undersigned, the Authorized Officer of Borrowers, hereby certifies (in my capacity as Authorized Officer and not in my individual capacity) to Agent and each of the other members of the Lender Group and the Bank Product Providers as follows as of March 10, 2016:

 

1.         Names.

 

(a)        The exact legal name of each Loan Party, as such name appears in its certified certificate of incorporation, articles of incorporation, certificate of formation, or any other organizational document, is set forth in Schedule 1(a).  Each Loan Party is (i) the type of entity disclosed next to its name in Schedule 1(a) and (ii) a registered organization except to the extent disclosed in Schedule 1(a).  Also set forth in Schedule 1(a) is the organizational identification number, if any, of each Loan Party that is a registered organization, the Federal Taxpayer Identification Number of each Loan Party and the jurisdiction of formation of each Loan Party.  Each Loan Party has qualified to do business and is in good standing in the states listed on Schedule 1(a).

 

 

(b)        Set forth in Schedule 1(b) hereto is a list of any other legal names each Loan Party has had in the past five years, together with the date of the relevant name change.

 

(c)        Set forth in Schedule 1(c) is a list of all other names used by each Loan Party in connection with any business or organization to which such Loan Party became the successor by merger, consolidation, acquisition, change in form, nature or jurisdiction of organization or otherwise or on any filings with the Internal Revenue Service, in each case, at any time in the past five years.  Except as set forth in Schedule 1(c), no Loan Party has changed its jurisdiction of organization at any time during the past four months.

 

2.         Chief Executive Offices and Other Collateral Locations.  The chief executive office of each Loan Party is located at the address set forth in Schedule 2 hereto, and except as otherwise listed, such chief executive office has not been located at any other address during the past five (5) years.  Schedule 2 hereto sets forth all of the locations where each Loan Party maintains (or within the past four months has maintained) any equipment, inventory or other tangible personal property.

 

3.         Real Property.

 

(a)        Attached hereto as Schedule 3(a) is a list of all (i) Real Property (as defined in the Guaranty and Security Agreement) of each Loan Party, (ii) common names, addresses and uses of each parcel of Real Property (stating improvements located thereon) and (iii) other information relating thereto required by such Schedule.  Except as described on Schedule 3(a) attached hereto:  (A) no Loan Party has entered into any leases, subleases, tenancies, franchise agreements, licenses or other occupancy arrangements as owner, lessor, sublessor, licensor, franchisor or grantor with respect to any of the real property described on Schedule 3(a) and (B) no Loan Party has any leases which require the consent of the landlord, tenant or other party thereto to the transactions contemplated by the Loan Documents.

 

(b)        Schedule 3(b) sets forth all third parties (“Bailees”) with possession of any Collateral (as defined in the Guaranty and Security Agreement) (including inventory and equipment) of the Loan Parties, including the name and address of such Bailee, a description of the inventory and equipment in such Bailee’s possession and the location of such inventory and equipment (if none please so state).  Schedule 3(b) also identifies whether such third party is a consignee, processor, warehouseman, freight forwarder/customs broker or other type of bailee.

 

4.         Extraordinary Transactions.  Schedule 4 attached hereto describes any acquisitions by a Loan Party of the businesses or assets of a Person outside the ordinary course of business during the five years preceding the Closing Date.  Except for those purchases, mergers, acquisitions, consolidations, and other transactions described on Schedule 4 attached hereto  during the preceding five year period, all of the Collateral (as defined in the Guaranty and Security Agreement) has been originated by each Loan Party in the ordinary course of business or consists of goods which have been acquired by such Loan Party in the ordinary course of business from a person in the business of selling goods of that kind.

 

5.         File Search Reports.  Attached hereto as Schedule 5 is a true and accurate summary of certified file search reports from (a) the Uniform Commercial Code filing offices (i) in

 

2

 

each jurisdiction of formation identified in Section 1(a) and in each location identified Section 2 with respect to each legal name set forth in Section 1 and (ii) in each jurisdiction described in Schedule 1(c) or Schedule 3 relating to any of the transactions described in Schedule 1(c) or Schedule 4 with respect to each legal name of the person or entity from which each Loan Party purchased or otherwise acquired any assets and (b) each filing office in each real estate recording office identified on Schedule 3(a) for any Real Property Collateral.  A true copy of each financing statement, including judgment and tax liens, bankruptcy and pending lawsuits or other filing identified in such file search reports has been delivered to Agent.

 

6.         UCC Filings.  The financing statements (duly authorized by each Loan Party constituting the debtor therein), including the indications of the collateral, attached as Schedule 6 relating to the Guaranty and Security Agreement or the Real Property, are in the appropriate forms for filing in the filing offices in the jurisdictions identified in Schedule 6 hereof.

 

7.         Schedule of Filings.  Attached hereto as Schedule 7 is a schedule of (i) the appropriate filing offices for the financing statements attached hereto as Schedule 6 and (ii) the appropriate filing offices for the filings described in Schedule 11(c) and (iii) any other actions required to create and perfect the security interests in the Collateral (as defined in the Guaranty and Security Agreement) granted, assigned or pledged to Agent pursuant to the Guaranty and Security Agreement or any other Loan Document.  No other filings or actions are required to create and perfect the security interests in the Collateral granted, assigned or pledged to Agent pursuant to the Loan Documents.

 

8.         Termination Statements.  Attached hereto as Schedule 8 are the duly authorized termination statements in the appropriate form for filing in each applicable jurisdiction identified in Schedule 8 hereto with respect to each Lien described therein.

 

9.         Stock Ownership and Other Equity Interests.  Attached hereto as Schedule 9(a) is a true and correct list of each of all of the authorized, and the issued and outstanding, Equity Interests of each Loan Party other than Administrative Borrower and its Subsidiaries and the record and beneficial owners of such Equity Interests.  Also set forth on Schedule 9(a) is each equity investment of each Loan Party that represents 50% or less of the equity of the entity in which such investment was made.  Attached hereto as Schedule 9(b) is a true and correct organizational chart of Borrowers and their Subsidiaries.

 

10.        Instruments and Chattel Paper.  Attached hereto as Schedule 10 is a true and correct list of all promissory notes, instruments (other than checks to be deposited in the ordinary course of business), tangible chattel paper, electronic chattel paper and other evidence of Indebtedness held by each Loan Party as of March 10, 2016 having an aggregate value or face amount in excess of $1,000,000, including all intercompany notes between or among any two or more Loan Parties or any of their Subsidiaries.

 

11.        Intellectual Property.

 

(a)        Schedule 11(a) provides a complete and correct list of all registered Copyrights (as defined in the Guaranty and Security Agreement) owned by any Loan Party, all applications for registration of Copyrights owned by any Loan Party, and all other Copyrights

 

3

 

owned by any Loan Party and material to the conduct of the business of any Loan Party.  Schedule 11(a) provides a complete and correct list of all Patents (as defined in the Guaranty and Security Agreement) owned by any Loan Party and all applications for Patents  owned by any Loan Party.  Schedule 11(a) provides a complete and correct list of all registered Trademarks (as defined in the Guaranty and Security Agreement) owned by any Loan Party, all applications for registration of Trademarks owned by any Loan Party, and all other Trademarks owned by any Loan Party and material to the conduct of the business of any Loan Party.

 

(b)        Schedule 11(b) provides a complete and correct list of all Intellectual Property Licenses (as defined in the Guaranty and Security Agreement) entered into by any Loan Party pursuant to which (i) any Loan Party has provided any license or other rights in Intellectual Property (as defined in the Guaranty and Security Agreement) owned or controlled by such Loan Party to any other Person (other than non-exclusive software licenses or “SaaS” usage rights granted in the ordinary course of business) or (ii) any Person has granted to any Loan Party any exclusive license or other exclusive or non-commercially available rights in Intellectual Property owned or controlled by such Person that is material to the business of such Loan Party, including any Intellectual Property that is incorporated in any Inventory, software, or other product marketed, sold, licensed, or distributed by such Loan Party, but specifically excluding licenses for commercially available software and data, whether licensed for a Loan Party’s own use, for a Loan Party to provide to a client, or for a Loan Party to provide services to a client.

 

(c)        Attached hereto as Schedule 11(c) in proper form for filing with the United States Patent and Trademark Office and United States Copyright Office (as applicable) are the filings necessary to preserve, protect and perfect the security interests in the United States Trademarks, United Patents, United States Copyrights and Intellectual Property Licenses set forth on Schedule 11(a) and Schedule 11(b), including duly signed copies of each of the Patent Security Agreement, Trademark Security Agreement and the Copyright Security Agreement, as applicable.

 

12.        Commercial Tort Claims.  Attached hereto as Schedule 12 is a true and correct list of all commercial tort claims that exceed $1,000,000 held by each Loan Party, including a brief description thereof.

 

13.        Deposit Accounts and Securities Accounts.  Attached hereto as Schedule 13 is a true and complete list of all Deposit Accounts and Securities Accounts (each as defined in the Guaranty and Security Agreement) maintained by each Loan Party, including the name of each institution where each such account is held, the name of each such account and the name of each entity that holds each account.

 

14.        Letter-of-Credit Rights.  Attached hereto as Schedule 14 is a true and correct list of all letters of credit issued in favor of any Loan Party, as beneficiary thereunder, having an aggregate value or face amount in excess of $1,000,000.

 

15.        Motor Vehicles.  Attached hereto as Schedule 15 is a true and correct list of all motor vehicles and other goods (covered by certificates of title or ownership) having an aggregate fair market value in excess of $1,000,000 and owned by any Loan Party, and the owner and approximate fair market value of such motor vehicles.

 

4

 

16.        Other Assets:  A Loan Party owns the following kinds of assets:

 

	
Aircraft:
    	
 
    	
Yes  o  No   x  
    
	
 
    	
 
    	
 
    
	
Vessels,   boats or ships:
    	
 
    	
Yes  o  No   x  
    
	
 
    	
 
    	
 
    
	
Railroad rolling stock:
    	
 
    	
Yes  o  No   x  
    

 

If the answer is yes to any of these other types of assets, please describe on Schedule 16.

 

[The Remainder of this Page has been intentionally left blank]

 

5

 

IN WITNESS WHEREOF, we have hereunto signed this Perfection Certificate as of this      day of                 , 2016.

 

	
 
    	
HARTE   HANKS, INC.
    
	
 
    	
 
    
	
 
    	
By  
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

	
 
    	
[Each of the other   Borrowers]
    
	
 
    	
 
    
	
 
    	
By  
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

	
 
    	
[Each of the   Guarantors]
    
	
 
    	
 
    
	
 
    	
By  
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

6

 

Schedule 1(a)

 

Legal Names, Etc.

 

	
Legal Name
    	
 
    	
Type of
   Entity
    	
 
    	
Registered
   Organization
   (Yes/No)
    	
 
    	
Organizational
   Number(1)
    	
 
    	
Federal
   Taxpayer
   Identification
   Number
    	
 
    	
Jurisdiction of
   Formation
    	
 
    	
Qualified
   Jurisdictions
    
	
Harte Hanks, Inc.
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
762402
    	
 
    	
74-1677284
    	
 
    	
Delaware
    	
 
    	
TX
    
	
Trillium Software, Inc. (F/K/A Harte-Hanks Data   Technologies, Inc.)
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
3150702
    	
 
    	
04-3493394
    	
 
    	
Delaware
    	
 
    	
Ontario, TX, FL, NY, MA, CA, IL
    
	
3Q Digital, Inc.
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
5490532
    	
 
    	
27-0958570
    	
 
    	
Delaware
    	
 
    	
IL, IN, MI, MO, NY, OR, VT, WA, NC, TX, GA
    
	
Harte-Hanks Data Services LLC
    	
 
    	
Limited Liability Company
    	
 
    	
Yes
    	
 
    	
W05606769
    	
 
    	
52-2206203
    	
 
    	
Maryland
    	
 
    	
PA
    
	
Harte-Hanks Direct, Inc.
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
1349117
    	
 
    	
13-3520560
    	
 
    	
New York
    	
 
    	
PA, TX, CA, OR
    
	
Harte Hanks Direct Marketing/Baltimore, Inc.
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
D00914499
    	
 
    	
52-1129017
    	
 
    	
Maryland
    	
 
    	
PA
    
	
Harte-Hanks Direct Marketing/Dallas, Inc.
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
4376972
    	
 
    	
75-2626529
    	
 
    	
Delaware
    	
 
    	
TX
    

 

(1)        If none, so state.

 

	
Harte-Hanks Direct Marketing/Fullerton, Inc.
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
C1549325
    	
 
    	
33-0209712
    	
 
    	
California
    	
 
    	
None.
    
	
Harte-Hanks Direct Marketing/Jacksonville, LLC
    	
 
    	
Limited Liability Company
    	
 
    	
Yes
    	
 
    	
3462805
    	
 
    	
59-3759459
    	
 
    	
Delaware
    	
 
    	
FL
    
	
Harte-Hanks Direct Marketing/Kansas City, LLC
    	
 
    	
Limited Liability Company
    	
 
    	
Yes
    	
 
    	
3462802
    	
 
    	
48-1252793
    	
 
    	
Delaware
    	
 
    	
KS, MT, ME, SD, ND
    
	
Harte-Hanks Florida, Inc.
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
3940080
    	
 
    	
20-2495117
    	
 
    	
Delaware
    	
 
    	
FL
    
	
Harte-Hanks Logistics, LLC
    	
 
    	
Limited Liability Company
    	
 
    	
Yes
    	
 
    	
L12000155417
    	
 
    	
30-0758173
    	
 
    	
Florida
    	
 
    	
CA, CO, CT, GA, IN, KY, MD, MA. NJ, NC, OH, PA, SD, TX
    
	
Harte-Hanks Print, Inc.
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
0100506466
    	
 
    	
23-2676694
    	
 
    	
New Jersey
    	
 
    	
None.
    
	
Harte-Hanks Response Management/Austin, Inc.
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
4376971
    	
 
    	
74-2898255
    	
 
    	
Delaware
    	
 
    	
TX, FL, NC, PA
    
	
Harte-Hanks Response Management/Boston, Inc.
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
042210147
    	
 
    	
04-2210147
    	
 
    	
Massachusetts
    	
 
    	
NJ, CA
    
	
Harte-Hanks Strategic Marketing, Inc.
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
5076301
    	
 
    	
45-3987467
    	
 
    	
Delaware
    	
 
    	
CA, FL, MA, ME, NY, PA, MD
    
	
Harte-Hanks STS, Inc.
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
4237966
    	
 
    	
20-5779914
    	
 
    	
Delaware
    	
 
    	
CA, PA, FL, MA
    

 

8

 

	
NSO, Inc.
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
689059
    	
 
    	
31-1190424
    	
 
    	
Ohio
    	
 
    	
CA, CO, NJ, TX, PA, DE, IL, NY, MD, MA, FL, KS, KY, WA, WI
    
	
Sales Support Services, Inc.
    	
 
    	
Corporation
    	
 
    	
Yes
    	
 
    	
1449320000
    	
 
    	
22-1664923
    	
 
    	
New Jersey
    	
 
    	
TX, CA
    

 

9

 

Schedule 1(b)

 

Prior Names

 

	
Loan Party/Subsidiary
    	
 
    	
Prior Name
    	
 
    	
Date of Change
    
	
Harte Hanks, Inc.
    	
 
    	
Harte-Hanks, Inc.
    	
 
    	
January 30, 2015
    
	
Trillium Software, Inc.
    	
 
    	
Harte-Hanks Data Technologies, Inc.
    	
 
    	
May 1, 2015
    
	
3Q Digital, Inc.
    	
 
    	
3Q Digital, LLC
    	
 
    	
February 28, 2014
    
	
Harte-Hanks Florida, Inc.
    	
 
    	
Harte-Hanks Flyer, Inc.
    	
 
    	
January 1, 2013
    

 

 

Schedule 1(c)

 

Changes in Corporate Identity; Other Names

 

	
Loan
   Party/Subsidiary
    	
 
    	
Name of Entity
    	
 
    	
Action
    	
 
    	
Date of
   Action
    	
 
    	
State of
   Formation
    	
 
    	
List of All Other
   Names Used on
   Any Filings with
   the Internal
   Revenue Service
   During Past Five
   Years
    
	
Harte   Hanks, Inc.
    	
 
    	
Harte-Hanks Stock Plan, Inc.
    	
 
    	
Merger
    	
 
    	
December 31, 2015
    	
 
    	
Delaware
    	
 
    	
 
    
	
Trillium   Software, Inc.
    	
 
    	
Avellino Technologies, Inc.
    	
 
    	
Merger
    	
 
    	
December 31, 2011
    	
 
    	
Delaware
    	
 
    	
 
    
	
Trillium   Software, Inc.
    	
 
    	
Global Address, Inc.
    	
 
    	
Merger
    	
 
    	
December 31, 2011
    	
 
    	
Utah
    	
 
    	
 
    
	
3Q   Digital, Inc.
    	
 
    	
3Q Digital, LLC
    	
 
    	
Conversion
    	
 
    	
February 28, 2014
    	
 
    	
California
    	
 
    	
 
    
	
3Q   Digital, Inc.
    	
 
    	
Harte Hanks Smart, Inc.
    	
 
    	
Merger
    	
 
    	
March 16, 2015
    	
 
    	
Delaware
    	
 
    	
 
    
	
3Q   Digital, Inc.
    	
 
    	
iSearch Media, Inc.
    	
 
    	
Merger
    	
 
    	
September 21, 2015
    	
 
    	
Delaware
    	
 
    	
 
    
	
Harte-Hanks   Logistics, LLC
    	
 
    	
HTS, Inc.
    	
 
    	
Merger
    	
 
    	
December 31, 2012
    	
 
    	
Connecticut
    	
 
    	
 
    

 

 

Schedule 2

 

Chief Executive Offices

 

	
Loan
   Party/Subsidiary
    	
 
    	
Address
    	
 
    	
County
    	
 
    	
State
    
	
Harte Hanks, Inc.
    	
 
    	
9601 McAllister Freeway, Suite 610
    	
 
    	
Bexar
    	
 
    	
TX
    
	
Trillium Software, Inc.
    	
 
    	
1700 District Avenue, Suite 300
    	
 
    	
Burlington
    	
 
    	
MA
    
	
3Q Digital, Inc.
    	
 
    	
155 Bovet Road, Suite 480
    	
 
    	
San Mateo
    	
 
    	
CA
    
	
Harte-Hanks Data Services LLC
    	
 
    	
4545 Annapolis Road
    	
 
    	
Baltimore
    	
 
    	
MD
    
	
Harte-Hanks Direct, Inc.
    	
 
    	
3800 Horizon Blvd., Suite 500
    	
 
    	
Bucks
    	
 
    	
PA
    
	
Harte Hanks Direct Marketing/Baltimore, Inc.
    	
 
    	
4545 Annapolis Road
    	
 
    	
Baltimore
    	
 
    	
MD
    
	
Harte-Hanks Direct Marketing/Dallas, Inc.
    	
 
    	
2750 114th Street, Suite 100
    	
 
    	
Tarrant
    	
 
    	
TX
    
	
Harte-Hanks Direct Marketing/Fullerton, Inc.
    	
 
    	
2337 West Commonwealth Avenue
    	
 
    	
Orange
    	
 
    	
CA
    
	
Harte-Hanks Direct Marketing/Jacksonville, LLC
    	
 
    	
7498 Fullerton Street, Bldg 600
    	
 
    	
Duval
    	
 
    	
FL
    
	
Harte-Hanks Direct Marketing/Kansas City, LLC
    	
 
    	
7801 Nieman
    	
 
    	
Johnson
    	
 
    	
KS
    
	
Harte-Hanks Florida, Inc.
    	
 
    	
1525 NW 3rd Street, Suite 21
    	
 
    	
Broward
    	
 
    	
FL
    
	
Harte-Hanks   Logistics, LLC
    	
 
    	
1525 NW 3rd Street, Suite 21
    	
 
    	
Broward
    	
 
    	
FL
    
	
Harte-Hanks Print, Inc.
    	
 
    	
9601 McAllister Fwy
    	
 
    	
Bexar
    	
 
    	
TX
    
	
Harte-Hanks Response Management/Austin, Inc.
    	
 
    	
2800 Wells Branch Pkwy
    	
 
    	
Travis
    	
 
    	
TX
    
	
Harte-Hanks Response Management/Boston, Inc.
    	
 
    	
600 North Bedford Street
    	
 
    	
Plymouth
    	
 
    	
MA
    
	
Harte-Hanks Strategic Marketing, Inc.
    	
 
    	
1700 District Avenue, Suite 300
    	
 
    	
Burlington
    	
 
    	
MA
    

 

 

	
Loan
   Party/Subsidiary
    	
 
    	
Address
    	
 
    	
County
    	
 
    	
State
    
	
Harte-Hanks   STS, Inc.
    	
 
    	
9601 McAllister Freeway, Suite 610
    	
 
    	
Bexar
    	
 
    	
TX
    
	
NSO, Inc.
    	
 
    	
1444 Wazee St., Suite 310/312
    	
 
    	
Denver
    	
 
    	
CO
    
	
Sales   Support Services, Inc.
    	
 
    	
2750 114th Street, Suite 1001
    	
 
    	
Tarrant County
    	
 
    	
TX
    

 

Other Collateral Locations

 

	
Loan
   Party/Subsidiary
    	
 
    	
Address
    	
 
    	
County
    	
 
    	
State
    
	
Trillium Software, Inc.
    	
 
    	
850 Concourse Parkway South #105
    	
 
    	
Orange
    	
 
    	
FL
    
	
Harte-Hanks Direct Marketing/Kansas City, LLC
    	
 
    	
17501 West 98th Street #18-44
    	
 
    	
Johnson
    	
 
    	
KS
    
	
Harte-Hanks Direct Marketing/Kansas City, LLC
    	
 
    	
15731-15745 W. 100th Terrace Building 3
    	
 
    	
Johnson
    	
 
    	
KS
    
	
Harte-Hanks Direct, Inc.
    	
 
    	
2100 Cabot Boulevard
    	
 
    	
Bucks
    	
 
    	
PA
    
	
Harte Hanks Direct Marketing/Baltimore, Inc.
    	
 
    	
165 Commerce Blvd.
    	
 
    	
Luzerne
    	
 
    	
PA
    
	
Harte-Hanks Response Management/Austin, Inc.
    	
 
    	
1801 N. Robison Rd, # 5
    	
 
    	
Bowie
    	
 
    	
TX
    
	
Harte-Hanks Response Management/Austin, Inc.
    	
 
    	
1421 Wells Branch Pkwy
    	
 
    	
Travis
    	
 
    	
TX
    
	
3Q Digital, Inc.
    	
 
    	
2201 Broadway, Suite 300
    	
 
    	
Alameda
    	
 
    	
CA
    
	
3Q Digital, Inc.
    	
 
    	
75 Federal St.
    	
 
    	
San Francisco
    	
 
    	
CA
    
	
3Q Digital, Inc.
    	
 
    	
47 Maple Street, Suite 300
    	
 
    	
Chittenden
    	
 
    	
VT
    
	
3Q Digital, Inc.
    	
 
    	
363 5th Avenue, Suite 300
    	
 
    	
San Diego
    	
 
    	
CA
    

 

13

 

	
Loan
   Party/Subsidiary
    	
 
    	
Address
    	
 
    	
County
    	
 
    	
State
    
	
3Q Digital, Inc.; NSO, Inc.; Harte-Hanks   Direct, Inc.; Harte-Hanks Strategic Marketing, Inc.
    	
 
    	
215 Park Avenue S., Suite 1707
    	
 
    	
New York
    	
 
    	
NY
    
	
3Q Digital, Inc.
    	
 
    	
25 East Washington
    	
 
    	
Cook
    	
 
    	
IL
    
	
Harte-Hanks Data Services LLC
    	
 
    	
991 Corporate Boulevard, 350
    	
 
    	
Anne Arundel
    	
 
    	
MD
    
	
Harte-Hanks Response Management/Austin, Inc.; Sales Support   Services, Inc.; Harte-Hanks STS, Inc.; Harte-Hanks Strategic   Marketing, Inc.; NSO, Inc.; Harte-Hanks Data Services, LLC
    	
 
    	
1421 Wells Branch Pkwy
    	
 
    	
Travis
    	
 
    	
TX
    

 

14

Schedule 3(a)

 

Real Property

 

	
Entity of
   Record
    	
 
    	
Common
   Name and
   Address
    	
 
    	
Owned,
   Leased
   or
   Other
   Interest
    	
 
    	
Landlord /
   Owner if
   Leased or
   Other
   Interest
    	
 
    	
Description of
   Lease or Other
   Documents
   Evidencing
   Interest
    	
 
    	
Purpose/
   Use
    	
 
    	
Improvements
   Located on
   Real Property
    	
 
    	
Legal
   Description
    	
 
    	
Encumbered
   or to be
   Encumbered
   by Mortgage
    	
 
    	
Filing
   Office for
   Mortgage
    	
 
    	
Option to
   Purchase
   /Right of
   First
   Refusal
    
	
Harte Hanks, Inc.; Harte-Hanks STS, Inc.
    	
 
    	
9601 McAllister Freeway, Suite 610 San Antonio, TX 78216
    	
 
    	
Leased
    	
 
    	
RBL Mcallister I, LP and RBL Mcallister II, LP
    	
 
    	
Office Building Lease Dated the 12th Date of November, 2009 and amended by the   First Amendment to Office Building Lease
    	
 
    	
Office
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
Harte-Hanks Data Services LLC
    	
 
    	
991 Corporate Boulevard, 350 Linthicum Heights, MD 21090
    	
 
    	
Leased
    	
 
    	
RPH Industrial, LLC
    	
 
    	
Multi-tenant Industrial Net Lease, dated February 9, 2011
    	
 
    	
Office
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    

 

 

	
Entity of
   Record
    	
 
    	
Common
   Name and
   Address
    	
 
    	
Owned,
   Leased
   or
   Other
   Interest
    	
 
    	
Landlord /
   Owner if
   Leased or
   Other
   Interest
    	
 
    	
Description of
   Lease or Other
   Documents
   Evidencing
   Interest
    	
 
    	
Purpose/
   Use
    	
 
    	
Improvements
   Located on
   Real Property
    	
 
    	
Legal
   Description
    	
 
    	
Encumbered
   or to be
   Encumbered
   by Mortgage
    	
 
    	
Filing
   Office for
   Mortgage
    	
 
    	
Option to
   Purchase
   /Right of
   First
   Refusal
    
	
Harte-Hanks Direct Marketing/Fullerton, Inc.
    	
 
    	
2337 West Commonwealth Avenue Fullerton, CA 92883
    	
 
    	
Leased
    	
 
    	
Cabot Industrial Properties, LP
    	
 
    	
Lease, dated March 27, 2003, and amended by the Seventh   Amendment to Lease
    	
 
    	
Warehouse/printing (& incidental office)
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
Harte Hanks Logistics, LLC
    	
 
    	
1525 & 1531 NW 3rd Street, #14-28 Deerfield Beach, FL   33442
    	
 
    	
Leased
    	
 
    	
Joe H. Scott, Sr. and Loretta A. Scott, Trustees
    	
 
    	
Lease, dated October 7, 1996, and amended by the Fourth   Addendum to Commercial Lease
    	
 
    	
Office, warehouse and light manufacture
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
Trillium Software, Inc.
    	
 
    	
850 Concourse Parkway South, #105 Maitland, FL 32751
    	
 
    	
Leased
    	
 
    	
BPL Maitland Concourse South, LLC
    	
 
    	
Lease Agreement for Office Facilities, dated as of   February 1, 2012
    	
 
    	
Office
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    

 

16

 

	
Entity of
   Record
    	
 
    	
Common
   Name and
   Address
    	
 
    	
Owned,
   Leased
   or
   Other
   Interest
    	
 
    	
Landlord /
   Owner if
   Leased or
   Other
   Interest
    	
 
    	
Description of
   Lease or Other
   Documents
   Evidencing
   Interest
    	
 
    	
Purpose/
   Use
    	
 
    	
Improvements
   Located on
   Real Property
    	
 
    	
Legal
   Description
    	
 
    	
Encumbered
   or to be
   Encumbered
   by Mortgage
    	
 
    	
Filing
   Office for
   Mortgage
    	
 
    	
Option to
   Purchase
   /Right of
   First
   Refusal
    
	
Harte-Hanks Direct Marketing/Jacksonville, LLC
    	
 
    	
7498 Fullerton Street, Building 600 Jacksonville, FL 32256
    	
 
    	
Leased
    	
 
    	
Gran Central Corporation
    	
 
    	
Lease Agreement, dated May 2, 1995, and amended by the   Ninth Amendment to Lease
    	
 
    	
Warehouse/printing (& incidental office)
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
Harte-Hanks Direct Marketing/Kansas City, LLC
    	
 
    	
17501 West 98th Street, #18-44 Lenexa, KS 66219
    	
 
    	
Leased
    	
 
    	
Meritex Lenexa Executive Park, LLC
    	
 
    	
Lease Agreement dated September 30th, 2014
    	
 
    	
Warehouse
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
Harte-Hanks Direct Marketing/Kansas City, LLC
    	
 
    	
7801 Nieman Road Shawneww, KS 66214
    	
 
    	
Leased
    	
 
    	
Block Development Company, Inc., c/o Block &   Company, Inc.
    	
 
    	
Freestanding Building Lease, dated February 20, 1998, and   amended by the Third Amendment to Lease
    	
 
    	
Warehouse/ printing (& incidental office)
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    

 

17

 

	
Entity of
   Record
    	
 
    	
Common
   Name and
   Address
    	
 
    	
Owned,
   Leased
   or
   Other
   Interest
    	
 
    	
Landlord /
   Owner if
   Leased or
   Other
   Interest
    	
 
    	
Description of
   Lease or Other
   Documents
   Evidencing
   Interest
    	
 
    	
Purpose/
   Use
    	
 
    	
Improvements
   Located on
   Real Property
    	
 
    	
Legal
   Description
    	
 
    	
Encumbered
   or to be
   Encumbered
   by Mortgage
    	
 
    	
Filing
   Office for
   Mortgage
    	
 
    	
Option to
   Purchase
   /Right of
   First
   Refusal
    
	
Harte-Hanks Direct Marketing/Kansas City, LLC
    	
 
    	
15731-15745 W. 100th Terrace, Building 3 Lenexa, KS 66219
    	
 
    	
Leased
    	
 
    	
Color Art Integrated Interiors of Kansas City, LLC (Sublandlord)
    	
 
    	
Sublease, dated December 17, 2015
    	
 
    	
Warehouse
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
Harte-Hanks Response Management/Boston, Inc.
    	
 
    	
600 N. Bedford Street, Bldg 2 & 5 East Bridgewater, MA   02333
    	
 
    	
Leased
    	
 
    	
Equity Industrial GHEB Limited Partnership
    	
 
    	
Lease Agreement dated June 26, 2003, and amended by the   Fifth Amendment of Lease
    	
 
    	
Warehouse/printing (& incidental office)
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
Trillium Software, Inc.
    	
 
    	
1700 District Avenue, Suite 300 Burlington, MA 01803
    	
 
    	
Leased
    	
 
    	
NEEP Investors Holdings, LLC
    	
 
    	
Office Lease Agreement, dated March 9, 2015
    	
 
    	
Office
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    

 

18

 

	
Entity of
   Record
    	
 
    	
Common
   Name and
   Address
    	
 
    	
Owned,
   Leased
   or
   Other
   Interest
    	
 
    	
Landlord /
   Owner if
   Leased or
   Other
   Interest
    	
 
    	
Description of
   Lease or Other
   Documents
   Evidencing
   Interest
    	
 
    	
Purpose/
   Use
    	
 
    	
Improvements
   Located on
   Real Property
    	
 
    	
Legal
   Description
    	
 
    	
Encumbered
   or to be
   Encumbered
   by Mortgage
    	
 
    	
Filing
   Office for
   Mortgage
    	
 
    	
Option to
   Purchase
   /Right of
   First
   Refusal
    
	
Harte-Hanks Direct Marketing/Baltimore, Inc.
    	
 
    	
4545 Annapolis Road Baltimore, MD 21227
    	
 
    	
Leased
    	
 
    	
DMA Realty III, LP
    	
 
    	
Agreement of Lease, dated May 1999, and amended by the   Second Amendment of Lease
    	
 
    	
Warehouse/printing & office
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
Harte-Hanks Direct, Inc.
    	
 
    	
2100 Cabot Boulevard Langhorne, PA 19047
    	
 
    	
Leased
    	
 
    	
Flynn 1982 Partnership
    	
 
    	
Lease Agreement, dated July 1, 1993, and amended by the   Third Amendment to Lease
    	
 
    	
Office (call center) & data center
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
Harte-Hanks Direct Marketing/Baltimore, Inc.
    	
 
    	
165 New Commerce Blvd., Welkes-Barre, PA 18706
    	
 
    	
Leased
    	
 
    	
165 New Commerce, LLC
    	
 
    	
Agreement of Lease, dated November 15, 2012
    	
 
    	
Warehouse/printing (& incidental office)
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
Harte-Hanks Direct, Inc.
    	
 
    	
3800 Horizon Boulevard, # 500, Bensalem, PA 19053
    	
 
    	
Leased
    	
 
    	
Horizon Office Development I, LP
    	
 
    	
Office Space Lease dated October 30, 2014
    	
 
    	
Office
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    

 

19

 

	
Entity of
   Record
    	
 
    	
Common
   Name and
   Address
    	
 
    	
Owned,
   Leased
   or
   Other
   Interest
    	
 
    	
Landlord /
   Owner if
   Leased or
   Other
   Interest
    	
 
    	
Description of
   Lease or Other
   Documents
   Evidencing
   Interest
    	
 
    	
Purpose/
   Use
    	
 
    	
Improvements
   Located on
   Real Property
    	
 
    	
Legal
   Description
    	
 
    	
Encumbered
   or to be
   Encumbered
   by Mortgage
    	
 
    	
Filing
   Office for
   Mortgage
    	
 
    	
Option to
   Purchase
   /Right of
   First
   Refusal
    
	
Harte-Hanks Direct Marketing/Dallas, Inc.
    	
 
    	
2750 114th St. Grand Prairie, TX 75050
    	
 
    	
Leased
    	
 
    	
ProLogis Industrial Properties Incorporated
    	
 
    	
Lease Agreement dated as of the 19th day of August, 2000, and amended by the   Fourth Amendment to Lease
    	
 
    	
Warehouse/ printing (& incidental office)
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
Harte-Hanks Response Management/Austin, Inc.
    	
 
    	
2800 Wells Branch Parkway Austin, TX 78728-6762
    	
 
    	
Leased
    	
 
    	
Lee Halford, Jr., George A. Shafer, Shafer Family Limited   Partnership, Heinz K. Simon and H. Stafford Peacock
    	
 
    	
Existing Building (Single Tenant) Lease Agreement, executed   June 23rd, 1994, and amended by the Fourth   Amendment to the Lease Agreement
    	
 
    	
Office (call center) & data center
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
Harte-Hanks Response Management/Austin, Inc.
    	
 
    	
1801 N. Robison Rd, #5 Texarkana, TX 75501
    	
 
    	
Leased
    	
 
    	
Kitty Wells, Inc.
    	
 
    	
Lease Agreement dated July 1, 2012
    	
 
    	
Office (call center)
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    

 

20

 

	
Entity of
   Record
    	
 
    	
Common
   Name and
   Address
    	
 
    	
Owned,
   Leased
   or
   Other
   Interest
    	
 
    	
Landlord /
   Owner if
   Leased or
   Other
   Interest
    	
 
    	
Description of
   Lease or Other
   Documents
   Evidencing
   Interest
    	
 
    	
Purpose/
   Use
    	
 
    	
Improvements
   Located on
   Real Property
    	
 
    	
Legal
   Description
    	
 
    	
Encumbered
   or to be
   Encumbered
   by Mortgage
    	
 
    	
Filing
   Office for
   Mortgage
    	
 
    	
Option to
   Purchase
   /Right of
   First
   Refusal
    
	
Harte-Hanks Response Management/Austin, Inc.; Sales Support   Services, Inc.; Harte-Hanks STS, Inc.; Harte-Hanks Strategic   Marketing, Inc.; NSO, Inc.; Harte-Hanks Data Services, LLC
    	
 
    	
1421 Wells Branch Pkwy Pflugerville, TX 78728
    	
 
    	
Leased
    	
 
    	
G&I VII Wells Branch LP
    	
 
    	
Consent to Sublease, executed November 10, 2015
    	
 
    	
Office
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
NSO, Inc.
    	
 
    	
1444 Wazee St, Suite 310/312, Denver, CO 80202
    	
 
    	
Leased
    	
 
    	
Wazee Street, LLC
    	
 
    	
Office Lease, dated February 4, 2016
    	
 
    	
Office
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    

 

21

 

	
Entity of
   Record
    	
 
    	
Common
   Name and
   Address
    	
 
    	
Owned,
   Leased
   or
   Other
   Interest
    	
 
    	
Landlord /
   Owner if
   Leased or
   Other
   Interest
    	
 
    	
Description of
   Lease or Other
   Documents
   Evidencing
   Interest
    	
 
    	
Purpose/
   Use
    	
 
    	
Improvements
   Located on
   Real Property
    	
 
    	
Legal
   Description
    	
 
    	
Encumbered
   or to be
   Encumbered
   by Mortgage
    	
 
    	
Filing
   Office for
   Mortgage
    	
 
    	
Option to
   Purchase
   /Right of
   First
   Refusal
    
	
3Q Digital, Inc.
    	
 
    	
2201 Broadway, Suite 300 Oakland, CA 94612
    	
 
    	
Leased
    	
 
    	
MV Broadway, LLC
    	
 
    	
2201 Broadway Lease Agreement, dated August 5, 2013
    	
 
    	
Office
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
3Q Digital, Inc.
    	
 
    	
75 Federal St. San Francisco, CA 94107
    	
 
    	
Leased
    	
 
    	
77 Federal Street, LLC
    	
 
    	
Lease 75 Federal Street, dated as of June 15, 2015
    	
 
    	
Office
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
3Q Digital, Inc.
    	
 
    	
47 Maple Street, Suite 300 Burlington, VT 05401
    	
 
    	
Leased
    	
 
    	
The Karma Bird House
    	
 
    	
Lease Agreement, dated February 1, 2016
    	
 
    	
Office
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
3Q Digital, Inc.
    	
 
    	
363 5th Avenue, Suite 300 San Diego, CA 92101
    	
 
    	
Leased
    	
 
    	
Shickry Properties, LLC
    	
 
    	
Standard Multi-Tenant Office Lease — Gross, dated July 16,   2015
    	
 
    	
Office
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
3Q Digital, Inc.
    	
 
    	
155 Bovet Rd, Suite 480 San Mateo, CA 94402
    	
 
    	
Leased
    	
 
    	
Casiopea Bovet, LLC
    	
 
    	
Lease Agreement, dated November 7, 2014
    	
 
    	
Office
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    

 

22

 

	
Entity of
   Record
    	
 
    	
Common
   Name and
   Address
    	
 
    	
Owned,
   Leased
   or
   Other
   Interest
    	
 
    	
Landlord /
   Owner if
   Leased or
   Other
   Interest
    	
 
    	
Description of
   Lease or Other
   Documents
   Evidencing
   Interest
    	
 
    	
Purpose/
   Use
    	
 
    	
Improvements
   Located on
   Real Property
    	
 
    	
Legal
   Description
    	
 
    	
Encumbered
   or to be
   Encumbered
   by Mortgage
    	
 
    	
Filing
   Office for
   Mortgage
    	
 
    	
Option to
   Purchase
   /Right of
   First
   Refusal
    
	
3Q Digital, Inc.
    	
 
    	
215 Park Avenue S., Suite 1707 New York, NY 10003
    	
 
    	
Leased
    	
 
    	
215 Park Avenue South Associates, LP
    	
 
    	
Agreement of Lease, dated November 30, 2015
    	
 
    	
Office
    	
 
    	
Building
    	
 
    	
As set forth in lease.
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    
	
3Q Digital, Inc.
    	
 
    	
25 East Washington Street, Suite 510 Chicago, IL 60602
    	
 
    	
Leased
    	
 
    	
Flex Lighting II, LLC & 25 East Washington Associates,   L.P. (Master Landlord)
    	
 
    	
Sublease Agreement, dated January 5, 2016
    	
 
    	
Office
    	
 
    	
Building
    	
 
    	
As set forth in lease
    	
 
    	
N/A
    	
 
    	
N/A
    	
 
    	
No
    

 

23

 

Schedule 3(a)

 

Real Property (cont.)

 

Required Consents; Loan Party Held Landlord/ Grantor Interests

 

I.                              Landlord’s / Tenant’s Consent Required

 

None.

 

II.                            Leases, Subleases, Tenancies, Franchise Agreements, Licenses or Other Occupancy Agreements Pursuant to which any Loan Party holds Landlord’s / Grantor’s Interest

 

There is one Commercial Sublease Agreement between 3Q Digital, Inc. (Sublandlord) and eShares (Subtenant) dated July 31, 2015. The agreement is to sublease the first floor of 75 Federal Street, San Francisco, CA 94107.

 

 

Schedule 3(b)

 

Bailees

 

None.

 

 

Schedule 4

 

Transactions Other Than in the Ordinary Course of Business

 

	
Loan Party/Subsidiary
    	
 
    	
Description of Transaction Including 
   Parties Thereto
    	
 
    	
Date of 
   Transaction
    
	
NSO, Inc.
    	
 
    	
Asset purchase of substantially all of Aleutian   Consulting, Inc.’s assets, pursuant to an Asset Purchase Agreement   between NSO, Inc., a wholly owned subsidiary of Harte Hanks, Inc.,   and Aleutian Consulting, Inc.
    	
 
    	
March 4, 2016
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
Harte Hanks, Inc. and Harte   Hanks Smart, Inc.
    	
 
    	
Acquisition of 3Q Digital, Inc., pursuant to an Agreement   and Plan of Merger with Harte Hanks Smart, Inc., a wholly-owned   subsidiary of Harte Hanks, 3Q digital, Inc. and Maury Domengeaux, as   representative of the stockholders of 3Q Digital.
    	
 
    	
March 16, 2015
    

 

 

Schedule 5

 

Certified File Search Reports

 

See attached, Schedule 5 Attachment.

 

 

27

 

Schedule 6

 

Copy of Financing Statements To Be Filed

 

See attached.

 

 

Schedule 7

 

Filings/Filing Offices

 

	
Type of Filing(2)
    	
 
    	
Entity
    	
 
    	
Applicable
   Collateral
   Document
    	
 
    	
Jurisdictions
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
Financing Statement
    	
 
    	
Delaware, Secretary of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Trillium Software, Inc.
    	
 
    	
Financing Statement
    	
 
    	
Delaware, Secretary of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
3Q Digital, Inc.
    	
 
    	
Financing Statement
    	
 
    	
Delaware, Secretary of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Harte-Hanks Data Services LLC
    	
 
    	
Financing Statement
    	
 
    	
Maryland Department of Assessments & Taxation
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Harte-Hanks Direct, Inc.
    	
 
    	
Financing Statement
    	
 
    	
New York, Department of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Harte-Hanks Direct Marketing/Baltimore, Inc.
    	
 
    	
Financing Statement
    	
 
    	
Maryland, Department of Assessments & Taxation
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Harte-Hanks Direct Marketing/Dallas, Inc.
    	
 
    	
Financing Statement
    	
 
    	
Delaware, Secretary of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Harte-Hanks Direct Marketing/Fullerton, Inc.
    	
 
    	
Financing Statement
    	
 
    	
California, Secretary of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Harte-Hanks Direct Marketing/Jacksonville, LLC
    	
 
    	
Financing Statement
    	
 
    	
Delaware, Secretary of State
    

 

(2)    UCC-1 financing statement, fixture filing, mortgage, intellectual property filing or other necessary filing.

 

 

	
UCC Filing
    	
 
    	
Harte-Hanks Direct Marketing/Kansas City, LLC
    	
 
    	
Financing Statement
    	
 
    	
Delaware, Secretary of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Harte-Hanks Florida, Inc.
    	
 
    	
Financing Statement
    	
 
    	
Delaware, Secretary of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Harte-Hanks Logistics, LLC
    	
 
    	
Financing Statement
    	
 
    	
Florida Department of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Harte-Hanks Print, Inc.
    	
 
    	
Financing Statement
    	
 
    	
New Jersey, Secretary of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Harte-Hanks Response Management/Austin, Inc.
    	
 
    	
Financing Statement
    	
 
    	
Delaware, Secretary of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Harte-Hanks Response Management/Boston, Inc.
    	
 
    	
Financing Statement
    	
 
    	
Massachusetts, Secretary of the Commonwealth
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Harte-Hanks Strategic Marketing, Inc.
    	
 
    	
Financing Statement
    	
 
    	
Delaware, Secretary of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Harte-Hanks STS, Inc.
    	
 
    	
Financing Statement
    	
 
    	
Delaware Secretary of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
Sales Support Services, Inc.
    	
 
    	
Financing Statement
    	
 
    	
New Jersey, Secretary of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
UCC Filing
    	
 
    	
NSO, Inc.
    	
 
    	
Financing Statement
    	
 
    	
Ohio, Secretary of State
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Intellectual Property Filing
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
Trademark Filing
    	
 
    	
United States Patent and Trademark Office
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Intellectual Property Filing
    	
 
    	
Trillium Software, Inc. (F/K/A Harte-Hanks Data   Technologies, Inc.)
    	
 
    	
Trademark Filing
    	
 
    	
United States Patent and Trademark Office
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Intellectual Property Filing
    	
 
    	
Harte-Hanks Data Services, LLC
    	
 
    	
Trademark Filing
    	
 
    	
United States Patent and Trademark Office
    

 

30

 

	
Intellectual Property Filing
    	
 
    	
Harte-Hanks Direct, Inc.
    	
 
    	
Trademark Filing
    	
 
    	
United States Patent and Trademark Office
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Intellectual Property Filing
    	
 
    	
Harte-Hanks Direct Marketing/Kansas City, LLC
    	
 
    	
Trademark Filing
    	
 
    	
United States Patent and Trademark Office
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Intellectual Property Filing
    	
 
    	
3Q Digital, Inc.
    	
 
    	
Trademark Filing
    	
 
    	
United States Patent and Trademark Office
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Intellectual Property Filing
    	
 
    	
Sales Support Services, Inc.
    	
 
    	
Trademark Filing
    	
 
    	
United States Patent and Trademark Office
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Intellectual Property Filing
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
Copyright Filing
    	
 
    	
United States Copyright Office
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Intellectual Property Filing
    	
 
    	
Sales Support Services, Inc.
    	
 
    	
Copyright Filing
    	
 
    	
United States Copyright Office
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
Intellectual Property Filing
    	
 
    	
Trillium Software, Inc.
    	
 
    	
Copyright Filing
    	
 
    	
United States Copyright Office
    

 

Other Actions Required

 

	
Action
    	
 
    	
Filing Office (as applicable)
    
	
Delivery to the Agent of   all pledged equity consisting of certificated securities, in each case   properly endorsed for transfer or in blank
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    
	
Agent must obtain control   of any Deposit Accounts in accordance with the UCC
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    
	
Administrative Agent must   take possession of all money in accordance with the UCC
    	
 
    	
N/A
    
	
 
    	
 
    	
 
    
	
Notation of security   interest in motor vehicles on certificates of title and such additional   actions as may be required with respect to such motor vehicles under   applicable certificate of title statutes
    	
 
    	
As set forth in   applicable certificate of title statutes
    

 

31

 

Schedule 8

 

Attached hereto is a true copy of each termination statement filing duly acknowledged or otherwise identified by the filing officer.

 

Termination Statement Filings

 

Not applicable.

 

 

Schedule 9(a)

 

(a)  Equity Interests of Loan Parties and Subsidiaries

 

	
Current Legal
   Entities Owned
    	
 
    	
Record
   Owner
    	
 
    	
Certificate
   No.
    	
 
    	
No. Shares/Interest
    	
 
    	
Percent
   Pledged
    	
 
    
	
3Q   Digital, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
1
    	
 
    	
1,000 shares outstanding and authorized/Harte Hanks, Inc.   owns 100%
    	
 
    	
100
    	
%
    
	
Harte-Hanks   Direct Marketing/Cincinnati, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
1
    	
 
    	
1,000 shares outstanding and authorized/Harte Hanks, Inc.   owns 100%
    	
 
    	
100
    	
%
    
	
Harte-Hanks   Response Management/Boston, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
1
    	
 
    	
5,000 shares outstanding and authorized/Harte Hanks, Inc.   owns 100%
    	
 
    	
100
    	
%
    
	
Harte-Hanks   Direct Marketing/Fullerton, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
1
    	
 
    	
1,000 shares outstanding and authorized/Harte Hanks, Inc.   owns 100%
    	
 
    	
100
    	
%
    
	
Harte-Hanks   Pty. Limited
    	
 
    	
Trillium Software, Inc.
    	
 
    	
N/A
    	
 
    	
12 shares outstanding, 10,000,000 shares authorized/Trillium   Software, Inc. owns 100%
    	
 
    	
65
    	
%
    
	
Trillium   Software, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
1
    	
 
    	
1,000 shares outstanding and authorized/Harte Hanks, Inc.   owns 100%
    	
 
    	
100
    	
%
    
	
Harte-Hanks   Strategic Marketing, Inc.
    	
 
    	
Trillium Software, Inc.
    	
 
    	
1
    	
 
    	
1,000 shares outstanding and authorized/ Trillium   Software, Inc. owns 100%
    	
 
    	
100
    	
%
    

 

 

	
Current Legal
   Entities Owned
    	
 
    	
Record
   Owner
    	
 
    	
Certificate
   No.
    	
 
    	
No. Shares/Interest
    	
 
    	
Percent
   Pledged
    	
 
    
	
Harte   Hanks Trillium UK Limited
    	
 
    	
Harte Hanks UK Limited
    	
 
    	
N/A
    	
 
    	
10,000 Ordinary A Shares and 1,518,1000 Ordinary B Shares   outstanding, 9,850,000 Ordinary A Shares and 1,650,000 Ordinary B Shares   authorized/Harte Hanks UK Limited owns 100%
    	
 
    	
0
    	
%
    
	
Harte-Hanks   Florida, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
1
    	
 
    	
1,000 shares outstanding and authorized/Harte Hanks, Inc.   owns 100%
    	
 
    	
100
    	
%
    
	
Harte-Hanks   Trillium Software Germany GmbH
    	
 
    	
Harte-Hanks GmbH
    	
 
    	
N/A
    	
 
    	
2 shares outstanding and 25,000 shares authorized/Harte-Hanks   GmbH owns 100%
    	
 
    	
0
    	
%
    
	
Harte   Hanks Direct Marketing/Baltimore, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
7
    	
 
    	
1,000 shares outstanding and authorized/ Harte Hanks, Inc.   owns 100%
    	
 
    	
100
    	
%
    
	
Harte-Hanks   DO Brazil Consultoria E Servicos Ltda.
    	
 
    	
Trillium Software, Inc.
    	
 
    	
N/A
    	
 
    	
Trillium Software, Inc. owns 100%
    	
 
    	
65
    	
%
    
	
Harte-Hanks   Data Services LLC
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
N/A
    	
 
    	
100 membership units/ Harte Hanks, Inc. owns 100%
    	
 
    	
100
    	
%
    
	
HHMIX SAS
    	
 
    	
Harte Hanks Europe B.V.
    	
 
    	
N/A
    	
 
    	
10,000 shares of FRF 100/Harte Hanks Europe B.V. owns 100%
    	
 
    	
0
    	
%
    

 

34

 

	
Current Legal
   Entities Owned
    	
 
    	
Record
   Owner
    	
 
    	
Certificate
   No.
    	
 
    	
No. Shares/Interest
    	
 
    	
Percent
   Pledged
    	
 
    
	
Harte-Hanks   GMBH
    	
 
    	
Harte Hanks Europe B.V.
    	
 
    	
N/A
    	
 
    	
DM 500,000, divided into one share of DM 331,600,three shares of   DM 50,000, two shares of DM 6,700 and one share of DM 5,000/Harte Hanks   Europe B.V. owns 100%
    	
 
    	
0
    	
%
    
	
Harte-Hanks   Direct, Inc.
    	
 
    	
Harte-Hanks Print, Inc.
    	
 
    	
1
    	
 
    	
200 shares outstanding and authorized/ Harte-Hanks   Print, Inc. owns 100%
    	
 
    	
100
    	
%
    
	
Harte-Hanks   Logistics, LLC
    	
 
    	
Harte-Hanks Florida, Inc.
    	
 
    	
N/A
    	
 
    	
100 membership units/ Harte-Hanks Florida, Inc. owns 100%
    	
 
    	
100
    	
%
    
	
Harte-Hanks   Philippines, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
15
    	
 
    	
11,200,00.00 shares outstanding and authorized/ Harte   Hanks, Inc. owns 100%
    	
 
    	
65
    	
%
    
	
Harte-Hanks   Print, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
HHP-1
    	
 
    	
1,000 shares outstanding and 20,000,000 shares authorized/ Harte   Hanks, Inc. owns 100%
    	
 
    	
100
    	
%
    
	
Harte   Hanks Direct Marketing/Jacksonville, LLC
    	
 
    	
Harte-Hanks Florida, Inc.
    	
 
    	
N/A
    	
 
    	
100 membership units/ Harte-Hanks Florida, Inc. owns 100%
    	
 
    	
100
    	
%
    
	
Harte-Hanks   Direct Marketing/Kansas City, LLC
    	
 
    	
Sales Support Services, Inc.
    	
 
    	
N/A
    	
 
    	
100 membership units/ Sales Support Services, Inc. owns   100%
    	
 
    	
100
    	
%
    

 

35

 

	
Current Legal
   Entities Owned
    	
 
    	
Record
   Owner
    	
 
    	
Certificate
   No.
    	
 
    	
No. Shares/Interest
    	
 
    	
Percent
   Pledged
    	
 
    
	
Harte   Hanks Europe B.V.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
N/A
    	
 
    	
NLG 40,000 outstanding and NLG 200,000 authorized/ Harte   Hanks, Inc. owns 100%
    	
 
    	
65
    	
%
    
	
Harte-Hanks   Market Intelligence Espana, LLC
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
1
    	
 
    	
100 membership units/Harte Hanks, Inc. owns 100%
    	
 
    	
100
    	
%
    
	
Harte   Hanks UK Limited
    	
 
    	
Trillium Software, Inc.
    	
 
    	
N/A
    	
 
    	
100 shares outstanding and authorized/ Trillium   Software, Inc. owns 100%
    	
 
    	
65
    	
%
    
	
Harte-Hanks   Direct Marketing/Dallas, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
1
    	
 
    	
1,000 shares outstanding and authorized/ Harte Hanks, Inc.   owns 100%
    	
 
    	
100
    	
%
    
	
NSO, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
1
    	
 
    	
1,000 shares outstanding and authorized/Harte Hanks, Inc.   owns 100%
    	
 
    	
100
    	
%
    
	
Southern   Comprint Co.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
5
    	
 
    	
1,070 shares outstanding and 1,500 shares authorized/ Harte   Hanks, Inc. owns 100%
    	
 
    	
100
    	
%
    
	
Harte-Hanks   SRL
    	
 
    	
Harte Hanks UK Limited
    	
 
    	
N/A
    	
 
    	
60 at E6 outstanding and authorized/Harte Hanks UK Limited owns   100%
    	
 
    	
0
    	
%
    
	
Harte-Hanks   Shoppers, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
101
    	
 
    	
15,174 shares outstanding and 250,000 shares authorized/Harte   Hanks, Inc. owns 100%
    	
 
    	
100
    	
%
    

 

36

 

	
Current Legal
   Entities Owned
    	
 
    	
Record
   Owner
    	
 
    	
Certificate
   No.
    	
 
    	
No. Shares/Interest
    	
 
    	
Percent
   Pledged
    	
 
    
	
Harte-Hanks   Response Management/Austin, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
1
    	
 
    	
1,000 shares outstanding and authorized/ Harte Hanks, Inc. owns   100%
    	
 
    	
100
    	
%
    
	
Sales   Support Services, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
1
    	
 
    	
5,617 shares outstanding and 10,000 shares authorized/Harte   Hanks, Inc. owns 100%
    	
 
    	
100
    	
%
    
	
Harte-Hanks   Belgium N.V.
    	
 
    	
Harte Hanks, Inc. and Harte-Hanks Direct, Inc.
    	
 
    	
N/A
    	
 
    	
BEF 6,250,000 represented by registered shares having no par   value and numbered 1 through 625/ Harte Hanks, Inc. owns 624 shares and   Harte-Hanks Direct, Inc. owns 1 share
    	
 
    	
65
    	
%
    
	
Harte-Hanks   STS, Inc.
    	
 
    	
Harte Hanks, Inc.
    	
 
    	
001
    	
 
    	
1,000 shares outstanding and authorized/Harte Hanks, Inc.   owns 100%
    	
 
    	
100
    	
%
    

 

(b) Other Equity Interests

 

37

 

Schedule 9(b)

 

Organizational Chart

 

See attached, Schedule 9(b) Organizational Chart Attachment.

 

 

 

 

 

 

Schedule 10

Instruments and Chattel Paper

 

1.         Promissory Notes:

 

Intercompany Notes:

 

	
Entity
    	
 
    	
Principal
   Amount
    	
 
    	
Date of
   Issuance
    	
 
    	
Interest Rate
    	
 
    	
Maturity Date
    
	
Harte Hanks, Inc.
    	
 
    	
$
    	
4,000,000
    	
 
    	
March 7, 2016
    	
 
    	
Applicable Federal Rate
    	
 
    	
7 years
    
	
Harte Hanks, Inc.
    	
 
    	
$
    	
2,000,000
    	
 
    	
March 7, 2016
    	
 
    	
Applicable Federal Rate
    	
 
    	
7 years
    
	
Harte Hanks, Inc.
    	
 
    	
$
    	
2,500,000
    	
 
    	
March 7, 2016
    	
 
    	
Applicable Federal Rate
    	
 
    	
7 years
    
	
Harte Hanks, Inc.
    	
 
    	
$
    	
25,000,000
    	
 
    	
March 7, 2016
    	
 
    	
Federal Applicable Rate
    	
 
    	
7 years
    

 

2.         Chattel Paper:

 

 

Schedule 11(a)

 

Copyrights, Patents and Trademarks

 

UNITED STATES COPYRIGHTS

 

Registrations:

 

	
OWNER
    	
 
    	
TITLE
    	
 
    	
REGISTRATION
   NUMBER
    
	
Harte Hanks, Inc. 

(FKA Harte-Hanks   Communications, Inc.)
    	
 
    	
Harte-Hanks Direct   Marketing product & Services manual
    	
 
    	
TX0001912563
    
	
Harte Hanks, Inc. 

(FKA Harte-Hanks   Communications, Inc.)
    	
 
    	
Effective,   interviewing-the front door to productivity
    	
 
    	
PA0000117710
    
	
Harte Hanks, Inc. 

(FKA Harte-Hanks   Communications, Inc.)
    	
 
    	
10/9/78 column for   Wednesday 10-11 or later
    	
 
    	
TX0000140289
    
	
Harte Hanks, Inc. 

(FKA Harte-Hanks   Communications, Inc.)
    	
 
    	
Editorial management   program
    	
 
    	
TXu000043961
    
	
Harte Hanks, Inc. 

(FKA Harte-Hanks   Communications, Inc.)
    	
 
    	
For Sunday 10-15 or   later & 3 other titles
    	
 
    	
V1699P378
    
	
Harte Hanks, Inc. 

(FKA Harte-Hanks   Communications, Inc.)
    	
 
    	
For Sunday 10/15 or later
    	
 
    	
TX0000140290
    
	
Harte Hanks, Inc. 

(FKA Harte-Hanks   Communications, Inc.)
    	
 
    	
Harte-Hanks direct   marketing product and services manual
    	
 
    	
TX0001865480
    
	
Harte Hanks, Inc. 

(FKA Harte-Hanks Communications, Inc.)
    	
 
    	
Harte-Hanks direct   marketing product and services manual: Vol. II
    	
 
    	
TX0001903482
    
	
Harte Hanks, Inc. 

(FKA Harte-Hanks   Communications, Inc.)
    	
 
    	
Harte-Hanks newspapers   prize pictures of ‘77
    	
 
    	
TX0000105523
    

 

 

	
Harte Hanks, Inc. 

(FKA Harte-Hanks   Communications, Inc.)
    	
 
    	
Legislative   contributions & 1 other title
    	
 
    	
V1719P314
    
	
Harte Hanks, Inc. 

(FKA Harte-Hanks   Communications, Inc.)
    	
 
    	
One on one
    	
 
    	
V2057P174
    
	
Harte Hanks, Inc. 

(FKA Harte-Hanks   Communications, Inc.)
    	
 
    	
One on one
    	
 
    	
TX0001342745
    
	
Harte Hanks, Inc. 

(FKA Harte-Hanks   Communications, Inc.)
    	
 
    	
Telemarketing West, a   division of Harte-Hanks Communications, presents Training module 1[-6] of The   Shopper telemarketing series 1
    	
 
    	
TX0002152832
    
	
Harte Hanks, Inc. 

(FKA Harte-Hanks   Communications, Inc.)
    	
 
    	
Weatherhoud
    	
 
    	
VAu000227983
    
	
Harte Hanks, Inc. 

(FKA Harte-Hanks   Communications, Inc.)
    	
 
    	
Zipcom & 1 other   title
    	
 
    	
V1984P349
    
	
Trillium   Software, Inc. 

(FKA Harte-Hanks Data   Technologies, LLC)
    	
 
    	
IRE main program
    	
 
    	
TXu000907404
    
	
Harte Hanks, Inc. 

(Harte-Hanks Direct   Marketing)
    	
 
    	
How to (finally) meet   your “type”
    	
 
    	
TX0003440056
    
	
Harte Hanks, Inc.
    	
 
    	
Harte-Hanks agent   academy: an explosive training program equipped to prepare you for all future   missions
    	
 
    	
TX0005265797
    
	
Sales Support Services, Inc.
    	
 
    	
Outsourcing
    	
 
    	
PAu002001884
    

 

2

 

Schedule 11(a)

 

Copyrights, Patents and Trademarks (cont.)

 

UNITED STATES TRADEMARKS:

 

Registrations:

 

	
OWNER
    	
 
    	
REGISTRATION
   NUMBER
    	
 
    	
TRADEMARK
    
	
Harte Hanks, Inc.
    	
 
    	
4452119
    	
 
    	
True Health and Wellness
    
	
Harte Hanks, Inc.
    	
 
    	
7314843
    	
 
    	
We Make Brands Personal
    
	
Harte Hanks, Inc.
    	
 
    	
4221651
    	
 
    	
Pretrak
    
	
Harte Hanks, Inc.
    	
 
    	
4056191
    	
 
    	
Momentium
    
	
Trillium   Software, Inc.
    	
 
    	
4249482
    	
 
    	
Allink
    
	
Harte-Hanks Data Technologies, Inc.
    	
 
    	
4154645
    	
 
    	
Trilliumapps
    
	
Trillium   Software, Inc.
    	
 
    	
3320127
    	
 
    	
ADQ Direct
    
	
Harte-Hanks Data Services   LLC
    	
 
    	
3172720
    	
 
    	
Advanced Data Quality
    
	
Harte Hanks, Inc.
    	
 
    	
3967247
    	
 
    	
The Agency Inside
    
	
Harte Hanks, Inc.
    	
 
    	
3800527
    	
 
    	
Insight. Passion.   Results.
    
	
Trillium   Software, Inc.
    	
 
    	
2671358
    	
 
    	
Trillium Software
    
	
Trillium   Software, Inc.
    	
 
    	
2550481
    	
 
    	
Allink
    
	
Harte-Hanks   Direct, Inc.
    	
 
    	
2439475
    	
 
    	
Postfuture
    
	
Harte Hanks, Inc.
    	
 
    	
2150450
    	
 
    	
Harte Hanks
    
	
Trillium   Software, Inc.
    	
 
    	
1903431
    	
 
    	
Trillium Software System
    
	
Harte-Hanks Direct, Inc.
    	
 
    	
1869882
    	
 
    	
Dimark
    
	
Harte-Hanks Direct   Marketing/Kansas City, Inc.
    	
 
    	
1201476
    	
 
    	
Speed Gram
    
	
3Q Digital, LLC
    	
 
    	
4622226
    	
 
    	
3Q Digital
    
	
3Q Digital, LLC
    	
 
    	
4610939
    	
 
    	
Intended
    
	
Sales Support   Services, Inc.
    	
 
    	
1620310
    	
 
    	
Action Inquiry
    
	
Sales Support Services, Inc.
    	
 
    	
1626232
    	
 
    	
Action Inquiry
    
	
Trillium   Software, Inc.
    	
 
    	
3308244
    	
 
    	
TS Quality
    
	
Harte Hanks, Inc.
    	
 
    	
2152012
    	
 
    	
HARTE HANKS design
    

 

3

 

Applications:

 

	
OWNER
    	
 
    	
APPLICATION
   NUMBER
    	
 
    	
TRADEMARK
    
	
Harte Hanks, Inc.
    	
 
    	
86794616
    	
 
    	
Data Refinery
    
	
Harte Hanks, Inc.
    	
 
    	
86118883
    	
 
    	
HARTE HANKS squares   design
    
	
Harte Hanks, Inc.
    	
 
    	
86106660
    	
 
    	
Connections Made. Impact   Delivered.
    
	
Harte Hanks, Inc.
    	
 
    	
86828631
    	
 
    	
Total Customer Discovery
    

 

Unregistered Software:

 

	
·
    	
Trillium Software System   (all versions, variants and modules)
    
	
·
    	
NexTouch   fulfillment ordering system (all versions, variants and modules, except   custom extensions owned by clients as work for hire)
    
	
·
    	
PostFuture email platform   (all versions, variants and modules)
    
	
·
    	
HITS logistics management   software (all versions, variants and modules)
    

 

4

 

Schedule 11(b)

 

Intellectual Property Licenses

 

None.

 

 

Schedule 11(c)

 

Intellectual Property Filings

 

Provisional patent for Data Refinery to be filed.

 

7

 

 

Schedule 12

 

Commercial Tort Claims

 

None.

 

 

Schedule 13

 

Deposit Accounts and Securities Accounts

 

	
OWNER
    	
 
    	
TYPE OF
   ACCOUNT
    	
 
    	
BANK OR
   INTERMEDIARY
    	
 
    	
ACCOUNT
   NUMBERS
    
	
Harte Hanks, Inc.
    	
 
    	
Parent Account
    	
 
    	
Chase Manhattan Bank
    	
 
    	
 
    
	
Harte Hanks, Inc.
    	
 
    	
E-Commerce Account
    	
 
    	
Chase Manhattan Bank
    	
 
    	
 
    
	
Harte Hanks, Inc.
    	
 
    	
Chase Direct Deposit   Account
    	
 
    	
Chase Manhattan Bank
    	
 
    	
 
    
	
Harte Hanks, Inc.
    	
 
    	
Flexible Spending Account
    	
 
    	
Chase Manhattan Bank
    	
 
    	
 
    
	
Trillium   Software, Inc.
    	
 
    	
HDT/MAC AP
    	
 
    	
Chase Manhattan Bank
    	
 
    	
 
    
	
Trillium   Software, Inc.
    	
 
    	
HCA Operating Account   (CAD)
    	
 
    	
Chase Manhattan Bank
    	
 
    	
 
    
	
3Q Digital, Inc.
    	
 
    	
3Q Checking
    	
 
    	
Chase Manhattan Bank
    	
 
    	
 
    
	
3Q Digital, Inc.
    	
 
    	
3Q Intended LLC
    	
 
    	
Chase Manhattan Bank
    	
 
    	
 
    
	
Harte-Hanks Response   Management/Austin, Inc.
    	
 
    	
Harte Hanks ASA Program
    	
 
    	
Wells Fargo Bank
    	
 
    	
 
    
	
Harte-Hanks Response Management/Austin, Inc.
    	
 
    	
Harte Hanks Putnam   Program
    	
 
    	
Wells Fargo Bank
    	
 
    	
 
    
	
Harte-Hanks Response   Management/Austin, Inc.
    	
 
    	
Harte Hanks Samsung   Program
    	
 
    	
Wells Fargo Bank
    	
 
    	
 
    
	
Harte-Hanks Response   Management/Austin, Inc.
    	
 
    	
Harte Hanks TI Seminars
    	
 
    	
Wells Fargo Bank
    	
 
    	
 
    
	
Harte-Hanks Response   Management/Austin, Inc.
    	
 
    	
Harte Hanks TI   Fulfillment
    	
 
    	
Wells Fargo Bank
    	
 
    	
 
    
	
Harte Hanks, Inc.
    	
 
    	
Parent Account
    	
 
    	
Bank of America ABA
    	
 
    	
 
    

 

 

	
Harte Hanks, Inc.
    	
 
    	
Corporate Savings
    	
 
    	
Bank of America ABA
    	
 
    	
 
    
	
Harte-Hanks Response   Management/Austin, Inc.
    	
 
    	
HDM/Corporate Manual   Paycheck
    	
 
    	
Bank of America ABA
    	
 
    	
 
    
	
Harte Hanks, Inc.
    	
 
    	
Individual Investor   Account
    	
 
    	
Bank of America ABA
    	
 
    	
 
    
	
Harte Hanks, Inc.
    	
 
    	
Corporate Savings
    	
 
    	
Comerica
    	
 
    	
 
    
	
Harte Hanks, Inc.
    	
 
    	
Money Market Trader   Account
    	
 
    	
Comerica
    	
 
    	
 
    
	
Harte Hanks, Inc.
    	
 
    	
Money Market
    	
 
    	
BBVA Compass ABA
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
HKC Operating Account
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Black & Decker
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Elanco
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Elanco Bounceback
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Elanco Reconcile Mailing
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Elanco Triflexis Offense
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Norelco Cool Slim Shaver
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Ross Zone Perfect
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Sonicare Consumer
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct Marketing/Kansas   City, LLC
    	
 
    	
Sonicare Professional
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Tri-Heart Plus
    	
 
    	
UMB
    	
 
    	
 
    

 

10

 

	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Walmart Optical
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Walmart Pharmacy
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Elanco 2014 Rebate
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Elanco High Value Program
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Elanco Loyalty Program
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
National Consumer Rebate
    	
 
    	
UMB
    	
 
    	
 
    
	
Harte-Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
Special Offers Rebate
    	
 
    	
UMB
    	
 
    	
 
    
	
Sales Support Services, Inc.
    	
 
    	
SSS Parent for Customer   Accts
    	
 
    	
PNC
    	
 
    	
 
    

 

11

 

Schedule 14

 

Letter of Credit Rights

 

None.

 

12

 

Schedule 15

 

Motor Vehicles

 

Aggregate fair market value is less than $1,000,000.

 

 

Schedule 16

 

Other Assets

 

None.

 

 

Schedule A-1

 

Agent’s Account

 

An account at a bank designated by Agent from time to time as the account into which Borrowers shall make all payments to Agent for the benefit of the Lender Group; unless and until Agent notifies Borrowers to the contrary, Agent’s Account shall be that certain deposit account bearing account number ############, reference Project River Walk (Harte Hanks), and maintained by Agent with Wells Fargo Bank, N.A., 420 Montgomery Street, San Francisco, CA, ABA  ########.

 

 

SCHEDULE A-2

 

AUTHORIZED PERSONS

 

Douglas C. Shepard

EVP, Chief Financial Officer

Harte Hanks

9601 McAllister Freeway, Ste 610

San Antonio, TX 78216

Phone: 210-829-9120

 

Robert L. R. Munden

SVP, General Counsel & Secretary

Harte Hanks

9601 McAllister Freeway, Ste 610

San Antonio, Texas 78216

Phone: 210-829-9135

Fax: 210-829-9139

 

 

Schedule C-1

 

Commitments

 

	
Lender
    	
 
    	
Revolver 
   Commitment
    	
 
    	
Term Loan 
   Commitment
    	
 
    	
Total 
   Commitment
    	
 
    
	
Wells Fargo Bank, National   Association
    	
 
    	
$
    	
65,000,000
    	
 
    	
$
    	
25,000,000
    	
 
    	
$
    	
90,000,000
    	
 
    
	
LBC III WF FUNDING, LLC
    	
 
    	
$
    	
0
    	
 
    	
$
    	
20,000,000
    	
 
    	
$
    	
20,000,000
    	
 
    
	
All Lenders
    	
 
    	
$
    	
65,000,000
    	
 
    	
$
    	
45,000,000
    	
 
    	
$
    	
110,000,000
    	
 
    

 

 

SCHEDULE D-1

 

DESIGNATED ACCOUNT

 

	
Designated   Account Number: 
    	
#########
    
	
 
    	
 
    
	
Designated   Account Name:
    	
Harte   Hanks Parent Account
    
	
 
    	
 
    
	
Designated   Account Bank:
    	
JPMorgan/Chase   Bank
    
	
 
    	
4 New York Plaza, 4th Floor
    
	
 
    	
New York, NY 10004
    
	
 
    	
ABA# #######
    

 

 

SCHEDULE I-1

 

IMMMATERIAL SUBSIDIARIES

 

Harte-Hanks Direct Marketing/Cincinnati, Inc.

Harte-Hanks Market Intelligence Espana LLC

Harte-Hanks Shoppers, Inc.

Southern Comprint Co.

HHMIX SAS

Harte-Hanks do Brazil Consultoria e Servicos Ltda.

Harte-Hanks Pty. Limited

Harte-Hanks SRL

 

 

SCHEDULE P-1

 

PERMITTED INVESTMENTS

 

Amended and Restated Demand Notes:

 

	
Lender
    	
 
    	
Borrower
    	
 
    	
Principal 
   Amount
    	
 
    	
Date of 
   Issuance
    	
 
    	
Interest Rate
    	
 
    	
Maturity
   Date
    	
 
    
	
Harte Hanks, Inc.
    	
 
    	
Harte-Hanks   Trillium Software Germany GmbH
    	
 
    	
$
    	
4,000,000
    	
 
    	
March 7,   2016
    	
 
    	
Applicable   Federal Rate
    	
 
    	
7   years
    	
 
    
	
Harte-Hanks Belgium N.V.
    	
 
    	
Harte   Hanks Inc.
    	
 
    	
$
    	
4,000,000
    	
 
    	
March 7,   2016
    	
 
    	
Applicable   Federal Rate
    	
 
    	
7   years
    	
 
    
	
Harte Hanks, Inc.
    	
 
    	
Harte-Hanks   do Brazil Consultoria e Servicos Ltda.
    	
 
    	
$
    	
2,000,000
    	
 
    	
March 7,   2016
    	
 
    	
Applicable   Federal Rate
    	
 
    	
7   years
    	
 
    
	
Harte Hanks Europe B.V.
    	
 
    	
Harte   Hanks, Inc.
    	
 
    	
$
    	
3,000,000
    	
 
    	
March 7,   2016
    	
 
    	
Applicable   Federal Rate
    	
 
    	
7   years
    	
 
    
	
Harte Hanks, Inc.
    	
 
    	
Harte   Hanks UK Limited
    	
 
    	
$
    	
25,000,000
    	
 
    	
March 7,   2016
    	
 
    	
Applicable   Federal Rate
    	
 
    	
7   years
    	
 
    
	
Harte-Hanks Philippines, Inc.
    	
 
    	
Harte   Hanks, Inc.
    	
 
    	
$
    	
16,000,000
    	
 
    	
March 7,   2016
    	
 
    	
Applicable   Federal Rate
    	
 
    	
7   years
    	
 
    
	
Harte-Hanks Pty. Limited
    	
 
    	
Harte   Hanks, Inc.
    	
 
    	
$
    	
3,500,000
    	
 
    	
March 7,   2016
    	
 
    	
Federal   Applicable Rate
    	
 
    	
7   years
    	
 
    
	
Harte-Hanks SRL
    	
 
    	
Harte   Hanks, Inc.
    	
 
    	
$
    	
500,000
    	
 
    	
March 7,   2016
    	
 
    	
Federal   Applicable Rate
    	
 
    	
7   years
    	
 
    
	
Harte Hanks Trillium UK Limited
    	
 
    	
Harte   Hanks, Inc.
    	
 
    	
$
    	
21,000,000
    	
 
    	
March 7,   2016
    	
 
    	
Federal   Applicable Rate
    	
 
    	
7   years
    	
 
    
	
Harte Hanks, Inc.
    	
 
    	
Harte-Hanks   GmbH
    	
 
    	
$
    	
2,500,000
    	
 
    	
March 7,   2016
    	
 
    	
Federal   Applicable Rate
    	
 
    	
7   years
    	
 
    
	
HHMIX SAS
    	
 
    	
Harte   Hanks, Inc.
    	
 
    	
$
    	
8,000,000
    	
 
    	
March 7,   2016
    	
 
    	
Federal   Applicable Rate
    	
 
    	
7   years
    	
 
    

 

 

SCHEDULE P-2

 

PERMITTED LIENS

 

None.

 

 

Schedule 1.1

 

As used in the Agreement, the following terms shall have the following definitions:

 

“3QD Earnout” means the earnout obligations pursuant to Section 2.7 of that certain Agreement and Plan of Merger, dated as of March 16, 2015, among Administrative Borrower, Harte Hanks Smart, Inc., 3Q Digital, Inc., a Delaware corporation and Maury Domengeaux as representative, as such agreement is in effect on the Closing Date and constituting a portion of the purchase price payable pursuant to such agreement.

 

“3QD Earnout Reserves” means, as of any date of determination, those reserves that Agent deems necessary or appropriate, in its Permitted Discretion and subject to Section 2.1(c), to establish and maintain with respect to the Borrowing Base or the Maximum Revolver Amount, for the anticipated amount of the 3QD Earnout, which reserves shall be instituted on a monthly, building basis beginning on April 1, 2016 and shall increase by not less than $1,000,000 per month thereafter (not to exceed, in the aggregate, the forecasted or actual amount of the 3QD Earnout payable at any time, as applicable), and shall be maintained until such 3QD Earnout has been paid in full.

 

“Account” means an account (as that term is defined in the Code).

 

“Account Debtor” means any Person who is obligated on an Account, chattel paper, or a general intangible.

 

“Accounting Changes” means changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or successor thereto or any agency with similar functions).

 

“Acquired Indebtedness” means Indebtedness of a Person whose assets or Equity Interests are acquired by Administrative Borrower or any of its Subsidiaries in a Permitted Acquisition; provided, that such Indebtedness (a) is either purchase money Indebtedness or a Capital Lease with respect to Equipment or mortgage financing with respect to Real Property, (b) was in existence prior to the date of such Permitted Acquisition, and (c) was not incurred in connection with, or in contemplation of, such Permitted Acquisition.

 

“Acquisition” means (a) the purchase or other acquisition by a Person or its Subsidiaries of all or substantially all of the assets of (or any division or business line of) any other Person, or (b) the purchase or other acquisition (whether by means of a merger, consolidation, or otherwise) by a Person or its Subsidiaries of all or substantially all of the Equity Interests of any other Person.

 

“Additional Documents” has the meaning specified therefor in Section 5.12 of the Agreement.

 

“Administrative Borrower” has the meaning specified therefor in Section 17.13 of the Agreement.

 

1

 

“Administrative Questionnaire” has the meaning specified therefor in Section 13.1(a) of the Agreement.

 

“Affected Lender” has the meaning specified therefor in Section 2.13(b) of the Agreement.

 

“Affiliate” means, as applied to any Person, any other Person who controls, is controlled by, or is under common control with, such Person.  For purposes of this definition, “control” means the possession, directly or indirectly through one or more intermediaries, of the power to direct the management and policies of a Person, whether through the ownership of Equity Interests, by contract, or otherwise; provided, that, for purposes of the definitions of Eligible Billed Accounts, Eligible Unbilled Accounts and Eligible Foreign Accounts, and Section 6.10 of the Agreement:  (a) any Person which owns directly or indirectly 10% or more of the Equity Interests having ordinary voting power for the election of directors or other members of the governing body of a Person or 10% or more of the partnership or other ownership interests of a Person (other than as a limited partner of such Person) shall be deemed an Affiliate of such Person, (b) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of such Person, and (c) each partnership in which a Person is a general partner shall be deemed an Affiliate of such Person.

 

“Agent” has the meaning specified therefor in the preamble to the Agreement.

 

“Agent-Related Persons” means Agent, together with its Affiliates, officers, directors, employees, attorneys, and agents.

 

“Agent’s Account” means the Deposit Account of Agent identified on Schedule A-1 to this Agreement (or such other Deposit Account of Agent that has been designated as such, in writing, by Agent to Borrowers and the Lenders).

 

“Agent’s Liens” means the Liens granted by each Borrower or its Subsidiaries to Agent under the Loan Documents and securing the Obligations.

 

“Agreement” means the Credit Agreement to which this Schedule 1.1 is attached.

 

“Agreement Among Lenders” means that certain Agreement Among Lenders dated as of the Closing Date among Agent, LBC III WF Funding, LLC and each other Lender, pursuant to which such parties have agreed, among other things, to certain voting arrangements relative to matters requiring the approval of the Lenders (including the exercise of remedies), the priority and application of certain payments and proceeds of Collateral, and certain pricing arrangements.

 

“Applicable Margin” means, as of any date of determination and with respect to Revolving Loans that are Base Rate Loans or LIBOR Rate Loans, as applicable, the applicable margin set forth in the following table that corresponds to the Average Excess Availability of Borrowers for the most recently completed month; provided, that for the period from the Closing Date through and including August 31, 2016, the Applicable Margin shall be set at the margin in the row styled “Level II”; provided further, that any time an Event of Default has occurred and is continuing, the Applicable Margin shall be set at the margin in the row styled “Level III”:

 

2

 

	
Level
    	
 
    	
Average Excess
   Availability
    	
 
    	
Applicable Margin Relative
   to Revolving Loans that are
   Base Rate Loans (the “Base
   Rate Margin”)
    	
 
    	
Applicable Margin Relative
   to Revolving Loans that are
   LIBOR Rate Loans (the
   “LIBOR Rate Margin”)
    
	
I
    	
 
    	
> $35,000,000
    	
 
    	
1.00 percentage points
    	
 
    	
2.00 percentage points
    
	
II
    	
 
    	
< $35,000,000 and >   $17,500,000
    	
 
    	
1.25 percentage points
    	
 
    	
2.25 percentage points
    
	
III
    	
 
    	
< $17,500,000
    	
 
    	
1.50 percentage points
    	
 
    	
2.50 percentage points
    

 

The Applicable Margin shall be re-determined as of the first day of each calendar month of Borrowers.

 

“Applicable Prepayment Premium” means, as of any date of determination, an amount equal to (i) during the period from and after the Closing Date up to (but not including) the date that is the first anniversary of the Closing Date (the “First Period”), 3% times the outstanding principal balance of the Term Loan on the date immediately prior to the date of determination, (ii) during the period from and including the date that is the first anniversary of the Closing Date up to (but not including) the date that is the second anniversary of the Closing Date (the “Second Period”), 2% times the outstanding principal balance of the Term Loan on the date immediately prior to the date of determination, (iii) during the period from and including the date that is the second anniversary of the Closing Date up to (but not including) the date that is the third anniversary of the Closing Date (the “Third Period”), 1% times the outstanding principal balance of the Term Loan on the date immediately prior to the date of determination, and (iv) from and after the date that is the third anniversary of the Closing Date, 0%.

 

“Applicable Partial Prepayment Premium” means, as of any date of determination, an amount equal to (i) during the First Period (as defined in the definition of Applicable Prepayment Premium), 3% times the outstanding principal balance of the Term Loan prepaid on such date, (ii) during the Second Period (as defined in the definition of Applicable Prepayment Premium), 2% times the outstanding principal balance of the of the Term Loan prepaid on such date, (iii) during the Third Period (as defined in the definition of Applicable Prepayment Premium), 1% times the outstanding principal balance of the Term Loan prepaid on such date, and (iv) from and after the date that is the third anniversary of the Closing Date, 0%.

 

“Applicable Unused Line Fee Percentage” means, as of any date of determination, the applicable percentage set forth in the following table that corresponds to the Average Revolver Usage of Borrowers for the most recently completed month as determined by Agent in its Permitted Discretion; provided, that for the period from the Closing Date through and including August 31, 2016, the Applicable Unused Line Fee Percentage shall be set at the rate in the row styled “Level II”:

 

3

 

	
Level
    	
 
    	
Average Revolver Usage
    	
 
    	
Applicable Unused Line Fee Percentage
    
	
I
    	
 
    	
> $35,000,000
    	
 
    	
0.25 percentage points
    
	
II
    	
 
    	
< $35,000,000
    	
 
    	
0.375 percentage points
    

 

The Applicable Unused Line Fee Percentage shall be re-determined on the first date of each month by Agent.

 

“Application Event” means the occurrence of (a) a failure by Borrowers to repay all of the Obligations in full on the Maturity Date, or (b) an Event of Default and the election by the Required Lenders to require that payments and proceeds of Collateral be applied pursuant to Section 2.4(b)(iii) of the Agreement.

 

“Assignee” has the meaning specified therefor in Section 13.1(a) of the Agreement.

 

“Assignment and Acceptance” means an Assignment and Acceptance Agreement substantially in the form of Exhibit A-1 to the Agreement.

 

“Authorized Person” means any one of the individuals identified on Schedule A-2 to the Agreement, as such schedule is updated from time to time by written notice from Borrowers to Agent.

 

“Availability” means, as of any date of determination, the amount that Borrowers are entitled to borrow as Revolving Loans under Section 2.1 of the Agreement (after giving effect to the then outstanding Revolver Usage).

 

“Average Excess Availability” means, with respect to any period, the sum of the aggregate amount of Excess Availability for each Business Day in such period (calculated as of the end of each respective Business Day) divided by the number of Business Days in such period.

 

“Average Revolver Usage” means, with respect to any period, the sum of the aggregate amount of Revolver Usage for each Business Day in such period (calculated as of the end of each respective Business Day) divided by the number of Business Days in such period.

 

“Bank Product” means any one or more of the following financial products or accommodations extended to a Borrower or its Subsidiaries by a Bank Product Provider:  (a) credit cards (including commercial cards (including so-called “purchase cards”, “procurement cards” or “p-cards”)), (b) credit card processing services, (c) debit cards, (d) stored value cards, (e) Cash Management Services, or (f) transactions under Hedge Agreements.

 

“Bank Product Agreements” means those agreements entered into from time to time by a Borrower or its Subsidiaries with a Bank Product Provider in connection with the obtaining of any of the Bank Products.

 

4

 

“Bank Product Collateralization” means providing cash collateral (pursuant to documentation reasonably satisfactory to Agent) to be held by Agent for the benefit of the Bank Product Providers (other than the Hedge Providers) in an amount determined by Agent as sufficient to satisfy the reasonably estimated credit exposure with respect to the then existing Bank Product Obligations (other than Hedge Obligations).

 

“Bank Product Obligations” means (a) all obligations, liabilities, reimbursement obligations, fees, or expenses owing by each Borrower and its Subsidiaries to any Bank Product Provider pursuant to or evidenced by a Bank Product Agreement and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, (b) all Hedge Obligations, and (c) all amounts that Agent or any Lender is obligated to pay to a Bank Product Provider as a result of Agent or such Lender purchasing participations from, or executing guarantees or indemnities or reimbursement obligations to, a Bank Product Provider with respect to the Bank Products provided by such Bank Product Provider to a Borrower or one of its Subsidiaries.

 

“Bank Product Provider” means Wells Fargo or any of its Affiliates, including each of the foregoing in its capacity, if applicable, as a Hedge Provider.

 

“Bank Product Reserves” means, as of any date of determination, those reserves that Agent deems necessary or appropriate to establish (based upon the Bank Product Providers’ determination of the liabilities and obligations of Administrative Borrower and its Subsidiaries in respect of Bank Product Obligations) in respect of Bank Products then provided or outstanding.

 

“Bankruptcy Code” means title 11 of the United States Code, as in effect from time to time.

 

“Base Rate” means the greatest of (a) the Federal Funds Rate plus 1⁄2%, (b) the LIBOR Rate (which rate shall be calculated based upon an Interest Period of 1 month and shall be determined on a daily basis), plus 1 percentage point, and (c) the rate of interest announced, from time to time, within Wells Fargo at its principal office in San Francisco as its “prime rate”, with the understanding that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publications as Wells Fargo may designate.

 

“Base Rate Loan” means each portion of the Revolving Loans or the Term Loan that bears interest at a rate determined by reference to the Base Rate.

 

“Base Rate Margin” has the meaning set forth in the definition of Applicable Margin.

 

“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of ERISA) for which any Loan Party or any of its Subsidiaries or ERISA Affiliates has been an “employer” (as defined in Section 3(5) of ERISA) within the past six years.

 

5

 

“Board of Directors” means, as to any Person, the board of directors (or comparable managers) of such Person, or any committee thereof duly authorized to act on behalf of the board of directors (or comparable managers).

 

“Board of Governors” means the Board of Governors of the Federal Reserve System of the United States (or any successor).

 

“Borrower” and “Borrowers” have the respective meanings specified therefor in the preamble to the Agreement.

 

“Borrower Materials” has the meaning specified therefor in Section 17.9(c) of the Agreement.

 

“Borrowing” means a borrowing consisting of Revolving Loans made on the same day by the Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing Loan, or by Agent in the case of an Extraordinary Advance.

 

“Borrowing Base” means, as of any date of determination, the result of:

 

(a)                                 the sum of, without duplication, (i) 85% of the amount of Eligible Billed Accounts, (ii) the lesser of $5,000,000 and 85% of the amount of Eligible Foreign Accounts and (iii) the lesser of $15,000,000 and 85% of Eligible Unbilled Accounts, minus

 

(b)                                the aggregate amount of the Dilution Reserve, Receivable Reserves, Bank Product Reserves, 3QD Earnout Reserves and other Reserves, if any, established by Agent under Section 2.1(c) of the Agreement.

 

“Borrowing Base Certificate” means a certificate in the form of Exhibit B-1.

 

“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks are authorized or required to close in the state of Illinois or the state of Texas, except that, if a determination of a Business Day shall relate to a LIBOR Rate Loan, the term “Business Day” also shall exclude any day on which banks are closed for dealings in Dollar deposits in the London interbank market.

 

“Capital Expenditures” means, with respect to any Person for any period, the amount of all expenditures by such Person and its Subsidiaries during such period that are capital expenditures as determined in accordance with GAAP, whether such expenditures are paid in cash or financed, but excluding, without duplication (a) expenditures made during such period in connection with the replacement, substitution, or restoration of assets or properties pursuant to Section 2.4(e)(ii) of the Agreement, (b) with respect to the purchase price of assets that are purchased substantially contemporaneously with the trade-in of existing assets during such period, the amount that the gross amount of such purchase price is reduced by the credit granted by the seller of such assets for the assets being traded in at such time, (c) expenditures made during such period to consummate one or more Permitted Acquisitions, (d) expenditures made during such period to the extent made with the identifiable proceeds of an equity investment in a Borrower or any of its Subsidiaries which equity investment is made substantially contemporaneously with the making of the expenditure, and (e) expenditures during such period

 

6

 

that, pursuant to a written agreement, are reimbursed by a third Person (excluding any Borrower or any of its Affiliates).

 

“Capitalized Lease Obligation” means that portion of the obligations under a Capital Lease that is required to be capitalized in accordance with GAAP.

 

“Capital Lease” means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

 

“Cash Equivalents” means (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within 1 year from the date of acquisition thereof, (b) marketable direct obligations issued or fully guaranteed by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within 1 year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor’s Rating Group (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”), (c) commercial paper maturing no more than 270 days from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody’s, (d) certificates of deposit, time deposits, overnight bank deposits or bankers’ acceptances maturing within 1 year from the date of acquisition thereof issued by any bank organized under the laws of the United States or any state thereof or the District of Columbia or any United States branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $1,000,000,000, (e) Deposit Accounts maintained with (i) any bank that satisfies the criteria described in clause (d) above, or (ii) any other bank organized under the laws of the United States or any state thereof so long as the full amount maintained with any such other bank is insured by the Federal Deposit Insurance Corporation, (f) repurchase obligations of any commercial bank satisfying the requirements of clause (d) of this definition or recognized securities dealer having combined capital and surplus of not less than $1,000,000,000, having a term of not more than seven days, with respect to securities satisfying the criteria in clauses (a) or (d) above, (g) debt securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the criteria described in clause (d) above, and (h) Investments in money market funds substantially all of whose assets are invested in the types of assets described in clauses (a) through (g) above.

 

“Cash Management Services” means any cash management or related services including treasury, depository, return items, overdraft, controlled disbursement, merchant store value cards, e-payables services, electronic funds transfer, interstate depository network, automatic clearing house transfer (including the Automated Clearing House processing of electronic funds transfers through the direct Federal Reserve Fedline system) and other cash management arrangements.

 

“CFC” means a controlled foreign corporation of which any Loan Party is a “United States shareholder” (as that term is defined in the IRC) within the meaning of Section 951 of the IRC.

 

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“Change in Control” means that:

 

(a)                                 any Person or two or more Persons acting in concert shall have acquired beneficial ownership, directly or indirectly, of Equity Interests of Administrative Borrower (or other securities convertible into such Equity Interests) representing 40% or more of the combined voting power of all Equity Interests of Administrative Borrower entitled (without regard to the occurrence of any contingency) to vote for the election of members of the Board of Directors of Administrative Borrower;

 

(b)                                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 Administrative Borrower or control over the Equity Interests of such Person entitled to vote for members of the Board of Directors of Administrative 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 40% or more of the combined voting power of such Equity Interests;

 

(c)                                 during any period of 24 consecutive months commencing on or after the Closing Date, the occurrence of a change in the composition of the Board of Directors of Administrative Borrower such that a majority of the members of such Board of Directors are not Continuing Directors;

 

(d)                                Administrative Borrower fails to own and control, directly or indirectly, 100% of the Equity Interests of each other Loan Party (except as a result of transactions expressly permitted by the terms of this Agreement); or

 

(e)                                 the occurrence of any “Change of Control” as defined in the Harte-Hanks, Inc. Restoration Pension Plan.

 

“Change in Law” means the occurrence after the date of the Agreement of:  (a) the adoption or effectiveness of any law, rule, regulation, judicial ruling, judgment or treaty, (b) any change in any law, rule, regulation, judicial ruling, judgment or treaty or in the administration, interpretation, implementation or application by any Governmental Authority of any law, rule, regulation, guideline or treaty, or (c) the making or issuance by any Governmental Authority of any request, rule, guideline or directive, whether or not having the force of law; provided that notwithstanding anything in the Agreement to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives concerning capital adequacy promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities shall, in each case, be deemed to be a “Change in Law,” regardless of the date enacted, adopted or issued.

 

“Closing Date” means the date of the making of the initial Revolving Loan (or other extension of credit) under the Agreement.

 

8

 

“Code” means the Illinois Uniform Commercial Code, as in effect from time to time.

 

“Collateral” means all assets and interests in assets and proceeds thereof now owned or hereafter acquired by any Borrower or any of its Subsidiaries in or upon which a Lien is granted by such Person in favor of Agent or the Lenders under any of the Loan Documents.

 

“Collateral Access Agreement” means a landlord waiver, bailee letter, or acknowledgement agreement of any lessor, warehouseman, processor, consignee, or other Person in possession of, having a Lien upon, or having rights or interests in any Borrower’s or its Subsidiaries’ books and records, Equipment, or Inventory, in each case, in form and substance reasonably satisfactory to Agent.

 

“Commitment” means, with respect to each Lender, its Revolver Commitment or its Term Loan Commitment, as the context requires, and, with respect to all Lenders, their Revolver Commitments or their Term Loan Commitments, as the context requires, in each case as such Dollar amounts are set forth beside such Lender’s name under the applicable heading on Schedule C-1 to the Agreement or in the Assignment and Acceptance pursuant to which such Lender became a Lender under the Agreement, as such amounts may be reduced or increased from time to time pursuant to assignments made in accordance with the provisions of Section 13.1 of the Agreement.

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

 

“Compliance Certificate” means a certificate substantially in the form of Exhibit C-1 to the Agreement delivered by the chief financial officer of Administrative Borrower to Agent.

 

“Confidential Information” has the meaning specified therefor in Section 17.9(a) of the Agreement.

 

“Continuing Director” means (a) any member of the Board of Directors who was a director (or comparable manager) of Administrative Borrower on the Closing Date, and (b) any individual who becomes a member of the Board of Directors after the Closing Date if such individual was approved, appointed or nominated for election to the Board of Directors by a majority of the Continuing Directors.

 

“Control Agreement” means a control agreement, in form and substance reasonably satisfactory to Agent, executed and delivered by a Borrower or one of its Subsidiaries, Agent, and the applicable securities intermediary (with respect to a Securities Account) or bank (with respect to a Deposit Account).

 

“Copyright Security Agreement” has the meaning specified therefor in the Guaranty and Security Agreement.

 

“Current Assets” means, as at any date of determination, the total assets of Borrowers and their Subsidiaries (other than cash and Cash Equivalents) which may properly be

 

9

 

classified as current assets on a consolidated balance sheet of Borrowers and their Subsidiaries in accordance with GAAP.

 

“Current Liabilities” means, as at any date of determination, the total liabilities of Borrowers and their Subsidiaries which may properly be classified as current liabilities (other than the current portion of the Term Loan, the Swing Loans and the Revolving Loans) on a consolidated balance sheet of Borrowers and their Subsidiaries in accordance with GAAP.

 

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

 

“Defaulting Lender” means any Lender that (a) has failed to fund any amounts required to be funded by it under the Agreement on the date that it is required to do so under the Agreement (including the failure to make available to Agent amounts required pursuant to a Settlement or to make a required payment in connection with a Letter of Credit Disbursement), (b) notified Borrowers, Agent, or any Lender in writing that it does not intend to comply with all or any portion of its funding obligations under the Agreement, (c) has made a public statement to the effect that it does not intend to comply with its funding obligations under the Agreement or under other agreements generally (as reasonably determined by Agent) under which it has committed to extend credit, (d) failed, within 1 Business Day after written request by Agent, to confirm that it will comply with the terms of the Agreement relating to its obligations to fund any amounts required to be funded by it under the Agreement, (e) otherwise failed to pay over to Agent or any other Lender any other amount required to be paid by it under the Agreement on the date that it is required to do so under the Agreement, or (f) (i) becomes or is insolvent or has a parent company that has become or is insolvent or (ii) becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, or custodian or appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment or has a parent company that has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment.

 

“Defaulting Lender Rate” means (a) for the first 3 days from and after the date the relevant payment is due, the Base Rate, and (b) thereafter, the interest rate then applicable to Revolving Loans that are Base Rate Loans (inclusive of the Base Rate Margin applicable thereto).

 

“Deposit Account” means any deposit account (as that term is defined in the Code).

 

“Designated Account” means the Deposit Account of Administrative Borrower identified on Schedule D-1 to the Agreement (or such other Deposit Account of Administrative Borrower located at Designated Account Bank that has been designated as such, in writing, by Borrowers to Agent).

 

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“Designated Account Bank” has the meaning specified therefor in Schedule D-1 to the Agreement (or such other bank that is located within the United States that has been designated as such, in writing, by Borrowers to Agent).

 

“Dilution” means, as of any date of determination, a percentage, based upon the experience of the immediately prior twelve (12) months, that is the result of dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising allowances, credits, or other dilutive items with respect to Borrowers’ Accounts during such period, by (b) Borrowers’ billings with respect to Accounts during such period.

 

“Dilution Reserve” means, as of any date of determination, an amount sufficient to reduce the advance rate against Eligible Accounts by 1 percentage point for each percentage point by which Dilution is in excess of 5%.

 

“Disqualified Equity Interests” means any Equity Interests that, by their terms (or by the terms of any security or other Equity Interests into which they are convertible or for which they are exchangeable), or upon the happening of any event or condition (a) matures or are mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments), (b) are redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (c) provide for the scheduled payments of dividends in cash, or (d) are or become convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is 180 days after the Maturity Date.

 

“Dollars” or “$” means United States dollars.

 

“Drawing Document” means any Letter of Credit or other document presented for purposes of drawing under any Letter of Credit.

 

“Earn-Outs” shall mean the 3QD Earnout and any unsecured liabilities of a Loan Party arising under an agreement to make any deferred payment as a part of the Purchase Price for a Permitted Acquisition, including performance bonuses or consulting payments in any related services, employment or similar agreement, in an amount that is subject to or contingent upon the revenues, income, cash flow or profits (or the like) of the target of such Permitted Acquisition.

 

“EBITDA” means, with respect to any fiscal period,

 

(a)                                 Borrowers’ consolidated net earnings (or loss),

 

minus

 

(b)                                without duplication, the sum of the following amounts of Borrowers for such period to the extent included in determining consolidated net earnings (or loss) for such period:

 

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(i)                                     any extraordinary, unusual, or non-recurring gains,

 

(ii)                                  interest income, and

 

(iii)                               exchange, translation or performance gains relating to any hedging transactions or foreign currency fluctuations,

 

plus

 

(c)                                 without duplication, the sum of the following amounts of Borrowers for such period to the extent included in determining consolidated net earnings (or loss) for such period:

 

(i)                                     any extraordinary, unusual, or non-recurring non-cash losses,

 

(ii)                                  Interest Expense,

 

(iii)                               tax expense based on income, profits or capital, including federal, foreign, state, franchise and similar taxes (and for the avoidance of doubt, specifically excluding any sales taxes or any other taxes held in trust for a Governmental Authority),

 

(iv)                              depreciation and amortization for such period,

 

(v)                                 with respect to any Permitted Acquisition after the Closing Date, costs, fees, charges, or expenses consisting of out-of-pocket expenses owed by Administrative Borrower or any of its Subsidiaries to any Person for services performed by such Person in connection with such Permitted Acquisition incurred within 180 days of the consummation of such Permitted Acquisition, (i) up to an aggregate amount (for all such items in this clause (v)) for such Permitted Acquisition not to exceed the greater of (1) $250,000 and (2) 5% of the Purchase Price of such Permitted Acquisition and (ii) in any amount to the extent such costs, fees, charges, or expenses in this clause (v) are paid with proceeds of new equity investments in exchange for Qualified Equity Interests of Administrative Borrower contemporaneously made by shareholders thereof,

 

(vi)                              with respect to any Permitted Acquisitions after the Closing Date: (1) purchase accounting adjustments, including, without limitation, a dollar for dollar adjustment for that portion of revenue that would have been recorded in the relevant period had the balance of deferred revenue (unearned income) recorded on the closing balance sheet and before application of purchase accounting not been adjusted downward to fair value to be recorded on the opening balance sheet in accordance with GAAP purchase accounting rules; and (2) non-cash adjustments in accordance with GAAP purchase accounting rules under FASB Statement No. 141 and EITF Issue No. 01-3, in the event that such an adjustment is required by Administrative Borrowers’ independent auditors, in each case, as determined in accordance with GAAP,

 

(vii)                           fees, costs, charges and expenses, in respect of Earn-Outs incurred in connection with any Permitted Acquisition to the extent permitted to be incurred under

 

12

 

the Agreement that are required by the application of FAS 141R to be and are expensed by Administrative Borrower and its Subsidiaries,

 

(viii)                        non-cash pension expense, non-cash compensation expense (including deferred non-cash compensation expense), or other non-cash expenses or charges, arising from the sale or issuance of Equity Interests, the granting of stock options, and the granting of stock appreciation rights and similar arrangements (including any repricing, amendment, modification, substitution, or change of any such Equity Interests, stock option, stock appreciation rights, or similar arrangements) minus the amount of any such expenses or charges when paid in cash to the extent not deducted in the computation of net earnings (or loss),

 

(ix)                              one-time non-cash restructuring charges,

 

(x)                                 non-cash exchange, translation, or performance losses relating to any hedging transactions or foreign currency fluctuations, and

 

(xi)                              non-cash losses on sales of fixed assets or write-downs of fixed or intangible assets.

 

in each case, determined on a consolidated basis in accordance with GAAP.

 

For the purposes of calculating EBITDA for any period of 12 consecutive fiscal months (each, a “Reference Period”), (a) if at any time during such Reference Period (and after the Closing Date), Administrative Borrower or any of its Subsidiaries shall have made a Permitted Acquisition, EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto (including pro forma adjustments arising out of events which are directly attributable to such Permitted Acquisition, are factually supportable, and are expected to have a continuing impact, in each case to be mutually and reasonably agreed upon by Borrowers and Agent) or in such other manner acceptable to Agent as if any such Permitted Acquisition or adjustment occurred on the first day of such Reference Period, and (b) the portion of EBITDA attributable to the Foreign Subsidiaries of Administrative Borrower shall be excluded from the calculation of EBITDA to the extent  such portion attributable to the Foreign Subsidiaries in the aggregate exceeds 15% of EBITDA.

 

“Eligible Accounts” means Eligible Billed Accounts, Eligible Unbilled Accounts and Eligible Foreign Accounts.

 

“Eligible Billed Accounts” means those Accounts created by a Borrower in the ordinary course of its business, that arise out of such Borrower’s sale of goods or rendition of services, that comply with each of the representations and warranties respecting Eligible Billed Accounts made in the Loan Documents, and that are not excluded as ineligible by virtue of one or more of the excluding criteria set forth below; provided, that such criteria may be revised from time to time by Agent in Agent’s Permitted Discretion to address the results of any field examination performed by (or on behalf of) Agent from time to time after the Closing Date.  In determining the amount to be included, Eligible Billed Accounts shall be calculated net of customer deposits, unapplied cash, taxes, discounts, credits, allowances, and rebates.  Eligible Billed Accounts shall not include the following:

 

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(a)                                 Accounts that the Account Debtor has failed to pay within 90 days of original invoice date,

 

(b)                                Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of the value of all Accounts owed by that Account Debtor (or its Affiliates) are deemed ineligible under clause (a) above,

 

(c)                                 Accounts with respect to which the Account Debtor is an Affiliate of any Borrower or an employee or agent of any Borrower or any Affiliate of any Borrower,

 

(d)                                Accounts arising in a transaction wherein goods are placed on consignment or are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a bill and hold, subject to any other refund, repurchase or return agreement,

 

(e)                                 Accounts that are not payable in Dollars,

 

(f)                                   Accounts with respect to which the Account Debtor (i) does not maintain its chief executive office in the United States, (ii) is not organized under the laws of the United States or any state thereof, or (iii) is the government of any foreign country or sovereign state, or of any state, province, municipality, or other political subdivision thereof, or of any department, agency, public corporation, or other instrumentality thereof, unless (A) the Account is supported by an irrevocable letter of credit, banker’s acceptance or other credit support terms reasonably satisfactory to Agent (as to form, substance, and issuer or domestic confirming bank) that has been delivered to Agent and is directly drawable by Agent, (B) the Account is covered by credit insurance in form, substance, and amount, and by an insurer, reasonably satisfactory to Agent, or (C) the Account is an Eligible Foreign Account,

 

(g)                                Accounts with respect to which the Account Debtor is either (i) the United States or any department, agency, or instrumentality of the United States (exclusive, however, of Accounts with respect to which Borrowers have complied, to the reasonable satisfaction of Agent, with the Assignment of Claims Act, 31 USC §3727), or (ii) any state of the United States,

 

(h)                                 Accounts with respect to which the Account Debtor is a creditor of a Borrower, has or has asserted a right of recoupment or setoff, or has disputed in good faith its obligation to pay all or any portion of the Account, to the extent of such claim, right of recoupment or setoff, or dispute,

 

(i)                                     Accounts with respect to an Account Debtor whose total obligations owing to Borrowers exceed 10% (such percentage, as applied to a particular Account Debtor, being subject to reduction by Agent in its Permitted Discretion if the creditworthiness of such Account Debtor deteriorates) of all Eligible Accounts, to the extent of the obligations owing by such Account Debtor in excess of such percentage; provided, that, in each case, the amount of Eligible Accounts that are excluded because they exceed the foregoing percentage shall be determined by Agent based on all of the otherwise Eligible Accounts prior to giving effect to any eliminations based upon the foregoing concentration limit,

 

(j)                                     Accounts with respect to which the Account Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone out of business, or as to which any Borrower has

 

14

 

received notice of an imminent Insolvency Proceeding or a material impairment of the financial condition of such Account Debtor,

 

(k)                                 Accounts, the collection of which, Agent, in its Permitted Discretion, believes to be doubtful, including by reason of the Account Debtor’s financial condition,

 

(l)                                     Accounts that are not subject to a valid and perfected first priority Agent’s Lien,

 

(m)                             Accounts with respect to which (i) the goods giving rise to such Account have not been shipped and billed to the Account Debtor, or (ii) the services giving rise to such Account have not been performed and billed to the Account Debtor,

 

(n)                                 Accounts with respect to which the Account Debtor is a Sanctioned Person or Sanctioned Entity,

 

(o)                                Accounts that represent the right to receive progress payments or other advance billings that are due prior to the completion of performance by the applicable Borrower of the subject contract for goods or services; provided that, for purposes hereof, “progress payments” means any invoice for goods sold or leased or services rendered under a contract or agreement pursuant to which such Account Debtor’s obligation to pay such invoice is conditioned upon the applicable Borrower’s completion of any further performance under the contract or agreement, and does not include any invoice for goods sold or leased or services rendered for which portions have been completed and for which the revenue has been earned pursuant to such contract or agreement, or

 

(p)                                Accounts owned by a target acquired in connection with a Permitted Acquisition, until the completion of an appraisal and field examination with respect to such target, in each case, reasonably satisfactory to Agent (which appraisal and field examination may be conducted prior to the closing of such Permitted Acquisition).

 

“Eligible Foreign Account” means an Account that would otherwise be an Eligible Account (other than for the Account Debtor of such Account not maintaining its chief executive office in the United States or not being organized under the laws of the United States or any state thereof); provided, that, (a) such Accounts are or will be invoiced from the United States and payable in US Dollars, and (b) such foreign Account Debtor is a wholly-owned Subsidiary of company that maintains its chief executive office in the United States, is organized under the laws of the United States or any state thereof, and maintains an Investment Grade rating.

 

“Eligible Transferee” means (a) any Lender (other than a Defaulting Lender), any Affiliate of any Lender (other than a Defaulting Lender) and any Related Fund of any Lender; (b) (i) a commercial bank organized under the laws of the United States or any state thereof, and having total assets in excess of $1,000,000,000; (ii) a savings and loan association or savings bank organized under the laws of the United States or any state thereof, and having total assets in excess of $1,000,000,000; (iii) a commercial bank organized under the laws of any other country or a political subdivision thereof; provided that (A) (x) such bank is acting through a branch or agency located in the United States or (y) such bank is organized under the laws of a country that

 

15

 

is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country, and (B) such bank has total assets in excess of $1,000,000,000; (c) any other entity (other than a natural person) that is an “accredited investor” (as defined in Regulation D under the Securities Act) that extends credit or buys loans as one of its businesses including insurance companies, investment or mutual funds and lease financing companies, and having total assets in excess of $1,000,000,000; and (d) during the continuation of an Event of Default, any other Person approved by Agent; provided, that no Affiliate of a Loan Party shall qualify as an Eligible Transferee.

 

“Eligible Unbilled Accounts” means Accounts of a Borrower that would qualify as Eligible Billed Accounts except that such Accounts have not yet been billed to the applicable Account Debtor; provided that an Account shall cease to be an Eligible Unbilled Account upon the earlier of (i) the date such Account is billed to the applicable Account Debtor and (ii) 30 days after the goods giving rise to such Account have been shipped to the applicable Account Debtor or the service has been performed.  In determining the amount to be included, Eligible Unbilled Accounts shall be calculated net of customer deposits and unapplied cash.

 

“Employee Benefit Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA, whether or not subject to ERISA, (a) that is or within the preceding six (6) years has been sponsored, maintained or contributed to by any Loan Party or (b) to which any Loan Party has, or has had at any time within the preceding six (6) years, any liability, contingent or otherwise including by reason of being an ERISA Affiliate.

 

“Environmental Action” means any written complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter, or other written communication from any Governmental Authority, or any third party involving violations of Environmental Laws or releases of Hazardous Materials (a) from any assets, properties, or businesses of any Borrower, any Subsidiary of any Borrower, or any of their predecessors in interest, (b) from adjoining properties or businesses, or (c) from or onto any facilities which received Hazardous Materials generated by any Borrower, any Subsidiary of any Borrower, or any of their predecessors in interest.

 

“Environmental Law” means any applicable federal, state, provincial, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy, or rule of common law now or hereafter in effect and in each case as amended, or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, in each case, to the extent binding on any Borrower or its Subsidiaries, relating to the environment, the effect of the environment on employee health, or Hazardous Materials, in each case as amended from time to time.

 

“Environmental Liabilities” means all liabilities, monetary obligations, losses, damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts, or consultants, and costs of investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a result of any claim or demand, or Remedial Action required, by any Governmental Authority or any third party, and which relate to any Environmental Action.

 

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“Environmental Lien” means any Lien in favor of any Governmental Authority for Environmental Liabilities.

 

“Equipment” means equipment (as that term is defined in the Code).

 

“Equity Interests” means, with respect to a Person, all of the shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in such Person, whether voting or nonvoting, including capital stock (or other ownership or profit interests or units), preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statutes, and all regulations and guidance promulgated thereunder.  Any reference to a specific section of ERISA shall be deemed to be a reference to such section of ERISA and any successor statutes, and all regulations and guidance promulgated thereunder.

 

“ERISA Affiliate” means each entity, trade or business (whether or not incorporated) that together with a Loan Party or a Subsidiary would be (or has been) treated as a “single employer” within the meaning of section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414 of the IRC.  ERISA Affiliate shall include any Subsidiary of any Loan Party.

 

“Event of Default” has the meaning specified therefor in Section 8 of the Agreement.

 

“Excess Availability” means, as of any date of determination, the amount equal to Availability minus the aggregate amount, if any, of all trade payables of Borrowers and their Subsidiaries aged in excess of historical levels with respect thereto and all book overdrafts of Borrowers and their Subsidiaries in excess of historical practices with respect thereto, in each case as determined by Agent in its Permitted Discretion.

 

“Excess Cash Flow” means, with respect to any fiscal period and with respect to Borrowers determined on a consolidated basis in accordance with GAAP the result of:

 

(a)                                 trailing twelve months EBITDA, minus

 

(b)                                the sum of

 

(i)                                     the cash portion of Interest Expense paid during such fiscal period,

 

(ii)                                  the cash portion of income taxes paid during such period,

 

(iii)                               all scheduled principal payments made in respect of the Term Loan during such period,

 

(iv)                              the cash portion of Capital Expenditures (net of (y) any proceeds reinvested in accordance with the proviso to Section 2.4(e)(ii) of the Agreement, and

 

17

 

(z) any proceeds of related financings with respect to such expenditures) made during such period,

 

(v)                                 the cash portion of Restricted Payments made during such period, and

 

(vi)                              the excess, if any, of Net Working Capital at the end of such period over Net Working Capital at the beginning of such period (or, if the difference results in an amount less than zero, minus the excess, if any, of Net Working Capital at the beginning of such period over Net Working Capital at the end of such period).

 

“Exchange Act” means the Securities Exchange Act of 1934, as in effect from time to time.

 

“Excluded Accounts” has the meaning specified therefor in the Guaranty and Security Agreement.

 

“Excluded Swap Obligation” means, with respect to any Borrower or any other Loan Party, any Swap Obligation if, and to the extent that, all or a portion of the agreement of such Loan Party to be jointly and severally liable for such Swap Obligation of another Loan Party or  any guaranty of such Loan Party of, or the grant by such Loan Party of a security interest to secure, such Swap Obligation (or any guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the agreement of such Loan Party to be jointly and severally liable for such Swap Obligation or guaranty of such Swap Obligation or the grant of such security interest becomes effective with respect to such Swap Obligation.  If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such joint and several liability or guaranty or security interest is or becomes illegal.

 

“Excluded Taxes” means (i) any tax imposed on the net income or net profits of any Lender or any Participant (including any branch profits taxes), in each case imposed by the jurisdiction (or by any political subdivision or taxing authority thereof) in which such Lender or such Participant is organized or the jurisdiction (or by any political subdivision or taxing authority thereof) in which such Lender’s or such Participant’s principal office is located in each case as a result of a present or former connection between such Lender or such Participant and the jurisdiction or taxing authority imposing the tax (other than any such connection arising solely from such Lender or such Participant having executed, delivered or performed its obligations or received payment under, or enforced its rights or remedies under the Agreement or any other Loan Document); (ii) United States federal taxes that would not have been imposed but for a Lender’s or a Participant’s failure to comply with the requirements of Section 16.2 of the Agreement, (iii) any United States federal withholding taxes that would be imposed on amounts payable to a Foreign Lender based upon the applicable withholding rate in effect at the time such Foreign Lender becomes a party to the Agreement (or designates a new lending office), except

 

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that Excluded Taxes shall not include (A) any amount that such Foreign Lender (or its assignor, if any) was previously entitled to receive pursuant to Section 16.1 of the Agreement, if any, with respect to such withholding tax at the time such Foreign Lender becomes a party to the Agreement (or designates a new lending office), and (B) additional United States federal withholding taxes that may be imposed after the time such Foreign Lender becomes a party to the Agreement (or designates a new lending office), as a result of a change in law, rule, regulation, order or other decision with respect to any of the foregoing by any Governmental Authority, and (iv) any United States federal withholding taxes imposed under FATCA.

 

“Existing Credit Facility” means collectively the credit facilities provided to Administrative Borrower pursuant to (i) that certain Amended and Restated Credit Agreement, dated as of August 8, 2013, among Administrative Borrower, Bank of America, N.A., as administrative agent, swing line lender and l/c issuer thereunder, the other lenders from time to time party thereto, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger, as amended prior to the Closing Date, and (ii) that certain Term Loan Agreement, dated as of August 16, 2011, among Administrative Borrower, Bank of America, N.A., as administrative agent, the other lenders from time to time party thereto, Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC as joint lead arrangers, and Compass Bank as documentation agent, as amended prior to the Closing Date.

 

“Extraordinary Advances” has the meaning specified therefor in Section 2.3(d)(iii) of the Agreement.

 

“FATCA” means Sections 1471 through 1474 of the IRC, as of the date of the Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof.

 

“Fee Letter” means that certain fee letter, dated as of even date with the Agreement, among Borrowers and Agent.

 

“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal to, for each day during such period, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Agent from three Federal funds brokers of recognized standing selected by it.

 

“Fixed Charges” means, with respect to any fiscal period and with respect to Borrowers determined on a consolidated basis in accordance with GAAP, the sum, without duplication, of (a) Interest Expense accrued (other than interest paid-in-kind, amortization of financing fees, and other non-cash Interest Expense) during such period, (b) principal payments in respect of Indebtedness that are required to be paid during such period, (c) all federal, state, and local income taxes paid or payable in cash during such period, (d) all payments, in excess of those already reflected in the Borrowers’ calculation of consolidated net earnings (or loss), required to be made as contributions, installments or otherwise to or with respect to a Pension

 

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Plan, a Multiemployer Plan or the Harte-Hanks, Inc. Restoration Pension Plan, and (e) all Restricted Payments paid (whether in cash or other property, other than common Equity Interests) during such period.

 

“Fixed Charge Coverage Ratio” means, with respect to any fiscal period and with respect to Borrowers determined on a consolidated basis in accordance with GAAP, the ratio of (a) EBITDA for such period minus unfinanced Capital Expenditures made (to the extent not already incurred in a prior period) or incurred during such period, to (b) Fixed Charges for such period.

 

“Foreign Lender” means any Lender or Participant that is not a United States person within the meaning of IRC section 7701(a)(30).

 

“Funded Indebtedness” means, as of any date of determination, all Indebtedness for borrowed money or letters of credit of Borrowers, determined on a consolidated basis in accordance with GAAP, that by its terms matures more than one year after the date of determination, and any such Indebtedness maturing within one year from such date that is renewable or extendable at the option of any Borrower or its Subsidiaries, as applicable, to a date more than one year from such date, including, in any event, but without duplication, with respect to Borrowers and their Subsidiaries, the Revolver Usage, the Term Loan, and the amount of their Capitalized Lease Obligations.

 

“Funding Date” means the date on which a Borrowing occurs.

 

“Funding Losses” has the meaning specified therefor in Section 2.12(b)(ii) of the Agreement.

 

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

 

“Governing Documents” means, with respect to any Person, the certificate or articles of incorporation, by-laws, or other organizational documents of such Person.

 

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

 

“Guarantor” means (a) each Subsidiary of each Borrower (other than any such Subsidiary that is a Borrower) organized under the laws of a state of the United States or the District of Columbia, other than an Immaterial Subsidiary, and (b) each other Person that becomes a guarantor after the Closing Date pursuant to Section 5.11 of the Agreement.

 

“Guaranty and Security Agreement” means a guaranty and security agreement, dated as of even date with the Agreement, in form and substance reasonably satisfactory to Agent, executed and delivered by each of the Borrowers and each of the Guarantors to Agent.

 

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“Harte Hanks” has the meaning specified therefor in the preamble to the Agreement.

 

“Hazardous Materials” means (a) substances that are defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations as “hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal resources, (c) any flammable substances or explosives or any radioactive materials, and (d) asbestos in any form or electrical equipment that contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of 50 parts per million.

 

“Hedge Agreement” means a “swap agreement” as that term is defined in Section 101(53B)(A) of the Bankruptcy Code.

 

“Hedge Obligations” means any and all obligations or liabilities, whether absolute or contingent, due or to become due, now existing or hereafter arising, of each Borrower and its Subsidiaries arising under, owing pursuant to, or existing in respect of Hedge Agreements entered into with one or more of the Hedge Providers.

 

“Hedge Provider” means Wells Fargo or any of its Affiliates.

 

“Immaterial Subsidiary” means, as at any date, any Subsidiary of Administrative Borrower set forth on Schedule I-1 of the Agreement (as may be amended from time to time by notice from Administrative Borrower to Agent), provided, that, any Subsidiary designated as an Immaterial Subsidiary (a) did not, as of the last day of the fiscal quarter of Administrative Borrower most recently ended, have assets with a value in excess of two and one-half percent (2.5%) of total assets or revenues representing in excess of two and one-half percent (2.5%) of total revenues of Administrative Borrower and its Subsidiaries, in each case, on a consolidated basis as of such date, (b) taken together with all Immaterial Subsidiaries as of the last day of the fiscal quarter of Administrative Borrower most recently ended, did not have assets with a value in excess of ten percent (10.0%) of total assets or revenues representing in excess of ten percent (10.0%) of total revenues of Administrative Borrower and its Subsidiaries, in each case, on a consolidated basis as of such date, (c) shall not own or generate any Accounts or conduct any sales activities, and (d) shall not own any intellectual property (other than intellectual property of de minimis value not used in the operation of the business of Administrative Borrower or its Subsidiaries).

 

“Indebtedness” as to any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products, (c) all obligations of such Person as a lessee under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is

 

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assumed, (e) all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices and, for the avoidance of doubt, other than royalty payments payable in the ordinary course of business in respect of non-exclusive licenses), including the forecasted amount of the 3QD Earnout, from and after September 30, 2017 regardless of whether it is then due and payable, and any Earn-Outs, at the time such Earn-Outs become due and payable, (f) all monetary obligations of such Person owing under Hedge Agreements (which amount shall be calculated based on the amount that would be payable by such Person if the Hedge Agreement were terminated on the date of determination), (g) any Disqualified Equity Interests of such Person, and (h) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through (g) above.  For purposes of this definition, (i) the amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness which is limited or is non-recourse to a Person or for which recourse is limited to an identified asset shall be valued at the lesser of (A) if applicable, the limited amount of such obligations, and (B) if applicable, the fair market value of such assets securing such obligation.

 

“Indemnified Liabilities” has the meaning specified therefor in Section 10.3 of the Agreement.

 

“Indemnified Person” has the meaning specified therefor in Section 10.3 of the Agreement.

 

“Indemnified Taxes” means, any Taxes other than Excluded Taxes.

 

“Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

 

“Intercompany Subordination Agreement” means an intercompany subordination agreement, dated as of even date with the Agreement, executed and delivered by each Borrower, each of the other Loan Parties, and Agent, the form and substance of which is reasonably satisfactory to Agent.

 

“Interest Expense” means, for any period, the aggregate of the interest expense of Borrowers for such period, determined on a consolidated basis in accordance with GAAP.

 

“Interest Period” means, with respect to each LIBOR Rate Loan, a period commencing on the date of the making of such LIBOR Rate Loan (or the continuation of a LIBOR Rate Loan or the conversion of a Base Rate Loan to a LIBOR Rate Loan) and ending 1, 2 or 3 months thereafter; provided, that (a) interest shall accrue at the applicable rate based upon

 

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the LIBOR Rate from and including the first day of each Interest Period to, but excluding, the day on which any Interest Period expires, (b) any Interest Period that would end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day, (c) with respect to an Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period), the Interest Period shall end on the last Business Day of the calendar month that is 1, 2 or 3 months after the date on which the Interest Period began, as applicable, and (d) Borrowers may not elect an Interest Period which will end after the Maturity Date.

 

“Inventory” means inventory (as that term is defined in the Code).

 

“Investment” means, with respect to any Person, any investment by such Person in any other Person (including Affiliates) in the form of loans, guarantees, advances, capital contributions (excluding (a) commission, travel, and similar advances to officers and employees of such Person made in the ordinary course of business, and (b) bona fide accounts receivable arising in the ordinary course of business), or acquisitions of Indebtedness, Equity Interests, or all or substantially all of the assets of such other Person (or of any division or business line of such other Person), and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP, including Acquisitions.  The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustment for increases or decreases in value, or write-ups, write-downs, or write-offs with respect to such Investment.

 

“Investment Grade” means, in the case of S&P, a rating of BBB- or better and, in the case of Moody’s, a rating of Baa3 or better.

 

“IP Reporting Certificate” means a certificate substantially in the form of Exhibit I-1 to the Agreement executed and delivered by the Loan Parties to Agent.

 

“IRC” means the Internal Revenue Code of 1986, as amended, and any successor statutes, and all regulations and guidance promulgated thereunder.

 

“ISP” means, with respect to any Letter of Credit, the International Standby Practices 1998 (International Chamber of Commerce Publication No. 590) and any subsequent revision thereof adopted by the International Chamber of Commerce on the date such Letter of Credit is issued.

 

“Issuer Document” means, with respect to any Letter of Credit, a letter of credit application, a letter of credit agreement, or any other document, agreement or instrument entered into (or to be entered into) by a Borrower in favor of Issuing Bank and relating to such Letter of Credit.

 

“Issuing Bank” means Wells Fargo or any other Lender that, at the request of Borrowers and with the consent of Agent, agrees, in such Lender’s sole discretion, to become an Issuing Bank for the purpose of issuing Letters of Credit pursuant to Section 2.11 of the Agreement, and Issuing Bank shall be a Lender.

 

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“Joint Book Runners” has the meaning set forth in the preamble to the Agreement.

 

“Landlord Reserve” means, as to each location at which a Borrower has books and records material to the Accounts located and as to which a Collateral Access Agreement has not been received by Agent, a reserve in an amount equal to the greater of (a) the number of month’s rent for which the landlord will have, under applicable law, a Lien in the Inventory of such Borrower to secure the payment of rent or other amounts under the lease relative to such location, or (b) 3 month’s rent under the lease relative to such location; provided, that Borrowers shall have 90 days after the Closing Date (or after the establishment of any such new location) in order to furnish a fully-executed Collateral Access Agreement to Agent with respect to any such books and records location, during which time Agent may not establish a Landlord Reserve with respect to such location.

 

“Lender” has the meaning set forth in the preamble to the Agreement, shall include Issuing Bank and the Swing Lender, and shall also include any other Person made a party to the Agreement pursuant to the provisions of Section 13.1 of the Agreement and “Lenders” means each of the Lenders or any one or more of them.

 

“Lender Group” means each of the Lenders (including Issuing Bank and the Swing Lender) and Agent, or any one or more of them.

 

“Lender Group Expenses” means all (a) costs or expenses (including taxes and insurance premiums) required to be paid by any Borrower or its Subsidiaries under any of the Loan Documents that are paid, advanced, or incurred by the Lender Group, (b) documented out-of-pocket fees or charges paid or incurred by Agent and the Specified Lender in connection with the Lender Group’s transactions with each Borrower and its Subsidiaries under any of the Loan Documents and the Agreement Among Lenders, including, photocopying, notarization, couriers and messengers, telecommunication, public record searches, filing fees, recording fees, publication, real estate surveys, real estate title policies and endorsements, and environmental audits, (c) Agent’s and Specified Lender’s customary fees and charges imposed or incurred in connection with any background checks or OFAC/PEP searches related to any Borrower or its Subsidiaries, (d) Agent’s customary fees and charges (as adjusted from time to time) with respect to the disbursement of funds (or the receipt of funds) to or for the account of any Borrower (whether by wire transfer or otherwise), together with any out-of-pocket costs and expenses incurred in connection therewith, (e) customary charges imposed or incurred by Agent resulting from the dishonor of checks payable by or to any Loan Party, (f) reasonable documented out-of-pocket costs and expenses paid or incurred by the Lender Group to correct any default or enforce any provision of the Loan Documents or the Agreement Among Lenders, or during the continuance of an Event of Default, in gaining possession of, maintaining, handling, preserving, storing, shipping, selling, preparing for sale, or advertising to sell the Collateral, or any portion thereof, irrespective of whether a sale is consummated, (g) field examination, appraisal, and valuation fees and expenses of Agent related to any field examinations, appraisals, or valuation to the extent of the fees and charges (and up to the amount of any limitation) provided in Section 2.10 of the Agreement, (h) Agent’s and Specified Lender’s reasonable costs and expenses (including reasonable documented attorneys’ fees and expenses) relative to third party claims or any other lawsuit or adverse proceeding paid or incurred, whether in enforcing or defending the Loan Documents, the Agreement Among Lenders or otherwise in connection with the

 

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transactions contemplated by the Loan Documents, the Agreement Among Lenders, Agent’s Liens in and to the Collateral, or the Lender Group’s relationship with any Borrower or any of its Subsidiaries, (i) Agent’s and Specified Lender’s reasonable documented costs and expenses (including reasonable documented attorneys’ fees and due diligence expenses) incurred in advising, structuring, drafting, reviewing, administering (including travel, meals, and lodging), syndicating (including reasonable costs and expenses relative to the rating of the Term Loan, CUSIP, DXSyndicateTM, SyndTrak or other communication costs incurred in connection with a syndication of the loan facilities), or amending, waiving, or modifying the Loan Documents or the Agreement Among Lenders, and (j) Agent’s and each Lender’s reasonable documented costs and expenses (including reasonable documented attorneys, accountants, consultants, and other advisors fees and expenses) incurred in terminating, enforcing (including attorneys, accountants, consultants, and other advisors fees and expenses incurred in connection with a “workout,” a “restructuring,” or an Insolvency Proceeding concerning any Borrower or any of its Subsidiaries or in exercising rights or remedies under the Loan Documents or the Agreement Among Lenders), or defending the Loan Documents, irrespective of whether a lawsuit or other adverse proceeding is brought, or in taking any enforcement action or any Remedial Action with respect to the Collateral.

 

“Lender Group Representatives” has the meaning specified therefor in Section 17.9 of the Agreement.

 

“Lender-Related Person” means, with respect to any Lender, such Lender, together with such Lender’s Affiliates, officers, directors, employees, attorneys, and agents.

 

“Letter of Credit” means a letter of credit (as that term is defined in the Code) issued by Issuing Bank.

 

“Letter of Credit Collateralization” means either (a) providing cash collateral (pursuant to documentation reasonably satisfactory to Agent, including provisions that specify that the Letter of Credit Fees and all commissions, fees, charges and expenses provided for in Section 2.11(k) of the Agreement (including any fronting fees) will continue to accrue while the Letters of Credit are outstanding) to be held by Agent for the benefit of the Revolving Lenders in an amount equal to 105% of the then existing Letter of Credit Usage, (b) delivering to Agent documentation executed by all beneficiaries under the Letters of Credit, in form and substance reasonably satisfactory to Agent and Issuing Bank, terminating all of such beneficiaries’ rights under the Letters of Credit, or (c) providing Agent with a standby letter of credit, in form and substance reasonably satisfactory to Agent, from a commercial bank acceptable to Agent (in its sole discretion) in an amount equal to 105% of the then existing Letter of Credit Usage (it being understood that the Letter of Credit Fee and all fronting fees set forth in the Agreement will continue to accrue while the Letters of Credit are outstanding and that any such fees that accrue must be an amount that can be drawn under any such standby letter of credit).

 

“Letter of Credit Disbursement” means a payment made by Issuing Bank pursuant to a Letter of Credit.

 

“Letter of Credit Exposure” means, as of any date of determination with respect to any Lender, such Lender’s Pro Rata Share of the Letter of Credit Usage on such date.

 

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“Letter of Credit Fee” has the meaning specified therefor in Section 2.6(b) of the Agreement.

 

“Letter of Credit Indemnified Costs” has the meaning specified therefor in Section 2.11(f) of the Agreement.

 

“Letter of Credit Related Person” has the meaning specified therefor in Section 2.11(f) of the Agreement.

 

“Letter of Credit Usage” means, as of any date of determination, the aggregate undrawn amount of all outstanding Letters of Credit.

 

“Leverage Ratio” means, as of any date of determination the result of (a) the amount of Borrowers’ Funded Indebtedness as of such date, to (b) Borrowers’ EBITDA for the 12 month period ended as of such date.

 

“LIBOR Deadline” has the meaning specified therefor in Section 2.12(b)(i) of the Agreement.

 

“LIBOR Notice” means a written notice in the form of Exhibit L-1 to the Agreement.

 

“LIBOR Option” has the meaning specified therefor in Section 2.12(a) of the Agreement.

 

“LIBOR Rate” means the rate per annum as reported on Reuters Screen LIBOR01 PAGE (or any successor page) 2 Business Days prior to the commencement of the requested Interest Period, for a term, and in an amount, comparable to the Interest Period and the amount of the LIBOR Rate Loan requested (whether as an initial LIBOR Rate Loan or as a continuation of a LIBOR Rate Loan or as a conversion of a Base Rate Loan to a LIBOR Rate Loan) by Borrowers in accordance with the Agreement (and, if any such rate is below zero, the LIBOR Rate shall be deemed to be zero), which determination shall be made by Agent and shall be conclusive in the absence of manifest error.

 

“LIBOR Rate Loan” means each portion of a Revolving Loan or the Term Loan that bears interest at a rate determined by reference to the LIBOR Rate.

 

“LIBOR Rate Margin” has the meaning set forth in the definition of Applicable Margin.

 

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, easement, lien (statutory or other), security interest, or other security arrangement and any other preference, priority, or preferential arrangement of any kind or nature whatsoever, including any conditional sale contract or other title retention agreement, the interest of a lessor under a Capital Lease and any synthetic or other financing lease having substantially the same economic effect as any of the foregoing.

 

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“Loan” means any Revolving Loan, Swing Loan, Extraordinary Advance, or Term Loan made (or to be made) hereunder.

 

“Loan Account” has the meaning specified therefor in Section 2.9 of the Agreement.

 

“Loan Documents” means the Agreement, the Control Agreements, the Copyright Security Agreement, any Borrowing Base Certificate, the Fee Letter (and any fee split letters executed in connection therewith), the Guaranty and Security Agreement, the Intercompany Subordination Agreement, any Issuer Documents, the Letters of Credit, the Mortgages, the Patent Security Agreement, the Trademark Security Agreement, any note or notes executed by Borrowers in connection with the Agreement and payable to any member of the Lender Group, and any other instrument or agreement entered into, now or in the future, by any Borrower or any of its Subsidiaries and any member of the Lender Group in connection with the Agreement.  The parties acknowledge and agree that the Agreement Among Lenders is not a Loan Document.

 

“Loan Party” means any Borrower or any Guarantor.

 

“Margin Stock” as defined in Regulation U of the Board of Governors as in effect from time to time.

 

“Material Adverse Effect” means (a) a material adverse effect in the business, operations, results of operations, assets, liabilities or financial condition of Borrowers and their Subsidiaries, taken as a whole, (b) a material impairment of Borrowers’ and their Subsidiaries ability to perform their obligations under the Loan Documents to which they are parties or of the Lender Group’s ability to enforce the Obligations or realize upon the Collateral (other than as a result of as a result of an action taken or not taken that is solely in the control of Agent), or (c) a material impairment of the enforceability or priority of Agent’s Liens with respect to all or a material portion of the Collateral.

 

“Maturity Date” means March 10, 2021.

 

“Maximum Credit Amount” means $110,000,000.

 

“Maximum Revolver Amount” means $65,000,000, decreased by the amount of reductions in the Revolver Commitments made in accordance with Section 2.4(c) of the Agreement.

 

“Moody’s” has the meaning specified therefor in the definition of Cash Equivalents.

 

“Mortgages” means, individually and collectively, one or more mortgages, deeds of trust, or deeds to secure debt, executed and delivered by a Borrower or one of its Subsidiaries in favor of Agent, in form and substance reasonably satisfactory to Agent, that encumber the Real Property Collateral.

 

“Multiemployer Plan” means any multiemployer plan within the meaning of Section 3(37) or 4001(a)(3) of ERISA with respect to which any Loan Party or ERISA Affiliate

 

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has an obligation to contribute or has any liability, contingent or otherwise or could be assessed withdrawal liability assuming a complete withdrawal from any such multiemployer plan.

 

“Net Cash Proceeds” means:

 

(a)        with respect to any sale or disposition by any Borrower or any of its Subsidiaries of assets, the amount of cash proceeds received (directly or indirectly) from time to time (whether as initial consideration or through the payment of deferred consideration) by or on behalf of such Borrower or such Subsidiary, in connection therewith after deducting therefrom only (i) the amount of any Indebtedness secured by any Permitted Lien on any asset (other than (A) Indebtedness owing to Agent or any Lender under the Agreement or the other Loan Documents and (B) Indebtedness assumed by the purchaser of such asset) which is required to be, and is, repaid in connection with such sale or disposition, (ii) reasonable fees, commissions, and expenses related thereto and required to be paid by such Borrower or such Subsidiary in connection with such sale or disposition, (iii) taxes paid or payable to any taxing authorities by such Borrower or such Subsidiary in connection with such sale or disposition, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person that is not an Affiliate of any Borrower or any of its Subsidiaries, and are properly attributable to such transaction; and (iv) all amounts that are set aside as a reserve (A) for adjustments in respect of the purchase price of such assets, (B) for any liabilities associated with such sale or casualty, to the extent such reserve is required by GAAP, and (C) for the payment of unassumed liabilities relating to the assets sold or otherwise disposed of at the time of, or within  30 days after, the date of such sale or other disposition, to the extent that in each case the funds described above in this clause (iv) are (x) deposited into escrow with a third party escrow agent or set aside in a separate Deposit Account that is subject to a Control Agreement in favor of Agent and (y) paid to Agent as a prepayment of the applicable Obligations in accordance with Section 2.4(e) of the Agreement at such time when such amounts are no longer required to be set aside as such a reserve; and

 

(b)        with respect to the issuance or incurrence of any Indebtedness by any Borrower or any of its Subsidiaries, or the issuance by any Borrower or any of its Subsidiaries of any Equity Interests, the aggregate amount of cash received (directly or indirectly) from time to time (whether as initial consideration or through the payment or disposition of deferred consideration) by or on behalf of such Borrower or such Subsidiary in connection with such issuance or incurrence, after deducting therefrom only (i) reasonable fees, commissions, and expenses related thereto and required to be paid by such Borrower or such Subsidiary in connection with such issuance or incurrence, (ii) taxes paid or payable to any taxing authorities by such Borrower or such Subsidiary in connection with such issuance or incurrence, in each case to the extent, but only to the extent, that the amounts so deducted are, at the time of receipt of such cash, actually paid or payable to a Person that is not an Affiliate of any Borrower or any of its Subsidiaries, and are properly attributable to such transaction.

 

“Net Recovery Percentage” means, as of any date of determination, the percentage of the book value of Borrowers’ Inventory that is estimated to be recoverable in an orderly liquidation of such Inventory net of all associated costs and expenses of such liquidation, such percentage to be determined as to each category of Inventory and to be as specified in the most recent appraisal received by Agent from an appraisal company selected by Agent.

 

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“Net Working Capital” means, as of any date of determination, Current Assets as of such date minus Current Liabilities as of such date.

 

“Non-Consenting Lender” has the meaning specified therefor in Section 14.2(a) of the Agreement.

 

“Non-Defaulting Lender” means each Lender other than a Defaulting Lender.

 

“Notification Event” means (a) the occurrence of a “reportable event” described in Section 4043 of ERISA for which the 30-day notice requirement has not been waived by applicable regulations, (b) the withdrawal of any Loan Party or ERISA Affiliate from a Pension Plan during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA, (c) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination, under Section 4041 of ERISA, (d) the institution of proceedings to terminate, or the appointment of a trustee with respect to, any Pension Plan or Multiemployer Plan by the PBGC or any Pension Plan or Multiemployer Plan administrator, (e) any other event or condition that would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan, (f) the imposition of a Lien pursuant to the IRC or ERISA in connection with any Employee Benefit Plan or the existence of any facts or circumstances that could reasonably be expected to result in the imposition of a Lien, (g) the imposition of any liability under Title IV of ERISA, other than contributions to Pension Plans due in the ordinary course of business and PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any ERISA Affiliate; (h) a non-exempt prohibited transaction occurs with respect to any Pension Plan or Multiemployer Plan that would reasonably be expected to result in liability to any Loan Party or ERISA Affiliate individually or in the aggregate greater than $50,000, (i) the partial or complete withdrawal of any Loan Party or ERISA Affiliate from a Multiemployer Plan (other than any withdrawal that would not constitute an Event of Default under Section 8.12), (j) any event or condition that results in the reorganization or insolvency of a Multiemployer Plan under Sections of ERISA, (k) any event or condition that results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC of proceedings to terminate or to appoint a trustee to administer a Multiemployer Plan under ERISA, (l) any Pension Plan being in “at risk status” within the meaning of IRC Section 430(i), (m) any Multiemployer Plan being in “endangered status” or “critical status” within the meaning of IRC Section 432(b) or the determination that any Multiemployer Plan is or is expected to be insolvent or in reorganization within the meaning of Title IV of ERISA, (n) with respect to any Pension Plan, any Loan Party or ERISA Affiliate incurring a substantial cessation of operations within the meaning of ERISA Section 4062(e), (o) the failure of any Pension Plan or Multiemployer Plan to meet the minimum funding standards within the meaning of the IRC or ERISA (including Section 412 of the IRC or Section 302 of ERISA), in each case, whether or not waived, (p) the filing of an application for a waiver of the minimum funding standards within the meaning of the IRC or ERISA (including Section 412 of the IRC or Section 302 of ERISA) with respect to any Pension Plan or Multiemployer Plan, (q) any event that results in or could reasonably be expected to result in a liability by a Loan Party pursuant to Title I of ERISA or the excise tax provisions of the IRC relating to Employee Benefit Plans or any event that results in or could reasonably be expected to result in a liability to any Loan Party pursuant to Title IV of ERISA or Section 401(a)(29) of the IRC, (r) a violation of the applicable requirements of Section

 

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404 or 405 of ERISA or the exclusive benefit rule under IRC Section 401(a)(2) by any fiduciary or disqualified person with respect to any Pension Plan for which any Loan Party or ERISA Affiliate may be directly or indirectly liable, or (s) as of the last day of any plan year the “unfunded benefit liabilities” (i.e., 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) of any Pension Plan would reasonably be expected to result in material liability to any Loan Party or ERISA Affiliate.

 

“Obligations” means (a) all loans (including the Term Loan and the Revolving Loans (inclusive of Extraordinary Advances and Swing Loans)), debts, principal, interest (including any interest that accrues after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), reimbursement or indemnification obligations with respect to Letters of Credit (irrespective of whether contingent), premiums, liabilities (including all amounts charged to the Loan Account pursuant to the Agreement), obligations (including indemnification obligations), fees (including the fees provided for in the Fee Letter), Lender Group Expenses (including any fees or expenses that accrue after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), guaranties, and all covenants and duties of any other kind and description owing by any Loan Party arising out of, under, pursuant to, in connection with, or evidenced by the Agreement or any of the other Loan Documents and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all interest not paid when due and all other expenses or other amounts that Borrowers are required to pay or reimburse by the Loan Documents or by law or otherwise in connection with the Loan Documents, and (b) all Bank Product Obligations.  Without limiting the generality of the foregoing, the Obligations of Borrowers under the Loan Documents include the obligation to pay (i) the principal of the Revolving Loans and the Term Loan, (ii) interest accrued on the Revolving Loans and the Term Loan, (iii) the amount necessary to reimburse Issuing Bank for amounts paid or payable pursuant to Letters of Credit, (iv) Letter of Credit commissions, fees (including fronting fees) and charges, (v) Lender Group Expenses, (vi) fees payable under the Agreement or any of the other Loan Documents, and (vii) indemnities and other amounts payable by any Loan Party under any Loan Document.  Any reference in the Agreement or in the Loan Documents to the Obligations shall include all or any portion thereof and any extensions, modifications, renewals, or alterations thereof, both prior and subsequent to any Insolvency Proceeding.

 

“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the Treasury.

 

“Originating Lender” has the meaning specified therefor in Section 13.1(e) of the Agreement.

 

“Overadvance” means, as of any date of determination, that the Revolver Usage is greater than any of the limitations set forth in Section 2.1 or Section 2.11.

 

“Participant” has the meaning specified therefor in Section 13.1(e) of the Agreement.

 

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“Participant Register” has the meaning set forth in Section 13.1(i) of the Agreement.

 

“Patent Security Agreement” has the meaning specified therefor in the Guaranty and Security Agreement.

 

“Patriot Act” has the meaning specified therefor in Section 4.13 of the Agreement.

 

“Payment Conditions” means, with respect to any proposed Restricted Payment or prepayment of Indebtedness (each a “Proposed Payment”) each of the following conditions:

 

(a)                                 no Default or Event of Default shall have occurred and be continuing or would result from the making of the Proposed Payment,

 

(b)                                Borrowers have provided Agent with written confirmation, supported by reasonably detailed calculations, that on a pro forma basis after giving effect to the making of any Loans which constitute a source of funds therefor and the making of such Proposed Payment, Borrowers and their Subsidiaries (i) have a Fixed Charge Coverage Ratio for the 12 month period most recently ended prior to such Proposed Payment for which Agent has received financial statements of Borrowers pursuant to Schedule 5.1 of at least 1.1 to 1.0 (calculated as if such Loans were drawn and the Proposed Payment was made on the last day of such 12 month period and constitutes a Fixed Charge), (ii) have a Leverage Ratio as of the 12 month period most recently ended prior to such Proposed Payment for which Agent has received financial statements of  Borrowers pursuant to Schedule 5.1 of less than 2.0 to 1.0 (calculated as if such Loans were drawn and the Proposed Payment was made on the last day of such 12 month period), (iii) would have been in compliance with the financial covenants in Section 7 of the Agreement for the month ended immediately prior to the proposed date of making the Proposed Payment, and (iv) are projected to be in compliance with the financial covenants in Section 7 of the Agreement for each of the fiscal months in the period ended one year after the proposed date of the making of the Proposed Payment,

 

(c)                                 (i) solely with respect to the declaration and making of a one-time dividend payment on account of Equity Interests issued by Administrative Borrower, which dividend payment shall be declared and shall become due and payable during the second fiscal quarter of 2016, (x) for each day during the 30 calendar days prior to the Proposed Payment, Excess Availability has been greater than the sum of (1) the greater of 13.181818% of the Maximum Credit Amount and $14,500,000 and (2) the amount of the Proposed Payment, and (y) after giving effect to the Proposed Payment, Excess Availability is greater than the greater of 13.181818% of the Maximum Credit Amount and $14,500,000, and (ii) with respect to any other Proposed Payment, (x) for each day during the 30 calendar days prior to the Proposed Payment, Excess Availability has been greater than the sum of (1) the greater of 20% of the Maximum Credit Amount and $22,000,000 and (2) the amount of the Proposed Payment, and (y) after giving effect to the Proposed Payment, Excess Availability is greater than the greater of 20% of the Maximum Credit Amount and $22,000,000, and

 

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(d)                                Administrative Borrower has delivered a certificate to Agent certifying that all conditions described in clauses (a) through (c) have been satisfied after giving effect to the Proposed Payment.

 

“PBGC” means the Pension Benefit Guaranty Corporation or any successor agency.

 

“Pension Plan” means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to the provisions of Title IV or Section 302 of ERISA or Sections 412 or 430 of the Code sponsored, maintained, or contributed to by any Loan Party or ERISA Affiliate or to which any Loan Party or ERISA Affiliate has any liability, contingent or otherwise.

 

“Perfection Certificate” means a certificate in the form of Exhibit P-1 to the Agreement.

 

“Permitted Acquisition” means any Acquisition so long as:

 

(a)                                 no Default or Event of Default shall have occurred and be continuing or would result from the consummation of the proposed Acquisition and the proposed Acquisition is consensual,

 

(b)                                no Indebtedness will be incurred, assumed, or would exist with respect to any Borrower or its Subsidiaries as a result of such Acquisition, other than Indebtedness permitted under clauses (f) or (g) of the definition of Permitted Indebtedness and no Liens will be incurred, assumed, or would exist with respect to the assets of any Borrower or its Subsidiaries as a result or such Acquisition other than Permitted Liens,

 

(c)                                 Borrowers have provided each Lender with written confirmation, supported by reasonably detailed calculations, that on a pro forma basis (including pro forma adjustments arising out of events which are directly attributable to such proposed Acquisition, are factually supportable, and are expected to have a continuing impact, in each case, determined as if the combination had been accomplished at the beginning of the relevant period; such eliminations and inclusions to be mutually and reasonably agreed upon by Borrowers and Lenders) created by adding the historical combined financial statements of Borrowers (including the combined financial statements of any other Person or assets that were the subject of a prior Permitted Acquisition during the relevant period) to the historical consolidated financial statements of the Person to be acquired (or the historical financial statements related to the assets to be acquired) pursuant to the proposed Acquisition, and after giving effect to the making of any Loans which constitute a source of funds therefor, Borrowers and their Subsidiaries (i) would have been in compliance with the financial covenants in Section 7 of the Agreement for the fiscal month ended immediately prior to the proposed date of consummation of such proposed Acquisition (after decreasing the then applicable compliance levels by 0.25, in the case of Section 7(b)), (ii) are projected to be in compliance with the financial covenants in Section 7 of the Agreement for each of the 12 fiscal months in the period ended one year after the proposed date of consummation of such proposed Acquisition, and (iii) have a Leverage Ratio as of the 12 month period most recently ended prior to such Acquisition for which Agent has received financial statements of Borrowers pursuant to Schedule 5.1 of less than 1.75 to 1.0 (calculated as

 

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if such Loans were drawn and the Acquisition was consummated on the last day of such 12 month period),

 

(d)                                Borrowers have provided Lenders with the due diligence package relative to the proposed Acquisition, including forecasted balance sheets, profit and loss statements, and cash flow statements of the Person or assets to be acquired, all prepared on a basis consistent with such Person’s (or assets’) historical financial statements, together with appropriate supporting details and a statement of underlying assumptions for the 1 year period following the date of the proposed Acquisition, on a quarter by quarter basis), and for each Acquisition in respect of which the assets being acquired or the Person whose Equity Interest are being acquired had EBITDA of greater than $2,000,000 during the 12 consecutive month period most recently concluded prior to the date of the proposed Acquisition, a quality of earnings report prepared in connection with the proposed Acquisition and conducted by a “big four” accounting firm or other financial advisor retained by Administrative Borrower and reasonably acceptable to the Lenders, all in form and substance (including as to scope and underlying assumptions) reasonably satisfactory to Lenders,

 

(e)                                 Borrowers shall have Availability plus Qualified Cash in an amount equal to or greater than the larger of 17.5% of the Maximum Credit Amount and $19,250,000, immediately after giving effect to the consummation of the proposed Acquisition,

 

(f)                                   the assets being acquired or the Person whose Equity Interests are being acquired did not have negative EBITDA during the 12 consecutive month period most recently concluded prior to the date of the proposed Acquisition,

 

(g)                                Borrowers have provided Lenders with written notice of the proposed Acquisition at least 15 Business Days prior to the anticipated closing date of the proposed Acquisition and, not later than 5 Business Days prior to the anticipated closing date of the proposed  Acquisition, copies of the acquisition agreement and other material documents relative to the proposed Acquisition, which agreement and documents must be reasonably acceptable to Agent,

 

(h)                                 the assets being acquired (other than a de minimis amount of assets in relation to Borrowers’ and their Subsidiaries’ total assets), or the Person whose Equity Interests are being acquired, are useful in or engaged in, as applicable, the business of Borrowers and their Subsidiaries or a business reasonably related thereto,

 

(i)                                     the assets being acquired (other than a de minimis amount of assets in relation to the assets being acquired) are located within the United States or the Person whose Equity Interests are being acquired is organized in a jurisdiction located within the United States,

 

(j)                                     the subject assets or Equity Interests, as applicable, are being acquired directly by a Borrower or one of its Subsidiaries that is a Loan Party, and, in connection therewith, the applicable Loan Party shall have complied with Section 5.11 or 5.12 of the Agreement, as applicable, of the Agreement and, in the case of an acquisition of Equity Interests, the applicable Loan Party shall have demonstrated to Agent that the new Loan Parties have

 

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received consideration sufficient to make the joinder documents binding and enforceable against such new Loan Parties, and

 

(k)                                 the purchase consideration payable in respect of all Permitted Acquisitions (including the proposed Acquisition and including Earn-Outs and other deferred payment obligations) shall not exceed $25,000,000 in the aggregate; provided, that the purchase consideration payable in respect of any single Acquisition or series of related Acquisitions shall not exceed $7,500,000 in the aggregate.

 

“Permitted Discretion” means a determination made in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment.

 

“Permitted Dispositions” means:

 

(a)                                 sales, abandonment, or other dispositions of Equipment that is substantially worn, damaged, or obsolete or no longer used or useful in the ordinary course of business and leases or subleases of Real Property not useful in the conduct of the business of Borrowers and their Subsidiaries,

 

(b)                                sales of Inventory to buyers in the ordinary course of business,

 

(c)                                 the use or transfer of money or Cash Equivalents in a manner that is not prohibited by the terms of the Agreement or the other Loan Documents,

 

(d)                                the licensing, on a non-exclusive basis, of patents, trademarks, copyrights, and other intellectual property rights in the ordinary course of business,

 

(e)                                 the granting of Permitted Liens,

 

(f)                                   the sale or discount, in each case without recourse, of accounts receivable (excluding Eligible Accounts) arising in the ordinary course of business, but only in connection with the compromise or collection thereof,

 

(g)                                any involuntary loss, damage or destruction of property,

 

(h)                                 any involuntary condemnation, seizure or taking (including any transfer made in lieu of condemnation), by exercise of the power of eminent domain or otherwise, or confiscation or requisition of use of property,

 

(i)                                     the leasing or subleasing of assets of any Borrower or its Subsidiaries in the ordinary course of business,

 

(j)                                     the sale or issuance of Equity Interests (other than Disqualified Equity Interests) of Administrative Borrower,

 

(k)                                 (i) the lapse of registered patents, trademarks, copyrights and other intellectual property of any Borrower or any of its Subsidiaries to the extent not economically desirable in the conduct of its business or (ii) the abandonment of patents, trademarks,

 

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copyrights, or other intellectual property rights in the ordinary course of business so long as (in each case under clauses (i) and (ii)), (A) with respect to copyrights, such copyrights are not material revenue generating copyrights, and (B) such lapse is not materially adverse to the interests of the Lender Group,

 

(l)                                     the making of Restricted Payments that are expressly permitted to be made pursuant to the Agreement,

 

(m)                             the making of Permitted Investments,

 

(n)                                 so long as no Event of Default has occurred and is continuing or would immediately result therefrom, transfers of assets (i) from any Borrower or any of its Subsidiaries (other than any Borrower) to a Loan Party, (ii) from any Subsidiary of any Borrower that is not a Loan Party to any other Subsidiary of any Borrower, and (iii) from any Loan Party to any Subsidiary of any Borrower that is not a Loan Party in an aggregate amount not to exceed $250,000 in any fiscal year, and

 

(o)                                the surrender or waiver of contractual rights and settlement or waiver of contractual or litigation claims in the ordinary course of business,

 

(p)                                sales or dispositions of fixed assets not otherwise permitted in clauses (a) through (o) above so long as (1) no Default or Event of Default then exists or would arise therefrom, (2) made at fair market value, and (3) the aggregate fair market value of all assets disposed of in fiscal year (including the proposed disposition) would not exceed $5,000,000.

 

“Permitted Indebtedness” means:

 

(a)                                 Indebtedness evidenced by the Agreement or the other Loan Documents,

 

(b)                                Indebtedness of any Borrower or any of their Subsidiaries outstanding immediately before and after giving effect to the Closing Date, as set forth on Schedule 4.14 to the Agreement and any Refinancing Indebtedness in respect of such Indebtedness,

 

(c)                                 Permitted Purchase Money Indebtedness and any Refinancing Indebtedness in respect of such Indebtedness,

 

(d)                                endorsement of instruments or other payment items for deposit or collection,

 

(e)                                 Indebtedness consisting of (i) guarantees incurred in the ordinary course of business with respect to surety and appeal bonds, performance bonds, bid bonds, appeal bonds, completion guarantee and similar obligations; (ii) customary indemnification obligations to purchasers in connection with Permitted Dispositions; and (iii) guarantees with respect to Indebtedness of any Borrower or one of its Subsidiaries, to the extent that the Person that is obligated under such guaranty could have incurred such underlying Indebtedness,

 

(f)                                   unsecured Indebtedness of any Borrower that is incurred on the date of the consummation of a Permitted Acquisition solely for the purpose of consummating such

 

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Permitted Acquisition so long as (i) no Event of Default has occurred and is continuing or would result therefrom, (ii) such unsecured Indebtedness is not incurred for working capital purposes, (iii) such unsecured Indebtedness does not mature prior to the date that is 12 months after the Maturity Date, (iv) such unsecured Indebtedness does not amortize until 12 months after the Maturity Date, (v) such unsecured Indebtedness does not provide for the payment of interest thereon in cash or Cash Equivalents prior to the date that is 12 months after the Maturity Date, and (vi) such Indebtedness is subordinated in right of payment to the Obligations on terms and conditions reasonably satisfactory to Agent,

 

(g)                                Acquired Indebtedness in an amount not to exceed $500,000 outstanding at any one time,

 

(h)                                 Indebtedness incurred in the ordinary course of business under performance, surety, statutory, or appeal bonds,

 

(i)                                     Indebtedness owed to any Person providing property, casualty, liability, or other insurance to any Borrower or any of its Subsidiaries, so long as the amount of such Indebtedness is not in excess of the amount of the unpaid cost of, and shall be incurred only to defer the cost of, such insurance for the year in which such Indebtedness is incurred and such Indebtedness is outstanding only during such year,

 

(j)                                     the incurrence by any Borrower or its Subsidiaries of Indebtedness under Hedge Agreements that are incurred for the bona fide purpose of hedging the interest rate, commodity, or foreign currency risks associated with Borrowers’ and their Subsidiaries’ operations and not for speculative purposes,

 

(k)                                 Indebtedness incurred in the ordinary course of business in respect of credit cards, credit card processing services, debit cards, stored value cards, commercial cards (including so-called “commercial cards”, “procurement cards” or “p-cards”), or Cash Management Services,

 

(l)                                     unsecured Indebtedness of any Borrower owing to former employees, officers, or directors (or any spouses, ex-spouses, or estates of any of the foregoing) incurred in connection with the repurchase by such Borrower of the Equity Interests of Administrative Borrower that have been issued to such Persons, so long as (i) no Default or Event of Default has occurred and is continuing or would result from the incurrence of such Indebtedness and (ii) the aggregate amount of all such Indebtedness outstanding at any one time does not exceed $500,000,

 

(m)                             unsecured Indebtedness owing to sellers of assets or Equity Interests to a Loan Party that is incurred by the applicable Loan Party in connection with the consummation of one or more Permitted Acquisitions (including Earn-Outs) so long as (i) the aggregate principal amount for all such unsecured Indebtedness does not exceed $6,000,000 at any one time outstanding, (ii) is subordinated to the Obligations on terms and conditions reasonably acceptable to Agent, and (iii) is otherwise on terms and conditions (including all economic terms and the absence of covenants) reasonably acceptable to Agent,

 

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(n)                                 contingent liabilities in respect of any indemnification obligation, adjustment of purchase price, non-compete, or similar obligation of any Loan Party incurred in connection with the consummation of one or more Permitted Acquisitions,

 

(o)                                Indebtedness consisting of financed insurance premiums in the ordinary course of business,

 

(p)                                [intentionally omitted],

 

(q)                                Indebtedness composing Permitted Investments (including Permitted Intercompany Advances),

 

(r)                                    unsecured Indebtedness incurred in respect of netting services, overdraft protection, and other like services, in each case, incurred in the ordinary course of business,

 

(s)                                 [intentionally omitted],

 

(t)                                    [intentionally omitted],

 

(u)                                 Indebtedness in an aggregate outstanding principal amount not to exceed $3,000,000 at any time outstanding for all Subsidiaries of each Borrower that are not Loan Parties; provided, that such Indebtedness is not directly or indirectly recourse to any of the Loan Parties or of their respective assets,

 

(v)                                 accrual of interest, accretion or amortization of original issue discount, or the payment of interest in kind, in each case, on Indebtedness that otherwise constitutes Permitted Indebtedness,

 

(w)                               any secured Indebtedness incurred by any Borrower or any of its Subsidiaries in an aggregate outstanding amount not to exceed $500,000, and

 

(x)                                 any other unsecured Indebtedness incurred by any Borrower or any of its Subsidiaries in an aggregate outstanding amount not to exceed $5,000,000 at any one time.

 

“Permitted Intercompany Advances” means loans and other Investments made by (a) a Loan Party to another Loan Party, (b) a Subsidiary of a Borrower that is not a Loan Party to another Subsidiary of a Borrower that is not a Loan Party, (c) a Subsidiary of a Borrower that is not a Loan Party to a Loan Party, so long as the parties thereto are party to the Intercompany Subordination Agreement, and (d) a Loan Party to a Subsidiary of a Borrower that is not a Loan Party so long as (i) the aggregate amount of all such loans and other Investments (by type, not by the borrower) made from and after the Closing Date does not exceed $4,250,000 outstanding at any one time, less the amount of Indebtedness paid pursuant to and in accordance with Section 6.6(a)(ii), (ii) at the time of the making of such loan and other Investments, no Event of Default has occurred and is continuing or would result therefrom, and (iii) Borrowers have Excess Availability of $22,000,000 or greater immediately after giving effect to each such loan and other Investments.

 

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“Permitted Investments” means:

 

(a)                                 Investments in cash and Cash Equivalents,

 

(b)                                Investments in negotiable instruments deposited or to be deposited for collection in the ordinary course of business,

 

(c)                                 advances made in connection with purchases of goods or services in the ordinary course of business,

 

(d)                                Investments received in settlement of amounts due to any Loan Party or any of its Subsidiaries effected in the ordinary course of business or owing to any Loan Party or any of its Subsidiaries as a result of Insolvency Proceedings involving an account debtor or upon the foreclosure or enforcement of any Lien in favor of a Loan Party or its Subsidiaries,

 

(e)                                 Investments owned by any Loan Party or any of its Subsidiaries on the Closing Date and set forth on Schedule P-1 to the Agreement,

 

(f)                                   guarantees permitted under the definition of Permitted Indebtedness,

 

(g)                                Permitted Intercompany Advances,

 

(h)                                 Equity Interests or other securities acquired in connection with the satisfaction or enforcement of Indebtedness or claims due or owing to a Loan Party or its Subsidiaries (in bankruptcy of customers or suppliers or otherwise outside the ordinary course of business) or as security for any such Indebtedness or claims,

 

(i)                                     deposits of cash made in the ordinary course of business to secure performance of operating leases,

 

(j)                                     (i) non-cash loans and advances to employees, officers, and directors of a Borrower or any of its Subsidiaries for the purpose of purchasing Equity Interests in Administrative Borrower so long as the proceeds of such loans are used in their entirety to purchase such Equity Interests in Administrative Borrower, and (ii) loans and advances to employees and  officers of a Borrower or any of its Subsidiaries in the ordinary course of business for any other business purpose and in an aggregate amount not to exceed $500,000 at any one time,

 

(k)                                 Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business,

 

(l)                                     Investments resulting from entering into (i) Bank Product Agreements, or (ii) agreements relative to Indebtedness that is permitted under clause (j) of the definition of Permitted Indebtedness,

 

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(m)                             equity Investments by any Loan Party in any Subsidiary of such Loan Party which is required by law to maintain a minimum net capital requirement or as may be otherwise required by applicable law,

 

(n)                                 Permitted Acquisitions,

 

(o)                                Investments consisting of non-cash consideration received in connection with Permitted Dispositions, so long as the non-cash consideration received in connection with any Permitted Disposition does not exceed 25% of the total consideration received in connection with such Permitted Disposition,

 

(p)                                so long as no Event of Default has occurred and is continuing or would result therefrom, any other Investments in an aggregate amount not to exceed $1,000,000 during any fiscal year of the term of the Agreement, and

 

(q)                                Investments consisting of Liens, Indebtedness, fundamental changes, Dispositions and Restricted Payments permitted hereunder, provided that no Investments may be made solely pursuant to this clause (q).

 

“Permitted Liens” means:

 

(a)                                 Liens granted to, or for the benefit of, Agent, for the benefit of itself, each member of the Lender Group, each Bank Product Provider, and their respective successors and assigns, to secure the Obligations,

 

(b)                                Liens for unpaid taxes, assessments, or other governmental charges or levies that either (i) are not yet delinquent, or (ii) do not have priority over Agent’s Liens and the underlying taxes, assessments, or charges or levies are the subject of Permitted Protests,

 

(c)                                 judgment Liens arising solely as a result of the existence of judgments, orders, or awards that do not constitute an Event of Default under Section 8.3 of the Agreement,

 

(d)                                Liens set forth on Schedule P-2 to the Agreement; provided, that to qualify as a Permitted Lien, any such Lien described on Schedule P-2 to the Agreement shall only secure the Indebtedness that it secures on the Closing Date and any Refinancing Indebtedness in respect thereof,

 

(e)                                 the interests of lessors under operating leases and non-exclusive licensors under license agreements,

 

(f)                                   purchase money Liens on fixed assets or the interests of lessors under Capital Leases to the extent that such Liens or interests secure Permitted Purchase Money Indebtedness and so long as (i) such Lien attaches only to the fixed asset purchased, improved, repaired, replaced, or acquired and the proceeds thereof, and (ii) such Lien only secures the Indebtedness that was incurred to acquire the fixed asset purchased, improved, repaired, replaced or acquired or any Refinancing Indebtedness in respect thereof,

 

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(g)                                Liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of business and not in connection with the borrowing of money, and which Liens either (i) are for sums not yet delinquent, or (ii) are the subject of Permitted Protests,

 

(h)                                 Liens on amounts deposited to secure any Borrower’s and its Subsidiaries obligations in connection with worker’s compensation or other unemployment insurance,

 

(i)                                     Liens on amounts deposited to secure any Borrower’s and its Subsidiaries obligations in connection with the making or entering into of bids, tenders, or leases in the ordinary course of business and not in connection with the borrowing of money,

 

(j)                                     Liens on amounts deposited to secure any Borrower’s and its Subsidiaries reimbursement obligations with respect to surety or appeal bonds obtained in the ordinary course of business,

 

(k)                                 with respect to any Real Property, easements, rights of way, encroachments and other similar encumbrances and zoning restrictions that do not materially interfere with or impair the use or operation thereof,

 

(l)                                     non-exclusive licenses of patents, trademarks, copyrights, and other intellectual property rights in the ordinary course of business,

 

(m)                             Liens that are replacements of Permitted Liens to the extent that the original Indebtedness is the subject of permitted Refinancing Indebtedness and so long as the replacement Liens only encumber those assets that secured the original Indebtedness,

 

(n)                                 rights of setoff or bankers’ liens upon deposits of funds in favor of banks or other depository institutions, solely to the extent incurred in connection with the maintenance of such Deposit Accounts in the ordinary course of business,

 

(o)                                Liens granted in the ordinary course of business on the unearned portion of insurance premiums securing the financing of insurance premiums to the extent the financing is permitted under the definition of Permitted Indebtedness,

 

(p)                                Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods,

 

(q)                                Liens solely on any cash earnest money deposits made by any Borrower or any of its Subsidiaries in connection with any letter of intent or purchase agreement with respect to a Permitted Acquisition,

 

(r)                                    Liens assumed by any Borrower or any of their Subsidiaries in connection with a Permitted Acquisition that secure Acquired Indebtedness, and

 

(s)                                 other Liens (so long as such liens do not attach to any Accounts) as to which the aggregate amount of the obligations secured thereby does not exceed $500,000.

 

40

 

“Permitted Protest” means the right of any Borrower or any of its Subsidiaries to protest any Lien (other than any Lien that secures the Obligations), taxes (other than payroll taxes or taxes that are the subject of a United States federal tax lien), or rental payment, provided that (a) a reserve with respect to such obligation is established on such Borrower’s or its Subsidiaries’ books and records in such amount as is required under GAAP, (b) any such protest is instituted promptly and prosecuted diligently by such Borrower or its Subsidiary, as applicable, in good faith, and (c) Agent is satisfied that, while any such protest is pending, there will be no impairment of the enforceability, validity, or priority of any of Agent’s Liens.

 

“Permitted Purchase Money Indebtedness” means, as of any date of determination, Indebtedness (other than the Obligations, but including Capitalized Lease Obligations), incurred after the Closing Date and at the time of, or within 90 days after, the acquisition of any fixed assets for the purpose of financing all or any part of the acquisition cost thereof, in an aggregate principal amount outstanding at any one time not in excess of $3,500,000.

 

“Person” means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.

 

“Platform” has the meaning specified therefor in Section 17.9(c) of the Agreement.

 

“Projections” means Borrowers’ forecasted (a) consolidated balance sheets, (b) profit and loss statements (including a standalone profit and loss statement for Trillium), and (c) consolidated cash flow statements, all prepared on a basis consistent with Borrowers’ historical financial statements, together with appropriate supporting details and a statement of underlying assumptions.

 

“Pro Rata Share” means, as of any date of determination:

 

(a)                                 with respect to a Lender’s obligation to make all or a portion of the Revolving Loans, with respect to such Lender’s right to receive payments of interest, fees, and principal with respect to the Revolving Loans, and with respect to all other computations and other matters related to the Revolver Commitments or the Revolving Loans, the percentage obtained by dividing (i) the Revolving Loan Exposure of such Lender by (ii) the aggregate Revolving Loan Exposure of all Lenders,

 

(b)                                with respect to a Lender’s obligation to participate in the Letters of Credit, with respect to such Lender’s obligation to reimburse Issuing Bank, and with respect to such Lender’s right to receive payments of Letter of Credit Fees, and with respect to all other computations and other matters related to the Letters of Credit, the percentage obtained by dividing (i) the Revolving Loan Exposure of such Lender by (ii) the aggregate Revolving Loan Exposure of all Lenders; provided, that if all of the Revolving Loans have been repaid in full and all Revolver Commitments have been terminated, but Letters of Credit remain outstanding, Pro Rata Share under this clause shall be determined as if the Revolver Commitments had not been

 

41

 

terminated and based upon the Revolver Commitments as they existed immediately prior to their termination,

 

(c)                                 with respect to a Lender’s obligation to make all or a portion of the Term Loan, with respect to such Lender’s right to receive payments of interest, fees, and principal with respect to the Term Loan, and with respect to all other computations and other matters related to the Term Loan Commitments or the Term Loan, the percentage obtained by dividing (i) the Term Loan Exposure of such Lender by (ii) the aggregate Term Loan Exposure of all Lenders, and

 

(d)                                with respect to all other matters and for all other matters as to a particular Lender (including the indemnification obligations arising under Section 15.7 of the Agreement), the percentage obtained by dividing (i) the Revolving Loan Exposure and Term Loan Exposure of such Lender by (ii) the aggregate Revolving Loan Exposure and Term Loan Exposure of all Lenders, in any such case as the applicable percentage may be adjusted by assignments permitted pursuant to Section 13.1; provided, that if all of the Loans have been repaid in full, all Letters of Credit have been made the subject of Letter of Credit Collateralization, and all Commitments have been terminated, Pro Rata Share under this clause shall be determined as if the Revolving Loan Exposures had not been repaid, collateralized, or terminated and shall be based upon the Revolving Loan Exposures as they existed immediately prior to their repayment, collateralization, or termination.

 

“Protective Advances” has the meaning specified therefor in Section 2.3(d)(i) of the Agreement.

 

“Public Lender” has the meaning specified therefor in Section 17.9(c) of the Agreement.

 

“Purchase Price” means, with respect to any Acquisition, an amount equal to the aggregate consideration, whether cash, property or securities (including the fair market value of any Equity Interests of Administrative Borrower issued in connection with such Acquisition and including the maximum amount of Earn-Outs), paid or delivered by a Borrower or one of its Subsidiaries in connection with such Acquisition (whether paid at the closing thereof or payable thereafter and whether fixed or contingent), but excluding therefrom (a) any cash of the seller and its Affiliates used to fund any portion of such consideration and (b) any cash or Cash Equivalents acquired in connection with such Acquisition.

 

“Qualified Cash” means, as of any date of determination, the amount of unrestricted cash and Cash Equivalents of Borrowers and their Subsidiaries that is in Deposit Accounts or in Securities Accounts, or any combination thereof, and which such Deposit Account or Securities Account is the subject of a Control Agreement and is maintained by a branch office of the bank or securities intermediary located within the United States.

 

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant guaranty, keepwell, or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity

 

42

 

Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

“Qualified Equity Interests” means and refers to any Equity Interests issued by Administrative Borrower (and not by one or more of its Subsidiaries) that is not a Disqualified Equity Interest.

 

“Real Property” means any estates or interests in real property now owned or hereafter acquired by any Borrower or one of its Subsidiaries and the improvements thereto.

 

“Real Property Collateral” means any Real Property hereafter acquired by any Borrower or one of its Subsidiaries with a fair market value in excess of $500,000.

 

“Receivable Reserves” means, as of any date of determination, (a) Landlord Reserves, and (b) those reserves that Agent deems necessary or appropriate, in its Permitted Discretion and subject to Section 2.1(c), to establish and maintain (including reserves for rebates, discounts, warranty claims, returns and payroll) with respect to the Eligible Accounts or the Maximum Revolver Amount.

 

“Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

 

“Recurring Revenue” means, with respect to any period, all recurring maintenance revenues, recurring subscription/SaaS revenues and recurring postal directories revenues generated from Trillium software products determined on a consolidated basis attributable to software owned by Trillium or any of its Subsidiaries and earned and recognized during such period, calculated in accordance with GAAP on a basis consistent with the financial statements delivered to Agent prior to the Closing Date, excluding any such revenues paid more than 12 months in advance of the service to be performed.  Notwithstanding anything to the contrary contained herein, for each of the fiscal quarter periods set forth below, Recurring Revenue shall be deemed to be the amount set forth below opposite such quarter; provided, that, for the period commencing on January 1, 2016 and ending on the Closing Date, Recurring Revenue shall be Recurring Revenue for Trillium and its Subsidiaries for such period, calculated in a manner consistent with calculations made for the fiscal quarter periods set forth below:

 

	
Applicable Period
    	
 
    	
Recurring Revenue
    
	
Fiscal   quarter ended March 31, 2015
    	
 
    	
$
    	
10,162,000
    
	
Fiscal   quarter ended June 30, 2015
    	
 
    	
$
    	
11,370,000
    
	
Fiscal   quarter ended September 30, 2015
    	
 
    	
$
    	
10,564,000
    
	
Fiscal   quarter ended December 31, 2015
    	
 
    	
$
    	
10,633,000
    

 

43

 

“Refinancing Indebtedness” means refinancings, renewals, or extensions of Indebtedness so long as:

 

(a)                                 such refinancings, renewals, or extensions do not result in an increase in the outstanding principal amount of the Indebtedness so refinanced, renewed, or extended, other than by the amount of premiums paid thereon and the fees and expenses incurred in connection therewith and by the amount of unfunded commitments with respect thereto,

 

(b)                                such refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity (measured as of the refinancing, renewal, or extension) of the Indebtedness so refinanced, renewed, or extended, nor are they on terms or conditions that, taken as a whole, are or could reasonably be expected to be materially adverse to the interests of the Lenders,

 

(c)                                 if the Indebtedness that is refinanced, renewed, or extended was subordinated in right of payment to the Obligations, then the terms and conditions of the refinancing, renewal, or extension must include subordination terms and conditions that are at least as favorable to the Lender Group as those that were applicable to the refinanced, renewed, or extended Indebtedness, and

 

(d)                                the Indebtedness that is refinanced, renewed, or extended is not recourse to any Person that is liable on account of the Obligations other than those Persons which were obligated with respect to the Indebtedness that was refinanced, renewed, or extended.

 

“Register” has the meaning set forth in Section 13.1(h) of the Agreement.

 

“Registered Loan” has the meaning set forth in Section 13.1(h) of the Agreement.

 

“Related Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course and that is administered, advised or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers, advises or manages a Lender.

 

“Remedial Action” means all actions taken to (a) clean up, remove, remediate, contain, treat, monitor, assess, evaluate, or in any way address Hazardous Materials in the indoor or outdoor environment, (b) prevent or minimize a release or threatened release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (c) restore or reclaim natural resources or the environment, (d) perform any pre-remedial studies, investigations, or post-remedial operation and maintenance activities, or (e) conduct any other actions with respect to Hazardous Materials required by Environmental Laws.

 

44

 

“Replacement Lender” has the meaning specified therefor in Section 2.13(b) of the Agreement.

 

“Report” has the meaning specified therefor in Section 15.16 of the Agreement.

 

“Required Availability” means that the sum of (a) Excess Availability, plus (b) Qualified Cash exceeds $17,500,000.

 

“Required Lenders” means, subject to the Agreement Among Lenders, at any time, Lenders having or holding more than 50% of the sum of (a) the aggregate Revolving Loan Exposure of all Lenders, plus (b) the aggregate Term Loan Exposure of all Lenders; provided, that (i) the Revolving Loan Exposure and Term Loan Exposure of any Defaulting Lender shall be disregarded in the determination of the Required Lenders, and (ii) at any time there are 2 or more Lenders, “Required Lenders” must include at least 2 Lenders (who are not Affiliates of one another).

 

“Reserves” means, as of any date of determination, those reserves (other than Receivable Reserves, 3QD Earnout Reserves and Bank Product Reserves) that Agent deems necessary or appropriate, in its Permitted Discretion and subject to Section 2.1(c), to establish and maintain (including reserves with respect to (a) sums that any Borrower or its Subsidiaries are required to pay under any Section of the Agreement or any other Loan Document (such as taxes, assessments, insurance premiums, or, in the case of leased assets, rents or other amounts payable under such leases) and has failed to pay, and (b) amounts owing by any Borrower or its Subsidiaries to any Person to the extent secured by a Lien on, or trust over, any of the Collateral (other than a Permitted Lien), which Lien or trust, in the Permitted Discretion of Agent likely would have a priority superior to the Agent’s Liens (such as Liens or trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes where given priority under applicable law) in and to such item of the Collateral) with respect to the Borrowing Base or the Maximum Revolver Amount.

 

“Restricted Payment” means to (a) declare or pay any dividend or make any other payment or distribution, directly or indirectly, on account of Equity Interests issued by Administrative Borrower (including any payment in connection with any merger or consolidation involving Administrative Borrower) or to the direct or indirect holders of Equity Interests issued by Administrative Borrower in their capacity as such (other than dividends or distributions payable in Qualified Equity Interests issued by Administrative Borrower, or (b) purchase, redeem, make any sinking fund or similar payment, or otherwise acquire or retire for value (including in connection with any merger or consolidation involving Administrative Borrower) any Equity Interests issued by Administrative Borrower, (c) make any payment to retire, or to obtain the surrender of, any outstanding warrants, options, or other rights to acquire Equity Interests of Administrative Borrower now or hereafter outstanding, and (d) make any payment on account of any Earn-Outs.

 

“Revolver Commitment” means, with respect to each Revolving Lender, its Revolver Commitment, and, with respect to all Revolving Lenders, their Revolver Commitments, in each case as such Dollar amounts are set forth beside such Revolving Lender’s name under the applicable heading on Schedule C-1 to the Agreement or in the Assignment and

 

45

 

Acceptance pursuant to which such Revolving Lender became a Revolving Lender under the Agreement, as such amounts may be reduced or increased from time to time pursuant to assignments made in accordance with the provisions of Section 13.1 of the Agreement.

 

“Revolver Usage” means, as of any date of determination, the sum of (a) the amount of outstanding Revolving Loans (inclusive of Swing Loans and Protective Advances), plus (b) the amount of the Letter of Credit Usage.

 

“Revolving Lender” means a Lender that has a Revolving Loan Commitment or that has an outstanding Revolving Loan.

 

“Revolving Loan Exposure” means, with respect to any Revolving Lender, as of any date of determination (a) prior to the termination of the Revolver Commitments, the amount of such Lender’s Revolver Commitment, and (b) after the termination of the Revolver Commitments, the aggregate outstanding principal amount of the Revolving Loans of such Lender.

 

“Revolving Loans” has the meaning specified therefor in Section 2.1(a) of the Agreement.

 

“Sanctioned Entity” means (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, (d) a Person resident in or determined to be resident in a country, in each case, that is subject to a country sanctions program administered and enforced by OFAC.

 

“Sanctioned Person” means a person named on the list of Specially Designated Nationals maintained by OFAC.

 

“S&P” has the meaning specified therefor in the definition of Cash Equivalents.

 

“SEC” means the United States Securities and Exchange Commission and any successor thereto.

 

“Securities Account” means a securities account (as that term is defined in the Code).

 

“Securities Act” means the Securities Act of 1933, as amended from time to time, and any successor statute.

 

“Settlement” has the meaning specified therefor in Section 2.3(e)(i) of the Agreement.

 

“Settlement Date” has the meaning specified therefor in Section 2.3(e)(i) of the Agreement.

 

“Sole Lead Arranger” has the meaning set forth in the preamble to the Agreement.

 

46

 

“Solvent” means, with respect to any Person as of any date of determination, that (a) at fair valuations, the sum of such Person’s debts (including contingent liabilities) is less than all of such Person’s assets, (b) such Person is not engaged or about to engage in a business or transaction for which the remaining assets of such Person are unreasonably small in relation to the business or transaction or for which the property remaining with such Person is an unreasonably small capital, and (c) such Person has not incurred and does not intend to incur, or reasonably believe that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise), and (d) such Person is “solvent” or not “insolvent”, as applicable within the meaning given those terms and similar terms under applicable laws relating to fraudulent transfers and conveyances.  For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).

 

“Specified Lender” means LBC III WF Funding, LLC

 

“Standard Letter of Credit Practice” means, for Issuing Bank, any domestic or foreign law or letter of credit practices applicable in the city in which Issuing Bank issued the applicable Letter of Credit or, for its branch or correspondent, such laws and practices applicable in the city in which it has advised, confirmed or negotiated such Letter of Credit, as the case may be, in each case, (a) which letter of credit practices are of banks that regularly issue letters of credit in the particular city, and (b) which laws or letter of credit practices are required or permitted under ISP or UCP, as chosen in the applicable Letter of Credit.

 

“Subsidiary” of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the Equity Interests having ordinary voting power to elect a majority of the Board of Directors of such corporation, partnership, limited liability company, or other entity.

 

“Supermajority Lenders” means, at any time, Lenders having or holding more than 66 2/3% of the sum of the aggregate Revolving Loan Exposure and the aggregate Term Loan Exposure of all Lenders; provided, that (i) the Revolving Loan Exposure and Term Loan Exposure of any Defaulting Lender shall be disregarded in the determination of the Supermajority Lenders, and (ii) at any time there are 2 or more Lenders, “Supermajority Lenders” must include at least 2 Lenders (who are not Affiliates of one another).

 

“Swap Obligation” means, with respect to any Loan Party, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.

 

“Swing Lender” means Wells Fargo or any other Lender that, at the request of Borrowers and with the consent of Agent agrees, in such Lender’s sole discretion, to become the Swing Lender under Section 2.3(b) of the Agreement.

 

“Swing Loan” has the meaning specified therefor in Section 2.3(b) of the Agreement.

 

47

 

“Swing Loan Exposure” means, as of any date of determination with respect to any Lender, such Lender’s Pro Rata Share of the Swing Loans on such date.

 

“Taxes” means any taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein, and all interest, penalties or similar liabilities with respect thereto.

 

“Tax Lender” has the meaning specified therefor in Section 14.2(a) of the Agreement.

 

“Term Loan” has the meaning specified therefor in Section 2.2 of the Agreement.

 

“Term Loan Amount” means $45,000,000.

 

“Term Loan Commitment” means, with respect to each Lender, its Term Loan Commitment, and, with respect to all Lenders, their Term Loan Commitments, in each case as such Dollar amounts are set forth beside such Lender’s name under the applicable heading on Schedule C-1 to the Agreement or in the Assignment and Acceptance pursuant to which such Lender became a Lender under the Agreement, as such amounts may be reduced or increased from time to time pursuant to assignments made in accordance with the provisions of Section 13.1 of the Agreement.

 

“Term Loan Exposure” means, with respect to any Term Loan Lender, as of any date of determination (a) prior to the funding of the Term Loan, the amount of such Lender’s Term Loan Commitment, and (b) after the funding of the Term Loan, the outstanding principal amount of the Term Loan held by such Lender.

 

“Term Loan Lender” means a Lender that has a Term Loan Commitment or that has a portion of the Term Loan.

 

“Trademark Security Agreement” has the meaning specified therefor in the Guaranty and Security Agreement.

 

“Trillium” has the meaning specified therefor in the preamble to the Agreement.

 

“UCP” means, with respect to any Letter of Credit, the Uniform Customs and Practice for Documentary Credits 2007 Revision, International Chamber of Commerce Publication No. 600 and any subsequent revision thereof adopted by the International Chamber of Commerce on the date such Letter of Credit is issued.

 

“United States” means the United States of America.

 

“Unused Line Fee” has the meaning specified therefor in Section 2.10(b) of the Agreement.

 

“Voidable Transfer” has the meaning specified therefor in Section 17.8 of the Agreement.

 

48

 

“Wells Fargo” means Wells Fargo Bank, National Association, a national banking association.

 

“Withdrawal Liability” means liability with respect to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

 

49

 

Schedule 3.1

 

Conditions Precedent

 

The obligation of each Lender to make its initial extension of credit provided for in the Credit Agreement is subject to the fulfillment, to the satisfaction of each Lender (the making of such initial extension of credit by any Lender being conclusively deemed to be its satisfaction or waiver of the following), of each of the following conditions precedent:

 

(a)                                 The Closing Date shall occur on or before March 31, 2016;

 

(b)                                Agent shall have received a letter duly executed by each Loan Party authorizing Agent to file appropriate financing statements in such office or offices as may be necessary or, in the opinion of Agent, desirable to perfect the security interests to be created by the Loan Documents;

 

(c)                                 Agent shall have received evidence that appropriate financing statements have been duly filed in such office or offices as may be necessary or, in the opinion of Agent, desirable to perfect the Agent’s Liens in and to the Collateral;

 

(d)                                Agent shall have received each of the following documents, in form and substance satisfactory to Agent, duly executed and delivered, and each such document shall be in full force and effect:

 

(i)         a completed Borrowing Base Certificate,

 

(ii)         the Fee Letter, together with any fee split letter executed in connection therewith,

 

(iii)        the Control Agreements,

 

(iv)        the Controlled Account Agreements (as defined in the Guaranty and Security Agreement),

 

(v)        the Guaranty and Security Agreement,

 

(vi)        the Intercompany Subordination Agreement,

 

(vii)       a Perfection Certificate,

 

(viii)       the Trademark Security Agreement,

 

(ix)        the Copyright Security Agreement, and

 

(x)         a letter, in form and substance satisfactory to Agent, from Bank of America, in its capacity as administrative agent under the Existing Credit Facility (“Existing Agent”) to Agent respecting the amount necessary to repay in full all of the obligations of Borrowers and their respective Subsidiaries owing under the Existing Credit Facility and obtain a release of all of the Liens existing in favor of Existing Agent in and to the assets of Borrowers and 

 

1

 

their respective Subsidiaries securing the Existing Credit Facility, together with termination statements and other documentation evidencing the termination by Existing Agent of such Liens in and to the properties and assets of Borrowers and their respective Subsidiaries;

 

(e)                                 Agent shall have received a certificate from the Secretary of each Loan Party (i) attesting to the resolutions of such Loan Party’s board of directors (or similar governing body) authorizing its execution, delivery, and performance of the Loan Documents to which it is a party, (ii) authorizing specific officers of such Loan Party to execute the same, and (iii) attesting to the incumbency and signatures of such specific officers of such Loan Party;

 

(f)                                   Agent shall have received copies of each Loan Party’s Governing Documents, as amended, modified, or supplemented to the Closing Date, which Governing Documents shall be (i) certified by the Secretary of such Loan Party, and (ii) with respect to Governing Documents that are charter documents, certified as of a recent date (not more than 30 days prior to the Closing Date) by the appropriate governmental official;

 

(g)                                Agent shall have received a certificate of status with respect to each Loan Party, dated within 30 days of the Closing Date, such certificate to be issued by the appropriate officer of the jurisdiction of organization of such Loan Party, which certificate shall indicate that such Loan Party is in good standing in such jurisdiction;

 

(h)                                 Agent shall have received certificates of status with respect to each Loan Party, each dated within 30 days of the Closing Date, such certificates to be issued by the appropriate officer of the jurisdictions (other than the jurisdiction of organization of such Loan Party) in which its failure to be duly qualified or licensed would constitute a Material Adverse Effect, which certificates shall indicate that such Loan Party is in good standing in such jurisdictions;

 

(i)                                     Agent shall have received a certificate of insurance, together with the endorsements thereto, as are required by Section 5.6 of the Credit Agreement, the form and substance of which shall be satisfactory to Agent;

 

(j)                                     Agent shall have received Collateral Access Agreements with respect to the following locations: (i) 17 New England Executive Park, Suite 300, Burlington, MA 01803 and (ii) 9601 McAllister Freeway, Suite 610, San Antonio, TX 78216;

 

(k)                                 Agent shall have received an opinion of the Loan Parties’ counsel in form and substance satisfactory to Agent;

 

(l)                                     Borrowers shall have the Required Availability after giving effect to the initial extensions of credit under the Credit Agreement and the payment of all fees and expenses required to be paid by Borrowers on the Closing Date under the Credit Agreement or the other Loan Documents;

 

(m)                             For the twelve (12) month period ending on January 31, 2016 after giving pro forma effect to the making of the extensions of credit under the Credit Agreement and the payment of all fees and expenses required to be paid by Borrowers on the Closing Date under the Credit Agreement or the other Loan Documents, the Leverage Ratio does not exceed 1.73:1.00;

 

2

 

(n)                                 EBITDA for the twelve (12) month period ending January 31, 2016 is not less than $50,000,000;

 

(o)                                Agent shall have completed its business, legal and collateral due diligence;

 

(p)                                Agent shall have completed (i) Patriot Act searches, OFAC/PEP searches and customary individual background checks for each Loan Party, and (ii) OFAC/PEP searches and customary individual background searches for each Loan Party’s senior management and key principals,  the results of which shall be satisfactory to Agent;

 

(q)                                Agent shall have received $20,000,000 constituting a portion of the Term Loan, and Agent and the Specified Lender shall have entered into the Agreement Among Lenders in form and substance satisfactory to each of them;

 

(r)                                    Agent shall have received (i) consolidated financial statements of Borrowers and their respective Subsidiaries for the 2013 and 2014 fiscal years, in each case audited by independent certified public accountants reasonably acceptable to Agent and certified by such accountants to have been prepared in accordance with GAAP (such audited financial statements to include a balance sheet, income statement, statement of cash flow, and statement of shareholder’s equity, and, if prepared, such accountants’ letter to management); (ii) unaudited consolidated financial statements of Borrowers and their respective Subsidiaries for each quarterly period ended since December 31, 2014 and for the fiscal month ended January 31, 2016; and (iii) a set of Projections of Borrowers and their respective Subsidiaries for the 5 year period following the Closing Date (on a year by year basis, and for the 1 year period following the Closing Date, on a quarter by qurter basis), in form and substance (including as to scope and underlying assumptions) satisfactory to Agent;

 

(s)                                 Borrower shall have paid all Lender Group Expenses incurred in connection with the transactions evidenced by the Credit Agreement and the other Loan Documents;

 

(t)                                    Agent shall have received a solvency certificate, in form and substance satisfactory to it, certifying as to the solvency of each Loan Party, after giving effect to the initial extensions of credit under the Credit Agreement and the payment of all fees and expenses required to be paid by Borrowers on the Closing Date under the Credit Agreement and the other Loan Documents; and

 

(u)                                  all other documents and legal matters in connection with the transactions contemplated by the Agreement shall have been delivered, executed, or recorded and shall be in form and substance satisfactory to Agent.

 

3

 

Schedule 3.6

Conditions Subsequent

 

1.                                     Within 60 days after the Closing Date, the Loan Parties shall deliver to Agent a duly executed Control Agreement, in form and substance reasonably acceptable to Agent, with respect to each Deposit Account and/or Securities Account of the Loan Parties (other than any Deposit Accounts and/or Securities Accounts not required to be subject to a Control Agreement under Section 7(l)(iv) of the Guaranty and Security Agreement) maintained at Wells Fargo Bank, National Association.

 

2.                                     Within 90 days after the Closing Date, the Loan Parties shall have closed such Deposit Accounts of the Loan Parties maintained on the Closing Date at Bank of America, N.A., Comerica Bank, BBVA Compass Bank, UMB Bank, PNC Bank and JPMorgan Chase Bank, N.A.

 

3.                                     Within 5 days after the Closing Date, the Loan Parties shall deliver to Agent a filed copy of the certificate of incorporation of Harte-Hanks Direct Marketing/Fullerton, Inc. recently certified by the Secretary of State of California and in form and substance consistent with the certificate of incorporation attached to the Omnibus Secretary’s Certificate dated as of the Closing Date.

 

4.                                     Within 5 days after the Closing Date, the Loan Parties shall deliver to Agent a Joinder to the Intercompany Subordination Agreement in form reasonably satisfactory to Agent whereby Harte-Hanks Do Brazil Consultoria E Servicos Ltda. shall become an Obligor (as such term is defined in the Intercompany Subordination Agreement) thereunder.

 

5.                                     Within 10 days after the Closing Date, the Loan Parties shall deliver to Agent a certificate of status with respect to 3Q Digital, Inc. dated within 10 days of the Closing Date, such certificate to be issued by the office of the Secretary of State of the State of Illinois, which certificate shall indicate that Borrower is in good standing in such jurisdiction.

 

 

SCHEDULE 4.1(b)

 

CAPITALIZATION OF ADMINISTRATIVE BORROWER

 

	
 
    	
 
    	
Common Stock
    	
 
    	
Preferred Stock
    	
 
    
	
Authorized
    	
 
    	
250,000,000
    	
 
    	
1,000,000
    	
 
    
	
Issued and Outstanding, at   December 31, 2015*
    	
 
    	
62,237,007
    	
 
    	
0
    	
 
    

 

*Under New York Stock Exchange rules, treasury shares are included in issued and outstanding shares. Applying such rules, 119,279,888 shares were issued and outstanding at December 31, 2015.

 

 

SCHEDULE 4.1(c)

 

CAPITALIZATION OF ADMINISTRATIVE BORROWER’S SUBSIDIARIES

 

	
Subsidiary
    	
 
    	
Authorized
   Shares
    	
 
    	
Outstanding
   Shares
    	
 
    	
Number
   Outstanding
   Owned by
   Administrative
   Borrower
    	
 
    	
Percentage
   Outstanding
   Owned by
   Administrative
   Borrower
    
	
3Q   Digital, Inc.
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
100%
    
	
Harte-Hanks Belgium N.V.
    	
 
    	
6,250,000
    	
 
    	
6,250,000
    	
 
    	
6,250,000
    	
 
    	
100%(1)
    
	
Harte-Hanks Data Services   LLC
    	
 
    	
100(11)
    	
 
    	
100(11)
    	
 
    	
100(11)
    	
 
    	
100%
    
	
Harte-Hanks Direct, Inc.
    	
 
    	
200
    	
 
    	
200
    	
 
    	
200
    	
 
    	
100%(9)
    
	
Harte-Hanks Direct   Marketing/Baltimore, Inc.
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
100%
    
	
Harte-Hanks Direct   Marketing/Cincinnati, Inc.
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
100%
    
	
Harte-Hanks Direct   Marketing/Dallas, Inc.
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
100%
    
	
Harte Hanks Direct   Marketing/Fullerton, Inc.
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
100%
    
	
Harte Hanks Direct   Marketing/Jacksonville, LLC
    	
 
    	
100(11)
    	
 
    	
100(11)
    	
 
    	
100(11)
    	
 
    	
100%(7)
    
	
Harte Hanks Direct   Marketing/Kansas City, LLC
    	
 
    	
100(11)
    	
 
    	
100(11)
    	
 
    	
100(11)
    	
 
    	
100%(6)
    
	
Harte-Hanks do Brazil   Consultoria e Servicos Ltda.
    	
 
    	
R$
   7.660.644,00(12)
    	
 
    	
R$
   7.660.644,00(12)
    	
 
    	
R$
   7.660.644,00(12)
    	
 
    	
100%(4)
    
	
Harte Hanks Europe B.V.
    	
 
    	
NLG 200,000(13)
    	
 
    	
NLG 40,000(13)
    	
 
    	
NLG 40,000(13)
    	
 
    	
100%
    
	
Harte Hanks   Florida, Inc.
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
100%
    
	
Harte-Hanks GmbH
    	
 
    	
DM 500,000(14)
    	
 
    	
DM 500,000(14)
    	
 
    	
DM 500,000(14)
    	
 
    	
100%(3)
    
	
Harte Hanks Logistics,   LLC
    	
 
    	
100(11)
    	
 
    	
100(11)
    	
 
    	
100(11)
    	
 
    	
100%(7)
    
	
Harte-Hanks Market   Intelligence Espana LLC
    	
 
    	
100(11)
    	
 
    	
100(11)
    	
 
    	
100(11)
    	
 
    	
100%
    
	
Harte-Hanks   Philippines, Inc.
    	
 
    	
₽ 11,200,000(15)
    	
 
    	
₽ 11,200,000(15)
    	
 
    	
₽ 11,200,000(15)
    	
 
    	
100%
    
	
Harte-Hanks   Print, Inc.
    	
 
    	
20,000,000
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
100%
    
	
Harte-Hanks Pty. Limited
    	
 
    	
10,000,000
    	
 
    	
12
    	
 
    	
12
    	
 
    	
100%(2)
    
	
Harte-Hanks Response   Management/Austin, Inc.
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
100%
    
	
Harte-Hanks Response Management/Boston, Inc.
    	
 
    	
5,000
    	
 
    	
5,000
    	
 
    	
5,000
    	
 
    	
100%
    
	
Harte Hanks   Shoppers, Inc.
    	
 
    	
250,000
    	
 
    	
15,174
    	
 
    	
15,174
    	
 
    	
100%
    
	
Harte-Hanks SRL
    	
 
    	
60
    	
 
    	
60
    	
 
    	
60
    	
 
    	
100%(8)
    
	
Harte-Hanks Strategic   Marketing, Inc.
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
100%(2)
    
	
Harte-Hanks   STS, Inc.
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
100%
    

 

 

	
Harte-Hanks Trillium   Software Germany GmbH
    	
 
    	
25,000
    	
 
    	
2
    	
 
    	
2
    	
 
    	
100%(10)
    
	
Harte Hanks Trillium UK   Limited
    	
 
    	
9,850,000
   Ordinary A
   Shares,
   1,650,000
   Ordinary B
   Shares
    	
 
    	
10,000 Ordinary
   A Shares,
   1,518,100
   Ordinary B
   Shares
    	
 
    	
10,000 Ordinary
   A Shares,
   1,518,100
   Ordinary B
   Shares
    	
 
    	
100%(8)
    
	
Harte Hanks UK Limited
    	
 
    	
100
    	
 
    	
100
    	
 
    	
100
    	
 
    	
100%(2)
    
	
HHMIX SAS
    	
 
    	
100,000
    	
 
    	
10,000
    	
 
    	
10,000
    	
 
    	
100%(3)
    
	
NSO, Inc.
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
100%
    
	
Sales Support   Services, Inc.
    	
 
    	
10,000
    	
 
    	
5,617
    	
 
    	
5,617
    	
 
    	
100%
    
	
Southern Comprint Co.
    	
 
    	
1,500
    	
 
    	
1,070
    	
 
    	
1,070
    	
 
    	
100%
    
	
Trillium   Software, Inc.
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
1,000
    	
 
    	
100%
    

 

(1)                   99.84% Owned by Harte Hanks, Inc.
  0.16% Owned by Harte-Hanks Direct, Inc.

(2)                   Owned by Trillium Software, Inc.

(3)                   Owned by Harte Hanks Europe B.V.

(4)                   99.999% Owned by Trillium Software, Inc.
  .001% Owned by Harte Hanks, Inc.

(5)                   Owned by Harte-Hanks Direct, Inc.

(6)                   Owned by Sales Support Services, Inc.

(7)                   Owned by Harte-Hanks Florida, Inc.

(8)                   Owned by Harte Hanks UK Limited

(9)                   Owned by Harte-Hanks Print, Inc.

(10)            Owned by Harte-Hanks GmbH

(11)            Membership Units

(12)            Expressed as quota capital in Brazilian Real (R$)

(13)            Expressed as capital in Dutch Guilder (NLG)

(14)            Expressed as capital in Deutsche Mark (DM)

(15)            Expressed as capital in Philippine Peso (₽)

 

 

SCHEDULE 4.1(d)

 

SUBSCRIPTIONS, OPTIONS, WARRANTS, CALLS

 

1.  Administrative Borrower has two stockholder-approved equity incentive plans, the 2005 Omnibus Incentive Plan (the “2005 Plan”) and the 2013 Omnibus Incentive Plan (the “2013 Plan,” and together the “Equity Plans”).  Under the Equity Plans, the Administrative Borrower has issued (and under the 2013 Plan, will continue to issue) equity-based awards to its employees and directors, as described in the Equity Plans (as filed with the Securities and Exchange Commission (“SEC”)) and related registration statements and descriptions in Administrative Borrower’s proxy statements.

 

2.  Administrative Borrower has issued inducement equity awards pursuant to New York Stock Exchange Listing Rule 303A.08 to its CEO and CMO, and has agreed to issue inducement awards to its incoming COO & CTO, in amount and subject to the terms and conditions disclosed in the press releases and Periodic Reports on Form 8-K (and the exhibits thereto) filed with the SEC related to the hiring of such persons.

 

3.  Administrative Borrower has in the past, and will in the future, allow persons awarded equity-based awards to reimburse the Administrative Borrower for the exercise price and withholding tax obligations incurred by such recipients upon the exercise or vesting of such awards by tendering (or making a net issuance of) shares of vested common stock.

 

 

SCHEDULE 4.6

 

LITIGATION

 

1.  Harte-Hanks Logistics, LLC (“Logistics”):  Under the Fair Labor Standards Act, the Department of Labor is investigating to determine if we are properly classifying employees as “exempt/ non-exempt” for the purposes of determining whether these employees are entitled to overtime payments (hourly vs. salary) and/or properly paid for all time worked.  Several employees have likewise issued demands or suits, most of which have settled.  The Department of Labor has not issued its report, but if it is unfavorable, and/or if a collective action is filed for the underlying circumstances, it is reasonably possible that the fines and damages awarded in such actions could exceed $1,000,000.  These matters are not covered by insurance.

 

2.  Harte-Hanks Shoppers, Inc. (“Shoppers”) and Harte Hanks, Inc. (“Harte Hanks”):

 

a.  Shoppers assigned a real estate lease to Pennysaver USA Publishing, LLC (“Pennysaver”).  Pennysaver defaulted and filed for Chapter 7 Bankruptcy. Hondle, Ltd (“Landlord”) seeks payment from Shoppers (and/or Harte Hanks) for unpaid rent, interest, legal fees and penalties under the lease.  Shoppers and Harte Hanks dispute liability, but Harte Hanks has accrued pre-petition unpaid rent.  The case (in Superior Court of California, San Diego County, North County Branch) is in discovery and motion practice, and the matters are not covered by insurance (provided that insolvent Pennysaver is obliged to indemnify Shoppers and Harte Hanks).  If Landlord prevails in its theory of the case and damages, the damages awarded in such an action could exceed $1,000,000.

 

b.  Wabash Property Company, LLC (“Wabash”) has threatened suit against Shoppers and Harte Hanks.  Shoppers assigned a real estate lease to Pennysaver USA Publishing, LLC (“Pennysaver”).  Pennysaver defaulted and filed for Chapter 7 Bankruptcy. Wabash, the landlord under such lease, seeks payment from Shoppers (and/or Harte Hanks) for unpaid rent, interest, legal fees and penalties under the lease.  Shoppers and Harte Hanks dispute liability, but Harte Hanks has accrued pre-petition unpaid rent.  Wabash has not filed suit.  If Wabash were to bring an action as threatened, and prevails in its theory of the case and damages, the costs and damages awarded in such an action could exceed $1,000,000.

 

3.  HHMIX SAS (“HHMIX”):  HHMIX was sued by Profondia AG (“Profondia”) for breach of license and related unfair competition claims relating to use of Swiss and Austrian business database records. Profondia won a trial judgment for  €469,185.40, which has been paid to Profondia.  Profondia appealed with respect to matters it did not prevail (including onerous injunctive relief and penalties), and HHMIX appealed as to matters in which it did not prevail.  The parties are in motion practice, and are conducting settlement negotiations.  The actions are not covered by insurance, and if Profondia prevails in its appeals, the additional penalties, costs and damages could exceed $1,000,000.

 

4.  Harte-Hanks Response Management/Austin, Inc. (“HHRM/A”):  Call center employees in HHRM/A’s Texarkana facility have filed an action alleging that HHRM/A (i) failed to pay for

 

 

“boot-up” and “log-off” time; (ii) failed to pay for “off the clock customer service calls” and (iii) failed to pay overtime relating to the foregoing.  Filed in the U.S. Federal Court (EDTX, Texarkana), the Court recently conditionally certified a class consisting of FedEx Customer Service and Trace agents at the Texarkana Call Center, but denied Plaintiffs’ request to include Claims agents in the class.  The case is in discovery and motion practice. The actions are not covered by insurance, and if the plaintiffs prevail in their theories, costs and damages could exceed $1,000,000, and in any event, HHRM/A’s defense costs are likely to exceed $1,000,000.

 

5.  Harte-Hanks Direct, Inc. (“HHD”):  On February 3, 2014, HHD received a demand for indemnification from its client, AAA Life Insurance Company (“AAA Life”).  AAA Life has been sued by a patent troll for infringement of a series of patents, and alleged that HHD contributed to the alleged infringement and had a duty to indemnify.  After investigating, HHD determined that it was not required to indemnify AAA Life under the circumstances, and notified AAA Life to that effect.  Since such denial, HHD has only received a few communications from AAA Life (concerning discovery).  If AAA Life were to reassert a demand for indemnity and prevail on such a demand, HHD’s damages would not be covered by insurance and could exceed $1,000,000.

 

6.  Harte-Hanks Data Licensing, LLC (“HHDL”):  On September 14, 2015, HHDL received a demand for indemnification from its client, T. Rowe Price Group (“TRP”). TRP has been sued by a patent troll for infringement of a series of patents, and alleged that HHDL contributed to the alleged infringement and had a duty to indemnify.  After investigating, HHDL determined that it was not required to indemnify TRP under the circumstances, and notified TRP to that effect.  If TRP were to reassert a demand for indemnity and prevail on such a demand, HHDL’s damages would not be covered by insurance and could exceed $1,000,000.

 

 

SCHEDULE 4.8

 

MATERIAL ADVERSE EFFECT

 

An impairment analysis of goodwill indicated an impairment of Customer Interaction goodwill that is recorded in the Consolidated Statements of Comprehensive Income (Loss) in the third quarter of 2015 in the amount of $209.9 million. A corresponding $36.8 million tax benefit was recorded, resulting in a net income impact of $173.1 million.

 

On April 14, 2015, Harte Hanks, Inc. sold its B2B research businesses, Aberdeen Group, Inc. and Harte Hanks Market Intelligence, Inc. (“the B2B research business”). As a result of the sale, Harte Hanks, Inc. recognized a pre-tax loss of $9.5 million in relation to the disposal or transfer of assets and liabilities to the purchasing organization.

 

 

SCHEDULE 4.10

 

BENEFIT PLANS

 

Harte-Hanks, Inc. Pension Plan, dated January 1, 2009, as supplemented by that certain First Supplement, Second Supplement, Third Supplement, Fourth Supplement, Fifth Supplement, Amended Sixth Supplement, Seventh Supplement, Eighth Supplement, Ninth Supplement and Tenth Supplement, as amended by that certain First Amendment to the Harte-Hanks Inc. Pension Plan, dated December 20, 2010, as amended by that certain Second Amendment to the Harte-Hanks Inc. Pension Plan, dated December 31, 2013, as amended by that certain Third Amendment to the Harte-Hanks, Inc. Pension Plan, dated December 11, 2014 (collectively, the “Pension Plan”). Reference is hereby made to that certain Trust Agreement dated January 1, 1998, whereby Bankers Trust Company, a New York banking corporation, agrees to act as trustee for the trusts that serve as a funding medium for the Pension Plan.

 

Harte-Hanks, Inc. Restoration Pension Plan, dated January 1, 2008.

 

 

SCHEDULE 4.11

 

ENVIRONMENTAL MATTERS

 

Harte-Hanks Print, Inc. and the New Jersey Department of Environmental Protection executed an ISRA Remediation Agreement (the “Remediation Agreement”) on October 27, 2006, which required remediation of the property located at 1012A Edgewater Avenue, and designated as Block 99, Lots 5, 12, 14, 15, 16, and 17 on the tax maps of Westville, Gloucester County, New Jersey. The Remediation Agreement also required that Harte-Hanks Print, Inc. establish and maintain during the lift of the Remediation Agreement a remediation funding source in the amount of $100,000. Such funding source was established pursuant to that certain Remediation Trust Fund Agreement dated October 25, 2006 by and between Harte-Hanks Print, Inc. and Wells Fargo Bank, National Association. Harte-Hanks Print, Inc. is further required to annually submit a detailed estimate of the cost of remediation.

 

 

SCHEDULE 4.14

 

PERMITTED INDEBTEDNESS

 

Amended and Restated Demand Notes:

 

	
Lender
    	
 
    	
Borrower
    	
 
    	
Principal 
   Amount
    	
 
    	
Date of 
   Issuance
    	
 
    	
Interest Rate
    	
 
    	
Maturity
    Date
    	
 
    
	
Harte   Hanks, Inc.
    	
 
    	
Harte-Hanks Trillium Software Germany GmbH
    	
 
    	
$
    	
 4,000,000
    	
 
    	
March 7, 2016
    	
 
    	
Applicable Federal Rate
    	
 
    	
7 years
    	
 
    
	
Harte-Hanks   Belgium N.V.
    	
 
    	
Harte   Hanks Inc.
    	
 
    	
$
    	
 4,000,000
    	
 
    	
March 7, 2016
    	
 
    	
Applicable Federal Rate
    	
 
    	
7 years
    	
 
    
	
Harte   Hanks, Inc.
    	
 
    	
Harte-Hanks do Brazil Consultoria e Servicos   Ltda.
    	
 
    	
$
    	
 2,000,000
    	
 
    	
March 7, 2016
    	
 
    	
Applicable Federal Rate
    	
 
    	
7 years
    	
 
    
	
Harte   Hanks Europe B.V.
    	
 
    	
Harte   Hanks, Inc.
    	
 
    	
$
    	
 3,000,000
    	
 
    	
March 7, 2016
    	
 
    	
Applicable Federal Rate
    	
 
    	
7 years
    	
 
    
	
Harte   Hanks, Inc.
    	
 
    	
Harte   Hanks UK Limited
    	
 
    	
$
    	
 25,000,000
    	
 
    	
March 7, 2016
    	
 
    	
Applicable Federal Rate
    	
 
    	
7 years
    	
 
    
	
Harte-Hanks   Philippines, Inc.
    	
 
    	
Harte   Hanks, Inc.
    	
 
    	
$
    	
 16,000,000
    	
 
    	
March 7, 2016
    	
 
    	
Applicable Federal Rate
    	
 
    	
7 years
    	
 
    
	
Harte-Hanks   Pty. Limited
    	
 
    	
Harte   Hanks, Inc.
    	
 
    	
$
    	
 3,500,000
    	
 
    	
March 7, 2016
    	
 
    	
Federal Applicable Rate
    	
 
    	
7 years
    	
 
    
	
Harte-Hanks   SRL
    	
 
    	
Harte   Hanks, Inc.
    	
 
    	
$
    	
 500,000
    	
 
    	
March 7, 2016
    	
 
    	
Federal Applicable Rate
    	
 
    	
7 years
    	
 
    
	
Harte   Hanks Trillium UK Limited
    	
 
    	
Harte   Hanks, Inc.
    	
 
    	
$
    	
 21,000,000
    	
 
    	
March 7, 2016
    	
 
    	
Federal Applicable Rate
    	
 
    	
7 years
    	
 
    
	
Harte   Hanks, Inc.
    	
 
    	
Harte-Hanks   GmbH
    	
 
    	
$
    	
 2,500,000
    	
 
    	
March 7, 2016
    	
 
    	
Federal Applicable Rate
    	
 
    	
7 years
    	
 
    
	
HHMIX   SAS
    	
 
    	
Harte   Hanks, Inc.
    	
 
    	
$
    	
 8,000,000
    	
 
    	
March 7, 2016
    	
 
    	
Federal Applicable Rate
    	
 
    	
7 years
    	
 
    

 

 

Schedule 5.1

 

Deliver to Agent and each Lender each of the financial statements, reports, or other items set forth below at the following times in form satisfactory to Agent:

 

	
Monthly, as soon as   available, but in any event within 30 days (45 days in the case of a month   that is the end of one of Administrative Borrower’s fiscal quarters) after   the end of each month during each of Administrative Borrower’s fiscal years,
    	
 
    	
(a)        a report summarizing Recurring   Revenues by type for (i) the prior month, and (ii) the trailing   twelve months on a monthly basis, 

 

(b)        an unaudited consolidated and   consolidating balance sheet, income statement, statement of cash flow, and   statement of shareholder’s equity covering Administrative Borrower’s and its   Subsidiaries’ operations during such period and compared to the prior period   and plan, together with an unaudited, standalone income statement for   Trillium in form substantially consistent with income statements previously   provided to Agent and a corresponding discussion and analysis of results from   management, and

 

(c)         a Compliance Certificate along with   the underlying calculations, including the calculations to arrive at EBITDA,   Fixed Charge Coverage Ratio, Leverage Ratio, Recurring Revenue and Capital   Expenditures.
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Quarterly (no later   than the last day of the month 45 days following the end of each fiscal   quarter),
    	
 
    	
(d)        IP Reporting Certificate, and 

 

(e)        a report detailing Recurring Revenue   retention statistics for the prior quarter and for the trailing four   quarters, in form and methodology consistent with what has been previously   provided to Agent.
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Annually, as soon as   available, but in any event within 90 days after the end of each of   Administrative Borrower’s fiscal years,
    	
 
    	
(f)         consolidated and consolidating   financial statements of Administrative Borrower and its Subsidiaries for each   such fiscal year, audited by independent certified public accountants   reasonably acceptable to Agent and certified, without any qualifications (including   any (A) “going concern” or like qualification or exception,   (B) qualification or exception as to the scope of such audit, or   (C) qualification which relates to the treatment or classification of   any item and which, as a condition to the removal of such qualification,   would require an adjustment to such item, the effect of which would be to   cause any noncompliance with the provisions of Section 7 of the   Agreement), by such accountants to have been prepared in accordance with GAAP   (such audited financial statements to include a balance sheet, income   statement, statement of cash flow, and statement of shareholder’s equity,   and, if prepared, such accountants’ letter to management), 

 

(g)        a Compliance Certificate along with   the underlying calculations, including the calculations to arrive at EBITDA,   Fixed Charge Coverage Ratio, Leverage Ratio, Recurring Revenue, and Capital   Expenditures, 
    	
 
    

 

1

 

	
 
    	
 
    	
(h)        a   detailed calculation of Excess Cash Flow, and 

 

(i)         an   updated Perfection Certificate.
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Annually, as soon as   available, but in any event within 30 days prior to the start of each of   Administrative Borrower’s fiscal years,
    	
 
    	
(j)         copies of Administrative Borrower’s   Projections, in form and substance (including as to scope and underlying   assumptions) satisfactory to Agent, in its Permitted Discretion, for the   forthcoming 3 fiscal years, on a quarter by quarter basis, certified by the   chief financial officer of Borrower as being such officer’s good faith   estimate of the financial performance of Administrative Borrower during the   period covered thereby.
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
If and when filed by   Administrative Borrower,
    	
 
    	
(k)        Form 10-Q quarterly reports, Form 10-K   annual reports, and Form 8-K current reports, (l) any other filings made   by Administrative Borrower with the SEC, and (m) any other information that   is provided by Administrative to its shareholders generally.
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Promptly, but in any   event within 5 days after Administrative Borrower has knowledge of any event   or condition that constitutes a Default or an Event of Default,
    	
 
    	
(n)        notice of such event or condition and   a statement of the curative action that Borrower proposes to take with   respect thereto.
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Promptly after the   commencement thereof, but in any event within 5 days after the service of   process with respect thereto on Administrative Borrower or any of its   Subsidiaries,
    	
 
    	
(o)        notice of all actions, suits, or   proceedings brought by or against Administrative Borrower or any of its   Subsidiaries before any Governmental Authority which reasonably could be   expected to result in a Material Adverse Effect.
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Upon the request of Agent,
    	
 
    	
(p)        any   other information reasonably requested relating to the financial condition of   Administrative Borrower or its Subsidiaries.
    	
 
    

 

2

 

Schedule 5.2

 

Provide Agent and each Lender with each of the documents set forth below at the following times in form satisfactory to Agent:

 

	
Monthly (no later than the 15th day of each month),
    	
 
    	
(a)        an executed Borrowing Base Certificate,

(b)        a detailed aging, by total, of Borrower’s   billed and unbilled Accounts (aged by reference to the empty date in respect of   unbilled Accounts), together with a reconciliation and supporting documentation   for any reconciling items noted (delivered electronically in an acceptable format,   if Borrower has implemented electronic reporting),

(c)        a detailed calculation of those Accounts   that are not eligible for the Borrowing Base, including but not limited to deferred   revenue, customer deposits and pre-paid postage accruals, if Borrower has not   implemented electronic reporting,

(d)        a listing of unbilled Accounts, in each   case showing the date of the service or order and the current status thereof,

(e)        notice of all claims, offsets, or disputes   asserted by Account Debtors with respect to Administrative Borrower’s and its   Subsidiaries’ Accounts,

(f)         a summary aging, by vendor, of Administrative   Borrower’s and its Subsidiaries’ accounts payable and any book overdraft (delivered   electronically in an acceptable format, if Borrower has implemented electronic   reporting) and an aging, by vendor, of any held checks, and

(g)        a detailed report regarding Borrower’s   and its Subsidiaries’ cash and Cash Equivalents, including an indication of which   amounts constitute Qualified Cash.
    
	
 
    	
 
    	
 
    
	
Monthly (within 30   days (45 days in the case of a month that is the end of a fiscal quarter)   after the end of each month),
    	
 
    	
(h)        a reconciliation of Accounts and trade   accounts payable from Administrative Borrower’s general ledger accounts to   its monthly financial statements including any book reserves related to each   category.
    
	
 
    	
 
    	
 
    
	
Quarterly (no later   than the last day of the month 45 days following the end of each fiscal   quarter),
    	
 
    	
(i)         a report regarding Administrative   Borrower’s and its Subsidiaries’ accrued, but unpaid, ad valorem taxes.
    

 

1

 

	
Promptly upon any   officer of a Loan Party becoming aware of any of the following events, such   Loan Party shall notify Agent in writing of such event and provide the   documentation listed with respect to each such event,
    	
 
    	
(j)         the occurrence of any Notification   Event or of any “prohibited transaction,” as described in section 406 of   ERISA or in section 4975 of the IRC in connection with any Pension Plan or   any trust created thereunder, a written notice signed by a chief financial officer   of such Loan Party, specifying the nature thereof, what action the Loan Party   proposes to take with respect thereto, and, when known, any action taken or   proposed by the Internal Revenue Service, the Department of Labor or the PBGC   or other governmental body with respect thereto,

(k)        any notice from the PBGC setting forth   an intention to terminate or appoint a trustee to administer a Pension Plan,   copies of any such notices and any written correspondence from the Loan Party   to the PBGC with respect thereto,

(l)         a request by any Loan Party or ERISA   Affiliate for an estimate of its Withdrawal Liability from any Multiemployer   Plan or any estimate of Withdrawal Liability is provided to any Loan Party,   any such estimate and any written communications related thereto received by,   or delivered by, any Loan Party with respect thereto,

(m)       any written notice to a Multiemployer   Plan that a Loan Party or ERISA Affiliate is withdrawing from such   Multiemployer Plan, a copy of such notice; and

(n)        any notification from a Multiemployer   Plan, that such Multiemployer Plan has incurred a mass withdrawal or that any   withdrawal obligations of a Loan Party are accelerated or increased, copies   of such notification and any written correspondence from the Loan Party with   respect thereto.
    
	
 
    	
 
    	
 
    
	
Promptly after the   filing thereof with the United States Secretary of Labor, the Internal   Revenue Service or the PBGC,
    	
 
    	
(o)        copies of each annual and other report   (including all attachments thereto) with respect to each Pension Plan or any   trust created thereunder.
    
	
 
    	
 
    	
 
    
	
Annually,
    	
 
    	
(p)        a detailed list of Administrative   Borrower’s and its Subsidiaries’ customers, with address and contact   information.
    
	
 
    	
 
    	
 
    
	
Upon request by Agent,
    	
 
    	
(q)        such other reports, including but not   limited to a summary aging of the Administrative Borrower’s Accounts, and a   summary aging, by vendor, of Borrower’s accounts payable, and any book   overdrafts, and copies of purchase orders and invoices for Equipment acquired   by Borrower or its Subsidiaries, and as to the Collateral or the financial   condition of Administrative Borrower and its Subsidiaries, as Agent may   reasonably request.
    

 

2

 

SCHEDULE 6.10

 

AFFILIATE TRANSACTIONS

 

None.

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